SBA Communications Corporation (Nasdaq: SBAC) ("SBA" or the
"Company") today reported results for the quarter ended June 30,
2023.
Highlights of the second quarter include:
- Net income of $202.0 million or $1.87 per share
- AFFO per share of $3.24
- Site leasing revenue of $626.1 million, representing a 7.9%
growth over the prior year period
- Increased full year 2023 outlook for Site Leasing Revenue,
Tower Cash Flow, Adjusted EBITDA, and AFFO
In addition, the Company announced today that its Board of
Directors has declared a quarterly cash dividend of $0.85 per share
of the Company’s Class A Common Stock. The distribution is payable
September 20, 2023 to the shareholders of record at the close of
business on August 24, 2023.
The Company also announced today that it has entered into a new
long-term master lease agreement with AT&T, Inc. (the “MLA”).
The comprehensive MLA will streamline AT&T’s deployment of 5G
and other next generation technology across SBA’s extensive US
tower portfolio, mutually benefitting both companies through
securing a committed operating relationship for years into the
future.
“We posted good financial results for the second quarter,
exceeding estimates and our own expectations,” stated Jeffrey A.
Stoops, President and Chief Executive Officer. “Customer activity
varied by region, with US customers a little less active in the
aggregate with their wireless networks than we expected, and
international customers a little more active in the aggregate than
we expected. Combined, we posted solid growth in site leasing
revenue and Tower Cash Flow. We continue to execute very well,
growing both our Tower Cash Flow and Adjusted EBITDA margins on a
year-over-year basis. We generated solid AFFO in the quarter,
providing ample cash for discretionary spending. During the
quarter, we dedicated the majority of our discretionary spending to
retire floating-rate indebtedness, resulting in quarter-end net
debt to Adjusted EBITDA of 6.6x, our lowest leverage ratio in
decades. We are also very pleased to announce our newly signed
master lease agreement with AT&T. This agreement serves to
expand upon our existing strong relationship with AT&T,
providing for future leasing growth from AT&T at our tower
sites and enhancing efficiencies in the day-to-day operations
between our two companies. We are excited about this next phase in
our relationship. Based on second quarter results, our current
expectations for the remainder of 2023 and our new MLA with
AT&T, we have adjusted our full year outlook in a number of
areas, including increases to Site Leasing Revenue, Tower Cash
Flow, Adjusted EBITDA, AFFO and AFFO per share.”
Operating Results
The table below details select financial results for the three
months ended June 30, 2023 and comparisons to the prior year
period.
% Change
excluding
Q2 2023
Q2 2022
$ Change
% Change
FX (1)
Consolidated
($ in millions, except per
share amounts)
Site leasing revenue
$
626.1
$
580.2
$
45.9
7.9
%
8.6
%
Site development revenue
52.4
71.8
(19.4
)
(27.1
%)
(27.1
%)
Tower cash flow (1)
503.5
459.6
43.9
9.6
%
10.2
%
Net income
202.0
69.2
132.8
191.9
%
57.1
%
Earnings per share - diluted
1.87
0.64
1.23
194.2
%
58.3
%
Adjusted EBITDA (1)
471.7
437.8
33.9
7.8
%
8.4
%
AFFO (1)
352.7
335.3
17.4
5.2
%
6.0
%
AFFO per share (1)
3.24
3.07
0.17
5.5
%
6.2
%
(1)
See the reconciliations and other
disclosures under “Non-GAAP Financial Measures” later in this press
release.
Total revenues in the second quarter of 2023 were $678.5 million
compared to $652.0 million in the prior year period, an increase of
4.1%. Site leasing revenue in the second quarter of 2023 of $626.1
million was comprised of domestic site leasing revenue of $456.8
million and international site leasing revenue of $169.4 million.
Domestic cash site leasing revenue in the second quarter of 2023
was $450.3 million compared to $431.8 million in the prior year
period, an increase of 4.3%. International cash site leasing
revenue in the second quarter of 2023 was $168.4 million compared
to $138.6 million in the prior year period, an increase of 21.5%,
or 24.6% on a constant currency basis. Site development revenues in
the second quarter of 2023 were $52.4 million compared to $71.8
million in the prior year period, a decrease of 27.1%.
Site leasing operating profit in the second quarter of 2023 was
$511.1 million, an increase of 9.0% over the prior year period.
Site leasing contributed 97.5% of the Company’s total operating
profit in the second quarter of 2023. Domestic site leasing segment
operating profit in the second quarter of 2023 was $392.3 million,
an increase of 4.3% over the prior year period. International site
leasing segment operating profit in the second quarter of 2023 was
$118.8 million, an increase of 28.6% from the prior year
period.
Tower Cash Flow in the second quarter of 2023 of $503.5 million
was comprised of Domestic Tower Cash Flow of $385.0 million and
International Tower Cash Flow of $118.5 million. Domestic Tower
Cash Flow in the second quarter of 2023 increased 5.1% over the
prior year period and International Tower Cash Flow increased 27.2%
over the prior year period, or increased 30.4% on a constant
currency basis. Tower Cash Flow Margin was 81.4% in the second
quarter of 2023, as compared to 80.6% for the prior year
period.
