Operator:

Ladies and gentlemen, thank you for standing by. Welcome to the SBA Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode, and later we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, VP of Finance, Mark DeRussy. Please go ahead.

Brendan Cavanagh:

Thank you, Mark, and good afternoon. The second quarter was another solid one with good execution operationally and financial results in line with our expectations. Accounting for recent weakening in foreign exchange rates, we have modestly lowered our full-year outlook for most financial measures. However, on a constant currency basis, we have slightly increased our projected full-year results. The year has largely unfolded as we had expected. Steady carrier activity across our markets, but no material inflection in new lease and amendment executions thus far into the year. In the US, we have continued to receive increased inquiries from our customers, which is a good sign, but to date we have only seen a modest increase in new business executions. Looking out over the next several years though, we are very excited about the prospects for further increased demand. Mobile network consumption continues to grow at a very healthy pace, adding strain to existing networks. The offering of fixed wireless access by all three of our major customers will only add to this network strain. I have mentioned it before but I believe it bears repeating. The average fixed wireless access user consumes 15 to 25 times the data that a typical mobile wireless user consumes. As a result, the equivalent mobile subscriber additions to our customers networks is significantly higher than it has been in the past. This phenomenon will require continued network investment by our customers to keep pace with the demand. And all have publicly discussed plans to continue to grow fixed wireless access subscribers over the next several years. We also expect that the eventual incorporation of new Generative AI capabilities into handsets will further increase network consumption. In addition, the percentage of our existing leases with the big three carriers that have been upgraded with mid-band 5G spectrum still remains at just over 50%, leaving a significant growth opportunity ahead of us. Varying rates of 5G progress among our largest customers creates competitive pressures that we believe will also be a driver of future network investment, just as it has been in past cycles. Incidentally, mid-band 5G spectrum upgrades in our international markets are at even lower percentages of completion than in the US. Beyond all these demand-oriented drivers, we expect increased network spending driven by 5G coverage commitments made in connection with past regulatory approvals. Some of these commitments not only require coverage of POPs, but also minimum downlink speeds. This means that denser buildouts and expansion into areas not previously prioritized, particularly rural areas, will become more important as deadlines approach. We believe we are well situated to assist our customers in meeting their objectives with both our assets and our services support solutions. We are in the business of long-term assets and long-term customer relationships. Things don't change materially overnight, but the signs of numerous demand drivers are all there, and we are confident in our long-term organic growth prospects. In our services business, we had another good quarter as well. Revenue was up 15% from the first quarter and our gross profit contribution was ahead of our internal expectations. We have lowered our full year outlook for services revenue by $10 million at the midpoint due to a lower anticipated level of construction work, although we still expect to increase that number in the second half of the year over first half levels. Notwithstanding this lowered revenue outlook, we have not reduced our expected gross profit contributions to our full year adjusted EBITDA outlook as we continue to secure higher margin work. Our services teams continue to perform very well for our customers, helping them to significantly reduce their deployment cycle times. Internationally, results were also in line with expectations in the prior quarter, although we did see a pick-up in new leasing activity during the quarter, increasing the contribution to full year revenue from new leases and amendments. Each of our markets has opportunities for increased organic growth as new spectrum and new generations of wireless technology are rolled out. Challenging macroeconomic factors and imbalanced market share among mobile network operators in some of our markets has led to consolidations and increased network rationalizations, presenting some near-term challenges, but ultimately bolstering the strength and sustainability of our customers' prospects. We continue to work toward enhancing our own market positioning and our alignment with the leading carriers in each of our markets. We believe our efforts will ultimately enhance the long-term strength and stability of our cash flows and increase our opportunities to capture incremental organic leasing revenue growth. During the second quarter, we also continued a balanced approach to capital allocation with a mix of portfolio expansion, stock repurchases, dividends, and debt reduction. I anticipate that we will continue to balance our capital allocation for the remainder of the year. Since our last earnings call, we have largely focused on debt reduction and have reduced our outstanding revolver balance to just $30 million as of today. We have some upcoming debt maturities that we anticipate refinancing in the near future. But until that time, we will likely continue to prioritize debt reduction and liquidity. The debt markets are wide open to us and have also improved over the last few months as we have seen some tightening of rates. Our quarter-end net debt to adjust to EBITDA leverage ratio was 6.4 times. So, while our current priority is debt reduction, we have preserved the flexibility to take advantage of material value enhancing investment opportunities if they arise. We continue to explore and stay educated about the numerous asset portfolios available throughout our markets, but we'll retain an informed financial discipline in our approach to these opportunities. Our approach has really not changed, but our increased cost of capital has certainly underscored the emphasis we place on precise valuation and strategic rationale. I still believe we are the best in the business at valuing, integrating, and operating tower assets. So I believe we can continue to create value through asset acquisitions. We have a great long-term steady cash flow, low-risk business. The underlying strength of wireless dependent products and services will continue to drive increased needs for enhanced infrastructure solutions, and we have positioned ourselves as a key partner for our customers in meeting the challenges of addressing those needs. Before turning it over to Marc to share some more specifics on our second quarter results, I'd like to thank our team members and our customers for their contributions to our success. With that, I'll now turn things over to Marc who will provide additional details.

Mark DeRussy:

Thank you, Marc. Our balance sheet remains strong, and we have ample liquidity. Our current leverage of 6.4 times net debt to adjusted EBITDA remains near historical lows. Our second quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense remains very strong at 5.2 times. Our weighted average maturity is approximately four years with an average interest rate of 3% across our total outstanding debt. Including the impact of our current interest rate hedge, the interest rate of 97% of our current outstanding debt is fixed. We continue to use cash on hand to repay amounts outstanding under the revolver. And as of today, we have a $30 million balance under our $2 billion revolver. In addition, during the quarter, we declared and paid a cash dividend of $105.3 million, or $0.98 per share. And today, we announced that our Board of Directors declared a second quarter dividend of $0.98 per share payable on September 18, 2024, to shareholders of record as of the close of business on August 22, 2024. This dividend represents an increase of approximately 15% of the dividend paid in the second quarter of 2023. And operator, with that we are ready to open up the call for questions.

David Barden:

Hey, guys. Thanks so much for taking the questions. I guess the first question, if I could, maybe either for -- I don't know who this question goes to. Just talking a little bit about the evolution of the financing market, there's been a lot of movement in the last few weeks. You guys took some steps to try to maybe pre-finance the term loan coming due in 2025. I'm wondering if you could kind of comment a little bit about what the landscape looks like and how the rates that you are being presented look relative to what they might have looked like a month ago? And then if I could, the second one is, just for our, just as a reminder, Marc or Brendan, when we think about how you guys choose to budget FX into your guidance, with the real blowing out to like BRL5.60, are you looking at forward rates? Are you looking at spot rates? How are you deciding what you're going to bake into guidance, which seems to be the biggest moving part in what happened this quarter? Thanks.

David Barden:

Okay, great. Thank you for the color, Brendan.

Operator:

And our next question comes from Simon Flannery with Morgan Stanley. Please go ahead.

Brendan Cavanagh:

Sure. Yeah. The comment about material value enhancing, obviously that's not different than what we've done in the past. I think the key difference now is that with our leverage having come down to a much lower place, actually the lowest place it's been in our history, it allows for flexibility that if we saw something of material size that we thought would be value enhancing to be able to transact that maybe easier than it would have been in the past. But our approach is not that different. Obviously, cost of capital is higher, and so that affects what we can pay or where we see value in terms of the opportunities that are out there. But it's our goal and intention to hopefully find opportunities that are creative and add other value, even strategic value in terms of positioning to the extent it's in international markets for example. And I think you should expect that we're constantly looking and that hopefully we will find those opportunities just as we've done in the past. In terms of the where, it really depends. I mean, mostly we're focused on the markets that we're in, but we kind of scour the globe and we look at everything that's available. We look at opportunities that are in markets we're not in, because sometimes we see things that we think will fit very well and will be long-term value creating. So there's not a specific target, but to the extent that we can add in markets where we already are, there's obviously some synergies associated with the operations around that.

Brendan Cavanagh:

Yeah, I think it's moving more in the right direction than it has in the past few years. Specifically internationally, I would say we're seeing that constrain meaningfully in terms of the difference between the twp. Domestically, it's probably less so, and I think that's mostly a function of just limited supply in the US. And obviously, it's kind of the prime tower market. But even in the US, I'm starting to see some indications that maybe that gap will narrow a little bit.

Operator:

And our next question comes from Jim Schneider with Goldman Sachs. Please go ahead.

Brendan Cavanagh:

Sure. Yeah. As we mentioned it at the beginning of the year on our first call of the year about our approach, that we're doing a review kind of all of our not only our international markets but all of our business lines. But specifically as it relates to our international markets, what we've determined as we kind of look through it is it definitely is an advantage to be of greater scale, to be of more relevance to your customers in the markets that you're in. And in some places we are in that position, and in other places we are not. And so, to the extent that we can solve that issue through expansion in some of those markets, we would like to do that. If we do not see a reasonable way to do that, then we may look to move on from certain markets as we've done, at least with one in the past. So we're continuing through that exercise, and even though there's no real update on that at the moment, it's not because there's no progress being made, there is in fact a lot of progress being made, but we're not at a point to be able to discuss specifics yet, but we will be down the road. So ideally, we'll look to be able to have a good scale in each of the markets that we're in, and we'll also look to be aligned with the stronger carriers that are operating in those markets as well.

Brendan Cavanagh:

Yeah, I don’t -- it's not really signifying much. It is -- the mix of work that we're doing is a little bit different. It's a little more oriented towards consulting or site development services type of business as opposed to construction. So the top line volume ends up being lower, but the margin ends up being higher on that. And our outlook, although it is lowered in total for the year, and that's really based on the first half of the year, honestly, we expect the second half of the year, and it's implied in the number, to be higher in terms of the volume than the first half of the year. So I wouldn't say that it's necessarily a sign of it being more muted. I think it's just the mix of work as much as anything.

Brendan Cavanagh:

Sure.

Michael Elias:

Great. Thanks for taking the questions. Two, if I may. First, there are a few assets on the market in Europe right now. I'm just curious, at a high level, could you give us your thoughts philosophically on the European tower market? Maybe if you could compare and contrast the opportunities and headwinds for that market. And then my second question would be, just based on everything you're seeing domestically at the moment, do you believe we can see domestic new leasing in 2025 be up versus 2024 levels? And kind of, if not, when is the drop dead for us to see a pick-up in activity for it to really be reflected in 2025? Thank you.

Michael Elias:

Great, thanks for the color.

Richard Choe:

Just wanted to ask on the leverage. It's continued to go down and it seems like it'll continue to trend that way given if there's nothing out in the M&A environment. How low could we see that leverage go to over the foreseeable future? Thank you.

Richard Choe:

It seems like the opportunities have been a little bit slow in the first half of this year. Do you think things will pick up in the second half and as we go into next year?

Richard Choe:

Yes.

Richard Choe:

Great, thank you.

Operator:

Our next question comes from Ric Prentiss with Raymond James. Please go ahead.

Brendan Cavanagh:

Hey, Ric.

Brendan Cavanagh:

Yeah, I think, Ric, it's a -- obviously, we have what we have. We have a big embedded business, particularly in Brazil, and it's got that risk, and we've seen it in past cycles, too. And, of course, it's disappointing to us to have to lower outlook based solely on that particular issue. I think it does impact or influence the way that we think about the mix of our asset base and our revenue base to have something that's a little more stable. I think at the beginning of the year when we were talking about our overall goals and the way that we look at things, stability was kind of a key point in that. And obviously, this particular item introduces an element of instability that I would prefer not to have. However, we have a very good business down there. There's a lot of good things that are going on in Brazil. And so trying to navigate through the right way to reduce that exposure probably comes through increased exposure in other places that perhaps have more stable currencies. So we'll see if we can do that but I would say that it at least influences us to not get too overextended to some of these currencies that have greater volatility.

Brendan Cavanagh:

Yeah, I do have that and it does vary by market and I think maybe something we can share with you offline because I don't have it right in front of me. It's kind of a mix, but I would say, this is me ballparking it based on what I've seen for each country that we've got. You're looking at somewhere in the probably 25% or less on average across all of the existing international markets that we're in.

Brendan Cavanagh:

Yeah, I think that's never been a big part of our goal is to shrink through selling off assets. I think certainly, partnerships that bring in partners is a possibility that we would consider. But in terms of selling assets, I would say it's on the table, Ric, if in fact evaluations are just at a level that we believe is clearly well above the credit that we're getting for those assets, but there's a lot of logistics that we would have to work through as well. We obviously have financing structures, we have MLA agreements, we have a number of different things that would impact our ability to kind of hive off assets here in the US. But I wouldn't rule it out altogether. I just would say that it's not at the top of the list ideally.

Brendan Cavanagh:

Yeah, and maybe just one other thought on that as I'm thinking about it. We always talk about the disconnect, and I think the inference is always that the disconnect is that the private multiples are too high, I might flip that around and suggest that the public multiples perhaps are too low. So it's not -- when it closes, which way it closes will obviously have an impact on how you feel about that sort of an exit.

Operator:

Our next question comes from Jon Atkin with RBC. Please go ahead.

Brendan Cavanagh:

Okay. Yeah. On the BTS, I think you said, if I heard you correctly, you were talking specifically about domestic builds, John?

Brendan Cavanagh:

Yeah. I mean, we would like to do more of those certainly. I mean obviously you've seen our numbers over the last few years. They haven't been particularly heroic and a lot of that's because the carriers have tended to go to low-cost providers because that's a choice that they have because there's so much capital out there supporting this particular industry. So we would like to do more. We found a way to do that though is to secure high quality locations to get out ahead of where coverage needs are and secure those opportunities in more of a strategic manner as opposed to pure build astute, although we do some of those still. But yeah, I'd like to be more aggressive on it, for sure. I just don't know if we're going to get to numbers that really move the needle too much. In terms of our backlog and the fixed wireless access influence on it, it's hard for us to say exactly, because fixed wireless access is typically using the 5G oriented mid-band spectrum that is being deployed more broadly. And so I think to date, most of these fixed wireless subscribers have been supported through excess mid-band spectrum that's been deployed, capacity on that spectrum that's been deployed already but it's starting to get closer to a point where that's going to be harder to do because of the amount of consumption for that particular product. So I can't draw a direct line to it yet, but we see signs that the customer's networks are going to become more and more congested as a result of that product, and that ultimately is very good for us.

Brendan Cavanagh:

Yeah it's actually Two things. It's one, they have been very active, they've probably been our most active leasing customer broadly across our international markets. But two, with the FX decline in Brazil, they are obviously a tenant there but they have a presence in a number of our other markets, so they're not as affected as some of the other carriers on that list that we share. So their percentage just by default comes up as a result of the FX shift.

Brendan Cavanagh:

I mean, it could, although you're really making a little bit of a bet because if you're using the ABS market to refinance the existing ABS debt, you are using a benchmark rate that implies a certain expectation around the rate. It's not directly affected by when the Fed cuts, if they cut. So if you were to say, well, I'll hold off and take my chances and do it down the road, the revolver will be priced at a higher rate. So for the time being, you will be paying a much higher rate than you otherwise would. And so does it make sense? Plus we have other financings maturing, one big one in January and then others in January of ‘26. So you can only do that for a limited period of time. So I'm kind of inclined not to think about it that way. But the good news is, we have tremendous liquidity and we can be flexible if necessary.

Brendan Cavanagh:

Sure.

Michael Rollins:

Thanks and good afternoon. I had two questions. First, with respect to the domestic carrier conversations that you referenced, can you share if those are related to the typical a la carte business that you've seen from your carrier customers, or are these discussions possibly getting you closer to signing additional comprehensive MLAs with additional national wireless carriers? And second, is there any change in timing or magnitude of the anticipated multi-year churn from mergers and industry rationalization for both the domestic and the international segments? Thanks.

Michael Rollins:

Thanks.

Operator:

Our next question comes from Brandon. I apologize. Our next question comes from Nick Del Deo with MoffettNathanson. Please go ahead.

Brendan Cavanagh:

Yeah, it’s -- I would say that it was across a number of our different markets. I mentioned earlier that Claro was busy. They were a big driver of that. And yeah, I can't say for sure whether it's to be sustained, but our backlogs continue to be pretty strong. And so I hope that in fact it will be. I think there's a lot to do as we look at the needs that these carriers have. It's really more of a financial question, I think, than anything else. So I think it's a good sign to see it ahead of the pace that we expected to be at, at this point. And at this point, I think that that will continue throughout the balance of the year, and we'll let you know where we are as we get into next year.

Brendan Cavanagh:

I think from an operational standpoint that the scale benefits are very limited because we're pretty streamlined at this point. I think there are some certainly but I think it's relatively small part of any large scale deal that we would do here in the US. But there probably are some benefits in terms of just being able to help our customers achieve some of their broader reaching goals if we have a bigger portfolio. That does make a little bit of a difference, I think. But I don't think it's a major factor. I think ultimately they'll need the sites that they need, and we have a lot of great sites and a lot of great locations that are frankly ones that can't be duplicated. So it's something that we would think would be marginally beneficial from a strategic standpoint but marginally being the key word.

Operator:

And our next question comes from Brandon Nispel with KeyBanc. Please go ahead.

Brendan Cavanagh:

Hey, Brandon.

Brendan Cavanagh:

Brandon, I'm sorry. You were muffled there. I couldn't really hear what you said.

Brendan Cavanagh:

Yeah, that's better. Thanks.

