Q1 2021 SBA Communications Corp Earnings Call
Impacting revenues by $12 $6 million on a year over year basis.
Same tower recurring cash leasing revenue growth for the first quarter, which is calculated on a constant currency basis was three 6% over the first quarter of 2020, including the impact of two 4% of churn.
On a gross basis same tower growth was 6%.
Domestic same tower recurring cash leasing revenue growth over the first quarter of last year was five 6% on a gross basis and three 1% on a net basis, including two five percentage churn.
Domestic operational leasing activity or bookings, representing new revenue placed under contract during the first quarter was modestly lower sequentially in the prior quarter.
But on the heels of our newly signed agreements with Verizon wireless and dish, we have seen substantial increases in our domestic new lease and new amendment application backlogs.
These backlog increases are supportive of significant increases in domestic operational leasing activity throughout the balance of this year.
During the first quarter amendment activity represented 77% of our domestic bookings with 23% coming from new leases.
Three carriers represented 86% from a total incremental domestic leasing revenue signed up during the Corp.
Internationally on a constant currency basis same tower cash leasing revenue growth was six 1%, including one 3% of churn or seven 4% on a gross basis.
International leasing activity remained steady during the first quarter in.
In Brazil, our largest international market, we had another solid quarter of leasing activity gross same tower organic growth in Brazil was eight 5% on a constant currency basis.
During the first quarter 85, 3% 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 11, 1% of all cash site leasing revenues during the quarter and eight 1% of cash site leasing revenue excluding revenues from pass through expenses.
Tower cash flow for the first quarter was $411 8 million.
Our tower cash flow margins continue to be very strong with a first quarter domestic tower cash flow margin of 84, 4% and an international tower cash flow margin of 78% or 91%, excluding the impact of pass through Reimbursable expenses.
Adjusted EBITDA in the first quarter was $391 million.
Our industry, leading adjusted EBITDA margin was 71, 2% in the quarter.
Excluding the impact of revenues from pass through expenses adjusted EBITDA margin was 75, 6%.
Approximately 98% of our total adjusted EBITDA was attributable to our tower leasing business in the first quarter.
Our services business had a very strong first quarter with $43 $6 million on revenue and a higher contribution to adjusted EBITDA than any quarter in 2020.
Activity levels have picked up materially.
The increasing activity levels with our carrier customers have led to increases in our services backlog and a resulting increase in our full year outlook for site development revenue.
<unk> on the first quarter was $286 3 million.
<unk> per share was $2 58.
An increase of 13, 2% over the first quarter of 2020, and a 16, 2% increase on a constant currency basis.
During the first quarter. We also continued to expand our portfolio acquiring 731 communications sites, including wireless and it licenses on 697 utility transmission structures from the previously announced <unk> transaction for total cash consideration for all sites of 907.
<unk> $5 $5 million.
We also built 62 new sites in the quarter.
Subsequent to quarter end, we have purchased or agreed to purchase 413 additional sites in our existing markets for an aggregate price of $110 $2 million and we anticipate closing on the majority of the sites under contract by the end of the third quarter.
In addition to new tower assets. We also continue to invest in the land under our seven during.
During the quarter, we spent an aggregate of $6 5 million to buy land and easements and to extend ground lease terms.
At the end of the quarter, we owned or controlled from more than 20 years, the land underneath approximately 71% of our towers and the average remaining life under our ground leases, including including renewal options under our control is approximately 35 years.
Looking ahead now this afternoons earnings press release includes our updated outlook for full year of 2021.
We have increased our outlook for most of our key metrics from the outlook previously provided with our prior quarter earnings release.
In addition to our increased outlook for site development revenue, which I mentioned a moment ago. We have also increased our outlook for full year site leasing growth.
The majority of this increased leasing revenue outlook is due to our recently signed global Amendment in agreement with Verizon wireless.
One component on this agreement involved the extension of the current lease terms across our existing lease agreements with Verizon, resulting in average noncancelable terms of approximately eight years.
These term extensions increased our outlook for straight line revenue for 2021 by approximately $22 $5 million.
While we anticipate higher levels of operational leasing activity throughout the year as a result of the Verizon agreement that will contribute to improved organic leasing revenue growth in future years, we do not expect it to materially impact. Our previously provided 2021 outlook per tower cash flow on adjusted EBITDA.
With regard to site leasing revenue in addition to the Verizon straight line impact. We also increased our outlook for better leasing revenue recognition in the first quarter than we previously projected and for other increases in straight line revenue associated associated with term extension separate from a Verizon agreement.
We anticipate our domestic same tower revenue growth will begin to increase in the second half of the year and then we will exit 2021 at the highest rate of the year.
Our updated outlook for adjusted EBITDA on <unk> incorporate increased expectations for contributions from our services business and <unk> is also projected to benefit from slightly better non discretionary capital expenditures and cash taxes than we previously anticipated.
Our customers ramping efforts around five G give us great confidence in our projected growth.
As is always the case, our full year 2021 outlook does not assume any further acquisitions beyond those under contract today on the outlook also does not assume any share repurchases other than those completed as of today.
However, we are likely to invest in additional assets or share repurchases or both during the during the rest of the year.