Net income in the second quarter of 2023 was $202.0 million, or
$1.87 per share, and included a $27.8 million gain, net of taxes,
on the currency-related remeasurement of U.S. dollar denominated
intercompany loans with foreign subsidiaries. Net income in the
second quarter of 2022 was $69.2 million, or $0.64 per share, and
included a $43.1 million loss, net of taxes, on the
currency-related remeasurement of U.S. dollar denominated
intercompany loans with foreign subsidiaries.
Adjusted EBITDA in the second quarter of 2023 was $471.7
million, a 7.8% increase over the prior year period. Adjusted
EBITDA Margin in the second quarter of 2023 was 70.3% compared to
68.2% in the prior year period.
Net Cash Interest Expense in the second quarter of 2023 was
$96.6 million compared to $82.8 million in the prior year period,
an increase of 16.7%.
AFFO in the second quarter of 2023 was $352.7 million, a 5.2%
increase over the prior year period. AFFO per share in the second
quarter of 2023 was $3.24, a 5.5% increase over the prior year
period.
Investing Activities
During the second quarter of 2023, SBA acquired 9 communication
sites for total cash consideration of $7.2 million. SBA also built
64 towers during the second quarter of 2023. As of June 30, 2023,
SBA owned or operated 39,426 communication sites, 17,426 of which
are located in the United States and its territories and 22,000 of
which are located internationally. In addition, the Company spent
$10.1 million to purchase land and easements and to extend lease
terms. Total cash capital expenditures for the second quarter of
2023 were $83.3 million, consisting of $14.7 million of
non-discretionary cash capital expenditures (tower maintenance and
general corporate) and $68.6 million of discretionary cash capital
expenditures (new tower builds, tower augmentations, acquisitions,
and purchasing land and easements).
Subsequent to the second quarter of 2023, the Company purchased
or is under contract to purchase 134 communication sites for an
aggregate consideration of $72.9 million in cash. The Company
anticipates that these acquisitions will be consummated by the end
of 2023.
Financing Activities and
Liquidity
SBA ended the second quarter of 2023 with $12.7 billion of total
debt, $9.7 billion of total secured debt, $273.6 million of cash
and cash equivalents, short-term restricted cash, and short-term
investments, and $12.4 billion of Net Debt. SBA’s Net Debt and Net
Secured Debt to Annualized Adjusted EBITDA Leverage Ratios were
6.6x and 5.0x, respectively.
As of the date of this press release, the Company had $360.0
million outstanding under its $1.5 billion Revolving Credit
Facility.
The Company did not repurchase any shares of its Class A common
stock during the second quarter of 2023. As of the date of this
filing, the Company has $504.7 million of authorization remaining
under its approved repurchase plan.
In the second quarter of 2023, the Company declared and paid a
cash dividend of $92.1 million.
Outlook
The Company is updating its full year 2023 Outlook for
anticipated results. The Outlook provided is based on a number of
assumptions that the Company believes are reasonable at the time of
this press release. Information regarding potential risks that
could cause the actual results to differ from these forward-looking
statements is set forth below and in the Company’s filings with the
Securities and Exchange Commission.
The Company’s full year 2023 Outlook assumes the acquisitions of
only those communication sites under contract and anticipated to
close at the time of this press release. The Company may spend
additional capital in 2023 on acquiring revenue producing assets
not yet identified or under contract, the impact of which is not
reflected in the 2023 guidance. The Outlook also does not
contemplate any additional repurchases of the Company’s stock or
new debt financings during 2023, although the Company may
ultimately spend capital to repurchase additional stock or issue
new debt during the remainder of the year.
The Company’s Outlook assumes an average foreign currency
exchange rate of 4.90 Brazilian Reais to 1.0 U.S. Dollar, 1.32
Canadian Dollars to 1.0 U.S. Dollar, 2,400 Tanzanian shillings to
1.0 U.S. Dollar, and 18.60 South African Rand to 1.0 U.S. Dollar
throughout the last two quarters of 2023.
Change from
Change from
May 1, 2023
May 1, 2023
Outlook
(in millions, except per share
amounts)
Full Year 2023
Outlook (7)
Excluding FX
Site leasing revenue (1)
$
2,502.0
to
$
2,522.0
$
21.0
$
12.0
Site development revenue
$
205.0
to
$
225.0
$
—
$
—
Total revenues
$
2,707.0
to
$
2,747.0
$
21.0
$
12.0
Tower Cash Flow (2)
$
2,004.0
to
$
2,024.0
$
26.0
$
19.5
Adjusted EBITDA (2)
$
1,878.0
to
$
1,898.0
$
23.0
$
17.0
Net cash interest expense (3)
$
380.0
to
$
385.0
$
2.0
$
2.0
Non-discretionary cash capital
expenditures (4)
$
52.0
to
$
62.0
$
(2.0
)
$
(2.0
)
AFFO (2)
$
1,396.0
to
$
1,436.0
$
22.0
$
17.5
AFFO per share (2) (5)
$
12.80
to
$
13.16
$
0.25
$
0.20
Discretionary cash capital expenditures
(6)
$
335.0
to
$
355.0
$
5.0
$
4.0
(1)
The Company’s Outlook for site leasing
revenue includes revenue associated with pass through reimbursable
expenses.
(2)
See the reconciliation of this non-GAAP
financial measure presented below under “Non-GAAP Financial
Measures.”
(3)
Net cash interest expense is defined as
interest expense less interest income. Net cash interest expense
does not include amortization of deferred financing fees or
non-cash interest expense.
