Q1 2022 American Tower Corp Earnings Call
Ladies and gentlemen, thank you for standing.
Welcome to the American Tower first quarter 2022 earnings conference call.
As a reminder, today's conference call is being recorded.
Following their prepared remarks, we will open the call for questions.
If you'd like to ask a question. Please press one then zero on your Touchtone Paul.
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If youre using a speakerphone please pick up your handset before pressing any buttons.
I would now like to turn the call over to your host Adam Smith, Vice President of Investor Relations. Please go ahead, Sir good morning, and thank you for joining American Tower's first quarter 2022 earnings conference call, we've posted a presentation, which we'll refer to throughout our prepared remarks under the Investor Relations tab of our website www.
<unk> Dot America tower dotcom.
On this morning's call Tom Bartlett, our president and CEO will provide an update on our U S business and then Rod Smith, our executive Vice President CFO and Treasurer will discuss our Q1 2022 results and revised full year outlook.
After these comments, we'll open up the call for your questions.
Before we begin I'll remind you that our comments will contain forward looking statements that involve a number of risks and uncertainties. Examples of these statements include our.
Our expectations regarding future growth, including our 2022 outlook capital allocation and future operating performance.
Our expectations regarding the financing plan for the core site acquisition.
Our expectations regarding the impacts of COVID-19.
And any other statements regarding matters that are not historical facts.
You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward looking statements.
Such factors include the risk factors set forth in this morning's earnings press release.
Those set forth in our Form 10-K for the year ended December 31, 2021 and.
And in other filings, we make with the SEC.
We urge you to consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances.
With that I'll turn the call over to Tom.
Thanks, Adam and thank you everyone for joining our call. This morning.
In line with our traditional first quarter practice my comments on this call I will primarily focus on our core U S and Canadian tower business, which together with our U S. Based datacenter segment made up approximately 54% of our total property revenues and 65% of our total property segment operating profit in the firm.
Quarter.
Growth in our foundational U S and Canadian business continues to be propelled by the rapid acceleration in mobile data consumption that we've seen over the last decade plus back in 2017, the average smartphone in the U S was consuming roughly six gigabytes of data per month and today in the early stages.
<unk> uptake by consumers that number has grown by a staggering 240% to over 20 gigabytes on a monthly basis as both <unk> handsets and coverage become increasingly pervasive. This upward trend is expected to continue with industry estimates now forecasting in <unk>.
Average monthly consumption rate of 54 gigabytes by 2027.
To meet this expected demand carriers are aggressively deploying mid band spectrum to provide ubiquitous <unk> mobile services.
Toric Lee annual carrier Capex in the U S has grown by approximately $5 billion to $6 billion with every new G is <unk> deployed capital to maintain service quality on their increasingly strained networks and provide incremental capacity and density to meet consumer demand for enhanced network performance.
Early evidence in the <unk> cycle suggest this will continue to be the case.
In fact in 2021, we saw carriers increased aggregate network capex to approximately $34 billion up from the roughly $30 billion annually. We saw during the <unk> cycle and independent industry reports suggest that this number should continue in the $35 billion range on average.
<unk> forward.
Further as we've seen with prior network technology deployments, we expect a prolonged <unk> investment cycle that will extend over the next decade.
Today carriers are in the earlier stages of upgrading sites with new equipment to provide broad contiguous <unk> coverage across their respective subscriber basis.
And given the propagation characteristics of mid band spectrum and ever increasing mobile data consumption paired with incremental low latency requirements are rising from five <unk> enabled use cases, we would expect an extended period of investment aimed at delivering greater cell site density and stronger performance across networks for many.
The years to come.
Importantly, it is clear that macro towers will continue to be crucial infrastructure for the long runway of carrier network investments that lie ahead.
Macro sites have historically been the most cost effective means for carriers to provide broad based network coverage to the vast majority of the U S populace and evidence suggests that remains unchanged in a <unk> world.
To support this point over the last five years, our backlog of contractually guaranteed revenues in the U S has more than doubled on a per site basis. This speaks not only to our team's capacity to secure long term profitable cash flow growth from our more than 43000 distributed sites, but also to the long term.
<unk>, our tenant's place on our macro tower assets.
A critical component of their network deployment strategy for <unk> and beyond.
These trends along with the guaranteed growth secured through our comprehensive MLA as support our expectation for strong growth on our tower assets, both in the near and longer term in.
In 2022, we expect another year of accelerating gross new business growth in the U S and Canada and as we've previously communicated growth from co locations and amendments is expected to ramp in the back half of the year with the expectation that we'll exit 2022 on a high point.
With Colocation and amendment contributions accelerating.
And the impacts of the sprint churn beginning to come off their peaks, we are well positioned to execute on our return to strong mid single digit organic tenant billings growth in 2023 and beyond.
On the operational front, our U S teams remain focused on driving efficiencies throughout the business and allow us to quickly scale up to meet customer needs and maximize the flow through of top line growth to the bottom line.
