Q4 2021 SBA Communications Corp Earnings Call
Yeah.
Okay.
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the SBA fourth quarter results call. At this time all lines are in a listen only mode. Later, we will have a question and answer session if you'd like to queue up for a question. Please press. One then zero at any time during today's call. As a reminder, today's conference is being recorded.
I'd now like to turn the conference over to Vice President of Finance Mark The ROTC. Please go ahead.
Good evening and thank you for joining us for Sba's fourth quarter 2021 earnings Conference call here with me today are Jeff Stoops, our President and Chief Executive Officer, and Brendan cabin, all our Chief Financial Officer.
Some of the information we will discuss on this call is forward looking including but not limited to any guidance for 2022 and beyond.
In today's press release and in our SEC filings, we detailed material risks that may cause our future results to differ from our expectations. Our statements are as of today February 28, and we have no obligation to update any forward looking statement. We may make in addition, our comments will include non-GAAP financial measures and other key operating.
Metrics the reconciliation of and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our Investor Relations website with that I'll now turn it over to Brendan to discuss our fourth quarter results.
Thanks, Marc good evening.
SBA finished 2021 with our best quarter of the year the quarter included financial and operating results ahead of our expectations and continued strong momentum into 2022.
Total GAAP site leasing revenues for the fourth quarter were $539 4 million and cash site leasing revenues were $529 8 million.
Foreign exchange rates were generally in line with our previously forecasted FX rate estimates for the quarter. They were a headwind, though on comparisons to the fourth quarter of 2020 negatively impacting revenues by $2 $1 million on a year over year basis.
Same tower recurring cash leasing revenue growth for the fourth quarter, which is calculated on a constant currency basis was 4% over the fourth quarter of 2020, including the impact of two 7% of churn.
On a gross basis same tower growth was six 7%.
Domestic same tower recurring cash leasing revenue growth over the fourth quarter of last year was six 3% on a gross basis and three 9% on a net basis, including two 4% of churn.
Domestic operational leasing activity or bookings, representing new revenue placed under contract during the fourth quarter was at its highest level of the year.
This was the highest quarterly level since 2014.
Even with this high level of executions, we continued to replenish our domestic new lease a new amendment application backlog, which remained very healthy at year end.
These backlog support our expectations for continued strong domestic operational leasing activity throughout 2022.
During the fourth quarter amendment activity represented 48% of our domestic bookings with 52% coming from new leases.
The big four carriers of AT&T T mobile Verizon and dish represented 96% of total incremental domestic leasing revenue signed up during the quarter.
In the fourth quarter reported domestic site leasing revenue was slightly impacted by the timing of revenue commencements versus our internal estimates primarily with regard to new dish leases.
This is a timing issue only as the number of leases executed exceeded our expectations.
During the quarter, we also had slightly less domestic churn than our internal estimates due to delays in timing versus our prior estimates.
Internationally on a constant currency basis same tower cash leasing revenue growth was four 3% net including four 4% of churn or eight 7% on a gross basis.
International leasing activity increased again and was at the highest level of the year.
As anticipated the impact of international churn increased in the quarter as we began to see greater impacts from carrier consolidations and other networking contract modifications in Central America. Although there were some churn timing delays that resulted in slightly lower reported into our international churn for 2021 than we previously forecasted.
In Brazil, our largest international market, we had another solid quarter of leasing activity.
Gross same tower organic growth in Brazil was nine 8% on a constant currency basis.
During the fourth quarter 84, 9% 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, 3% of consolidated 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 fourth quarter was $434 $1 million.
Our tower cash flow margins remained very strong with a fourth quarter domestic tower cash flow margin of 85% and an international tower cash flow margin of 71% or 91, 6%, excluding the impact of pass through Reimbursable expenses.
Adjusted.
EBITDA in the fourth quarter was $409 $1 million.
The adjusted EBITDA margin was 69, 8% in the quarter exclude.
Excluding the impact of revenues from pass through expenses adjusted EBITDA margin was 74, 5%.
Approximately 97% of our total adjusted EBITDA was attributable to our tower leasing business in the fourth quarter.
During the fourth quarter, our services business produced record results for the third quarter in a row with $55 $9 million in revenue and $12 9 million of segment operating profit.
Yes.
Notwithstanding these record results, we were able to completely replenished our services backlogs, finishing the year at an equal level to our company all time high backlog from September 30.
Based on this backlog and the continuing high activity levels by our customers. We are projecting another very strong contribution from our services business in 2022.
<unk> in the fourth quarter was $310 $8 million.
<unk> per share was $2 81.
An increase of 13, 3% over the fourth quarter of 2020 on a constant currency basis.
During the fourth quarter, we continued to expand our portfolio acquiring 59 communication sites for total cash consideration of $38 $4 million.
We also built 88, new sites in the quarter, including our first seven sites built in our new market the Philippines, Jeff.
Jeff will touch on our expansion into the Philippines in a moment.
