Updates Full Year 2019 Outlook
SBA Communications Corporation (Nasdaq: SBAC) ("SBA" or the
"Company") today reported results for the quarter ended September
30, 2019.
Highlights of the third quarter include:
- Strong operating results in both the leasing and site
development businesses
- Net income of $21.8 million or $0.19 per share
- AFFO per share growth of 12.0% over the year earlier
period
- Closed on South Africa transaction adding 889
towers
“We had another solid performance in the third quarter,”
commented Jeffrey A. Stoops, President and Chief Executive Officer.
“Our customers, domestic and international, continued to stay
active primarily with 4G densification work but also, particularly
in the U.S., with early 5G deployment. In the U.S., we believe we
are at the beginning of a long-term 5G deployment cycle that we
expect will sustain activity levels for quite some time, with
international markets to follow. Operationally, we executed well
again in the third quarter. We closed on the consolidation of our
South Africa operation, smoothly integrating approximately 900
towers. We paid our first cash dividend, and allocated capital
materially in three areas – portfolio growth, stock repurchases and
the cash dividend. All this positive activity helped contribute to
double-digit growth in AFFO per share. We look forward to a strong
finish to 2019.”
Operating Results
The table below details select financial results for the three
months ended September 30, 2019 and comparisons to the prior year
period.
% Change
excluding
Q3 2019
Q3 2018
$ Change
% Change
FX (1)
Consolidated
($ in millions, except per
share amounts)
Site leasing revenue
$
468.6
$
435.3
$
33.3
7.7%
7.8%
Site development revenue
39.0
32.0
7.0
21.9%
21.9%
Tower cash flow (1)
376.3
344.8
31.5
9.1%
9.2%
Net income
21.8
16.1
5.7
35.4%
27.5%
Earnings per share - diluted
0.19
0.14
0.05
35.7%
28.6%
Adjusted EBITDA (1)
355.4
328.1
27.3
8.3%
8.4%
AFFO (1)
247.4
222.7
24.7
11.1%
11.2%
AFFO per share (1)
2.15
1.92
0.23
12.0%
12.0%
(1)
See the reconciliations and other
disclosures under “Non-GAAP Financial Measures” later in this press
release.
Total revenues in the third quarter of 2019 were $507.5 million
compared to $467.2 million in the year earlier period, an increase
of 8.6%. Site leasing revenue in the quarter of $468.6 million was
comprised of domestic site leasing revenue of $374.7 million and
international site leasing revenue of $93.9 million. Domestic cash
site leasing revenue was $371.4 million in the third quarter of
2019 compared to $350.4 million in the year earlier period, an
increase of 6.0%. International cash site leasing revenue was $93.4
million in the third quarter of 2019 compared to $79.8 million in
the year earlier period, an increase of 17.0%, or 17.9% excluding
the impact of changes in foreign currency exchange rates.
Site leasing operating profit was $375.6 million, an increase of
9.5% over the year earlier period. Site leasing contributed 97.8%
of the Company’s total operating profit in the third quarter of
2019. Domestic site leasing segment operating profit was $310.9
million, an increase of 8.5% over the year earlier period.
International site leasing segment operating profit was $64.7
million, an increase of 14.9% over the year earlier period.
Tower Cash Flow for the third quarter of 2019 of $376.3 million
was comprised of Domestic Tower Cash Flow of $311.6 million and
International Tower Cash Flow of $64.7 million. Domestic Tower Cash
Flow for the quarter increased 7.4% over the prior year period and
International Tower Cash Flow increased 18.2% over the prior year
period. Tower Cash Flow Margin was 81.0% for the third quarter of
2019, as compared to 80.2% for the year earlier period.
Net income for the third quarter of 2019 was $21.8 million, or
$0.19 per share, and included a $21.0 million loss, net of taxes,
on the currency related remeasurement of U.S. dollar denominated
intercompany loans with foreign subsidiaries, while net income for
the third quarter of 2018 was $16.1 million, or $0.14 per share,
and included a $17.1 million loss, net of taxes, on the currency
related remeasurement of U.S. dollar denominated intercompany loans
with a Brazilian subsidiary.
Adjusted EBITDA for the quarter was $355.4 million, an 8.3%
increase over the prior year period. Adjusted EBITDA Margin was
70.6% in the third quarter of 2019 compared to 71.0% in the third
quarter of 2018.
