The operator introduces the SBA First Quarter Results Conference Call and hands over to the host, Vice President of Finance, Mark DeRussy. He is joined by President and CEO Brendan Cavanagh and CFO Marc Montagner. They discuss forward-looking statements and non-GAAP financial measures, and mention an increase in full-year outlook for Tower cash flow, adjusted EBITDA, and AFFO per share. This is due to cost-saving measures and completed share buybacks.

The company's outlook for site leasing revenue, total revenues, Tower cash flow, and adjusted EBITDA is slightly lower than expected due to fluctuations in currency. Domestic same tower recurring cash leasing revenue grew by 5.9%, with churn of 2.3% and $7.5 million related to Sprint consolidation. Operational leasing activity was consistent with 2023 levels. Non-Sprint domestic churn is between 1% and 2%. Estimates for Sprint's return remain unchanged. International same tower recurring cash leasing revenue grew by 3.3%, with churn of 4.8%. Brazil's organic growth was 6.8%, but reported growth was impacted by a declining CPI link escalator. The majority of consolidated cash site leasing revenue is denominated in U.S. dollars, with Brazil representing 15.8% of revenue.

In the third paragraph, the company mentions that their 2024 outlook does not include any churn and surcharge related to the oil wireless consolidation, but they may adjust their outlook if they enter into further agreements with other carriers. They have also increased their full year churn outlook for oil wireline due to a new judicial reorganization plan, resulting in a $2 million increase in site leasing revenue. The company has acquired 11 communication sites and built 76 new sites in the first quarter of 2024, and plans to purchase 271 more sites by the end of the third quarter. The outlook does not include any further acquisitions or share buybacks, but the company may invest in additional assets or share repurchases during the year. The outlook for net cash interest expenses and FFO also includes a refinancing of their ABS Tower Securities in July 2024. The company's balance sheet remains strong with ample liquidity.

The company's recent share buyback has helped pay down their $2 billion revolver, and their current leverage of 6.5 times net debt to EBITDA is near a historical low. Their balance sheet is strong with a low weighted average interest rate and a weighted average maturity of four years. The company has used cash on hand to repay amounts outstanding under the revolver and has also repurchased shares and paid a cash dividend. The Board of Directors has declared a second quarter dividend, which represents a 15% increase from the previous quarter.

The first quarter of 2024 was a good start for the company, with operational and financial results meeting expectations. In some markets, macroeconomic challenges have limited customer network investments, but there is still a strong demand for 5G upgrades and data-heavy use cases. The high cost of capital is a hindrance to spending, but it is expected to decrease in the future. Internationally, growth is slower compared to previous levels.

The primary reason for lower growth rates in the telecommunications industry is consolidation-related churn, as surviving carriers focus on rationalizing their networks rather than expanding them. However, new spectrum and technology deployments are expected to lead to an acceleration in growth over time. The company remains focused on enhancing long-term cash flows and prioritizing dividend payments. They have added a small number of towers to their portfolio but remain selective about quality and price. Opportunities for growth will continue to arise.

The company is being patient in pursuing opportunities due to the current high cost of capital. They are decommissioning sites to save costs and are considering repurchasing shares to increase shareholder value. However, they are also aware of the potential impact of higher interest costs on their AFFO and will continue to focus on reducing debt. They have a strong balance sheet and low average cost of debt, but will need to refinance $1.8 billion in debt over the next 12 months, which may result in higher rates. They will carefully manage the amount and timing of this debt.

The company has a lot of available capital and is evaluating different options to use it. They are also conducting a portfolio review to stabilize and grow their core business and shift towards high-quality assets. This process will take time and they are exploring different paths to improve their position in the market, such as acquiring assets and improving customer relationships. Divestitures are not their preferred option.

The author discusses a recent visit to the company's team in Brazil and their efforts to improve customer experience and longevity of relationships. They emphasize the importance of financial results and maximizing the value of their assets. The company has seen a slight increase in lease applications, but it is too early to predict leasing activity for 2025. The increase in applications is not specific to any particular geography or carrier.

The speaker discusses the broad-based nature of their business across different geographies and carriers. They also mention their goal of managing leverage lower in the current environment, but are open to leveraging back up for potential investment opportunities. There is no specific target for net debt leverage, but they may look to reduce absolute debt levels in the absence of investment opportunities. The speaker then answers a question about the most interesting build-to-suit opportunities and their guidelines for M&A.

The company is actively looking for new build opportunities in their existing markets, particularly in Africa and South America. They prioritize high-quality opportunities in their existing markets for M&A, with a focus on financial analysis and return thresholds. The decommissioning process for Oi's wireless network is about 40% complete, while the wireline side has seen some de-commissionings already.

The company's portfolio review has not been in progress for long, but they are considering paying down debt due to the expectation of higher interest rates. This may impact their M&A strategy and they are currently in the midst of the review.

