LAMR

Lamar Advertising Company (LAMR)

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Lamar Advertising (LAMR)

Q1 2013 Earnings Call

May 08, 2013 11:00 am ET

Executives

Sean E. Reilly - Chief Executive Officer

Keith A. Istre - Chief Financial Officer, Principal Accounting Officer and Treasurer

Analysts

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

Benjamin Swinburne - Morgan Stanley, Research Division

James G. Dix - Wedbush Securities Inc., Research Division

Alexia S. Quadrani - JP Morgan Chase & Co, Research Division

Eric O. Handler - MKM Partners LLC, Research Division

Davis Hebert - Wells Fargo Securities, LLC, Research Division

Presentation

Operator

Excuse me, everyone. We now have Sean Reilly and Keith Istre in conference. [Operator Instructions]. In the course of this discussion, Lamar may make forward-looking statements regarding the company, including statements about its future financial performance, strategic goals and plans. All forward-looking statements, including statements with respect to Lamar's consideration of an election to real estate investment trust status, involve risks, uncertainties and contingencies, many of which are beyond Lamar's control and which may cause actual results to differ materially from anticipated results. Lamar has identified important factors that could cause actual results to differ materially from those discussed in this call in the company's most recent annual report on Form 10-K as updated by its quarterly reports on Form 10-Q. Lamar refers you to those documents.

Lamar's first quarter 2013 earnings release, which contains information required by Regulation G regarding certain non-GAAP financial measures, was furnished to the SEC on a Form 8-K this morning and is available on Lamar's website, www.lamar.com.

I would now like to turn the conference over to Sean Reilly. Mr. Reilly, you may begin.

Sean E. Reilly

Thank you, Tiffany, and welcome, everyone, to our discussion of first quarter results. Kevin will not be on the call, as he is out of the country.

I'll begin with a quick comment on our endeavors to seek REIT status. We don't have a substantive update today, as we continue to await final IRS response to our PLR request. As you'll recall, we filed in November of last year and were told to expect it in 3 to 6 months. We're now at the outer edge of that time horizon, so, hopefully, it'll be sooner rather than later. When we do get it, we will thoroughly analyze it and communicate its ramifications to the market as soon as possible.

I'll now turn it over to Keith, and he'll discuss the financial results.

Keith A. Istre

Good morning, everyone. Just a couple of highlights from the quarter. You saw from our press release revenue came in at $283.5 million. We had guided to a range of $282 million to $285 million, so we were in the midpoint of that range; on a pro forma growth basis, up 2.4%. The nice surprise in the quarter was that the direct and G&A expenses before corporate overhead was exactly flat or even with last year's first quarter, absolutely no growth whatsoever. There's a couple of things that created that dynamic. One was we have gone to a state-of-the-art illumination system for all of our static billboards, and we are still rolling that out. I had mentioned it on a call last year. But our illumination expense was down $0.75 million in the quarter due to that technology. And in addition, we used to own our own printing facilities, and, at the end of last year, we divested of those and went under contract with a national supplier for all of our advertising copy that we put up on the boards for the customers and that resulted in a first quarter savings of $1 million as well.

Corporate expenses were up about $1 million. As I told you last quarter, we were going to be incurring some REIT expenses at the corporate level. About $250,000 of that $1 million increase was REIT related, and the other -- another $200,000 was legal and accounting related to 2 acquisitions that we did in the fourth quarter of last year. All of that being said, that resulted in a EBITDA pro forma growth of 5.2%. And our margins were 39% for the quarter, and that is the best first quarter results as far as our margins since the first quarter of 2008.

With that, I'll point it back to Sean.

Sean E. Reilly

Great. Thanks, Keith. So as Keith mentioned, on the operating side, it's pretty much steady as she goes. Our team continues to run an extremely tight ship on the expense side.

But it should continue throughout the year. We'll continue to see the benefits of savings on illumination, and, of course, our outsourcing of our printing operation should again continue to show benefits through the course of the year.

Let me kick off the familiar internal stats and then I'll open it up for questions. Let me start with digital. As of today, we have 1,750 digital units in the air, 972 bulletins and 778 posters. We put up 42 in Q1, so we're pacing slightly ahead of plan in terms of our digital deployment. And it looks like we'll end up the year with about 150 new digital units in the year.

Some of -- we've been fortunate on the regulatory front of late. And when you have these regulatory wins, sometimes it's use it or lose it. So we went ahead and accelerated our pace of deployment because of those regulatory wins.

On the same board digital revenues side, slightly disappointing. We came in, in Q1 at minus 2.7% primarily at the tail end of the quarter; things it got a little soft in March. We are reading the tea leaves into May and June, and we think we're seeing some improvement. So hopefully, when we get together next, you'll see that number turning the other way.

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