Subsequent to quarter end on January 4th we closed on our previously announced deal to acquire towers from Airtel Tanzania. This.
This transaction added 1445 sites to our tower portfolio at a cash purchase price of $176 $1 million and the impact of this transaction is fully included in our 2022 full year outlook.
Additionally, subsequent to year end, we have purchased or under agreement to purchase 371 sites in our existing markets for an aggregate price of $137 $1 million.
We anticipate closing on these sites under contract by the end of the third quarter.
In addition to new tower assets. We also continued to invest in the land under our sites.
During the quarter, we spent an aggregate of $13 6 million to buy land and easements and to extend ground lease terms.
At the end of the quarter, we owned or controlled for more than 20 years, the land underneath approximately 72% of our towers and the average remaining life under our ground leases, including renewal options under our control is approximately 37 years.
Looking ahead now this afternoons earnings press release includes our initial outlook for full year 2022.
Our outlook reflects a significant increase in organic leasing revenue contributions from new leases and amendments.
This increased organic leasing contribution is largely due to the increased pace of new leasing activity, we experienced during 2021.
As well as some contributions from anticipated continued strong organic leasing activity during 2022.
Our outlook for contributions from new leases and amendments is based in part on estimates of lease commencement timing with each of our customers and shifts in the timing of equipment installations may have minor impacts on these estimates as they did in the fourth quarter.
We are also projecting increases in contributions from contractual escalations.
Most of the increase was projected in our international markets were inflationary increases are expected to drive increased rental escalations.
In addition, our leasing revenue outlook contemplates increased impacts from customer churn in 2022.
The primary increases in connection with anticipated sprint related decommissioning.
Our outlook incorporates our current estimate of approximately $30 million of churn in 2022 related to legacy sprint leases and our previously provided estimates of aggregate sprint related churn over the next several years remains unchanged.
Our total churn projections for 2022 are based in part on internal estimates of a variety of factors that can impact the timing of actual revenue C states to.
To the extent that there are variances from these internal estimates there may be impacts on our reported 2020 to churn.
However, any differences in reported 2020 to churn from these variances is a timing issue and does not change our expectations for long term aggregate churn.
In addition to sprint churn our outlook includes increased churn in our international markets, primarily due to carrier consolidation in Central America.
Our full year 2022 outlook includes the projected impact of the Tanzania acquisition, but it does not assume any further acquisitions beyond those under contract today.
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 year.
Our outlook for net cash interest expense and for <unk> do not contemplate any further financing activity in 2022.
However, we will continue to look for opportunities to optimize our balance sheet and our cost of debt.
Finally, our outlook for <unk> per share is based on an assumed weighted average number of diluted common shares of $110 million, which assumption is influenced in part by estimated future share prices.
We are very excited about 2022, our customers are all very active and we expect to produce very strong results as we help them to achieve their network buildout goals.
And with that I'll now turn things back over to Mark who will provide an update on our liquidity position and balance sheet. Thanks, Brendan we ended the quarter with $12 4 billion of total debt and $12 billion of net debt our net debt to annualized adjusted EBITDA leverage ratio was seven three times, our fourth quarter.
Net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was five times 5.0 times the highest in the Companys history.
During the fourth quarter the company through an existing trust issued $895 million of 184% secured tower revenue Securities series 2021 dash to see.
Which have an anticipated repayment date of April nine 2027, and a final maturity date of October 10, 2051 and.
In addition, $895 million of 2.5, 93% secured tower revenue Securities series 2021 Dash three C.
We have with the.
Which have an anticipated repayment date of October 19, 2031, and a final maturity date of October 10 2056.
The aggregate $1 $79 billion of these tower securities have a blended interest rate of two to one 7%.
And a weighted average life through the anticipated repayment date of seven eight years.
Also during the fourth quarter the company repaid at par the entire aggregate principal amount of the 2013 Dash <unk> tower Securities, which had an anticipated repayment date of April 11 2023.
And we also redeemed the entire aggregate $1 1 billion principal amount of the 2016 for 875% senior notes as well as paid all premiums and cost associated with such redemption.
As of the end of the year the weighted average interest rate of our outstanding debt was two 6% with a weighted average maturity of approximately four eight years.
In the interest rate on 97% of our outstanding debt is fixed.
As of today, we have $560 million outstanding under our $1 5 billion revolver.
During the fourth quarter, we repurchased approximately 786000 shares of our common stock for $263 6 million at an average price per share of $335 in 2006.
Subsequent to year end, we repurchased an additional $1 million 47000 shares for $350 million at an average price per share of $334 40.
Since the beginning of 2021, we have repurchased two 9 million shares of our stock at an average price of $318 59 per share.
All of the shares repurchased were retired we currently have $586 4 million of repurchase authorization remaining under our $1 billion stock repurchase plan.
The company's shares outstanding at December 31, 2021 were $109 million compared to $109 8 million at December 31, 2020, a reduction of 8%.