Brendan Cavanagh:

Yeah, I can't give you next year's numbers at this point. I would tell you that from an application standpoint, we have seen increases. Each of the last couple of quarters, quarter-over-quarter, continues to go up, so that's a good sign. But an application doesn't necessarily tell the whole story because you have to see how that plays through and what's the level of equipment that they're installing and so forth. I do think with the increases that we're seeing in terms of interest and applications that we'll see an opportunity to have greater executions as we move through the year, particularly into next year. But there's so much that still has to be -- has to play out for us to know what that does to next year's number that -- it's premature for me to say.

Brendan Cavanagh:

Yeah, I would say that it was broad in the sense that it was across the customers that make up that revenue base, although we do have certain concentrations. So obviously it's a greater absolute dollar amount from certain carriers. But there's nothing that stands out about that. It's really more, as I said earlier, it's really more about the mix of work being a little more SDS related instead of construction related.

Brendan Cavanagh:

Sure.

Matt Niknam:

Hey guys, thank you for taking the questions. Just two follow-ups. First, I guess to the topic of carrier activity, any changes in activity or uptick in conversations with DISH? And then secondly, on the operational review of the business, I know it was a bigger topic last call and I know it sounds like there's more going on behind the scenes, but is there's any initial findings or when we can anticipate more meaningful updates on that front? Thank you.

Matt Niknam:

Thank you.

Operator:

Our Next question comes from Brendan Lynch with Barclays. Please go ahead.

Brendan Cavanagh:

I think it will be an informed amount of risk. There's always some degree of risk, particularly when you're making decisions to invest capital and expand by buying or building new assets. So I believe that all of the learnings that we have over the years and what we've seen in each of the markets where we operate make us better informed to understand the risk that we're taking on and to manage and frankly price that in in any decisions that we make. So I don't know that it's changed a lot. I think the knowledge that we have changes every day and that informs it, but our overall risk tolerance is probably not that different, just our education is a little different.

Brendan Cavanagh:

Yeah, I mean, so much of the decisions around investments in the new assets is impacted by your view of the future of those assets in the markets and what are the M&Os in those particular markets going to be doing and what are their needs going forward. And I think almost in every case, when one tower company buys a portfolio instead of another, it probably comes down typically to their view of the future. And one has maybe a slightly more favorable view than another, and therefore they are able to see their way clear to pay a little bit more. And I don't think things are any different than that today. Obviously, the cost of capital being higher makes a difference, but it's higher for everybody. And I think that's what started to normalize. It started to make its way through the system, whereas before you had certain folks who were using capital that was priced at a much lower point, and that was allowing them to continue on buying stuff at prices that were suddenly becoming not as attractive to some of us that were affected more quickly by the change in cost of capital. So I don't think it's any different. I think it's just a matter of everybody adjusting to the cost of capital and then how you see your way clear to obtain the growth necessary on the assets that you're buying.

Brendan Cavanagh:

Sure.

Ari Klein:

Thank you. Maybe just going back to the carrier inquiries you alluded to, is there any additional context you can provide as to how they've changed and how typical or atypical is it for these conversations to ultimately materialize in better leasing?

Ari Klein:

Thank you.

Operator:

Our next question comes from [Jonathan Chaplin] (ph) with New Street. Please go ahead.

Brendan Cavanagh:

Well, yeah, I didn't say that we are definitely buying a material portfolio. I'd say that we are looking at all kinds of things that are available. And some of those include material portfolios. But whether those happen or not remains to be seen. So sometimes you have to be patient in terms of how you use your capital. We've in the past had people say, well, you must not like your stock because you didn't buy it this quarter. Well, that's not necessarily true. It depends on other things that are going on that take a lot longer than one or two months to determine how they're going to play out. So I think what you should expect is going forward, we will over time have a mix of all of these things. We will do buybacks, we will do debt paydowns, and we will also hopefully buy assets.

Brendan Cavanagh:

Yeah, I think in the past when we first were entering certain of these markets, our view on scale was that scale is reaching a point that you cover your overhead and you produce positive EBITDA. And I think where our view has evolved is that scale is more than that. It's your relevance to the leading carriers in the market and if you don't have that and in particular international more than this is the case in the US internationally, if you don't have that the way that work is handed out, the way that carriers engage with providers, tower providers in this case, is influenced by the relative importance to their network that you represent. And so we have some places where we simply have small portfolios and there are much bigger players. And so we either need to figure out how to become a bigger player that's more relevant to our customers or we shouldn't be there.

Brendan Cavanagh:

Sure.

Batya Levi:

Thanks. A couple of follow-ups. First, on the domestic side, normal churn is still running at the high end of 1% to 2% you've laid out. Do you see some opportunity to lower that to the low end? I think some of your peers are suggesting it. And a reminder on the exposure to US seller would be good and how long you have left on that contract? And lastly, SG&A stepped down sequentially, can you talk about if that level is sustainable going forward? Thank you.

Batya Levi:

Got it. Thank you.

Operator:

And our next question comes from David Guarino with Green Street. Please go ahead.

Brendan Cavanagh:

Yeah, I mean, it's hard to get too specific on all that, but just to touch on the ones that you mentioned, Tanzania, thus far has worked out extremely well. We've had tremendous growth there that we've been very pleased with from an organic leasing standpoint. Obviously, the entry price we came in was attractive and so the return on investment capital thus far has been tremendous in that market. In the case of the Philippines, it was a little bit of a totally different animal. There wasn't an acquisition there. That was almost all brand new builds. And it's really at a fairly early stage. So I'd say that so far it's gone well. The leasing has been strong, but we have a very small portfolio and they're brand new sites. So we've got to give that a little bit more time to see how it plays out.

Brendan Cavanagh:

Yeah, I mean, we're a macro tower company, so that’s obviously we've spent the vast majority of our time. The other things were specific items that had ancillary strategic rationale that we were looking at, but it's not the core of what we look at.

Brendan Cavanagh:

Sure.

Operator:

That does conclude our conference for today. Thank you for your participation. You may now disconnect.

Operator:

Ladies and gentlemen, thank you for standing by, and welcome to the SBA first quarter results conference call. [Operator Instructions] As a reminder, this conference is being recorded.

Mark DeRussy:

Good evening, and thank you for joining us for SBA's First Quarter 2024 Earnings Conference Call. Here with me today are Brendan Cavanagh, our President and Chief Executive Officer; and Marc Montagner, our Chief Financial Officer.

Marc Montagner:

Thank you, Mark.

Mark DeRussy:

Thank you, Marc. We ended the quarter with $12.4 billion of total debt and $12.2 billion of net debt. Our net debt to annualized adjusted EBITDA leverage ratio was 6.5x, below the low end of our target range. Our first quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was very strong at 5.2x. We continue to use cash on hand to repay amounts outstanding under the revolver. And as of today, we have $195 million outstanding under our $2 billion revolver.

Brendan Cavanagh:

Thank you, Mark. Good afternoon.

Operator:

[Operator Instructions] Our first question comes from Michael Rollins.

Brendan Cavanagh:

Yes, Mike, I think it's a little bit premature to say that. My comments about the increased applications are obviously positive in general, as increases, obviously, would be. But I think it's a little bit early. It's only been 2 months since our last report. And we haven't seen a material change. We've just seen a minor step-up directionally in those items. So at this point, I think it's too early to comment on where 2025 will come out.

Brendan Cavanagh:

No. I would say it's fairly broad-based. And different geographies, different carriers are perhaps a little bit busier than others. But I think you're aware of some of the initiatives that some of our customers have going on. But I would say, it's generally broad-based across the big 3 carriers.

Brendan Cavanagh:

Yes. We don't really have a goal. In fact, we're actually not explicitly changing our targets, although we're obviously operating well below them today. And the reason we're not changing the targets is that opportunities come along and sometimes being flexible and levering back up to take advantage of a particular opportunity may be the best choice, and so I don't want to kind of present it like we have to be the lower number.

Operator:

Our next question comes from Jonathan Atkin.

Brendan Cavanagh:

Yes. On the new build opportunities, well, first of all, we're looking in every market that we're in for specific opportunities that meet our requirements because we already have a presence in that market and an operation scalability there. So ideally, we'd like to build sites wherever we can. But specifically, certain markets, in our African markets in particular, we're seeing more opportunities and certain select markets in South America as well.

Jonathan Atkin:

And then Brazil, can you remind us broadly where Oi is in terms of the equipment being decommissioned off of towers for their mobile network? And then prospectively, for the wireline, you gave a little bit of color in the prepared remarks, but where are they in terms of physical decommissioning as opposed to you haven't already maybe recognized it in your reporting?

Michael Elias:

First, I just want to delve back on the portfolio review. It seems like when you're talking about the M&A environment, valuation is the holdup. I think just interpretation, that's part of the reason why we're seeing you shift more capital allocation to the buyback. Just curious how your thoughts there have evolved, that would be the first thing. And then second, is there any color that you can share in terms of the 271 sites that you announced that you are acquiring, where they're located, that would be helpful.

Brendan Cavanagh:

Yes. We didn't change any of our outlook for the year, so that still stands as of today that we would expect a similar number to what we talked about last time exiting the year. So right now, we haven't seen enough shift in carrier activity to change those projections.

Simon Flannery:

Brendan, I wonder if you could just characterize some of the big 3 activity. Are you seeing them complete or move further on adding mid-band to existing sites? Are you seeing them move to densification? And any kind of parallels you could draw with the LTE 4G kind of phasing from that initial coverage phase to the next phase, how does this compare? Is it slower, as you noted, because of the rising rates? And perhaps you could just remind us, you talked about an uptick in applications, how should we think about timing from applications to actually execute leases and revenue generation?

Simon Flannery:

Great. And any color you can provide on DISH?

Operator:

Our next question comes from Rick Prentiss.

Brendan Cavanagh:

Yes. I think it's somewhere in our report, or maybe it's not, but it will be in our 10-Q anyway. I believe roughly half, just over half, was in March and the balance was in the beginning of April.

Brendan Cavanagh:

Yes. It's not so much the leverage ratio. In fact, the ratio was up but the absolute amount of debt was pretty similar to what it was at year-end. It's a little bit higher because of the buybacks, but not much. It was actually higher on a leverage ratio basis because the EBITDA was down a little bit, mainly because of services. So I'm a little less focused there because we have so much room in our ratio and it's more of a focus on the absolute amount of debt that we're carrying, and specifically because we have these maturities that are coming up in the next 8 months or so. And so as I kind of eye that, our ability to kind of reduce the amount of absolute debt as we approach those maturity dates is really what we'll be targeting as opposed to worrying about where the leverage ratio is.

Ric Prentiss:

Okay. And then on operational front, I think Marc M. was talking about the Sprint churn, confirming those kind of numbers. Legacy churn, non-carrier consolidation in the U.S. more than 2%. As we look out over the next 1, 2, 3 years, it seems like you might be heading to the lower end of that 1% to 2% historical level because a lot has already been maybe sucked up. Is that something that we might think of as maybe heading more towards the lower end of 1% to 2% as we look out over the next few years?

Ric Prentiss:

Great. Very helpful. And I appreciate your clarity on the strategic review. That helps.

Operator:

Our next question comes from Nick Del Deo.

Brendan Cavanagh:

Yes, I think it's really more the latter. You've got, obviously, on the Sprint/T-Mo related consolidations here. But internationally, with the Oi consolidation in particular, I mean, those are really the big ones. There's some others here and there, but those are the biggest ones. It's a lot of sites. And so as we kind of look at what can we do in this window of time where carrier spending is a little bit slower and we have some of these headwinds, what can we do to maximize our bottom line results. Costs become a little more material potentially to that story of improvement. So it's really more the volume than it is anything else. But that increased volume requires a little bit more of a concerted direct focused effort on it.

Brendan Cavanagh:

Yes. Well, I'm going to sidestep that a little bit because there are some specific things we're doing that are creative, that actually are adding value for our customers down there. Things that relate to power, that relate to other centralized hosting of wireless coverage solutions and even security-related items. As you add some of these types of things in terms of the service package that you provide, you make your site that much better. And when somebody has the choice to make the choice, you want to have your options be preferred. But it's not just that, it also comes with the ability to enter into longer-term agreements that secure that relationship for an extended period of time. And that's really what we're focusing on.

Operator:

Our next question comes from David Barden.

Brendan Cavanagh:

Sure, Alex. Yes, on the international churn front, I would expect that it will be elevated for the next couple of years, maybe not quite as high as it is this year, but it will be elevated by historical standards. We used to have almost 0 churn basically. But we've reached a point where you have a lot more consolidation that's taken place across many of our markets. That's driving a lot of it. And so as we just kind of look at when leases are scheduled to roll off and where there's been consolidations and what we think our exposures we might have, plus, frankly, the Oi wireline bankruptcy, those things will, I believe, cause it to stay elevated for the next several years, although, again, hopefully not quite as high as it's been this year.

Batya Levi:

A couple of follow-ups. On the network services side, can you talk a little bit about the slowdown you saw in the quarter? And I think you're tracking below your annual guidance. Should we expect this quarter to be the trough and continue to improve from here? And maybe on the tower side, can you give an update on what percent of your sites have been upgraded with 5G equipment now?

Richard Choe:

I have two follow-ups also. I'm not sure if you can tell, but the new lease densification applications, are they mainly in markets where there's a significant amount of fixed wireless?

Richard Choe:

Got it. And then on the decommissionings and cost savings, is there a significant delay from when the decommissions happen and when you can do the cost savings given maybe the ground leases underlying? Or can you kind of get ahead of it and kind of close that timing gap?

Operator:

Our next question comes from Matt Niknam.

Brendan Cavanagh:

Your second question, the answer is yes. That is the primary driver. I mean it's small dollars, obviously. You're talking about $4 million for the year, but yes, that's the driver.

Operator:

Our next question comes from Eric Luebchow.

Brendan Cavanagh:

Yes, it's actually been very good in the sense that I think it's kind of loosen the gears up, if you will, between the 2 companies. They have a lot of work to do, and we're a big supplier of theirs in terms of tower space. So the ability to have a much easier, free flowing kind of understood process by which we they make requests and we help satisfy those requests has been a positive. And so I think that, in and of itself, is something that we love to have with all of our customers. And I think we generally do. But with AT&T perhaps, it was the one that given that we have never really had any kind of master agreement with them, there was a little more low-hanging fruit there to address.

Eric Luebchow:

Great. And just one follow-up from one of the earlier questions. I think you talked about getting to 1% U.S. tower churn, excluding Sprint, in the next few years. So just a glide path to get there, is that coming more from some of your smaller customers? Are you also seeing some current opportunities with the big 3 or 4 customers? Does it have anything to do with less competitive activity from tower overbuilders or anything you can cite to kind of get down to those levels?

Operator:

Our next question comes from Walter Piecyk.

Brendan Cavanagh:

Yes. I'm not sure if there's just a moment in time when things change. We bought back stock in late March and basically the first few days of April. And I think that, that still is a good return on investment. The reality, Walt, is it's hard to be that precise and exact-timing all of these things. And I think as we go forward, it doesn't mean that we won't buy stock back at all. I'm just telling you that directionally, as I look at it today, that I think paydowns of debt is slightly more accretive than buying back stock where it is right now. But that doesn't mean there won't be opportunities to do both, and I expect we will do both going forward. But we're going to see what other options we have available to us as we move through the balance of the year, and that will influence how it plays out.

Walter Piecyk:

That's fine, Mark. I appreciate that. Just one follow-up though. Again, just based on math, right, this is a very predictable business, right? We can see what the free cash flow is. If you think share repurchase is more important for these reasons that you've outlined, which I don't disagree with, right, and assuming that, that view doesn't change, all of a sudden, the Fed doesn't start f***ing dropping rates left and right in the near future, again, unlikely, I just don't see how that doesn't mean that you have to mostly turn off the share repurchase spigot at least through the end of the year, like it's just the math of the free cash flow and what's available in terms of at least trying to top the $600 million reduction that you did last year.

Walter Piecyk:

Just got one last operational question. I guess I'll phrase it this way, outside of the big 3 operators and DISH, have you seen anyone demonstrating interest in or submitting applications for CBRS spectrum to deploy on your towers?

Operator:

Our next question comes from Brandon Nispel.

Brendan Cavanagh:

Brandon, I'm sorry to interrupt you, but we're having a little bit of a hard time hearing you, you're a little garbled. You may have to repeat that first.

Brendan Cavanagh:

Yes, that's much better. Thanks.

Operator:

And our next question comes from Brendan Lynch.

Brendan Cavanagh:

Yes. I mean that's one option that's obviously on the table. The advantage to it, of course, is that it would allow you to retire it quickly over time or as you could over time without having to lock into a longer-term maturity date. But the negative is that it's some of the most expensive debt that we have right now. It would be more expensive than obviously whenever we would refinance it with in a different market. So it's an option.

Brendan Cavanagh:

Yes. Well, we saw a decent amount of deployment of dual-band radios. That certainly was a driver last year and maybe even before that. But at this stage, it seems like most of the focus is on just deploying the mid-band spectrum that they have on hand and just incremental new leases, as we talked about before, for coverage and densification. I wouldn't say that there's anything more technical than that.

Brendan Cavanagh:

Great. Thank you all for dialing in. We appreciate your time tonight and look forward to reporting to you next quarter.

Operator:

Ladies and gentlemen, thank you for standing by. Welcome to the SBA Fourth Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mark DeRussy, Vice President of Finance. Please go ahead.

