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Lamar Advertising Co (NASDAQ:LAMR)
Q1 2020 Earnings Call
May 7, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Excuse me, everyone. We now have Sean Reilly and Jay 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 today, we will then open the floor for questions. In the course of this discussion, Lamar may make forward-looking statements regarding the company, including investments about its future financial performance; strategic goals, plans, and objectives, including with respect to the amount of timing of any distributions and stockholders and impacts and effects of the novel coronavirus; on the company's business, financial conditions, and results of operations. All forward-looking statements involve risks, uncertainties, and contingencies, many of which are beyond Lamar's control and which may cause actual results to differ materially from the 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 first quarter 2020 earnings release, and its most recent annual report on Form 10-K as updated or supplemented by its quarterly reports on Form 10-Q, and current reports on Form 8-K. Lamar refers you to those documents. Lamar's first quarter 2020 earnings release, which contains information required by Regulation G regarding certain non-GAAP financial measures, which furnished to the SEC on Form 8-K this morning, is available on the Investors section of the Lamar website, www.lamar.com.

I would now like to turn the conference over to Sean Reilly. Mr. Reilly, you may begin.

Sean Reilly -- Chief Executive Officer

Thank you, Carrie. Good morning, everyone. I trust that you and yours are safe and well. Welcome to Lamar's Q1 2020 earnings call. I want to begin by thanking our employees for their dedicated and -- dedication and resilience through these trying times. They have distinguished themselves as has the out-of-home industry. We and our colleagues in the industry have donated unprecedented amounts of our inventory to honor frontline healthcare workers and first responders and to amplify important messages about safety practices and public health in communities all across the country. We, at Lamar, kept all of our constituents, employees, customers, shareholders and the communities we serve top of mind. We are taking all necessary steps to ensure that we emerge stronger than ever as the crisis faded and our economy recovers.

Our results in Q1 were strong and would have been stronger had business not turned midway through March, which we believe cost us $4 million or $5 million in revenue. As it was, Q1 was our 40th consecutive quarter of revenue growth and an indication that the fundamental to the out-of-home business, our ability to deliver large audiences at affordable prices with powerful messages are prized by advertisers. Obviously, COVID-19 has set us back in the question on everyone's mind is what's ahead. Our crystal ball is no clearer than anyone else's, however, we think that by the August call, we will be able to provide new full-year AFFO guidance to replace guidance we withdrew in April.

But for now, I can tell you how April went. Revenues were approximately $116 million, a decline of approximately 20% from pro forma April 2019 and we generated net cash in the month even though we had some digital projects and completed some small acquisitions. That said, April is just a data point and I would caution you not to extrapolate April into all of Q2. May will be a tough month also, likely a little tougher than April. But as we look through the windshield at the road ahead, we see encouraging signs.

Our audience is the driving public and in many, many of our markets, drivers are hitting the roads again. I can attest from personal experience, the traffic is way up in bad orders from a month ago and in many of our managers -- and many of our managers tell me the same is true in their markets as well. Since we began -- since this began, we have been tracking driving activity by market using data provided by Geopath. Go to their website at geopath.com, scroll down to a link called Daily Mobility, and you can see for yourself virtually real-time updates of traffic by market compared to last year or go to our website at lamar.com, the Investor section, and you can see each of our markets, its percentage contribution to our 2019 revenues and up-to-date status of its traffic compared to last year. We plan on updating this weekly. It is a helpful tool, and I encourage you to look at it.

The data reveal two things: number one, travel activity across our markets, typical middle markets in Lamar land like felt far less sharply and has rebounded far quicker than the top DMAs like New York City that were unfortunately hit so hard by COVID-19; number two, the rebound in traffic is dramatic. As we noted in the release, markets that collectively generated 80% of our 2019 billboard revenues, traffic is already back in those markets to 75% of last year's average and traffic is rising fast. As I mentioned, we're going to update this data every week so you can see progress by market.

