SBA Communications Corporation (Nasdaq: SBAC) ("SBA" or the
"Company") today reported results for the quarter ended September
30, 2022.
Highlights of the third quarter include:
- Net income of $99.8 million or $0.91 per share
- AFFO per share increased 15.1% over the prior year period on
a constant currency basis
- Total revenue of $675.6 million, representing a 14.6% growth
over the prior year period
- On October 11, 2022, we closed on our previously announced
deal to purchase 2,632 sites in Brazil
In addition, the Company announced today that its Board of
Directors has declared a quarterly cash dividend of $0.71 per share
of the Company’s Class A Common Stock. The distribution is payable
December 15, 2022 to the shareholders of record at the close of
business on November 17, 2022.
“We produced great results in the third quarter, exceeding
consensus and our own estimates,” stated Jeffrey Stoops, President
and CEO. “Our results evidence the high levels of wireless
deployment across our markets, driven mostly by 5G domestically and
4G in our international markets. Wireless carrier activity was, and
remains, robust across most of our markets. We believe activity
will remain strong into 2023 and perhaps beyond, given the size and
scope of our customers’ 5G deployment plans. We continue to execute
very well, driving record revenue, Adjusted EBITDA, AFFO and return
on invested capital in the quarter. Due to these strong results, we
ended the quarter with a net debt/annualized adjusted EBITDA ratio
below the low-end of our target range, positioning us well for the
closing of the previously announced acquisition of 2,632 additional
towers in Brazil which we completed in early October. The
integration of those additional towers is proceeding smoothly and
ahead of plan. With this acquisition, we expect to grow our
portfolio of owned tower sites approximately 15% this year,
positioning us well for future growth on what we believe are very
attractive terms. As a result of these positive results, prospects
and investment, we are again increasing our 2022 Outlook across all
key financial metrics, and we expect to end the year at or below
the low-end of our net debt/annualized adjusted EBITDA ratio target
range.”
Operating Results
The table below details select financial results for the three
months ended September 30, 2022 and comparisons to the prior year
period.
% Change
excluding
Q3 2022
Q3 2021
$ Change
% Change
FX (1)
Consolidated
($ in millions, except per
share amounts)
Site leasing revenue
$
587.3
$
535.5
$
51.8
9.7
%
10.3
%
Site development revenue
88.3
53.8
34.5
64.1
%
64.1
%
Tower cash flow (1)
464.1
428.1
36.0
8.4
%
8.9
%
Net income
99.8
47.8
52.0
108.8
%
35.1
%
Earnings per share - diluted
0.91
0.43
0.48
111.6
%
36.9
%
Adjusted EBITDA (1)
446.8
407.0
39.8
9.8
%
10.2
%
AFFO (1)
339.4
302.5
36.9
12.2
%
12.7
%
AFFO per share (1)
3.10
2.71
0.39
14.4
%
15.1
%
(1)
See the reconciliations and other
disclosures under “Non-GAAP Financial Measures” later in this press
release.
Total revenues in the third quarter of 2022 were $675.6 million
compared to $589.3 million in the prior year period, an increase of
14.6%. Site leasing revenue in the third quarter of 2022 of $587.3
million was comprised of domestic site leasing revenue of $449.6
million and international site leasing revenue of $137.7 million.
Domestic cash site leasing revenue in the third quarter of 2022 was
$437.2 million compared to $415.4 million in the prior year period,
an increase of 5.3%. International cash site leasing revenue in the
third quarter of 2022 was $138.4 million compared to $109.8 million
in the prior year period, an increase of 26.1%, or 29.1% on a
constant currency basis. Site development revenues in the third
quarter of 2022 were $88.3 million compared to $53.8 million in the
prior year period, an increase of 64.1%.
Site leasing operating profit in the third quarter of 2022 was
$475.3 million, an increase of 8.8% over the prior year period.
Site leasing contributed 95.4% of the Company’s total operating
profit in the third quarter of 2022. Domestic site leasing segment
operating profit in the third quarter of 2022 was $383.2 million,
an increase of 6.0% over the prior year period. International site
leasing segment operating profit in the third quarter of 2022 was
$92.1 million, an increase of 22.3% from the prior year period.
