Excuse me, everyone. We now have Mr. Sean Reilly and Mr. Keith Istre in conference. Please be aware each of your lines is in listen-only mode. At the conclusion of the company's presentation, we will open the floor for questions.

[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 second 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 second quarter 2019 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 like to now turn the conference over to Sean Reilly. Mr. Reilly, you may begin..

Thank you, Stephanie. Good morning all and welcome to Lamar's Q2 2019 earnings call. In terms of guidance, pacings indicate Q3 acquisition adjusted growth coming in slightly stronger than Q2. In addition, if pacings for Q4 hold up, we should come in at the higher end of our previously provided guidance range for full year AFFO per share.

Expense growth in the back half of the year will be lower than in the first half, and is expected to come in, at or below 2% for the full year. Finally, it's been an active year so far on the acquisition front, including new offices in Saint Louis, Springfield, Fort Smith and Wichita with over $200 million in acquired outdoor assets year-to-date.

Keith?.

Good morning, everybody. Let me just expand on Sean's comment on the expense growth. We had guided to approximately 2% expense growth - consolidated expense growth for Q2 and 2% for the year. There were a couple of things that caused us to migrate to the upper end of that guidance.

One was we had several transit contracts that renewed in the first quarter and the revenue sharing component of those contracts increased over the previous contracts that added about $1 million in expense in the quarter and there was about $2.5 million increase in our billboard lease expense.

The majority of that was in revenue sharing on our digital billboards. As Sean pointed out, we think that we will be at or below 2% for the full year.

Just to remind everybody of our consolidated expense growth in the back half of last year, Q3 was up 3.2% on an apples-to-apples basis, Q4 was up 5%, and that was mainly due to sales commissions and year-end bonuses based on the revenue growth that we experienced in those two quarters. So I wouldn't be alarmed over one quarter's growth.

Last, our debt leverage at June 30 was 3.6 times..

Great. Thanks, Keith. Let me touch on a few of the usual metrics and then, we'll open it up for questions. In terms of growth of our digital platform, we ended up the quarter with 3,337 digital units in the air. We're tracking for 2019 to put up a little more than 200 digital units for the full year. Our same-board digital performance in Q2 was up 4.3%.

In terms of national/local sales mix, our Q2 sales mix was 76% local, 24% national. As noted in the release, local was up 4.3% in Q2, national was essentially flat. I would remind everybody, as we discussed on the last call, our largest customer had a cadence in a buy that was back-end loaded.

That was somewhat responsible for that relatively flat national performance. We expect national to do better in the back half of the year in large part, because of back-end loaded buy from very large customer. In terms of categories of business, verticals showing strength.

Hospitals and health care was up 12% in Q2, financial was up 8%, real estate was up 9% and automotive actually stabilized and was up 1%. In terms of verticals, they were a tad disappointing. Gaming was down 4%, and we're hopefully looking for a turnaround there as we get more of the online Sportsbook business.

So with that, Stephanie, we will open it up for questions..

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

It's Stefan on for Marci. You guys kind of indicated that you're still comfortable with the upper end of your AFFO guide kind of being the target.

Are you - what's your level of comfort in that?.

That's a good question. So it's really based on Q4 pacings that we're looking at this moment in time, and you always have to be a little cautious when you're looking at patient. The pacing reports, they are snapshot, they are not a guarantee. Right now, pacings for Q4 have - at the upper end of the range.

Last year, we had some late breaking political that helped us out in Q4. We won't have that this year. So that's a little note of caution. However, with what we're doing on the programmatic front, we think we have that replaced. So as we sit today, Q4 looks strong enough to us to get us to the upper end of our guidance..

And then programmatic was actually my next question.

What was the impact of programmatic in Q2 and how much you see impacting the second half?.

Sure. So our programmatic book is building as we go through the course of the year. In Q2, it was running at a run rate of, give or take 800,000 a month; Q3, the run rate seems to be between 901 million a month; and Q4, we're looking at a run rate that would be around 1 million a month, maybe a little bit more.

So that's the way the programmatic book is building and to step back a little bit and look where we are as an industry and I think you're hearing this from the other guys as well. While we're in the early innings as regards programmatic, it's an exciting time for us. We're tapping into $2 that otherwise wouldn't have gotten.

Clear Channel made reference to it, enhancing our ability to go direct to customers and we're seeing that as well. So we're excited about that direction..

And are those figures included in the guidance for Q3 revenue and your expectation - and your pacings for Q4?.

They are an expectation. As we've mentioned on other calls, because of the way programmatic billing hits and we collect in arrears.

It's not actually in a pacing report, but the expectation is certainly that the programmatic will come in about where we expect and in particular will help us replace that slight headwind that is the result of not having political dollars this year..

Our next question comes from Alexia Quadrani with JPMorgan..

Do you have a rough sense or just the ballpark sense of what the run rate for national would have been if that large customer hadn't sort of pulled back?.

I would say positive to the tune of maybe 2%, if you kind of do the arithmetic. That's not the whole story, there was a little bit of ebb and flow in the national book.

Again, stepping back and looking at the numbers that were posted by Outfront and Clear Channel, we're at a moment in time where top 20 DMAs are outperforming the DMAs that are below the top 20 and of course, you know we're predominantly below the top 20, about 80% of our book is below the top 20 DMAs.

So that is a little bit of the divergence and what's going on in their national book and what's going on in our national book..

