TechDogs-"SBA Communications Corporation Reports Second Quarter 2023 Results; Updates Full Year 2023 Outlook; Declares Quarterly Cash Dividend; And Announces Newly Signed Master Lease Agreement With AT&T"

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SBA Communications Corporation Reports Second Quarter 2023 Results; Updates Full Year 2023 Outlook; Declares Quarterly Cash Dividend; And Announces Newly Signed Master Lease Agreement With AT&T

By Business Wire

Business Wire
Overall Rating

BOCA RATON, Fla.--(BUSINESS WIRE)--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


Contacts

Mark DeRussy, CFA
Capital Markets
561-226-9531

Lynne Hopkins
Media Relations
561-226-9431

Read full story here

First published on Tue, Aug 1, 2023

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