Q4 2020 Radius Global Infrastructure Inc Earnings Call
Good morning, and welcome to radius global infrastructure, Fourthquarter, 2020 financial results conference call. During management's presentation. Your lines will be in a listen only mode. At the conclusion of prepared remarks, there will be a question.
And and answer session I will provide you and instructions to join the question queue. After management's comments today's conference is being recorded I will now turn the call over to Jay Birnbaum radius is general Counsel. Please go ahead Sir.
Thank you operator, and welcome everyone to the radius global infrastructure fourth quarter and full year 2020 earnings call.
Before we begin I would like to remind everyone that many of the comments made today are considered forward looking statements under federal Securities laws.
As described in our earnings release and filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed.
These statements speak as of today's date, and we undertake no obligation publicly to update or revise these forward looking statements. And addition on today's call. We may discuss certain non-GAAP financial information you can find this information together with reconciliations to the most directly comparable GAAP financial measure and this morning's earnings.
Lease and the supplemental financial information are available on our website www dot radius global Dot Com Bill.
Bill.
Thanks, Jay Thank you and welcome everyone to radius is fourth quarter and year end 2020 earnings conference call and we hope everyone is doing well and preparing for a gradual return to a new normal and.
2020 was a pivotal year for radius as we completed our merger with landscape acquisition Holdings re domiciled in Delaware and listed on the NASDAQ in the third quarter during.
During this time our team remains extremely focused on gross capital deployment and acquiring and managing real property interest underlying critical communications sites.
Moving under wireless towers, rooftops fiber and interconnection sites data antenna system networks and related digital infrastructure assets.
And 2020, we more than doubled year over year acquisition spend of $221 million when taking into consideration the cost of your origination platform and this represents a blended purchase yield of seven 2%.
After the application of leverage we expect these investments will produce returns and the mid teens over their asset lives.
In addition, we expect this overall growth and scale will result in a proportional decline and acquisition SG&A and we realized benefits from incremental operating scale and leverage.
And coordination with our capital deployment efforts our team has been actively exploring ways to enhance our liquidity and is continually continuously focused on lowering our cost of capital to support our core asset origination growth as well and other growth initiatives.
Second growth achieved in the fourth quarter and the entire year result, and you know owning as of year, and 5000, and 427 sites and 7189 lease stream.
These results represent 18% growth oversights and leases and at the end of 2019, we deployed $118 million of new capital and the fourth quarter compared to $38 million in the fourth quarter of 2019, bringing our annual total in 2020 as I mentioned before to 200 and <unk>.
And $1 million more than twice the amount deployed in 2019.
Our team swiftly and successfully adapted to the wide ranging impact of the pandemic.
And the success of this underscores the effectiveness of our global origination platform with respect to our portfolio composition and attributes we ended the year with 56% of our sites and Europe, 26% and North America, and 18% and South America with 59% of our annualized in place.
<unk> represented probably Europe, 26% of these rents represented by North America, and 15% in South America.
U S rental streams continue to be dominated by ground on your tower assets at 73% with the balance primarily representing rooftop property interest internationally and 52% of our rental streams are rents under towers and 32% are from rooftops.
Weighted average remaining tenant term of our portfolio leases at year end 2020 was approximately nine years in 2020, our rents enjoyed four 9% of our contractual escalator.
And organic growth offset by one 1% and churn for net growth of three 8%. This combination of long term revenue visibility attractive annual growth and low annual churn reinforces for us the desirability of the digital infrastructure asset class.
We are enthusiastic about our growth prospects in 2020, one our global pipeline remains extremely active and we are diligently working to pursue accretive opportunities for our shareholders.
The massive annual global investment and digital infrastructure continues to produce tailwind that propels our business model well within our existing operations and new jurisdictions.
Look forward to sharing our ongoing process now Glenn <unk>, our CFO will discuss our financial results in more detail Brian.
Thanks, Bill we are pleased with our fourth quarter performance, which capped a year on strong growth.
Fourth quarter revenues were $20 1 million, which was up 36% compared to the prior year quarter and gross profit was $19 9 million up 37% over the prior year.
In terms of asset growth during the fourth quarter, we deployed $118 million on new capital.
