American Tower Corp (AMT) — Q1 2023 Earnings Call Transcript

Good morning. And thank you for joining American Tower’s first quarter 2023 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 U.S. tower and data center businesses. And then Rod Smith, our Executive Vice President, CFO and Treasurer, will discuss our Q1 2023 results and revised full year 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 set forth in our 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 us this morning. As is customary for our first quarter call, my comments today will focus on our U.S. business, which is principally comprised of our tower and data center platforms, which made up 55% of our consolidated property revenue and 64% of our property operating profit in the first quarter of 2023. With regard to our tower platform, the secular tailwinds that have supported outstanding growth over the last two decades remain consistent. Every year, U.S. wireless subscribers consume more mobile data through a growing number of devices and applications, requiring faster speeds and lower latency performance. As a result of the increasing levels of data being consumed, our customers are deploying more equipment on our towers to meet that demand. In addition, and more than ever before, our customers are utilizing multiple bands of spectrum to deliver those high-quality, ubiquitous levels of service. In 2022, U.S. carriers deployed around $40 billion in network capital to provide nationwide 5G services on mid-band spectrum. This record level of activity is reflective of the first major wave of the typical investment cycles we’ve seen over the last 20 years, during which carriers amend existing sites to provide initial coverage and capacity with the new technology and harvest benefits from core network enhancements and spectral efficiencies. In previous cycles, these initial peaks have typically been followed by periods of moderation in overall spending, driven in part by reductions in spend on core upgrades, fiber and other infrastructure assets. However, we’ve historically seen tower spend remain in focus as our customers look to support continuous growth in mobile data consumption and provide market-leading network quality and reliability. And we would expect more of the same over the 5G cycle. In 2023, while we’re still in the relatively early stages of the overall 5G rollout, we continue to see customers making significant investments into their networks as part of their broader coverage initiatives, having yet to invest in densification at scale. These investments into adding and modifying equipment on our sites, which we’ve monetized to our MLAs, is driving 5.6% organic growth in Q1 or nearly 7%, absent the impacts of the Sprint churn, our strongest quarter since Q1 of 2020. And for the full year, we expect $220 million in year-over-year growth contributions from colocations and amendments, a record for our U.S. business. Looking out over the next several years, we see an environment that is supportive of continued strong performance in the U.S. as the 5G investment cycle progresses and densification occurs. In American Tower, we’ve underwritten this expectation into the comprehensive MLAs that underpin our expectation to deliver average annual organic growth of at least 5% or 6% excluding the Sprint churn over the next 5 years, which closely mirrors the 6.2% average organic growth we experienced between 2016 and 2020. Further, industry estimates suggest total monthly mobile data consumption that will require increased speed and lower latency is set to grow at a compounded annual rate of above 20% over the next five years, which we expect to be driven by continuous increases in mobile network utility, irrespective of potential impacts from any one category of new applications. As a result, we believe our customers’ networks will need to provide at least two times the network capacity they have today in three to four years or roughly three times today’s capacity as we approach the end of the decade. Over time, we expect our customers to meet this demand through continued network upgrade and densification initiatives, spectrum refarming, and the deployment of 5G on new spectrum. In this context, we believe our portfolio of over 43,000 sites is optimally positioned to serve our customers across the balance of the 5G cycle with significant capacity to accommodate additional equipment and new tenancies even beyond what’s been contractually locked in today. As we’ve done historically, we anticipate leveraging our best-in-class internal processes to generate incremental efficiency in the business and higher levels of service for our customers with both resulting in increasing conversion of our top line growth to AFFO. Through a combination of organic growth and M&A, we’ve added nearly $2.4 billion in annual property revenues to our U.S. and Canada segment since 2014, paired with less than $60 million in incremental SG&A expense or roughly 2% of the corresponding revenue growth. This prudent approach to cost management and operational efficiency has helped to drive operating profit margin expansion in the segment by roughly 400 basis points over the period. Going forward, given the benefits of our established scale, demonstrated ability to maximize the operating leverage potential inherent to our model and concerted efforts to further drive cost efficiencies at every level of the organization, we see a tremendous opportunity for capacity utilization in our existing assets to drive high-margin growth and expanding returns on invested capital as the 5G landscape continues to mature. Now, with respect to our CoreSite U.S. data center platform, we are equally excited about the prospects for value creation. Increasingly complex digital business demands require enhanced infrastructure performance and flexibility. CoreSite serves as an optimal nexus for the cloud service providers, service integrators, networks, and enterprise customers to interoperate to propel their business initiatives forward. We continue to see customers landing and expanding with CoreSite because it provides native access to key cloud service platforms and a diverse ecosystem, which allows them to serve their customers in a way that is flexible, scalable and drives growth and efficiency in their businesses. This is reflected in the continued strength of CoreSite’s leasing results interconnection growth driven by both existing customers and new logos, as well as the ability to drive pricing, solid renewal rates, and generate industry-leading returns. We also recognize that we’re still in the early stages of a broader digital transformation movement. Each year, data center workloads and compute instances continue to grow at a rate of approximately 12% in the vast majority of all new IT architectures deployed into cloud and hybrid environments that CoreSite is uniquely positioned to support. Additionally, we continue to expect to generate long-term growth from enterprise digital transformations and IT hybridization as organizations face workload management challenges that require the operational optionality, agility and critical interconnection capabilities that our CoreSite data center platform offers. Importantly, the absorption of this type of demand drives incremental value to our interconnection ecosystem and further builds on the momentum behind the CoreSite flywheel and the value we can provide our customers. So, we see a long tail of opportunity to continue growing and scaling our campuses, and we have the added benefit of being able to prudently select opportunities that are accretive to our ecosystem. As a result, we’ll continue to invest cash flows generated in the data center segment back into the business, provide our customers incremental confidence in a long runway for growth with CoreSite and generate highly attractive returns. Meanwhile, our teams continue working to develop solutions that leverage our combined communications real estate platforms to position American Tower as a leading infrastructure provider for the networks of the future and create incremental value for our customers and shareholders alike. In summary, our foundational U.S. tower and data center platforms are set to deliver continued growth and strong returns. We believe that the long-term secular tailwinds, the differentiated high-quality nature of both our U.S. tower portfolio and our data center interconnection platform, the value proposition they represent for our customers and the seasoned high talented teams managing them uniquely positions American Tower to create significant incremental value for the industry and our shareholders for many years to come. With that, I’ll hand the call over to Rod to discuss our Q1 results and expectations for the balance of the year.

