The operator welcomes participants to the American Tower First Quarter 2024 Earnings Conference Call and introduces the host, Adam Smith, who is joined by the President and CEO, Steve Vondran, and the Executive Vice President, CFO and Treasurer, Rod Smith. The call will include a discussion of forward-looking statements and potential risks and uncertainties. Topics to be covered include future growth, capital allocation, and the sale of the India business. Participants are reminded to refer to the risk factors outlined in the earnings press release and other SEC filings.

The company reported strong results driven by mobile network upgrades and digital transformation trends. The US and Canada tower business has seen growth due to focus on asset quality, operational excellence, and long-term value creation. The portfolio of 43,000 sites has been strategically built over 25 years and has benefited from neutral host operation.

The company has strategically acquired high-quality assets, including independent tower provider portfolios, smaller tech and portfolios, and build-to-suit sites, which have resulted in significant value creation. Their focus on assets in premier locations and with significant structural capacity has led to increased profitability and efficiency, with cash operating profit margins expanding by over 440 basis points since 2016. The company plans to continue this strategy to further increase profitability in the future.

The company has invested in technology and capabilities to improve efficiency and provide exceptional value for customers. They have reduced cycle times and improved data quality and governance to enhance their services. They also focus on meeting customer needs and expanding profitability through their tower asset protection program. The company prioritizes long-term value for both themselves and their customers, and has a deep understanding of the value of their assets.

The company has achieved significant growth and created value for shareholders through traditional and innovative MLA agreements. These agreements provide guaranteed growth and lower total cost of ownership for carrier customers, leading to increased monetization and growth in mobile data consumption and carrier CapEx. During the 4G investment cycle, mobile data consumption per smartphone increased significantly, and it is expected to continue growing during the 5G investment cycle.

The company's CapEx investment of $230 million in 5G technology has led to significant growth in co-location amendments, and the company expects even greater growth in 2024. The services segment has also seen an increase in contributions and application volume, with March being the highest in the past year. This supports the company's 2024 guidance, including expected revenue and co-location growth. The company believes its US tower portfolio is well-positioned for continued growth due to the increasing demand for 5G and mobile data consumption.

In the paragraph, the speaker discusses the company's performance and outlook for 2024. They highlight the company's expertise in developing a global portfolio and monetizing trends, as well as their focus on increasing efficiency and generating shareholder value. The speaker also mentions the strong start to 2024, with Q1 performance exceeding expectations and positive trends in key metrics. They emphasize the company's reoccurring fundamentals and cost discipline, leading to strong growth and margin expansion.

In the first quarter of 2024, the collections trends seen in the previous quarter in India continued, resulting in a reversal of $29 million in previously reserved revenue. Progress has also been made in accelerating payments associated with the sale of ATC India to Brookfield, and efforts are being made to monetize debentures issued by VIL. The company also accessed the debt capital markets and issued $1.3 billion in senior unsecured notes. Consolidated property revenue grew by 3.3%, or over 4.5% excluding non-cash straight line revenue, with 1.8% growth in the US and Canada, and a 1% impact from Sprint churn.

In summary, international revenue grew by 3.7%, or 6% without currency fluctuations, with a boost from improved collections in India but a decrease in Latin America termination fees. The data center business saw a 10.6% increase in revenue due to strong demand for hybrid and multi-cloud IT architecture. Consolidated organic tenant billings grew by 5.4%, with the US and Canada segment seeing growth of 4.6% (5.5% without Sprint-related churn). Adjusted EBITDA grew by 5.2%, or 8% without non-cash straight line, while facing 90 basis points in FX headwinds.

In the first quarter, the company saw a 240 basis point improvement in cash adjusted EBITDA margins, driven by expense timing in India and cost management efforts. The US services business also showed improvement, with gross margins increasing by 70% compared to the previous quarter. This, along with a strong application pipeline, gives the company confidence in their full-year outlook. Attributable AFFO and AFFO per share also saw growth, supported by high conversion of cash adjusted EBITDA. The company's revised full-year outlook includes updates, such as a net benefit of $45 million from strong collections in India, resulting in a net reserve of $20 million for the year.

The company has revised its FX and net interest assumptions for the year, resulting in a small negative impact. However, they have also increased their expectations for property revenue and adjusted EBITDA, driven by positive collections in India and strong organic tenant billings growth across all regions. As a result, they are also raising their expectations for AFFO attributable to common stockholders. The increase in interest expense is offset by a similar increase in interest income.

