Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by.
Yes, Okay first quarter results conference at this time, all participants are in listen only mode. Later, well conduct a question and answer session and instructions will be given that time.
If you should require assistance during the call. Please press Star then zero.
As a reminder, this conference is being recorded.
I'd now like turn the conference over to our host Vice President Finance Mark Derussy. Please go ahead.
Good evening. Thank you for joining US recipes first quarter 2020 earnings conference call.
Here with me today for Jeff Stoops, our President and Chief Executive Officer, and Brendan Cavanagh, <unk>, our Chief Financial Officer.
Some of the information will discuss in this call is forward looking including but not limited to any guidance for 2020 and beyond in today's press release and in our SEC filings. We detailed material risks that may cause our future result to differ from our expectations. Our statements RASM today may fit and we have no obligation to update.
Any forward looking statement, we may make.
In addition, our comments will include non-GAAP financial measures and other key operating metrics. The reconciliation up and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our Investor Relations website with that I'll now turn the call over to Brett.
Thank you Mark good evening.
Well, that's b. I had another solid quarter operationally and financially and given the unprecedented events occurring around the globe, we feel both pleased and fortunate to be able to report our results.
Total GAAP site leasing revenues for the first quarter were $492.3 million and cash site leasing revenues were 490 million.
Foreign exchange rates were 2.7 million dollar headwind to revenues when compared with our internal estimates for the first quarter.
They were also a headwind on comparisons to the first quarter 2019.
Same tower recurring cash leasing revenue growth for the first quarter, which is calculated on a constant currency basis was 5.6% over the first quarter of 2019, including the impact of 2.2% of churn.
On a gross basis same tower growth was 7.8%.
Domestic same tower recurring cash leasing revenue growth over the first quarter of last year was 7.6% on a gross basis and 5.1% on a net basis, including 2.5% of churn, 0.7% of which was related to metro leap and Clearwire terminations.
Domestic operational leasing activity, representing new revenue placed under contract during the first quarter was slower than the year ago period, and similar to the fourth quarter of 2019 due to T mobile Brent and dish awaiting resolution of the legal challenges to the sprint T mobile merger and the ultimate.
Closing of the merger.
Amendment activity was again, the large majority of our domestic bookings with newly signed up domestic leasing revenue coming 84% from amendments and 16% from new leases.
Despite the lack of contribution from T mobile and sprint the big four carriers now big three carriers still represented 79% of total incremental domestic leasing revenues signed up during the quarter.
We did have some nice contribution to domestic leasing activity from a couple of regional carriers.
Our domestic application backlog remains strong and we expect that with the closing of the sprint T. Mobile merger now behind US we will soon begin to see a significant increase in incremental leasing activity.
Early activity post merger has finally begun.
Internationally on a constant currency basis same tower cash leasing revenue growth was 8.1%, including 0.5% of churn or 8.6% on a gross basis.
Leasing activity internationally was largely inline with expectations for the quarter.
This quarter, Brazil was again, the largest contributor to international lease up and we continued to see contributions from all four major carriers there.
Gross same tower organic growth in Brazil was 10.8% on a constant currency basis.
During the first quarter, 84.1% of consolidated cash site leasing revenue was denominated in us dollars.
The majority of non U.S. dollar denominated revenue was from Brazil, with Brazil, representing 12.8% of all cash site leasing revenues during the quarter and 9.6% of cash site leasing revenue excluding revenues.
From pass through expenses.
Tower cash flow for the first quarter was $398.1 million.
Our industry, leading domestic tower cash flow margin was 84.2% in the quarter.
International Tower cash flow margin was 70.4% and was 90.5% excluding the impact of pass through Reimbursable expenses.
Adjusted EBITDA in the first quarter was $369.9 million our industry, leading adjusted EBITDA margin was 71.9% in the quarter up 150 basis points from the prior year period.
Excluding the impact of revenues from pass through expenses adjusted EBITDA margin was 76.7%.
Approximately 99% of our total adjusted EBITDA was attributable to our tower leasing business in the first quarter.
Our first quarter tower cash flow margin and adjusted EBITDA margin, we're both record highs for SPX.
As AFFO in the first quarter was $259.9 million AFFO per share with $2.28, an increase of 10.1% over the first quarter of 2019, and a 13.5% increase on a constant currency basis.
