The following is a recording for Bianca Strother with Lamar Advertising on Tuesday, May 4, 2021 at 8 am Central Time. Excuse me, everyone. We now have Sean Reilly and Jeh Johnson 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.
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 the COVID-nineteen pandemic on the company's business, financial conditions and results of our operations. All forward looking statements involve risks, uncertainties and contingency, many of which are beyond Lamar's control, 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 Q1 2021 earnings release and its most recent annual report on Form 10 ks. Lamar refers you to those documents. Lamar's Q1 2021 earnings release, which contains information required by Regulation G regarding certain non GAAP financial measures was furnished to the SEC on a Form 8 ks this morning and is available on the Investor of Lamar's website at www.lamar.com.
I would now like to turn the conference over to Sean Reilly. Mr. Reilly, you may begin.
Thank you, Travis. Good morning, all, and welcome to Lamar's Q1 2021 earnings call. Simply put, business is very good, and the year is off to a much stronger start than we expected when we talked in late February. In community after community, our customers, both local And National are ramping up their ad spend as they see their customers returning to their old habits of shopping, traveling and entertaining. And they are planning for even more activity as spring rolls into summer and summer into fall.
We can see it in our numbers. While Q1 revenue was down relative to the strong onboarding start of 2020, we saw improvement through the period. Our billboard billing in March April was essentially back to 2019 levels, even adjusting for acquisitions we've done since Q1 2019. In the Transit and Airport business, where there was a lag and recovery in the back half of twenty twenty, activity has picked up in recent weeks. Overall, bookings in both March April, in other words, total contract value written in those months for the rest of 2021 exceeded bookings in the same month of 2019 for the rest of that year.
This portends very well for the remainder of 2021.
As you
saw in the release, we've revised our guidance for full year AFFO per share upward. Given the strength we saw in April and for the rest of the year, today's guidance already feels conservative to me. Assuming the momentum continues, it is more likely than not that we will be revising upward again come August. It is also more likely We will be considering an increase in the distribution in Q3 as well. Turning to the Q1, we had, as we flagged on the call in February, a tough comp given the strength in Q1 of 2020.
The roughly 8% year Over year revenue decline was nevertheless better than we expected, thanks to the pickup in March. Categories of relative strength in the quarter included healthcare, gaming and real estate, which were all slightly up over a year ago as well as automotive and restaurants, which were slightly down over a year ago. Amusements and entertainment as a category continued to lag, but we have seen improvements in bookings even there in recent weeks, and we anticipate further continued at the year they announced. I continue to be pleased by our discipline on expenses. As revenues improve, we will see some escalation in management bonuses, commission expense and revenue share leases, but we anticipated that and I'm confident that we will continue to benefit from some of the cost control steps we took in 2020.
Finally, we announced several weeks ago that we will be sponsoring a corporate SPAC, Lamar Portman Partnering Corporation. The rationale is simple. As a REIT, Lamar the parent is somewhat limited constrained, if you will, to acquiring re qualified assets in North America. However, the world of out of home advertising is much bigger than that, via digital screens that are not re qualified because of their location or ad tech that drives digital screens and enables programmatic or international assets, We believe we have insights and expertise across the range of acquisition opportunities outside the REIT space, but inside the greater world of out of home. And we believe we can bring that expertise to bear for the benefit of our shareholders.
Lamar Parton Corporation is in registration at the SEC and under their rules, I cannot really say more at this point, but I would direct you to the S-1 for any questions you may have. With that, I will turn it over to Jay to walk you through some numbers.
Thanks, Sean. Good morning, everyone, and thank you for joining us. I will begin with brief comments on the quarter, then review our balance sheet and conclude with a discussion of our current financial position, including a little more detail around this morning's revised guidance. We had a solid Q1, exceeding internal expectations across revenue, adjusted EBITDA and AFFO. We had year over year AFFO growth for the 2nd consecutive quarter, improving 2.7% to $1.15 per share on a fully diluted basis against Q1 2020.
In the Q1, Acquisition adjusted revenue declined 8.2% from the same period last year. As you may recall, We began 2020 strong in January February prior to the onset of the COVID-nineteen pandemic. As a result, The Q1 represents the company's most difficult comparison year over year. And despite this challenge, we were quite pleased with results. We continue to see the resilience of our business and benefit from our operating model with a focus on local markets and a portfolio heavily concentrated in billboards.
