Excuse me, everyone. We now have Sean Reilly and Jay Johnson in conference. Please be aware that each of your lines are now in listen-only mode. At the conclusion of the company's presentation, we will open the floor for questions. At the course -- in the course of this discussion, Lamar may make forward-looking statements regarding the company, including statements about its future financial performance, strategic goals, plans and objectives, including with respect to the amount and timing of the distribution of stockholders and the impacts and effects of general economic conditions including inflationary pressures on the company's business, financial condition and results of operations. All forward-looking statements involve risks, uncertainties and contingencies, which many of which are beyond Lamar's control and which may cause actual results to differ materially from the anticipated results. Lamar has identified important factors that could cause actual results to differ materially from those discussed in this call in the company's second quarter 2022 earnings release and its most recent annual report on Form 10-K. Lamar refers you to these documents. Lamar's second quarter 2022 earnings release, which contains information required by Regulation G regarding certain non-GAAP financial measures was furnished to the SEC on a Form 8-K this morning and is available on the Investors section at Lamar website, www.lamar.com. I would now like to turn the conference over to Sean Reilly. Mr. Reilly, you may now begin.

Thank you, Carla. Good morning, everyone, and welcome to Lamar's Q2 2022 earnings call. Let me start by saying our business remains on solid footing. We were extremely pleased with our second quarter results, which were even stronger than we had anticipated, and our bookings for the balance of 2022 remain encouraging. As a result, as we noted in the release, we are pacing towards the top end of our previously provided guidance for full-year AFFO per share. Certainly, we're aware of the general macroeconomic concern out there. But apart from notes of caution around a few national accounts, we are not presently seeing signs of a slowdown in our book. That's not to say we will not. But for now, we are still feeling very good about the back half of 2022. Let's turn to the second quarter where we once again saw strong growth across all business lines and geographies, with billboard revenue up more than 10% on an acquisition-adjusted basis. Our transit and airport businesses also really performed well and with the exception of Canada, all our business units have surpassed pre-COVID levels. We were able to push pricing in Q2 with rates up high single-digits versus Q2 2021, both on analog posters and on Bolton. Meanwhile, our digital billing increased by more than 10% year-over-year on a same unit or same-store basis. Growth that reflects both higher rates and better sell-through. As we look forward, we will be comping against what was a strong second half of 2021. And we think it's likely that those growth rates will normalize to around 3% to 5% top line growth, and we expect expense growth, which you saw was above trend in Q2 to normalize also as we finish '22 and round into 2023. Those expense growth numbers will…

Thanks, Sean. Good morning, everyone, and thank you for joining us. I will begin with brief comments on the quarter, then review our balance sheet and conclude with a discussion of our current financial position. We had another solid quarter and are extremely pleased with quarterly results, which exceeded our own internal expectations as well as consensus estimates across revenue, adjusted EBITDA and AFFO. The company achieved AFFO growth for the seventh consecutive quarter, improving 10.9% to $1.94 per share on a fully diluted basis. Following our first quarter performance, and based on the outlook for the remainder of the year. In May, we revised guidance upward for the full-year and today reaffirm that guidance as we are tracking to the high end of the revised range. In the second quarter, acquisition-adjusted revenue increased 12.2% from the same period last year. Both revenue and adjusted EBITDA set new high watermarks for any quarter on record. And revenue in May was the highest of any month in the company's history. As in the first quarter, all of our regions experienced pro forma revenue growth ranging from the high single-digits to mid-teens. And through the first half of 2022 year-to-date, all outdoor regions had double-digit growth. Acquisition adjusted operating expenses increased 13.2% in the second quarter driven primarily by variable expenses tied to revenue. The most notable is the return of minimum guarantees associated with our transit and airport divisions. Operating expense growth decelerated in the quarter and should continue to moderate as we progress through the year and compare against more normal operations less impacted by COVID. Despite expense increases, the company maintained strong margins, which continue to lead the out-of-home industry. Our sales team has done a tremendous job pushing rates across the portfolio. Rates on our large-format traditional bulletins…

