Sean Reilly – Chief Executive Officer Keith Istre – Chief Financial Officer and Treasurer.

Marci Ryvicker – Wells Fargo Ben Swinburne – Morgan Stanley David Miller – Loop Capital Markets Alexia Quadrani – JPMorgan Jason Bazinet – Citi Eric Handler – MKM Partners.

Excuse me, everyone. We now have 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, plans and objectives, including with respect to the amount 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 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 third 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 third quarter 2017 earnings release, which contains information required by Regulation G regarding certain non-GAAP financial measures, was furnished to the SEC on Form 8-K this morning and is available on the Investors section of Lamar's website www.lamar.com. I would now like to turn the conference over to Sean Reilly. Mr.

Reilly, you may begin, sir..

Thank you, Brandon, and good morning, and welcome all to Lamar's Q3 2017 Earnings Call. Q3 came in slightly better than expected across the board, up 1% on a pro forma basis, coupled with tight expense controls. Q4 is tracking much the same, up about 1%, plus or minus a little. Regarding hurricane damage.

Counting all three storms, Harvey, Irma and Maria, our maintenance CapEx associated with the damage should come in between $3 million and $4 million. We're still assessing the damage in Puerto Rico, but those numbers should hold up. Keith will touch on maintenance CapEx in his remarks.

However, in spite of the damage, we are still tracking towards the upper end of our AFFO per share guidance. We are also still assessing the operational impacts of the hurricane in Puerto Rico. It may create some white noise in our Q4 pro forma numbers. The effects will be minor. But for now, our plus or minus one for Q3 excludes Puerto Rico.

Keith?.

Good morning, everyone. Just a couple of quick things here. As Sean mentioned, our third quarter performance metrics, there were no surprises. We did as well a better-than- expected. There was a nice surprise on the consolidated pro forma expense growth.

It came in only four tenths of a percent over last year, and we were expecting about 1%, which is about what we are expecting in Q4 as well. The only bad surprise, as Sean mentioned, was the three hurricanes. No material damage.

Maintenance CapEx guidance from the that we gave you was for $41 million for the full year, and as Sean said, it'll be slightly higher, plus approximately $3 million or so in Q4.

As far as Puerto Rico goes, in the fourth quarter, when we have our next call and release our next earnings report, we will present our numbers with and without Puerto Rico on a pro forma basis. You will see that the impact is immaterial.

But for Puerto Rico, because of the condition that the island is in, there will be – we will have very little, if any, revenue that will be generated in that market. In the fourth quarter, we still have ongoing operating expenses on leases, personnel, et cetera, so that's why we'll separate those from the numbers. But again, it's immaterial.

Last, you saw in the press release that we closed approximately $92 million in acquisitions in the third quarter. These were all fill-ins and one stand-alone, and we have another $120 million under contract that we will close in the fourth quarter. That's in purchase price in the fourth quarter before we close out the year.

So with that, Sean?.

Thanks, Keith. I'll quickly touch on some of the metrics that we're familiar with. On digital, we added about 163 through newbuilds and acquisitions year-to-date. 111 of those year-to-date are newbuilds. Our same-board digital pro forma growth came in at just about 1% for Q3, basically the same as the whole platform.

Our national/local sales mix shifted a little bit, I'll touch on that in a minute. We came in at 76% local and 24% national. That was basically the result of a trend that has been going on throughout 2017. Our national book has been stronger than our local book. Our local book is basically flat year-to-date, and our national book is up 4.7%.

In terms of verticals. Strong performers were service, up 14%; telcom, up 18%. We experienced a little bit of weakness in automotive, down 5%, and are still struggling a little bit with the education category, which was down 9%.

And again, if you take our top 10 verticals, add them all together, it's 73% of our book, and it was up 1%, sort of same as the whole platform. Brandon, you can open it up for questions now..

[Operator Instructions] The first question will come from Marci Ryvicker with Wells Fargo..

Thanks. Thank you so much. I have a couple of clarifications.

Keith, when you talk about the 1% expense growth in the fourth quarter, is that also excluding Puerto Rico?.

No that is including Puerto Rico..

Okay, but the revenue was excluding? Okay..

Correct..

Sean when do you cycle through education?.

It is a tough question. I thought we would have cycled through actually in this quarter. So we'll just have to see how it holds up in Q4. I don't have a real precise answer for that Marci..