The company is reiterating its capital allocation plans for 2024, which includes selectively funding projects with high returns and maintaining a flat dividend. They are also focused on achieving a 5x net leverage by the end of the year and have a strong foundation for future growth. The company is confident in their ability to drive sustained growth and be a best-in-class operator for their stakeholders.

The speaker, Steve Vondran, is discussing the company's recent quarterly results and answering a question from Matt Niknam of Deutsche Bank. He mentions an acceleration in activity and an increase in application pipeline and services gross margin in the US. This supports the company's guidance for the year, with expected revenue of $195 million and gross margin of $100 million in services. Vondran expresses confidence in meeting these targets based on current activity and customer conversations.

The speaker is optimistic about the growth in Q1 and mentions that their revenue assumptions are supported by their comprehensive MLAs. They expect to see organic tenant billings growth of approximately 4.7% in the US, with some variation quarter by quarter. They are encouraged by the broad-based activity pick up with major customers and anticipate this trend to continue throughout the year. They also mention a strong quarter for retail sales and a healthy pipeline for CoreSite, although they may not achieve another record year. The growth in CoreSite is driven by enterprises transitioning to hybrid cloud IT infrastructure, and there is still potential for growth in this area.

The biggest driver for CoreSite is still data center activity, with a long tail of demand. There is also an uptick in activity from AI, specifically in the inferencing portion. CoreSite is well-suited to provide distribution for AI models. The company is not seeing a decrease in demand, and supply issues are actually driving pricing up. They have a record number of megawatts under construction, with a high percentage already pre-leased. Interconnect growth is also continuing, despite some grooming of cross connects. Overall, the company is optimistic about demand and the sales pipeline, aiming for another record year.

The speaker is discussing the growth and success of their company in the first quarter. They mention record levels of new business and a high backlog, which positions them well for future growth. They also mention a pickup in domestic activity and are confident in their sales team. They are asked about competition and whether they are taking share from competitors.

The speaker discusses the recent activity levels in the US market and how they support the company's long-term growth plan. They are optimistic about meeting their guide for the year and believe there is still a lot of work to be done in completing mid band 5G rollouts. They also mention how their MLAs give them an advantage in the market and reiterate their long-term guide for at least 5% organic tenant billings growth between 2023 and 2027.

The OTBG number was 5.3% in 2023 and is projected to be 4.7% this year. Despite absorbing over 100 basis points of Sprint churn, the company sees strong activity levels that support their long-term guide. The company also feels positive about the 5G cycle and the performance of 5G in terms of data usage. There has been a slight shift in the mix between amendments and densification in domestic activity, with both types of demand being seen across carriers. The company has comprehensive MLAs in place with some customers, but one major customer recently rolled off their comprehensive MLA which may result in more seasonality in commencements of leases.

The speaker, Steve Vondran, responds to a question about the company's M&A plans and updates on the deal timing in India. He mentions that there are no updates on the India situation and that the company is still expecting approval in the second half of the year. He also states that the company is constantly looking at potential M&A opportunities but there is nothing compelling enough to change their current capital allocation priorities. They are focused on paying dividends and reducing debt. He clarifies that there is no specific plan to sell any part of their portfolio, but they do have some businesses that may not be as strategic or at scale.

The company is considering selling some non-strategic businesses in their portfolio if the right buyer and price comes along. They are currently focusing on improving their underperforming businesses and increasing sales and margins. They have announced the sale of their India business for up to $2.5 billion, which includes intercompany debt, a term loan, working capital, receivables, and a ticking fee. The sale is expected to be completed in the second half of the year and is going well according to the company.

The company has realized about $2.5 billion in proceeds from various sources in India and plans to bring some of that money back to the US. This includes $100 million from positive collections trends and $200 million from converting and liquidating a receivable balance. The company plans to resume dividend growth in 2025, subject to board approval, and will give more details on this in their Q4 call in February. Over the long term, the company expects dividend per share and AFFO per share growth to be similar, with potential short-term changes due to events such as the India divestiture.

The company is expecting a dislocation between AFFO per share growth and taxable income, but over the long term, they should be similar. They will provide more specific details about the dividend in February of next year. The payout ratio will likely stay in the 60-65% range, leaving them with $1.5-2 billion for other uses. The company is hopeful for improvement in the US market and will continue to invest in carrier CapEx.

Steve Vondran discusses how carrier CapEx is not a perfect indicator of leasing activity. While overall CapEx is increasing, not all of it goes towards the radio access network on towers. The focus is on the CapEx for tower sites, which is determined through market intelligence and information from teams on the ground. While CapEx does matter, it is not a perfect algorithm for predicting leasing activity.