Thanks, Tom. Good morning. And thank you for joining today’s call. As you saw in our press release, we are off to a solid start to the year with performance exceeding our initial expectations across many of our key metrics. Before diving into the results and the revised outlook for 2023, I’ll start with a few highlights from the quarter. First, despite ongoing macroeconomic volatility, strong demand trends continue to drive favorable leasing and growth across our global footprint, which is a testament to the resiliency and stability of our business. In Q1, we posted consolidated organic tenant billings growth of over 6%, our highest rate since 2017 and an over 300 basis-point acceleration as compared to Q1 of 2022. This includes growth through colocations and amendments of over 5%, our highest in three years, as carriers continue to leverage our leading macro tower portfolio to aggressively roll out their networks to meet customer demand. Organic leasing growth was further complemented by another quarter of strong new build volumes as we continue to leverage our scale and capabilities to attract accretive development opportunities from our leading customers across our international business. Finally, we had another record quarter of leasing from CoreSite, continuing the momentum from what was a record-breaking 2022 and exceeding our initial underwriting plan. Complementing our solid top line trends, our focus on cost management combined with the inherent operating leverage in the tower model drove margin expansion of approximately 270 basis points as compared to Q1 of last year to 63.7%, with the benefits being more noticeable given the absence of material M&A. Going forward, we’ll continue to manage our business with cost discipline, maximizing the profitability of our strong reoccurring organic growth profile. Next, we accessed the debt capital markets, successfully issuing $1.5 billion in unsecured notes and $1.3 billion in secured notes at attractive terms. Proceeds from these offerings more than cover our Q1 maturities and the remainder together with the proceeds from various strategic initiatives, including the sale of the Mexico Fiber business, were used to pay down floating rate debt. As a result, we’ve reduced our floating balance by nearly $800 million year-to-date, now representing slightly over 20% of our debt structure. We’ll continue to evaluate opportunities to further manage this balance over the course of the year. Finally, we continue to have constructive discussions with potential investors as we assess strategic options for our India business. We remain focused on executing an outcome that maximizes value and optimizes our global portfolio mix and the risk-adjusted return profile for American Tower and its stakeholders. As we move forward, we will keep our investors informed of any new developments. With that, please turn to slide 6, and I’ll review our property revenue and organic tenant billings growth for the quarter. As you could see, Q1 consolidated property revenue growth was over 4% and approximately 7% on an FX neutral basis over the prior year period. This included U.S. and Canada property revenue growth of over 4%, international growth of over 3% or nearly 9%, excluding the impacts of currency fluctuations, and approximately 10% growth in our U.S. data center business. In the quarter, we benefited from accelerated decommissioning-related settlements in Latin America, totaling approximately $39 million, partially offset by Vodafone Idea or VIL, revenue reserves of approximately $33 million, representing a modest improvement to payment trends as compared to the second half of 2022. Moving to the right side of the slide, organic tenant billings growth was a significant contributor to our overall revenue growth, standing at 6.4% on a consolidated basis, which as I mentioned, was our highest quarter since Q3 of 2017. In our U.S. and Canada segment, organic tenant billings growth was 5.6% and nearly 7% absent Sprint-related churn, including a record quarter of colocation and amendment growth contributions of nearly $60 million, a nearly 65% increase as compared to the growth reported in Q1 of 2022. Growth modestly exceeded our expectations, driven by some delays in churn, which we still anticipate to occur in the year and, to a lesser extent, new business upside. Similarly, our international operations experienced improvements across nearly all reported segments, generating organic tenant billings growth of 7.5% and over 180 basis-point acceleration from Q4 of 2022, which includes the benefits of CPI-linked escalator commencements across various contracts. Africa generated its highest quarter on record with organic tenant billings growth of 12.1%, including escalator contributions of over 10% and a continuation of solid new business of nearly 7%. Growth in the quarter benefited from some delays in previously communicated carrier consolidation-driven churn, which we still expect to occur in the year. Turning to Europe, we saw a growth of 8.2% and including over 6% from escalations, demonstrating our ability to monetize on CPI-linked escalators across the vast majority of our portfolio in the region. In Latin America, we saw a growth of 6.1%, which includes relatively consistent escalator and new business growth, partially offset by the continued elevated churn, as we’ve highlighted on past calls. Churn in the quarter was favorable relative to our initial expectations as the decommissioning events have been slightly delayed to later in the year. Lastly, in Asia Pacific, we saw a growth of 3.4%, demonstrating steady improvement over the past three quarters. This growth acceleration was mainly driven by colocation and amendment contributions as carriers ramp up 5G deployments. Organic tenant billings growth was further complemented by the construction of over 1,300 sites in the quarter, representing our 11th consecutive quarter of exceeding 1,000 sites, primarily in Africa and Asia Pacific, as carriers continue to invest in their network coverage and densification needs