Sean Reilly - CEO Keith Istre - Treasurer and CFO.

Marci Ryvicker - Wells Fargo Alexia Quadrani - JP Morgan David Miller - Loop Capital Markets Ben Swinburne - Morgan Stanley.

Excuse me, everyone. We now have Mr. Sean Reilly and Mr. 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, plans and objectives, including with respect to the amount of and timing of any distributions to stockholders.

All forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond Lamar’s control and which may cause actual results to differ materially from 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 2017 earnings release and its most recent annual report on Form 10-K, as updated or supplemented by its quarterly reports on Form 10-Q. Lamar refers you to those documents.

Lamar’s second quarter 2017 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 of Lamar’s website at www.lamar.com. I would now like to turn the conference over to Mr. Sean Reilly. Mr.

Reilly, you may begin, sir..

Thank you, David, and good morning, all, and welcome to Lamar’s Q2 earnings call. As we mentioned in the release, Q2 came in largely as expected, and our team did a great job keeping expenses down. Unfortunately, though, business activity slowed somewhat in June and July, and pacings now indicate flat to slightly up Q3 pro forma revenue growth.

In light of the tepid ad environment, we will continue to keep a close eye on expenses. Before I get to question on political, it appears to us to be costing us about 1% in Q3 pro forma revenue growth. All of the other internals for Q2 are again as expected, and I’ll cover some of that after Keith goes through the numbers.

Keith?.

Good morning, all. Just to touch on a couple of things, there’s really not much to talk about. Everything is pretty laid out in the release.

But to go to the consolidated expense, the organic expense growth for the quarter at 1.1%, I’d like to just remind everybody that in the first quarter of this year, our expense growth had blipped up to 3.5% on an organic basis, and we told everybody that, that was due to several onetime nonrecurring items and that we should come in, in the 2% range on organic expense growth for the year.

And we think we will be in that zip code. Due to the 1.1% organic expense growth, our EBITDA margins came in at approximately 46% for the quarter.

Just briefly to remind everyone, during the quarter, we put in a new five year bank facility, a $450 million term loan and a $450 million revolving credit commitment that resulted in a 25 basis point drop in our overall interest cost going forward.

And last, if you look on the last page in our release, the new guidance schedule, you’ll notice that we have pegged our maintenance CapEx for the full year of ‘17 at $41 million. We’ve been giving you a range but we’ve gone ahead and pegged that at $41 million.

So anyway, with that, Sean?.

Great. Thanks, Keith. Let me speak a little bit to our digital platform, which continues to outperform the rest of the platform. Same board, digital group, 2.3% in Q2. We ended the quarter with 2,673 units in the air. That’s an increase of 60 digital boards quarter-over-quarter and year-to-date, an increase of 98 digital boards year-over-year.

Regarding our sales mix, a little bit of an anomaly, I think, given that national was up 4.5%, local was up 1.5%. Local did improve a little bit Q2 over Q1, if you recall from our last earnings call, and hopefully, that trend will continue. Regarding verticals, a little bit of frustration out there.

We had one vertical that we’re looking to recover, that was health and hospitals, and it did, coming in at up 1%. And just as soon as you get an important vertical healthy, another one stumbles a little bit. Automotive was down 3% in Q2. And another vertical that we struggled with a little bit in Q2 was gaming, which came in at down 5%.

Again, on the upside, telecom came in at up 13%. So it just appears to be one of those years where one vertical will recover and do well. And just as soon as you feel like you’re over the hump with that one, another one stumbles a little bit. So I’d say that pretty much seems to be the story going forward.

Consequently, we’ve reduced our AFFO guide for the release. And I’m happy to take questions on that as well. So David, you can now open it up for questions..

Thank you, sir. At this time, the floor is open for your question. [Operator Instructions]. And our first question will come from Marci Ryvicker with Wells Fargo..

In light of the lower revenue guide, Sean, what’s your thought on digital deployment? And then, Keith, is there anything you can do with that 2% expense growth for the year if revenue is trending on a lower end of that sort of new flat to up low single pace?.

Yes. Look, we’re not seeing the kind of year that would suggest we change our game plan. So we’re going to steady as she goes on digital deployment, steady as she goes on tuck-in acquisitions. The flat to slightly up was Q3. So hopefully, the holidays turn in a little better performance and we get to where we need to be.

Other than that, I’ll defer to keep on the expenses, but I’m going to tell you we’re going to be watching it tight, yes. We’re pretty good at that, and to the extent we can control it, we will..

Yes. I think in the back half, Marci, we’re saying that we are expecting up 2% because of course, the first quarter was 3.5%. So that puts us a little behind the eight ball out of the gate.

But we think that the expenses in the third and fourth quarter should narrow somewhere close to the second quarter, hopefully somewhere between 1% and 2%, not 2 plus. And there are some things that we can do in the short run. We’re not talking about 2009 here. But yes, we have some levers that we can pull to rein in some of the things.

We don’t see any unexpected material expenses coming through the pipeline at this point in time, so I think we’ll be okay. Hopefully, we will come in below 2%..

Okay. And just a follow-up again on the ad environment. Is this -- it feels like it’s macro, Sean.

Is it all macro? And are things getting worse as you move through the quarter? Or are they pretty steady?.