Our outlook for net cash interest expense does not contemplate any further financing activity in 2021.
Finally, our outlook for <unk> per share is based on an assumed weighted average number of diluted common shares of $111 4 million, which assumption is influenced in part by estimated future share prices.
With that I will now turn things over to Mark who will provide an update on our liquidity position and balance sheet. Thanks, Brendan we ended the quarter on a $12 1 billion of total debt and $11 9 billion of net our net debt to annualized adjusted EBITDA leverage ratio was seven six times this leverage ratio is.
Weighted slightly above our target range of 7.0 to seven five times due to the PGA acquisition during the first quarter.
First quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was four four times.
On January 29, the company issued $1 5 billion of unsecured senior notes due February one 2020.
Each notes accrue interest at a rate of 312, 5% per year in interest is due semi annually on February one and August one of each year beginning on August one 2021 the.
The net proceeds from this offering were used to fully redeem all of the outstanding 4% senior notes to pay up premiums and cost associated with such redemption and to repay the amounts outstanding at the time under the revolving credit facility and for general corporate purposes as of today, we have $530 million outstanding under our revolver.
And the weighted average interest rate of our outstanding debt is 3% with a weighted average maturity of approximately four three years.
During the first quarter, we repurchased 654000 shares of our common stock for $168 9 million or an average price of $250 33 per share.
All shares repurchase will retire as of today, we have $475 1 million of.
Repurchase authorization remaining under our $1 billion stock repurchase plan.
Company shares outstanding at March 32021 were $109 3 million compared to $111 6 million at March 31, 2020, a reduction of 2%.
In addition, during the quarter, we declared and paid a cash dividend of $63 4 million or <unk> 58 per share.
And today, we announced on our board of directors declared a second quarter dividend of <unk> 50 cents per share payable on June 15th 2021 to shareholders of record as of the close of business on May 22001, with that I'll now turn the call over to Jeff Thanks, Mark and good evening.
As you have heard we had a strong start to the year with solid financial and operating results activities in the first quarter to provide a solid foundation for the rest of 2021 for the next couple of years during the quarter each of our largest domestic customers provided public disclosures expanded upon their <unk> deployment plans.
<unk>, making it clear on the upgrades to the existing macro network will be a key component of their network investment strategies over the next several years, we have begun to see direct evidence of this with significant growth on our leasing application block loans and increasing volumes in our services business.
Our services business had its biggest quarter nearly seven years.
But notwithstanding that strong first quarter performance, our services backlog from continuing to growth substantial setting us up to have our best services here in a very long time.
The increased services volume and backlog are day to grow network planning and deployment efforts by our largest customers that are supportive of our anticipated growth in domestic organic leasing activity over the coming quarters, a growing leasing application backlogs further support our expectations around future leasing activity.
Since our last earnings call the results of the C band auction were disclosed.
Verizon AT&T and T mobile, where all meaningful participants in the auction.
Is it an AT&T both pay premium prices for a block spectrum, a clear indication that the ability to move quickly and building out the top markets is a priority for them.
On April 1st we saw the new global agreement with Verizon to facilitate their <unk> network buildout, including the deployment of the newly acquired C band spectrum.
New agreement addresses several loans, including the extension of committed terms under our existing agreements with.
Establishing equipment specific pricing terms and conditions for upgrades to horizons existing leases and establishing parameters in volume incentives for new slightly.
We are excited.
And SBA will benefit from years of incremental new business between our organizations.
Agreement with Verizon as well as the substantial minimum lease commitments under a new master lease agreement with dish that our existing activity levels and building backlogs with both T. Mobile on AT&T are all part of the foundation for a strong couple of years with heightened activity or.
Our domestic leasing backlogs are as high as they've been in quite some time.
We have non incorporated any material amount of revenue from these climate backlogs in our 2021.
Outlook because of the time of uncertainty and lines between application execution.
But the future certainly, but it's reported.
In addition to the exciting events around our domestic leasing and services businesses. Our international leasing activity also was solid during the first fourth quarter.
During the quarter, we signed up 50% or more international revenue from new leases and the other 50.
80% through amendments to existing leases, we had strong leasing results in Brazil, and South Africa are two largest international markets. Notwithstanding continued challenges in these markets from the COVID-19 pandemic.
We believe the underlying fundamentals for wireless network network growth are strong in these markets and once we see a return to normalcy due to increased vaccine availability and other steps to reduce the COVID-19 impact in these markets, we will be well positioned for increased network investment and organic leasing growth.
In addition to our first quarter operational successes, we also made advances through positive capital allocation and opportunistic financing activities as discussed on our prior call. We added a large number of high quality assets to our portfolio through PPA transaction during the quarter.
And while it's a little bit about two months since we closed on the majority of this transaction, we're very pleased with what we're seeing so far.
We have received significant interest from our customers around those sites and we have established a very positive working relationship with the infusion, which should allow us to maximize these opportunities through providing efficient access to these assets for our customers and.
In addition to the PGA day transaction, we are closed and placed under contract a number of new high quality assets that should be supportive of incremental future organic growth.
We also continued to deploy capital into share repurchases during the quarter successfully deployed almost a $170 million to opportunistically take advantage from dislocations on our stock price, while also effectively managing our leverage ratio.