2020 cost reduction initiatives implemented in response to COVID-nineteen continued to prove effective Consolidated operating expenses declining 9% in Q1. Adjusted EBITDA for the quarter was $152,400,000 compared to $159,800,000 in 2020, which was a decrease of 4.6%. On an acquisition adjusted basis, the decline was 4.5%. Adjusted EBITDA margin was 41.1%, expanding 180 basis points versus the Q1 of 2020. In addition to the cost reductions, lower interest expense contributed to AFFO growth and free cash flow also improved, increasing 10.6% in the quarter.
We experienced an acceleration of sales in both local and national markets within our portfolio. Relative to the Q1 of last year, local revenue growth outpaced national slightly, but against the difficult comparison for national, which grew in the low double digits in Q1 2020 over Q1 2019. Consistent with last year, local sales accounted for 79% of billboard revenue in the Q1 with Nashville representing 21%. Last year, in response to COVID-nineteen, we demonstrated Lamar's operational flexibility, including our disciplined approach to CapEx. In 2021, we expect to return to a more regular year in terms of capital deployment.
CapEx is anticipated to total approximately $150,000,000 for the full year, including $55,000,000 of maintenance CapEx. During the Q1, total CapEx was $16,300,000 with maintenance comprising $7,900,000 Q1 is seasonally low in CapEx spend and will accelerate in the coming quarters. Given our strong financial position and the recovery in our business, we increased our appetite for acquisitions beginning in Q4 of last year. While we are aggressively pursuing acquisitions, in the early stages of the year, there remained a valuation gap between buyers and sellers. Consequently, there was only modest investment activity in the Q1.
Our acquisition pipeline has seen an uptick in potential opportunities over the last several weeks. We continue to anticipate that when all is said and done, 2021 will have been an active year. Now turning to our balance sheet, which continues to be a critical focus for the company and core to our strategy and competitive advantage. We're quite pleased with the financial strength of Lamar coming through the COVID-nineteen pandemic. Our balance sheet is well positioned going forward and not only the strongest in the history of the company, but by far the strongest amongst our public company peers.
With our most recent bond issuance During the Q1, we have effectively refinanced the entire balance sheet since the beginning of 2020. This resulted in an interest expense reduction of 8 $400,000 in the Q1 relative to the Q1 of 2020. Our debt maturity schedule is well laddered and positioned to take advantage of the economic recovery post COVID-nineteen. After the AR securitization, which will mature in December and we intend to extend our nearest term maturity in the revolving credit facility. Our weighted average interest rate is 3.3% with a weighted average maturity of 7.3 years.
We ended the quarter with total leverage of 4 times net debt to EBITDA as defined under our credit facility. As LTM EBITDA troughed in the Q1, with the full year of COVID impacted results now included, Leverage should improve going forward and we plan to finish the year below our 4 times target. Our secured debt leverage was 0.9 times at quarter end and and we expect our secured debt test to remain below 1x during the balance of the year. We are comfortably in compliance with both our total debt and current and secured debt maintenance debt against covenants of 7x and 4.5x, respectively. At the end of the quarter, we had approximately $765,000,000 of liquidity comprised of $43,000,000 of cash on hand, dollars 11,000,000 available on the securitization line and $711,000,000 available under our revolver.
As Sean mentioned and included in this morning's release, we increased our AFFO guidance based on strong performance in the Q1, which exceeded our expectations. The revised AFFO guidance of $5.40 to $5.60 per share represents an increase of $0.15 at the midpoint. Looking at the balance of the year, we anticipate the 2nd and third quarters to be the strongest on a comparable basis. Given the solid performance in Q4 2020, which included political and a presidential year, we expect Q4 2021 to have a more difficult comparison year over year. Furthermore, because of our efforts around the balance sheet, cash interest in 2021 should be approximately $105,000,000 or about $25,000,000 lower than full year 2020.
Taxes should come in slightly below our $10,000,000 to $11,000,000 historical level due to operations in the TRS, primarily our airport and transit division that are expected to be slower to recover. Moving to our dividend policy. In the Q1, we paid a cash dividend of $0.75 per share. Management's recommendation at the upcoming Board meeting will be to declare a cash dividend of $0.75 for the Q2 as well. This recommendation is subject to Board approval and we will communicate the Board's decision in the ordinary course following the Board of Directors meeting later this month.