Now, it only starts with audience and eyeballs are not customers. But on the customer front, we have turned the corner, meaning we are having fewer discussions about contract relief, be it cancellations, campaign deferrals or flexible invoicing, and more conversations about renewals and new contracts. We've identified several of the verticals showing renewed activities in our release, including stalwarts [Phonetic] such as services, quick-serve restaurants, healthcare, financial institutions and education.

To that list, I would add a few things like online education, home improvement, beer and wine. And with less air travel and more road travel this summer, regional tourism, maybe not Vegas or Disney World, but think Myrtle Beach and Hershey, Pennsylvania. It is clear that people are going to hit the road this summer. It's also clear that the traditional regional roadside businesses will do well, and we're going to be there for them.

It's also clear from our calls with management that the nation's heartland is recovering economically faster than the I-95 corridor or the Far West. Middle- and smaller-sized markets are showing more sales activity than the top 10 markets in the country.

In terms of OpEx and capex, we are also adjusting to the post-COVID reality. We have reduced our capex budget from $130 million to approximately $58 million, and we expect to reduce consolidated OpEx by at least $50 million from 2019's pro forma total of approximately $980 million. The big ticket items in the reduction in expenses are $16.5 million in executive and management bonuses, at least $13 million in lease portfolio savings and reduced payments to transit and airport authorities, approximately $9 million in sales commissions, and $6.5 million in travel, entertainment, and the like.

Keep in mind that Q1 capex and OpEx are out the door, so these cuts are even more impactful when spread over the final three quarters of the year. Jay?

Jay Johnson -- Executive Vice President and Chief Financial Officer

Thanks, Sean. Good morning, everyone, and thank you for taking the time to join our call during this extraordinary time in our society and our economy. I will begin with some brief comments on the first quarter, then review our balance sheet, and conclude with a discussion of our current financial position with particular focus on the company's debt obligations and compliance with our financial covenants.

In the first quarter, acquisition adjusted revenue growth was 4.4%, while consolidated expenses grew only 1.8% and acquisition adjusted EBITDA increased 8.7%. Adjusted EBITDA was $159.8 million compared to $146.1 million for the first quarter of 2019, an increase of 9.4%, and fully diluted AFFO increased 13.1% to $1.12 per share.

Moving over to capex, total spend for the quarter was approximately $26 million, comprised of $15 million in growth capex and approximately $11 million of maintenance capex. As Sean mentioned, we've reduced our 2020 capex budget significantly by over 50% to approximately $58 million. Capex for the balance of the year will be approximately $32 million and pretty evenly split between growth and maintenance with remaining growth capex representing expenditures of projects that we're contractually obligated to complete.

Turning to our balance sheet. The steps we took during the first quarter should provide for greater stability while lowering both interest expense and scheduled debt amortization. Our balance sheet now is even stronger than in recent years and we continue to believe Lamar enjoys access to both the debt and equity capital markets. The company ended the quarter with total leverage of 4.03 times net debt-to-EBITDA as defined under our credit facility. Furthermore, we had approximately $609 million of liquidity, comprised of $497 million of cash on hand and $112 million of availability under our revolving credit facility.

In March, we drew $535 million on our revolver out of an abundance of caution and currently have $625 million outstanding. For the month of April, the company was net cash positive. And as of April 30, we had approximately $518 million of cash and our revolver availability remains unchanged from quarter-end. During the first quarter, the company took advantage of a constructive backdrop within the capital markets, refinancing debt at favorable terms and further strengthening our balance sheet. These transactions provide significant benefits as we face the current unprecedented economic conditions, lowering our cost of debt, extending maturities, enhancing liquidity, and adding flexibility under our covenant structure.