Net Cash Interest Expense was $95.3 million in the third quarter
of 2019 compared to $93.7 million in the third quarter of 2018, an
increase of 1.7%.
AFFO for the quarter was $247.4 million, an 11.1% increase over
the prior year period. AFFO per share for the third quarter of 2019
was $2.15, a 12.0% increase over the prior year period.
Investing Activities
During the third quarter of 2019, excluding the sites from the
previously announced South Africa investment, SBA acquired 78
communication sites for total cash consideration of $27.8 million.
SBA also built 98 towers during the third quarter of 2019. On
August 30, 2019, the Company closed on its option to acquire all
but 6% of a previously unconsolidated joint venture in South
Africa. The cumulative amount invested by the Company in South
Africa through the closing date is approximately $140.0 million. At
closing, the South Africa joint venture had 889 towers in
operation. As of September 30, 2019, including South Africa, SBA
owned or operated 30,904 communication sites, 16,385 of which are
located in the United States and its territories, and 14,519 of
which are located internationally. In addition, the Company spent
$15.9 million to purchase land and easements and to extend lease
terms. Total cash capital expenditures for the third quarter of
2019 were $171.0 million, consisting of $8.8 million of
non-discretionary cash capital expenditures (tower maintenance and
general corporate) and $162.2 million of discretionary cash capital
expenditures (new tower builds, tower augmentations, acquisitions,
and purchasing land and easements).
Subsequent to the third quarter of
2019, the Company acquired 6 communication sites for an aggregate
consideration of $6.7 million in cash. In addition, the Company has
agreed to purchase and anticipates closing on 107 additional
communication sites for an aggregate amount of $32.7 million. The
Company anticipates that the majority of these acquisitions will be
consummated by the end of the first quarter of 2020.
Financing Activities and
Liquidity
SBA ended the third quarter of 2019 with $9.9 billion of total
debt, $7.3 billion of total secured debt, $156.9 million of cash
and cash equivalents, short-term restricted cash, and short-term
investments, and $9.8 billion of Net Debt. SBA’s Net Debt and Net
Secured Debt to Annualized Adjusted EBITDA Leverage Ratios were
6.9x and 5.0x, respectively.
On September 13, 2019, the Company, through a trust, issued
$1.165 billion of Secured Tower Revenue Securities Series 2019-1C,
which have an anticipated repayment date in January 2025 and a
final maturity date in January 2050 (the “2019-1C Tower
Securities”). The fixed interest rate on the 2019-1C Tower
Securities is 2.836% per annum, payable monthly. Net proceeds from
this offering were used to repay the entire aggregate principal
amount of the 2014-1C Tower Securities ($920.0 million), as well as
accrued and unpaid interest, amounts outstanding under the
Revolving Credit Facility, and any remaining amount was used for
general corporate purposes.
During the third quarter of 2019, the Company repurchased 0.7
million shares of its Class A common stock for $175.7 million, of
which $2.7 million was funded in the fourth quarter, at an average
price per share of $249.04 under its $1.0 billion stock repurchase
plan. All shares repurchased were retired. As of the date of this
filing, the Company has $824.3 million of authorization remaining
under the plan.
In the third quarter of 2019, the Company declared and paid its
first cash dividend of $41.9 million.
Outlook
The Company is updating its full year 2019 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 2019 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 2019 on acquiring revenue producing assets
not yet identified or under contract, the impact of which is not
reflected in the 2019 guidance. The Outlook also does not
contemplate any new financings or any additional repurchases of the
Company’s stock in 2019 other than those financings and repurchases
completed as of the date of this press release.
The Company’s Outlook assumes an average foreign currency
exchange rate of 4.10 Brazilian Reais to 1.0 U.S. Dollar, 1.33
Canadian Dollars to 1.0 U.S. Dollar, and 15.2 South African Rand to
1.0 U.S. Dollar for the fourth quarter of 2019. When compared to
the Company’s full year 2019 Outlook provided July 29, 2019, the
variances in the actual third quarter foreign currency exchange
rates versus the Company’s assumptions, and the changes in the
Company’s foreign currency rate assumptions for the remainder of
the year negatively impacted the full year 2019 Outlook by
approximately $7.7 million for Site Leasing Revenue, $5.0 million
for Tower Cash Flow, and $4.6 million for Adjusted EBITDA and
AFFO.
