Q4 2023 SBA Communications Corp Earnings Call
Operator: [music].
Ladies and gentlemen, thank you for standing by and welcome to the SBA fourth quarter results Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the SBA fourth-quarter results conference call. At this time, all participants are in a listen-only mode.
Operator: Later, we will conduct a question and answer session. Instructions will be given at that time. If you should require assistance during the call, please press star, then zero.
Time, if you should require assistance during the call. Please press Star then zero and as a reminder, this conference is being recorded.
Operator: And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mark DeRussi, Vice President of Finance. Please go ahead. Good morning, everyone.
I would now like to turn the conference over to our host Mark their ROTC Vice President of Finance. Please go ahead.
Mark: Good morning, everyone I'm, sorry, good evening, everyone and thank you for joining us for Sba's fourth quarter 2022 earnings Conference call.
Mark DeRussi: I'm sorry, good evening, everyone, and thank you for joining us for SBA's fourth quarter 2023 earnings conference call. Here with me today are Brendan Cavanagh, our President and Chief Executive Officer, and Mark Montage, our Chief Financial Officer. Some of the information we'll discuss on this call is forward-looking, including but not limited to any guidance for 2024 and beyond. In today's press release and in our FTC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, February 26th, and we have no obligation to update any forward-looking statements 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 will now turn it over to Mark to discuss our fourth quarter results for 2024. Thank you, Mark.
Mark: With me today are Brendan cabinet, all our president and Chief Executive Officer, and Mark Mockingjay, Our Chief Financial Officer.
Mark: Some of the information we will discuss on this call is forward looking including but not limited to any guidance for 2024 and beyond.
Mark: 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 26, and we have no obligation to update any forward looking statements we may make.
Mark: In addition, our comments will include non-GAAP financial measures and other key operating metrics the reconciliation.
Mark: 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 will now turn it over to Mark to discuss our fourth quarter results in 2024 outlook. Thank you Mark.
Mark DeRussi: We ended 2023 with another strong quarter. Our fourth quarter results were ahead of our expectations and allowed us to finish at or near the high end of our full year 2023 outlook for site leasing revenue, tower cash flow, adjusted EBITDA, AFFO, and AFFO per share. Consolidated Team Tower recurring cash leasing revenue growth for the fourth quarter, calculated on a constant currency basis, was 3.6% net year-over-year, including the impact of 3.9% of churn. On a gross basis, same-tower recurring cash leasing revenue growth was 7.5%.
Mark Mockingjay: And in 2023 was another strong quarter.
Mark Mockingjay: Fourth quarter results were ahead of our expectation and allow us to finish at or near the high end.
Mark Mockingjay: Full year 2020 outlook.
Mark Mockingjay: Leasing revenue.
Mark Mockingjay: Our cash flow or adjusted EBITDA, yes, it will fall for sure.
Mark Mockingjay: I'm sorry, the cheap tower recurring cash leasing revenue growth for the fourth quarter, which is calculated on a constant currency basis was three 6% year over year, including the impact of three 9% of churn on the gross business same tower recurring cash leasing revenue growth was seven 5%.
Mark Mockingjay: <unk>.
Mark DeRussi: Domestic Sim Tower recurring cash leasing revenue growth over the fourth quarter of last year was 6.9% on a gross basis and 3.5% on a net basis, including 3.4% of churn. Of that 3.4%, 1.6% was related to the spring consolidation trend. As expected, domestic operational leasing activity, or bookings, representing new revenue placed under contract during the fourth quarter was consistent with the low levels of activity we saw during the second and third quarters of 2023. The full year organic leasing contribution to domestic site leasing revenue ended up in line with our previously provided outload.
Mark Mockingjay: Domestic same tower recurring cash leasing revenue growth over the fourth quarter of last year was 649% on a gross basis and three 5% on a net basis, including three 4% of churn well. That's we put 4% one six was related to scream consolidation churn.
Mark Mockingjay: As expected domestic operational leasing activity or bookings, representing new revenue placed under contract during the fourth quarter was consistent with the low levels of activity. We saw during the second and third quarter of 2020 suite.
Mark Mockingjay: For your organic leasing contribution domestic site leasing revenue and in line with our previously provided outlook.
Mark DeRussi: Non-spring-related domestic annual churn was also in line with our prior expectation and continues to be between 1% and 2% of our domestic cycling revenue. International SIN Tower recurring cash using revenue growth for the first quarter, which is calculated on a constant currency basis, was 4.2% net, including 5.9% of churn, or 10.1% on a gross basis. In Brazil, our largest international market, same-tower growth and organic growth were 8% on a constant currency basis.
Mark Mockingjay: None screen really domestic annual churn was also in line with our prior expectation and continues to be between one and 2% of our domestic site leasing revenue.
Mark Mockingjay: International same tower recurring cash leasing revenue growth for the fourth quarter, which is calculated on a constant currency basis was four 2% net increased five 9% of churn or 10, 1% on a gross basis.
Mark Mockingjay: Brazil.
Mark Mockingjay: Rogers International market same tower growth organic growth was 8% on a constant currency basis.
Mark DeRussi: Total international return remained elevated in the fourth quarter, due mostly to TRA consolidation. During the fourth quarter, 77.5% of consolidated cash site listing revenue was denominated in U.S. dollars. The majority of non-US dollars denominated revenue was from Brazil, with Brazil representing 16.1% of consolidated cash-backed leasing revenues during the quarter.
Mark Mockingjay: Total international where churn remain elevated in the fourth quarter due mostly to carry constant condition during the fourth quarter.
Mark Mockingjay: 77, 5% of consolidated cash site leasing revenue was nominated in U S dollars.
Mark Mockingjay: The majority of non U S. Dollar denominated revenue was from Brazil, with Brazil, representing 16, 1% of consolidated cash site leasing revenues during the quarter.
Mark DeRussi: During the fourth quarter, we expanded our power portfolio, acquiring 23 communications sites for a total cash consideration of $21.3 million. We also built 138 new sites. Subsequent to the quorum, we have purchased, or entered into an agreement to acquire 281 sites in all of our existing markets for an aggregate price of $87.8 million. We anticipate closing on these sites under contract by the end of the third quarter. Looking ahead, this afternoon's earnings press releases include our initial outlook for the full year 2024. Our outlook reflects a continuation of the reduced level of carrier capex that began early last year.
Mark Mockingjay: During the fourth quarter, we expanded our tower portfolio acquiring twenty-three communication sites for total cash consideration of $21 million.
Mark Mockingjay: We also built 138 new site so.
Mark Mockingjay: Subsequent to the quarter end, we have purchased.
Mark Mockingjay: I wanted to agreement to acquire 281 side in all of our existing market for an aggregate price of $87 million.
Mark Mockingjay: We anticipate closing on these sites under contract by the end of the third quarter.
Mark Mockingjay: Looking ahead. This afternoon earnings press release include our initial outlook for the full year 2024.
Mark Mockingjay: I'll Cook reflects a continuation of the reduced level of carrier Capex that began early last year.
Mark DeRussi: Despite this, our leasing business will continue to grow organically through contributions from new leases, amendments, and contracted escalators. Domestically, our outlook assumes $55 million of customer churn in 2024, of which approximately $30 million is related to sprint-related decommissioning. A previously provided estimate of aggregate spring rate return over the next several years remains largely unchanged.
Despite this our leasing business was continuing to grow organic piece to contribution from new leases.
Mark Mockingjay: Mad men and contracted escalators.
Domestically at Lucas from $55 million of customer churn in 2024 of which approximately $30 million related to spring related decommissioning.
Mark Mockingjay: Our previously provided estimate of aggregates, we return over the next several years, we mean neurology unchanged.
Mark DeRussi: We anticipate a wage of $40 to $45 million in 2025, $45 to $55 in 2026, and $10 to $20 million in 2027. Internationally, our output includes approximately $22 million in turn in 2024. During the fourth quarter of 23, we signed a multi-year agreement with Vivo in Brazil. Under this agreement, we expect to incur $4 million of oil wireless consolidation insurance in 2024 and an additional $2 million over the next several years. Total anticipated oil warehouse consumption remains at approximately $30 million.
We anticipate a range of $40 million to $45 million in 2025.
Mark Mockingjay: 45 to 55 in 2026 and $10 million to $20 million in 2027.
Mark Mockingjay: I'm not sure you are all crude and includes approximately $22 million turning 2024.
Mark Mockingjay: During the fourth quarter of 'twenty suite, we signed a multiyear agreement with vivo in Brazil.
Mark Mockingjay: Under this agreement, we expect to incur for millions of wireless consolidation churn in 2024, and an additional $2 million over the next several years.
Mark Mockingjay: Total and discrete or why he has come to the contrary June remains at approximately $30 million.
Mark Mockingjay: Additionally.
Mark DeRussi: Additionally, our full year 2024 outlook reflects a year-over-year decline in service revenue and gross profit due to the low overall TRE activity in the U.S. However, our outlook is in line with historical performance, excluding a very strong result in 2022 and 2023 due to the initial rollout of 5G networks by some of our wireless customers during this year. This outlook does not assume any further acquisition beyond those under contract and does not assume any share repurchase.
Mark Mockingjay: Full year 2024 reflects a year over year decline in service revenue and gross profit due to the low or no activity in the U S.
Mark Mockingjay: However, our outlook is in line with.
Mark Mockingjay: Historical performance, excluding our very strong resort in 2022 and 'twenty three due to the initial award out of <unk> network by some of our wireless customer joined as yours.
Mark Mockingjay: This outlook Theres noticed through menu further acquisitions beyond those under contract and does not assume any share repurchase.
Mark DeRussi: However, we are likely to invest in additional assets and or share repurchase during the year. Our outlook for net cash interest expense and for FFO and FFO per share includes the recent refinancing of our turn-alone big debt, the upsurge of our credit facility, and the future refinancing of a prevailing rate in the future of our $620 million ABS power security, which we're enjoying in October of 2022. A bearish heat remains very strong, and we have ample liquidity. In January of 2024, we recently had our $2.3 billion credit facility, pushing up the maturity to 2031. We also increased our revolver capacity by $500 million. Thank you, all of you.
Mark Mockingjay: Whether we're likely to invest in addition to us at annual share repurchases during the year.
Mark Mockingjay: I'll Cook for net cash interest expense and for asset pool and <unk> per share include the recent refinancing of bulk terminal b debt.
Obsess about credit facility in the future, we financing raising rates in the future of about $620 million ETS Howard Securities maturing October 2024.
Mark Mockingjay: Our balance sheet remains very strong and we have ample liquidity.
Mark Mockingjay: And generally as 2024, we refinance.
