Q3 2024 SBA Communications Corp Earnings Call
Your conference will begin momentarily, please continue to hold.
Speaker Change: Thank you for standing by and welcome to the FBA Communications third quarter results conference.
Speaker Change: At this time, our participants are in a listen-only mode.
Speaker Change: Later we welcome Dr. K. Question and Answer session. Instructions will be given at that time.
Speaker Change: If you should require any assistance during the call today, please press star then zero.
Speaker Change: and as a reminder, this conference is being recorded.
Speaker Change: I would now like to turn the conference over to our host, Vice President of Finance. Mark DeRussy, please go ahead sir. Thank you.
Mark DeRussy: Good evening, thank you for joining us for SBA's third quarter 2021 earnings conference call. Here with me today, our Brendan Cavanagh, our President Chief Executive Officer, and Mark Montagner, our Chief Financial Officer.
Mark DeRussy: Somebody information we will discuss on this call as forward-looking, including but not limited to any guidance for 2024 and beyond.
Mark DeRussy: and today's press release in our SEC filings, we detail material risks.
Mark DeRussy: and they cause our future results to differ from our expectations.
Mark DeRussy: Our State Master as of today, October 28th, and we have no obligation to update any forward-looking statement we may make.
Mark DeRussy: In addition, our comments will include not-gap 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 a landing major in this release on website. With that, I will now turn it over to Brendan to comment on the third quarter.
Brendan Cavanagh: Thank you, Mark, good afternoon. Operationally, the third quarter ended up rolling out largely as we expected, with leasing results in line with our outlook and services results, a little ahead of our outlook.
Brendan Cavanagh: Foreign exchange rates were a little stronger than our estimates a quarter ago, and domestic new carrier activity was up from the first half of the year. All these items combined to allow us to increase our whole year, 24-hour, across all of our key financial metrics.
Brendan Cavanagh: In the US, new business executions were up from the prior three quarters, and applications and inquiries have increased as well. We are beginning to see a shift in the makeup of our new business signed up and applications with a growing percentage coming from new lease co-locations versus amendments to existing leases.
Brendan Cavanagh: We anticipate this trend continuing into 2025.
Brendan Cavanagh: All of our major customers have significant network needs over the next few years, as mobile network consumption continues to grow to healthy pace.
Brendan Cavanagh: The limitation of new spectrum availability over the next several years will challenge our customers to meet the demands on their networks through incremental equipment deployment and densification of sites.
Brendan Cavanagh: are macro tower portfolio should be a beneficiary of this dynamic.
Brendan Cavanagh: Other growth drivers, which we have discussed before, such as fixed wireless access, the incorporation of new generative AI capabilities into handsets.
Brendan Cavanagh: Regulatory Buildout Committments and Remaining 5G Coverage Expansion will all contribute to a healthy network investment environment over the next several years.
Brendan Cavanagh: In addition, our customer relationships are strong. We are a trusted and valued partner to each of them. We are very focused on helping them to achieve their objectives through providing exceptional service and quality.
Brendan Cavanagh: As I mentioned on last quarter's call, we are in the business of long-term assets and long-term customer relationships.
Brendan Cavanagh: Things don't change much from quarter to quarter, but consistently delivering over time as we have done for the past 35 years, is the best way to be our customers first choice provider and ultimately to maximize growth for our shareholders.
Brendan Cavanagh: Internationally, we have adopted the same philosophy, and as a result, we are seen as a valued partner to our carrier customers in each of our largest markets.
Brendan Cavanagh: The quarter was solid with international leasing results in line with our expectations and we expect to solid finish to the year. The broader market internationally though still presents some challenges as we manage through customer consolidation and network rationalizations.
Brendan Cavanagh: However, we see light at the end of this tunnel as the surviving customers are stronger and better positioned to invest in growing their wireless product offerings and their arquise.
Brendan Cavanagh: To accomplish this, increased network investment will be required. 5G upgrades across all of our international markets are really just at the very beginning. And while it's broadband consumption is growing across our markets, just as fast if not faster than the US.
Brendan Cavanagh: Overall, we believe our international business will continue to be additive to our organic growth profile over time and the long-term prospects are still very good.
Brendan Cavanagh: As part of maximizing the long-term prospects of our international business, we continue to strategically review our operations and future potential in each of our existing markets.
Brendan Cavanagh: As I have shared with you before, we believe that in order to create the longest, the greatest, to be using long-term stability and opportunity to maximize growth in a particular market, it is important to be of scale and position as an industry leader in that market and to be closely aligned with the leading wireless carriers in the market as well.
Brendan Cavanagh: In alignment with that effort, we are very pleased to share with you today's announcement of a purchase agreement signed with Mila Com International Cellular for the acquisition of over 7,000 sites throughout Central America for an international cash purchase price of approximately $975 million.
Brendan Cavanagh: Proforma for this transaction, SBA will be the largest tower company across the region. We are very excited to increase our partnership with Milocom and to help them grow their business for many years to come.
Brendan Cavanagh: The assets are located across five countries in Central America, increasing SBA scale and four of those countries where we already have operations.
Brendan Cavanagh: The assets are anticipated to produce approximately $129 million in site-leasing revenue and $89 million in tower cash flow during the first full year of operations after closing and significantly all of the cash flow will be denominated in US dollars.
Brendan Cavanagh: Miller-Comball be attended on each site under a lease back arrangement in which they have committed to an initial 15-year term.
Brendan Cavanagh: In addition, as part of the leasing arrangement, Milcom has agreed to extend all of their approximately 1500 existing leases with SBA that exist on our existing assets in the region for a new 15-year term.
Brendan Cavanagh: SBA in Melakom have also entered into a new build-to-suit agreement, under which SBA will exclusively build up to 2,500 new sites in Central America for Melakom over the next seven years.
