LAMAR ADVERTISING COMPANY This report contains forward-looking statements. Actual results could differ materially from those anticipated by the forward-looking statements due to risks and uncertainties described in the section of this combined report on Form 10-Q entitled "Note Regarding Forward-Looking Statements" and in Item 1A to the 2021 Combined Form 10-K filed onFebruary 25, 2022 , and as such risk factors as further updated or supplemented, from time to time, in our combined Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. You should carefully consider each of these risks and uncertainties in evaluating the Company's andLamar Media's financial conditions and results of operations. Investors are cautioned not to place undue reliance on the forward-looking statements contained in this document. These statements speak only as of the date of this document, and the Company undertakes no obligation to update or revise the statements, except as may be required by law.
The following is a discussion of the consolidated financial condition and
results of operations of the Company for the three and nine months ended
Overview
The Company's net revenues are derived primarily from the rental of advertising space on outdoor advertising displays owned and operated by the Company. Revenue growth is based on many factors that include the Company's ability to increase occupancy of its existing advertising displays; raise advertising rates; and acquire new advertising displays and its operating results are therefore affected by general economic conditions, as well as trends in the advertising industry. Advertising spending is particularly sensitive to changes in general economic conditions which affect the rates that the Company is able to charge for advertising on its displays and its ability to maximize advertising sales or occupancy on its displays.
Acquisitions and capital expenditures
Historically, the Company has made strategic acquisitions of outdoor advertising assets to increase the number of outdoor advertising displays it operates in existing and new markets. The Company continues to evaluate and pursue strategic acquisition opportunities as they arise. The Company has financed its historical acquisitions and intends to finance any future acquisition activity from available cash, borrowings under its senior credit facility or the issuance of debt or equity securities. See "Liquidity and Capital Resources- Sources of Cash" for more information. During the nine months endedSeptember 30, 2022 , the Company completed over 50 acquisitions for a total cash purchase price of approximately$287.9 million . See Uses of Cash - Acquisitions for more information. The Company's business requires expenditures for maintenance and capitalized costs associated with the construction of new billboard displays, the entrance into and renewal of logo sign and transit contracts, and the purchase of real estate and operating equipment. The following table presents a breakdown of capitalized expenditures for the three and nine months endedSeptember 30, 2022 and 2021: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Total capital expenditures: Billboard - traditional$ 12,165 $ 5,706 $ 30,388 $ 13,077 Billboard - digital 19,218 15,140 61,172 37,841 Logos 3,636 2,898 9,639 7,465 Transit 817 564 3,021 1,774 Land and buildings 2,467 2,871 5,102 5,233 Operating equipment 2,703 2,918 7,486 6,123 Total capital expenditures$ 41,006 $ 30,097 $ 116,808 $ 71,513 36
-------------------------------------------------------------------------------- Table of ContentsUmbrella Partnership Real Estate Investment Trust As previously announced, onJuly 1, 2022 , the Company completed a tax reorganization to a specific type of REIT known as anUmbrella Partnership Real Estate Investment Trust ("UPREIT"). The UPREIT structure allows property owners of appreciated properties to contribute property to the operating partnership of the REIT, on a tax-deferred basis, in exchange for a partnership interest in the form of operating partnership units. This reorganization is not expected to have any material impact on the Company's combined financial statements or business operations. Non-GAAP Financial Measures Our management reviews our performance by focusing on several key performance indicators not prepared in conformity with Generally Accepted Accounting Principles inthe United States ("GAAP"). We believe these non-GAAP performance indicators are meaningful supplemental measures of our operating performance and should not be considered in isolation of, or as a substitute for, their most directly comparable GAAP financial measures. Included in our analysis of our results of operations are discussions regarding earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA"), funds from operations ("FFO"), as defined by theNational Association of Real Estate Investment Trusts , adjusted funds from operations ("AFFO") and acquisition-adjusted net revenue. We define adjusted EBITDA as net income before income tax expense (benefit), interest expense (income), equity in earnings (loss) of investees, loss (gain) on extinguishment of debt and investments, stock-based compensation, depreciation and amortization, loss (gain) on disposition of assets and investments, transaction expenses and capitalized contract fulfillment costs, net. FFO is defined as net income before gains or losses from the sale or disposal of real estate assets and investments and real estate related depreciation and amortization and including adjustments to eliminate unconsolidated affiliates and non-controlling interest. We define AFFO as FFO before (i) straight-line income and expense; (ii) capitalized contract fulfillment costs, net (iii) stock-based compensation expense; (iv) non-cash portion of tax expense (benefit); (v) non-real estate related depreciation and amortization; (vi) amortization of deferred financing costs; (vii) loss on extinguishment of debt; (viii) transaction expenses; (ix) non-recurring infrequent or unusual losses (gains); (x) less maintenance capital expenditures; and (xi) an adjustment for unconsolidated affiliates and non-controlling interest. Acquisition-adjusted net revenue adjusts our net revenue for the prior period by adding to it the net revenue generated by the acquired assets before our acquisition of these assets for the same time frame that those assets were owned in the current period. In calculating acquisition-adjusted revenue, therefore, we include revenue generated by assets that we did not own in the period but acquired in the current period. We refer to the amount of pre-acquisition revenue generated by the acquired assets during the prior period that corresponds with the current period in which we owned the assets (to the extent within the period to which this report relates) as "acquisition net revenue". In addition, we also adjust the prior period to subtract revenue generated by the assets that have been divested since the prior period and, therefore, no revenue derived from those assets is reflected in the current period. Adjusted EBITDA, FFO, AFFO and acquisition-adjusted net revenue are not intended to replace net income or any other performance measures determined in accordance with GAAP. Neither FFO nor AFFO represent cash flows from operating activities in accordance with GAAP and, therefore, these measures should not be considered indicative of cash flows from operating activities as a measure of liquidity or of funds available to fund our cash needs, including our ability to make cash distributions. Rather, adjusted EBITDA, FFO, AFFO and acquisition-adjusted net revenue are presented as we believe each is a useful indicator of our current operating performance. We believe that these metrics are useful to an investor in evaluating our operating performance because (1) each is a key measure used by our management team for purposes of decision-making and for evaluating our core operating results; (2) adjusted EBITDA is widely used in the industry to measure operating performance as depreciation and amortization may vary significantly among companies depending upon accounting methods and useful lives, particularly where acquisitions and non-operating factors are involved; (3) acquisition-adjusted net revenue is a supplement to net revenue to enable investors to compare period-over-period results on a more consistent basis without the effects of acquisitions and divestitures, which reflects our core performance and organic growth (if any) during the period in which the assets were owned and managed by us; (4) adjusted EBITDA, FFO and AFFO each provide investors with a meaningful measure for evaluating our period-to-period operating performance by eliminating items that are not operational in nature; and (5) each provides investors with a measure for comparing our results of operations to those of other companies. 37
--------------------------------------------------------------------------------
Table of Contents
Our measurement of adjusted EBITDA, FFO, AFFO and acquisition-adjusted net revenue may not, however, be fully comparable to similarly titled measures used by other companies. Reconciliations of adjusted EBITDA, FFO, AFFO and acquisition-adjusted net revenue to net income, the most directly comparable GAAP measure, have been included herein.