Compared to $38 million during the prior year fourth quarter, a 210% increase.
This origination activity represented $9 5 million and rents across 286 lease streams.
This brought our full year deployment to $228 million up 123% from the comparable prior year period.
Our strong performance both in the quarter and for the full year demonstrates the value of the origination platform that we have developed over the past 10 years.
We have posted our earnings release, our 10-K and the supplemental financial reporting package on our website to provide additional details and assist you with your analysis of the company.
As you review our results keep in mind and in the prior year period, a P wireless and not yet been acquired so our year to date financial statements for 2020 commenced with the completion of our acquisition of AEP wireless from February 10 2020.
We have provided our results for three time periods to assist you and billing comparable periods for the full year. Please.
Please refer to our supplemental reporting package for our pro forma 12 month presentation on a relative key performance metrics.
Turning to our full year results the company delivered $69 8 million and combined revenues, representing a 25% increase over the prior year period.
Reflecting the growth and our rental streams from both our in place portfolio escalators on the revenue enhancements and acquired rental streams are annualized base rents at year and increased 35% to $84 1 million from $62 1 million in the year before.
Our gross profit increased 25 per cent year over year to $69 1 million as compared to $55 4 million a year ago in line with our revenue growth.
Our growth was fueled by $256 1 million of net gross spend for the full year of which $35 4 million, what we're selling and marketing underwriting and related cost to core assets producing annualized in place rents of $18 5 million.
As Bill mentioned these rent streams produced a year, one fully burdened unlevered yield of seven 2% I would like to note that our origination SG&A as a multiple of one on rent acquired decrease by a full multiple turn from approximately three times in 2019 to approximately two times and two.
<unk> thousand 20.
We anticipate that as radius continues to grow and originate assets operational SG&A should decrease on a proportional basis overtime.
With respect to our balance sheet and liquidity at year end, we had total gross debt outstanding of $735 4 million and net debt of $577 5 million with aggregate cash of $215 4 million.
This debt is 100% institutional.
Fixed rate at a weighted average cash coupon of four 3% and interest only until maturity.
The weighted average term is seven years and we presently have no material financing due prior to 2023.
And.
Subsequent to year, and we added debt of approximately $77 million euro representing $94 million of USD equivalents and February 2021.
With the issuance of eight year fixed and floating rate interest only secured junior notes under one of our existing debt facilities.
This debt carries a three 9% coupon free cash pay and one seven and 5% of interest paid in kind and.
This allows us to continue to enhance our liquidity and lower our cost of capital to support our growth initiatives.
I'd now like to turn the call back over to Bill.
Thank you Glenn This concludes our prepared remarks, we would now like to open the call for questions. Operator. Please open the lines per any questions. Thank you.
Thank you if you would like to ask a question. Please press star one on your telephone keypad and confirmation tone will indicate your line is and the question queue. You May press star two if he would like to remove your question from the queue and for participants using speaker equipment and may be necessary to pick up the handset before pressing the star.
Our first question is from Sami Badri with credit Suisse. Please proceed.
Got it thank you and congrats everyone right out the gate towards the end of the year <unk> 'twenty.
I just have a couple of questions for you guys.
The first one is looking at your metrics like the number of sites acquired and then the annualized in place rents average per site and for Q 'twenty and so I'm just trying to take kind of kpis and compare for each one of the prior quarters was there a change and the reach and or type or asset types that works.
Wired and <unk> 'twenty that kind of may be throwing off the averages per site a little bit.
Yeah, I think it's a good question Sami and good morning to you.
Yes, we've had on.
In addition of incremental asset classes as I mentioned in my prepared remarks.
Sometimes those asset classes produce different ramps and we will see in certain countries for wireless underneath towers, those asset classes again and b.
Sort of fiber aggregation points and distributed antenna system typically indoors.
Such as a hospital I've thought Apple.
Got it got it so just in <unk> 'twenty you guys find yourselves more just acquiring that specific type of assets and and that was essentially like the predominant focus just because the averages were thrown off a little bit and I just want to make sure I completely understand all of those.
I wouldn't say that was predominantly but you're going to occasionally get to you as you know.