Brendan Cavanagh: The transaction is subject to regulatory approvals and customer-acclosing conditions, and we expect it will close sometime in mid to late 2025.
Brendan Cavanagh: The Millicon transaction demonstrates one way in which we are carrying out the learnings from our strategic review of each market. Increasing our scale and existing markets and establishing long-term relationships with the leading customers in those markets.
Brendan Cavanagh: In some markets, however, we make include this type of opportunity is not available to us.
Brendan Cavanagh: In those cases, we will consider debesting markets where we are stubbed scale. One example of this is in the Philippines.
Brendan Cavanagh: Our original strategy in the Philippines was to gain scale through build-to-suit arrangements with local carriers and continue to grow our portfolio through organic growth, smaller acquisitions and further builds.
Brendan Cavanagh: Unfortunately, over the past two years, the market has changed. With the leading carriers awarding large build-to-suit opportunities to tower companies, as a component of significant sale lease-back transactions with those tower companies at very high valuations.
Brendan Cavanagh: We have successfully built a valuable portfolio of tower assets in the Philippines, but today there are over 30 independent tower companies in the market and our market share is still less than 1%.
Brendan Cavanagh: Given our lack of broader presence in the region, an eliminated path to scale over the near-demediant term, we have begun a process to exit the market through a sale of our existing business.
Brendan Cavanagh: We will continue our strategic review of all of our operations and markets with a focus on stabilizing long-term cash flows and positioning ourselves to maximize organic growth opportunities in each market.
Brendan Cavanagh: Some markets may grow and others we may exit, but I am confident that each decision will strengthen SVH prospects for the long term.
Brendan Cavanagh: Pivoting now to our services business, we had a very good third quarter. Revenue was up over 23% from the second quarter and gross profit was up over 33%.
Brendan Cavanagh: Our carrier customers meaningfully stepped up their construction activity in the corridor, contributing to better results than we anticipated.
Brendan Cavanagh: As a result, we have increased our full year outlook for services revenues from the outlook provided last quarter. And our full year adjusted EBITDA outlook also benefited from these strong results.
Brendan Cavanagh: Our services teams continue to execute very well and they provide a true differentiation for SBA with our customers.
Brendan Cavanagh: During the third quarter, we also made significant progress in managing our balance sheet, with three very positive capital markets transactions, which Mark will discuss in a moment. These transactions demonstrate our access to a trackably priced capital and our position as a preferred issue or across the debt markets in which we participate.
Brendan Cavanagh: Our leverage remains near historical lows. We have one debt maturity over the next two years, and our $2 billion revolver is fully undrawn. So we are an excellent state in terms of capital structure and liquidity.
Brendan Cavanagh: In addition, we continue a targeted approach to capital allocation. Completing our recent refinance seems provides us with flexibility to opportunistically allocate capital into strategic and value-enhancing asset investments, with a key example being the Millicom transactions.
Brendan Cavanagh: During the third quarter, we also acquired a portfolio of high cash flowing sites in the US at an attractive price. And we will continue to look for opportunities to grow our asset base and appropriate valuations as well as to opportunistically repurchase our stuff.
Brendan Cavanagh: Our business continues to perform well and our customers continue to enhance their networks. As a result, we are set up well for a strong finish to the year.
Brendan Cavanagh: The four-turned-in-it over-the-marked-the-share more specifics on our third quarter results. I'd like to thank our team members and our customers for their contributions to our success.
Brendan Cavanagh: Our Operations Teams deserve a special thank you for the tremendous job they did through the recent hurricanes affecting the Southeast through the United States.
Brendan Cavanagh: Between the two storms we had over a thousand sites in the path of one or both storms.
Brendan Cavanagh: Our sites once again demonstrated their resiliency with relatively little structural damage.
Brendan Cavanagh: More impressive though, was the quick and dedicated response from our team members to assess the damage, clear access, and assist our customers and getting their networks up and running as quickly as possible.
Brendan Cavanagh: A greatly appreciate the dedication and commitment of our teams on the ground in these challenging situations.
Speaker Change: With that, I will now turn things over to Mark, we'll provide additional details.
Mark: Thank you, Brendan. Our third quarter results were mostly nine without expectations. So it's quarter domestic, same tower revenue goes over the third quarter of last year was 5.3% on the monthly percent of children's.
Mark: of that 3.3% to person was related to sprint consummation.
Mark: International Earth Sim Tower, recurring cash-leasing revenue gross for the third quarter, which is calculated on the constant currency basis, with 3.1% net, including 4.3% of turn, or 7.4% on the gross basis.
Mark: In Brazil, our largest international market, same tower goes organically with 6.5 percent on the constant currency basis.
Mark: We continue to see solid, organic, these up-in-one international markets. To learn international culture and remain elevated in this work course, to mostly to previously announce key area of conservation.
Mark: and the former footballer today's announcement with the Americans, approximately 80% of cash side-de-lead in revenue, and 84% of adjusted EBITDA, like expected to be denominated in US dollars.
Mark: Let's now cover our without our look for 2024.
Mark: Even excluding the impact of better than expected foreign currency change rates in the third quarter, increase our fuel output across all key metrics, including cycling, single revenue, Calcutta so, or just to give it a, as I feel an effort for per share, as compared to our prior outlook.
Mark: We've got to say a development of revenue, we're increasing the full output by $5 million to mostly to sponsor third-core performance in that business.
Mark: Please also note that the outlook that there's no human filter acquisition beyond those which, as of today, or under contract in expected to close by your end
Mark: We also do not assume any help with purchase beyond what was already considered so far this year. However, in this possible and investment additional asset, of shared with purchase for both during the year.
Mark: Our group for net caution to our experiences and for FF4 and after 4 push air now assumed a recent ABS and anything and we're pricing about turn around these.
Mark: Additionally, we enter into a new forward starting into a switch-flop starting April 2021. We would have no impact on our 2024 auto.
