Lamar (LAMR) Q4 2025 Earnings Call Transcript

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DATE

Friday, Feb. 20, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Sean Reilly
• Chief Financial Officer — Jay Johnson

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TAKEAWAYS

• Acquisition-Adjusted Revenue -- Grew more than 4% in the quarter when excluding political advertising, with December seeing nearly 6% growth and full-year growth of 2.1% to $2.27 billion.
• Adjusted EBITDA -- Increased 3.7% to $288.9 million for the quarter; margin expanded 40 basis points to 48.5%, with operating margin above 47% at full-year guidance midpoint (historic high).
• Funds From Operations (AFFO) -- Diluted AFFO per share was $2.24 for the quarter (up 1.4%) and $8.26 for the full year (up 3.4%); full-year 2026 guidance is $8.50–$8.70 per share, targeting 4.1% growth at the midpoint.
• Dividend -- Regular quarterly dividend paid was $1.55 per share for 2025; proposed Q1 2026 dividend is $1.60 per share, annualizing to $6.40, with a projected yield of 4.8% at the prior close.
• Digital Expansion -- Added 111 digital displays in the quarter, ending with 5,553; digital accounted for 33.7% of Q4 business and 31.6% of full-year revenue.
• Programmatic Revenue -- Programmatic revenue rose approximately 19% year over year for Q4, with national/programmatic segments up 3.3% overall.
• M&A Activity -- Completed 13 acquisitions in Q4 ($57 million cash) and 50 in 2025 ($191 million cash), with the Verde UPREIT transaction highlighted as an industry first; seven acquisitions totaling $40 million have been closed since January 1, 2026.
• Expense Growth -- Expense increases are expected to moderate in the second half of 2026.
• Capital Expenditures -- Total spend was $63 million in Q4, with $20.8 million for maintenance; full-year CapEx was $180.8 million ($57.3 million maintenance).
• Net Debt and Liquidity -- Total consolidated debt was ~$3.4 billion; net debt to EBITDA at 2.92x (near historic lows); liquidity at year-end was $800 million ($64.8 million cash, $742.2 million revolver), and investment capacity exceeds $1 billion.
• Political Advertising Outlook -- Political advertising was a ~$11 million headwind in Q4 vs. 2024; management forecasts a $12–$14 million YOY political revenue tailwind for 2026.
• Category Performance -- Service, health care, building, and construction categories saw double-digit Q4 revenue gains (service up 12%, health care up 13%, financial up 17%, building/construction up 16%); telecom fell 10%, beer/wine declined 20%.
• World Cup Impact -- Management projects $3–$4 million in incremental revenue from the 2026 World Cup, benefiting specific local markets.

SUMMARY

Management emphasized acquisition-adjusted revenue and profitability metrics that outpaced the revised guidance, citing robust December performance and a positive start to 2026. The company targets historic margin highs and continued digital expansion while maintaining disciplined expense growth and leveraging a strong balance sheet for further acquisitions. Management states that political advertising and new pharma opportunities may provide additional upside, with expectations for momentum to build throughout the year.

• Jay Johnson said, "Operating expense growth decelerated in the fourth quarter," indicating a shift from prior trends and foreshadowing expense moderation in 2026.
• Sean Reilly stated, "pacings for the balance of this year remain promising," expressing management's positive outlook based on current sales trends.
• M&A activity is expected to mirror or surpass last year's levels, with future synergies projected to bring post-acquisition multiples to the 10%–11% range for Lamar.
• Company integration of the Verde UPREIT and recently acquired assets is progressing successfully, positioning Lamar for further portfolio growth.
• National segment gains are being driven by recovering insurance advertising and continued strength in pharma, a trend supported by changes in FDA advertising rules.
• Dividend policy remains to distribute 100% of taxable income, and the proposed increase in quarterly distributions signals confidence in 2026 performance.