I'm, particularly pleased that we were able to finish the quarter with a net debt to adjusted EBITDA leverage ratio of seven six times just above our target range of 77 five times, we knew that we would be above on a project range temporarily due to the <unk> transaction, but we are ahead of schedule on delevering back into our cash.
That range due to our strong first quarter results in fact on a pro forma basis for a full quarter's contribution to.
The EBITDA from <unk>, we would have reported leverage of seven five times from the first quarter.
This result demonstrates the tremendous ability of our company through quickly organically delever, even after substantial capital investments.
During the first quarter. We also completed a $1 5 billion unsecured bond offering at the lowest price for unsecured debt in our history.
This combination of steadily growing EBITDA access to low cost debt gives us great confidence in our long standing approach to leverage and capital allocation as a key component to grow <unk> per share and creating incremental shareholder value.
Our access to low cost that continues today from <unk>.
That will have on other opportunities to improve on cost of debt financing volume this year.
In the first quarter, which produced $2 58 sets.
Per share over 16% higher than the first quarter of last year on a constant currency basis, we're on.
Also increased our first quarter dividend by 25% over the prior year, while still achieving a very low <unk> per share payout ratio of 22, 5%.
Our ability to manage our balance sheet optimize our operations and Opportunistically allocate capital will allow us to continue to generate long term returns for our shareholders that capitalize on the quality of the foundation of the.
The strong underlying macro tower business.
So I wanted to close with some comments about our performance through the pandemic.
We're currently operating on broker return on headquarters, representing about 33% of our global workforce at 50% capacity.
Plans to fully return to the offices on a 100% by early July by.
Our other offices are varying attendance percentages with U S office is generally a higher levels of attendance that our international offices.
Thankfully say that the pandemic has had no material impact on our U S business and internationally I believe we have navigated dependent as well.
In every case, we've worked carefully with local health care experts on our team members to prioritize safety FERC.
I could not be more proud of the way we've navigated this pandemic to achieve both the safety of our team members and meeting the needs of our customers and communities.
I want to thank our team members and our customers from their commitment.
<unk> during these challenging times and their contributions to our success, we look forward to an exciting rest of the year on sharing our results with you next quarter.
And with that Justin we are now ready for questions.
Thank you and just a reminder, listen gentlemen.
It will appear for questions go ahead, you touched on one.
Zero now Bruce.
First we go to line of John that Kim RBC. Your line is open.
Thanks, very much so on.
I was interested in.
Whether you've seen any actual liquidity in soles.
On your U S towers.
What kind of the C band or OEM variety.
And then I had a kind of a bigger question bigger picture question about escalators.
Which historically have been fixed and we get a lot of questions, sometimes about why that couldnt eventually become.
More CPI based over time and kind of the core U S business. Thanks.
So on C band type thing, so I'll just speak generically John.
Signed leases and amendments, yes, actual installs yet no.
<unk> and.
You shouldn't read anything more into that other than the typical time it takes to go from execution to installation.
Well on the fixed escalators.
Versus variable.
I mean, that's an age old question.
Obviously, it depends on which side of the historical inflation you fall on as to what you prefer.
It's been discussed.
<unk>.
In every case that I know of in the U S. As people have landed on a fixed escalator carlsbad.
So I don't know really consolidated beyond.
It's a regular topic of discussion in fixed as the way folks on board.
Got it and then.
Any more color you could provide on.
Brazil, and just kind of macro topics economy carrier landscape.
Brazil, Brazil is Brazil struggle still with COVID-19, There's no question.
The economy is.
Feeling the effects I believe are solid.
Hello.
Employment rate in Brazil is now car overall, 15%.
Our approach are optimistic that better times are.
Shortly ahead.
But we'll need to we'll need to see all of that I will say that notwithstanding the overall.
Bleaker.
Environment, there certainly compared to the U S are our business on our operations continued to do just spot.
So we're obviously thankful for that communications continues to be a key.
Need there and the carriers continue to answer that need.
But in general I mean.
Our ROE reached the same things, but onboard on the same folks I talk to them.
They are still they still have some sort of on room to go in terms of improving their COVID-19 position.
Lastly from me just on the PGM assets.
Are there any kind of metrics around.
Portion of the portfolio that.
The legitimate they per lease up.
The use cases, you are finding when people do similar lease application.
And just how to kind of think about the growth profile there.
Well, obviously all along.
On.
We've talked about.
And use we.
We have interest in some of the other 28000 net occur or non.
Non reviews and the demand has been both or amendments by existing customers and.
New leases, so we're pretty pleased with without going into volume first couple of months.
Adjusted I think we're ready for our next question.
Mr. Michael Rollins from Citi. Your line is open.
Sure.
Alright, thanks, and good afternoon.
<unk> first.
Just following up on your comments regarding the activity levels with the Verizon deal on the book.
Couple more months.
Discussions and activity.
One key the trough for domestic organic growth and growth that was reported at five 6%.
Have you think about what the peak range could be.
This metric again now that you have a couple more months of conversations and agreement.
And then just secondly are there any updates on the possible timing from merger related churn.