Over the last few years, we progressed on process and it initiatives designed to deliver best in class cycle times and introduced technology innovations in the field that improved site monitoring and data collection capabilities, while lowering site level operating costs and providing efficiency benefits for our tenants.
In addition, our focus on cost controls as driven cash SG&A as a percent of property revenue in this segment to well below 4% on a consistent basis a trend we expect to continue in 2022 and beyond.
As a result, we've been able to continue extending on the significant operating leverage inherent to the tower business model.
At the midpoint of our 2022 outlook, we expect an operating profit margin of 78, 8%, representing a 370 basis point expansion in this segment over the last five years, even while absorbing the significant impacts of sprint churn more recently.
This strong conversion of top line growth profit margin combined with the low capital intensity of just over 1% positions our U S and Canadian business to continue its decades long track record of delivering strong free cash flow growth in 2022 and beyond.
With that I'd like to shift gears for a moment to our data center segment, which we expect to benefit from many of the same long term technological trends that are driving attractive growth in our tower business.
We're off to a great start in our first full quarter of ownership of the core side business in Q1 as expected. The core site team delivered a very strong quarter of new and expansion sales as these interconnection rich network and cloud dense data center campuses continue to attract strong demand from enterprises and cloud.
The network and it service providers and key U S markets.
Looking forward, we expect to continue to see accelerating hybrid and multi cloud deployments drive increasing demand for our highly interconnected portfolio, which should result in opportunities to selectively deploy capital toward high yield development projects.
Additionally, as the <unk> Revolution begins to unlock new capabilities, we're beginning to see incremental deployments, resulting from our VR gaming artificial intelligence machine learning and other next generation use cases, which require lower latency.
We would only expect this trend to accelerate and drive more demand for our data center campuses over the coming years, while pushing storage and compute requirements further out to the network edge and.
And when we combine our differentiated data center portfolio CSP in network, operator relationships with our distributed U S macro tower portfolio and longstanding MMO partnerships. We believe we have a significantly enhanced options to create value.
The edge evolves over the coming years.
In summary, we're more excited than ever for the opportunity to extend our long track record of strong profitable growth in the U S.
Is the <unk> environment continues to take shape. We believe we are uniquely positioned to drive continued long term value for shareholders, while playing a critical role as an industry leader in this evolving <unk> landscape.
Finally, I'd like to acknowledge the horrific events unfolding in Ukraine today, it's hard for any of us to comprehend the suffering of those affected by this humanitarian crisis and while we do not have operations our employees in Ukraine, our thoughts and prayers go out to all those we have lost into all of those who continue to be subject to this.
Prices.
We like many global organizations are focused on finding ways to help the millions of people who are suffering both within the country and those who are now refugees elsewhere, and we will look to join with others to contribute to the relief efforts underway.
With that let me hand, the call over to Rod to discuss our first quarter results and updated 2022 outlook Rod.
Thanks, Tom and thanks, everyone for joining today's call as you saw in today's press release, we're off to a great start in 2022, delivering another quarter of strong performance across our global business.
Before getting into the details of our Q1 results and revised outlook I wanted to touch on a few highlights from the quarter.
First demand for our towers continues to be strong throughout our global footprint evidenced by the sequential acceleration of organic tenant billings growth across each of our reported segments. Additionally.
Additionally, organic leasing activity was complemented with nearly 1450 newly constructed sites in Q1, our 11th quarter of over 1000, new builds in the last three years, a milestone that was only achieved once prior to 2019.
Growth from our recently acquired Premier assets <unk> and core site is at the high end of our initial expectations.
As a result, we are modestly raising guidance for Europe organic tenant billings growth and the mid point of our data Center segment revenues. Additionally, in Europe , We recently signed an agreement with one and one in Germany, establishing a leasing framework to support their network rollout, which we expect to be another solid catalyst for growth in an already strong.
<unk> leasing market.
We believe this further speaks to the quality and strategic positioning of our acquired <unk> assets, the opportune timing of the transaction and our optimism for the future and.
And finally, we continue to leverage the capital markets to support our investment grade balance sheet and were able to issue $1 $3 billion in senior unsecured notes on attractive terms right. After the end of the first quarter with proceeds used to term out a portion of our floating rate debt.
Looking ahead and as it relates to our core site financing plan. We continue to explore options that are aimed at maximizing shareholder value, while supporting our investment grade credit ratings.
Consistent with our prior outlook, we are targeting to finance, the $10 billion plus purchase price roughly equally between debt and equity.
That are potentially being satisfied through issuances of common equity mandatory preferred equity or other convertible instruments or private capital or a well balanced combination.
With that please turn to slide six and I'll review, our property revenue and organic tenant billings growth for the quarter.
As you can see our Q1 consolidated property revenue of $2 $6 billion grew by 22% or over 23% on an FX neutral basis over the prior year period, which included a contribution of approximately 17% and growth from Telsey isn't core site.
In the U S and Canada property revenue grew under 1% due to the impacts of sprint churn, while international growth stood at roughly 32% or nearly 35% excluding the impacts of currency fluctuations. Additionally.