Pro forma for the repurchases after year end, we have reduced our outstanding share count by one 7%.
In addition, during the fourth quarter, we declared and paid a cash dividend of $63 1 million or <unk> 58 per share and today, we announced that our board of directors declared a first quarter dividend of <unk> 70, 171 per share an increase of 22, 4% over last quarter payable on March <unk>.
Five 2022 to shareholders of record as of the close of business on March 10, 2022 today.
Todays dividend announcement represents a payout ratio of 25% of fourth quarter <unk> per share with that I'll now turn the call over to Jeff. Thanks, Mark and good evening, everyone. We had a very strong finish to the year again generating double digit percentage growth in <unk> per share we produced record results in several.
Categories, and we're set up well for a very strong 2022 2021 lease up activity levels were ahead of plan in both the U S and internationally. The U S market was particularly strong with the highest level of organic new leasing revenue per tower signed up and over seven years during the fourth quarter T mobile remained.
Streamline busy.
<unk> and their continued nationwide deployment of two five gigahertz and 600 megahertz spectrum dish continued signing up a large number of new lease agreements in support of their brand new nationwide <unk> network. Verizon continued its ramp up for their C band deployments and AT&T remained a steady contributor.
These significant activity levels have also translated into meaningful U S services results, where we produced record services revenue and margin results for the third quarter in a row.
Domestic activity has remained strong through the first two months of 2022 and both our leasing and services backlogs have remained very healthy notwithstanding the solid fourth quarter results. We produced in both segments of the business.
Based on this backlog commentary from our largest U S customers disclosing robust capital expenditure plans for 2022, and the sky and the size and scope of our customers <unk> deployment plans, we expect to continue seeing elevated domestic leasing and services activities throughout 2022.
<unk> into 2023 and perhaps beyond.
Internationally, we had our strongest leasing quarter of the year demand remains high in many of our largest international markets and we expect to continue to see it remained strong throughout 2022 during the fourth quarter, we signed up 68% of new international revenue through new leases and 32% through amendments to existing.
<unk> leases, we had strong leasing results in Central America, Brazil, and South Africa. In addition, the recent <unk> spectrum auction in Brazil, and the upcoming <unk> spectrum auction in South Africa give us confidence that we will continue to see increasing network investment and thus leasing demand throughout our larger.
International markets. We are also excited about the potential from our two newest international markets. In early January we closed on our previously announced acquisition of over 1400 sites from Airtel, Tanzania. We believe this market has great promise for us not only in terms of organic lease up on our acquired sites.
But also in terms of new tower build opportunities significant wireless investment will be needed over the upcoming years, and we are well positioned to support our customers in Tanzania and participate in the growth of wireless throughout this market.
In addition, during the fourth quarter, we built our first brand new Greenfield sites in the Philippines. The Philippines is a market that we have studied for a number of years and we're very excited about the prospects for favorable growth over the next few years, we have established operations in the market opening a local office hiring staff working with.
The appropriate government agencies for all necessary permits and establishing strong positive relationships with each of the three major mobile network operators in the market.
We are initially and primarily focused on a greenfield new build strategy in the Philippines, and we anticipate the demand to support significant new tower build numbers for the next several years, we believe our significant long standing tower operation expertise will provide meaningful value to our customers in this market and will give us a competitive advantage.
I look forward to sharing results with you in the future as we continue to grow in the Philippines. Overall internationally, we have a lot of very exciting things happening and we believe 2022 will be a very good year.
Throughout the last year, we've done an excellent job with regard to our balance sheet and capital allocation priorities. During the last year. We have completed a number of significant low cost refinancings, which have meaningfully improved our balance sheet positioning, particularly ahead of a period with a potentially increasing interest rates our early refinance.
<unk> of several of our outstanding debt Securities during 2021 extended out maturity dates and produced the lowest weighted average interest rate in our company's history at two 6%. The substantial majority of our interest cost is also locked in at fixed rates. We have continued to target our net debt to annualized adjusted EBITDA.
Leverage in a range of 7% to seven five earns.
And have invested the available capital produced by that strategy into portfolio growth and share repurchases. Since the beginning of 2021, we have grown our site portfolio by over 8% and we have repurchased two 9 million shares of our outstanding stock.
We have also been able to continue to meaning meaningfully increase our quarterly dividend today announcing an increase in our dividend of over 22%, while still retaining over 75% of our projected <unk> for additional discretionary investments. We believe that all of these factors will be additive to <unk>.
<unk> per share and as a result shareholder value creation.
I'd like to take a moment to reflect on full year results. They were very good year over year. We grew cash site leasing revenue tower cash flow adjusted EBITDA and <unk> per share by six 3% six 5% seven 6% and 13, 9% respectively.
<unk>.
We posted industry, leading tower cash flow and adjusted EBITDA margins of 81, 7% and 75% beyond the impressive growth rates and margins the quality of revenue and cash flow shine through backed by predominantly U S macro towers in our services segment, we had a banner year, finishing.
