Q1 2020 Earnings Call

I will be a question and answer session to ask the question during especially new the press Star One your telephone as a reminder, today's conference is being recorded.

We were required to further assistance. Please press star one zero I wouldn't electronic sell through his conference call Mr., Marcelo Shawn Johnson, Vice President Investor Relations.

[music].

Thank you and good morning.

We'd like to welcome you to landmark infrastructure partners first quarter earnings call today, we'll share an operating and financial overview of the business.

I will also take your questions following our presentation.

Presenting on the call today are 10, Brazy, Chief Executive Officer, and George Doyle, Chief Financial Officer.

I would like to remind all participants that our comments today will include forward looking statements, which are subject to certain risks and uncertainties.

A number of factors and uncertainties could cause actual results in future periods to differ materially from our current expectations.

For a complete discussion of these risks we encourage you to read the partnership's earnings release and documents on file with the FCC.

Additionally, we may do refer to non-GAAP measures such as AFFO.

So EBITDA and adjusted EBITDA during the call.

Please refer to the earnings release in a public filings for definitions and reconciliations of these non-GAAP measures to their most comparable GAAP measures and with that I'll turn the call over to Tim.

Marcello Thank you and good morning, everyone.

Given the challenges we face these days I'm, especially grateful for the opportunity to speak with you. This morning and wish all of you the best.

Before we discuss our first quarter financial and operating results I'd like to provide you with an overview of the cobot dampening impact on our employees.

Well as our tenants and or overall business.

As the impact from the pandemic intensified in February.

Our management team executed contingency plans that allowed us to quickly transition to a remote workplace environment with minimal disruptions.

Oh sponsor has over 170 employees.

We've been working from home since early to mid March and they've done a phenomenal job supporting their markets and their customers.

I'm extremely proud of our team and how they've responded to an unprecedented situation.

In terms of our tenants.

Based on what we've seen so far we're confident that the cope with pandemic will not significantly impact or wireless communication or renewable power generation portfolio.

Wireless communication fundamentals remain extremely favorable through this fiveg upgrade cycle and the deployment of additional spectrum.

While there will be some permitting and workforce the ways due to the health crisis.

We expect the wireless carriers to continue to progress deployment other fiveg networks.

The industry has performed well in previous economic downturns and we've all seen for ourselves in the last few months how critical services are.

Now with central we are for the and consumer.

Given the shelter in place orders throughout the country.

And the stage restarting of U.S. economy.

We believe wireless communication services and connectivity solutions will become even more central as consumer stay at home for longer periods of time.

In the same way, we believe the renewable power generation industry will perform well.

Fights to health crisis, and economic downturn.

The powered produced is genuinely sold to investment grade utilities, and our rental payments are ultimately backed by long term contractual power purchase agreements.

Utility Counterparties are well positioned in the current market environment and should not experience as much of the financial impact in economic downturns as other companies since the power. They purchase is essential for their customers.

With regard to outdoor advertising.

Our tenants in this sector are experiencing some challenges.

State and local social distancing and stay at home workers, along with other covert safety recommendations over the past couple of months have created an unprecedented scenario for outdoor advertising companies.

The economic impact of the pandemic, resulting in fewer drivers on the road in consumer spending more time at home.

Has created a challenging market for outdoor advertising tenants.

Advertisers have reduced their spending on outdoor advertising in the near term.

An outdoor advertising companies have been taking preventive measures as a result with this downturn.

It varies cash through drawdowns of their revolving credit facilities. Some have selected we sold assets and others have directly raised capital enhancing their balance sheets and financial flexibility.

In our portfolio, we've received a number of abatements and requests for rent relief and rent reductions from our outdoor advertising tenants as they look to manage their liquidity given their near term lower revenue outlook.

Now it's important to note a few things.

First of all it's still much too early to quantify the full extent and impact of cobot pandemic on an outdoor advertising tenants and in turn our own business.

Second we're confident that the industry will rebound, but we don't know the exact timing.

Third.

Our first quarter results were strong we had minimal impact from the pandemic demonstrating the strong cash flow profile of our portfolio.

And we expect to benefit from the favorable long term trends driving our industries.

And finally.

While we cannot control things that are beyond our reach we've taken and we'll continue to take measures that we believe will position. The elemer came to withstand these challenges and take advantage of market opportunities as we move forward.

In the first quarter, we delivered strong operating and financial results were solid revenue and a AFFO growth year over year.

Our portfolio continues to generate stable cash flows.

With the occupancy rate at 95% as of the ended the quarter.

While contractual rent escalators rent modifications and select accretive acquisitions in the past 12 months have all contributed to increasing cash flows.

In terms of our general business strategy, our focus has been on or higher return development projects.

We did not make any significant acquisitions in the first quarter.

Given that we've deliberately slowed the pace of our acquisitions and we'll continue to be selective given the health crisis and the changing economic environment.

Continue to work to preserve our liquidity and flexibility.

Dan started development initiatives and position us to take advantage of attractive acquisition opportunities should they arise.

With regard to our development initiatives, we continue to make progress on several fronts.