INDUSTRY GLOSSARY

• AFFO (Adjusted Funds From Operations): A REIT-specific performance metric that adjusts FFO for recurring capital expenditures and straight-line rents to better represent cash flow available to shareholders.
• UPREIT: "Umbrella Partnership Real Estate Investment Trust," a structure allowing property owners to exchange assets for operating partnership units in a tax-deferred manner.
• Programmatic Revenue: Automated, data-driven buying and selling of advertising inventory on digital platforms.
• Pacings: Internal forward-looking sales indicators derived from booked contracts and pipeline visibility.
• ARO (Asset Retirement Obligation): An accounting entry representing the future cost to remove and remediate billboard infrastructure as required by lease agreements.

Full Conference Call Transcript

Sean Reilly: Thank you, Angela. Good morning all, and welcome to Lamar's Q4 2025 Earnings Call. We ended 2025 with encouraging sales momentum with both local and national delivering growth in Q4 despite a challenging political comp in October. Excluding political, revenues grew more than 4% on an acquisition-adjusted basis in the quarter. We delivered increases across both analog and digital billboards as well as in airports and logos. Our revenue growth, combined with solid discipline on expenses, allowed us to exceed the top end of the revised full year AFFO guidance that we provided in August. The sales strength continued in Q1 and pacings for the balance of this year remain promising.

Based on those pacings and as noted in the release, we anticipate full year AFFO to be between $8.50 and $8.70 per share representing year-over-year growth of 4.1% in AFFO per share at the midpoint. The midpoint of the guidance also implies revenue growth of approximately 3.5% on an acquisition-adjusted basis, with expenses increasing approximately 3% on that same basis. Expense growth should taper as we get to the back half of 2026. I would also note that the midpoint of the range implies consolidated operating margins of over 47%, the best in the company's history.

In the meantime, back to Q4, categories of strength included services, health care, building and construction and financial, while telecom and beer and wine were weaker. For the quarter, local was up 1.7%, while national/programmatic grew 3.3%. This is the third consecutive quarter that national has been up. We had a real nice pharmaceutical buy that helped the health care category and boosted national's growth. Programmatic was again strong, up approximately 19% year-over-year. Excluding programmatic, national's growth was 1.5%. As mentioned, political was a headwind in Q4 and for the full year, but that, that dynamic should reverse in 2026. For the quarter, political was down about $11 million versus 2024. Again, headwind last year, tailwind this year.

We added 111 digitals in Q4, ending the year with 5,553 operating units. On a same-store basis, digital revenue increased 3.7% in Q4, demonstrating that advertisers continue to value the flexibility that digital provides. In light of that, we intend to remain aggressive and are targeting approximately the same number of additional internal digital deployments this year as last year. We closed 13 acquisitions in Q4 for approximately $57 million in cash, bringing the full year total to 50 acquisitions for $191 million in cash. In addition, of course, last year, we completed the Verde deal, the first UPREIT transaction in the history of the out-of-home space.

Our integration of the Verde assets as well as our other acquisitions in 2025 is going well, and I anticipate another active M&A year in 2026. We're actually off to a good start. As of yesterday, we've completed 7 acquisitions since January 1 for a total purchase price of approximately $40 million. Before I turn it over to Jay, I want to thank our employees for their contributions in 2025. From sales to ops to real estate, our consistent growth on the top and bottom line demonstrates that Lamar has the best team in out-of-home, and I look forward to seeing what we can achieve together in 2026. Jay?

Jay Johnson: Thanks, Sean. Good morning, everyone, and thank you for joining the call. We had a solid fourth quarter and are pleased with our results, which exceeded internal expectations across revenue, adjusted EBITDA and AFFO. Growth in AFFO continued in the fourth quarter. Diluted AFFO per share increased 1.4% to $2.24 versus $2.21 in the fourth quarter of 2024. In addition, the company ended the year above the high end of our revised AFFO outlook, driven by outperformance in December with acquisition-adjusted revenue growing almost 6% and acquisition adjusted EBITDA increasing 13.5% during the month. Operating expense growth decelerated in the fourth quarter with adjusted EBITDA margin remaining strong at 48.5%, an expansion of 40 basis points over a year ago.

Adjusted EBITDA for the quarter was $288.9 million compared to $278.5 million in 2024, which was an increase of 3.7%. On an acquisition-adjusted basis, adjusted EBITDA was up 2.1%. Also in the quarter, depreciation and amortization expense decreased $151.3 million, returning to a more normal level. As you may recall, in the fourth quarter of 2024, we revised the cost estimate included in calculation of the company's asset retirement obligations, or ARO. ARO accounts for Lamar's obligation to dismantle and remove over 71,000 billboard structures on leased land and restore the sites to original condition.