across the regions. Initial returns remained solidly in the double digits with Q1 constructed sites yielding nearly 14% on day one. Turning to slide 7. Adjusted EBITDA grew nearly 9% to approximately $1.8 billion or nearly 10% on an FX-neutral basis for the quarter. As I mentioned in my opening remarks, adjusted EBITDA margin demonstrated an approximately 270 basis-point improvement year-over-year to 63.7% and still an over 190 basis-point improvement when normalizing both periods of VIL-related revenue and bad debt reserves in India. This margin expansion was achieved through our continued focus on cost controls, allowing for approximately 100% conversion of revenue to adjusted EBITDA growth. Again, on a normalized VIL basis and driving cash, SG&A as a percent of total property revenue down by approximately 50 basis points year-over-year to approximately 7.1% for the quarter. Moving to the right side of the slide. Attributable AFFO growth was 1.5%, while roughly flat on a per share basis, which includes financing cost headwinds of around 7.5% and 9.5% against attributable AFFO and attributable AFFO per share growth, respectively, primarily driven by the rise in rates over the past year. Let’s now turn to our revised full year outlook. As mentioned earlier, we had a strong first quarter, outperforming our initial expectations across the majority of our key metrics. While we are excited about the results to date and the sustainable demand trends that underpinned our performance, we have largely kept core and full year assumptions consistent to our prior guide, given our early position in the year and some of the timing benefits I alluded to earlier. This approach for our Q1 guidance is relatively consistent to past years. This also includes our assumptions around VIL-related revenue reserves, which we’ve held at $75 million for the year. As noted earlier, we did record approximately $33 million in VIL reserves in Q1 with the guide applying an improvement for the duration of the year, notably in the back half. This assumption is supported by certain factors that we’ve considered in our risk assessment, including the customers’ contractual obligations for 2023, our latest conversations with VIL management, where they’ve committed to meet these contractual obligations, and a demonstrated improvement in payments by the customer in Q1 relative to the second half of 2022. Key updates to our revised outlook include the impacts from the recent sale of the fiber business in Mexico, together with the upsides from FX derived using our standard methodology and several small adjustments below EBITDA at the attributable AFFO level. With that, let’s dive into the numbers. Turning to slide 8. We are reducing our expectations for property revenue by approximately $20 million versus our prior outlook, driven by $45 million related to the sale of the fiber business in Mexico, partially offset by $25 million associated with the positive impacts of FX. Moving to slide 9. We are reiterating our prior outlook expectations for organic tenant billings growth across our regions, and we’ll continue to assess the positive momentum coming from our strong first quarter as we work further into the year. Moving on to slide 10. We are reiterating our adjusted EBITDA outlook with a decline of approximately $25 million related to the Mexico Fiber sale, offset by $25 million from positive impacts of FX. Turning to slide 11. We are raising our expectations for AFFO attributable to common stockholders by $20 million at the midpoint and approximately $0.05 on a per share basis, moving the midpoint to $9.65 per share. Updates to our expectations, aside from FX, include the cash adjusted EBITDA reduction driven by the Mexico Fiber sale, offset by favorable net interest in part due to the use of the sale proceeds to pay down debt and some cash tax savings. On an isolated basis, the Mexico Fiber sale resulted in a $15 million decline to attributable AFFO as compared to our prior outlook midpoint. Moving on to slide 12. I’ll review our balance sheet and capital allocation priorities for 2023. Beginning on the left side of the slide, our capital allocation priorities for 2023 remain consistent with our prior outlook, which includes approximately $3 billion towards our common dividend, subject to Board approval, representing 10% growth year-over-year on a per share basis. In addition, our CapEx outlook midpoints remain unchanged across all categories and support our initial plans to construct approximately 4,000 new sites across our international footprint. Moving to the right side of the slide. And as I highlighted earlier, we further strengthened our investment-grade balance sheet in the first three months of the year, extending our average maturity profile to nearly six years, while reducing our floating rate debt balance to slightly over 20%. Additionally, we closed the quarter with net leverage of approximately 5.2 times, well on track towards our deleveraging target of 3 to 5 times. Consistent with our past remarks, we remain focused on driving shareholder value through our growing dividend and accretive CapEx program while strengthening our balance sheet through deleveraging, maximizing liquidity, managing a diverse pool of capital sources and an ongoing assessment of market conditions to potentially further term out floating rate debt and extend our maturity profile. Turning to slide 13 and in summary. Q1 was another strong quarter across our business with incremental steps taken towards strengthening our balance sheet. Underpinned by sustained demand trends across our global footprint, our leading portfolio of communications infrastructure assets generated accelerating leasing growth, while our capabilities as an operator and partner continue to afford us opportunities to deploy accretive capital to its high-yielding development projects. We believe we are well positioned to drive compelling growth, supported by attractive secular trends across our global footprint and deliver solid returns to our shareholders over the long term.