Additionally, our newly expanded U S data center business contributed over $180 million of growth in the quarter.
These growth rates across our property segments continued to reflect the essential nature of digital services and our communications real estate throughout our served markets.
Moving to the right side of the slide you'll see our organic tenant billings growth for the quarter with consolidated growth standing at 3%.
In the United States, and Canada, while growth was <unk>, 6%, we saw an acceleration of gross organic new business on a dollar basis, posting our highest quarter since Q1 of 2020, resulting in a three 3% contribution to growth.
Given the mechanics of our Msas and the timing of certain use fees in 2021, we will see a decline in gross organic new business in the second quarter before ramping up in the back half of the year, which was all contemplated in our original 2022 guidance.
Escalators were three 5%, which is also impacted by certain timing mechanics within our mla's, though for the full year, we expect escalators to come in right around 3% consistent with historical trends. This growth was largely offset by the impacts of sprint churn.
On the international side growth was seven 4% and we saw improvements across each of our reported segments, starting with Latin America growth came in at roughly eight 7%. This includes approximately eight 5% from Escalations, which represents an acceleration of 300 basis points as compared to Q4 2020.
<unk>.
Additionally, relatively consistent growth organic leasing trends were largely offset by churn primarily associated with certain decommissioning agreements as highlighted on our Q4 2021 earnings call.
In Africa, we generated organic tenant billings growth of 8%, which includes 7% and gross organic new business contributions our second highest quarter on record. This strong new leasing activity was complemented by the construction of over 600 sites in the quarter as we see <unk> coverage and Densification initiatives.
To drive strong top line growth and returns across the region.
We have now constructed over 3800 sites in Africa since the start of 2020 around the time, we closed the Eaton tower transaction, which meaningfully augmented our scale and enhanced existing <unk> relationships in the region.
As a point of reference prior to the Eaton transaction, we had constructed less in 2200 sites in the preceding nine years of operations in Africa combined.
Turning to Europe , we saw growth of 18, 8%, reflecting pronounced contributions from the <unk> portfolio, which was not in our Q1 2021 base.
<unk>, our legacy European business grew over 6% an expansion of 300 basis points as compared to our Q1 2021 growth rate.
As we look to the back half of 2022, where we'll have more comparable year over year results with Telsey is included we expect to see strong organic tenant billings growth in the mid 7% range driven by accelerating <unk> deployments and continuing investments in <unk>.
In APAC, we saw growth of two 1% a continuation of the improvements we've seen over the past several quarters as churn further moderates in the India market. In fact churn is now down to the mid 6% range. The lowest we've seen in nearly five years, which we project to further improve over the course of 2022.
Turning to slide seven our first quarter adjusted EBITDA grew approximately 13% or nearly 14% on an FX neutral basis to $1 6 billion.
Adjusted EBITDA margin was 61% down over five percentage points over the prior year driven by the lower margin profile of newly acquired assets. The conversion impacts of commenced sprint churn along with a higher pass through revenue, resulting from rising fuel costs.
Moving to the right side of the slide attributable <unk> and attributable <unk> per share grew by roughly 6% and nearly 4% respectively.
Growth was meaningfully impacted by the timing of cash taxes and maintenance Capex in 2021, which was heavily back end weighted the.
The contributions of these two line items provided a negative year over year growth headwind of approximately 5% on <unk> in the quarter.
Let's now turn to our revised full year outlook, where I'll start by reviewing a few of the key high level drivers.
First due to higher pass through revenue associated with rising fuel costs.
Strong underlying trends in the business and modest FX improvements, we're increasing our property revenue outlook by $75 million at the midpoint.
It is important to note that we continue to apply our standard methodology for projecting FX across our regions.
Taking the more conservative of the trailing 30 day spot rate averages and an aggregation of bank estimates when.
When applying current spot rates, we would actually see improvement beyond these revised assumptions, although we believe it's prudent to continue with our standard approach.
Second through solid conversion of our top line upside the carryforward of some cost benefits and strong services performance in Q1, we are raising our outlook for adjusted EBITDA by $55 million at.
At an attributable <unk> per share level, we are raising our guide at the midpoint to $9 72.
An increase of <unk> finally, as I mentioned earlier, we are maintaining our prior guidance assumptions around the equity financing for core site.
With that let's move into the details of our revised full year expectations. As you can see on slide eight we are now projecting consolidated year over year property revenue growth of 14% at the midpoint.
The increase as compared to prior guidance is due to approximately $66 million in additional international pass through and straight line revenue.
$7 million in core property revenue outperformance, along with another $2 million and FX benefits.
Moving to slide nine you'll see our revised organic tenant billings growth expectations for 2022 with the leasing environment remaining largely consistent across our footprint. We are reiterating our prior growth rates for Latin America, APAC International USA, Canada and on a total consolidated basis, we are modest.
Raising our expectations for Africa, driven by stronger new business in Europe , mainly due to higher CPI driven escalation contributions as such we now expect organic growth of greater than 6% and greater than 9% and Africa and Europe , respectively.