Mark Mockingjay: $2 3 billion credit facility pushing out the maturity to 2031.
Also inquiries that we've already capacity by $500 million.
Mark Mockingjay: Two two.
$2 billion revolver is almost fully paid down.
Mark Mockingjay: Our leverage remains at historical lows and well below our stated target of seven to seven five turns.
Mark Mockingjay: There's plenty of dry powder for opportunistic acquisition and or share repurchase.
Mark Montage: Lastly, the purchase of Ford starting interest rate swap in the fourth quarter. This will give us great certainty around, greater certainty around future interest rates. With that, let me turn the call over to Mark, who will provide additional details. Thank you, Mark.
Mark Mockingjay: Lastly report shows a forward starting interest rate swap in the fourth quarter.
Mark Mockingjay: It will give us greater certainty around greater certainty around future and towards the goals.
Mark Mockingjay: With that let me turn the call over to Mark will provide additional detail. Thank you Mark we ended the quarter with $12 4 billion of total debt and $12 1 billion of net debt our net debt to annualized adjusted EBITDA leverage ratio was six three times, which is below the low end up our target range and near the lowest level, we have seen in <unk>.
Mark Montage: We ended the quarter with $12.4 billion of total debt and $12.1 billion of net debt. Our net debt to annualized adjusted EBITDA leverage ratio was 6.3 times, which is below the low end of our target range and near the lowest level we have seen in decades. Our fourth quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was very strong at 5.8%. Additionally, during the fourth quarter of 2023, the company entered into a $1 billion forward-starting interest rate swap, which will swap one-month SOFR for a fixed rate of 3.83%. The swap has an effective start date of March 31, 2025, which coincides with the expiration of our existing $1.95 billion notional interest rate swap. This forward starting interest rate swap agreement will expire April 11, 2028.
Mark Mockingjay: Our fourth quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was very strong at five two times.
Mark Mockingjay: During the fourth quarter 2023, the company entered into a $1 billion forward started forward starting interest rate swap, which will swap one month, so far for a fixed rate of 383%. The swap has an effective start date of March 31, 2025, which coincides with the exploration of.
Mark Mockingjay: Of our existing $1 $95 billion notional interest rate swap.
Mark Mockingjay: This forward starting interest rate swap agreement will expire April 11th 2028 subsequent to the fourth quarter and our January 25, 2024, the company issued a new $2 3 billion secured term loan b under its amended and restated senior credit agreement.
Mark Montage: Subsequent to the fourth quarter and on January 25th, 2024, the company issued a new $2.3 billion secured term loan B under its amended and restated senior credit agreement. This matures in January of 2031. The new term loan accrues interest at SOFR plus 200 basis points. The existing $1.95 billion interest rate swap will remain in effect until expiration on March 31, 2025. The term loan was issued at 99.75% of par value
Mark Mockingjay: This matures in January of 2031.
Mark Mockingjay: New term loan accrues interest at <unk>, plus 200 basis points, the existing $1 95 billion interest rate swap will remain in effect until expiration on March 31 2025.
Mark Mockingjay: The term loan was issued at 90, 975% of par value. The proceeds were used to retire the company's 2018 term loan and to pay related fees and expenses also subsequent to the quarter on February 23, 2024. The company further increase the total commitments under the revolving credit facility from $1 75 billion to two.
Mark Montage: The proceeds were used to retire the company's 2018 term loan and to pay related fees and expenses. Also, subsequent to the quarter, on February 23rd, 2024, the company further increased the total commitments under the revolving credit facility from $1.75 billion to $2 billion. We continue to use cash on hand to repay amounts under the revolver, and as of today, we have a $70 million outstanding balance under our $2 billion revolver. The current weighted average interest rate of our total outstanding debt is 3%, with a weighted average maturity of approximately 4.1. The current rate on our outstanding revolver balance is 6.4%. The interest rate on 97% of our current outstanding debt is fixed.
Mark Mockingjay: Billion.
Mark Mockingjay: We continue to use cash on hand to repay amounts under the revolver and as of today, we have a $70 million outstanding balance under our $2 billion revolver. The current weighted average interest rate of our total outstanding debt is 3%.
Mark Mockingjay: The weighted average maturity of approximately $4 one year.
Mark Mockingjay: The current rate on our outstanding revolver balance is six 4%.
Mark Mockingjay: The interest rate on 97% of our current outstanding debt is fixed.
Mark Montage: During the fourth quarter, as previously discussed on our third quarter earnings call, we repurchased 234,000 shares of our common stock for $46 million at an average price of $198.27 per share. We currently have $405 million of repurchase authorization remaining under our $1 billion stock repurchase program. The company's shares outstanding at December 31st, 2023 were $108.1 million.
Mark Mockingjay: During the fourth quarter as previously discussed our third quarter earnings call, we repurchased 235, I'm, sorry, 234000 shares of our common stock $46 million at an average price of $198 27 per share.
Mark Mockingjay: We currently have $405 million of repurchase authorization remaining under our $1 billion stock repurchase plan.
Mark Mockingjay: The company shares outstanding at December 31, 2023, or $108 1 million $108 1 million.
Mark Montage: In addition, during the fourth quarter, we declared and paid a cash dividend of $91.8 million, or $0.85 a share. And today, we announce that our Board of Directors declared a first quarter dividend of $0.98 per share, payable on March 28, 2024, to shareholders of record as of the close of business on March 14, 2024. This dividend represents an increase of approximately 15% over the dividend we paid in the fourth quarter. With that, I'll now turn the call over to Brendan. Thank you, Mark. Good afternoon.
In addition, during the fourth quarter, we declared and paid a cash dividend of $91 8 million or <unk> 85, a share.
Mark Mockingjay: And today, we announced that our board of directors declared a fourth quarter dividend of <unk> 98 per share payable on March 28, 2024 to shareholders of record as of the close of business on March 14th 2020 for this dividend represents an increase of approximately 15% over the dividend we paid in the fourth.
Mark Mockingjay: Quarter.
Mark Mockingjay: With that I'll now turn the call over to Brian.
Thank you Mark good afternoon.
Brendan Thomas Cavanagh: I am pleased for the opportunity to reflect on our 2023 performance and to share our thoughts about 2024 and beyond. 2023 was a year marked by some significant macro headwinds, in particular, the consistently high interest rate environment that not only directly affected SBA's floating rate debt costs and the views around our cost of future refinancing but also impacted our customers and their network spending levels. In spite of these macro headwinds, SBA executed extremely well and produced solid financial results. When compared against the initial outlook for 2023, given in February of last year, our actual results for the year finished materially above the high end of the ranges given for site leasing revenue, tower cash flow, adjusted EBITDA, AFFO, and AFFO per share. Most of the outperformance was organic, as we spent very little incremental discretionary CapEx in comparison to our initial outlook. Our excess free cash flow was instead largely spent on paying down our floating rate revolver debt, and we finished the year at a multi-decade low leverage level of 6.3 times, and today have a current revolver balance of only $70 million.
Brian: I am pleased for the opportunity to reflect on our 2023 performance and to share our thoughts about 2024 and beyond.
2023 was a year marked by some significant macro headwinds in particular, the consistently high interest rate environment that not only directly affected SBA floating rate debt costs and the views around our cost of future refinancings, but also impacted our customers and their network spending levels. In spite of these macro headwinds SBA executed extremely.
Brian: Greenlee, well and produced solid financial results when compared against the initial outlook for 2023, given in February of last year. Our actual results for the year finished materially above the high end of the ranges given for site leasing revenue tower cash flow adjusted EBITDA and <unk> per share.
Brian: Most of the outperformance was organic as we spend very little incremental discretionary capex in comparison to our initial outlook.
Brian: Our excess free cash flow was instead largely spent on paying down our floating rate revolver debt and we finished the year at a multi decade low leverage level of six three times and today have a current revolver balance of only $70 million.
Brian: Internally it was a year of leadership transition for the company Jeff.
Brendan Thomas Cavanagh: Internally, it was a year of leadership transition for the company. Jeff Stoops' retirement, the addition of Marc Montagnier to the team, and new leaders in our international, legal, and IT functions. Everyone has stepped up extremely well into their roles, and I am very happy with how the team is collaborating and performing.
Brian: Jeff Skips retirement. The addition of Mark Montagnais to the team and new leaders in our international legal and it functions everyone has stepped up extremely well into their roles and I am very happy with how the team is collaborating in performing.
Brendan Thomas Cavanagh: The discipline, succession planning, and highly capable team members assembled throughout the organization have positioned us well for the future. However, as we look forward to 2024, we recognize that we are coming off of a period of reduced network investment by our largest domestic customer. However, future network needs for each of these customers remain significant, and we anticipate being a critical partner for our customers in meeting their operational goals and objectives. A significant percentage of our sites still require 5G-related upgrades, which we are confident will take place over the next couple of years. In addition, the success and growth of fixed wireless access as a product offering for our customers will add greater demand for increased network capacity as the average user of this product uses 20 times or more broadband data than the typical mobile customer, and the evolution of AI-infused 5G offerings will continue to fuel the demand for improved speeds and lower latency.
Brian: The disciplined succession planning and highly capable team members assembled throughout the organization have positioned us well for the future.
Brian: As we look forward to 2024, we recognize that we are coming off of a period of reduced network investment by our largest domestic customers.
Brian: However, future network needs for each of these customers remains significant and we anticipate being a critical partner for our customers and meeting their operational goals and objectives.
Brian: A significant percentage of our sites still require <unk> related upgrades, which we're confident will take place over the next couple of years.
Brian: In addition, the success and growth of fixed wireless access as a product offering for our customers will add greater demand for increased network capacity as the average user of this product uses 20 times or more broadband data than the typical mobile customer.
Brian: And the evolution of AI infused <unk> offerings will continue to fuel the demand for improve speeds and lower latency.
Brendan Thomas Cavanagh: All of these factors, as well as good old-fashioned service-based competition, have been supportive of steady, organic leasing activity on our U.S. assets for years. Internationally, we also see a dynamic of significant network needs providing a backdrop for continued solid organic leasing activity throughout many of our markets. Financial pressures have impacted many of our international customers as well, but the demand for advanced wireless products and services is significant, and in a number of cases, even greater than that seen in the U.S. We expect this will, in turn, drive continued demand for incremental space at our towers. Nonetheless, there have been customer consolidations in several of our markets.
Brian: All of these factors as well as good old fashioned service based competition are supportive of steady organic leasing activity on our U S assets for years to come.
Brian: Internationally, we also see a dynamic of significant network needs, providing a backdrop for continued solid organic leasing activity throughout many of our markets.
Financial pressures have impacted many of our international customers as well, but the demand for advanced wireless products and services is significant and in a number of cases, even greater than that seen in the U S.
