Lamar Advertising Company Announces Fourth Quarter and Year End 2018 Operating Results

Three Month Results

•  Net revenue increased 7.4% to $427.9 million
•  Net income increased 9.8% to $95.7 million
•  Adjusted EBITDA increased 9.5% to $195.3 million

 
Three Month Acquisition-Adjusted Results

•  Acquisition-adjusted net revenue increased 5.6%
•  Acquisition-adjusted EBITDA increased 6.4%

BATON ROUGE, La., Feb. 20, 2019 (GLOBE NEWSWIRE) -- Lamar Advertising Company (Nasdaq: LAMR), a leading owner and operator of outdoor advertising and logo sign displays, announces the Company’s operating results for the fourth quarter and year ended December 31, 2018.

"We completed 2018 with a strong fourth quarter, allowing us to exceed the upper end of our guidance for full year diluted AFFO per share," said Chief Executive Sean Reilly.  "Our integration of the markets that we acquired from Fairway in late December is going well and we anticipate another year of solid sales and AFFO growth in 2019.”  

Fourth Quarter Highlights

•  Same unit digital revenue increased 10.8%
•  AFFO increased 8.6%
•  Diluted AFFO per share increased 7.2%

Fourth Quarter Results
Lamar reported net revenues of $427.9 million for the fourth quarter of 2018 versus $398.5 million for the fourth quarter of 2017, a 7.4% increase.  Operating income for the fourth quarter of 2018 increased $10.6 million to $130.6 million as compared to $120.0 million for the same period in 2017.  Lamar recognized net income of $95.7 million for the fourth quarter of 2018 compared to net income of $87.2 million for same period in 2017.  Net income per diluted share was $0.96 and $0.88 for the three months ended December 31, 2018 and 2017, respectively.

Adjusted EBITDA for the fourth quarter of 2018 was $195.3 million versus $178.4 million for the fourth quarter of 2017, an increase of 9.5%.

Cash flow provided by operating activities was $194.8 million for the three months ended December 31, 2018, an increase of $8.4 million as compared to the same period in 2017.  Free cash flow for the fourth quarter of 2018 was $126.0 million as compared to $112.3 million for the same period in 2017, a 12.2% increase. 

For the fourth quarter of 2018, Funds From Operations, or FFO, was $150.8 million versus $140.0 million for the same period in 2017, an increase of 7.7%.   Adjusted Funds From Operations, or AFFO, for the fourth quarter of 2018 was $147.5 million compared to $135.8 million for the same period in 2017, an increase of 8.6%.   Diluted AFFO per share increased 7.2% to $1.48 for the three months ended December 31, 2018 as compared to $1.38 for the same period in 2017.

Acquisition-Adjusted Three Months Results
Acquisition-adjusted net revenue for the fourth quarter of 2018 increased 5.6% over Acquisition-adjusted net revenue for the fourth quarter of 2017.  Acquisition-adjusted EBITDA for the fourth quarter of 2018 increased 6.4% as compared to Acquisition-adjusted EBITDA for the fourth quarter of 2017.  Acquisition-adjusted net revenue and Acquisition-adjusted EBITDA include adjustments to the 2017 period for acquisitions and divestitures for the same time frame as actually owned in the 2018 period.  See “Reconciliation of Reported Basis to Acquisition-Adjusted Results”, which provides reconciliations to GAAP for Acquisition-adjusted measures.

Twelve Months Results
Lamar reported net revenues of $1.63 billion for the twelve months ended December 31, 2018 versus $1.54 billion for the same period in 2017, a 5.6% increase.  Due to non-cash operating expense growth in depreciation, amortization and stock-based compensation for the year ended December 31, 2018 of $34.0 million over the same period in 2017, operating income for the year ended December 31, 2018 increased only 1.1% to $460.6 million.  Due to the above factors and a $15.4 million loss on debt extinguishment related to the prepayment of Lamar Media’s 5 7/8% Senior Subordinated Notes due 2022 in the first quarter of 2018, Lamar’s net income for the year ended December 31, 2018 decreased $12.4 million to $305.2 million as compared to $317.7 million for the same period in 2017.  Net income per diluted share for the year ended December 31, 2018 was $3.08 compared to $3.23 for the year ended December 31, 2017.  In addition, Adjusted EBITDA for the year ended December 31, 2018 was $722.5 million versus $671.4 million for the same period in 2017, a 7.6% increase.