As Sean mentioned, we will evaluate our dividend for future quarters following Q2 results. Again, we are extremely pleased with this quarter's performance and are optimistic about the outlook for the remainder of the year. Our balance sheet remains strong and we maintain excellent access to both the debt and equity capital markets. A strong balance sheet is core to our operating strategy and serves as a significant competitive advantage. With our intense focus on the company's capital structure and increased flexibility despite the COVID-nineteen pandemic, Lamar is well positioned to take advantage of opportunities as they arise.
I will now turn the call back over to Sean.
Thanks, Jay. I mentioned April's strength in our billboard revenues Catching up with 2019. And as you know, we usually don't talk about individual months, and I certainly look forward to not drawing comps to 2 years prior. But these aren't normal times, so I'm going to give you some encouraging April data points. Number 1, in April 2021 programmatic was 100% higher than April of 2019.
April digital billing for 2021 was up 10% over April of 2019. And while we still have some challenged geography, places like Los Angeles and Las Vegas in the West and Hartford in New York City in the East, which trailed in April of 2021 under 2019 by about 20%. All of those markets are showing significant improvement in May and should hit 2019 levels of billings sometime in the back half. Our U. S.
Transit division should also hit 2019 levels of billings in the back half. Unfortunately, our airport and Canadian transit division, while showing signs of recovery, will probably not fully heal until 2022. Turning to our digital deployment. We ended Q1 with 3,692 digital units in the air, an increase of 42. While that was a bit of a slow start for Q1, we are still targeting something north of 300 new units for the full year and feel good about that number.
Finally, in my opening, I discussed Q1 categories showing relative Strength and weakness. As you can tell, the theme of this call is forward looking, not backward looking. And in that regard, We're seeing strength across the board, across all verticals and across local and national as we look to the rest of 2021. With that, Travis, we can open it up for questions.
Yes, sir.
Our first question comes from Ben from Morgan Stanley.
Hey, good morning. Hey, Dan.
Hey, guys. Good morning. Thanks for all the data points, Sean. I guess maybe I want to ask you, I think the same question I asked you last quarter. Usually you guys have pretty good Visibility into the current quarter, when you report a couple of months in, I think even as of last quarter, the business was still booking pretty late.
So it's sort of harder to read the pacing data and see around the corner. It sounds like visibility has improved, but I was hoping I could get Your answer is sort of what the world looks like in terms of visibility versus normal at this point.
Yes, Ben, I think that's a good Preservation visibility has improved. Customers are reserving space in September, October as it sits today. And that's just really gratifying to see. As you know, when we talk about Total new contract value written in March April, that's not a true pacing number. That's just an indication of business activity and momentum.
So from a purely definition of pacing, which would include January February, which were tough months for us, and all of the businesses we've laid down in those months. We haven't quite caught up to 2019, But we do like what we're seeing, and we're closing in on that number. And I tried to parse out the different product lines we have because they are on different recovery trajectories. But The activity we're seeing across all the products, including the airport division, it is encouraging. We're seeing signs of life in Vegas and the Vegas airport as conventions are actually starting to book in September October.
All in all, the strength we're seeing is, as we mentioned, has exceeded our expectations.
Yes. And then, I was a little surprised to hear you talk about revisiting the dividend in the Q3. Is that a function of Your required payout based on QRS income or is that just sort of a view that while the business is outperforming, The dividend is an important part of shareholder returns and they need to match up even on a relatively short term basis. Just wondering if you can maybe expand a little bit on that comment.
Sure. And then you can look at it
both ways. If you do the arithmetic and let's say that we're It's going to be north of the top end of the range of the guidance that we just gave you or even at the top end of the range. It would be We would have net income that would exceed our distributions, if we kept them where they are. Right. Meaning, there is the requirement.
So that is a part of the analysis. But another part of the analysis is just what is the right percentage of AFFO per share to be distributed. And whether it was a requirement or not, I believe that if the momentum continues And we do indeed exceed the guidance we just gave you. I think the appropriate level is north of, Let's call it 55% of AFFO. Right.
So again, I think we're looking at it both ways. And I think our Board would be looking at it both ways. And I think our shareholder expectations would look at it both ways.
Yes. Good luck getting some M and A done this year. Thanks a lot.
Yes. Yes.
Our next question comes from Alexia.