During the first quarter, we continue to invest in expanding our tower portfolio acquiring 69 communication sites for $79.9 million and building a total of 49 sites in the quarter.
Subsequent to quarter end, we have purchased or agreed to purchase 137 additional sites at an aggregate price of $52 million, which sites. We anticipate closing by the end of the third quarter.
We also continued to invest in the land under our sites, which provides both strategic and financial benefits.
During the quarter, we spent an aggregate of $6.9 million to buy land in easements and to extend ground lease terms.
At the ended 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 35 years.
In our earnings press release. This afternoon, we included an update to our outlook for full year 2020.
The most material changes to our outlook are the result of significant changes in foreign currency exchange rates. Since we initially provided our 2020 outlook.
The weakening of the Brazilian real South African Rand and Canadian dollar relative to the U.S. dollar have caused us to revise our estimates for these currency exchange rates for the balance of 2020.
The combination of these estimate changes and the actual first quarter exchange rates relative to our prior assumptions.
Have negatively impacted our outlook for site leasing revenue by $47 million.
Our cash flow adjusted EBITDA, and AFFO were negatively impacted by 32 million 30 million and $29 million respectively. Due to these updated exchange rate assumptions.
Hey, AFFO per share was negatively impacted by approximately 26 cents.
Excluding the impact of these foreign currency related adjustments, we raised our full year outlook for leasing revenue tower cash flow and AFFO per share.
Even with the T mobile sprint merger related overall industry slowdown in the us in the second half of last year and year to date. This year, we still anticipate another year of solid growth in our leasing business, although primarily concentrated in the second half of this year.
We raised our full year domestic leasing revenue expectations. Although we have made a minor reduction to the anticipated contribution from new leasing activity, both domestically and internationally due primarily to a conservative view around the possible impacts from the covert 19 pandemics.
While these are immaterial changes and we haven't seen any material delays to date. It is impossible today to say with certainty that there will not be some minor impact from covert 19 somewhere in our business this year.
Similarly, with regard to our services business, we have lowered our full year revenue outlook largely due to potential impacts from KOVA 19, and slower activity levels in the first half of the year pending the expected lift from uptick from T Mobile post merger.
Our full year outlook still contemplate the pickup in our leasing and services businesses in the second half of the year, particularly now that the sprint T mobile merger has closed.
Our customers have a ton to do and it is apparent to us and our backlogs in our in our discussions with them.
As a result, we remain excited about not only 2020, but the next several years of activity.
Ill now turn things over to Mark who will provide an update on our liquidity position and balance sheet. Thanks, Brendan we ended the first quarter with $10.7 billion of total debt and $10.4 billion net debt.
Our net debt annualized adjusted EBITDA leverage ratio was 7.0 times down 110th of a terms since last quarter.
First quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 3.9 times, which was up 110th of return since last quarter.
On February 4th we issued $1 billion of new seven year unsecured senior notes at an interest rate of 3.875%.
Proceeds of which we used to redeem all of our outstanding 2000% to 4.875% senior notes pay the associated call premium on those notes and repay portion of the balance outstanding under our revolving credit facility.
As of today, yes bidding balance under our revolver is $380 million.
A weighted average coupon of our outstanding debt is 3.6% and our weighted average maturity is approximately four years.
During the first quarter, we repurchased 824000 shares of our common stock for 200 million dollar or average price of $242.86 per share.
Ill shares repurchased were retired as of today, we have $424.3 million of repurchase authorization remaining under our $1 billion stock repurchase plan.
The company shares outstanding as of March 30, Onest 2020 are 111.6 million compared to $113.2 million at March 30, Onest 2019, a reduction of 1.5%.
In addition, during the first quarter, we declared and paid a cash dividend of 52.2 million or 46.5 cents per share and today, we announced that our board of directors declare an equivalent second quarter dividend of 46.5 cents per share payable on June 18, 2022 shareholders.
Record as of the close of business on May 28, 2020 with that I'll now turn the call over to Jeff Thanks, Mark and good evening everyone.