2021, with $205 million in revenue and $46 million and gross profit among the highest in company history.
Each quarter throughout the year SBA posted sequentially higher results are reflection of the tremendous activity, we're seeing from our customers with little signs of slowing we.
We allocated over $2 billion in 2021, with the lion's share going towards acquisitions, and new builds share repurchases and dividends. We added 991, and 335 sites through acquisitions and new builds respectively. In the year following that on January four.
With over 1500 sites acquired in Tanzania.
Finally, we published our second corporate sustainability report at the end of the year evidenced our continued focus on and success in environmental social and governance matters.
We take great pride in our performance throughout 2021, and we are very excited about the upcoming year. The current operating environment for our industry and our internal excellence of operational execution combined to give us great confidence that we will produce very strong results. This year and I believe our full year 2022 outlook provided in two.
<unk> earnings release supports that confidence our customers are all very busy and we believe we are well positioned to help them achieve their operational and network bowls I want to thank our team members and our customers for their commitment and contributions to our success and I look forward to sharing our 2022 results with you as.
As we move through the year.
And with that Ryan we are now ready for questions.
Okay, ladies and gentlemen, if you do wish to ask a question. Please press one then zero at this time one zero.
Our first question will come from the line of Phil Cusick with J P. Morgan. Please go ahead. Your line is open.
Hi, guys. Thank you.
Two things so for can you just talk about what's built in for dish and AT&T and the current guide.
Well, we're not going to get too specific Phil but we.
There will.
Dish has rolled over quite a bit of activity that will be.
In our outlook as revenues for 2022.
I'll speak generally to AT&T and really just track there.
Public comments, which is that they anticipate a step up in their level of activity when the $3 45 equipment becomes available mid year. So that they can combine that with C band equipment and do a one stop or one truck roll.
Stop so if I mean, knowing our history and knowing that.
You really need all year leasing activity in the first nine months of the year to impact that fiscal year's results.
I would say you have more probably in there from dish.
As opposed to any kind of incremental step up this fiscal year for AT&T, Although we would certainly expect to see that quite a bit greater in 2023.
Okay.
And then secondly, if I can.
Anything we should think about in terms of site development, either frontloaded or back loaded.
And the current guide anyway. Thank you.
I think it's matching up pretty.
Well with anticipating.
We're leasing revenue is and we will be headed for.
At least the next couple of quarters.
I think it's a current to two quarter forward look at activity.
Okay. Thanks, Jeff.
Okay.
Our next question will come from the line of Brett Feldman with Goldman Sachs. Please go ahead. Your line is open.
Yes, thanks to about.
M&A if you don't mind first now that Youre in the Philippines, I understand youre, mostly going to be doing that through greenfield builds but how are you thinking about that as maybe a beachhead for broader expansion across Asia and what is the M&A opportunities look like over there and then just on the data center side of things you know as you've gotten further.
<unk> operating at a very small portfolio, we've clearly seen some of your peers get bigger through M&A in the data center space are you at a point, where you're thinking that might become a more interesting priority for your capital allocation or do you still think that this is mostly a bit of a niche.
Period for you as you understand the synergy between those assets in your tower assets.
Yeah, and southeast Asia, Theres, a number of opportunities Brett carrier dispositions, we think will be coming.
And just like anywhere else in the World, We will look at that.
Mostly from its financial sensibilities.
Not.
Did anything strategic as we know necessarily combined North America with the far Easter or anywhere in between so just.
Just like with every other decision we make it will it will be primarily made on its financial attributes, but having said that we would love to continue to grow.
And that is our goal and remains our number one priority is using capital to grow the portfolio.
The second question.
Out of centers.
Yeah, I think youre going to continue to see our.
Kind of current.
Turn of behavior remain there.
We like data centers.
But in terms of a big investment.
Much bigger than kind of what we've been doing it we'd really have to get to the point, where it was absolutely clear that there were great synergies in the data centers would lead to <unk>.
Expanded activity at tower site, and while there are certain pieces of evidenced towards that it has not really been proven out yet.
So I think it's going to be the latter of the two paths that you framed in your question.
And we will continue to.
To learn the business and grow the business very very modestly it actually has turned out to be very good so far and the two that we've had we've we've had demands for increased capacity, we're actually investing additional capital to grow the capacity in both Jacksonville in Chicago in that space.
On contracted tenant demand so I mean, so far so good but not.
Not material today, it won't be material this year, and we'll see where it goes in the future.
Thank you.
Next we'll go to the line of Michael Rollins with Citi. Please go ahead.
Well, thanks, and good afternoon, two questions if I could first Jeff Youre, describing some of the visibility.
And the demand picture in 2023 and beyond and just curious what.
How's your visibility today different Navy from times in the past.
And if there is a sense of the type of average growth investors should be expecting over the next few years and then just.
The balance sheet on target leverage.
Given some of the recent changes in rates curious what your current perspective is on target net debt leverage maybe in the current year and then overtime.