RESULTS OF OPERATIONS
Nine months ended
Net revenues increased$203.8 million or 15.8% to$1.50 billion for the nine months endedSeptember 30, 2022 from$1.29 billion for the same period in 2021. This increase was primarily attributable to an increase in billboard net revenues of$167.6 million , an increase in transit net revenues of$34.9 million , and an increase in logo net revenues of$1.3 million over the same period in 2021. For the nine months endedSeptember 30, 2022 , there was a$156.9 million increase in net revenues as compared to acquisition-adjusted net revenue for the nine months endedSeptember 30, 2021 , which represents an increase of 11.7%. See "Reconciliations" below. The$156.9 million increase in revenue is primarily due to an increase of$125.4 million in billboard net revenues as well as an increase in transit net revenues of$30.4 million over the same period in 2021. Total operating expenses, exclusive of depreciation and amortization and gain on disposition of assets, increased$110.6 million , or 15.4%, to$828.5 million for the nine months endedSeptember 30, 2022 from$717.8 million for the same period in 2021. The$110.6 million increase over the prior year is comprised of a$115.1 million increase in total direct, general and administrative and corporate expenses (excluding stock-based compensation and transaction expenses) primarily related to the operations of our outdoor advertising assets, as well as a$3.8 million increase in transaction expenses related to acquisitions and the write-off of deferred offering costs, offset by a$8.2 million decrease in stock-based compensation. Depreciation and amortization expense decreased$3.5 million to$202.2 million for the nine months endedSeptember 30, 2022 as compared to$205.7 million for the same period in 2021. The decrease is due to the revision in the cost estimate included in the calculation of asset retirement obligations during 2021, offset by acquisitions and capital expenditures that occurred in the second half of 2021 and during 2022.
For the nine months ended
Due to the above factors, operating income increased by
During the nine months endedSeptember 30, 2021 , the Company recognized a loss on debt extinguishment of$21.6 million related to the early repayment of our 5 3/4% Senior Notes during the period. There was no loss on debt extinguishment during the nine months endedSeptember 30, 2022 . Interest expense increased$9.2 million for the nine months endedSeptember 30, 2022 to$89.8 million as compared to$80.6 million for the nine months endedSeptember 30, 2021 primarily due to the increase in interest rates on the Accounts Receivable Securitization Program and senior credit facility.
Equity in earnings of investee was
The increase in operating income and the decrease in loss on extinguishment of debt, offset by the increase in interest expense, resulted in a$110.8 million increase in net income before income taxes. The effective tax rate for the nine months endedSeptember 30, 2022 was 2.4%, which differs from the federal statutory rate primarily due to our qualification for taxation as a REIT and adjustments for foreign items. As a result of the above factors, the Company recognized net income for the nine months endedSeptember 30, 2022 of$372.5 million , as compared to net income of$264.8 million for the same period in 2021. 38
--------------------------------------------------------------------------------
Table of Contents
Reconciliations:
Because acquisitions occurring afterDecember 31, 2020 have contributed to our net revenue results for the periods presented, we provide 2021 acquisition-adjusted net revenue, which adjusts our 2021 net revenue for the nine months endedSeptember 30, 2021 by adding to or subtracting from it the net revenue generated by the acquired or divested assets prior to our acquisition or divestiture of these assets for the same time frame that those assets were owned in the nine months endedSeptember 30, 2022 . Reconciliations of 2021 reported net revenue to 2021 acquisition-adjusted net revenue for the nine months endedSeptember 30 , as well as a comparison of 2021 acquisition-adjusted net revenue to 2022 reported net revenue for the nine months endedSeptember 30 , are provided below: Reconciliation and Comparison of Reported Net Revenue to Acquisition-Adjusted Net Revenue Nine Months Ended September 30, 2022 2021 (in thousands) Reported net revenue$ 1,496,630 $ 1,292,827 Acquisition net revenue - 46,925 Adjusted totals$ 1,496,630 $ 1,339,752 Key Performance Indicators Net Income/Adjusted EBITDA (in thousands) Nine Months Ended Amount of September 30, Increase Percent 2022 2021 (Decrease) Increase (Decrease) Net income$ 372,544 $ 264,776 $ 107,768 40.7 % Income tax expense 8,976 5,922 3,054 Loss on debt extinguishment - 21,604 (21,604) Transaction expenses 3,769 - 3,769 Interest expense (income), net 89,082 80,084 8,998 Equity in earnings of investee (2,655) (1,141) (1,514) Gain on disposition of assets (1,990) (1,922) (68) Depreciation and amortization 202,210 205,671 (3,461) Capitalized contract fulfillment costs, net (463) (900) 437 Stock-based compensation expense 14,331 22,540 (8,209) Adjusted EBITDA$ 685,804 $ 596,634 $ 89,170 14.9 % Adjusted EBITDA for the nine months endedSeptember 30, 2022 increased 14.9% to$685.8 million . The increase in adjusted EBITDA was primarily attributable to an increase in our gross margin (net revenue less direct advertising expense, exclusive of depreciation and amortization and capitalized contract fulfillment costs, net) of$128.9 million , offset by an increase in total general and administrative and corporate expenses of$40.6 million , excluding the impact of stock-based compensation expense and transaction expenses. 39
--------------------------------------------------------------------------------
Table of Contents
Net Income/FFO/AFFO
(in thousands)
Nine Months Ended Amount of Percent
September 30, Increase Increase
2022 2021 (Decrease) (Decrease)
Net income $ 372,544 $ 264,776 $ 107,768 40.7 %
Depreciation and amortization related to real
estate 193,164 197,395 (4,231)
Gain from sale or disposal of real estate, net of
tax (1,783) (1,712) (71)
Adjustments for unconsolidated affiliates and
non-controlling interest (2,135) (618) (1,517) FFO$ 561,790 $ 459,841 $ 101,949 22.2 % Straight line expense 2,884 2,195 689 Capitalized contract fulfillment costs, net (463) (900) 437 Stock-based compensation expense 14,331 22,540 (8,209) Non-cash portion of tax provision 1,851 1,178 673 Non-real estate related depreciation and amortization 9,046 8,276 770 Amortization of deferred financing costs 4,527 4,405 122 Loss on extinguishment of debt - 21,604 (21,604) Transaction expenses 3,769 - 3,769 Capital expenditures - maintenance (44,681) (32,697) (11,984)
Adjustments for unconsolidated affiliates and
non-controlling interest 2,135 618 1,517 AFFO$ 555,189 $ 487,060 $ 68,129 14.0 % FFO for the nine months endedSeptember 30, 2022 increased from$459.8 million in 2021 to$561.8 million for the same period in 2022, an increase of 22.2%. AFFO for the nine months endedSeptember 30, 2022 increased 14.0% to$555.2 million as compared to$487.1 million for the same period in 2021. The increase in AFFO was primarily attributable to an increase in our gross margin (net revenue less direct advertising expense, exclusive of depreciation and amortization and capitalized contract fulfillment costs, net) offset by an increase in total general and administrative and corporate expenses (excluding the effect of stock-based compensation expense and transaction expenses) and capital expenditures related to the maintenance of our advertising assets.
Three months ended
Net revenues increased$50.5 million or 10.6% to$527.4 million for the three months endedSeptember 30, 2022 from$476.9 million for the same period in 2021. This increase was primarily attributable to an increase in billboard net revenues of$41.3 million and an increase in transit net revenues of$9.2 million over the same period in 2021. For the three months endedSeptember 30, 2022 , there was a$29.8 million increase in net revenues as compared to acquisition-adjusted net revenue for the three months endedSeptember 30, 2021 , which represents an increase of 6.0%. See "Reconciliations" below. The$29.8 million increase in revenue is primarily due to an increase of$22.8 million in billboard net revenues as well as an increase in transit net revenues of$7.1 million over the same period in 2021. Total operating expenses, exclusive of depreciation and amortization and gain on disposition of assets, increased$21.3 million , or 8.2%, to$280.6 million for the three months endedSeptember 30, 2022 from$259.3 million for the same period in 2021. The$21.3 million increase over the prior year is comprised of a$29.2 million increase in total direct, general and administrative and corporate expenses (excluding stock-based compensation and transaction expenses) primarily related to the operations of our outdoor advertising assets, offset by an$8.0 million decrease in stock-based compensation. Depreciation and amortization decreased$18.5 million to$65.8 million for the three months endedSeptember 30, 2022 as compared to$84.3 million for the same period in 2021. The decrease is due to the revision in the cost estimate included in the calculation of asset retirement obligations during 2021, offset by acquisitions and capital expenditures that occurred in the second half of 2021 and during 2022. 40
--------------------------------------------------------------------------------
Table of Contents
For the three months ended
Due to the above factors, operating income increased by
Interest expense increased$7.4 million for the three months endedSeptember 30, 2022 to$33.5 million as compared to$26.1 million for the three months endedSeptember 30, 2021 primarily due to the increase in interest rates on the Accounts Receivable Securitization Program and senior credit facility.