Marc Montagner:

Thank you, Mark. We ended 2023 with another strong quarter. Our fourth quarter results were ahead of our expectations and allow us to finish at or near the high end of our full year 2023 outlook for site leasing revenue, tower cash flow, adjusted EBITDA, AFFO and AFFO per share. Consolidated same tower recurring cash leasing revenue growth for the fourth quarter, which is calculated on a constant currency basis was 3.6% net year-over-year including impact of 3.9% of churn. On a gross basis, same-tower recurring cash leasing revenue growth was 7.5%. Domestic same tower recurring cash leasing revenue growth over the fourth quarter of last year was 6.9% on a gross basis and 3.5% on a net basis, including 3.4% of churn. Of that 3.4%, 1.6% was related to Sprint consolidation churn. As expected, domestic operational leasing activity or bookings representing new revenue placed under contract during the fourth quarter was consistent with the lower levels of activity we saw during the second and third quarter of 2023. Full year organic leasing contribution to domestic site leasing revenue ended up in line with our previously provided outlook. Non-Sprint related domestic annual churn was also in line with our prior expectations and continues to be between 1% and 2% of our domestic site leasing revenue. International same tower recurring cash leasing revenue growth for the fourth quarter, which is calculated on a constant currency basis was 4.2% net, including 5.9% of churn or 10.1% on a gross basis. In Brazil, our largest international market, same-tower gross organic growth was 8% on a constant currency basis. Total international churn remained elevated in the fourth quarter due mostly to [carrier] (ph) consolidation. During the fourth quarter, 77.5% of consolidated cash site leasing revenue was denominated in US dollars. The majority of non-US dollar-denominated revenue was from Brazil, with Brazil representing 16.1% of consolidated cash site leasing revenues during the quarter. During the fourth quarter, we expanded our tower portfolio, acquiring 23 communication sites for a total cash consideration of $21.3 million. We also built 138 new sites. Subsequent to the quarter end, we have purchased under agreement to acquire 281 sites in all of our existing markets for an aggregate price of $87.8 million. We anticipate closing on this site under contract by the end of the third quarter. Looking ahead, this afternoon, earnings press release includes our initial outlook for the full year 2024. Our outlook reflects a continuation of the reduced level of carrier CapEx that began early last year. Despite this, our leasing business will continue to grow organically through contribution from new leases amendment and contracted escalators. Domestically, our outlook assumes $55 million of customer churn in 2024, of which approximately $30 million related to Sprint related decommissioning. Our previously provided estimate of aggregate Sprint related churn over the next several years remain largely unchanged. We anticipate a range of $40 million to $45 million in 2025, $45 million to $55 million in 2026 and $10 million to $20 million in 2027. Internationally, our outlook includes approximately $22 million churn in 2024. During the fourth quarter of '23, we signed a multiyear agreement with Vivo in Brazil. Under this agreement, we expect to incur $4 million wireless consolidation churn in 2024 and an additional $2 million over the next several years. Total anticipated wireless consolidated churn remains at approximately $30 million. Additionally, our full year 2024 outlook reflects a year-over-year decline in service revenue and gross profit due to the lower overall carrier activity in the US. However, our outlook is in line with the historical performance, excluding our very strong result in 2022 and '23 due to the initial rollout of 5G network by some of our wireless customers during these years. This outlook does not assume any further acquisitions beyond those under contract and does not assume any share repurchase. However, we are likely to invest in additional assets and/or share repurchase during the year. Our outlook for net cash interest expense and core FFO and FFO per share include the recent refinancing of our term loan B debt, the upsize of our credit facility and the future [refinancing up with rerating rate] (ph) in the future of our $620 million ABS tower securities maturing in October 2024. Our balance sheet remains very strong, and we have ample liquidity. In January of 2024, we refinanced our $2.3 billion credit facility, pushing out the maturity to 2031. We also increased our revolver capacity by $500 million. Our $2 billion revolver is almost fully paid down. Our leverage remains at historical lows and well below our steady target of 7 to 7.5 turns, giving us plenty of dry powder for opportunistic acquisition and/or share repurchase. Lastly, we purchased a forward-starting interest rate swap in the fourth quarter. This will give us great certainty around great uncertainty on future interest costs. With that, let me turn the call over to Mark, who will provide additional detail.

Brendan Cavanagh:

Thank you, Mark. Good afternoon. I am pleased for the opportunity to reflect on our 2023 performance and to share our thoughts about 2024 and beyond. 2023 was a year marked by some significant macro headwinds, in particular, the consistently high interest rate environment that not only directly affected SBA's floating rate debt costs and the views around our cost of future refinancing, but also impacted our customers and their network spending levels. In spite of these macro headwinds, SBA executed extremely well and produced solid financial results. When compared against the initial outlook for 2023, given in February of last year, our actual results for the year finished materially above the high end of the ranges given for site leasing revenue, tower cash flow, adjusted EBITDA, AFFO and AFFO per share. Most of the outperformance was organic as we spent very little incremental discretionary CapEx in comparison to our initial outlook. Our excess free cash flow was instead largely spent on paying down our floating rate revolver debt, and we finished the year at a multi-decade low leverage level of 6.3 times and today have a current revolver balance of only $70 million. Internally, it was a year of leadership transition for the company. Jeff Stoops retirement, the addition of Marc Montagner to the team and new leaders in our international, legal and IT functions. Everyone has stepped up extremely well into their roles, and I am very happy with how the team is collaborating and performing. The disciplined succession planning and highly capable team members assembled throughout the organization have positioned us well for the future. As we look forward to 2024, we recognize that we are coming off of a period of reduced network investment by our largest domestic customers. However, future network needs for each of these customers remain significant, and we anticipate being a critical partner for our customers in meeting their operational goals and objectives. A significant percentage of our sites still require 5G-related upgrades, which we are confident will take place over the next couple of years. In addition, the success and growth of fixed wireless access as a product offering for our customers will add greater demand for increased network capacity as the average user of this product uses 20 times or more broadband data than the typical mobile customer. And the evolution of AI-infused 5G offerings will continue to fuel the demand for improved speeds and lower latency. All of these factors as well as good old-fashioned service-based competition are supportive of steady organic leasing activity on our US assets for years to come. Internationally, we also see a dynamic of significant network needs, providing a backdrop for continued solid organic leasing activity throughout many of our markets. Financial pressures have impacted many of our international customers as well but the demand for advanced wireless products and services is significant, and in a number of cases, even greater than that seen in the US. We expect this will in turn drive continued demand for incremental space at our tower sites. Nonetheless, there have been customer consolidations in several of our markets. As a result, we have worked closely with our customers to help them achieve necessary efficiencies in their operations, but while preserving the breadth of our business relationships, and solidifying our contractual commitments for the long term. While this temporarily leads to elevated churn, we believe the long-term strength and stability of our cash flow streams produced as a result of these efforts meaningfully improves our go-forward value proposition. This is a good segue into my views around our forward strategy. Internally, we are highlighting a desire to analyze everything we do or consider doing through the lens of stabilizing our results, growing our core business and shifting our mix more and more to high-quality assets and operations. While this is not materially different than the approach SBA has taken throughout its history, we recognize that not all of our assets or business lines fit well within this goal. As a result, we are doing the work to evaluate our full portfolio and develop action plans around how we improve our position in each business line and in each market. For instance, in our international operations, we have found it to be valuable to be a market leader in the markets we operate in. In places where we hold a more significant position, we have tended to do better than those places where we do not. This ultimately means that we need to find a path to increase scale in certain markets or possibly exit a market. An example of this was our fourth quarter exit from Argentina. Not only was our market position subscale, but the economic instability in that country created operational challenges that were dilutive to the otherwise typically very attractive attributes of the tower business. We will pursue incremental investments to drive continued growth as we always have. But we will prioritize either an overall favorable shift in the quality and stability of our asset mix or an opportunistic investment that improves our standing and existing markets. Financial results always matter. We will be disciplined toward producing the best possible financial results over the long term. We believe high-quality assets ultimately produce that result. We also believe that when opportunities for incremental asset investments are not available, stock repurchases and debt reductions are worthwhile uses of capital. We intend to continually evaluate our optimal capital structure, and we'll look to balance the lowest cost of capital with retaining appropriate investment flexibility. Our attention to optimize capitalization of the company has placed us in what I believe is the best position in the industry. We are the fastest dividend grower, but yet have the greatest retained AFFO post dividend to invest in the business. We have maintained an average cost of debt very close to our larger peers, but have retained access to up to two turns more leverage. We have recently extended and expanded our revolver capacity by $500 million, creating increased liquidity. This structure provides us with significant optionality to move in whichever direction we believe will provide the best return for our shareholders. The strength and stability of our core tower business remains and it provides a tremendous foundation for all future endeavors. As a result, I have great confidence in our ability to create future value for our shareholders. I want to thank our customers for their support and their confidence in SBA. I also want to thank our team members for their contributions to our success. And with that, Eric, we are ready to take questions.

Ric Prentiss:

Thanks. Good afternoon, everyone and Brendan, congrats on the new seat. Mark with the K, welcome to the calls.

Ric Prentiss:

First, leverage obviously has been a key focus. You guys have been paying down floating rate debt. You've got your net leverage down to 6.3 turns. Almost all the floating is paid off as of today then. How should we think about 6.3, where it heads in the future versus stock buyback? And then on the M&A side, update us as far as what you're seeing out there, you mentioned that you like to be the leader in your markets. Are there any deals out there that would give you an industry-leading position? And what would kind of make that an interesting market if there were new markets out there?

Ric Prentiss:

Obviously, we're sitting here at the end of February. Can you help us understand the pacing of what you think new lease activity in the United States will kind of play out through the year? And is it still kind of three months, maybe closer to six months as far as when you get an application in to where it actually turns into revenue?

Ric Prentiss:

Great. Thanks a lot.

Jonathan Atkin:

Thanks. Two questions. One, you talked about the willingness to examine an exit from markets where you lack scale, does that apply to product areas such as data centers? And then my second question is, you called out the Vivo relationship in Brazil. Anything with TIM or Claro along similar lines where you might be renegotiating some of your commercial terms or looking to kind of react to market conditions in Brazil? Thanks.

Operator:

Thank you. Next, we’ll hear form Nick Del Deo with MoffettNathanson. Please go ahead.

Brendan Cavanagh:

Yeah. It basically means your relevance in the market to your customers, which generally means the size and scale of your operations. So the percentage of the portfolio that you represent for the larger, most important customers in that market. When you are at a level that is frankly immaterial to their network needs, your ability to drive additional business and to negotiate terms on new opportunities is just not as great as when you're a more meaningful partner. So that's really what I mean when I talk about the size and scale. As it relates to new markets, that would be a consideration, obviously, before we go into the new market, what's our position going to look like in that market. So it doesn't mean that we would not go into a new market, but we would consider that factor as one of the factors when we're thinking about it.

Brendan Cavanagh:

Well, yeah, it could. Obviously, we're just above $40 million now for this year. So if we don't see any pickup as we get to the second half of the year, I do expect that the run rate at the end of the year today, that's implied in our guidance would be slightly below $40 million. So it’s possible. I think though some of this is lumpiness in the way that things come in under our AT&T MLA agreement. So the fact that it's a little higher in the first part of the year and a little lower in the second half of the year could be something we see next year as well.

Brendan Cavanagh:

Yeah.

David Barden:

Thanks so much for taking the questions. So I guess the first one, for the guidance, it was clear that you weren't assuming any new portfolio acquisitions or buybacks, but could you be specific about what you are assuming in the guide for the use of cash? Is it putting it in the bank at a 5% interest rate? Or what should we kind of use as a baseline as a comparison to what's going on? I guess a second question, if I could, is -- Brendan, is there a fuse on any of these decisions about whether to pull the trigger on portfolio acquisition versus stock buybacks, given that your stock buybacks could be pretty powerful if they happen sooner rather than later? And I apologize, if I could just one last one for Mark D. This $1 billion hedge on a forward basis that you've put in place, which replaces the existing hedge on the $2 billion term that comes due March '25, I'm assuming that there's an opportunity if you chose to do something additional to the $3.85 million that you've locked in, is there a timetable to make that decision? Thank you.

Brendan Cavanagh:

Yeah. On that item, David, I mean, really the thinking was that we sort of took half of it and created some level of certainty given that there's some instability, obviously, in what interest rates will look like. And we've seen -- we've all seen over the last few months, expectations of when interest rate cuts are going to happen, move around quite a bit. So for us, we basically ensure that a portion of that debt, we would have some stability and certainty on it. And it locks in basically at much lower rate than exists today. So if we let the other piece flow, I think we can have a good natural hedge in that case. On your other questions on the use of cash in our guidance, we do -- because there will be cash that's obviously accumulated, part of it first goes into paying down the revolver, of course, what's left outstanding on that and it covers some of the discretionary spending that is implied in our guidance for deals that are under contract as well as new builds, the items that are basically covered in our discretionary CapEx guidance. Anything excess is assumed to be invested at about a 4% or so interest rate. So that is implied in our net cash interest guidance, some interest income on that. And then I think your other question was the M&A versus buybacks and the timing. I mean, we -- there's a variety of things that we're constantly looking at. And the timing of M&A transactions, you don't have as much control over. Obviously, we have complete control over buybacks. And so -- to some degree, we have to balance the capital that we have available and that we may or may not need. And so sometimes we can jump in earlier. If we have a clear vision as to what's going to happen and other times, we have to hold back a little bit and see how things play out. So I hear what you're saying, and we obviously believe our stock is a good buy at this level that we've got to balance that against all the different options in front of us.

Operator:

And next, we'll hear from Michael Rollins with Citi. Please go ahead.

Brendan Cavanagh:

Yeah. So, Mike, the numbers that we typically report on, we report on because we think they're the most important. I think the number one metric in our view here and with our Board and frankly, with many of our investors is AFFO per share because it represents that amount of actual free cash flow that is available to be returned to shareholders in some form or fashion, whether that be reinvested into the business, or be paid out as a dividend or be used for stock buybacks, whatever the usage is, it's effectively what's available at the end of the day after everything has been paid for. And so that's the metric that we focus on most of all. Having said that, obviously, the next few years, there are some challenges to our AFFO per share metric, largely because of two things that are not new. Interest rates, we've done an excellent job over the last many years locking in very low-cost debt, but the market is what it is. And at some point, you have to refinance at least some of that debt. And so you're going to see higher interest costs that weighs on that a little bit. And of course, the Sprint churn, in particular, that is kind of out there that we know we have ahead of us, and we've scoped for you as to what that looks like. But outside of that, the real goal, frankly, is to see that number go up over an extended period of time. This is a business that is a very long-term business at its core. We have very long-term contracts. Our relationships are long term. The assets are long term. And so we look at how we're going to maximize that number over an extended period of time. As a public company, it can be challenging because you're reporting every single quarter, and so it gets scrutinized every quarter, but the nature of the business is long term. So we try to take that long-term view on how we're going to grow that number out over a period of five to 10 years. And I think we'll be well positioned to do that. The other metrics though are very important as well. Obviously, growing site leasing revenue, growing adjusted EBITDA shows that we're able to find continued returns on our operations, but really AFFO per share is where I focus most of my energy. And then I guess your second question was about the upgrade percentage for 5G. We're a little bit over halfway in terms of upgrades to our sites for 5G, but that is different among the different carriers. Some are much further along and others are below that number. So we still have a pretty good runway. I think we're looking at the next two to three years to get to where they've upgraded all the sites they need to.

Brendan Cavanagh:

Sure.

Simon Flannery:

Right. Thank you very much and congrats on your new role, Brendan and Mark, great to reconnect and good luck in your new role. Two, if I could. First, on the M&A. I think in the past, you've noted that the M&A multiples haven't necessarily come in to reflect the new interest rate environment. It would be great to just get some perspective of -- if you see a better risk-reward balance there for the growth and the multiples that you're paying. Obviously, you've done some transactions versus buying back your own stock? And secondly, anything you could share with us on DISH and how you think about DISH within your leasing assumptions, especially given they have some specific FCC and DOJ targets to hit in mid-'25? Thank you.

Simon Flannery:

Thank you. Appreciate it.

Matt Niknam:

Hey guys, thanks so much for taking the question. Just a two-parter. First, on the strategic review, Brendan, is this at all a pullback from I guess, more emerging markets and a pivot of the portfolio towards more developed markets? Is there anything of that sort underpinning the review? And then maybe on a related note, any additional color you could provide on the 281 sites that were acquired subsequent to 4Q just in terms of region or any other color you can share? Thank you.

Matt Niknam:

Is there a time frame attached to the strategic review?

Matt Niknam:

Excellent. Thank you.

Richard Choe:

Hi, I just wanted to ask about the pacing of the services revenue through the year. And then another question on -- in terms of new activity. How much of it is coming from colocation versus amendments? And do you expect any significant change through the year?

Richard Choe:

Got it. And a final one is in terms of Argentina, can you quantify what the impact would have been to revenue and EBITDA had you kept it?

Operator:

And next, we'll hear from Michael Elias with TD Cowen.

Brendan Cavanagh:

So on holistic MLAs, I think that is a -- when we talk about a goal of trying to ensure that we have stabilized our cash flow streams and results, one of the ways you do that is through enhancing and improving customer relationships. And that can be done in part through master agreements. We obviously signed one with AT&T last year. We've signed others in the past with each of our customers along the way. So I would expect we will continue to make use of that, assuming that it's the best structure for what our customers need to get done and SBA is able to achieve a certain amount of certainty and length of commitment as part of those agreements. But each of those will be determined on an individual basis based on the needs of the customer and what we need. Again, the buybacks versus M&A, yeah, I mean, we are -- we're not necessarily sitting here saying we've got all this cash we're ready to spend on buybacks. We are -- in fact, we still have balances out on our revolver. So I don't feel like we've necessarily been in that position. We have historically been very opportunistic around share buybacks. I would expect that to continue to be the case now. But individual acquisition opportunities, particularly of size, may influence our timing on when we would buy back our stock if we otherwise saw it as an attractive investment. So that's where we are, and we'll see as time goes by. But just because you don't see us buy back our stock doesn't necessarily mean that we don't see it as a good value. It means there may be other factors we're considering.