Thanks, Jay. Let me highlight a couple of points before we open it up for questions. With -- as Jay and I discussed, the normalization of our top line growth and our expense growth as we move through the back half, we expect to finish out the year at 46-plus percent consolidated EBITDA margins, which would essentially mirror our EBITDA margins from last year. Turning to our digital footprint and the number of units we have in the year, we ended the quarter with 4,159 units up and operational. Of those, year-to-date, 114 are new builds. We expect to finish up the year somewhere between 250 and 300 in terms of new digital conversions for 2022. We mentioned same-unit revenue increase, and we're really pleased with how that's gone. It was -- for Q2, it was up 10.6%. If we look at it on a year-to-date basis, our digital same board performance is up 15%. As Jay mentioned, we are basically at peak occupancy for our analog platform, our traditional platform. So gains are primarily being made through rate and the story there is likewise very strong. For our poster product, rates were up in Q2, 7.6%. And for our bulletin product, our largest product, rates were up 9.6%. So really pleased with the way the field is driving rate in the environment that we're in. We're still in that familiar 80% local, 20% national. But I would note that in Q2, it was a very balanced quarter in terms of relative strength. As Jay mentioned, local was up 10.4% and national/programmatic was up 8.4%. So relative balance there. Looking at categories of strength, our service, which is our largest vertical at 13% of our book of business was up about 18%. Restaurants, a very important category for us. It's about a little more than 9% of our book of business was up 11%. Retail was up 18% and of course, amusements, entertainment, and sports continues its recovery. It was up 42% in Q2. Education up 21%, gaming up 12% so really, as I mentioned, all of our top 10 verticals are performing nicely. I mentioned a couple of national accounts that were showing relative weakness. This was primarily in the insurance category. It's not a top 10 category. But our belief is that, that weakness was particular to that vertical and not indicative of a broader slowdown. So in sum, we're optimistic, as Jay mentioned, cautiously optimistic as we move into the back half of 2022, and we expect strong results as we close out the year. With that, Carlos, let's open it up for questions.

Absolutely. At this time we will open the floor for questions. [Operator Instructions]. We will take our first question from Ben Swinburne with Morgan Stanley. Your line is open.

Thank you. Hey good morning guys.

Hey, Ben.

Good morning, Ben.

Good morning. Maybe first, Sean, I was curious, you've been through a lot of cycles. I guess we don't really know what the cycle looks like over the next year. But what are you looking for in the business or in the field to sort of suggest maybe some changes to how you allocate capital or operate the business? And are there things you're thinking about today in terms of investments or your cost structure or your digital boards that you're maybe being a little more or M&A, are you being a little more deliberate just because of everything we're seeing around us or not? I guess, would be the first question.

Yes, great question. First of all, as you've heard me say many times, Lamar has been around for a long time. And we buy through the cycles. So I don't think you're going to see any of whatever the business cycle brings affect how we would view M&A, for example. And given the strength we're seeing in our digital footprint. I don't -- even if there is a little softness somewhere out there in the macro, I think you'll still see us pedal to the metal on digital build-out. So I think the answer would be no. We're just going to keep on keeping on whatever the macro brings.

Okay. That makes sense. And then I wanted to just follow-up on your comment about rate. I mean these rate increases or the benefit of rate, these are big numbers. Can you talk a little bit about how much of that is showing up from advertiser mix? In other words, are the same advertisers paying you 10% more this year than last year. That feels like a that's a lot of cost pressure on their side? Or is the field succeeding and bringing in different advertisers and sort of the mix shift is driving rate. I don't know if that question makes sense, but I was just curious if you can tell us how that works?