Mark: We're quite busy with our baronsheet in the last two months. During the third quarter, the company issued to an existing press to move from a sheet of tower of revenue security touring 2.07 billion dollars.
Mark: This includes a 12.620 million dollar issue at 4.65% It's an anticipated repayment rate of over 2027 and a final maturity date of over 254
Mark: This also includes a promise of 1.45 billion dollars, which should at 4.8 to 1%. With an end-speed, it will be implemented of October 2029, and the final maturity date of October 254.
Mark: The net policies from the offering were used to repay the $620 million silver maturity that would be used to pay back the $1.165 billion for the EBS maturity in June of 2021.
Mark: Cash4Cs to repeat a January maturity with sitting in the next 40 count and the event, at which time the 1.165 billion will be the only paid. Our next maturity is a $7 and $15 million dollar ABS doing January 2020.
Speaker Change: and Martin Cavanagh. Thank you, Mark. It's September we've priced our $2.3 billion term loan by lowering the spread of one month term so far from 200 basis points to 175 basis points. It's improvement represents approximately $6 million of annual interest expense savings.
Speaker Change: In addition to lowering the spread on our term, along by 25 basis points, we also further hedge the future floating rate component of the loan by entering into a forward starting interest rate swap. This swap will fix the otherwise floating one month term.
Speaker Change: So for at 3% for a no-shinal out of $1 billion significantly lower than today's current one month term so for rate.
Speaker Change: Similar to the existing $1 billion for restarting interest rates swap, we entered into back in the fourth quarter of 2023. The new swap has an effective start date of March 31, 2025, and a maturity of April 11, 2020.
Speaker Change: Together, the blended one month term so far right, we will pay starting in March 2025 on 2 billion
Speaker Change: Inclusive of the news spread of 175 basis points, the all-in cost for the $2 billion fixed portion of the $2.3 billion outstanding term loan will be 5.165% starting April of 2025.
Speaker Change: The remaining unheaded portion of the loan will continue to float in a crew interest at one month term so far plus 175 basis points.
Speaker Change: For the new swap approximately 98% of our non-revolvered debt outstanding as fixed, which will reduce the impact of future interest rate fluctuations and create greater certainty in our future AFFL.
Speaker Change: A current leverage of 6.4 times met that to adjusted EBITDA, remains in their historical lows. Our third quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was a very strong 5.3 times.
Speaker Change: Proforma for the ABS refinancing are weighted average maturity is approximately four years with an average interest rate of 3.2% across our total outstanding debt.
Speaker Change: We continue to use cash on hand to repay amounts of spending other under the revolver. And as of today, our $2 billion revolver is fully paid down.
Speaker Change: and finally, during the third quarter, we declared in pay to cash dividend of 105.3 million or 98 cents per share.
Speaker Change: and today we now set our board of directors to clear the fourth board of evidence of 98 cents per share.
Speaker Change: Payable on December 12th.
Speaker Change: 2020 for to share holders of records as of the close of business on November 14, 2024. This dividend represents an increase of approximately 15% over the dividend paid in the fourth quarter of 2023. An operator with that, we are now ready for questions.
Speaker Change: Thank you. And ladies and gentlemen, if you would like to ask a question at this time, please press 1-0 on your phone.
Speaker Change: You may remove yourself from cue at any time by pressing the 1-0 again. And if you are using a speaker phone, please pick up the answer before pressing the numbers. Once again on the phone, if you do have a question, it is 1-0. One moment please for our first question.
Speaker Change: and we'll go to the line of excuse me one moment. That you'll leave me your line is open.
Speaker Change: Great, thank you. A couple questions. First, domestically, you mentioned that carrier activities, increasing from the first half levels, is shifting to more co-vocation versus amendment. Can you size that mix? And if this holds up into full queue.
Speaker Change: How should we think generally about 25 policing versus 24 can't be flat to up? And on the middle come deal, can you provide more color on the SOP Pro share, Christian and New One, and maybe the least have opportunity on these facts. Thank you.
Speaker Change: Sure.
Speaker Change: So on the carrier activity, mixed.
Speaker Change: We have seen an increase in carrier activity in the U.S. in terms of new business signed up. The third quarter was higher than the first half of the year, really than the last.
Speaker Change: 3 corners actually.
Speaker Change: and we would expect based on the backlogs growing that we'll continue to see that move up.
Speaker Change: It's not in levels of where it was, you know, during the height of a couple of years ago, but it's moving up in the right direction and obviously that's favorable for the future. The mix of that shifting we've begun to see as I mentioned.
Speaker Change: A little bit more of that revenue coming from new coalications as opposed to amendments. We had had such a large percentage from amendments over time that now as we start to see more new leases it's starting to...
Speaker Change: and it's starting to shift a bit. And I guess what that really means is that we're obviously getting more points of presence with those carrier customers, which is a good thing for future growth as a baseline.
Speaker Change: It does mean I guess slightly on the negative side is that there's a little bit greater delay from when those leases, when that revenue gets signed up to when it commences, the amendments typically commence a little bit quicker.
Speaker Change: But if we continue to see something similar in the fourth quarter to what we saw in the third quarter, you know, we'll be in okay shape for next year, but I can't really comment on how to look relative to this year. There's a lot of moving parts, so we'll see where we are when we get there.
Speaker Change: as it relates to the Milicon Deal.
Speaker Change: It's a little premature for me to give you the exact AFFO creation. I think you can look at the numbers that we released in our press release in terms of the tower cash flow. It will be because we're in many of these markets, so it'll be limited.
Speaker Change: Overhead increases associated with that, in addition, I would expect will help.
Speaker Change: You know, some income tax implications, but it definitely will be a needed to have a focus here once it closes.
Speaker Change: The issue is really just the timing of when it closes. So, you know, as we get a little bit further down the road, we have a better sense of timing. You know, we'll share that more specifically with you, Bob.