There's a distribution and then happens Zach and throw the average off because you have one or two larger deals, let's say take on large hospital debt, we were successful and acquiring as an example.
And those are the types of things that can throw at average off but on the whole I guess the weight and view and is our mission is to find a central critical assets.
And with high.
High credit quality tenants that are driving great lengths and so we don't really distinguish in our mind all the assets. We just happen to have I guess looked at the Adjacencies and said they're completely similarly, situated as to what we've been doing before.
Got it got it so I think I have one follow up to just this topic quite low to the next set of questions is what these kinds of assets that you guys are acquiring these aggregation points or are these things.
Think of these as like Oh aggregation points, probably the best way to put it but are these considered higher value ore stickier sites. When you compare them to some of the other assets and the portfolio on a relative basis.
I guess, the way and we view it as our mission is to do a great job and underwriting so every cell.
And is different but the answer is I think theyre just equivalents, we know the stand the test of time and you look at the overall network, which is just something that we've spent 30 years doing which is building networks and recognizing what sites suggest are really incredibly difficult to replace where Jay on economic to replace so.
Yes.
Simply said it's.
They are very sticky and they're.
Very compelling at least to us.
Got it got it so shifting over to SG&A and.
You guys have a slide slide 15, and the supplemental.
Presentation that was also published today. So you guys made a comment regarding the multiple the on origination.
Originations G&A as well on rent.
About two times and 'twenty, what should be the investor expectation for this multiple as you guys continue to grow over time should we be looking at similar type of multiple compression and cadence or is this going to start normalizing over the next couple of years.
I think it's a good question and I hate to give any forward guidance as to what will or won't be one of the things that will happen and is actually enter into a new jurisdiction is often takes and investment upfront. So im hesitant to tell you that this is just a trend and it's always going to happen now that being said scale economics should lead to just <unk>.
Further improvement and.
And to quantify what we think that would be its just too difficult for us to say and when does that time and determined not to give any more forward guidance, but we're hopeful we get more efficient every year.
Got it got it so along the lines of what you. Just said you guys are not going to provide may be quantitative 2020, one or forward looking guidance, but maybe on the qualitative side. If you look at the macroeconomic and industry trends that we're essentially.
And in play and <unk> and <unk> of 2020 would you say the same economic or macroeconomic drivers for your business are still there in 2020 one.
I'm not sure I know exactly what you're referring to on the macro but I think what we saw in 2020.
Should hopefully still exists for 2021.
And you never know what's going to happen out there just like we never knew there was going to be a pandemic vis vis last year.
Got it got it alright, thank you I will Oh, let's and other other analysts ask question. Thank you know sure happy to answer any day.
Our next question is from Ric Prentiss with Raymond James. Please proceed.
Hey, good morning, Rick.
And you guys glad you're doing well.
A follow up questions to Sandy's, there as well as we think about acquisition Capex, clearly, that's where the governor and factors to creating the growth over time, how should we think about.
Your targets and your aspirations on how much could be put to work as we think about the next 135 years maybe.
Look it's a great question.
I think the way we were always trade is to under promise and over deliver.
A lot of it comes down to.
And how well we can identify and acquire some of the adjacent assets and then number two our ability to enter into new jurisdictions, which of course will expand what we're able to acquire and then third.
Our team just continuing to do their job in a low global operating markets. I think those are the three core drivers at least from what we would consider the origination side and our business and then on the other front.
And like everybody else are seeing.
Quite a lot of activity just from an M&A perspective and assets.
And larger in scale being portfolio, that's going on and at some point I wouldnt be surprised that you see us.
Selectively making a larger acquisition you on.
And imagine that we spend a fair amount of time on a bunch of and in the last couple of quarters.
And Meanwhile, you seek to get married and Xiaomi.
And so you would imagine as we Havent announced anything that we didn't win some deals that we were really seriously.
Yeah.
But I think it's okay.
Hard to project out and it's why I said Sami that forward guidance is really hard for us, but we feel very confident that we have a long runway to originate and it's just really hard to I guess predict or forecast, what that's going to compete.
