Bay Street News

Lamar Advertising Company Announces Third Quarter 2018 Operating Results

Three Month Results

Three Month Acquisition-Adjusted Results

                                                             

BATON ROUGE, La., Nov. 08, 2018 (GLOBE NEWSWIRE) — Lamar Advertising Company (Nasdaq: LAMR), a leading owner and operator of outdoor advertising and logo sign displays, announces the Company’s operating results for the third quarter ended September 30, 2018.

“We delivered healthy revenue growth in the third quarter and are encouraged by our Q4 pacings, which indicate even more robust sales growth,” said Chief Executive Sean Reilly. “Consequently, we are tracking to finish 2018 at the upper end of or slightly above our revised guidance for full year diluted AFFO of $5.30 to $5.40 per share.”  

Third Quarter Highlights

Third Quarter Results
Lamar reported net revenues of $418.5 million for the third quarter of 2018 versus $399.3 million for the third quarter of 2017, a 4.8% increase.  Operating income for the third quarter of 2018 decreased $3.4 million to $128.4 million as compared to $131.7 million for the same period in 2017, primarily due to increases in non-cash stock-based compensation expense of $6.6 million and depreciation and amortization expense of $3.3 million. Lamar recognized net income of $94.1 million for the third quarter of 2018 compared to net income of $96.3 million for same period in 2017.  Net income per diluted share was $0.95 and $0.98 for the three months ended September 30, 2018 and 2017, respectively.

Adjusted EBITDA for the third quarter of 2018 was $192.5 million versus $182.8 million for the third quarter of 2017, an increase of 5.3%.

Cash flow provided by operating activities was $154.3 million for the three months ended September 30, 2018, an increase of $28.4 million as compared to the same period in 2017.  Free cash flow for the third quarter of 2018 was $130.7 million as compared to $122.2 million for the same period in 2017, a 7.0% increase. 

For the third quarter of 2018, Funds From Operations, or FFO, was $146.6 million versus $142.4 million for the same period in 2017, an increase of 3.0%.   Adjusted Funds From Operations, or AFFO, for the third quarter of 2018 was $150.1 million compared to $137.5 million for the same period in 2017, an increase of 9.1%.   Diluted AFFO per share increased 7.9% to $1.51 for the three months ended September 30, 2018 as compared to $1.40 for the same period in 2017.

Acquisition-Adjusted Three Months Results
Acquisition-adjusted net revenue for the third quarter of 2018 increased 3.1% over Acquisition-adjusted net revenue for the third quarter of 2017.  Acquisition-adjusted EBITDA for the third quarter of 2018 increased 3.0% as compared to Acquisition-adjusted EBITDA for the third quarter of 2017.  Acquisition-adjusted net revenue and Acquisition-adjusted EBITDA include adjustments to the 2017 period for acquisitions and divestitures for the same time frame as actually owned in the 2018 period.  See “Reconciliation of Reported Basis to Acquisition-Adjusted Results”, which provides reconciliations to GAAP for Acquisition-adjusted measures.

Nine Months Results
Lamar reported net revenues of $1.20 billion for the nine months ended September 30, 2018 versus $1.14 billion for the same period in 2017, a 4.9% increase.  Operating income for the nine months ended September 30, 2018 decreased to $329.9 million as compared to $335.4 million for the same period in 2017, primarily due to increases in non-cash stock-based compensation expense of $15.7 million and depreciation and amortization expense of $12.2 million.  Lamar recognized net income of $209.5 million for the nine months ended September 30, 2018 as compared to net income of $230.5 million for the same period in 2017.  Net income per diluted share decreased to $2.12 for the nine months ended September 30, 2018 as compared to $2.34 for the same period in 2017.  In addition, Adjusted EBITDA for the nine months ended September 30, 2018 was $527.2 million versus $493.0 million for the same period in 2017, a 6.9% increase.