Equity in earnings of investee was
The increase in operating income, offset by the increase in interest expense, resulted in a$40.7 million increase in net income before income taxes. The effective tax rate for the three months endedSeptember 30, 2022 was 2.0%, which differs from the federal statutory rate primarily due to our qualification for taxation as a REIT and adjustments for foreign items.
As a result of the above factors, the Company recognized net income for the
three months ended
Reconciliations:
Because acquisitions occurring afterDecember 31, 2020 have contributed to our net revenue results for the periods presented, we provide 2021 acquisition-adjusted net revenue, which adjusts our 2021 net revenue for the three months endedSeptember 30, 2021 by adding to or subtracting from it the net revenue generated by the acquired or divested assets prior to our acquisition or divestiture of these assets for the same time frame that those assets were owned in the three months endedSeptember 30, 2022 . Reconciliations of 2021 reported net revenue to 2021 acquisition-adjusted net revenue for the three months endedSeptember 30 , as well as a comparison of 2021 acquisition-adjusted net revenue to 2022 reported net revenue for the three months endedSeptember 30 , are provided below: Reconciliation and Comparison of Reported Net Revenue to Acquisition-Adjusted Net Revenue Three Months Ended September 30, 2022 2021 (in thousands) Reported net revenue$ 527,390 $ 476,894 Acquisition net revenue - 20,663 Adjusted totals$ 527,390 $ 497,557 41
--------------------------------------------------------------------------------
Table of Contents
Key Performance Indicators
Net Income/Adjusted EBITDA
(in thousands)
Three Months Ended Amount of
September 30, Increase Percent Increase
2022 2021 (Decrease) (Decrease)
Net income $ 146,188 $ 106,838 $ 39,350 36.8 %
Income tax expense 3,056 1,712 1,344
Transaction expenses 93 - 93
Interest (expense) income, net 33,297 25,927 7,370
Equity in earnings of investee (1,554) (1,141) (413)
Gain on disposition of assets (53) (25) (28)
Depreciation and amortization 65,833 84,299 (18,466)
Capitalized contract fulfillment costs, net (772) - (772)
Stock-based compensation expense 5,108 13,076 (7,968)
Adjusted EBITDA $ 251,196 $ 230,686 $ 20,510 8.9 %
Adjusted EBITDA for the three months ended September 30, 2022 increased 8.9% to
$251.2 million . The increase in adjusted EBITDA was primarily attributable to an
increase in our gross margin (net revenue less direct advertising expense,
exclusive of depreciation and amortization and capitalized contract fulfillment
costs, net) of $29.6 million , offset by an increase in total general and
administrative and corporate expenses of $7.6 million , excluding the impact of
stock-based compensation expense and transaction expenses.
Net Income/FFO/AFFO
(in thousands)
Three Months Ended Amount of
September 30, Increase Percent Increase
2022 2021 (Decrease) (Decrease)
Net income $ 146,188 106,838 $ 39,350 36.8 %
Depreciation and amortization related to real
estate 63,089 81,580 (18,491)
Gain from sale or disposal of real estate, net
of tax (10) 83 (93)
Adjustments for unconsolidated affiliates and
non-controlling interest (1,364) (903) (461)
FFO $ 207,903 $ 187,598 $ 20,305 10.8 %
Straight line expense 741 466 275
Capitalized contract fulfillment costs, net (772) - (772)
Stock-based compensation expense 5,108 13,076 (7,968)
Non-cash portion of tax provision 639 (565) 1,204
Non-real estate related depreciation and
amortization 2,743 2,720 23
Amortization of deferred financing costs 1,577 1,443 134
Transaction expenses 93 - 93
Capital expenditures - maintenance (13,008) (13,094) 86
Adjustments for unconsolidated affiliates and
non-controlling interest 1,364 903 461
AFFO $ 206,388 $ 192,547 $ 13,841 7.2 %
FFO for the three months ended September 30, 2022 increased from $187.6 million
in 2021 to $207.9 million for the same period in 2022, an increase of 10.8%.
AFFO for the three months ended September 30, 2022 increased 7.2% to $206.4
million as compared to $192.5 million for the same period in 2021. The increase
in AFFO was primarily attributable to an increase in our gross margin (net
revenue less direct advertising expense, exclusive of depreciation and
amortization and capitalized contract fulfillment costs, net) offset by an
increase in total general and administrative and corporate expenses (excluding
the
42--------------------------------------------------------------------------------
Table of Contents
effect of stock-based compensation expense and transaction expenses) and capital expenditures related to the maintenance of our advertising assets.
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Company has historically satisfied its working capital requirements with cash from operations and borrowings under the senior credit facility. The Company's wholly owned subsidiary,Lamar Media Corp. , is the borrower under the senior credit facility and maintains all corporate operating cash balances. Any cash requirements of the Company, therefore, must be funded by distributions fromLamar Media . Sources of Cash Total Liquidity. As ofSeptember 30, 2022 we had$857.3 million of total liquidity, which is comprised of$79.4 million in cash and cash equivalents,$738.7 million of availability under the revolving portion ofLamar Media's senior credit facility and$39.2 million of availability under the Accounts Receivable Securitization Program. We expect our total liquidity to be adequate for the Company to meet its operational requirements for the next twelve months. We are currently in compliance with the maintenance covenant included in the senior credit facility and we would remain in compliance after giving effect to borrowing the full amount available to us under the revolving portion of the senior credit facility. As ofSeptember 30, 2022 andDecember 31, 2021 , the Company had a working capital deficit of$238.8 million and$274.4 million , respectively. The decrease in working capital deficit of$35.6 million is primarily due to increases in receivables and other current assets, offset by an increase in current maturities of long-term debt as ofSeptember 30, 2022 . Cash Generated by Operations. For the nine months endedSeptember 30, 2022 and 2021, our cash provided by operating activities was$537.1 million and$488.2 million , respectively. The increase in cash provided by operating activities for the nine months endedSeptember 30, 2022 over the same period in 2021 primarily relates to an increase in revenues of$203.8 million offset by an increase in operating expenses (excluding stock-based compensation, gain on disposition of assets, and depreciation and amortization) of$118.8 million . We expect to generate cash flows from operations during 2022 in excess of our cash needs for operations, capital expenditures and dividends, as described herein. We believe we have sufficient liquidity available under our revolving credit facility to meet our operating cash needs for the next twelve months. Accounts Receivable Securitization Program. OnJune 24, 2022 ,Lamar Media and the Special Purpose Subsidiaries entered into the Sixth Amendment (the "Sixth Amendment") to the Receivables Financing Agreement. The Sixth Amendment increased the Accounts Receivable Securitization Program from$175.0 million to$250.0 million and extended the maturity date of the Accounts Receivable Securitization Program toJuly 21, 2025 . Additionally, the Sixth Amendment provides for the replacement of LIBOR-based interest rate mechanics with Term Secured Overnight Financing Rate ("Term SOFR") based interest rate mechanics for the Accounts Receivable Securitization Program. Borrowing capacity under the Accounts Receivable Securitization Program is limited to the availability of eligible accounts receivable collateralizing the borrowings under the agreements governing the Accounts Receivable Securitization Program. In connection with the Accounts Receivable Securitization Program,Lamar Media and certain of its subsidiaries (such subsidiaries, the "Subsidiary Originators") sell and/or contribute their existing and future accounts receivable and certain related assets to one of two special purpose subsidiaries,Lamar QRS Receivables, LLC (the "QRS SPV") andLamar TRS Receivables, LLC (the "TRS SPV" and together with the QRS SPV the "Special Purpose Subsidiaries"), each of which is a wholly-owned subsidiary ofLamar Media . Existing and future accounts receivable relating toLamar Media and its qualified REIT subsidiaries will be sold and/or contributed to the QRS SPV and existing and