Waiting to the T mobile and sprint deal.
Hey, Mike.
On the same tower growth rates.
Q1 is certainly right around the trough it's possible that Q2 also would be at a similar level based on what we've got in mind today.
Just as a reminder, that metric is a calculation based on the trailing 12 months. So it's really backward looking.
On a lot of the increasing significant increases we've seen in the organic leasing activity has just started to happen.
Recently here and so I expect that it will it will start to increase in the second half of the year and we will exit the year at a higher rate and frankly continue to increase as we move into next year.
As far as how high could it be.
I can't really say for sure I think on a previous call we talked about on a net basis gains.
Mid single digits I think that that is certainly achievable from big question Mark is the timing of the churn which leads me to your third question, which is about the sprint T mobile overhang.
The numbers that we gave on our previous call are still pretty much. The same we don't have nothing has occurred that would make us change our expectations just as a refresher on this year, we have about $8 million or so of impact 2021 is what we are anticipating we've already incurred.
Decent portion of that so that's probably about the right number for this year next year is expected to be a little bit bigger closer to $30 million of impact next year before it steps down the following couple of years to somewhere around $10 million to $15 million per year until we see the biggest impact potentially in 2025 and 26.
Having said all of that that's an estimate based on the timing of windows leases.
On the overlapping leases come up for their maturity date.
Certainly possible that T. Mobile's plans will change on in terms of what sites they need to keep them and so we will have to keep our eyes on that and we'll certainly inform you of payment changes.
Maybe willing to JP.
J P. Morgan your line is open.
Hey, guys. Thanks.
Can you help us think about activity ramping from this year to next year as we go from the guided activity and talking about on X and exit run rate accelerating from here.
I just want to pull the churn discussion out in early and really think about what activity could be doing.
<unk>.
Well, it's clearly going to accelerate fill as the.
The C band spectrum is cleared.
On Verizon themselves stated that.
One of the reasons for the training that was to be able to get ahead of.
The actual clearing and have the equipment already installation ready to go so I think as a practical matter there will be.
Fair amount of.
Just in time delivery.
New C band equipment as it relates to when they get the spectrum.
On a clear and At&t's commentary was that.
Much of their <unk> spending will.
Occur on sale.
Beginning in 2022, so if you take what our customer which was set at face value.
We should move through this year and continue to grow as we move from 2022.
Sure doesn't 19 is it as a good example of what happens when two carriers are really spending do you think 2022 activity could be better than that $63 million from cable.
I mean it could.
Would only get too far ahead of ourselves on.
High growth if you take your premises on.
All four carriers being very very busy I think 2022 will be that year.
Yes.
Okay last thing the service this quarter.
Really strong anything that we should think of that sort of like a one timer on not repeatable in the second quarter or is that a good new run rate.
I don't know how long would take it out but its theres nothing.
<unk>.
We know of today as to why Q2 should be materially different.
Thanks, Jeff.
Sure.
Okay.
Next we have the line of Spencer Kurn, New Street Research Your line is open.
Hey, guys. Thanks for taking the question.
I was wondering if you could.
Elaborate on the deal you struck with Verizon.
One of your peers signed a more holistic deal.
We're certain amount.
Our revenue was contracted annually.
You guys did so I was curious.
Why don't you take that approach.
We historically have.
Thought it.
Best for all parties to.
Operate on a more on base, especially on.
So you are correct our stray.
Straight line only includes the results of the term extensions.
Does not include any type of use right because that's a different deal.
And Thats just the way we.
Historically over on the business of us to do things.
Got it.
I don't know if there's any any more complicated than chocolate versus vanilla.
Yes.
Well, it's worked out favorably for you the Pos.
We will have to see how things.
Shakeout.
And one follow up in your prepared remarks, I think you said that you didn't include any benefit from the increase in your.
On your backlog that you saw this quarter because of the uncertainty around.
The commencement timing.
Is it the case that you had already baked in some impact of the C band The guide and the applications that you saw this quarter.
Basically that your expectation or is it the case that if.
If these sites due to net it could be incremental to your expectations that you laid out last quarter.
Yes, Hey, Spencer its Brendan.
Did certainly expect and included in our original guidance and increasing the amount of.
Leasing activity throughout the year, the backlogs are supportive of that.
Big question, Mark, which we did mentioned in our prepared remarks, it's just simply the timing of.
Those applications train MCU signed agreements and then the next step of the signed agreement hitting dates at which the rents would kick in and so we've got certain assumptions, we've made around how thats going to play out.
Certainly we will be increasing as we move through the rest of the year, but that was already assume so to the extent that we are off at all and it is a little bit faster I guess, it could be higher but I think as we get later in the year.
Potential for that to be a material impact is very limited.
Next we have the line of Ric Prentiss of Raymond James Your line is open.
Great.
Thanks.
Correct Eric.
Okay.
Little surprised with the cash taxes.
Hi.
Would you get there.
You broke up a little bit I think you're asking about the channel.
Taxes, yes, so the cash taxes for the balance of the year, it's actually in part due to.
Expected benefits that we have now from the <unk> acquisition in terms of amortization of that asset that was not I think fully it more when we gave the original guidance because that deal actually just closed right before we gave the last guidance. So that's something we're going to benefit from any other things that affected it are fairly minor differences in some of our.