I was hoping I can ask about some background on the sale of the Mexican fiber asset. What led to that? Was that something you were actively shopping, or was there an inbound that came there? And then if we maybe just take a higher-level approach to this. You gave us an update you’re considering and evaluating a potential equity sale in the India business. You just sold a piece of your Mexican business. Are you undertaking a broader portfolio rationalization strategy? And if that is the case or even if it was just India, where you would pull some additional proceeds in, how do we think about applying those proceeds especially now that you’re getting close to the high end of your target leverage range? Thank you.

Yes. I’ll begin, and Rod can certainly add to this. We continuously evaluate all of our assets in the markets we operate in to identify the best return rates and determine if there are better opportunities to reallocate capital. This is an ongoing internal process that we also discuss with our Board annually. Our fiber business in Mexico, which we have operated for several years, was part of our initial innovation and platform expansion strategy. However, this particular business did not generate the returns we anticipated, and we believed it would perform better in the hands of a larger player in the market. Consequently, we have actively marketed this business over the past several months as part of our regular review. This is similar to our approach with the Indian market, which follows the same disciplined evaluation. We assess whether there are more beneficial opportunities to reallocate capital or invest in different products and services. This is the current process we are undergoing. Rod and I discussed this in our last call with you. Our goal from a balance sheet perspective is to reduce debt, and we plan to use the proceeds from the fiber sale to achieve that.

Brad, I'd like to add a couple of points. Thank you for the question. In our quarterly numbers, we've reduced our leverage to 5.2%. We utilized the proceeds from the fiber business to pay down debt, not only to delever but also to lower our exposure to floating rate debt, which we have reduced to around 20%. This reflects our commitment to maintaining an investment-grade balance sheet in the current environment, prioritizing deleveraging. This remains a primary focus in our capital allocation strategy following our dividend payments and growth.

Great. If you don’t mind as a quick follow-up question. I mean, just being at 5.2 turns, which is so close to the high end of your range. It doesn’t seem like it would take 12 to 18 months to get into that target range. And so, is the right interpretation of that statement to say that in this environment, all things being equal, you would likely just continue to delever and particularly to pay down floating rate debt absent something that’s highly compelling, meaning you may drift below 5 times and closer to 3 times, if that’s just the case?

Yes, absolutely, Brett. You’re exactly right. And now whether we go back down to 3 times, it could be a bit of a stretch. But clearly, we want to get sub-5. And as Rod said, we really do want to lessen the exposure to the floating rate debt that we have on the balance sheet.

One thing I want to mention, Brett, is that you might see the ratio rise a little, potentially reaching 5.3 in the upcoming quarters before it starts to trend down again. This is related to where our quarterly annualized EBITDA ends up. However, this shouldn’t lead you to think that our commitment to reducing debt is any less strong, because it certainly is. You might notice a slight increase before it decreases again.

Good morning. This is Landon Park on for Simon. Thanks for taking the questions. I’m wondering if we can start on the data center side. You mentioned another record bookings quarter for CoreSite. Can you maybe provide any more color there in terms of what you’re seeing in the market and where that demand is coming from? And on the data center side, can you give us an update on your edge data center project that you were trying to get built out this year to start scaling on that front?