(in millions, except per share
amounts)
Full Year 2019
Site leasing revenue (1)
$
1,849.0
to
$
1,859.0
Site development revenue
$
145.0
to
$
155.0
Total revenues
$
1,994.0
to
$
2,014.0
Tower Cash Flow (2)
$
1,485.0
to
$
1,495.0
Adjusted EBITDA (2)
$
1,400.0
to
$
1,410.0
Net cash interest expense (3)
$
381.0
to
$
387.0
Non-discretionary cash capital
expenditures (4)
$
31.0
to
$
37.0
AFFO (2)
$
954.0
to
$
980.0
AFFO per share (2) (5)
$
8.31
to
$
8.54
Discretionary cash capital expenditures
(6)
$
468.0
to
$
478.0
(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 114.8 million. Our
Outlook does not include the impact of any potential future
repurchases of the Company’s stock during 2019.
(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.
Conference Call Information
SBA Communications Corporation will host a conference call on
Monday, October 28, 2019 at 5:00 PM (EST) to discuss the quarterly
results. The call may be accessed as follows:
When:
Monday, October 28, 2019 at 5:00
PM (EST)
Dial-in Number:
(844) 767-5679
Access Code:
8438087
Conference Name
SBA third quarter results
Replay Available:
October 28, 2019 at 11:00 PM to
November 11, 2019 at 12:00 AM (TZ: Eastern)
Replay Number:
(866) 207-1041 – Access Code:
198429
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) the long-term impact of
customer activity in 5G deployment both domestically and
internationally, (ii) the Company’s financial and operational
performance in 2019, (iii) the Company’s financial and operational
guidance for the full year 2019, the assumptions it made and the
drivers contributing to the change in its full year guidance, (iv)
the timing of closing for currently pending acquisitions, and (v)
foreign exchange rates and their impact on the Company’s financial
and operational guidance.
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 ability and
willingness of wireless service providers to maintain or increase
their capital expenditures; (2) the Company’s ability to identify
and acquire sites at prices and upon terms that will provide
accretive portfolio growth; (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 impact of continued
consolidation among wireless service providers, including the
impact of the potential T-Mobile and Sprint merger, on the
Company’s leasing revenue; (6) the Company’s ability to
successfully manage the risks associated with international
operations, including risks associated with foreign currency
exchange rates; (7) the Company’s ability to secure and deliver
anticipated services business at contemplated margins; (8) the
Company’s ability to maintain expenses and cash capital
expenditures at appropriate levels for its business while seeking
to attain its investment goals; (9) the Company’s ability to
acquire land underneath towers on terms that are accretive; (10)
the economic climate for the wireless communications industry in
general and the wireless communications infrastructure providers in
particular in the United States, Brazil, and internationally; (11)
the Company’s ability to obtain future financing at commercially
reasonable rates or at all; (12) the ability of the Company to
achieve its long-term stock repurchases strategy, which will
depend, among other things, on the trading price of the Company’s
common stock, which may be positively or negatively impacted by the
repurchase program, market and business conditions; (13) 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 2019; and (14) the Company’s
ability to meet its total portfolio growth, which will depend, in
addition to the new build risks, on the availability of sufficient
towers for sale to meet our targets, 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 and its ability to accurately
anticipate the future performance of the acquired towers, 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. 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 2019 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 February 28, 2019.
