American Tower Corp (AMT) — Q4 2022 Earnings Call Transcript

Good morning, and thank you for joining American Tower's Fourth Quarter and Full Year 2022 Earnings Conference Call. We have posted a presentation, which we will refer to throughout our prepared remarks, under the Investor Relations tab of our website, www.americantower.com. On this morning's call, Tom Bartlett, our President and CEO, will provide an update on our strategy; and then Rod Smith, our Executive Vice President, CFO and Treasurer, will discuss our 2022 results and 2023 outlook. After these comments, we will open up the call for your questions. Before we begin, I'll remind you that our comments will contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include our expectations regarding future growth, including our 2023 outlook, capital allocation and future operating performance; our collections expectations associated with Vodafone Idea in India; and any other statements regarding matters that are not historical facts. You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements. Such factors include the risk factors set forth in this morning's earnings press release, those that will be set forth in our upcoming Form 10-K for the year ended December 31, 2022, and in other filings we make with the SEC. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances. With that, I'll turn the call over to Tom.

Thanks, Adam, and thanks to everyone for joining the call this morning. Five years ago, when we rolled out the Stand and Deliver strategy that would guide us over the following decade, we emphasized driving the business forward through four key pillars: enhancing operational efficiency, growing our assets and capabilities, investing in innovation and platform extensions, and augmenting industry leadership. Since that time, we've seen carriers across our global footprint invest over $300 billion in network assets and methodically deploy next-generation networks to support rapidly increasing data demand in their served markets. Our commitment to execute on each pillar of Stand and Deliver not only aligns with our customers' needs in this context but also enhances American Tower's position to serve as a strategic provider of critical infrastructure for the networks of the future. So before highlighting the key strategic objectives we'll focus on in 2023 and over the next several years, I'd like to spend a moment reviewing the achievements from the past five years that have driven our success to date. On the operational front, we've signed comprehensive master lease agreements with T-Mobile, AT&T, DISH, and most recently, Verizon in the United States. These agreements represent a commitment to a mutually beneficial, predictable growth path and strategic alignment between American Tower and its customers while also demonstrating the value and criticality of our nationwide 43,000-plus site portfolio to support 4G, 5G, and future network generations. Such agreements also bring with them efficiency innovations designed to deliver simplicity in leasing processes and accelerated time to market for the carriers. To extend on these benefits, we've invested in technologies to build a holistic standardized data set, mapping the vast majority of our US assets, which can be leveraged to eventually bring application cycle times down to a matter of hours. We believe this type of capability will be a particularly attractive customer value proposition in the context of a 5G densification cycle and one we believe can be scaled across our global footprint over time. Our focus on operational efficiency has extended throughout our international business as well. Notably, since the beginning of 2018, we've invested nearly $350 million, primarily in Africa, on improving site level performance through our Power as a Service program. This includes the installation of lithium-ion batteries and solar arrays for primary and backup power delivery, which has resulted in a sizable reduction in average fuel consumption per site across our African portfolio and has extended the replacement cycles of critical power sources all while providing over a 99.9% average uptime for our customers' networks. At the same time, we've established a centralized procurement organization that aims to drive down material costs. And we've leveraged shared best practices and our scale as a multinational operator to strengthen our global vendor relationships. By streamlining these critical operational functions, we've been able to continue to drive solid investment returns on our capital deployments and efficiently meet the infrastructure needs of our customers, all against a challenging backdrop of price volatility and supply chain disruptions. In fact, since the start of 2018, we've added nearly 26,000 sites to our international portfolio through new builds, more than two times the volume of the previous five-year period. Today, these sites are contributing approximately $250 million in tower cash flow and an NOI yield of approximately 21%, demonstrating meaningful expansion from the already attractive low double-digit day one yields we typically see on these new build opportunities. On the M&A front, we've executed a number of transactions that have been transformational in terms of delivering additional critical scale in existing and new markets ahead of major network investment cycles, the benefits of which we are seeing in our results and forward-looking expectations today. These include InSite in the United States, the in portfolio in Africa, as well as Telxius in Europe and Latin America, which augmented our scale in Germany and provided entry to Spain in a leadership position just as 5G investments were beginning to ramp up on the continent. More recently, through our efforts to selectively expand our platform and position American Tower as a market leader in the next generation of network architecture development, we entered the data center space through the acquisition of CoreSite. CoreSite delivers an interconnection and cloud on-ramp rich platform as well as exposure to a resilient high-demand communications infrastructure business, which we believe will deliver strong performance as demonstrated by a record signed new business in 2022 and provide accretive returns on a standalone basis over time. As importantly, we believe the combination of CoreSite and American Tower's platform of distributed tower real estate positions us to enhance the value of our existing assets as the edge proliferates. Finally, I'm particularly proud of the steps we've made towards augmenting our leadership in several areas. Organizationally, we've made ESG core to our operations through initiatives such as our commitment to Science-Based Targets, localized DE&I initiatives designed to facilitate an inclusive organization for our employees and stakeholders, and through the growth of our digital communities program, which has now reached more than 400 communities and serves more than 335,000 people across 15 countries. As I mentioned on this call last year, we're also a member of the EDISON Alliance: 1 Billion Lives Challenge, which provides us the opportunity to contribute to the development of affordable and accessible digital healthcare, finance and education solutions for communities in need. Over the past year, we've developed partnerships with healthcare providers that have resulted in the launch of several telehealth locations that provide primary, preventative, and specialty teleconsultation services in underserved areas. While this is just one positive first step, we believe that what we've achieved over the last year clearly demonstrates the value we can create and the communities we serve through a commitment to multi-stakeholder collaboration and partnerships. And we hope more organizations will join us in efforts like these over the coming years, which brings us to today and our focus for 2023 and beyond. We believe we're poised to build on and accelerate the successes of Stand and Deliver that we've achieved thus far. Our teams are focused on key strategic objectives that will continue to guide our operations and management teams in American Tower over the next several years.