future accounts receivable relating toLamar Media's taxable REIT subsidiaries will be sold and/or contributed to the TRS SPV. Each of the Special Purpose Subsidiaries has granted the lenders party to the Accounts Receivable Securitization Program a security interest in all of its assets, which consist of the accounts receivable and related assets sold or contributed to them, as described above, in order to secure the obligations of the Special Purpose Subsidiaries under the agreements governing the Accounts Receivable Securitization Program. Pursuant to the Accounts Receivable Securitization Program,Lamar Media has agreed to service the accounts receivable on behalf of the two Special Purpose Subsidiaries for a fee.Lamar Media has also agreed to guaranty its performance in its capacity as servicer and originator, as well as the performance of the Subsidiary Originators, of their obligations under the agreements governing the Account Receivable Securitization Program. None ofLamar Media , the Subsidiary Originators or the Special Purpose Subsidiaries guarantees the collectability of the receivables under the Accounts Receivable Securitization Program. In addition, each of the Special Purpose Subsidiaries is a separate legal entity with its own separate creditors who will be entitled to access the assets of such Special Purpose Subsidiary before the assets become available toLamar Media . Accordingly, the assets of the Special Purpose Subsidiaries are not available to pay creditors ofLamar Media or any of 43
--------------------------------------------------------------------------------
Table of Contents
its subsidiaries, although collections from receivables in excess of the amounts required to repay the lenders and the other creditors of the Special Purpose Subsidiaries may be remitted toLamar Media . As ofSeptember 30, 2022 , there was$200.0 million in outstanding aggregate borrowings under the Accounts Receivable Securitization Program. Based on the availability of eligible accounts,Lamar Media had$39.2 million of unused availability under the Accounts Receivable Securitization Program as ofSeptember 30, 2022 . The Accounts Receivable Securitization Program will mature onJuly 21, 2025 . "At-the-Market" Offering Program. OnMay 1, 2018 , the Company entered into an equity distribution agreement (the "Sales Agreement") withJ.P. Morgan Securities LLC ,Wells Fargo Securities LLC andSunTrust Robinson Humphrey, Inc. as our sales agents. Under the terms of the Sales Agreement, the Company could have, from time to time, issued and sold shares of its Class A common stock, having an aggregate offering price of up to$400.0 million through the sales agents as either agents or principals. The Sales Agreement expired by its terms onMay 1, 2021 . The Company did not issue any shares under this program in 2021. OnJune 21, 2021 , the Company entered into a new equity distribution agreement (the "2021 Sales Agreement"), withJ.P. Morgan Securities LLC ,Wells Fargo Securities LLC ,Truist Securities, Inc. ,SMBC Nikko Securities America, Inc. andScotia Capital (USA) Inc. as our sales agents (each a "Sales Agent", and collectively, the "Sales Agents"), which replaced the prior Sales Agreement with substantially similar terms. Under the terms of the 2021 Sales Agreement, the Company may, from time to time, issue and sell shares of its Class A common stock, having an aggregate offering price of up to$400.0 million through the Sales Agents as either agents or principals. Sales of the Class A common stock, if any, may be made in negotiated transactions or transactions that are deemed to be "at-the-market offerings" as defined in Rule 415 under the Securities Act of 1933, as amended, including sales made directly on or through the Nasdaq Global Select Market and any other existing trading market for the Class A common stock, or sales made to or through a market maker other than on an exchange. The Company has no obligation to sell any of the Class A common stock under the 2021 Sales Agreement and may at any time suspend solicitations and offers under the 2021 Sales Agreement. The Company intends to use the net proceeds, if any, from the sale of the Class A common stock pursuant to the 2021 Sales Agreement for general corporate purposes, which may include the repayment, refinancing, redemption or repurchase of existing indebtedness, working capital, capital expenditures, acquisition of outdoor advertising assets and businesses and other related investments. The Company did not issue any shares under this program from its inception throughSeptember 30, 2022 . Shelf Registration Statement. OnJune 21, 2021 , the Company filed a new automatically effective shelf registration statement that allowsLamar Advertising to offer and sell an indeterminate amount of additional shares of its Class A common stock. During the nine months endedSeptember 30, 2022 and the year endedDecember 31, 2021 , the Company did not issue any shares under either shelf registration. Credit Facilities. OnFebruary 6, 2020 ,Lamar Media entered into a Fourth Amended and Restated Credit Agreement (the "Fourth Amended and Restated Credit Agreement") with certain ofLamar Media's subsidiaries as guarantors,JPMorgan Chase Bank, N.A . as administrative agent and the lenders party thereto, under which the parties agreed to amend and restateLamar Media's existing senior credit facility. The Fourth Amended and Restated Credit Agreement amended and restated the Third Amended and Restated Credit Agreement dated as ofMay 15, 2017 , as amended (the "Third Amended and Restated Credit Agreement"). OnJuly 2, 2021 ,Lamar Media entered into Amendment No. 1 (the "Amendment"), to the Fourth Amended and Restated Credit Agreement. The Amendment amends the definition of "Subsidiary" to exclude each ofLamar Partnering Sponsor LLC andLamar Partnering Corporation and any of their subsidiaries (collectively, the "Lamar Partnering Entities") such that, after the giving effect to the Amendment, none of the Lamar Partnering Entities are subject to the Fourth Amended and Restated Credit Agreement covenants and reporting requirements, but any investment byLamar Media in any of the Lamar Partnering Entities would be subject to the Fourth Amended and Restated Credit Agreement covenants. The Amendment also amends the definition of "EBITDA" to replace the existing calculation with a net income-based calculation, which excludes the income of non-Subsidiary entities such as the Lamar Partnering Entities, except to the extent that income of such entities is received byLamar Media in the form of dividends or distributions. The senior credit facility, as established by the Fourth Amended and Restated Credit Agreement (the "senior credit facility"), consists of (i) a$750.0 million senior secured revolving credit facility which will mature onFebruary 6, 2025 (the "revolving credit facility"), (ii) a$600.0 million Term B loan facility (the "Term B loans") which will mature onFebruary 6, 2027 , and (iii) an incremental facility (the "Incremental Facility") pursuant to whichLamar Media may incur additional term loan tranches or increase its revolving credit facility subject to a pro forma secured debt ratio calculated as described under "Restrictions under Senior Credit Facility" of 4.50 to 1.00, as well as certain other conditions including lender approval.Lamar Media 44
--------------------------------------------------------------------------------
Table of Contents
borrowed all
The Term B loans bear interest at rates based on the Adjusted LIBO Rate
("Eurodollar term loans") or the Adjusted Base Rate ("Base Rate term loans"), at
Lamar Media's option. Eurodollar term loans bear interest at a rate per annum
equal to the Adjusted LIBO Rate plus 1.50%. Base Rate term loans bear interest
at a rate per annum equal to the Adjusted Base Rate plus 0.50%. The revolving
credit facility bears interest at rates based on the Adjusted LIBO Rate
("Eurodollar revolving loans") or the Adjusted Base Rate ("Base Rate revolving
loans"), at Lamar Media's option. Eurodollar revolving loans bear interest at a
rate per annum equal to the Adjusted LIBO Rate plus 1.50% (or the Adjusted LIBO
Rate plus 1.25% at any time the Total Debt Ratio is less than or equal to 3.25
to 1). Base Rate revolving loans bear interest at a rate per annum equal to the
Adjusted Base Rate plus 0.50% (or the Adjusted Base Rate plus 0.25% at any time
the total debt ratio is less than or equal to 3.25 to 1). The guarantees,
covenants, events of default and other terms of the senior credit facility apply
to the Term B loans and revolving credit facility.