Yes in terms of visibility Mike It hasnt really changed that much in our views around.
The comments really about this year's activity rolling into 2023 really are a combination of what our customers have said as to how many sites that they're going to be able to get to this year, what their capital plans are and what our own internal.
Yes.
Backlogs are showing.
Basically it to oversimplify it.
There is going to be a lot of work still left to do by the end of this year. So that's what gives us confidence about 2023 and and not sure it'll all be done by the end of 2023, So average growth rates over the next year I mean, I think on a gross basis.
You're still looking at the mid to high single digits that we've been we've been talking about.
We feel good about that.
And in.
In terms of leverage we've talked about this a lot over time.
A 60 basis point movement in the.
10 year, while it's seemingly had done quite a bit of.
The impact to our trading multiple it really doesn't impact the way, we think about structure and capital.
Allocation and balance sheet.
So we were not really changing anything today based on where the <unk>.
10 year is now.
Hopefully it doesn't but if it goes up materially from here, we would have to revisit that the fact that we do pay a dividend puts a.
A little bit more.
Caution and conservatism and where we ultimately want to take <unk>.
Leverage or maintain leverage in an increasing rate environment, but but the movement that we've seen so far this year really hasnt caused us to rethink any of the big picture balance sheet structural points.
Thanks.
Our next question will come from the line of Ric Prentiss with Raymond James. Please go ahead.
Thanks, Good afternoon everybody.
Okay.
So good questions, Jeff our ambitious call.
Last week.
Charlie Oregon mentioned, how in the future maybe there is some ability to share spectrum, particularly in that three five.
Spectrum band, but maybe some of the other spectrum bands as well.
How long do you guys look at that and how do you actually even monitor it.
Okay.
There are certain filings that would allow you to monitor it you have to work at it.
But.
There is a certain reliance on customer <unk>.
Transparency, because all of the leases really talk only about.
Deploying and using spectrum that is owned or controlled by the lessee. So that's really not.
It's not something that would be allowed under our current leases without some additional discussions and modifications to the least.
But in terms of actually.
You know.
It's not like there is necessarily going to be new equipment on the tower to do that but.
But you would be able to figure that out through RF tests based on each customer's sic.
Strength in that particular area.
If they're not on the.
They are not on the tower officially but for some reason there broadcasting is a strong signal of $3 four or five you know you've got a sharing issue.
Yeah exactly.
I think you also called out that obviously CPI is going to be up escalators up and in Latam.
Quickie math suggests instead of being in the four as you might be in the sixes, but where does CPI go and how long should we think about the pacing in Latin America or your all your international markets on what we should think of CPI and escalators.
Brendan Yeah Rick.
There.
Obviously, the majority of our international escalators are in Brazil, Brazil, and South Africa, being our largest markets.
We do have some concentration of leases in a couple of.
Time periods during the year based on acquisitions that we've done over the years and the lease back associated with those but.
Otherwise over time, it's fairly well evenly spread in so.
We've we've put in certain basic assumptions for purposes of guidance. Obviously some of those are our best estimate today as to where it'll be at the point that the the biggest escalator concentration happens but.
Think that they are reasonable if not maybe a touch conservative.
And those concentration point are they kind of more in the middle of the year I am sorry, remember back from some of those old acquisitions, Yeah. I mean, one of them is in the late spring and one is sort of in the late fall.
Okay.
And last one for me you also touched on that return is not going to be as low.
In the current calendar year 'twenty two is might've been first thought.
Update us on just remind us what is the cumulative sprint churn youre expecting can you give us a feeling as far as how much you're thinking right now 23 or 'twenty four.
Yes, I mean, our assumptions right now are pretty much the same as what we've disclosed before when we talked about 22 in last year. When we gave our projections for it we said we'd be somewhere in the $30 million to $35 million range. We actually are thinking we're somewhere on the lower end of that.
Right now based on just some slight movements in timing around various decommissioning and stuff. So.
All that means is that that probably rolls into next year, our projections for 'twenty three 'twenty four that we've given before $10 million to $20 million in each year, that's still the case.
But obviously if numbers shift in 'twenty two at all that would slightly affect 'twenty, three but but really we have a fairly small level of churn expected for the next couple of years.
Before we see our bigger years, which are after this year. After this year, which so 25% and 26 are the bigger years, where we expect to see the majority of our sprint related churn.
Makes sense. Thanks for the extra color I'll see you guys next week.
Yes.
Our next question comes from the line of Walter <unk> with light shed. Please go ahead.
Okay.
Jeff I, just paid like $600 to have roto rooter clearer drain for me, which I'm pretty sure was double.
Double the last time I had to do it can you.
Give us a sense of the labor market and whether that's having any impact and all the construction activities of these of these telcos out there and whether you think that has any impact on <unk>.
On their speed at the moment.
Walt that as more information than I needed to hear.
Got it.
$600 to have a dream.
I couldnt talking to believe it.
