The American Tower Fourth Quarter and Full Year 2023 Earnings Conference Call is about to begin. The operator introduces the host, Adam Smith, and reminds participants that the call will be recorded. Smith is joined by President and CEO Steve Vondran and CFO Rod Smith. Forward-looking statements will be made, including expectations for growth, capital allocation, and the sale of the India business. Factors that may affect the company's future and could cause actual results to differ from these statements will be discussed.

Steven Vondran, the new CEO of American Tower, is excited about the opportunities ahead for the company. He believes that the increasing demand for digital infrastructure and the company's strong portfolio will lead to growth and profitability. In order to achieve this, the company will focus on owning and investing in assets in high-demand areas.

The company's success in 2023 was largely due to their focus on securing business with market leaders, maximizing organic growth, and minimizing risks. They also saw record growth in their U.S. and Canada Tower business and international performance. Going forward, they will continue to focus on organic growth and carefully assess their capital allocation decisions. They also aim to operate a portfolio that delivers sustained top line growth and commands a premium in the market. Additionally, they are focused on implementing a cost-efficient global operating model, expanding margins, and increasing returns on invested capital.

In this paragraph, the company discusses their plans to improve their operating leverage and reduce costs through various initiatives. They also highlight their focus on strengthening their balance sheet and maintaining their investment grade credit rating. The company plans to prioritize resiliency and flexibility in their capital allocation program and will maintain their dividend in 2024, subject to board approval.

The company plans to reduce its debt balance and prioritize financial flexibility. M&A is not a current priority, but the company wants to be prepared for potential opportunities. They will continue to invest in their existing tower and data center platforms with a focus on high-return opportunities. The company's ability to allocate capital between their U.S. and international businesses is seen as a competitive advantage. They plan to increase their exposure to developed markets in the near term, but will also continue to grow their tower portfolio globally through partnerships. The company expects to build 3,000 new tower sites primarily in international markets, but there may be a decline in volumes due to certain risks. Overall, they see this as a key component of their long-term growth strategy.

The speaker discusses the changes in the global macroeconomic environment and how they have affected the required returns for the company. They also mention their focus on discipline and flexibility in capital allocation and the importance of their dedicated teams. The speaker expresses confidence in the company's future opportunities and hands the call over to another speaker to discuss financial results and outlook.

The company had a successful year with over 6% organic tenant billings growth, record colocation and amendment growth in the U.S. & Canada and International segments, and a record year of signed new business. They also focused on cost management and reduced their exposure to floating rate debt through deleveraging and successful debt issuance. The company also sold their India business and believes this will enhance their portfolio and lead to sustained earnings growth.

In 2023, the company saw strong growth in consolidated property revenue and tenant billings, with organic growth of 6.3%. The international market saw a 5% growth in property revenue, while the United States & Canada saw over 4% growth. Data center segment also contributed to a record year of signed new business. Adjusted EBITDA grew by 7%, with cash adjusted EBITDA margins improving by 170 basis points. Attributable AFFO and AFFO per share also saw growth, despite negative impacts from financing costs and FX.

The company is committed to owning and operating a high-quality portfolio and maintaining a strong balance sheet. They plan to drive organic growth and reduce costs to increase profitability. They also expect a full year contribution from the India business in their outlook, but will revise their assumptions after the sale is completed. A slide is included in the presentation to show the potential impact of the India sale on their outlook.

The company has included $65 million in revenue reserves for the India segment, resulting in a reduction of $0.14 in attributable AFFO per share. They are being conservative in their approach due to uncertain collection results. The company has also factored in interest rate assumptions and FX impacts in their outlook for 2024. At the midpoint of their outlook, they expect total property revenue to increase by 1% and 3% on an FX neutral basis. This growth is driven by cash revenue growth in the U.S. and Canada segment, international regions, and data centers. There will be a headwind of 2% or $191 million due to FX impacts. The company expects solid organic growth from their U.S. & Canada and International segments.