On July 29, 2022 , Lamar Media entered into Amendment No. 2 (the "Amendment No.
2") to the Fourth Amended and Restated Credit Agreement with certain of Lamar
Media's subsidiaries as guarantors, JPMorgan Chase Bank, N.A . as administrative
agent and the lenders party thereto. The Amendment No. 2 establishes a new
$350.0 million Senior Secured Term Loan A loan (the "Term A loans") as a new
class of incremental term loans. The Term A loans will mature on February 6,
2025 and bear interest at Term SOFR plus 1.25% and a credit spread adjustment of
0.10%. The covenants, events of default and other terms of the senior credit
facility apply to the Term A loans. Lamar Media borrowed all $350.0 million in
Term A loans on July 29, 2022 . Proceeds from the Term A loans were used to repay
outstanding balances on the revolving credit facility and a portion of the
outstanding balance on our Accounts Receivable Securitization Program.
As of September 30, 2022 the aggregate balance outstanding under the senior
credit facility was $950.0 million , consisting of $600.0 million in Term B loans
aggregate principal balance, $350.0 million in Term A loans aggregate principal
balance and no outstanding borrowings under our revolving credit facility. Lamar
Media had approximately $738.7 million of unused capacity under the revolving
credit facility.
Factors Affecting Sources of Liquidity
Internally Generated Funds. The key factors affecting internally generated cash flow are general economic conditions, specific economic conditions in the markets where the Company conducts its business and overall spending on advertising by advertisers. We expect to generate cash flows from operations during 2022 in excess of our cash needs for operations, capital expenditures and dividends, as described herein, and we believe we have sufficient liquidity with cash on hand and availability under our revolving credit facility to meet our operating cash needs for the next twelve months.
Restrictions Under Debt Securities . The Company andLamar Media must comply with certain covenants and restrictions related to its outstanding debt securities. Currently,Lamar Media has outstanding the$600.0 million 3 3/4% Senior Notes issuedFebruary 2020 , the$550.0 million 4% Senior Notes issuedFebruary 2020 andAugust 2020 , the$400.0 million 4 7/8% Senior Notes issued inMay 2020 and the$550.0 million 3 5/8% Senior Notes issued inJanuary 2021 . The indentures relating toLamar Media's outstanding notes restrict its ability to incur additional indebtedness, but permit the incurrence of indebtedness (including indebtedness under the senior credit facility), (i) if no default or event of default would result from such incurrence and (ii) if after giving effect to any such incurrence, the leverage ratio (defined as the sum of (x) total consolidated debt plus (y) the aggregate liquidation preference of any preferred stock ofLamar Media's restricted subsidiaries to trailing four fiscal quarter EBITDA (as defined in the indentures)) would be less than 7.0 to 1.0. Currently,Lamar Media is not in default under the indentures of any of its outstanding notes and, therefore, would be permitted to incur additional indebtedness subject to the foregoing provision. In addition to debt incurred under the provisions described in the preceding paragraph, the indentures relating toLamar Media's outstanding notes permitLamar Media to incur indebtedness pursuant to the following baskets:
•up to
•indebtedness outstanding on the date of the indentures or debt incurred to refinance outstanding debt;
•inter-company debt between
45--------------------------------------------------------------------------------
Table of Contents
•certain purchase money indebtedness and capitalized lease obligations to
acquire or lease property in the ordinary course of business that cannot exceed
the greater of
•additional debt not to exceed
•up to
Restrictions Under Senior Credit Facility.Lamar Media is required to comply with certain covenants and restrictions under the senior credit facility. If the Company orLamar Media fails to comply with these tests, the lenders under the senior credit facility will be entitled to exercise certain remedies, including the termination of the lending commitments and the acceleration of the debt payments under the senior credit facility. AtSeptember 30, 2022 we were, and currently, we are, in compliance with all such tests under the senior credit facility.Lamar Media must maintain a secured debt ratio, defined as total consolidated secured debt ofLamar Advertising ,Lamar Media and its restricted subsidiaries (including capital lease obligations), minus the lesser of (x)$150.0 million and (y) the aggregate amount of unrestricted cash and cash equivalents ofLamar Advertising ,Lamar Media and its restricted subsidiaries (other than the Special Purpose Subsidiaries (as defined above under Sources of Cash - Accounts Receivable Securitization Program)) to EBITDA, as defined below, for the period of four consecutive fiscal quarters then ended, of less than or equal to 4.5 to 1.0.
Lamar Media is also restricted from incurring additional unsecured senior indebtedness under certain circumstances unless, after giving effect to the incurrence of such indebtedness,Lamar Media would have a total debt ratio, defined as (a) total consolidated debt (including subordinated debt) ofLamar Advertising ,Lamar Media and its restricted subsidiaries as of any date minus the lesser of (i)$150.0 million and (ii) the aggregate amount of unrestricted cash and cash equivalents ofLamar Advertising ,Lamar Media and its restricted subsidiaries (other than the Special Purpose Subsidiaries) to (b) EBITDA, as defined below, for the most recent four fiscal quarters then ended, is less than 7.0 to 1.0.
