Q2 2025 SBA Communications Corp Earnings Call
Okay.
Welcome and thank you all for joining today's SBA second quarter 2025 results.
Operator: Welcome, and thank you all for joining today's SBA second quarter 2025 results. Please note that this call is being recorded, and currently, all attendees are in a listen-only mode. Please stand by one moment as we get our speakers connected. Thank you so much for your patience. With that, I'd now like to formally begin today's call and turn it over to Mark DeRussy, VP of Finance.
Please note that this call is being recorded and correctly all attendees are in a listen only mode.
Please standby one moment as we get our speakers connected.
Okay.
Thank you so much for your patience with that I'd now like to formally begin today's call and turn it over to Mark <unk> VP of finance.
Thank you good evening. Thank you for joining us for SBA second quarter 2025 earnings Conference call here with me today are Brendan cabin, all our president and Chief Executive Officer, and Mark Martin Yang Our Chief financial officers. Some of the information we will discuss on this call is forward looking including but not limited to any guidance for 2020.
Mark Montagner: Thank you. Good evening. Thank you for joining us for SBA's second quarter 2025 earnings conference call. Here with me today are Brendan Cavanagh, our president and chief executive officer, and Mark Montagner, our chief financial officer. Some of the information we will discuss on this call is forward-looking, including but not limited to any guidance for 2025 and beyond. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, August 4th, and we have no obligation to update any forward-looking statement we may make. In addition, our comments will include non-GAAP financial measures and other key operating metrics. The reconciliation of and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our investor relations website.
And beyond.
<unk> 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 August 4th and we have no obligation to update any forward looking statement. We may make in addition, our comments will include non-GAAP financial measures and other key operating metrics.
The reconciliation of and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our Investor Relations website with that I will now turn it over to Brendan.
Mark Montagner: With that, I will now turn it over to Brendan.
Thank you Mark good afternoon, I'm very pleased with our second quarter results exceeding our internal projections, both the U S and international businesses performed very well and we are pleased to increase our full year guidance across all key metrics, both in total and on a constant currency basis.
Brendan Cavanagh: Thank you, Mark. Good afternoon. I'm very pleased with our second quarter results, exceeding our internal projections. Both the US and international businesses performed very well, and we are pleased to increase our full-year guidance across all key metrics, both in total and on a constant currency basis. In the US, activity levels continue to improve, and this quarter represents the sixth sequential quarter where bookings increased. While not at the peak levels enjoyed back in '21 and '22, positive momentum continues to build, and we are encouraged by the sustained levels of activity as carriers continue investing in their wireless networks. In addition, the trend towards more co-locations continues, driving more new points of presence with our key customers across our portfolio.
In the U S activity levels continue to improve and this quarter represents the sixth sequential quarter, where bookings increased.
While not at the peak levels enjoyed back in 'twenty, one and 'twenty two positive momentum continues to build and we are encouraged by the sustained levels of activity as carriers continue investing in their wireless networks.
In addition, the trend towards more co locations continues driving more new points of presence with our key customers across our portfolio.
Our carrier customers are working hard densify their existing footprints.
Brendan Cavanagh: Our carrier customers are working hard densifying their existing footprints, expanding fixed wireless access, as well as pushing out into rural parts of the United States, where our portfolio is well-positioned to capture that sustained network investment. The backlog also remains healthy, which bodes well for the remainder of the year and into 2026. Consistent with our strong US bookings, our services business outperformed our expectations, and we are increasing our full-year services revenue guidance by almost 20%. Most of the increase is related to construction services as carrier installations accelerate across the US. I am optimistic about domestic organic growth opportunities over the next year or two due to the specific initiatives of each of our major customers. But I am also optimistic about the long term.
Spanning fixed wireless access as well as pushing out into rural parts of the United States, where our hour.
Our portfolio is well positioned to capture that sustained network investment.
The backlog also remains healthy, which bodes well for the remainder of the year and into 2026.
Consistent with our strong U S bookings, our services business outperformed our expectations and we are increasing our full year services revenue guidance by almost 20%.
Most of the increase is related to construction services as carrier installations accelerate across the U S.
I am optimistic about domestic organic growth opportunities over the next year or two due to the specific initiatives of each of our major customers, but I am also optimistic about the long term the growth in fixed wireless access subscribers for all of our <unk> customers the expanding number of AI intensive applications.
Brendan Cavanagh: The growth in fixed wireless access subscribers for all of our MNO customers, the expanding number of AI-intensive applications, 5G advanced enabled new use cases, and the opportunity for incremental spectrum options are all supportive of sustained long-term growth. With regard to the spectrum, the recently passed federal spending and tax bill included the reinstatement of the FCC's spectrum auction authority, a positive development for us and our customers. In addition, as part of the new bill, 800 megahertz of spectrum will be identified and eventually auctioned to help boost network capacity and support the next generation of wireless technologies. This new spectrum will require new equipment at our cell towers, particularly at the higher bands that are not currently used for traditional wireless service today.
<unk> advanced enabled new use cases, and the opportunity for incremental spectrum auctions are all supportive of sustained long term growth.
With regard to the spectrum. The recently passed federal spending and tax Bill included the reinstatement of the FCC's spectrum auction authority.
A positive development for us and our customers.
In addition, as part of the New Bill 800 megahertz of spectrum will be identified and eventually auction to help boost network capacity and support the next generation of wireless technologies.
This new spectrum will require new equipment at our cell towers, particularly at the higher bands that are not currently used for traditional wireless service today.
Additionally, with bonus depreciation being permanently reinstated improving available liquidity for our customers, we could see greater investment in their networks as they have more capital available to invest.
Brendan Cavanagh: Additionally, with bonus depreciation being permanently reinstated, improving available liquidity for our customers, we could see greater investment in their networks as they have more capital available to invest. Similar to the US, our international business continues to perform well as our customers invest in 5G upgrades and ongoing densification. We signed a growing number of new leases in our international markets and continue to expand our portfolio through high-quality strategic new tower builds. And elevated CPI rates continue to support healthy tenant lease escalations. While certain international markets continue to experience elevated levels of churn, we believe this to be temporary and necessary for the long-term health and success of our customers. One area of challenge internationally is with one of our carrier customers in Brazil, Oi. As indicated in our updated full-year guidance, we are increasing international churn by $5 million, primarily related to Oi.
Similar to the U S. Our international business continues to perform well as our customers invest in <unk> upgrades and ongoing densification we.
We signed a growing number of new leases in our international markets and continue to expand our portfolio through high quality strategic new tower builds.
And elevated CPI rates continue to support healthy tenant lease escalations.
While certain international markets continue to experience elevated levels of churn. We believe this to be temporary and necessary for the long term health and success of our customers.
One area of challenge internationally is with one of our carrier customers in Brazil.
As indicated in our updated full year guidance, we are increasing international churn by $5 million.
Primarily related to OLED.
Brendan Cavanagh: As previously disclosed, Oi Wireline, the remaining Oi business post the wireless business breakup, which is mostly point-to-point wireless backhaul, represents approximately $20 million of run-rate revenue. On July 2nd, Oi filed an amendment to their judicial reorganization plan, citing unforeseen financial difficulties. While many things remain unknown and will take time to work through the court system, we have booked a bad debt allowance for certain outstanding receivable balances and are now assuming that a portion of the recurring revenue churns this year and next year. We will continue to monitor this situation closely and provide any updates to our thinking as the situation develops. Turning to our portfolio review, I'm very pleased with the progress we have made recently, both expanding our presence in key markets and exiting a market where we are currently subscale and could not see a path towards being a more meaningful player.
As previously disclosed OE wireline the remaining <unk> business post the wireless business breakup, which is mostly point to point wireless backhaul represents approximately $20 million of run rate revenue.
On July <unk>.
<unk> filed an amendment to their judicial reorganization plan, citing unforeseen financial difficulties.
While many things remain unknown and will take time to work through the court system, we have booked a bad debt allowance for certain outstanding receivable balances and are now assuming that a portion of the recurring revenue insurance this year and next year.
We will continue to monitor this situation closely and provide any updates to our thinking as the situation develops.
Turning to our portfolio review I am very pleased with the progress we have made recently, both expanding our presence in key markets and exiting a market, where we are currently subscale and could not see a path towards being a more meaningful player.
On the former we added approximately 4300 sites through the partial early closing from the previously announced millicom transaction deploying $550 million towards enhancing our strategic positioning and Central America, making SBA, the leading tower operator in that region.
Brendan Cavanagh: On the former, we added approximately 4,300 sites through the partial early closing from the previously announced Millicom transaction, deploying $550 million towards enhancing our strategic positioning in Central America, making SBA the leading tower operator in that region. This early closing contributed to the increase in our full-year guidance. As previously mentioned, this portfolio has a 15-year MLA, tenant contracts with the leading mobile network operator, contracts denominated in US dollars, and comes with a substantial bill to suit arrangement. We continue to expect the balance of the deal to fully close by September 1st. With regard to the market exit, we are announcing the sale of our tower business in Canada. We entered Canada back in 2009, and we have had reasonable success. However, we have been unable to meaningfully grow our portfolio, and as a result, we made the decision to explore strategic alternatives.
This early closing contributed to the increase in our full year guidance.
As previously mentioned this portfolio has a 15 year MLA tenant contracts with a leading mobile network operator contracts denominated in U S dollars and comes with a substantial build to suit arrangement.