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 and South
Africa. 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,
2019
2018
2019
2018
Revenues:
Site leasing
$
468,572
$
435,260
$
1,379,758
$
1,295,686
Site development
38,975
31,961
121,229
86,160
Total revenues
507,547
467,221
1,500,987
1,381,846
Operating expenses:
Cost of revenues (exclusive of
depreciation, accretion,
and amortization shown below):
Cost of site leasing
92,993
92,294
279,167
278,800
Cost of site development
30,516
24,447
92,606
67,693
Selling, general, and administrative
(1)
42,272
34,908
148,755
106,901
Acquisition and new business initiatives
related
adjustments and expenses
4,692
2,995
9,669
9,171
Asset impairment and decommission
costs
8,240
6,868
23,631
22,778
Depreciation, accretion, and
amortization
174,987
167,703
517,590
502,659
Total operating expenses
353,700
329,215
1,071,418
988,002
Operating income
153,847
138,006
429,569
393,844
Other income (expense):
Interest income
1,311
2,006
4,692
4,972
Interest expense
(96,567)
(95,717)
(292,681)
(278,278)
Non-cash interest expense
(662)
(632)
(1,954)
(2,002)
Amortization of deferred financing
fees
(5,157)
(4,980)
(15,333)
(15,265)
Loss from extinguishment of debt, net
(457)
—
(457)
(14,443)
Other income (expense), net
(33,551)
(24,518)
(21,296)
(110,175)
Total other income (expense), net
(135,083)
(123,841)
(327,029)
(415,191)
Income (loss) before income taxes
18,764
14,165
102,540
(21,347)
(Provision) benefit for income taxes
3,002
1,979
(22,813)
11,645
Net income (loss)
21,766
16,144
79,727
(9,702)
Net income attributable to the
noncontrolling interest
(87)
—
(87)
—
Net income (loss) attributable to SBA
Communications
Corporation
$
21,679
$
16,144
$
79,640
$
(9,702)
Net income (loss) per common share
attributable to SBA
Communications Corporation:
Basic
$
0.19
$
0.14
$
0.70
$
(0.08)
Diluted
$
0.19
$
0.14
$
0.69
$
(0.08)
Weighted average number of common
shares
Basic
113,037
114,597
112,985
115,378
Diluted
115,184
116,114
114,824
115,378
(1)
Includes non-cash compensation of $12,281
and $10,261 for the three months ended September 30, 2019 and 2018,
and $59,017 and $31,188 for the nine months ended September 30,
2019 and 2018, respectively.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except par
values)
September 30,
December 31,
2019
2018
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents
$
128,778
$
143,444
Restricted cash
27,502
32,464
Accounts receivable, net
122,725
111,035
Costs and estimated earnings in excess of
billings on uncompleted contracts
28,303
23,785
Prepaid expenses and other current assets
(1)
21,946
63,126
Total current assets
329,254
373,854
Property and equipment, net (1)
2,763,055
2,786,355
Intangible assets, net
3,261,885
3,331,465
Right-of-use assets, net (1)
2,449,933
—
Other assets (1)
397,011
722,033
Total assets
$
9,201,138
$
7,213,707
LIABILITIES AND SHAREHOLDERS'
DEFICIT
Current Liabilities:
Accounts payable
$
35,130
$
34,308
Accrued expenses
63,151
63,665
Current maturities of long-term debt
24,000
941,728
Deferred revenue
112,382
108,054
Accrued interest
34,493
48,722
Current lease liabilities (1)
230,197
—
Other current liabilities (1)
10,799
9,802
Total current liabilities
510,152
1,206,279
Long-term liabilities:
Long-term debt, net
9,821,502
8,996,825
Long-term lease liabilities (1)
2,174,512
—
Other long-term liabilities (1)
241,269
387,426
Total long-term liabilities
12,237,283
9,384,251
Redeemable noncontrolling interests
14,077
—
Shareholders' deficit:
Prefer. stock-par value $.01, 30,000
shares authorized, no shares issued or outst.
—
—
Common stock - Class A, par value $.01,
400,000 shares authorized, 112,604
shares and 112,433 shares issued and
outstanding at September 30, 2019
and December 31, 2018, respectively
1,126
1,124
Additional paid-in capital
2,446,369
2,270,326
Accumulated deficit
(5,387,091)
(5,136,368)
Accumulated other comprehensive loss
(620,778)
(511,905)
Total shareholders' deficit
(3,560,374)
(3,376,823)
Total liabilities, redeemable
noncontrolling interests, and shareholders' deficit
$
9,201,138
$
7,213,707
(1)
On January 1, 2019, the Company adopted
ASU 2016-02 which requires lessees to recognize a right-of-use
asset and a lease liability.
