Lamar Advertising Company Class A Stock

Excuse me, everyone, we now have Sean Reilly and Jay Johnson 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 and the impacts and effects of general economic conditions, including inflationary pressures on the company's business, financial condition and results of operations. 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 2026 earnings release and its most recent annual report on Form 10-K. Lamar refers you to those documents.

Lamar's second quarter 2026 earnings release, which contains information 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, Katie. Good morning all, and welcome to Lamar's Q2 2026 Earnings Call. Our business is in a terrific place right now. As our second quarter results demonstrate, advertisers clearly value our ability to connect them with their audiences and deliver messages that resonate. We are meeting our customers where they are, including through our growing programmatic sales channel, and we're attracting new advertisers who appreciate out-of-home's NAC for standing out in today's increasingly fragmented media landscape. The vibe out there is good.

For the quarter, revenue and EBITDA growth once again exceeded our internal forecast, with increases in revenue across all business offerings, billboards, transit, airports and logos, and all regions and on both the local and national levels. On an acquisition-adjusted basis, consolidated revenue grew 6.1% in the second quarter, while EBITDA increased 7.3%, with a record EBITDA margin of 49.2% in the quarter. It was our highest rate of revenue growth since Q2 2022, and our 21st consecutive quarter of revenue growth overall. The momentum has carried into Q3 and pacing suggests year-over-year revenue growth rates for the balance of 2026 are likely to be in the same range as Q2.

With that in mind, we have raised our guidance for full year AFFO to a range of $8.75 to $8.90 per share. At the midpoint, that would represent AFFO per share growth of approximately 7% over 2025. Additionally, management will be recommending a $0.05 increase in our quarterly dividend to $1.65 per share.

Back to Q2. Categories of strength included service, political, retail and financial, while real estate and amusements were slightly weaker. Service has been a reliable growth category for several years now, propelled by demand from attorneys. But in the second quarter, we also saw a surge in business from technology service providers, including those within the AI space. Political spend, meanwhile, increased more than $5 million year-over-year in Q2 and is running well ahead of 2024 levels. It will continue to be a tailwind in Q4.

About half the political dollars are being spent on our digital platform, which was the biggest driver of our overall growth in Q2. Our digital revenue increased 15.4% year-over-year and now constitutes a full 1/3 of our total billboard revenues. On a same board basis, digital billboard revenue increased 6.5% year-over-year. Growth of more than 50% through our programmatic sales channel once again made it a bright spot, and programmatic accounted for approximately 10% of digital billboard revenue in the quarter.

Our national business was particularly strong, helped, of course, by the World Cup. On a consolidated basis, national and programmatic revenue increased nearly 16% in Q2, the sharpest increase since the COVID rebound in 2021. Local and regional revenue, meanwhile, increased 3.4%.

We have been active on the M&A front. Through June 30, we had spent more than $100 million on nearly 30 billboard acquisitions as well as on purchases of easements beneath our billboards. We have a healthy pipeline of billboard deals and easements under LOI and should easily exceed $200 million in cash spend for the full year. Meanwhile, we expect to close our second UPREIT transaction in the coming weeks.

All in all, I could not be more pleased with how the year is shaping up. I want to commend our team across Lamar land for their efforts so far in 2026. We have been busy.

With that, I will turn it over to Jay to walk you through some additional numbers.

Thanks, Sean. Good morning, everyone, and thank you for joining us. We had a strong second quarter and are extremely pleased with our results, which exceeded internal expectations and consensus estimates across revenue, adjusted EBITDA and AFFO. The airport business continued to outperform with acquisition-adjusted revenue increasing 21.1% in Q2 versus last year, which was an acceleration from last quarter when airports grew a healthy 15.5%. Our billboard regions all experienced mid-single-digit top line growth, led by the Southwest and Atlantic, which were up 7.7% and 6.5%, respectively.

In addition, the positive momentum continued in July with revenue increasing 6%, outpacing our original budget. July's strong performance brings acquisition-adjusted revenue to 5.2% through the first 7 months of the year, and we are optimistic about our booking pace for the balance of the third quarter as we approach midterm elections. Acquisition-adjusted consolidated expenses increased 5.1% in the second quarter, which grew 150 basis points more than anticipated, but driven by variable expenses tied to solid revenue growth in the second quarter.

Adjusted EBITDA was $303.4 million compared to $278.4 million in 2025, an increase of 9% in the quarter and improving 7.3% on an acquisition-adjusted basis. This was the strongest growth we've seen since resurgence from the COVID-19 pandemic. Adjusted EBITDA margin expanded 110 basis points to 49.2%, the strongest margin in any quarter of the company's history.

Adjusted funds from operations totaled $247.9 million in the second quarter compared to $225.3 million last year, an increase of 10.1%. The diluted AFFO per share grew 8.1% to $2.40 per share versus $2.22 in the second quarter of 2025. Local and regional sales grew for the 21st consecutive quarter and accounted for approximately 77% of billboard revenue in Q2. It has been over 5 years since the portfolio last experienced a year-over-year decline in local and regional sales, which was due to COVID. National sales performance was extremely robust and grew to represent 23% of our book, up from 18% last quarter.

On the capital expenditure front, total spend for the quarter was $42.7 million, including $14.7 million of maintenance CapEx. And for the full year, we anticipate total CapEx of approximately $186 million with maintenance CapEx comprising $65 million.

As for our balance sheet, we have a well-laddered debt maturity schedule with no maturities until the AR securitization in October 2027 and no senior notes maturity until February 2028. We will likely extend the securitization later this year, assuming market conditions remain favorable. The company currently has approximately $3.5 billion in total consolidated debt and our weighted average interest rate is 4.5% with a weighted average debt maturity of 4 years. As defined under our credit facility, we ended the quarter with total leverage of 2.9x net debt-to-EBITDA, which remains amongst the lowest levels ever for the company. Our secured debt leverage was 0.7x at quarter end, and we are in compliance with both our total debt incurrence and secured debt maintenance test against covenants of 7x and 4.5x, respectively.

For the full year, we expect total leverage to hover around 3 turns with secured leverage coming in comfortably below 1x net debt-to-EBITDA. In addition, our latest 12-month interest coverage through June 30 was 7.1x adjusted EBITDA to cash interest, further demonstrating the strength of the company's balance sheet. As Sean mentioned, M&A has been active thus far in 2026. We continue to benefit from an investment capacity well over $1 billion with the ability to deploy this capital while remaining at or below the high end of our target leverage range of 3.5 to 4x net debt-to-EBITDA.

Our liquidity and access to capital both remain strong. At quarter end, we had $720 million in total liquidity, comprised of $68 million of cash on hand and $652 million available under our revolver. The AR securitization was fully drawn with $250 million outstanding. Subsequent to quarter end, the company repaid $55 million on the revolving credit facility, and we currently have $35 million outstanding.

In this morning's release, we revised our full year outlook and now expect diluted AFFO per share of $8.75 to $8.90, an increase of $0.22 at the midpoint. Cash interest in our guidance totaled $155 million and assumes no change in short-term floating interest rates for the balance of the year. As I touched on earlier, maintenance CapEx is budgeted for $65 million in 2026 and cash taxes are projected to come in around $12 million, which is slightly higher than our original expectations.

And finally, our dividend. We paid a cash dividend of $1.60 per share in each of the first and second quarters. Management's recommendation for the third quarter will be to increase the dividend to $1.65 per share, and this recommendation is subject to Board approval, and we will communicate the Board's decision. For the full year, we expect to distribute a regular dividend of at least $6.50 per share. The proposed $6.50 distribution results in a yield of 4.1% at yesterday's closing stock price. However, given our performance in Q1 and Q2 and expectations for the remainder of the year, it is likely that we will request approval for a special dividend at year-end.

This is consistent with our practice in years past to ensure distribution of 100% of our taxable income. As a reminder, the company's dividend is based on taxable income, subject to Board approval, and our dividend policy remains to distribute 100% of our taxable income on an annual basis. Again, we are pleased with an extremely strong start to the first half of the year as well as the momentum that has continued into the third quarter, and we look forward to executing on our strategy in the third and fourth quarters.

I will now turn the call back over to Sean.

Thanks, Jay. I'll touch on some familiar metrics and then open it up for questions.

While all regions are doing well, I'll give a special shout out to the Southwest and Atlantic regions, which are showing the best growth both in Q2 and year-to-date. As mentioned, Q2 same board digital growth was 6.5%, while total digital revenue growth was 15.4% and digital now comprises 33.3% of total revenues. And has been the case and as has been the case for some time now, the bulk of our growth in static has come from rate. For example, in our Marquee bulletin product, rate was up 3.7% in Q2.

We ended Q2 with 5,730 digital units in operation, an increase of 177 units over year-end 2025. Also, as mentioned, national programmatic had an exceptional Q2, increasing nearly 16% and combined comprised 22.7% of our total book of business, while local and regional made up 77.3%. On top categories of business, services continues to set records, up 15.4% in Q2. We also saw strong growth from retail, up 6.5%; financial, up 9.7%; gaming up 9.2%, and building and construction up 10.2%.

Finally, political also continues to set records with political pacings for this year running significantly ahead of the 2024 cycle. '24 ended up with approximately $29 million in total political. I'll be disappointed if we don't reach low to mid-30s of millions this year.

Katie, I'll now open it up for questions.

[Operator Instructions] Our first question will come from Jonnathan Navarrete with TD Cowen.

Could you help us separate what is already booked for the second half from what's still the shorter lead time demand and whether the strength is broad-based across both during the fourth quarter? And the second question I have is, perhaps I heard wrong, but did you say that you guys are weeks away from completing your second UPREIT transaction?

Yes. I'll hit the second question first. Yes, we have -- we expect to close our second UPREIT transaction sometime next week. We're pleased with the reception we're getting out there to sellers that see that as a very attractive way to really join forces with Lamar, stay in the business, but also in a very tax-efficient way, monetize their billboard assets. So we're encouraged by what we're seeing out there in terms of, again, receptivity for an UPREIT transaction.

The first question was regarding bookings...

For the second half -- yes, for the second half and like what's already booked versus what still depends on the shorter lead time demand and whether you see this trend pretty equal in the third and fourth quarter?

Sure. So we're booked to goal, we're booked at about 85% to 90%. So we still have 10% to 15% left to sell in the period for the period to hit all of our goals. And pacings are strong. We feel good about it.

Okay. And perhaps one more question is just what kind of -- like how do you guys think about we should do an UPREIT transaction versus, I don't know, other forms of financing transaction? How does -- what's the thought process like? And what's the strategy like going forward? Do you see this becoming a more common occurrence for Lamar? Or is it more like a one-off kind of special occasion?

We view it as -- number one, we're always going to do transactions that are accretive to AFFO per share. So that's rule #1, right? And so anytime we are issuing shares, we want to make sure that we do so accretively. If we view it as another arrow in our arsenal to do attractive, accretive acquisitions. It's really up to the seller. It's -- again, it's a very attractive way for sellers in a very tax-efficient manner to sell their inventory, yet also hitch their wagon to Lamar and enjoy the upside that we've delivered for folks that do UPREIT transactions with us. So we do see it happening more and more, and we're getting more and more inbound queries from folks in the billboard business that want to explore it.

Our next question will come from Alexey Philippov with JPMorgan.

Sean, you called out revenue was up almost 5% acquisition adjusted in April on the prior call, and the second result came in much stronger at 6%. Can you help us unpack the monthly cadence through May to June? And what you've seen so far in July and August? And then with the guidance upgrade, what's the underlying organic growth that you assume for the full year? I think you started with 3.6% in February. And what's the number that you have in mind right now? And the final one on UPREIT, is it fair to expect a similar size to were there? And also, do you include this deal in your new guidance?

So last question first. No, this is a smaller UPREIT transaction. It's in the sort of mid-30s-ish. And at the end of the day, we are encouraged to actually be able to roll out an UPREIT transaction with a smaller asset size. It means we can do more of them. We're not -- I'm not going to guide to a specific pro forma growth number for the year, but it will be north of 5-ish, right? If you did pencil out what we laid out there in terms of the rest of the year looking much like Q2, that's the arithmetic -- you'll get to that arithmetic.

Same board digital is a bright spot. And I would encourage that you hold us accountable to same board digital growing faster than the static base because we're deploying a lot of capital to grow that platform. And if it's not showing same board growth, then we have to question whether or not it's capital well spent. Right now, we're extremely encouraged, and we are putting up digital as fast as we can.

Well, Alexey, in terms of the cadence on top line growth in Q2, we just saw an acceleration in each month. We were at 4.8% in April. We went to about 5.5% in May and June was 8% top line growth. So that's how you saw the acceleration go from 5% to 6% for the quarter. So it was an excellent quarter.

Great. And if I may, to follow up on costs. I think acquisition-adjusted expenses were up 5% in second quarter, which is above your roughly 3% full year expense growth framework. Is there any like specific to this quarter? Or we should expect a higher expense growth in the back half of the year?

No, Alexey, if you look at expense growth, we grew 5.1%, about 150 basis points of that was all tied to variable expenses like revenue share leases or sales commissions that were tied to solid top line growth. So it's actually -- it was a positive from our perspective. For the full year, because we are outpacing the 3.5% that we thought top line, we're going to be closer to the mid. You're probably going to see expense growth kind of in the 4% range because of that.

Our next question will come from Cameron McVeigh with Morgan Stanley.

Just from a high level, Sean, I'm curious just why you think you're seeing such strength recently, both at Lamar and what we're seeing across the industry? And do you think you're taking share from other mediums, like is this the AI industry advertising more? Is it more political? I'm just curious your high-level thoughts on how you see it.

So I think there is something secular going on in terms of what's happening to our competitors out there in other local media, for example, what's going on, clearly with radio, what's going on with print, and what is increasingly going on with local network affiliate television. Some of that is coming our way as they experience a drop in their audience, some of their spend is coming our way. What we're also increasingly hearing from advertisers, and I think you're hearing this from our peers at OUTFRONT and Clear Channel as well, digital ad spend, while it's still the gorilla in the room, there is some disaffection with what's going on in the sort of what many people believe is the vast wasteland of what's going on with the panoply of digital products out there.

And so some advertisers are coming to us in the out-of-home world because they know exactly what they're getting. There's no bot fraud. There's no chance that they're going to show up in a place that they don't want to be. And they're increasingly getting comfortable with our ability to track results when they spend with us. So it's all good out there for out-of-home. It's -- you heard this from OUTFRONT. Yesterday, you saw it in the Clear Channel numbers. and a rising tide is lifting all boats because we're feeling it as well.

Got it. That's great. And then just secondly, Sean and Jay, I'd be curious what the latest is on your cost savings initiatives? And is this the year we might see the 48% margins?

We're going to be close. I don't know that we're going to get all the way to 48%, but we will set a record, and we should be at least 1 point better than last year.

So we've successfully gone through Phase 1 of our enterprise software and upgrades, mostly back office and financial and with some savings accompanying those efforts. We're somewhat hitting the pause button on Phase 2. We've had some wins that are going to result in some cost savings in out years. But as you're hearing from other companies, the sands are shifting around software deployment and options for functionality. So we're evaluating those things. And what we're seeing out there are some more elegant and more cost-effective ways to get the functionality we're looking for. So on some of those cost savings, it's stay tuned, maybe not get to 48% this year, but quite possibly in '27 or '28, probably.

[Operator Instructions] Our next question will come from Steven Cahall with Wells Fargo.

I was wondering if we could go one level deeper into that acceleration you saw through the second quarter. I know there was a lot of sports going on in that time, but it sounds like your pacings continue to improve. Were there particular categories of strength that you see persisting into the back half and maybe even into '27? I'm curious if AI, which has become obviously a much bigger sector is showing up as a bigger advertiser as well.

And then just on your M&A plans, I was wondering how you're thinking about valuations in the marketplace right now. It seems like one of your competitors is going to have a better balance sheet than it has historically. Sector multiples are a little higher. So just wondering how competitive that market looks for valuations.

Sure. I'll hit the second question first. So we do basically 3 types of acquisitions. There are ones that are 100% fill in, in our existing footprint, we have, by far and away, the largest footprint nationwide of any operator. So for many of these transactions that we do that are sort of cookie-cutter fill-in transactions, we're the highest and best buyer and sometimes we're the only buyer, and we just sit down and meet with a seller, and we get to yes. So some of them are actually not competitive processes.

As the transactions get larger, more parties come to the table and there is more of a competitive dynamic, sometimes those transactions are in DMAs where we don't already have operations. and that can attract some attention. We just remain disciplined, and we have our valuation metrics, and we stick to them.

Regarding the other 2 publics, it's interesting. Their footprints are different. Oftentimes, they're shopping in places we're not, just given their geographical profile. So we run into them sometimes and sometimes we don't. And I would describe it as we're frenemies when it comes to that. And we're going to win our fair share as will they.

Business, as I mentioned, services is a pretty big catch basin, and it's just growing really fast. And we saw the advent of telecom and technology services, particularly around -- in the AI space, augment that whole category of business. And that's been a good thing to see. And then don't forget political. We've got nice political tailwinds that we're enjoying this year. It has been somewhat unusual to have a mid-cycle outpace a presidential cycle, but that's what's going on in 2026 over 2024. And that, again, has certainly been one of the nice things to see this year.