Tower Cash Flow in the third quarter of 2022 of $464.1 million
was comprised of Domestic Tower Cash Flow of $370.9 million and
International Tower Cash Flow of $93.2 million. Domestic Tower Cash
Flow in the third quarter of 2022 increased 5.5% over the prior
year period and International Tower Cash Flow increased 21.4% over
the prior year period, or increased 24.2% on a constant currency
basis. Tower Cash Flow Margin was 80.6% in the third quarter of
2022, as compared to 81.5% for the prior year period.
Net income in the third quarter of 2022 was $99.8 million, or
$0.91 per share, and included a $25.5 million loss, net of taxes,
on the currency-related remeasurement of U.S. dollar denominated
intercompany loans with foreign subsidiaries. Net income in the
third quarter of 2021 was $47.8 million, or $0.43 per share, and
included a $45.0 million loss, net of taxes, on the
currency-related remeasurement of U.S. dollar denominated
intercompany loans with foreign subsidiaries.
Adjusted EBITDA in the third quarter of 2022 was $446.8 million,
a 9.8% increase over the prior year period. Adjusted EBITDA Margin
in the third quarter of 2022 was 67.3% compared to 70.3% in the
prior year period.
Net Cash Interest Expense in the third quarter of 2022 was $84.1
million compared to $88.3 million in the prior year period, a
decrease of 4.8%.
AFFO in the third quarter of 2022 was $339.4 million, a 12.2%
increase over the prior year period. AFFO per share in the third
quarter of 2022 was $3.10, a 14.4% increase over the prior year
period, or 15.1% on a constant currency basis.
Investing Activities
During the third quarter of 2022, SBA acquired 131 communication
sites for total cash consideration of $54.9 million. SBA also built
113 towers during the third quarter of 2022. As of September 30,
2022, SBA owned or operated 36,519 communication sites, 17,401 of
which are located in the United States and its territories and
19,118 of which are located internationally. In addition, the
Company spent $9.1 million to purchase land and easements and to
extend lease terms. Total cash capital expenditures for the third
quarter of 2022 were $122.5 million, consisting of $12.6 million of
non-discretionary cash capital expenditures (tower maintenance and
general corporate) and $109.9 million of discretionary cash capital
expenditures (new tower builds, tower augmentations, acquisitions,
and purchasing land and easements).
On October 11, 2022, the Company completed the previously
announced acquisition of 2,632 sites from Grupo TorreSur in Brazil
for approximately $725.0 million in cash. The Company used
borrowings under the Revolving Credit Facility and cash on hand to
fund the acquisition.
Additionally, subsequent to the third quarter of 2022, the
Company purchased or is under contract to purchase 34 communication
sites for an aggregate consideration of $28.5 million in cash. The
Company anticipates that these acquisitions will be consummated by
the end of the first quarter of 2023.
Financing Activities and
Liquidity
SBA ended the third quarter of 2022 with $12.4 billion of total
debt, $9.4 billion of total secured debt, $297.5 million of cash
and cash equivalents, short-term restricted cash, and short-term
investments, and $12.1 billion of Net Debt. SBA’s Net Debt and Net
Secured Debt to Annualized Adjusted EBITDA Leverage Ratios were
6.8x and 5.1x, respectively.
As of the date of this press release, the Company had $995.0
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 third quarter of 2022. As of the date of this
filing, the Company has $504.7 million of authorization remaining
under its approved repurchase plan.
In the third quarter of 2022, the Company declared and paid a
cash dividend of $76.7 million.
Outlook
The Company is updating its full year 2022 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 2022 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 2022 on acquiring revenue producing assets
not yet identified or under contract, the impact of which is not
reflected in the 2022 guidance. The Outlook also does not
contemplate any additional repurchases of the Company’s stock or
new debt financings during 2022, 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 5.30 Brazilian Reais to 1.0 U.S. Dollar, 1.35
Canadian Dollars to 1.0 U.S. Dollar, 2,330 Tanzanian shillings to
1.0 U.S. Dollar, and 17.90 South African Rand to 1.0 U.S. Dollar
throughout the last quarter of 2022.