CONDENSED CONSOLIDATED
STATEMENT OF CASH FLOWS
(unaudited) (in
thousands)
For the three months
ended September 30,
2019
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
21,766
$
16,144
Adjust. to reconcile net income to net
cash provided by operating activities:
Depreciation, accretion, and
amortization
174,987
167,703
Non-cash asset impairment and decommission
costs
8,405
6,468
Non-cash compensation expense
12,732
10,433
Deferred income tax provision
(benefit)
(8,834)
(6,514)
Loss on remeasurement of U.S. dollar
denominated intercompany loans
32,887
25,863
Other non-cash items reflected in the
Statements of Operations
8,240
6,422
Changes in operating assets and
liabilities, net of acquisitions:
AR and costs and est. earnings in excess
of billings on uncompleted contracts, net
(9,363)
(7,483)
Prepaid expenses and other assets
(3,193)
(12,459)
Operating lease right-of-use assets,
net
20,765
—
Accounts payable and accrued expenses
(4,374)
5,398
Accrued interest
(14,741)
(15,578)
Long-term lease liabilities
(22,325)
—
Other liabilities
21,789
2,690
Net cash provided by operating
activities
238,741
199,087
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions
(132,382)
(118,472)
Capital expenditures
(38,596)
(36,352)
Other investing activities
11,524
4,662
Net cash used in investing activities
(159,454)
(150,162)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayments) borrowings under
Revolving Credit Facility
(80,000)
35,000
Proceeds from issuance of Tower
Securities, net of fees
1,153,036
—
Repayment of Tower Securities
(920,000)
—
Repurchase and retirement of common
stock
(172,962)
(108,015)
Proceeds from employee stock
purchase/stock option plans
24,988
21,372
Repayment of Term Loans
(6,000)
(6,000)
Payment for dividends
(41,873)
—
Other financing activities
(307)
(263)
Net cash used in financing activities
(43,118)
(57,906)
Effect of exchange rate changes on cash,
cash equivalents, and restricted cash
(4,301)
(4,058)
NET CHANGE IN CASH, CASH EQUIVALENTS, AND
RESTRICTED CASH
31,868
(13,039)
CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH:
Beginning of period
126,812
176,363
End of period
$
158,680
$
163,324
Selected Capital Expenditure
Detail
For the three
For the nine
months ended
months ended
September 30, 2019
September 30, 2019
(in thousands)
Construction and related costs on new
builds
$
12,041
$
40,191
Augmentation and tower upgrades
17,746
46,571
Non-discretionary capital
expenditures:
Tower maintenance
7,451
21,480
General corporate
1,358
3,139
Total non-discretionary capital
expenditures
8,809
24,619
Total capital expenditures
$
38,596
$
111,381
Communication Site Portfolio
Summary
Domestic
International
Total
Sites owned at June 30, 2019
16,371
13,474
29,845
Sites acquired during the third quarter
(1)
14
953
967
Sites built during the third quarter
4
94
98
Sites decommissioned during the third
quarter
(4)
(2)
(6)
Sites owned at September 30, 2019
16,385
14,519
30,904
(1)
Includes 889 towers in South Africa.
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,
2019
2018
2019
2018
2019
2018
(in thousands)
Segment revenue
$
374,705
$
353,502
$
93,867
$
81,758
$
38,975
$
31,961
Segment cost of revenues (excluding
depreciation, accretion, and amort.)