Cash flow provided by operating activities increased to $370.1 million for the nine months ended September 30, 2018, as compared to $320.6 million in the same period in 2017. Free cash flow for the nine months ended September 30, 2018 increased 8.6% to $345.0 million as compared to $317.7 million for the same period in 2017.

For the nine months ended September 30, 2018, FFO was $376.2 million versus $373.0 million for the same period in 2017, a 0.9% increase.  AFFO for the nine months ended September 30, 2018 was $397.0 million compared to $360.5 million for the same period in 2017, a 10.1% increase.  Diluted AFFO per share increased to $4.02 for the nine months ended September 30, 2018, as compared to $3.67 in the same period in 2017, an increase of 9.5%.

Liquidity
As of September 30, 2018, Lamar had $342.6 million in total liquidity that consisted of $332.0 million available for borrowing under its revolving senior credit facility and approximately $10.6 million in cash and cash equivalents.

Forward Looking Statements
This press release contains forward-looking statements, including statements regarding sales trends.  These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements.  These risks and uncertainties include, among others: (1) our significant indebtedness; (2) the state of the economy and financial markets generally and the effect of the broader economy on the demand for advertising; (3) the continued popularity of outdoor advertising as an advertising medium; (4) our need for and ability to obtain additional funding for operations, debt refinancing or acquisitions; (5) our ability to continue to qualify as a Real Estate Investment Trust (“REIT”) and maintain our status as a REIT; (6) the regulation of the outdoor advertising industry by federal, state and local governments; (7) the integration of companies that we acquire and our ability to recognize cost savings or operating efficiencies as a result of these acquisitions; (8) changes in accounting principles, policies or guidelines; (9) changes in tax laws applicable to REITs or in the interpretation of those laws; (10) our ability to renew expiring contracts at favorable rates; (11) our ability to successfully implement our digital deployment strategy; and (12) the market for our Class A common stock. For additional information regarding factors that may cause actual results to differ materially from those indicated in our forward-looking statements, we refer you to the risk factors included in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017, as supplemented by any risk factors contained in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.  We caution investors not to place undue reliance on the forward-looking statements contained in this document.  These statements speak only as of the date of this document, and we undertake no obligation to update or revise the statements, except as may be required by law.

Use of Non-GAAP Financial Measures
The Company has presented the following measures that are not measures of performance under accounting principles generally accepted in the United States of America (“GAAP”):  Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), Free Cash Flow, Funds From Operations (“FFO”), Adjusted Funds From Operations (“AFFO”), Diluted AFFO per share, Outdoor Operating Income and Acquisition-Adjusted Results.  Our management reviews our performance by focusing on these key performance indicators not prepared in conformity with GAAP. We believe these non-GAAP performance indicators are meaningful supplemental measures of our operating performance and should not be considered in isolation of, or as a substitute for their most directly comparable GAAP financial measures.

Our Non-GAAP financial measures are determined as follows:

Adjusted EBITDA, FFO, AFFO, Outdoor Operating Income and Acquisition-Adjusted Results are not intended to replace other performance measures determined in accordance with GAAP.  Free Cash Flow, FFO nor AFFO represent cash flows from operating activities in accordance with GAAP and, therefore, these measures should not be considered indicative of cash flows from operating activities as a measure of liquidity or of funds available to fund our cash needs, including our ability to make cash distributions. Adjusted EBITDA, Free Cash Flow, FFO, AFFO, Diluted AFFO per share, Outdoor Operating Income and Acquisition-Adjusted Results are presented as we believe each is a useful indicator of our current operating performance. Specifically, we believe that these metrics are useful to an investor in evaluating our operating performance because (1) each is a key measure used by our management team for purposes of decision making and for evaluating our core operating results; (2) Adjusted EBITDA is widely used in the industry to measure operating performance as it excludes the impact of depreciation and amortization, which may vary significantly among companies, depending upon accounting methods and useful lives, particularly where acquisitions and non-operating factors are involved; (3) Adjusted EBITDA, FFO, AFFO and Diluted AFFO per share each provides investors with a meaningful measure for evaluating our period-over-period operating performance by eliminating items that are not operational in nature and reflect the impact on operations from trends in occupancy rates, operating costs, general and administrative expenses and interest costs; (4) Acquisition-Adjusted Results is a supplement to enable investors to compare period-over-period results on a more consistent basis without the effects of acquisitions and divestures, which reflects our core performance and organic growth (if any) during the period in which the assets were owned and managed by us; (5) Free Cash Flow is an indicator of our ability to service debt and generate cash for acquisitions and other strategic investments; (6) Outdoor Operating Income provides investors a measurement of our core results without the impact of fluctuations in stock-based compensation, depreciation and amortization and corporate expenses; and (7) each of our Non-GAAP measures provides investors with a measure for comparing our results of operations to those of other companies.