This does conclude our Q&A session. I would now like to turn the meeting back to Sean Reilly for any closing remarks.

Well, thank you all for listening, and we look forward to catching up again next quarter.

Thank you. That brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

All right. Sorry for the delay. We'll get started. To my left is Sean Reilly, President and CEO of Lamar Advertising. Sean, thanks for being here.

Happy to be here, David.

So I'll give you a kickoff question. So last week, you were at OAAA in Dallas. Maybe give us the latest on the mood of the industry. Any kind of takeaways from the event.

Yes. It was a great conference. The enthusiasm and the confidence and the sense of possibilities this year was measurably better than last year. So there's something going on. There's a lot of excitement in the industry. All of the publics had unbelievably good earnings calls just before Outfront posted some great numbers. Clear Channel. On one thing Scott Wells told me was I finally had an incredible quarter, and I'm not doing conference calls anymore going private. But no, the industry is in a good place.

Got it. So you reported earnings also. You noted forward bookings are, I think you said the strongest you've seen since COVID. Maybe walk through a little bit more specifically what things look like for Lamar at the moment and what's giving you confidence to kind of signal that potential change to your outlook in August when you report?

So there's a few components to it. Political is certainly coming in stronger than we anticipated. And as I mentioned on the call, usually, we see a drop-off in a midterm as opposed to a presidential cycle. This midterm cycle, we're going to do double-digit better growth over '24. So that feels very good. We also have a huge new category that wasn't with us a year ago, which is pharma, and that buy has been meaningful to us and well received by them. So we're very happy with the way that's played out.

But in general, it's strength across the board. National, which 18 months ago was a headwind is now a tailwind. And our local business is steady Eddie. The growth there is healthy and above our overall platform growth last year. So good news.

Let me unpack some of those pieces. So maybe on the local side, we did hear, for instance, from a few broadcasters, you cited incremental weakness. Why do you think on the local side holding up better than, say, the television side?

Our verticals aren't exactly the same as theirs. And some of our verticals actually perform very well in a K-shaped economy. Our, for example, restaurant business is quick service. It holds up well. Our retail business can be both ends of the K-shape that we get good strong buys out of jewelers, right? But we also get good strong buys out of convenience stores, right? So it's both ends. And our local services category is exploding. So -- it could be a little bit of the story around what your verticals look like. And it could be the fact that our audience is growing in certain other broadcast media, that's not the case.

And I'm going to ask on local services, anything in particular? Is it lawyers? Is it...

So we announced as -- on our calls, we call it services. It's our fastest-growing vertical. It's about 21% of our book. Attorneys make up about 60% of that, and they're very healthy. They're increasing their spend with us, but it's also other services that you could imagine like pest control and plumbers and accountants. So it's a very healthy, large and growing segment for us.

Got it. And maybe going back to political. I think in February, you were a bit more conservative. So what's changed? Is it something specific to the Lamar footprint and the races there? Or is this sort of a broad effect across the industry?

Yes. So broadly defined for local races, we are more important to races happening in middle markets than large markets. That's been true long time. I think what's different this year is you have a lot of early primaries, hard fought, oftentimes Republican against Republican in places like Texas and Louisiana, where we've had just intense races, some of which are going to happen again because no Republican candidate in the primary got more than 50% as was the case in Louisiana just this weekend. And we got good spend from all the candidates engaged in that.

Another thing that's going on, which I think is probably even more important, 65% of what we code as political is actually advocacy. It's not necessarily candidate running against candidate. It's someone trying to promote a particular position around a particular issue. And I am finding comfort in that because that can happen in off-cycle years, right? Not to the degree it's going to happen in an even year, but to some degree.

And so we're -- I'm really looking forward to at the end of this year, ferreting out, number one, what happened; number two, how the cadence through the year because I feel something a little bit different this year than in the past. And we need to understand it. We need to communicate it to you guys so that you all have an easier job modeling us because we didn't get it right last year, and we didn't get it right this year, but to the upside this year.

Right. And it feels like the issues piece is the main -- is one of the main...

I got to get to the end of the year and really slice it and dice it. But yes, that does feel a little different, too.

Got it. And maybe can you just remind us on the recent history of national versus local? I know national picked up a bit starting in the back half. And maybe you can talk to some of the drivers you mentioned pharma, we can hear a little bit more about where you're getting more traction.

Yes. I would start with our good friends in big pharma. But it's really across the board. We have customers that were longtime great verticals for us that maybe hit the pause button 18 months ago, who are now back in. Auto insurance, I would highlight there. And then we've got some -- a telecom customer who we never had before, who's coming in this year. So it's a combination of new friends and old friends and just general strength across our national buyers. It's wonderful to see. And I think that's one of the reasons the attitude and atmosphere at the convention was so good, particularly when you look at the footprint that Outfront and Clear have and the numbers they posted, they were very impressive because of national recovery.

Do you think anything structural is going on across channels? For instance, one of your peers sometimes put forth a notion that if you look at everything going on in search today, there is disruption there caused by AI and marketers are looking for alternative reach vehicles and outdoor has one and sort of cost-effective reach. Any veracity to that do you think? Or is that sort of more of a go-forward kind of comment?

No. First of all, Nick is very eloquent when he talks about in real life, which I think you're probably referencing, right? I think -- Scott's good at that, too. I think there's something to it. It feels like something is different. It's not just the sort of cyclical, yes, national is up and it's going to be down. There seems to be a rethinking of by big brands of what exactly they're getting in the digital ecosystem and where that's going. Those guys are still going to command the vast bulk of the dollars, but just a little shift our way is big in our world, right?

Maybe extending the conversation on national. I don't know if you can just update on the latest in terms of conversations with the ad agencies. Obviously, in the past, we've talked about some of the challenges of getting increased allocations in there. Maybe just an update on where things stand there.

Yes. So one of the good things about going to the convention is it's not just the billboard owners talking to themselves. The buyers go as well. And all of the meetings that I had with the agency partners that we enjoy, they were all good. Everybody was as busy as they've ever been, and they don't see any change going into the back half. So the vibe was just really, really good.

Maybe last one from a category perspective. AI has been called out as a vertical point of strength in New York, Northern California. Maybe those are a little bit less material markets for you, but have you observed any impact across your DMAs?

Yes, we have. It entered a top 10 position for us. That said, it is more of a san fran phenomenon. I mean you can't drive from the airport into downtown San Francisco without seeing every single AI large and small entity represented. And we're not in san fran, unfortunately. But that said, no, they're using us and they're using us well.

Yes. For Lamar, I was thinking Vegas, maybe there's a...

There's a convention we did well with them. We are the Vegas airport, so we got some of that stuff.

Got it. Okay. So programmatic grew 25% in Q1. I think that's well above the kind of roughly 10% you had expected at one point for the year. Maybe just where is that growth coming in stronger than expected?

Number one, across the board, right? It's just -- it's a channel that is increasingly being embraced by the digital specialists. But I think the primary driver, and I don't typically name names in public, so I won't, but we got some customers back that were big spenders with us across our whole platform, let's call it, 2 years to 18 months ago. And now they're coming back because they can buy programmatically. The dollars aren't as big as they used to spend with us, but they're getting there. And they're almost exclusively programmatic in their reentry into Lamar.

And in that particular instance, was there any kind of catalyst that pushed them back into the market?

Well, the channel -- programmatic channel is highly targeted, really easy to execute on. And their digital shops that specialize in placement for them are placing them on us the same way they place on this, right? So the very same metrics and algorithm and everything they're looking for it shows up on here, and it shows up on the interstate.

Got it. Maybe just staying on that or on programmatic. Can you just speak to where you are overall in developing the channel? I think at this point, it's all national. What would you need to see to then extend that to local clients?

So the good news is we're seeing it already because we're experimenting with a product that we call Flex Direct, which is available to our local customers. So backing up for a minute to your comment, when we first started going down the programmatic path, we wanted to make sure it was net new business, and we wanted to make sure we could protect our CPMs, right? And we had very good experience doing that by limiting it to only digital native shops and only national.

What we've learned is we can protect our CPMs, even enhance our CPMs, number one. And number two, we have sophisticated local customers that buy across platforms like Meta and Google, and they are used to buying impressions in a self-service way. And they want to do that with us. And so we're rolling out a platform that enables them to do it, and we're really excited about it because we think the ease of buying will get them to buy more.

Maybe staying on digital. So I think you framed 350 conversions as sort of a reasonable annual run rate. I think the associated cost of that is around $65 million. A question we often receive is why shouldn't or why can't Lamar accelerate this, especially just given the high returns and obviously, your balance sheet flexibility. So maybe just walk through what kind of governs your conversion pace, whether you have or what conditions are there for you to accelerate?

The #1 gating issue is the permitting regulatory environment, right? Now that works both ways. The permitting process is a barrier to entry in our business, and so it can work as our friend. When it comes to accelerating digital rollouts, we have to navigate a variety of different sign ordinances and rules in something approaching 4,000 to 5,000 jurisdictions. And so navigating that landscape just takes time. So that's number one.

Number two is these are big construction projects outside, right? And so things have to happen. Crews have to arrive on time. This structure has to be retrofitted to hold the extra weight, you have to get the actual screen itself to a place and all that stuff that just has to happen. Believe it or not, sometimes we get held up because we're waiting on the power company, right? So it's just so much as I'd like to go faster, if I could do that and have 5,000 more, I would do it, but that's not the world.

Got it. Maybe just remind us at this point what the current kind of revenue and cost uplift looks from a conversion, how do you think about the IRR thresholds?

Sure. First point I'd make is the returns have been remarkably consistent. Board #1 that went up 20 years ago and board #5,000 that went up 18 months ago, right? Same return profiles. And I think that's a testament to really as we get more digital out there and our customers get more used to using the platform and use it in wonderfully inventive ways, the demand is there, right? And so that's been gratifying over the course of time to see that. So you've got a picture of billboard, right? You got something that's making, let's call it, 3,000 a month. That's on average. Now it's going to be different in Vegas and it's going to be in Baton Rouge.

So our customers paying $3,000 a month. They also have to buy the substrate. That's what they print on. That probably costs them $1,000. They amortize that over a 6- to 12-month contract. That's the economics as a static. Now it's digital, and we have 6 to 8 slots. The advertiser typically pays about the same absolute dollars. So it's probably still $3,000 for them to be on it, right? But from their point of view, it's the CPM goes up because it's shared space. From our point of view, we've got the opportunity to put 6 to 8 customers up there paying almost the exact same.

So picture something to be conservative, we were making $3,000. Now we're going to make $15,000 to $18,000. And the incremental margin contribution from that is going to be somewhere between 65% and 75%, depending on how well we manage the real estate. If we do a great job on the real estate, it's more like 75% incremental margin. If we're just do a so-so job managing the lease portfolio, then it's 65%. Either one is a good one. And you can do the ROI. It's pretty good.

And I'm going to ask in that situation, right, where the advertisers is paying the higher CPM, are you bringing in different advertisers since the CPM is higher, right, essentially or...

It's -- yes. So typically, you contract for 1 slot and then you've got -- you're sharing that space with, let's call it, 5 other advertisers. And they're happy to pay a slightly higher CPM because it's so dynamic. They can integrate it in with their social media. They can change the copy from their desktop, they can copy daypart, right?

Got it. Maybe switching to the expense side. So you've talked recently about completing the ERP project in August. Maybe what should investors expect on this in terms of cost and operating improvements?

So on the first quarter call, I went out there and said we're going to do a point better, right, 100 basis points better on margin, which will take it from 46.7% to 47.7%. There are some different components to that. One was a very simple component. We got rid of the Vancouver transit franchise, which really helped with our margin profile. But another part of the component of that is tuck-in acquisitions that we do because those also come down at an EBITDA contribution margin of plus or minus 65%. And we did a lot of those last year. So you're seeing the effect of that this year.

On the ERP project, two things of note there. Number one, the spend on it is going to trail off as we get into the back half of the year because we'll be -- you're never done with this stuff, but we're kind of sort of done. And then given -- we're evaluating, okay, what did we get? And how much is it going to help us. But we had some wins, and you should see from that activity, again, some margin enhancement as we get to tail end of next year and particularly going into '28 is when I really expect a little lift there.

And then I don't know if this falls strictly into the bucket of cost, but I want to ask about AI, right? You've been asked this question before, how it impacts your business. I like to quote, you usually say, AI is good at wording pictures, right? That's what Lamar does. But curious if you could update your thinking on that, right, as your clients consider what they could do maybe with their creative on your boards.

Yes. That's an interesting story actually, and it's got a ways to work itself out. You've heard the term AI slop. We're experiencing a little bit of AI slop right now because our clients are using AI to design their own copy. They think it's gorgeous, but it's not real good billboard art. And you don't want to go back to a client and say, no, no, no, we're working our way through that, and that's going to sort itself out. Ultimately, what it's going to do, though, is, like I said, it's good at words and pictures. We're going to figure that out. We're -- by the way, we're a Gemini shop. And internal to Gemini, you can build what they call [ gyms ], right? I don't know if you all have heard that phrase before.

We're building a [ gym ] to get rid of that AI slop that we're going to make available to our clients. And it's going to put guardrails around what colors you can use, what aspect ratios you can use, how you don't want 32 words on a billboard, you want something around the neighborhood of 10, right? And it will just sort of help them do good billboard copy so that when they bring it to us, we can say, God, it's beautiful. I got some space for you. So that's what we're doing to work through the AI slop issues.

Okay. On the M&A side, so Lamar has completed 19 acquisitions year-to-date for $80 million in cash. Math would suggest deals on the smaller end of the market. Just kind of curious, overall, is that where you're seeing kind of the most opportunity right now?

Yes. We're feeling real good about the marker we put out there to kind of do about $200 million in cash deals. And that -- we're on pace to do that. That feels kind of like it did last year, and they were very successfully integrated and doing what they're supposed to do. We hadn't landed the big UPREIT one yet. And those are structurally a little more complicated. You got to have just the right seller, someone with low or no basis, someone who loves Lamar and wants to take our stock, someone who doesn't need liquidity. Those people are out there, and they have been in touch. They know the structure, and it's really just a matter of the timing being right for them for the bigger ones, north of $100 million kind of thing.

And you're saying that post Verde, the UPREIT investors are more at that size level.

Yes. And they've -- like I said, these are either sophisticated families or there's someone like Ernie Garcia, who's a sophisticated investor. That's the profile of the seller that this is the perfect vehicle for them.

Got it. Maybe how would you just frame overall the seller's mindset today, right? And is it more challenging for you given kind of going back to your initial commentary, you just had 3 publicly traded firms all report great results. And does that sort of change everyone's mindset in terms of is the best environment or not?

So a couple of ways to think about that. The environment is a little more frothy for sure. And whether they're a sophisticated seller or not, everybody knows Lamar's arithmetic. Our model is pretty easy. No, you work really hard figuring this out, but -- our model is pretty easy to figure out, right? And so what gives Lamar an advantage is our footprint. Our footprint is such that almost anything in the outdoor space is a fill-in for us, right? And that gives us an advantage. And as long as we can operate somebody's inventory as the highest and best user, we can offer them a multiple that makes them happy and a post-synergy multiple that makes us happy. And that is the sort of secret to us being able to knock down so many of these long-tail deals.

Maybe just staying on capital allocation. You've also talked about wanting to ramp spending on easements. I think you budgeted $20 million this year, but expressed the desire to double or triple that. Does the higher rate environment open up an opportunity to potentially execute on that?

Yes, that's a good observation because typically, when we're buying easements or real estate, it can become a cap rate discussion, right? And so the higher the interest rates, the higher the cap rate, which is a lower purchase price. We don't tend to talk the language of cap rates. We tend to talk the language of multiples of foregone lease cost because that's what you're doing. You're buying down your leases. And so if we're paying somebody $40,000 a year to have a billboard on their property, and they feel like they would rather have a one lump sum of $400,000. That's the kind of conversation we want to have with somebody. And those people are out there. And it's a good use of capital. It's a no-brainer. It's a riskless return.

And can you just remind us the percentage of your portfolio that you own?

Expressed as a percentage of revenue, it's slightly more than 20% of our revenues. We actually own the real estate under our billboards. Expressed as actual billboard locations, it's, let's see, 160,000 billboard faces, and we own the real estate under 20,000-ish -- did I get that Ross right? I got that right, yes. Yes.

Maybe about 5 minutes left. Anyone in the room want to ask one? If you do, feel free to raise your hand. Okay. Maybe just stepping back, I'll ask one on margins. Maybe just speak more broadly on the path towards the long-term target. I think your communication in March was to -- I think it was to exceed 48% by '28. As you noted earlier, though, I think the goal this year is 47.7%. So is there kind of room to execute to the long term early? What would be the factors around that?

Start with the macro. Right. So assuming that's constant, the things we talked about relative to IT and AI should contribute. But I think the most important thing is continuing to pay attention to those tuck-ins that fall to the bottom line at a margin that's higher than our consolidated margins. Digital conversions fall to the bottom line at a margin that's higher than our consolidated margin. Don't do anything stupid to get into a mix of businesses where the margins are lower. So don't go bid on some huge big city contract that's going to come in at a margin contribution lower than your consolidated margins. So yes, it's a combination of do the good things and avoid the bad things, and we should get there.