In 2024, American Tower Corporation expects organic tenant billings growth of around 4.7% in Canada and 11% to 12% in Africa. In Europe, growth is expected to be 5% to 6%, while in Latin America and Asia Pacific it is expected to be around 2%. Adjusted EBITDA growth is expected to be less than 1% at the midpoint, but approximately 2.5% on an FX neutral basis. This includes a negative impact from net straight line.

In 2024, the company plans to continue focusing on organic growth, operational efficiency, and balance sheet strength. They also plan to reduce cash SG&A by $30 million and see gross margin growth from their U.S. services business. They expect attributable AFFO per share to grow by 5% year-over-year and prioritize discretionary spending into capital projects. They also plan to maintain an annual common dividend distribution of approximately $3 billion and evenly distribute it across each quarter of the year. Additionally, they plan to deploy around $1.6 billion in CapEx, with 90% being discretionary.

The flexibility of American Tower's capital expenditures is a competitive advantage that allows them to drive sustained returns for shareholders. In 2024, they plan to increase their CapEx allocation in developed markets, specifically for data center development. They also expect to meet their target net leverage range by the end of the year and maintain their investment grade credit rating. Overall, the company's global business showed solid growth in 2023 and they have strategic initiatives in place to continue this trend and strengthen their position in the industry.

The speaker, Steven Vondran, discusses the company's ability to capitalize on opportunities, adapt to challenges, and deliver returns to shareholders. He mentions a review process for each market to determine its fit and potential for growth. He also mentions investing in developed markets and addressing challenges in markets like Nigeria. The company is also focused on expanding its data center business and reassessing all capital allocation decisions to ensure the highest quality portfolio.

The company is focusing on ongoing capital allocation and evaluating whether to continue investing in certain markets. They are striving for a high-quality portfolio and have made strategic decisions to exit certain markets. They believe that the emerging market portfolio is still important for their growth, but they are being cautious due to current challenges. They are adjusting their capital allocation to prioritize developed markets over emerging markets.

The company has been rebalancing their portfolio by making inorganic acquisitions and divesting from emerging markets. They are focusing on expanding their existing campuses in CoreSite to replenish sold capacity and are seeing record leasing. Pre-leasing has reduced risk and shortened the time to reach stabilized returns. They may also consider smaller acquisitions in Tier 2 markets in the U.S. if there is an anchor tenant with a good return.

In this paragraph, the speaker discusses potential expansion plans for their company, including the possibility of developing a larger campus and expanding internationally. However, these plans are not currently a top priority and the company is not planning to invest a lot of capital in them. The company also has protections in place to mitigate risks, such as currency fluctuations, in markets like Nigeria. The speaker also mentions their underwriting process and long-term outlook in evaluating potential opportunities. The next question from a caller pertains to the official transition of the company's leadership.

The speaker shares updates on the domestic leasing environment and mentions an increase in carrier activity. They also discuss the roadmap for the LatAm portfolio to return to normal levels of organic growth and the underwritten guidance for OTBG in the U.S. They note a slight increase in application levels and engagement with carriers in regards to services.

The company has increased its guidance and services business for next year due to an uptick in activity, particularly in construction services. This has resulted in a lower margin due to the targeted nature of the construction business. In Latin America, the company expects 2% organic tenant billings growth, with steady colocation and amendment activity, inflation escalators, and 5% churn. The company has worked through previous churn events, including Telefonica in Mexico and Oi in Brazil.

David Barden asks Steve about the discrepancy between American Tower's expectations for higher activity levels in the second half of the year and another peer's prediction that the year will be front-end loaded and the later years may be slower.

The speaker is asked about the conviction level for higher activity levels in the second half of the year and the difference between their MLA relationships and others. They are also asked about the discrepancy between the unlevered and levered numbers in India and how it affects the 2024 AFFO per share guide. The speaker explains that their comprehensive MLAs decouple their revenue from activity levels, making it difficult to compare to others. They also mention that their services business is a better indicator of activity and can be unpredictable.