(4)
Consists of tower maintenance and general
corporate capital expenditures.
(5)
Outlook for AFFO per share is calculated
by dividing the Company’s outlook for AFFO by an assumed weighted
average number of diluted common shares of 109.1 million. Outlook
does not include the impact of any potential future repurchases of
the Company’s stock during 2023.
(6)
Consists of new tower builds, tower
augmentations, communication site acquisitions and ground lease
purchases. Does not include expenditures for acquisitions of
revenue producing assets not under contract at the date of this
press release.
(7)
Changes from prior outlook are measured
based on the midpoint of outlook ranges provided.
Conference Call Information
SBA Communications Corporation will host a conference call on
Monday, July 31, 2023 at 5:00 PM (EDT) to discuss the quarterly
results. The call may be accessed as follows:
When:
Monday, July 31, 2023 at 5:00 PM (EDT)
Dial-in Number:
(877) 692-8955
Access Code:
7464269
Conference Name:
SBA Second quarter 2023 results
Replay Available:
July 31, 2023 at 11:00 PM to August 14,
2023 at 12:00 AM (TZ: Eastern)
Replay Number:
(866) 207-1041 – Access Code: 3711070
Internet Access:
www.sbasite.com
Information Concerning Forward-Looking
Statements
This press release and the Company’s earnings call include
forward-looking statements, including statements regarding the
Company’s expectations or beliefs regarding (i) execution of the
Company’s growth strategies and the impacts to its financial
performance, (ii) future discretionary spending and the sufficiency
of the Company’s cash position, (iii) the Company’s outlook for
financial and operational performance in 2023, the assumptions it
made and the drivers contributing to its updated full year
guidance, (iv) the impact of the new MLA with AT&T on the
Company’s financial and operational performance, (v) the timing of
closing for currently pending acquisitions, (vi) the Company’s
tower portfolio growth and positioning for future growth, (vii)
foreign exchange rates and their impact on the Company’s financial
and operational guidance and the Company’s updated 2023
Outlook.
The Company wishes to caution readers that these forward-looking
statements may be affected by the risks and uncertainties in the
Company’s business as well as other important factors may have
affected and could in the future affect the Company’s actual
results and could cause the Company’s actual results for subsequent
periods to differ materially from those expressed in any
forward-looking statement made by or on behalf of the Company. With
respect to the Company’s expectations regarding all of these
statements, including its financial and operational guidance, such
risk factors include, but are not limited to: (1) the impact of
recent macro-economic conditions, including increasing interest
rates, inflation and financial market volatility on (a) the ability
and willingness of wireless service providers to maintain or
increase their capital expenditures, (b) the Company’s business and
results of operations, and on foreign currency exchange rates and
(c) consumer demand for wireless services, (2) the economic climate
for the wireless communications industry in general and the
wireless communications infrastructure providers in particular in
the United States, Brazil, South Africa, Tanzania, and in other
international markets; (3) the Company’s ability to accurately
identify and manage any risks associated with its acquired sites,
to effectively integrate such sites into its business and to
achieve the anticipated financial results; (4) the Company’s
ability to secure and retain as many site leasing tenants as
planned at anticipated lease rates; (5) the Company’s ability to
manage expenses and cash capital expenditures at anticipated
levels; (6) the impact of continued consolidation among wireless
service providers in the U.S. and internationally, on the Company’s
leasing revenue and the ability of Dish to compete as a nationwide
carrier; (7) the Company’s ability to successfully manage the risks
associated with international operations, including risks
associated with foreign currency exchange rates; (8) the Company’s
ability to secure and deliver anticipated services business at
contemplated margins; (9) the Company’s ability to acquire land
underneath towers on terms that are accretive; (10) the Company’s
ability to obtain future financing at commercially reasonable rates
or at all; (11) the Company’s ability to achieve the new builds
targets included in its anticipated annual portfolio growth goals,
which will depend, among other things, on obtaining zoning and
regulatory approvals, availability of labor and supplies, and other
factors beyond the Company’s control that could affect the
Company’s ability to build additional towers in 2023; and (12) the
Company’s ability to meet its total portfolio growth, which will
depend, in addition to the new build risks, on the Company’s
ability to identify and acquire sites at prices and upon terms that
will provide accretive portfolio growth, competition from third
parties for such acquisitions and our ability to negotiate the
terms of, and acquire, these potential tower portfolios on terms
that meet our internal return criteria.
With respect to its expectations regarding the ability to close
pending acquisitions, these factors also include satisfactorily
completing due diligence, the amount and quality of due diligence
that the Company is able to complete prior to closing of any
acquisition, the ability to receive required regulatory approval,
the ability and willingness of each party to fulfill their
respective closing conditions and their contractual obligations and
the availability of cash on hand or borrowing capacity under the
Revolving Credit Facility to fund the consideration, its ability to
accurately anticipate the future performance of the acquired towers
and any challenges or costs associated with the integration of such
towers. With respect to the repurchases under the Company’s stock
repurchase program, the amount of shares repurchased, if any, and
the timing of such repurchases will depend on, among other things,
the trading price of the Company’s common stock, which may be
positively or negatively impacted by the repurchase program, market
and business conditions, the availability of stock, the Company’s
financial performance or determinations following the date of this
announcement in order to use the Company’s funds for other
purposes. Furthermore, the Company’s forward-looking statements and
its 2023 outlook assumes that the Company continues to qualify for
treatment as a REIT for U.S. federal income tax purposes and that
the Company’s business is currently operated in a manner that
complies with the REIT rules and that it will be able to continue
to comply with and conduct its business in accordance with such
rules. In addition, these forward-looking statements and the
information in this press release is qualified in its entirety by
cautionary statements and risk factor disclosures contained in the
Company’s Securities and Exchange Commission filings, including the
Company’s most recently filed Annual Report on Form 10-K.