Yes, it makes a lot of sense, Ben, and we get this question a lot. We've been a REIT for I guess, five or six years now. And I've been telling our REIT investors that inflation is our friend when it comes to Lamar. And that's because our average length of contract is four months, which means every four months, we get to have a new rate discussion. So to answer your question, yes, it's new advertisers coming into the space and since it's turning over every four months, again, and that turnover is ratable through the year, right? So we're able to push rate because it's a new tenant. Now it may be a familiar advertiser, but they're coming on to a different unit. Yes, we have advertisers that are long-term occupants of the same space. That becomes a slightly different discussion, maybe not so aggressive on rate. But again, as space turns over and a new tenant comes in, that's when you get to have a new discussion.

Okay. That makes sense. And then maybe for you or Jay, I want to ask about the acquisitions you've completed. I see the margins on those acquisitions are lower than your overall margins. And I'm wondering -- I know that the assets that you bought are not all the same billboard, 40% plus businesses or maybe they're not yet. So just kind if you could talk about the sort of integration process of margin capture? Because I think if I look at the press release, it's like a 30% margin on the acquired business. I'm just wondering if that's just the state of those assets or if you can get those businesses up? And then I just wanted to ask about the UPREIT. Is the way that benefits a seller and therefore benefits Lamar, a function of using your stock? Or would that also apply to a cash acquisition? And then I'm done.

Sure. Ben, yes, I think you're misreading something on the margin contributions from acquisitions.

Okay.

With the exception of the Colossal acquisition, which was completed last year, Colossal has a different margin profile. It operates more sort of in the 10% to 15% margin range. But with that exception, all of the other traditional billboards we've bought are going to have incremental margin contributions between 45% and 60%. And so I think we're going to have to circle back with you on that arithmetic and see where that number is at.

It could be just Colossal bringing the average down. That could be it.

And then on the UPREIT, and I'll let Jay speak to this as well. But what the UPREIT structure allows us to do is, as you know, in a traditional C Corp, stock transaction, the seller has to take at least 50% of the consideration in the buyer's stock, and it can only be C Corp to C Corp. What the UPREIT allows us to do is be much more flexible to address sellers' tax situations. You can, for example, do UPREIT units for assets. You can do UPREIT units for partnership interest. You can do UPREIT units for C-Corp stock. And you can also treat buyers differently depending on their own individual tax circumstances. So we just view it as a very flexible way to meet sellers' tax needs. I don't know, Jay, you might want to...

Sure. So ultimately, OP units are convertible on a one-for-one basis into Lamar common stock. The issuance of OP units, though to the seller is not a taxable transaction. So that's the benefit for the seller to defer their taxes. After holding the units for a year, they're eligible to convert those one-for-one for Lamar stock. At our option, we can redeem those with either Lamar stock or cash. So we kind of control that side of the transaction, whether we elect to issue equity or pay the equivalent in cash.

Thank you. Thanks guys.

And our next question comes from Jason Bazinet with Citi. Your line is open.

Thanks so much. I guess this period is really confusing to me, and maybe you can sort of give your color in terms of what's happening. But we're watching ad agencies put up double-digit growth and their guidance employed implies a deceleration in the back half. And then a lot of the digital properties like YouTube or Roku just have just massively collapsing growth. And I guess, my intuition is that there's some -- it's some combination of inflation and advertisers skittishness where they're sort of pulling dollars from the sort of tactical buys that they do in real time. And then I listened to your commentary, and it seems like you're largely immune. So maybe not to the inflation part, but certainly be a slowdown. So I'd just love to get your take on what you actually think is happening in the broader ad market because it feels very different than anything I've ever seen.