Got it. Maybe it's a smaller part of Lamar, but your airports division posted over 15% growth in Q1. I think the logos were up over 6%. We saw some other transit results that were strong across peers. Just maybe just unpack the strength and just transit broadly at the moment.

So for us, we're not -- in the airport business, we're not Logan or Kennedy or LaGuardia. We're middle market airports, large portfolio of small contracts. Same thing for the transit business. We don't do the MTAs of the world. We have lots of contracts with middle and small markets. And that's a portfolio approach that allows you to sleep at night because no one big contract is a must-have. As a matter of fact, when we win a franchise or lose a franchise, you don't even know it. We don't even announce it. The only reason we announced that we were exiting Vancouver was because it had an impact on our margin profile. So that's that business.

The logo business is a fun little niche business we have. It's the blue signs on the highway right away, let's say, food, gas lodging. We do that under contract with highway departments. We're by far the largest player. It's a niche industry. So the margins have stayed healthy in that business. It's not even really advertising because it's price fixed. Per our contract, anyone that applies, we have to put them up and we can only charge them what our contract with the highway department says we can charge them.

So it's a funny little business. We invented it in 1989. And like I said, it's a fun little niche business, plus or minus $90 million in revenues with, call it, a 35% margin profile.

Every year, we ask you about measurement. I always think it's a relevant topic given the industry has kind of long flagged a gap to your actual reach. Just how do you see that landscape evolving? Anything on the latest with geo?

Yes. Yes, there's good news. And the industry and the buy side are united. We're walking in lockstep. We're abandoning the data provider that used to feed Geopath. It's a company called Motionworks. And we're going with a globally respected brand called Ipsos. They do the measurement in Australia, for example, in the U.K., for example, where out-of-home is a larger share of total media spend. So I'm excited about measurement for the first time in my career, and I've been doing this a long time, right?

And I'm hopeful that this time, we're going to get it right. And like I said, Lamar, Outfront, Clear Channel, independence on the sell side and all the agency players that care about our space, we're all singing from the same hembook. We're all pulling in the same direction. So I feel good about this one.

Okay. Great. With that, we're out of time. Sean, thanks for being here.

Appreciate it, David. Thanks.

Excuse me, everyone, we now have Sean Reilly and Jay Johnson 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 distribution to stockholders and the impacts and effects of general economic conditions, including inflationary pressures on the company's business financial condition and results of operations. 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 2026 earnings release and its most recent annual report on Form 10-K. Lamar refers you to those documents.

Lamar's first quarter 2026 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, Katie. Good morning all, and welcome to Lamar's Q1 2026 Earnings Call. The year is shaping up quite well for us. Our first quarter results exceeded our internal expectations on both the top and bottom lines with strength from both local and particularly national customers. And our forward bookings are very promising. We are pacing to the top end, if not above, the guidance that we previously provided for full year AFFO per share. If that trend continues, we will need to revisit that guidance on the August call. I am particularly encouraged by the momentum on the national side, which, as you know, was bumpy through 2023 and 2024 before beginning to recover last year.

For the first quarter, national revenue increased 5.8% versus the first quarter of 2025, with programmatic growing by nearly 25% to approximately $11 million for the quarter. Ex programmatic, national was up 4.1%. Pacings for the balance of 2026 are even stronger than that. We are seeing increased spend from some long-time national customers as well as activity from new accounts and categories. What it tells me is that in an increasingly algorithm-driven world, out-of-home's ability to reach customers at scale with memorable messages at affordable prices is resonating with both big brands and local advertisers.

Back to Q1. Consolidated revenue increased 3.9% on an acquisition-adjusted basis with growth across all divisions, billboards, airports, transit and logos and across all of our regions. Our pacing suggests that revenue growth will accelerate into Q2. For the quarter just completed, EBITDA grew by 5.2% on an acquisition-adjusted basis, on a margin that improved by approximately 130 basis points versus the year earlier quarter. Categories of strength in Q1 included services, restaurants, gaming, political and insurance, while education and telecom were a tad weaker. In addition to national growth mentioned earlier, local grew 3%. Digital again led the way with revenues increasing 5% on a same board basis and accounting for more than 30% of our revenue in the quarter. Rates on our analog bulletins and posters meanwhile, showed a healthy growth of 3%.

On the M&A front, we are off to an active start. So far in 2026, we have completed 19 acquisitions for a total cash purchase price of $80 million, and we have a solid pipeline working and potential for more accretive billboard deals. Meanwhile, we have ramped up our efforts to secure easements beneath our best-performing locations, and we are optimistic about what we will be able to accomplish there in 2026. That's a great use of our capital, by the way. All in all, I could not be more pleased with how 2026 has begun.

With that, I will turn it over to Jay to walk you through some additional numbers. Jay?

Thanks, Sean. Good morning, everyone, and thank you for joining us. We had a solid first quarter and are extremely pleased with our results, which exceeded our own estimates across revenue, adjusted EBITDA and AFFO. The airport business led the way with acquisition-adjusted revenue increasing 15.5% in Q1 versus last year, followed by logos, which was up 6.3% in the quarter. Our billboard regions all experienced low to mid-single-digit top line growth, driven by the Midwest and Atlantic, which were up 5.7% and 4.8%, respectively. In addition, the positive momentum continued in April with revenue increasing 4.8% outpacing our original budget. April's strong performance brings acquisition-adjusted revenue to 4.1% through the first 4 months of the year, and we are excited about our booking pace for the balance of the second quarter.

Acquisition-adjusted consolidated expenses increased 3% in the quarter, which was better than expected and should be in the 3% range for the full year. Adjusted EBITDA was $226.3 million compared to $210.2 million in 2025, an increase of 7.7% in the quarter, improving 5.2% on an acquisition-adjusted basis. This was the strongest growth we've seen in almost 2 years. Adjusted EBITDA margin expanded 130 basis points over a year ago to 42.9%. Adjusted funds from operations totaled $177.5 million in the first quarter compared to $164.3 million last year, an increase of 8%. Diluted AFFO per share grew 7.5% to $1.72 per share versus $1.60 in the first quarter of 2025.

Local and regional sales accounted for approximately 82% of billboard revenue in Q1, growing for the 20th consecutive quarter. In fact, it has been 5 years since the portfolio last experienced a year-over-year decline in local and regional sales, which was due to COVID.

On the capital expenditure front, total spend for the quarter was $33.1 million, including $9.3 million of maintenance CapEx. And for the full year, we anticipate total CapEx of approximately $186 million with maintenance CapEx comprising $64 million. As for our balance sheet, we have a well-laddered debt maturity schedule with no maturities until the AR securitization in October 2027 and no senior notes maturity until February 2028. We will likely extend the securitization later this year, assuming market conditions remain favorable. The company currently has approximately $3.5 billion in total consolidated debt, and our weighted average interest rate is 4.5%, with a weighted average debt maturity of 4.3 years.

As defined under our credit facility, we ended the quarter with total leverage of 3x net debt-to-EBITDA, which remains amongst the lowest level ever for the company. Our secured debt leverage was 0.7x at quarter end, and we're in compliance with both our total debt incurrence and secured debt maintenance tests against covenants of 7x and 4.5x, respectively. For the full year, we expect total leverage to hover around 3 turns with secured leverage coming in comfortably below 1x net debt-to-EBITDA. In addition, our LTM interest coverage through March 31 was 7x adjusted EBITDA to cash interest, further demonstrating the strength of the company's balance sheet.

As Sean mentioned, M&A has been active thus far in 2026. We continue to benefit from an investment capacity well over $1 billion with the ability to deploy this capital while remaining at or below the high end of our target leverage range of 3.5 to 4x net debt-to-EBITDA. Our liquidity and access to capital, both remain strong. As of March 31, we had just over $700 million in total liquidity, comprised of $39.3 million of cash on hand and $662.2 million available under our revolver. The company's AR securitization had $242.1 million outstanding at quarter end. Subsequent to quarter end, the company repaid $40 million on the revolving credit facility, and we currently have $40 million outstanding. Also, the AR securitization is now fully drawn at $250 million.

In this morning's release, we affirmed our full year AFFO guidance of $8.50 to $8.70 per share. Cash interest in our guidance totals $154 million and assumes no change in short-term floating interest rates for the balance of the year. As I touched on earlier, maintenance CapEx is budgeted for $64 million in 2026 and cash taxes are projected to come in around $11.5 million, which is slightly higher than our original expectations.

And finally, our dividend. We paid a cash dividend of $1.60 per share in the first quarter. Management's recommendation at the upcoming Board meeting will be to declare a cash dividend of $1.60 per share for the second quarter as well. This recommendation is subject to Board approval, and we will communicate the Board's decision following the Board of Directors meeting later this month.

For the full year, we still expect to distribute a regular dividend of at least $6.40 per share. On an annualized basis, the second quarter proposed dividend represents a yield of 4.5% at yesterday's closing stock price. Given the outperformance in Q1 and expectations for Q2, it is likely management will request that the Board approve increasing the dividend in the back half of the year. However, and as a reminder, the company's dividend is based on taxable income, subject to Board approval, and our dividend policy remains to distribute 100% of our taxable income.

Again, we are pleased with the strong start to the beginning of the year as well as the momentum that has continued into the second quarter, and we look forward to executing on our strategy throughout 2026.

I'll now turn the call back over to Sean.

Thank you, Jay. And as Jay mentioned, the strongest region in Q1 was our Midwest region with pro forma revenue growth up 5.7%. The region showing relative weakness was our Gulf Coast region with revenues up 1%. I would note that looking forward, all regions are pacing well at up mid-single digits. Also of note, and as mentioned by Jay, our airports division was particularly strong, up 15.5%, and our logos division came in up 6.3%. Also as mentioned, same-board digital was up 5% and digital constituted almost 31% of our billboard billing in Q1. We ended Q1 with 5,657 digital spaces, an increase of 104 over the year-end 2025.

As we have said on many of our recent calls, our pro forma revenue growth was mostly driven by rate on our static units and overall same board yield on our digital units. It also bears repeating that national/programmatic sales growth was a solid 5.8%. This was aided by programmatic's strong showing of 25% quarter-over-quarter growth. As of May 1, we were 75% booked to our total revenue goal for the year. That's the strongest laid down bookings that we've seen since COVID.

I've already mentioned categories of relative strength and weakness. To that, I would add that all of our top 10 verticals are healthy and happy. There are ebbs and flows, of course, but collectively, our top 10, which generates 75% of our revenues in Q1 were up 5.4%. Finally, political this year is pacing well ahead of where it was in 2024 and should continue to be a nice tailwind.

With that, Katie, I'll open it up to questions.

[Operator Instructions] Our first question will come from Cameron McVeigh with Morgan Stanley.

Curious if you could give us just a -- you've mentioned, but a high-level broader view on your view of the macro and any notable verticals that are driving the strength in the national ad market. And I know you said you expect revenue to accelerate into the second quarter. But just curious at this point, if you'd expect that strength to continue over the course of the year from what you can tell and how that cadence might look?

Sure. Last question first. Q2, 3, 4 are all looking very good, Cameron, and pacing, I would call, roughly the same pro forma revenue growth. And regarding the first part of the question, it's really across the board. That's why I mentioned that if you look at all of our top 10 verticals, they're all doing well. There are going to be ebbs and flows through the course of the year and across the years. But that top 10, as I mentioned, was up 5.4%. So yes, we're seeing health across the board.

That's great. And just one follow-up. Sean, I'm curious how you're thinking about the upcoming tailwinds, including the World Cup and the midterms and if your views have changed or evolved around the sizing of those?

So I think the World Cup is -- that basically is in our book, and it's done and it's contracted for. And I'd say, in general, that's helping our national. And it's coming in, give or take, where we expected. I think the surprise, Cameron, is how strong political is. We were, I think, understandably a little bit conservative on our guide to that when we opened up -- began the year because it's a midterm year, not a presidential year, but we are pacing well ahead of 2024, the presidential year. And assuming that continues, that will be the first time that's ever happened.

Our next question will come from Daniel Osley with Wells Fargo.

Beyond revenue coming in ahead of your expectations, were there any other contributors to the margin strength that you saw in Q1? And then maybe as a follow-up, how should we think about your margin expansion for the full year compared to '25, especially given your commentary around easements.

Yes. Good question. So there are a couple of factors in there. Obviously, revenue growth helps. Recall that we lost that Vancouver franchise last year. That was essentially a no-margin business. So that is now out of our portfolio, and that has contributed somewhat. We layer -- when we layer in acquisitions, and we did quite a few of them last year, those may come in at a margin contribution of approximately 65%. So that also obviously is helping. Now we're going to lap some of that activity as we go into the back half. But I would anticipate, and I would be disappointed if we don't have at least a full point -- percentage point of margin expansion for the full year. Last year, it was 46.7%. And I'm looking for something in the 47.7% range for the full year this year.

[Operator Instructions] Our next question will come from Alexey Philippov with JPMorgan.

Can you discuss monthly dynamics through the quarter? You talked about massive 6% revenue growth in December with demand cooling off in January, February. And did you witness acceleration in March or the overall beat this quarter is largely explained by that strong momentum at the beginning of the quarter? And how much of the beat was national versus local?

So on the second part of the question, I would say national was the surprise that led to the beat. Clearly, we had some large buys from some large customers that were not contracted for when we last spoke, but now are on the books and contributed nicely. And also political came in better and continues to come in better than we anticipated at the beginning of the year.

And in general, to the tone of the question, we're seeing the book build nicely as we look at our pacings for the rest of the year. I would anticipate that by the time we get to the August call, as I mentioned in my prepared remarks, we'll be looking at hopefully revising that guidance upward as we go through the year.

Yes. Can I ask one more?

Sure.

Yes. Last year, you talked about the deep pipeline of private targets across various size ranges and the Verde UPREIT transaction was clearly well received. So with the stock where it is today, we would expect you to be very interested to do such deals. Are you seeing seller interest in the UPREIT structure today?

Good question. Yes, we are. We've had several inbound inquiries, and we're hopeful that we'll -- we can get a couple of UPREIT deals done this year. And it's a very, very attractive structure for sellers. It's very tax efficient. And of course, they get to hitch their wagon to Lamar, diversify their exposure to out-of-home, and we've been a good bet so far.

Great. And can you remind what's embedded in the full year guidance for AFFO with respect to acquisitions that you have completed in the first quarter already?

When we guide to AFFO -- I'll pump that over to Jay for a second. But when we guide to AFFO per share, we don't anticipate layering in acquisitions.

Yes. And so if you think about acquisitions from a top line pro forma growth, it's probably adding 20 to 25 basis points this year from an actual versus pro forma.

This concludes our Q&A session. I'll now turn the call back over to Sean Reilly for any final or closing remarks.

Well, thank you all for your interest in Lamar and for joining us on the call. And we look forward to another good call in August.

Thank you. That brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

All right. We are on time. So let's get started. And first, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representatives.

And with that, my name is Cameron McVeigh. My pleasure to welcome Sean Reilly to the conference, CEO of Lamar Advertising. Sean?

I appreciate you having me.

So to start, Sean, you've described the 2026 is having a really good setup. And it sounds like pacings for the rest of the year are promising. The guide if I recall correctly, it's about 3.5% acquisition adjusted growth, 4% AFFO per share growth. I was hoping you could walk us through maybe the building blocks of that guidance and what gives you confidence in the trajectory?

Yes. I would say we're basically being conservative with the guidance. Our pacings are stronger than those numbers. National is a real tailwind, and it's been a headwind in the past. And also, I think we're being conservative on our projections for [indiscernible]. It just feels like it's going to be a little stronger than we suggested I feel good.

Great. Good to hear. As you think through 2026 and your outlook for the year, what are the priorities for you, Jay and the team?

We got the ERP thing. We got it get done, right? On that front, we're done in August. Go live, you'll see the spend tail down. As a matter of fact, we guided for about 1.8% growth at corporate and expenses. So we'll finally start realizing some benefits of that project. We have put a number out there in terms of what we expect the margin enhancement to be from it. About 0.5% of margin enhancement, which we should see as we start going through 2027 and in '28. I told a lot of folks today that we expect by the time we get to 2028, we'll be north of 48% on consolidated on our margin. So that's a nice tailwind for AFFO growth.

That's great. And just on the ERP point since we're on the topic. Can you just remind us what the catalyst was to start the ERP? What you expect the benefits to be going forward?

So we had what IT people call technical debt, right, 20-, 30-year-old legacy systems built by Lamar, for Lamar, not cloud-based on-premise. And so cleaning that up was number one. Number two, in order to realize whatever promise AI brings you have to clean up your data and you have to have a backbone that can support an overlay of AI products. So that's another big motivator. And what we expect is that it will take a sales process that might take 14 people hours to get a nice proposal out and get in front of a client and take that down to maybe 6 people hours, right? So the sales process is going to get much more efficient and much more intelligent, right? So more pitches, better pitches, more intelligent pitches. And hopefully, that's not just cheaper, but also more successful. Hopefully, it also helps the top line.