Thanks Tom. Good morning and thank you for joining today's call. Before I dive into our 2022 results and expectations for 2023, I would like to highlight a few key accomplishments from the past year and provide an update on several developments in India since our last earnings call. First, demand and operational performance across our global portfolio remain as solid as ever. We closed the year on a positive note with colocation and amendment tenant billings growth contributions of over 4% in Q4. In particular, our US and Canada property segment delivered its strongest quarter since Q1 of 2020, and we have a clear line of sight to continued acceleration into 2023, which I will discuss shortly. Organic growth was complemented by the construction of nearly 7,000 sites, an American Tower record, including over 2,300 sites built in Q4, our highest level over the past eight quarters with an average day one NOI yield of over 12%. Moreover, during its first full year of ownership by American Tower, CoreSite delivered record new business, selling nearly double the number of megawatts compared to the previous trailing two-year average, demonstrating the value of the company's interconnection and cloud on-ramp rich ecosystem. This robust growth was driven by increased demand from high-quality new logos and expansions from existing customers, driven by secular tailwinds of digital transformation and the demand for hybrid IT solutions. Furthermore, since the announcement of the CoreSite acquisition, we successfully executed on our permanent financing plan at attractive terms, including through the issuance of common equity and senior notes, as well as our strategic partnership with Stonepeak. These financing activities reduced our leverage from 6.8 times at the end of 2021 to 5.4 times at the end of 2022 and moved us closer to our target range of three times to five times. Next, I'd like to take a moment to cover the latest developments in India. As anticipated, Vodafone Idea or VIL continued making partial payments in Q4 of 2022, consistent with our outlook, resulting in total revenue reserves of approximately $38 million for the quarter and around $87 million for the year. Recently, we were pleased to see the completion of the Indian government's conversion of the adjusted gross revenue interest balances to equity in VIL. We view this as a reaffirmation of the government's commitment to support a three-player private carrier telecommunications market and a critical first step towards the possibility of more stabilized collections from VIL. However, although VIL had committed to pay their billings in full in 2023 and make payments for outstanding balances from prior years in early 2023, they have communicated that they would continue to make partial payments. For that reason, we believe it is prudent to include revenue reserves against their annual billings and other contracted obligations in our 2023 outlook, which we've assumed at $75 million. We will, however, remain focused on collecting what we are contractually owed in full over the course of the year. In the meantime, we have worked to incrementally better position American Tower and our receivables balance, while also demonstrating a level of support for VIL and India's wireless market. This includes the expectation to convert approximately $200 million in existing VIL receivables into optionally convertible debentures pending Vodafone Idea shareholder approval. Upon closing this agreement, we would have elevated the seniority of our pre-existing receivables balance and established an additional level of liquid collateral at American Tower's option. And finally, as we remain focused on stabilizing our India business, collecting our outstanding and future receivables in full and assessing the positioning of our global portfolio, we are currently exploring various strategic options, including the potential sale of an equity stake in our India business. As always, any decision taken will include careful consideration of the growth opportunity and risk profile in the market going forward, valuation and the optimal portfolio and capital structure mix for American Tower and its stakeholders. We will certainly keep our investors informed of any developments as we move forward. With that, let's dive into the details of our full year 2022 results. Turning to Slide 6. Full year consolidated property revenue growth was nearly 15% and nearly 18% on an FX-neutral basis, which included a contribution of approximately 11% of growth from Telxius and CoreSite and negative impacts of approximately 2% and 1% from Sprint churn and revenue reserves taken associated with VIL in 2022, respectively. Organic tenant billings growth for the full year came in at 3.2%, in line with expectations, complemented by solid growth from new builds with actual volumes coming in at the upper end of our prior outlook range for the year. In the United States and Canada, property revenue growth was nearly 2% with organic tenant billings growth of just over 1%, in line with expectations, including approximately $150 million or 3.4% from colocations and amendments. Escalators added another 3%, consistent with historical trends. This growth was partially offset by churn of around 5%, which consisted of roughly 1% in normal course churn with the balance being driven by Sprint. Our international property revenue grew by nearly 13%. International organic tenant billings growth was 6.6%, led by Europe at 8.4% and followed by Latin America at 7.9%, Africa at 7.7% and APAC at 2.6%. Overall, colocation and amendment growth for the full year was around 5%, while 6% came from escalators, partially offset by just over 4.5% of churn, the result of decommissioning agreements in Latin America, carrier consolidation in Africa, and customer-specific churn in APAC. Finally, our data center segment contributed over $765 million to our total property revenue in 2022, including a record year of new business from CoreSite as I previously mentioned. Moving on, adjusted EBITDA grew around 11% to over $6.6 billion or around 13% on an FX-neutral basis for the year. Growth was supported by solid contributions from Telxius and CoreSite and strong flow-through of top line growth achieved through effective cost management. On a consolidated basis, adjusted EBITDA margins were down around 190 basis points as compared to 2021, primarily due to the impacts of the VIL reserves and Sprint churn in the US, higher pass-through revenue due to rising fuel costs and the lower margin profile of newly acquired assets, which we believe are well positioned to drive meaningful margin expansion over time. Moving to the right side of the slide, attributable AFFO and attributable AFFO per share grew by approximately 5.6% and 3.5%, respectively, including over 11% growth on a per share basis in Q4. For the year, both metrics included over 2% in headwinds associated with FX. Attributable AFFO per share of $9.76 exceeded the original 2022 outlook midpoint laid out a year ago by $0.06, despite absorbing the negative impacts of incremental VIL reserves, rate-driven interest costs, and FX relative to our initial assumptions. Now before I discuss the details of our outlook for 2023, I will start by summarizing a few key highlights and assumptions. First, as we've previously communicated, we expect a meaningful step-up in US and Canada organic tenant billings growth driven by an acceleration in new business backstopped by the comprehensive MLAs we have signed over the last few years together with the sequential improvement in contracted Sprint churn. Internationally, we expect a strong year of organic tenant billings growth across most of our regions driven by continued strength in organic leasing trends, along with contributions from CPI-based escalators, particularly in Europe and Africa. As we've communicated over the past couple of quarters, growth in Latin America will be moderated by churn headwinds associated with the continuation of Telefonica churn in Mexico and Oi churn in Brazil, where we'll see some staggered impacts over the next several years. Second, and as I mentioned earlier, we have factored into our guide an expectation for a continuation in VIL collections volatility, resulting in an assumption of $75 million in revenue reserves for the year. Third, given the unprecedented rise in interest rates over the course of 2022, which saw the one-month LIBOR increase by more than 400 basis points and 10-year treasuries increase by around 250 basis points from the beginning to the end of the year, we expect 2023 to have one-time outsized negative growth headwinds associated with financing costs. Key components driving this assumption include elevated costs on our floating rate debt and to a lesser extent, the refinancing of our 2023 senior note maturities as well as the full-year impacts of our 2022 equity-related initiatives, including our common equity issuance and the incremental minority interest and preferred distributions associated with our