ALPS Active REIT ETF

Q3 acquisition adjusted revenue increased 23.3% year over year, and both Q3 acquisition adjusted revenue and adjusted EBITDA exceeded Q3 2019. Adjusted EBITDA was $230.7 million, up 35.2% from $170.7 million a year ago, and adjusted EBITDA margin was 48.4% versus 44.2% in Q3 2020. AFFO per share was $1.90, up 43.9% year over year, and free cash flow increased 36.6%. For the full year, management raised AFFO guidance to $6.35-$6.50 per share, expects full-year expenses around $945 million-$950 million, CapEx of roughly $120 million including $55 million of maintenance CapEx, cash interest of about $102 million, and full-year EBITDA to easily exceed 2019’s $785 million. The company also said it expects Q4 2021 to face a tougher comparison because Q4 2020 included political and presidential-year spend.

Sean Reilly’s message was that Lamar’s recovery has not only been complete, but in many areas better than 2019, with strength across top line, bottom line, margins and AFFO. He emphasized resilience in the business model, citing strong returns in harder-hit regions, a rebound in national/programmatic, and improving transit/airport trends. He was upbeat about 2022, saying bookings are ahead of where they were at a comparable point pre-pandemic and that the setup for next year looks as strong as he has seen in his career at Lamar.

Jay Johnson focused on the financial engine behind the results: revenue and EBITDA beat expectations, operating expenses rose as variable costs came back, and lower interest expense supported AFFO growth. He said operating expenses that were cut by about $80 million in 2020 are now expected to have $50 million-$55 million return in 2021, with full-year expenses around $945 million-$950 million, while net interest expense was $24.5 million in Q3, about $8.7 million lower than last year. He also highlighted balance sheet strength, with total leverage at 3.2x net debt-to-EBITDA, liquidity of about $823 million, and credit rating upgrades from Moody’s and S&P.

Analysts pressed on inflation, rent growth, and programmatic revenue. Management said inflation is generally favorable for Lamar because ground leases are mostly fixed and labor is partly variable, while its short contract duration allows repricing more frequently than many REITs. On programmatic, Sean Reilly said the platform recovered from a near-zero level in spring 2020, set a record in October, and is expected to exceed the prior target of $25 million-$30 million this year. In response to questions on 2022 visibility and dividends, management said 2022 bookings are currently running ahead of the same point in 2019, and Jay Johnson said a Board-approved special dividend of $0.50 per share would likely be sought in December and paid in January.