Great. Sean, in response to the 2026 goals, it sounds like national, there's been sort of an inflection point from some national advertisers. And recently, you highlighted some of the top 5 accounts were GEICO, Progressive, JPMorgan, Coca-Cola, Johnson & Johnson, large blue-chip national advertisers. And I'm curious what you think is driving the resurgence of these advertisers? And do you see this more as a cyclical or a structural tailwind?

By and large, you've heard me say this before. National for us tends to be more cyclical, right? So they can come in and go out. This year feels better because verticals that were soft are now coming in big, right, insurance, auto insurance, definitely going to be much stronger this year than the last 18, 24 months. And then there's cracking the pharma code was -- is, I believe, can be huge. We had a big pharma buy in Q4. That's kind of what led to the upside surprise. And they've recommitted to Q2, right? And so that can be a game changer for us. It's big dollars, big budgets. And the fact that they immediately committed to another sizable buy means they had a good experience, right? So it feels much better this year than it has on the national side than it has 18, 24 months ago.

Great. That's helpful. I guess just a follow-up on the pharma point. How big do you think pharma can be as a vertical. And was the interest immediate following some of the change in the rules around the disclosure levels?

Yes. The FDA disclaimer rules huge, right, made their messaging really billboard friendly, right. This was one, really only 1 customer that has been making the difference so far, and there's lots of them out there, right? So anything that you see on CNN in the way of drug commercial is a candidate for us, literally.

Got it. And is there a new sales team or function to try and pursue these pharma ads? Is that part of the strategy now?

Yes. We have a dedicated team that's going direct. So -- and this buy was direct to the pharmaceutical company. It was not an RFP response type of national buy. Now they ended up running it through their agency. So there is an agency of record, but it was direct.

Great. And just to double-click in on the industry verticals, health care, financial services, building and construction were all double digits in the last quarter. Telecom and beverages, a little soft. How should we think about the composition going into '26?

Everybody is happy and healthy, particularly our top 6 verticals, all doing fine. Telecom is coming back. So we feel better about that vertical than in the recent past. I would say beer and wine, they're struggling. It's beer, wine, alcohol, less people drinking. It's about half local for us, beer distributors and about half national, I think Constellation Brands. So that one is probably still going to be a little wobbly. It's about 3% of our book.

Got it. Okay. Maybe just on the local side. It sounds like sentiment is still a little bit cautious. As we enter '26, what do you think it takes for local ad spend to start to reaccelerate?

I think we're there, yes, I do. I think Main Street is feeling pretty good about the world.

Great. Great. Okay. Sean, I wanted to hit on political. We have the midterm election coming up. Maybe if you could talk about your expectations for political ad spend and how that compares versus '25 and '24?

Sure. So '25, $11 million; '24, about $30 million, right? So let's call it a delta of $20 million. We were being cautious looking at this year, and we guided to roughly $12 million, $13 million, $14 million in terms of '26 over '25. I think that's conservative, given what I'm hearing out there. So I feel good about that one. That runoff in Texas didn't hurt.

Definitely. Okay. And speaking of other onetime cyclical tailwinds, but if we think about the World Cup, I know you've sized in the past around a $3 million to $4 million incremental opportunity. Are there any broader maybe indirect benefits you might expect to see whether if you think about category mix shifts or pricing power?

So, in general, it's going to help clear and out front a little more than us given their presence around the major venues, but it's going to be helpful. Seattle is a big market for us, and that's 1 of the venues. It will be helpful in Kansas City, Dallas, in and around Northern Jersey. So incrementally, it's nice. It's already in-house, by the way. We got the contract signed, and it's a little north of $3 million. We might get some bits and pieces come in between now and then. We get really, really good pricing which is really nice now, but then we have to figure it out next year, right? So -- but incrementally, it's good stuff. It's really good advertisers. And they go after our best units in those markets. And so looking forward to that.

We are getting better at pricing and price optimization around big events. We do incredibly well, for example, at Coachella in Southern California, just kill it there. So as a team, we're getting better at that.

Great. I was talking to one of your main competitor up here earlier today around the digital momentum in the out-of-home space and especially around programmatic. Can you just talk about what you're seeing in the programmatic trends, maybe what inning it is? And where do you expect that to go going forward?

Yes. It's still, let's call it, third inning. And primarily because we haven't opened up the channel to our local customers, right? So that's the next step. In terms of national programmatic, we're well established. It's still our fastest-growing channel by far. One of the problems we have growing the channel is the fact that we're selling by definition, unsold inventory. And so to the extent we're full on a digital unit, we can't offer it up to the programmatic channel. So we're a victim of a little bit of our own success in that regard.

But we're figuring out ways to work around that to make space preemptable and available for that channel because while the absolute cost of sale is 10%, which is more than our normal channels, which is 6%, the CPM we get is higher and it makes up for that. So we're working it. It will grow this year in the neighborhood of 10%, this year over last year. Last year, it grew 20%. So it's, I believe, going to become increasingly important, but it's really going to matter when we open it up to our local customers, and our local customers are no longer essentially soaking up demand at a lower CPM that would otherwise go to a programmatic buyer, right? That's a couple of years away.

And I recognize it's probably easier said than done, but what do you think the process is to open up to the local SMB type based on a programmatic buy?

They have to be sophisticated, right, relatively big budgets. Increasingly, I think that they're going to want to buy us the way they buy Facebook and Google, right? And so we have to do it, right?

Got it. Okay. And Sean, I wanted to switch over to the acquisition strategy. You guys are acquisitive. Maybe if you can speak to your broader acquisition and outlook for the year and maybe bring us through just some of the synergies that Lamar brings to the table?

Sure. Last year, plus or minus $200 million in cash for assets types of acquisitions, 1 big UPREIT deal. And this year, I think, is going to look like last year. We've got a couple of leads on the UPREIT structure. And then on the cash for assets deals, if they're fill-ins, we just knock those out just day after day after day. They're relatively predictable. Some of them are not very big. We mentioned we did a little over $40 million year-to-date in cash for asset deals. The average transaction size was like $6 million, right? And so we just see that continuing. And those are highly predictable. Typically, we don't need some of the infrastructure that the seller needs, so we can get expense synergies really quickly.

Great. And with the UPREIT structure, how has potential seller interest been with the new structure? And how is the pipeline developing?

There's a lot of interest out there. It does take a special seller, someone who doesn't need the cash, right, someone who might have 0 basis in the assets. So the tax thing is real. They have to have a lot of confidence in the industry because they're going to be part of our group, right? And those folks are out there, right? They're families still that have been running these businesses for generations, have little or no basis, don't need the cash, sort of check all those boxes, right? So -- and we're the only company that can do it.

So that's a competitive advantage, right, when it comes to sitting down with a family or entrepreneur and it's not an auction environment. It's very much a -- it's a romance, if you will.

That's great. And curious how private multiples are looking and maybe how that's been trending recently?

Remarkably consistent. What might look like a 13, 14 multiple to a seller by the time we take it on and do our thing, it's 10 or 11, right? But it all depends on the quality of the inventory, the size of the transaction, lots of ingredients go into getting to yes, right? But that fundamental ability we have to get to where they want to be and still get to where we need to be, that is really our secret sauce, right? The fact that almost anything we do is a fill-in given our scale and scope and broad national footprint.

Great. And Sean, I wanted to ask about the Clear Channel news that we saw with the go private and the go-shop period. Just curious your broader view on potential industry implications and what that might mean for Lamar?

I don't expect that Scott and his team are going to manage any differently, right? They've run a good shop, have as a public company, they'll do the same as a private company. I think it's good for the industry that they will have a short up balance sheet. It's good to have in any industry, healthy competitors. So I view that as a good thing. And so yes, I think it's just steady as she goes. And I'm happy for Scott. It's a good deal for him.

Definitely. Okay. Great. And on the M&A acquisition topic, can you talk a little bit about Lamar's newly appointed President of the Outdoor division, Ross Reilly?

Yes, I can talk about him. He is sitting right there. Ross is going to be great in this new role. He has a breadth of experience across our whole company in terms of roles and responsibilities. But most importantly, our -- as with every industry and the impact of AI and the impact of technological change, it's -- I understand it, but I don't understand it like this guy, right? It's -- he is in the right place to only drive the change being brought up by ERP, but also help us realize the promise of AI. And so yes, it's a good move. And he might have prolonged my CEO life because for 15 years, I've had 16 direct reports and now I've only got 8. So maybe I'll last a little longer.

Yes. Great. On the topic of AI, obviously, a big topic to date. And in the out-of-home industry, in particular, it almost seems like it's this new industry vertical coming in, bringing in some marketing budgets. But I'm curious just how you look at it on a -- maybe the potential impact from the new industry, but also potential implications on broader marketing budgets into the out-of-home industry more broadly?

Let me start with -- it can only help us, right? There's a lot of industries where it's going to be disruptive and quite possibly damaging, not so with us, I think it can only help. Now you drove from the airport to here. You saw all those billboards with AI on them. I wish I had inventory in San Fran, but I don't. So we're getting some of it. We're not getting as much as you're seeing around here. It will hopefully help our customers buy smarter, help us with attribution and measurement in a way that -- because the information is so readily available and accurate and so rich with data that it gives them more confidence to use more of us. And I think there's some logic to that, right?

The other thing I think it can do for us, particularly Lamar, our digital yield management is not where it needs to be in terms of optimizing. I think it can help us there. I really do. So as a yield management tool in the hands of our local managers, I think it can make a difference.

Got it. That makes sense. I wanted to open it up and see if there's any audience Q&A while we -- over here.

Sean, you guys had a nice little investment gain in Vistar. I think it closed about maybe a year ago or so to T-Mobile. Has that asset and sort of the whole programmatic space evolved much under T-Mobile's ownership? Have you seen anything change meaningful?

I think we will. The most meaningful thing that happened was T-Mobile came back in and is buying more. But -- so the CEO of Vistar, Michael, is rapidly rising at T-Mobile, and he is taking on more responsibility for their -- not their marketing budget, but they're marketing products. And so yes, I think it's going to be good for us. And it was a little bit of a shock when I was told that it was T-Mobile buying. But I think it has proven to be a good thing. Yes.

Just on Clear Channel, was that an asset that you would have looked at? And how do you think about the potential for a larger scale M&A in this space?

So their leverage was made it impossible for us to think about the whole, right? We would like to have had some discussions around buying some piece parts didn't get anywhere with that. But I think they're going to -- like I said, they're going to go in, they're going to go private. It wouldn't surprise me if they didn't become a private REIT. They're going to -- I think Scott still has some expense work that he can do given the changes they've gone through. And I think they're going to delever a little more. And I wouldn't be surprised if they weren't a public company in 3 years, right. But we'll see what happens there.

There's a handful of independence with asset value, let's call it, $300 million to $1 billion, right? They're still out there. And one of which is private equity backed. They've got a time horizon. So we'll see. In the meantime, we're just going to keep cranking it out a few small deals at a time.

Great. Sean, I wanted to ask on capital allocation. Your balance sheet is arguably the healthiest of the industry, and it enables different forms of allocation. So curious if you could just walk through how you prioritize your capital?

Sure. Our best ROI is still digital conversion. It's about $65 million we'll spend this year on that. Second best ROI is going to be the tuck-in acquisitions that we just do year in and year out, hope to spend $150 million to $200 million on that kind of activity. I would like to see us spend more money on purchasing land under our billboards. We've budgeted about $20 million for this year to do that. I'd like to double or triple that, because that's a nice return, and it also protects our best assets. And then we executed on a buyback last year. Our timing was very fortuitous. We bought near the low of 52 weeks. So yes, that's a good hierarchy. But we're a REIT, right? So number 1 is pay the distribution and hopefully increase it, right, like we're going to do this year. So that's the hierarchy of capital.

Got it. When you go to buy land, you generally target digital boards first by the land.

We do. We target digital conversions, but not exclusively. It makes most sense to do it under your best units though, highest performers.

Great. And as we wrap, I wanted to ask a bigger picture industry, if you look out 5 to 10 years and you think about the outdoor advertising industry, how it's going to look, maybe the mix of digital versus static and what role programmatic plays. Curious just your high-level thoughts?

Sure. The industry here is plus or minus 30%, 35% digital, right? In the U.K., for example, Australia, it's over 50%, right? So we should be moving more towards that. So much more digital. You're not going to think about digital dollars and traditional dollars. The pots are going to emerge, right? So there will be much more programmatic buying going on, right? Because now it's mostly in digital shops, right? We will have opened up automated programmatic buying for everybody. And that I think is going to result in higher revenue because ease of buying, better proof of performance. So I think that -- all of that stuff bodes well for out-of-home. And I think other media are going to continue to get disintermediated, right? So Again, that's good for us.

So I think it's very bright. I'm optimistic. I'm not going to the beach yet, but I'm going to hand off a good ship to Mr. Reilly here.

That's great. Looking forward to it. I think that's a good place to wrap. Sean Reilly, thank you so much.

Yes. Appreciate it. Thank you, guys.

I'm Jason Bazinet. Very pleased to have Lamar with us here this morning. Mr. Sean Reilly, CEO of the company. Sean and Jay Johnson, CFO, is here as well. So this session is for Citi clients only and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to liveqa.com and enter the code GPC26 to submit questions. And with that, Sean, I'll just turn it over to you to kick it off.

Sure. And thanks for having us. Appreciate it, and you can fire away with whatever questions you have.

Well, let me just start with a big one. We're sort of in a -- I would characterize it as a pretty unique time in the market, right, where there's a lot of sort of cross currents going on. Macro seems pretty good. But what would be the top 2 or 3 reasons you would give to investors on why they should buy Lamar over some other security that's out there?

Well, sure. Let me talk to us as a REIT first. Even though we're trading close to all-time highs right now, our yield is still pushing almost 5% and the average REIT yield is 4%. Our AFFO multiple is around 15 or 16, and the average REIT is around 20. So relative to those metrics, we're still cheap, right? And I would argue that our business model is superior to most REITs. So we shouldn't trade at a discount to them.

When you say your business model is superior, I'll tell you what I hear from investors when they call me and say, "Oh, I want to talk about Lamar." What they're looking for is just pro-cyclical exposure in the REIT portfolio. That's the main inbound I get. So if you're a REIT investor and you're sort of defensively positioned, you sort of want to get cyclicality, you buy Lamar. What would be the other attributes that you say make Lamar superior?

Let me start by quoting Warren Buffett. He likes businesses that have a moat around them. And by the way, Berkshire is in us. It's almost impossible to build a new billboard in the United States today. And unlike other real estate asset classes where capacity comes online regularly, our capacity is severely constrained, and that protects in Lamar's case, dominant market shares in middle and small markets. I mean we have across 80-plus percent of our footprint, 80-plus percent market share, pushing 85%, 90%, which puts us in a very unique position, right?

Now the capacity is being added by conversion to digital, right? You take down a static unit, you put up a digital unit and you instantly have 7 more faces, right? That said, because of our market shares, we are able to essentially control our destiny when it comes to the digital competition in our footprint.

So can I go back to that barriers to entry point? I think what you're referring to, but maybe it's something different, sort of the Highway Beautification Act that sort of restricts new billboards. I always think of -- that's technically true, but there are a lot of places where billboard assets sit off the highway, right, off of the federal interstate infrastructure.

Yes. So we're regulated at 3 levels. It starts at the federal level, Highway Beautification Act. And that's all of your federal A primary roadways. But then there's a level of state and local regulation and zoning that is actually more strict. We operate in hundreds and hundreds and hundreds of jurisdictions. Most of them have their own sign ordinance that is specific to what they call off-premise signs. So you start there.

Then you're subject to the same time use, manner, zoning regs that overlay virtually every municipality. And then we are subject to state permitting requirements, right? And that permit is actually the property right that allows the billboard company to have that physical structure. And that permit runs with the billboard company, not the landowner. That's a very, very important distinction. So anyway, when you combine all those 3 regulatory regimes, you get a huge moat built around your business.

That's great. What would you say about AI? How -- I mean, this is on the mind of every investor. How does AI impact your firm?

Great question. And of course, we do exist in the real world we're physical, right? We do words and pictures, and that's what AI does well. So it can really only help us, right? It can only make our sales process more efficient, our ops process more efficient. And quite frankly, our business intel that much more powerful actually. We are -- as you know, we're in the process of finishing up a massive ERP program that thankfully, this is the last year of it. And that is in preparation for laying over that new Oracle, Salesforce cloud-based platform, laying over it a closed AI system that will enable us to better mine our data and again, be more intelligent.

That's great. What do you think -- I mean, do you have a guess in terms of what -- I always measure advertising in the U.S. as a percentage of personal consumption as an example. Do you have a guess in terms of what happens to the ad intensity of the economy as AI becomes bigger?

I think there's a lot we don't know about AI and its impact on various businesses. I -- when I think about U.S. domestic ad spend, I tend to look first at the consumer, the Michigan consumer index. And then there's lots of prognosticators that guess what a given years -- the coming years U.S. domestic ad spend is going to be. Ultimately, for us, we're going to be somewhat tethered to GDP, right? You've heard me say that every year I've been here. Hopefully, if we do our job and we have a good year, we typically can beat GDP. And I'm anticipating that this year.

