Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SBA Communications Corp (SBAC, Financial) reported leasing results in line with expectations and services results slightly ahead, leading to an increased full-year 2024 outlook across key financial metrics.
- The company announced a significant acquisition of over 7,000 sites in Central America from Millicom International Cellular, enhancing its scale and positioning as the largest tower company in the region.
- SBA Communications Corp (SBAC) experienced an increase in domestic new carrier activity and a shift towards more new lease locations, indicating potential for future growth.
- The company successfully executed three positive capital markets transactions, demonstrating strong access to attractively priced capital and maintaining leverage near historical lows.
- SBA Communications Corp (SBAC) reported a strong performance in its services business, with revenue up over 23% from the second quarter and gross profit up over 33%.
Negative Points
- The international market presents challenges due to customer consolidations and network rationalization, although SBA Communications Corp (SBAC) sees potential for future growth.
- The company is facing elevated churn in its international markets, primarily due to previously announced customer consolidations.
- SBA Communications Corp (SBAC) is exiting the Philippines market due to a lack of scale and limited path to growth, highlighting challenges in certain international markets.
- The shift towards more new lease locations may result in a delay from when revenue is signed up to when it commences, compared to amendments.
- The company faces limitations in new spectrum availability, which may challenge customers to meet network demands through incremental equipment deployment and site densification.
Q & A Highlights
Q: Domestically, you mentioned that carrier activity is increasing from the first half levels and shifting to more co-location versus amendment. Can you size that mix? And if this holds up into 4Q, how should we think generally about '25 leasing versus '24? Can it be flat to up? And on the Millicom deal, can you provide more color on the AFFO per share accretion in year one and maybe the lease-up opportunity on these sites?
A: We have seen an increase in carrier activity in the US in terms of new business signed up. The third quarter was higher than the first half of the year, and we expect this trend to continue. The mix is shifting towards more new co-locations versus amendments, which is favorable for future growth. Regarding the Millicom deal, it's premature to give exact AFFO accretion numbers, but it will be accretive once it closes. The current tenant ratio is 1.2, indicating potential for future growth.
Q: On the Tigo deal, can you help us understand the EBITDA multiple and the quality of the assets?
A: The incremental SG&A will be between $3 million and $5 million, making the EBITDA multiple about half a turn higher than the tower cash flow multiple of 11 times. The assets are robust, and the carrier universe in these markets provides a good leasing potential. The sites are under-penetrated, which sets them up well for future growth.
Q: Regarding the Millicom deal, what should we draw from this in terms of potential expansion into other markets like Europe?
A: Our top priority is to strengthen our position in existing markets. This deal does not necessarily indicate plans for expansion into Europe or other new markets. Our focus remains on improving our current market positions or exiting markets where we don't see a clear path to growth.
Q: Can you talk about the application backlog in terms of signed but not commenced new leases? And when is the bottom for leasing metrics?
A: The application backlog reflects the shift in mix towards more new leases. The fourth quarter leasing is expected to be around $9 million, which might represent the bottom. We are seeing an uptick in overall leasing activity, so we are optimistic about future growth.
Q: Could you touch on how you see non-Sprint churn in your domestic markets looking beyond this year?
A: Non-Sprint churn is currently at about 1.3% and is expected to improve further. We anticipate getting close to 1% next year, indicating a continued decline in churn rates.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