Yes, let me begin, and then Rod can expand. We're seeing a continuation of the strong demand for our digital infrastructure that started in 2022. There's a great mix of enterprise accounts, operators, and cloud services. The pipeline is looking really healthy, and we've managed to leverage strong pricing opportunities throughout the year, especially as we focus on driving interconnection growth. We're very pleased with the team's performance and the business they’ve generated, which led to a strong Q1, and we have high expectations for the future. Regarding our edge projects, we're internally identifying locations where we can provide 1 meg or 2 meg of power. We have several sites ready to go, and we're eager to move forward. We're actively engaging with service operators, hyperscalers, and cloud providers to refine our value proposition for mutual profitability. It's still early days, but we remain very enthusiastic about the potential ahead.

And just one follow-up on that. Where are you at in terms of the design phase for that sort of edge data center that you guys were hoping, I think, to design this year and something that could be scaled relatively easily going forward?

From a design and engineering perspective, we really have the specs really well laid out such that, as I said before, we’re shovel-ready on a couple of locations to start to deploy it. And so, the teams know exactly what it’s going to look like, have identified who the vendors are that are going to be providing a lot of the resources and pieces of it. And so, we’re really far along on the overall design.

Thanks. Good morning, everybody. I want to follow up on Brett’s question a little bit on the Mexico Fiber sale. Let’s go deeper into what lessons that you learned there. I think you were hoping to see some small cell. But is it just that the fiber business is dramatically different than the power business, and small cells weren’t playing? But what specifically did you learn? And I got a U.S. question.

Rick, it’s consistent with some of the experiences candidly that we’ve had in the past in the business, and we thought we might be able to do things differently and unique. That particular asset came with tens of thousands of sites in Mexico City, which was also very interesting to it and remains very interesting to us, and we still have the right to those particular assets as our customers deploy and densify in Region IX or in Mexico City itself. But what we continue to learn on the retail side, just how difficult it is to be able to provision circuits and make money, providing lit services to enterprise accounts and then just how competitive it is. And the SLAs that go along with them, how difficult it is to be able to maintain them in a very profitable manner. There’s a tremendous amount of competition in the marketplace. And so, as a result, it just makes sense for us to put those particular capabilities in the hands of somebody that just does that 24/7. And hopefully, they will find more success there. But it’s consistent with what we see in the fiber business in all of our markets, including the U.S., where we think that there’s really an opportunity for fiber is when you’re bringing it to the tower. That’s kind of a slam dunk for us because that’s obviously improving the capability and the capacity of a particular site. So, when we start to get into the retail aspects of it, it’s just such a competitive, capital-intensive, low-margin opportunity that it just made sense for us to move out of it.

In this debt environment, good to reduce your floating rate and save some interest. On the U.S. side, can you update us as far as in aggregate what kind of percent of your towers do you think have been touched with mid-band spectrum by the carriers. And we’ve heard a lot of talk that private networks are going slowly, but starting to ramp, but that some of the carriers are wanting to see private networks before we get to the edge. So just trying to gauge in the U.S. where we’re at as far as mid-band touches and what you’re seeing on private networks.

Yes, it is still around the 50% range. Some are a bit higher, and some are a bit lower, but overall, it remains around that mark. This has primarily been due to coverage, with some areas seeing densification, mainly driven by amendments to ensure widespread coverage across the country. The carriers continue to be active, and as mentioned, we anticipate overall capital spending to decrease in 2023 compared to 2022. However, our comprehensive Master Lease Agreements provide protection against that volatility. While carrier spending may vary, it has slowed down as expected in 2023, but we are shielded from that effect. On the private side, there has been increased discussion regarding private networks. Although I wouldn't classify it as a surge in deployments, our sales teams are starting to have different types of conversations with carriers and enterprises about implementing private 5G networks. We are currently experimenting with and deploying some, and I believe there is more to come in that area. Clearly, 5G will play a significant role in developing this segment of the market.

Thanks. Just following up on the domestic leasing environment. Curious how much of the leasing strength is coming from outside of the big three national wireless carriers? And what’s the sensitivity to performance, both for ‘23 and as you look out to your multi-year guidance, if that activity from these others, which could include DISH, were to significantly increase or significantly decrease? And then if I could just throw in a second question, the common theme from some of the market-by-market commentary with delay of churn. And so just curious if there’s more to unpack in what’s causing those delays in certain markets. And if those delays should help the ‘23 outlook and just be something we should be considerate of in terms of a possible headwind for part of 2024? Thanks.