So I guess are you seeing that also - where you do have a presence in big cities, are you seeing a divergence in your performance, seeing much better performance in the larger DMAs?.

Yes. In particular, in the first half, our larger DMAs are doing better. And as Keith referenced some of the revenue shares, which tend to be in this larger DMAs resulted in a little bit more expense growth than we thought, and that's because those larger DMAs or doing slightly better..

And this slight softening in June, which I understand bounce back a bit in July already is that, that larger national customers or was there something else going on in June?.

I would say just sort of across the board, there was just a little bit of a softening. I mean, you're talking about $0.5 million to a $1 million on a $450 million book. So it wasn't a huge material thing, but it did result in the difference between being up around where we thought we would be and being where we ended up..

Our next question comes from Eric Handler with MKM Partners..

Yes. Good morning and thanks for the question. Wonder, if you could talk a little bit about the M&A environment, it seems the $200 million of deal seems above average relative to some prior years.

Wondered if you're seeing anything in particular that might be causing more deals to be occurring at this point in time of the economic cycle, is it impacting multiples at all to have this many deals.

Just any color you could provide would be great?.

Sure. So yes, the run rate to be halfway through the year and already have $200 million under our belt is a little bit stronger pace than you've seen in the past, absent a large transaction like Fairway. There was one transaction that was over half of that and brought us some new markets, I mentioned Fort Smith, Arkansas, and Wichita, Kansas.

That was probably a little bit of an anomaly to have one that was being that big. What we're seeing though is on the tuck-in front, there's just a lot of activity and it's the pricing has been virtually the same that we talk about a year in and year out, relatively the same forward multiples that you're used to..

Our next question comes from Jason Bazinet with Citi..

I know you guys have been talking about programmatic for a couple of quarters, but I was just wondering, could you describe if there is such a thing, a typical programmatic customer? And are these revenues you're citing of sort of $1 million a month run rate that's improving, is that all incremental or is it sort of cannibalizing some other part of the business? Thanks..

Yes. Great question, Jason. So when we went down this road of thinking about how to make our digital inventory available in a programmatic setting. We set in some business rules to make sure that it was incremental dollars. The first business rules was we're not participating in auctions.

We are controlling our CPM, so that when a digital dollar has dropped into an algorithm. We've got our pricing loaded along with the demographics. So if it hits the CPM that a buyer wants, we'll get the business. If it doesn't, we won't. So that's rule number one, protect your pricing, don't get caught in an auction environment.

Rule number two is to wall this channel off from our traditional channels. So if you are a traditional agency using traditional ad dollars and traditional buying services, you're not allowed to plug and play. So this is only made available to digital buying shops and increasingly going direct to our customers that have internal digital capabilities.

Heretofore, if they dropped the digital dollar into an algorithm, it would show up on your mobile phone. Now it's also showing up on our screens, assuming they make an internal allocation to go to the big screen as well as the small screen.

It's a growing trend, Jason and I think if you look at again, stepping back where the agency model is going, more and more we're going to be - I believe going direct to customers that have their own internal digital buying shops..

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

Just maybe to Keith on - Sean - on expenses. Thank you for the color. Are the items you called out the transit step up, billboard lease expense, are those is driving G&A, since G&A was up a decent amount year-on-year. I would assume those were indirect, but I just wanted to ask, if you had any color on the G&A growth..

Right, that is indirect. As far as G&A, and I didn't mention this, we acquired Fairway at the end of last year. There was a lot of professional and legal fees that came out of that acquisition about a $1 million worth, that slipped into Q2. We had to have an audit done by E&Y of their financial statements.

It was required, that was a lot of legal fees and other professional fees that were associated with that acquisition that dropped in, in Q2 that would be in G&A..

That growth will slow a bit in the back half it sounds like..

Yes, that's correct. That's right..

And then, Sean. I guess two questions. One is, as you think about continuing to build out this programmatic platform.

Can you just talk about your ability to use your static inventory? If that's something you're either doing today or it's in the product pipeline or if this is a digital-only phenomena? And if it is, do you accelerate digital? And then lastly we're all at times playing armchair economist and you have a good sense of the market out there.

I just love to get a sense for whether you think there is any softening of the consumer or sort of "Main Street" in the U.S. market today as you look out for the back half, because you've got smart GMs all over the country who probably are pretty close to the economic cycle..

Yes. I'll hit that one first. Local for us was up 4.3% in Q2 and so we're not really seeing chinks in the armor in that regard, Ben. So yeah, there is no - we're not flashing red around here. Things still look pretty good. With regards to programmatic, it is now as we sit today a digital product only.

We're not selling static or traditional inventory in - through programmatic channels.

However, if you talk to our partners, they are working on - may be you wouldn't call it programmatic, you might call it automated, but they are working on automated platforms that would allow for the - our customers to go direct and purchase through an algorithm or static inventory. I would say that's a ways off, maybe a couple of years.

But there is a whole lot of smart people working on trying to make that work..

There are no additional questions at this time. I'd like to now turn the conference back to Mr. Sean Reilly for closing remarks..

Thank you all for listening. Before I sign off, I do have to give a shout out to Nancy Fletcher who is retiring after 29 years of outstanding leadership at the OAAA and an additional shout out to Anna Bager, who is going to replace her as CEO of OAAA, ushering in a new era. And these are indeed exciting times in the world of out-of-home.

So with that, thank you all for listening and we'll talk next quarter..

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