Moving to slide 10, and as noted earlier, we are raising our adjusted EBITDA outlook by $55 million and now expect year over year growth of roughly 10, 5%. These revised expectations include $26 million from cash gross margin outperformance driven by the increase in our revenue guidance and.
Some services margin expansion path.
Partially offset by higher pass through expenses.
We also now expect an additional $19 million in net straight line and another $10 million associated with the revised FX assumptions.
Turning to slide 11, we are raising our expectations for <unk> attributable to common stockholders by $10 million at the midpoint as the benefits from the operational and FX Upsides I just mentioned are being partially offset by higher interest expenses. The result of an elevated rate curve since our last call.
This translates to an increase of <unk> <unk> on a per share basis, moving the midpoint to $9 72.
As I mentioned earlier and consistent with our initial outlook. Our <unk> guidance includes an assumption for the core site equity financing, which for modeling purposes assumes a common equity issuance by mid year. However, we continue to evaluate several potential sources, including common equity mandatory convert.
<unk> preferred equity and other convertible instruments and also private capital partnerships, where discussions continue to progress as a result of strong interest from leading private investors for a minority stake in our U S data center business.
That said, we remain flexible in our approach with the final mix ultimately depending upon what course offers the most attractive cost of capital terms and operational flexibility.
Finally, with respect to the balance sheet management. Following our recent senior unsecured note issuance, which I highlighted earlier and pro forma for executing our equity financing.
We will have termed out a significant balance of our floating rate debt and would expect to bring our net leverage to the high five times range with a clear path to returning to our target range of three to five times over the next couple of years.
Moving on to Slide 12, Let's review our capital deployment expectations for 2022, which are consistent with our prior outlook and reflect our continued focus on driving strong sustainable <unk> per share growth.
As always distributing capital to our common shareholders remains our top priority and we continue to expect to allocate subject to board approval approximately $2 8 billion towards our dividend in 2022 on.
On a per share basis. This equates to approximately 12, 5% in year over year growth consistent with our double digit target.
On the Capex front, we are reiterating our prior outlook mid points across all categories. This plan supports our initial expectations to construct approximately 6500, new sites across our international footprint and includes roughly $300 million towards our datacenter business $270 million of which is <unk>.
Hi to development projects.
We will continue to prioritize our development opportunities across our global footprint given its strong return profile and our ability to largely fund these initiatives through locally generated cash flows in fact of the nearly 1400 50 sites. We constructed in Q1, we saw an average day one NOI.
High yield of 14% at the high end of the double digit initial return rates, we've seen through our build program historically looks.
Looking ahead, our development pipeline remains strong with opportunities afforded by our scale market positions customer relationships operational capabilities and solid underlying secular trends, which continue to drive strong demand across the portfolio.
Finally on slide 13, and in summary, Q1 was a fantastic start to the year with organic tenant billings growth accelerating sequentially across each of our reported segments as <unk> deployments for G. Densification initiatives and the benefits of our comprehensive MLA agreements drive strong organic new leasing.
And increasing demand for newly constructed sites we.
We see the same secular trends driving solid performance on the data center front, and we could not be happier with the assets and team. We've added through the core site and data site acquisitions, we continue to be encouraged by the demand trends across our global portfolio of distributed communications real estate and look forward to executing on a <unk>.
Number of strategic initiatives, including finalizing our core site financing through the rest of the year as we aim to deliver compelling total returns to our stockholders.
With that I'll turn the call back over to the operator for Q&A.
Thank you and as a reminder, ladies and gentlemen, if you do have questions press. One then zero on your Touchtone phone, you'll hear an indication who've been placed into queue and you may remove yourself from the queue by repeating the London Zero command.
If you're on a speaker phone please pickup your handset and make certain that your phone is on mute it before pressing any buttons.
Our first question will come from the line of Matt <unk> from Deutsche Bank Go ahead. Please.
Hey, guys. Thank you for taking the question.
Just two if I could first on Europe . So we've heard a lot of press around larger carrier portfolios coming to market there.
I'm wondering how you think about the prospects of scaling up in Europe further through the lens of either full ownership versus partnering with a financial sponsor as you've done in the past and then already in light of leverage sitting at $6. Four turns right now and then secondly on core site. Obviously this was the first full quarter.
With core site under your belt I'm wondering if there are any positive or negative surprises you can share and then rod I think you alluded to maybe a little bit of an increased outlook for the data center business.
If theres any color or additional detail you can give.
Hey, Matt, let me start off and Rod can add in.
As you see the first of all within Europe , where well first of all both <unk> as well as our core site acquisition are hitting on all cylinders.
There are both outperforming.
Our expectations kind of right out of the gate and so in Europe , we're very focused on and.
And really realizing the full potential with Lcs as Raj said, we just landed.
Transaction with with one on one and so our focus is really on the.
Final integration steps with Lcs, and and really leveraging that capability in the markets that we're in so we're really pleased with the teams there and maybe the contracts there and the relationship with the with Telefonica with regards to core site.