The first quarter was a solid start to the year financially and operationally for SPX, we produce leasing revenue Tcf and AFFO per share that we're all well ahead of our expectations, our domestic and international Tcf margins as well as our adjusted EBITDA margin for the quarter, where the highest in our company's history at ARIA.
FFO per share growth on a constant currency basis of 13.5% over the first quarter of last year was evidence of the tremendous growth characteristics of our business a very resilient predictable business. The solid growth gives us great confidence and continuing to invest in our business, while paying out one of the fastest growing dividend.
Setting, where we announced today, our second quarterly dividend over the year at an annual excuse me at an amount up 26% over our quarterly dividend paid in the second half of last year. During the quarter, we were active both adding assets to our portfolio and repurchasing our stock we invested over.
For 100 million in new assets, and repurchased 200 million of our stock were once again opportunistic in our share repurchase efforts buying stock at an average price of $242.86.
While all of that certainly sounds great. Our costs. These days are largely consumed by coated 19.
The global impact of the Cobot 19 pandemic has been dramatic we've all been affected in some way, including us via our.
Our Hearts go out to those that have lost loved ones are at health complications due to this virus.
And we have also concern for those who have lost jobs are faced economic hardships due to the far reaching shutdowns undertaken in response to the virus.
Thankfully, we have only had a handful of team members test positive, which we're very fortunate for with the global workforce of almost 1500 team members thankfully, they're all doing okay. Prior to the Coven 19 crisis SP I was not a telecommuting company, we learned to become a telecommuting company in 14 countries in the less.
In a week.
For those of our team members and essential jobs, where they did not work from home, including all of our services team members working for our customers every day, we developed state of the arc health and safety protocols with a cost and assistance of medical professionals I don't feel we missed a beat I salute all of our team members for their dedication service.
And commitment.
At SPJ, we recognized both that we are fortunate to be at an industry that is proven resilient to the challenges of the current environment and that we have an obligation to support the communities in which we live and work.
One thing that has become abundantly clear during this crisis. This a tremendous importance of broadband and wireless connectivity a cornerstone to the continued functioning of much of our society. During this time of social assistance.
In recognition of this we have supported our customers and their efforts to address the needs of our communities. Our tower crews have been on the front lines installing equipment checking equipment, performing maintenance and repairs checking and resetting power systems and performing other site level task not normally within SBH scope we.
Even short uninterrupted access to sites for authorize personnel seven days, a week 24 hours a day.
And many of our international markets, we've made sell on wheels solutions available to our customers at no charge. We've also accelerated payments to certain of our vendors facing hardships. We are busy all of our team members remain fully employed and we have recently added some employees in anticipation of a more active second half.
Finally, Sps committed material financial resources to support charitable organizations in each of the domestic and international markets, where we have offices. We believe it is important to support the communities, where our team members live work and raised their families and we feel fortunate that we're able to do it.
From a financial standpoint, our business continues to be strong during these challenging times the impacts to our core business from coated 19 of the minor a few delays share there.
Only material negative impact we currently expect to our financial projections as you heard from Brendan is due to weaker foreign exchange rates at our largest international markets. We are hopeful that these rates will improve when the current crisis as east but for now we continue to keep local cash flows in local markets supporting local operations.
So there will be no impact to our day to day operations in those countries. The bottom line is the future is very bright for SPX. In fact, as you heard for Brendan but for foreign exchange adjustments, we would have been increasing our full year outlook in a number of important areas, including a AFFO per share where financially health.
Well position and a critical business and there are number of growth drivers ahead of us.
One of those growth drivers is of course, the new T mobile.
With the closing of the T mobile spread transaction now behind US we're on the Costco significant network investment by all of our us customers in order to meet their required fiveg coverage goals, the new T mobile will require meaningful upgrades across their combined portfolio deploying both 2.5 gigahertz spectrum.
100 megahertz spectrum.
Post merger discussions and early activity are underway, Verizon and 80 and see our each active and upgrades in network expansion for both Fourg and Fiveg as well. In addition, ATM Tees Firstnet build out continues in full swing and deployments survey Ws three and WCS spectrum continue.
We anticipate that both the CBR acid C band spectrum auction scheduled for later this year will be highly competitive, but ultimately a material driver of incremental growth for the tower industry, particularly the C band option. This critical mid band spectrum is expected to be a key component of future Fiveg network deploy.
