Q4 2024 Earnings Summary
- Significant Acceleration of Digital Display Deployment: Lamar plans to substantially increase the rollout of new digital displays in 2025, targeting at least 350 new units and possibly up to 375, which would be a record for the company. This expansion is expected to drive revenue growth, as digital displays command higher rates and enable more flexible advertising options like programmatic sales. ,
- Strong Pricing Power at Peak Occupancy Levels: With occupancy at peak levels, Lamar's gains have been driven by rate increases. The company anticipates continuing to drive rates higher to achieve their goals, demonstrating strong pricing power and the ability to increase revenues without relying on higher occupancy.
- Active M&A Pipeline and Beneficial Industry Trends: Lamar expects increased M&A activity in 2025, with a pipeline of potential deals totaling around $150 million, including some larger transactions in the $40 million to $50 million range. Strategic acquisitions could enhance their market position and contribute to growth. Additionally, the recent acquisition of Vistar Media by T-Mobile, from which Lamar realized substantial gains, underscores confidence in the out-of-home advertising medium. As the owner of the largest large-format digital network in the country, Lamar stands to benefit from increased investment and innovation in the sector.
- Lamar's AFFO guidance for 2025 is below street estimates, with expected acquisition-adjusted revenue growth of only 3% , which is lower than industry projections of around 5%. This suggests potential underperformance relative to peers and indicates slower growth than anticipated by analysts.
- National advertising growth is lagging behind peers due to Lamar's less robust footprint in key markets like New York and Los Angeles. This may limit the company's ability to capture national ad spend recovery, impacting future growth opportunities in the national segment.
- Higher operating expenses are anticipated in 2025, including increased capital expenditures and costs associated with the ERP conversion, which may pressure margins and limit AFFO growth. These expenses could offset revenue gains and negatively impact profitability.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Increased by ~4.3% (from $555.91M to $579.57M) | Total revenue increased modestly, driven by overall business growth despite uneven performance across segments. The increase is largely supported by the strong performance in transit advertising and modest gains in billboard and logo advertising, building on previous incremental revenue gains. |
Transit Advertising | Increased by ~9.4% (from $42.46M to $46.44M) | Transit Advertising experienced robust growth, outperforming other segments by nearly 10% YoY. This reflects a strong rebound in local and regional demand, capitalizing on operational improvements from prior periods. |
Billboard Advertising | Increased by ~3.8% | Billboard Advertising showed modest gains similar to previous periods, suggesting that while there is steady demand, the growth is limited compared to transit. This indicates a continuation of prior trends with gradual improvements rather than transformative change. |
Logo Advertising | Increased by ~3.6% | Logo Advertising increased slightly, mirroring the modest pace seen in past quarters without significant catalysts, suggesting a stable but constrained market in this segment. |
Operating Income | Collapsed by over 80% (from $192.21M to $36.80M) | Operating income faced a dramatic decline despite revenue growth, primarily due to a steep rise in operating expenses. The collapse is driven by significantly higher costs—particularly stock-based compensation, administrative expenses, and other increases—eroding margins that had been previously stronger. |
Net Income | Turned negative (from $149.82M profit to a $0.84M loss) | Net income reversal is directly tied to the operating income decline and further exacerbated by a massive increase in depreciation and amortization expenses, which overshadowed revenue gains and other operating improvements seen in earlier periods. |
Depreciation & Amortization | Increased by 233% (from $70.50M to $235.44M) | A 233% jump in depreciation and amortization is the most significant change and indicates major acquisitions and/or capital expenditure adjustments. This drastic rise has a substantial negative impact on both operating and net income compared to previous periods, implying that the company is investing heavily in assets which are taking a toll on short-term profitability. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
AFFO per Share | FY 2024 | $7.85 to $7.95 | no guidance | no current guidance |
EBITDA Margin | FY 2024 | 47% | no guidance | no current guidance |
Capital Expenditures (CapEx) | FY 2024 | Total CapEx of $125 million with $50 million for maintenance | no guidance | no current guidance |
