Lamar Advertising Company — Q1 2024 Form 10-Q
Business context and reporting period. This combined, unaudited filing covers Lamar Advertising Company and its wholly owned subsidiary, Lamar Media Corp., for the three months ended March 31, 2024; comparisons are with Q1 2023 unless noted. Lamar primarily sells advertising space on billboard, logo and transit displays. Lamar Media is the operating borrower and holds corporate operating cash.
Key financial results
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Net revenue | $498.2 million | $471.3 million | +5.7% |
| Operating income | $124.6 million | $118.8 million | +4.9% |
| Net income | $78.5 million | $76.2 million | +3.0% |
| Diluted EPS | $0.76 | $0.74 | +$0.02 |
| Operating cash flow | $110.6 million | $108.7 million | +$1.9 million |
| Adjusted EBITDA (non-GAAP) | $211.9 million | $198.0 million | +7.1% |
| FFO / AFFO (non-GAAP) | $148.5 million / $158.2 million | $143.5 million / $144.1 million | FFO +3.5%; AFFO +9.8% |
Revenue growth was led by billboard advertising, up $22.2 million, and transit advertising, up $4.2 million; logo revenue rose $0.4 million. On an acquisition-adjusted basis, revenue increased 5.3%. Operating expenses excluding depreciation and amortization and asset-sale gains rose 6.5% to $300.5 million, outpacing reported revenue growth. Operating margin was approximately 25.0%, versus 25.2% a year earlier. Interest expense increased $3.0 million to $44.5 million, primarily due to higher rates on the credit facility and receivables securitization borrowings. The effective tax rate was 1.9%, primarily reflecting REIT status and foreign items.
Q1 cash flows included $45.0 million used in investing activities, including $29.5 million of capital expenditures and $18.3 million for acquisitions; and $73.6 million used in financing activities, principally reflecting dividends and distributions, partly offset by net revolving-credit borrowings. Cash declined $8.2 million to $36.4 million. The company declared and paid $1.30 per common share in the quarter.
Balance sheet, debt and liquidity
- At March 31, 2024, total assets were $6.53 billion and stockholders’ equity was $1.18 billion.
- Debt was $3.43 billion gross, or $3.40 billion net of deferred financing costs; cash was $36.4 million. Debt figures exclude operating lease liabilities, which totaled $1.24 billion.
- Current maturities of debt were $585.8 million, compared with $250.0 million at year-end 2023, contributing to a working-capital deficit of $616.5 million. Management expects to repay the $350 million Term A loan due February 2025 with cash and revolving-credit availability.
- Total liquidity was reported as $634.8 million: $36.4 million of cash and $598.4 million available under the $750 million revolver. The $235.7 million receivables securitization balance had no additional borrowing availability and matures July 21, 2025.
- Management said liquidity should be adequate for operating needs over the next 12 months and expects 2024 operating cash flow to exceed cash needs for operations, capital expenditures and dividends. Lamar Media reported compliance with applicable debt covenants.
Outlook, commentary and risks
- Management anticipates approximately $125 million of total 2024 capital expenditures. It expects 2024 common distributions to be at least $5.20 per share, including the $1.30 paid in March, subject to board approval. Future distributions remain discretionary and subject to REIT requirements, cash flows, debt restrictions and other factors.
- The company completed multiple acquisitions for approximately $18.3 million during the quarter and plans to continue evaluating acquisitions, construction and reinvestment opportunities.
- Variable-rate debt under the senior credit facility and receivables program totaled approximately $1.33 billion, about 38.7% of outstanding debt, at a weighted-average rate of 6.7%. The filing estimates a 200-basis-point increase would have added approximately $6.3 million to interest expense for the quarter. Higher rates could reduce earnings and cash available for distributions.
- The revolver’s stated maturity is July 2028, but it may spring to an earlier date if liquidity is insufficient to repay specified Term B loan or note maturities. The receivables facility matures in July 2025; refinancing or replacement may be needed.
- Management identifies economic conditions and advertising demand, competition, regulation, contract renewals, acquisition integration, digital deployment, severe weather, indebtedness and maintaining REIT status as risks. The filing reports no material changes to the risk factors in the 2023 Form 10-K. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting.
- Non-GAAP measures, including adjusted EBITDA, FFO and AFFO, are supplemental measures and are not substitutes for GAAP results or operating cash flow; company definitions may not be comparable with other issuers.
Most important facts for investors to verify
- How Lamar will repay or refinance the $350 million Term A loan due February 2025 and the receivables securitization facility due July 2025, given the current working-capital deficit and no securitization borrowing availability.
- Whether revenue growth and margins persist after separating organic growth from acquisitions, and whether expense growth—particularly stock-based compensation—continues to pressure operating margins.
- Actual variable-rate debt exposure, interest costs and covenant headroom if rates remain elevated or rise further.
- Whether operating cash generation supports planned capital spending and the expected minimum $5.20-per-share 2024 distribution while maintaining adequate liquidity.
- Whether the revolver springing-maturity liquidity test and other debt restrictions could affect refinancing, distributions or investment plans.