Operator:

Next, we'll hear from Brendan Lynch with Barclays. Please go ahead.

Brendan Cavanagh:

Yeah. I can't tell you exactly with precision sitting here, but I'm sure we can follow up with you. It is largely based on what's already been signed up to date. I'm sure it's somewhere in the three quarters range of the number, but maybe even more. So we'll follow up with you, Brendan, separately on that.

Brendan Cavanagh:

Yeah. So I mentioned it briefly in my prepared comments, but there are a number of markets that we're in where we have consolidations taking place, in particular, in Brazil where you had the Oi wireless consolidation with the other big three carriers there as we kind of work through that. Last year, that was a big factor. It represented roughly 40%. It was just from 10% by itself, associated with that consolidation, there's one item. That is probably going to be a continued driver of some level of international churn over the next few years. But we're working through negotiations with each of our customers. And as we do that, we're kind of pricing this long-term relationship, long-term commitment where we've got stability that we can reintroduce into the relationship, but allow them to get through the efficiencies that they need to achieve as a result of the combination of customers that's taking place in the market. So it's a mix, but Brazil will probably be the biggest just because it's the biggest market we have with the most revenue.

Operator:

And next, we'll hear from Walter Piecyk with LightShed. Please go ahead.

Brendan Cavanagh:

Yes, I probably can't answer that in this forum, Walt. But we do have ongoing conversations with them about all different things that they do that we do that might fit together. So -- go ahead.

Brendan Cavanagh:

Well, it's probably coincidental to some degree. I don't think you'd see us go above 8x at any point in our history. But now that we've got this -- we've got a pretty big cushion given where our leverage has come down to. So I don't really foresee that ever being a number that we approach.

Brendan Cavanagh:

Well, what -- I mean, really what gives me confidence, but we'll see how it plays out, its history. I mean, every time we've seen the cycle of activity, it's ultimately gotten to the suburban markets, the rural markets. Those dense urban centers really were never tower markets to begin with. So it's not really been a factor for us. Anything that's getting resolved with root tops, that's a very limited tower market. So I'm not sure it matters that much to us.

Brendan Cavanagh:

Sure.

Operator:

And next we will hear from David Guarino with Green Street. Please go ahead.

Brendan Cavanagh:

So the leasing level into the future, yeah, we think it could go up, sure. Obviously, it's all driven by carrier activity. I mean if you go back over the last three years, David, you will see, if you go back a few years ago, that we were at a level very similar to where we are now. In fact, I think we reported a number lower than the $42 million that we just put in our outlook for this year, three, four years ago. So since that time, obviously, it spiked up much higher than that because of carrier activity. And I think to some degree, the network strain that they may feel the -- and the cost of capital is very impactful to the decisions they're making there. And so yes, we believe there's definitely opportunity to see the number go higher in future years, but we need to see how that moves. In the case of -- I'm sorry, your other question was on CapEx?

Brendan Cavanagh:

Yeah. I think -- I don't believe -- I believe what we guided to was similar to what last year's number was. Yeah it’s where we guided to, $330 million at the midpoint and last year, it was $310 million. So sorry, Dave, what do you -- what's the core of the question?

Brendan Cavanagh:

Okay. All right. Thanks.

Batya Levi:

Thank you. Just a couple of follow-ups. First, on -- AT&T recently signed a new contract with FirstNet. Can you provide color if that will be included within the current M&A you have with them or provide some upside? And just another one on M&A. As you think about increasing your portfolio, do you have a preference for carrier-owned towers versus portfolios that are coming out of independent tower operators? Thank you.

Batya Levi:

Got it. Thank you.

Brendan Cavanagh:

Well, great. Thank you, everybody, for taking the time, and we look forward to reporting to you next quarter.

Operator:

Ladies and gentlemen, thank you for standing by. Welcome to the SBA Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode. And later, we will conduct a question-and-answer session, instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mark DeRussy, Vice President of Finance. Please go ahead.

Brendan Cavanagh:

Thank you, Mark. Good evening. We had another very solid quarter in Q3, with financial results that were ahead of our expectations. Based on these results and our updated expectations for the fourth quarter, we have increased our full year 2023 outlook for site leasing revenue, tower cash flow, adjusted EBITDA, AFFO and AFFO per share, notwithstanding weaker forecasted foreign currency exchange rates than we had previously expected. Total GAAP site leasing revenues for the third quarter were $637.5 million and cash site leasing revenues were $630.4 million. Foreign exchange rates represented a headwind of approximately $1.4 million when compared with our previously forecasted FX rate estimates for the quarter, and a benefit of $4.8 million when compared to the third quarter of 2022. Same tower recurring cash leasing revenue growth for the third quarter, which is calculated on a constant currency basis, was 4.7% net over the third quarter of 2022, including the impact of 4.1% of churn. On a gross basis, same-tower recurring cash leasing revenue growth was 8.8%. Domestic same-tower recurring cash leasing revenue growth over the third quarter of last year was 8.6% on a gross basis, and 4.7% on a net basis, including 3.9% of churn. Domestic operational leasing activity or bookings representing new revenue placed under contract during the third quarter was up materially from the second quarter, primarily as a result of the AT&T master lease agreement signed in July. Excluding the impact of the AT&T MLA, third quarter activity levels were similar to the second quarter. All major carriers remain active with their networks. However, agreement execution levels continue to be slower than a year ago. The higher cost of capital naturally has caused a focus on cash management and expense control by our customers. This dynamic extends the timing over which 5G-related network investments are being made. There is still a long way to go for 5G network investments based on the number of our sites that remain to be upgraded with mid-band spectrum deployments by the major mobile network operators. Wireless data use continues to grow materially, and that fact, combined with the limited spectrum availability will require additional infrastructure over time to maintain and certainly to enhance service quality. This gives us great confidence in continued domestic organic leasing growth for many years to come. During the third quarter, domestic churn was slightly below our prior projections due to a slower pace of decommissioning of legacy Sprint leases than we had projected. Our overall expectations for Sprint related churn remain the same, but there will likely continue to be small variations in timing of realizing this churn over the next several years. We currently expect Sprint related churn for 2023 to be $28 million. 2024 Sprint related churn is currently estimated to be approximately $30 million. Non-Sprint related domestic churn was in line with our prior projections and continues to range between 1% and 2% of our domestic leasing revenue. Internationally, on a constant currency basis, third quarter same-tower cash leasing revenue growth was 4.5% net, including 4.9% of churn or 9.4% on a gross basis. International leasing activity remained strong in the third quarter and was again ahead of our internal expectations. While global macroeconomic conditions present challenges to our carrier customers, we have continued to see pockets of dedicated network investment across a number of our markets. The desire and need for enhanced wireless coverage and quality of service continues to be elevated internationally, and we expect will continue to drive leasing opportunities across our portfolio. Wireless data growth in our international markets is even greater than the U.S. We also continue to see steady contributions from inflation-based escalators in many of our markets. In Brazil, our largest international market, the same-tower organic growth rate was 2.6% on a constant currency basis, including the impact of 6.3% of churn, which growth rate reflects a decline in the Brazilian inflationary index. The net growth rate was also again significantly impacted by our previously discussed TIM agreement. As a reminder, our 2023 outlook does not include any churn assumptions related to the Oi consolidation other than that associated with the TIM agreement. However, we continue to discuss potential arrangements with other carriers related to the Oi consolidation that could have an impact on our current year international churn. During the third quarter, 77.8% of consolidated cash site leasing revenue was denominated in U.S. dollars. The majority of non-U.S. dollar-denominated revenue was from Brazil, with Brazil representing 16% of consolidated cash site leasing revenues during the quarter, and 12.9% of cash site leasing revenue, excluding revenues from pass-through expenses. Tower cash flow for the third quarter was $511.7 million. Our tower cash flow margins remain very strong, with a third quarter domestic tower cash flow margin of 85.3%, and an international tower cash flow margin of 70%, or 91.5% excluding the impact of pass-through reimbursable expenses. Adjusted EBITDA in the third quarter was $482.1 million. The adjusted EBITDA margin was 71.4% in the quarter. Excluding the impact of revenues from pass-through expenses, adjusted EBITDA margin was 76.9%. Approximately 98% of our total adjusted EBITDA was attributable to our tower leasing business in the third quarter. During the third quarter, our services business had another solid quarter, with $45.1 million in revenue, and $13.6 million of segment operating profit. While off last year's all-time high activity levels, we continued to execute on our backlog of high quality, high margin work and deliver for our carrier customers. However, given the slower pace of carrier network related activity across the industry, we have lowered our full year outlook for our site development business by $15 million at the midpoint. Notwithstanding this adjustment, we continue to manage our costs and focus on high-margin work. And thus, we have not lowered our expected margin contributions to 2023 adjusted EBITDA and AFFO from our services business. We still expect 2023 to be the second largest services revenue year in our history, trailing only 2022. Adjusted funds from operations or AFFO in the third quarter was $364.1 million. AFFO per share was $3.34, an increase of 7.7% over the third quarter of 2022. During the third quarter, we continued to invest in additions to our portfolio, acquiring 45 communication sites for total cash consideration of $40.8 million, and building 86 new sites. Subsequent to quarter-end, we have purchased or are under agreement to purchase 215 sites, all of which are in our existing markets for an aggregate price of $74 million. We anticipate closing on these sites under contract by the end of the second quarter of 2024. In addition to new towers, we also continued to invest in the land under our sites. During the quarter, we spent an aggregate of $15.1 million to buy land and easements and to extend ground lease terms. At the end of the quarter, we owned or controlled for more than 20 years the land underneath approximately 70% of our towers, and the average remaining life under our ground leases, including renewal options under our control, is approximately 36 years. Before I turn things over to Mark, I'd like to take a quick moment to welcome Marc Montagner, who joined our team in mid-October, and will be taking over as our new CFO on January 1. Marc brings with him an extensive background in telecommunications and finance, and we are very excited to have him as part of the team. I also would be remiss if I did not take a moment to recognize that this call is Jeff's final earnings call as CEO of SBA. I have big shoes to fill, and I am grateful for the professional guidance and the friendship he has extended to me over the last 25 years. And with that, I will now turn things over to Mark, who will provide an update on our balance sheet.

Jeff Stoops:

Thanks, Mark and good evening, everyone. We continue to execute well in the third quarter. We produced financial results ahead of external and internal expectations. And we continue to be a valued partner to our carrier customers in helping them to meet their network objectives. Each of our largest U.S. customers continued to add equipment to sites in support of 5G through the deployment of new spectrum bands as well as to expand coverage through brand new colocations. Although current activity levels are below the pace of the last couple of years, we have continued to steadily organically grow our revenues and tower cash flow. Even in a slower than typical demand environment wireless carriers still have a constant need to invest in expanding and enhancing their networks. By leveraging our high quality assets and providing them quality services support, we have been able to continue growing our business relationship with each of our major customers. In addition, we are confident there will be additional material network investment over the next several years as wireless data usage continues to grow materially. The growth in wireless demand is not slowing down and networks will continue to be strained and our customers still have significant mid-band spectrum holdings that need to be deployed with little additional spectrum plan for release anytime soon. Macro tower sites are still the most efficient and effective way to deliver wireless connectivity, and our focus on high quality portfolio will make us a key participant in network growth for many years to come. Internationally, we also had another solid quarter with greater organic leasing activity than we had anticipated. We again experienced strong contributions broadly from many of our markets, including Central America, Brazil and South Africa. Brazil, our largest market outside of the U.S. was again ahead of our internal expectations, and each of the big three carriers in that market remained busy with coverage expansion, densification and integration of the legacy Oi wireless network. Lease up across many of our Central American markets was also ahead of expectations and evidences the need of our customers to meet the constantly growing demand of wireless customers for wireless data in those markets. I am pleased with our operational execution internationally, and I am optimistic for the future based on significant network needs across many of our markets. During the third quarter, we again generated very healthy AFFO, providing strong dividend coverage and significant cash for discretionary allocation. During the quarter, we allocated capital to the dividend and new site additions through both acquisitions and new tower builds, selectively adding high quality sites that we believe will be additive to our organic growth in future years. We also spent $100 million on share repurchases at prices we believe represent a very good value and will produce a nice return over time. We also continue paying down the outstanding balance on our revolver. We immediately benefited from this by reducing some of our highest rate cash interest obligations. The reduction in our outstanding debt, along with our continued solid growth in adjusted EBITDA produced a quarter ending net debt to adjusted EBITDA leverage ratio of 6.4x, which I believe is the lowest level ever in our public company history. Even with continued portfolio growth, stock repurchases and growing dividends, we have reduced our leverage by almost one full turn in the last 18 months, demonstrating the deleveraging power of our business. At this leverage level, we believe we have the near-term optionality to achieve an investment grade rating. However, for the time being, we are maintaining flexibility in order to comfortably assess all capital allocation options. Going forward, we expect to continue growing our dividend at a rate higher than the rate of growth of our AFFO over the next several years, while maintaining a low AFFO payout ratio. For the time being, excess future cash flows will likely be directed into the repayment of debt, as it is the most accretive short-term and is also beneficial long-term, but we will of course, also stay opportunistic around portfolio opportunities and additional stock buybacks. Our balance sheet remains in great shape with no debt maturities until October 2024, and we have the capacity to satisfy that repayment entirely with cash flow from operations or availability under our revolver. We continue to have very good access to capital, and thus are comfortable to be opportunistic around the timing of future financings. Overall, we feel very good about our current capital position. As Brendan mentioned earlier, this represents my final earnings call as CEO of SBA. I have participated in approximately 100 of these calls over the years. I have been honored to be the leader of this organization for the past 22 years and appreciative of the time I have spent with many of you on this call. Thank you for your support and goodwill throughout this very enjoyable ride. I will retire with the comfort and satisfaction of knowing SBA is a great company, in great shape, and with a management team that I know will lead it to new heights. I want to conclude by thanking our team members and our customers for their contributions to our shared success. And with that, Eric, we’re ready for questions.

Jon Atkin:

Thanks very much. And Jeff, I want to wish you all the best. And maybe a question for you given your tenure in the industry. Your company and many of your peers have seen kind of a lot of changes. I think your company at one point was doing shared wireless backhaul. You’ve gone into data centers, you’ve evaluated things like outdoor DAS. But anything about the sector as you see it on your way out of the company as an active observer, I imagine. But any kind of broad brush structural changes that you see affecting the tower model or anything ancillary to that that we should be looking for as investors? Thanks.

Jon Atkin:

Great. That’s great perspective. And thinking forward over the next year or so, Brendan, I guess would be directed towards you. But kind of the operating trends and the demand drivers, any sense as to kind of the cadence that one might see as this spectrum gets further deployed and the kind of the 5G journey continues on behalf of the M&Os?

Jon Atkin:

Thanks very much and all the best, Jeff.

Ric Prentiss:

Thanks, good afternoon everybody. Jeff, I think I've been on 96 of those 100 earnings calls with you. So I'll echo Jonathan's comments. And have fun with the grandkids and your charity work I know you're so active with.

Ric Prentiss:

Yes. I want to come to a couple of items. The dividend policy. I appreciate the comments on that, dividend rate over the growth rate of AFFO. Some of the others in the space are looking at the dividend policy, should it be tied more towards the qualified REIT subsidiary, kind of minimum that you have to do versus total AFFO. How should we think about you all looking at kind of the dividend versus qualified REIT subsidiary versus total AFFO, and as you think about the payout ratio over time?

Jeff Stoops:

Yes. I think, Rick, the reason we haven't broken out total AFFO versus just AFFO from requalifying income that dividend is calculated, is we're not close to any of those levels. I mean, I think our philosophy will never change, which is we're only going to pay out what we have to on that calculation. And it also kind of confuses people if we introduced another metric. It's just, I think, easier for people to understand and think about when we're using AFFO. But we have a long way to go before we get to the point where we've exhausted our NOLs. And that gives us the ability to increase dividends faster than perhaps others. But at the same time, we're watching the total payout as a percentage of AFFO. And we're going to be able to do both, keep a lower relative payout ratio and increase the dividend at a faster pace for the next several years.

Brendan Cavanagh:

Yes. So as you alluded to, obviously, the broader environment, in terms of rates and cost of capital, is certainly influencing the trajectory of our leverage levels lately. And really, it's a combination of a couple of things. It's the overall cost, but it's also the relationship to the opportunities in front of us in terms of investing capital and what we see as the potential return on those items. And we haven't seen an appropriate adjustment, I guess, in the price points for some of that investment relative to the shift in the cost of capital. And so as a result, the best use of the cost of capital, most of the time, is to pay off some of our debt. And as you know, we had balances outstanding on our revolver. And so it's easy for us to just pay that down as the use of capital, and given that it's floating rate, it's some of our highest cost debt. So we will continue to do that. But at the same time, we're going to look to be opportunistic around opportunities to invest that capital, and the stock buybacks are representative of that. We started to see our stock trading down to levels where we just felt that it was an appropriate time to jump in, and it would be certainly accretive to us. Both in the short term and over the long term, we would expect to invest a little bit of capital into the buyback. So I think, as we think forward, longer term, we haven't necessarily targeted being investment grade, but the leverage has continued to drop. And that's one of the great things about this business, you continue to grow EBITDA, and it naturally – as we produce a lot of free cash flow, you naturally start to delever quickly. And so we're approaching those levels now where we certainly could move towards investment grade. But as we mentioned in our scripted comments, we are going to maintain that flexibility for the time being and see how things go. And if we decide that, that's a better way to go in terms of improving our cost of capital, then we have that optionality to do it. And if not, and there's other places to invest that we think are going to produce greater returns for our shareholders, we'll go that direction.