Speaker Change: and thank you. Yeah, you asked one other question too which I don't think I answered which is about the lease of potential on those sites.
Speaker Change: You know, the current tendency ratio on those sites is 1.2 with the one obviously being a mellow calm police back. So they're fairly under-penetrated in terms of colocation. So we think it actually will set them up pretty well to see some nice growth in the future.
Speaker Change: John, thank you.
Speaker Change: and next we'll go to the line of Rick Prentis with Raymond James. Your line is open.
Speaker Change: Thanks for everything everybody.
Rick Prentis: Can you help us understand kind of maybe a rough magnitude of Eva Tau, from where you said you'd be a little bit out and over at it. Trying to get that, the understanding looks like the multiple on tower cash flows about 11 times for the initial payment. Just trying to get a sense of what the Eva Tau multiple might have been about as far as
Speaker Change: Yeah, I would expect that the incremental SQNA will be between $3.5 million dollars.
Speaker Change: Okay, you know, maybe a half a turn or so higher.
Speaker Change: and the most beautiful.
Speaker Change: So something came in the sun six times over E.B. that you've done multiple paid for the disaster.
Speaker Change: 11.
Speaker Change: Okay, so help us understand.
Speaker Change: Maybe a little bit more about why that price can you talk a little bit about the quality of the assets, how robust are they as far as adding tenants. And then just once we carry our universe and like in each one of those markets, we can understand that the leasing potential given them the multiple is kind of like a lead on the aptone.
Speaker Change: Yeah, so Rick, first of all, he just kind of goes over all premise which I tried to lay out a little bit of my scripted comments but...
Speaker Change: We're operating throughout Central America today. We're one of the leading tower companies there. But as we kind of, and I talked about this earlier in the year, as we kind of looked through each of our markets and where we're operating.
Speaker Change: We tried to say, what's the future look like? What's the potential look like for us? And we came pretty early on to the conclusion that you need to be a leader.
Speaker Change: in the market in terms of your size and scale to be of the most relevance and importance of the carriers that operate there. And not only that, you need it to be aligned as close as you could with the leading carriers in the markets so that you weren't as subject to some of the challenges that we faced when we've been indexed to maybe some of the weaker carriers in certain markets that we've been in. And it obviously has created churn and some...
Speaker Change: Disruption to the stability that this business is well known for.
Speaker Change: With that in mind, this was an opportunity to one take a leadership position where we're clearly the largest most dominant.
Speaker Change: Tower Company across the region and two to partner with the leading carrier across the region.
Speaker Change: So, that was really the biggest driver. We could, and the fact that we could do it at a price point that was good for us and good for Tego, I think made it work very well. You know, obviously, it's a way for them to unlock value and assets that are not quarter their operations, and for us it's a way.
Speaker Change: to make the most of our skill set, which is delivering these types of infrastructure assets at the highest quality and making them available not only to T-go but also to the other carriers in the region.
Speaker Change: and when we look at the growth potential across the markets we have.
Speaker Change: You know, a number of these markets, one of the good things about where we are today as we look forward, is that many of them have already experienced the consolidation that kind of disrupted things for a little while over the last few years. And because of that, we feel very good about the remaining carriers in each of the markets.
Speaker Change: So, each one's a little bit different, each country's a little different. Some only have two carriers that are fairly well balanced, which you go being one. Others have more carriers than that. But the fact that there's only 1.2 tenants on these sites.
Speaker Change: and looking at where a number of them are located with Tigo as the leading provider in many of these markets. We believe it's a nice opportunity for some additional growth in the market.
Speaker Change: Okay, and any catfish that's required kind of to get them up to handle that additional tendency.
Speaker Change: There may be some, but that would obviously be figured in it to the analysis as we sign those leases with new carriers. So, you know, there's no required capex other than to the extent we see fit that it's appropriate in connection with the lease of opportunity.
Speaker Change: Thanks.
Speaker Change: and next we'll go to the line of Jim Schneider with Goldman's X. Your line is open.
Jim Schneider: Good afternoon and thanks for taking my question. I guess first question would be relative to no-com deal. Clearly you're doubling down on the Central America footprint. What should we draw away from this in terms of anything that may say about, you know, or not about proposing the possibility of a larger out-of-foot print deal in Europe or elsewhere?
Speaker Change: I don't think that it.
Speaker Change: and that's necessarily, means anything is related to that. Our top priority was certainly to look at the markets where we already are operating.
Speaker Change: and to improve our position in those, or frankly to look at exiting those if we don't see a clear path to doing that. But that in and of itself.
Speaker Change: is in a commentary on expansion into other places. I think the expansion into other places is simply secondary to strengthening the position and the markets where we already are.
Speaker Change: Understand, and then in terms of the commentary on greater proportion of new leasing on the domestic sites, can we just talk a little bit about, qualitatively, how much of that is sort of new leases in, say, rural markets and sort of outside of urban suburban areas, and are you seeing anything on the margin in terms of densification?
Speaker Change: Yeah, I'd say it's a little bit of both. Jim, I mean, it's fairly early that we started to see this shift. We've really just seen an uptick in the sheer number of brand new leases that were signing relative to the pace we'd seen over the last two years.
Speaker Change: So, some of that is definitely in more rural markets, as at least one of our customers has an initiative.
Speaker Change: Regulatory Requirement, frankly, to build out some of those areas, so that's a part of it. But other parts of it are definitely done to the patient as well in some of the more suburban markets.
Speaker Change: and I think, you know, it's our best gas based on what we're seeing in the conversations we're having our customers, but I expect both of those things to actually continue into the future, particularly given the lack of new spectrum that's going to be made available.
Speaker Change: Great, thank you.
Speaker Change: and the next book of the line of Brandon Mispel with Key Bank Capital Market.