Hey, Michael. Good morning. Thanks for joining, and thanks for the question. We’ve talked about in the past we are seeing an acceleration in the leasing environment in the U.S. in terms of our numbers and specifically the incremental revenue that we’re seeing from new business coming from colocations and amendment. So, we had a really strong quarter in Q1 in the U.S. We booked about $60 million of incremental colocation amendment revenue. That’s well on track to achieve our $220 million target for the year, which is a nice step-up over last year, which was about $150 million. So, that’s the acceleration that we’re seeing. That is primarily coming from the primary carriers, the big three certainly. And DISH is also a contributor in that. And I think you know and most everyone on the call knows that we have holistic deals with the carriers in the U. S. environment. So not that we’ll go through any specifics with how they work carrier by carrier, but what it does is it has our revenue contracted in there. So, we have about 90% of our revenue and revenue growth for this year fully contracted, and there’s no variability in that. So, we feel really good about that. And then when you look at the long-term going out through 2027, you’ve heard us talk about that 5% on average OTBG in the U.S. We have about 75% visibility out over that long period of time of the underlying revenue as colored for revenue growth. So we feel really good about that. But the vast majority of that activity is the big three plus DISH. When you think about churn, we did have delays in churn, which helps support our growth rates for the quarter. So, we’re up to about 6.4%. Our churn came in at about 3.4% for the quarter. And the places where it’s noticeable, it’s a slight improvement in the U.S. because of churn, but that’s not the biggest piece. It’s probably more dropping down into Latin America. Within our overall guide for Latin America, we had 8 percentage points in for churn. And that is primarily coming from two big carriers: Telefonica, which everyone knows what’s happening with Telefonica in Mexico as well as Oi down in Brazil. Oi represents about 2% within that 8%. And what’s happening is just the delay. So we fully expect the churn for the Telefonica churn as well as the Oi churn to kind of catch up here during the year. That’s why you’re not seeing a change to our organic tenant billings outlook for the full year. So, we do expect to kind of catch up with that. So, we’ll take the positive benefits for Q1, and we’re still kind of being realistic and maybe a little conservative in terms of keeping our organic tenant billings growth consistent. But that’s really where it is. We also have elevated churn in Africa with Cell C down in South Africa and even AirtelTigo over in Ghana. And again, we’re not changing our full year outlook with just the timing is moving around just a bit.

Just two, if I could. First, on India, if there’s any more color you can give or update in terms of where that process is and when you may expect to have that resolved. And then, maybe to dovetail on the prior question, obviously, this year has been impacted by interest, FX, some VIL reserves. As we kind of move past that, is high-single-digit type AFFO per share growth maybe a more viable aspirational target to consider in 2024 onwards, or are there other maybe headwinds we should be contemplating as we start to roll the calendar? Thanks.

Let me hit the India process first, and then I’ll jump into the next question. So, we are running a process, as Tom and I have talked about here on this call and in the prior call. It’s very similar to the process we walked through when we sold an equity stake in our data center business in the U.S. as well as the European joint venture that we did. So, we’ve gone out to the top couple dozen highly professional, large investors that are in the infrastructure space. Our goals remain the same that in the other transactions we did, really, which is to partner to or sell the equity to a very strong investor that understands the space that can help run the business, has government connection, has carrier connections, all those sorts of things. So bringing more than just capital, but also a willingness and some experience to be a strategic partner in the business. So that process continues. I would say at this point, it’s progressing. And we’ve got the list worked down from the full couple of dozen to a smaller list here, still very active. And I think we’ll figure out where we head and what that transaction might look like in the coming quarter. We are going to be patient and take advantage of opportunities as they arise. Our decisions will prioritize the best interests of shareholders, employees, and customers in India. This process is similar to what we've experienced before. Regarding our AFFO, we anticipate a slight decline in per share growth, largely due to headwinds from financing interest costs and the share issuance from last year to fund the CoreSite business, as well as foreign exchange impacts. We expect an approximately 8% headwind this year from financing factors, including rising interest rates, and about a 1% headwind from foreign exchange. The $75 million VIL reserve we discussed represents another 2% headwind. Despite this, we see the core business growing in the 8% to 9% range this year, which we view positively. If we achieve 5% organic tenant billings growth in the U.S. and stronger growth in our international markets, complemented by another 100 basis points from new builds, we believe an upper single-digit growth rate is within reach. However, we need to monitor a few factors. The ongoing VIL situation requires our attention, and we remain cautious about interest rate movements. We aim to minimize our exposure to floating rate debt, manage refinancings effectively, and have already issued nearly $3 billion in new bonds this year to mitigate refinancing risk. Looking ahead to 2024, we are preparing to further reduce that risk. If interest rates stabilize and we manage the volatility in India, achieving upper single-digit growth is certainly possible. We have a strong portfolio of assets in prime locations, and our customers continue to actively lease these sites, reinforcing our confidence in the core performance of the portfolio.

I have two questions. Firstly, for Rod, I want to clarify the situation with Vodafone Idea. When you provided guidance for 2023 after the second half, you mentioned that you expected the collections rate to be similar to the second half run rate for 2023. You initially indicated that about 70% to 80% of what you anticipated would be received was based on a cash accounting method. However, you mentioned today that collections in the first quarter were better than expected, but you also made a provision that was nearly half of the reserves you had anticipated for the entire year. I'm having trouble reconciling these points, so could you explain how this all works? Secondly, Tom, DISH's stock has reached a 24-year low, and its bonds are yielding between 20% and 30% over the next three years, indicating it's in a distressed state. Many people have questions about how secure you feel about your contractual relationship with them and how this influences your growth. Additionally, for those who may not have as much experience, how would you assess the impact if bankruptcy were to occur within the wireless industry today? Thank you.