Landmark vertex.

Our self wireless infrastructure, smart pool, and dart or existing program with the Dallas area Rapid transit system are both moving ahead.

As you would expect a pandemic has led to some delays in our development projects.

This will result in some assets deployments shifting a quarter or too.

Encouraged by the progress that we've made so far we expect further progress and deployments throughout this year.

Before turning the call over to George I'd like to briefly touch on the announcement of the distribution reduction we made a few weeks ago.

Certainly was not an easy decision to make.

But we're managing through an unprecedented event and an extraordinary market environment.

Although our overall long term strategy hasn't changed our near term focus is to enhance our financial flexibility to address the potential impact of the pandemic.

We believe the recent reduction in our distribution will give us the ability to navigate these markets with greater flexibility.

Allowing us to reduce our leverage maintain or liquidity and look for potential market opportunities and as we said, we'll reevaluate or distribution levels once business conditions normalize.

And with that I'll turn the call over to George will provide us with a more detailed financial review of the quarter.

George.

Thank you Tim.

As Ken mentioned in his remarks, yes, it's in our portfolio continue to perform well do the first quarter of 2020.

In the first quarter 2020 rental revenue was 15.7 million.

Which was 9% higher year over year.

The strong year over year growth is attributable to a number of lease amendments that commenced at the beginning of the fourth quarter.

As well as the customary contractual lease escalators.

In the impact from accretive acquisitions completed within the last 12 months.

Partially offset by the impact from asset sales completed in the second quarter of 29 team.

Turning to at that so if that south.

Yes, that's held for diluted unit was one cents this quarter compared to 12 cents into first quarter of last year.

As we have discussed in prior calls AFFO can fluctuate quarter to quarter, depending on the change in that fair value of our interest rate hedges.

As well as various other items, including a loss on early extinguishment of debt this quarter due to the securitization refinancing transaction in January.

Yes itself.

Which excludes these unrealized gains and losses on our interest rate hedges and other items.

Was 33 cents per diluted unit this quarter compared to 32 cents in the first quarter of last year a.

A year over year increase of 5%.

Now turning to our balance sheet.

We ended the first quarter with approximately 178 million about see any borrowings under our revolving credit facility.

100% of our outstanding debt is either fixed rate debt or borrowing teed up in fixed through interest rate swaps.

Despite the recent terminal on the debt markets, we continue to see attractive financing rates for our asset classes.

But that said we have no scheduled maturities until November 2022.

In terms of liquidity, we ended the quarter with approximately 14 million in cash in 272 million of Undrawn borrowing capacity under our revolving credit facility.

Subject to compliance with certain covenants.

Debt to adjusted EBITDA ratio under revolving credit facility was approximately six times.

At the end of the quarter.

Which is below our covenant requirements of eight times.

Regarding our distribution.

As Tim outlined earlier in the call we earned an unprecedented in challenging market environment.

And we believe the decision to preserve liquidity and enhance our financial flexibility.

Reducing the distribution, what's the appropriate response.

Based on the distribution declared a 20 cents per unit.

Our distribution coverage ratio in the first quarter of 2020 was 1.65 times.

But the distribution coverage ratio at 1.65 times in the first quarter.

We believe this positions us well during this environment.

In summary, we had a great first quarter as our portfolio produced strong organic growth from contractual escalators in lease modifications.

We also benefited from the accretive acquisitions made in the second half of 29 team.

In addition, we continue to make progress with our development projects.

As more assets were placed into service in the first quarter and additional development assets are expected to be placed into service throughout 2020.

It will now take your questions.

Again, ladies and gentlemen, if you have a question or comment at this time. Please press Star then one key on your Touchtone telephone. If your question has been answered you missed him or herself from the Q. Please press the pound she.

My first question comes from Dave Rodgers from Bayer.

Yeah. Good morning out there guys can you give a little more color on the deferral of an abatement that you did give it sounded like most of it or all of it was in outdoor advertising, but can you kind of dive into what the amount of requests were what you granted to date and maybe just talk also about kind of the length of the lease duration, there and outdoor advertising and what what might come back.

You this year if anything.

Sure this has been.

What I would say is an ongoing process, we're still working through it with a lot of the tenants.

From what we're seeing.

There's a.

Yeah Fair number requested come in and we're evaluating them in looking at the merits of each request were.

We're not granting.

Really large percentage of those requests we are looking at him to see if there's essentially a problem with the site heading into this downturn as far as the a the impact we're still quantify Nat. This is still I would say a bit early on in the process. So it's hard to give.

A lot of a guidance on that front, we we do expect it to hit so Q2 results and.

Ultimately, it's going to depend on how long is this downturn less and the stay at home orders last we think that essentially after.

People become mobile again and.

The economy starts to rebound you will see advertising levels return.

On the the billboards that type of Billboards that Ah we invested.

And we typically.

Don't invest in a transit or street furniture or most of ours are gonna be the larger format Billboards alongside a major road so as soon as a.

Consumers become a mobile again a in advertise started spending we expect a we expect the industry start rebound.