International markets, but <unk> was really the biggest difference.
So as we think longer term, how should we think about kind of standard without one.
Well.
Obviously as a means theyre going to go up yes. They are certainly going to go up.
It's interesting because as a REIT, we obviously have limited federal cash tax.
Taxes.
At any point, but there are currently state cash taxes that we do pay.
We're not seeing our full earn out as a dividend. So there is some opportunity to improve on that front, but on the other side. The more impactful thing will be our international taxes, which as we continue to grow in those markets on some of the depreciation shield thrown out youll see net cash taxes on the international market decline.
Okay.
Thanks, Dan.
Should we think about the <unk> opportunity, what's the timing and size of being able to put capital to work.
On the timing is now.
The primary as they can.
Interest.
Right now will come from.
Municipalities private networks, we're actually building some school systems to help bridge the digital divide that are focused on <unk>.
And while some of our.
Cable customers are also.
Active I think in terms of the.
National wireless carriers, they are going to focus really on the mid band and use the CP RF stuff really is more of a niche.
Our niche.
Solution for them.
So the biggest opportunity is really our <unk> in particular.
Outside of the National wireless carriers today.
It makes sense, but have you thought about giving us a table share.
Spreads for.
As far as Colo versus other sites.
One of your peers.
We have thought about it but we will.
Think about the growth.
Alright, thanks, guys stay well.
Thanks to a blend of bucket even from UBS. Your line is open.
Great. Thank you.
First of all you're correct.
Correct.
How do you think that net.
We'll go on.
Maybe two.
Next year or C band become.
The mix down the road.
How does the.
Management revenue.
Thank you.
You broke up on a lot of that and I don't think any of the three of US here heard everything you said could you try that again.
Sure.
I was asking about the amendment revenue mix I think it was 77% this quarter, how do you think about that.
Trending towards the year end and maybe with the C band deployments, becoming a part of.
So that makes the biggest part of the mix.
On.
Yes.
Average in terms of growth.
So the amendment revenues compared on monthly basis now versus prior on upgrades.
Okay.
77%.
This is purely a guess.
But I am going to guess it goes down as we.
Fifth year end.
Mostly because of the dish business is going to be new leases. So that's probably gone up.
To the extent it changes it will be for that reason because most of the other activity is from the other three carriers.
Definitely going to be amendments and in terms of the book.
The pricing.
Really never get into that but I will tell you that based on our load and a.
A usage basis.
<unk> is entirely consistent with what our history has been.
Okay, Alright, maybe one quick follow up the new tower purchases 413.
That's where they were.
How does the M&A activity noted from those markets.
Does are those are actually under contract most of those and they are mostly located internationally.
<unk> markets of ours.
Got it okay. Thank you.
Next we have the line of David Barden Bank of America.
Alan.
Hey, guys. Thanks, so much.
I guess a few questions. So.
On the services activity.
In the past, we've had one or two carriers from the driver of that.
I guess, how democratically distributed would you describe services activity.
Ahead of expectations at this stage.
<unk>.
I guess the second question was just on the commencement.
Mark.
The comments that John Stinky made about quote unquote skittishness with respect to supply chain.
Any observations just maybe you guys have from your perch.
As to how you see.
On the probability of the confidence interval around accelerating to be given those post questions from the strike price.
Yes on your last flow well your first one.
It's still not too democratically spread out it is still our services revenues are still.
<unk>.
Disproportionately coming from a few.
Actors.
Which actually is good because we have the opportunity to expand that base as we move through the year.
In terms of your second question.
We haven't really seen any any supply issues.
Net David that's not to say if somebody says that theyre out there they are.
We haven't seen them, yet and in terms of.
What it's going to mean for US I think we've explained many many times.
Plus a leaser amendment is executed when it actually.
<unk> begins to accrue revenue is the later or excuse me the earlier of the day certain or when we actually installed equipment. So.
We're all rooting for fast equipment availability and end.
Dates of install it or earlier than the.
The specified end date in the contract, but if that happens we'll begin to accrue greater revenue earlier.
But I mean right.
Right now as we think about life and how this year and next year is going to play out we're not really thinking about equipment delays.
Okay, Great and then if I could do one more follow up on.
Just in light of the PGE deal, obviously, now that thats kind of write them and closed.
Has there been an elevated or any amount of inbounds from other corners of the world looking to kind of do what <unk> done or was that more of a force situation that was kind of unique.
Well <unk> had its own unique needs.
But we have.
Net income critical enquiries from other utilities around the country.
Yeah.
Okay.
Thanks.
Yes, because the line of Nick del Deo market needs to line is open.
Hey, Thanks for taking my questions on.
First returning to the PGA need sites.
You think back to other assets you've acquired that may not have been.
Adequately marketed but that is how long does it take them to kind of hit their stride and start seeing the benefits of being plugged into your sales engine with it. It was a paper right away or does take a little time.
It always takes time.
Always takes.
Six months to a year to really to really get to the point, where it's just like a homegrown assets.
Okay. Okay. That's helpful and then maybe one on the M&A front.