The speaker discusses the current state of M&A activity and buybacks, which are financially driven. They mention contracts for sites, with the majority being located in South America. They also mention their outlook for the year and potential carrier activity. A question is asked about the big 3's activity and the speaker discusses potential mid-band additions and densification. They also mention an uptick in applications and the timing for executing leases and generating revenue.

The speaker discusses the current state of activity in the telecommunications industry, stating that there is a mix of mid-band spectrum deployments and new leases from major carriers. However, the pace of deployment is slower due to the cost of money and customers being more disciplined in their capital spending. They also mention that they are still signing leases with DISH, but at a lower level. In response to a question, they mention that they did some stock buybacks in March and will provide more information in their 10-Q report.

The speaker, Brendan Cavanagh, discusses the company's debt reduction and stock buyback strategy. He mentions that the leverage ratio increased to 6.5% in the quarter, but the absolute amount of debt remained similar to the previous quarter. He also notes that the company's focus is on reducing the absolute amount of debt, especially with upcoming maturities. In terms of buybacks, the company has been opportunistic and may continue to do so, but currently, their priority is on reducing debt. The speaker also mentions that the churn rate for Sprint customers is in line with expectations, and the churn rate for non-carrier consolidation in the U.S. is around 2%.

Brendan and Marc predict that tower decommissioning will increase in the next few years due to consolidation-related churn. This will involve a concerted effort to reduce costs, particularly in international markets, where there have been major consolidations. The volume of sites to be decommissioned is the main factor driving this increase.

The speaker discusses steps being taken to improve the customer experience at sites in Brazil, which could lead to longer-term agreements and increased value for customers. However, specific details are not provided due to competitive reasons. The questioner then asks about elevated international churn.

Brendan Cavanagh discusses the potential for elevated international churn for the next few years due to consolidation and wireline bankruptcy. He also mentions that FDA is open to expanding into new markets through M&A, but they will be financially focused and only pursue opportunities that are value additive for the company and its shareholders.

The company's willingness to expand into new and existing markets remains the same, despite challenges in aligning seller expectations with market trends. The services business saw a slowdown in the first quarter, but the company expects it to improve in the second half of the year. More than half of the company's sites have been upgraded with 5G equipment.

During a conference call, an operator introduces a question from Richard Choe about new lease densification applications and potential cost savings from decommissioning towers. Brendan Cavanagh responds by saying that it is not certain if the new applications are in markets with fixed wireless, and that the goal is to achieve cost savings as quickly as possible. Another question is asked by Matt Niknam about evaluating options for debt maturities and the potential for cap recycling, as well as the impact of tower decommissioning on tower cash flow.

Brendan Cavanagh discusses the primary driver of the company's $4 million for the year and mentions that they are open to exploring different options for debt refinancing. He also talks about the positive impact of the comprehensive MLA signed with AT&T last year and the potential for similar agreements with other customers.

The speaker discusses the company's agreements with its customers, stating that each one is tailored to the specific needs of the customer and their existing relationship with the company. They mention a past agreement with T-Mobile that was extended, showing the company's ability to find mutually beneficial solutions. The speaker then discusses their goal of reaching 1% U.S. tower churn in the next few years, attributing it to a decrease in smaller customers and less competition from overbuilders. They also mention that master agreements with larger customers will help prevent attempts to take existing tenants.

Walter Piecyk asked a question about the company's debt reduction and share repurchase plans. He noted that the company has reduced its debt by $600 million in 2023, but has not yet reached that pace this year. He also mentioned the $800 million debt maturities and questioned how the company can continue to buy back stock while also addressing these maturities. Brendan Cavanagh responded that the company bought back stock in late March and early April and will continue to do so in the future, but it is difficult to be precise with timing. He also stated that this does not mean the company will not buy back stock at all.

The company is considering paying down debt instead of buying back stock, but they will continue to assess their options. The decision to buy back stock is made in advance and is affected by blackout periods. The analyst suggests that the company could continue to buy back stock based on their free cash flow, but the company states that their options may change.

The speaker discusses the possibility of acquiring a new opportunity and paying down debt, but also keeping flexibility. They also mention that there has been no significant interest in their towers for CBRS spectrum. The next question asks for quantification of customer consolidation churn and normal churn domestically and internationally, and for Brendan to comment on AFFO per share growth given their current leasing and churn numbers and upcoming maturities.

The speaker discusses the challenge of predicting the cost of refinancing debt and the potential impact on AFFO per share growth. They also mention the consolidation of customers, with Sprint being a major player, and the potential for churn in Brazil. One option for refinancing is using the revolver, but it may be more expensive than other options. The speaker also briefly mentions technology.

Brendan Cavanagh gives an update on the deployment of dual-band radios and other technology initiatives that could drive incremental demand. However, it seems that most of the focus is on deploying mid-band spectrum and new leases for coverage and densification. There are currently no other questions in the queue. The conference call has now ended.

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