The operator introduces the SBA Fourth Quarter Results Conference Call and turns it over to the host, Mark DeRussy. DeRussy, along with President and CEO Brendan Cavanagh and CFO Marc Montagner, discuss the company's fourth quarter results and provide guidance for 2024. They mention that some information is forward-looking and that their statements are as of February 26. They also mention non-GAAP financial measures and direct listeners to their supplemental financial data package. Montagner concludes by stating that the company had a strong fourth quarter and met or exceeded their full year 2023 outlook for various financial metrics.

In the fourth quarter, the company experienced a 3.6% net year-over-year growth in consolidated same tower recurring cash leasing revenue, with a 7.5% gross growth. Domestic growth was 6.9% gross and 3.5% net, with 3.4% of churn, including 1.6% related to Sprint consolidation. Operational leasing activity was consistent with previous quarters, and full year organic leasing contribution met expectations. International same tower recurring cash leasing revenue grew 4.2% net and 10.1% gross, with Brazil representing the largest market. 77.5% of consolidated revenue was in US dollars, with Brazil contributing 16.1%. The company acquired 23 sites and built 138 new ones in the quarter.

The company has purchased 281 sites in existing markets and expects to close the deal by the end of the third quarter. Their outlook for 2024 includes a continuation of reduced carrier CapEx, organic growth in leasing business, and customer churn related to Sprint decommissioning. They also signed a multiyear agreement with Vivo in Brazil, which will result in wireless consolidation churn. The outlook also reflects a decline in service revenue and gross profit due to lower carrier activity, but is in line with historical performance. The outlook does not include any further acquisitions or share repurchase, but the company may invest in additional assets or repurchase shares during the year.

The company's outlook for net cash interest expense and core FFO includes recent refinancing and future plans for refinancing. The balance sheet is strong, with low leverage and ample liquidity. The company also purchased a forward-starting interest rate swap to provide certainty for future interest costs. The company ended the quarter with $12.4 billion of total debt and $12.1 billion of net debt, with a net debt to annualized adjusted EBITDA leverage ratio of 6.3 times. In January of 2024, the company entered into a $1 billion forward starting interest rate swap, and subsequently issued a new $2.3 billion secured term loan B.

The company's term loan matures in 2031 and accrues interest at SOFR plus 200 basis points. The existing $1.95 billion interest rate swap will remain in effect until 2025. The term loan was issued at 99.75% of par value and was used to retire the company's 2018 term loan and pay related fees and expenses. The company also increased the total commitments under the revolving credit facility and currently has a $70 million outstanding balance. The current weighted average interest rate of the company's total outstanding debt is 3% with a weighted average maturity of 4.1 years. The company repurchased shares of its common stock and has remaining authorization for repurchases. The company declared and paid a cash dividend in the fourth quarter and announced an increase in the first quarter dividend. The speaker will now discuss the company's 2023 performance and plans for the future.

In 2023, SBA faced challenges such as high interest rates and reduced network spending by customers. However, the company performed well and exceeded its financial targets. The excess cash flow was used to pay off debt and the company's leadership team underwent changes. Looking ahead to 2024, SBA expects to continue to be a key partner for its customers as they make necessary upgrades for 5G technology.

The success of fixed wireless access and the evolution of AI-infused 5G offerings will drive demand for increased network capacity and improved speeds, leading to steady organic leasing activity on US assets. Internationally, there is also significant demand for advanced wireless products and services, which will drive demand for incremental space at tower sites. Customer consolidations have led to elevated churn, but efforts to improve long-term cash flow streams are expected to improve the company's value proposition. The company's forward strategy focuses on stabilizing results, growing the core business, and shifting towards high-quality assets and operations.

The SBA is evaluating its portfolio and developing plans to improve its position in each business line and market. They have found success in being a market leader in certain markets and may exit others. They will prioritize investments that improve their asset mix or financial results. They will also consider stock repurchases and debt reductions to optimize their capital structure. This has put them in a strong position in the industry.

The company has a strong financial position with fast dividend growth and a high retained AFFO. They have maintained a low cost of debt and have access to more leverage. They have recently increased their liquidity and have confidence in their ability to create value for shareholders. The company is focused on paying down debt and may consider stock buybacks in the future. They are also open to potential M&A opportunities that would give them a leading position in their markets.

The company has a leverage of 6.3 times due to their focus on paying down debt and not seeing better opportunities for capital. They are open to using the capital for stock buybacks or quality acquisitions. They aim to be a market leader in their existing markets and are considering opportunities globally. The pacing of new lease activity in the US is uncertain and it takes approximately three to six months for an application to turn into revenue.

The company is open to exiting markets where they lack scale, but there are no specific plans to exit data centers. They are evaluating all aspects of their business through a financial lens, including international markets and product lines, and considering synergies with their core business as a tower company.

The speaker explains that their company is analyzing their holdings and may decide to either exit or grow certain areas. They have an existing agreement with TIM in Brazil and are in discussions with Claro. The speaker also discusses their company's focus on having a leadership position and meaningful scale in markets they operate in. They define a leadership position as having a significant share of total assets and relevance to customers. This may impact their decision to enter new markets.