Brian: We expect this will in turn drive continued demand for incremental space at our tower sites.
Brian: Nonetheless, there have been customer consolidations in several of our markets. As a result, we have worked closely with our customers to help them achieve necessary efficiencies in their operations, but while preserving the breadth of our business relationships and solidifying our contractual commitments for the long term.
Brendan Thomas Cavanagh: As a result, we have worked closely with our customers to help them achieve necessary efficiencies in their operations, but while preserving the breadth of our business relationships and solidifying our contractual commitments for the long term. While this temporarily leads to elevated churn, we believe the long-term strength and stability of our cash flow streams produced as a result of these efforts meaningfully improves our go-forward value proposition. This is a good segue into my views around our forward strategy. Internally, we are highlighting a desire to analyze everything we do or consider doing through the lens of stabilizing our results, growing our core business, and shifting our mix more and more to high-quality assets and operations. While this is not materially different from the approach SBA has taken throughout its history, we recognize that not all of our assets or business minds fit well within this goal.
Brian: While this temporarily leads to elevated churn, we believe the long term strength and stability of our cash flow streams produced as a result of these efforts meaningfully improves our go forward value proposition.
Brian: This was a good segue into my views around our forward strategy.
Brian: Internally, we are highlighting a desire to analyze everything we do or consider doing through the lens of stabilizing our results growing our core business and shifting our mix more and more to high quality assets and operations.
While this is not materially different than the approach SBA has taken throughout its history, we recognize that not all of our assets or business lines fit well within the scope.
Brendan Thomas Cavanagh: As a result, we are doing the work to evaluate our full portfolio and develop action plans around how we improve our position in each business line and in each market. For instance, in our international operations, we have found it to be valuable to be a market leader in the markets we operate in. In places where we hold a more significant position, we have tended to do better than those places where we do not. This ultimately means that we need to find a path to increase scale in certain markets or possibly exit a market. An example of this was our fourth-quarter exit from Argentina.
Brian: As a result, we are doing the work to evaluate our full portfolio and develop action plans around how we improve our position in each business line and in each market for.
Brian: For instance, in our international operations, we have found it to be valuable to be a market leader in the markets we operate in.
Brian: In places, where we hold it more significant position we've tended to do better in those places where we do not.
Brian: This ultimately means that we need to find a path to increase scale in certain markets or possibly exit a market in.
An example of this was our fourth quarter exit from Argentina.
Brendan Thomas Cavanagh: Not only was our market position subscale, but the economic instability in that country created operational challenges that were dilutive to the otherwise typically very attractive attributes of the tower business. We will pursue incremental investments to drive continued growth as we always have, but we will prioritize either an overall favorable shift in the quality and stability of our asset mix or an opportunistic investment that improves our standing in existing markets. Financial results always matter.
Brian: Not only was our market position subscale, but the economic instability in that country created operational challenges that were dilutive to the otherwise typically very attractive attributes of the tower business we.
Brian: We will pursue incremental investments to drive continued growth as we always have but we will prioritize either an overall favorable shift in the quality and stability of our asset mix or an opportunistic investment that improves our standing in existing markets.
Brian: Financial results always matter.
Brendan Thomas Cavanagh: We will be disciplined toward producing the best possible financial results over the long term. We believe high-quality assets ultimately produce that result. We also believe that when opportunities for incremental asset investments are not available, stock repurchases and debt reductions are worthwhile uses of capital. We intend to continually evaluate our optimal capital structure, and we'll look to balance the lowest cost of capital with retaining appropriate investment flexibility.
Brian: We will be disciplined towards producing the best possible financial results over the long term.
Brian: We believe high quality assets ultimately produce that result.
Brian: We also believe that when opportunities for incremental asset investments are not available stock repurchases and debt reductions are worthwhile uses of capital.
We intend to continually evaluate our optimal capital structure, and we will look to balance the lowest cost of capital with retaining appropriate investment flexibility.
Brian: Our attention to optimize capitalization of the company has placed us in what I believe is the best position in the industry. We are the fastest dividend grower, but yet have the greatest retained <unk> post dividend to invest in the business we.
Brendan Thomas Cavanagh: Our attention to optimizing the capitalization of the company has placed us in what I believe is the best position in the industry. We are the fastest dividend grower, but yet we have the greatest retained AFFO post-dividend to invest in the business. We have maintained an average cost of debt very close to our larger peers but have retained access to up to two terms more leverage. We have recently extended and expanded our revolver capacity by $500 million, creating increased liquidity.
Brian: We have maintained an average cost of debt very close to our larger peers, but have retained access to up to two turns more leverage we have recently extended and expanded our revolver capacity by $500 million, creating.
Brian: Creating increased liquidity.
This structure provides us with significant optionality to move in whichever direction. We believe we will provide the best return for our shareholders.
Brian: The strength and stability of our core tower business remains and it provides a tremendous foundation for all future endeavors.
Operator: This structure provides us with significant optionality to move in whichever direction we believe will provide the best return for our shareholders. The strength and stability of our core tower business remain, and it provides a tremendous foundation for all future endeavors. As a result, I have great confidence in our ability to create future value for our shareholders. I want to thank our customers for their support and their confidence in SBA. I also want to thank our team members for their contributions to our... And with that, Eric, we are ready to take questions. If you would like to ask a question today, please press 1, then 0. You may remove yourself from the queue at any time by pressing 1, then 0 again.
As a result, I have great confidence in our ability to create future value for our shareholders.
Brian: I want to thank our customers for their support and their confidence in SBA I also want to thank our team members for their contributions to our success with that Eric we are ready to take questions.
Speaker Change: If you would like to ask a question today. Please press. One then zero you may remove yourself from queue at any time by pressing one zero again.
Speaker Change: People are using a speaker phone please pick up the handset before pressing the numbers once again to ask a question. Please press one zero and one moment. Please for our first question.
Speaker Change: First we will hear from Rick Prentiss with Raymond James. Please go ahead.
Operator: If you are using a speakerphone, please pick up the handset before pressing the number. Once again, to ask a question, please press 1, then 0. And one moment, please, for our first question. First we will hear from Ric Prentiss with Raymond James. Please go ahead.
Ric Prentiss: Good afternoon, everyone and.
Congrats on the new seat Mark with a K welcome to the calls.
Ric Prentiss: Thank you.
Ric Prentiss: Yeah, Hey, guys first.
Leverage obviously has been a key focus you guys have been pay down floating rate debt net leverage down to six three turns.
Ric Prentiss: All the flooding has paid off as of today, one how should we think about.
Ric Prentiss: Good afternoon, everyone, and Brendan, congrats on the new seat, and Mark with a K, welcome to the call. Thank you. First, leverage obviously has been a key focus; you guys have been paying down floating rate debt. You've got your net leverage down to 6.3 turns. Almost all the floating has paid off as of today, then.
Speaker Change: $6, three where it heads in the future versus stock buyback and then on the M&A side up tests as far as what Youre seeing out there you mentioned that you'd like to be a leader in your markets are there any deals out there that would give you an industry leading position and what would.
Speaker Change: That's an interesting market, but with new markets out there.
Speaker Change: Yes, so Rick on the leverage side, we're at six three times, mostly because we believe that throughout the last year. The best use of our capital was into paying down that floating rate debt that we had with some of the highest cost debt in our structure and we didn't necessarily see opportunities that we thought were a better use of capital.
Brendan Thomas Cavanagh: How should we think about... 6.3 where it heads in the future versus stock buyback. And then on the M&A side, against as far as what you're seeing out there, you mentioned that you'd like to be then a leader in new markets. Are there any deals out there that would give you an industry-leading position?
Speaker Change: But.
We're comfortable at a higher level of leverage if we see the right place to use that capital that may include some amount of stay back stock buybacks, but it also obviously would include.
Brendan Thomas Cavanagh: And what would kind of make that an interesting market if there were new markets out there? Yeah, so, Ric, on the leverage side, we're at 6.3 times, mostly because we believe that throughout the last year, the best use of our capital was to pay down that floating rate debt that we had. It was some of the highest cost debt in our structure.
Speaker Change: Quality acquisitions, if we see that opportunity. So so really what we're dealing is we're retaining flexibility as it relates to our balance sheet too to go whichever direction. We think produces the best result.
Speaker Change: We don't feel that we have to stay at this level, but if we do that's fine too.
On the on the M&A front.
Speaker Change: Yeah, it's one of the aspects of what we look for when we're looking at a new market or even at opportunities within some of our existing markets, where we're perhaps not a market leader in terms of our position is to be.
Brendan Thomas Cavanagh: And we didn't necessarily see opportunities that we thought were a better use of capital. But we're comfortable at a higher level of leverage if we see the right place to use that capital. That may include some amount of stock buybacks, but it also obviously would include quality acquisitions if we see that opportunity. So, really, what we're doing is retaining flexibility as it relates to our balance sheet to go in whichever direction we think produces the best results. We don't feel that we have to stay at this level, but if we do, that's fine, too.
Speaker Change: <unk> a leader if we can in terms of our size and importance to our customers.
Speaker Change: You should just assume that we look at all opportunities that are available throughout the globe frankly, as they come available and we consider that among a number of other factors. When we're looking at that I can't really speak to anything specific that we're looking at but.
Speaker Change: There definitely are opportunities out there.
Speaker Change: Okay.
Speaker Change: Obviously, we're sitting here at the end of February.
Brendan Thomas Cavanagh: On the M&A front, yeah, it's one of the aspects of what we look for when we're looking at a new market or even at opportunities within some of our existing markets where we're perhaps not a market leader in terms of our position to be, you know, a leader if we can in terms of our size and importance to our customers. You should just assume that we look at all opportunities that are available throughout the globe, frankly, as they become available, and we consider that among a number of other factors when we're looking at them. I can't really speak to anything specific that we're looking at, but, you know, there definitely are opportunities out there. Obviously, we're sitting here at the end of February. Can you help us understand the pacing of what you think new lease activity in the United States will kind of play out through the year, and is it still kind of? Three months, maybe closer to six months, as far as when you get an application and when it actually turns into revenue.
Speaker Change: Can you help us understand the pacing of what you think new lease activity in the United States will kind of play out through the year and is it still kind of.
Speaker Change: Three months, maybe closer to six months as far as when you get an application into where it actually turns into revenue.
Speaker Change: Yes, the timeframe from signing something to when it actually gets into revenue, it's still pretty consistent with what it's been in the past, obviously, it's a little bit longer for a brand new lease when we sign that that's usually a good six months or more on the amendments it's typically shorter closer to three months.
Speaker Change: And on the specific circumstances, so that that's pretty consistent with what it's been in the past.
