SBA COMMUNICATIONS CORP Q4 FY2024 earnings call

Management Statement and Operational Highlights

• The fourth quarter was a solid finish with results in-line to slightly ahead of estimates despite worse foreign exchange rates. Domestic new carrier activity increased sequentially, with a shift in new business mix toward more new lease colocations vs. amendments to existing leases. Carrier customers expanded 5G mid-band coverage and fixed wireless access. Leasing application backlogs and US-based services business had best quarters. 2025 started strongly. International results were in-line, with continued network investment needed. International churn was elevated due to customer consolidations. 2024 was successful with expanded customer relationships, backlog growth, mission/vision/values refresh, and operational streamlining. Debt was refinanced, improving the balance sheet. Entered a deal to purchase ~7,000 towers from Millicom, exited Argentina, Philippines, and Colombia. Key growth drivers include mobile consumption growth, limited spectrum, fixed wireless, AI, regulatory buildout, and 5G expansion. Strong balance sheet and free cash flow for investments and shareholder remuneration.

Segment Performance

• Domestic: Fourth quarter domestic organic revenue growth was 5.1% gross and 2.2% net year-over-year, including 2.9% churn. The quarter saw approximately $8.5 million added in new leases and amendments billings. 1.6% of the 2.9% churn was related to Sprint consolidation, totaling ~$7 million.
• International: Year-over-year international organic recurring cash leasing revenue growth (constant currency) for the fourth quarter was 1.7% net, including 6% churn (7.7% gross). Brazil, the largest international market, had 8.7% gross organic growth. Consolidated cash site leasing revenue and adjusted EBITDA denominated in US dollars were 78% and 81%, respectively. Brazil accounted for 15.6% of consolidated cash site leasing revenues.

Guidance

• Domestic: Guiding $35 million to $39 million from new leases and amendments, $50 million to $52 million related to Sprint churn, and $20 million to $22 million regular churn.
• International: Guiding $16 billion to $18 billion for new lease and amendment, and $27 million to $31 million for churn. FX expected to have a negative $25 million impact on site leasing revenue.
• Services: Guiding $160 million to $180 million in revenue. The Millicom transaction is expected to close September 1, contributing ~$42 million to cash site leasing revenue and ~$29 million to total cash flow. No assumption of further acquisitions or share repurchases beyond current deals.

Risks

• International churn remains elevated due to customer consolidations.
• Delays in the Millicom transaction closing due to regulatory hurdles and other factors.
• FX headwinds impacting financial results.
• Uncertainty around future spectrum auctions and their impact on customer investments.
• Potential challenges in exiting markets where subscale positions exist.

Question and Answer Q: Provide color on increase in backlog, mix of tenants, book to bill cycle.

A: Backlog mix is broad across tenants. There's a shift to more new leases vs. amendments, leading to a later book to bill cycle, expecting quarter-over-quarter growth in US leasing contributions.

Q: Ability to grow domestic leasing in outyears with carrier CapEx budgets.

A: Carriers' CapEx budgets have shifts in mix, with more activity in wireless networks, including fixed wireless, driving investment.

Q: Leasing outlook for 2025, customer-specific activity.

A: Leasing outlook has contributions from big three carriers, certain carriers with regulatory obligations driving activity. DISH contribution is lesser. Services guidance is conservative for the back half of the year.

Q: Mix of business, Sprint churn, leverage target.

A: US business has more colo vs. amendments. Sprint churn fees are incurred but not overly material. Target debt leverage is between 6-6.5 times net debt to EBITDA, potentially investment-grade.

Q: Millicom deal timeline, international churn post-2026.

A: Millicom deal closing is expected September 1, but could be earlier/later. International churn in Brazil is higher due to Oi consolidation, with other markets having churn from carrier rationalizations.

Q: Services diversification, new builds yield.

A: Services are still concentrated but increasing across board. New builds in Central America (Millicom deal) and Tanzania have good initial yields.

Q: BEAD program impact, DISH's effect on tower demand.

A: No direct requests for SBA help with BEAD fixed wireless. DISH contribution is expected to be low in 2025.

Q: International churn peak, share repurchases.

A: International churn is not peaked, likely similar in 2025. Share repurchases are opportunistic, influenced by capital obligations but independent to some extent.

Q: Spectrum auctions, market exits.

A: Supportive of spectrum auctions, but immediate impact on customer investments is on optimizing current spectrum. Not intending to exit more markets, prefer scaling with leading carriers.