We continue to expect the balance of the deal to fully close by September one.
With regard to the market, we are announcing the sale of our tower business in Canada.
We entered Canada back in 2009, and we've had reasonable success. However.
However, we have been unable to meaningfully grow our portfolio.
And as a result, we made the decision to explore strategic alternatives.
Brendan Cavanagh: On July 21st, we entered into an agreement to sell all of our towers and related operations to a leading global infrastructure fund. Today, Canada represents approximately $27 million of annual leasing revenue in Canadian dollars and 15 million Canadian of cash flow after taxes. As mentioned in our press release, we expect the deal to close sometime in the fourth quarter, but given the uncertainty in closing timing, we have made no adjustments to our full-year outlook related to this transaction. Upon closing, we expect this deal to be immediately accretive to AFFO per share. I would like to briefly thank our Canada-based team for all of their hard work and contributions to SBA over the last 16 years. The portfolio review remains ongoing, and I look forward to providing further updates.
On July 20, <unk>, we entered into an agreement to sell all of our towers and related operations to a leading global infrastructure fund.
Today, Canada represents approximately $27 million of annual leasing revenue in Canadian dollars and $15 million Canadian of cash flow after taxes.
As mentioned in our press release, we expect the deal to close sometime in the fourth quarter, but given the uncertainty in closing timing, we have made no adjustments to our full year outlook related to this transaction.
Upon closing we expect this deal to be immediately accretive to <unk> per share.
I would like to briefly thank our Canada base team for all their hard work and contributions to SBA over the last 16 years.
The portfolio review remains ongoing and I look forward to providing further updates.
Brendan Cavanagh: In addition to portfolio acquisitions, you should expect SBA to continue to deploy capital towards a mix of share repurchases and/or debt reduction, as seen in our latest quarter and revised outlook. We continue to be committed to a balanced approach to capital allocation, opportunistically using each of these different options to invest in value-creating assets or to return capital to our shareholders. With that, I'll now turn the call over to Mark.
In addition to portfolio acquisitions, you should expect SBA to continue to deploy capital towards a mix of share repurchases <unk> debt reduction as seen in our latest quarter and revised outlook.
We continue to be committed to a balanced approach to capital allocation opportunistically using each of these different options to invest in value, creating assets or to return capital to our shareholders.
With that I'll now turn the call over to Mark.
Thank you Brendan there is a positive.
Mark DeRussy: Thank you, Brendan. As the positive momentum from last quarter continues to increasing our full-year outlook for all key metrics, including site leasing revenue, tower cash flow, adjusted EBITDA, FFO, and FFO per share as compared to our last quarter guidance. The primary drivers of these increases include the outperformance of second quarter results, higher straight-line revenue, the acquisition of Millicom towers earlier than expected in two international markets, an improved outlook for services, favorable foreign currency movement, and a reduction in share count from recently completed share buybacks. Second quarter domestic organic leasing revenue growth over the second quarter of last year was 5% on the gross basis, 1% on the net basis, including 4% of churn. 11 million of the second quarter churn was related to spring consolidation, which was still anticipated to be approximately $50 to $52 million for the full year 2025.
Positive momentum from last quarter continues to increasing our full year outlook for all key metrics, including <unk> revenue <unk>.
Cash flow or adjusted EBITDA.
And then if a <unk> per share as compared to our last quarter guidance.
Drivers of these increases included outperformance of second quarter results higher suite type revenue.
The acquisition of Milacron towers.
Correct it into international market to improve the outlook for services favorable foreign currency movement and a reduction in share count from recent peak completed share buybacks.
Second quarter domestic organic leasing revenue growth over the second quarter of last year was 5% on a gross basis.
1% on that basis, including 4% of children.
$11 million second quarter churn was related to sprint consolidation, which we still anticipate to be approximately $50 million to $52 million for the full year 2025.
Our previously provided estimate of total spring related churn over the next several years remains unchanged.
Mark DeRussy: Our previously provided estimate of total sprint-related churn over the next seven years remains unchanged. Beyond 2025, we anticipate approximately $50 million of churn in 2026 and 20 million thereafter. Non-sprint domestic annual churn continues to be between 1% and 1.5% of our domestic site leasing revenue. During the second quarter, 80% of consolidated cash site leasing revenue and 85% of adjusted EBITDA was denominated in US dollars. International organic leasing revenue growth for the second quarter, which is calculated on a constant currency basis, was 0.8% net, including 7.5% of churn or 8.3% on the gross basis. Total international churn remained elevated in the second quarter, mainly due to ongoing carrier consolidation as well as the Oi Wireline churn in Brazil.
Beyond 2025, we anticipate approximately 50 million of June in 2026 and 20.
$20 million thereafter.
Non screened domestic annual return continue to be between one and one 5% of our domestic site leasing revenue.
During the second quarter to 80% of consolidated cash site leasing revenue and 85% of adjusted EBITDA was denominated in U S dollars.
International organic leasing revenue growth for the second quarter, which calculated on a constant currency basis, with 0.8% net including seven 5% of children.
Could sweep is centered on a gross basis.
Total international return will remain elevated in the second quarter, mainly due to ongoing carrier consolidation.
Oil water and churn in Brazil.
During the second quarter of 2025.
Mark DeRussy: During the second quarter of 2025, we acquired 4,329 sites for total cash consolidation of approximately $563 million, mostly related to the acquisition of sites for Millicom in Guatemala and Panama. The remaining 2,500 sites related to the Millicom transaction remain under contract, and the guidance continues to assume a September 1st closing date. The ultimate closing date is dependent upon regulatory approval and other requirements and may differ from this date. We also built 94 sites in a quarter, mostly outside of the US. Switching to the balance sheet, we have ample liquidity from both available cash and a $2 billion revolver, which as of today has a balance of $35 million outstanding. At the end of the second quarter, our weighted average interest rate was 3.7% across our total outstanding debt, and our weighted average maturity was 3.2 year approximately.
<unk> 4329 side for total cash consideration of approximately $563 million.
Mostly related to the acquisition of sites for Millicom in Guatemala and Panama.
The remaining 2500 charge related to the <unk> transaction remained under contract and the guidance continue to assume a September 1st closing date.
You mean cruising date is dependent upon regulatory approval and other requirements.
And may differ from this date, we also built 94 sites in the quarter, mostly outside of the U S.
Switching to the balance sheet, we have ample liquidity from both the available cash.
The $2 billion revolver, which as of today.
Balance was $35 million outstanding at the end of the second quarter, our weighted average interest rate was three 7% and of course, our tool outstanding debt and our weighted average maturity was three two year approximately.
Mark DeRussy: Including the impact of our current interest rate hedge, the interest rate on 97% of our current outstanding debt is fixed. And finally, our next debt maturity is a $750 million ABS security due in January 2026. We conclude by discussing the recent credit rating update by S&P. We were pleased to see that on July 30th, S&P upgraded our corporate credit rating to triple the investment grade rating. Driven mostly by S&P new criteria for digital infrastructure companies, the upgrade underscored the benefits of our stable and predictable cash flows and the positive impact on our US revenue growth of anticipated increased wireless capital spending in the US in 2026 and beyond. While we have made no change to our financial policy, this upgrade brings us one step closer to accessing the investment-grade debt market. And now I will turn the call over to Mark.
<unk> the impact of our current interest rate hedge the interest rate on 97% of our current outstanding debt is fixed.
And finally.
On the next debt maturities are $715 million.
Security due in January 2026.
I will conclude by discussing the recent credit rating upbeat by S&P.
Pleased to see that on July 30 years, S&P upgraded our corporate credit rating to Triple B investment grade rating.
Driven mostly by S&P, new criteria for digital infrastructure companies.
Oh, great underscore the benefits of our stable and predictable cash flows and the positive impact on our U S revenue growth of anticipated increased wireless capital spending in the U S in 2026 and beyond.
What we have made no change to our financial policy is.
Bringing us one step closer to accessing the investment grade debt market.
Now ill turn the call over to Mark. Thanks, Mark we ended the quarter with $12 6 billion of total debt and $12 3 billion of net debt.
Mark Montagner: Thanks, Mark. We ended the quarter with 12.6 billion of total debt and 12.3 billion of net debt. Our current leverage of 6.3 times net debt to adjusted EBITDA, as adjusted on a pro forma basis for the Millicom assets, remains near historical lows. Our second quarter cash net interest coverage ratio of adjusted EBITDA to net cash interest expense remains strong at 4.3 times. During the second and third quarter, we purchased 799,000 shares of our common stock for $172 million at an average price per share of $215 and 33 cents. We currently have 1.45 billion of repurchase authorization remaining under our $1.5 billion stock repurchase plan. In addition, during the second quarter, we declared to pay the cash dividend of $119.4 million or $1.11 per share.
Our current leverage of six three times net debt to adjusted EBITDA.
As adjusted on a pro forma basis for the Millicom assets remains near historical lows, our second quarter cash net interest coverage ratio of adjusted EBITDA to net cash interest expense remained strong at four three times.
During the second and third quarter, we purchased 799000 shares of our common stock for $172 million.
At an average price per share of $215 and 33.
We currently have 145 billion of repurchase authorization remaining under our one 5 billion.
Stock repurchase plan. In addition to the SEC. In addition, during the second quarter, we declared and paid a cash dividend of $119 4 million or $1 11 per share.
