Keith Istre - Chief Financial and Accounting Officer & Treasurer Sean Reilly - CEO.

David Miller - Imperial Capital Stephan Bisson - Wolfe Research Anna Lizzul - JPMorgan.

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 of timing and any distributions to stockholders.

All forward-looking statements involve risk, 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 and the company's third quarter 2018 earnings release and its most recent annual report on Form 10-K as updated or supplemented by its quarterly reports on Form 10-Q and current reports on Form 8-K.

Lamar refers you to those documents. Lamar's third quarter 2018 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, www.lamar.com.

I would now like to turn the conference over to Sean Reilly. Mr. Reilly, you may begin. .

Thank you, Todd. Good morning, all, and welcome to Lamar's Q3 2018 Earnings Call. We are happy with the healthy revenue growth that we posted in Q3, although, we did see a significant amount of political shift from September to October.

Regarding Q4 guidance, our pacing suggests Q4 will be up plus or minus 5% pro forma, a very strong same-store number helped in part by the strongest political spend in the company's history. Assuming Q4 comes in as expected, we should exceed the top-end guidance of the $5.40 per share of AFFO by a few cents.

Keith will talk about expenses in more detail in a few minutes, but we are confident that full year 2018 expenses will come in at or near the usual 2% pro forma growth. Again, we are in the middle of what we expect to be a robust Q4. We are closing 2018 strong and carrying good momentum into 2019.

Keith?.

Thanks, Sean. Good morning. I want to briefly address the 3% consolidated expense growth in the third quarter. First of all, I think as most of you know, 3% is not our typical quarterly organic expense growth. It's surely 1% to 2%. A couple of things that accounted for the uptick.

First, our organic expense growth in Q3 and Q4 of last year was flat so our comps are a little tough going into the end of the year. Second, our bonus and sales commission expense for Lamar's management, who wants the profit centers in the field, will be significantly higher than last year.

They are rewarded for exceeding their goals, and they are vastly exceeding those goals this year. As for Q4, we expect expense growth to be similar to Q3 plus 3%, taking into account all 4 quarters for 2018. As Sean said, we should end up with organic consolidated expense growth at 2%, which is our normal annual run rate.

Sean?.

Great. Thanks. I'll hit a few of metrics that we typically address. First, let me speak to political spend, I know I'll get the question and what its contribution is expected to be to our pro forma growth. In Q3, political added about half a point to what would otherwise be our pro forma growth.

In Q4, again, because some of that spend moved from 3 to 4, we expect it to contribute about 1.2% to what would be our expected 5% pro forma, our growth for Q4. For the full year, that will translate into about 0.7% political contribution to what would otherwise be our pro forma growth of what we expect now to be around 3%. So a tad better.

Digital continues to be a great story for the company. Our same-board digital performance continues to shine, up 7.2% in Q3. By the end of Q3, we had added an additional 129 new digital units. We expect that number to be roughly 175 by year-end. So you can expect us to be talking about that on our next call.

Local and national contributed equally to our Q3 pro forma growth and we expect the same in Q4. Regarding acquisitions, year-to-date, we have closed about $70 million worth of acquisitions, and we have roughly $240 million in acquisitions under various stages of letter agreements that we expect to close in early 2019.

Regarding verticals, the averages came in heavy, up 28%. As a matter of fact, MillerCoors is now our - or was our largest customer in Q3. Financials, up 11%; education, up 11%; retail, up 5% were the highlights, and the one lowlight was automotive, which came in at minus 7%. So Todd, with that, happy to open it up for questions..

Thank you. [Operator Instructions] We'll take our first question from David Miller of Imperial Capital..

Hey, guys. Congratulations on solid results.

Sean, could you just talk about some of the regions in the country that might be outperforming your current growth rate and maybe underperforming your current growth rate? And then the auto minus 7% in the quarter, any kind of outlook or any - or color as to how you see that category maybe resurrecting itself in the current quarter or going into 2019? Any color on that would be great.

Thanks a lot..

Sure. Regarding auto, I'll take that one first. That was a little bit of disappointing number for us. Well, I think all media outlets are experiencing what the auto category is, but they are experiencing a little bit of a difficult year. And in particular, dealerships, their business model is shifting a little bit I think.

And so we'll just continue to model that -- monitor that, and we still figure into their plan, and I believe that as they recover, that spend will pick up. Regarding regions, strongest was the West, and I'm happy to say, because we haven't seen this a lot, the Northeast came in real strong.