Brandon Mispel: Thanks for taking the question, Brendan, I'll try to leave the next to the question a little bit away. So being able to quantify the growth and relief applications in terms of the lack of relief is very exciting and not convinced.
Brandon Mispel: and then Marc was looking at the guy in the pot and by for a few weeks he looks like something just shot in my mind. And all of this is not the bottom and when you actually think there is an infection in the next week.
Brendan Cavanagh: I'm sorry to this, but it was a little hard to hear you. I think you were asking about the organic growth and the time of the inflection. Is it possible for you to just repeat it a little bit? Yeah, I can try again. I was hoping you could take the...
Speaker Change: Activity question, a little different direction and hoping you could quantify that application backlog in terms of signs, but not commenced new leases and then just looking at four cues and applied by guidance.
Speaker Change: seems like New Leases and Domastically is just shy of $9 million. Is that correct? And when is the bottom for that leasing metric?
Speaker Change: Yeah, so the application backlog is of a similar shift in mix that we talked about. Your number for the fourth quarter is pretty close.
Speaker Change: I would say within half $9 or so of what we estimate.
Speaker Change: and y'all the timing of the bottom, I think.
Speaker Change: You know, that's around it. I can't tell you for sure yet as we get in next year, but I think we would expect to see.
Speaker Change: that sort of reprition.
Speaker Change: and I'm trying to write around the bottom area. I mean, some of that is dependent upon what we continue to see happen here as we move to the balance of the year in terms of leasing activity. The other caveat to that, the reason I'm hedging a little bit is just that shift in the mix of the lease up has some impact.
Speaker Change: on timing. The two different things are obviously related. One is what we sign up, and two is one that we can't comment and hit the financials, and that shift in the mix.
Speaker Change: to some degree can push it out a little bit further. So until we see how that plays out to the balance of the year, it's hard for me to say exactly. But, you know, we're seeing an uptick and overall leasing activity, so I'm pretty confident we'll start to see it move, pop work.
Speaker Change: Thank you.
Speaker Change: Sure.
Speaker Change: and the next rule goes to the line of Simon Flannery with Morgan Stanley. Your line is open.
Simon Flannery: Thank you very much. Good evening. I want to come back to the Millicon Deal. You did a an additional bill to sue a agreement with them. Could you just talk about how you think about underwriting that?
Simon Flannery: and return on investment in so forth. In the 6-7 year deal, so is that rateable over.
Speaker Change: and then I think leverage state in the mid-sixes, how are you thinking about where you want leverage to go over the next year or two as you balance M&A and buy back and keeping flexibility on the balance sheet.
Speaker Change: So...
Speaker Change: So, yeah, the Build Suit agreement was actually a piece of it that we're very excited about because it allows us to continue to expand our partnership with Millacom. You know, basically what it is is we are their exclusive provider of Build Suit Opportunities over that next seven years up to a total of 2,500 sites.
Speaker Change: We underwrote that with...
Speaker Change: You know, as we looked at what we expected the estimated cost and the pricing of it was...
Speaker Change: was tied into those estimated costs.
Speaker Change: We expected to be a high returner, certainly north of double digits.
Speaker Change: Without any leave, stop them. And again, we think that there will be plenty of opportunities to see second tendencies on a number of those sites as we have them over time because they're typically going in locations where there isn't any coverage today.
Speaker Change: So I think it'll be...
Speaker Change: It'll be certainly additive over time in terms of the timing of it coming in over that seven years.
Speaker Change: you know the reasons to have.
Speaker Change: and expected timeframe and may come in evenly over that or it may come in quicker. So we'll just, we'll report that as it progresses, there's no requirement in that regard.
Speaker Change: on the leverage front.
Speaker Change: Yeah, you know our leverage is still hovering around the lowest level that it's been at.
Speaker Change: for us historically at 6.4 times, even with the Milacom Deal, Proforma for that. That's a fairly small impact you're talking about. Point two turns is what I'd estimate of incremental levels when that eventually closes.
Speaker Change: You know?
Speaker Change: I don't really have the desire to necessarily see the leverage go lower. It's really more a function of good places to use the XS capital that it generates.
Speaker Change: This deal is an example of an opportunity that we saw that we thought would be very value enhancing, and so having that flexibility to do that is a nice place to be.
Speaker Change: and that leverage being lower allows us to opportunity to do that. But going forward, we'll continue to look for places where we can invest in assets and if we don't see asset opportunities, we'll...
Speaker Change: Will invest in share-re purchases and if that doesn't seem like the best spot at a given time, we'll obviously continue to pay down debt, but my preference is to do one of the first two.
Speaker Change: Craig, thanks for watching.
Speaker Change: Next we'll go to the line of Jonathan Atkin with RBC Capital Markets.
Jonathan Atkin: Sir, I'm in his open. Thank you, a couple of questions. As you manage your Latin American portfolio, my recollection is that you had somewhat of a centralized model doing a lot of it out of Florida. And that's still the case now that you've got a couple quarters under your bills as a CEO. And there's the Millicom transaction change that at all.
Speaker Change: Yeah, it's basically still the same and really what it is is the things that can be done centrally, we try to do centrally, meaning back office functions accounting.
Speaker Change: HR, Leeville, those types of things.
Speaker Change: We obviously have to have a presence of course in the markets for operational purposes.
Speaker Change: for sales purposes interactions with our customers, those sorts of things. And we do have local representation of these other functions there, but we try to have everything kind of funneled back through our core systems here and our teams here. And the reason we do that is one is cost effective, but two, it gives us a much greater insight into what's happening across all of our international markets by having it run that way.
Speaker Change: and three, it also allows us to have consistency across all these various markets in the way that we operate and the way that we approach our business. And I think...
Speaker Change: Over time, that has generally benefited us relative to our peers. So, I don't expect to change that going forward. And even with this militant deal, obviously, I have to have a few more people in the fields, and maybe one or two more here. But I think the general structural state of the same.