No.
I would like to point out is that we're all seeing this we're all seeing are our expenses go up right.
Who knows how transitory it is but.
Are the operators are they play these games like when you look at the services businesses. I mean do you think this has any impact on the business. There's a lot of times in the last couple of quarters.
Meaning collectively the tower industry until Oh, it's not it's not a big deal everything fine. It's just hard to believe given what we see in the market right now that that's not having some impact on.
And it is having some impact in absolute terms, but.
We are I think we're managing it pretty well so here here's what's going on so there is there is wage pressure everywhere. So in the services business.
We generally work on fixed fees.
<unk>.
The site consulting business, which is the zoning business in the construction business, though which was most of the revenue.
We'll be this year, that's all bid and its bid contemporaneously. So we're able to pass a lot of that on assuming we win the bid.
So we're actually managing it okay I mean it.
It has started over a year ago, and we're very happy with the profits and the margins that we're producing in that business.
Our outlook implies that we're going to.
We're going to do it again.
So yes, it is happening, but we are managing it in a good way some of which gets passed on through to the customer because of the bid process and the way the work is award.
And when you said I think it was Phil I'd asked about dish and I think you used the term rolled over.
Is that when you say rolled over does that mean that that was lease revenue that maybe a little while ago you thought would've hit in 2021 analysis going to be hitting in 2022. Instead is that is that what you mean by rolled over.
Yeah. It means it means the leases the leasing activity has been tremendous.
The revenue recognition on those leases lags based on either.
A fixed end date or the earlier of construction, so thats, where we managed an estimate that.
We were estimating a little bit higher last year.
But the reality is the leases were signed up they rolled over into this year and it gives US you know obviously solid confidence for where dishes revenue contribution will be this year.
Okay and last question as we met the leases that were signed up that had not begun accruing revenue in 2021.
Right. So just better visibility for 'twenty two so my last question then on the Divi policy I think I think.
You had mentioned in the prepared comments.
You highlighted 25% of <unk> per share obviously, 20% growth was good so when I think about like a company like cogent, which gets a very elevated valuation it's because they schafer goes out there and predictably says like the same dividend increase every quarter right. So.
Is the 25% of <unk> per share is that what we should just use as kind of a benchmark and then yield investors can just look at <unk> and.
Then just just predict the dividend growth as a result of the growth of the F O for sure.
Well.
I think we will we will grow I think what we have done we will continue to do which is grow our dividend.
<unk> that our <unk> per share growth now we have that luxury because we started with a low payout and on a yield basis, it's still low but.
As we've always said going back to before we paid a dividend.
While we want to pay a dividend to expand the base of our Investor Universe. We believe that we will make our shareholders more money by keeping the money inside the company in compounding it through portfolio growth and stock repurchases.
Right, so why why not them rather than white tied to say hey, we're growing it fast that I have just put like just tell the yield investor It will grow minimum.
X percent, whether thats 10, 15th or whatever the number is you want to pick and then just give them a very predictable growth rate.
Can bring all these people and <unk>.
In order to drive the stock.
<unk> talked about a an amount of growth in five year increments and I think we've talked about 20% annually. Yeah. We've said I mean in the past well, we've we've been pretty clear that we expect to grow it for the next several years by at least 20% per year.
And I guess, you've been either repeat it on your prepared remarks every quarter like Dave does and then you can get that benefit okay. Thank you.
Yes.
Our next question comes from the line of Nick they'll deal with Moffett Nathanson. Please go ahead.
Hey, Hey, guys. Thanks for taking my questions.
Yeah, I guess first Geoff I was hoping you could talk a bit more about your aspirations for the Philippines.
Maybe a bit more about the magnitude of the greenfield opportunity over the coming years, and maybe describe the level of competition, you're seeing or expect to see because it's not mistaken several other tower codes with jumped into that market too since it opened up.
And then second Oh, sorry go ahead.
I was going to answer your question Oh sure sure.
So the Philippines has 110 million people and growing.
And they have about 24000 cell sites. So there is a huge opportunity.
Just on those numbers.
Two.
Expand wireless networks, and a lot of greenfield sites will need to be built.
The market, we like it from a stability point of view from a land use of regulation point of view.
There are.
<unk>.
'twenty.
Over 20 tower companies in country, we know that because you have to get a license to two operators of tower company in the Philippines, but we think theres only.
Five or six of them, including us that are strong and have the has the confidence of the customers to get meaningful build to suit opportunities going forward. We've found the customers in the Philippines to be very.
Smart and very.
Careful in terms of who they partner with and I think those are the kinds of relationships, where our history experience with our people on the ground will will distinguish themselves and we will excel. So I think thousands of of Tau.
Towers will be built in the Philippines every year for the next 10 years and I think if we get our fair share of that will build a nice business there.
Okay, Okay, that's terrific and it sounds like the.
At a headline competition may not be as intense as it does it sure seems which is good the numbers the numbers are higher.