Is it a lot of talk on higher capital gains taxes this year.
Would you expect that to potentially increase the pool of.
Of towers for sales in the U S or you're not hearing much upfront.
It has historically Nick.
So I would expect it to do so again.
But I.
I don't know that the magnitude will be so great that it will.
We like that.
A tsunami of deals, but clearly there will be tax sensitivity.
Capital gains rates are increasing.
Okay. So maybe you can pick up a few more but not enough to really change the direct or anything.
Okay.
I wouldn't say, we're going to get to 20% portfolio growth on Tesla.
Okay Fair enough. Thank you Jeff.
Yes.
Next we have Tim long from Barclays. Your line is open.
Thank you.
Two questions if I could.
First I think you guys mentioned something on <unk> and kind of digital divide.
Some benefits there could you talk more broadly about that.
On some of the government push for more rural broadband and what do you think that might mean overall for your business.
And then second can you just update us on any updated developments on kind of the.
The whole edge compute data center World, where we know you guys are kind of kicking the tires right now thank you.
Yes.
The government.
<unk> involvement in broadband and bringing.
Broadband to more rural areas.
Right in the middle of that Tim made the initial bills have been.
Mostly focused on fiber because they are trying to establish a minimum uplink and downlink speed, which for fixed wireless today is on rail.
And there's a tremendous amount of lobbying going on right now too.
<unk> basically free money.
Sure.
Wireless as well as as well as fibre net.
All remains to be seen.
In addition, the other aspect of.
The legislation that's been proposed it's mostly for Capex.
And.
We've tried to make it clear if you are.
Industry channel.
Trailing net capex that you need there is a lot of capex out there somehow we released could be structured in a way that guarantees rental payments that opex growth periods of volume.
Benefits, you really have something thats going to be impactful.
For our industry. So the the work that we're doing so far actually has not worked.
<unk> share.
So much on any federal programs there isn't there isn't E rate program that is for education managed spread related administered that's part of it mostly we have been working with.
Net of calcium school districts and actually private one day, that's interested in economic development to make this stuff happen.
So we're excited about the potential what we've done to date hasn't really evolved much if any federal funding because of that take is still not baked yet.
On the edge compute.
It continues to be a focus of ours I continue to think.
It's going to bear a lot of fruit, we actually have.
Two new customers and two new facilities that are under construction since our last call, but what really needs to happen.
We've been very clear on this I think from day, one is you need to have a.
Use case world.
Where do you need computing power right at the cell site.
And that's but we're not there yet I think we're going to get there, but until we get there. That's why we really don't know that the edge computing opportunity.
The good one that we think its growth.
Thank you very much.
Next we have Walter Lynch. Your line is open.
Thanks, Jeff I want to go back to sales question drilling on 'twenty, two but do you think 'twenty two is the peak year for color on amendments.
Titled Zone.
<unk>.
Well it all depends on how quickly our customers want to spend more.
Okay and then.
<unk> had AT&T, saying.
They're not really on a start there is C band work until 2022, so I mean, it could be but.
But it also may not be.
Got it.
I think Phil have you drilled down pretty nicely on the 60 versus 63 or whatever so we have a good sense of R. 22 is how much of <unk>.
Horizon.
Smattering of fish and stuff like that from there. So I'm just curious if you think there is much left over to take that number even higher in 'twenty three.
Yes, I don't think we I mean I.
I would disagree that we know enough now to have 2022.
Fully baked and compare that to what ultimately will be the full build out plans for our share our customers have noticed the multi year such as the two year gig and it's not even really started until late this year at the earliest so.
The more we talk the lessor prepared to say 2022 will be the topic.
Yes.
Got it and then Brendan I think when you were talking about in the last two quarters you gave us a good sense of the churn that was ordered out at T. Mobile on sprint. So I think you reiterated that.
Eight ish number non which whatever.
I think Randy you also mentioned a lot of that has already been loaded in the first quarter. So I mean, so is it was it a couple of million dollars in Q1.
About eight ish or nine net debt is.
As already kind of on hit your numbers.
It was a little less than $2 million was probably about $1.8 million or so.
It'll take a little bit bigger so yes.
A bunch of these releases that ended at the end of last year at the beginning of this year. So that piece, we already knew about and then there are some other.
Extra pieces that we're assembling happened may or may not but they're relatively small.
So when you talk about Brent on the mid single digit growth is it.
Is it should we think about that including that sprint number or sprint Nextel, Mexico on T mobile number or.
Yeah.
Is it after that.
Yes.
Long term.
The question that I was answering was what do we think you could get to in terms of the organic growth rate.
So yes, that's a net number.
But it's on include including sprint, because obviously that sprint churn from a start cranking up in share.
But in any given year, but obviously in any given year it could be higher or lower because of the sprint churn is lumpy. So depending on the year. Some years will be below that and I guess conceivably it could be higher than that if you had really low churn and high at least on himself.
Thanks.
Just hoping that on a good David if I could Dave Shaffer long term, we're excited that that number we're always waiting for.
And then last question is on the dish massive marker or dish are they are they using massive mimo antennas in terms of their new lease activity or is that.
Are they using more traditional approach.
Or traditional.
Got you.
