Lamar Advertising Co 2026 Q2 Earnings Call

Thank you, Katie. Good morning, all. Welcome to Lamar's Q2 2026 earnings call. Our business is in a terrific place right now. As our second quarter results demonstrate, advertisers clearly value our ability to connect them with their audiences and deliver messages that resonate. We are meeting our customers where they are, including through our growing programmatic sales channel. We're attracting new advertisers who appreciate Out of Home's knack for standing out in today's increasingly fragmented media landscape. The vibe out there is good. For the quarter, revenue and EBITDA growth once again exceeded our internal forecasts, with increases in revenue across all business offerings, billboards, transit, airports, and logos. All regions, and on both the local and national levels.

On an acquisition-adjusted basis, consolidated revenue grew 6.1% in the second quarter, while EBITDA increased 7.3% with a record EBITDA margin of 49.2% in the quarter. It was our highest rate of revenue growth since Q2 2022 and our 21st consecutive quarter of revenue growth overall. The momentum has carried into Q3. Pacing suggests year-over-year revenue growth rates for the balance of 2026 are likely to be in the same range as Q2's. With that in mind, we have raised our guidance for full year AFFO to a range of $8.75-$8.90 per share. At the midpoint, that would represent AFFO per share growth of approximately 7% over 2025. Management will be recommending a $0.05 increase in our quarterly dividend to $1.65 per share.

Back to Q2. Categories of strength included service, political, retail, and financial, while real estate and amusements were slightly weaker. Service has been a reliable growth category for several years now, propelled by demand from attorneys. In the second quarter, we also saw a surge in business from technology service providers, including those within the AI space. Political spend, meanwhile, increased more than $5 million year-over-year in Q2 and is running well ahead of 2024 levels. It will continue to be a tailwind in Q4. About half the political dollars are being spent on our digital platform, which was the biggest driver of our overall growth in Q2. Our digital revenue increased 15.4% year-over-year and now constitutes a full third of our total billboard revenues. On a same board basis, digital billboard revenue increased 6.5% year-over-year.

Growth of more than 50% through our programmatic sales channel once again made it a bright spot, programmatic accounted for approximately 10% of digital billboard revenue in the quarter. Our national business was particularly strong, helped, of course, by the World Cup. On a consolidated basis, national and programmatic revenue increased nearly 16% in Q2, the sharpest increase since the COVID rebound in 2021. Local and regional revenue, meanwhile, increased 3.4%. We have been active on the M&A front. Through June 30, we had spent more than $100 million on nearly 30 billboard acquisitions, as well as on purchases of easements beneath our billboards. We have a healthy pipeline of billboard deals and easements under LOI and should easily exceed $200 million in cash spend for the full year.

Meanwhile, we expect to close our second UPREIT transaction in the coming weeks. All in all, I could not be more pleased with how the year is shaping up. I want to commend our team across Lamar Land for their efforts so far in 2026. We have been busy. With that, I will turn it over to Jay to walk you through some additional numbers.

Thanks, Sean. Good morning, everyone, and thank you for joining us. We had a strong second quarter and are extremely pleased with our results, which exceeded internal expectations and consensus estimates across revenue, adjusted EBITDA, and AFFO.

The airport business continued to outperform with acquisition-adjusted revenue increasing 21.1% in Q2 versus last year, which was an acceleration from last quarter when airports grew a healthy 15.5%. Our billboard regions all experienced mid-single-digit top-line growth, led by the Southwest and Atlantic, which were up 7.7% and 6.5% respectively. The positive momentum continued in July, with revenue increasing 6%, outpacing our original budget. July's strong performance brings acquisition-adjusted revenue to 5.2% through the first seven months of the year. We're optimistic about our booking pace for the balance of the third quarter as we approach midterm elections. Acquisition-adjusted consolidated expenses increased 5.1% in the second quarter, which grew 150 basis points more than anticipated, driven by variable expenses tied to solid revenue growth in the second quarter.

Adjusted EBITDA was $303.4 million compared to $278.4 million in 2025, an increase of 9% in the quarter and improving 7.3% on an acquisition-adjusted basis. This was the strongest growth we've seen since resurgence from the COVID-19 pandemic. Adjusted EBITDA margin expanded 110 basis points to 49.2%, the strongest margin in any quarter of the company's history. Adjusted funds from operations totaled $247.9 million in the second quarter compared to $225.3 million last year, an increase of 10.1%. Diluted AFFO per share grew 8.1% to $2.40 per share versus $2.22 in the second quarter of 2025. Local and regional sales grew for the 21st consecutive quarter and accounted for approximately 77% of billboard revenue in Q2. It has been over five years since the portfolio last experienced a year-over-year decline in local and regional sales, which was due to COVID.

National sales performance was extremely robust and grew to represent 23% of our book, up from 18% last quarter. On the capital expenditure front, total spend for the quarter was $42.7 million, including $14.7 million of maintenance CapEx. For the full year, we anticipate total CapEx of approximately $186 million, with maintenance CapEx comprising $65 million. As for our balance sheet, we have a well-laddered debt maturity schedule with no maturities until the AR securitization in October 2027 and no senior notes maturity until February 2028. We will likely extend the securitization later this year, assuming market conditions remain favorable. The company currently has approximately $3.5 billion in total consolidated debt. Our weighted average interest rate is 4.5%, with a weighted average debt maturity of four years.

As defined in our credit facility, we ended the quarter with total leverage of 2.9 times net debt to EBITDA, which remains amongst the lowest levels ever for the company. Our secured debt leverage was 0.7 times at quarter end. We are in compliance with both our total debt incurrence and secured debt maintenance test against covenants of seven times and 4.5 times, respectively. For the full year, we expect total leverage to hover around three turns, with secured leverage coming in comfortably below one times net debt to EBITDA. In addition, our latest 12-month interest coverage through June 30th was 7.1 times adjusted EBITDA to cash interest, further demonstrating the strength of the company's balance sheet. As Sean mentioned, M&A has been active thus far in 2026.

We continue to benefit from an investment capacity well over $1 billion, with the ability to deploy this capital while remaining at or below the high end of our target leverage range of three and a half to four times net debt to EBITDA. Our liquidity and access to capital both remain strong. At quarter end, we had $720 million in total liquidity, comprised of $68 million of cash on hand and $652 million available under our revolver. The AR securitization was fully drawn with $250 million outstanding. Subsequent to quarter end, the company repaid $55 million on the revolving credit facility, and we currently have $35 million outstanding. In this morning's release, we revised our full-year outlook and now expect diluted AFFO per share of $8.75 to $8.90, an increase of $0.22 at the midpoint.

Cash interest in our guidance totals $155 million and assumes no change in short-term floating interest rates for the balance of the year. As I touched on earlier, maintenance CapEx is budgeted for $65 million in 2026, and cash taxes are projected to come in around $12 million, which is slightly higher than our original expectations. Finally, our dividend. We paid a cash dividend of $1.60 per share in each of the first and second quarters. Management's recommendation for the third quarter will be to increase the dividend to $1.65 per share. This recommendation is subject to board approval, and we will communicate the board's decision. For the full-year, we expect to distribute a regular dividend of at least $6.50 per share. The proposed $6.50 distribution results in a yield of 4.1% at yesterday's closing stock price.