And today, we announced that our board of directors declared a quarterly dividend of $1 11 per share payable on September 18, 2025 to shareholders of record as of the close of business on August 12, 2025. This dividend represented an increase of approximately 13% over the dividend paid in.
Mark Montagner: And today, we announced that our board of directors declared a quarterly dividend of $1.11 per share payable on September 18th, 2025, to shareholders of record as of the close of business on August 12th, 2025. This dividend represents an increase of approximately 13% over the dividend paid in the third quarter of 2024 and approximately 35% of the midpoint of our full-year AFFO outlook. Operator, we are now ready for questions.
In the third quarter of 2024, and approximately 35% of the midpoint of our full year <unk> outlook, operator, we're now ready for questions.
If you'd like to ask a question. Please.
Operator: If you would like to ask a question, please pound two on your telephone keypad to enter the question queue. You are going to hear a notification when your line has been unmuted, at which time you can then please state your name, your organization, and your question. Once again, pressing pound two on your telephone keypad will indicate that you wish to ask a question. Please stand by just one moment as our queue assembles. Moving to the first question in our queue, John at In with RBC, your line is unmuted. Please go ahead, sir.
Two on your telephone keypad to entering the question queue.
You are going to hear notification when your line has been muted at which time you can then please state your name your organization and your question.
Once again pressing pound two on your telephone keypad will indicate that you wish to ask a question.
Please standby just one moment as our queue assembles.
Okay.
Okay.
Moving to the first question in our queue, John Atkin with RBC. Your line is on mute. Please go ahead Sir.
Thanks, very much I'm interested first of all in kind of observed ability.
Michael Funk: Thanks very much. I'm interested, first of all, in kind of the durability of the demand drivers that you indicated in your prepared remarks around FWA and densification and coverage and so forth. Any sense as to how far that kind of takes us through end of '25 and 2026 and the directionality around that? And then secondly, any thoughts on kind of the drivers of churn or maybe rent reduction initiatives on the part of some of your customers that occasionally come up and how that might kind of tie into your forecasting as well as thoughts on MLAs? Thank you.
The demand drivers that you indicated in your prepared remarks around <unk>, and densification and coverage and so forth.
Any sense as to how far that kind of takes us into.
<unk> 25 in 2026, and the directionality around that.
And then secondly, any.
Any thoughts on kind of the drivers of churn.
Sure.
Maybe rich reduction initiatives on the part of some of your customers that occasionally comes up.
And how that might kind of tie into your forecasting as well as thoughts on M&A. Thank you.
Sure, Yes, so on the demand drivers all the things that we mentioned, we feel pretty good about from an extended standpoint.
Brendan Cavanagh: Sure. Yeah. So on the demand drivers, all the things that we mentioned, we feel pretty good about from an extended standpoint. you know, these things always obviously ebb and flow a little bit, but at the fixed wireless piece being one of those, you've obviously seen what our customers have reported and the significant growth that they're seeing in terms of subscribers there. And of course, as we've mentioned before, what each of the subscribers represents relative to the typical wireless subscriber, which is a significant amount of additional traffic. So I think the more of that that we see and their expectations in terms of the number of subscribers they expect to have three and four years from now would suggest that we're going to see significant network capacity taken up over the coming years. So I think, you know, as a long-term driver, that's definitely a positive.
These things always obviously ebb and flow a little bit but on the fixed wireless piece being one of those we've obviously seen what our customers have reported and the significant growth that they're seeing in terms of subscribers there and of course as we've mentioned before.
What each of those scrap subscribers represents relative to the typical wireless subscriber which is a significant amount of additional traffic. So.
I think the more of that that we see in their expectations in terms of the number of subscribers they expect to have.
Three and four years from now would suggest that we're going to see significant network capacity taken up over the coming years. So I think that was it.
A long term driver Thats definitely a positive some of the other things I mentioned, obviously, the new spectrum bands being auctioned off.
Brendan Cavanagh: Some of the other things I mentioned, obviously, the new spectrum bands being auctioned off over the coming years, that's an extended period of contribution. So yeah, each of these things and just generally the the uptake in the amount of broadband traffic that's traveling through these wireless networks is significant. And I think more of these AI enabled products and and other things that kind of come into play is just going to continue to weigh on that. So I feel pretty good about the the durability of it, and I think it'll continue to require investment in the networks that we will benefit from for for many years. in terms of churn, I think you're asking specifically about the US based on how you you said the question, John.
Over the coming years, that's an extended period of contribution so each.
Each of these things and just generally the uptake in the amount of broadband traffic. That's traveling through these wireless networks is significant and I think more of these AI enabled.
Products and other things that kind of come into play as just kind of continue to weigh on that so I feel pretty good about the durability of it and I think it will continue to require investment in the networks that we will benefit from for many years.
In terms of churn I think you're asking specifically about the U S. Based on how you set the question John but.
Brendan Cavanagh: But you know, there's there's no real, you know, obviously, our customers always want to pay less if they can, but there's no specific initiatives underway that that would result in in lowering rents on any material basis. So I think, you know, the effort for us is just around continuing to work with our customers to allow them to achieve their network goals at at a price that's fair and and is balanced to them, but also is fair to us in terms of the capacity that we're providing and and the help we're providing. And I think we've struck that balance pretty well.
There's no real obviously, our customers always want to pay less if they can but there is no specific.
Initiatives underway that would result.
And lowering rents on any <unk>.
Material basis, So I think the effort for US is just around continuing to work with our customers to allow them to achieve their network goals at a price thats fair and balanced to them, but also it's fair to us in terms of the capacity that we're providing and the help we're providing and I think we've struck that balance pretty well.
Thank you.
Michael Funk: Thank you.
Yes.
Brendan Cavanagh: Yep.
Moving to our next question.
Operator: Moving to our next question. Richard Cho with JP Morgan, your line is unmuted. You can please go ahead.
Richard Choe with JP Morgan Your line is on mute. If you can please go ahead.
Hi, I just wanted to ask about the activity levels. It seems like there is a lot of coordination activity, but the revenue hasn't quite come through yet.
Richard Choe: Hi. I just wanted to ask about the activity levels. It seems like there's a lot of coalition activity, but the revenue hasn't quite come through yet. Can you talk a little bit more about the timing there that you're expecting?
Talk a little bit more about the timing there that youre expecting.
Sure Yeah, Yeah, we definitely are seeing as I mentioned in our remarks, we've definitely seen an increase in activity in terms of business being signed up. We also mentioned that we've seen that the trend is moving towards more new co locations versus amendments.
Brendan Cavanagh: Sure. Yeah. Yeah. We definitely are seeing, as I mentioned in our remarks, we're definitely seeing an increase in activity in terms of business being signed up. We also mentioned that we've seen the trend of it moving towards more new co-locations versus amendments compared to what we've historically seen. That trend has continued for us. And that's great in terms of a number of aspects of it, including the number of sites that we're now engaged with our customers at. But one thing that it does do typically is delay a little bit the timing of when revenue commences because you have more new leases. It typically takes a little bit longer to start to see those leases getting installed and revenue commencing than we used to see with amendments being a bigger share. But that's really just a timing thing.
Compared to what we've historically seen.
That trend has continued for us and.
That's great in terms of a number of aspects of that including the number of sites that were now engaged with our customers at.
One thing that it does do typically as delay a little bit the timing of when revenue commences because you have more new leases. It typically takes a little bit longer to start to see those leases getting installed in revenue commencing than we used to see with amendments being a bigger share, but that's really just a timing thing and if you notice we.
Brendan Cavanagh: And if you notice, you know, we've left our full-year outlook for contributions from new leases and amendments the same. And as we see this activity, if you look at what's been contributed in the first half of the year, it clearly indicates that the second half of the year we'll have to have greater contributions in order to meet that target that we put out there.
We've left our full year outlook for contributions from new leases and amendments.
The same and as we see this activity. If you look at what's been contributed in the first half of the year. It clearly indicates that the second half of the year, we will have to have greater contributions.
To meet that target that we put out there.
Great and a quick follow up on the services stuff.
Richard Choe: Great. And a quick follow-up on the services. I mean, a real step up, and it's going well. And you mentioned a little bit about what's driving it. But can you give us a little bit more color on what is driving the services business?
Stefan.
It's going well and you mentioned a little bit about what's driving that but can you give us a little bit more color on what is driving the services business.
Yes, it's really the same thing I mean, they are kind of related to each other right. What we're seeing that's driving our leasing activity is also driving services. So.
Brendan Cavanagh: Yeah, it's really the same thing. I mean, they're kind of related to each other, right? What we're seeing that's driving our leasing activity is also driving services. So on the SIDAC side, you have more effort to find new locations and to get more deployments done. So we're supportive there. On the construction side, which is also up significantly, that's obviously more actual work being done, particularly with some of these builds that are expanding out into the more rural areas. And we at SBA are actually doing more services work now, not just on our own sites, but on other people's sites as well. And so that's a driver of increased activity, too. And I think, you know, the more we're able to partner with our carrier customers broadly across everybody's towers, it creates a better relationship between us and them, and we can be counted on more.
On the <unk> side, you'll have more effort to find new locations and to get more deployments done sore supportive there on the construction side, which is also up significantly that's obviously more actual work being done, particularly with some of these builds that are spanning out into the more rural areas.