Change from
Change from
August 1, 2022
August 1, 2022
Outlook
(in millions, except per share
amounts)
Full Year 2022
Outlook (7)
Excluding FX
Site leasing revenue (1)
$
2,325.0
to
$
2,335.0
$
23.0
$
22.0
Site development revenue
$
291.0
to
$
301.0
$
26.0
$
26.0
Total revenues
$
2,616.0
to
$
2,636.0
$
49.0
$
48.0
Tower Cash Flow (2)
$
1,844.0
to
$
1,854.0
$
18.0
$
17.0
Adjusted EBITDA (2)
$
1,763.0
to
$
1,773.0
$
27.0
$
26.0
Net cash interest expense (3)
$
338.0
to
$
343.0
$
3.0
$
3.0
Non-discretionary cash capital
expenditures (4)
$
48.0
to
$
53.0
$
(0.5
)
$
(0.5
)
AFFO (2)
$
1,326.0
to
$
1,350.0
$
18.0
$
17.0
AFFO per share (2) (5)
$
12.12
to
$
12.34
$
0.18
$
0.17
Discretionary cash capital expenditures
(6)
$
1,380.0
to
$
1,390.0
$
(35.0
)
$
(36.0
)
(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 109.4 million. Outlook
does not include the impact of any potential future repurchases of
the Company’s stock during 2022.
(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, October 31, 2022 at 5:00 PM (EDT) to discuss the quarterly
results. The call may be accessed as follows:
When:
Monday, October 31, 2022 at 5:00
PM (EDT)
Dial-in Number:
(877) 692-8955
Access Code:
1502503
Conference Name:
SBA Third quarter 2022
results
Replay Available:
October 31, 2022 at 11:00 PM to
November 14, 2022 at 12:00 AM (TZ: Eastern)
Replay Number:
(866) 207-1041 – Access Code:
7277834
Internet Access:
www.sbasite.com
Information Concerning Forward-Looking
Statements
This press release and our earnings call include forward-looking
statements, including statements regarding the Company’s
expectations or beliefs regarding (i) customer activity and demand
for the Company’s wireless communications infrastructure into 2023
and beyond, both domestically and internationally, and the impact
of customer 4G and 5G deployment plans on such demand, (ii) the
Company’s future capital allocation, (iii) the Company’s financial
and operational performance in 2022, the assumptions it made and
the drivers contributing to its updated full year guidance, (iv)
the Company’s net debt/annualized adjusted EBITDA ratio at the end
of 2022, (v) the timing of closing for currently pending
acquisitions, (vi) integration of the recently completed Brazil
acquisition, (vii) the Company’s tower portfolio growth for 2022
and positioning for, and terms of, future growth, (viii) foreign
exchange rates and their impact on the Company’s financial and
operational guidance and our 2022 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, including the
impact of the completed T-Mobile and Sprint merger, 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, weather,
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 2022; 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 2022 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 Annual Report on Form 10-K filed with the Commission on
March 1, 2022.