With real capabilities, though are much lower.
Got it got it got it.
And then maybe second question.
You repurchased a lot of stock so far in 2022, maybe just some updated thoughts on the relative appeal of M&A versus repurchases here and maybe any general observations about trends in the M&A market and what you are saying.
Based on.
$303 stock price and the midpoint of our guidance I'd say 26 times <unk> per share multiple if I'm not mistaken.
And that currently.
While I think there is some rationalization going on in the markets.
Both domestic and internationally.
There are a number of.
Transactions that are selling for quite a bit more than that on a multiple basis.
So that should lead you to conclude that while we continue to want to grow our portfolio and we'll we'll make every effort to do that we will do it only in those circumstances, where it makes financial sense and that.
Stock repurchases at today's price relative to private market values are extremely attractive.
Got it that's great. Thank you Jeff.
Okay.
Our next question will come from the line of Greg Williams with Cowen. Please go ahead.
Great. Thanks for taking my questions. The first one just on the International guide looks like Tanzania is contributing about $45 million revenue. How much is being contributed in terms of EBITDA and <unk> per share for Tanzania.
Second question is just maybe more philosophical on the telco versus cloud debate is an ongoing debate of cloud providers offering network as a service AWS in the Fray.
Does that lightened.
Lightened up the equipment load for you guys, maybe not the top of the towers, but at the bottom of the towers and how do you see that dynamic unfolding.
The contribution from Tanzania is approximately $22 million to EBITDA.
Very similar to <unk>.
And on your second question I mean, we have always thought of ourselves.
First and foremost as as.
Houses and housing antennas radios. So while there is some movement as to the compute that's going on at the tower site.
We really haven't seen that impact and it really doesn't impact our thoughts in terms of antenna and radio locations. So.
While a lots going on there, we really don't see or expect.
A material impact at least in terms of the way we structure leases and think about our business.
Got it thank you.
Uh-huh.
Our next question will come from the line of Sami Badri with Credit Suisse. Please go ahead.
Hi, Thank you I have two questions. So the first one is regarding just the wage inflation conversation you had earlier now we all are operating with this idea that prices and costs of labor are going to be reduced or normalize, but what if they don't what measures will you have to take if they don't.
Actually normalized and this new pricing level is actually the new normal.
Well, we will do what we always do which is take a take a fine pencil and work through the ASP.
Aspects of our costs, where we can do something about it.
In some cases, we may be able to improve upon that in some cases.
We won't.
What is good though in this conversation is for people to realize how small frac.
Frankly for us compared to other businesses that these changes can really have on our bottom line because of the <unk>.
70% plus EBITDA margins I mean, we have great operating leverage in this business and thankfully we've demonstrated over the years and that continues to be true.
That.
A little amount of people can manage and operate a lot of towers. So we have that going for us but.
We will do what we always do we will.
Execute and make changes as necessary to make sure we have the best team on the field at the best possible expense levels for the company.
And then maybe just for us to know because there are some new.
Contracts in place with the malaise and all the telcos more formalizing what they plan on spending or what they prefer to spend so does the fact that there are MLA in place make the renegotiation process more complex or.
No different no difference at all.
It makes things much.
Less complex in terms of.
The business that Youre doing with your counterparty during the life of the MLR.
I'm not sure I got your question, the renegotiation of what with employees or the renegotiation of an MLA.
Renegotiation.
The MLA and the fees, you're getting the contributing payments from your customer and revenue relatively matching the wage inflation against.
Against price right. So just managing your margin just to get an idea on where youre going to be turning the levers.
Well when we when we get to that point that certainly will be a consideration, but I would I would just say I think your.
I think youre focused on something that we don't believe will be a material issue at all and I think if you look at our outlook, you'll see increasing margins, yes, and maybe I can just add to that that our actual cash SG&A is about 6% of our total.
Revenues. So it's its impact from a personnel standpoint is not that much our largest expense on our tower business are ground leases, which also have they have fixed escalators. So that's an expense that can be.
Controlled it doesn't it doesn't adjust with any of these inflationary pressures that you're talking about.
Yes, I got it.
I hope you can tell from our combat Sami that we don't really worry about that that much and we are fully aware of where the market is today and where it might go.
No absolutely and just these are questions that I get on my side. So I was just hoping I could run that by you guys.
The other kind of question I actually do get as well from investors that I was hoping you could share your take on it.
As you are very focused on emerging market opportunities seen by the acquisitions and the announcements you've made and then there are just your competitors going after or your competitor going after developing or developed markets sorry within the European region, and that seems to be a very compelling and digestible opportunity in the wake of international.
And geopolitical dynamics is there a reason why you guys haven't really tilted on the European side as an opportunity for M&A, rather than sticking to emerging markets.
It's entirely due to our assessment of return on invested capital for those opportunities versus what we believe we will achieve in Tanzania, Philippines in markets like that I mean, we've talked a lot Sami over the years about how we liked the European market, but when you.