And we are at SBA are actually doing more services work now not just on our own sites, but on other people's sites as well and so that will.
Driver of increased activity.
And I think the more we're able to partner with our carrier customers.
<unk> lay across everybody's towers.
It.
Creates a better relationship between us and them and we can be counted on more I think it helps us in the leasing game as well.
Brendan Cavanagh: I think it helps us in the leasing game as well.
Great. Thank you.
Richard Choe: Great. Thank you.
Brendan Cavanagh: Sure.
Sure.
Moving to the next question and our Q <unk> Levi with UBS. Your line is on mute. If you can please go ahead.
Operator: Moving to the next question in our queue. Batia Levi with UBS, your line is unmuted. You can please go ahead.
Great. Thank you maybe just a follow up on the domestic activity just a slight slowdown in Q is that mostly rounding and looking ahead.
Batya Levi: Great. Thank you. Maybe just a follow-up on the domestic activity. Just a slight slowdown into queue. Is that mostly rounding? And looking ahead, you mentioned that bookings growth is very strong. You had started the year strong. Are we seeing an acceleration in that growth rate? And I think in the beginning of the year, it was mostly one of the carriers that was very active. Are you seeing more broad-based activity now? Thank you.
You mentioned that bookings growth is very strong you you had started the year strong are we seeing an acceleration in that growth rate.
I think in the beginning of the rate was mostly one of the carriers that was very active are you seeing more broad based activity now thank you.
Yeah. So first of all on the second quarter slowdown. It is mostly rounding I mean, the differences were actually we round to a 1 million.
Brendan Cavanagh: Yeah. So first of all, on the second quarter slowdown, it is mostly rounding. I mean, these differences were actually, we round to a million dollars, but the difference is probably a couple hundred thousand dollars, and it's not really indicative of anything in particular. In terms of the pacing of activity, it definitely has increased this quarter. It was probably slightly ahead of last quarter, but last quarter was also very strong. And so we would expect that that will drive, you know, a pickup in the actual revenue recognized, as I mentioned a moment ago, as we head into the second half of this year and into next year.
But the difference is probably a couple hundred thousand dollars in it it's not really indicative of anything in particular.
In terms of the pacing.
Of activity. It definitely has increased this quarter was probably slightly ahead of last quarter, but last quarter was also very strong and so we would expect that that will drive a pickup in the actual revenue recognized as I mentioned, a moment ago as we headed into the second half of this year and into next year.
Got it thank you.
Batya Levi: Got it. Thank you.
Brendan Cavanagh: Sure.
Sure.
Okay.
Moving to our next question.
Operator: Moving to our next question. Michael Rollins with City. Your line is unmuted. You can please go ahead.
Michael Rollins with Citi. Your line is <unk>. Please go ahead.
Okay.
Mike Michael.
Brendan Cavanagh: Mike?
Operator: Michael. Sorry, Michael, we're not getting any audio from your line. We'll circle back. Brendan Lynch with Barclays. Your line is unmuted. You can please go ahead, sir.
Sorry, Michael we're not getting any audio from your line, we'll circle back.
Lyndon Lynch with Barclays. Your line is on mute interest and please go ahead Sir.
Great. Thank you Brendan and I want to follow up on your comment about AI application.
Eric Luebchow: Great. Thank you. Brendan, I just wanted to follow up on your comment about AI application growth and that being a driver. To what extent are you seeing this now? And any outlook for the relatively near term would be helpful as well.
And that being a driver to what extent are you seeing this now.
Any outlook for the relatively near term would be helpful as well.
Yeah. So Brendan some of these comments are a little bit thematic in there based on conversations we have with our customers and just general traffic trends because it's hard for us where we sit in the value chain to have.
Brendan Cavanagh: Yeah. So, Brendan, some of these comments are a little bit thematic, and they're based on conversations we have with our customers and just general traffic trends because it's hard for us where we sit in the value chain to have tremendous specificity around that. But based on conversation, based on reviews done by our own engineering folks, we are seeing a number of products start to get out there where AI is being embedded into the devices that we believe will be a strong driver of increased activity. And that ultimately, obviously, is positive in terms of the amount of infrastructure needed to support it.
Tremendous specificity around that but based on our conversation based on reviews done by our own engineering folks we are seeing.
We are seeing a number of products start to get out there.
AI is being embedded into the devices that.
That we believe will be a strong driver of increased activity and that ultimately obviously is positive in terms of the amount of infrastructure needed to support it.
Okay. Thanks, that's helpful. And then just on the Canadian asset sale can you give any of the details.
Eric Luebchow: Okay. Thanks. That's helpful. And then just on the Canadian asset sale, can you give any of the details about these assets in particular and why you didn't think you were going to be able to scale more meaningfully in the Canadian market and how we should interpret that for any of the other markets where you have a relatively small footprint?
About these assets in particular and why you didn't think you're going to be able to scale.
More meaningfully in the Canadian market.
How we should interpret that for any of the other markets, where you have a relatively small footprint.
Yeah. So we've been in Canada, a long time as I mentioned earlier was actually the first international market that we went into <unk>.
Brendan Cavanagh: Yeah. So, you know, we've been in Canada a long time. As I mentioned earlier, it was actually the first international market that we went into 16 years ago. And so we've had a lot of time and experience there. The assets themselves were good assets. We've had reasonable success in leasing them up over the years. The comment about the difficulty in growing is really about in growing the portfolio size to continue to get to a bigger scale. And honestly, some of that was based on the fact that the carriers own their sites. You may have seen TELUS recently just kind of set up sort of a captive tower company with a private party investing in that, about 49% of that. And so, you know, breaking into that, particularly not being a Canadian company, was a little bit challenging. And so we built sites.
16 years ago, and so we've had a lot of time and experience there the assets themselves were good assets.
We've had reasonable success in leasing them up over the years the comment about the difficulty in growing is really about in growing the portfolio size to continue to get to a bigger scale and honestly some of that was based on the fact that.
The carriers own their sites you may have seen tell us recently, just kind of set up sort of a captive tower company with a private.
Party investing in and that about 49% of that and so.
Breaking into that.
Particularly not being a Canadian company was a little bit challenging and so we built sites, we had some modest growth there, but the ability to really move to a place where we were going to be a significant player in that market. We just found to be challenging and really we would've continued there and I think I've made reasonable progress but.
Brendan Cavanagh: We had some modest growth there, but the ability to really move to a place where we were going to be a significant player in that market, we just found to be challenging. And really, we would have continued there, and I think made reasonable progress. But it was an opportunity for us when we started exploring strategic alternatives to actually realize a valuation on our assets that was certainly much higher than our public company valuation. And so there was a financial benefit. And given, you know, what we saw as a limited ability to continue to grow our portfolio, we thought that that was the right thing to do for us financially. And I think it worked for us and the buyer because they have a local presence there and a different plan, and I think they'll be able to do well with it.
It was an opportunity for us when we started exploring strategic alternatives.
<unk> actually realize a valuation on our assets that was certainly much higher than our public company valuation and so there was a financial benefit and given what we saw is the limited ability to continue to grow our portfolio.
We thought that that was the right thing to do for US financially I think it worked for us and the buyer because they have a local.
Since they're in a different plan and I think there'll be able to do well with it but for us.
Brendan Cavanagh: But for us, it was, I think, just a better economic choice, and it positioned us, you know, to focus on the markets where we can be of scale. On the second part of your question, in terms of what it means for other markets, it doesn't mean anything in the sense that what happens here is not necessarily exactly what happens elsewhere. But all of the markets that we're in, we are looking at through a lens of what is our potential going forward. And if we're subscaling a particular market, it is something that we look at in terms of, okay, well, how can we change that dynamic in a way that is favorable to us? And if we can't see a way to do that, then yes, we would look at it.
It was just a better economic choice and it position us.
Focus on the markets, where we can be of scale.
On the second part of your question in terms of what it means for other markets.
It doesn't mean anything in the sense that what happens here is not necessarily exactly what happens elsewhere, but all of the markets that we're in we are looking at through a lens of what is our potential going forward and if we're subscale in a particular market. It is something that we look at in terms of okay, well, how can we change that dynamic.
A way that is favorable to us and if we can't see a way to do that then yes, we would look at it and you've seen us exit a couple of markets, but you've also seen us.
Brendan Cavanagh: And you've seen us exit a couple of markets, but you've also seen us expand in some of the markets where we were a little bit subscaled, particularly Central America. And I think the expansion that we've done has made us much, much stronger. So if we can find that path, we frankly would prefer to do that. But if we can't, then, you know, we'll continue to look at what our options are in terms of downsizing, too.
Expand in some of the markets, where we were a little bit subscale, particularly Central America and I think the expansion that we've done has made us much much stronger. So if we can find that path. We frankly would prefer to do that but if we can't then we'll continue to look at what our options are in terms of downsizing too.
Great. Thank you very much.
Eric Luebchow: Great. Thank you very much.
Operator: Moving to our next question. Jim Schneider with Goldman Sachs, your line is unmuted. You can please go ahead.
Our next question.
Jim Schneider with Goldman Sachs. Your line is on mute. If you can please go ahead.
Yes.
Good afternoon, and thanks for taking my question I was wondering if you could maybe follow on on your comments earlier, Brendan with respect to fixed wireless obviously it seems like your customers are continuing to drive good traction there, but is the activity level you are seeing for densification.