Steve Vondran and Rick Prentiss discuss the potential for increased average rent and growth in the long-term due to the shift from coverage and amendment activity to new lease activity and new co-locations. They also mention the possibility of using excess cash for capital allocation, construction projects, and stock buybacks in the future, once the company has gone through the process of dealing with India.

The company is focused on improving its balance sheet and adding capital expenditures to drive quality earnings and long-term growth. They have achieved their goal of 5x net leverage in the first quarter, but this may increase slightly throughout the year. Once their leverage is at a sustainable level, they will consider all options, including buybacks. However, they will be cautious and wait for more certainty in the economy before engaging in buybacks, and this reassessment may happen towards the end of the year. Their current focus is on reducing floating rate debt and managing the business effectively to drive AFFO growth.

The speaker discusses the potential impact of FX headwinds on the company's outlook, specifically in regards to the Argentinian peso, Nigerian Nira, and Japanese yen. They also mention a potential decrease in fixed wireless access as a contributor to growth. The speaker notes that there may be more certainty in the economic outlook and interest rates in the future, allowing for a full consideration of different allocation options.

The company has seen a mix of positive and negative effects from currency exchange rates in different regions, with a net positive impact for the year but some headwinds in the first quarter. They have diversified their debt structure and reinvested cash flows from international markets back into the business, which helps mitigate the effects of currency devaluation.

The company takes into account FX headwinds when allocating capital and has a diverse portfolio which allows them to invest where it makes the most sense. They also factor in FX impacts in their underwriting model and use contractual mechanisms to control it, such as CPI-linked escalators and pegging revenue to the US dollar in some markets. Over the long term, they feel confident in their ability to handle FX, but they actively monitor and adjust in the short term.

The paragraph discusses the natural hedge that the company has due to a portion of its revenue being in local currency and some expenses being in US dollars. It also mentions the increasing use of fixed wireless by carriers in the US and the potential for it to drive additional business for the company.

The speaker is asked about the growth in MMR per cabinet in CoreSite and the drivers behind it. He explains that it is mainly driven by supply-demand dynamics and that there is a healthy mix of retail and scale deals in their funnel. He also mentions that CoreSite is not just a retail or co-location facility, but also an interconnection hub, so they are selective in the customers they choose to do business with.

CoreSite is not considered a low cost provider in the markets it operates in. The company focuses on providing interconnection services and has a mix of different types of customers. The pricing of higher density cabinets is influenced by the amount of power they use, and the company recently became NVIDIA-certified. CoreSite is also working on keeping expenses down by focusing on operational excellence due to the lack of acquisitions and integrations in recent years.

The company is looking for ways to improve operations without affecting customer service or the future of the business. They are currently in the first phase of this process and are exploring opportunities to globalize the business by implementing best practices from different markets. They are also focusing on being efficient in all areas, such as fuel usage in Africa. In LATAM, the quarter performed better than expected and there is a possibility of churn from Oi's wireline business.

The speaker is responding to a question about the company's build-to-suit program and any changes in light of macro pressures and regional risks. The speaker provides an update on the outlook for 2024 in LATAM, mentioning a steady level of demand and activity, moderating inflation, and a lower level of churn. They also mention the impact of Oi, a wireline company, on the company's revenue and a 20% discount that has been assumed in their outlook.

The speaker discusses the financial details of a recent transaction, including a discount of $7 million per year over the next few years and the acquisition of certain sites from Oi. They also mention that the churn in LATAM is temporary and expect low growth in the region for the next couple of years. The build-to-suit update mentions lower volumes but higher quality due to being more selective in the current market. The final question is about the use of MLAs internationally, which is primarily paid by the drink.

The speaker is asked about the use of holistic MLAs internationally and if there will be any changes in the future. They mention that there is variation in contract structures internationally and that they have a few holistic deals. Educating international customers on the benefits of these structures may take time. There are no planned changes to US agreements at the end of this year, and it is too early to give guidance for 2025. The speaker believes their growth algorithm will remain consistent.

In 2025, the company expects to see strong growth in the US and Canada, as well as positive leasing volumes in Europe and Africa. They will focus on margin expansion and cost discipline, and remain disciplined in capital allocation. However, Latin America may experience slower growth due to consolidation churn. There are some variables that could impact growth, such as FX rates and interest rates, but the company remains confident in their long-term growth algorithm. The India closing may also affect their AFFO per share growth rate.

The speaker is addressing the audience and informing them that the conference has come to an end. They thank the participants for using AT&T teleconference and instruct them to disconnect.

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