This press release contains non-GAAP financial measures.
Reconciliation of each of these non-GAAP financial measures and the
other Regulation G information is presented below under “Non-GAAP
Financial Measures.”
This press release will be available on our website at
www.sbasite.com.
About SBA Communications
Corporation
SBA Communications Corporation is a leading independent owner
and operator of wireless communications infrastructure including
towers, buildings, rooftops, distributed antenna systems (DAS) and
small cells. With a portfolio of more than 39,000 communications
sites in 16 markets throughout the Americas, Africa and the
Philippines, SBA is listed on NASDAQ under the symbol SBAC. Our
organization is part of the S&P 500 and is one of the top Real
Estate Investment Trusts (REITs) by market capitalization. For more
information, please visit: www.sbasite.com.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(unaudited) (in thousands,
except per share amounts)
For the three months
For the six months
ended June 30,
ended June 30,
2023
2022
2023
2022
Revenues:
Site leasing
$
626,143
$
580,233
$
1,243,411
$
1,139,665
Site development
52,357
71,773
110,605
132,111
Total revenues
678,500
652,006
1,354,016
1,271,776
Operating expenses:
Cost of revenues (exclusive of
depreciation, accretion,
and amortization shown below):
Cost of site leasing
115,014
111,515
235,133
218,670
Cost of site development
39,236
54,497
83,421
100,269
Selling, general, and administrative
expenses (1)
63,383
63,274
135,592
125,398
Acquisition and new business initiatives
related
adjustments and expenses
4,953
6,829
11,010
11,933
Asset impairment and decommission
costs
32,867
8,521
59,257
17,033
Depreciation, accretion, and
amortization
181,820
176,392
364,235
350,716
Total operating expenses
437,273
421,028
888,648
824,019
Operating income
241,227
230,978
465,368
447,757
Other income (expense):
Interest income
4,683
1,517
7,498
4,020
Interest expense
(101,288
)
(84,315
)
(202,514
)
(166,566
)
Non-cash interest expense
(7,518
)
(11,529
)
(21,757
)
(23,054
)
Amortization of deferred financing
fees
(5,044
)
(4,922
)
(10,032
)
(9,804
)
Other income (expense), net
40,732
(66,141
)
78,293
42,019
Total other expense, net
(68,435
)
(165,390
)
(148,512
)
(153,385
)
Income before income taxes
172,792
65,588
316,856
294,372
Benefit (provision) for income taxes
29,178
3,563
(14,331
)
(36,914
)
Net income
201,970
69,151
302,525
257,458
Net loss attributable to noncontrolling
interests
1,678
365
2,340
682
Net income attributable to SBA
Communications
Corporation
$
203,648
$
69,516
$
304,865
$
258,140
Net income per common share attributable
to SBA
Communications Corporation:
Basic
$
1.88
$
0.64
$
2.82
$
2.39
Diluted
$
1.87
$
0.64
$
2.79
$
2.36
Weighted-average number of common
shares
Basic
108,355
107,850
108,244
107,966
Diluted
108,884
109,347
109,078
109,443
(1)
Includes non-cash compensation of $17,566
and $23,248 for the three months ended June 30, 2023 and 2022,
respectively, and $43,094 and $47,364 for the six months ended June
30, 2023, and 2022, respectively.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except par
values)
June 30,
December 31,
2023
2022
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents
$
179,169
$
143,708
Restricted cash
72,077
41,959
Accounts receivable, net
160,311
184,368
Costs and estimated earnings in excess of
billings on uncompleted contracts
42,146
79,549
Prepaid expenses and other current
assets
64,914
33,149
Total current assets
518,617
482,733
Property and equipment, net
2,712,201
2,713,727
Intangible assets, net
2,628,077
2,776,472
Operating lease right-of-use assets,
net
2,362,254
2,381,955
Acquired and other right-of-use assets,
net
1,528,070
1,507,781
Other assets
855,251
722,373
Total assets
$
10,604,470
$
10,585,041
LIABILITIES, REDEEMABLE NONCONTROLLING
INTERESTS,
AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable
$
47,027
$
51,427
Accrued expenses
84,121
101,484
Current maturities of long-term debt
24,000
24,000
Deferred revenue
230,072
154,553
Accrued interest
55,104
54,173
Current lease liabilities
274,828
262,365
Other current liabilities
23,237
48,762
Total current liabilities
738,389
696,764
Long-term liabilities:
Long-term debt, net
12,571,931
12,844,162
Long-term lease liabilities
2,018,065
2,040,628
Other long-term liabilities
330,842
248,067
Total long-term liabilities
14,920,838
15,132,857
Redeemable noncontrolling interests
37,573
31,735
Shareholders' deficit:
Preferred stock - par value $0.01, 30,000
shares authorized, no shares issued or outstanding
—
—
Common stock - Class A, par value $0.01,
400,000 shares authorized, 108,381 shares and
107,997 shares issued and outstanding at
June 30, 2023 and December 31, 2022,
respectively
1,084
1,080
Additional paid-in capital
2,824,994
2,795,176
Accumulated deficit
(7,362,838
)
(7,482,061
)
Accumulated other comprehensive loss,
net
(555,570
)
(590,510
)
Total shareholders' deficit
(5,092,330
)
(5,276,315
)
Total liabilities, redeemable
noncontrolling interests, and shareholders' deficit
$
10,604,470
$
10,585,041
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(unaudited) (in
thousands)
For the three months
ended June 30,
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
201,970
$
69,151
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, accretion, and
amortization
181,820
176,392
(Gain) loss on remeasurement of U.S.