Any questions from the audience? Okay. Well, maybe we can just start with just your distillation of maybe recapping 2025. Tell us what you think went well, what didn't go well, if anything? And then how you think 2026 might be a little bit different, if at all?

Well, 2025 was one of those years where you -- we missed it a little bit when we were in January of last year, and we were setting our budgets and setting expectations for the year. We kind of thought the year was going to be up 3-ish, and it ended up being up 2-ish, right? We actually had to sort of tweak our guide, as you know. Interestingly, though, we finished way stronger than we thought we would. We had an incredible holiday season. December was up 6% on the top EBITDA and December was up 13.5%. And that drove about $0.07 of AFFO per share that we kind of didn't know was going to be there, right? And we ended up at the top end of our range for our original guide,

I apologize for that miss. So that was last year. This year, we've got some tailwinds that were headwinds last year. For example, political. Last year was a headwind, and this year is going to be a tailwind. probably to the tune of about 0.5% of pro forma growth. So that's helpful. We also did about $300 million worth of highly accretive acquisitions last year that are going to pay off this year in terms of a little shot in the arm for AFFO per share. And those integrations have gone exceedingly well. 80-plus percent of them were fill-ins where highly predictable exercise, just fold them into existing operations. And the magic happens on the bottom when we do that fairly quickly.

So can I just make 2 comments on what you just said. The first thing is, for those of you that are new to Lamar, the fact that Lamar sort of took their guidance down and then sort of came out ultimately at the high end, I think, speaks to the integrity and honesty of this management team because they don't sort of pretend and hope that everything is going to be a hockey stick at the end of the year. They just tell you exactly what's happening, which you always do a great job on your conference calls, just telling us exactly what's happening, whether it's good or bad, there's not a lot of fluff or spin or anything like that, which is.

Well, we've been public for 30 years. So you kind of have to be consistent. You can't cover up 30 years, right? You got to.

That's fair.

You got to lay it out just like it is.

The other thing that's just interesting to me is I keep reading about this K-shaped economy and the market seems very nervous about the low-end consumer feeling sort of stressed. You can sort of see it in the, I think, the polling numbers, right, where people are very frustrated the economy in a ways that aren't tethered to GDP growth or the S&P 500, like there's real pain out there. And yet here you are saying that the fourth quarter was sort of surprisingly good for you. How would you square that or reconcile those 2 things, which feel somewhat contradictory to me?

Well, there's parts of the K-shaped economy that are good for Lamar. The obvious example being when McDonald's, who is our largest customer, decides they want to promote value meals, they use us, and they came in pretty heavy, right? So that's just an example of how that works. But we also had a brand-new vertical buy at scale, right? Pharma came in big, and it was mostly fourth quarter.

When we were sitting in August and we did that tweak to our guidance, we didn't have that contract in hand. And about a month later, suddenly, we've got a $5 million big pharma buy, which they're continuing, by the way. And that is great news for the industry because it's a vertical we've never had before. And I think it's very promising. And again, that's a tailwind for us this year as well.

Would you say that, that new pharma vertical is a function of some of the changes that happened from a regulatory standpoint as it relates to pharma advertising on television? Or do you think it's sort of unrelated to that, you have to guess?

So the regulation that changed was the FDA said -- if pharma doesn't say what the drug cures, they don't have to do the disclaimers. Now keep in mind, billboards don't work with paragraphs, right? And so they were disincentive to use us because they'd have to have all this fine print all over the place. Well, now they don't have to do that, right? They can have the name of the drug, some pretty pictures, the name of the drug company and then say, call your doctor. That's perfect for out-of-home. I mean it's just absolutely perfect.

Now what we do, do is we geofence the unit. And if a phone that has the right app goes within -- drives by that billboard, it gets pinged with the ad that has the disclaimers in it. So you get the same ad, but now you get everything else and a ton of information, right? So geofencing and that ability has also resulted in pharma really using our medium effectively.

That's great. So what about -- can we talk about 2026 and some of the undulations things that are embedded in your guide? You mentioned the 50 basis points, I think you said of political tailwinds. What about the Vancouver exit and the Verde acquisition? Can you talk about those? And also, I think World Cup, I think you said $1 million to $3 million was -- I think you said that on the call, maybe I made that number.

Yes. It's actually the high end of that. We've already got a little over $3 million in contracts that are World Cup related in and around World Cup venues. So yes, you've got political as a tailwind. You've got the World Cup as a nice little piece of business. Vancouver was one of those transit franchises that had a tough recovery coming out of COVID because the audience is actually the people that ride the train.

When you look at our other transit businesses, we wrap buses, right? They drive around the DMA and the audiences are people that are in and out and about, right, not necessarily the ridership. Well, Vancouver, it's the ridership and ridership obviously went way down after COVID. So we struggled there. It was a money loser until last year. It turned the corner and made a little bit, but last year was also the year we had to rebid it. And it went to a Canadian company. You can probably imagine why.

And so when we lost that franchise, we didn't really weep over that because it was plus or minus $24 million in billing, but no EBITDA contribution to speak of. Verde, on the other hand, is -- was about the same in terms of billing, but its flow-through EBITDA contribution in our hands is about 70%. So I'll take that swap any day.

Okay. So neutral to revenue but positive [indiscernible].

Yes.

What about -- this part still confuses me, you told me this, but I'm a little bit slow. There was a time when you used to talk about programmatic through the digital subset of your -- and so we're a little bit hesitant about programmatic because by the time you pay all those ad tech fees going through the machine, it can be more than our sales commissions. And I think it was like 12 or 18 months ago, you sort of reversed course on that. And I'm still confused because I -- maybe I'm wrong but that...

I wouldn't say we've reversed course. Let me walk through the arithmetic and you can see what I'm talking about. So our overall cost of sales through our traditional channels, let's call it, 1,000 account executives, our national account managers that touch big agencies, runs about 6%. Our programmatic channel runs about 10%. That's what we have to pay the tech enablers that do it for us, the Vistar's of the world, right? And that's still the case, right?

So as that channel grows, our cost of sales is going to tick up. One reason it doesn't concern me as much as when we started is our CPMs are demonstrably higher with programmatic. So we're making up for it. If you look at our average CPM across our whole platform, it runs about $3 cost per thousand impressions. We're getting about $7 cost per thousand impressions for a programmatic buy. That's what our customers are willing to pay to go through that channel.

Now why will they pay more? They pay more because they're getting, number one, a much more precise delivery of their ad to a targeted demographic at a moment in time and a place they want to be. They're taking a rifle shot, if you will, as opposed to a shotgun shot. So that's number one. Number two, they also have access to a richer set of data to prove out the efficacy of their buy. And that is paid for in that data fee we pay sometimes and sometimes it's actually paid for by the customer themselves. But they are willing to pay a higher CPM for those 2 reasons.

That's interesting. Is there any sort of difference between a national -- like when I think of television, I always think of it in general, local CPMs being higher than national CPMs. Is there any sort of corollary in your business where if you're selling to a national advertiser, the CPM is demonstrably different than a local advertiser? Or is it just a function of just the board and how popular is the board and the traffic that goes by the board, independent of who their customer is?

Yes. I don't know that there's a big difference. Now there are varying dynamics, right? So some customers are able to drive a little better rate because they buy in bulk, right? So think -- again, think McDonald's, think Cracker Barrel, a couple of our larger customers. And so they use that to drive their CPMs down, right, as you would imagine they would. But there's an interesting -- we have local customers that actually buy smarter than the national customers because they know the inventory a lot better than the national customers. So it can work both ways, local and national. It all kind of washes out.

I will say this, as you know, we're 80% local, 20% national, plus or minus during a year, 40,000 or 50,000 local customers touched by about 1,000 account executives. It tends to make us more important in their world. And what I mean by that is if you look at market shares and other traditional media, right? We're much more important in the world. We take a much greater share of wallet locally, obviously, than we do nationally. And so if you go to a place like Little Rock, Arkansas and talk to Tom Gibbons, who's our GM there, he can tell you what the newspaper pulls, what the TV stations pull, what the radio stations pull.

And I'm going to guess, and it's not even a guess. We're now pulling more than the newspaper out of most of those middle markets. That's a dramatic change from 20, 30 years ago. We're pulling probably more than all the radio stations combined, right? That's a dramatic change. You still have a significant chunk of local dollars going to local network affiliate television, but that's beginning to change, right? So when it just comes to garnering share locally, we're in a good place.

That's great. Any questions from the audience? I don't have any on my website. So maybe we can shift to pricing.

Yes.

So you can correct me if I'm wrong, but I remember there was this long period of time where pricing was sort of not part of the narrative of Lamar. And then we went through the higher levels of inflation. I think you guys took pricing for a while. And I sort of lost the thread in terms of where pricing is in terms of your overall thinking to hit your long-term AFFO targets. Do you mind just sort of talking about philosophically where we are on pricing?

So let me go back to the Great Recession. Coming out of the Great Recession and recovering, it was all about occupancy coming out of that, right, at first. And then it became about rate. But as everybody recalls, interest rates and inflation were almost nonexistent, right? I mean we were in a 2% world. And we lived with that until COVID hit. And then we had to do it all over again. We had to build occupancy back. One thing we were able to do that was different in COVID as opposed to the Great Recession is we didn't have to reeducate our customers on the value proposition. So we held the line on rate.

We suffered in occupancy during COVID, and then we absolutely rocketed out of COVID. Now we still weren't talking a lot about rate because interest rates again were very low and inflation was seemingly very low. And then boom, '23 hits, right? I think the take home here is, particularly for REIT investors, inflation is our friend, very much our friend because we -- our average length of contract runs about 6 months. And so that means in an inflationary environment, we get to have a rate discussion every 6 months. And we drove rate double digits during that time of hyperinflation, and we've had just an incredible year.

Where are we now? We are now at a place where interest rates and the expectation of inflation is around a 3% kind of thing. The -- we, at Lamar are at what I call peak occupancy. So the gains you're going to see this year are going to be driven primarily by rate. And we're -- if we're in a 3% inflationary GDP world, as you know, we guided to somewhere above that, 3.5-ish. So that's our expectation is to drive to that number, and it's going to be mostly rate.

Okay. That's great. Can I give you my sort of mental framing of rate and occupancy and the dynamics and then tell you the one thing that if we end up having a recession sometime over the next few years, what scares me a smidgen. So my sort of narrative is you go into a cyclical soft patch. And the first thing that happens is the utilization rate drops pretty quickly and then you discount on the rate side to sort of fill up the boards and then we sort of equilibrate and then the utilization comes up and then you begin to take price when we get to the top of the cycle. So rate and occupancy are both quite good.

Let me challenge one of those. Other than the Great Recession, and I've managed through several. I hate to admit it, I've been doing this for 30 years. During a garden variety recession, we hold the line on rate. And we suffer in occupancy, occupancy comes back faster. In a garden variety recession, we've never been down in consecutive years and never down more than a smidge.

I say that because people do tend to view us as -- since we are ad supported as more cyclical than we actually are. Now the one caveat to that was the Great Recession. We couldn't hold the line on rate during the Great Recession, and everybody was curled up under their desk in a fetal position. But the garden variety recession, that's how we manage through it.

Okay. That's great. And then I remember going back to the GFC, you guys did a phenomenal job in terms of managing your expenses to minimize sort of the impact to AFFO. I mean, I've never seen anything like it in my career actually. But it feels like you run a pretty tight ship sort of day in and day out. I mean, if we end up having something that is something other than a garden variety recession, I mean, do you still feel like you have shock absorbers on the expense side? Or it's a lot less than it was, say, pre-GFC?

Yes, there's a couple of shock absorbers. One is there -- we can prune for want of a better word, our real estate portfolio. These are the ground leases we have billboards on. We have a stockpile of not great performing financially leases. We keep them for a variety of reasons. We keep them to block out competition. We keep them to use as trade for jurisdictions to allow us to put up digital. But we can attack that lease portfolio and drop our costs pretty significantly.

Obviously, you have sales commissions that flex with sales. You have management bonuses that flex with sales and bottom line performance. So yes, I mean, we -- one stat when we became a REIT, and I was educating the REIT community on our business, actually, during the Great Recession, we could have paid the distribution that we paid the first year we became a REIT. And a lot of REITs couldn't say that, right?

That's great. So can I shift gears to the ERP project that you touched on at the very beginning. Can you just sort of step back and just give us a lay of the land in terms of what is this ERP system going to do? How much have you invested so far? And then what are the key things that investors should keep an eye on as '26, '27 unschool?

Yes. So we're 3.5 years into this, and this is the last year, and we will have spent plus or minus $50 million on it. We -- about 40% of that is OpEx and about 60% is CapEx. This year, again, being the last year, we'll spend about $3 million in OpEx and about $6 million in CapEx and we'll be done. Phase 1 was the back office part of the shop, the CFO functions, if you will. And we had old legacy systems that were 20, 30 years old, built by Lamar for Lamar and being held together with paper clips and baling wire. So we did that first. That was Phase 1, highly successful.

Phase 2 was the rest of the enterprise, touching virtually every aspect of our business. Fulfillment, sales cycle, sales process, operations, I mean, you name it. And the promise is that it will take -- let's talk about the sales process. It will take something that looks like this today and maybe has 3 people involved in 14 people hours to make a nice proposal and get in front of a client, and it will take it to that, right? And now it might be 2 people and 6 hours. But what it will also do is allow us then to create and overlay a closed AI system that will then take the sales process that's here and take it to there, right?

Smarter proposals, more proposals, getting in front of more clients and logic would dictate from that, you get more business. So that's the promise of it. And in terms of financial benefit, I think conservatively in '27, you should see 0.5% of expense savings, right? So -- let me say that a different way. You should see an uptick of 0.5% on our margin -- consolidated margins. So that's what, $12 million annually. And I think it only gets better from there.

So one of the things that I've always marveled at to be candid with you, is when I look at the verticals where you guys have exposure, there will be an area like, I don't know, 2006, I'll say, or 2007, and real estate will be a big vertical. And then we'll go into the GFC and it will sort of disappear, but then sort of out of nowhere a new vertical shows up and sort of backfills real estate. And this happens over and over again where your sales force seems to be able to find the pockets where they can get sort of new clients, new customers and they're sticky and they stick around for many years. And there could be some event that happens that changes that. But your sales force always comes up with something new.

Does this ERP system allow them to do that more quickly? I mean not that they've done it in a slow way, but is there a response function that will make them more nimble? And if I can just pause for those of you that are listening to the webcast, when Sean was saying it used to look like this and now it looks like this, he was taking his hands that were maybe 3 feet apart and making them 1 foot apart.

Well, yes, I mean, we've -- I have to remind our investors that customers come and go, verticals come and go. In 1998, cigarettes, tobacco was 24% of our business. That year, it was legislated off the billboards. That year, we grew. We replaced 24% the same year, it disappeared. In the early 2000s, travel and lodging, hotel, motel was 14% of our business. Two things happened. You had the recession generated by 9/11 and you had the advent of the Expedias of the world. Hotel/Motel quickly went to 2% of our business. And over that time horizon, we grew. So there's lots of examples like that.

But what I would say that our ERP plans and our AI plans will do for us is it will allow us to keep up with the additional velocity we're creating as we deploy more digital and do more acquisitions. I mean, over the next 3 to 5 years, we're going to spend well over $1 billion doing acquisitions. And we're going to add every year, hopefully, 350-some-odd digital units to our footprint. And that just requires a larger velocity of artwork and proposals and the like. And we'll be able to meet that with our existing sales force, right, because they're going to be that much more efficient. And logic would dictate that if they can be smarter about their proposals and get in front of more people that, that's going to result in more business.

That's great. Any questions from the audience before we wrap up?

Sorry, I don't know if you touched on acquisitions at all for this coming year relative to the $300 million you said you did in 2025?

So we -- of that $300 million, roughly $200 million was cash and one was an UPREIT transaction, first ever done in our industry. It's my hope and expectation that we'll probably approach that same number on a cash basis. We'll probably get to about $200 million. The pipeline looks pretty strong. And we also have a couple of leads on some possible UPREIT deals. So yes, it should be another pretty active year. We are the only company as of right now in our industry that can pull off an UPREIT deal. So it's a little bit of a competitive advantage.

So yes, and Jason, thanks. Appreciate the time.

Absolutely. That's great. Thank you.

Excuse me, everyone. We now have Sean Reilly and Jay Johnson 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 and the impacts and effects of general economic conditions, including inflationary pressures on the company's business, financial condition and results of operations.

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 fourth quarter 2025 earnings release and in its most recent annual report on Form 10-K.

Lamar refers you to those documents. Lamar's fourth quarter 2025 earnings release, which contains information required by Regulation G regarding certain non-GAAP financial measures, was furnished to the SEC on the 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 can begin.

Thank you, Angela. Good morning all, and welcome to Lamar's Q4 2025 Earnings Call. We ended 2025 with encouraging sales momentum with both local and national delivering growth in Q4 despite a challenging political comp in October. Excluding political, revenues grew more than 4% on an acquisition adjusted basis in the quarter. We delivered increases across both analog and digital billboards as well as in airports and logos. Revenue growth, combined with solid discipline on expenses, allowed us to exceed the top end of the revised full year AFFO guidance that we provided in August.

