Lamar Advertising Co (LAMR) Q3 2018 Earnings Conference Call Transcript
Image source: The Motley Fool
Lamar Advertising Co (NASDAQ: LAMR)
Q3 2018 Earnings Conference Call
Nov. 08, 2018, 9:00 a.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Excuse me, everyone. We now have Sean Reilly and Keith Istre in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of the company's presentation, we will open the floor for questions. (Operator Instructions)
In the course of this discussion, Lamar may make forward-looking statements regarding the company, including statements about its future financial performance, strategic goals, plans and objectives, including with respect to the amount and timing of any distributions to stockholders. All forward-looking statements involve risks, uncertainties and contingencies, many of which are beyond Lamar's control and which may cause actual results to differ materially from anticipated results. Lamar has identified important factors that could cause actual results to differ materially from those discussed in this call, in the company's third quarter 2018 earnings release, and its most recent annual report on Form 10-K, as updated or supplemented by its quarterly reports on Form 10-Q and current reports on Form 8-K. Lamar refers you to those documents.
Lamar's third quarter 2018 earnings release, which contains information required by Regulation G regarding certain non-GAAP financial measures was furnished to the SEC on a Form 8-K this morning and is available on the Investors section of Lamar's website, www.lamar.com.
I would now like to turn the conference over to Sean Reilly. Mr. Reilly you may begin.
Sean Reilly -- Chief Executive Officer
Thank you, Todd. Good morning, all, and welcome to Lamar's Q3 2018 earnings call. We are happy with the healthy revenue growth that we posted in Q3. Although we did see a significant amount of political shift from September to October. Regarding Q4 guidance, our pacing suggests Q4 will be up plus or minus 5% pro forma, a very strong same-store number helped in part by the strongest political spend in the company's history.
Assuming Q4 comes in as expected, we should exceed the top-end guidance of $5.40 per share of AFFO by a few cents. Keith will talk about expenses in more detail a few minutes but we are confident that full-year 2018 expenses will come in at or near the usual 2% pro forma growth. Again, we are in the middle of what we expect to be a robust Q4. We are closing 2018 strong and carrying good momentum into 2019. Keith?
Keith Istre -- CFO
Thanks, Sean. Good morning. I want to briefly address the 3% consolidated expense growth in the third quarter. First of all, I think, as most of you know, 3% is not our typical quarterly organic expense growth, it's surely 1% to 2%. A couple of things that accounted for the uptick. First, our organic expense growth in Q3 and Q4 of last year was flat, so our comps are getting tough going into the end of the year.
Second, our bonus and sales commission expense for Lamar's management who runs the profit centers in the field will be significantly higher than last year. They are rewarded for exceeding their goals and they are vastly exceeding those goals this year. As for Q4, we expect expense growth to be similar to Q3 plus 3% taking into account all four quarters for 2018. As Sean said, we should end up with organic consolidated expense growth at 2%, which is our normal annual run rate. Sean?
Sean Reilly -- Chief Executive Officer
Great. Thanks. I'll hit a few of the metrics that we typically address. First, let me speak to political spend, I know I'll get the question, and what it's contribution is expected to be to our pro forma growth. In Q3, political added about 0.5 point to what would otherwise be our pro forma growth. In Q4, again, because some of that spend moved from like 3 to 4. We expect it to contribute about 1.2% to what would be our expected 5% pro forma growth for Q4.
For the full-year, that will translate into about 0.7% political contribution to what would otherwise be our pro forma growth that what we expect now to be around 3%, it a little tad better. Digital continues to be a great story for the company. Our same-board digital performance continues to shine, up 7.2% in Q3. By the end of Q3, we had added an additional 129 new digital units. We expect that number to be roughly 175 by year-end. So you can expect us to be talking about that on our next call.
Local and national contributed equally to our Q3 pro forma growth, and we expect the same in Q4. Regarding acquisitions, year-to-date we have closed about $70 million worth of acquisitions and we have roughly $240 million in acquisitions under various stages of letter agreements that we expect to close in early 2019. Regarding verticals, leverages came in heavy up 28%. As a matter of fact, MillerCoors is now our -- was our largest customer in Q3. Financial is up 11%, Education is up 11%. Retail up 5% were the highlights. And the one lowlight was automotive which came in at 9.07%.
So Todd, with that I'am be happy to open it up for questions.
Questions and Answers:
Operator
Thank you. At this time, we will open the floor for questions. (Operator Instructions) We'll take our first question from David Miller of Imperial Capital.
David Miller -- Imperial Capital -- Analyst
Yeah. Hey, guys. Congratulations the stellar results. Sean, could you just talk about some of the regions in the country that might be outperforming your current growth rate and maybe underperforming your current growth rate? And then the -- the auto minus 7% in the quarter, any kind of outlook or color as to how you see that category maybe resurrecting itself in the current quarter? Or going into 2019? Any color on that would be great. Thanks a lot.
Sean Reilly -- Chief Executive Officer
Sure. Regarding auto, I'll take that one first. That was a little bit of disappointing number for us. What I think all media outlooks are experiencing with the auto category as well as they're experiencing a little bit of a difficult year. And in particular, dealerships, their business model is shifting a little bit, I think, but we'll just continue to model that -- monitor that and we still figure into their plan. And I believe that, as they recover that spend will pick up. Regarding regions, strongest was the West and I'm happy to say because we haven't seen this a while. The Northeast came in real strong.