Altogether, the refinancings will result in $57 million of scheduled amortization savings this year and even greater savings of $73.5 million in 2021. Though we did not anticipate the current pandemic-related downturn, we wanted to ensure that we had the lowest possible cost of debt while maintaining the financial flexibility to withstand periods of weakness throughout the economic cycle. While the current environment was not in our analysis, we believe the steps taken will allow the company to endure even if the current economic environment persists for an extended period of time. With the upside revolver, amortization savings and the steps we are taking to cut expenses, we're confident that we have ample liquidity to withstand this economic crisis and we're well positioned for future growth once this pandemic-related downturn ends.

Shifting to our new covenant structure, which provides greater flexibility, our senior secured credit agreement contains two financial covenants; a secured debt maintenance test of 4.5 times, which was increased from 3.5 times, and a total debt incurrence test of 7 times, which also was increased in February from 6 times. Both tests are based on net debt to trailing 12-month EBITDA as defined under the credit agreement. At the end of the first quarter, our secured debt leverage was only 1.32 times even after the $535 million draw on the revolver in March. Prior to the draw on the credit facility and pro forma for closing of the refinancing transactions, our secured debt covenant was 0.9 times. At the current level of secured debt outstanding, our latest 12-month trailing EBITDA would have to decline approximately 70% from full year 2019 for the company to reach its maximum secured debt leverage.

To put this in context, our EBITDA declined approximately 21% during the global financial crisis from year-end 2007 to year-end 2009. It should be noted that this covenant is only applicable to the revolver. If our line of credit is repaid and cancelled, our secured debt covenant would no longer apply even if the Term Loan B remained outstanding. Our second financial covenant is a limit on how much total debt the company may have outstanding relative to EBITDA. Unlike our secured debt test, total leverage is an incurrence test, which if not met, would only limit our ability to raise additional debt and not result in a default under any of our debt agreements.

As mentioned, at the end of the first quarter, our total debt to EBITDA was 4.03 times, up approximately 50 basis points from year end due to the revolver draw in March to increase our cash on hand. Under terms of our credit agreement, cash balances are not fully deducted from our secured or total debt balances and the netting of cash against our debt is limit to a maximum of $150 million.

At the current level of total debt outstanding, our latest 12-month trailing EBITDA would have to decline approximately 40% from full-year 2019 for the company to reach its maximum total debt leverage. Hopefully this provides some clarity on the financial flexibility of Lamar as we face the present level of economic uncertainty. As circumstances stand today, we do not anticipate the need to approach our bank group seeking relief or amendment to any of our financial covenants for the foreseeable future.

With that, I will now turn the call back over to Sean.

Sean Reilly -- Chief Executive Officer

Thanks, Jay. I'm going to cover a few of the metrics that you're familiar with, and then I'm going to do a little deeper dive in terms of color on what we're seeing in our verticals. I think that might be helpful. So, digital count, we ended the first quarter with 3,589 digital units, that's an increase of 47 units, a few of those 47 were by acquisition. We actually greenfield new digital put up 42 in the quarter. Our same digital unit revenue was up 5.9% in Q1. Our national local sales mix 79% local 21% national and problematic for Q1 2020. So that's looking in the rearview mirror.

Let's look through the windshield at some of our verticals and talk a little more granularly about them. So our top three verticals, as you're familiar with, are service hospitals and restaurants. And I would say that one, two and three are looking good to strong as we look through the windshield. Service, of course, is primarily attorneys. We're getting a lot of in-bounds from attorneys that are looking to expand their relationships and we feel good about that. But we also feel good about services expanding slightly because there are other services that fall in that category things like pest control, home and office cleaning. As you can imagine, the cleaning services are in great demand, and we're seeing some of that, and so we feel good about the service category.

Hospitals and healthcare is also very strong as you can imagine. We're seeing activity in things like elective surgeries as states opened up and there is increased demand and pent-up demand for clinic visits, doctor visits, and elective surgeries.