We test our ARO estimate annually and the cost to retire these assets rose substantially in 2024, which led to an increase in our depreciation and amortization expense during Q4 2024. As a noncash item, this has no impact on the company's adjusted EBITDA or AFFO. For the full year, acquisition-adjusted revenue increased 2.1% to $2.27 billion compared to $2.22 billion the prior year. Operating expenses grew approximately 2.6% and adjusted EBITDA was $1.06 billion, which represents an increase of 1.4% on an acquisition-adjusted basis. Adjusted EBITDA margin was 46.7% for the full year, essentially flat versus a year ago. We were pleased to see margin hold steady given continued pressures on the expense side.

The company ended 2024 with full year diluted AFFO of $8.26 per share, which was above the top end of our revised guidance. For the 12 months ended December 31, diluted AFFO per share increased 3.4% compared to full year 2024. Local and regional sales accounted for approximately 78% of billboard revenue in Q4, similar to the same period in 2024 and growing for the 19th consecutive quarter. This consistent performance exhibits the resilience of our core local advertising business and differentiates the company from our peer group. Now moving to capital expenditures. Total spend for the quarter was approximately $63 million, including $20.8 million of maintenance CapEx.

And for the full year, CapEx totaled $180.8 million with maintenance CapEx comprising $57.3 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 currently have approximately $3.4 billion in total consolidated debt and our weighted average interest rate is 4.5% with a weighted average debt maturity of 4.6 years. As defined under our credit facility, we ended the quarter with total leverage of 2.92x net debt to EBITDA, which remains amongst the lowest level ever for the company.

Our secured debt leverage was 0.6x at year-end, and we are in compliance with both our total debt incurrence and secured debt maintenance tests against covenants of 7x and 4.5x, respectively. As a result of the continued focus on our balance sheet, the company is well positioned on the acquisition front. Last year, we refinanced $1.1 billion of debt, extending our maturity profile and significantly improving liquidity. Lamar has an investment capacity of well over $1 billion and has the ability to deploy this capital while remaining at or below the high end of our target leverage range of 3.5 to 4x net debt to EBITDA. Our liquidity and access to capital both remain strong.

As of December 31, we had just over $800 million in total liquidity, comprised of $64.8 million of cash on hand and $742.2 million available under our revolver. The company's AR securitization was fully drawn with $250 million outstanding. In this morning's press release, we provided full year AFFO guidance of $8.50 to $8.70 per share, reflecting AFFO growth of 2.9% to 5.4% over 2024. At the midpoint of guidance, we expect acquisition-adjusted top line growth of about 3.6% with acquisition-adjusted operating expenses anticipated to grow modestly slower than revenue during the year. As we did last year, we are assuming SOFR remains flat for purposes of cash interest and have included $154 million in our guidance.

Our maintenance CapEx budget for the year is anticipated to be $64 million in 2026 and cash taxes are projected to come in at approximately $10 million. During 2025, we paid a regular quarterly cash dividend of $1.55 per share, totaling $6.20 for the full year. Management's recommendation will be to declare a regular cash dividend of $1.60 per share for the first quarter, and we expect to distribute a regular cash dividend of $6.40 per share in 2026. On an annualized basis, the Q1 proposed dividend represents a yield of 4.8% at yesterday's closing stock price.

As a reminder, the company's dividend is based on taxable income, subject to Board approval, and our dividend policy remains to distribute 100% of our taxable income. Again, we are pleased with our fourth quarter performance and strong finish to 2025 as well as the momentum we are seeing early this year, and we look forward to executing on our strategy in 2026. I will now turn the call back over to Sean.

Sean Reilly: Thanks, Jay. And as Jay mentioned, we had an exceptional holiday season with December's pro forma growth hitting almost 6%. And ex political for Q4, we grew 4.3% pro forma. In terms of regional relative strength and weakness, our Atlantic and Southwest regions showed relative strength in Q4 with our Northeast region showing relative weakness. In Q4, digital grew to 33.7% of our book of business. For the full year, it grew to 31.6% of our total revenues. We are still at what I would call peak average annual occupancy. So the gains that we saw throughout the year and we will be seeing in 2026 are primarily coming through rate.