Speaker Change: And then a couple of US questions, just wondering if you're seeing any kind of different impacts or activity from some of the builds of relocate tower development activities, as well as any impacts that you might expect to see in the industry with a Verizon portfolio sale changing hands into an independent operation.
Speaker Change: Yeah, we're not really seeing too much on the reload stuff anymore, it was a little bit...
Speaker Change: A couple of years ago, but...
Speaker Change: is largely died down. We see very limited situations for that. I think most people have come to realize that building towers next to other towers is kind of a way to mutually assured self-destruction in those particular situations. So we're seeing a lot less of that.
Speaker Change: In terms of the Verizon sale, there was a nice portfolio here in the US. There's obviously very few portfolios of that size available in the US market. Looks like it went for a very nice price, which I think is...
Speaker Change: is representative of the value of towers here in the U.S. and...
Speaker Change: and we think it's supportive of the fact that SBA has a very high quality, high value platform and portfolio.
Speaker Change: Thank you.
Speaker Change: Yep.
Speaker Change: and next we'll go to the line of Richard Chow with JP Morgan.
Richard Chow: Hi, I want to ask you about the site development, the revenue picked up and the guidance was mid-dust lately, is that type of work following what they increase in co-location and new leases or is there something else going on there?
Richard Chow: How should we think about it as we roll into next year?
Speaker Change: Richard, it is a little bit. We had it actually a better quarter than we had anticipated when we gave guidance three months ago, which is why we're moving our outlook up.
Speaker Change: for the year.
Speaker Change: and I would say a lot of that, you know, the couple of carrier customers that were particularly busy.
Speaker Change: and it does seem to be because of this shift to more new leases and the fact that actually we're doing a lot more of the full-term key work than we used it. So there's a heavy construction component to it.
Speaker Change: Doing that heavy construction piece drives the total volume up even on the same number of agreements. I do think that's one of the contributing factors. I would expect as we move in the next year we'd see the same types of drivers for it.
Speaker Change: You talked a little bit about domestic M&A, but you did have a smaller deal that you said was highly catch for a creative. Do you think there's more of these smaller deals to kind of build upon or is that just the one off-pack thing?
Speaker Change: Unfortunately, I would say it's somewhat limited. We do our best to look at everything that's available and the volume of opportunities in the US is somewhat limited, which is part of the reason that they go for such high valuations because the...
Speaker Change: The folks chasing them out, number the folks making them available for sale. But...
Speaker Change: Yeah, I mean we're going to continue to look and I think every so often we're going to find opportunities to jump in and take advantage of something where maybe somebody else is misted or we see value Unlock opportunities that I was down but but I do think Unfortunately it's more limited than I would like
Speaker Change: Thank you.
Speaker Change: and we'll go to the line of Matt Nicknum with Deutsche Bank. Your line is open.
Matt Nicknum: Hey guys, thanks for taking the question. Just a delve detail on some of the questions that have been asked around the US. Can you talk maybe a little bit more on what necessarily changed in three queue that drove the uptake and activity? Was it one carrier in particular?
Matt Nicknum: For more broad-based, and then maybe just to follow onto that on the dish front, any changes in activity, and any thoughts you can offer up on some of the moves they've made of late. Thank you.
Matt Nicknum: EUR
Speaker Change: Yeah, the change in the third quarter.
Speaker Change: Now let's say it's...
Speaker Change: More broad-based, but you know, in a given quarter one carrier can be a little more active than another site. I don't know that as I kind of look at the pieces of it here in front of me, I don't see too much.
Speaker Change: So, to highlight and we don't really like to get into the individual customers. I'm not sure that it would mean anything anyway because the next quarter that shift can can turn around a little bit and just be a different area. It all depends on when they're hitting our specific sites, I think.
Speaker Change: With regard to dish, you know, obviously some positive news that I think sets us up well for the future, just the fact that, you know, they're one of our key customers they have a lot to do.
Speaker Change: The fact that they got some relief on the regulatory deadlines.
Speaker Change: I think it's clearly positive because it allows them to actually be able to achieve the spilled out that they seem very, very committed to.
Speaker Change: and the funding that they've raised through the sales satellite.
Speaker Change: Business, I think, is also obviously positive.
Speaker Change: It's really just a question of timing. What they've done here is they've raised the funding, they've got themselves scheduled that they can work with, but I do think it'll take some time for them to go through that. It's a little early for me to know what the short-term impacts will be, but I do know a long-term, it's obviously very positive.
Speaker Change: Okay, do you focus on one more follow-up? In terms of color relative to a man named in the US, what's the mix now and how does it, I mean, I just, because you mentioned, you know, more of a mix of color, but I'm just curious, at least in the third quarter, what that mix was in the US.
Speaker Change: Yeah, and this is based on dollars, but it was roughly 60% little over 60% from new leases.
Speaker Change: very thank you
Speaker Change: and we'll go to the line of Nick DeRudeo with Muffet Nathanson. Your line is open.
Speaker Change: Hi, thanks for making my questions. First, a couple of clarifications on Millicom. The Millicom press release highlighted the potential for them to get Ernouts over time. If you meet certain financial milestones, are those likely, with a movement to your approach as a prize?
Speaker Change: and from a churn perspective, it's very to say that the 15 year LLA kind of locks Millicom in without any opportunity to get off any of the towers over time.
Speaker Change: We asked on the second one, it's a 15-year committed term. On the first question on the urnout, there are some potential urnouts for them. Those would only be paid if certain financial milestones were reached.
Speaker Change: and that would be actually a great win for both parties. I don't think it's overly material, material, it will change the numbers and it actually will be certainly enhancing to the overall multiple of the deal if it happens.
Speaker Change: Okay, okay.
Speaker Change: and then you decided to deal with a nice yield on it that you close. I think you're referencing the television deal.
Speaker Change: Can you share anything about the expected contribution there?