Good morning, David. I’ll address the question regarding Voda. The collections rate we observe in Q1 aligns with our expectations; it is not better or worse. We anticipate maintaining this collection level into Q2. To clarify further, the collections rate in Q1 is slightly higher than what we saw in Q4 and Q3 of last year, indicating improvement in collections from Vodafone when comparing the first half of this year to the second half of last year. Regarding your question about the latter part of the year, we do expect collections from Vodafone to improve as we move into the second half. We maintain regular communication with Voda. As you may have noted, the government converted their equity, which allows Voda to address their balance sheet and pursue equity and debt financing. They're actively working on that. Additionally, we believe the recent Board appointment in India is a positive development. We are confident that Voda's management is committed to increasing their payments to us in the second half of the year, which factors into our outlook.

Dave, with regards to DISH, they remain very active in the market. They are investing throughout the country to meet all of their FCC requirements. They’ve have always been a good partner. I have a lot of faith in their leadership team there in terms of being able to develop the network and drive strategies that make sense for them. So from our perspective, there has been a very strong player and a very strong partner. I’m not going to speculate on bankruptcies and all the other types of things candidly. But just to let you know that I believe that they are really strong leadership team, really smart and being, I think, very intelligent in terms of how they’re building out their network.

Tom, if I could just follow up. I think that there is a spectrum of relationships that tower companies have with DISH. Some are activity-related, some are kind of minimum take rates with contractual escalators and such. And I think that you’re in the latter camp. Is that fair to say?

We have been collaborating with DISH for several years to support them in engineering and expanding their network. Our U.S. leadership team has established a strong relationship with them from the start. I can't comment on the nature of relationships with other tower companies, but we have felt very comfortable with our partnership and how it has developed over time. There is a mutual respect between both organizations.

Can you talk a little bit about how you will approach M&A? There seems to be a number of portfolios available in some of the Asian markets that you don’t currently have a presence in and maybe some in Europe. If you could just talk about your interest and how you would prioritize portfolio growth in the next couple of years, that would be great. And a second question maybe just specifically in Europe. What do you see in terms of the carrier activity? And if there’s any update on how one-on-one is contributing to your growth? And if they decide to grow the MVNO route, should we expect any impacts on your growth outlook? Thank you.

Good morning, Batya. Thank you for your question. Regarding mergers and acquisitions, our perspective remains consistent with what it has been over the past few months and certainly through the last couple of quarters. In the current environment, considering what's available and the pricing differences between private tower sales and public tower equities, as well as other important terms and conditions, we continue to evaluate our pipeline on a portfolio and regional basis. At this time, we do not find anything compelling that would prompt us to make any moves. Therefore, we are committed to our capital allocation strategy moving forward. A key aspect guiding us is the uncertainty around interest rates and our plan to reduce leverage back below five times in a prudent timeframe, as well as lowering our floating rate exposure. We're focused on managing interest rates effectively while also providing and growing dividends for our shareholders. When considering the range of opportunities, we are fully dedicated to maintaining and growing our dividend. We also invest capital into our internal programs, specifically in building around 4,000 towers globally this year, which are expected to generate high initial net operating income yields, approximately in the mid-teens. For the first quarter, we anticipate a yield of around 14%, which we view positively. Furthermore, we plan to allocate part of our capital this year, around $360 million, towards CoreSite. This investment aligns with their cash flow generation, as they generate EBITDA in the mid-400s. We are reinvesting their cash flow into the business to ensure we can meet customer demand, which has been at record levels in the past year and continues in the first quarter of this year. It’s important to note that our capital program this year is slightly less than last year, primarily due to our focus on strengthening our balance sheet, reducing leverage, and minimizing our floating rate exposure. In Europe and Asia, we see potential for growth and wish to expand, but we have not yet found compelling portfolios that meet our criteria regarding terms and pricing. We do not anticipate significant developments in this area soon, but over the next two to five years, we plan to actively explore different portfolios in Europe, which presents a strong market opportunity. Should we decide not to acquire anything in Europe, we are confident in our existing portfolio. In Asia, despite having explored various opportunities in the past couple of years, we have yet to find deals that align with our disciplined approach to pricing, terms, and country evaluations. We will maintain this discipline moving forward and remain focused on enhancing our balance sheet, reducing leverage, and controlling floating rate debt, while avoiding major mergers and acquisitions in the near term. In Europe, we are observing positive activity across the region. In Germany, Drillisch 1&1 is starting to enhance their network with a full greenfield 5G build, which is generating some revenue for us. We are eager to assist them as they develop their network and anticipate increased collaboration in the second half of this year and in the future. In France, Germany, and Spain, we see a strong environment with capable partners and carriers, which gives us confidence in our growth potential and our standing in those markets. We guided when we did the Telxius transaction that we would be achieving mid-single-digit organic tenant billings growth. We’ve been above that since we acquired the portfolio in this year, we’re again looking at upper single digits in that 7% to 8% range, which is a really nice place. We’re benefited from the activity that we’re seeing from the carriers in terms of the leasing. We’re also benefited from the contract terms where we have untapped escalators in Germany and in Spain, which is very helpful. And then we’re seeing very low churn rates again, because of the demand that we see from the carriers to build out networks and also the way the contracts work that we’ve been able to negotiate. So, we feel really good about our position in Europe. We feel really good about our ability to support the carriers’ endeavors to build out networks in Europe, and we think there are some good things to come in Europe.