Speaker Change: In terms of the pacing throughout the year.
Speaker Change: Our projections if you look at our bridge in terms of what we put forth as contributions and I assume you're asking about domestic specifically, but domestically.
Speaker Change: Number should be a little bit more front end loaded today, because it's based on activity that we've seen throughout last year, and that's kind of rolling over and at this point, we're not necessarily forecasting a material pickup in activity, but to the extent there is that pickup in activity, it's mostly going to impact.
Brendan Thomas Cavanagh: Yeah, the time frame from signing something to when it actually gets into revenue is still pretty consistent with what it's been in the past. Obviously, it's a little bit longer for a brand new lease when we sign that. That's usually a good six months or more. On the amendments, it's typically shorter, closer to three months, but it depends on the specific circumstances.
Speaker Change: Year.
Speaker Change: Great. Thanks, a lot.
Speaker Change: And next we'll hear from Jonathan Atkin with RBC capital markets. Please go ahead.
Brendan Thomas Cavanagh: So that's pretty consistent with what it's been in the past, in terms of the pacing throughout the year. Our projections, if you look at our bridge in terms of what we've put forth as contributions, and I assume you're asking about domestically specifically, but domestically, that number should be a little bit more front-end loaded today because it's based on activity that we saw throughout last year, and that's kind of rolling over. And at this point, we're not necessarily forecasting a material pickup in activity, but to the extent Thanks a lot.
Jonathan Atkin: Thanks, two questions one.
Jonathan Atkin: You talked about the willingness to examine and exited from markets, where you lack scale does that apply to product areas such as data centers and then my second question is you called out the vivo relationship in Brazil.
Jonathan Atkin: Any anything with Tamara Claro.
Jonathan Atkin: Along similar lines, where you might be renegotiating some of your commercial terms or.
Jonathan Atkin: Looking at kind of react to mark market conditions in Brazil.
Jonathan Atkin: Yes.
Brendan Thomas Cavanagh: And next, we'll hear from Jonathan Atkin with RBC Capital Markets. Please go ahead. Thanks. I have two questions. One, you talked about the willingness to examine an exit from markets where you lack scale. Does that apply to product areas such as data centers? And then my second question is, you mentioned the VIVO relationship in Brazil. Anything with Tim or Claro along similar lines where you might be renegotiating some of your commercial terms or looking to kind of react to market conditions in Brazil? Thanks.
Jonathan Atkin: Your first question there is no specific plans to exit anything to exit the datacenters or anything else in particular, but I will tell you that we are applying the same lens to everything that we do is we kind of evaluate these.
Jonathan Atkin: Various things, whether its international markets or its other product lines and we look at that through a.
Jonathan Atkin: Financial lens and what the future can be opportunities to grow at what are the synergies with our base core business I mean, ultimately we're a tower company out of things fit in with that as we go through that analysis, we may come to the conclusion was something that we should.
Jonathan Atkin: Yeah, On your first question, there are no specific plans to exit anything, to exit the data centers or anything else in particular, but I will tell you that we are applying the same lens to everything that we do as we kind of evaluate these various things, whether it's international markets or other product lines, and we look at that through a financial lens and what the future can be, opportunities to grow it, and what are the synergies with our base core business. I mean, ultimately, we're a tower company. How do things fit in with that?
Jonathan Atkin: Exited but we may also come to the conclusion that we can grow it two so at this stage.
Jonathan Atkin: Premature to say that we would make a decision one way or the other but you should assume that we're looking at it.
Each of our holdings through that lens.
Jonathan Atkin: With regard to Brazil.
We did actually I don't know if you call it John but last year, we announced about a year ago. At this time that we had entered into an agreement with Tim.
Related to the OE consolidation and it actually pulled forward some of the churn into 2023 associated with that consolidation, but it dealt with a number of other issues and extended agreements out. So we already have something largely in place with him in.
Brendan Thomas Cavanagh: As we go through that analysis, we may come to the conclusion with something that we should exit it, but we may also come to the conclusion that we should grow it too. So, at this stage... premature to say that we would make a decision one way or the other, but you should assume that we're looking at each of our holdings through that lens. With regard to Brazil, we did actually, I don't know if you recall, John, but last year we announced about a year ago at this time that we had entered into an agreement with Tim related to the OI consolidation, and it actually pulled forward some of the churn into 2023 associated with that consolidation, but it dealt with a number of other issues and extended agreements out.
Jonathan Atkin: In the case of Claro, there's currently nothing in place, but we're constantly in discussions with them and.
Jonathan Atkin: It may or may not lead to something but.
Jonathan Atkin: We're talking with them about what would be best for them and for us.
Speaker Change: Thank you.
Speaker Change: Next we'll hear from Nick del Deo with Moffett Nathan. Please go ahead.
Speaker Change: Hey, Thanks for taking my questions and congratulations to both Brendan and Mark on your newish positions.
Speaker Change: Yes, Brendan I guess to start you noted that.
Speaker Change: You tend to do better in markets, where you have meaningful scale or a leadership position.
Speaker Change: How do you define a leadership position is that share of total assets owned by some threshold or is it. Some other measure and this is general framework that you're embracing mean, it's less likely that youre going to enter into a new market or is that sort of a separate consideration. If you think you are on a path to to a leadership position in it.
Brendan Thomas Cavanagh: So we already have something largely in place with Tim. In the case of Claro, there's currently nothing in place, but we're constantly in discussions with them, and it may or may not lead to something, but we're talking with them about what would be best for them and for us. Thank you. And next, we'll hear from Nick Del Deo with Moffett Nathanson. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Basically means your relevance in the market to your customers, which generally means the size and scale of your operations. So the percentage of.
Nick Del Deo: Hey, thanks for taking my questions and congratulations to both Brendan and Mark on your newish positions. You know, Brendan, I guess to start, you noted that you tend to do better in markets where you have meaningful scale or a leadership position. How do you define a leadership position?
Speaker Change: Of the portfolio that you represent for the larger most important customers in that market. When you are at a level that is frankly immaterial to their network needs.
Speaker Change: Your ability to drive additional business and.
Speaker Change: Negotiate terms on new opportunities is just not as great. As when you are more there are more meaningful partners. So that's really what I mean, when I talk about the size and scale.
Brendan Thomas Cavanagh: Is that, you know, a share of total assets owned above some threshold, or is it some other measure? And does this general framework that you're embracing mean it's less likely that you're going to enter into a new market, or is that sort of a separate consideration if you think you have a path to a leadership position in it? Yeah, it basically means your relevance in the market to your customers, which generally means the size and scale of your operations, so the percentage of the portfolio that you represent for the larger, most important customers in that market.
Speaker Change: As it relates to new markets.
Speaker Change: That would be a consideration obviously before we go into the new market, what's our position going to look like in that market.
Speaker Change: So it doesn't mean that we would not go into a new market, but we would consider that factor is one of the factors when we're thinking about it.
Speaker Change: Okay, Okay, and then regarding domestic.
Speaker Change: Domestic leasing and 24 in the U S. Your guidance of $42 million. This year and you said it was going to be probably front end loaded I think.
Brendan Thomas Cavanagh: When you are at a level that is frankly immaterial to their network needs, your ability to drive additional business and negotiate terms on new opportunities is just not as great as when you're a more meaningful partner. So that's really what I mean when I talk about size and scale. As it relates to new markets, you know, that would be a consideration, obviously, before we go into the new market. What is our position going to look like in that market? So it doesn't mean that we would not go into a new market, but we would consider that factor as one of the factors when we're thinking about it. Okay, okay.
Speaker Change: <unk> spoken to a sort of a low end of our <unk>.
Speaker Change: <unk> of leasing over time as being around $40 million.
Speaker Change: It seems like the.
Speaker Change: The run rate in the second half of the year at 42 is front end loaded Mike annualize to a pace below 40, I guess do you see a plausible scenario, where full year leasing to go below 40 in light of current conditions.
Speaker Change: Well, yeah it could be.
Speaker Change: Obviously, where we're just above 40% now for this year.
Speaker Change: So if we don't see any pick up.
Speaker Change: As we get to the second half of the year I do expect that the run rate at the end of the year today, that's implied in our guidance would be slightly below 40, so sure that's possible I think though.
Nick Del Deo: And then, you know, regarding domestic leasing in 24, in the US, your guidance of $42 million this year, and you said it was probably going to be front-end loaded. I think you've previously spoken to a sort of the low end of a range of leasing over time as being around $40 million. It seems like the run rate in the second half of the year, if 42 is front-end loaded, might annualize to a pace below 40. I guess, do you see a plausible scenario where full-year leasing could go below 40 in light of current conditions? Well, yeah, it could have.
Speaker Change: Some of this is lumpiness in the way that things come in under our AT&T MLA agreement.
Speaker Change: So the fact that it's a little higher in the first part of the year and a little lower in the second half of the year it could be something we see next year as well.
Speaker Change: Okay, Okay. Thanks for that Brendan.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: And next we'll hear from David Barden with Bank of America. Please go ahead.
Speaker Change: Right.
Speaker Change: All right.
David William Barden: Alright, guys. Thanks, so much for taking the questions. So.
David William Barden: So I guess the first one.
David William Barden: For the guidance it was clear that you werent, assuming any new portfolio acquisitions or buybacks, but could you be specific about what you are assuming in the guide for the use of cash is it putting it in the bank at a 5% interest rate or what should we kind of use as a baseline as a comparison towards.
Brendan Thomas Cavanagh: Obviously, we're just above 40 now for this year. So if we don't see any pickup as we get to the second half of the year, I do expect that the run rate at the end of the year today that's implied in our guidance would be slightly below 40. So sure, that's possible. I think, though, some of this is lumpiness in the way that things come in under our AT&T MLA agreement. So the fact that it's a little higher in the first part of the year and a little lower in the second half of the year could be something we see next year as well. Okay. Thanks for that, Brendan.
David William Barden: Going on I guess, a second question. If I could is Brendan is is there a fuse on any of these decisions about whether to pull the trigger on.
David William Barden: Portfolio Act.
David William Barden: Acquisitions versus stock buybacks, given that your stock buybacks could be pretty powerful if they happen soon.
Nick Del Deo: Yep. And next, we'll hear from David Barden with Bank of America. Please go ahead.
Speaker Change: Sooner rather than later and I apologize if I could just one last one.
For Mark D.