Moments and it will require the deployment of new equipment at many of our customers existing macro subs.
On top of all those fish will be active investing heavily to meet their own fiveg coverage commitments as they begin to build out of a branded nationwide facilities based wireless network.
Major initiatives will all support continued growth for us BA for at least that several years.
Okay.
Internationally, we expect our business to remain steady.
While some of our customers outside the us may feel the impact of cobot 19 more than those in the us at least in the short term due to government imposed consumer payment deferrals. The reason those deferrals were implemented in the first places that wireless is and will remain the primary means of communications in these markets expanded.
Wireless services capability in reliability required by the market and perhaps regulatory authorities are expected in these markets. Our current levels of activity and backlogs are very good and absent some material change from this point forward, we anticipate a solid 2020 internationally.
From a balance sheet perspective, we remain very strong as well, we have plenty of liquidity and good access to incremental capital if needed. We remain a preferred issuer age of the markets, where we access capital and that is even more of the case in the current environment.
Im very comfortable with our current leverage level and the strength of our balance sheet provides us with flexibility to continue to be opportunistic around investment opportunities in share repurchases, while still being able to comfortably support our dividends our dividend remains at a relatively low percentage of AFFO, providing us with great capital allocation.
At opportunities.
Our assets focus remains unchanged, whether macro towers mobile as much in building or other assets, we seek out exclusive multi tenant mission critical assets that will be essential for the needs of our customers today and tomorrow and will provide returns to SPJ materially above our cost of capital whereby.
Very focused on Im pleased with our return on invested capital strength of our financial position shines through in times like these.
Finally, I'd like to again, thank our team members of our customers for their contributions to our success. We're all in this together as I mentioned earlier I could not be more proud of the way that the SBA team has come together in these challenging times and performed at a very high level with their continued contributions I look forward to a solid and improving.
The rest of the year.
We have.
Adjusted well and we'll continue to address well to the times and we remain laser focused on serving our customers and providing increasing returns to our shareholders.
Rich with that we're now ready for questions.
Certainly ladies and gentlemen, if you wish to ask a question. Please press one than zero on your telephone keypad you withdraw your question and maybe time by repeating the one zero command. If you are using a speaker phone. We ask that you. Please pick up for pressing the numbers. Once again, if you have a question press one than zero at this time.
And we will start with a line of David Barden Bank of America. Please go ahead.
Hey, guys. Thanks, so much for taking the questions and it's good to hear that the team is functioning so well under these tough times.
I think Jeff you guys have had a special relationship with dish.
[music].
In terms of their.
Network build initiatives.
So far.
[music].
They recently announced the.
First RFP vendor.
Manner.
An open Rand.
Company, that's going to be kind of the glue that will be kind of pulling their.
Network together I was wondering if you could kind of elaborate a little bit as you think about your guidance for the year.
How dependent.
It is and how confident you are in dishes plans for.
Deploying some kind of physical services based network.
And.
Uh huh.
Your conviction that the.
They are for real when it comes to the to the business Weve Super helpful to get your views on that thank you.
Well, Thanks, David I Hope you are well you and your family.
We.
We know dishes for real they are extremely committed to two this undertaking there's a tremendous amount at stake and at risk.
For Mr, Oregon, and new shareholders.
If they are not successful and they.
Our certainly pursuing it.
In every way shape and form two to our visibility to be successful.
We're very very very involved with them at all kinds of conversations.
Recall.
From there prior disclosures that they expect this year to be a very very big planning year with deployments really to commence next year. So based on those comments we have not.
Included.
Virtually anything in our leasing guidance and perhaps very little in our services guidance.
But that does not mean that.
Work relationships.
Our not.
Quite quite good and quite voluminous between the companies in.
Hi.
I wouldn't bet against them.
Yes.
Thanks, Jeff if lucky if I could have a quick follow up which is fee you called out switching mobile.
Being a big part of the landscape in the coming six months, which I think we all expect I guess.
Some of US were surprised to see that that they really jumped out of the gates with the Philadelphia 2.5 gigahertz launch.
Announcing the New York.
Market is going to be next.
[music].
Is there something about this Richie mobile.
Merger.
Deployment schedule that seems faster.