Cash Interest | FY 2024 | $166 million | no guidance | no current guidance |
Cash Taxes | FY 2024 | $10 million | no guidance | no current guidance |
Dividend | FY 2024 | Regular dividend of $1.40 for Q4 and full-year dividend of $5.60 | no guidance | no current guidance |
Special Dividend | FY 2024 | Approximately $0.20 per share | no guidance | no current guidance |
Digital Billboard Rollout | FY 2024 | 375 to 400 new digital units | no guidance | no current guidance |
AFFO per Share | FY 2025 | no prior guidance | $8.13 to $8.28 | no prior guidance |
Revenue Growth | FY 2025 | no prior guidance | Approximately 3% | no prior guidance |
Operating Expenses | FY 2025 | no prior guidance | Increase of ~3% | no prior guidance |
Dividend | FY 2025 | no prior guidance | Run rate of $6.20 per share | no prior guidance |
Digital Deployment | FY 2025 | no prior guidance | 350 new digital displays with a stretch goal of 375 | no prior guidance |
Capital Expenditures (Maintenance CapEx) | FY 2025 | no prior guidance | $60 million (i.e. $8 million higher than prior year) | no prior guidance |
Cash Taxes | FY 2025 | no prior guidance | $10 million | no prior guidance |
Cash Interest | FY 2025 | no prior guidance | $152 million (assumed as cash interest via SOFR assumption) | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Digital Display Conversion and Expansion | Q1 highlighted digital same-board growth and renewed growth after 2023 declines. Q3 provided detailed unit economics and expansion targets (375–400 new displays). Q2 did not provide explicit details on this topic. | Q4 emphasized aggressive digital deployment plans for 2025 with at least 350 new digital displays (stretching to 375), robust digital revenue growth (nearly 8% year-over-year, with programmatic up 30%), and the use of both organic growth and M&A for digital assets. | Increased focus and expansion. The company is clearly doubling down on digital conversion with higher deployment targets and revenue growth expectations. |
Active M&A Activity and Strategic Acquisitions | Q1 noted a quiet M&A quarter with small deals. Q2 mentioned limited activity ($10 million) with expectations for a pickup. Q3 discussed “fill-in” acquisitions and preparations for a ramp-up in 2025. | Q4 described a modest 2024 M&A spending ($45 million) with strong indications of a more active 2025 outlook, forecasting about $150 million in deals including acquisitions of digital assets, supported by a strong investment capacity. | Renewed focus with anticipation for greater M&A activity in 2025. While 2024 was quiet, the outlook for strategic acquisitions has become more aggressive. |
National Advertising Revenue Challenges and Geographic Market Gaps | Q1 and Q2 reported declines in national advertising (5.5% drop in Q1, 2.5% decline in Q2) and cited regional performance issues (e.g. Midwest, Gulf Coast). Q3 pointed out softness in national revenue and challenges in regions like the Gulf Coast. | Q4 reiterated challenges with national ad revenue, attributing lagging performance to a weaker footprint in key DMAs (New York and L.A.) and emphasizing that geographic market gaps continue to hamper national ad spend. | Persistent challenges remain. National advertising headwinds and geographic gaps are consistently noted, with ongoing concerns about limited exposure in top markets. |
Rising Operating Expenses and Cost Pressures (Including ERP Conversion and Reduced COVID-19 Relief) | Q1 reported a 4.4% increase due to normalization (loss of COVID relief) and ERP conversion spending. Q2 saw a modest 1.9% rise, while Q3 experienced a 5.4% increase amid timing issues and higher costs. | Q4 reported a 4% increase driven by peak ERP conversion costs (expected to continue until Q1 2025) and the absence of COVID-19 relief, despite adjustments in other expense areas. | Consistent cost pressures are evident due primarily to ongoing ERP conversion costs and loss of COVID-related benefits, with management expecting improvements post-conversion. |
Programmatic Advertising Growth and Cost Dynamics | Q1 showed strong growth (27% increase) with digital same-store gains. Q2 reported a 73% improvement with new customer segments and favorable cost dynamics. Q3 revealed over 70% growth, noting higher costs offset by premium CPMs and anticipated cost reductions. | Q4 recorded a 30% year-over-year increase in programmatic revenue during the quarter (with full-year growth over 48%), indicating sustained strength while managing cost pressures through improved efficiency and higher CPMs. | Very positive growth with evolving cost efficiencies. While growth remains robust, there is a slight moderation in the Q4 percentage gain indicative of a maturing channel. |