They had a record retail and scale a quarter and so we're really pleased with what we've seen there we've got a terrific management team in place a good balance between the activity between the retail scale and Hyperscale types of business I've got our sights set on on building out some of the existing.
Infrastructure that we have available to us.
So on bulk transactions, we couldnt be more pleased with the activity that we're seeing right out of the gate.
Good morning, Matt. Thanks for thanks for joining us and thanks for the question I'll add a couple of points on core site. So we are seeing positive trends in core site, you've heard us say before we continue to view the asset as a very unique high quality asset and we are seeing the quality of the asset come through early on here in the in the <unk>.
Financials. So we did have a terrific.
End of the year last year in terms of new and expansion revenue being added we do see that accelerating into 2022. So that's really positive that allowed us to increase the midpoint of the revenues.
About $5 million and we have seen the backlog for that metric kind of come up we're sitting at about 19 million backlog versus a year ago same period, where it was around nine.
9 million, so that's up about $10 million and across the major metrics here. We think the business is really strong in terms of revenue growth. The range. We look at is between 6% and 8%. We're looking at the high end of that range, maybe even a touch above that range here are the escalators are in the range of 2% to 4% interconnection growth our target range is between.
Six and eight and again, we'll be at the high end of that range, we believe cash mark to market in the range of 2.3.
We'll have to see exactly where that ends up it always can be affected by kind of unique renewals from certain customers, but the range. There is about 2% to 3%.
On an ongoing basis.
Monthly recurring revenue per cabinet, we look at growth rates, 4% to 6% range again, we're in the mid single digits for this year. So that is compelling the churn rates are right, where we expected them to be in the mid <unk>.
In the middle of the range the range of 6% to 8%.
On all cylinders with the business I think it really demonstrates the quality of the asset the fact.
Customers of this business really do enjoy the interconnection nature in the cloud centric nature of these of these assets and from a capex perspective.
Put in about 2% of revenue backing in maintenance Capex and for growth Capex, We've got about $300 million going into the business. This year really to build out additional capacity.
Hopefully that gives you some color Matt.
Our next question will come from the line of Eric <unk> with Wells Fargo go ahead.
Hi, good morning, Thanks for taking the question.
Wondering if you could comment a little bit on the the one on one relationship the new MLA, you signed does that kind of driving.
You know a faster organic growth outlook in Europe than you previously had had anticipated.
Then secondly, I just wanted to take your temperature on the potential to do future data Center M&A, obviously core site only in eight markets.
Are you seeing some opportunities out there whether internationally or perhaps in secondary markets in the U S that might be interesting and to further scale that platform. Thank you.
Yeah, Let me I'll take the first or the second one and Rod you can take the first one on 101 first of all with regards to the data centers, where we're really leveraging what we have acquired at the end of last year and we're very focused on further developing.
That business working very much on that.
The fundamentals of expanding sales authentic.
Extending distribution.
We're gonna campuses market expansion.
Leveraging the interconnection capabilities that they have.
And then secondly, looking at unlocking the opportunities at the edge and so I think what you will see and of course I'd transactions, yeah, there'll be further buildout of existing.
Our resources there are expansions into up in Silicon Valley, we have a fairly sizable new asset that we're looking to build up there.
And really just trying to again unlock the edge and work jointly with both of our customer sets and figuring out how we can play a meaningful role in that development. So the U S is our first.
<unk>.
Our project in terms of trying to.
<unk> worked through all of these opportunities here, we remain really excited about the opportunity there the kinds of conversations that we're having with the various potential.
Potential customers are really exciting for us it's going to take a while for this to unfold, but that's really where our focus is and so we don't see.
Towers of our business.
That's the reason that we did this transaction to begin with to further develop the the revenue that we're going to be able to enjoy at the tower site and so that's where our focus is going to be.
Why not one right.
Yes, Thanks, Tom and thanks, Eric So it was one O. One we are pleased that we have the agreement with one on one we're really looking forward to help them.
Build out their greenfield five year network across Germany. So that's that really is very exciting the deal that we struck really as a framework around how the two parties.
We will work together contractually it also kind of lays out and it gives 101 kind of that framework to access our sites. So that's exciting there are long term contracts kind of embedded in there.
So we'll work through that its not really driving additional growth in our 2022 organic tenant billings yet, although we do think it's a very exciting development that will provide growth over the long term and maybe even pick up in the back of this year, a little bit, but maybe Eric I'll hit a couple of points on the growth rates here in <unk>.
So you saw the.
Announcement earlier in the presentation, we did have organic tenant billings growth in Europe in the high teens.
A lot of that is driven by the healthiest assets, which is again, a really high quality assets across Europe , particularly in Germany, We do expect that momentum to continue.
At least in terms of the leasing activity, but the when you get out into the back half of the year. When you bring the TLC is in base revenue into the equation, we expect organic tenant billings growth for Europe to moderate and dropdown into the 7% range, maybe between 7% and 8%. So still very strong growth. If you exclude calcium when you just look at Germany.