Under the senior credit facility, as amended, "EBITDA" means, for any period, net income, plus (a) to the extent deducted in determining net income for such period, the sum determined without duplication and in accordance with GAAP, of (i) taxes, (ii) interest expense, (iii) depreciation, (iv) amortization, (v) any other non-cash income or charges accrued for such period, (vi) charges and expenses in connection with the senior credit facility, any actual or proposed acquisition, disposition or investment (excluding, in each case, purchases and sales of advertising space and operating assets in the ordinary course of business) and any actual or proposed offering of securities, incurrence or repayment of indebtedness (or amendment to any agreement relating to indebtedness), including any refinancing thereof, or recapitalization, (vii) any loss or gain relating to amounts paid or earned in cash prior to the stated settlement date of any swap agreement that has been reflected in operating income for such period), and (viii) any loss on sales of receivables and related assets to a securitization entity in connection with a permitted securitization financing, plus (b) the amount of cost savings, operating expense reductions and other operating improvements or synergies projected byLamar Media in good faith to be realized as a result of any acquisition, investment, merger, amalgamation or disposition within 18 months of any such acquisition, investment, merger, amalgamation or disposition, net of the amount of actual benefits realized during such period from such action; provided, (a) the aggregate amount for all such cost savings, operating expense reductions and other operating improvements or synergies will not exceed an amount equal to 15% of EBITDA for the applicable four quarter period and (b) any such adjustment to EBITDA pursuant to this clause (b) may only take into account cost savings, operating expense reductions and other operating improvements or synergies that are (I) directly attributable to such acquisition, investment, merger, amalgamation or disposition, (II) expected to have a continuing impact onLamar Media and its restricted subsidiaries and (III) factually supportable, in each case all as certified by the chief financial officer ofLamar Media ) on behalf ofLamar Media , minus (c) to the extent included in net income for such period (determined without duplication and in accordance with GAAP) (i) any extraordinary and unusual gains or losses during such period, and (ii) the proceeds of any casualty events and dispositions. For purposes of this EBITDA definition, the effect thereon of any adjustments required under Statement of Financial Accounting Standards No. 141R will be excluded. If during any period for which EBITDA is being determined, we have consummated any acquisition or disposition, EBITDA will be determined on a pro forma basis as if such acquisition or disposition had been made or consummated on the first day of such period. 46
--------------------------------------------------------------------------------
Table of Contents
Under the senior credit facility, "net income" means for any period, the consolidated net income (or loss) ofLamar Advertising , us, and our restricted subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that the following is excluded from net income: (a) the income (or deficit) of any person accrued prior to the date it becomes a restricted subsidiary or is merged into or consolidated withLamar Advertising , us or any of our restricted subsidiaries, and (b) the income (or deficit) of any person (other than any of our restricted subsidiaries) in whichLamar Advertising , we or any of our subsidiaries has an ownership interest, except to the extent that any such income is received byLamar Advertising , us or any of our restricted subsidiaries in the form of dividends or similar distributions. The Company believes that its current level of cash on hand, availability under the senior credit facility and future cash flows from operations are sufficient to meet its operating needs for the next twelve months. All debt obligations are reflected on the Company's balance sheet. Restrictions under Accounts Receivable Securitization Program. The agreements governing the Accounts Receivable Securitization Program contain customary representations and warranties, affirmative and negative covenants, and termination event provisions, including but not limited to those providing for the acceleration of amounts owed under the Accounts Receivable Securitization Program if, among other things, the Special Purpose Subsidiaries fail to make payments when due,Lamar Media , the Subsidiary Originators or the Special Purpose Subsidiaries become insolvent or subject to bankruptcy proceedings or certain judicial judgments, breach certain representations and warranties or covenants or default under other material indebtedness, a change of control occurs, or ifLamar Media fails to maintain the maximum secured debt ratio of 4.5 to 1.0 required underLamar Media's senior credit facility.
Uses of Cash
Capital Expenditures. Capital expenditures, excluding acquisitions, were
approximately
Acquisitions. During the nine months endedSeptember 30, 2022 , the Company completed acquisitions for an aggregate purchase price of approximately$287.9 million , which were financed using available cash on hand and borrowings on the Accounts Receivable Securitization Program and senior credit facility. OnMay 4, 2022 , the Company acquiredBurkhart Advertising Inc. which includes more than 1,500 billboard structures and 3,200 billboard faces, including 23 digital displays. The acquisition was funded with a combination of cash on hand and borrowings under our revolving credit facility. Dividends. OnFebruary 24, 2022 , the Company's Board of Directors declared a quarterly cash dividend of$1.10 per share, paid onMarch 31, 2022 to its stockholders of record of its Class A common stock and Class B common stock onMarch 21, 2022 . OnMay 19, 2022 , the Company's Board of Directors declared a quarterly cash dividend of$1.20 per share, paid onJune 30, 2022 to its stockholders of record of its Class A common stock and Class B common stock onJune 20, 2022 . OnSeptember 6, 2022 , the Company's Board of Directors declared a quarterly cash dividend of$1.20 per share, paid onSeptember 30, 2022 to its stockholders of record of its Class A common stock and Class B common stock onSeptember 19, 2022 . Subject to approval of the Company's Board of Directors, inDecember 2022 , the Company expects to declare a quarterly dividend of$1.20 per share of common stock for the upcoming fourth quarter 2022 distributions to stockholders as well as an additional special dividend of$0.30 per share of common stock. Beginning in 2023, management expects to recommend to the Board of Directors an increase in the quarterly dividend of$0.05 per common share, to$1.25 per common share. As a REIT, the Company must annually distribute to its stockholders an amount equal to at least 90% of its REIT taxable income (determined before the deduction for distributed earnings and excluding any net capital gain). The amount, timing and frequency of future distributions will be at the sole discretion of the Board of Directors and will be declared based upon various factors, a number of which may be beyond the Company's control, including financial condition and operating cash flows, the amount required to maintain REIT status and reduce any income and excise taxes that the Company otherwise would be required to pay, limitations on distributions in our existing and future debt instruments, the Company's ability to utilize net operating losses to offset, in whole or in part, the Company's distribution requirements, limitations on its ability to fund distributions using cash generated through its Taxable REIT Subsidiaries ("TRSs"), the impact of general economic conditions on the Company's operations and other factors that the Board of Directors may deem relevant. The foregoing factors may also impact management's recommendations to the Board of Directors as to the timing, amount and frequency of future distributions.
47--------------------------------------------------------------------------------
Table of Contents
S-1, with theSecurities and Exchange Commission (the "SEC"). OnJune 21, 2022 , LPC filed its request to withdraw its registration statement with theSEC . In conjunction with the withdrawn offering, the Company incurred a transaction expense of$1.2 million for the write-off of deferred offering costs incurred on behalf of LPC's registration statement. The$1.2 million in expenses are included in Corporate expenses in our Condensed Consolidated Statement of Income and Comprehensive Income atSeptember 30, 2022 . Stock and Debt Repurchasing Program. OnMarch 16, 2020 , the Company's Board of Directors authorized the repurchase of up to$250.0 million of the Company's Class A common stock. Additionally, the Board of Directors has authorizedLamar Media to repurchase up to$250.0 million in outstanding senior or senior subordinated notes and other indebtedness outstanding from time to time under its senior credit agreement. OnSeptember 20, 2021 , the Board of Directors authorized the extension of the repurchase program throughMarch 31, 2023 . There were no repurchases under the program as ofSeptember 30, 2022 . The Company's management may opt not to make any repurchases under the program, or may make aggregate purchases less than the total amount authorized.
Material Cash Requirements
Our expected material cash requirements for the twelve months following
Debt and Contractual Obligations. The following table summarizes our future debt maturities, interest payment obligations, and contractual obligations including required payments under operating and financing leases as ofSeptember 30, 2022 (in millions): Less than 1 year Thereafter Debt maturities(1)$ 199.7 $ 3,016.6 Interest obligations on long-term debt(2) 138.1 625.5 Contractual obligations, including operating and financing leases 244.8 1,497.9 Total payments due$ 582.6 $ 5,140.0
(1) Debt maturities assume there is no refinancing prior to the existing
maturity date.
(2) Interest rates on our variable rate instruments assume rates at the
Required Annual Distributions. As a REIT, the Company must annually distribute to its stockholders an amount equal to at least 90% of its REIT taxable income (determined before the deduction for distributed earnings and excluding any net capital gain). OnFebruary 24, 2022 , the Company's Board of Directors approved a dividend of$1.10 per common share, paid onMarch 31, 2022 . OnMay 19, 2022 , the Company's Board of Directors approved a dividend of$1.20 per common share, paid onJune 30, 2022 . OnSeptember 6, 2022 , the Company's Board of Directors approved a dividend of$1.20 per common share, paid onSeptember 30, 2022 . Our Board of Directors will continue to evaluate future dividends in order to continue to satisfy the requirements needed to maintain our REIT status. Opportunistic Expenditures. As part of our capital allocation strategy, we plan to continue to allocate our available capital among investment alternatives that meet our return on investment criteria. We will continue to reinvest in our existing assets and expand our outdoor advertising display portfolio through new construction. We will also continue to pursue strategic acquisitions of outdoor advertising businesses and assets. This includes acquisitions in our existing markets and in new markets where we can meet our return on investment criteria.