Let's talk about the restaurant category. The vast majority of our restaurant business is quick service and national chains like Cracker Barrel, and they are going to be fine. In fact, as I mentioned, I believe that as America hits the open road this summer, I believe there's going to be a record number of miles driven this summer across the country. Restaurants, quick service and national chains are going to do well.

Our fourth largest vertical is retail. It's about 8% of our book. Retail is -- we're going to have to take a close eye -- keep a close eye on it, watch it closely. It's tied more to what is going to be determined by the macro recovery. Certainly we issued a lot of credits to retail stores that were closed in the month of April and May. As things reopen. they're going to come back. The question is, what's the macro environment in Q3 and Q4, and we're going to be watching that closely. Most of our retail business are small local retailers, local jewelry stores and the like.

Another tough category, of course, is amusement. Definitely took a hit in the shutdown. We think that we're seeing some renewed activity. It's not necessarily Vegas and Disney World, it's more sort of your regional amusement venues. I mentioned places like Hershey and the like. And again, I think we'll see a little rebound in amusement this summer as America hits the open road. The real recovery though for amusement is going to be probably fourth quarter, Q1 next year when things really open up.

Automotive. The color I'm getting on automotive from the field is that it's hanging in there. Automotive was actually up 2% in Q1. It will probably be down most likely in Q2. But the auto dealers use us in a variety of ways. If they're not selling new cars, they advertise their service offering, asking people to come in and get their car serviced. So, we feel like that's going to hang in there

Gaming. Gaming is likewise challenged in a shutdown environment. Vegas is an important market to us and is taking a pretty good hit. However, I would note that 90% of our gaming business is regional and outside of Vegas, and openings in places like the Mississippi Gulf Coast and the like are beginning to be announced. The Mississippi Gulf Coast, for example, has announced June 1 openings for many of their casinos, and that business is sticking with us.

The education vertical is tremendously strong. It was up 70% in Q1 and is looking strong in Q2. The two main themes there: online education, you can imagine the thinking there; but also fall enrollment and reinforcing the notion that schools that are going to be open want to tell the world that they are and reassure their student population that they're going to be there for them. Telecom, strong and getting stronger. That's the stay-at-home environment. And then, finally, we have a category that's number 19, as we speak. It's household furnishings and home improvement, and we're seeing a nice uptick there.

So, as I look across our verticals and think about where the recovery is coming from and the speed with which it could possibly happen, I'm encouraged.

So, with that, Carrie, we'll open it up for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] And our first question will be from Alexia Quadrani from JPMorgan.

Anna Lizzul -- JPMorgan -- Analyst

Hi. This is Anna on for Alexia. Thank you so much for the question. Great commentary on the call as well. Just given that results were not as much affected by COVID-19 in Q1, and your commentary has been very upbeat in terms of your ability to maintain business in Q2, would you consider M&A as certain strategic assets came on the market?

Sean Reilly -- Chief Executive Officer

Thank you for the question, Anna. I've been doing this a long time. I've been in the outdoor business for over three decades and have managed through good times and tough times. And one thing that my father and my brother told me as they taught me the business is, you always buy through the cycles. And hopefully, as we recover, I know one thing that we will emerge as one of the strongest players in the industry, if not the strongest. Hopefully opportunities will come our way. So stay tuned.

Anna Lizzul -- JPMorgan -- Analyst

Great. Thanks so much.

Operator

Thank you. Our next question will be from Stephan Bisson from Wolfe Research.

Stephan Bisson -- Wolfe Research -- Analyst

Good afternoon. Thanks for all the commentary. It was amazingly [Phonetic] comprehensive. Two questions for me. I guess, the first is, on the Q2 trend and in May, you said things got a little bit worse. Is it significantly worse or is it just directionally a little bit further down, and then your early commentary on June? And then, I know you guys have a lot of Middle America. How is the oil patch fared, given all the troubles in that industry as of late?