Speaker Change: or the degree in which that piece is based on the existing broadcast revenue stream versus potential lease up. And how big of a chariore business is broadcast today?
Speaker Change: Broadcast is a fairly small percentage of our business. We have some existing embedded broadcast towers that we've had for a lot of years in our portfolio. This particular portfolio is something that we spent.
Speaker Change: A number of months with them on looking at each side and what its potential was.
Speaker Change: Obviously the price point is well below where the typical...
Speaker Change: Wilders, Towers are trading here in the U.S.
Speaker Change: and that allows for a lot more flexibility and try to what you can do from an organic growth standpoint. But we do think some of the sites have potential for some growth, but it doesn't really require much. And we have a long-term commitment from the univision on that piece.
Speaker Change: Great, thanks, Brendan.
Speaker Change: and the next we'll go to the line of Eric LubaChao with Will's Fargo. One moment please.
Speaker Change: and your line is open.
Eric LubaChao: But you may be put on kind of how not you seem non-spirit churn in your domestic markets. Looking beyond this year, I think you've talked about getting that down to the low 1% range, but any update on kind of timing to win you guys. Thank you for getting there.
Speaker Change: Yeah, I think that, um, and guys and room correctly, they're wrong. I believe we were, for this quarter, it's at about 1.3%.
Speaker Change: the non-spright churn. So it's already down into the lower ones and I think it will probably improve from there. So I think that next year I would expect that we're going to get somewhere close to 1% or so.
Speaker Change: So it continues to, you know, in terms of overall numbers and impact.
Speaker Change: Gotcha, did you hear? And then just to follow up on the Millicom in the way, you noted it's mostly US dollar dynamics.
Speaker Change: and you kind of call it, you can ride on kind of the escalator structure whether, you know, are those fixed and are the new leases with more comprehensive or holistic in nature or will that growth be more subject to their kind of future activity levels just kind of comparing it with what we typically see in the US. Thanks.
Speaker Change: Yeah, I can't get into too much detail on all of it. First of all, on the dollar piece, the MLA is 100% U.S. dollars.
Speaker Change: The MLA is all in U.S. dollars. You know, and it's got all of the typical things you would see. There are escalators in it, but I'd rather not get into all the detailed structure on that, if I can avoid it.
Speaker Change: They're great. Thank you.
Speaker Change: And we'll go to the line of Walter Pysyk with LightShed Partners.
Walter Pysyk: Hey, can you just refresh my memory on how long it does take from order to implementation for a COLO? I mean, it obviously takes longer than a Mammut, but just kind of a ballpark number of months.
Speaker Change: Yeah, I'd say ballpark six months, Walt.
Speaker Change: So if the order flow is kicking in now, then obviously that revenue should kick in in conjunction with the capital plans for these operators in 2025. And then on the dividend...
Speaker Change: Obviously, you stayed to what you're doing in the fourth quarter. Last year, the growth was 20% this year.
Speaker Change: It was 15%. It's kind of like the outlook.
Speaker Change: In terms of growth, it might be a bit better, maybe not. But is the expectation, when you look at the investor base out there that's available to you on the yield side,
Speaker Change: These are kind of a...
Speaker Change: Like a floor that you think about in terms of growth in the dividend year over year as we contemplate 25 and 26.
Speaker Change: Not explicitly. I would expect that we will be certainly the fastest growing dividends within our small industry here and one of the fastest among REITs broadly. It is 15% this year, which is the lowest it's been, actually, at any point in our history.
Speaker Change: Obviously, we're starting with relatively small numbers, so the percentage growth can be higher.
Speaker Change: Part of it, Walt, is that we're triangulating a little bit towards our re-obligation. We have NOLs that we've been burning off, and so we've been able to use those.
Speaker Change: you know, as kind of a supplement to limit us from having to pay the full rate.
Speaker Change: Thank you.
Speaker Change: dividend, but as we burn those NOLs.
Speaker Change: that starts to kind of lock in more and more with our number.
Speaker Change: to be. but I- I would expect, uh I don't really wanna jump ahead because we're gonna look at our dividend increase next quarter. we typically do it with our fourth quarter earnings. but I would expect it will still be uh very healthy growth relative to the rest of the
Speaker Change: Got it. Thank you.
Speaker Change: And we'll go to the line of David Barden with Bank of America.
David Barden: Hey guys, thanks for taking the question.
David Barden: Can you explain a little bit more about why you bought what you bought and didn't buy what you didn't buy? And then, I guess, another question for the Marks.
David Barden: revolver is fixed.
David Barden: Can you talk a little bit...
David Barden: about why you chose now to make that decision. And you had a lot of activity in the quarter. A lot of it had to do with the $2.3 billion term loan expiring in 2025. Are there more moves to make, or is this kind of the balance sheet?
David Barden: that SBA is going to have for the next, you know, 12, 24 months that we can kind of just kind of chew on and put into our models. Thank you.
David Barden: Thank you.
Speaker Change: frankly, where we have a good size presence and this was a meaningful enough transaction to put us in a much stronger go forward position. Some of the markets where they operate, we are not currently in some of those markets and others were well below scale and it didn't really
Speaker Change: It seemed like it was going to change things, and it was actually a much cleaner separation to do Central America versus South America. There's nothing that you should read into that in terms of future.
Speaker Change: additional items. This was one specific deal and it stands on its own merits.
Speaker Change: You know, we actually already had hedges in place.
Speaker Change: for the vast majority of our floating debt. Sometimes it changes because of the amounts outstanding on the revolver, which is obviously floating.
Speaker Change: And part of the reason it's 98% is because there's zero outstanding on the revolver. But we already have most of our term loan, which is the other floating instrument.
Speaker Change: fixed today through hedges.
Speaker Change: And what we've done is enter into some forward starting hedges to continue that fixing to provide some certainty. And we did that more to be opportunistic around the rate environment that we saw locking in rates that were materially below where the rates are today. It will require significant reductions in rates.