Thank you very much Eric.
Next we have Brett Feldman from Goldman Sachs. Your line is open.
Yes. Thank you two questions. If you don't mind, we're talking a lot about C band in the historical conventional wisdom has always been higher frequencies are more useful in dense areas.
Useful in less dense areas in your portfolio seems skew a little more less dense now did you actually have insight from some conversations with carriers about how youre thinking about using the C band what level of visibility or confidence do you have that they're actually going to go to all of the towers. We currently use with you in markets, where the whole C band licenses and upgrade them.
Support C band or do you think theres some towers won't fit in the other side of it. If you can put your Optimus add on is to what extent do you actually think they are going to increase their density with you being going on sites. They maybe historically have not as they deploy C band and then the second question, if I sort of think back on some of the earlier.
Question before it sounds like you really haven't changed your approach to your leases you're sticking with fixed escalators, you're still like Ala Carte and there are some emerging operators.
Signal that maybe that has created opportunity for them as <unk> been able to get into some spaces, where maybe youre not winning business because we haven't been as flexible how have you gotten comfortable with that trade off.
As you went through this fast deterioration of major negotiations.
Seem like you really by slot.
Well I would put out <unk>.
Great results as the reason why we're comfortable with that in our first quarter results from where we will be this year and where we will be next year.
And kind of leave it at that.
In terms of the.
Your first question on density I think we've seen enough so far to know that it's going to be fairly broad.
I would never tell you to tell on 100% of every lease book, but it is going to be broad it's going to be.
Closer to the 100 day this statistic.
<unk>.
And we won't really know.
I think until we get into it a little bit.
Particularly with the existing carriers.
As to how much new leasing will come about this because clearly they are all pursuing co locations first because that's faster cheaper and it's just a smart way to build on it and it'll be a little bit of time before we see the demand for new leases, but it will be like anything else I mean, if the demand is good enough on this molecule.
Nate.
They're going to all of it.
Okay.
Thank you.
Next we have Eric Route Cheng from Wells Fargo. Your line is open.
Thanks for taking the question just wanted to follow up on that last point you mentioned on the Verizon deal. There were some parameters around new sites opened seems like recently, the big pretty wireless carriers haven't done as much with the public tower codes on new build so you see an opportunity beyond just the initial amendment activity produced by its either with Verizon or any of the other carriers or is it.
Just too early to tell at this point no.
We definitely see an opportunity.
This.
This agreement will facilitate kit.
Okay, Great and then just one more from me.
I'm just wondering if the initial discussions with the C band winters your large customers.
And then the net opportunity beyond the C band radios, perhaps than looking at lower frequency spectrum upgrades to support uplink to allow them to get better propagation out of the mid band spectrum.
Yes, yes, I mean, there is a variety of requests and equipment profit. They go about this its luster strictly.
C band radios.
A big part of this is the massive.
A massive mimo antennas.
That's different from what your question was but we're seeing a whole variety of different take care of which really the unleashing of the C. Band has now given everybody. The reason to go back to the macro networks that they knew was coming so here we are.
Okay, great. Thank you.
Next we have non copies from Lasalle income Youre.
Your line is open.
Great. Thank you I appreciate with the horizon.
MLA.
There is not a new Steve I'm curious and deals like that if you.
Put in place on type of an incentive to potentially go on to axa non on their sites.
Faster than otherwise and if for example, they do that they get pricing lower than they might otherwise I'm. Just curious if there are those types of structures.
And deals assets and then.
We can evidence set of.
On a company and you say deals like this I mean this is the first global Master agreement, we've ever done with Verizon So.
Okay, but I guess to your point there is an incentive that if they go on to X amount of sites by an accent on a day.
It would be more cost effective on a per site basis than if they took longer.
Yes.
Cash about X price ex day, it equals X discount.
Got it and then secondly.
Brendan I'm curious, if there's any more refi opportunities.
Obviously that list.
Savings and then just lastly.
I'm just curious what drove the <unk>.
I think that's where in terms of revenue EBITDA and that's where we saw the biggest b. If I just take your first quarter number and annualize that that already gets you to the midpoint of your 2020 on guidance just curious if there's anything onetime in there. Thank you.
Yes.
So refi opportunities there definitely are opportunities without a doubt we have some debt that is reaching a point where it can be refinanced and based on the current market environment, we would expect to be able to refinance it at better rates than we're currently paying on several dozen instruments. So.
I'd, just say stay tuned because we're constantly looking at that and I would expect us to.
To take advantage of those opportunities.
On the <unk>.
Beach.
I think you're referring to basically our increase in our outlook for it in addition to the beat but yeah.
Yes, I mean, I guess, they're onetime in some sense one of the main contributors was in the services area, which we already talked about we actually had a very strong quarter. So the margin contribution from services was very high.
Not a recurring business. So I guess you could call. It one time, but we do expect to continue to see a similar level of activity throughout the year based on per backlogs that we have.
We also on that point I, just can't say.
<unk> asked this but are you seeing a similar margin profile from that as well.
Yes.
Yes, okay.
Sure.
And that is subject to shift a little bit depending on the mix.