And I think what you are seeing is a little bit of that typical beta in national spend that touches larger markets a little more than in the middle markets. So, New York for example for us was particularly strong in Q3. And then on the sort of still perhaps struggling a little bit. You've got the Midwest coming in not too bad, but certainly not plus 4% and 5% that we expect on some of the other regions even 6% or 7% some of the other regions are hitting on pro forma revenue growth before. Did that answer, David?
David Miller -- Imperial Capital -- Analyst
Yeah. That's great. And then just one final one if I may. We track CapEx (ph) per digital board in our models. We are coming up a number of around $185,000 per digital board. I realize it's just sort of all over the place because some boards are much larger than others. Do see that kind of holding steady over the time? Or are there new entrants from the market maybe just some international player that you think might lower overall CapEx per board? Thanks very much.
Sean Reilly -- Chief Executive Officer
Sure. Yeah, as you mentioned, there's different size of boards. A digital poster, for example, is going to come in more around the $60,000 range, and a 14x48 is going to be somewhere in the neighborhood that you quoted which is the largest we put up. Costs are not -- certainly not dropping as dramatically as you've seen over the last four, five, six years . But what is happening is, that performances is dramatically increasing. Performance basically in terms of useful life moving 11, 12 years of useful life from the earlier iterations, where it was seven or eight. They're lighter, brighter and they use less energy. All those sorts of things are good. So, I would categorize it more in the sort of greatly enhanced performance as new entrants come in more so than dramatic cost decreases.
David Miller -- Imperial Capital -- Analyst
Okay. Wonderful. Thank you very much.
Operator
Thank you. We'll take our next question from Stephan Bisson of Wells Research.
Stephan Bisson -- Wells Research. -- Analyst
Good morning. I know that the visibility continues to get shorter, but core revenue growth into Q4 based on your pacing seems really quite strong. Any early insights into 2019?
Sean Reilly -- Chief Executive Officer
It's a little early I guess to be talking about '19 as you know, we are reluctant to do that until we get there. But I can say this, what we are seeing in addition to the momentum that we had in four that we think we will carry into the first. We've seen customers commit earlier this year than last year. Contracts are coming in earlier and they're committing longer. So we're seeing very large customers come in. And again, contracting earlier for '19 and contracting for the whole year. That's always a good sign.
Stephan Bisson -- Wells Research. -- Analyst
Great. And then on digital, performance has been strong and it has been for a while. Is this really just a function of higher price from immense demand? Or is there sales with more advanced campaigns with geofencing? Just trying to get a better hand on the drivers?
Sean Reilly -- Chief Executive Officer
The demand has been real strong for digital. We quote (ph)a total yield, so we don't break it out right in occupancy. But my gut tells me that we are driving great and when in our industry when we drive rate on our shorter cycle sales, that's a very good sign that things are picking up.
Stephan Bisson -- Wells Research. -- Analyst
Great. Thanks so much for the color.
Operator
Thank you. We'll take our next question from Alexia Quadrani of JPMorgan.
Anna Lizzul -- JP Morgan -- Analyst
Hi. This is Anna Lizzul on for Alexia. Thanks for the question. We were just wondering how much of a benefit you've seen from the political cycle this year has been really high. And why you think you had a good share of benefit in the past? And if so why?
Sean Reilly -- Chief Executive Officer
Sure. As you know, when we came into the year in earlier earnings calls, we were expecting to do marginally better than the 2014 cycle which was the last midterm cycle. In '14 we did $7.5 million. As of today, we've already got a little north of $11 million on the books in political. So that's almost 50% of over that cycle. But you know, two things. Number one, really focused on it. We had a lot of our folks calling on candidates, calling on packs, calling on agencies that control political ad spend. So, we made it a priority and it paid off, number one.
Number two, our medium is becoming more responsive in a way that political ad spend demands. Our digital product, you can have whatever message it is you want up in five minutes and it so more responsive than any other medium out there. If things get typical tit for tat -- that they usually get to be down the stretch, then you can use our medium to execute on that. So that's it.
Anna Lizzul -- JP Morgan -- Analyst
Great. Thank you. And in terms of the verticals in auto, is there any expectation that this can be a positive contributor in 2019?
Sean Reilly -- Chief Executive Officer
I hope so. It has slipped -- auto has slipped from a number, basically number five to number six and its slipped from 6% of our book to to 5% of our book. We would hope that it normalizes back up to the traditional 6% next year. We'll see.
Anna Lizzul -- JP Morgan -- Analyst
Great. Thanks. And then one final question. How is the pipeline looking for potential M&A going forward?
Sean Reilly -- Chief Executive Officer
Very robust. As good as I've ever seen it. As I mentioned, year-to-date we closed about $7 million. But we have under various stages of letter agreement about $240 million that we expect to close early in 2019.
Anna Lizzul -- JP Morgan -- Analyst
Great. Thanks for the answers.
Operator
Thank you. That concludes our questions. I'll turn it back to Mr. Reilly.
Sean Reilly -- Chief Executive Officer
Well great. Thank you all for listening. Again, we look forward to finishing 2018 with a very strong year and carrying that momentum into 2019. Thank you all for listening.
Operator
Thank you ladies and gentlemen. This concludes the conference today. You may now disconnect.
Duration: 16 minutes
Call participants:
Sean Reilly -- Chief Executive Officer
Keith Istre -- CFO
David Miller -- Imperial Capital -- Analyst
Stephan Bisson -- Wells Research. -- Analyst
Anna Lizzul -- JP Morgan -- Analyst
Transcript powered by AlphaStreet
This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
More From The Motley Fool
Motley Fool Transcribers has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