partnership with Stonepeak. Taken together, we have assumed a roughly 8% headwind to attributable AFFO per share growth associated with financing costs in 2023. Next, our initial outlook reflects estimated negative translational FX impacts of approximately $150 million for property revenue, $64 million for adjusted EBITDA, and $47 million for attributable AFFO as compared to 2022. And finally, looking beyond the challenges I mentioned associated with interest rates, VIL reserves, and FX, our core business continues to demonstrate strong performance and resiliency, representing nearly double-digit year-over-year growth at the attributable AFFO level. While this performance is fueled by the solid organic leasing trends we're seeing across our global portfolio, it's further amplified by exceptional conversion rates through AFFO, achieved through a keen focus on cost management across our business. With that, let's dive into the numbers. Moving on to the details of slide 7. At the midpoint of our outlook, we expect total property revenues of nearly $10.8 billion, representing growth of approximately 3% or approximately 4% absent the incremental reserves assumed for VIL in 2023. Our guide includes expected cash revenue growth of around $230 million in the US and Canada, and $245 million of FX neutral growth in our international regions, excluding the 2023 VIL reserves of $75 million. We also expect data centers to contribute roughly $55 million of growth in cash revenue to the property segment in 2023. Lastly, as I mentioned in my earlier remarks, we anticipate a modest FX headwind of just under 1.5% to consolidated growth. Turning to slide 8. We expect organic growth to contribute meaningfully to our property revenue growth assumptions. Starting with the US and Canada, we anticipate organic tenant billings growth of approximately 5% or greater than 6% excluding Sprint churn. This expectation includes record levels of year-over-year co-location and amendment growth of around $220 million, a nearly 50% increase over the levels achieved in 2022 and a 60% increase as compared to the trailing three-year average. Of the $220 million, over 90% is locked in through MLA-driven use right fee commencements and carryover growth. On the churn side of the equation, after incurring the largest impact of Sprint churn last year, we expect churn of around 3% in 2023, including an approximate 1% impact associated with Sprint, which would represent a year-over-year improvement of over 200 basis points in the segment. Moving to Latin America. We expect organic tenant billings growth of greater than 2% for the year driven by relatively consistent co-location and amendment activity and continued solid contributions from CPI-based escalators of approximately 8%. This escalator rate does represent a step down from 2022 levels, as we saw inflation in markets like Brazil moderate in 2022 as compared to 2021. As we've previously highlighted, higher churn of around 8% is partially offsetting gross growth due to the expected continuation of Telefonica churn in Mexico and the early part of what we expect to be staggered Oi churn in Brazil. Similar to last year, we do expect to receive some settlement payments from Telefonica over the course of the year, which will be captured outside of the organic tenant billings growth metric. We've assumed approximately $50 million in 2023 payments as compared to the over $80 million we received from Telefonica Mexico and Nextel Brazil in 2022. Turning to Asia Pacific. We are guiding to approximately 4% organic tenant billings growth in 2023, including churn of around 4%, which is around 70 basis points lower than the 2022 churn rate. We expect co-location and amendment growth contributions to ramp up compared to 2022, coming in around 6%, fueled by the rollout of 5G networks. However, it is important to note that the reserves we've assumed for VIL in our guide reside outside of this metric, consistent with past practices. Turning to Europe. 2023 organic tenant billings growth is expected to be 7% to 8%, which is slightly lower than 2022 due to the mathematical benefits realized last year, given Telxius was only in the prior year base for a partial year. However, this does suggest a solid acceleration off our Q4 2022 organic growth rate of around 6%, which represents a more normalized comparison. On the co-location and amendment front, we anticipate 2% to 3% growth, while growth from escalators stands at roughly 6%, reflecting the benefits of CPI-linked escalators across the majority of our European footprint. Churn is expected to decline to around 1%, reaping the benefits of the lower churn profile of our recently acquired Telxius portfolio. Finally, in Africa, we expect a solid acceleration off of 2022, with expected organic tenant billings growth of approximately 9%. This includes co-location and amendment contributions of around 6%, along with escalators of around 10% and expected 450 basis point increase from 2022 levels. This will be partially offset by an expectation of elevated churn of greater than 6%, as carrier consolidation continues to work its way through the financial metrics. Moving on to slide nine. At the midpoint of our outlook, we expect adjusted EBITDA growth of approximately 4% and around 5%, absent the incremental reserves assumed for VIL in 2023, while absorbing approximately 1% in FX headwinds. We expect this growth to be achieved through solid cash conversion rates of 85% to 90%, the result of prudent cost controls across the business and the expectations for another strong year from our US services business. Turning to slide 10. We expect attributable AFFO per share to decrease by $0.16 on a reported basis, while remaining flat year-over-year absent the impacts of the 2023 VIL revenue reserves. As mentioned, we expect growth to be meaningfully impacted by financing costs, which include a rate-driven increase to cash interest expense along with the incremental full-year impact of minority interest and preferred distributions associated with our US data center business. Together with the common equity share issuance in 2022, financing costs are expected to provide a significant one-time growth headwind of approximately 8% in 2023. As I mentioned earlier, absent the impact of financing costs, FX, and the 2023 VIL reserves, our business is demonstrating solid growth contributions of around 9%. Moving on to slide 11, I'll review our capital plans for 2023 and our balance sheet progress and priorities for the upcoming year. In 2023, we will continue to deliver returns to our shareholders through the growth of our dividend. And subject to Board approval, we expect to distribute approximately $3 billion, representing an approximately 10% year-on-year growth rate on a per-share basis. In addition, we expect to deploy around $1.7 billion in CapEx, of which 90% will be discretionary. This will largely be spent continuing the success of our new build program internationally, which assumes the construction of around 4,000 sites at the midpoint. We also expect data center capital to increase modestly as we seek to replenish the record capacity sold in 2022 and maintain appropriate levels of sellable capacity. Moving to the right side of the slide. As you can see, we made tremendous progress towards strengthening our balance sheet over the course of 2022, putting us ahead of the deleveraging path we committed to with the rating agencies, which actually afforded us the flexibility to repurchase a modest number of our shares in Q4. Throughout 2023, we will continue to be guided by our long-standing financial policies as we execute on our financing plans. This includes the refinancing of maturing debt, while leveraging our strong liquidity position as needed to remain opportunistic as we access the capital markets. Finally, we remain committed to our investment-grade credit rating. And our priorities over the course of 2023 and into 2024 remain on deleveraging our balance sheet back down to the three to five times range. Consistent with our recent comments, at this time, we do not see any material M&A in our pipeline that would alter these areas of focus. Turning to slide 12. And in summary, we delivered strong results in 2022, demonstrating the resiliency of our business model in the face of various macro-related and customer-specific challenges. Our global portfolio of assets and operational capabilities continue to prove critical in meeting the growing demands of our customers and the customers they serve. We saw record new build volumes internationally and record leasing within our CoreSite business and experienced a steady acceleration in colocation and amendment growth as we exited 2022, which we expect to continue into 2023. As we look ahead, we expect to further build on the successes of the recent years and leverage our portfolio to drive strong recurring growth on the back of consistent secular technology trends for many years to come. With that, operator, we can open up the line for questions.