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 first choice provider and
leading owner and operator of wireless communications
infrastructure in North, Central, and South America, South Africa,
the Philippines, and Tanzania. By “Building Better Wireless,” SBA
generates revenue from two primary businesses – site leasing and
site development services. The primary focus of the Company is the
leasing of antenna space on its multi-tenant communication sites to
a variety of wireless service providers under long-term lease
contracts. 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 nine months
ended September 30,
ended September 30,
2022
2021
2022
2021
Revenues:
Site leasing
$
587,302
$
535,492
$
1,726,967
$
1,564,814
Site development
88,282
53,813
220,393
148,882
Total revenues
675,584
589,305
1,947,360
1,713,696
Operating expenses:
Cost of revenues (exclusive of
depreciation, accretion, and amortization shown below):
Cost of site leasing
112,013
98,666
330,682
289,510
Cost of site development
65,540
41,357
165,809
116,172
Selling, general, and administrative
expenses (1)
65,843
51,000
191,241
156,546
Acquisition and new business initiatives
related adjustments and expenses
6,844
5,730
18,776
17,525
Asset impairment and decommission
costs
8,532
9,860
25,565
18,560
Depreciation, accretion, and
amortization
173,825
170,916
524,541
530,266
Total operating expenses
432,597
377,529
1,256,614
1,128,579
Operating income
242,987
211,776
690,746
585,117
Other income (expense):
Interest income
2,858
945
6,878
2,124
Interest expense
(86,961
)
(89,199
)
(253,528
)
(269,839
)
Non-cash interest expense
(11,528
)
(11,820
)
(34,582
)
(35,436
)
Amortization of deferred financing
fees
(4,955
)
(4,934
)
(14,758
)
(14,690
)
Loss from extinguishment of debt, net
—
—
—
(13,672
)
Other (expense) income, net
(39,756
)
(69,804
)
2,262
(49,390
)
Total other expense net
(140,342
)
(174,812
)
(293,728
)
(380,903
)
Income before income taxes
102,645
36,964
397,018
204,214
(Provision) benefit for income taxes
(2,883
)
10,834
(39,797
)
(15,494
)
Net income
99,762
47,798
357,221
188,720
Net loss attributable to noncontrolling
interests
247
—
929
—
Net income attributable to SBA
Communications Corporation
$
100,009
$
47,798
$
358,150
$
188,720
Net income per common share attributable
to SBA Communications Corporation:
Basic
$
0.93
$
0.44
$
3.32
$
1.72
Diluted
$
0.91
$
0.43
$
3.27
$
1.70
Weighted average number of common
shares
Basic
107,916
109,577
107,950
109,487
Diluted
109,358
111,565
109,416
111,329
(1)
Includes non-cash compensation of $24,945
and $16,589 for the three months ended September 30, 2022 and 2021,
respectively, and $72,309 and $57,249 for the nine months ended
September 30, 2022 and 2021, respectively.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except par
values)
September 30,
December 31,
2022
2021
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents
$
201,211
$
367,278
Restricted cash
75,166
65,561
Accounts receivable, net
116,966
101,950
Costs and estimated earnings in excess of
billings on uncompleted contracts
81,665
48,844
Prepaid expenses and other current
assets
54,805
30,813
Total current assets
529,813
614,446
Property and equipment, net
2,658,366
2,575,487
Intangible assets, net
2,701,939
2,803,247
Operating lease right-of-use assets,
net
2,325,009
2,268,470
Acquired and other right-of-use assets,
net
989,685
964,405
Other assets
737,568
575,644
Total assets
$
9,942,380
$
9,801,699
LIABILITIES, REDEEMABLE NONCONTROLLING
INTERESTS, AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable
$
44,680
$
34,066
Accrued expenses
96,176
68,070
Current maturities of long-term debt
663,181
24,000
Deferred revenue
216,927
184,380
Accrued interest
25,106
49,096
Current lease liabilities
255,609
238,497
Other current liabilities
30,066
18,222
Total current liabilities
1,331,745
616,331
Long-term liabilities:
Long-term debt, net
11,696,068
12,278,694
Long-term lease liabilities
2,017,760
1,981,353
Other long-term liabilities
221,022