Brendan Cavanagh:

Yes. I think last quarter, we gave you a range that was around $20 million to $30 million. And so by saying $30 million now, we're seeing it a little bit lower here as we end this year. But the total is still the same. When we originally were giving guidance, we expected to see a little bit more in 2025 and 2026. And now we're thinking 2025 is probably a little bit lower. So again, the total number is going to be basically the same, Ric. It's just trying to pinpoint exactly the timing from year-to-year is – it's been a little bit challenging to do with that kind of precision. But I think we've been pretty close.

Jeff Stoops:

Thanks, Ric.

Simon Flannery:

Thank you very much. And Jeff, also my best, will miss you on these calls and your insights on the industry. A couple of things. You talked a lot about the demand being subdued, given the financial conditions in the market. To what extent are things like the FCC not having the spectrum authority to release some spectrum, the dual-band radio issue. Do you think any of those might get solved here in the near term that might be holding back some spending, or even just a turn off the calendar from year-end 2023 and to 2024? And then you did some M&A in the quarter. It would be great just to get some broader thoughts on the M&A environment. I think we've heard in the past, just a big difference between public and private multiples, but it'd be great to get any color on what you were able to find in the market and what you see out there today? Thanks.

Brendan Cavanagh:

Yes. So on the M&A environment, we continue to see a very competitive environment. Notwithstanding where public valuations have gone, private valuations continue to remain elevated. And to the comments that I made earlier, that's obviously influence where we've directed some of our capital. So in the U.S., in particular, pricing is staying high. And even internationally, we're seeing that to some degree. Although I would say, internationally, there's perhaps been less in the market. There's still a ton out there of potential supply, but I think that sellers are being a little more cautious in their timing of bringing things to market.

Operator:

And our next question goes to Batya Levi with UBS. Please go ahead.

Brendan Cavanagh:

Yes. The leasing growth, I wouldn't say that it's really all that different than what we thought three months ago when we talked about it. It's perhaps slower than what we thought at the beginning of the year than we were originally thinking how this year would play out. But what we described last quarter, it's staying pretty much in line with that expectation that we laid out. And you could see that even in the guidance that we gave, where we didn't make any changes there. On the AT&T MLA and it's the potential for that with others. We have master agreements in place with other carriers. The form of those agreements can vary among the carriers, but it's really dependent upon the needs of that specific customer, and what works best for them and for us and creates the best win-win situation given what they're trying to accomplish in that particular negotiation. So I would say that we are certainly open to agreements with others over time as they're needed, and we have those conversations all the time. Exactly how they're structured may very well vary though, depending on the carriers' needs.

Brendan Cavanagh:

Using the 5G-related spectrum it's approximately 50%.

Operator:

And our next question comes from Michael Rollins with Citi. Please go ahead.

Jeff Stoops:

Thanks Mike.

Brendan Cavanagh:

Yes. I don't know if it's necessarily structure. I would agree with your reference to scale, that in markets where we have scale, we've seen the benefits of that in our relationships with the carrier customers in those markets, and our ability to be more impactful in their projects for build-outs that they have. So scale is something that we're definitely paying attention to within these markets. And then in terms of other things that we might add, in some of these places, there are opportunities to provide incremental services that are somehow related or associated with what we currently do that add sort of an extra level of value that we're able to provide. It generates additional revenue streams that but it also kind of strengthens that relationship for a longer period of time. So we're exploring that. We're doing some things around C-RAN hubs, some things around power, some things around security in certain of our markets and we'll continue to explore those opportunities.

Brendan Cavanagh:

No, there's not a specific target. I think, excluding Sprint churn, I would expect that we'll be able to produce mid-single digits growth rate in the U.S. But at this point, we're not comfortable to lay out a long-term target. And some of that, Mike, just to be clear, it's – there are a lot of factors that really aren't about wireless needs. If it was just about what do our customers need to do in terms of their network deployments, we perhaps would be able to do that a little bit more comfortably. I think some of these factors around cost of capital and other things that may affect timing of when our customers are spending influence that. So that just leads us to be a little bit more cautious in kind of naming specific targets.

Operator:

And our next question comes from Nick Del Deo with MoffettNathanson. Please go ahead.

Jeff Stoops:

Thanks Nick.

Jeff Stoops:

I do believe that there's a lot of spectrum out there, which is why now all of the three largest carriers have now all, or either have, or are beginning to deploy fixed wireless. Don't know that, that technology's been available in the last generation, it would have worked out. I mean, just on that point, from some things that I've read, the fixed wireless subscriber takes up 20 times to 30 times the wireless – the spectrum capacity. So I mean, it's statistics like that, Nick, that give us great confidence that over time, the connection that's existed forever, at least as long as I've been around, the connection between wireless data growth and the need for additional physical infrastructure is going to continue. But yes, I mean there's a lot of spectrum out there now, but it's rapidly getting used up. And it's going to continue to rapidly get used up the more success that the customers have with fixed wireless.

Brendan Cavanagh:

Yes. I don't – I think, Nick, it does speak to the higher-margin type work that we're doing. I'm not sure that it's sustainable at that same level that we are experiencing right at the moment. Some of that is really tied to an estimate of costs as we put these jobs on the books, and we're ending up actually finding ways to operate more efficiently and come in at lower cost levels. And then as you kind of true-up [ph] those jobs, since they're accounted for on a percentage of completion basis that helps. But I think, it just is evidence of our intent to focus on high-quality, high-margin work, and we'll continue to do that. But I don't know that 30% margins are the story for the long-term.

Operator:

And next we'll hear from Eric Luebchow with Wells Fargo. Please go ahead.

Brendan Cavanagh:

Yes. Well, first of all, I think that we have tremendous access to capital. So from a refinancing perspective, I'm not concerned about that. We're actively evaluating all of our options there. And I'm confident that there are numerous markets available to us. Obviously, the costs are higher than they've been in the past. But in terms of access to capital, so that – that part of it doesn't concern me. I think, when we think about allocation of capital, though, it really is just a matter of what is the best return on investment, what is going to create the most shareholder value. So that sounds simplistic. But ultimately, that's what we're looking at. And so if we can use our capital, and maybe our leverage goes a little bit higher, which it's been in the past, certainly, because we see opportunities to invest that capital into either buybacks or new assets, we'll do that. We'd like to do that. But recently, we found that paying down debt has been the better way to go. And at some point, we'll be at a level where it's just going to be a natural shift. If that doesn't change, will be the natural shift to investment grade. And then it's just a matter of finding the right instruments that fit our capital structure to allow us to retain flexibility, but also get the best cost possible.

Eric Luebchow:

Okay. I appreciate that color. And just one follow-up question. Just quickly on domestic churn. I think, excluding the Sprint churn, you'll be at about $30 million this year, maybe around 2% of your revenues. And it's been in that ballpark for the last couple of years. As you look further out over the next few years, are there opportunities to bring that run rate churn level lower? We've heard from some peers about some of their run rate tower churn moving closer to 1% of revenue. Thanks.

Eric Luebchow:

Okay. Great to hear. Thank you guys.

Brendan Lynch:

Great. Thanks for taking my question and Jeff, want to echo everyone's congratulations as well. Maybe we could just start with the international market. You kind of described demand being above your internal expectations. And a component of that, I believe you mentioned, was the escalators. But if I understand correctly, those are more backward looking. So I'd imagine that you have pretty good visibility on that for the year. So maybe you could just get into some of the other drivers that are driving the international exposure and international profitability higher than what you had been expecting?

Brendan Lynch:

Great. That's helpful. And maybe just one on the build-to-suit program. You had some more activity there in the quarter. Maybe just give us an update on where you see those opportunities over the next couple of quarters?

Brendan Lynch:

Great. Thanks for the color.

David Guarino:

Hey, thanks. Brendan, I think this one will be for you. On the comment you made about U.S. tower validation staying high. Could you provide some more color on why you think that is? And I asked just because I guess I'm surprised, given we've had a pretty meaningful rise in interest rates over the last few months. While at the same time, we've had some concerns about lower macro tower growth that have emerged. So any additional color would be great.

David Guarino:

Yes. That's helpful. And the second one, maybe sticking with you. I'm guessing next year, you guys are going to be accessing the secured market to refinance some debt. And I know that, that's still a few quarters away. But could you maybe give us an idea of where secured borrowing costs sit today for tower assets?

David Guarino:

Great. Appreciate it.

Brandon Nispel:

Hey, great. Just one for me. And hopefully, it haven't been asked. But Jeff, hope you could talk about what you're seeing during the quarter, more specifically from an activity perspective. Specifically, I was hoping you could help us understand where you are from a year-over-year perspective, from a backlog of unsigned lease applications, and how that trended versus last quarter? Thanks.

Brandon Nispel:

Thanks.

Jeff Stoops:

Well, I usually sign off. But I'm going to let Brendan sign off.

Jeff Stoops:

It's been an honor and a privilege. And I'm not able to say, as I have in my last 100, that we – that I look forward to talking to you next quarter. But you're in good hands.

Operator:

That does conclude our conference for today. Thank you for your participation. You may now disconnect.

Operator:

Ladies and gentlemen, thank you for standing by. Welcome to the SBA Second Quarter Earnings Results Conference Call. At this time all participants are in a listen-only mode and later we will conduct a question-and-answer session. [Operator Instructions] And I would now like to turn the conference over to our host, Vice President of Finance, Mark DeRussy. Please go ahead.

Brendan Cavanagh:

Thank you, Mark. Good evening. We had another steady quarter in Q2 with solid financial results that were slightly ahead of our expectations. Based on these results and our updated expectations for the balance of the year, we have increased our full year 2023 outlook for site leasing revenue, tower cash flow, adjusted EBITDA, AFFO and AFFO per share. Total GAAP site leasing revenues for the second quarter or $626.1 million and cash site leasing revenues were $618.7 million. Foreign exchange rates represented a benefit of approximately $1.9 million when compared with our previously forecasted FX rate estimates for the quarter and a headwind of $4.2 million when compared to the second quarter of 2022. Same tower recurring cash leasing revenue growth for the second quarter which is calculated on a constant currency basis was 4.3% net over the second quarter of 2022 and including the impact of 3.9% of churn. On a gross basis, same-tower recurring cash leasing revenue growth was 8.2%. The Domestic same-tower recurring cash leasing revenue growth over the second quarter of last year was 7.8% on a gross basis and 4.2% on a net basis, including 3.6% of churn. Domestic operational leasing activity or bookings representing new revenue placed under contract during the second quarter declined from the first quarter. While all major carriers remained active with their networks, agreement execution levels in the second quarter from several of our customers were below our prior expectations. Longer term, we continue to see significant runway for new 5G-related leasing activity based on the number of our sites that remain to be upgraded with mid-band spectrum deployments by the major mobile network operators. In addition, today, we announced that we have entered into a new long-term master lease agreement with AT&T. This comprehensive agreement will streamline AT&T's deployment of 5G solutions across our tower portfolio while providing us with committed future leasing growth from AT&T for years to come. Based on this MLA, we have increased our projected contribution to 2023 leasing revenue from domestic organic new leases and amendments by $6 million from the full year projections we provided last quarter. During the second quarter, amendment activity represented 42% of our domestic bookings and new leases represented 58%. The big 4 carriers of AT&T, T-Mobile, Verizon and DISH represented approximately 89% of total incremental domestic leasing revenue that was signed up during the quarter. Domestically, churn was slightly elevated during the quarter, primarily due to faster decommissioning of legacy Sprint leases than we had projected which is the opposite of our experience last year. Based on our current analysis, we expect Sprint related churn for 2023 will be at the high end of our previously stated range for this year of $25 million to $30 million, resulting in a change to our full year domestic churn outlook of $4 million. Our views around the ultimate multiyear cumulative impact of Sprint merger-related churn have not changed. Although we continue to update our outlook around timing as more information becomes available. We now project 2024 Sprint related churn to be in a range of $20 million to $30 million, 2025 to be between $35 million and $45 million. 2026 to be $45 million to $55 million and 2027 to be $10 million to $20 million. Just as last year ended up being well below our initial churn expectations and 2023 will likely be a little above our initial expectations, we anticipate that the exact timing will continue to be somewhat fluid but in line with our provided projections. Non-Sprint-related domestic churn was in line with our prior projections. Moving now to international results. On a constant currency basis, same-tower cash leasing revenue growth was 4.8% net, including 4.9% of churn or 9.7% on a gross basis. International leasing activity was strong in the second quarter and ahead of our internal expectations. These positive results and our solid backlogs have allowed us to increase our projected contribution to 2023 leasing revenue from international organic new leases and amendments by $1 million. Inflation-based escalators also continued to make steady contributions to our organic growth. However, decreases in actual and projected Brazilian CPI rates have caused us to moderate our outlook for international escalation contributions for the full year by approximately $1 million. Overall, Brazil, our largest international market, had another very good quarter. The same tower organic growth rate in Brazil was 5.7% on a constant currency basis, including the impact of 5.6% of churn which amount was significantly impacted by our previously discussed TIM agreement. While international churn remains elevated, it continues to be in line with expectations and our previously provided outlook. As a reminder, our 2023 outlook does not include any churn assumptions related to the OI consolidation other than that associated with the TAM agreement. However, if during the year, we were to enter into any further agreements with other carriers related to the oil consolidation that would be expected to have an impact on our current year we would adjust our outlook accordingly at that time. During the second quarter, 77.5% of consolidated cash site leasing revenue was denominated in U.S. dollars. The majority of non-U.S. dollar-denominated revenue was from Brazil, with Brazil representing 16.2% of consolidated cash site leasing revenues during the quarter and 13.1% of cash site leasing revenue, excluding revenues from pass-through expenses. Tower cash flow for the second quarter was $503.5 million, Tower cash flow in the quarter benefited by approximately $7.3 million in accounting-driven cost reclassifications. Our tower cash flow margins remain very strong, with second quarter domestic tower cash flow margin of 85.5% and an international tower cash flow margin of 70.3% or 92.3%, excluding the impact of pass-through reimbursable expenses. Adjusted EBITDA in the second quarter was $471.7 million. The adjusted EBITDA margin was 70.3% in the quarter. Excluding the impact of revenues from pass-through expenses, adjusted EBITDA margin was 75.9%. Approximately 98% of our total adjusted EBITDA was attributable to our tower leasing business in the second quarter. During the second quarter, our services business had another strong quarter with $52.4 million in revenue and $13.1 million of segment operating profit. While off year ago activity levels, our carrier customers remained busy deploying new 5G-related equipment during the quarter and we have retained our full year outlook for our site development business due in part to the strength of our first half results. Adjusted funds from operations or AFFO in the second quarter was $352.7 million. AFFO per share was $3.24, an increase of 6.2% over the second quarter of 2022 on a constant currency basis. During the second quarter, we continued to invest in additions to our portfolio, acquiring 9 communication sites for total cash consideration of $7.2 million and building 64 new sites. Subsequent to quarter end, we have purchased or are under agreement to purchase 134 sites, all in our existing markets for an aggregate price of $72.9 million. We anticipate closing on these sites under contract by the end of the year. In addition to new towers, we also continue to invest in the land under our sites and during the quarter, we spent an aggregate of $10.1 million to buy land and easements and to extend ground lease terms. At the end of the quarter, we owned or controlled for more than 20 years the land underneath approximately 70% of our towers and the average remaining life under our ground leases, including renewal options under our control, is approximately 36 years. With that, I will now turn things over to Mark, who will provide an update on our balance sheet.

Jeff Stoops:

Thanks, Mark and good evening, everyone. The second quarter was another very solid one for SBA. We produced good financial results across all areas of our business and we continue to deliver high-quality service and operating results for our customers. Each of our largest U.S. customers remained active with their networks. Our customers continue to add equipment to sites in support of 5G through the deployment of new spectrum bands as well as to expand coverage through brand new colocations. We did, however, see the same slowdown in activity that many others have discussed. While we had always anticipated domestic leasing growth to moderate as we move through 2023 and organic leasing activity levels were lower than we anticipated in Q2 from some of our customers. Some of this was due, we believe, to slower activity from AT&T in anticipation of our new MLA as would be expected. We believe that these variations in activity are part of the normal cycle of carrier network investment that we have seen over time, a large initial burst of coverage activity as the next generation of technology starts to be deployed, followed by many years of coverage completion and capacity building. We are confident that there will be additional material network investment over the next several years. We believe this for a number of reasons. Most importantly, wireless demand continues to grow at a fast clip, consuming more and more of current network capacity. We have a large remaining number of sites that have not been upgraded yet to accommodate the mid-band spectrum holdings acquired by our customers over the last couple of years, some of which spectrum is not even available for deployment yet. DISH has their next phase of regulatory coverage requirements to meet in 2025 and we have our newly signed MLA with AT&T. We believe all of these items and others are supportive of multiyear continued development activity. While there will always be ebbs and flows in leasing activity levels based on a variety of factors, we believe that there will remain a need for continuous network investment just as we have seen throughout our history in this business. With regard to our announced master lease agreement with AT&T, we're very excited about this next chapter in our long-standing successful relationship. This new agreement highlights the long-term importance of SBA sites to AT&T's future network deployment plans. The agreement will improve operating efficiencies between our organizations and enhance stability with regard to future leasing growth. We look forward to working closely with AT&T for years to come under this mutually beneficial framework. In the second quarter, our services business remained busy helping our carrier customers meet deployment objectives in an efficient and effective manner. While our services business is down on a year-over-year basis, 2023 will still represent the second biggest service this year in our company's history behind only 2022. We believe our legacy and reputation in the Services business keeps us well positioned to be a go-to provider for our customers to meet their network rollout goals. Internationally, we also had another solid quarter with greater organic leasing activity than we had anticipated. During the quarter, 62% of new international business signed up in the quarter came from amendments to existing leases and 38% came through new leases with strong contributions broadly for many of our markets, including Central America, Brazil and South Africa. Brazil, our largest market outside of the U.S. was ahead of our internal expectations with contributions from each of the big 3 carriers in that market. I continue to be pleased with our operational performance, cost management and customer relationships in Brazil which has made us a leader in the market. And we have recently seen positive movements in the currency exchange rate, providing some financial benefit and increased U.S. dollars for repatriation as well as contributing to our increased full year outlook. We remain excited about our opportunities in Brazil. During the quarter, we again generated solid AFFO providing significant cash for discretionary allocation. While our strong financial position allows us to retain flexibility for future further opportunistic investment in portfolio growth and stock repurchases and we dedicated the majority of our available cash in the quarter to paying down the outstanding balance on our revolver. We immediately benefit from this by reducing our floating rate cash interest obligations which today represent among the highest cost debt in our capital structure. With the continuing high cost and limited availability of private market tower acquisition opportunities, we believe this is currently our best use of discretionary spending. Our quarter ending net debt to adjusted EBITDA leverage ratio was 6.6% which I believe to be the lowest in our history, at least as a public company. As always, we will continue to be opportunistic around investments but for the near term, likely direct future cash flows into the repayment of debt as the most accretive short term and certainly a long-term beneficial use of capital. Our balance sheet is in great shape with no debt maturities until October 2024. And since that maturity could easily be refinanced under our revolver, we are comfortable now to remain opportunistic around timing of future financings. We are a preferred issuer in the debt markets we routinely use and retain very good access to capital. We finished the quarter with 95% of our debt fixed and thus, we are only modestly exposed for now to significant interest rate fluctuations. Our exposure to floating rate debt is also expected to decline further as we continue paying down our outstanding revolver balance throughout the year. We feel very good about our current capital position. We feel fortunate to be in a sound, stable business with tremendous fundamentals and significant long-term opportunity ahead. Our customers continue to have significant network needs and we will be there to support them in meeting those needs. I want to thank our team members and our customers for their contributions to our shared success. And with that, Eric, we are now ready for questions.