I mean, just look at Europe on a legacy business that business for Q1 grew greater than 6% on an organic tenant billings growth basis that compares to a year ago same period is only 3%. So we're seeing really good growth momentum in Europe on the otp metric on our legacy business as well as being listed.
With the high quality assets from <unk>, and we do think one O. One will be a kind of a multiyear additional beds. We go forward.
Okay.
We will go next to the line of Michael Rollins with Citi Go ahead.
Thanks, and good morning.
I'm just curious if you could talk a little bit more about the domestic leasing environment in terms of that multiyear visibility that you've previously been speaking to and how that visibility.
Evolving for the business.
Yes sure sure.
Thanks for the question and thanks for joining us so I'll just remind you in terms of the long term guidance that we have out there. It was over a seven year average really going out to 2027, and we were looking at.
And at least 4% growth over that time on average reported and on a normalized basis excluding the.
The impact the negative impact was perhaps it would be up 5%.
No what that metric look like in 'twenty, one and now you see kind of where we're guiding in in 'twenty. Two will hit an average of about 2% for those two years on a reported basis and if you exclude again normalized for the sprint churn that would be up around 5% and we're actually seeing that in Q1 in terms of our U S organic growth which came.
And at about <unk>, 6% for the quarter and that did have an impact from sprint churn that was pretty close to 4%. So that would have been up in the mid to upper fours.
Normalized to the sprint churn. So that's certainly where we expect to head. If you look at the 23 to 27 time period, we would look at reported organic tenant billings growth being greater than 5% greater than or equal to 5% and on a normalized basis around 6% greater than 6%. So we do see that acceleration kind of been momentum.
We think we're in for a nice run here, a really stable long term healthy growth in the U S business. Once we work through the sprint churn and in these numbers, it's important to point out that two thirds of the not just the underlying revenue, but also the growth is already contracted in the in the in the MLA that we have the holistic MLA and it doesn't.
<unk>.
The acceleration and the partnership we have with dish in terms of that agreement where revenue begins this year. It accelerates through the year and then it'll be there over the long term. So hopefully that gives you a little color Mike.
Michael in terms of the U S growth rates.
Our next question will come from David Barden with Bank of America go ahead. Please.
Hi, Good morning, everyone. This is Alex waters on for Dave.
Maybe just my first one here.
You hit on it in your prepared remarks, but could you elaborate a little bit more on the plans for the size and the timing of the car site.
Equity raise I think in the past years.
So that was to kill and May slip into <unk>.
And then have the plans evolve.
Include private capital there.
Yeah. Thanks, Alex Thanks for the question Thanks for joining us.
So we.
We're working through the financing plan, we're very excited about the prospects and the different opportunities. We have as I said in her prepared remarks, we're looking at equity.
And equity component, that's really the final piece of the entire courtside financing we ended the quarter here at about four six times leverage.
Our target range is between three and five times and we do have a plan to delever over the next couple of years.
So we expect by the end of the year to get into the mid to upper Fives times. So that's where the equity component comes in we're looking at raising about $5 billion from an equity transaction Thats whats in our in our base model and the outlook just to reiterate just to reiterate here.
Yes.
The base plan assumes that we're going to do a common equity issuance to the 5 billion at roughly $235 a share that's what's in our 2022 guidance for core <unk> per share growth, but with that said we're also looking at.
Other forms of equity so.
Complementing the common equity with some preferred convertible equity instruments other kinds of convertible instruments and private capital. So we are.
Looking at private capital options much of that has come from inbound inquiries that we've had when people heard that we are buying core side I think that theres a lot of excitement in the.
And the marketplace in terms of the high quality nature of those assets.
There was a lot of inbound interest there and we also went out with some outbound inquiries and we've been working through a process. So.
The other thing I would just clarify here, Alex I think I mixed up the numbers on the leverage we're ending at $6 four and I think I may have said $4 six.
So again, we're getting back down into the mid to upper fives by the end of the year I think you've made a comment in your question that we might be pushing the equity financing into Q3 I'm not sure that's correct, but we're working through the process. There's a good chance that we could have it wrapped up in Q2 like we initially said at the outset of the year.
And I guess right I would just add you know we chose not to change the outlook assumptions. So at the time when we issued that initial outlook.
We had the the equity at the 5 billion level at the price point level.
As I said just for clarity I just wanted to make sure that we just kept that the same.
Going forward and obviously, we'll adjust that.
Right.
Finally closes this whole transaction, which again, we would expect in Q2.
Yeah.
We'll go next to the line of Ric Prentiss with Raymond James Go ahead.
Good morning, everybody.
Eric Good morning, I'm busy very.
Busy morning, I appreciate you guys being available first question is.
Down in Brazil, where it looks like its finally, making it to the.
The final positioning can you update us a little bit about how you see the boy getting carved into the other three operators as far as what it means to that market and just what your exposure is.
Sure Rod do you want to.
Yes, Rick So you bought it has has kind of finished there their process.
Or exiting the market.