(63,836)
(66,862)
(29,157)
(25,432)
(30,516)
(24,447)
Segment operating profit
$
310,869
$
286,640
$
64,710
$
56,326
$
8,459
$
7,514
Segment operating profit margin
83.0%
81.1%
68.9%
68.9%
21.7%
23.5%
Non-GAAP Financial Measures
The press release contains non-GAAP financial measures including
(i) Cash Site Leasing Revenue; (ii) Tower Cash Flow and Tower Cash
Flow Margin; (iii) Adjusted EBITDA, Annualized Adjusted EBITDA, and
Adjusted EBITDA Margin; (iv) Net Debt, Net Secured Debt, Leverage
Ratio, and Secured Leverage Ratio (collectively, our “Non-GAAP Debt
Measures”); (v) Funds from Operations (“FFO”), Adjusted Funds from
Operations (“AFFO”), and AFFO per share; and (vi) 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). 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 (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 2014 Senior
Notes, 2016 Senior Notes, and 2017 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
2019 year
Foreign
Growth excluding
over year
currency
foreign
growth rate
impact
currency impact
Total site leasing revenue
7.7%
(0.1%)
7.8%
Total cash site leasing revenue
8.0%
(0.2%)
8.2%
Int'l cash site leasing revenue
17.0%
(0.9%)
17.9%
Total site leasing segment operating
profit
9.5%
(0.1%)
9.6%
Int'l site leasing segment operating
profit
14.9%
(0.7%)
15.6%
Total site leasing tower cash flow
9.1%
(0.1%)
9.2%
Int'l site leasing tower cash flow
18.2%
(0.8%)
19.0%
Net income
35.4%
7.9%
27.5%
Earnings per share - diluted
35.7%
7.1%
28.6%
Adjusted EBITDA
8.3%
(0.1%)
8.4%
AFFO
11.1%
(0.1%)
11.2%
AFFO per share
12.0%
0.0%
12.0%
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,
2019
2018
2019
2018
2019
2018
(in thousands)
Site leasing revenue
$
374,705
$
353,502
$
93,867
$
81,758
$
468,572
$
435,260
Non-cash straight-line leasing revenue
(3,319)
(3,086)
(488)
(1,978)
(3,807)
(5,064)
Cash site leasing revenue
371,386
350,416
93,379
79,780
464,765
430,196
Site leasing cost of revenues
(excluding
depreciation, accretion, and
amortization)
(63,836)
(66,862)
(29,157)
(25,432)
(92,993)
(92,294)
Non-cash straight-line ground lease
expense
4,048
6,578
474
383
4,522
6,961
Tower Cash Flow
$
311,598
$
290,132
$
64,696
$
54,731
$
376,294
$
344,863
Tower Cash Flow Margin
83.9%
82.8%
69.3%
68.6%
81.0%
80.2%
Forecasted Tower Cash Flow for Full Year
2019
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 2019:
Full Year 2019
(in millions)
Site leasing revenue
$
1,849.0
to
$
1,859.0
Non-cash straight-line leasing revenue
(14.0)
to
(11.0)
Cash site leasing revenue
1,835.0
to
1,848.0
Site leasing cost of revenues
(excluding
depreciation, accretion, and
amortization)
(369.0)
to
(374.0)
Non-cash straight-line ground lease
expense
19.0
to
21.0
Tower Cash Flow
$
1,485.0
to
$
1,495.0
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,
2019
2018
(in thousands)
Net income
$
21,766
$
16,144
Non-cash straight-line leasing revenue
(3,807)
(5,064)
Non-cash straight-line ground lease
expense
4,522
6,961
Non-cash compensation
12,732
10,433
Loss from extinguishment of debt, net
457
—
Other (income) expense, net
33,551
24,518
Acquisition and new business initiatives
related adjustments and expenses
4,692
2,995
Asset impairment and decommission
costs
8,240
6,868
Interest income
(1,311)
(2,006)
Total interest expense (1)
102,386
101,329
Depreciation, accretion, and
amortization
174,987
167,703
Provision for taxes (2)
(2,788)
(1,786)
Adjusted EBITDA
$
355,427
$
328,095
Annualized Adjusted EBITDA (3)
$
1,421,708
$
1,312,380
(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,
2019 and 2018, these amounts included $214 and $193, 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,
2019
2018
(in thousands)
Total revenues
$
507,547
$
467,221
Non-cash straight-line leasing revenue
(3,807)
(5,064)
Total revenues minus non-cash
straight-line leasing revenue
$
503,740
$
462,157
Adjusted EBITDA
$
355,427
$
328,095
Adjusted EBITDA Margin
70.6%
71.0%
Forecasted Adjusted EBITDA for Full Year
2019
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 2019:
Full Year 2019
(in millions)
Net income
$
107.5
to
$
137.5
Non-cash straight-line leasing revenue
(14.0)
to
(11.0)
Non-cash straight-line ground lease
expense
19.0
to
21.0