Great. Thank you very much. Good morning. Tom, you talked about scaling the core, and Rod just talked about no material M&A in the pipeline. Thanks for that. Just give us a little bit more color, if you could, on how you see the portfolio today. And is this the mix of assets that you want? You've obviously talked about potentially monetizing some of India. But any kind of areas where you feel like you're overexposed or underexposed? And how long is this sort of approach of not doing large deals likely to last? And then you talked about the strong results in CoreSite. You did buy some land there. I've noticed your future development pipeline potential goes up quite significantly, probably as a result of that. Just give us some color as how you think about beyond just incremental capacity, something larger, given the opportunities you see there? Thanks.

Yes, Simon. You raised multiple points in your question, so let me address them one by one, and please remind me if I overlook anything. When it comes to the scale of our core business, it really boils down to three main aspects. First, we focus on our daily operations, which involve servicing our customers and fostering organic growth. We're particularly dedicated to this in the US, as evidenced by our expectations for 2023 and the years to come. The large-scale partnerships we've established with key carriers in the United States are designed for the long term, giving us a predictable growth path in this market, which is the foundation of our entire business. I've always emphasized the advantages of diversification, as some markets will experience significant growth while others may grow at a slower pace due to varying methodologies our customers use for their builds. By considering all these growth patterns, we can achieve stable growth rates. We're optimistic about coming out of 2022 and anticipate increased growth in 2023, particularly in the United States. From a total portfolio standpoint, we continuously assess where we can extract maximum value. Currently, we're operating in 26 countries, and there may be specific markets where it could make sense to divest certain assets from various perspectives. While we don’t have any particular assets in mind right now, we're always reviewing our options. As for India, it's a market on track to surpass China in population soon. It has high data penetration and usage, and we want to remain engaged there because we believe in its growth potential. If there's an opportunity to partner with a third party to monetize part of that asset and reinvest the capital elsewhere, we will consider it. This approach is opportunistic, and we evaluate every available option. Regarding our data center business, we had an excellent year in 2022 with record sales and are replenishing our capacity as needed. We've acquired land in Denver and New Jersey to facilitate expansion. Currently, we're working on an additional 30 megawatts of capacity, with a third already pre-leased, and we have plans for 224 megawatts of future development. The demand for interconnection hubs is substantial, as you know, and we focus on creating opportunities for new clients. Last year, we added over a hundred new clients, and we're excited about the demand for our data center business in the United States. Did I cover everything, Simon?