Ric Prentiss:

Good afternoon, everybody. Obviously, I have some questions on the AT&T MLA, big news item there. I appreciate, I think, Randy, you said $6 million of the increase lease activity was really driven by AT&T MLA it [ph].

Ric Prentiss:

Can you hear me better now?

Ric Prentiss:

You bet. Yes, I'm sorry about that. I had another phone call come in. It's like doing something busy. Yes, I appreciate some of the color on the MLA with AT&T A couple of questions around it. Why now? And any others that you're working on? And then also suggesting that $6 million increase in guidance came from that it looks like we should be thinking maybe of kind of flattish new lease activity over the next couple of quarters. And as we exit '23, is that the way we should be thinking about it.

Ric Prentiss:

Okay. And one other one for me on the -- paying down the revolver. When does the calculus move back towards stock buyback? Because it sounds like there's still not a lot of M&A out there which would be probably your first choice. But how do we think about when the lever moves since you're down to 6.6 leverage to more stock buyback? Is that like a next year item? Is that further out?

Operator:

And next, we'll hear from Michael Rollins with Citi.

Brendan Cavanagh:

Yes, Mike. So it will certainly smooth the way that we operate with AT&T. So I think from that perspective, perhaps it impacts our reported growth numbers in terms of ebbs and flows. There may be a little bit less of that, at least as it relates to this particular agreement. From a straight-line impact, we would expect that over the course of the agreement that we will have some straight-line impacts but there are no straight line -- or very minimal straight-line impacts in the short term.

Jeff Stoops:

Yes. I think we know our site development business very well. You know it primarily centers around work almost entirely work on our towers. So we have a very good feel for it. And there's just enough work out there Mike, that was already booked earlier in the year and actually some of it probably spilling over from last year, that's now working itself through our services backlog that gives us the comfort to continue with the guidance that we have. So a lot of it is more a reflection of activity levels that occurred Q1, Q4 of last year.

Simon Flannery:

Great. I was just wondering on the leverage point, have you had any more consideration of targeting investment-grade status? Or is that -- is this going to be just a temporary that change in your overall leverage targets. And then you could just talk on [ph].

Simon Flannery:

Great. Yes. And just one follow-up. You mentioned earlier that you still got a lot of sites that have not been upgraded to 5G. Do you think as given some of the rural SKU of your portfolio, do you think that would advantage to your portfolio in the next several years versus to that initial build out?

Operator:

And next, we'll hear from Phil Cusick with JP Morgan.

Jeff Stoops:

Go ahead, Brendan.

Jeff Stoops:

Yes. And as far as the services revenue, Phil, the first half of what we report in 2024 will be largely dictated by what we do now operationally with leasing. We have 2 different components of that. We have the site acquisition component which is the planning stuff and then we have the construction which is where a lot of the current activity is taking place because that's the last part of the cycle. So we'll see. We'll see where we come out with the guidance on services but it will be obviously heavily impacted by how we finish out the rest of the year.

Jonathan Atkin:

So I was interested in doing just to contextualize the AT&T MLA, how much of your revenues for kind of this year next year, the following year, can we be considered to be fairly locked in as opposed to usage based -- segmental revenue.

Jonathan Atkin:

Overall revenue base for the whole company, how do we kind of think about how much is kind of a lock versus more the.

Jeff Stoops:

And a greater portion of the AT&T then probably exists under other agreements, although we still have some of that. And I mean I don't think that's not a number that we have focused on that. So the best we can answer, Jonathan, is that it's a much greater extent under the AT&T revenue.

Jeff Stoops:

Correct. Yes. correct.

Jeff Stoops:

Yes. I mean we continue to look for good financially smart new build opportunities. We're doing those mostly outside the United States primarily Brazil and South Africa, our 2 largest markets outside the United States. And we have a steady focus on ground lease purchases and extensions which hasn't changed at all. It's moved a little bit more international in terms of the mix just because we've been at it so long in the United States. But nothing's really changed there. We would put more capital into particularly the land purchases and extensions if the opportunities arose.

Jeff Stoops:

Yes. I mean, the answer to that question is pretty much the same as it has been for years for the right deal, we will do it. We have no strategic hole that we feel needs to be filled. In market growth because of the existing base is going to be preferred over new market growth but we would still go into a new market. If we found the right deal and I would point back to the Tanzania investment as a good example of that. But because it's all financially driven, it makes our decision to use discretionary cash to pay down the revolver that much more straightforward.

Brendan Cavanagh:

It's 5 years, Jonathan.

David Barden:

So I guess maybe 2. The first one, Jeff, just with respect to some of the actions that your competitors are taking frozen cons for being in the construction business for towers at all? Is there maybe an opportunity to redirect resources in more optimal ways? Or is there an opportunity if people are willing to give up business for you guys to lean in at the margin as we think about the go ahead business? And then second, maybe for Mark, as we think about the 25 term loan and its maturity what should the Street be doing in terms of expectations in the model with respect to how we address that cost fixed, long-term roll it? What is the plan?

Brendan Cavanagh:

On the services question, David, we've had a lot of history. Actually, you recall, that's how SBA started. So we have a very flexible cost structure that allows us to ramp up, ramp down we use a lot of subcontracted tower crews. We have our own but we also use subcontracted tower crews. And 1 of the things that has really served us well and our customers give us high praise for this is by using our services people for work on our towers for them, they are greatly benefited in terms of speed to market and efficiencies. So I don't think that changes. So I guess if I had to choose 1 of your 2 options lean out or lean in, we'll look to lean in and not be afraid to do that because of our confidence in how we manage that business.

Operator:

And next, we'll hear from Walter Piecyk with LightShed.

Brendan Cavanagh:

I can't really answer that question, Walt, because there's so many elements that go into it. what would the activity be with AT&T, otherwise, those types of things. So I can't really say for sure what it would be, given that we were working on this for quite a while. [Technical Difficulty] First, we don't like to discuss the individual customers but obviously, DISH has just gotten through a major deadline that they had. There's a little bit of a slowdown or pause, if you will, related to that. And we would expect that will eventually pick up. But given the delay between signings and revenue recognition, I would expect that will weigh year-over-year on next year. and T-Mobile was frankly very, very busy as well and you have somewhat of a similar dynamic there. But that's what we're going into for next year. But longer term, there's still a lot to do there. So we can...

Brendan Cavanagh:

If there was something incremental in what sense?

Brendan Cavanagh:

Yes. I don't think there's something particularly new. I think it's been a little bit slower than what we had anticipated before. But directionally, it's still the same. So what does that mean for next year? Does that mean $5 million difference or $10 million. I can't tell you yet. We're not ready to get there and we still have half the year to go. But it's marginally worse than what we thought in terms of the balance of the other carriers.

Walter Piecyk:

Are you seeing anything from cable, Jeff?

Operator:

And next we'll hear from Batya Levi with UBS.

Brendan Cavanagh:

Yes. So I'm sorry, what was the first part of the question?

Brendan Cavanagh:

Right. So it does -- there may be a few exceptions because of specific issues around individual sites but the vast majority of our sites are covered by the MLA.

Brendan Cavanagh:

Yes, that have AT&T on of course. And then on the escalator piece, I can't really get into the specifics around what the escalator is but our historical escalator with AT&T has been north of 3% and we would expect that to continue.

Brendan Cavanagh:

It would be. It would be if you took DISH out of the mix, you would have a much higher percentage of amendments of the total.

Brendan Cavanagh:

No, we can't give you that kind of specificity now. Much less it was but it's much less than it was exiting last year.

Nick Del Deo:

First, regarding the AT&T deal, should we think of that as pulling forward some revenue that you otherwise would have expected in the latter years into the near future? And do you feel that the totality of the revenue that you'll get from AT&T over the course of the contract is similar to what it otherwise would have been.

Brendan Cavanagh:

I mean it's hard to say because, obviously, previously, it would be very specific to the timing of when they were signing things. We don't know exactly what that timing would be. So could be pulling forward, could be pushing.

Nick Del Deo:

Okay. So we should think of it more, call it, smoothing a bit but not necessarily sort of a mass reallocation of what the revenue would have been. Is that fair?

Nick Del Deo:

Yes. Okay, great. And then, kind of two clarifications for Brendan. One, it looks like your forecast for other international revenue went up by about $9 million versus last quarter's guidance. What was that? And was it in this quarter's results? And then second, can you elaborate a bit on the $7 million in cost reclassifications that you noted in your prepared remarks -- what was it reclassified to and from? What was behind it which segment?

Nick Del Deo:

Okay. So sort of a onetime true-up?

Nick Del Deo:

Okay. Can you share anything about how much of the change was attributable to that beyond the $7 million recognized in the quarter, what it would be for the full year?

Operator:

And next, we'll hear from Brett Feldman with Goldman Sachs.

Jeff Stoops:

I will take the last one first. I believe portfolio growth will always be our most desirable and highest potential allocation of capital. where it falls today. I mean, keep in mind, we grew the portfolio 15% last year. Where it falls today is purely a function of cost of debt and availability and pricing of assets. But as long as all that works out, Brett, to achieve an investment result that we want, I don't see the preference and prioritization of portfolio growth changing.

Jeff Stoops:

It will -- you will see straight-line benefits over time over the course of the 5 years, Brett, based on various triggers and activity levels as opposed to as opposed to upon signing.

Unidentified Analyst:

One just very basic question. How do you assess that paying down the revolver is the most accretive use of free cash flow? How do you sort of put that up against the accretion you get from share repurchase? Is it as simple as what the yield of the debt is relative to your AFFO yield? And are you taking the direction of rates into consideration when you make that determination? Or is it just sort of a moment-by-moment decision that drives whether you're in the market buying back stock or paying down the revolver? And then just a follow-up question on DISH. Is there anything assumed in new leasing activity for the second half of this year from DISH in your guidance?

Jeff Stoops:

Yes. And that bodes towards stock repurchases, Jonathan, with one major exception today which is we don't know that interest rates have stopped going up. And when interest rates go up, it immediately affects the cost on the revolver. We can always buy our stock back. And that -- we take comfort in that. But when you have an increasing interest rate environment where we don't know when it's over, we just think both from a business perspective and certainly a balance sheet perspective and from an accretion perspective, pay down the revolver balance while we have one as the way to go.

Operator:

And next, we'll hear from Eric Luebchow with Wells Fargo.

Brendan Cavanagh:

Well, based on the thresholds that are there by the agencies or at least by one of the agencies right now, we're getting very close to being there, certainly within a half turn of leverage of being there. but it would be more about the commitment to staying there than it would be about hitting the leverage tier.

Jeff Stoops:

Yes. I mean it's really the latter. But I mean, we've always said we would be open to a variety of structures I mean this, I think, evidence is that openness. So for the right deal, Eric, we would do any number of structures with our customers.

Brendan Lynch:

Belaboring the point, I have a few on the maybe just high level, given the MLA with Tim and now with AT&T, has the market changed? Have customers changed? Or has your perspective changed? And then maybe if you could give us any specifics along the number of sites, minimum payment schedule. You mentioned it was sort of 5 years but I'd imagine the leases are for much longer. Any details around that would be helpful.

Jeff Stoops:

Yes. I mean, we are trying to be responsive to our customers, while at the same time being responsible to ourselves and our shareholders. and that will continue to be kind of the big picture as to how we approach these things and it could lead to more or if this could be the only one.

Jeff Stoops:

Yes. This would be a little different than that. This would be payments in exchange for AT&T having certain rights to use our towers.

Greg Williams:

Just first question on any further developments with beyond Tim with the other carriers, any ongoing discussions are you having them? And are you hopeful you can get anything done by year-end? And then just second, on the site development, it sounds like it'll hang out in the low 50s for the next few quarters. Anything to think about in terms of service margins from here?

Operator:

And we have no further questions at this time.

Operator:

And that does conclude our conference for today. Thank you for your participation and for using AT&T Event Conferencing. You may now disconnect.

Operator:

Ladies and gentlemen, thank you for standing by. Welcome to the SBA, First Quarter Results Conference Call. At this time all participants are in a listen-only mode and later we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mark DeRussy, Vice President of Finance. Please go ahead.

Brendan Cavanagh:

Thank you, Mark. Good evening. We started the year off with a solid first quarter. Our results were slightly ahead of our expectation and allowed us to increase our full-year 2023 outlook for most metrics. Total GAAP site leasing revenues for the first quarter were $617.3 million and cash site leasing revenues were $610.4 million. Foreign exchange rates represented a benefit of approximately $600,000 when compared with our previously forecasted FX rate estimates for the quarter and a headwind of $2.5 million when compared to the first quarter of 2022. Same tower recurring cash leasing revenue growth for the first quarter, which is calculated on a constant currency basis, was 4.7% net over the first quarter of 2022, including the impact of 4.2% of churn. On a gross basis, same-tower recurring cash leasing revenue growth was 8.9%. Domestic same-tower recurring cash leasing revenue growth over the first quarter of last year was 8.5% on a gross basis and 5.1% on a net basis, including 3.4% of churn. Domestic operational leasing activity or bookings representing new revenue placed under contract during the first quarter remains steady and was similar through the fourth quarter. We again saw balanced contributions from each of our largest customers. During the first quarter, amendment activity represented 51% of our domestic bookings and new leases represented 49%. The big four carriers of AT&T, T-Mobile, Verizon and DISH represented approximately 95% of total incremental domestic leasing revenues signed up during the quarter. Domestically, churn was in-line with our prior quarter projections, and our full-year churn expectations remain the same as we provided last quarter, including $25 million to $30 million of Sprint merger-related churn. Internationally, on a constant currency basis, same-tower cash leasing revenue growth was 2.5% net, including 7.8% of churn or 10.3% on a gross basis. International leasing activity was good again, with similar results to our solid fourth quarter. Inflation-based escalators also continue to make healthy contributions to our organic growth, although these inflationary rates have begun to decline from their ‘22 highs. In Brazil, our largest international market, we had another good quarter, although the impact of the previously discussed TIM agreement weighed on our first quarter, same-tower organic growth. This growth rate in Brazil was 4.7% on a constant currency basis, including the impact of 5.9% of churn. International churn remains elevated, but in line with expectations and our previously provided outlook. Excluding Oi consolidation related churn, we believe 2023 will be the high watermark for international churn. As a reminder, our 2023 outlook does not include any churn assumptions related to the Oi consolidation, other than associated with the TIM agreement, but if during the year we were to enter into any further agreements with other carriers related to the Oi consolidation that have an impact on the current year, we would adjust our outlook accordingly at that time. During the first quarter, 78% of consolidated cash site leasing revenue was denominated in U.S. dollars. The majority of non-U.S. dollar denominated revenue was from Brazil, with Brazil representing 15.5% of consolidated cash site leasing revenues during the quarter, and 12.4% of cash site leasing revenue excluding revenues from pass-through expenses. Tower cash flow for the first quarter was $491 million. Our tower cash flow margins remain very strong as well, with a first quarter domestic tower cash flow margin of 84.3% and an international tower cash flow margin of 69.9% or 91.8%, excluding the impact of pass-through reimbursable expenses. Adjusted EBITDA in the first quarter was $459.3 million. The adjusted EBITDA margin was 68.7% in the quarter. Excluding the impact of revenues from pass-through expenses, adjusted EBITDA margin was 74%. Approximately 97% of our total adjusted EBITDA was attributable to our tower leasing business in the first quarter. During the first quarter, our services business had another strong quarter, with $58.2 million in revenue and $14.1 million of segment operating profit. Our carrier customers remained busy deploying new 5G related equipment during the quarter, and our services backlogs also remained healthy at quarter end. Adjusted Funds From Operations or AFFO in the first quarter was $341.7 million. AFFO per share was $3.13, an increase of 5.7% over the first quarter of 2022. AFFO growth was hindered by increased interest rates, which are anticipated to impact growth rates throughout the year. During the first quarter, we continue to invest in our portfolio, acquiring 14 communication sites for total cash consideration of $8.6 million. During the quarter we also built 52 new sites. Subsequent to quarter end we have purchased or are under agreement to purchase 66 sites, all in our existing markets for an aggregate price of $63.7 million. We anticipate closing on these sites under contract by the end of the year. In addition to new towers, we also continue to invest in the land under our sites. During the quarter, we spent an aggregate of $11.6 million to buy land and easements and to extend ground lease terms. At the end of the quarter we owned or controlled for more than 20 years the land underneath approximately 70% of our towers, and the average remaining life under our ground leases, including renewal options under our control, is approximately 36 years. With that, I’ll now turn things over to Mark who will provide an update on our balance sheet.