Thank you. Just a couple of questions, if I may. The Business sounds so great. And I know you talked about the momentum that continues to build and could even potentially lead To you guys being even more upbeat in August. I'm curious, to that point, would that really come from just More of the same, meaning things continue to kind of go which way is it going?
Or does that sort of also look to Assuming some of the areas that are clearly lagging because of COVID, entertainment you pointed out, retail correcting itself by Then, I'm just sort of any more color you can give sort of on what your expectations are for those still COVID sort of in Penn's area. And then my second question is really just on the M and A front. It does sound like you guys are obviously really doing well, but the environment Stealth is getting better. And I'm curious, the more robust pipeline in M and A, is that coming from a disconnect kind of appearing or really maybe you guys are just really outperforming so many of the smaller It'd be midsized competitors, which are still somewhat disadvantaged and therefore more willing to sell.
Not the latter, actually. Our the independents that we're talking to are doing well. I've talked to numerous medium and smaller independents. And for the most They're seeing what we're seeing in their business. Some of them actually saw it sooner than us, given that they don't have the same market mix we have.
They have a smaller DNA, smaller footprint, pure billboards. Some of them We are actually highly confident they're going to beat 2019, and we're trying to get Our expectations in line with theirs. So yes, in the world of independent billboard operators, it's been A really good recovery. And again, in some cases, because of geography or product mix, even stronger than ours. On the optimism that we're feeling as the year progresses, There is obviously still some risk that the COVID Somehow falters if we don't get things right in the fall in terms of COVID.
And that's a possibility. But what we're seeing right now is just a real sense of pent up demand across literally all of our verticals. Even of late, The amusement, entertainment and sport. I mentioned business activity for the Vegas airport picking up because they're beginning to book conventions in the Q4. That is a real tell, not just for us, but for overall life returning to normal And activity around us gathering as people again.
Just anecdotally, we got a call from the And the Las Vegas Raiders, they are planning for 100% attendance in their opening game. And so it's really that kind of sense, Alexia, that there's pent up demand and that In the economy, in general, it's a little bit of a catapult as opposed to a slow slog recovery.
And I guess to that point, the optimism you have on some of the geographic regions like Hartford, New York that are sort of still Lagging, is that sort of coming from that sense of pent up demand or are you actually also seeing some better visibility in terms Commitments in those regions.
Yes. So to benchmark it off of the same month in 2019, As I mentioned, for April, those geographies were down 20 plus percent. For May, if we're just kind of looking at those individual market pacing and Objection. There's going to be high single digit improvement in that number, and that's just for May, right? And As we progress through the summer, it just looks like by the time we approach the Q4, those geographies will be pretty much on par with where they were in 2019 in terms of their revenues for that month comp to 2019.
Okay. Thank you so much.
Our next question comes from Stefan Bissaint, Wolfe Research.
Good morning. These are really encouraging trends. I was wondering, could you give us a little bit of color on the pricing and occupancy and maybe where those stand compared to 2019?
So we don't give rate and occupancy numbers anymore. I will give you as a general Proposition in talking to John Miller, who heads up our national sales. This is anecdotal, but He actually thinks in terms of our prime time and let's call it A and B plus Inventory, we're going to run out of it. The demand, the occupancy for our prime inventory is going to be extremely strong. He also tells me that we are beginning to drive rate on those prime time units, and That spills out to the rest of our inventory.
You fill up the A and B inventory first and then some of them maybe not the time time inventory then begins to fill up. So it feels really good. That's great
to hear. And then I think oftentimes we get same board digital, if you have that number handy, maybe versus 2019?
Same More Digital in April versus 2019 was up 10%. I don't have it for the first, but we're not really focused Too much on the first. Yes, I got it. Yes, so year over year, I'm pulling it for you, down 6. So down 6 in Q1 versus a whole platform that was down 8, so relative outperformance.
Great. And then one more forward looking one. With the revised guidance, I think the former guidance implied 4% to 6% revenue growth. Do Do you happen to have the revenue growth implied by the new guidance?
I think we run that. I'll have to get back with you on that one.
Great. Thanks so much. Really encouraging results.
Okay. Yes. Thanks.
There are no further questions in the queue at this time. I would now like to turn the call over back to Sean Reilly for closing remarks.
Well, thank you all for listening, and we really do look forward to visiting again in August with our Q2 release. That's all we have, Travis. Thanks.
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