David William Barden: Thanks so much for taking the questions. So I guess the first one, for the guidance, it was clear that you weren't assuming any new portfolio acquisitions or buybacks. But could you be specific about what you are assuming in the guide for the use of cash? Is it putting it in the bank at a 5% interest rate, or what should we kind of use as a baseline as a comparison to what's going on? I guess a second question, if I could, is, Brendan, is there a fuse on any of these decisions about whether to pull the trigger on portfolio acquisition versus stock buybacks, given that stock buybacks could be pretty powerful if they happen sooner rather than later? And, if I could, just one last one for Mark D. This billion-dollar hedge on a forward basis that you've put in place, which replaces the existing Additional to the 3.85 that you've locked in, is there a timetable to make that decision? Thank you. There is the possibility to do that.
Speaker Change: This billion dollar hedge on a forward basis that you've put in place, which replaces the existing hedge on the on the 2 billion term that comes due March 25, I'm, assuming that there's an opportunity if you chose to do something.
Speaker Change: Additional to the $3 85 that you've locked in.
Speaker Change: Is there a timetable to make that decision. Thank you.
Speaker Change: There is the possibility to do that.
Speaker Change: We have done this in the past.
Speaker Change: This hedge only represents 50% of what actual outstanding.
Outstanding debt is so there could be room to increase our.
Speaker Change: Our hedging along those lines as well, but with respect to any type of timetable David No. There is no timetable, we're just going to keep an eye on the market and act appropriately if we decide that that's something that we need to do.
Speaker Change: Yes.
Speaker Change: Item, David I mean really the thinking was that.
Speaker Change: We sort of took half of it and created some level of certainty.
Speaker Change: Giving given that theres, some instability, obviously and what interest rates will look like and we've seen we've all seen over the last few months expectations of when interest rate cuts are going to happen move move around quite a bit so for us we basically ensure that a portion.
Mark Montage: We have done this in the past. This page only represents 50% of what our actual outstanding debt is, so there could be room to increase our..., are hedging along those lines as well. But with respect to any type of timetable, David, no, there is no timetable.
Speaker Change: Of that debt, we would have some stability and certainty on it and it and it locks in basically a much lower rate than exists today so right.
Speaker Change: If we let the other piece float I think we kind of have a good natural hedge in that case.
Speaker Change: On your question your other questions.
Brendan Thomas Cavanagh: We're just going to keep an eye on the market and act appropriately if we decide that that's the thing that we need to do. Yeah, on that item, David, really, the thinking was that we sort of took half of it and created some level of certainty given that there's some instability, obviously, and what interest rates will look like. We've all seen over the last few months that expectations of when interest rate cuts are going to happen move around quite a bit. So for us, we basically ensured that a portion of that debt would have some stability and certainty on it. And it locks in basically a much lower rate than exists today. So if we let the other piece float, I think we kind of have a good natural hedge there.
The use of cash in our guidance, we do because there will be cash. It's obviously accumulated part of it first goes into paying down the revolver of course whats left.
Speaker Change: Outstanding on that and to cover some of the discretionary spending that is implied in our guidance for comp for.
Speaker Change: Deals that are under contract as well as new builds the items that are basically covered in our discretionary capex guidance anything excess is assumed to be invested at about a 4% or so interest rate.
Speaker Change: That is implied in our net cash interest guidance.
Speaker Change: Interest income on that.
Speaker Change: And then I think your other question was the M&A versus buybacks and the timing.
Brendan Thomas Cavanagh: On your other questions, on the use of cash in our guidance, we do, because there will be cash that's obviously accumulated. Part of it first goes into paying down the revolver, of course, what's left outstanding on that, and it covers some of the discretionary spending that is implied in our guidance for deals that are under contract, as well as new builds, the items that are basically covered in our discretionary CapEx guidance. Anything excess is assumed to be invested at about a 4% or so interest rate. So that is implied in our net cash interest guidance, some interest income on that. And then I think your other question was about M&A versus buybacks and the timing. I mean, we, you know, there's a variety of things that we're constantly looking at. And, you know, the timing of M&A transactions. You don't have as much control over them.
Speaker Change: I mean, we.
Speaker Change: No.
Theres a variety of things that we're constantly looking at and.
Speaker Change: The timing of M&A transactions.
Speaker Change: You don't have as much control over obviously have complete control over buybacks and so to some degree we have to balance.
Speaker Change: The capital that we have available and that we may or may not need and so sometimes we can jump in earlier, if we have a clear vision as to what's going to happen in other times, we have to hold back a little bit and see.
Speaker Change: How things play out so I hear what youre, saying.
Speaker Change: We obviously believe our stock is a goodbye at this level, but.
We got to balance that against all the different options in front of us.
Speaker Change: Got it very helpful. Thank you guys.
Speaker Change: And next we'll hear from Michael Rollins with Citi. Please go ahead.
Thanks, Good afternoon.
Michael I. Rollins: If I could first.
Brendan Thomas Cavanagh: Obviously, I have complete control over buybacks. And so, to some degree, we have to balance the capital that we have available and that we may or may not need. And so sometimes we can jump in earlier if we have a clear vision as to what's going to happen. And other times, we have to hold back a little bit and see how things play out. So I hear what you're saying.
Michael I. Rollins: If you look at the business going forward can you give us an update as.
Michael I. Rollins: As to what are your north star metrics that are guiding the decision, making and your measurement if performance is it organic leasing EBITDA <unk>.
Michael I. Rollins: <unk> per share.
Michael I. Rollins: Or other metrics that are important to you and the board and you can you give us kind of Directionally, how you see that growth in those metrics, let's say over the next three years and then just separately just more of a operational question on the tower portfolio can you give us an update as to what percent of the sites have been upgraded in touch to bring them.
David William Barden: And, you know, we obviously believe our stock is a good buy at this level. But we've got to balance that against all the different options in front of us.
Michael I. Rollins: Very helpful. Thank you, guys. Yep. And next, we'll hear from Michael Rollins with Citi. Please go ahead. Thanks. Good afternoon.
Michael I. Rollins: Two five mid band capabilities and over what period do you think you'd get to a 100%. Thanks.
Michael I. Rollins: Two questions, if I could. First, as you look at the business going forward, can you give us an update as to what your North Star metrics are? that are guiding the decision making and your measurement of performance. There's organic leasing, EBITDA, AFFO per share, or other metrics that are important to you on the board. And can you give us some direction of how you see that growth in those metrics over the next three years? And then, just separately, just more of an operational question on the Tower portfolio, can you give us an update as to what percent of the sites have been upgraded and touched to bring them to 5G, you know, mid-band capabilities, and over what period do you think you will get to 100?
Michael I. Rollins: Okay.
Speaker Change: Yes, so Mike.
Mike: The numbers that we typically report Arne we report on because we think they are the most important I think the number one metric in our view here and.
Mike: With our board and frankly with many of our investors is <unk> <unk> per share because it represents that amount of actual free cash flow that is available.
Mike: Should be returned to shareholders in some form or fashion, whether that'd be reinvested into the business or would be paid out as a dividend or it be used for stock buybacks whatever the usages.
Mike: It's effectively what's available at the end of the day. After everything has been paid for and so that that's the metric that we focus on most of all.
Having said that obviously the next few years there are some challenges to our <unk> per share metrics largely because of two things that are not new interest rates, we've done an excellent job over the last.
Michael I. Rollins: Thanks. Yeah, so my, The numbers that we typically report on, we report on because we think they're the most important. I think the number one metric, in our view here, and with our board and, frankly, with many of our investors as AFFO per share because it represents that amount of actual free cash flow that is available to be returned to shareholders in some form or fashion, whether that be reinvested into the business or it be paid out as a dividend or it be used for stock buybacks, whatever the usage is, it's effectively what's available at the end of the day after everything has been paid for.
Mike: Many years locking in very low cost debt, but the market is what it is and at some point you have to refinance at least some of that debt and so youre going to see higher interest cost that weighs on that a little bit and of course, the sprint churn in particular that is kind of out there that we know we have ahead of us.
Mike: Scope for years as to what that looks like but outside of that the real goal frankly is to see that number go up over an extended period of time. This is a business that is a very long term business at its core we are a very long term contracts or relationships are long term assets are long term and so we look at how we're going to maximize that number.
Mike: Over an extended period of time as a public company can be challenging because you're reporting every single quarter and so it gets scrutinized every quarter, but the nature of the business is long term. So we try to take that long term view and how we're going to grow that number.
Brendan Thomas Cavanagh: And so that's the metric that we focus on most of all. Having said that, obviously, for the next few years, there are some challenges to our AFFO per share metric, largely because of two things that are not new. Interest rates. We've done an excellent job over the last many years locking in very low-cost debt, but the market is what it is, and at some point, you have to refinance at least some of that debt, and so you're going to see higher interest costs that weigh on that a little bit. And, of course, the sprint churn, in particular, that is kind of out there that we know we have ahead of us. Our goal is to see that number go up over an extended period of time. This is a business that is a very long-term business at its core. We have very long-term contracts. Our relationships are long-term.
Mike: Out over a period of five to 10 years, and I think we'll be well positioned to do that the other metrics that are very important as well obviously growing site leasing revenue growing adjusted EBITDA shows that we're able to find continued.
Mike: Returns on our operations, but really <unk> per shares where I focus most of my energy.
Mike: And then I guess your second question was about the upgrade percentage for.
Mike: For <unk>, we're a little bit over half way in terms of upgrades to our sites for <unk>.
Mike: But that is different among the different carriers. Some are much further along than others or below that number. So we still have a pretty good runway I think we're looking at the next two to three years.
To get to where they've upgraded all the sites they need to.
Speaker Change: Thanks, that's very helpful.
Brendan Thomas Cavanagh: The assets are long-term, and so we look at how we're going to maximize that number over an extended period of time. As a public company, it can be challenging because you're reporting every single quarter, and so it gets scrutinized every quarter.
Speaker Change: Sure.
Speaker Change: And next we will hear from Simon Flannery with Morgan Stanley. Please go ahead.
Simon Flannery: Alright, Thank you very much.
Simon Flannery: Congrats on your role Brendan and Mark Great to reconnect and good luck in your new role.
Brendan Thomas Cavanagh: But the nature of the business is long-term, so we try to take that long-term view and how we're going to grow that number out over a period of 5 to 10 years. And I think we'll be well-positioned to do that. The other metrics, though, are very important as well.
Simon Flannery: Two if I could first on the M&A I think in the past you've noticed that the M&A multiples havent necessarily come into effect, the new interest rate environment would be great to just get some perspective of if you see a better.
Simon Flannery: Risk reward balance there for the growth and the multiples that you're paying obviously, you've done some transactions versus buying back your own stock and secondly, anything you could share with us on dish and how you think about dish within your leasing assumptions, especially given the absence of specific FCC and Doj targets to hit in mid 'twenty five.