Well, I guess, just in terms of the scale M&A, you've obviously done a lot of deals over the years. If you get back down into that three times to five times leverage, is that when we think about you're potentially looking at larger deals again?

Interesting, Simon. We have a lot of different ways of being able to secure M&A. We demonstrated that really with what we've done in Europe, with our capital, even in the United States with Stonepeak in terms of private capital. So I think the capital is there. For us, yeah, it is a function that our objective is to delever. I really do want to get down to that five times kind of leverage. And so that remains a top priority for the business. But on top of that, we want to continue to feed our build program. We had record build last year. We have a strong build program this year. With regards to the M&A, there's just still a significant difference between the valuations, the bid and the ask. And there's nothing out there that's compelling as we see it today. And so our focus continues to be on, as I said, what we do every day, driving organic growth, driving efficiency. You see we expect margin improvement in 2023 versus 2022 and supporting our build program. Our customers are very active around the world from a build perspective. And I think in the last several years, we brought in like – we built like 25,000 sites. And so there's a significant opportunity there, and the returns are incredibly compelling on that new build program. So as I said, there's just nothing at this point in time that we see out there that's interesting really from an M&A perspective. And we continue to just keep our head down in terms of funding our build program and delevering our business.

Great. Thanks a lot.

Thanks, Good morning, everyone.

A couple of questions. I'll give it to you part-by-part. First, as we think about the guidance, and thanks for all the color there, how should we think about in US, Canada the pacing throughout the year? Is it going to ramp through the year? Does it start high and come down? Is it balanced? But the opening question everybody is trying to figure out what is happening with the pacing in 2023 in US, Canada?

Actually, Rick, it's going to be very consistent, very linear throughout the year. And so largely, it's a function of the relationships and the agreements that we have in place. But we would expect it to be very consistent in the US throughout the year.

Okay. A related question to consider is that last year at this time, you shared some insights on the long-term leasing activity in the US and Canada for the period 2023 to 2027, projecting it to be above 5% and possibly even reaching or exceeding 6%. How is your outlook on that as we approach the end of 2023, looking ahead to 2024, 2025, 2026, and 2027, as you mentioned a year ago?

Yeah, exactly the same. I mean, it's – as we have said, as we have predicted, as we have thought, and again, it comes down to largely the relationships that we have with our customers. We see strong demand coming out. I still think we're in the early innings really with 5G. Our customers on average are probably on about half of our sites. So there is a significant amount of opportunity there. But it also comes down to the types of relationships and the arrangements that we have with regards to our MLAs. So we are underscoring really what we had said a year ago relative to growth coming out of 2023 through 2027.

Okay. And the last one for me, taking that to the bottom line, attributable AFFO per share last year at this time mentioned that 21 to 27 maybe above – at or above 10%. We've had a couple of tough years here with Sprint churn. 2023, we've got financing costs, still some Indian reserves. How do we think throw away 2021 to 2027 and just say, hey, as we look at 2023 as a new base point, how are you feeling about that ability to grow attributable FFO per share, dividend per share from this point onwards?

Well, I mean, you've got a couple of questions in there. We're not going to – we're not focused on rolling out a long-term guide at this point, as you would expect. But there have been some significant macro environment changes that happened around the world that we use to underwrite kind of that double-digit expectation, which I think is what you're referring to. But I'm not letting the foot off the gas in the business, okay? We're not changing anything at this point in time. Our core growth, as Rod just walked through, really remains really, really strong. And we don't have any expectations for that kind of growth diminishing. We see kind of 4G, 5G being rolled out across all of our footprints, which really gives us a lot of comfort in terms of being able to suggest that, that growth is going to continue. Now, also having the types of relationships that we do with our customers in the United States helps underpin a lot of that growth. The interest rates, Rod walked through the impact of rates. It's kind of a reset in 2023. I believe it to be kind of more of a one-off, if you will, in 2023. So we remain really bullish on going forward. As I said, I'm not going to talk about long-term guide, but I'm not letting the gas – letting the foot off the gas at all within the business. With regards to – of our dividend program, as you all know, you're a REIT expert. Our policy is just followed our REIT TI. And it's been very consistent. We've been able to enjoy double-digit rates of growth on our dividend for the better part of the last 10 years actually, which has been very supportive. And we continue to be – we continue to feel that our dividend is an important part of our total shareholder return. So we're looking at 10% dividend, as Rod talked about this year. It's difficult really to predict what that might be. It depends upon what we bring into the REIT, what's not in the REIT, obviously, what kind of M&A exists out there. It could drop a little bit to high single digits. But again, we continue to expect it to grow significantly. And as I said, it's an important piece of our overall total shareholder return.

