Ladies and gentlemen, 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 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 first quarter 2019 earnings release and its most recent annual report on Form 10-K/A 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 first quarter 2019 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 welcome all to Lamar's Q1 2019 earnings call. As mentioned in the release, Q1 came in largely as we guided top and bottom with a little better than 2% pro forma growth.

Looking forward, we see Q2 tracking up 2.5% to 3% pro forma and because our pacings for the full year show significant strengthening, we feel good about a new year at the upper end of our full year AFFO per share guidance, ending the new year with something north of 3% full year pro forma top line growth.

We continue to see a good deal of acquisition activity and anticipate being busy on that front as the year progresses. In addition, our programmatic automated buying initiative continues to build momentum, and we believe it'll make a visible contribution to our pro forma growth this year.

Keith?.

Good morning, everyone. I'm going to just touch real briefly on the new lease accounting standard that went effective January 1, 2019, and how it impacts Lamar. Lamar as well as most companies with large lease portfolios had to adopt the new lease accounting standard 842.

In Q1, for us, adoption of the new standard resulted in a reduction in operating expenses of approximately $3.8 million. The impact is a noncash GAAP item that we have shown as a separate and distinct line item in operating expenses included in our consolidated statement of income on an as reported basis for Q1.

As such, in order to reflect comparable results for our organic operating expense growth, this adjustment is excluded from our reconciliation of reported basis to acquisition-adjusted results on Page 8 of our press release. As such, our consolidated organic operating expense increased 3.4% in Q1.

On the last call, we had guided for that organic growth to be approximately 4%. So we came in a little bit better. To reiterate, we are expecting our organic expense growth in 2018 to be approximately 2%, and we are thinking that the second quarter will come in somewhere in the 2% range as well.

In addition, under the other data section of our release on Page 6 and in our 10-Q, you'll notice that the total assets on our balance sheet grew to approximately $5.8 billion from $4.5 billion in Q4 of 2018.

This is due to the recording of the right-of-use assets under this new standard of approximately $1.3 billion, liabilities also increased by the same amount. With that, I will turn it back over to Sean..

Great. Thanks, Keith. And turning real quick to our digital platform, our same-unit digital remained strong, up approximately 5% for Q1 and we finished the quarter with 3,279 digital units in the air. We remain on track to add about 230 to 240 units this year.

Local, national, the local/national mix was 79% local and 21% national, skewing a little more local due to local being up 4.1% in Q1 and national being down 2% in Q1. Recall that we mentioned a very large customer whose spend with us shifted to the back half of the year.

The cadence was a little different again weighted more towards to the back half of the year. Given that we actually have more billing book with this customer this year than last year, it gives us confidence again that the back half of the year is going to be stronger than the first.

Categories showing strength in Q1 include real estate, up 13%; financials, up 12%; health care, up 9%. Auto was a little disappointing for us. Recall, we launched some sales initiatives at the beginning of the year around auto and thought we saw some relative strength early on. But that slipped to down 1.3% for the year.

We'll continue to keep you addressed on how we're doing with that important category. But again, right now, we're pacing for the full year down 1.3% in auto. With that, David, I'm happy to open it up for questions..

[Operator Instructions] Our first question will come from Marci Ryvicker with Wolfe Research..

It's Stephan for Marci. So you mentioned that the pace is slightly ahead of the 3% for the full year versus the prior guide.

Is it significantly stronger or marginally stronger? Just maybe a little bit more color?.

It feels now like we should end this year kind of like we ended up last year for the full year. So if that's any help.

Clearly, where we finished the first and where we're thinking about the second and 3 and 4 are going to be stronger to get us above that 3%, right?.

Right. And then, are you seeing any noticeable difference in the performance based on market size, just asking because at Clear Channel and Outfront, clearly, in the larger markets, we're seeing a little bit faster growth.

So you're seeing the same in your various markets?.