Our measurement of Adjusted EBITDA, FFO, AFFO, Outdoor Operating Income and Acquisition-Adjusted Results may not, however, be fully comparable to similarly titled measures used by other companies. Reconciliations of Adjusted EBITDA, FFO, AFFO, Outdoor Operating Income and Acquisition-Adjusted Results to the most directly comparable GAAP measures have been included herein.

Conference Call Information
A conference call will be held to discuss the Company’s operating results on Thursday, November 8, 2018 at 8:00 a.m. central time.  Instructions for the conference call and Webcast are provided below:

Conference Call

All Callers:   1-334-323-0520 or 1-334-323-9871
Passcode:    Lamar
     
Replay:      1-334-323-0140 or 1-877-919-4059
Passcode:
 
  70196432
Available through Thursday, November 15, 2018 at 11:59 p.m. eastern time 
     
Live Webcast:        www.lamar.com 
     
Webcast Replay:   www.lamar.com 
Available through Thursday, November 15, 2018 at 11:59 p.m. eastern time
     
Company Contact:

 

  Buster Kantrow
Director of Investor Relations
(225) 926-1000
bkantrow@lamar.com
     


General Information

Founded in 1902, Lamar Advertising (Nasdaq: LAMR) is one of the largest outdoor advertising companies in North America, with more than 348,000 displays across the United States and Canada. Lamar offers advertisers a variety of billboard, interstate logo, transit and airport advertising formats, helping both local businesses and national brands reach broad audiences every day. In addition to its more traditional out-of-home inventory, Lamar is proud to offer its customers the largest network of digital billboards in the United States with over 2,900 displays.

LAMAR ADVERTISING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

    Three months ended
  September 30,
  Nine months ended
  September 30,
     2018     2017     2018     2017 
               
Net revenues $   418,498     $    399,345     $   1,199,324     $    1,142,785   
                                 
               
Operating expenses (income)              
  Direct advertising expenses     140,699         134,977          419,776         401,896  
  General and administrative expenses     70,214         66,588          205,734         200,160  
  Corporate expenses      15,104         14,983          46,608          47,683  
  Stock-based compensation     8,624          2,017          22,745          7,060  
  Depreciation and amortization     55,089         51,796          167,251          155,003  
  Loss (gain) on disposition of assets      407          (2,734)          7,265          (4,377)  
                                 
         290,137          267,627          869,379           807,425  
                                 
  Operating income     128,361         131,718          329,945          335,360  
                 
Other (income) expense              
  Loss on extinguishment of debt      —         —          15,429          71  
  Interest income      (157)         (2)          (313)          (6)  
  Interest expense      31,850          32,064          97,321          95,526  
         31,693          32,062          112,437          95,591  
                                 
Income before income tax expense     96,668         99,656           217,508         239,769   
Income tax expense   2,612       3,325       7,969       9,257  
                                 
Net income   94,056       96,331       209,539       230,512  
Preferred stock dividends   91       91       273       273  
Net income applicable to common stock $ 93,965     $ 96,240     $ 209,266     $ 230,239  
                                 
               
Earnings per share:              
  Basic earnings per share $ 0.95     $ 0.98     $ 2.12     $ 2.35  
  Diluted earnings per share $ 0.95     $ 0.98     $ 2.12     $ 2.34  
                               