Jeff Stoops:

Thanks Mark and good evening everyone. The first quarter represented a very good start to 2023. Our team continued to execute at a very high level and we produced solid year-over-year growth in each of our key metrics. Each of our largest U.S. customers remain busy and they contributed relatively equally to our organic leasing activity during the quarter. The focus of their activity was a balanced mix of adding equipment to sites in support of 5G through the deployment of new spectrum bands and infill and coverage expansion through brand new colocations. While we believe domestic activity in 2023 will fall below the peak levels of activity in 2022, we expect our carrier customers to stay relatively busy with additional network deployment over the next several years for a number of reasons. Some of AT&T's and Verizon’s C-Band licenses will not be cleared until later this year. The C-Band and 3.45 gigahertz licenses won by T-Mobile have been delayed due to the lapse of the FCC spectrum authority. Dual band radios are our customers are planning to use in their deployment supporting 3.45 gigahertz and C-Band frequencies have just been approved by the FCC and dual band radios supporting C-Band and CBRS are still pending approval. And DISH will be moving forward with additional co-locations to meet their 2025 coverage requirements. We believe all of these developments will drive multi-year continued development activity. Also encouraging about the prospects for future network development activity is the letter sent last week from CTIA to the White House, imploring the President to free up 1,500 megahertz of additional mid-band spectrum currently held by the Department of Defense and other governmental agencies. The request is for the spectrum to be made available on a full-power license basis, which obviously would have positive implications for additional macro-site activity. The request from CTIA demonstrates the industry believes that more network resources will be necessary to handle increasing demand for volume, quality and new applications and to stay competitive with the rest of the world. Just as the last 20 years has demonstrated the need for continuous network investment, we believe the future will be the same. We believe this will provide continued – a continued positive environment for SBA. Internationally we also add a solid quarter with continued steady organic leasing activity. During the first quarter, 42% of new international business signed up in the quarter came from amendments to existing leases and 58% came through new leases with particularly strong contributions from Tanzania and South Africa. Brazil also had a strong quarter, ahead of our internal expectations with contributions from each of the big three carriers in that market, as well as good-sized contributions from CPI based escalators. The integration of the GTS assets has gone very smoothly and these assets are performing well thus far, and we have seen a stabilization in the currency exchange rate that has contributed to our increased full-year outlook. We remain excited about our opportunities in Brazil over the coming years as we build on our strong customer relationships and expect meaningful 5G related investments and continued expansion of wireless services throughout the country. Moving on now to our balance sheet, we remain in a very strong position. As we have stated before, we continue to be a preferred issuer in the debt markets we currently participate in with extremely good access to capital. With respect to the current interest rate environment, fortunately we do not have any debt materials until October 2024. Thus we do not need to issue incremental debt today, unless we see a compelling use of capital that we expect to be additive to long-term shareholder value. We finished the quarter with 93% of our debt fixed and thus we are only modestly exposed to significant interest rate fluctuations. Our exposure to floating rate debt is also expected to decline further as we anticipate further paying down our outstanding revolver balance throughout the year absent other more compelling capital allocation. While our first choice for capital allocation continues to be portfolio growth, today the market is pretty slow globally and lacking attractive opportunities. That of course can change quickly and we will be ready when it does. We ended the quarter with a net debt to annualized adjusted EBITDA leverage ratio of 6.9x below our target range and giving us flexibility if we see value enhancing investment opportunities. As a result of our strong financial position and our optimism about our future, today we announced our second quarter dividend, consistently our first quarter dividend which represents a nearly 20% year-over-year increase. This dividend represents only approximately 27% of our projected AFFO in our 2023 outlook, leaving us substantial capital for additional investment in portfolio growth, stocking purchases and revolver payments. Our financial condition remains very strong. Last quarter I mentioned the fourth quarter ratings upgrade we received from Standard & Poor’s to just below investment grade. Since our last earnings release, we received another ratings increase, this time from Moody's. These upgrades are indicative of the comfort the rating agencies have and the strength and stability of our underlying business. The future of our business remains bright. Our customers continue to have significant network needs and we are committed to supporting them and efficiently and effectively meeting those needs. I want to thank our customers and I want to thank our team members for the significant effort put in by all to the contribution to our shared success. We look forward to sharing with you our progress as we move throughout the balance of 2023. And with that Eric, we are now ready for questions.

Nick Del Deo:

Hi! Thanks for taking my question, guys. It looks like you did about $20 million or $21 million in leasing in the first quarter. The guidance implies may be 51 or so for the rest of the year. Should we think of the acceleration from here being fairly linear or is it going to have a bit of a different shape to it?

Nick Del Deo:

Okay, okay, good. And then with the strike to new builds overseas, looks like the pace stepped down quite a bit versus what you were doing in 2022. So I just want to know if that's kind of normal noise or if there's something more substantive that we should be cognizant of.

Nick Del Deo:

Okay. Which countries are you most focused on from a new build perspective?

Brendan Cavanagh:

One thing Nick is that in Brazil a little bit of that slowdown is with the merger that took place among the carriers. There's some focus on that. So, that's put a little bit of a slowdown on the new builds temporarily, but we expect over time that will obviously come back and pick up.

Operator:

And next we'll hear from Jonathan Atkin with RBC.

Jeff Stoops:

Yeah, in terms of the stock repurchases, John, they are definitely high on our priority list as we demonstrated over the years and they will continue to be. We just feel like at this moment in time that we need to let the Fed do their thing and get to the point where we see that interest rates have stopped going up, because the rate that they are increasing has a direct impact on the cost of our revolving credit facility. So we think through this particular period of time, and given the rate that we're paying on the revolver, that is absolutely the best use of our temporary capital allocations, but rest assured we will be buying material amounts of stock back over the coming years. In terms of the rate of changes of the carriers, and we don't want to get into too much detail about who's exactly doing what, and I think it's been fairly well broadcast that who was spending the most money last year, and who was the most active. T-Mobile and DISH really were the two big ones last year for the industry. Verizon and AT&T were busy. And that really hasn't changed a whole lot this year other than the aggregate amounts when you add it all up, what we expect for this year in terms of the volume of activity is going to be a little bit off from last year.

Operator:

And next, we'll hear from Walter Piecyk with LightShed.

Jeff Stoops:

So, the revolver is $595.0 million Wal and absent some other use of capital allocations, that'll be paid off by the end of this year.

Jeff Stoops:

I think your intuition is, is directly correct. I mean, right now we're using dollars to pay back 6.5% debt. When that’s paid down, we won’t be earning 6.8% on our cash. So we'll be looking for other uses.

Jeff Stoops:

You know we're very confident of the debt, unless we spend additional money on something that will be obviously better, will be gone this year. So we didn't want to get off of a long-term dividend trend that we're trying to establish here just for the sake of less than a year.

Jeff Stoops:

Yeah, I think they will for sure, but they rely very heavily on outsourcing to Verizon's network, at least Charter and Comcast. So with that in mind, it’s kind of their built-in default system. What they have to do around their other spectrum that they can develop is more limited. We are getting some business from them, but of course it pales in comparison to the four traditional wireless service providers.

Operator:

And next, we'll hear from David Arden with Bank of America.

Brendan Cavanagh :

Yeah David, first on your estimate of approximately how much they represent on a run rate, that's in the right ballpark today. We still continue to have activity though with them. They are still signing up new business, not the same pace they were a year ago. And so, we'll exit the year at something, obviously, greater than that, would be our expectation given the fact that we're constantly signing up new business. And then really, it's a question of, as they turn their sights towards their 2025 obligations how much more will be required. And we're pretty confident based on our conversations with them that there will be a good bit more required, so we'll have to see. But I think for the balance of this year, a lot of it is focused on deployment of a lot of what they've already signed up. And we'll see how much more they are able to churn to the 2025 objectives by the time we get to the end of the year.

David Arden :

Right, I think yeah, that's a good point. And if I could follow-up real quick, maybe Jeff, just on your comments regarding Brazil or maybe this is also Brendan. You mentioned that if there is some sort of new agreement that evolves as a function of the Oi situation, that you would change your outlook obviously. Should the market be expecting that that is a likelihood or should the market be expecting that that's unlikely to happen in 2023? Sorry, thank you.

David Arden :

Perfect! Alright, great! Thanks Jeff.

Michael Rollins :

Thanks and good afternoon. Two questions if I could. First, just curious for your current thoughts on sustaining SBA's al-a-carte leasing framework for the domestic business, and if you have any new thoughts on the possibility of someday pivoting to a structure around comprehensive leases and comprehensive MLA's. And then just secondly, if you can unpack, within this first quarter churn, the amount that specifically came from the Sprint merger decommissioning. Thanks.

Brendan Cavanagh:

And Mike, on the Sprint churn question in the first quarter, $6.5 million of the churn, incremental churn to Q1 was related to Sprint.

A - Brendan Cavanagh:

Yeah.

Brandon Nispel :

Great! Multipart question for you Jeff. Can you talk about booking's activity in terms of unsigned lease applications and how that's trending this quarter from like a year-over-year perspective? Then you had mentioned a number of drivers in terms of why we should still be bullish on 5G investments, including Verizon, AT&T, CBAN that’s not being cleared, T-Mobile licenses, dual band radios and DISH. Which of these is the largest potential driver for leasing for you over the next couple of years. Thanks.

Brandon Nispel :

Great, thanks. And one follow-up, when do you expect to see lease applications for some of these dual band radios? Thanks.

Brandon Nispel :

Will they just – I believe it might have even been just last week that the FCC approved by waiver, the 3.45 and the C-Band dual radio equipment from Ericsson.

Operator:

And next we'll hear from Ric Prentiss with Raymond James.

A - Jeff Stoops:

Hey Ric!

Jeff Stoops:

Yeah, I would think it's not going to be a steady 20%. I would think it will – as it has since we started the dividend, it will decline a little bit each year or so over time so we can continue – while still increasing that, what may be the REIT industry's fastest growth dividend, still growing at a very fast clip, while we maintain a relatively low, relative to our peers AFFO payout ratio. That's been the strategy from the start Ric.

Brendan Cavanagh:

It should be much less than that. I mean maybe way out long term, I would say its closer to 45%, 50%, because ultimately when we're through our NOLs, it will obviously match our net income, or taxable net income. So at this stage the relationship of the tax net income to AFFO is somewhere in that 40% to 50% range.

A - Brendan Cavanagh:

Yeah, so related specifically to the Oi consolidation risk, I think you're asking, the total exposure we've ball-parked in the $25 million to $35 million range. We've through the TIM deal, that represents about $10 million of churn that we've locked in, that's in our 2023 guidance. There's nothing in there for anybody else at this point. None of those leases are up. So if it were to be added into this year through an agreement, it would be pulling some of that forward. But the total range we still think is a fair estimate over time of $25 million to $35 million, of which $10 million is already in.

A - Brendan Cavanagh:

Yeah, it's pretty much the same as it's been in the past. Our big years are ‘25 and ‘26, where we would estimate somewhere about $45 million to $50 million in each of those years. Next year as we sit here today, we think we'll be a little bit lower in the $15 million to $20 million range and then as I said, $45 million to $50 million to the following two years, and then there's some marginal amount after that, probably $10 million to $20 million that kind of dribbles out into the future. So that's the full exposure of what's left after this year.

Operator:

Next we'll hear from Batya Levi with UBS.

A - Jeff Stoops:

On the spectrum that the CTI wrote to the White House about? A brand new spectrum? Yeah, I mean there's some antenna efficiencies that may allow that to happen depending on the spectrum, but there are no radio efficiencies. There has to be new radios that are frequency specific. They could be dual band or multi band, but they are not in any of the equipment today for the spectrum that has not yet been auctioned, so that's a real opportunity should that spectrum become available. In terms of our leverage, one of the reasons that we – there are several reasons, but one of the reasons that we're using our free cash flow to pay down the revolver is exactly to your point Batya, which is to see how the Fed, how they do in their war against inflation. If they succeed, we believe rates will come down and we will kind of go back exactly to the way we have done business for 20 years. If it looks like it is more permanent that we're going to be in a higher rate environment and inflation doesn’t come under control, then we'll take a much more serious look at turning investment grade, which will actually position to do fairly well and over a manageable period of time, if that's in fact what we choose to do? I think the macro world will play itself out in the next year and we will be able to tell you with much more specificity exactly which of those paths we're going to take.

Operator:

And next we'll hear from Simon Flannery with Morgan Stanley.

A - Jeff Stoops:

Yeah, in terms of M&A, it's a combination of both of those things Simon. There's just not a lot that's being offered for sale or shopped around I mean and that's a global comment relative to past times. I think it's a combination of the interest rate environment and I think it's a combination – and added to that would be the – it's a closing gap, but there's still a gap between buyer and seller expectation. There's really, and we keep pretty close tabs on all opportunities out there and there's really not a lot. And even the fewer that we would find attractive as evidenced by the fact that we did the amounts and everything this quarter.

A - Jeff Stoops:

Yeah, we'd be open for the right opportunity similar to our past practices. We would obviously be careful and thoughtful, but we're not foreclosing new markets.

Jeff Stoops:

Our customers have all been very, and they haven't said anything different to us, have all been very careful to describe fixed wireless as a product that really is just for excess capacity on the 5G network and I don't know if that'll change or not. I mean, they're all – well, the ones that are offering it more intentionally are doing very well. So, I mean you could see at some point that there is specific capital allocation, purely justified off of the fixed wireless. But I cannot tell you today that any activity that we're seeing is predominantly there because of fixed wireless.

Jeff Stoops:

Oh yeah, it absolutely would be. But you got to have to deploy it. You got to have to deploy at a minimum radios for that and in most cases probably antennas too.

Operator:

Our next question comes from Phil Cusick with JP Morgan.

A - Jeff Stoops:

I'll take the South Africa question and Brendan, you could take the DISH question if you have the answer. We know it's at the spectrum holding level Phil. I mean, that's probably about as best as we can. We can get back to you with the exact legal entity if you'd like, but it's with the entity that has the spectrum. So on the South Africa question, you know power is an issue and there is a movement effort by some carriers, particularly – well, I'm not going to name them specifically, but to outsource power on the towers. And it is something that we’re looking at. The bigger issue in South Africa and one that we're working on and hopefully we'll have something meaningful for both us and our customers in the future, is security. And we really don't want to spend a lot of money on power supply, solving those issues until you have the site facilities secured, and that involves a wide range of potential solutions Phil, which we've got a lot of folks looking at and studying and I think we'll be able to share more with you on that over the coming year.

Operator:

And next we'll hear from Brett Feldman with Goldman Sachs.

Jeff Stoops:

Well, other than some assets which are very de minimis to the operation of our data center in Brazil or our towers internationally, we don't have any fiber businesses internationally Brett, so nothing really to divest there. In terms of new builds, over time they should continue to be a steady, although I don't know if it will be growing number of new build opportunities. The new build market in the U.S. has slowed somewhat as carriers have focused more on amending their existing sites to roll out most efficiently their 5G. And I will also tell you that the cost of new builds have gone up tremendously in the last five years. They may have doubled over that period of time. So I think that's providing a bit of a damper on activities as well.

Jeff Stoops:

Yeah, the same names are still out there, but the volumes are well down.

Operator:

Our next question comes from Brendan Lynch with Barclays.

Jeff Stoops:

Yeah, I don't want to speak for our customers, but I will tell you that the literature that's available on this topic from organizations like Light Reading [ph] for example really go into quite a bit of detail as to what our customers plans are with respect to those dual band radios, including one of our customers said to not deploy any of certain amounts of spectrum that they already have until those dual-band radios are. So I mean that's what I know and I don't want to really talk more about specific customer discussions, but I think if you look at that literature, you will see a picture that is very clear that there's, there has been holdback in terms of what our customers would otherwise do, pending the availability of that type of equipment. And in particular, you know right now the deployment is a separate radio and antenna for C-Band and 3.45. It'll be a more efficient form function when they are combined and to the extent that they were doing that in one truck roll with the two different radios, they would have the efficiencies of a single truck roll. So that's a long-winded way of saying, yeah, we think it's going to be a positive development when that equipment is available.

Brendan Cavanagh:

Not really, because we are obviously focused on aged accounts receivable, which are not – we're doing fine on collections. So a lot of that's really just timing around some of the services contracts, generally services related in terms of fluctuations not leasing.

Operator:

Next question comes from David Guarino with Green Street.

Jeff Stoops:

Well, I think you'd see a tremendous amount of increased densification, because that will be the only way to satisfy demand in a spectrum constrained environment. The question is, it's the age-old question, who's going to pay for that and are our customer's buying going to find a good enough return on investment? I mean if there’s no more spectrum Dave, there has to be self-splitting and densification.