Benjamin Swinburne: Good afternoon. Thanks for taking my question. I was wondering if you could maybe follow on and on your comments earlier, Brendan, with respect to fixed wireless. Obviously, it seems like your customers are continuing to drive good traction there. But is the activity level you're seeing for densification, you know, beyond going beyond the sort of single lead customer that was most aggressive originally? Is that broadened to two or three customers at this point from what you can tell?
Beyond going beyond the sort of single lead customer that was most aggressive originally is that broadened to two or three customers at this point from what you can tell.
Yes, I would say it has broadened we're seeing more activity.
Brendan Cavanagh: Yes. I would say it has broadened. We're seeing more activity, you know, expanding among each of our bigger customers. So I do think that we'll continue. And what we've seen is a shift in that, where I would say that there's still one customer that's probably heavier than the others at this point, but that gap is closing. And I think based on the trends of applications and the conversations we're having, I would expect that to continue to narrow, and we will see all of them very active. And fixed wireless is one driver of that, for sure.
Expanding among each of our bigger customers. So I do think that will continue.
What we've seen is a shift in that where I would say that there is still one customer that is probably heavier than the others. At this point, but that gap is closing and I think based on the trends of applications and the conversations we're having I would expect that to continue.
To narrow and we will see all of them.
Very active in that fixed wireless is one driver of that for sure.
That's helpful. Thanks, and then.
Benjamin Swinburne: That's helpful. Thanks. And then maybe as a follow-up, you know, given the recent announcements from US Cellular with that deal closing, as well as announcements from DISH, can you give us any kind of color on, again, just sort of reaffirming the level of exposure those represent for you and any color you have in terms of planned churn or any kind of sense of whether there's any kind of change in revenue profile that you expect to recognize over the next 18 months or so? Thank you.
Follow up.
Given the recent announcements from U S. Cellular was that deal closing as well as announcements from dish can you give us any kind of color on again to serve reaffirming the level of exposure those represent for you and any color you have in terms of planned churn or any kind of a sense of whether there was any kind of change the revenue.
Finally, we expect to recognize over the next 18 months or so thank you.
Yes, I mean at this moment there is no plan to churn specifically, but just in terms of exposures on the U S cellular piece.
Brendan Cavanagh: Yeah. I mean, at this moment, there's no planned churn specifically, but just in terms of exposures on the US Cellular piece, the total revenue that we have with US Cellular is about $20 million a year. That's the total. I don't think we would expect to see all of that go away. But, you know, even if it did, it would be over a number of years. So I would expect the impact to be rather small. In terms of DISH, our total revenue with DISH is roughly around 55 million a year. That's a whole different situation. Obviously, US Cell has sold and would have some overlap there with T-Mobile that would lead to some risk there. In the case of DISH, it's a different situation today. We continue to operate on an ongoing basis and serve them where we can.
Total revenue that we have with U S. Cellular is about $20 million a year that's the total.
I don't think we would expect to see all of that go away.
But.
Even if even if it did it would be over a number of years. So I would expect the impact to be rather small in.
Terms of dish, our total revenue with dish is roughly around $55 million a year, that's a whole different situation, obviously USL has sold and.
It would have some some overlap there with T mobile that would lead to some risk there in the case of dish is a different situation today, we continue to operate on an ongoing basis and serve them, where we can they still in fact signed some leases and some amendments so.
Brendan Cavanagh: They still, in fact, sign some leases and some amendments. And so we'll just have to see where that goes.
We'll just have to see where that where that goes.
Thank you.
Benjamin Swinburne: Thank you.
Yes.
Brendan Cavanagh: Yeah.
Moving to the next caller in queue.
Operator: Moving to the next caller in our queue, Nick Delbio with Moffett Nathanson. Your line's unmuted. You can please go ahead, sir.
Nick del Deo.
With Moffett Nathan your line please.
Please go ahead Sir.
Yeah.
Benjamin Swinburne: Oh, hey. Thanks, guys. First question on the Millicom towers. You know, I'm sure you've had initial conversations with the other carriers in those markets about accessing that infrastructure. Can you share anything about, you know, the initial feedback you're getting and, you know, the degree to which it, you know, aligns with or is supportive of the lease-up assumptions you've made for those assets?
Okay. Thanks, guys.
First question on the Millicom towers I'm sure you've had initial conversations with the other carriers in those markets about accessing that infrastructure can you share anything about the initial feedback youre getting.
And the degree to which it.
Aligned to where they were supportive of the lease up assumptions you've made for those assets.
Yeah, it's been actually quite positive.
Brendan Cavanagh: Yeah. It's been actually quite positive. We're very encouraged about the opportunity there. I think it may even be better than we were thinking. And if you think about it, it's pretty logical. I mean, Millicom, for the most part, in each of these markets, is the number one carrier in many of the markets. And so that would suggest that they naturally have a deeper footprint. And in order to close that gap, the opportunity to have some of those sites opened up to the other carriers, they see it as an opportunity to grow and to close the competitive gap there. So, you know, that's to our benefit. So we'll continue to see how it goes. Obviously, we just closed on the majority of the sites we've bought so far. We just closed on at the end of June.
Very encouraged about the opportunity there I think it may even be better than we were thinking.
And if you think about it it's pretty logical when we millicom for the most part and each of these markets is the number one carrier in many of the markets and so.
That would suggest that they naturally have a deeper footprint and in order to close that gap the opportunity to have some of those sites opened up.
To the other carriers, they see us as an opportunity to grow and to <unk>.
The competitive gap there so that's.
As to our benefits so we'll.
We will continue to see how it goes obviously, we just closed on the majority of the sites.
But so far we just closed on at the end of June. So we haven't had a ton of time, there, but we certainly have been having those conversations and feel pretty good about the.
Brendan Cavanagh: So we haven't had a ton of time there, but we certainly have been having those conversations and feel pretty good about the potential.
The potential.
Okay, Okay, that's great to hear.
Benjamin Swinburne: Okay. Okay. That's great to hear. And then maybe one, you know, on Canada, you know, but a different angle, just the use of proceeds. You know, it looks like you're getting about $325 million US dollars, you know, which is obviously a much more substantial chunk than you've gotten from some of the other markets that you've sold. Any specific use of proceeds you're thinking about, or should we just think of that as sort of, you know, debt reduction?
And then maybe one on Canada, but a different angle just the use of proceeds it looks like you're getting about $325 million, which obviously are much more substantial chunk and you've gotten from some of the other markets that you sold any any specific use of proceeds youre thinking about or should we just think of that as sort of debt.
Debt reduction.
Yes, I think you can.
Brendan Cavanagh: Yeah. I think you can, it's somewhat fungible, Nick. I mean, we have a variety of things that are going on. We obviously have another Millicom closing, so you could say it's used for that. If you'd like, you could say it's used for debt reduction, share buybacks, dividends, whatever you want. We have kind of the pool of capital allocation, and this is just another source of proceeds that allows us to basically keep our leverage a little bit lower and manage those expenditures.
Fungible.
Nick I mean, we have a variety of things that are going on we obviously have another millicom closing. So you could say it's used for that if you'd like you can say, it's used for debt reduction share buybacks dividends or whatever you want we have kind of the pool of capital allocation and this is just another source of proceeds that allows us to.
Basically keep our leverage a little bit lower and manage those those expenditures.
Okay, great. Thanks Brendan.
Benjamin Swinburne: Okay. Great. Thanks, Brendan.
Brendan Cavanagh: Sure.
Sure.
Okay.
Operator: Moving to our next caller, Rick Prentice with Raymond James. Your line is unmuted. You can please go ahead.
Our next caller.
Ric Prentiss with Raymond James Your line is <unk>. Please go ahead.
Good afternoon guys.
Ric Prentiss: Good afternoon, guys. Can you hear me okay?
Okay.
Brendan Cavanagh: Hey, Rick.
Okay, Yes.
Ric Prentiss: Okay. Yeah. There's a little feedback.
There's a little feedback.
Brendan Cavanagh: First.
Yeah.
Can you hear me.
Ric Prentiss: Can you hear me?
Yes go ahead Rick.
Brendan Cavanagh: Yes. Go ahead, Rick.
Ric Prentiss: Okay. Thanks. Yeah. One just clarification. So on the sprint churn, 15 million expected in '26, and then 20 million thereafter. That's a grand total of 20 million thereafter, right? That's not like 20 million a year. That's the end of the sprint churn is the 20 million that's post '26.
Okay.
Yes.
Just a clarification so on the sprint churn.
$15 million expected in 2006, and then $20 million thereafter, that's a grand total of $20 million thereafter that is highly <unk>.
Nine years at the end of the sprint churn as a $20 million that's post 'twenty six.
Brendan Cavanagh: That's right. Yeah. And I would expect most, if not all, of that will be in 2027. Really, we said thereafter because the exact timing tends to change. But yes, it's a grand total.
Right, Yes, and I would expect most if not all of that will be in 2027, really we said thereafter, because that exact timing tends to change, but yes, it's a grand total.
Okay, and then back to the Canadian sale I think you said $27 million Canadian lease revenue was that 15 million Canadian after tax cash flow does that also Canadian dollars and is that like an <unk>.
Ric Prentiss: Okay. And then back to the Canadian sale, I think you said 27 million Canadian lease revenue, and was that 15 million Canadian after-tax cash flow? Was that also Canadian? And is that like an AFFO type of number?