Brendan Thomas Cavanagh: Obviously, growing site leasing revenue, and growing adjusted EBITDA shows that we're able to find continued success in our operations, but really, AFSO for sure is where I focus most of my energy. And then I guess your second question was about the upgrade percentage for 5G. We're a little bit over halfway in terms of upgrading our site for 5G, but that is different among the different carriers. Some are much further along, and others are below that number.
Speaker Change: Thank you.
Speaker Change: Sure.
Speaker Change: Yes, the M&A market is still.
Speaker Change: Like competitive in.
Speaker Change: In the U S. In particular, because there is such a limited number of assets available theyre very competitively bid. So we continue to see price points that are very high internationally that is also true although I would say we've seen a little more moderation with the increasing cost of capital in terms of.
Brendan Thomas Cavanagh: So we still have a pretty good runway. I think we're looking at the next two to three years to get to where they've upgraded all the sites they need. Thanks, that's very helpful. Next, we will hear from Simon Flannery with Morgan Stanley. Please go ahead. Great. Thank you very much. And congratulations on your new role, Brendan and Mark. Great to reconnect.
Speaker Change: International price points, but the interesting thing about that is what it is what it has resulted in is not necessarily deals being done at lower prices in many cases, but frankly deals not getting done at all where there's sort of a disconnect between where seller expectations are and where where buyers are willing to pay I think you'll start to see some of that shifts.
Simon Flannery: And good luck in your new role. Two, if I could, first on the M&A, I think in the past, you've noted that the M&A multiples haven't necessarily come in to reflect the new interest rate environment. It would be great to just get some perspective on whether you see a better risk-reward balance there for the growth and the multiples that you're paying. Obviously, you've done some transactions versus buying back your own stock.
Speaker Change: Over the course of the coming year, particularly if the interest rate environment remains.
Speaker Change: Elevated.
Speaker Change: In the case of dish yeah. They are certainly a component of our assumptions for our leasing growth for this year.
Brendan Thomas Cavanagh: And secondly, anything you could share with us on DISH and how you think about DISH within your leasing assumptions, especially given they have some specific FCC and DOJ targets to hit in mid-25. Thank you. Yeah, the M&A market is still quite competitive in the U.S., in particular because there's such a limited number of assets available, and they're very competitively bid. So we continue to see price points that are very high. Internationally, that is also true, although I would say we've seen a little more moderation with the increasing cost of capital in terms of international price points. But the interesting thing about that is what it's resulted in is not necessarily deals being done at lower prices in many cases, but frankly, deals not getting done at all, where there's sort of a disconnect between where seller expectations are and where buyers are willing to pay.
Speaker Change: They have they do have the deadlines that you mentioned and we've had.
Speaker Change: Ongoing conversations with them and we believe that they will be attacking those those obligations.
Speaker Change: Absolutely. So we do have some amount of growth in our our model associated with this but.
Speaker Change: I would say, it's a relatively small percentage of the total.
Thank you I appreciate it.
Speaker Change: And next we will hear from Matt nickname with Deutsche Bank. Please go ahead.
Matt: Hey, guys. Thanks, so much for taking the question.
Matt: Just a two parter first on the strategic review.
Matt: Brendan is this at all a pullback from.
Matt: It's more emerging markets and a pivotal the portfolio towards more developed markets.
Matt: Is there anything of that sort of underpinning the review and then maybe on a related note any additional color you could provide on the.
Brendan Thomas Cavanagh: I think you'll start to see some of that shift over the course of the coming year, particularly if the interest rate environment remains elevated. In the case of DISH, yeah, they are certainly a component of our assumptions for our leasing growth for this year. They do have the deadlines that you mentioned, and we've had ongoing conversations with them, and we believe that they will meet those obligations. We do have some amount of growth in our model associated with DISH, but I would say it's a relatively small percentage. Thank you; I appreciate it.
Matt: 281 sites that were acquired subsequent to <unk> just in terms of region.
Matt: Any other color you can share thank you.
Matt: Sure.
Speaker Change: The second one first that the 281 arent necessarily all closed at this point, they're either I think a few are close but most are just under contract at this point and about 10% of those are in the U S. The remaining 90% are located.
Simon Flannery: And next, we will hear from Matt Niknam with Deutsche Bank. Please go ahead. Hey guys.
Speaker Change: Throughout our existing markets.
Speaker Change: Half a dozen different countries.
Speaker Change: We're already in.
Speaker Change: In the case of the way, we're thinking about the strategic review it's really.
Matthew Niknam: Thanks so much for taking the question. Just a two-parter. First, on the strategic review, Brendan, is this at all a pullback from, I guess, more emerging markets and a pivot of the portfolio towards more developed markets? Is there anything of that sort underpinning the review?
Speaker Change: It's not necessarily emerging markets versus developed although that can be a factor.
It's a focus on how we maximize our position in those markets. So we have positions in emerging markets that are very strong because of the strength of our role and our existing relationships with the strongest carriers in those markets and so if we can.
Brendan Thomas Cavanagh: And then maybe, on a related note, any additional color you could provide on the 281 sites that were acquired subsequent to 4Q, just in terms of region or any other color you can share. Thank you. Sure, I'll take the second one first.
Speaker Change: Can enhance that in places, where we don't have it then I think we would be comfortable with the markets regardless of whether they were necessarily developed or emerging markets.
Brendan Thomas Cavanagh: But the 281 aren't necessarily all closed at this point. They're either, I think a few are closed, but most are just under contract at this point. And about 10% of those are in the U.S.
Speaker Change: However, I think developed markets do offer.
Speaker Change: Some aspects of quality that we.
Speaker Change: We would find attractive if we can find the right opportunities things like strong tower, citing regulatory regimes.
Brendan Thomas Cavanagh: The remaining 90% are located throughout our existing markets in half a dozen different states that we're already in. In the case of the way we're thinking about the strategic review, it's really... It's not necessarily emerging markets versus developed markets, although that can be a factor.
Speaker Change: Certainly strength of the wireless carriers in the market in relative balance to their market share.
Speaker Change: Stability of the currency stability of the tax regime.
Speaker Change: Things like that.
Brendan Thomas Cavanagh: It's a focus on how we maximize our position in those markets. So we have positions in emerging markets that are very strong because of the strength of our role and our existing relationships with the strongest carriers in those markets, and so if we can.., can enhance that in places where we don't have it, then I think we would be comfortable with the markets regardless of whether they were necessarily developed or emerging markets. However, I think, you know, developed markets do offer some aspects of quality that we would find attractive if we can find the right opportunities, things like strong tower siting regulatory regimes, certainly strength of the wireless carriers in the market and relative balance to their market share, stability of the currency, stability of the tax regime, things like that would be things that we would find valuable because at the end of the day.., sort of the value proposition of a tower company, when most people look at it, is this expectation that you have a long-term, very stable cash flow stream that is going to grow steadily over time.
Would be things that we would find valuable because at the end of the day.
Speaker Change: Sort of the value proposition of a tower company when most people look at it is this expectation that you have a long term very stable cash flow stream that is going to grow steadily over time.
Speaker Change: And sometimes if you are in places that don't have some of those attributes I. Just mentioned you can introduce a certain amount of volatility that we would be looking to obviously try to move out of the mix and focus more on that kind of stable growing cash flow stream. So.
Speaker Change: I think we're open to two shifts in the type of market, but I think the markets that we're in have opportunities to improve our positioning in and that's what we're looking at.
Speaker Change: Is there a timeframe attached to the strategic review.
Speaker Change: It's it's something that I would expect us to be working on throughout this year.
Speaker Change: But there are also factors that are outside of our control things that we would like to do.
Speaker Change: That may take some time to figure out whether the opportunities actually exist. So I think it will be an ongoing effort, but the real the real point and this isn't some wholesale changes to kind of reiterate that it's not like we're doing something totally one way before and we've completely shifted this is more of a refinement of the app.
Brendan Thomas Cavanagh: And sometimes, if you're in places that don't have some of those attributes I just mentioned, you can introduce a certain amount of volatility that we would be looking to, obviously, try to move out of the mix and focus more on that kind of stable, growing cash flow stream. You know, I think we're open to changing the type of market, but I think the markets that we're in have opportunities to improve our positioning, and that's what we're looking for. Is there a time frame attached to the strategic review?
Speaker Change: Broached that SBA has historically taken we've always I think you know us to have always focused on quality financial returns all of those things are still the same.
Speaker Change: What this really is kind of digging in a little bit deeper on some of our current holdings and looking at.
Brendan Thomas Cavanagh: It's something that I would expect us to be working on throughout this year, but there are also factors that are outside of our control, things that we would like to do that may take some time to figure out whether the opportunities actually exist. So I think it will be an ongoing effort, but the real point, and this isn't some wholesale change, just to kind of reiterate that. It's not like we were doing something totally one way before, and we've completely shifted. This is more of a refinement of the approach that SBA has historically taken. I think you know us to have always focused on quality and financial returns. All those things are still the same.
Speaker Change: Where we are underperforming what are the root causes of that and what can we do to address that and if we can't if we don't feel we can address. It then we would look at it like Argentina and say Hey. This this we don't think we necessarily convinced we can fix and so we will adjust.
Speaker Change: Again, it's really just a refinement of what it has been our long standing policy.
Speaker Change: Excellent. Thank you.
Speaker Change: Okay.
Speaker Change: And next we'll hear from Richard Choe with Jpmorgan. Please go ahead.
Richard Choe: Hi, I just wanted to ask about the pacing of the services revenue through the year.
Brendan Thomas Cavanagh: What this really is kind of digging in a little bit deeper on some of our current holdings and looking at where we're underperforming, what are the root causes of that, and what can we do to address that? And if we don't feel we can address it, then we would look at it like Argentina and say, hey, this we don't think we necessarily can fix, and so we'll adjust. So again, it's really just a refinement of what has been our longstanding. Excellent. Thank you. And next, we'll hear from Richard Cho of J.P. Morgan. Please go ahead.
Richard Choe: And then another question on.
Richard Choe: In terms of new activity, how much of it is coming from co location versus amendments.
Richard Choe: Do you expect any significant change through the year.
Richard Choe: Yes, the services revenue, we actually in our outlook expected to slightly increase but to be relatively balanced throughout the year.
On the Colo versus amendments.
Speaker Change: I don't know if youre asking about.
Speaker Change: The actuals of the fourth quarter.
Speaker Change: Where it was it was more we've seen more of a shift towards new leases, but.
Richard Cho: Hi, I just wanted to ask about the pacing of the services revenue through the year and then another question about, in terms of new activity, how much of it is coming from co-location versus a, Do you expect any significant change through the year? Yeah, the services revenue. We actually, in our outlook, expect it to slightly increase but be relatively balanced throughout the year. On COLAs versus amendments.