191,475
Total long-term liabilities
13,934,850
14,451,522
Redeemable noncontrolling interests
40,615
17,250
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, 107,964 shares and 108,956 shares issued
and outstanding at September 30, 2022 and December 31, 2021,
respectively
1,080
1,089
Additional paid-in capital
2,756,215
2,681,347
Accumulated deficit
(7,508,231
)
(7,203,531
)
Accumulated other comprehensive loss,
net
(613,894
)
(762,309
)
Total shareholders' deficit
(5,364,830
)
(5,283,404
)
Total liabilities, redeemable
noncontrolling interests, and shareholders' deficit
$
9,942,380
$
9,801,699
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (unaudited) (in thousands)
For the three months
ended September 30,
2022
2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
99,762
$
47,798
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, accretion, and
amortization
173,825
170,916
Loss on remeasurement of U.S. denominated
intercompany loans
37,427
67,626
Non-cash compensation expense
25,492
17,111
Non-cash asset impairment and decommission
costs
8,237
9,502
Deferred income tax benefit
(7,480
)
(16,913
)
Other non-cash items reflected in the
Statements of Operations
19,051
20,896
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable and costs and
estimated earnings in excess of billings on uncompleted contracts,
net
(25,817
)
(12,953
)
Prepaid expenses and other assets
(16,641
)
(22,995
)
Operating lease right-of-use assets,
net
35,591
29,722
Accounts payable and accrued expenses
16,126
5,366
Accrued interest
(25,734
)
(39,915
)
Long-term lease liabilities
(33,102
)
(29,113
)
Other liabilities
25,732
6,000
Net cash provided by operating
activities
332,469
253,048
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions
(65,143
)
(57,903
)
Capital expenditures
(57,377
)
(35,032
)
Sale of investments, net
15,256
—
Other investing activities
1,648
(133
)
Net cash used in investing activities
(105,616
)
(93,068
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under Revolving Credit
Facility
(120,000
)
(85,000
)
Repurchase and retirement of common
stock
—
(115,421
)
Payment of dividends on common stock
(76,664
)
(63,563
)
Proceeds from employee stock
purchase/stock option plans, net of taxes
13,222
36,987
Other financing activities
(6,622
)
(9,785
)
Net cash used in financing activities
(190,064
)
(236,782
)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(7,893
)
(7,609
)
NET CHANGE IN CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH
28,896
(84,411
)
CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH:
Beginning of period
250,978
338,810
End of period
$
279,874
$
254,399
Selected Capital
Expenditure Detail
For the three
For the nine
months ended
months ended
September 30, 2022
September 30, 2022
(in thousands)
Construction and related costs
$
28,830
$
72,275
Augmentation and tower upgrades
15,982
39,514
Non-discretionary capital
expenditures:
Tower maintenance
10,579
29,975
General corporate
1,986
6,584
Total non-discretionary capital
expenditures
12,565
36,559
Total capital expenditures
$
57,377
$
148,348
Communication Site
Portfolio Summary
Domestic
International
Total
Sites owned at June 30, 2022
17,395
18,902
36,297
Sites acquired during the third
quarter
8
123
131
Sites built during the third quarter
1
112
113
Sites decommissioned/reclassified during
the third quarter
(3
)
(19
)
(22
)
Sites owned at September 30, 2022
17,401
19,118
36,519
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 September 30,
ended September 30,
ended September 30,
2022
2021
2022
2021
2022
2021
(in thousands)
Segment revenue
$
449,595
$
426,758
$
137,707
$
108,734
$
88,282
$
53,813
Segment cost of revenues (excluding
depreciation, accretion, and amort.)
(66,423
)
(65,260
)
(45,590
)
(33,406
)
(65,540
)
(41,357
)
Segment operating profit
$
383,172
$
361,498
$
92,117
$
75,328
$
22,742
$
12,456
Segment operating profit margin
85.2
%
84.7
%
66.9
%
69.3
%
25.8
%
23.1
%
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.