Type of number.
Brendan Cavanagh: Yeah. Yes, Rick. I mean, yes. The terminology we used was probably a little funny only because AFFO obviously takes into account interest, and there's no that we really weren't counting out interest. But basically, what that represents is adjusted EBITDA, less taxes, less, I guess, less maintenance capex, too, which is small, but basically less taxes because we're an income taxpayer up there. So it's essentially AFFO, yes.
Yes, Rick I mean, yes. The terminology, we used was probably a little funny only because <unk>, obviously takes into account interest and there is no that we really weren't counting out interest, but basically what that represents is adjusted EBITDA.
Less taxes.
But I guess less maintenance capex, too, which is small, but basically less taxes, because we are an income taxpayer up there.
So it's essentially a ethical yes.
Brian So your comment kind of pointing to that would imply like a 30 times multiple.
Ric Prentiss: Right. And so your comment kind of pointing to that would imply like a 30-time multiple on an AFFO type basis up there, if I'm doing the math right.
On an <unk> basis update.
If I'm doing the math right.
Yes, that's right.
Brendan Cavanagh: Yes, that's right. In order to be totally fair, though, we will pay a capital gains tax on the gain on the sale of the assets. So it'll end up being in a mid to upper 20s is what the multiple for practical purposes will be.
Order to be totally fair, though we will pay a capital gains tax on the gain on the sale of the assets. So you'll end up being in the mid to upper twenties.
What the multiple for practical purposes will be.
I think that to your guys makes sense.
Ric Prentiss: I can't hear you guys. Makes sense. But again, it just tees up the privates are paying more than publics, it seems. Help us understand, as you look at your leverage, I think you've said, you know, you want to keep looking for M&A opportunities, and that's why maybe you don't go investment grade yet. But just help us understand, it seems like it's really hard to win external growth opportunities if it really is winning when you have to pay up. And just kind of as you think through longer term, the balance sheet, the debt, investment grade, and what it might mean for ultimately kind of dividend growth rates.
But again, just tee up the privates are paying more than publish it seems.
Help us understand as you.
You look at your leverage I think you said you want to keep looking for M&A opportunities and that's why maybe you don't feel investment great. Jeff just help us understand it seems like it's really hard to win external growth opportunities. If it really is winning when you have to pay out and just kind of as you think through longer term the balance sheet.
At investment grade and what it might mean for ultimately kind of dividend growth rates.
Yes, I think that that's obviously a fair statement, we've been saying that it feels like for many years now that there's this disconnect between public and private market valuations and as a result, you haven't seen it.
Brendan Cavanagh: Yeah. I think that that's obviously a fair statement. We've been saying it, it feels like for many years now that there's this disconnect between public and private market valuations. And as a result, you haven't seen a ton of M&A. You haven't seen what we, you know, did in the early part of our history. I mean, forever, we were known, and by design, were the kind of highly leveraged, you know, M&A-heavy growth company. And it's been harder to be that now, largely because obviously, cost of debt has gone up, but we could absorb that if there was a reasonable adjustment in the valuations of assets. We just haven't seen that. And so it's caused us to have to be on the sidelines more. So yeah, I mean, it affects obviously the way we think about the future planning for our balance sheet.
Non of M&A, you Havent seen what we did in the early part of our history I mean forever we were known.
And by design, we're the kind.
Kind of highly levered.
M&A heavy growth company and it's been harder to be that now largely because of obviously cost of debt has gone up but we could absorb that if there was a reasonable adjustment in the valuations of assets. We just haven't seen that and so it's caused us to have to be on the sidelines more so yes, I mean, it affects obviously the <unk>.
We think about the future planning for our balance sheet and you've seen our leverage come down over the last year or two.
Brendan Cavanagh: And you've seen our leverage come down over the last year or two. And if we can't see a place to continue to invest meaningful capital because others just are simply willing to pay more, then, you know, that results in us doing other things, whether it's buying back our own stock or or even moving our debt down and moving closer towards that investment grade rating.
And if we can't see a place to continue to invest meaningful capital because others, just simply willing to pay more than that results in us doing other things, whether it's buying back our own stock or or even moving our our debt down and moving closer towards that investment grade rating.
What do you think you need to get at.
Ric Prentiss: What do you think you need to get at to get investment grade, given your mix of portfolio in the US and Latin and Africa?
So we get investment grade given your mix of portfolio.
U S.
Latam in Africa.
Yes.
Brendan Cavanagh: Yeah. Well, I mean, you heard Mark mention earlier that we were just upgraded by S&P. At least our corporate rating was upgraded to an investment grade rating just last week. So I don't believe we need to do a whole lot. It's really a matter of policy and probably the mix of our debt. The secured versus unsecured debt is really probably the main thing. In terms of leverage, though, I don't think we need to do much.
Mark mentioned earlier that we were just upgraded by S&P at least our corporate rating was upgraded to an investment grade rating.
Last week, so I don't believe we need to do a whole lot, it's really a matter of policy and probably the mix of our debt.
Secured versus unsecured debt is really probably the main thing in terms of leverage though I don't think we need to do much.
All right all right. Okay I appreciate it thanks.
Ric Prentiss: Right. Right. Okay. Appreciate it. Thanks.
Brendan Cavanagh: Sure.
Sure.
Before we move to the next question just for attendees. If you would like to enter the question queue. Please press pound two on your telephone keypad to enter the question queue.
Operator: Before we move to the next question, just a reminder for attendees, if you would like to enter the question queue, you can please press pound two on your telephone keypad to enter the question queue. Moving to our next caller, Michael Rollins with City. Your line is unmuted. You can please go ahead, sir.
Moving to our next caller, Michael Rollins with Citi. Your line is on mute. Please go ahead Sir.
Thanks can you hear me now.
Benjamin Swinburne: Thanks. Can you hear me now?
Brendan Cavanagh: Yes, we can hear you now, Mike.
Yes, we can hear you on that Mike we can hear you.
Benjamin Swinburne: I can hear you now. Great. Thanks for the question. So I'm trying to think about maybe longer term. Can you help us with what is the right or fair level that SBA should be able to grow AFFO per share on an annual basis? And when you think about working through, you know, some of the things that you've been talking about, whether it's international merger churn, domestic merger churn, normalizing domestic leasing, you know, absorbing a higher cost of debt, what inning are we in to get to that future annual run rate opportunity? Thanks.
Great. Thanks for the question.
So just trying to think about maybe longer term can you help us with what is the right or fair level debt SBA should be able to grow assets held for sure on the annual basis.
And when you think about working through some of the things that you'd be talking about whether it's international merger churn domestic merger churn.
Normalizing domestic leasing.
Yes.
We're being a higher cost of debt.
What inning are we in to get to that future annual run rate opportunity. Thanks.
Sure Yes.
Brendan Cavanagh: Sure. Yeah. I think the biggest thing, Mike, I mean, we have some of these things, obviously, with the sprint churn and even the international churn to a certain degree, although it's not that much. The biggest issue is the interest rates. We have, you know, you know that we have $12.5 billion of debt today. Much of that has a very low interest rate. We mentioned our average interest rate, I think, is 3.7%. And that includes some recent financing at much higher rates. So there's a lot of low-cost debt in there, which is great, but it will come due over a number of years. And that's a pretty significant headwind. If you normalize for that item, which eventually, obviously, we will get over, then you're looking at a mid to high single-digits AFFO per share growth rate that I would be very comfortable we could maintain.
Yes, I think the biggest thing Mike I mean, we have some of these things obviously with the sprint churn and even the international churn to a certain degree although it is not that much. The biggest issue is the interest rates.
We have.
You know that we have $12 5 billion.
Debt today.
Much of that has a very low interest rate. We mentioned our average interest rate I think is three 7% and that includes some recent financings at much higher rates. So theres a lot of low cost debt in there which is great but.
It will come due over a number of years and.
That's a pretty significant headwind if you normalize for that item, which eventually obviously, we will we will get over then youre looking at a mid to high single digits <unk> per share growth rates that would be very comfortable we could maintain but.
Brendan Cavanagh: But you know, you ask what inning. It's hard to say what inning exactly, but we're several years, really, from getting to that, I believe, depending on what happens with interest rates. We may find that there's, you know, a more rapid reduction in interest rates, and that would actually help us. But even without that, you know, our next three maturities all have a one-handle on their current interest rate coupon. So you can imagine that it's a significant difference in terms of that. So, you know, as we've brought our leverage down, it's helped with that a little bit, but you know, that's really the biggest issue. But as we move beyond that, I think, you know, the steadiness in terms of growing the business organically will continue, and we're able to operate more and more efficiently all the time.
You asked what inning, it's hard to say what inning exactly but we're several years really from getting to that I believe depending on what happens with interest rates, we may find that there's a.
More rapid reduction in interest rates and that would actually help us but even.
Even without that our next three maturities all have a one handle on their current interest rate coupons. So you can imagine that it's a significant difference in terms of that so.
As we brought our leverage down has helped with that a little bit but.
<unk>.
That's really the biggest issue, but as we move beyond that.
I think the steadiness in terms of growing the business organically will continue.
We're able to operate more and more efficiently all the time, so I feel good we will continue to grow it otherwise.
Brendan Cavanagh: So I feel good we'll continue to grow it otherwise.