Cash Flows
The Company's cash flows provided by operating activities increased$48.9 million from$488.2 million for the nine months endedSeptember 30, 2021 to$537.1 million for the nine months endedSeptember 30, 2022 , primarily resulting from an increase in revenues of$203.8 million offset by an increase in operating expenses (excluding stock-based compensation, gain on disposition of assets, and depreciation and amortization) of$118.8 million , as compared to the comparable period in 2021. Cash flows used in investing activities increased$199.2 million from$203.2 million for the nine months endedSeptember 30, 2021 to$402.5 million for the nine months endedSeptember 30, 2022 primarily due to a net increase in the amount of assets acquired through acquisitions, investments and capital expenditures of$195.6 million , as compared to the same period in 2021. The Company's cash flows used in financing activities were$154.8 million for the nine months endedSeptember 30, 2022 as compared to$319.1 million for the nine months endedSeptember 30, 2021 . This decrease in cash used in financing activities of 48 -------------------------------------------------------------------------------- Table of Contents$164.3 million for the nine months endedSeptember 30, 2022 is primarily due to increased borrowings on the senior credit facility in 2022, offset by an increase in cash paid for dividends and distributions in 2022 over the comparable period in 2021.
Critical Accounting Estimates
Our discussion and analysis of our results of operations and liquidity and capital resources are based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. There have been no material changes to the critical accounting policies and estimates as previously disclosed in Item 7 of our 2021 Combined Form 10-K.
Accounting Standards and Regulatory Update
See Note 14, "New Accounting Pronouncements" to our condensed consolidated financial statements included in Part 1, Item 1 of this report for a discussion of our Accounting Standards and Regulatory Update.
The following is a discussion of the consolidated financial condition and
results of operations of
RESULTS OF OPERATIONS
Nine months ended
Net revenues increased$203.8 million or 15.8% to$1.50 billion for the nine months endedSeptember 30, 2022 from$1.29 billion for the same period in 2021. This increase was primarily attributable to an increase in billboard net revenues of$167.6 million , an increase in transit net revenues of$34.9 million , and an increase in logo net revenues of$1.3 million over the same period in 2021. For the nine months endedSeptember 30, 2022 , there was a$156.9 million increase in net revenues as compared to acquisition-adjusted net revenue for the nine months endedSeptember 30, 2021 , which represents an increase of 11.7%. See "Reconciliations" below. The$156.9 million increase in revenue is primarily due to an increase of$125.4 million in billboard net revenues as well as an increase in transit net revenues of$30.4 million over the same period in 2021. Total operating expenses, exclusive of depreciation and amortization and gain on disposition of assets, increased$110.9 million , or 15.5%, to$828.1 million for the nine months endedSeptember 30, 2022 from$717.1 million for the same period in 2021. The$110.9 million increase over the prior year is comprised of a$115.4 million increase in total direct, general and administrative and corporate expenses (excluding stock-based compensation and transaction expenses) primarily related to the operations of our outdoor advertising assets, as well as a$3.8 million increase in transaction expenses related to acquisitions and the write-off of deferred offering costs, offset by a$8.2 million decrease in stock-based compensation. Depreciation and amortization expense decreased$3.5 million to$202.2 million for the nine months endedSeptember 30, 2022 as compared to$205.7 million for the same period in 2021. The decrease is due to the revision in the cost estimate included in the calculation of asset retirement obligations during 2021, offset by acquisitions and capital expenditures that occurred in the second half of 2021 and during 2022. For the nine months endedSeptember 30, 2022 ,Lamar Media recognized a gain on disposition of assets of$2.0 million , primarily resulting from transactions related to billboard locations and displays.
Due to the above factors, operating income increased by
During the nine months endedSeptember 30, 2021 ,Lamar Media recognized a loss on debt extinguishment of$21.6 million related to the early repayment of our 5 3/4% Senior Notes during the period. There was no loss on debt extinguishment during the nine months endedSeptember 30, 2022 . Interest expense increased$9.2 million for the nine months endedSeptember 30, 2022 to$89.8 million as compared to$80.6 million for the nine months endedSeptember 30, 2021 primarily due to the increase in interest rates on the Accounts Receivable Securitization Program and senior credit facility. 49
--------------------------------------------------------------------------------
Table of Contents
Equity in earnings of investee was
The increase in operating income and the decrease in loss on extinguishment of debt, offset by the increase in interest expense, resulted in a$110.5 million increase in net income before income taxes. The effective tax rate for the nine months endedSeptember 30, 2022 was 2.4%, which differs from the federal statutory rate primarily due to our qualification for taxation as a REIT and adjustments for foreign items. As a result of the above factors,Lamar Media recognized net income for the nine months endedSeptember 30, 2022 of$372.9 million , as compared to net income of$265.5 million for the same period in 2021.
Reconciliations:
Because acquisitions occurring afterDecember 31, 2020 have contributed to our net revenue results for the periods presented, we provide 2021 acquisition-adjusted net revenue, which adjusts our 2021 net revenue for the nine months endedSeptember 30, 2021 by adding to or subtracting from it the net revenue generated by the acquired or divested assets prior to our acquisition or divestiture of these assets for the same time frame that those assets were owned in the nine months endedSeptember 30, 2022 . Reconciliations of 2021 reported net revenue to 2021 acquisition-adjusted net revenue for the nine months endedSeptember 30 , as well as a comparison of 2021 acquisition-adjusted net revenue to 2022 reported net revenue for the nine months endedSeptember 30 , are provided below: Reconciliation and Comparison of Reported Net Revenue to Acquisition-Adjusted Net Revenue Nine Months Ended September 30, 2022 2021 (in thousands) Reported net revenue$ 1,496,630 $ 1,292,827 Acquisition net revenue - 46,925 Adjusted totals$ 1,496,630 $ 1,339,752 Key Performance Indicators Net Income/Adjusted EBITDA (in thousands) Nine Months Ended Amount of September 30, Increase Percent 2022 2021 (Decrease) Increase (Decrease) Net income$ 372,927 $ 265,473 $ 107,454 40.5 % Income tax expense 8,976 5,922 3,054 Loss on debt extinguishment - 21,604 (21,604) Transaction expenses 3,769 - 3,769 Interest expense (income), net 89,082 80,084 8,998 Equity in earnings of investee (2,655) (1,141) (1,514) Gain on disposition of assets (1,990) (1,922) (68) Depreciation and amortization 202,210 205,671 (3,461) Capitalized contract fulfillment costs, net (463) (900) 437 Stock-based compensation expense 14,331 22,540 (8,209) Adjusted EBITDA$ 686,187 $ 597,331 $ 88,856 14.9 % Adjusted EBITDA for the nine months endedSeptember 30, 2022 increased 14.9% to$686.2 million . The increase in adjusted EBITDA was primarily attributable to an increase in our gross margin (net revenue less direct advertising expense, exclusive of depreciation and amortization and capitalized contract fulfillment costs, net) of$128.9 million , offset by an increase in total 50
--------------------------------------------------------------------------------
Table of Contents
general and administrative and corporate expenses of
Net Income/FFO/AFFO
(in thousands)
Nine Months Ended Amount of Percent
September 30, Increase Increase
2022 2021 (Decrease) (Decrease)
Net income $ 372,927 $ 265,473 $ 107,454 40.5 %
Depreciation and amortization related to real
estate 193,164 197,395 (4,231)
Gain from sale or disposal of real estate, net of
tax (1,783) (1,712) (71)
Adjustments for unconsolidated affiliates and
non-controlling interest (2,135) (618) (1,517) FFO$ 562,173 $ 460,538 $ 101,635 22.1 % Straight line expense 2,884 2,195 689 Capitalized contract fulfillment costs, net (463) (900) 437 Stock-based compensation expense 14,331 22,540 (8,209) Non-cash portion of tax provision 1,851 1,178 673 Non-real estate related depreciation and amortization 9,046 8,276 770 Amortization of deferred financing costs 4,527 4,405 122 Loss on extinguishment of debt - 21,604 (21,604) Transaction expenses 3,769 - 3,769 Capital expenditures - maintenance (44,681) (32,697) (11,984)
Adjustments for unconsolidated affiliates and
non-controlling interest 2,135 618 1,517 AFFO$ 555,572 $ 487,757 $ 67,815 13.9 % FFO for the nine months endedSeptember 30, 2022 increased from$460.5 million in 2021 to$562.2 million for the same period in 2022, an increase of 22.1%. AFFO for the nine months endedSeptember 30, 2022 increased 13.9% to$555.6 million as compared to$487.8 million for the same period in 2021. The increase in AFFO was primarily attributable to an increase in our gross margin (net revenue less direct advertising expense, exclusive of depreciation and amortization and capitalized contract fulfillment costs, net) offset by an increase in total general and administrative and corporate expenses (excluding the effect of stock-based compensation expense and transaction expenses) and capital expenditures related to the maintenance of our advertising assets.