Okay, and they we’ve gotten couple of questions this morning on 2018.

What visibility do you have, if at all, at this point, going into next year?.

It is a little early to be talking about 2018. I feel good that – think we are teed up for a good year, the political will no longer be a headwind; it'll be a tailwind. And we've also, as Keith, we've teed up some really good accretive acquisitions more than our normal activity. So I feel like we, again, teed it up for a good year in 2018..

Okay thank you..

Thank you for the question. The next question will come from Ben Swinburne with Morgan Stanley. Please go ahead..

Hey, good morning guys. Couple of questions. Just maybe sticking on the M&A theme, Sean. Is you sort of hurdle rate or what you and what you need to see from a deal changed at all given your the organic growth has been a little bit softer than the last year or so? And it seems like the sellers are becoming more reasonable.

But as you mentioned before, you've done more deals than usual this year and you have got some more in the fourth quarter. I'm just curious if how you're thinking about putting money to work in M&A since you're driving, I think, a decent amount of AFFO accretion from these deals..

I don't think the environment has changed. I think it's just one of those years where – just more than usual within the pipeline. There were a couple of transactions that were – I would describe as sort of exceptional in terms of why they came about.

Descriptively, these are fill-ins basically all around the country, touching most of our footprint, really predictable fill-in stuff. And I don't think there's been a shift in the environment. You guys are pretty, pretty familiar with our acquisition math, and these are going to be right in that range that you've been familiar with..

Okay.

Do you have a sense of how much, when all is said and done, in AFFO per share you'll get from deals this year?.

I'm going to guess that we – it should be in the neighborhood of an additional $0.05 of AFFO per share..

Yes, okay. Okay, cool. And then I don't know if Keith wanted to give us Puerto Rico. Just the size of the business in a quarter or a year might just be helpful from our perspective on modeling..

Sure, I'll touch on that real quick..

Okay, Sean..

You're talking about, give or take, $9 million to $10 million a year in annual revenues, so $750,000 to $800,000 a month in revenues. Marginal EBITDA contribution, between zero and $1 million – in EBITDA contribution.

So again, it's not material to the overall business, but it could, as we mentioned, create a little white noise in our – what would otherwise be our pro forma revenue growth..

Are your variable costs coming out then as well with Puerto Rico? Your, whatever, lease expense or other direct costs associated with that business, is that also coming out in Q4 while this is under weather-related damage?.

It's hard – as of right now, we're carrying all those expenses. One of the challenges we're going to have is what does Puerto Rico look like a year from now, and what's the right size of that business? And we don't have the answers to those questions right now. Right now, we have the ability to service many of our customers with digital and static.

The problem is our customers aren't ready to commit yet. They just – their lives aren't put back together..

Yes, great. If I could just ask one last question.

Just so if you look at the portfolio regionally, Sean, where are the best-performing markets and where are the weakest? And how wide is that gap these days?.

It's a little wider gap than we're used to seeing. And I can – it's a little bit of an anomaly given the strength of our national business. So the best-performing markets are on the coasts, the Gulf Coast being the strongest performer, the West being – following up and the Northwest.

Where we're experiencing a little bit of weakness is in large markets, places like New York and Chicago. And we're trying to track that down because our national book is actually strong. It – the national patterns are buying – they're buying a little bit deeper.

And some of the categories that we classify as national are stronger than some other traditional national accounts. But yes, so in general, I would categorize it as coastal being – we're most of the strength is. And our largest markets being where we're having a little bit of relative weakness. .

Got it, thank you very much..

Yes..

Thank you for your question. The next question will come from David Miller with Loop Capital Markets. Please go ahead..

Yes, hey guys, congratulations on the stellar results. Just following up on the previous question with regard to M&A priorities. Sean, obviously, your national book is up 4.7% for the year. You're sort of flat locally.

The Steen acquisition seemed to kind of have the sense of more of a national kind of core media buy just given the Philadelphia presence.

Do you guys feel like you need to be more of a core national media buy in front of media buyers? And will M&A priorities kind of center around the big cities going forward? Or do you still feel like you want to retain your local flavor? Appreciate it. Thanks very much..