Look at what who is competing for assets over there and the fact that a number of them are.
They denominate their investors and their results in euros and you can borrow euros at least you could I'm not sure. What today is but you could borrow at less than zero.
<unk>.
It just became.
A market that we did not find compelling from a investment perspective and from a shareholder value creation perspective as it otherwise the good market sure.
Well, thank you guys very much.
Our next question will come from the line of David Gower Reno with Green Street. Please go ahead.
Hey, thanks.
$65 million of domestic new leasing activity. This year I believe if you hit that that would be a record set of company I. Just wanted to know do you think that's a sustainable pace going forward or it's 22, just an outsized year.
Yeah.
2023, we think's going to be really good too.
And that's kind of as far as the Crystal ball goes right now.
Yeah.
So while we're not making any promises or guarantee on anything we don't we would not sit here today and tell you that we were we're sure that 2022 will be the high watermark it may not be.
Okay, that's definitely encouraging.
Maybe going back to the Philippines comment I don't think you mentioned, it but could you share, which and then as the anchor tenant on your new builds it would be interesting to know just in light of the cowardice dispositions at several of the carriers have hinted that recently and then with the opportunity both it's both globe and smart.
Okay, that's very help.
And then could you just tell us what's the day one yield that you can achieve on the tower builds given at large opportunities that you talked about.
Double digit.
Okay, well better than what you would get in Latam or is it comparable to the other emerging markets Youre in.
It's comparable and that's on a tower cash flow yield.
But that's that's kind of what we look for when we're we're putting new powers up.
Okay. That's it for me thank you.
Our next question will come from the line of Simon Flannery with Morgan Stanley . Please go ahead.
Great. Thank you good evening, Jeff you talked a little bit about the M&A environment. You grew your site portfolio about 8%.
Since last February how are you thinking about the 5% to 10% long term guidance is that still something you see as achievable even in this M&A environment or my dad morby through M&A or is it more maybe some built to suit to hit those sort of numbers, while we're definitely going to need some build to suit assignment to get to to any number.
You know I still feel pretty good about the.
5% to 10%, certainly, 5% and that and that is.
That is still a goal of ours.
We'll need to do work around that like we do every year, but we managed to two.
To look a lot and find some things that work for US we certainly did that between the <unk> deal in Tanzania.
We're going to build a lot more towers this year than we built in the prior year and if we get one good size acquisition out there somewhere.
We'll hit at least the bottom end of that range.
Great and on the Philippines.
You talked about the large market opportunity.
What is sort of critical mass for you in a market like that is that 500 towers a thousand towers.
Yes, those are good guesses as to at least 500 or so.
We have gone in there with the belief in the.
Expectation that we will get to at least $500 in that market.
Great. Thanks, a lot.
Yes.
And the final question, we have in queue comes from the line of Brandon <unk> with Keybanc capital markets. Please go ahead.
Awesome, maybe two questions for Brendan could you share what the backlog at least applications what that was up year over year in the fourth quarter, then going back on the 65 million in new leasing in 2022.
Imagine that that is predominantly second half weighted is it possible that you could exit the year with say $20 million in new leases.
On a year over year basis. Thanks.
Yes, Brendan I don't want to be too specific on the backlog, it's obviously up.
A good bit from where it was last year, but we came out of last year with a reasonably good backlog, we had a slow first quarter.
And then it began to ramp and it's been at a pretty high level thats been fairly consistent throughout at least the second half of the year and as much as back end of the second quarter of last year. So.
You know I don't want to get into the specifics too much but well.
I mean, if you look at who was in that backlog in December of 'twenty. 'twenty, you didn't really have dish had no debt and you really didn't have Verizon C band. So it's up it's up big.
December 31 to December 31, Yes, I mean, the question is how much of it was sitting there at the time that hadn't yet been signed I mean, if you look at the growth, though in the actual number that $65 million that we just printed versus <unk>.
38, I believe for last year, I mean that percentage from the time that activity was down to when it started to pick up that's representative of what we saw on the growth in the backlog. So that's almost doubling.
The backlog in terms of dollars.
And then I'm sorry, the second question.
I apologize I guess, just looking at the new leasing again, yes.
On my numbers, you're at $11 million in new leasing to do.
Today to get to the guide to $65 million, which suggests that you need to get something like a high teens low $20 million number for the fourth quarter and just making sure that that's yes, that's right, yes, that's accurate.
Accurate I expect that it's going to get it's going to go up every single quarter I would expect during the course of this year just based on what we've already signed up and the timings of when we're estimating the.
The commencements so youre numbers are in the right range.
Thank you.
And we have no further questions in queue.
Great I want to thank everybody for joining us too.
Wrap up our 2021 results and we greatly look forward to reporting as we move through 2022. Thank you very much.
Yes.
Ladies and gentlemen that does conclude today's conference I'd like to thank you for your participation you may now disconnect.
Okay.
Yeah.
We're sorry your conferences ending now please hang up.