The recent earnings call for Lamar Advertising Company (LAMR) painted a picture of cautious optimism. National ad spend is down, the M&A landscape is quiet, and everyone is holding their breath waiting for the political season to kick into high gear. But beneath the surface, a subtle trend emerged that has the potential to reshape Lamar's future and may have slipped past the radar of many analysts: the growing dominance of local sales.

On the surface, Lamar's Q1 2024 earnings appear solid. Acquisition-adjusted revenue grew 5.3%, marking the highest increase in years. EBITDA followed suit with a 6.5% climb, a remarkable feat considering the tough expense comparisons due to the absence of COVID-relief grants in the airport business. Programmatic revenue exploded, surging a remarkable 27%. Yet, national ad spend lagged, contracting by 5.5% compared to Q1 2023.

While this local versus national divergence is not new, its magnitude in Q1 2024 signals a deeper shift. Lamar's CEO, Sean Reilly, revealed a telling statistic: the company's top 10 customers contributed less than 5% to their Q1 revenue. This highlights the sheer breadth of Lamar's local customer base, a silent army of tens of thousands of businesses, fueling the company's robust growth.

This local strength is not just about weathering the storm of national uncertainty. It’s about tapping into a fundamental transformation in the advertising landscape. The rise of programmatic platforms, the increasing fragmentation of media consumption, and the renewed focus on community engagement are all pushing advertisers, especially at the local level, towards out-of-home solutions.

Lamar is perfectly positioned to capitalize on this trend. With its vast network of billboards and an army of nearly 1,000 account executives deeply embedded in their local communities, Lamar offers a unique blend of reach, contextual relevance, and personalized service that digital giants struggle to match.

Local vs. National Sales Revenue

The following chart compares Lamar Advertising's local and national sales revenue, illustrating the growing disparity between the two segments. Data is sourced from the Q1 2024 earnings call transcript.

Here's the hypothesis: Lamar's deep local roots, once viewed as a characteristic of a traditional business, are evolving into a significant competitive advantage. As national brands grapple with a complex, fragmented media landscape, local businesses are increasingly turning to Lamar, recognizing the unmatched value proposition it offers in reaching their target audience effectively and efficiently.

Consider these numbers: in Q1 2024, local sales accounted for a staggering 82% of Lamar's billboard revenue, up from 78% in Q4 2023. Key local sectors like services (up 14.5%), amusements and attractions (up 11.4%), and building and construction (a remarkable 33.2% increase) are driving this momentum.

This points towards a compelling narrative: Lamar is not just passively benefiting from a shift in ad spending. It’s actively shaping this shift by empowering local businesses, offering them the tools and expertise to navigate the evolving advertising landscape. Lamar's deep understanding of local markets, combined with its programmatic platform, is creating a powerful feedback loop, attracting more local customers and reinforcing its position as the go-to advertising partner for local businesses.

This quiet revolution in local sales could have profound implications for Lamar's future. As national ad spending stabilizes and political season ramps up, the local segment, supercharged by programmatic, could become the engine of Lamar's growth, driving both revenue and EBITDA to new heights.

"Fun Fact: Did you know that Lamar's iconic green logo was inspired by the color of the company's original wooden billboards? It's a testament to Lamar's long-standing legacy and its deep roots in the American landscape. This quiet giant, now embracing the power of local engagement, may be on the verge of a very loud success story."