Sean Reilly gave a short course in how to grow your out of home company cashflow margin at an appearance at the JP Morgan Media and Telecom conference this week.  Some of the highlights:

How Lamar grows margins…

The trick to margin expansion in the Billboard business is really really simple… grow the top line a little faster than you grow your expense line…and build some digital billboards because the incremental margin from digital is 75-80%…then do a whole lot of tuck-in acquisitions because the incremental margin on a tuck in can run upwards of 65% all of that is accretive…we really focus on the real estate so the largest cost is your lease cost the lease cost under our digital platform runs 10% under the total platform it runs 21% so you got to the 11% delta there that flows right to the bottom line.  We own a lot of the real estate under our digital boards and continue to be active doing that because very accretive.

Main Street is healthy

What we’re seeing is a very healthy Main Street USA.  Last year it seemed at this conference everybody was asking me how do you perform in the recession.   Not so much this year… nobody’s asking

Lamar is cutting capexp and acquisitions to pay down a term loan that’s coming due next year.

We’re slightly changing our capital allocation.   I would call it temporary, and we’re curtailing acquisition activity and when you look at our CapEx budgets going from $185 million down to $125 million and we’re taking those savings and we’re paying down the Term A that’s due February of next year.  We can take out about half of it with free cash and then we’re going to take out the other half with our revolver…

There’s still lots of opportunity for acquisitions

Our industry, it’s still highly fragmented. The number of companies with asset value between $5 million and $75 million is literally in the hundreds.   Asset value $75 million to over a billion – a dozen or more and I’m not counting the other two publics.  So it’s really just the I had to go get the money from somewhere so instead of doing $140 million in deals we’ll do about about $30 million in deals this year…we also think that back half of 2025 going into 2026 could be a meaningful year …so we’re prepping the balance sheet for that…

Out of home has a chance to take share from television

I think the big opportunity is linear television I mean that’s a lot of dollars that’s a ton of money… I can draw a straight line from the demise of Yellow Pages to the rise of attorneys in our book.   That used to be their primary medium.   Now we are.   I can draw a straight line from the erosion of radio audience to our digital amusements entertainment and sports which is the vertical that over indexes to our digital footprint….I can’t draw a straight line from the demise of linear television yet but what you want to look for is auto growing in our book because auto still buys local network affiliate television – they buy those silly news adjacencies that nobody watches…so that’s the one that that I would look at

Why it’s becoming easier for pharma to buy out of home

They they have a very hard time using this because of the disclaimer requirements.  You wouldn’t be able to read the verbiage on the board if they had to do all of these disclaimers, but what they have gotten regulatory approval to do is a call-your-doctor-prophylactic- coverage on that disclaimer.   If they don’t go into too much detail about the symptom or even the disease they’re trying to treat…then say call your doctor, that’s perfect for billboards.  Hopefully they’re not just dipping their finger in it and hopefully they had a good experience with us.

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