The sales strength continued in Q1 and pacings for the balance of this year remain promising. Based on those pacings and as noted in the release, we anticipate full year AFFO to be between $8.50 and $8.70 per share representing year-over-year growth of 4.1% in AFFO per share at the midpoint. The midpoint of the guidance also implies revenue growth of approximately 3.5% on an acquisition-adjusted basis, with expenses increasing approximately 3% on that same basis. Expense growth should taper as we get to the back half of 2026.

I would also note that the midpoint of the range implies consolidated operating margins of over 47%, the best in the company's history. In the meantime, back to Q4 categories of strength included services, health care, building and construction and financial while telecom and beer and wine were weaker. For the quarter, local was up 1.7% and while national programmatic grew 3.3%. This is the third consecutive quarter that National has been up.

We had a real nice pharmaceutical buy the health care category and boosted National's growth. Programmatic was again strong, up approximately 19% year-over-year. Excluding programmatic, National's growth was 1.5%. As mentioned, political was a headwind in Q4 and for the full year, but that dynamic should reverse in 2026. For the quarter, political was down about $11 million versus 2024. Again, headwind last year tailwind this year.

We added 111 digitals in Q4, ending the year with 5,553 operating units. On a same-store basis, digital revenue increased 3.7% in Q4 and demonstrating that advertisers continue to value the flexibility that digital provides. In light of that, we intend to remain aggressive and are targeting approximately the same number of additional internal digital deployments this year as last year.

We closed 13 acquisitions in Q4 for approximately $57 million in cash, bringing the full year total to 50 acquisitions for $191 million in cash. In addition, of course, last year, we completed the Verde deal, the first UPREIT transaction in the history of the out-of-home space. Our integration of the Verde assets as well as our other acquisitions, in 2025 is going well, and I anticipate another active M&A year in 2026. We're actually off to a good start as of yesterday. We have completed 7 acquisitions since January 1, for a total purchase price of approximately $40 million.

Before I turn it over to Jay, I want to thank our employees for their contributions in 2025 from sales to ops to real estate, our consistent growth on the top and bottom line demonstrates that Lamar has the best team in out-of-home, and I look forward to seeing what we can achieve together in 2026. Jay?

Thanks, Sean. Good morning, everyone, and thank you for joining the call. We had a solid fourth quarter and are pleased with our results, which exceeded internal expectations across revenue, adjusted EBITDA and AFFO. Growth in AFFO continued in the fourth quarter. Diluted AFFO per share increased 1.4% to $2.24 versus $2.21 in the fourth quarter of 2024. In addition, the company ended the year above the high end of our revised AFFO outlook driven by outperformance in December with acquisition-adjusted revenue growing almost 6% and acquisition adjusted EBITDA increasing 13.5% during the month.

Operating expense growth decelerated in the fourth quarter with adjusted EBITDA margin remaining strong at 48.5%, an expansion of 40 basis points over a year ago. Adjusted EBITDA for the quarter was $288.9 million compared to $278.5 million in 2024, which was an increase of 3.7%. On an acquisition-adjusted basis, adjusted EBITDA was up 2.1%. Also in the quarter, depreciation and amortization expense decreased $151.3 million returning to a normal level. As you may recall, in the fourth quarter of 2024, we revised the cost estimate included in calculation of the company's asset retirement obligation, or ARO. ARO accounts for Lamar's obligation to dismantle and remove over 71,000 billboard structures on leased land and restore the sites to original condition. We test our ARO estimate annually and the cost to retire these assets rose substantially in 2024, which led to an increase in our depreciation and averaging expense during Q4 2024.

As a noncash item, this has no impact on the company's adjusted EBITDA or AFFO. For the full year, acquisition-adjusted revenue increased 2.1% to $2.27 billion compared to $2.22 billion the prior year. Operating expenses grew approximately 2.6% and adjusted EBITDA was $1.06 billion, which represents an increase of 1.4% on an acquisition-adjusted basis. Adjusted EBITDA margin was 46.7% for the full year, essentially flat versus a year ago. We were pleased to see margin hold steady given continued pressures on the expense side.

The company ended 2024 with full year diluted AFFO of $8.26 per share, which was above the top end of our revised guidance. For the 12 months ended December 31, diluted AFFO per share increased 3.4% compared to full year 2024. Local and regional sales accounted for approximately 78% of billboard revenue in Q4, similar to the same period in 2024 and growing for the 19th consecutive quarter. This consistent performance exhibits the resilience of our core local advertising business and differentiates the company from our peer group.

Now moving to capital expenditures. Total spend for the quarter was approximately $63 million, including $20.8 million of maintenance CapEx. And for the full year, CapEx totaled $180.8 million with maintenance CapEx comprising $57.3 million. As for our balance sheet, we have a well-laddered debt maturity schedule with no maturities into the AR securitization in October 2027 and no senior notes maturity until February 2028.

We currently have approximately $3.4 billion in total consolidated debt, and our weighted average interest rate is 4.5%, with a weighted average debt maturity of 4.6 years. As defined under our credit facility, we ended the quarter with total leverage of 2.92x net debt-to-EBITDA, which remains amongst the lowest level ever for the company. Our secured debt leverage was 0.6x at year-end and we are in compliance with both our total debt incurrence and secured debt maintenance test against covenants of 7x and 4.5x, respectively.

As a result of the continued focus on our balance sheet, the company is well positioned on the acquisition front. Last year, we refinanced $1.1 billion of debt, extending our maturity profile and significantly improving liquidity. And Lamar has an investment capacity of well over $1 billion and has the ability to deploy this capital while remaining at or below the high end of our target leverage range of 3.5 to 4x net debt to EBITDA.

Our liquidity and access to capital, both remained strong. As of December 31, we had just over $800 million in total liquidity comprised of $64.8 million of cash on hand and $742.2 million available under our revolver. The company's AR securitization was fully drawn with $250 million outstanding. In this morning's press release, we provided full year AFFO guidance of $8.50 to $8.70 per share, reflecting AFFO growth of 2.9% to 5.4% for 2024.

At the midpoint of guidance, we expect acquisition adjusted top line growth of about 3.6%, with acquisition-adjusted operating expenses anticipated to grow modestly slower than revenue during the year. As we did last year, we are assuming SOFR remains flat for purposes of cash interest and have included $154 million in our guidance. Our maintenance CapEx for the year is anticipated to be $64 million in 2026 and cash taxes are projected to come in at approximately $10 million.

During 2025, we paid a regular quarterly cash dividend of $1.55 per share, totaling $6.20 for full year. Management's recommendation will be to declare a regular cash dividend of $1.60 per share for the first quarter, and we expect to distribute a regular cash dividend of $6.40 per share in 2026. On an annualized basis, the Q1 proposed dividend represents a yield of 4.8% at year today's closing stock price. As a reminder, the company's doing is based on taxable income subject to Board approval, and our dividend policy [indiscernible] distribute 100% of our taxable income. Again, we are pleased with our fourth quarter performance and strong finish to 2025 as well as the momentum we are seeing earlier this year. And we look forward to executing on our strategy in 2026.

I will now turn the call over to Sean.

Thanks, Jay. And as Jay mentioned, we had an exceptional holiday season with December's pro forma growth hitting almost 6%. And ex political for Q4, we grew 4.3% pro forma. In terms of regional relative strength and weakness, Atlantic and Southwest regions showed relative strength in Q4 and with our Northeast region showing relative weakness.

In Q4, digital grew to 33.7% of our book of business. For the full year, it grew to 31.6% of our total revenues. We are still at what I would call peak average annual occupancy. So the gains that we saw about the year and we'll be seeing in 2026 are primarily coming through rate. As I mentioned, we ended the year with 5,553 digital units in the air, an increase of 111 over Q3, an increase of 559 over year-end 2024, with approximately 320 of those being internally deployed and the rest through acquisition.

And as I mentioned on a same board basis, our digital billing grew 3.7% in Q4. With the help of a strong programmatic platform and that pharma buy, National had a strong Q4 and represented 22.4% of our revenues, the high watermark for the year. And as mentioned, programmatic grew 18.7% in Q4. Regarding categories of relative strength and weakness, I mentioned and called out service, health care and financial Buildings & Construction. Services being up 12% in Q1, health care, up 13% in Q1, financial up [indiscernible] I'm sorry, Q4 for all of those. And building and construction up 16% in Q4. For the full year, services were up 10%, health care up 6% and financial up 10%; Building and Construction up 16%.

Categories of relative weakness, telecommunications, down 10% in Q4. Beverages, beer and wine down 20% in Q4, similar numbers down for the full year. I would note that it's nice to see that our largest verticals, that being service and health care are also among our healthiest. For a point of reference, telecom represents about 2% of our book; beverages, beer and wine represents 1.5% of our book. Conversely, services represent about 19% of our book. Health care represents 10.5% of our book. So again, it's nice to see our largest verticals are also among our healthiest.

With that, Angela, I will open it up for questions.

[Operator Instructions] And we'll go for to Cameron McVeigh with Morgan Stanley.

So Sean, I was curious your view on the state of the macro in the U.S. ad market is we're nearly 2 months in 2026. And then secondly, it sounds like a strong start at M&A front. I'm curious how multiples are trending in the private market and if you have an expectation or goal for the amount of acquisition spend over 2026?

Yes. Thanks. So on the acquisition front, to start with, it looks to us like we'll do at least as much as we did last year on the cash acquisition side, which was close to $200 million. I'd say that's a realistic goal for this year, given what we're seeing. And multiples are basically where we talk about them year in and year out because of the synergies we can bring to bear. The multiple from the seller's point of view might look something slightly below the mid-teen-ish range. But by the time we bring our synergies to bear, it's something between 10% and 11% going forward for us. And that arithmetic holding up out there.

We're seeing a good ad spend climate for 2026. You've got some good things going on. Of course, we mentioned the political tailwind this year but you also have some additional spend in and around World Cup menus. We expect to pick up some of that. We are optimistic about where pharma is going to come in this year, and that's a pardon the pun shot in the arm for us. So yes, we feel good and pacings look good.

Our next question comes from Jason Bazinet with Citi.

I just had a question on the decision by Clear Channel to sell themselves. I guess if that acquisition ends up going through, do you think that has any potential M&A implications for you to peel off some of assets? Or would you view that as unlikely?

I would say, number one, just in terms of structurally for the industry and strategically for how we are positioned and their position, we don't see any change in terms of what it means for the industry. Scott and his team are going to stay in place. So for point of view, I think as they get financially more healthy, that's a good thing for the industry. Looking at the structure of the go private and the work that they're going to do to shore up the balance sheet as they do that. It looks to us like they don't need to sell assets to delever. So I would put it in probably not likely category for now. They make for strategic reasons, decide that some markets don't fit their profile. But for now, I would call the whole transaction sort of steady as she goes for the industry. .

Our next question comes from Daniel Osley with Wells Fargo.

How should we think about acquisition adjusted growth in Q1 as a starting point after the strength you called out in December? And how do you see the growth cadence playing out for the full year?

Good question. I think it's going to be one of those years where Q1 comes in, maybe a tad below where the guide implies and then we pick up momentum as the year moves on. That's what the pacings are indicating. And I would also note that traditionally, political breaks late. So the fact that our pacings for the time being actually are showing that the guidance is a tad conservative, it may also be conservative given what we're anticipating political may do. Again, the political has been relatively easy to predict at the end of the year, but the beginning of the year given that it breaks late and the campaigns happen in September, October, November. Again, the good news is it's not reflected in our pacings right now. So it can only get stronger as the year progresses. .

That's helpful. And maybe a quick follow-up. What are your expectations on local versus national for the year? And can you help us to quantify the benefit you'll have from World Cup this year.

So when you look at Lamar's footprint on the World Cup, we're not as well positioned to stay out front or Clear Channel, but we'll get our share. So we're anticipating, let's call it, $3 million to $4 million in incremental World Cup business. It's nice. And it's certainly going to help those local markets that have World Cup venues. We're feeling good about national. We've had a tough past few years until recently last year. with our national book of business. Some of the verticals that were 2 years ago, a drag are now coming back in, I would highlight insurance, for example. So we're very positive on what's going on, on the national front and of course, to the extent pharma comes in in Q1 or 2 -- that's a lift that we didn't have last year in the first half. .

We'll go next to David Karnovsky with JPMorgan.

On the 3% cash OpEx growth, I think that's a little above the kind of 2.5% traditional increase, Sean, as you termed it. Should we think about that delta is largely driven by the ERP? And can you just update on where you are in that process?

Sure. I'll let Jay hit the ERP. But yes, some of it is the ERP. Some of it, though, is also health care. There's no question, but that health insurance has inflation that is running a little hotter than the rest of what happens on our expense side. It's about 0.5%. So the difference between 2.5% and 3%, you can look at it as somewhat being fed by the -- what's going on in our health insurance costs and again, somewhat driven by ERP, which Jay can hit.

Yes. And it's been driven by Europe last year this year, that will moderate as we look to go live later this year with the second phase of our technology. initiatives. From a corporate perspective, because of that, expenses have kind of normalized a little bit and should be -- corporate expenses should go below 2% this year. I would reiterate the health care expenses. It's been quite a headwind for us over the last 3 years or so, you're talking high single-digit growth on the health care line with very little ability to foresee it or forecast it. So that's when that continues to play us on the expense line. .

Okay. And then, Sean, you mentioned pharma several times. Maybe just you could speak broadly to where you are with the vertical or where you stand also with just bringing on some other nascent national categories as well?

So yes, so the pharma story is a good one, and it's good for the industry, by the way. The basic driver is, number one, a change in FDA rules around disclosures that pharma is required to do for their advertising of drugs. Essentially, if you don't say what the drug is going to cure, then you don't have to do all the disclaimers of the possible side effects, which means you can say the name of the drug, you can say the name of the drug company, have pretty pictures, and then call your doctor. And that eventually opened up our medium to be an effective voice for pharma. They also have a data set that proves out their campaigns. They use a company called CROSX to prove out campaigns across all media and CROSX has developed a way to do attribution studies for our media. Which again has helped pharma prove out the efficacy of using us to get their word out. So yes, that's a good one, and we have high hopes that it can move the needle. .

[Operator Instructions] And we'll go next to Jonnathan Navarrete with TD Bank.

How much of a benefit are you expecting from political in terms of dollars? And how does that compare in terms of, I think when you compare it to our presidential election year. And my last question is, should we expect most of the benefit from political to come in the third or fourth quarter?

Yes. The answer to the last part of the question is, yes. Like I said, it typically breaks late. It doesn't show up in our pacings until really and truly to the back half. In terms of the delta, one way to look at it is the difference between '24 and '25 was a little less than $20 million. So that's one way to think of it, that of course '24 was a presidential year. And so I wouldn't anticipate quite that much. And so something maybe conservatively around $12, $13, $14 million and incremental this year, political over last year's political.

At this time, there are no further questions in queue. I will now turn the meeting back to Sean Reilly.

Again, thank you all for your interest in Lamar, and we look forward to getting together again for the Q1 call in a few months. Thank you, Angela. .

This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Great. We'll go ahead and kick things off. For those who don't know me, my name is Daniel Osley, I'm an analyst at Wells Fargo. I have the pleasure of welcoming Sean Reilly for our next fireside, President and CEO of Lamar Advertising. Thank you, Sean.

Yes. Thanks for having me, Dan. Appreciate it.

Great. Well, maybe starting with an industry question. Out-of-home has been pretty stable over the years at about 2% to 3% of the total U.S. ad market. Over time, do you expect the industry to grow a share of the pie? And what do you view as the drivers of unlocking that upside?

Yes, good question. I'll start with Lamar is 80% local, right, and 20% national. Meaning that I think a lot about what's going on with the share of the pie at the local level. And when you look at the local level, virtually every other traditional media is struggling with their audience, right? Whether it's a newspaper, we know the story there. Radio, we know the story there. Increasingly, local network affiliate linear television is having its challenges.

Now look, we're not going to get all of that, that might move away from them, but just getting a little really can rock our world. So I would start with that. And there are clear -- you can draw a clear line from the demise of local -- a local medium and a vertical that increases their spend with us. The obvious example would be 20 years ago, attorneys owned the Yellow Pages. Well, there are no more Yellow Pages, and now they buy a lot of billboards. So that's going to continue, and that's going to be a tailwind for us over the next 3, 5, 10 years.

That's helpful. And both you and your peers are seeing a strong uptick in national advertising. What do you think is driving the reengagement of large advertisers? And what's changed from the conversations you're having around this time and -- or at this point in time versus where -- the conversations you were having last year around this time?

Yes. I would start with the vibe going into '26 is just much more pleasant than the vibe going into '25. The chatter is all good. The talk of what large advertisers are expecting to do next year, it just has a stronger tone and tenor than it had going into last year.

You know what's changed? Well, number one, you've heard me say many times, there's a bigger beta in what happens with national ad spend and what happens with local ad spend. What's gratifying is, for whatever reason, if a vertical decides to soften up on us, let's call it, auto -- which did, auto insurance -- now they're coming back in. So that means that it wasn't us. It was just how they felt about their world and their ad spend, and now they're coming back in because they kind of ebb and flow.