Non-cash compensation
77.0
to
72.0
Loss from extinguishment of debt, net
0.5
to
0.5
Other expense (income), net
22.0
to
20.0
Acquisition and new business initiatives
related adjustments and expenses
16.0
to
13.0
Asset impairment and decommission
costs
33.0
to
31.0
Interest income
(6.0)
to
(5.0)
Total interest expense (1)
414.0
to
409.0
Depreciation, accretion, and
amortization
697.0
to
691.0
Provision for taxes (2)
34.0
to
31.0
Adjusted EBITDA
$
1,400.0
to
$
1,410.0
(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”) and Adjusted
Funds from Operations (“AFFO”)
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)
2019
2018
Net income
$
21,766
$
16,144
Real estate related depreciation,
amortization, and accretion
173,898
166,840
Adjustments for unconsolidated joint
ventures
233
2,217
FFO
$
195,897
$
185,201
Adjustments to FFO:
Non-cash straight-line leasing revenue
(3,807)
(5,064)
Non-cash straight-line ground lease
expense
4,522
6,961
Non-cash compensation
12,732
10,433
Adjustment for non-cash portion of tax
provision
(8,834)
(6,513)
Non-real estate related depreciation,
amortization, and accretion
1,089
863
Amortization of deferred financing costs
and debt discounts
5,819
5,612
Loss from extinguishment of debt, net
457
—
Other (income) expense, net
33,551
24,518
Acquisition and new business initiatives
related adjustments and expenses
4,692
2,995
Asset impairment and decommission
costs
8,240
6,868
Non-discretionary cash capital
expenditures
(8,809)
(8,335)
Adjustments for unconsolidated joint
ventures
1,822
(850)
AFFO
$
247,371
$
222,689
Weighted average number of common shares
(1)
115,184
116,114
AFFO per share
$
2.15
$
1.92
(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
2019
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 2019:
(in millions, except per share
amounts)
Full Year 2019
Net income
$
107.5
to
$
137.5
Real estate related depreciation,
amortization, and accretion
690.0
to
686.0
Adjustments for unconsolidated joint
ventures
2.0
to
3.0
FFO
$
799.5
to
$
826.5
Adjustments to FFO:
Non-cash straight-line leasing revenue
(14.0)
to
(11.0)
Non-cash straight-line ground lease
expense
19.0
to
21.0
Non-cash compensation
77.0
to
72.0
Adjustment for non-cash portion of tax
provision
7.0
to
7.0
Non-real estate related depreciation,
amortization, and accretion
7.0
to
5.0
Amort. of deferred financing costs and
debt discounts
21.0
to
23.0
Loss from extinguishment of debt, net
0.5
to
0.5
Other expense (income), net
22.0
to
20.0
Acquisition and new business initiatives
related adjustments and expenses
16.0
to
13.0
Asset impairment and decommission
costs
33.0
to
31.0
Non-discretionary cash capital
expenditures
(37.0)
to
(31.0)
Adjustments for unconsolidated joint
ventures
3.0
to
3.0
AFFO
$
954.0
to
$
980.0
Weighted average number of common shares
(1)
114.8
to
114.8
AFFO per share
$
8.31
to
$
8.54
(1)
Our assumption for weighted average number
of common shares does not contemplate any additional repurchases of
the Company’s stock during 2019.
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,
2019
(in thousands)
2013-2C Tower Securities
$
575,000
2014-2C Tower Securities
620,000
2015-1C Tower Securities
500,000
2016-1C Tower Securities
700,000
2017-1C Tower Securities
760,000
2018-1C Tower Securities
640,000
2019-1C Tower Securities
1,165,000
2018 Term Loan
2,370,000
Total secured debt
7,330,000
2014 Senior Notes
750,000
2016 Senior Notes
1,100,000
2017 Senior Notes
750,000
Total unsecured debt
2,600,000
Total debt
$
9,930,000
Leverage
Ratio
Total debt
$
9,930,000
Less: Cash and cash equivalents,
short-term restricted cash and short-term investments
(156,936)
Net debt
$
9,773,064
Divided by: Annualized Adjusted EBITDA
$
1,421,708
Leverage Ratio
6.9x
Secured Leverage
Ratio
Total secured debt
$
7,330,000
Less: Cash and cash equivalents,
short-term restricted cash and short-term investments
(156,936)
Net Secured Debt
$
7,173,064
Divided by: Annualized Adjusted EBITDA
$
1,421,708
Secured Leverage Ratio
5.0x
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191028005718/en/
Mark DeRussy, CFA Capital Markets 561-226-9531
Lynne Hopkins Media Relations 561-226-9431
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