And I think what you're seeing is a little bit of that typical beta and national spend that touches larger markets a little more than in the middle markets. So New York, for example, for us, was particularly strong in Q3.

And then on the sort of still perhaps struggling a little bit, you got the Midwest coming in not too bad but certainly not good, plus 4% and 5% that we expect, on some of the other regions, even 6% or 7%, some of the other regions are hitting on pro forma revenue growth before.

You got an answer, David?.

Yes, that's great. And then just one final one if I may. We track CapEx per digital board in our models. We're coming up with a number of around $185,000 per digital board. I realize it's just sort of all over the place, because some boards are much larger than others.

Do see that kind of holding steady over the time? Or are there new entrants into the market from maybe some international players that you think might lower overall CapEx per board? Thanks very much..

Sure. Yes, as you mentioned, there's different sized boards. Our digital poster, for example, isn't -- is going to come in more around the $60,000 range and a 1,448 is going to be somewhere in the neighborhood that you quoted, which is the largest we put up.

Costs are not -- certainly not dropping as dramatically as you've seen over the last 4, 5, 6 years. ‘ But what is happening is the performances is dramatically increasing. Performance basically in terms of useful life, moving 11, 12 years of useful life from the earlier iterations where it was 7 or 8.

They are lighter, brighter, and they use less energy. All those sorts of things are good. So I would categorize it more in the sort of greatly enhanced performance as new entrants come in more so than dramatic cost decreases..

Wonderful. Thank you very much..

Thank you. We'll take our next question from Stephan Bisson of Wolfe Research..

Good morning. I know that visibility continues to get shorter, but core revenue growth in Q4 based on your pacing seems really quite strong.

Any early insights into 2019?.

It's a little early I guess to be talking about '19. As you know, we're reluctant to do that until we get there. But I can say this, what we are seeing in addition to the momentum that we have in 4 that we think we'll carry into the first. We're seeing customers commit earlier this year than last year.

Contracts are coming in earlier, and they're committing longer. So we're seeing very large customers come in. And again, contracting earlier for '19 and contracting for the whole year. That's always a good sign. .

Great. And then on digital, performance has been strong and it has for a while. Is this really just a function of higher price from immense demand? Or is there sales more against campaigns of geo-fencing? Just trying to get a better handle on the drivers. .

The demand has been real strong for digital. We quote a total yield, so we don't break it out right by occupancy. But my gut tells me that we're driving rate. And when -- in our industry, when we drive rate on our shorter-cycle sales, that's a very good sign that things are picking up..

Great. Thanks so much for the color..

Thank you. We'll take our next question from Alexia Quadrani of JPMorgan..

Hi. This is Anna Lizzul on for Alexia. Thanks for the question, We were just wondering how much of a benefit you've seen from that political cycle this year has been really high.

And why you think -- you've had a greater share of the benefit in the past? And if so, why?.

Sure. As you know, when we came into the year in earlier earnings calls, we were expecting to do marginally better than the 2014 cycle, which was the last midterm cycle. In '14, we did $7.5 million. As of today, we're -- we've already got a little north of $11 million on the book in political. So that's almost 50% up over that cycle. Two things.

Number one, we really focused on it. I mean we had -- we have a lot of our folks calling on candidates, calling on packs, calling on agencies that control political ad spend. So we made it a priority, and it paid off, number one.

Number two, our medium is becoming more responsive in a way that political ad spend demands -- our digital product, you can have whatever message it is you want up in 5 minutes, and so it's more responsive than any other medium out there.

If things get the typical tit for tat that they usually get to be down the stretch, then you can use our medium to execute on that. So that's it. .

Great. Thank you.

And in terms of the verticals in auto, is there any expectation that this can be a positive contributor in 2019?.

I hope so. It has slipped, auto has slipped from number - basically number 5 to number 6, and it slipped from 6% of our book to - to 5% of our book. We would hope that it would normalize back up to the traditional 6% next year. We'll see. .

Great. And one final question.

How is the pipeline looking for a potential M&A going forward?.

Very robust. As good as I've ever seen it. As I mentioned, year-to-date, we closed about $70 million. But we have under various stages of letter agreement about $240 million yet we expect to close early in 2019. .

Great. Thanks for the answers..

Thank you. That concludes our questions. I'll turn it back to Mr. Reilly..

Well, great. Thank you all for listening. Again, we look forward to finishing 2018 with a very strong year and carrying that momentum into 2019. Thank you all for listening. .

Thank you, ladies and gentlemen. This concludes the conference today. You may now disconnect.+++.