Now one thing that I would say has changed is the number of third-party data providers that can help. In particular, national customers feel good about their spend. And I'll use the example of pharma. We just got our first ever very large, meaningful pharma buy. And it came down in no small part because their trusted third-party data provider, [ Crossix ], got them comfortable with what they wanted to do with us. And so I think that has changed over the last, what, 2, 3 years.

And maybe going back to your point on the cyclicality or the beta that you see in national. Do you think this upswing that we're seeing right now, is there anything structurally different about this time with national recovering? Or are you seeing evidence that supports national maybe being structurally stronger for a longer period of time?

Well, let me start with -- I've been doing this longer than I'd like to think about. And over the last 3 decades in my career, we have been 80% local and 20% national the whole time, right? So around that, you have the swings in national, and local tends to just be sort of real steady. But you can have that beta where if you smooth it out, you're still seeing an upward trajectory, right? Because the math is what the math is, right? If you're 20 -- if you're 80-20 for 30 years, then they're essentially growing at the same rate. And there will just be a moment in time where sometimes local seems stronger and there will be a moment in time where sometimes national seems stronger. We're in the moment in time now where national seems stronger.

That's helpful. And part of that strength in national is also being driven by the programmatic sales channel that you all have been investing in. So are you seeing evidence that, that channel is pulling in new advertisers to out-of-home?

Yes. I mentioned auto insurance, right? They are heavy users of programmatic. And I think that has played a role in enticing them back in. So I could answer it by saying maybe not new, but a welcome return because we have the channel and they may not have spent as much if we didn't have it.

Now other programmatic customers are absolutely net new, wouldn't use us at all if we didn't have programmatic. And that's primarily because they are digital specialists. They don't pick up the telephone and give you a call. They want to buy through an algorithm, period. And so we have to make that algorithm available to them.

And it's my understanding that your programmatic business is all national. So what would you need to see to open that capability up to your local clients? And how would you frame the potential benefits from making a move like that?

So great question. We're actually beta testing an automated buying platform for local customers in 3 markets as we speak. Now it's not full-blown programmatic like we make available to our national customers, primarily because our local customers aren't really asking for that. But they do want a self-service platform where they can go into their office, open up their computer, see avails, see pricing, get some rudimentary demographic information, put together their own campaign and then hit a button. That's what we're experimenting with. And again, it's not what I would call the full-blown algorithm-driven programmatic, but it is impression-based buying that is self-service, which is -- our sophisticated local customers, that's where they want to be.

And going back to a comment you made. In the third quarter, you saw your largest pharma buy ever, and I couldn't help but notice that it also coincided with the launch of your Health Connect solution. Can you talk a bit more about that tool and what benefits it's providing to pharma brands?

Sure. Well, I mentioned [ Crossix ], and that's a big part of it. But what is also a part of it is we are not waiting for their agency to figure us out. We have a team that's dedicated to going direct to the customer around the agency and arm in arm with [ Crossix ] and saying we can do this for you. We can sharpen your buy. We can prove out inventory to you that is most likely to hit your target audience in a way that we couldn't before. And so that is what that is at its core about is being able to go direct to pharma, go to their conventions, talk to them in a way that we really couldn't before. And we're showing some early wins.

And with this 1 specific buy, do you see this as an opportunity to maybe act as a proof point for other pharma buyers or some of the other competitors of that specific advertiser to open up their spend out of home as well?

Yes, no question. And that's a common phenomenon, right? Once 1 respected company in a particular vertical decides that we're going to go this way, then others follow. And we're in front of them.

Great. And do you see any other ad categories where maybe a similar vertical-specific measurement solution or tool could also help to drive growth?

I think increasingly, customers are going to not necessarily look to our industry to provide all the measurement solutions. There are third-party vendors that are trusted by different verticals really popping up everywhere. Right? So the quick service restaurant guys may want one type of data point to prove out their campaign, where as I mentioned, pharma might want one, auto might want one, tech may want a different one.

And so I think as an industry, number one, this is an increasingly accelerating phenomenon, which is good for us. And number two, I think it takes a little of the pressure off of the industry to necessarily get every aspect of measurement correct. Because we've struggled with that. As you know, we have an industry measurement organization called Geopath. And it's been tough for Geopath to keep up in an ever-changing world. And so we're working as an industry to get the baseline data correct at Geopath and then let our customers take whatever other data they want to overlay and use that. So that's where the industry is going, and it can only be good for us.

And is this vertical-specific data, is there any cost with integrating that within your programmatic capabilities? And is your programmatic system already set up to easily plug into some of these things?

Yes. Programmatic is plug and play. It's -- there's a menu. It's almost like a drop-down menu, you can pick whichever one you want and use it on top of the Geopath data. In the pharma example, the [ Crossix ] expense is a pass-through. So the customer actually is paying for it on a campaign-by-campaign basis. And it's not that expensive. I mean within the realm of the overall buy, it's very reasonable.

And then maybe touching -- going back to the point on Geopath. Can you talk about your expectations for the industry measurement standard to evolve over time? I know one of your peers has been speaking about potential optimism on '26 and '27 in terms of an overhaul to that system. But can you speak to what you're seeing on Geopath?

Yes. And you're referencing Scott Wells, who runs Clear Channel, and he has been very engaged and doing a great job. He's the new Chairman of the OAAA, and he took my place 1.5 years ago. And he's been very engaged in this and doing a good job, and we are hopeful that we can take Geopath and have its data be trusted and baseline, and then again, build on it with third-party data, right? And I think if we get that right, our customers are going to be really open to that model. They don't mind paying for it if they trust it.

And do you see this as more beneficial to local or national advertisers? It seems like maybe the bigger advertisers at first, or where this could be targeting. But from a local perspective with some of the linear medium degradation that we've talked about in the past and some of the search disruption that we've seen, is there an opportunity for -- like the program you have on the programmatic side to move to more an impression-based buy and get more sophisticated with your local advertisers?

Yes, I think so. But in general, our local customers, they live in the place where they're advertising. And they know who's driving by their billboard. And oftentimes, they're anchored to a specific geography within a DMA. And they want to talk to the customers in the ZIP codes that are likely to stop at their store or their dealership. And we're perfect for that, right? They don't have wasted circulation by buying the whole DMA. They can just buy us and target geographically with great precision and target demographically with just intuitive feel for who they know lives in the neighborhood. So that's primarily why local customers have a lot of faith in us without necessarily having to have a lot of data.

That's helpful. And on local and national trends, it does feel like more recently, we've seen a bit of a bifurcation with national strengthening here. So can you give us some more detail on what you're hearing from local advertisers and whether you're starting to see any green shoots there?

So it's 40,000 customers touched by 1,000 account executives, so it would be extremely anecdotal. But I can speak to my pacing, right? And the pacings are going to be the best mathematical expression of how it's looking going into next year. And I can say our pacings for 2026, this -- these are contracts in hand, right? This is a business that is in the books. And as we sit today peering into next year, our pacings are markedly stronger than sitting in the same day last year, looking into 2025. So that just gives me a good feeling about how 2026 is going to shape up. Because again, those pacings, they're going to be 80% local.

And speaking of '26, what do you see as generally the biggest drivers of top line growth next year?

So we have politics as a tailwind instead of a headwind. And to sort of put that in -- some arithmetic around that. This year, we did round numbers, $10 million. In '24, we did round numbers, $30 million, so your delta there is about $20 million. Now '26 is not a presidential year. So our team is expecting something in the neighborhood of, let's call it, $25 million. So the delta, the tailwind is about $15 million, which is nice.

We've got the World Cup, which is going to be a nice event. It's not huge, given our geography, as opposed to what Clear Channel or Outfront might experience. But it's something. I mean our team is saying, Sean, you should expect a lift of $3 million or $4 million-ish around the World Cup.

And then we report as reported numbers and same-store numbers, acquisition adjusted. Because we did, give or take, $300 million in acquisitions this year, our as reported numbers are going to be pretty gaudy next year. I mean, they're going to be nice. And if your focus is AFFO per share, it's more than a few pennies accretive to our AFFO per share.

And I know in the past, you've spoken about having a percentage of your full year budget booked at specific periods of time. So I guess as we look into '26, as we say here today, what percentage of -- what visibility do you have into the full year?

It's somewhere between 45 and 50. When we turn the corner into January, it will be something between 55 and 60. So it's not a perfect crystal ball. But it's a good indication of how the year should shape up. And my team hears me say this a lot, and you all have heard me say this a lot. You have to sell in the period for the period to make the period, right, whether that's the month, the quarter or the year. So you still have to keep your selling intensity up. You have to keep your shoulder to it. But in general, I feel like we've got a lot of reasons to feel good about '26 for sure.

And maybe going back to political. Right now, out-of-home broadly gets a very small piece of the total political ad market. So I wanted to ask, do you see any opportunities to pick up or to grow your share of total political advertising over time, specifically as you all get more digital and as programmatic becomes a larger piece of the pie?

Yes. That's a good question. And sometimes I hate talking about political because it is not a lot of dollars, and I don't like for us to be considered an ex-political medium like radio and TV because I just have never viewed us that way. But it is becoming a more meaningful part of what we do.

And I think that is because of digital. If I go back 20 years, most of our political was hyper local. I'm talking city council races, mayors' races. A lot of them used our medium simply for name recognition, right? Because you can't use it tit for tat, and -- but digitally, you can, right? And so we're finding that with being able to respond to your opponent in real time through digital makes us more attractive to the way campaigns are run these days. So we are going to get more of the -- the more digitized our inventory becomes.

And then there's just a lot more money being spent. I mean, they're seemingly an endless amount of money to be thrown at campaigns. And increasingly, it's not the candidates themselves. It's third-party packs and advocacy groups. But yes, I think your instinct that we're more responsive now. So consequently, we'll get more is right.

That's helpful. And how much of the political dollars that you all pull in today are local versus national? Roughly?

It's still predominantly local. I would say 95% of it that comes in is coded local. So for example, even though you kind of think of a U.S. Senate race as a national race, I mean, that's -- you're running for Senate in a state, that's going to go down to one of our local markets, they're going to handle the buy. It's going to be local.

That makes sense. And as we think about forward EBITDA and AFFO growth, can you walk us through some of the major puts and takes when it comes to expense growth next year?

Sure. I think it's going to be a good story next year for a couple of reasons. Number one, we're finishing up a huge ERP conversion. So some of that OpEx is going to go away about halfway through the year, number one. Number two, the top line is going to grow faster than it did this year. And so I think what you're going to see is a GDP plus top line, on top of a more traditional Lamar-like 2.5-ish percent expense growth. And I'll be disappointed if the margin improvement doesn't take us into something north of 47%, which will be the first time consolidated, we have ever gotten there for a full year.

So yes, I think the story is good on margin expansion, on EBITDA growth. And then when you get to AFFO per share, as I mentioned, you'll have all that arithmetic, and then you'll also have the accretive acquisitions that will add to that number. So if that's the number you track, it should, all things being equal, be a really good year. And as you know, we have to distribute the bulk of that AFFO per share, so our distribution should likewise go up.

Yes. And do you have a North Star? Do you have longer-term EBITDA margin goals? And I guess, how should we think about the longer-term growth algorithm, specifically on the top line, as you mentioned, more GDP plus? But on cost, is it kind of the 2 to -- 2% to 2.5%. Is that a reasonable range to think about on a normalized basis?

Yes. I mean, I'll put that number out there, I'll be disappointed if we don't do better. I mean, there is the promise of some expense savings from this ERP conversion. There's the promise of some expense savings from the adoption of AI tools, whatever they might be. And so if by 2028, we're not 1 point to 1.5 points better than where we sit today, I'll be pretty disappointed. I'd like to have a 48 in front of it.

But we don't -- and I don't think anybody really knows what AI is going to do. But as I said on our earnings call, we know it's good at words and pictures. And that's what we do, is words and pictures. So it can't help but be good for us.

All right. And you mentioned the ERP conversion that I know has taken some time, and it does take time and money to get these things right. But once you fully completed that -- or, I guess, first, when do you expect to start to be on the back end of that? And then how should we think about the potential benefits or savings that you should see from that program?

Yes. So July of next year, as I'm fond of saying, we're going to kick all the consultants out of the building. And you should see our OpEx normalize at corporate. Because as you know, that's been running a little hot because of the -- the benefits, the way I like to think about them is not so much around headcount, but it's a more efficient sales process that results in more touches, more client touches, better client touches, more tailored client touches, which should result in more business. Over time, it's going to allow us to scale without adding headcount. I mean, I can envision a 3- to 5-year future where we spend well over $1 billion buying extra inventory through internal conversions and acquisitions, adding a couple of thousand digital units. That increases the velocity of art and proposals that we need to generate. And we'll be able to keep up with that velocity without adding headcount. So it will allow us to scale with the infrastructure that we have.

All right. And you mentioned AI and AI tools earlier. Or can you talk about any ways in which you're using AI today? What are some of the trials, if any, that you have going on?

Well, I mean you have the publicly available easy stuff. Like embedded in Adobe Graphics is an AI tool that helps our graphic artists be more productive. And we're doing that today. I mean, that's kind of dipping your pinky finger in. Our folks that are putting together proposals, I'm sure they're hopping on ChatGPT and helping craft whatever words they want to put into a campaign. So that's there today.

But again, that's just barely dipping your toe into what I believe is going to be a very powerful tool, mainly because of not just making us more efficient. It's going to make us smarter. It's going to make us know, to a much greater degree, what is likely to make a client say yes. Because we're going to know far more about the client than we do today, right? So it can't help but be a good thing from that point of view, just being able to get to yes quicker.

Maybe moving to capital allocation. So given Lamar has the best balance sheet in the industry, do you see any opportunities to ramp your organic uses of capital? Are there maybe additional digital conversion opportunities? Or I guess, are there any other organic uses of capital that you see to maybe deploy additional capital?

So what I'm telling our folks is all of the above, right? I want to go as fast as we possibly can, deploying digital. Just everywhere it makes sense, everywhere we can, everywhere we can get the right regulatory regime in place, get the right lease terms in place, let's go. And there's no capital constraint there. That's -- literally, we've got the wherewithal to do whatever we can put in place.

Then there's M&A. We just reconstituted our balance sheet. We've got well over $1 billion in powder. And the same story there. We're open for business on the M&A front. And this year, plus or minus $300 million in asset value. Without a big one, I'm targeting the same number for next year. And if something big breaks loose, then so much better.

On that point, can you talk about how the market for larger scale transactions is currently shaping up?

Sure. There's maybe 5 targets that are, let's call it, asset value north of $500 million. None of those are rumored to be coming available anytime soon. Then if you look at asset value over, let's call it, $100 million to $150 million, there's probably a dozen of those. Right? It wouldn't surprise me if something doesn't break loose in that order of magnitude, right? It may even be an UPREIT transaction because that's a very doable size for an UPREIT, and you have sellers or potential sellers that fit a profile where that would be attractive to them. So maybe a dozen of those.

And then once you get in the below $75 million-ish, there's hundreds and hundreds, right? Of the cash transactions we did this year, let's call it, $175 million worth, the average transaction size is going to be $8 million, $10 million, right? Just lots of little ones.

That makes sense. And from an integration perspective, can you remind us how quickly you're able to typically realize synergies from these smaller tuck-in acquisitions and how that may differ from a larger transaction's?

Yes. So if you look at our footprint, go on our website, the first thing you're going to see is a map of the United States. You can actually drill down to the individual billboard anywhere in the country. But the first impression you're going to get is, wow, they really are everywhere. So virtually, anything we buy is a fill-in. Now that's not 100% the case, but it's a lot of the time is the case. And those transactions are extremely predictable. We don't need people, trucks, buildings. All we're buying is a billboard structure, a permit to be there, an advertising contract and a ground lease contract.

And so the magic on the expense side happens very quickly. And the -- like I said, the synergies are very visible, and it's a very predictable exercise. We -- over time, we'll get synergies on the top, but that doesn't happen right away for a couple of reasons. Number one, there's usually advertising contracts in place, right? So you got to run those off. They are typically going to be 6-, 8-, 12-month contracts. So there's a natural rolling off of the old contracts before we can maybe raise the bar a little bit on the top line. But the real take-home message is it's a very predictable exercise. And so it is a very accretive and good use of shareholder capital.

And I guess, how meaningful of an opportunity is it to maybe see some of those top line synergies? Obviously, a lot of these smaller assets are mom-and-pop kind of operations. So are you really able to get in once some of the initial contracts roll off and use your sales force and use your industry strength to -- or industry position to really drive top line synergies?

Yes. And it happens a couple of ways. Number one, we have access to national customers that they might not, right? So there's that additional demand that we can bring to bear to help us with our pricing. And then it's not uncommon for them to just price under our umbrella.

Right. Okay. And I know in the past, you've talked about your leverage target staying within or below 3.5x to 4x. But do you have an appetite to take that leverage higher if there were a deal out there of significantly larger size?

