Lamar Advertising Company — Q1 2022 Form 10-Q
Business context and period. The filing covers the three months ended March 31, 2022 and compares results with Q1 2021. Lamar earns most of its revenue from advertising space on billboard, logo and transit displays. Lamar Media Corp. is the wholly owned operating subsidiary and borrower; its results are substantially similar to the parent’s consolidated operating results.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Net revenue | $451.4 million | $370.9 million | +21.7%; acquisition-adjusted growth was 18.6% |
| Operating income | $120.5 million | $88.9 million | +35.5% |
| Net income | $92.2 million | $38.3 million | +140.4% |
| Adjusted EBITDA (non-GAAP) | $191.2 million | $152.4 million | +25.5% |
| Operating cash flow | $102.0 million | $83.3 million | +$18.7 million |
| Capital expenditures | $28.8 million | $16.3 million | +$12.4 million |
Billboard revenue increased $67.7 million, transit revenue increased $12.5 million, and logo revenue increased $0.3 million. Operating margin was approximately 26.7%, versus 24.0% in Q1 2021; net margin was approximately 20.4%, versus 10.3%. The 2021 comparison included a $21.6 million loss on early debt extinguishment, absent in 2022. Adjusted EBITDA, FFO and AFFO are non-GAAP measures and should not be treated as substitutes for GAAP earnings or cash flow.
Cash flow and investment: Investing activities used $83.3 million, including $55.3 million for acquisitions and $28.8 million for capital expenditures. Financing activities used $2.7 million; the quarter included $111.7 million of common and preferred distributions and $115.0 million of net revolving-credit borrowings. Cash increased $16.1 million to $115.9 million.
Debt and liquidity
At March 31, 2022, reported debt was approximately $3.13 billion net of deferred financing costs ($3.17 billion before those costs), compared with $3.01 billion net at year-end 2021. Cash was $115.9 million, and revolving-credit availability was $446.3 million, for reported total liquidity of $562.2 million. The $175.0 million receivables securitization facility was fully drawn with no additional availability. Working capital remained negative at $164.0 million, an improvement from a $274.4 million deficit at December 31, 2021.
Approximately $1.06 billion of debt was variable-rate. Management reported covenant compliance and stated liquidity was expected to cover operating needs for the next 12 months. The filing estimates that a 200-basis-point rate increase would add about $4.6 million to interest expense for the quarter, based on its stated sensitivity analysis. Operating lease liabilities were $1.17 billion and represent a material additional contractual obligation.
Outlook, commentary and risks
- Management anticipated approximately $170 million of 2022 capital expenditures and expected operating cash flow to exceed operating, capital expenditure and dividend needs.
- Subject to board approval, the company expected total 2022 common distributions of $4.70 per share, including the $1.10 per-share Q1 payment. Future distributions remain discretionary and subject to REIT requirements, cash flows and debt restrictions.
- Q1 acquisitions totaled approximately $55.3 million. After quarter-end, on May 4, 2022, Lamar acquired Burkhart Advertising, including more than 1,500 billboard structures; the purchase was funded with cash and revolver borrowings.
- Management cited economic and advertising-market conditions, inflation, COVID-19 effects, competition, regulation, lease and contract renewals, acquisition integration, digital deployment, severe weather, leverage and REIT qualification as risks. Future results may differ from current expectations.
- The company reported effective disclosure controls and no material changes to internal control over financial reporting. No material changes to the risk factors in the 2021 Form 10-K were reported.
Important facts for investors to verify
- Whether revenue and adjusted EBITDA growth persist, including organic growth after adjusting for acquisitions and divestitures.
- How variable interest rates, refinancing needs and debt covenants affect interest expense and available liquidity.
- Whether management’s $170 million capital expenditure estimate and expected $4.70-per-share 2022 distributions remain achievable.
- The cash-flow and leverage effects of acquisitions, including the post-quarter Burkhart purchase, and the extent to which expected synergies are realized.
- The scale of lease commitments and other contractual obligations relative to cash generation; the filing lists $516.4 million of payments due in less than one year across debt, interest and contractual obligations.