Expiration of Net Operating Losses and Dividend Policy Implications | Q1 explained that 2024 would be the final year to use NOLs, leading to upward pressure on distributions. Q2 reinforced this point with details about $35 million of NOLs and potential special dividends. Q3 discussions did not mention this topic. | Q4 did not mention net operating losses or dividend policy implications. | No recent mention. The topic was prominent in Q1 and Q2 but has since dropped out of discussion in Q3 and Q4, possibly having been addressed earlier in the year. |
Strong Financial Position and Liquidity for Future Investments | Q1 stressed a robust balance sheet with low leverage (below 3x net debt/EBITDA) and significant liquidity (~$635 million). Q2 emphasized debt repayment achievements and over $1 billion in available liquidity. Q3 reiterated strong liquidity and low leverage. | Q4 confirmed strong liquidity with $500 million total, healthy leverage metrics (2.83x net debt/EBITDA), and significant investment capacity (over $1 billion), supporting future acquisitions and strategic investments. | Steady strength. The company consistently maintains a strong financial position and liquidity across periods, ensuring readiness for future investments. |
Emerging Political Advertising Revenue Trends | Q1 noted modest but growing political ad revenue ($3.8 million) and anticipated a tailwind. Q2 reported that political ads added around 60 basis points to growth with $15 million booked, driven largely by local races. Q3 celebrated record levels (about $30 million full-year expectation). | Q4 reported a significant jump with Q4 political revenue at $14.5 million and a full-year total of $29.2 million, though noting uncertainties about the sustainability and replacement of this revenue in the future. | Upward momentum. Political advertising revenue has steadily increased, reaching record levels. However, there remains uncertainty about future replacement dynamics. |
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2025 AFFO Guidance
Q: Why is 2025 AFFO guidance below estimates?
A: Management explained that several factors are contributing to lower AFFO guidance for 2025. They won't have the benefit of certain net income items this year , and there's a $0.13 headwind due to CapEx and the loss of Vistar income. They're also experiencing peak expenditures from their ERP conversion, expected to complete in Q1 next year. Additionally, last year's muted acquisition activity means acquisitions are adding only about 40 basis points this year, which is typically higher. -
CapEx and Digital Conversions
Q: What's your plan for digital conversions and CapEx?
A: The company plans to deploy 350 to 375 digital conversions this year, more than ever before. The spend is expected to be steady throughout the year. Limiting factors include regulatory permitting, construction challenges, supply chain issues, and coordinating crews and power hookups. They also have extraordinary CapEx in their logo division and for building new facilities and refurbishing old ones. -
M&A Pipeline
Q: Can you discuss the M&A pipeline and deal sizes?
A: Management indicated their M&A pipeline includes deals ranging from $2 million to $50 million. They had focused on retiring the term ad last year, but now sellers are approaching them since they're back in the market. It's a typical year of good Lamar tuck-in activity, and they are being active and aggressive. -
National Growth Lagging Peers
Q: Why is your national growth lagging peers?
A: The company attributes this to their footprint, as national ad spend focuses on top DMAs like New York and Los Angeles, where their presence is less robust than competitors like OUTFRONT or Clear Channel. It's also driven by category recoveries; for example, the entertainment category focuses on LA, benefiting competitors with stronger footprints there. -
Pricing and Rate Increases
Q: How do you view pricing and ability to drive rates?
A: With occupancy at peak levels, virtually all gains last year were driven by rate increases, and they anticipate this will continue. To hit their goals, they must continue to drive rate, given limited room for higher occupancy. -
Industry Growth Estimates
Q: Why is your growth guidance below industry estimates?
A: Management notes that industry estimates include broader out-of-home definitions like digital screens not in their portfolio, such as retail television networks and cinema advertising. Their guidance reflects their specific portfolio, and they've seen total out-of-home up between 3.5% and 4%. Differences are due to portfolio compositions and inclusion of smaller screens and transit space recoveries not in their portfolio. -
Vistar and T-Mobile Partnership
Q: What does T-Mobile's involvement with Vistar mean for you?
A: T-Mobile's investment in Vistar is positive for the industry. T-Mobile is entrepreneurial, understands marketing, and has unique consumer insights as a leading cellular provider. This bodes well for Lamar as the owner of the largest large-format digital network in the country.