denominated intercompany loans
(43,336
)
63,716
Non-cash compensation expense
18,252
23,900
Non-cash asset impairment and decommission
costs
25,367
8,598
Deferred and non-cash income tax
benefit
(36,578
)
(11,250
)
Other non-cash items reflected in the
Statements of Operations
20,206
19,067
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable and costs and
estimated earnings in excess of
billings on uncompleted contracts, net
40,463
1,734
Prepaid expenses and other assets
(13,753
)
(12,604
)
Operating lease right-of-use assets,
net
37,774
35,498
Accounts payable and accrued expenses
(15,600
)
3,938
Accrued interest
27,024
27,136
Long-term lease liabilities
(34,492
)
(31,952
)
Other liabilities
77,816
(1,209
)
Net cash provided by operating
activities
486,933
372,115
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions
(19,808
)
(138,397
)
Capital expenditures
(63,448
)
(52,963
)
Purchase of investments, net
(20,141
)
(38,823
)
Other investing activities
(8,188
)
369
Net cash used in investing activities
(111,585
)
(229,814
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under Revolving Credit
Facility
(225,000
)
(150,000
)
Payment of dividends on common stock
(92,137
)
(76,565
)
Proceeds from employee stock
purchase/stock option plans
7,366
9,405
Payments related to taxes on net
settlement of stock options and restricted stock units
(719
)
(394
)
Other financing activities
(3,670
)
(6,700
)
Net cash used in financing activities
(314,160
)
(224,254
)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
1,139
(3,507
)
NET CHANGE IN CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH
62,327
(85,460
)
CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH:
Beginning of period
193,182
336,438
End of period
$
255,509
$
250,978
Selected Capital Expenditure
Detail
For the three
For the six
months ended
months ended
June 30, 2023
June 30, 2023
(in thousands)
Construction and related costs
$
25,013
$
46,579
Augmentation and tower upgrades
23,701
39,492
Non-discretionary capital
expenditures:
Tower maintenance
13,396
24,139
General corporate
1,338
2,373
Total non-discretionary capital
expenditures
14,734
26,512
Total capital expenditures
$
63,448
$
112,583
Communication Site Portfolio
Summary
Domestic
International
Total
Sites owned at March 31, 2023
17,418
21,944
39,362
Sites acquired during the second
quarter
9
—
9
Sites built during the second
quarter
2
62
64
Sites decommissioned/reclassified
during the second quarter
(3
)
(6
)
(9
)
Sites owned at June 30, 2023
17,426
22,000
39,426
Segment Operating Profit and Segment
Operating Profit Margin
Domestic site leasing and International site leasing are the two
segments within our site leasing business. Segment operating profit
is a key business metric and one of our two measures of segment
profitability. The calculation of Segment operating profit for each
of our segments is set forth below.
Domestic Site Leasing
Int'l Site Leasing
Site Development
For the three months
For the three months
For the three months
ended June 30,
ended June 30,
ended June 30,
2023
2022
2023
2022
2023
2022
(in thousands)
Segment revenue
$
456,754
$
442,084
$
169,389
$
138,149
$
52,357
$
71,773
Segment cost of revenues (excluding
depreciation, accretion, and amort.)
(64,434
)
(65,768
)
(50,580
)
(45,747
)
(39,236
)
(54,497
)
Segment operating profit
$
392,320
$
376,316
$
118,809
$
92,402
$
13,121
$
17,276
Segment operating profit margin
85.9
%
85.1
%
70.1
%
66.9
%
25.1
%
24.1
%
Non-GAAP Financial Measures
The press release contains non-GAAP financial measures including
(i) Cash Site Leasing Revenue, Tower Cash Flow, and Tower Cash Flow
Margin; (ii) Adjusted EBITDA, Annualized Adjusted EBITDA, and
Adjusted EBITDA Margin; (iii) Funds from Operations (“FFO”),
Adjusted Funds from Operations (“AFFO”), and AFFO per share; (iv)
Net Debt, Net Secured Debt, Leverage Ratio, and Secured Leverage
Ratio (collectively, our “Non-GAAP Debt Measures”); and (v) certain
financial metrics after eliminating the impact of changes in
foreign currency exchange rates (collectively, our “Constant
Currency Measures”).
We have included these non-GAAP financial measures because we
believe that they provide investors additional tools in
understanding our financial performance and condition.