Splitting their business up into the other three remaining carriers. There. So we do see that as a positive event, taking that those leases and putting them was with carriers that are financially secure and kind of in a healthy competition in that market. So we think that is certainly going to be productive.
We do we do have a a chunk.
Chunk of revenue from <unk>, we have about 6.7, just about seven years remaining on average on those leases.
Rick in terms of the <unk>.
The revenue impacts to our business, it's less than 1% of our revenues globally.
That we have with alloy down in Brazil, even though we had that nearly seven years on average there. That's an average so there could be some leases that come up a little bit earlier than that and we may see churn beginning as early as next year and kind of moving through the next few years. So we will be working.
Through that process, but in general we think it's a healthy thing for the industry. There in Brazil, we've been working through the kind of the process as it has.
Last couple of years. So yeah, I think it's good to get that behind us and get it behind the wireless segment there in Brazil, So everyone can move forward.
And Rick I'd, just reiterate that I think this is candidly a very positive about that putting these assets in the hands of Tim Claro in vivo and.
Theyre very focused.
Just on on building out further <unk> and <unk>. So I think this is a real positive for the market.
We'll move onto the line of Brandon Isbell with Keybanc go ahead.
Yes.
Follow up on Mike's question, you guys continue to expect to be at $150 million in co location and amendments in the U S. In 'twenty two and then how should we think about the exit rate in terms of Colocation and amendment for modeling purposes for 2023 is that going to be a good run rate.
Thanks.
Yes, Brendan thanks for the question. Thanks for joining us. So we are targeting about $150 million of contribution to organic tenant billings growth through Colocation and amendment the metrics for the quarter was about 36 million. So that's an acceleration over the exit out of 2021.
And it's higher than any quarter, we had in 2021. So we are seeing that acceleration in that gross leasing activity in the U S. As I said in my prepared remarks, and we will see a <unk>.
Slight pullback in Q2 in that metric really just around the mechanics of the way the work in the U S. But when you get to Q3 and Q4 will be above the Q1 total here. So we'll be exiting at a higher level going into next year I don't want to talk about next year two specifically here.
And give guidance, but we are seeing an acceleration in that metric, we expected to see that and we and we are seeing that and it's all very constructive and kind of in line with our longer term organic tenant billings growth guidance for the U S.
We'll move onto the line of Jon Atkin with RBC go ahead.
Thanks, very much a couple of questions I noticed that the.
You talked about $120 million of asset acquisitions 30 million of which were towers can you talk to us a little bit about what what comprised the presence.
Sure Jonathan I couldn't give you that it's really just a variety of small acquisitions on the tower side.
Many of them were in Europe , we do have an arrangement with a carrier in Europe , where we consistently.
A number of sites throughout the throughout each quarter in Europe , but we're also buying a few down in.
In in Latin America are ones and twos here.
There we also.
We have a pipeline in the U S, where we're rolling up a few.
Patience here and there and then there's some payments that are related to the prior year deals that.
That we that we acquired.
So theres really not not a ton going on there I would think about it in terms of Europe and.
In Latin America, primarily.
And I'm just interested in the.
Sungard announced the bankruptcy earlier.
April I think of course, either as a Standalone company had alluded to.
Then put around the pre package bankruptcy, but now that we're kind of going through the next phase of that I wondered what the what impact you're seeing on your data center business from that type of event.
Now Jonathan we're not we're not expecting anything material from that perspective, we don't see it we don't see any real negatives.
Being meaningful to note so.
We're committed and kind of confident in the growth rates that I outlined a little earlier in the call.
Yes.
And our next question will be from voucher Levi with UBS go ahead. Please.
Great. Thank you and the euro.
Can you talk a little bit about the activity you are seeing from dish.
Fixed wireless is ramping faster than we had expected I know, it's still very small and the carriers have a lot of capacity, but anecdotally do you see any change in carrier activity on the sidelines usage is increasing significantly once you get your thoughts on that and then another question in terms of the.
Bill do you have a significant we'll talk I'm sure on development Capex can you talk about.
So what youre seeing in terms of a cause for us with your expectations on any delays.
Sure.
Yeah.
Built on the continued build out in the U S. I mean, yeah. There I think the carriers of if all said there are interest and continually building out fixed wireless but that is not getting in the way in terms of their capital spend.
And really building out <unk> and so we would expect again kind of a continued acceleration of that <unk> built.
I'd really accelerating as Roger said kind of in the in the second half of the year.
Spectrum being cleared and being able to be put in place. We're excited about the prospects for that for that <unk> build I don't think the carriers are going to let anything getting away.
Of that opportunity going forward.
And on the on the on the build side I just want to say you know this is.
The last 12 quarters 11 of them are built over a thousand.
New builds and and that's going to contribute.
Significantly to our overall growth rate in 'twenty.
'twenty two.
As it has in 'twenty one we've we've laid out a path of looking at you know north of 40000 builds over the next several years and have visibility into contracts with all of our existing customers to do so.
Rod mentioned the build that's going on in Africa, we see equally build going on in Europe , clearly in India as.