Right, but if you think longer term and any thoughts on obviously origination can bounce around quarter to quarter or month to month and any thoughts about kind of the size of the checkbook that might be able to be put to work just to scale it as far as goalpost.
I think it's pretty substantial when you think about it.
And operating markets. We're in today and there is roughly a million wireless sites and then you add and some of the adjacent asset classes and then if you said to yourself.
And the target jurisdictions, where we think we can expand to channel the sort of characteristics that we look for probably is in the sort of another 500000 wireless sidestepped, there and presently we're approaching 6000 and sites that we own. So you can see the total addressable market is huge interest being.
Efficient and by and of course, the right assets and biomarker and we will.
Seem to be the right price and so.
I know one and.
And my answer to your question on specifically in July I would say that the runways and quite right long and then frankly why for US we just have to keep our head down and execute.
That makes sense and.
And you.
You mentioned, obviously pricing and the marketplace. How is that affecting you because definitely a lot of people were excited by digital infrastructure.
And interest rates have been low, although maybe trending up a little bit but it definitely has created maybe a tougher environment to get assets at the prices you want just maybe give us a sense of what youre seeing and the marketplace.
And I think that's a great point and candidly prices are up we've seen that predominantly from.
Tower companies, especially in Europe, who are now out there and also acquiring assets that being said the markets are quite large so that I think there's room for everybody.
Notwithstanding that as well when we look back historically at the prices that we paid I like to think about it as a spread to the local inflation when sovereign bonds and so because interest rates have gone down we're still sustaining roughly the same spread and we had before even as prices move up and.
And that goes to sandwich question about macroeconomic factors now that being said, we will have more increased competition with all of that.
And leno's shedding their assets to tower companies and I also would add on.
And then Preston.
I was bit surprised at how fast the shedding and occurred I guess cell makes a lot of credit for how aggressive they've been.
So that's happened and I guess faster than we think but our mission of course is to keep ahead of it and to also expand other jurisdictions, where typically and there aren't as many dominant tower companies as well and it gives us sort of greenfield to acquire it.
And final one from me as we think about growth rates organic growth rates on the same site growth rates.
How should we think about the dynamics of what you guys can be producing and 21 and beyond kind of on a CAGR basis than on on revenue or adjusted EBITDA.
It's a good question if you noticed in our supplemental around 70% of our rents are CPI linked and so thats. Your first base growth that you've got I think the second thing that Commons and the larger we get.
The bigger the but we would collapse and enhancement team that we actually put to work and that means doing a better job of taking whether it's our rooftops or ground and getting additional lease up that will come from our carrier and or a tower company decided to put and generator and the heat excess space. It can come on our ROE.
But from another kind of Eze and <unk>.
Adding additional.
Radio access network equipment.
And then lastly, the thing that drives us and.
You will notice this as well and our debt is lease renewal oftentimes when we buy side they are well below market and our goal is.
Really to be constructive with our tenants, we just want to make sure we get paid and fair market based rent and if you'll notice and I forget which page. It's on I think our average lease exploration when rents.
When leases expire that we can actually enter into a lease renewal negotiation is roughly nine years.
Longer and the U S, but in Europe substantially shorter and so we didn't disclose the actual number but.
That will also give us we believe pretty good lift on Ras just targeting mark market rent and not trying to be more aggressive and that and our goal remains being a passive landlord first and foremost.
Great. Thanks, guys. Good luck as you continue that process.
I appreciate it.
As a reminder, just star one on your telephone keypad, if he would like to answer your question. Our next question is from Walter <unk>.
Rick with late Channel partners. Please proceed.
That's price.
And as you guys know.
How's it going.
And I have sympathy.
A pronounced.
Your weighted average property life jumped up and Europe is that a result of renewals of instead of the assets or was that from COVID-19.
That just a reflection of where the acquisition activity occurred this quarter.
I think its the latter its also the fact that and some of the cases, we get by what you would call a fee simple, which is effectively perpetuity or 99 years, so excuse the average up on that.
And as kind of bounce around on one with a place my perspective is anything.
40, 50 years, we always feel like we have and embedded option to get to 99, because if you ever want to go back to and landlord and say to them Hey al.