Speaker Change: I would expect as we get into this year Youll see amendment activity again be the lion's share of what we do.
Speaker Change: And final one is in terms of Argentina can you quantify what the impact would have been to revenue and EBITDA you kept it.
Speaker Change: Yeah. It was it represented about $1 million of EBITDA.
Speaker Change: A little over 2 million about $2 3 million of revenue.
Speaker Change: On an annual basis.
Speaker Change: Yes.
Okay.
Michael I. Rollins: And next we'll hear from Michael alias with PD Cowen.
Michael: Great. Thanks for taking the questions first time caller long time listener here.
Brendan Thomas Cavanagh: You know, if you're, I don't know if you're asking about the actuals of the fourth quarter, where it was, it was more, we've seen more of a shift towards new leases, but I would expect as we get into this year, you'll see amendment activity again be the lion's share of what we've seen. And a final one is, in terms of Argentina, can you quantify what the impact would have been to revenue and EBITDA had you kept it? Yeah, it represented about a million dollars of EBITDA and a little over two million, about 2.3 million of revenue. © The Bulletproof Executive 2013, And next we'll hear from Michael Elias with P.D. Cowan.
Michael: My first question for you as you mentioned earlier in the prepared remarks about the stability of our result, Im curious upon the U S side.
Michael: But we should take that to mean, you're more open to doing let's say holistic malaise with with the carriers as you have with.
Michael: With AT&T. That's my first question and then the second question is when you talked about the use of cash you were essentially mentioning that.
Michael: You assume the remainder is reinvested at around 4%. So when I take a look at the ethical yield of your stock it's implying.
Michael I. Rollins: Great. Thanks for taking the questions, first-time caller, long-time listener here. You know, my first question for you is: you mentioned earlier in the prepared remarks about the stability of results. I'm curious if, on the U.S. side, we should take that to mean you're more open to doing, let's say, holistic MLAs with the carriers as you have with AT&T. That's my first question.
Michael: 6% you talked about earlier, how you may hold back if you see some opportunities I guess, what I'm getting at here is.
Michael: Are you holding back on the buyback under the expectation that we're going to go forward and do more M&A. So just trying to get some more color in terms of.
What youre thinking on the buybacks versus M&A.
Speaker Change: Thank you.
Okay.
Speaker Change: So on holistic MLA as you know I think that is a.
Brendan Thomas Cavanagh: And then the second question is, you know, when you talked about the use of cash, you were essentially mentioning that you assume the remainder is reinvested at around 4%. So when I take a look at the AFFO yield of your stock, it's implying, you know, over 6%. You talked about earlier how, you know, you may hold back if you see some opportunities. I guess what I'm getting at here is, you know, are you holding back on the buyback under the expectation that you're going to go forward and do more M&A? Just trying to get some more color in terms of, you know, what you're thinking on the buybacks versus the M&A. Thank you.
Speaker Change: When we talk about a goal of trying to ensure that we have stabilized our cash flow streams and results. One of the ways you do that is through enhancing and improving customer relationships and that can be done in part through master agreements. We obviously signed one with AT&T last year, we've signed others in the past with each.
Speaker Change: Of our customers along the way.
Speaker Change: So I would expect we will continue to make use of that assuming that it's the best structure for what our customers need to get done in SBA is able to achieve a certain amount of certainty and length of commitment as part of those agreements, but each of those will be determined.
Brendan Thomas Cavanagh: So on holistic MLAs, you know, I think that is a good idea. When we talk about a goal of trying to ensure that we have stabilized our cash flow streams and results, one of the ways you do that is through enhancing and improving customer relationships. And that can be done, in part, through master agreements. We obviously signed one with AT&T last year.
Speaker Change: On an individual basis based on the needs of the customer and what we need.
Speaker Change: Hum.
Speaker Change: Again, the buybacks versus M&A.
Speaker Change: We are.
Speaker Change: We're not necessarily sitting here, saying Oh, we've got all this cash we're ready to spend on buybacks we are.
Speaker Change: In fact, we still have balances out on our revolver. So I don't feel like we have necessarily been in that position. We have historically been very opportunistic around share buybacks I would expect that to continue to be the case now, but individual acquisition opportunities, particularly.
Brendan Thomas Cavanagh: We've signed others in the past with each of our customers along the way, so I would expect we will continue to make use of that, assuming that it's the best structure for what our customers need to get done and SBA is able to achieve a certain amount of certainty and length of commitment as part of those agreements. But each of those will be determined on an individual basis based on the needs of the customer and what we need. Um, on, again, the buybacks versus M&A. Yeah, I mean, we aren't necessarily sitting here saying, Oh, we've got all this cash. We're ready to spend on buybacks. We are. In fact, we still have balances out on our revolvers, so I don't feel like we've necessarily been in that position.
Speaker Change: Particularly of size may influence our timing on when we would buy back our stock if we otherwise saw it as an attractive investment so.
Speaker Change: No that's.
Speaker Change: That's where we are and we will see.
Speaker Change: As time goes by but just because you don't see us buy back our stock doesn't necessarily mean that we don't see it as a as a good value I mean, there may be other factors were considering.
Speaker Change: Got it thank you.
Speaker Change: Next we'll hear from Brendan Lynch with Barclays. Please go ahead.
Brendan Lynch: Great. Thanks for taking my question.
Maybe just to it's been asked a few ways, but maybe to put it in a different term could you talk a little bit about.
Brendan Thomas Cavanagh: We have historically been very opportunistic around share buybacks. I would expect that to continue to be the case now, but individual acquisition opportunities, particularly of size, may influence our timing on when we would buy back our stock if we otherwise saw it as an attractive investment. Yeah, it's that.
Brendan Lynch: What is assumed in the $42 million of domestic leasing guidance.
Brendan Lynch: It relates to kind of lap over effect of signings in 2023 versus what you need to sign in.
Brendan Thomas Cavanagh: That's where we are, and we'll see. This concludes today's conference, www. SBA.gov.
Brendan Lynch: In 2020 for itself.
Speaker Change: Yes, I can't tell you exactly with precision sitting here, but I'm sure. We can follow up with you.
Brendan Lynch: Thank you. Next, we'll hear from Brendan Lynch with Barclays. Please go ahead. Great.
Speaker Change: It is largely based on what's already been signed up to date and I'm sure it's somewhere in the three quarters.
Brendan Thomas Cavanagh: Thanks for taking my question. Maybe just to, it's been asked a few ways, but maybe to put it in a different way, can you talk a little bit about what is assumed in the 42 million of domestic leasing guidance that relates to the kind of lop over effective signings in 2023 versus what you need to sign in 2024 itself? Yeah, I can't tell you exactly with precision sitting here, but I'm sure we can follow up with you. It is largely based on what's already been signed up to date. I'm sure it's somewhere in the three quarters range of the number, but maybe even more.
Speaker Change: Range of the number but maybe even more so we'll follow up with you Brendan separately on that.
Brendan: Okay. That's helpful. Thank you and then one other question on international churn I know you were expecting some churn and some Latin American markets, maybe you could talk a little bit about what youre seeing there did seem to tick up a bit in the fourth quarter.
Brendan: And give some color on what you anticipate throughout the next year.
Speaker Change: Yeah. So.
Speaker Change: I mentioned it briefly in my.
Speaker Change: Prepared comments, but there are a number of markets that we're in where we have consolidations taking place.
Brendan Thomas Cavanagh: So we'll follow up with you, Brendan. Okay, that's helpful. Thank you. And then one other question on international churn. I know you were expecting some churn in some Latin American markets. Maybe you could talk a little bit about what you're seeing there, and it did seem to pick up a bit in the fourth quarter, and give some color on what you anticipate throughout the next year.
Speaker Change: In particular in.
Speaker Change: Brazil, where you had the Oi wireless.
Speaker Change: Wireless consolidation with the other big three carriers, there as we kind of work through that.
Speaker Change: Last year that that was a big factor represented roughly 40% and was just from 10 by itself.
Speaker Change: Associated with that consolidation is one as one item.
Speaker Change: That is probably going to be a continued driver of some level of international churn over the next few years.
Speaker Change: But we're working through.
Speaker Change: Negotiations with each of our customers.
Brendan Thomas Cavanagh: Yeah. I mentioned it briefly in my prepared comments, but, you know, there are a number of markets that we're in where we have consolidations taking place. In particular, in Brazil, where you had the OEI wireless consolidation with the other big three carriers there. Last year, that was a big factor.
As we do that.
Speaker Change: We're kind of Prizing. This.
Speaker Change: Long term relationship long term commitment.
Speaker Change: We've got stability that we can reintroduce into the relationship but allow them to get through the efficiencies that they need to achieve as a result of the combination of of.
Speaker Change: Uh huh.
Speaker Change: Customers Thats, taking place in the market so.
It's a mix, but Brazil will probably be the biggest just because it's the biggest market we have with the most revenue.
Brendan Thomas Cavanagh: It represented roughly 40 percent. It was just from 10 by itself associated with that consolidation as one item. That is probably going to be a continued driver of some level of international churn over the next few years. But we're working through negotiations with each of our customers, and as we do that, we're kind of praising this long-term relationship, long-term commitment, where we've got stability that we can reintroduce into the relationship, but allow them to get through the efficiencies that they need to achieve as a result of Customers that are taking place in the market, so it's a mix, but Brazil will probably be the biggest just because it's the biggest market we have with the most revenue.
Speaker Change: Great. Thanks for the color.
Speaker Change: Yes.
Speaker Change: And next we'll hear from Walter Paycheck with White shirt. Please go ahead.
Speaker Change: Thanks.
Walter Piecyk: Just a quick follow on for that one.
Walter Piecyk: In your discussions with those customers is there an opportunity with mobile and maybe take ownership of those towers do you think there'll be some regulatory issues with that.
Walter Piecyk: Yeah, I, probably can't answer that.
Walter Piecyk: In this forum Walt I mean, but we do have ongoing conversations with them about all different things that they do that we do that might fit together so.
Speaker Change: Got it.
Regulatory demands.
Speaker Change: Go ahead.
Speaker Change: I forgot.
Speaker Change: Good looking through history, you go back to <unk>.
Brendan Thomas Cavanagh: Great. Thanks for the call. And next, we'll hear from Walter Piecyk with LightShed.
Speaker Change: And then you look at PGE and your Max the balance sheet at like 77.
Walter Piecyk: Please go ahead. Thanks. I guess just a quick follow-on for that one. In your discussions with those customers, is there an opportunity for Mobile to maybe take ownership of those towers? Do you think there'd be some regulatory issues with that? Yeah, I probably can't answer that in this forum, Walt. I mean, but we do have ongoing conversations with them about all different things that they do, that we do, that might fit together. And then, if I could... Go ahead.