Speaker Change: And so it's really to provide the certainty, but also to take advantage of what we thought were actually pretty good rates.
Speaker Change: Marc, do you want to add anything?
Speaker Change: and traditional Milton Friedman.
Speaker Change: of a dip in interest rate to locking a cap on the max interest rate we're going to pay on the Turn-on-V starting in April of 2025.
Marc: Yeah, I mean they're really just replacements of what existed when they're set to expire.
Marc: And I think, you know, going forward, you asked the question about whether the balance sheet looks the same here for the next 12 months or so. I mean, we only have one maturity during the next 24 months. And that's in January of 2026. And frankly, it's only 750 million, which
Marc: is really not that much can be managed in many different ways. So I think the answer to that question is yes, David, it's going to stay very much similar to what you see today. The only caveat to that is, you know, other opportunities that come along that will require some shift.
Marc: and the way we're capitalized to take advantage of them. But otherwise, you should expect it would be the same.
David Barden: Okay, great. Thank you, guys.
Speaker Change #101: And, excuse me, we'll go to the line of Mike Rollins with Citigroup. Your line is open.
Mike Rollins: Thanks for taking the questions. Two if I could. First, as you're seeing more opportunity and leasing from your carrier customers, does that increase the likelihood that you would enter into new multi-year comprehensive deals with additional domestic?
Mike Rollins: or just given some questions of inflation and future rates, are you considering taking a CPI-based approach with possible floors and ceilings? Thanks.
Speaker Change #103: So as you know, we already have a comprehensive MLA that we signed with AT&T about 15 months or so ago.
Speaker Change #104: So that is already set in place and isn't really impacted by what's happening now. I think as we ...
Speaker Change #104: As we have continuing conversations with our other customers, if we can find, you know, a way to agree on things that work for both parties, that
Speaker Change #104: are comprehensive in nature. We're open to doing that.
Speaker Change #104: In either case, I would expect us to have...
Speaker Change #104: what I'll call regular MLAs, meaning things that define the overall, you know, merits of the relationship. They don't necessarily have to be the all-you-can-eat structure. That really just depends on if it's something that works for what their needs are in the short term and what we think is the best way to monetize value. So.
Mike Rollins: I don't really know, honestly, Mike. We'll continue to talk to our customers and whatever structure works the best for both parties is what we'll go with, but we don't have a disposition towards trying to do more of those.
Mike Rollins: Sometimes we'll look at what the escalator will be for the brand new co-locations that they sign. We don't touch the ones that are in the embedded base, and that's obviously the bulk of our business. So there's little impact on the base escalators.
Mike Rollins: For the new ones, we will discuss it, but we usually end up focusing on a fixed rate as opposed to a CPI, but really that's a matter of just negotiation on each individual case.
Speaker Change #105: Thanks very much.
Speaker Change #105: Perfect.
Speaker Change #106: and we'll go to the line of Brendan Lynch with Barclays.
Brendan Lynch: Great, thanks for taking my questions. A couple quick ones on Milicom. The first release alluded to 7,000 communication sites. Can you talk about the mix of towers versus rooftops?
Brendan Lynch: And then also on the tenancy ratio being 1.2, can you talk about whether Millicom was pursuing a strategy of co-location or perhaps they were trying to avoid leasing to some of their competitors to maintain a competitive advantage in some of these areas?
Speaker Change #108: Yeah. So...
Speaker Change #109: The vast majority of these are towers, and even the ones that are rooftops, which is a fairly small percentage, are typically towers on rooftops. So it's basically all...
Speaker Change #109: effectively towers, but I don't know the exact number off the top of my head. I think it's somewhere around 90% as ground-based towers and the other 10% to 12% or so is...
Speaker Change #109: Rooftop based.
Speaker Change #109: And then on the tenancy side, they, Melicom did have these in a, they had established a
Speaker Change #109: tower company entity that they called Lottie. That's where these towers resided.
Speaker Change #109: and the intention was to leave space on them to other parties, so they did do some.
Speaker Change #109: efforts around that. However,
Speaker Change #109: It's our belief that a number of these sites were held back because they were better sites and therefore, for competitive reasons, for their wireless business, they did not make them available. Even in other cases...
Speaker Change #109: competing carriers were not as inclined to go on the sites when they were owned by one of their competitors. So we do think there's an opportunity to unlock lease-up value here.
Speaker Change #110: Thank you.
Speaker Change #111: And we'll go to the line of David Garino with Green Street Advisors.
David Garino: I guess as we kind of think about when the deal closes, should we assume that line item in your queues is going to increase materially, or is the earn out not that material? And then also just an idea of the time frame for when those earn outs would be payable. Thanks.
Speaker Change #113: Yeah, I don't think it's going to change on our balance sheet. There may be some disclosure around potential.
Speaker Change #113: Burnouts, but
Speaker Change #114: Honestly, David, the deal was just signed today, so I'm not 100% sure what the disclosure will look like in our financials, but that's something that maybe our guys can look at and just get with you all.
Speaker Change #114: offline on that. In any case, it's not that material to the overall picture. So, I think even if you see what it might look like, I don't think it's going to.
Speaker Change #114: It's not going to change the way that the deal looks, and as I said, to the extent that anything is paid, it will actually be a success because it means that we've added more revenue than perhaps we even expected.
Speaker Change #114: Thanks.
Speaker Change #115: And again, if we do have any questions at this time, it is 1 then 0 on your phone.
Speaker Change #116: Colin, I think we're probably ready. I think we've already used up our allotted time. So, I just want to thank everybody for joining the call and we look forward to catching up with you next quarter to share our year-end results.
Speaker Change #117: And ladies and gentlemen, that does conclude our teleconference call for today. Thank you for your participation and for using AT&T Conferencing Services. You may now disconnect.