Cash flow provided by operating activities increased to $564.8 million for the twelve months ended December 31, 2018, as compared to $507.0 million in the same period in 2017. Free cash flow for the twelve months ended December 31, 2018 increased 9.5% to $471.1 million as compared to $430.0 million for the same period in 2017.

For the twelve months ended December 31, 2018, FFO was $527.0 million versus $513.0 million for the same period in 2017, a 2.7% increase.  AFFO for the twelve months ended December 31, 2018 was $544.5 million compared to $496.3 million for the same period in 2017, a 9.7% increase.  Diluted AFFO per share increased to $5.50 for the twelve months ended December 31, 2018, as compared to $5.05 in the same period in 2017, an increase of 8.9%.

Liquidity
As of December 31, 2018, Lamar had $178.3 million in total liquidity that consisted of $156.8 million available for borrowing under its revolving senior credit facility and approximately $21.5 million in cash and cash equivalents. On January 17, 2019, Lamar increased its borrowing capacity under the revolving portion of Lamar Media’s credit facility by an additional $100 million in aggregate principal amount.

Guidance
We expect Diluted AFFO per share for fiscal year 2019 will be between $5.67 and $5.83, representing growth of approximately 3.0% to 6.0% over 2018, with net income per diluted share expected to be between $3.69 and $3.86.  See “Supplemental Schedules and Unaudited Reconciliations of Non-GAAP Measures” for a reconciliation of GAAP.

Forward Looking Statements
This press release contains forward-looking statements, including statements regarding sales trends.  These statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements.  These risks and uncertainties include, among others: (1) our significant indebtedness; (2) the state of the economy and financial markets generally and the effect of the broader economy on the demand for advertising; (3) the continued popularity of outdoor advertising as an advertising medium; (4) our need for and ability to obtain additional funding for operations, debt refinancing or acquisitions; (5) our ability to continue to qualify as a Real Estate Investment Trust (“REIT”) and maintain our status as a REIT; (6) the regulation of the outdoor advertising industry by federal, state and local governments; (7) the integration of companies and assets that we acquire and our ability to recognize cost savings or operating efficiencies as a result of these acquisitions; (8) changes in accounting principles, policies or guidelines; (9) changes in tax laws applicable to REITs or in the interpretation of those laws; (10) our ability to renew expiring contracts at favorable rates; (11) our ability to successfully implement our digital deployment strategy; and (12) the market for our Class A common stock. For additional information regarding factors that may cause actual results to differ materially from those indicated in our forward-looking statements, we refer you to the risk factors included in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017, as supplemented by any risk factors contained in our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.  We caution investors not to place undue reliance on the forward-looking statements contained in this document.  These statements speak only as of the date of this document, and we undertake no obligation to update or revise the statements, except as may be required by law.

Use of Non-GAAP Financial Measures
The Company has presented the following measures that are not measures of performance under accounting principles generally accepted in the United States of America (“GAAP”):  Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), Free Cash Flow, Funds From Operations (“FFO”), Adjusted Funds From Operations (“AFFO”), Diluted AFFO per share, Outdoor Operating Income and Acquisition-Adjusted Results.  Our management reviews our performance by focusing on these key performance indicators not prepared in conformity with GAAP. We believe these non-GAAP performance indicators are meaningful supplemental measures of our operating performance and should not be considered in isolation of, or as a substitute for their most directly comparable GAAP financial measures.
Our Non-GAAP financial measures are determined as follows:

• We define Adjusted EBITDA as net income before income tax expense (benefit), interest expense (income), loss (gain) on extinguishment of debt and investments, stock-based compensation, depreciation and amortization and gain or loss on disposition of assets and investments.  
• Free Cash Flow is defined as Adjusted EBITDA less interest, net of interest income and amortization of deferred financing costs, current taxes, preferred stock dividends and total capital expenditures.
• We use the National Association of Real Estate Investment Trusts definition of FFO, which is defined as net income before gains or losses from the sale or disposal of real estate assets and investments and real estate related depreciation and amortization and including adjustments to eliminate unconsolidated affiliates and non-controlling interest.
• We define AFFO as FFO before (i) straight-line revenue and expense; (ii) stock-based compensation expense; (iii) non-cash portion of tax provision; (iv) non-real estate related depreciation and amortization; (v) amortization of deferred financing costs; (vi) loss on extinguishment of debt; (vii) non-recurring infrequent or unusual losses (gains); (viii) less maintenance capital expenditures; and (ix) an adjustment for unconsolidated affiliates and non-controlling interest.
• Diluted AFFO per share is defined as AFFO divided by Weighted average diluted common shares outstanding.  
• Outdoor Operating Income is defined as Operating Income before corporate expenses, stock-based compensation, depreciation and amortization and loss (gain) on disposition of assets. 
• Acquisition-Adjusted Results adjusts our net revenue, direct and general and administrative expenses, outdoor operating income, corporate expense and EBITDA for the prior period by adding to, or subtracting from, the corresponding revenue or expense generated by the acquired assets or divested before our acquisition or divestiture of these assets for the same time frame that those assets were owned in the current period. In calculating Acquisition-Adjusted Results, therefore, we include revenue and expenses generated by assets that we did not own in the prior period but acquired in the current period. We refer to the amount of pre-acquisition revenue and expense generated by or subtracted from  the acquired assets during the prior period that corresponds with the current period in which we owned the assets (to the extent within the period to which this report relates) as “Acquisition-Adjusted Results”.

Adjusted EBITDA, FFO, AFFO, Outdoor Operating Income and Acquisition-Adjusted Results are not intended to replace other performance measures determined in accordance with GAAP.  Free Cash Flow, FFO and AFFO do not represent cash flows from operating activities in accordance with GAAP and, therefore, these measures should not be considered indicative of cash flows from operating activities as a measure of liquidity or of funds available to fund our cash needs, including our ability to make cash distributions. Adjusted EBITDA, Free Cash Flow, FFO, AFFO, Diluted AFFO per share, Outdoor Operating Income and Acquisition-Adjusted Results are presented as we believe each is a useful indicator of our current operating performance. Specifically, we believe that these metrics are useful to an investor in evaluating our operating performance because (1) each is a key measure used by our management team for purposes of decision making and for evaluating our core operating results; (2) Adjusted EBITDA is widely used in the industry to measure operating performance as it excludes the impact of depreciation and amortization, which may vary significantly among companies, depending upon accounting methods and useful lives, particularly where acquisitions and non-operating factors are involved; (3) Adjusted EBITDA, FFO, AFFO and Diluted AFFO per share each provides investors with a meaningful measure for evaluating our period-over-period operating performance by eliminating items that are not operational in nature and reflect the impact on operations from trends in occupancy rates, operating costs, general and administrative expenses and interest costs; (4) Acquisition-Adjusted Results is a supplement to enable investors to compare period-over-period results on a more consistent basis without the effects of acquisitions and divestitures, which reflects our core performance and organic growth (if any) during the period in which the assets were owned and managed by us; (5) Free Cash Flow is an indicator of our ability to service debt and generate cash for acquisitions and other strategic investments; (6) Outdoor Operating Income provides investors a measurement of our core results without the impact of fluctuations in stock-based compensation, depreciation and amortization and corporate expenses; and (7) each of our Non-GAAP measures provides investors with a measure for comparing our results of operations to those of other companies.

Our measurement of Adjusted EBITDA, FFO, AFFO, Outdoor Operating Income and Acquisition-Adjusted Results may not, however, be fully comparable to similarly titled measures used by other companies. Reconciliations of Adjusted EBITDA, FFO, AFFO, Outdoor Operating Income and Acquisition-Adjusted Results to the most directly comparable GAAP measures have been included herein.

Conference Call Information
A conference call will be held to discuss the Company’s operating results on Wednesday, February 20, 2019 at 8:00 a.m. central time.  Instructions for the conference call and Webcast are provided below:

Conference Call

General Information
Founded in 1902, Lamar Advertising (Nasdaq: LAMR) is one of the largest outdoor advertising companies in North America, with approximately 360,000 displays across the United States and Canada. Lamar offers advertisers a variety of billboard, interstate logo, transit and airport advertising formats, helping both local businesses and national brands reach broad audiences every day. In addition to its more traditional out-of-home inventory, Lamar is proud to offer its customers the largest network of digital billboards in the United States with over 3,100 displays. 

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The guidance provided above is based on a number of assumptions that management believes to be reasonable and reflect our expectations as of February 2019.  Actual results may differ materially from these estimates as a result of various factors, and we refer to the cautionary language regarding “forward looking” statements included in the press release when considering this information.