There is a little bit of difference. And again, this large customer who I won't name, tends to skew some markets that look like Lamar markets. Our larger markets are actually performing, I would say, in line with what you're hearing from Outfront and Clear.

So yes, that has made a slight difference in the first half, but we see it correcting itself as we move through the year..

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

This is Anna Lizzul on for Alexia.

First off, was there any benefit in Q1 from political?.

The way political runs for us, this being an odd, not an even year, we actually got less political than we would typically get. I think political was down something like 60% for Q1, something like that..

Okay. Great.

And secondly, and how is the acquisition pipeline shaping up for 2019?.

Looks good. We've adjusted what we did last year with the Fairway assets. There won't be anything in that we don't believe, there won't be anything, sort of, of that order of magnitude, but by the time you add it all up, it should approach $250 million to $300 million worth of assets..

Thank you. Our next question comes from David Miller with Imperial Capital..

Just a different kind of question for you I just wanted to know what you thought of the 5G cellular opportunity.

Is there a real sort of step up in revenue growth there with that opportunity? Or would you describe it as more for a pie in the sky sort of academic discussion at this point? Seems to be just one of these things that a lot of analysts, both buy side and sell side kind of mull over, but there doesn't really seem to be a lot of movement on it.

Just wondering what your thoughts are about the 5G cellular opportunity? Thanks a lot..

Sure. Thanks. So we've been very cautious to avoid getting too excited about 5G and the large telecom companies using our platform to roll out their cellular infrastructure. Essentially, if you look at lot -- what a lot of Lamar land looks like, they want to be up a little taller than we can get them in smaller markets.

And if you look at the more high dense urban markets, there is a lot of competition and there's lots of places they can put them. So we're getting it in sort of nickels and dimes are coming through the door, but it's not something that I would say is moving the needle..

Our next question comes from Davis Hebert with Wells Fargo Securities..

I just wanted to ask a couple quickly. On the cash flows from investing activities, look like it was a little bit of a ramp up this quarter.

And I want to refer that was acquisitions, some of which you referred to, Sean? And then secondly, what your pro forma leverage is with the Fairway transaction having closed at the end of the, towards the end of the last year?.

Let me talk about the leverage first. We are, let me get to, we are as of 03/31 at 3.7x on our leverage test. And we are expecting that to go down throughout the year and end up somewhere more like 3.5x, which is about where we ended up last year. As far as the operating cash flows, we did have the Fairway assets in the mix for the full first quarter.

We got, we closed that at the end of December actually the second, the last week of December. So that had a big impact on that line item..

Okay.

And then were there any acquisitions made in the first quarter as well?.

No. Not really, I mean, minimal. Very small..

Yes. That makes it around $60 million worth, Davis..

[Operator Instructions] Our next question comes from Marci Ryvicker from Wolfe Research. Mr. Ryvicker your line is open, you might need to unmute to ask your question. .

I have one follow-up. You mentioned the programmatic contribution coming in this year.

Is that already within the guide or is that incremental to the guide?.

That is a complicated question. The way programmatic works is it's not in our billing system until 2 weeks after it runs, and then we settle up. It's just that, it's just the way programmatic automated work. So it's not something that we're seeing in our pacings as we speak, but we do have a pretty good feel for how it's going to play out.

Q1 was approximately $2 million, Q2 looks to be approximately $2.5 million. We have 4 partners that are pitching our platform, and they like what they see in the back half and are telling us that they think it's actually going to accelerate from there. But it doesn't show up in our pacings because it's not actually booked until 2 weeks after it runs.

Does that make sense?.

It does.

So you're pacing up above the 3% prior for the full year without assuming the incremental programmatic in half 2 versus half 1?.

Yes. We are, because again, we can't see it..

You can't see it?.

Yes. Exactly..

At this time, we have no further questions. So I'll turn it back to Mr. Reilly for closing comments..

Well, great. Thank you all for listening. And we look forward to visiting with you again in about 3 months..

Thank you. Ladies and gentlemen, that concludes this morning's presentation. You may now disconnect..