Sean Reilly -- Chief Executive Officer

Sure. Good questions. So, the oil patch is going to struggle. And the color and commentary there is in places like Tulsa and Oklahoma City and Midland Texas. The macro is challenging and difficult, and that is just something we're going to have to manage through. So, the way our business unfolds in selling for the period to make the period, you've probably heard me say this before, when we're 60 -- 30 to 60 days out from a month, that's when most of the activity goes into that month, right? So, the world shut down in April just means that a little more of the impact was felt for May. Now we're selling in the month for the month in May as we speak. And we believe we are going to have net new business for May as the month progresses.

That said, we think that May will be -- I would categorize it as a tad worse than April, not dramatically. Don't want to get into June yet, but I have hopes that as we're writing business in May for June, June can pick up. So, I don't to guide to the quarter, but we certainly don't see it as dire as some of the analysts had.

Stephan Bisson -- Wolfe Research -- Analyst

Understood. And then, one follow-up. How is programmatic faring? Is that something that can really help out in an environment where you are doing so much selling that's closer to the air date?

Sean Reilly -- Chief Executive Officer

Yeah. So, that is a really good question, and I'm going to kind of broaden it a little bit because it's axiomatic in our business that the shorter the cycle, the quicker a downturn but also the quicker the bounce, right. Programmatic is our shortest cycle business. It's a -- in many instances, it's a nanosecond. So, programmatic are hit pretty bad in April. Now, there were two reasons for that. Number one, it's extremely short cycle. But number two, it's the only channel wherein we guarantee impression, right. When we sell a bulletin on the interstate for the month, there's lots of data around the traffic who's driving by, what the demographics are, but we don't guarantee a set number of impressions. In programmatic, we do and in April, we could not do that.

I'm happy to report that as of, I believe tomorrow, we're going to have data that allows us buy inventory -- buy digital inventory to guarantee impression. And the programmatic activity has really picked up. And so, we are going to see a lift from that in May, and I believe as we progress through the year. So, good question. To broaden it out a little bit, digital is -- broadly speaking is our next shortest cycle sale and it took a bigger hit in April than the rest of our platform and we see it also coming back faster. I didn't mention one little green shoe that I should have talked about, which is political. Political for the back half, Qs 3 and 4 is pacing up 32% from the 2018 cycle.

Stephan Bisson -- Wolfe Research -- Analyst

Well, thank you so much.

Operator

Thank you. [Operator Instructions] Your next question will be from Benjamin Swinburne from Morgan Stanley.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Thank you. Hey. Sean. Good morning.

Sean Reilly -- Chief Executive Officer

Hey, Ben.

Benjamin Swinburne -- Morgan Stanley -- Analyst

I'll take it [Phonetic] from you, guys. I have two questions. And I know there's no way to really know or have confidence in the first one. But when you think about the business coming out of this, and I know the timing is unknown, but also trying to just get a sense for how this feels to you and the team relative to '08/'09 in terms of the recovery. I mean, one of the things that was -- I think I'm sure you share the frustration. It was an OK recovery, but it wasn't -- we didn't have the kind of snapback last time and I know this is -- again, it's an unknown, but the business has changed a bit or maybe a lot since then. I'm just wondering if you could share your thoughts on that. And then, I'd also love to know -- and this is probably a Board decision, but how are you guys thinking about the dividend versus leverage, like what's the balance there that you're trying to strike?

Sean Reilly -- Chief Executive Officer

Sure. Great questions. So, '08/'09, of course, I was the Chief Operating Officer of the company back then. And I will tell you that for six months, I walked around with a feeling of dread and a pit on my stomach. It's just...

Benjamin Swinburne -- Morgan Stanley -- Analyst

I work at Morgan Stanley, so you can imagine how I felt.

Sean Reilly -- Chief Executive Officer

Yeah. So, I say that to sort of highlight that I have not felt that way throughout this. It does not feel as it felt back then almost existential. There's a couple of reasons for that. Our scale is bigger, our platform is broader, our inventory is in more demand, our balance sheet is far, far better. If you recall, we went into that thing levered at about 6 times and we had to scramble and they were running around getting covenant relief and all that stuff. And it was just of a much more difficult time.