If I had a very, very quick glide path to get it below 4x, yes. I think our bondholders and the rating agencies would understand because of our history and the way we've operated. But in general, we've been very consistent in saying that if you're a publicly traded REIT, your leverage should be in the 3.5x to 4x range. And you get above that, you're in not necessarily a comfortable place. So that's where we want to be.

Right now, we're well below that. We could do a transaction in the neighborhood of $1.5 billion and be barely at 4x, right, given the acquired EBITDA that we'd be getting. So plenty of powder, plenty of headroom on the balance sheet and just need the right transaction to show up.

That makes sense. And one final question. But thinking about your footprint, Lamar has always prided itself on being dominant in middle market locations. So given some of the trends that we've seen on the national side, do you have any desire to deliberately add inventory in some larger DMAs or markets?

Yes. But it has to be -- this is what we've learned through programmatic. There are some very desirable ZIP codes that I'd like to have covered in. And so it has to be not just a large DMA. It has to be the right ZIP code. And it also has to be quality inventory, quality, large-format digital inventory in some very desirable ZIP codes. Because we could -- through our programmatic channel, we can see where we're not getting wins. And it's primarily because we just don't have inventory there, right? And that implies top 15 DMAs.

And I guess, how do multiples in those markets compare to some of the other markets? I'd imagine that it's relatively more expensive to get bigger in those larger DMAs?

It really depends on the size of the transaction. If it's 6 digital units in a top 10 DMA, it could be that there's not a lot of attention there. It could be that a Clear or an Outfront has enough there already and don't necessarily need to show up for this one. That would be a transaction that would be below the radar of private equity. So it could be not huge inflation and trying to pull that one down. But if it's a major, major player in a top 10 DMA, there's going to be other players there, for sure. We just have to stay disciplined about it.

Great. Well, we'll leave it there.

All right.

Thank you for joining us, Sean.

Dan, always a pleasure. Appreciate you.

Thank you.

Excuse me, everyone, we now have Sean Reilly and Jay Johnson 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 and the impacts and effects of general economic conditions, including inflationary pressures on the company's business, financial condition and results of operations.

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 third quarter 2025 earnings release and its most recent annual report on Form 10-K.

Lamar refers you to those documents. Lamar's third quarter 2025 earnings release, which contains information [ regarding ] 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, Katie. Good morning, all, and welcome to Lamar's Q3 2025 Earnings Call. For the third quarter, we delivered solid operating results with consolidated revenue growth improving to 2.9% on an acquisition-adjusted basis, led by national/programmatic, which had its strongest period of growth since Q2 of 2022. On the local level, a cautious vibe still prevails. And as a result, Q3 looked a lot like the rest of 2025 has with year-over-year growth in the low single digits. As we noted in the release, we are pacing to reach our previously provided guidance for full year AFFO per share.

That is despite difficult political comps in October, which we knew would be a headwind. Our pacings for November and December are encouraging as are our conversations thus far with customers about 2026, which for a variety of reasons, we believe sets up to be a good year. So far, our pacings bear that optimism out. Back to Q3. Categories of strength included services, health care and financial, while beverages and real estate were weaker as was our government/nonprofit category, which has been hampered by some of the uncertainty emanating from Washington, D.C. National and programmatic led the way with growth of 5.5%, while local was plus 1.6%.

Insurance was very strong, and we benefited from our largest ever pharmaceutical buy, which launched towards the back end of Q3 and extends through most of Q4 and includes both analog and digital inventory. Our experience with that campaign has provided valuable insights into the data that we need to deliver to help pharma customers make their buying decisions, and we are hopeful that pharma will continue to be a growth vertical for us. As we have discussed before, national can be a bit lumpy, and we had a lot of political that came our way through national channels in Q4 of 2024.

As a result, national is likely to be flattish in Q4 2025. Ex political, however, national should be up nicely in Q4, and we do like what we're hearing about 2026 from national buyers. Our digital platform continues to be very popular with both local and national advertisers. For the quarter, digital billing grew 5%, including 3.4% on a same-store basis and represents today about 31% of our billboard billing. We now have more than 5,400 digital billboard faces across 155 Lamar markets. On the M&A front, the integration of the Verde assets, which we acquired in an UPREIT transaction in early July, the first ever in the out-of-home space, is going very well.

We closed another 18 purchases for nearly $47 million in Q3, bringing the year-to-date cash spend to nearly $134 million at the end of September. For the full year acquisition spend, excluding Verde, it's likely to be north of $175 million. Including Verde, we'll end the year spending plus or minus $300 million on accretive transactions. Overall, I'm pleased with how resilient the business is proving to be in a period of fairly significant macroeconomic uncertainty, and I am confident that we will finish 2025 successfully and carry momentum into 2026.

With that, I will turn it over to Jay to walk you through more numbers, including our successful capital market transactions at the end of Q3. Jay?

Thanks, Sean. Good morning, everyone, and thank you for joining us. We continue to experience positive momentum in our portfolio during the third quarter. Acquisition-adjusted revenue increased 2.9% from the same period last year, accelerating 100 basis points over the second quarter. Our billboard regions all grew in the low single-digit range, led by the Atlantic and Northeast, which improved 3.8% and 3.3%, respectively.

Our airport and logos divisions also outpaced the broader portfolio with airport growing 5.8%, followed by logos, which increased 5.2%. Acquisition-adjusted operating expenses increased 3.7% in the third quarter, including onetime severance costs associated with termination of our Vancouver transit contract on July 31 as well as increased costs from Phase 2 of our technology implementation. These items accounted for approximately 125 basis points of expense growth over the comparable period in 2024 and were both included in our revised guidance in August.

We still anticipate full year acquisition-adjusted operating expense growth in the 2.5% to 2.75% range. Adjusted EBITDA for the quarter was $280.8 million compared to $271.2 million in 2024, which was an increase of 3.5%. On an acquisition-adjusted basis, adjusted EBITDA increased 2%. Despite the growth in operating expenses, adjusted EBITDA margin for the quarter remained strong at 48%, essentially flat year-over-year. Adjusted funds from operations totaled $226.5 million in the third quarter compared to $220.7 million last year, an increase of 2.6%.

Diluted AFFO per share increased 2.3% to $2.20 versus $2.15 in the third quarter of 2024. Local and regional sales accounted for approximately 78% of billboard revenue in Q3, growing for the 18th consecutive quarter. Q1 of 2021, a COVID-impacted quarter, was the last in which we saw a year-over-year decline in local and regional sales. This consistent performance exhibits the resilience of our core local advertising business and differentiates the company from our peer group. On the capital expenditure front, total spend for the quarter was approximately $50 million, including $13.9 million of maintenance CapEx.

Through the first 3 quarters of the year, CapEx totaled $118 million, $37 million of which was maintenance. And for the full year, we anticipate total CapEx of $180 million with maintenance comprising $60 million. We ended the quarter with total leverage of 3x net debt to EBITDA as defined under our credit facility, which remains amongst the lowest level ever for the company. Our secured debt leverage improved to 0.65x, and we are comfortably in compliance with both our total debt incurrence and secured debt maintenance test against covenants of 7x and 4.5x, respectively.

For the full year, we expect total leverage to remain at 3x with secured leverage consistent as well below 1x net debt to EBITDA. Lamar continues to enjoy access to both the debt and equity capital markets. During the quarter, we took significant steps to further improve our industry-leading balance sheet, raising a total of $1.1 billion. With the positive market backdrop, we opportunistically refinanced the company's $600 million Term Loan B due February 2027, which was our nearest term maturity. The offering was well received and given the demand, we upsized the transaction to $700 million. In addition, we were able to maintain a spread of 150 basis points over SOFR, which remains the lowest priced Term Loan B in the market.

Following the successful launch of the term loan, we accessed the high-yield bond market with a new $400 million senior notes offering. The bond deal was oversubscribed, allowing us to achieve the lowest ever spread to treasuries for an 8-year in the high-yield market with a coupon of [ 5 3/8% ]. We are extremely pleased with both capital markets transactions, which extend our maturity profile and significantly enhance liquidity. Excess proceeds were used to repay outstandings under the company's revolving credit facility and AR securitization.

As of September 30, we had $834 million in total liquidity comprised of approximately $22 million of cash on hand, $742 million available under our revolving credit facility and $70 million available on the AR securitization. At quarter end, there were no borrowings outstanding on the revolver and $180 million outstanding under the AR securitization program. We had approximately $3.4 billion in total consolidated debt and our weighted average interest rate was 4.6% with a weighted average debt maturity of approximately 5 years. As a result of the focus on our balance sheet, the company is well positioned with an investment capacity well over $1 billion.

In addition, we have the ability to deploy this capital while remaining at or below the high end of our target leverage range of 3.5 to 4x net debt to EBITDA. This morning, we affirmed our full year guidance and expect AFFO to finish the year between $8.10 and $8.20 per diluted share. Cash interest in our guidance totaled $152 million and assumes SOFR remains flat for the balance of the year. As I touched on earlier, maintenance CapEx is budgeted for $60 million and cash taxes are projected to come in around $10 million, which excludes any taxes related to disposition of our interest in Vistar Media.

And finally, our dividend. We paid a cash dividend of $1.55 per share in each of the first 3 quarters this year. Management's recommendation will be to declare a regular cash dividend of $1.55 per share for the fourth quarter as well. This recommendation is subject to Board approval, and we will communicate the Board's decision next month. The company's dividend policy remains to distribute 100% of our taxable income. And for the full year, we expect to distribute a regular dividend of $6.20 per share, excluding any required distribution resulting from the Vistar sale. Again, we are pleased with our financial position and strong balance sheet, which we view as an asset and competitive advantage in the out-of-home industry. I will now turn the call back over to Sean.

Thanks, Jay. I will cover some familiar key performance metrics, and then we'll open it up for questions. On the billboard side, our static inventory grew quarter-over-quarter approximately 2%, while as I mentioned, digital grew a tad over 5%. As for political, Q3 this year was $2.7 million versus $6.1 million for last year's Q3. Full year-to-date political this year has been $7.4 million compared to $29.2 million year-to-date in 2024. By the way, 2024, as I mentioned, $29.2 million, that was over $7.5 million for 2023, indicating that we certainly will have political as a tailwind in 2026 as opposed to a headwind that it represented this year.

A quick word on October and political. Last year, we did over $11 million in political in the month of October. We replaced all but about $3.5 million of that ex political, October grew 2.9% quarter -- year-over-year, month-over-month. As we mentioned for several quarters now, our pro forma increases are being driven primarily by rate. Also, in terms of digital units in the [ air ], we ended Q3 with 5,442 digital units in operation, an increase of approximately 450 year-to-date over last year-to-date. This includes acquired units. Also, as I mentioned, same board digital revenue grew 3.4% Q-over-Q.

Local-national split, approximately 78% was local and 22% national in Q3. Growth for local was 1.6% and growth for national was 5.5%. Programmatic grew a little over 13% in Q3. I don't usually tick off individual customers, but I do believe that an impressive list of accounts really are indicative of how we're feeling about national year-over-year and going into 2026. The top 5 accounts in terms of increases in their spend with us in Q3 are as follows: GEICO, Progressive Insurance, JPMorganChase, Coca-Cola and Johnson & Johnson. Again, that list of blue-chip customers, I believe, points to our optimism going into 2026. With that, Katie, let's open it up for questions.

[Operator Instructions] Our first question will come from Cameron McVeigh with Morgan Stanley.

I was curious, as you look ahead into 2026, how you're thinking about the growth opportunity and what you see for your business as the primary growth drivers next year? And then secondly, also curious how you're thinking about the M&A environment and if we should expect another acquisitive year ahead.

Yes, Cameron. Regarding the acquisition activity, yes, we do feel good. We feel like this has been a great year. When we look into 2026 and the momentum from the approximately $300 million we spent this year, that's certainly a growth driver for AFFO per share, right? Other growth drivers are -- just our pacings are stronger, markedly stronger as we peer into 2026, this day and 2025.

Last year, on the same day, as we were looking into 2025, pacings were good, but not near the strength that we're seeing going into next year. And then, of course, as I mentioned, we'll have political as a tailwind, and that makes a difference. So for all those reasons, 2026, the setup is real good.

Great. And then I also just wanted to ask about potential AI company-related advertising exposure. Is that -- has that been an influence on the national growth we saw at all this quarter? And is that something maybe an opportunity going forward?

So as Jay mentioned and we've talked about for several quarters now, we are going through a pretty extensive enterprise conversion. And that is setting us up to realize the benefits of AI in 2027. We'll finish the conversion about halfway through next year. And of course, that's going to have a lot of benefits. It's going to have some efficiency benefits. It's also going to -- once all the consultants leave the building, we won't have that additional OpEx and CapEx spend that we've had the last several quarters.

In terms of AI driving our business, without speculating too much, I can say with some confidence that AI is certainly good at 2 things. Number one is words and number two is pictures. And when you think about what we do in the out-of-home space, that's what it is. It's words and pictures. So it can't help but help us.

Our next question will come from Jason Bazinet with Citi.

I also had, I think, a simple question on 2026. Other than the political tailwinds that you called out, am I right that the benefit you'll get next year from the Verde acquisition is about the same size as the headwind you'll see from the Vancouver exit, like those 2 offset each other, so it's just a clean year other than the political tailwinds?

That's a good observation, Jason, and you're directionally correct. Now when we report same-store growth, we will adjust for the loss of Vancouver and the addition of Verde. So your pro forma numbers are going to be clean. But you're right in terms of absolute revenue expectations for 2026. It's a pretty decent offset.

The only thing I would add there, Jason, you're correct on the top line. But if you recall, the Vancouver contract, while high revenue had relatively low EBITDA contribution, I think it was below 10%. So should see better flow-through from the Verde transaction than you would from Vancouver.

Yes, significantly better flow-through.

Our next question will come from David Karnovsky with JPMorgan.

Sean, with the auto insurance, your comments are consistent [indiscernible] from this morning, and I wanted to see if you could expand on what's going on with the vertical and whether you think the strength here is sustainable, just given the category has been choppy over the past few years? And then can you just remind us how to think about political specifically during a midterm cycle and how that might compare to your prior presidential results?

Yes. Let me hit the political first because I think it is instructive on what an off-presidential does. Okay. So in 2022 -- over 2021, in 2022, we did approximately [ $21 million ] in political. And that's year-to-date, right? So that doesn't include Q4 of those years. And in 2021, we did [ $7.9 million ]. So that's sort of your order of magnitude and should give you a little bit of feel for it. Look, on insurance, here's what's most gratifying from my point of view. Several quarters back, the auto category and insurance, they were having trouble with their own actuarial results.

And so they pulled back. And what's gratifying when you see a large customer pull back for whatever reason it is, it's gratifying to see them come back in because that means it's not the medium that they were concerned about. It was sort of their own internal calculations around their own business and how they're feeling about their business. So that's number one. And I would say that also the programmatic channel has become very for both of those customers. They buy across both static and digital. However, a lot of their spend is coming through the programmatic channel.

Our next question comes from Jonnathan Navarrete with TD Cowen.

I'm curious to see how you guys are thinking about demand for the World Cup in 2026. I know that JCDecaux experienced some good bumps there when they had the Euro 2024. So just wondering how you guys are thinking about that.

We're feeling very good about it actually. I didn't make it a talking point. But when you add political to that mix of the World Cup, that gives us a lot of optimism around how 2026 is going to shape up for sure.

Great. So I guess the second and third quarters also see a nice bump there. And just the last question, can you remind us what is the potential distribution for the Vistar sale? Could we expect it to be all cash if there is distribution in stock? Like how can we see Vistar coming back to shareholders?

Sure. It will be all cash as we've done in previous years where we've issued a special cash distribution at the end of the year. And we'll do that in Q4 on December 31, alongside our regular cash dividend. And right now, we anticipate that's going to be around $0.25, give or take $0.01 depending on how the performance comes in, in November and December.

[Operator Instructions] Our next question will come from Daniel Osley with Wells Fargo.

Sean, you noted an impressive list of national customers increasing their spend with Lamar. Can you further unpack the inflection you're seeing on national and your confidence that national -- that the national turnaround is sustainable?

So in addition to what we're hearing from those large national accounts that I rattled off, conversations around 2026 and plans for 2026 from national accounts in general feels better. Good momentum ex political in the back half of this year is going to carry in, we believe, carry over into 2026. And the vibe feels better going into next year -- at this time this year than it felt this time last year coming into 2025.

That's helpful. And as a quick follow-up. Your transit segment continues to perform nicely. Just given the strength of airports' advertising across the industry, do you expect to bid on any additional RFPs on the airport side?

Great question. As I've said several times, when you think about Lamar and transit and airports, think about a large portfolio of small and middle market transit and airport contracts. So yes, we will continue to pursue airports in the sort of middle market arena sort of outside the top 20 DMAs. Clear Channel is dominant in that top 20 DMA space for airports. They do a great job. And we kind of specialize in the smaller middle market airport space. And it has been a good strong growth for us, a growth vehicle for us.

At this time, this concludes our Q&A session. I'll now turn the meeting back over to Sean Reilly for any final or closing remarks.

Well, thank you all for your interest in Lamar, and we certainly look forward to visiting in February 2026. That's it, Katie. Thanks.

Thank you. That brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect, and thank you.