Great. Thank so much. Everybody stay well.

You bet.

Thanks and good morning. Just a couple of follow-ups. So first, and maybe this is a slightly different question on the US leasing environment. But you outlined the percentage of revenue tied to comprehensive deals. I'm just curious if you can unpack where the flex could be in US performance, both in 2023 and maybe going forward as you think about the organic leasing growth potential of the US business. And then thinking a little bit more about the percent of revenue that you have tied to comprehensive deals. You shared a lot over the last couple of years on how the US has been shaping up on that front. Can you share with us how other regions fit in terms of the percent of revenue tied to comprehensive deals? And as you work with your customers, are there aspirations that you have in different markets to get that to certain levels over time? Thanks.

Hey, Michael. Good morning. This is Rod. I'll start here, and Tom can certainly join in. So, in the US, the leasing activity is really strong. Our revenue in the US is supported by what we refer to as holistic agreements, which I think everyone is familiar with. We've seen contributions from colocations and amendments increase from about $150 million in 2022 to $220 million in 2023. This drives about a 5% contribution to our organic tenant billings growth. As Tom mentioned earlier, we see about 90% of that locked in for 2023. Regarding the long-term guidance Rick asked about, we are continuing to target at least 5% growth from 2023 to 2027. A significant portion of that activity, both the underlying revenue and the revenue growth, is secured as part of the holistic deals. As we move beyond 2023, that 90% will likely decrease to around two-thirds by the time we reach the later years due to the nearing end of some agreements, with some potentially being rewritten along the way. We feel confident about the visibility we have into the US leasing market and the strength we see in the US market, especially because of our assets and how we manage these agreements. Your question relates to flex, and I think what you’re asking is about the potential upside. There is indeed potential upside if there is a faster adoption of 5G in the US. If that leads carriers to densify networks more quickly, we may see a faster conversion for colocations and fewer amendments in the future, which could bring additional upside. Moreover, concerning the build of certain carriers, DISH comes to mind as they establish a new network. If they exceed their minimum commitments with us, that could also lead to upside. It would be wise to monitor DISH and other carriers, keep an eye on 5G utilization, and observe how new applications impact bandwidth demands and when network densification might occur. It's an exciting time in the US market, particularly regarding 5G networks and potential forthcoming applications. This summarizes our US leasing outlook. Concerning our international business, we don’t have holistic deals in a significant way outside the US. They are generally more traditional, with a pay-as-you-go model globally. That's my take on that point, Michael.

Thanks very much.

Thank you for taking the questions. Tom, I appreciate your comments about the commitment to reducing debt. You mentioned that there are significant differences between the bid and ask prices on potential acquisitions. If that's the case, does this openness to consider selling part of the India market stem from the idea that if acquisition costs are too high, it might be a good time to divest? Is this thought process limited to India, or could it apply to Latin America or other regions in your portfolio as well? Additionally, is now the right moment to consider this, especially in light of the situation with VIL, or should we postpone any decisions until that situation is resolved? Rod, you noted that financing will have an 8% impact on the AFFO, and without that, plus the provisions for VIL, we could see an underlying AFFO growth of 8% to 9% per share. Should we take this as our baseline for considering 2024, indicating that, aside from other factors, we might be looking at an 8% to 9% growth in FFO for the year? Thank you.

Okay, Dave, you covered a lot of ground there. Let me start by saying that regarding the M&A in India, there isn't a direct connection between the two. They are somewhat separate decisions. This becomes part of a larger conversation about what we think will create value in the portfolio over time. Currently, our focus in India is more opportunistic, and we're still exploring options. There are several things happening there, and if we identify a value creation opportunity, we can capitalize on market growth and invest that capital elsewhere, including potentially accelerating our debt reduction. While I see the connection you’re making, I don't view them in that manner and believe the paths are distinct.

Good morning David. I'll address the AFFO per share growth. The chart indicates that our FFO per share has decreased from $9.76 to approximately $9.60 on an attributable basis. The financing costs represent about $315 million, which amounts to around $0.68 or an 8% headwind. The growth from our regional businesses, alongside our corporate cost centers, contributes 405, representing about 9% growth. This reflects our core growth generated from operations. The FX headwind is approximately 1%, and the VIL situation accounts for around a 2% headwind. When combined, this results in a negative 2% growth. However, we anticipate that the financing impacts are one-time occurrences. We expect interest to peak mid-year and potentially decline towards next year, which could turn into a positive factor. If that happens, it could eliminate the 8% headwind we are currently facing. Both FX and the VIL circumstances in India are unpredictable, but setting those aside, we are optimistic about our global operating business achieving upper single-digit growth in this environment. This growth is significantly driven by the increase in mobile data consumption worldwide and the corresponding demand for tower space, which positions our portfolio favorably to capitalize on these trends.

Okay. Great. Thank you guys. Appreciate it.

You're welcome.

Hi. This is Richard for Phil. Just wanted to follow-up on the builds. So what do you see as the most attractive markets right now internationally?