Specifically, we believe that:
(1) Cash Site Leasing Revenue and Tower Cash Flow are useful
indicators of the performance of our site leasing operations;
(2) Adjusted EBITDA is useful to investors or other interested
parties in evaluating our financial performance. Adjusted EBITDA is
the primary measure used by management (1) to evaluate the economic
productivity of our operations and (2) for purposes of making
decisions about allocating resources to, and assessing the
performance of, our operations. Management believes that Adjusted
EBITDA helps investors or other interested parties meaningfully
evaluate and compare the results of our operations (1) from period
to period and (2) to our competitors, by excluding the impact of
our capital structure (primarily interest charges from our
outstanding debt) and asset base (primarily depreciation,
amortization and accretion) from our financial results. Management
also believes Adjusted EBITDA is frequently used by investors or
other interested parties in the evaluation of REITs. In addition,
Adjusted EBITDA is similar to the measure of current financial
performance generally used in our debt covenant calculations.
Adjusted EBITDA should be considered only as a supplement to net
income computed in accordance with GAAP as a measure of our
performance;
(3) FFO, AFFO and AFFO per share, which are metrics used by our
public company peers in the communication site industry, provide
investors useful indicators of the financial performance of our
business and permit investors an additional tool to evaluate the
performance of our business against those of our two principal
competitors. FFO, AFFO, and AFFO per share are also used to address
questions we receive from analysts and investors who routinely
assess our operating performance on the basis of these performance
measures, which are considered industry standards. We believe that
FFO helps investors or other interested parties meaningfully
evaluate financial performance by excluding the impact of our asset
base (primarily depreciation, amortization and accretion and asset
impairment and decommission costs). We believe that AFFO and AFFO
per share help investors or other interested parties meaningfully
evaluate our financial performance as they include (1) the impact
of our capital structure (primarily interest expense on our
outstanding debt) and (2) sustaining capital expenditures and
exclude the impact of (1) our asset base (primarily depreciation,
amortization and accretion and asset impairment and decommission
costs) and (2) certain non-cash items, including straight-lined
revenues and expenses related to fixed escalations and rent free
periods and the non-cash portion of our reported tax provision.
GAAP requires rental revenues and expenses related to leases that
contain specified rental increases over the life of the lease to be
recognized evenly over the life of the lease. In accordance with
GAAP, if payment terms call for fixed escalations, or rent free
periods, the revenue or expense is recognized on a straight-lined
basis over the fixed, non-cancelable term of the contract. We only
use AFFO as a performance measure. AFFO should be considered only
as a supplement to net income computed in accordance with GAAP as a
measure of our performance and should not be considered as an
alternative to cash flows from operations or as residual cash flow
available for discretionary investment. We believe our definition
of FFO is consistent with how that term is defined by the National
Association of Real Estate Investment Trusts (“NAREIT”) and that
our definition and use of AFFO and AFFO per share is consistent
with those reported by the other communication site companies;
(4) Our Non-GAAP Debt Measures provide investors a more complete
understanding of our net debt and leverage position as they include
the full principal amount of our debt which will be due at maturity
and, to the extent that such measures are calculated on Net Debt
are net of our cash and cash equivalents, short-term restricted
cash, and short-term investments; and
(5) Our Constant Currency Measures provide management and
investors the ability to evaluate the performance of the business
without the impact of foreign currency exchange rate
fluctuations.
In addition, Tower Cash Flow, Adjusted EBITDA, and our Non-GAAP
Debt Measures are components of the calculations used by our
lenders to determine compliance with certain covenants under our
Senior Credit Agreement and indentures relating to our 2020 Senior
Notes and 2021 Senior Notes. These non-GAAP financial measures are
not intended to be an alternative to any of the financial measures
provided in our results of operations or our balance sheet as
determined in accordance with GAAP.
Financial Metrics after Eliminating the
Impact of Changes In Foreign Currency Exchange Rates
We eliminate the impact of changes in foreign currency exchange
rates for each of the financial metrics listed in the table below
by dividing the current period’s financial results by the average
monthly exchange rates of the prior year period, and by eliminating
the impact of the remeasurement of our intercompany loans. The
table below provides the reconciliation of the reported growth rate
year-over-year of each of such measures to the growth rate after
eliminating the impact of changes in foreign currency exchange
rates to such measure.
Second quarter
2023 year
Foreign
Growth excluding
over year
currency
foreign
growth rate
impact
currency impact
Total site leasing revenue
7.9%
(0.7%)
8.6%
Total cash site leasing revenue
8.5%
(0.7%)
9.2%
Int'l cash site leasing revenue
21.5%
(3.1%)
24.6%
Total site leasing segment operating
profit
9.0%
(0.7%)
9.7%
Int'l site leasing segment operating
profit
28.6%
(3.2%)
31.8%
Total site leasing tower cash flow
9.6%
(0.6%)
10.2%
Int'l site leasing tower cash flow
27.2%
(3.2%)
30.4%
Net income
191.9%
134.8%
57.1%
Earnings per share - diluted
194.2%
135.9%
58.3%
Adjusted EBITDA
7.8%
(0.6%)
8.4%
AFFO
5.2%
(0.8%)
6.0%
AFFO per share
5.5%
(0.7%)
6.2%
Cash Site Leasing Revenue, Tower Cash
Flow, and Tower Cash Flow Margin
The table below sets forth the reconciliation of Cash Site
Leasing Revenue and Tower Cash Flow to their most comparable GAAP
measurement and Tower Cash Flow Margin, which is calculated by
dividing Tower Cash Flow by Cash Site Leasing Revenue.