We think we took the hit in June and July. You never know until you get there. But the macro environment for ad spend, as you guys have heard from a lot of other companies, is a little difficult out there. I think the automotive issue is real. You saw automotive ads -- you saw auto sales in July take a pretty big tumble.

But again, we’re seeing recovery in healthcare. That’s a good one to have a little bit of a tailwind on. Hospitals represent our fourth largest category at 9% of our book. It’s hard for us to gauge political. Marci, you’ve been following us for a long time. Last year for us was the largest political year we’ve ever had.

We don’t speak about our Q3 pro forma revenue performance, as I mentioned, to the tune of about 1%. So maybe it’s a little bit mix of macro. Maybe it’s a little mix of the impact of political. And you put those two things together, and you’re flat to slightly up..

Our next question comes from Alexia Quadrani with JP Morgan..

Hi, thank you. Just a couple of follow-ups on your commentary now about advertising. It sounds like, I mean, obviously auto is one of the current weaker areas.

I mean, just given what you said about the sales data, I guess is there any reason to be hopeful or more constructive? Or I guess why would we assume it sort of stays soft? And then just as any color with any regions in particular that might have been weaker than others that would be of note?.

Sure. It’s hard to tell exactly where the macro is. If you look at, obviously, the aggregate economic data that you guys look at and that we look at, things appear to be pretty good. But then you look at ad spend, and you pause a little bit.

We feel like -- there’s no guarantee, but we feel like it’s kind of leveled off, and again, maybe the holidays bring a little strength. In terms of regions, it’s a similar story that we told the last time we talked because we are doing well. The Northwest actually was up 6.7%. The Western region was up 4.2%. The Gulf Coast was up 3.7%.

The Atlantic Coast was up 2%. So the coastal regions basically beat the rest of our footprint. And so, it’s the middle part of the country that they’re lagging slightly..

Okay.

And just to follow up on M&A, I guess does it -- anything about the pipeline or the outlook? Is it looking like there’s a fair amount of opportunities out there, how competitive it is, et cetera?.

Sure. Well, we, on Friday, we announced the acquisition of Steen in Philadelphia. That’s just an outstanding property and a great acquisition for us and makes us a real player in the number 4 DMA in the country. And I can’t help but talk about it in a way that reflects a little bit of honor really on the Steen family.

They’re an old line, outdoor family that have been in the industry since the late ‘30s, and they’ve built a wonderful company. And we’re proud to have it in the Lamar fold. So that was a good one. It’ll help us out next year on our AFFO per share to the tune of a few pennies.

We’ve got a few more in the pipeline, and I think by the time we wrap up 2017, we’re going to be very happy with what we did on the acquisition front..

Our next question comes from David Miller with Loop Capital Markets..

Just following up on the previous question. Sean, you mentioned the coasts are doing well, East Coast, West Coast doing very well. The middle of the country is struggling.

Does that include the oil patch markets that you had cited as a reason for the weakness about 1.5 years ago? Did that kind of, it feels like that recovered a bit and now it’s kind of heading back south a bit.

Would that be the best way to couch it?.

I would say recovered is the right word, but it’s not going south again. Actually, the Southwest, which has most of that oil patch in it, is, was up in Q2. So we haven’t seen an actual up number out of the Southwest since oil took a nosedive. So I’m confident.

I don’t know how much you follow the oil patch, but it appears that the Permian is, has recovered and there’s a lot of activity. So we’re feeling good about that part of the world..

Our next question comes from Ben Swinburne with Morgan Stanley..

Sean, I don’t know if you’re willing to talk about how the fourth quarter book looks now from a pacing perspective. It looks like your guidance, I mean, you gave a range, so it’s sort of tough to nail it down. But it seems like, seems Q4 is better than Q3.

I just was curious if you could give us any color on sort of where it sits today versus the prior year at this point in time..

Sure. It’s better than Q3 but only slightly, and December is the strongest month as we look out. That’s why I’m a little optimistic that we could have a good holiday season..

Got you. And just on auto, if you could educate us a bit, how much, what’s the biggest driver, excuse the pun, of spending in your business on auto? Is it auto sales? Or is it auto inventories? I would imagine both are a factor.

And if inventories are high because sales have dipped, might that be a reason, at least in the short term, for dealers to spend more? What’s the bigger factor in the out-of-home auto business?.

So auto was roughly flat and the same in Q1, and it was down 3% in Q2, and July was sort of the same as Q2. When I, this is anecdotal, but when I talk to car dealers, they’re, what they look at first is consumer confidence. So they don’t tend to look just at what’s going on in their showroom and what’s going on with their immediate circumstance.

They tend to look forward, and they look at consumer confidence, and their ad spend tends to mirror that. Now again, that’s anecdotal. That’s just what happens in -- anecdotally in Lamar land. But I’d start there if you’re trying to figure out where ad spend is going in the auto category..

At this time, we have no further comments, so we’ll turn it back to Mr. Reilly for closing comments..

Well, thank you, all. And we look forward to visiting with you in November and hopefully discuss a better than expected Q3..

Ladies and gentlemen, that concludes this morning’s presentation. You may disconnect your phone lines. And thank you for joining us this morning..