When it comes to our build program, Richard, I mean, we're going to build about 4,000 sites this year. That's the expectation. The biggest chunks here really come from Africa and India in the range of 1,600, 1,700 sites each in those areas. In Europe, we're going to drive just over 400. In Latin America, maybe just under 300 sites. So there's an opportunity to build in all of these markets. And we get really good NOI yields in these markets kind of across the board. So it's not just about the volume of sites. Certainly, we like the idea of increasing our footprint in Europe, in particular, driving more builds there with very highly credit quality customers in really attractive economies. So the 400 plus, 400 to 500 sites we'll build there are very attractive to us. But as Tom talked about with scaling the core, anywhere where we have management teams and assets and customers, to the extent we can add assets through an internal CapEx program with high NOI yields, it creates a lot of value for our shareholders long-term. It's good for our customers as well. So we think all of these markets are attractive in terms of our ability to build new assets.

Just to add to that, one of the most interesting aspects of our growth is what we're doing in Africa. We are focused on developing green sites with Airtel, utilizing our expertise in power and fuel in that region. We have implemented solar power at over 15,000 locations and introduced lithium-ion solutions at more than 19,000 sites. Over the past few years, we have reduced diesel usage by 5 million liters. We are building significant expertise in Power as a Service in this market, which we are integrating into the green sites we are developing with Airtel. This is an area we are particularly excited about for the next few years.

And coming back to the US, you said about the carriers are about 50% of your sites are 5G. When can we see, I guess, more densification activity? Do you think that's coming at the end of this year or into next year?

I'm certain that there are areas in the United States where we are already witnessing some densification in the marketplace. I expect this trend to continue as 5G adoption grows. It's in the carriers' best interest to roll out 5G since it will reduce their overall service costs. As more activities and applications develop and are deployed, you will begin to notice this densification. Therefore, I think it's already happening, and I anticipate that in the next two to three years, there will be an increase in market densification. Additionally, carriers are utilizing slightly higher spectrum bands, which means they will need to achieve higher levels of densification due to the propagation characteristics associated with those bands.

Thank you.

Great. Thanks for squeezing me in. So I just wanted to check in on the LATAM business. Obviously, as you mentioned, some churn impacts this year. Maybe you could break out the impact from Telefonica and Oi in your guide? And what type of visibility you have on churn beyond 2023 when some of these events may resolve and we could see organic growth go back to historical upper single-digit ranges? And then secondly, just a balance sheet question for Rod, obviously, a big increase in interest expense. Maybe you can talk about how you're thinking about managing the balance sheet this year in terms of fixed floating mix, whether there's the possibility of terming out some additional floating rate debt given the inverted yield curve or accessing the secured market or anything else you're looking at to help drive that down? Thank you.

Certainly. In Latin America, our guidance for organic tenant billings growth is slightly above 2%. This is composed of a few factors: we expect gross new business to be in the mid-single digits, around 3%. Additionally, we're experiencing higher escalators at about 8%. However, we also face a churn headwind of roughly 8%. This churn rate is relatively high, but we believe it's temporary and expect to improve over the next couple of years, leading to stronger overall growth in the market. Specifically for 2023, a significant portion of the churn is related to Telefonica, especially considering the situation in Mexico with Telefonica becoming an MVNO with AT&T, which is contributing to the churn. We're also observing churn from American Movil connected to the Nextel assets acquired in Brazil. Those two factors are the main contributors, aside from some smaller churn affecting lesser customers in the region. Regarding Oi, this accounts for about $100 million in revenue for us, approximately 1% of our total business. One-third of this revenue is tied to their landline business, which we expect will retain those sites over time. The remaining two-thirds have an average lease duration of five to six years left. Currently, Oi's impact is not significant, but we anticipate that developments will unfold this year and into next year as we negotiate with the three entities that have divided Oi's assets, likely extending the process over multiple years. This summarizes the current situation related to churn in Latin America. Yes. On the balance sheet, a couple of things that I would say. I mean, we have longstanding percentage policies when it comes to fixed and floating. We run 80-20. We're pretty much there at the end of 2022. We expect to stay in and around that range. I mean, we can be opportunistic. I think you saw it at the very end of 2021 just before interest rates began to rise. We were fairly aggressive in terms of terming out floating rate balances. We got our floating rate percentage down to closer to 10%. With about 90% or just over 90% on fixed, we did that very purposefully to take advantage of the low rates, both in the US bond market and the euro market. And that was just ahead of purchasing the data center business on December 28, 2021. So we can be flexible there. In terms of managing the balance sheet going forward, we have about $3 billion in bonds that we'll refinance this year. We'll look at a variety of opportunities to do that. That could come in the form of getting into the US capital markets that we can do that or parts of that in the European markets. And of course, we'll be balancing short-term and long-term rates. We could stay on the shorter end of the curve and with the expectation that rates may come down in the next couple of years, and then we go out longer when the rates are more attractive. We can also secure some of the debt that's on the balance sheet to the extent we refinance it and maybe carve off some savings from that perspective as well. So there are a lot of opportunities in terms of looking at the market. There's a lot to consider in terms of where we expect rates to head. But as I said earlier in one of my last comments, we do expect that rates will probably peak here in the US this year, maybe even drift down later in the year. And we'll continue to watch the markets and interest rates and economy to see what we expect to be happening next year. But we'll be looking at the full curve and all the different capital opportunities that we have in front of us to make the very best decisions going forward.

Great. Thanks, Rod.