Yes. Jason, so here's what we're hearing. And there is sort of a difference between what's going on in your traditional digital platforms that rely on pinpoint accuracy in determining who the viewer is and what their proclivities are online. As you know, Apple has come down with new privacy protocols that have called into question the efficacy of some of those platforms. And so what we're seeing is large national advertisers are pulling back and trying to figure that out. So they're pulling away from the snaps and Facebooks of the world because, again, privacy protocols have called into question, number one, the pinpoint accuracy on the front end of a buy; and number two, the efficacy on the back end of a buy. We think, ultimately, that's going to inure to our benefit actually. We don't have to wrestle with those issues. So I think that is all good for out-of-home in general and Lamar in particular. Now ultimately, those advertisers are going to figure it out, right? They're going to figure out what they want to accomplish in the digital world in social and mobile and search. But for right now, there's just a little bit of confusion out there and large advertisers are stepping back and trying to figure that out.

Super. Helpful. Thank you.

[Operator Instructions]. Next, we will take our question from Richard Choe with JPMorgan. Your line is open.

I wanted to follow-up on the comment on national versus local. In your guidance, you're saying 3% to 5%. Does that depend on the national piece kind of staying strong or improving? Or is that 3% to 5% range depending on just across the business?

Well, it starts with what we're seeing in our pacing's, which includes both, right? And right now, there is a little skittishness out there, as I mentioned in the insurance category. But we, as I mentioned, think that's particular to that vertical and not indicative of a broader slowdown in national in our book. When we touch base with all of our unit operators and management yesterday. One of the overwhelming comments was that local remains really strong. And that our renewal activity and rate discussions are likewise very strong. And keeping in mind that that's 80% of what we do, right? So it starts with our pacing's and what we have actually booked to close out the year. And then, of course, the other benefit we have in 2022 is that we've got political tailwinds that are going to be kicking in as we move into September and October.

And to follow-up on political, it's growing well, and it seems like it will continue in a big way to really potentially move the needle this year? Is that fair to say?

Yes. It's not a top 10 category, but it's a nice tailwind. This year is a mid-cycle year. It's not a presidential year. And yet we're pacing well above what was the 2020 presidential cycle. It's the first time I've ever seen that. So yes, political is going to be exceptionally strong this year.

And then just two last ones for me. One, you talked about how your contract is coming up every four months. On the business that isn't the long-term business that you mentioned that you, I guess, focus on retention, so pricing might be a little bit lower. Are you seeing more, I guess, people not renew because of the price increases? Or has that held steady and you're able to replace it with new business? Just trying to get some color there.

Sure. If you followed us for a while, Richard, you'll notice that our verticals and our customer, our customers tend to be remarkably stable, right? I mean, year in and year out, the verticals are very stable, right? I mean, year in and year out, our top 10 customers are the same ones. That said, as Jay mentioned, we're basically at peak occupancy. And what that means is, number one, we're gaining it on rate. And number two, we're moving the space, right? I mean, even though we're driving rate in some cases, double-digits, we're maintaining peak occupancy. The -- our shortest cycle sale is our digital platform. And that same board yield is up even higher than what we're doing, driving rate on our analog products. So again, we're seeing that strength across our shorter cycle sale, our mid-cycle and our longer-term contracts, which are our annual contracts. By the way, those annual contracts don't all renew in January. They renew ratably throughout the year, which, again, gives us the opportunity to have that rate discussion all during the year, if you will, even on 12-month contracts.

And then last one for me. On the M&A front, have you seen asking prices change? It seems like your pacing is kind of picking up is that due to prices being a little bit more reasonable these days?

It's been interesting to see what happened as we came out of the pandemic. Last year, we greatly exceeded our M&A expectations with over $300 million in deals, we'll be north of $350 million this year. Billboard companies are great businesses. You don't -- you're not going to steal one even if things get a little soft. So we're not necessarily seeing people's expectations drop for pricing. But I do think, as I look forward to 2023, I think all this activity may have pulled forward -- pull forward some of that M&A activity.

Great. Thank you.

It appears we have no further questions at this time. I will now turn the call back over to our presenter for closing comments.

Well, once again, I thank all of you for your interest in Lamar, and we will visit again in our -- on our Q3 call shortly. See you in a few months.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.