As I mentioned, we ended the year with 5,553 digital units in the air, an increase of 111 over Q3 and an increase of 559 over year-end 2024, with approximately 320 of those being internally deployed and the rest through acquisition. And as I mentioned, on a same board basis, our digital billing grew 3.7% in Q4. With the help of a strong programmatic platform and that pharma buy, National had a strong Q4 and represented 22.4% of our revenues, the high watermark for the year. And as mentioned, programmatic grew 18.7% in Q4.

Regarding categories of relative strength and weakness, I mentioned and called out service, health care and financial, buildings and construction, services being up 12% in Q1, health care up 13% in Q1; financial up 17% -- I'm sorry, Q4 for all of those and building and construction up 16% in Q4. For the full year, services were up 10%, health care up 6% and financial up 10%, building and construction up 16%. Categories of relative weakness, telecommunications, down 10% in Q4. Beverages, beer and wine down 20% in Q4, similar numbers down for the full year. I would note that it's nice to see that our largest verticals, that being service and health care are also among our healthiest.

For a point of reference, telecom represents about 2% of our book. Beverages, beer and wine represents 1.5% of our book. Conversely, services represents about 19% of our book. Health care represents 10.5% of our book. So again, it's nice to see our largest verticals are also among our healthiest. With that, Angela, I will open it up for questions.

Operator: [Operator Instructions] And we'll go first to Cameron McVeigh with Morgan Stanley.

Cameron McVeigh: So Sean, I was curious your view on the state of the macro in the U.S. ad market as we're nearly 2 months into 2026. And then secondly, it sounds like a strong start on the M&A front. Curious how multiples are trending in the private market. And if you have an expectation or goal for the amount of acquisition spend over 2026.

Sean Reilly: Yes. So on the acquisition front, to start with, it looks to us like we'll do at least as much as we did last year on the cash acquisition side, which was close to $200 million. I'd say that's a realistic goal for this year given what we're seeing. And multiples are basically where we talk about them year in and year out. Because of the synergies we can bring to bear, the multiple from the seller's point of view might look something slightly below the mid-teen-ish range. But by the time we bring our synergies to bear, it's something between 10% and 11% going forward for us. And that arithmetic is holding up out there.

We're seeing a good ad spend climate for 2026. You've got some good things going on. Of course, we mentioned the political tailwinds this year, but you also have some additional spend in and around World Cup venues. We expect to pick up some of that. We are optimistic about where pharma is going to come in this year, and that's a pardon the pun shot in the arm for us. So yes, we feel good and pacings look good.

Operator: Our next question comes from Jason Bazinet with Citi.

Jason Bazinet: I just had a question on the decision by Clear Channel to sell themselves. I guess if that acquisition ends up going through, do you think that has any potential M&A implications for you to peel off some of their assets? Or would you view that as unlikely?

Sean Reilly: I would say, number one, just in terms of structurally for the industry and strategically for how we're positioned and their position, we don't see any change in terms of what it means for the industry. Scott and his team are going to stay in place. So from that point of view, I think as they get financially more healthy, that's a good thing for the industry. Looking at the structure of the go private and the work that they're going to do to shore up the balance sheet as they do that, it looks to us like they don't need to sell assets to delever. So I would put it as in the probably not likely category for now.

They may, for strategic reasons, decide that some markets don't fit their profile. But for now, I would call the whole transaction sort of steady as she goes for the industry.

Operator: Our next question comes from Daniel Osley with Wells Fargo.

Daniel Osley: How should we think about acquisition-adjusted growth in Q1 as a starting point after the strength you called out in December? And how do you see the growth cadence playing out for the full year?

Sean Reilly: Good question. I think it's going to be one of those years where Q1 comes in maybe a tad below where the guide implies and then we pick up momentum as the year moves on. That's what the pacings are indicating. And I would also note that traditionally, political breaks late. So the fact that our pacings for the time being actually are showing that the guidance is a tad conservative. It may also be conservative given what we're anticipating political may do.