Thank you. I wanted to follow up on India, specifically regarding Vodafone. Can you provide details on the current partial payments they are making and whether there has been any change in the timing? Also, have there been any adjustments to the pricing of their contract? Additionally, as you assess strategic options for India, which has been a tough market, are there signs of improvement? How do you evaluate the valuation you would consider in relation to your long-term growth expectations in that region? Thank you.

I’ll address the question regarding the India reserve. In our outlook for 2023, we anticipate a specific reserve for VIL of about $75 million. This is compared to nearly $100 million reserved for the last two quarters of 2022 based on revenue. I won't delve into revenue percentages they're paying, but I can mention that in January, their payments to us are slightly higher than at the end of 2022. We're observing improvements in collections through VIL, and we expect this trend to continue, leading to increased payments from them throughout the remainder of 2023. We foresee them getting closer to their payment obligations by the year's end. Regarding contracts, we haven’t established any MLAs or leasing contracts with them, but we have entered into a $200 million convertible debenture that includes terms for payment timelines and conditions for leasing fees. This agreement provides us with some additional safeguards. The situation remains volatile, and we are focused on supporting VIL during this period. The recent government conversion is promising, and we believe it could lead to better opportunities for VIL to secure additional capital. Our goal is to create long-term value and to maintain a partnership with VIL in India. Could you remind me of your second question?

Yes. With improvement in India, why is this the right time to look for strategic options in the region?

Yes, I would say, it's really just being opportunistic, kind of, looking at the market. Certainly, India has been volatile over the last few years and maybe even a little bit longer than that. But as we said in the prepared remarks, we look at all of our portfolio assets around the globe kind of on a constant basis and evaluate growth opportunities, valuations and other things. So we are in the process of looking at strategic options in India. We haven't made any decisions at this point, but we are kind of going through a process in evaluating things. And it's really around being opportunistic. We do believe that the Indian market is an interesting market and does hold some upside, but there's also a fair amount of volatility that we have experienced. So we'll be looking at a number of things. And when and if we conclude and make any decisions, we'll certainly let everybody know.

Hey, good morning, guys. Thanks for taking my questions. First, just a follow-up on the India question. Tom, you've emphasized how important new site builds are to your growth outlook and the returns you get with them. Obviously, there's a step down in your build plan in 2023 versus 2022, and it looks like the driver is primarily India. So, I guess, does that explicitly tie into your view that India is more volatile, potentially less appealing market than you once believed, or is something else driving that downshift?

No, it's really not. In fact, the numbers from the field regarding expected builds are significantly higher. What we do is assess that and focus on where we can create the most value. There is no pullback related to site developments. Additionally, we will observe varying levels of site builds in each country, just as we notice different levels of colos and amendments based on densification and carrier requirements. However, I wouldn’t read anything into the pullback on new builds in India for 2023.

Okay. Okay. That's helpful. And then maybe turning to CoreSite, since you've had it for a little more than a year. It seems like things are going consistent with your underwriting, maybe even a bit better. I guess bigger picture, any key learnings you'd highlight now that you've had a chance to have deep discussions with CoreSite's customers and your tower customers about the vision for how you could integrate those assets or have them work together? And I guess, more generally, any adaptations or refinements of your plan versus a year ago that you'd want to highlight?

Yes, nothing specific comes to mind. We have a solid history in that area of the infrastructure business. We understood the model that CoreSite was using with their customers and recognized how important interconnection is for delivering value to both their customers and cloud service operators, and that demand is still strong. This represents a considerable barrier for potential competitors. I continue to be very impressed with the team's approach to returns and their relationships with customers. This was expected, as I realized this during the entire due diligence process. I acknowledged the quality of the team. We experienced significant growth in 2022, which I believe speaks to both the team's capabilities and the compelling value they provide to customers. We are optimistic that 2023 will also be a robust year. There is still considerable excitement regarding the future of the edge. We have formed an advisory board, established a lab, and made plans to begin building out some of that capacity. We have identified around 1,000 locations in the United States that can accommodate over a meg of capacity. Through the relationships we have built with CoreSite and the cloud, we remain very positive about the opportunities ahead and how we can drive additional business to our tower site, which has a strong competitive advantage due to our ownership of the land and the site. We are eager about these developments. Our guidance does not currently include any performance projections from this new activity, and as we've mentioned, it will be a multi-year rollout. However, we believe that the combination of CoreSite's assets and our tower assets positions us uniquely to play a significant role in the ongoing evolution of the edge. As I mentioned, we will continue to reinforce our initial thoughts, and we are systematically working towards becoming a key player in rolling out these capabilities.

Nick, I'll just add to what Tom mentioned. While we wait for the edge to develop, the CoreSite business is performing exceptionally well and meets our expectations. Earlier, we talked about the record new business we achieved in 2022. We see strong demand from enterprise customers for our core data center assets across the country. A few key metrics: we're seeing rental space escalations of around 3%, which is within our target range. Cash mark-to-market adjustments for 2023 have increased from about 2% to possibly 3% to 3.5%, which is positive. Churn remains around 6.5%, on the low end of our range. We expect interconnection growth in 2023 to fall between 6% and 8%, aligning with our expectations. Our development CapEx is projected to be around $360 million for 2023, primarily to replace capacity sold in 2022 due to our record new business. So far, we're seeing strong results and demand from the CoreSite business as we continue to develop the edge.

That’s great color. thank you both.

I appreciate everybody joining the call. If you have any questions, please feel free to reach out to myself or the Investor Relations team. Thanks everyone.