Lamar(LAMR) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2024, consolidated revenue grew by 4% or 3.6% on an acquisition-adjusted basis, marking the 14th consecutive quarter of growth for the company [6][11] - Adjusted EBITDA for the quarter was $271.2 million, an increase of 2.1% compared to$ 265.7 million in 2023, with an adjusted EBITDA margin of 48.1% [10][11] - Adjusted funds from operations (AFFO) totaled $220.7 million, up 5.7% from$ 208.8 million last year, with diluted AFFO per share increasing by 5.4% to $2.15 [11][19] - The company raised its full-year AFFO guidance to a range of$ 7.85 to $7.95 per share, representing a nearly 6% increase over 2023 [7][19] Business Line Data and Key Metrics Changes - Local/regional revenue increased by 4.9%, while national revenue decreased by 2.9% [8][12] - Digital revenue grew nearly 5% in the quarter, with programmatic sales channel revenue increasing over 70% year-over-year [8][9] - The company plans to accelerate the rollout of new digital units in 2025, targeting 375 to 400 new digital billboards [9] Market Data and Key Metrics Changes - Political advertising was a significant contributor, with nearly$ 15 million year-to-date through Q3, and expectations of approximately $30 million total by year-end [24][41] - Categories showing strength included Services (up 16%), Government nonprofit (up 17%), and Building & Construction (up 29%), while Insurance and Restaurants showed weakness [28] Company Strategy and Development Direction - The company anticipates increased M&A activity in 2025 after a quiet year in 2024, focusing on tuck-in transactions to enhance its footprint [10][49] - The strategy includes leveraging programmatic advertising growth and expanding into new customer categories such as consumer packaged goods and pharmaceuticals [29][31] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the resilience of local and regional sales, which accounted for approximately 79% of billboard revenue in Q3 [12] - The company is encouraged by the momentum seen in October's results and looks forward to executing its business plan for the remainder of the year [22] Other Important Information - Total capital expenditures for Q3 were$ 30.1 million, with a full-year CapEx estimate of $125 million [13][19] - The company extended its$ 250 million AR securitization for three years, maturing in October 2027, and maintains a well-laddered debt maturity schedule [14][16] Q&A Session Summary Question: Growth opportunities and potential drivers for 2025 - Management highlighted programmatic advertising and a rebound in national sales as key growth drivers, with new customers entering the programmatic space [29] Question: Current state of programmatic ad spending in out-of-home - Management noted that the programmatic channel is growing, with an increasing number of digital specialists entering the market, leading to higher CPMs [30][31] Question: Dichotomy between earnings and AFFO - Management explained that the increase in stock compensation due to stock price fluctuations impacted net income, while AFFO benefited from solid top-line growth [34][37] Question: Political contribution expectations for Q4 - Management projected political contributions for Q4 to be around $15 million, totaling close to$ 30 million for the year [41] Question: Revenue uplift from digital conversions - Management provided unit economics, indicating significant revenue increases from converting static units to digital, with a revenue lift of approximately 5 to 6 times [43][45] Question: M&A outlook for 2025 - Management indicated a pickup in M&A activity driven by internal decisions and improving market conditions, with a focus on fill-in acquisitions [49][56]