It is hard to predict the rebound in terms of, is it a V, is it a U, is it an L. But I'll go back to some of my commentary at the beginning. I have no doubt in my mind that car travel is going to pick up dramatically. There are going to be far fewer people flying. That overseas vacation is going to turn to a trip to the Grand Canyon for most of the family in the country. It doesn't make me feel good to say this but far fewer people in the major metros are going to take mass transit. We don't know exactly how that's going to affect commuting patterns. But by all indications, there's going to be more cars on the road and more people driving by our billboards. That makes our space more valuable.

There are some other trends, I think, that are going to be sped-up in terms of secular tailwinds for us and headwinds for others in the media business. There's going to be more cord-cutting, there's going to be more over the top, there's going to be more streaming, there's going to be less watching a linear television. I think that's going to accelerate the trends that affect network affiliate local TV and, to the extent, their advertisers move away, they're going to come to us.

It doesn't make me feel wonderful to say that local newspapers are going to get crushed by this. That trend is also accelerating and to the extent, their advertisers come our way. That's going to benefit us. So, in terms of secular trends, and it's hard to say how long it's going to take for these to materialize, but it's pretty clear that that's the way that the wind is blowing, and it's going to be at our back. The...

Benjamin Swinburne -- Morgan Stanley -- Analyst

Dividend leverage? Yeah.

Sean Reilly -- Chief Executive Officer

Yeah. So obviously, the board is going to primarily look to two things as they mull over not just the second quarter -- plans for the second quarter distribution but the rest of the year. Number one, we will maintain our REIT status period. So, as you know, we don't know what our year-end NOI is going to be, but it is our intent to distribute at least 90%, probably 100% of it. And right now, it seems to us that that will be in cash.

As you know, a lot of REIT in very, very, very tough times distribute stock in lieu of cash. You've seen that among a number of the REITs particularly in the lodging space already. We don't believe we need to go there in terms of distributing stock. But number one, protect your status as a REIT and we will do that.

And then, number two, it's the liquidity of the company. So we'll just have to see what the world looks like at the end of May for the second quarter distribution plan. And we believe, by August, we'll have visibility enough to speak to it for the rest of the year.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Thank you very much.

Operator

Thank you. Our next question will be from David Miller from Imperial Capital.

David Miller -- Imperial Capital -- Analyst

Yeah. Hey, guys. Jay, two questions for you and then, Sean, maybe you want to chime in. I hope everyone's safe over there. Thanks for conducting the call today. So, on the 8-K that you filed in April where you pulled guidance, you had some phraseology in there talking about ground leases and the potential for renegotiating some of the ground leases. Maybe you guys can just update us on that.

And then, I just want to know if you guys are thinking about this the right way. The fact that you guys cut your capex to $58 million and not zero means to me that you're sort of struggling between the choice of cutting capex, the bone, and still maintaining the dividend at $4, recognizing, of course, you've already paid $1 of the $4. Or curtailing the dividend and maybe using that free cash flow to invest in the future. Am I thinking about that the right way? And then I have another follow-up. Thank you.

Jay Johnson -- Executive Vice President and Chief Financial Officer

Sure. I'll hit the capex question and the real estate portfolio question. So, capex first. I wouldn't read too much into that, David. We had -- given that we had to take these measures at the end of the first quarter and that the first quarter was already out the door, we spent about $26 million in the first quarter. So, the $58 million being for the full year, you can just sort of glean that it's cut pretty deeply. We have some projects that we were contractually obligated to complete, particularly in our logo division under our contract with state highway departments. We have certain capex requirements, those that we cannot put off. We had some work-in-progress on the digital side. We have a really great relationship with the now Las Vegas Raiders and are building signage all around the new arena in Vegas. I can't wait to show that off one day. That's an example of one-off the projects that we had to go through with.