Than expected or or is it kind of what you were anticipating.
We really didnt know, but now we have alive greater visibility and I.
I think what we're seeing Adam is that based on where.
Both companies were particularly with sprint with there.
Already somewhat deployed two point fiveg.
That will be the markets that.
Mobile will quickly gravitate to too.
Two large first because it's logical interest makes sense so I.
I don't know that there's any surprises there as much David as there is now starting to be some some clarity.
Got it okay, well, thanks, I'm jealous of you guys being down in Florida and good luck in state. Thank you.
Thank you.
Thank you will Mexico, a line of Ric Prentiss with Raymond James. Please go ahead.
Thanks glad to hear you your family's employees are doing well hope that continues.
[music].
First also a shout out for a very well timed opportunistic stock buyback again.
Always good to see.
You mentioned that the services business would be down 20 million view to view on your guidance to the impact uncoated 19, and maybe a slower first activity with the sprint T mobile merger.
Is that and again it might not happen you haven't seen anything so far I think you said, but does that really thinking about would zoning permitting and the ability to get folks onto the site might be.
I think what we're experiencing so far and again none of that.
His Cove Ed.
[music].
Well it is it is co unrelated, but none of its material everything just seems take a little bit longer.
And and when when we talk about basically.
Doubling the size of the industry's work.
[music].
With the T mobile stuff getting really cranked up.
It's just hard for us to think that theres not going to be some covance 19, slowdowns I can't name of all today, but it's.
Just there has to be right.
So and then the rest of the cirrhosis thing was I mean, if we looked at our first quarter numbers.
And this is going to be the same and first.
In the second quarter it's.
Was somewhat behind where we thought it was going to bit.
Okay.
As you think about the guidance for the or the increasing operational activity.
Do you need an MLP in place to capture some of that services and leasing growth.
And along with new malaise take given how complicated some of this work might be.
Well, we have that malaise in place with both T mobile and spread which continue to be in place now I don't know their entirely perfect or.
Totally all all covering the things that now need to be covered but they do cover quite a bit so.
The answer is no we don't need any of that too.
To do the things that we've reflected in our outlook.
And how long would it take to update malaise is that a matter of months corridors.
Well.
It can be done a lot quicker than that yes, I would I would certainly take it would be months and not quarters.
Makes sense again best wishes and hope all the best for you your families and employees same to you Rick.
Thank you. We'll next go to line of Spencer Kurn with New Street Research. Please go ahead.
Hey, guys. Thanks for taking the question and I'm glad the organizations, all seems to be pretty well and healthy.
Just a question on organic growth your full year guidance is below where you are filed where you reported in the us today.
But it sounds like you're expecting a pretty big uplifts later in the year. So.
Could you just help us understand the cadence as we move throughout the year do you expect the second quarter to be the trough and gradually improving from there.
And.
I don't know if if you want to give us some granularity, but if you could help us understand the exit rate that you're expecting moving into 2021.
That would be very helpful. Thank you.
I'm going to give some high level comments and I will let Brendan give you some more detail I mean recall Spencer that the way we report that metric that's a trailing 12.
And when.
Sprint T mobile.
Dish pull back there was like August September So you had.
From September on you had very reduced activity you had it again in Q, what you had nothing basically from those guys in Q1 and you won't have.
Really anything from them in Q2, so there's three quarters right there that up how do the kind of run the mental mathematical gyrations, and you'll see where things should trough out and then where they should begin to pick up again so.
Brendan you want to hazard, a guess is to exit rates I'm not sure. We want to do that yes, no I don't think Sunday night, I think Youve already suggested Spencer that you calculated based on the revenue bridge in our.
Supplemental package, what the full year number is and if you're looking at it domestically that number is lower than what we reported for the first quarter and Thats because you will feel a lot of the impact that Jeff was just talking about what's happening in the first quarter and into the second quarter. It will continue to drive a trailing 12 months number down even though we expect.
Activity levels from a leasing standpoint to pick up in the second half of the year the financial impact to that will not be felt until we get to next year. So.
I think you should assume that the exit rate is somewhere around what we have projected there for the full year, maybe slightly below that actually but.
Accelerating from that point forward.
Our expectation.
Thank you and then.