Domestic Site Leasing
Int'l Site Leasing
Total Site Leasing
For the three months
For the three months
For the three months
ended June 30,
ended June 30,
ended June 30,
2023
2022
2023
2022
2023
2022
(in thousands)
Site leasing revenue
$
456,754
$
442,084
$
169,389
$
138,149
$
626,143
$
580,233
Non-cash straight-line leasing revenue
(6,475
)
(10,267
)
(1,005
)
421
(7,480
)
(9,846
)
Cash site leasing revenue
450,279
431,817
168,384
138,570
618,663
570,387
Site leasing cost of revenues
(excluding
depreciation, accretion, and
amortization)
(64,434
)
(65,768
)
(50,580
)
(45,747
)
(115,014
)
(111,515
)
Non-cash straight-line ground lease
expense
(814
)
413
654
308
(160
)
721
Tower Cash Flow
$
385,031
$
366,462
$
118,458
$
93,131
$
503,489
$
459,593
Tower Cash Flow Margin
85.5
%
84.9
%
70.3
%
67.2
%
81.4
%
80.6
%
Forecasted Tower Cash Flow for Full Year
2023
The table below sets forth the reconciliation of forecasted
Tower Cash Flow set forth in the Outlook section to its most
comparable GAAP measurement for the full year 2023:
Full Year 2023
(in millions)
Site leasing revenue
$
2,502.0
to
$
2,522.0
Non-cash straight-line leasing revenue
(26.0
)
to
(21.0
)
Cash site leasing revenue
2,476.0
to
2,501.0
Site leasing cost of revenues
(excluding
depreciation, accretion, and
amortization)
(468.5
)
to
(478.5
)
Non-cash straight-line ground lease
expense
(3.5
)
to
1.5
Tower Cash Flow
$
2,004.0
to
$
2,024.0
Adjusted EBITDA, Annualized Adjusted
EBITDA, and Adjusted EBITDA Margin
The table below sets forth the reconciliation of Adjusted EBITDA
to its most comparable GAAP measurement.
For the three months
ended June 30,
2023
2022
(in thousands)
Net income
$
201,970
$
69,151
Non-cash straight-line leasing revenue
(7,480
)
(9,846
)
Non-cash straight-line ground lease
expense
(160
)
721
Non-cash compensation
18,252
23,900
Other (income) expense, net
(40,732
)
66,141
Acquisition and new business initiatives
related adjustments and expenses
4,953
6,829
Asset impairment and decommission
costs
32,867
8,521
Interest income
(4,683
)
(1,517
)
Total interest expense (1)
113,850
100,766
Depreciation, accretion, and
amortization
181,820
176,392
Benefit for taxes (2)
(28,937
)
(3,302
)
Adjusted EBITDA
$
471,720
$
437,756
Annualized Adjusted EBITDA (3)
$
1,886,880
$
1,751,024
(1)
Total interest expense includes interest
expense, non-cash interest expense, and amortization of deferred
financing fees.
(2)
For the three months ended June 30, 2023
and 2022, these amounts included $241 and $261, respectively, of
franchise and gross receipts taxes reflected in the Statements of
Operations in selling, general and administrative expenses.
(3)
Annualized Adjusted EBITDA is calculated
as Adjusted EBITDA for the most recent quarter multiplied by
four.
The calculation of Adjusted EBITDA Margin is as follows:
For the three months
ended June 30,
2023
2022
(in thousands)
Total revenues
$
678,500
$
652,006
Non-cash straight-line leasing revenue
(7,480
)
(9,846
)
Total revenues minus non-cash
straight-line leasing revenue
$
671,020
$
642,160
Adjusted EBITDA
$
471,720
$
437,756
Adjusted EBITDA Margin
70.3
%
68.2
%
Forecasted Adjusted EBITDA for Full Year
2023
The table below sets forth the reconciliation of the forecasted
Adjusted EBITDA set forth in the Outlook section to its most
comparable GAAP measurement for the full year 2023:
Full Year 2023
(in millions)
Net income
$
549.5
to
$
594.5
Non-cash straight-line leasing revenue
(26.0
)
to
(21.0
)
Non-cash straight-line ground lease
expense
(3.5
)
to
1.5
Non-cash compensation
85.0
to
80.0
Other income, net
(58.0
)
to
(58.0
)
Acquisition and new business initiatives
related adjustments and expenses
25.5
to
20.5
Asset impairment and decommission
costs
112.0
to
107.0
Interest income
(17.5
)
to
(12.5
)
Total interest expense (1)
459.5
to
449.5
Depreciation, accretion, and
amortization
716.5
to
706.5
Provision for taxes (2)
35.0
to
30.0
Adjusted EBITDA
$
1,878.0
to
$
1,898.0
(1)
Total interest expense includes interest
expense, non-cash interest expense, and amortization of deferred
financing fees.
(2)
Includes projections for franchise taxes
and gross receipts taxes, which will be reflected in the Statement
of Operations in Selling, general, and administrative expenses.
Funds from Operations (“FFO”), Adjusted
Funds from Operations (“AFFO”), and AFFO per share
The tables below set forth the reconciliations of FFO, AFFO, and
AFFO per share to their most comparable GAAP measurement.