Weighted average common shares outstanding:
  – basic
  – diluted
  98,943,535
   99,253,008
      98,044,523
 98,490,277
      98,596,828
  98,870,116
      97,855,642
   98,340,248
 
OTHER DATA 
Free Cash Flow Computation:
Adjusted EBITDA
Interest, net
Current tax expense 
Preferred stock dividends
192,481
(30,479)
  (1,474)
  (91)
    $

 

182,797
   (30,819)
   (3,096)
   (91)
 

 

 

 

527,206
  (93,346)
  (6,394)
  (273)
    $

 

 493,046
  (91,654)
  (8,998)
  (273)
 
Total capital expenditures   (29,701)       (26,610)       (82,174)       (74,446)  
Free Cash Flow $ 130,736     $ 122,181     $ 345,019     $ 317,675  
                               
             
  OTHER DATA (continued):            
             
 

 

        September 30, December 31,
  Selected Balance Sheet Data:         2018 2017
  Cash and cash equivalents         $ 10,609   $ 115,471
Working capital         $ 109,914   $ 94,525
Total assets         $ 4,124,620   $ 4,214,345
Total debt, net of deferred financing costs (including current maturities)         $ 2,545,881   $ 2,556,690
Total stockholders’ equity         $ 1,096,959   $ 1,103,493
             
             
  Three months ended
  September 30,
  Nine months ended
  September 30,
    2018     2017     2018     2017
Selected Cash Flow Data:            
Cash flows provided by operating activities $ 154,305   $ 125,885   $ 370,089   $ 320,638
Cash flows used in investing activities $ 58,904   $ 117,669   $ 120,326   $ 191,029
Cash flows used in financing activities $ 104,381   $ 22,650   $ 353,943   $ 137,487
             

SUPPLEMENTAL SCHEDULES
UNAUDITED RECONCILIATIONS OF NON-GAAP MEASURES
(IN THOUSANDS)

  Three months ended   Nine months ended
  September 30,   September 30,
    2018       2017       2018       2017  
Reconciliation of  Cash Flows Provided by Operating Activities              
   to Free Cash Flow:              
Cash flows provided by operating activities $ 154,305     $ 125,885     $ 370,089     $ 320,638  
Changes in operating assets and liabilities   7,830       25,610       62,924       77,765  
Total capital expenditures   (29,701 )     (26,610 )     (82,174 )     (74,446 )
Preferred stock dividends   (91 )     (91 )     (273 )     (273 )
Other   (1,607 )     (2,613 )     (5,547 )     (6,009 )
  Free cash flow $ 130,736     $ 122,181     $ 345,019     $ 317,675  
               
               
               
Reconciliation of  Net Income to Adjusted EBITDA:              
Net Income $ 94,056     $ 96,331     $ 209,539     $ 230,512  
  Loss on extinguishment of debt               15,429       71  
  Interest income   (157 )     (2 )     (313 )     (6 )
  Interest expense   31,850       32,064       97,321       95,526  
  Income tax expense    2,612       3,325       7,969       9,257  
Operating Income   128,361       131,718       329,945       335,360  
               
Stock-based compensation   8,624       2,017       22,745       7,060  
Depreciation and amortization   55,089       51,796       167,251       155,003  
  Loss (gain) on disposition of assets   407       (2,734 )     7,265       (4,377 )
Adjusted EBITDA $ 192,481     $ 182,797     $ 527,206     $ 493,046  
               
               
               
Capital expenditure detail by category:              
  Billboards – traditional $ 8,715     $ 10,161     $ 23,922     $ 23,700  
  Billboards – digital   13,093       8,605       33,210       29,568  
  Logo   1,895       2,498       7,000       6,409  
  Transit   3,637       290       4,377       578  
  Land and buildings   593       3,682       6,622       8,196  
  Operating equipment   1,768       1,374       7,043       5,995  
  Total capital expenditures $ 29,701     $ 26,610     $ 82,174     $ 74,446  
               