Just on that same topic, you've still got about 70 basis points of churn from Metro piece, Yes leap in Clearwire when should we expect that to roll off that happened later in the year. Thank you.
You should expect that it will continue to decline because thats a again, a trailing 12 month number as well. So it will continue to step down because there's not that much left we probably got about $4 million or so of annualized revenue from them that we expect to churn off over the next.
Few quarters I'd say so.
It's stepping down already so that percentage will be lower by the end of the year.
Great. Thank you guys.
Thank you. We'll next go line of Simon Flannery go ahead.
Great. Thanks, good to hear everybody is doing okay. You mentioned this crs and see bound auctions.
Can you just elaborate a little bit more on the opportunity for macro towers with CBRN are you talking to some carriers that may deploy that at a macro environment or is there do you think it's mostly small cells and then you also commented on some decent activity by regional carriers is that something that you are seeing being sustained or is that more about kind of.
Short term boost there thank you.
Well when we didn't really have anything from.
Mobile and spread it mathematically made up a better percentage of the quarterly pie Simon that it and it typically would now I do think.
There will be if some continued.
Activity from those carriers, but I do think it will also declined just because of the law of larger numbers as you see more of the T mobile activity come in through the year, Yes, CB Rs. I think is primarily going to be mostly at end building.
Phenomenon, but we are having some conversations with not only traditional wireless.
Providers, but also cable companies about.
Macro installations, but as between the two options Crs versus C band I think it's.
Without question.
Going to be a more exciting and.
More activity producing.
Auction for us with respect to the C band.
Great. Thank you.
Thank you will now go line of Philip Cusick with Jpmorgan. Please go ahead.
Hey, guys. Thanks.
Ask how much visibility you really have into that services rather than it would rebound.
Location is that you're confident that sprint T. Mobile is going to be asking you to do a lot of work for them.
You dig more into what that work on tail and you said typical as your relationship with with sprint or T mobile in the past.
It's typical of both than it does imply that.
We do the work on our own towers, when it comes to amendments or co locations.
Is that sort of us.
Standards that would happen or is this a contract that's already been signed already.
It's kind of historical relationships and some contracted.
[music].
Relationships as well.
Understood and would you frame your thinking on the price of amendments the T mobile may be needing versus the average level.
Yes, they do the work.
No.
Just.
Thanks, a lot guys that would not be a good thing for me to do.
Phil.
Okay.
And we'll now go line of Walter Paycheck with slight chip. Please go ahead.
Hi, Thanks.
I guess, you called new leasing activity, the 7.6% growth number Jeff.
That actually based on how we yes, I guess, we do our math.
Seems like it didn't drop that much relative to kind of a lack of activity we've been talking about for the last six or nine months.
Are you still expecting.
Only I think what was the last guidance 49 million of new lease activity in 2020, because it seems like.
I think theres some differences in how we do our mass versus you, but it seems like your rate would be higher than that for the year if.
Even if it dropped a little bit in the June quarter event builds in the September December quarter based on Timo activity.
That you could do better than that 49 that I. Thank you Sir you talked about in.
In February.
Well, we actually reduce that number slightly to 47, well in the Oh, sorry, I didn't see Joe's notation here you're right. He has one [laughter] yeah. So even even more so then Mike how's it going be 47, when you started the year at a 7.6% growth rate based on a 337 number last year Thats.
14, 15 a quarter.
Yes, but we if you look at that obviously it implies that number goes down and again thats trailing 12 months. So if you calculate it out for the balance of the year, we're expecting that 7.6% to be lower in future quarters and it is lower than it was that is a step down in the fourth quarter. Their gross number was 8.2% and I think the quarter yet.
For that.
8.6 so.
It's stepping down basically based on what we've seen since mid third quarter last year, which was kind of a stop by by T. Mobile in particular so.
So aside from law of large numbers and everything else. So, let's say it steps down next quarter or whatever 10 million, but by the September and December quarter, you should be executing on the activity that T. Mobile is delivering to you today right. So again I think it's it feels like it's hard to get to only 47 for the year well.
Recall.
Recall, that's a financial recall lots of financial number not an operational number so operationally we expect to be extremely.
Busy but those are.
Go ahead Brenner, yes, I mean.