The company is providing their best estimate for future activity levels, which may be influenced by market conditions. They expect an uptick in activity in the second half of the year, but it may be dependent on timing and the amount of services work required. They are confident in their locked-in property revenue growth and anticipate a ramp-up in services activity. In regards to the India transaction, they expect it to close in the second half of 2024 and are currently going through the approval process with local teams and advisers.

The company expects the approval and closure of the India deal in the second half of the year, but the exact date is unknown. They provide a quarterly breakdown of the expected revenue and earnings from the deal. The dilution from the deal is estimated to be $0.30 to $0.40 for the year, with proceeds being used to pay down debt. There may be some required divestitures in India due to concentration of towers owned by Brookfield.

The company is in the process of acquiring another company, and they are confident that it will be approved, although there may be some divestitures required. They also expect to see new leasing activity and revenue in the coming months, but the timing varies depending on the customer. The contribution from new leases and colocation will be relatively flat over the period. One of their major MLAs expired at the end of last year.

The company has made changes to their dividend distribution and will now be more evenly distributed throughout the year. They have also discussed the possibility of a decrease in the dividend for the first quarter of 2024. The decision to raise the dividend in the fourth quarter of 2023 was made in order to fulfill their commitment to shareholders, even though it may cause a temporary decrease in the first quarter of 2024. The executives have emphasized their commitment to doing what they say they will do.

The speaker asks about the company's priorities for the year, specifically regarding deleveraging and investing in developed markets. They also inquire about potential M&A activity and the company's long-term AFFO growth rate. The response states that the company is focused on reducing leverage and waiting for strategic opportunities to arise. As for AFFO growth, the company has a specific algorithm in place to achieve double-digit growth, taking into account factors such as refinancing and the India transaction.

The speaker is pleased with the diversity of their portfolio, especially in emerging markets where there is a high demand for infrastructure. They expect roughly 5% organic growth from the U.S. and incremental growth from non-U.S. properties. They also anticipate upper single-digit, double-digit growth rates from CoreSite with a focus on cost discipline to drive expanded margins. Despite some headwinds in 2023, the underlying business is solidly upper single-digit growth and they expect to reach $10.33 per share in 2024.

The company expects some headwinds in financing and FX volatility, but still predicts upper single-digit core growth in AFFO and AFFO per share. In Europe, they see growth in colocations due to build-outs by carriers and substantial 5G population coverage, but are facing market complexities in Germany. They expect improvement in their timelines there and are utilizing best practices.

The company has seen increased colocation activity and has completed most of its 5G upgrades. They also had a write-down of $80 million in their Spain market due to rising cost of capital. The nature of conversations with customers is changing as AI becomes more prevalent, and there may be potential for micro data centers at the basis of their towers. The company is also reviewing and potentially extending the useful lives of their tower assets, which has led to a decrease in depreciation and amortization expenses.

CoreSite is seeing demand for its services driven by enterprises moving to hybrid cloud environments, as well as an increase in AI inferencing applications. They are exploring opportunities in the edge deployment market, particularly in niche markets such as the automotive industry. They have increased the tower life from 20 years to 30 years for book purposes to better reflect the actual realized life of the assets.

The speaker, Steven Vondran, responds to a question about the company's capital spending and development pipeline. He explains that the record sales have led to an increase in the development pipeline, but it is too early to predict future capital spending. He also mentions the option of using partners' capital for expansion. The company will assess the appropriate capital spending for 2025 and beyond at a later time. Another speaker, Rod Smith, adds that the company has full optionality going forward.

The speaker mentions that the company is investing $450 million in data centers in 2024, but this does not commit them to spending the same amount in the future. They have flexibility to invest in different areas and countries based on the best returns. The call concludes with thanks and the option to disconnect.

This summary was generated with AI and may contain some inaccuracies.