SUPPLEMENTAL SCHEDULES
UNAUDITED RECONCILIATIONS OF NON-GAAP MEASURES
(IN THOUSANDS)

    Three months ended
   September 30,
 
    2018     2017   % Change
Reconciliation of Reported Basis to Acquisition-Adjusted Results (a):          
 Net revenue $   418,498   $   399,345   4.8 %
Acquisitions and divestitures     —        6,672     
Acquisition-adjusted net revenue $   418,498   $   406,017   3.1 %
           
Reported direct advertising and G&A expenses $   210,913   $   201,565   4.6 %
Acquisitions and divestitures     —         2,549     
Acquisition-adjusted direct advertising and G&A expenses $   210,913   $   204,114   3.3 %
           
Outdoor operating income $   207,585   $   197,780   5.0 %
Acquisitions and divestitures     —         4,123     
Acquisition-adjusted outdoor operating income $   207,585   $   201,903   2.8 %
           
Reported corporate expenses $     15,104   $     14,983    0.8 %
Acquisitions and divestitures     —        —     
Acquisition-adjusted corporate expenses $    15,104   $    14,983   0.8 %
           
Adjusted EBITDA $   192,481   $   182,797   5.3 %
Acquisitions and divestitures     —        4,123     
Acquisition-adjusted  EBITDA $   192,481   $   186,920   3.0 %
           

 (a)  Acquisition-adjusted net revenue, direct advertising and general and administrative expenses, outdoor operating income, corporate expenses and EBITDA include adjustments to 2017 for acquisitions and divestitures for the same time frame as actually owned in 2018. 

    Three months ended
   September 30,
      2018     2017  
Reconciliation of  Net Income to Outdoor Operating Income:        
Net Income   $    94,056   $    96,331  
  Interest expense, net        31,693       32,062  
  Income tax expense        2,612       3,325  
Operating Income        128,361        131,718  
         
Corporate expenses        15,104        14,983   
  Stock-based compensation        8,624        2,017  
  Depreciation and amortization        55,089       51,796   
  Loss (gain) on disposition of assets        407     (2,734 )
Outdoor Operating Income   $  207,585   $ 197,780  
               

SUPPLEMENTAL SCHEDULES
UNAUDITED REIT MEASURES
AND RECONCILIATIONS TO GAAP MEASURES
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Adjusted Funds From Operations:

  Three months ended   Nine months ended  
    September 30,      September 30,  
    2018         2017       2018         2017  
               
 Net income $ 94,056     $ 96,331     $ 209,539     $ 230,512  
 Depreciation and amortization related to real estate   52,032       48,613       157,941       145,999  
 Loss (gain) from disposition of real estate assets and investments (tax effected)   505       (2,707 )     8,350       (4,114 )
  Adjustment for unconsolidated affiliates and non-controlling interest   43       190       385       580  
Funds From Operations $ 146,636     $ 142,427     $ 376,215     $ 372,977  
               
 Straight-line expense (income)   737       (287 )     (220 )     (382 )
 Stock-based compensation expense   8,624       2,017       22,745       7,060  
 Non-cash portion of tax provision   1,138       229       697       259  
 Non-real estate related depreciation and amortization    3,057       3,183       9,310       9,004  
 Amortization of deferred financing costs    1,214       1,243       3,662       3,866  
 Loss on extinguishment of debt               15,429       71  
 Capitalized expenditures—maintenance   (11,248 )     (11,082 )     (30,453 )     (31,760 )
 Adjustment for unconsolidated affiliates and non-controlling interest   (43 )     (190 )     (385 )     (580 )
               
Adjusted Funds From Operations $ 150,115     $ 137,540     $ 397,000     $ 360,515  
               
Divided by weighted average diluted common shares outstanding    99,253,008       98,490,277       98,870,116       98,340,248  
Diluted AFFO per share $   1.51     $ 1.40     $ 4.02     $ 3.67