Well, Jeff is going to do they don't commence until later he said in the third and fourth quarter, but we're just now starting to have activity Pekka pick back up than we've not been signing anything with T. Mobile basically year to date, including okay going back a quarter and a half of last year. So.
All the things that start to happen now even if we become very busy from this point forward and you layer on a commencement date to that that's typically several months after a sign up it's very limiting and its impact for this year, but but we do have started very helpful. Because it's interesting because T mobile talks about trying to get that to dot five on there on their tower.
Others in time for the Fiveg launch of the I phone. So if there just kind of given the subsea now and activity is not going to hit till 2021, there seems to be maybe a bit of a disconnect there.
During the way our communicated Brent I mean lets and it could be they could be more aggressive and faster than what has historically been but we're not projecting that because we don't have that any evidence of that at this point.
In terms of a token yes.
Well it is it is starting it could go quick sprint did have.
I will say a fair amount, but they do have some two and a half GE out there already I don't know if it's enough is certainly not enough to cover a nationwide iPhone launch but.
I mean it it.
Yes, I think the main thing to keep in mind Walt as is the numbers that you read our financial there they come off the financials, but while we talk about picked up set activity. That's that's the stuff thats, the signing and the dirt being turned and things like that and at the financial results.
Trail all that stuff.
So if you if you broke up a million dollars of new lease activity in Q1 of 2021 when is that when is that what does that mean in terms of when that site has been turned on for user.
For the operator.
We sign a million dollar now what I'm seeing revenue hit your new lease activity.
That means that dropped off.
Probably may turn it on where do they turned on in that quarter or had they turn it on the prior quarter.
Usually commences pain once they've installed and turned it on Scott's usually when that usually sync up it doesn't always work that way could be that they are.
Our pain earlier, there is a drop dead date, but typically those two things aligned.
Got it okay, great. Thank you.
Well go the line of Nick del Deo with Moffett Nathanson. Please go ahead.
Hey, Thanks for taking my questions.
First and I think you target, 5% to 10% annual portfolio growth, how do you feel that achieving that target given the number tower you've acquired to date have under contract and what you see in the market.
Well, we got a lot to do.
We.
We exceeded got close to 10% at the end of last year.
So.
We try to started off with up.
Some some lower levels of activity and you could see where those numbers are now.
Theres plenty of stuff out there Nick and that continues to be our goal I don't think we will repeat last year's percentage levels, which I believe we're close to 10%.
But I you know, we're still shoot for at least the 5% and there's there's enough out there to be done.
But like we always do we want the right we want the right assets.
Okay. Okay, it's good to hear.
And then you land purchases were down quite a bit versus the normal pace is that just a functional legal work getting gummed up because the lock down.
That is one.
Probably more visible aspect of Coven 19, then.
Perhaps that new build so I mean, a lot of the land purchase things require motorization.
Well scantily rehash can't get things jackets things notarized so.
That's a very tangible area of the business that that has seen some delays and just add in internationally most of those deals require in person.
Negotiation with the with the landowners and that obviously has been limited as well so it definitely is having an impact.
Now, let's interest we also think that.
There will be some.
More willing sellers.
That that was actually my follow up question, Yes, yes, yes, yes.
So we think there would be some balance there over the course of the year.
Okay. Okay sounds terrific. Thank you guys.
Sure.
Thank you will now go line of Michael Rollins Citi. Please go ahead.
Hi, Thanks, and good afternoon.
Just two questions. If I could you know the first is spectrum borrowing continues in turns into commercial rentals can you unpack. It SPJ has monetization opportunities associated with that.
And then secondly, any thoughts on how to try to manage the foreign currency volatility that you've been ingesting in the financials. Thanks.
Yes, our leases are.
[music].
Spectrum specific Mike.
But given why that spectrum is going to be.
Provided in times of you know a national emergency and to be use to help.
To help us all get through this.
Provided that's what it's being used for and that it goes back at some point.
I don't know that we're going to to charge for that now fit requires additional equipment to be to be utilized the new radios and new antennas.
But.
If it's just to help people get through.
And there's no new equipment required even though we can charge for we're probably not going to charge for that.
In terms of.
Foreign currency, we have spent.
Many many sleepless nights looking for PNM hedges.
But they are.