Third quarter
2022 year
Foreign
Growth excluding
over year
currency
foreign
growth rate
impact
currency impact
Total site leasing revenue
9.7%
(0.6%)
10.3%
Total cash site leasing revenue
9.6%
(0.6%)
10.2%
Int'l cash site leasing revenue
26.1%
(3.0%)
29.1%
Total site leasing segment operating
profit
8.8%
(0.5%)
9.3%
Int'l site leasing segment operating
profit
22.3%
(2.7%)
25.0%
Total site leasing tower cash flow
8.4%
(0.5%)
8.9%
Int'l site leasing tower cash flow
21.4%
(2.8%)
24.2%
Net income
108.8%
73.7%
35.1%
Earnings per share - diluted
111.6%
74.7%
36.9%
Adjusted EBITDA
9.8%
(0.4%)
10.2%
AFFO
12.2%
(0.5%)
12.7%
AFFO per share
14.4%
(0.7%)
15.1%
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 September 30,
ended September 30,
ended September 30,
2022
2021
2022
2021
2022
2021
(in thousands)
Site leasing revenue
$
449,595
$
426,758
$
137,707
$
108,734
$
587,302
$
535,492
Non-cash straight-line leasing revenue
(12,350
)
(11,408
)
664
1,016
(11,686
)
(10,392
)
Cash site leasing revenue
437,245
415,350
138,371
109,750
575,616
525,100
Site leasing cost of revenues (excluding
depreciation, accretion, and amortization)
(66,423
)
(65,260
)
(45,590
)
(33,406
)
(112,013
)
(98,666
)
Non-cash straight-line ground lease
expense
82
1,346
396
388
478
1,734
Tower Cash Flow
$
370,904
$
351,436
$
93,177
$
76,732
$
464,081
$
428,168
Tower Cash Flow Margin
84.8
%
84.6
%
67.3
%
69.9
%
80.6
%
81.5
%
Forecasted Tower
Cash Flow for Full Year 2022
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 2022:
Full Year 2022
(in millions)
Site leasing revenue
$
2,325.0
to
$
2,335.0
Non-cash straight-line leasing revenue
(41.0
)
to
(36.0
)
Cash site leasing revenue
2,284.0
to
2,299.0
Site leasing cost of revenues (excluding
depreciation, accretion, and amortization)
(440.0
)
to
(450.0
)
Non-cash straight-line ground lease
expense
—
to
5.0
Tower Cash Flow
$
1,844.0
to
$
1,854.0
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 September 30,
2022
2021
(in thousands)
Net income
$
99,762
$
47,798
Non-cash straight-line leasing revenue
(11,686
)
(10,392
)
Non-cash straight-line ground lease
expense
478
1,734
Non-cash compensation
25,492
17,111
Other expense, net
39,756
69,804
Acquisition and new business initiatives
related adjustments and expenses
6,844
5,730
Asset impairment and decommission
costs
8,532
9,860
Interest income
(2,858
)
(945
)
Total interest expense (1)
103,444
105,953
Depreciation, accretion, and
amortization
173,825
170,916
Provision (benefit) for taxes (2)
3,170
(10,605
)
Adjusted EBITDA
$
446,759
$
406,964
Annualized Adjusted EBITDA (3)
$
1,787,036
$
1,627,856
(1)
Total interest expense includes interest
expense, non-cash interest expense, and amortization of deferred
financing fees.
(2)
For the three months ended September 30,
2022 and 2021, these amounts included $287 and $229, 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 September 30,
2022
2021
(in thousands)
Total revenues
$
675,584
$
589,305
Non-cash straight-line leasing revenue
(11,686
)
(10,392
)
Total revenues minus non-cash
straight-line leasing revenue
$
663,898
$
578,913
Adjusted EBITDA
$
446,759
$
406,964
Adjusted EBITDA Margin
67.3
%
70.3
%
Forecasted Adjusted
EBITDA for Full Year 2022
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 2022:
Full Year 2022
(in millions)
Net income
$
469.0
to
$
504.0
Non-cash straight-line leasing revenue
(41.0
)
to
(36.0
)
Non-cash straight-line ground lease
expense
—
to
5.0
Non-cash compensation
101.5
to
96.5
Other income, net
(14.0
)
to
(14.0
)
Acquisition and new business initiatives
related adjustments and expenses
28.0
to
23.0
Asset impairment and decommission
costs
36.5
to
31.5
Interest income
(11.0
)
to
(7.0
)
Total interest expense (1)
419.5
to
410.5
Depreciation, accretion, and
amortization
717.5
to
707.5
Provision for taxes (2)
57.0
to
52.0
Adjusted EBITDA
$
1,763.0
to
$
1,773.0
(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 table below sets forth the
reconciliations of FFO and AFFO to their most comparable GAAP
measurement.