The speaker discusses the impact of a company's size and scale on their ability to drive business and negotiate terms. They also mention considering their position in a new market before entering it. The speaker then addresses questions about domestic leasing in the US and the possibility of it going below $40 million.

The speaker is asking for clarification on the company's use of cash in their guidance and if there is a timeline for making decisions about portfolio acquisitions or stock buybacks. They also inquire about the company's $1 billion hedge and if there is potential for increasing it. The company's response is that they have the possibility to increase their hedge and that they have already taken steps to create some level of certainty in their debt by locking in at a lower rate. They will continue to monitor the market and make decisions accordingly.

The speaker was asked about the company's North Star metrics, or key performance indicators, that guide their decision-making and measurement of performance. The speaker mentioned metrics such as organic leasing, EBITDA, and AFFO per share as important metrics for the company and its board.

The speaker is asked about the company's growth in metrics over the next three years and the progress of upgrading their tower portfolio for 5G capabilities. They respond by saying that the most important metric is AFFO per share, which represents the amount of free cash flow available to be returned to shareholders. However, they acknowledge that there may be challenges in the next few years due to interest rates and the Sprint churn. The goal is to see this number increase over an extended period of time, as the company is focused on long-term contracts and relationships.

The speaker discusses the long-term growth strategy of the company and the importance of metrics like site leasing revenue, adjusted EBITDA, and AFFO per share. They also mention that the company is about halfway through upgrading their sites for 5G and that there is still a good runway for this. In response to a question about M&A, the speaker notes that they are looking at the risk-reward balance and considering buying back their own stock. They also mention that they are considering the impact of DISH, who has specific targets to hit in mid-2025, on their leasing assumptions.

Brendan Cavanagh discusses the competitiveness of the M&A market and the high price points seen in the US and internationally. He also mentions the potential for deals not getting done due to a disconnect between seller expectations and buyer willingness to pay. Additionally, he notes that DISH is a component of their leasing growth assumptions for the year, but only a small percentage. In response to a question about the strategic review, Cavanagh does not indicate any specific changes in the portfolio, but does mention the recent acquisition of 281 sites and their focus on both developed and emerging markets.

The company currently has 281 deals under contract, with 10% of them in the US and the remaining 90% in existing markets in several countries. The strategic review is not focused on emerging versus developed markets, but rather on maximizing their position in each market. They are open to opportunities in both developed and emerging markets, but prefer markets with strong tower siding, regulatory regimes, stable currency and tax regimes, and a balanced market share among wireless carriers. The goal is to have a stable and growing cash flow stream, so they are looking to reduce volatility in their markets and improve their positioning.

Brendan Cavanagh discusses the strategic review that SBA is currently undergoing, which is expected to continue throughout the year. The review is focused on refining their approach and addressing underperforming holdings. Cavanagh also mentions that the services revenue is expected to slightly increase and remain balanced throughout the year.

The company is seeing a shift towards new leases in the fourth quarter, but expects amendment activity to be the majority of their business this year. Argentina represented about $1 million of EBITDA and $2.3 million of revenue annually. The company is open to doing holistic MLAs with carriers like AT&T to stabilize their cash flow. They assume the remaining cash will be reinvested at 4% and are holding back on buybacks in case of potential M&A opportunities.

The speaker discusses the company's past agreements with customers and their plans for future buybacks and acquisitions. They mention that the $42 million in domestic leasing guidance includes both current and future signings, but they cannot provide an exact breakdown.

Brendan Lynch asks about international churn in Latin American markets, and Brendan Cavanagh explains that there are consolidations taking place, particularly in Brazil, which will likely lead to continued churn in the future. They are working on negotiations with customers to establish long-term commitments and stability, but Brazil will likely be the biggest driver of churn due to its size and revenue. When asked about the possibility of Mobile taking ownership of towers in these markets, Cavanagh declines to answer due to regulatory issues.

The company has ongoing conversations with other companies about potential partnerships and opportunities. They do not plan to go above 8x leverage and are confident that the upcoming capital cycle will lead to growth in suburban and rural markets, which historically have been strong tower markets. They do not see rooftop solutions as a significant factor in their business.

In the paragraph, the speaker discusses the expected leasing activity and discretionary CapEx spend for the company in the future. They believe that the leasing level could increase in the future, but it is dependent on carrier activity and network strain. As for CapEx, they guided to a similar number as last year.

In this paragraph, a question is asked about a recent contract between AT&T and FirstNet. The speaker explains that there may be limited upside for their company from this contract and that it is more of a new site leasing opportunity. They also discuss their preference for acquiring independent tower company towers over carrier-owned towers, as they believe they can improve operations and find more opportunities for growth in these types of deals. However, they have experience with both types of acquisitions and can make improvements in either case.

The speaker concludes that the success of an opportunity depends on the individual, and thanks the audience for participating in the conference call. The operator then ends the call.

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