Yes. So I'd start with, it is important to be able to deliver to national advertisers' certain markets. What Steen did for us was give us a real solid good presence in a number for DMA in the country, so that's a good thing. If I'll – reflecting on this year's M&A activity, Steen was the only that was in a major DMA.

All the other ones were fill-ins in traditional sort of local core Lamar markets, places like Columbia, South Carolina and the Rio Grande Valley in South Texas and Macon, Georgia and Tuscaloosa, Alabama, places that, again, sort of feel and look like Lamar.

So I would say that our main focus on our M&A activity is high-quality requalified assets, and virtually everything we did this year certainly fits in that bucket..

Okay, wonderful. Thank you..

Yes..

Thank you for your question. The next question will come from Alexia Quadrani with JPMorgan. Please go ahead..

Hi, thank you. Just sort of staying on this national versus local theme.

When you see sort of the relative softness you've been seeing in local and obviously the relative strength in national, do you think any of that is sort of a permanent change, I mean, when you look at why local has been a bit weak? Or is it something structural? Or do you think it's just sort of typical cycle and you'll perhaps revert into a more normalized mix in the quarters to come?.

So we've seen these ebb and flows in the past, local versus national. One thing to keep in mind is that for us, political is coded local, and we didn't have it this year. So I'm thinking a little bit of that anomaly is being created by the lack of political, as is our 1% pro forma growth. If you adjust it for political, we'd be closer to 2%.

So again, I think that the political cycle is creating a little of that effect..

And then on the expense side, you have an impressive cost containment in the quarter.

When you look at – maybe this is too far out, but when you look at 2018, is there sort of a run rate we can sort of get comfortable with in terms of where we think the expenses will sort of fall out?.

I don't think you're going to see any surprises in an absolute basis on expenses. As we cycle around in comp to a 0.4%, that's going to create a tough comp for us next year and certainly in Q3. That being said, what we pride ourselves on is no surprises and relatively consistent performance on the expense side because that's what we can control..

Thank you very much..

The next question will come from Jason Bazinet with Citi. Please go ahead..

Yes. I just had two simple questions. If tax reform ends up going through, if I do the math, it seems like the advantage of being a REIT is diminished a bit if indeed the corporate tax rate falls to 20%.

If tax reform does pass, would you sort of unwind the restructure or – because are still in advantage, you're sort of not contemplating unwinding the REIT structure? And then my second question is – the working capital drag this quarter seemed a little bit larger than normal. I just didn't know if you could provide a little bit of color.

I think it was $130 million..

Well, we've owed a lot of the $92 million that we funded these acquisitions with from our working capital line of revolver. Obviously, we are in and out of that throughout the year. So we will – we pay that as we go through the fourth quarter and into next year with the free cash flow..

Okay..

So the tax reform question is an interesting one. Here's what we know so far in terms of its effect on REIT. We are being told by the association, Nareit, that as currently drafted, REITs would be deemed flow-through entities for purposes of personal taxation of flow-through income.

I think if you take a look at it from that point of view, you'll see that there's still a tremendous advantage, right..

Yes..

Because the flow-through – yes, you'll be taxed personally at 25% instead of what whatever you're otherwise rate would be..

Understood. Okay. Thank you..

Thank you. The next question will come from Eric Handler with MKM Partners. Please go ahead..

Yes, thanks for taking my question. So going back to a little bit – or on what Alexia was saying, you look at your pro forma organic growth, it's at 1%, although if you take out political, you said you're probably tracking closer to 2%.

What's it going to take – or what do you think will need to occur in order to see that 1%, 2% begin to look closer to like 3% or maybe even higher?.

There's a couple of our verticals that I'd like to see a little more healthy. I've spoken to health care in the past. There's a lot of uncertainty, as you all know, in the direction that health care policy is going in, and I think that's had an impact on how they're spending their ad dollars.

I also believe that the education vertical is also a little bit challenged. I don't think it's secular. I think it's cyclical, having to do with some of the challenges they also had on the regulatory front. Other than that, it's – I think it's just making sure that we can keep up with GDP. Last year, we beat GDP by a little over a point.

We're comping against that. This year, we're going to trail it. I think next year, we'll catch back up. .

Great, thank you..

Thank you. There are no further questions at this time. I'll now turn the conference back over to Sean..

Great. Thank you, Brandon, and thank you all for listening and tuning in, and look forward to chatting next year..

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect your lines..