For the three months
ended September 30,
(in thousands, except per share
amounts)
2022
2021
Net income
$
99,762
$
47,798
Real estate related depreciation,
amortization, and accretion
172,551
169,881
Asset impairment and decommission
costs
8,532
9,860
FFO
$
280,845
$
227,539
Adjustments to FFO:
Non-cash straight-line leasing revenue
(11,686
)
(10,392
)
Non-cash straight-line ground lease
expense
478
1,734
Non-cash compensation
25,492
17,111
Adjustment for non-cash portion of tax
benefit
(7,480
)
(16,865
)
Non-real estate related depreciation,
amortization, and accretion
1,274
1,035
Amortization of deferred financing costs
and debt discounts and non-cash interest expense
16,483
16,754
Other expense, net
39,756
69,804
Acquisition and new business initiatives
related adjustments and expenses
6,844
5,730
Non-discretionary cash capital
expenditures
(12,565
)
(9,989
)
AFFO
$
339,441
$
302,461
Adjustments for joint venture partner
interest
(868
)
—
AFFO attributable to SBA Communications
Corporation
$
338,573
$
302,461
Weighted average number of common shares
(1)
109,358
111,565
AFFO per share
$
3.10
$
2.71
AFFO per share attributable to SBA
Communications Corporation
$
3.10
$
2.71
(1)
For purposes of the AFFO per share
calculation, the basic weighted average number of common shares has
been adjusted to include the dilutive effect of stock options and
restricted stock units.
Forecasted AFFO for
the Full Year 2022
The table below sets forth the
reconciliation of the forecasted AFFO and AFFO per share set forth
in the Outlook section to its most comparable GAAP measurement for
the full year 2022:
(in millions, except per share
amounts)
Full Year 2022
Net income
$
469.0
to
$
504.0
Real estate related depreciation,
amortization, and accretion
709.0
to
704.0
Asset impairment and decommission
costs
36.5
to
31.5
FFO
$
1,214.5
to
$
1,239.5
Adjustments to FFO:
Non-cash straight-line leasing revenue
(41.0
)
to
(36.0
)
Non-cash straight-line ground lease
expense
—
to
5.0
Non-cash compensation
101.5
to
96.5
Adjustment for non-cash portion of tax
provision
16.0
to
15.0
Non-real estate related depreciation,
amortization, and accretion
8.5
to
3.5
Amortization of deferred financing costs
and debt discounts and non-cash interest expense
65.5
to
65.5
Other income, net
(14.0
)
to
(14.0
)
Acquisition and new business initiatives
related adjustments and expenses
28.0
to
23.0
Non-discretionary cash capital
expenditures
(53.0
)
to
(48.0
)
AFFO
$
1,326.0
to
$
1,350.0
Adjustments for joint venture partner
interest
(3.0
)
to
(3.0
)
AFFO attributable to SBA Communications
Corporation
$
1,323.0
to
$
1,347.0
Weighted average number of common shares
(1)
109.4
to
109.4
AFFO per share
$
12.12
to
$
12.34
AFFO per share attributable to SBA
Communications Corporation
$
12.09
to
$
12.31
(1)
Our assumption for weighted average number
of common shares does not contemplate any additional repurchases of
the Company’s stock during 2022.
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:
September 30,
2022
(in thousands)
2014-2C Tower Securities
$
620,000
2018-1C Tower Securities
640,000
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
Revolving Credit Facility
410,000
2018 Term Loan
2,298,000
Total secured debt
9,438,000
2020 Senior Notes
1,500,000
2021 Senior Notes
1,500,000
Total unsecured debt
3,000,000
Total debt
$
12,438,000
Leverage
Ratio
Total debt
$
12,438,000
Less: Cash and cash equivalents,
short-term restricted cash and short-term investments
(297,516
)
Net debt
$
12,140,484
Divided by: Annualized Adjusted EBITDA
$
1,787,036
Leverage Ratio
6.8x
Secured Leverage
Ratio
Total secured debt
$
9,438,000
Less: Cash and cash equivalents,
short-term restricted cash and short-term investments
(297,516
)
Net Secured Debt
$
9,140,484
Divided by: Annualized Adjusted EBITDA
$
1,787,036
Secured Leverage Ratio
5.1x
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221031005627/en/
Mark DeRussy, CFA Capital Markets 561-226-9531
Lynne Hopkins Media Relations 561-226-9431
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