Thank you.
Operator: Thank you.
Sure.
Brendan Cavanagh: Sure.
Okay.
Our next question Eric.
Operator: Moving to our next question. Eric Lubchak with Wells Fargo. Your line is unmuted. You can please go ahead, sir.
<unk> with Wells Fargo. Your line is on mute. Please go ahead Sir.
Alright, great. Thanks for taking the question.
Eric Luebchow: Great. Thanks for taking the question. Brendan, I wonder if you could talk just about the investment grade conversation a little bit, like what type of, you know, spread differential you think you could get on your debt versus potentially giving up flexibility to lever up if you see, you know, some more compelling investment opportunities down the road or opportunities to buy back your stock. How are you thinking about balancing that over the next couple of years?
And then I'm wondering if you could talk just about the investment grade conversation a little bit like what type of.
Spread differential that you think you could get on your debt.
Versus potentially giving us flexibility to lever up if you see some more compelling investment opportunities down the road or opportunities to buy back your stock. How are you thinking about balancing that over the next couple of years.
Yeah, well right now we are we have not gone in investment grade and part of it has been to retain that flexibility but.
Brendan Cavanagh: Yeah. Well, right now, we have not gone investment grade, and part of it has been to retain that flexibility. But we also have seen our leverage come down meaningfully, so that has allowed us to have a lot of capacity. I mean, you saw, obviously, we did a billion-dollar deal here with Millicom, and it hardly has an impact. So we have a lot of capacity. It would really only be for something really, really sizable. And you know, it's hard to change your whole policy hoping for or waiting for something of that magnitude to come along. So, you know, I think as we think about it, we'll continue to look at our options as our upcoming maturities come along.
We also have seen our leverage come down meaningfully so that has allowed us to have a lot of capacity and you saw obviously, we did $1 billion deal here with millicom and it hardly has an impact so we have a lot of capacity.
Only be for something really really sizable.
It's hard to.
To change your whole policy, hoping for waiting for something of that magnitude to come along so.
I think as we think about it we'll continue to look at our options as our upcoming maturities come along in terms of the impact on cost of debt I think it's it's.
Brendan Cavanagh: In terms of the impact on cost of debt, I think it's not huge, and it's not huge mainly because we've been an issuer of a substantial amount of our debt in the ABS market, and that has been investment-grade rated paper in that market. And so we've been able to achieve what we're very close to investment-grade type of rate through the use of that market. Where we would be able to see a benefit, I think, is on the unsecured paper. We would probably be able to see that at a better rate than what we've historically been able to get in the high-yield market. And even perhaps our term loan, we could improve slightly.
It's not huge and it's not huge mainly because we've been an issuer of a substantial amount of our debt in the ABS market and that has been investment grade rated paper in that market and so we've been able to achieve what we're very close to investment grade type of rates through the use of that market, where we would be able to see a benefit.
I think is on the unsecured paper, we would probably be able to see that at a better rate than what we've historically been able to get in the high yield market and even perhaps our term loan we could improve slightly but.
Brendan Cavanagh: But you know, we do that math around all those things, and we think about what might it look like if we made a shift there and what are the things we're giving up. I actually don't think we would be giving up too much. And so we continue to explore this a little bit further, frankly, because it's just naturally moving in that direction.
We do that math around all of those things that we think about what might it look like if we made a shift there and what are the things, we're giving up I actually don't think we would be giving up too much and so we continue to explore this a little bit further frankly, because it's just naturally moving in that direction.
I appreciate that and just maybe one follow up on the domestic leasing outlook I know you kept it stable for this year.
Eric Luebchow: I appreciate that. And just maybe one follow-up on the domestic leasing outlook. I know you kept it stable for this year. You should be at, you know, 10 or 11 million or so in the back half. I just wanted to think through some of the moving pieces. I know it's a little premature to talk about 2026, but based on the bookings of the last six quarters, do you see an opportunity to accelerate that further, that run rate going into '26, or are there any other mitigating factors that we should keep in mind? Thanks.
You should be at 10 or $11 million or so in the back half.
I need to think through some of the moving pieces I know, it's a little premature to talk about 2026, but based on the bookings over the last six quarters.
See an opportunity to accelerate that further that run rate going into 'twenty sector are there any other mitigating factors that we should keep in mind. Thanks.
Yeah.
Brendan Cavanagh: Yeah. I think it's a little premature for me to speak to that. You're right that the run rate at the end of the year will certainly be higher, probably in that $10, 11 million range. So we'll be at a run rate leaving the year that's certainly higher than this year's contribution was. As to whether that can go higher, it certainly can, but I think it's too early. You know, usually, we have to see something that's in that six-month window prior to the period that we're reporting on. We feel very good about what the second half of the year looks like. It's a little harder to say with absolute certainty about next year. But the trends are good. The backlogs continue to grow. The carriers are active.
Yes, I think it's a little premature for me to speak to that Youre right that the run rate at the end of the year will certainly be higher.
Probably in that $10 million to $11 million.
Range, So we'll be at a run rate, leaving the year that certainly higher than this year's contribution was as.
Whether that can go higher it certainly can but I think it's too early.
Usually we have to see something thats in that six month window prior to the period that we're reporting on we feel very good about what the second half of the year. It looks like it's a little harder to say with absolute certainty about next year, but but the trends are good backlogs continue to grow the carriers are active and so right now I feel good about things, but I don't know whether that means it stays at the <unk>.
Brendan Cavanagh: And so, you know, right now, I feel good about things, but I don't know whether that means it stays at the same level or it grows, and we'll let you know that when we give 2026 guidance.
Ain't level or grows and we'll let you know that when we give 2026 guidance.
Okay. Appreciate it thank you.
Eric Luebchow: Okay. Appreciate it. Thank you.
Sure.
Brendan Cavanagh: Sure.
Okay.
Moving to our next caller.
Operator: Moving to our next caller, David Guarino with Green Street. Your line is unmuted. You can please go ahead.
David <unk> with Green Street. Your line is on mute. Please go ahead.
David Guarino: Thanks. Brendan, on your question about this spectrum potentially being an option, I was wondering if you could share some thoughts on how high the frequency can go before it won't propagate well from a macro tower site. And then also, how quickly do you think the FCC could get the spectrum into the hands of the carriers if it was to be auctioned?
And on your question about new spectrum potentially be an option and I was wondering if you could share some thoughts on how high frequency can go before they won't propagate well from a macro tower sites and then also how quickly do you think the FCC could get.
Going to the second into the hands of the carriers electing the option.
Yeah, I think well certainly.
Brendan Cavanagh: Yeah. I think, well, certainly, the new spectrum that's talked about being auctioned as part of the bill that was recently passed in Congress, there will be different periods and different bands that will be auctioned along the way. The stuff that's longer term that hasn't been explicitly identified, but there are bands that have been named to be considered are the higher band stuff. I think it will propagate fine, but it will definitely require different and new radios and antennas in order to do that. So that's favorable to us. And I still believe that macro sites will be the primary way to get that spectrum deployed and used. It'll still be the most efficient way. So I think, you know, what's being talked about is still very much a macro-oriented solution. And then I'm sorry, David, what was the second part of your question?
The new spectrum, that's talked about being auctioned as part of.
The Bill that was recently passed in Congress.
There will be different.
Periods and different bands that will be auctioned along the way.
Tough that's that's longer term there hasnt been explicitly identified but there are bands that have been named to be considered are the higher band stuff.
I think that will propagate fine, but it will definitely require.
Different and new radios and antennas in order to do that so thats favorable to us and I still believe that Mac.
Macro sites will be the primary way.
Get that spectrum deployed and used it will still be the most efficient way so I think.
What's being talked about is still very much a macro oriented.
The solution and then I'm sorry, David what was the second part of your question.
Just on the timing of when do you think it could get in the hands of the carriers.
David Guarino: Just on the timing of when you think it could get in the hands of the carriers.
Brendan Cavanagh: Oh, yeah. So I think the stuff that's going to be auctioned, there's 100 megahertz that has to be auctioned by next summer, I believe, is the deadline, mid-2026. And I would expect that that piece probably would be able to be cleared in the carrier's hands within even two years or so following that. The other stuff, I think, is going to be much later. Even if it's auctioned in '28 or '29, you're looking at several years to get it cleared. You have DOD spectrum in there. So it's probably into the next decade before we start to see that.
Yeah. So I think the stuff that's going to be auctioned theres 100 megahertz that has to be auctioned by next.
Summer I believe is the deadline in mid 2026.
And I would expect that that piece, probably would be able to be cleared in the carriers hands within within two years or so following that.
The other stuff I think is going to be much later, even if its auction in 28 or 29 Youre looking at.
Several years to get it cleared YOD spectrum in there so it's probably into the next decade before we start to see that.
Okay. That's helpful. And then one quick one on the guidance did you guys I'm sorry, if I missed it but did you say how much of that earning guidance lift towards a result of the millicom hours closing earlier than anticipated.
David Guarino: Great. That's helpful. And then one quick one on the guidance list. Did you guys, sorry if I missed this, but did you say how much of the earnings guidance list was a result of the Millicom towers closing earlier than anticipated?
I don't know that we gave that I think we said $16 million of revenue.
Brendan Cavanagh: I don't know that we gave it. I think we said $16 million of revenue was due to the earlier closing of Millicom. So of the revenue increase, leasing revenue increase, 16 million of that was Millicom.
