LAMR

Lamar Advertising Company (LAMR)

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Industry: Technology
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Lamar Advertising (LAMR)

Q2 2011 Earnings Call

August 04, 2011 10:00 am ET

Executives

Sean Reilly - Chief Executive Officer

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

Kevin Reilly - Chairman, President, Chairman of Lamar Media Corporation, Chief Executive Officer of Lamar Media Corporation and President of Lamar Media Corporation

Analysts

James Boyle - Gilford Securities Inc.

Benjamin Swinburne - Morgan Stanley

Jason Bazinet - Citigroup Inc

Paul Sweeney - Bloomberg Research

Marci Ryvicker - Wells Fargo Securities, LLC

Scott Van den Bosch - Moody's Corporation

James Dix - Wedbush Securities Inc.

James Marsh - Piper Jaffray Companies

Presentation

Operator

Excuse me, everyone. We now have Kevin Reilly, 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. Lamar has identified important factors that could cause actual results to differ materially from those discussed in this call in the company's reports on forms 10-K and 10-Q and the registration statements that Lamar files with the SEC from time to time. Lamar refers you to those documents.

Lamar's second quarter 2011 earnings release, which contains the information required by Regulation G, 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 this conference over to Kevin Reilly. Mr. Reilly, you may begin.

Kevin Reilly

Thank you, Chantal. I want to welcome everyone to our quarterly conference call. As is our custom, management will make some brief comments, and then we'll turn the call over for our Q&A. 8% GDP growth didn't help much, but you can't sugarcoat weak performance and a weak guidance. We had an exceptionally tough time closing business in the month, for the month, especially with our smallest customers. And that leads me to believe that there still is a lack of conviction out there among our local customers. So until demand there bounces back, we will continue to manage our expenses and our balance sheet accordingly. Of course, one bright spot throughout the year and we expect going forward, is our digital efforts, and we do expect good things there. With that, I'd like to turn the call over to Keith Istre, our CFO.

Keith Istre

Okay. Welcome, everybody. Just a couple of quick comments. As you know, we've guided to approximately $296 million revenue for Q2. You saw we came in at $293 million and some change, so we were obviously a little light, and that's disappointing. Sean will get more into the details of what drove that. But accordingly, based on our bookings and our Q2 performance, our guidance for Q3 revenue is identical to our actual loss for Q2, and that's $293 million, which is up 2%.

In our fiscal years, our Q2 and Q3 revenues on a pro forma basis are pretty much identical. So FYI, our Q3 pro forma revenue from last year is identical to our last year's Q2 pro forma revenue, which we show in our press release that you have. The only other comment is on expense growth. Our consolidated expenses, including corporate overhead, were up 2.2%, that's on an actual-to-actual basis. If you pro forma the end some of the benefit costs that weren't there last year, we would be up about 1%. So for the rest of the year, we do expect our expense growth to remain in the low single-digits. Sean?

Sean Reilly

Thanks, Keith. And I'll hit some of the highlights and also point out some areas of weakness. On the highlights, Keith mentioned the expense controls. Obviously, we saw that the economic tailwinds weren't as strong as we had hoped, and we've began to manage expenses accordingly, and we'll continue to do that.

On the digital front, as Kevin mentioned, we've got a lot of confidence in how we're doing on the digital front. As of the end of July, we had 674 bulletins in the air, and 629 posters in the air, for a total of 1,303 units. That's an increase of 134 units since we announced our goal of getting 300 in the air last November.

We were slowed down a little bit by the winds and the weather in the first half. I estimate now that we'll end the year with approximately 250 additional units in the air since we announced that goal, so we may come up with tad short, not because we don't want to put more in the air, but we are getting them up as fast as we're physically able.

Digital has grown to 13% of our book of business. It was up 15% in the first half of the year. So again, that indicates to us that we need to keep pedal to the metal when it comes to growing our digital footprint.

Rate and occupancy stats for Q2 -- we're in an environment now where it's very difficult to push rate with our local customers. And paired up in the rates statistics, Q2 2011 average poster rate of 437, Q2 2010 average poster rate of 431, an increase of only 1%. On the bulletin side, Q2 2011 average rate, $1,112, versus Q2 2010, $1,111, or absolutely flat. And that's a little bit of disappointing and I think reflects the economic environment.

On the occupancy side, we continue to see a little bit of struggle on the poster side of our business. Q2 2010 occupancy was 73%. Q2 2011 occupancy was 72%. The news is a little better on the bulletin side. Occupancy is up 3 points on the bulletin inside. Q2 2010, occupancy of 74%; Q2 2011 occupancy of 77%.

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