Jeff Stoops:

I would say to densify within the existing spectrum and to have no additional spectrum introduced into the system. If you were going to truly build out to the max, to achieve the max 5G capabilities, I would tell you, we have a lot of opportunity and a lot of room on our towers that would need to be filled for our customers to achieve that.

Brendan Cavanagh:

Yeah, we've got about 130 or so sites right now, then a bunch more in construction, so we would expect to end the year in the high 100s somewhere.

David Guarino:

But nothing else on the horizon that you are aware off?

David Guarino:

Okay. Thank you.

Eric Luebchow:

Great, thanks for taking the question. Just curious, for the two large U.S. carriers that are already deploying C-band today, any kind of rough estimate on how many of your sites has been upgraded just to give us a sense for how long the growth there will be in the next few years?

Eric Luebchow:

Okay, helpful. And I guess when you think about the dual band radios, is there any real difference in your ability to monetize amendments, whether they are separate C-band and 3.45 radios, or if it's a dual-band, is it relatively equivalent in terms of your amendment revenue?

Eric Luebchow:

Got it, makes sense. And just last for me, I know you've made a couple of smaller data-centered investments kind of studying the edge compute market I guess. Have you had any learnings from those or anything to report that maybe could give you some confidence to get bigger in that space over time, either through new development or M&A?

Eric Luebchow:

Okay, great. Thank you.

Greg Williams:

Great, thanks for taking my questions. First one is on services. Your site development came in a bit stronger. Should we expect that also to sort of come down a little bit linearly? And second question is just on the dual-band radio opportunity on network services. So if T-Mobile and AT&T start deploying that, could we see an uptick in our services above and beyond your guidance? Thanks.

Brendan Cavanagh:

Yeah. And when the dual-band deployment start Greg, certainly that's going to benefit our services business.

Operator:

And we have no further questions at this time.

Operator:

That does conclude our conference for today. Thank you for your participation. You may now disconnect.

Operator:

Ladies and gentlemen, thank you for standing by and welcome to the SBA Fourth Quarter Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mark DeRussy, Vice President of Finance. Please go ahead.

Brendan Cavanagh:

Thank you, Mark. Good evening. We finished up an outstanding 2022 with another very strong quarter. Our fourth quarter results were ahead of our expectations and allowed us to finish at or near the high end of our full year 2022 outlook for most metrics. Total GAAP site leasing revenues for the fourth quarter were $609.6 million and cash site leasing revenues were $600.5 million. Foreign exchange rates represented a benefit of approximately $800,000 when compared with our previously forecasted FX rate estimates for the quarter and a benefit of $2.2 million when compared to the fourth quarter of 2021. Same tower recurring cash leasing revenue growth for the fourth quarter, which is calculated on a constant currency basis, was 5.1% net over the fourth quarter of 2021, including the impact of 4.2% of churn. On a gross basis, same-tower recurring cash leasing revenue growth was 9.3%. Domestic same-tower recurring cash leasing revenue growth over the fourth quarter of last year was 8.5% on a gross basis and 5% on a net basis, including 3.5% of churn. Domestic operational leasing activity or bookings representing new revenue placed under contract during the fourth quarter was not as strong as the third quarter, but still solid. We saw meaningful and balanced contributions from each of our largest customers. Full year organic leasing contributions to domestic site leasing revenue ended up in line with our outlook provided on our prior earnings call. During the fourth quarter, amendment activity and new leases each represented 50% of our domestic bookings. The big four carriers of AT&T, T-Mobile, Verizon and DISH represented approximately 95% of total incremental domestic leasing revenue signed up during the quarter. Domestically, we again experienced less churn than we had projected due to timing of merger-related decommissionings being later than we had previously estimated. We still expect to incur this churn and have incorporated our reduced 2022 domestic churn amount into our outlook for 2023. Internationally, on a constant currency basis, same-tower cash leasing revenue growth was 5.4% net, including 7.6% of churn or 13% on a gross basis. International leasing activity was very good again with similar results to our strong third quarter. 2022 was one of the strongest years in the company’s history for international gross leasing activity or bookings. In addition to strong customer activity levels across many of our markets, we continue to see healthy contribution from inflation-based escalators. In Brazil, our largest international market, we had another very strong quarter. Same-tower organic growth in Brazil was 13.2% on a constant currency basis. Similar to the third quarter and as anticipated, international churn remained elevated in the fourth quarter due primarily carrier consolidations and Digicel’s previously announced exit from Panama. During the fourth quarter, 78.5% of consolidated cash site leasing revenue was denominated in U.S. dollars. The majority of non-U.S. dollar-denominated revenue was from Brazil, with Brazil representing 15.1% of consolidated cash site leasing revenues during the quarter and 12.1% of cash site leasing revenue, excluding revenues from pass-through expenses. Tower cash flow for the fourth quarter was $485.9 million. Our tower cash flow margins remain very strong as well with a fourth quarter domestic tower cash flow margin of 85% and an international tower cash flow margin of 69.4% or 90.9%, excluding the impact of pass-through reimbursable expenses. Adjusted EBITDA in the fourth quarter was $460.7 million. The adjusted EBITDA margin was 68.1% in the quarter, again, impacted slightly by outsized services revenue. Excluding the impact of revenues and pass-through expenses, adjusted EBITDA margin was 73.1%. Approximately 96% of our total adjusted EBITDA was attributable to our tower leasing business in the fourth quarter. During the fourth quarter, our services business had another very strong quarter, with $76.5 million in revenue and $19.3 million of segment operating profit. We finished 2022 with our most successful services year in company history as measured by both revenue and profit by a very wide margin. Services backlogs remain very healthy at year end, although off the record high hit earlier in 2022. Our fourth quarter services results were again primarily driven by T-Mobile and Verizon. Adjusted funds from operations or AFFO in the fourth quarter, was $340.7 million. AFFO per share was $3.12, an increase of 11% over the fourth quarter of 2021. AFFO results finished ahead of our prior outlook, but were still negatively impacted relative to our outlook assumptions by our early refinancing of $640 million of secured tower revenue securities in November at a higher interest rate than the retired debt. During the fourth quarter, we meaningfully expanded our portfolio acquiring 2,642 communication sites for total cash consideration of $736.7 million, which included 2,632 sites acquired from Grupo TorreSur in Brazil for approximately $725 million. During the quarter, we also built 162 new sites. Subsequent to quarter end, we have purchased or are under agreement to purchase 31 sites all in our existing markets for an aggregate price of $23.2 million. We anticipate closing on these sites under contract by the end of the second quarter. In addition to new towers, we also continue to invest in the land under our sites. During the quarter, we spent an aggregate of $15.9 million to buy land and easements and to extend ground lease terms. At the end of the year, we owned or controlled for more than 20 years. The land underneath approximately 70% of our towers, and the average remaining life under our ground leases, including renewal options under our control, is approximately 36 years. Looking ahead now, this afternoon’s earnings press release includes our initial outlook for full year 2023. Our outlook reflects continued year-over-year growth across our leasing business, including an increase in organic leasing revenue contributions from new leases and amendments largely due to the strong new leasing activity we experienced during 2022. We also forecast significant revenue growth contributions from non-organic additions, primarily as a result of having the assets acquired from GTS in Brazil in our results for a full year in 2023. In addition, our leasing revenue outlook contemplates increased impacts from customer churn in 2023. Domestically, the increase is mainly in connection with the anticipated Sprint-related decommissioning, some of which we had previously expected in 2022. Due to the timing shifts of some of these decommissionings, including during the fourth quarter, we are now including an estimate of $25 million to $30 million of Sprint-related churn in our full year outlook. Our previously provided estimates of aggregate Sprint-related churn over the next several years remain unchanged. Internationally, our outlook includes increased churn as well, including carryover impacts from Digicel in Panama and carrier consolidations in Central America. In addition, our international churn includes approximately $10 million associated with an agreement we have entered into TIM Brazil, to address their consolidation of a portion of Oi Wireless. This agreement has accelerated certain turn impacts with us in exchange for longer-term business commitments from TIM, and we believe positions us well for a long, mutually beneficial relationship with TIM. Our 2023 outlook does not include any other churn assumptions related to the Oi consolidation. But if during the year, we were to enter into any further agreements with other carriers related to this that have an impact on the current year, we would adjust our outlook accordingly at that time. With regard to our Services business, our full year 2023 outlook reflects the year-over-year decline in revenues and adjusted EBITDA contribution but starts ahead of where our 2022 outlook started. If not for the phenomenal 2022 services results, our outlook for 2023 would represent the best year for services in our company’s history. As I mentioned a moment ago, we continue to have very healthy services backlog. And as a result, we expect another very strong year for this business. The outlook does not assume any further acquisitions beyond those under contract today and also does not assume any share repurchases. However, we are likely to invest in additional assets or share repurchases or both during the year. Our outlook for net cash interest expense and for AFFO does not contemplate any further financing activity in 2023, but it does assume we deploy excess cash into repayments of our outstanding revolver balance. Under this assumption, we would end the year with leverage in the mid 6x area, but we project that we would still incur approximately $36 million of increased net cash interest expense compared to 2022. Finally, our outlook for AFFO per share is based on an assumed weighted average number of diluted common shares of $109.6 million, which assumption is influenced in part by estimated future share prices. We are excited about 2023. Our customers remain active, and we expect to produce very strong results as we help them to achieve their network build-out goals. Before turning the call over to Mark, I would like to take just a moment to discuss the succession plan announced this afternoon. I’m truly honored to have been entrusted with the leadership of this tremendous company. I’ve had the privilege of spending the last 25 years at SBA and spending all of those years working closely with Jeff as the company has grown significantly under his leadership. Jeff has been a great friend and mentor to me and I look forward to continuing to have his counsel as Chairman of the Board. I’m very excited about the future of SBA. We have an amazing business that is part of a great and still growing industry. Our financial strength and very talented leadership team position us well to be a critical support to our customers and to capitalize on many future opportunities. I greatly look forward to working with the rest of the SBA team to continue rewarding shareholders and building upon the company’s great legacy. With that, I’ll turn things over to Mark, who will provide an update on the balance sheet.

Jeff Stoops:

Thanks, Mark and good evening, everyone. The fourth quarter was a strong end to one of the best operational years in our history. For the full year 2022, we beat the midpoint of our original full year guidance for revenue by almost 8% for AFFO per share by 5%. We grew our tower portfolio by over 15%, including entering into a new market in Tanzania, which has gone very well. We had a very strong year for lease-up, including one of the best ever internationally. Our Services business had its best year ever, beating the midpoint of our original outlook for services revenue by 46%, and we grew and expanded our relationships with our largest customers worldwide, setting us up for a bright future. During the fourth quarter, our domestic same tower leasing revenue growth was the highest of the year. All of our largest U.S. customers remain busy during the quarter with relatively balanced contributions from each of them as they continued adding equipment to sites in support of the deployment of new spectrum bands. As evidenced by our full year 2023 outlook, we expect the contribution to revenue growth from domestic leases and amendments to be good again this year, and we expect all of our largest customers to stay relatively busy with additional network deployment during 2023, although perhaps at levels slightly below the peak periods of activity we experienced in 2022. Each of the largest U.S. carriers still have significant remaining network needs. So we are confident we will see solid activity on our domestic power portfolio for years to come. Internationally, we ended the year with another very strong organic leasing quarter. During the fourth quarter, 60% of new business signed up in the quarter came from amendments to existing leases and 40% gain through new leases. International leasing activity was ahead of our internal expectations and led by strong contributions from Brazil, South Africa and Tanzania, our largest markets. In 2022, Brazil had, in particular, a very strong year. Lease-up in Brazil for the year was well ahead of internal expectations, and we also had a larger-than-anticipated contribution from CPI-based escalators. We realized material portfolio growth in Brazil, primarily as a result of the GTS acquisition for which the integration is going very smoothly. The foreign exchange rate fluctuations have stabilized over the last year and were actually a slight tailwind to our 2022 results. As Brendan mentioned, we recently entered into an agreement with 1 of the 3 major carriers in Brazil to address Oi consolidation issues in our broader long-term relationship, and we may do something similar with our other major customers in that market. We believe there are great opportunities for future growth in Brazil, particularly with recent 5G spectrum options as the driver. One item we are watching in Brazil is always recent filing for injunctive relief from some of their debt payments. We currently expect that Oi must and will continue to pay their operational vendors, including rents to tower providers. And to date, we have had no collection issues. Our financial exposure to Oi is much reduced given the recent sale of most of their wireless operations to the other 3 mobile carriers in Brazil, with Oi representing approximately 3.5% of our total international revenue. Our sites are critical to the operation of Oi’s network, and we have very long-term leases. As a result, we will likely see a little impact from this latest filing. However, we will, of course, continue to monitor the situation closely. Moving on now to our balance sheet, we remain in a very strong position. During the fourth quarter, in order to address the nearing maturity date, we completed a new 5-year ABS offering. And while the interest rate was higher than we would have liked, we were very pleased with the significant level of demand for our offering. We continue to be a preferred issuer with extremely good access to capital. While we have good access to additional debt capital, we will be very thoughtful this year when considering issuing incremental debt in the current rate environment, which would only be done for a compelling use of capital, similar to our Tanzanian GTS acquisitions in 2022. With completion of this refinancing, we now do not have any debt maturities until October of 2024. We finished the year with 93% of our debt fixed, keeping us largely insulated for the time being from significant interest rate fluctuations. Even with the GTS acquisition, we ended the year with a net debt to annualized adjusted EBITDA leverage ratio of 6.9x, below our target range. The strength of our operations and balance sheet and the steady growth in our cash flow allowed us to once again announce an increase of nearly 20% in our quarterly dividend. This increased dividend still represents only approximately 27% of our projected AFFO and our 2023 outlook, leaving us substantial capital for additional investment in portfolio growth, stock repurchases and revolver payments. The strength of our business and capital structure was recently recognized by the rating agency Standard & Poor’s. Since our third quarter earnings release, S&P increased our corporate rating to BB+, only one notch below investment grade. While a good development, we do not, however, have a specific goal of being an investment-grade company. Should we continue to use AFFO to pay down our revolver and reduce leverage, that would be a tactical choice to generate a guaranteed return to the higher interest rate environment compared to other uses of capital and not a change in our long-term views on the use of leverage. We would be building capacity and biding our time for the next opportunity to issue incremental debt at more attractive rates. We believe the stability and financial strength we offer provides shareholders strong opportunities for additional value creation. I want to end on our succession news. The Board and I have been working on succession planning for several years. We appropriately considered the pros and cons of an external search versus the appointment of an internal candidate as our next CEO. Brendan has, for many years, been growing as the leading internal candidate to be our next CEO with increasing internal and external responsibilities. We are confident we have made the right call. Brendan is an extremely talented executive, equally adept with internal and our external matters, strategy and shareholder value creation. His knowledge of SBA and our industry are without equal. He’s well known and respected in the investment community. SBA has an extremely bright future in his hands, and I get to remain very involved and invested in that as the future Chairman of the Board. So a little bit about my decision. It’s been very difficult, as you can imagine, given my love for involvement with SBA for more than 25 years. But the reasons are very simple. I turned 65 this year. And I’ve reached a point in life where I want to do some things while I still can, but I can’t do while running SBA full time. Things like spending more time with family, a growing number of grandchildren, travel, spending more time at our home in South Carolina and charity work, very basic reasons that I believe we all consider at various times in our life. With these things vying for my time and attention, it became clear that now is the right time to turn over leadership to Brendan and the next generation of our exceptional leaders. As you can see from our fourth quarter results and full year 2023 outlook, I am retiring at a time when SBA’s financial help and prospects are extremely strong. I want to thank all of you on this call or otherwise that have played a role in SBA’s success over the years. We have accomplished a lot, and it certainly has taken the work of many. I consider myself extremely fortunate have had the opportunity to lead such a talented group of individuals as we have at SBA, and to have been able to interact and build relationships with a much larger group of customers, constituents, friends, business partners and others who have all contributed to our success. And with that, Eric, we are now ready for questions.

Ric Prentiss:

Thanks, Jess. First, Jeff, congrats. Grandbabies are fine. I know you’re going to have fun with them as I am and Brendan, looking forward to working with you in your new role.

Jeff Stoops:

Thanks, Rick.

Jeff Stoops:

Yes, I think that is the seminal question, Rick. And I think, to be honest with you, I can’t name a 5G application that exists today that is kind of in the got to have category. And I think that’s what the whole ecosystem of wireless is waiting on. And when that happens, and I believe it’s a question of when, not if, you’re going to see a heightened sense of needing to invest and make sure that the competition doesn’t get too far ahead. But until that comes along, I think it’s sensible for our customers, particularly ones that have some promises to the Street on free cash flow and things like that, I think, to moderate. And based on all the commentary and what we heard from Ericsson yesterday, I mean that’s what’s going on.

Brendan Cavanagh:

Yes, Ric. So the pacing this year, we would expect will be higher growth in the first half of the year with a slight step down in the second half of the year. That obviously is dependent somewhat on how leasing activity goes in terms of signing up new business here in the first half of the year. But the first half is pretty much locked in for the most part based on the success of the leasing activity we saw at the end of last year. I mean your second part you were breaking up just a little bit. I think you were asking about the other on international. Is that...

Brendan Cavanagh:

Yes. So it’s a variety of things. In the case of international, there are some increases to pass-through expenses, which is the main driver. And then in the U.S., it’s a mixed bag. There is some other, what we kind of call, cash basis revenue that we’ve assumed will come in the first half. So it’s things like that. That’s really just our estimate of the year-over-year change as opposed to an absolute change as the business gets a little bit bigger, those things tend to grow.

Jeff Stoops:

Thanks, Ric.

Phil Cusick:

Hey, congratulations to both of you, Jeff and Brendan. Well deserved.

Brendan Cavanagh:

Thank you, Phil.