We had a few little construction progress -- projects on some of our buildings around the country. So, really it's -- I would categorize it more as work-in-progress, remaining capex for the rest of the year rather than what we're trying to glean on the distribution.

Regarding our lease portfolio, so we were very successful in 2008-2009 in cutting costs in our lease portfolio that it takes two primary directions. Number one, we actually take down units that are not necessarily productive and eliminate that lease cost altogether and in some cases where, for a variety of reasons, these costs have been elevated, we renegotiate. And so, between those two activities and relief from our minimum annual guarantees on the transit and airport side, we think we're going to save about $13 million through the end of this year.

David Miller -- Imperial Capital -- Analyst

Okay. And then, I'm happy to hear you sort of talk about your gut feeling that people are going to hit the road this summer, and maybe eschew that trip to whatever Hawaii or Cabo or Europe or what have you. As you know, we've been writing about that extensively over the last six to eight weeks or so. And we obviously agree.

I guess, I want to just ask you how do you know that, is that more of a gut call just based on your experience of having done this so long or is there certain data that you can cite for us on the call today that will give folks comfort that the volume of cars out there in North America is just going to be probably at a record versus any other time. Appreciate the commentary. Thank you.

Sean Reilly -- Chief Executive Officer

Sure, David. So, yeah, there's some conjecture and gut in that, but there's also some good solid data. I would really encourage you to go to our website as we speak and go look at the traffic activity highlights in our Investor section on our website. It will astound you how many people are on the road as we speak. We've got markets. These are smaller markets. They're rural markets where traffic is up 40%, 30%, 22% 19%, 14%. It's a little bit astounding as I said, and that's today, that's today. Go look at it. It will really open your eyes.

The headline number, as I mentioned, is that in markets that collectively contributed 80% of our billboard revenue last year, their travel activity in miles driven is already up to 75% of last year's average. Another little headline number, 76% of our billboards are in markets where travel activity is, at least, 80%of last year's average. I could cite you. You can ask me a market, and I'll tell you where it is with traffic as we speak. But I've got the list [Indecipherable].

David Miller -- Imperial Capital -- Analyst

Grand Canyon. How about the Grand Canyon? Grand Canyon is not there. Thank you very much. Appreciate it.

Jay Johnson -- Executive Vice President and Chief Financial Officer

Yes.

Operator

Thank you. Our next question will be from Eric Handler from MKM Partners.

Eric Handler -- MKM Partners -- Analyst

Yes. Good morning and thanks for the question. Wondered if you could talk a little bit about political. I was surprised that you said pacing was up 32% from the 2018 cycle, given what happened with the Democratic primaries. So, I'm just curious what's been driving the strength in political.

Sean Reilly -- Chief Executive Officer

That's a good question. So, number one, the book built very, very quickly in the first quarter and Q1 political was up dramatically. The Q2 was shaping up to be better than the '18 cycle, but that have hit the pause button and that's probably the effect of the Democratic primary, so that would have been felt as we sit today. So what I'm quoting you is Q3 and Q4, and there's -- it's that time of year when September and October roll around. That's when the glove come off and the political battle start. So we anticipate having a good political season.

Eric Handler -- MKM Partners -- Analyst

Great. Thank you very much.

Operator

Thank you. I'm showing no further questions at this time.

Sean Reilly -- Chief Executive Officer

Well, great. Thank you all for listening. Stay safe and we look forward to visiting in August.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Sean Reilly -- Chief Executive Officer

Jay Johnson -- Executive Vice President and Chief Financial Officer

Anna Lizzul -- JPMorgan -- Analyst

Stephan Bisson -- Wolfe Research -- Analyst

Benjamin Swinburne -- Morgan Stanley -- Analyst

David Miller -- Imperial Capital -- Analyst

Eric Handler -- MKM Partners -- Analyst

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