We’ve all seen them.  The simple directional logo signs along the side of a freeway highlighting businesses at the next exit.  There’s money in the logo business.  Here’s an analysis of Lamar’s logo business, sponsored and analyzed by SignValue.  Listen to what Lamar Advertising CEO Sean Reilly said about the business at the JP Morgan Tech, Media and Communications conference last week.

The logo business is a fun little niche business — the blue signs on the highway right-of-way that say food, gas, lodging. We do that under contract with highway departments, and we’re by far the largest player. It’s not even really advertising in the traditional sense because pricing is fixed per our contract with the highway department — anyone that applies, we have to put them up, and we can only charge them what the contract allows. We invented it in 1989. It’s a fun little niche business — around $90 million in revenues with roughly a 35% margin profile every year.

Here’s what the logo business financials look like for the last five years.  Lamar doesn’t break out segment profit so we’ve estimated cashflow assuming a 35% cashflow margin.

• Revenues have grown 3.4%/year  from $78 million in 2021 to $89 million in 2025.
• Lamar has a near monopoly on the logo business with 24 of the 26 state logo programs.
• Revenues are a modest $51/month per advertiser, set contractually by each state’s transit contract.
• Annual capexp is equal to approximately one-half of the cashflow generated by the logo business each year.  The economics of the logo business still are appealing because we suspect that Lamar does not have a huge capital cost in the structure besides annual maintenance.

SignValue’s take: We invented the business says Sean Reilly.  This highlights the benefits of staying in your lane and staying focused on domestic out of home markets.  Instead of running all over the world to buy or build hard to manage out of home companies (e.g. Clear Channel under Eccleshare) Lamar stays is its lane and builds a valuable, stable US out of home business.

If you have questions, contact one of SignValue’s experienced analyst for a free and confidential consultation at info@signvalue.com or call 480–657–8400.

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