For the three months
ended June 30,
2023
2022
(in thousands)
($ per share)
(in thousands)
($ per share)
Net income
$
201,970
$
1.85
$
69,151
$
0.63
Real estate related depreciation,
amortization, and accretion
180,118
1.65
175,190
1.60
Asset impairment and decommission
costs
32,867
0.30
8,521
0.08
FFO
$
414,955
$
3.80
$
252,862
$
2.31
Adjustments to FFO:
Non-cash straight-line leasing revenue
(7,480
)
(0.07
)
(9,846
)
(0.09
)
Non-cash straight-line ground lease
expense
(160
)
—
721
0.01
Non-cash compensation
18,252
0.17
23,900
0.22
Adjustment for non-cash portion of tax
benefit
(36,578
)
(0.34
)
(11,250
)
(0.10
)
Non-real estate related depreciation,
amortization, and accretion
1,702
0.02
1,202
0.01
Amortization of deferred financing costs
and
debt discounts and non-cash interest
expense
12,562
0.12
16,451
0.15
Other (income) expense, net
(40,732
)
(0.37
)
66,141
0.61
Acquisition and new business initiatives
related adjustments
and expenses
4,953
0.05
6,829
0.06
Non-discretionary cash capital
expenditures
(14,734
)
(0.14
)
(11,737
)
(0.11
)
AFFO
$
352,740
$
3.24
$
335,273
$
3.07
Adjustments for joint venture partner
interest
(1,829
)
(0.02
)
(971
)
(0.01
)
AFFO attributable to SBA
Communications
Corporation
$
350,911
$
3.22
$
334,302
$
3.06
Diluted weighted average number of common
shares
108,884
109,347
Forecasted AFFO for the Full Year
2023
The tables below set forth the reconciliations of the forecasted
AFFO and AFFO per share set forth in the Outlook section to their
most comparable GAAP measurements for the full year 2023:
(in millions, except per share
amounts)
Full Year 2023
(in millions)
($ per share)
Net income
$
549.5
to
$
594.5
$
5.04
to
$
5.45
Real estate related depreciation,
amortization,
and accretion
706.5
to
701.5
6.48
to
6.43
Asset impairment and decommission
costs
112.0
to
107.0
1.03
to
0.98
FFO
$
1,368.0
to
$
1,403.0
$
12.55
to
$
12.86
Adjustments to FFO:
Non-cash straight-line leasing revenue
(26.0
)
to
(21.0
)
(0.24
)
to
(0.19
)
Non-cash straight-line ground lease
expense
(3.5
)
to
1.5
(0.03
)
to
0.01
Non-cash compensation
85.0
to
80.0
0.78
to
0.73
Non-real estate related depreciation,
amortization, and accretion
10.0
to
5.0
0.09
to
0.05
Amortization of deferred financing costs
and
debt discounts and non-cash interest
expense
57.0
to
57.0
0.52
to
0.52
Other income, net
(58.0
)
to
(58.0
)
(0.53
)
to
(0.53
)
Acquisition and new business initiatives
related
adjustments and expenses
25.5
to
20.5
0.23
to
0.19
Non-discretionary cash capital
expenditures
(62.0
)
to
(52.0
)
(0.57
)
to
(0.48
)
AFFO
$
1,396.0
to
$
1,436.0
$
12.80
to
$
13.16
Adjustments for joint venture partner
interest
(5.0
)
to
(5.0
)
(0.05
)
to
(0.05
)
AFFO attributable to SBA
Communications
Corporation
$
1,391.0
to
$
1,431.0
$
12.75
to
$
13.11
Diluted weighted average number of common
shares (1)
109.1
to
109.1
(1)
Our assumption for weighted average number
of common shares does not contemplate any additional repurchases of
the Company’s stock during 2023.
Net Debt, Net Secured Debt, Leverage
Ratio, and Secured Leverage Ratio
Net Debt is calculated using the notional principal amount of
outstanding debt. Under GAAP policies, the notional principal
amount of the Company's outstanding debt is not necessarily
reflected on the face of the Company's financial statements.
The Net Debt and Leverage calculations are as follows:
June 30,
2023
(in thousands)
2014-2C Tower Securities
$
620,000
2019-1C Tower Securities
1,165,000
2020-1C Tower Securities
750,000
2020-2C Tower Securities
600,000
2021-1C Tower Securities
1,165,000
2021-2C Tower Securities
895,000
2021-3C Tower Securities
895,000
2022-1C Tower Securities
850,000
Revolving Credit Facility
450,000
2018 Term Loan
2,280,000
Total secured debt
9,670,000
2020 Senior Notes
1,500,000
2021 Senior Notes
1,500,000
Total unsecured debt
3,000,000
Total debt
$
12,670,000
Leverage
Ratio
Total debt
$
12,670,000
Less: Cash and cash equivalents,
short-term restricted cash and short-term investments
(273,625
)
Net debt
$
12,396,375
Divided by: Annualized Adjusted EBITDA
$
1,886,880
Leverage Ratio
6.6
x
Secured Leverage
Ratio
Total secured debt
$
9,670,000
Less: Cash and cash equivalents,
short-term restricted cash and short-term investments
(273,625
)
Net Secured Debt
$
9,396,375
Divided by: Annualized Adjusted EBITDA
$
1,886,880
Secured Leverage Ratio
5.0
x
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230731795337/en/
Mark DeRussy, CFA Capital Markets 561-226-9531 Lynne Hopkins
Media Relations 561-226-9431
SBA Communications (NASDAQ:SBAC)
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