<unk> type work versus construction construction is typically a little bit lower margin, but as of right. Now most of the work. That's happening is a lot of its pre construction. So I would expect that to stay similar and as we get towards the latter part of the year you probably start to see more construction work and so maybe the margin starts to shut down slightly at that point.
Growth projects at much higher dollar theyre on the higher volumes that's right. So.
And then other contributions on <unk> it's.
A couple of different things, we obviously had a little bit better cash taxes, which we talked about on an earlier question. We also had lower non discretionary capex than we had expected even lowered our guidance for the full year slightly for that as well so.
It's a mix of each of those things and frankly on a per share number the share buyback helped a little bit as well and reducing our share count so a mix of all of those things.
Okay, and then I guess the point, though is that even when I look at your taking that number had already get to the midpoint EBITDA guidance 17 that that number should be going up through the course of the year.
Yes, I mean, some of it's timing related I mean, we did we did do well in the first quarter in certain areas like the Capex and frankly, then our SG&A cost that we expect to be.
Those items to be a little bit higher as we move through the year. So some of it's just a timing issue.
But overall, we were able to improve our full year guidance in part because of the performance in the first quarter.
Got it thank you.
Yeah.
Next with the line of Brandon <unk>.
The bank capital markets. Your line is open.
Great.
Two questions. Jeff a question for you can you quantify the year on year change on the backlog of signed but not commenced new leases.
And I guess when was the last time backlogs, where this high in the.
Second question was around the minimum commitment that you would have would fish how does the minimum commitment to trend throughout the life of.
The contract thanks.
While they do have certain time periods, which were not going to disclose so there is.
X.
X business by one day.
And so it's broken out.
And more discrete periods over the contract so that there is definitely.
Incentives.
And commitments to move.
Things along boring white LIFO police it corrosive.
The dollar balance volume backlogs, we generally internally talk about backlogs in terms of the number of amendments and the number of leases and where we are today versus where we were a year ago.
Which is remember we had moving up to the T mobile sprint from.
We've just got to the finish line right about now.
I mean, there there are more than twice the size.
It's a different time.
And I guess when it was a lifetime net backlogs there with this high.
It's been it's been a few years, it's been a number of years.
We've had period, obviously when you go back to the LTE upgrades. They were high that probably were higher than they are now although we're still building that very.
Very well via quest and future here, but.
If you go back a couple of years ago when T. Mobile was particularly active we saw some higher levels, but.
We're definitely on a high level by historical standards, even if it's not the highest and it's continuing to build which bodes well from recent DLC.
LTE is the one thing we've made clear before is backlog from <unk> to <unk> <unk>.
Average amendment prices.
Much higher.
Heavy equipment.
Okay.
We certainly expect volume to all of our book.
Crushing will be a little bit different software on it.
The loss.
The less Debbie additional weight loads.
The more questions as part of the upgrades.
Got it thank you for taking the questions.
Please go ahead of time.
<unk> day.
Thank you next will come from Damon growing them Green Street. Your line is open.
Hey, Thanks, guys question free on data center since the start of the yearly seen that pick up from a number of transactions you guys evaluated any other acquisition.
One last time are in Jacksonville, and yes look.
The company's appetite to grow the data center footprint.
We have a greater appetite provided that comes along with.
Ed.
Deployments at our cell sites, so as that continues to grow and as we continue to demonstrate the.
Synergy between our regional data center and in net centers at our tower sites, which is what we.
We will beginning to announce experienced in Jacksonville in particular.
We would.
We continue to book.
We're very mindful of what we are the overall volume.
Wireless.
Infrastructure company.
And these these regional data centers, if any would be pursued only because of the success or the perceived success, we will be having around the cell sites.
Picked up or is that just in the U S. You would be looking or could we see you guys look internationally as well.
Concept applies everywhere.
Thank you.
On the final question comes from the line on that journey with Deutsche Bank. Your line is open.
Hey, guys. Thanks for squeezing me on.
Can you give any more color in terms of the latest just seeing from dish and when we should anticipate that there may be become a more meaningful driver for cash site leasing revenue growth.
In upcoming quarters, and then one housekeeping item maybe from Brandon.
If you can give us the contribution from a revenue on the tower cash flow perspective from <unk> and <unk> on.
Should we effectively double that.
In conclusion, given the full quarter.
On a P J D.
One I believe the contribution was somewhere between.
Four and $5 million.
Tower cash flow and only slightly higher on the revenue side because the costs are very limited there.
And you should pretty much double that because it closed pretty close to the middle of the quarter.
Yeah and on dish.
A lot of lot of signed leases.
Sure.
Price tag per application, so tremendous amount of activity, but what.
Whether we see revenue out of that this year.
We'll depend solely on how quickly.
Going through the site acquisition permitting construction phase of things and Thats.
I can't give you any more.
Guests than what I've said, because thats, what it would be.
That's what's going to drive revenue recognition. This year is the pace of the installs for this book.
But it's all moving in the right direction.
Understood. Thank you.
Thank you and thanks to everyone for joining us we think it's going to be a great year, and we look forward to sharing.
Our progress with you next quarter.
Okay.
Ladies and gentlemen that does conclude the presentation for this afternoon and thank you for your participation.
You may now disconnect.
Okay.