Three months ended
Net revenues increased$50.5 million or 10.6% to$527.4 million for the three months endedSeptember 30, 2022 from$476.9 million for the same period in 2021. This increase was primarily attributable to an increase in billboard net revenues of$41.3 million and an increase in transit net revenues of$9.2 million over the same period in 2021. For the three months endedSeptember 30, 2022 , there was a$29.8 million increase in net revenues as compared to acquisition-adjusted net revenue for the three months endedSeptember 30, 2021 , which represents an increase of 6.0%. See "Reconciliations" below. The$29.8 million increase in revenue is primarily due to an increase of$22.8 million in billboard net revenues as well as an increase in transit net revenues of$7.1 million over the same period in 2021. Total operating expenses, exclusive of depreciation and amortization and gain on disposition of assets, increased$21.3 million , or 8.2%, to$280.5 million for the three months endedSeptember 30, 2022 from$259.1 million for the same period in 2021. The$21.3 million increase over the prior year is comprised of a$29.2 million increase in total direct, general and administrative and corporate expenses (excluding stock-based compensation and transaction expenses) primarily related to the operations of our outdoor advertising assets, offset by an$8.0 million decrease in stock-based compensation. Depreciation and amortization expense decreased$18.5 million to$65.8 million for the three months endedSeptember 30, 2022 as compared to$84.3 million for the same period in 2021. The decrease is due to the revision in the cost estimate included 51
--------------------------------------------------------------------------------
Table of Contents
in the calculation of asset retirement obligations during 2021, offset by acquisitions and capital expenditures that occurred in the second half of 2021 and during 2022.
For the three months endedSeptember 30, 2022 ,Lamar Media recognized a gain on disposition of assets of$0.1 million , primarily resulting from transactions related to billboard locations and displays.
Due to the above factors, operating income increased by
Interest expense increased$7.4 million for the three months endedSeptember 30, 2022 to$33.5 million as compared to$26.1 million for the three months endedSeptember 30, 2021 primarily due to the increase in interest rates on the Accounts Receivable Securitization Program and senior credit facility.
Equity in earnings of investee was
The increase in operating income, offset by the increase in interest expense, resulted in a$40.7 million increase in net income before income taxes. The effective tax rate for the three months endedSeptember 30, 2022 was 2.0%, which differs from the federal statutory rate primarily due to our qualification for taxation as a REIT and adjustments for foreign items.
As a result of the above factors,
Reconciliations:
Because acquisitions occurring afterDecember 31, 2020 have contributed to our net revenue results for the periods presented, we provide 2021 acquisition-adjusted net revenue, which adjusts our 2021 net revenue for the three months endedSeptember 30, 2021 by adding to or subtracting from it the net revenue generated by the acquired or divested assets prior to our acquisition or divestiture of these assets for the same time frame that those assets were owned in the three months endedSeptember 30, 2022 . Reconciliations of 2021 reported net revenue to 2021 acquisition-adjusted net revenue for the three months endedSeptember 30 , as well as a comparison of 2021 acquisition-adjusted net revenue to 2022 reported net revenue for the three months endedSeptember 30 , are provided below: Reconciliation and Comparison of Reported Net Revenue to Acquisition-Adjusted Net Revenue Three Months Ended September 30, 2022 2021 (in thousands) Reported net revenue$ 527,390 $ 476,894 Acquisition net revenue - 20,663 Adjusted totals$ 527,390 $ 497,557 52
--------------------------------------------------------------------------------
Table of Contents
Key Performance Indicators
Net Income/Adjusted EBITDA
(in thousands)
Three Months Ended Amount of
September 30, Increase Percent Increase
2022 2021 (Decrease) (Decrease)
Net income $ 146,325 $ 106,974 $ 39,351 36.8 %
Income tax expense 3,056 1,712 1,344
Transaction expenses 93 - 93
Interest expense (income), net 33,297 25,927 7,370
Equity in earnings of investee (1,554) (1,141) (413)
Gain on disposition of assets (53) (26) (27)
Depreciation and amortization 65,833 84,300 (18,467)
Capitalized contract fulfillment costs, net (772) - (772)
Stock-based compensation expense 5,108 13,076 (7,968)
Adjusted EBITDA $ 251,333 $ 230,822 $ 20,511 8.9 %
Adjusted EBITDA for the three months ended September 30, 2022 increased 8.9% to
$251.3 million . The increase in adjusted EBITDA was primarily attributable to an
increase in our gross margin (net revenue less direct advertising expense,
exclusive of depreciation and amortization and capitalized contract fulfillment
costs, net) of $29.6 million , offset by an increase in total general and
administrative and corporate expenses of $7.6 million , excluding the impact of
stock-based compensation expense and transaction expenses.
Net Income/FFO/AFFO
(in thousands)
Three Months Ended Amount of
September 30, Increase Percent Increase
2022 2021 (Decrease) (Decrease)
Net income $ 146,325 $ 106,974 $ 39,351 36.8 %
Depreciation and amortization related to real
estate 63,089 81,580 (18,491)
Gain from sale or disposal of real estate, net
of tax (10) 83 (93)
Adjustments for unconsolidated affiliates and
non-controlling interest (1,364) (903) (461)
FFO $ 208,040 $ 187,734 $ 20,306 10.8 %
Straight line expense 741 466 275
Capitalized contract fulfillment costs, net (772) - (772)
Stock-based compensation expense 5,108 13,076 (7,968)
Non-cash portion of tax provision 639 (565) 1,204
Non-real estate related depreciation and
amortization 2,743 2,720 23
Amortization of deferred financing costs 1,577 1,443 134
Transaction expenses 93 - 93
Capital expenditures - maintenance (13,008) (13,094) 86
Adjustments for unconsolidated affiliates and
non-controlling interest 1,364 903 461
AFFO $ 206,525 $ 192,683 $ 13,842 7.2 %
FFO for the three months ended September 30, 2022 increased from $187.7 million
in 2021 to $208.0 million for the same period in 2022, an increase of 10.8%.
AFFO for the three months ended September 30, 2022 increased 7.2% to $206.5
million as compared to $192.7 million for the same period in 2021. The increase
in AFFO was primarily attributable to an increase in our gross margin (net
revenue less direct advertising expense, exclusive of depreciation and
amortization and capitalized
53--------------------------------------------------------------------------------
Table of Contents
contract fulfillment costs, net) offset by an increase in total general and administrative and corporate expenses (excluding the effect of stock-based compensation expense and transaction expenses) and capital expenditures related to the maintenance of our advertising assets.
© Edgar Online, source