I guess when we look at the U.S. leasing colo line, $60 million I think was a record for the Company ever. Are we at the point where that colo number is peaking? And just because if we look at the midpoint of the guide $220 million, it would imply some deceleration. And then, can you just help us just refresh us in terms of how your master lease agreements work in terms of the use fee provided to your customers. I guess my understanding is in year one of those contracts, it’s typically the highest use fee contribution and that those generally fall off as the term of the contract extends. But I was hoping you can help explain it for us. Thanks.

You are correct regarding the organic new bids we receive from colocations and amendments. We anticipate that the peak for the $60 million will occur this year. However, we expect the quarterly figure to range between $50 million and $60 million over the next three quarters. There won't be a significant drop-off; it's quite linear. Although there may be a slight decline due to the timing of the master lease agreements and use right fees, I won't dive too deeply into contract specifics. Timing differences can occur where use right fees increase in certain quarters, typically at the beginning of the period. Additionally, we have the potential for extra revenue that can vary throughout the quarter. The $220 million projected for this year partly reflects the impact of the master lease agreements and the transition phase associated with them. It's possible that this figure may be slightly lower next year, but we are seeing a strong acceleration in revenue as we start this year. While we expect some tapering on a quarterly basis, we will still reach the $220 million for the year, which represents nearly a 50% increase from last year's $150 million. We remain confident in the strength of our U.S. business and are targeting an average of 5% organic tenant billings growth through 2027.

Maybe just quickly touching on the data center business, obviously, continuing to perform well. Maybe you could talk about the accelerated growth you’re seeing there and kind of disaggregate it between just new leasing and then also pricing. We’ve heard that supply is really historically tightened data centers and a lot of operators are continuing to push rents. And then you made a comment, I think, that you’re seeing some pockets of densification in certain markets. Maybe you can talk about how you think the cadence of that evolves over the next few years, especially as some of the mid-band spectrum upgrades, amendment revenue starts to taper off in the next couple of years?

We are very enthusiastic about our data center business. We have previously mentioned that our assets are distinctive, featuring cloud-rich facilities with multiple cloud on-ramps, along with extensive networking and numerous enterprise customers. This creates significant interconnection opportunities, as clients utilize these facilities for access to various cloud services and to connect with other cloud providers, networking firms, and enterprise companies. This dynamic is a major contributor to the record growth we have experienced. In 2022, we saw record new bids for CoreSite, and this trend continued into Q1, with impressive business performance compared to the same quarter last year. This strong performance has led to a 10% year-on-year revenue growth for our data center business, which exceeds our initial projections of upper single-digit growth between 6% and 8%. Our year has started well, and while we anticipate that the 10% growth may moderate a bit, we expect to remain solidly within our growth targets. Additionally, we are witnessing robust growth in interconnection revenue, which has increased by about 9.5%. This growth is significant as it reflects the activities of our customers within our facilities and underlines the stability and stickiness of our revenue, fostering strong relationships among enterprises and networking companies. We are also adjusting prices in this market, balancing customer sensitivity with our growth objectives and ensuring that we are capturing the value our assets bring to clients. We are currently seeing cash mark-to-market increases in the range of 3% to 5%. Many of our contracts have escalators, and we typically observe a 3% increase embedded in them. The churn rate in our business remains in the mid-single digits, around 6.5%, which is within our target of 6% to 8%. Our maintenance CapEx aligns with our expectations, approximately 2% of revenue, amounting to between $20 million and $30 million annually. We are pleased with how the team is managing this business and how these assets benefit our customers. We maintain a gross margin close to 60%, which reinforces our satisfaction with the data center business's performance and future prospects. These assets also offer us exciting opportunities, particularly regarding edge computing and integrating them with our towers and edge infrastructure closer to our customers, as well as networking and enterprise firms across the U.S. The outlook for this business remains very strong.

Great. Thank you everybody for joining today’s call. If you have any questions, please feel free to reach out to myself or the Investor Relations team. Thanks, everyone.