Maybe maybe ask a little bit differently, George what percentage of your April rent that you build did you collect.

Let's say almost all of it we collected.

The more perspective than than what you've seen so far.

Exactly yeah. So Q1 was there was almost no impact so far.

April was just beginning at the downturn in May we're still seeing strong collections, but it's going to take at least a full quarter or the third quarter as well to really a assessing the impact of this.

Okay shifted development, if you would I know John Tim I think you mentioned development delays just with everything that's going on with the smartphone the dark but I think this was kind of the corner, where you guys are going to lay out you know much more about the development pipeline and kind of give as much more color and kind of the path of what's going on there. So what can you tell us about that.

Well at Manhattan, and how that's tracking and the leased percentage of your sites that you deployed to this point and can you can you talk about the revenues you're collecting off of the development pipeline today, and how that's kind of shape up in 2020.

Yes, the developments are still progressing, albeit at a slower pace or things.

I would say a delayed probably about a quarter as a result, a this shut down we've had limited ability to travel a permitting.

It's been a challenging because you have a lot to offices closed and then we can always get a construction.

Cruise mobilized things are I would say still progressing well and.

We're expecting to have a sites that are deployed and you know all are different projects here over the course, the next three quarters.

But I would say, we're probably out one more quarter from when we can provide a little bit more ah.

Detailing some of these projects just a.

Given the.

The impact from the shutdowns here.

Okay last one for me it looks like you did some common unit issuance on the ATM in the quarter what was that it was a small amount I realize the over the price there that you guys were comfortable going to market.

It was in the Oh.

16 or $17 range.

All right great. Thank you.

Sure.

Our next question comes from Liam Burke with B. Riley FBR.

Thank you good morning, Tim Good morning, George.

Good morning, Hey, good morning.

George have you seen any measurable disruption outside of outdoor advertising on the rental side.

No not at all our our tenants when you look at the the wireless in renewables.

Our.

Our pretty healthy and they haven't seen a lot of disruption in their businesses. So no. We haven't seen any sort of its challenges with collecting grant we also haven't been.

Approached with a request for abatements or rent reductions.

And I know you have some outdoor advertising presence in the UK has.

Have you seen any sorts of <unk> request for abatement on a UK or has it been any different than the U.S. [noise].

Yes, we've seen we've seen some in the UK as well the UK market is a little bit different than the domestic market that they're typically stronger lease terms a longer.

Leases.

The challenge with the UK market is is the stay at home orders were stronger than what they were in the U.S. So the downturn downturn in outdoor advertising spend in Europe.

Was.

Much more impactful than it was in the U.S. So hopefully they start to open up again here at the a ended the second quarter start to get back to.

You know some level of mobility in the second third quarter and we see that.

Advertising revenue pick back up overall, our portfolio in Europe, I would say is pretty strong we're not seeing quite as much impact on the.

On the revenue as we may see a in the U.S.

Thank you George.

Welcome.

Again, ladies and gentlemen, if you have a question or comment at this time. Please press Star then one key on your touched on telephone.

Our next question comes from Boral leap with RBC capital markets.

Hi, Thanks for taking the question.

Two questions I guess first of all the sprint T. Mobile haven't closed are you seeing early indications of activity, the sprint or T mobile portfolios or from dish.

Not yet on our or sprint and T. Mobile sites, it's still relatively short period of time since that that merger close to <unk>.

So no nothing yet.

Okay.

And.

With regard to bad debt expense.

I wasn't able to find it in the 10-Q, one trillion code that's been trending.

Hi, I'm done that and the first quarter and how that is relative to prior quarters.

Excuse increased provision for it.

Sure. We we did put a small provision on this quarter in it was related to in outdoor advertising tenant.

Ah that's.

[noise] had some challenges and is approximately 80000 this quarter.

Historically, we periodically we'll have some small charges for bad debt, we haven't had a lot historically I wouldn't I wouldn't expect.

That that trend changes too much I would I would expect there'd be a little bit more going forward, but a lot of the impact from the the downturn here would either be in the form of abatements potentially deferrals or rent reductions I'm not quite as much in the form.

Bad debt since our or tenants still generally need to pay the red It's just a question.

What's the.

What amount of rent are we going to be able to charge them lower entitled to charge sample.

What are we going to negotiate during this downturn.

Got it thanks very much.

Mhm.

And I'm not showing any further questions to start my turn the call back over to Tim.

Thank you operator and Ah. Thank you all for joining US. This morning, we are certainly in.

Uncharted territory here, but as George and I said, we've taken steps we believe.

In addition, the company to withstand the challenges and also take advantage of market opportunities as we move forward.

We believe we're well positioned for this year and our strategy really hasn't changed on or near term focuses and should be on flexibility to address the potential impact of the health crisis and you know the market disruption.

We believe the fundamentals of our business are strong and although it will take some time for aspects of the economy to recover we're confident in the future of our industries and Elemer. Okay.

So with that we wish you and your family as well, please take care and stay safe and we will talk to your next quarter.

Ladies and gentlemen, just conclude todays presentation you may now disconnect and have a wonderful day.

[laughter].