Lamar Advertising's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Lamar Advertising (LAMR)

Q3 2011 Earnings Call

November 03, 2011 11:00 am ET


Kevin P. Reilly - Chairman, President, Chairman of Lamar Media Corporation, Chief Executive Officer of Lamar Media Corporation and President of Lamar Media Corporation

Sean E. Reilly - Chief Executive Officer

Keith A. Istre - Chief Financial Officer, Principal Accounting Officer and Treasurer


Benjamin Swinburne - Morgan Stanley, Research Division

Jaime Morris - UBS Investment Bank, Research Division

Jason B. Bazinet - Citigroup Inc, Research Division

Nadia Lovell - JP Morgan Chase & Co, Research Division

Marci Ryvicker - Wells Fargo Securities, LLC, Research Division

William G. Bird - Lazard Capital Markets LLC, Research Division

James Dix - Wedbush Securities Inc., Research Division



Excuse me everyone, we now have Kevin Reilly, Sean Reilly and Keith Istre in conference. [Operator Instructions] In the course of this discussion, Lamar may make forward-looking statements regarding the company, including statements about its future financial performance, strategic goals and plans. Lamar has identified important factors that could cause actual results to differ materially from those discussed in this call in the company's reports on forms 10-K and 10-Q and the registration statements that Lamar files with the SEC from time to time. Lamar refers you to those documents.

Lamar's third quarter 2011 earnings release, which contains the information required by Regulation G, was furnished to the SEC on a form 8k this morning and is available on Lamar's website, I would now like to turn the conference over to Kevin Reilly. Mr. Riley, you may begin.

Kevin P. Reilly

Alabama fan all of us here in Ban Rouge thank you for helping us kick off this call. I want to welcome all of our analysts and friends on this call. One of our goals today is to shed some light on the cannibalization issue of i.e. digital on our analog business. And also to shed a little light on the secular versus cyclical, as it relates to our analog business. And in a few minutes, Sean will give you some data points that we hope will help the marketplace get their arms around those particular issues.

With that, I'd like to go ahead and start with Keith Istre to walk us through the quarter.

Keith A. Istre

Yes, just very briefly, I've not much to say this morning. I wanted to just highlight the paragraph in the press release concerning the extraordinary expenses for the legal claims and the fees associated with it. On the last call, I mentioned to everybody that our third quarter expenses should come in slightly under our second quarter expenses because we were going to be lapping some of the employee benefit programs that we had put in place beginning in the third quarter of last year. And I just wanted to draw a quick reconciliation. Last quarter, the second quarter of this year, our direct and G&A expenses were up 2% this quarter without the extraordinary settlement of the legal claims, the $1.2 million indirect in G&A we would be up 1.7% in pro forma expense growth. So basically, where we thought we would come in. Our consolidated expenses with -- including corporate overhead, without those claims and the fees associated would be 2% up for the quarter versus 2.1% up for the second quarter of this year. So we're going into the fourth quarter, we feel good about our expense growth for the year and we see no unusual items on the radar as of this time for our fourth quarter.

Also, if you look at the impact that those expenses had on our EBITDA, if you took those -- if you added those expenses back to our reported EBITDA for the quarter, we would have retained 65% of our revenue growth as our increase in EBITDA. So we're pleased with those numbers. With that, I'll turn it over to Sean.

Sean E. Reilly

Thank you, Keith. As Keith mentioned, expenses are in great shape, excluding those extraordinary legal expenses we're below 2% pro forma, so I feel good about that. One of those settlements by the way, was the permitting issue in New York City, and I'm happy to report we reached a great settlement with the city and the settlement's good for the city, it's good for the Lamar, it's good for the industry. And it leaves Lamar as -- with the largest number of fully permitted traditionally faces in the 5 boroughs and so, we can feel good about the way that played out.

Getting onto some of the traditional numbers that we gave you guys. We ended up the year -- I'm sorry we had at this moment in time, 1,378 digitals in the air. If you include the 40 that we have on order, we should finish up the year with roughly 250 new additional digitals this year. And the third quarter was a good quarter for us to look at and analyze in terms of whether this digital growth has come at the expense of our traditional platform. If you look at all of Q3, digital revenue was up 18%, and the rest of the platform was up 1.6%. So the rest of the platform continues to grow and that's in the face of what we believe is about 1%, U.S., domestic ad spend growth. Particularly if you look at September, I hate to just look at one month, but because we were adding digitals during the course of the quarter, it might instructive. ur digital book for business for September was up 26%. The rest of the platform was up 3.1%. Again, pacing ahead of U.S. domestic ad spend and ahead of GDP.

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