As well as in Latin America. So we're really excited about the build program. We're looking at over 6000, new builds are in 'twenty two.
And as I mentioned, I'm, hoping that that will continue to accelerate going forward.
And Bob I'll give you a couple of specific numbers here on the cost you had mentioned the cost of the bills are coming in at a little less than 100000 on average maybe closer to 70 575000 on average per site and we are continuing to see the targeted NOI yields seen in the in the in the low to mid teens.
So we're in the range of about 14% now, which is which is great regarding to your question on dish, we are seeing activity.
From dish in the U S. We did last year as you know that continues.
This year, we see it mostly showing up in our financials through our services business. So we're continuing to have strong volume and activity in our services business we are projecting.
In and around $225 million to $230 million in services revenue for this year last year. It was up to about 250, so there's a slight pullback there, but if you think about our services activity for the first quarter of 2022, it's almost 100% growth over that same.
Time period in last year, and certainly the dish Greenfield build is a big part of that and if you rewind back to 2020, our services business was what's driving less than a $100 million in revenue. So we've seen that step up in our service business, which really highlights the level of activity that we're seeing in the U S and again.
Dish as part of that will begin to see leasing revenue here. This year from dish and that will ramp at the back half of the year and we will exit.
You know of course, a much higher <unk>.
Level of leasing revenue from dish than we entered the year and then that will ramp and continue for years to come.
We'll go now to the line of Phil Cusick with J P. Morgan.
Your line is open.
Hey, guys. Thanks, a couple if I can.
First if you can if I can follow up on the capital raise for fore sight. If you were working on a large European deal would that be material enough that it would be hard to raise public equity in the meantime.
Or is that not not something that's an issue.
And then second can you dig into your comments about the expected decline in gross organic new business in the second quarter before you said wrapping a ramping up in the back half of the year.
And is that alluding to the Verizon MLA exploration it doesn't seem like that impacted the first quarter at all thanks very much.
Yeah. Thanks, Bill Thanks for joining the call and thanks for the question. So in terms of the capital raise I mean, I don't want to get into too much hypothetical there are a lot of different deals over in Europe , a lot of different stuff.
I don't want the gas in terms of the level of capital that potentially they needed I would tell you. Our equities are really strong we've got a lot of support in the equity markets. If we wanted to go out and raise equity we're very confident that we can do that for the right.
The rate of U E accretive deal for our.
For our shareholders. So that's what I would say in terms of the potential.
For any other acquisitions and <unk>.
And issuing equity certainly what continued to be active and looking around.
We like the transaction that we have in Europe , we like what we're seeing in the <unk> business. We think that was a high quality set of assets with really good contracts and we purchased it at the right time, so from a European perspective, we like exactly where we sit today and we are focused on financing the core site.
The core site opportunity as well jumping over to the deceleration.
From Q1 to Q2, and our Ot BG contributions from co locations and amendments, it's dropping down from like the mid thirties for Q1 into the into the low 30 for Q2, it's not horizon driven antics of the the MLA as and where some use rights fees kick in early in the year.
And then we do see that ramping up and we expect it to be in the range of 40, plus each of the final two quarters in the year. So that's kind of the way to think about that that that ramp theres nothing.
Turning about the step down in Q2, it's all just MLA mechanics, and we feel very good about the level of activity in the position of our U S portfolio.
So let me just reiterate as I've said all along the course of the capital raise is not impacting how we think at all about future tower opportunities.
Stop.
Yeah.
We have time for one final question that will come from line of Sami Badri with credit Suisse go ahead.
Alright, Thank you very much for the question.
First I wanted to just get a better sense on how you think about the core site business from a pricing and renewal perspective, and I know you mentioned that business for retail Colo and other parts also were very strong last quarter, but what is kind of the strategy. At A&P are you guys looking to kind of take a bigger share out of the market.
By lowering pricing a little bit of winning a bigger chunk or are you maintaining pricing discipline as legacy core site and seeing kind of the revisions in renewables as kind of a strong as what core site was reported before they were taken out by you guys just trying to get a better idea on the strategy and the vision of course site under.
T.
And let me just so I can start and rocket in it we're very focused on pricing discipline. Okay. I mean, they the asset that they have in and what the business is doing.
With its own fabric within we think can support this high single digit low double digit kind of growth rate going going forward and so the team is very focused on extending <unk>.
Distribution into all it's three major pieces are really driving new and expansion sales working on those renewals.
Developing the campus market expansion leveraging interconnection.
So really driving organic growth from existing customers and bring to getting new business from a high quality, new ones and driving new logos within the business. So no change at all in terms of the direction and the discipline that the team brings to the marketplace.
We are.
Have increased some of the funding to be able to accelerate some of the build out so that there is.
More opportunity for growth, but the underlying discipline in terms of how they have approached the business is what we acquired and and we're very excited about continuing that same type of discipline going forward.
And with that we'll turn the conference call back over to your host.
Thanks, everyone for joining today's call. Please feel free to reach out to me or the IR team with any further questions. Thanks again.
Yes.
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