Speaker Change: Is that coincidental or is that kind of.
Speaker Change: Your.
Speaker Change: Threshold of pain in terms of where you would take something for the opportunities that.
Speaker Change: Exist out there.
Speaker Change: Well, it's probably coincidental to some degree.
Speaker Change: I think you'd see us go above eight times at any point in our history, but now that we've got this you know.
Speaker Change: We've got a pretty big cushion, given where our leverage has come down too. So I don't really foresee that ever been.
Speaker Change: A number that we approach.
Speaker Change: Okay, well that gives us a sense of the size of things you can consider.
Brendan Thomas Cavanagh: I forgot. It's gone looking through history, you know, you go back to OI and then you look at PGE, and you max the balance sheet at like 7-7. Is that coincidental, or is that kind of your threshold of pain in terms of where you would take something for the opportunities that exist out there? Well, it's probably coincidental to some degree.
Speaker Change: And then just lastly, just kind of touchy feely question, which is.
Speaker Change: These operators have a have a lot of spectrum.
Speaker Change: Which makes it a little different than past capital cycles, when there's kind of an ebb and flow.
Speaker Change: What gives you confidence that when this.
Brendan Thomas Cavanagh: I don't think you'd see us go above eight times at any point in our history, but now that we've got this, you know, we've got a pretty big cushion given where our leverage has come down to, so I don't really foresee that ever being the case. The number that we have. Okay, well that gives us a sense of the size of things that you can consider. And then, just lastly, just kind of, you know, a touchy-feely question, which is... You know, these operators have a lot of spectrum, which makes it a little different than past capital cycles when there's kind of an ebb and flow. What gives you confidence that when this ebb turns to flow, it's not, you know, only going to be in markets where it can be set aside on rooftops and small cells as opposed to traditional areas where densification is required? I'm talking domestically; forget about your global markets. Yeah, well, what really gives me confidence, but we'll see how it plays out is history. I mean, every time we've seen, uh...
Speaker Change: Turns to flow if not.
Speaker Change: Only going to be in markets, where it can be satisfied with.
Speaker Change: <unk> and small cells as opposed to traditional areas.
Speaker Change: Densification as required.
Speaker Change: I'm talking domestically forget about your global markets.
Speaker Change: Yeah, well, what I mean really what gives me confidence, but we will see how it plays out as history I mean every time we've seen.
The cycle of activity, it's ultimately gotten to the suburban markets rural markets those dense urban centers really we're never tower market to begin with so.
Speaker Change: It's not really been a factor for us anything thats getting resolved with rooftops, that's a very limited tower market. So I'm not sure it matters that much to us.
Speaker Change: So are there factors that.
Speaker Change: In suburbia that you could hit.
Speaker Change: Not you, but like let's say team is Verizon may be AT&T jumps on board they hit enough penetration.
Speaker Change: That the depth of spectrum that they have from C band in the sprint spectrum is not enough to serve whatever let's call it 30% penetration that they would require additional densification.
Brendan Thomas Cavanagh: The cycle of activity has ultimately gotten to suburban markets and rural markets. Those dense urban centers really were never tower markets to begin with, so it's not really been a factor for us. Anything that's getting resolved with rooftops, that's a very limited tower market, so I'm not sure it matters that much. So are there factors that in suburbia that you could hit, or not you, but like, let's say, Temas, Verizon, maybe AT&T jumps on the board, they get enough penetration that the depth of spectrum that they have from CMAN and the Sprint spectrum is not enough to serve whatever, let's call it, 30% penetration, that they would require additional amplification?
Speaker Change: Okay sure. Thank you.
Speaker Change: Yeah.
And next we'll hear from David <unk> with Green Street. Please go ahead.
David William Barden: And then sticking with the U S on the $48 million in new leasing activity expected in 'twenty. Four is this level of the new run rate, we should expect as we model out over the next few years.
David William Barden: I think theres, a chance that new leasing level to reach what we saw in 'twenty, two and 'twenty three again.
David William Barden: And then the second question was can you just comment on that discretionary capex spend for 2004. It looked like it stepped up pretty meaningfully from 23, what drove that increase.
Walter Piecyk: Okay, sure. Thank you. And next, we'll hear from David Guarino on Green Street. Please go ahead.
David Guarino: Hey, thanks. Yeah, sticking with the U.S. on the $40-ish million in new leasing activity expected in 2024, is this level the new run rate we should expect as we model out over the next few years? Or do you think there's a chance that new leasing levels might reach what we saw in 2022 and 2023 again? And then the second question was, can you just comment on the discretionary CAPEX spend for 2024? It looked like it stepped up pretty meaningfully from 2023. What drove that increase?
David William Barden: So the leasing level into the future, yes, we think it could go up sure.
David William Barden: It's all driven by carrier activity and if you go back over the last three years, David you will see if you go back a few years ago that we were at a level very similar to where we are now in fact, I think we reported a number lower than the $42 million that we just put in our outlook for this year.
David William Barden: What three or four years ago, so since that time, obviously it spiked up.
David William Barden: Much higher than that because of carrier activity and I think to.
David William Barden: To some degree the network strain.
Brendan Thomas Cavanagh: So the leasing level into the future, yeah, we think it could go up, sure. Obviously, it's all driven by carrier activity. And if you go back over the last three years, David, you will see that if you go back a few years ago, we were at a level very similar to where we are now. In fact, I think we reported a number lower than the 42 million that we just put in our outlook for this year, what, three, four years ago. So since that time, obviously, it's spiked up much higher than that because of carrier activity, and I think.
David William Barden: They may feel the.
David William Barden: And the cost of capital.
David William Barden: Is very impactful to the decisions, we're making there and so yes. We believe there is definitely opportunity to see the number go higher.
David William Barden: In future years, but we need to see how that moves.
David William Barden: In the case of I'm sorry. Your other question was on Capex discretionary correct Larry.
Larry: Yes, I think I don't believe I believe what we guided to was it was similar to what last year's number was so great.
Brendan Thomas Cavanagh: To some degree, the network strain that they may feel and the cost of capital are very impactful on the decisions they're making there. And so, yes, we believe there's definitely opportunity to see the number go higher in future years, but we need to see how that plays out. In the case of, I'm sorry, your other question was on CapEx. Secretary Counsel Robert D. Reilly said, Yeah, I think, I don't believe, I believe what we guided to was similar to what last year's number was, so. 30th. Yeah, so what do we have? We're at 330 at the midpoint, and last year it was 310 million, so...
Larry: <unk>.
Larry: Yes, So why do we guide to $3 30 at the midpoint and last year was $310 million. So.
Speaker Change: Sorry, David what do you what's the core of the question.
Speaker Change: No my apologies I must admit we have that wrong.
Speaker Change: And you can just regarding the question Okay alright. Thanks.
Speaker Change: And next we'll hear from Boccia Levy with UBS. Please go ahead.
Batya Levi: Thank you and just a couple of follow ups first on AT&T.
Batya Levi: <unk> recently signed a new contract with first Matt can you provide color if that will be included within the current MLA you have with them or provide some upside and just another one on M&A.
Brendan Thomas Cavanagh: I'm sorry David, what's the core of the question? No, my apologies. I must have misread that wrong.
Speaker Change: How did you think about.
David Guarino: If it's flat, you can disregard the question. Okay. All right. Thanks. And next, we'll hear from Batya Levi with UBS, please go ahead.
Speaker Change: The increase in your portfolio do you have a preference for carrier owned towers at first as well.
Speaker Change: Portfolios that are coming out of independent Doctor operator, Thank you.
Batya Levi: Thank you. Just a couple of follow-ups. First, AT&T recently signed a new contract with FirstNet. Can you provide color on whether that will be included within the current MLA you have with them or provide some upside?
Speaker Change: Sure.
Speaker Change: With regards to AT&T first net.
Speaker Change: For the most part I would expect based on my understanding of everything that is expected to happen there that it would have limited upside for us from an amendment or upgrade standpoint.
Brendan Thomas Cavanagh: And just another one on MNA: As you think about increasing your portfolio, do you have a preference for carrier-owned towers versus portfolios that are coming out of independent tower operators? Thank you. With regard to AT&T FirstNet, for the most part, I would expect, based on my understanding of everything that is expected to happen there, that it would have limited upside for us from an amendment or upgrade standpoint. The opportunity set would be more based on a need to densify where they needed to actually have new lease agreements set for existing sites or possibly even new tower buildings. So it's really a new site leasing opportunity to the extent that there's an impact, but I do not think there's much of an amendment impact potential for us.
Speaker Change: The opportunities that would be more based on our need to densify, where they needed to actually have new lease agreements at existing.
Speaker Change: The existing sites or possibly even new tower builds.
Speaker Change: So it's really a new site leasing.
Speaker Change: Opportunity to the extent that there is an impact but.
Speaker Change: I do not think there is much of an amendment impact potential for us.
Speaker Change: With regards to the M&A question.
Speaker Change: We would <unk>.
Speaker Change: Generally speaking I would say we would prefer.
Speaker Change: Independent Tower company towers as opposed to the carrier owned towers usually.
Speaker Change: We find that they've been developed with the mindset of co location already in there and they are operated and maintained in a way typically that is is better than what you find with the traditional carrier sale leaseback, but having said that we've done both kinds of deals and I think our what we bring to the table is our expert.
Brendan Thomas Cavanagh: With regard to the M&A question, we would. Generally speaking, I would say we would prefer... independent tower company towers as opposed to carrier-owned towers. Usually, we find that they've been developed with the mindset of co-location already in place, and they are operated and maintained in a way that is typically better than what you find with the traditional carrier sale leaseback. But having said that, we've done both kinds of deals, and I think what we bring to the table is our expertise that allows us to kind of improve those operations. Sometimes there's a greater opportunity for improvement when you buy things that haven't been run quite as well. So I guess it just depends on the individual opportunity.
Speaker Change: <unk> that allows us to kind of improve those operations, sometimes there's a greater opportunity for improvement when you buy things that haven't been run quite as well. So I guess it just depends on the individual opportunity.
Speaker Change: Alright, thank you.
Speaker Change: And we have no further questions at this time.
Speaker Change: Well great. Thank you everybody for taking the time and we look forward to reporting to you next quarter.
Speaker Change: That does conclude our conference for today. Thank you for your participation you may now disconnect.
Brendan Thomas Cavanagh: Thank you. And we have no further questions at this time. Great. Thank you everybody for taking the time, and we look forward to reporting to you next quarter. That does conclude our conference for today. Thank you for your participation. You may now disconnect. We're sorry, your conference is ending now. Please hang up.
Speaker Change: We're sorry your conferences ending now please hang up.