By year, and as 60 drove 99, most of them and won't be around and therefore, it will take the money. So that's why we don't I'll shoot forget and 99 right off the bat.
Got it and then and Europe, obviously area of opportunity for you there are pretty significant.
Sell next their activity and acquiring portfolios and and.
Vodafone spitting out as towers or how does that change the dynamics if at all for the opportunity that you have or the prices that you have to pay.
And so by additional sites.
Well I think certainly as we come across them and a competitive situation.
No change.
And that we pay and you go up sometimes will win but if they want to win and be and make it on economic offered and protect the property and I think their site theyre always going to win and that being said it has long been our goal to establish partnerships with one or multiple tower companies because we.
Think we can do a better job given that we're laser focused on buying property and doing it in a constructive and productive way for everybody. So.
Stay tuned we'll see what happen got it from.
And then kind of and again I know Europe is a big part of the story, but coming back to the U S. Now that C band is done.
I mean, there's obviously some debate about how much densification is required.
And is do you sell.
Cell site construction and opportunity do you think or is it really just going to existing assets.
Are you asking just in the U S. Only just yeah, sorry, just in the U S.
You know I think it always depends on a given market as you well know.
So there certainly will be places, where south and construction is going to be needed will it increase in terms of the percentage year to year that we see towers that have been built over time my personal opinion and this is just my opinion and it will stick to the regular trends I'm still enormous beleaguered net when we think about Densification and we think about the addition.
Or the swap out of bad and a massive mimo antenna array that is massive mimo.
I guess equipment get further cost reduce and further.
Trunk and size and weight is going to become very powerful tool whether for coverage where capacity because as you know the more antenna elements you put in put up the more capacity you get and it's rather linear and still I'm, just a very big believer and its capability, which is allowing and way of saying that and.
Even side youre going to be able to add many many many and tell us and it even.
And if that means augmenting and tower and Thats still cheaper most of the time and building a new macro tower and door, saying to yourself on guidance, yet backhaul power and getting a small cell out there now and Richard Who's our Chief operating officer average Goldstein and I debate that Theyre still on accounts come home and all the time, but it's about economics.
And just like it on it.
And sorry to keep you all and I was just saying well and just a last question is I'm taking it from the prior questions in terms of acquisition Capex, Obviously, you had a big quarter.
And you can look at the year.
Much larger than it had in 2019, but you just don't want to give a range in terms of acquisition capex or growth capital that you would spend in a given year because I think I think what Rick was probably pressing on is when we look at this is as what is going to continue to fuel that growth going forward.
Getting some sense of your belief that hey, we're going to do let's call it $150 million or $100 million of acquisition Capex in 2020 one.
It doesn't necessarily have to be a promise that you deliver over you know whatever under promise over deliver but it's it gives us kind of more confidence that the pipeline.
But you have confidence and the pipeline rather than just saying like hey, and a market. There is 5000 and sites that we have and 5000 and sites are available and that's a big market opportunity I think putting a dollar amount in terms of what you think the amount of growth capital you can spend in any given year.
It would probably be helpful in terms of understanding that that market opportunity.
No I appreciate that and I think we're really optimistic that what we achieve G and 2020 can indeed be replicated and you would imagine we always like to show a nice.
And straight line and go on up until the right on a graph so we'd like to keep growing that on the thing I would mention is prior to being public we were capital constrained and so we can dial up.
Ford now that we're public.
And our capital on our balance sheet as well as access to capital web and a form of debt or equity.
And that will free us up to do a lot more things both on our existing operating markets as well as outside though.
But to give you.
I guess more succinctly, we feel very confident.
And we have the ability to replicate what we've done this year I just can't.
And I can say that and get committed and thats for guidance and I understand.
But that statement and and of itself was helpful. So I appreciate that they all have a great day here.
Good day and asking the question.
[laughter].
This concludes our question and answer session and I would like to turn the conference back over to Mr. Brookman for closing and covenants.
Thanks, very much operator, and I appreciate everybody joining us today look forward to our next earnings call and of course, if anybody should have any questions feel free to reach out to myself personally or anybody at radius and we're happy to talk to any and all shareholders or.
Or the lines have a good day, thanks very much.
Yeah.
Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.