They are cost prohibitive.
The only real hedges the work or when you are purchasing an asset in advance you can.
Hedge your dollars going in.
And then the other hedges to borrow in local currency, but in terms of what I think you're talking about looking forward to purchase a PNM hedge.
There is not one out there that is.
Fixed cost sense.
And we do try to at this time, there's limited repatriation of money and we are.
Where we see opportunities trying to invest the cash flows that are being generated in these markets back into those markets.
So with with that it's not really costing us at this point. It certainly is costing us in terms of what we report.
But as Jeff said, it's somewhat cost prohibitive for what is basically a.
Fixing a paper loss.
Right now.
It has that performance over the last few years and FX change the way you approach international acquisitions in terms, our hurdle rates or the types of assumptions that you're layering into the models.
Yes, we continue to adopt increasingly.
Higher.
Foreign exchange hurdles as part of our model and components.
Thank you.
Thank you will now go the line of Colby sinus fell with Cowen. Please go ahead.
Great. Thank you and glad to hear and based doing well first off on the guidance you mentioned that excluding the FX had when you actually would have increased.
Your guidance, but you didn't mention that you had taken down your expectations for.
New leasing activity I'm, just curious if you could explain.
Where that would and then and then secondly on churn I think going into 2020, the expectation in United States.
Was that churn would be eliminated because as 93.
Elevated churn and just curious if that number or assumption has changed thank you.
Yeah Colby on the guidance changes so net of the FX. There is an increase to several of our metrics that we guide to including.
Leasing revenue and the the organic lease up we did reduce slightly the increases as a result of some of the other things, particularly in the first quarter, we had a strong outperformance in a variety of things including.
Certain one time fees in and out of period billings those sorts of things that were were higher than expected.
So that allowed us to increase the guidance for the full year net of it and those things that will offset in the second quarter that we should be thinking about we model or they things that will occur again.
No I mean, we always have some of that stuff every quarter and so one of the challenges of certainly for us to pinpoint exactly what it's going to be because it's not the typical recurring monthly payments that we get onto the leases, which is the majority of our revenue.
But there will be some amount of it whether our assumptions in the first quarter were.
Little bit low and it.
Continues a little bit higher or that's the new normal I don't know yet, but I think if you're modeling it out and you keep it in the same ballpark is what we saw in the first quarter you'd be okay.
And then.
On the churn side there are there wasn't really a material shift in the non big three.
Churn from what we talked about last quarter in fact, our reported numbers I think quarter over quarter were very similar there were flat.
So China roughly around I think 2% is that the and I can't recall right now, but she tells.
Yes.
Yes for that for the US 2020 would be somewhere around 2%.
Okay. Thank you.
Thank you will go the line of Sammy Badri with credit Suisse. Please go ahead.
Hi, Thank you very much for taking my question.
Jeff You mentioned on prior earnings calls regarding.
M&A activity and potentially entertaining other deals and other regions now there's been several references on this conference call regarding slowdowns in decision, making and just the overall pace.
Just slowing down.
Would you say that your plans for any M&A deal considerations of also slowed down for 2020, pushing them back a little better or even potentially a question out to 2021.
Well I don't I don't want to.
I don't want to over of your comment I think over emphasizes the I hope I didnt convey that theres been too much of the slowdown because there really hasn't been so far there's been little delays here and there.
But.
There would be I think some potential.
You know much more.
Larger difficulties in trying to.
Execute an M&A deal in a new market.
And that geography, where we've never been before me. Some of these states are on locked down and not allowing travelers to.
To to go into these countries. So when that I mean, obviously those things have to change before you would.
Be able to to even embark upon anything like that so I think there just some practical limitations, which.
I don't think Shouldnt surprise anybody who's been watching what's going on.
That.
Our go to be a little different this year until this situation all has a little bit more clarity, which will make.
You know the typical year of M&A, a little more challenging for everybody than than than than not.
Got it thank you.
Time, we've exhausted all questions in the two you may continue.
Well I want to thank everyone for dialing in from probably their homes.
And I do want to convey that.
You know our our thoughts on our efforts are are with the safety not only here of our team members and our customers, but all of you out there on the all it'll be safety well.
We look forward to speak with you on our next call. Thank you very much.
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