Was due to the earlier closing of millicom. So of the revenue increase leasing revenue increased $16 million of that was telecom.
Okay. Thanks.
David Guarino: Okay. Thanks.
Yes.
Moving to our next question instrument Swinburne with Morgan Stanley. Your line is <unk>. Please go ahead Sir.
Operator: Moving to our next question. Benjamin Swinburne with Morgan Stanley. Your line is unmuted. You can please go ahead, sir.
Thank you good afternoon.
Benjamin Swinburne: Thank you. Good afternoon. Brendan, I'm not sure if you heard Equistar's call on Friday, not to put you on the spot, but they announced a big LEO project. I'm not sure how they're going to fund it, but nonetheless, their pitch on the call was really about offering this satellite constellation network to carriers and making the argument that it would create more efficient network structures, particularly in rural areas where, you know, they're inefficient today given how much they have to spend on terrestrial coverage, etc. I just didn't know. I know we've talked about satellite as a player in the market and whether that is or isn't a competitor to the tower business, but this was a little bit of a new angle on it.
Brian Im not sure. If you heard Echostar is call on Friday, not to put you on the spot they announced a big Leo project.
I'm not sure how long, it's going to fund it but nonetheless their pitch on the call was really about.
Often this satellite constellation.
Network to carriers.
And making the argument that it would create more efficient.
Network structures, particularly in rural areas, where they're they're inefficient today, given how much you have to spend on terrestrial coverage et cetera, I just didn't know I know you've talked about satellite as a.
As a player in the market and whether that is or isn't a competitor to the tower business, but this was a little bit of a new angle on and so I was curious if you had any thoughts or any comments on how you see the.
Benjamin Swinburne: And so I was curious if you had any thoughts or any comments on how you see the, you know, growing satellite business, you know, potentially competing or not or complementing towers.
Growing satellite business.
Potentially competing or not or complementing towers.
Yes, I think just generally our belief that we spent a lot of time looking at this as you can imagine it's been a question that's come up for a while and just for our own.
Brendan Cavanagh: Yeah. I think, well, just generally, our belief, and we spent a lot of time looking at this. As you can imagine, it's been a question that's come up for a while. And just for our own sake, we want to kind of have an informed view on it. And we're pretty comfortable that it is a complementary solution. You know, what it really comes down to is locations that are challenging to cover economically to cover from a traditional macro standpoint. Everything could be covered that way, but the cost in some of these more rural areas where you have less pops or it's harder to get, you know, a fiber-based backhaul, that kind of thing, satellites become a pretty good solution to do that. But it's modest coverage. You can't do some of the things that you could do in an urban or suburban community with your device.
For our own sake, we want to have.
<unk> view on it and we're pretty comfortable that it is a complementary solution.
Really it comes down to is locations that are challenging to cover <unk>.
Economically to cover.
From a traditional macro standpoint, everything could be covered that way, but the cost and some of these more rural areas, where you have less pumps or it's harder to get.
Fiber based backhaul that kind of thing satellites become a pretty good solution to do that but it's modest covered you can't do some of the things that you could do in <unk>.
Urban or suburban community with your device, but you can get basic connectivity. So I don't really look at it as something that is truly competitive I look at it as something that is complementary and if in case of Echostar.
Brendan Cavanagh: But you can get basic connectivity. So I don't really look at it as something that is truly competitive. I look at it as something that is complementary. And if in the case of Equistar, you know, I don't know anything more about it than what they said. And I'm sure you're more informed than I am, Ben, on it. But what I gathered from that is that if they are able to come up with that solution, that that would certainly be something I would consider very favorable for the tower industry in that it's a complementary solution to go with their existing terrestrial solution and that they would be able to be somebody who could provide sort of a distinct competitive offering compared perhaps to the other carriers. And so, you know, we would be supportive of that certainly in whatever way we could be.
I don't know anything more about it and what they said and I'm sure you're more informed and I haven't been on it but what I what I gathered from that is that if they are able to come up with that solution that that would certainly be something I would consider very favorable for the tower industry.
That it's a complementary solution to go with their existing terrestrial solution and that they would be able to.
Be somebody who can provide sort of a distinct competitive offering compared perhaps too to the other carriers and so.
We would be supportive of that certainly in whatever way, we could be but.
Brendan Cavanagh: But I, you know, in terms of the viability of it and all that, I just don't know. I guess we'll have to see.
In terms of the viability of it and all that I, just don't know I guess, what I see.
Benjamin Swinburne: Yeah. Yep. No, it makes sense. And then just a quick one on the guide. I think there was an increase in the domestic straight line revenue for the year versus your prior guide. Correct me if I'm wrong. I don't know if you talked about that in your prepared remarks, but is that just a lease amendment or something that you could explain?
Yes, yes.
Yes that makes sense and then just a quick one on the guidance I think there was an increase in the domestic straight line revenue for the year versus your prior guide correctly.
Correct me, if I'm wrong I don't know if you talked about that in prepared remarks, but is that just an elite.
Or something that you could explain yes.
Brendan Cavanagh: Yeah. What that is, yes, there was an increase there. And what that basically is, is the under the, I'll just tell you straight out, under the AT&T MLA that we signed a couple of years ago, one of the things that exists in that is to the extent that they do any upgrades at any sites, there is an extension to the term of that existing lease. And so when the term is extended, it ends up having a favorable straight line impact. So that's really what you're seeing there.
That is yes, there was an increase there and what that basically is is the under the.
I'll just tell you straight out under the AT&T MLA that we signed a couple of years ago, one of the things that exists and that is to the extent that they do any upgrades at any sites. There is an extension to the term.
Of that existing lease and so when the term is extended it ends up having a favorable.
Straight line impact, so thats really what youre seeing there.
Benjamin Swinburne: I see. Got it. Thank you very much.
Got it thank you very much.
Sure.
Brendan Cavanagh: Sure.
Just as a final reminder for activities. If you would like to ask a question you can please press the pound two on your telephone keypad to enter the question queue.
Operator: This is the final reminder for attendees. If you would like to ask a question, you can please press pound two on your telephone keypad to enter the question queue. We do have another hand raised. Michael Funk from Bank of America. He's unmuted. You can please go ahead.
We do have another hand raised Michael funk from Bank of America.
If you can please go ahead.
Michael Funk: Yeah. Thank you for taking the question. On the call, you mentioned bonus appreciation increase in carrier cash flow. I think most of the carriers mentioned earmarking that primarily for fiber builds among other projects. Just curious if your conversations with the carriers have discussed incremental tower or wireless network builds as well.
Yeah. Thanks for taking the question.
On the call you mentioned bonus depreciation increase in carrier cash flow I think most of the carriers mentioned earmarking that primarily for fiber balance among other projects. Just curious your conversation with the carriers have discussed incremental tower or wireless network builds as well.
Yeah, I mean, we don't have a discussion with the carriers that's explicitly related to what they are.
Brendan Cavanagh: Yeah. I mean, we don't have a discussion with the carriers that's explicitly related to what they're doing with bonus depreciation benefits. But what we do talk to them about is their general network plans over the longer term and the needs that they have, which we believe will support continued network investment in the wireless side. You know, I'm sure some of the benefits that they'll get from a tax savings will go into fiber as well. And, you know, as I said in response to a question about our own capital allocation earlier, to some degree, it's fungible. What's good about it is that there's excess cash available to them to invest broadly in their network initiatives, whether that be fiber-based or wireless. I think wireless will benefit from that, too.
What theyre doing with bonus depreciation benefits, but what we do talk to them about is their general network plans over the longer term and the needs that they have which we believe will support continued network investment in the wireless side.
I'm sure some of the.
The benefits that they will get from the tax savings will go into fiber as well and as.
As I said in response to a question about our own capital allocation earlier to some degree it's fungible. What's good about it is that there is excess cash available to them to invest broadly in their network initiatives, whether that be fiber based or wireless I think wireless will.
Benefits from that too.
And just curious in AI App comments, he made earlier as well, but you engineer with looking at the.
Michael Funk: And just curious, you know, AI app comment that you made earlier as well, but your engineer is looking at the AI apps and the usage. Do you have any quantification of the increase in traffic or usage off of AI apps?
AI apps and the usage do you give any quantification of the increase in traffic or usage also have AI ops.
I do not have anything specific that I can give you now, but perhaps over time, that's something we'll be able to share more with I think as it develops there will be more data available on it but it's a little premature for that.
Brendan Cavanagh: I do not have anything specific that I can give you now. But perhaps over time, that's something we'll be able to share more with. I think as it develops, there will be more data available on it, but it's a little premature for that.
Perfect. Thank you so much.
Michael Funk: Great. Thank you so much.
Yep.
Brendan Cavanagh: Yep.
Okay.
Yeah.
Operator: We ask there are no further questions in the queue.
No further questions in the queue.
Okay, great. Thank you thanks to everybody for joining the call and we look forward to following up next quarter.
Brendan Cavanagh: Great. Thank you, sir. Thanks to everybody for joining the call, and we look forward to following up next quarter.
Thank you to all of our speakers and thank you all of the audience for joining us today with that our call is concluded and you may now disconnect.
Operator: Thank you to all of our speakers, and thank you to all of the audience for joining us today. With that, our call is concluded, and you may now disconnect.