Again, the political has been relatively easy to predict at the end of the year, but at the beginning of the year, given that it breaks late and the campaigns happen in September, October, November, again, the good news is it's not reflected in our pacings right now. So it can only get stronger as the year progresses.

Daniel Osley: That's helpful. And maybe a quick follow-up. What are your expectations on local versus national for the year? And can you help us to quantify the benefit you'll have from the World Cup this year?

Sean Reilly: So when you look at Lamar's footprint on the World Cup, we're not as well positioned to say OUTFRONT or Clear Channel, but we'll get our share. So we're anticipating, let's call it, $3 million to $4 million in incremental World Cup business. It's nice, and it's certainly going to help those local markets that have World Cup venues. We're feeling good about national. We've had a tough past few years until recently last year with our national book of business. Some of the verticals that were 2 years ago, a drag are now coming back in. I would highlight insurance, for example. So we're very positive on what's going on, on the national front.

And of course, to the extent pharma comes in, in Q1 or 2, that's a lift that we didn't have last year in the first half.

Operator: We'll go next to David Karnovsky with JPMorgan.

David Karnovsky: On the 3% cash OpEx growth, I think that's a little above the kind of 2.5% traditional increase, Sean, as you termed it. Should we think about that delta as largely driven by the ERP? And can you just update on where you are in that process?

Sean Reilly: Sure. I'll let Jay hit the ERP. But yes, some of it is the ERP. Some of it, though, is also health care. There's no question, but that health insurance has inflation that is running a little hotter than the rest of what happens on our expense side. It's about 0.5%. So the difference between 2.5% and 3%, you can look at it as somewhat being fed by the -- what's going on in our health insurance costs and again, somewhat driven by ERP, which Jay can hit.

Jay Johnson: Yes. And it's been driven by ERP over the last couple of years. This year, that will moderate as we look to go live later this year with the second phase of our technology initiatives. From a corporate perspective, because of that, expenses have kind of normalized a little bit and should be -- corporate expenses should grow below 2% this year. I would reiterate the health care expenses. It's been quite a headwind for us over the last 3 years or so, you're talking high single-digit growth on the health care line with very little ability to foresee it or forecast it. So that's one that continues to plague us on the expense line.

David Karnovsky: Okay. And then, Sean, you mentioned pharma several times. Maybe just you could speak broadly to where you are with the vertical or where you stand also with just bringing on some other nascent national categories as well.

Sean Reilly: So yes, so the pharma story is a good one, and it's good for the industry, by the way. The basic driver is, number one, a change in FDA rules around disclosures that pharma is required to do for their advertising of drugs. Essentially, if you don't say what the drug is going to cure, then you don't have to do all the disclaimers of the possible side effects, which means you can say the name of the drug, you can say the name of the drug company, have pretty pictures and then say call your doctor. And that essentially opened up our medium to be an effective voice for pharma.

They also have a data set that proves out their campaigns. They use a company called Crossix to prove out campaigns across all media and Crossix has developed a way to do attribution studies for our media, which again has helped pharma prove out the efficacy of using us to get their word out. So yes, that's a good one, and we have high hopes that it can move the needle.

Operator: [Operator Instructions] We'll go next to Jonnathan Navarrete with TD Bank.

Jonnathan Navarrete: How much of a benefit are you expecting from political in terms of dollars? And how does that compare in terms of -- when you compare it to a presidential election year? And my last question is, should we expect most of the benefit from political to come in the third or fourth quarter?

Sean Reilly: Yes. The answer to the last part of the question is yes. Like I said, it typically breaks late. It doesn't show up in our pacings until the -- really and truly until the back half. In terms of the delta, one way to look at it is the difference between '24 and '25 was a little less than $20 million. So that's one way to think of it. That -- of course, '24 was a presidential year. And so I wouldn't anticipate quite that much. And so something maybe conservatively around $12 million, $13 million, $14 million in incremental this year political over last year's political.

Operator: At this time, there are no further questions in queue. I will now turn the meeting back to Sean Reilly.

Sean Reilly: Again, thank you all for your interest in Lamar, and we look forward to getting together again for the Q1 call in a few months. Thank you, Angela.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

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