American Tower Corp (AMT) — Q3 2024 Earnings Call Transcript

Good morning, and thank you for joining American Tower's Third Quarter 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. I'm joined on the call today by Steve Vondran, our President and CEO; and Rod Smith, our Executive Vice President, CFO, and Treasurer. Following our prepared remarks, 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 2024 outlook, capital allocation, and future operating performance, 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 most recent Annual Report on Form 10-K and other risks described in documents we subsequently file from time to time 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 Steve.

Thanks, Adam, and thanks to everyone for joining today. As you can see in our Q3 results, demand remains strong across our global portfolio of real-estate assets. In our Tower business, our customers' efforts to deploy mid-band 5G for additional coverage continue to support a healthy pipeline of activity across the US, Europe, and parts of our emerging markets. The discussions we're having with our carrier customers about their need to address upcoming capacity requirements, particularly in the US, further reinforce our bullish expectations for the densification phase of the 5G investment cycle. Additionally, our data center segment delivered another fantastic quarter of leasing, benefiting from accelerating hybrid IT deployments and early signs of AI-related demand. To complement our top line growth, we're executing our previously stated strategic initiative to enhance our portfolio composition and improve the quality of earnings by focusing our discretionary capital in developed markets and closing our India sale. I want to thank all the teams involved in the sale process for their efforts and dedication to getting the deal over the finish line and for ensuring a successful outcome for both American Tower and Brookfield. Finally, we continue to add value by managing our cost structure to maximize conversion rates, expand our margins, and drive profitability across our business. We remain committed to executing on all these strategic priorities that position American Tower to deliver durable, high-quality earnings growth over the long term. On our last call, I talked through the key lessons learned from our historical capital investments that have led us to refine our approach to investment underwriting and prioritize capital deployment to our developed markets. Having recently covered the US tower market where demand remains firmly intact, I'll focus today's remarks on our other developed market platforms, Europe and CoreSite. However, I'd first like to recognize the critical efforts of our US teams who have been working with our customers to rapidly restore essential communication and emergency services to those communities affected by Hurricanes Helene and Milton. I really appreciate all their hard work. So now I'd like to highlight trends in our European and CoreSite businesses, which are each positioned to capture high rates of organic growth and provide opportunities to further invest where returns meet our standards. I'll start with Europe. As we've highlighted on past calls, we were highly disciplined in our approach to select European markets at scale, and we're seeing that patience pay off. In our assessment of Europe, we leveraged our global underwriting and operating experience to effectively evaluate the most attractive markets. Our criteria included macroeconomic stability, government support for mobile connectivity, healthy carrier and counterparty profiles, and critical contract terms and conditions. Additionally, we sought market and competitive dynamics where we believe that our value proposition as a true independent operator with over two decades of global experience could successfully deliver a best-in-class customer experience that affords outsized new business and enhanced margins. This rigorous assessment led to the acquisition of select portfolios across Germany, France, and Spain, where mobile data consumption is expected to grow at about a 20% CAGR over the next five years and where governments have advocated for nationwide coverage through various activities, including spectrum auctions and subsidy programs like the new deal in France, Spain's 5G UNICO to support rural 5G development, and the Gigabit Infrastructure Act at the broader EU level. Importantly, these markets also present a healthy carrier environment, including increased competition in Germany and Spain through new entrants as well as strong market leaders with whom we contract for the majority of our business. Approximately 85% of our revenues in Europe are indexed to carriers with at least a 25% share in their respective markets. This provides a high degree of insulation from further consolidation risk, maintaining our very low exposure to ongoing consolidation in Spain while providing visibility into sustained growth and quality earnings over the long term. And although land sharing is a reality in certain parts of these markets, we mitigate its impact with well-structured customer agreements that allow us to either monetize such sharing or provide certain revenue protections that support our growth objectives. American Tower is uniquely positioned to unlock opportunities in Germany, France, and Spain where the neutral host independent tower model is still relatively nascent. Leveraging our considerable experience and capabilities can help solve persistent operational challenges experienced by the carriers and infrastructure operators throughout past network cycles. Since closing the Telxius acquisition, which increased our asset count in the region over five times, we further enhanced our ability to serve our customers by internalizing critical activities that align with our global competencies, reducing reliance on external vendors and strengthening our process management leadership and when possible, integrating our teams directly with our customers to expedite decision making and improve processes. Our disciplined approach to market entry and effective operational execution have yielded an attractive growth profile in Europe. On the organic side, healthy carrier demand combined with the benefit of CPI-linked escalators have yielded an average of over 7% organic tenant billings growth over the past three years and we remain confident in driving organic growth, in line with our mid-single-digit expectations in the region going forward. To complement this organic growth, we also invested in increased new build activity, delivering 1,200 new sites since the start of 2021. Additionally, we've improved the process of getting new colocations on air to further evolve the neutral host model and reduce the carrier's total cost of ownership. This required engagement with regulators, landlords, tenants, vendors, and the enhancement of our own internal skill sets that is paying off as approximately 70% of our expected organic new business growth in 2024 is coming through colocations, of which over a quarter are on rooftops. Taken altogether, we see a long runway of sustained growth with optionality to further capitalize on a multi-year pipeline of attractive development opportunities. As carriers continue to rapidly deploy mid-band spectrum and densify their networks to meet insatiable data demand, we'll continue to assess opportunities using both the principles that shaped our investments for over a decade and the recent learnings we've institutionalized. Now, I'll switch to our data center business. We also see long-term demand trends within our US data center segment, which like our European portfolio, provides a platform for incremental development opportunities underwritten at very attractive return profiles. Since closing the CoreSite transaction at the end of 2021, we've achieved record-breaking leasing each year and are on pace again to deliver a new high mark in 2024. As we've highlighted on past calls, our portfolio is optimally positioned to benefit from accelerating demand for hybrid and multi-cloud IT architecture due to its ability to facilitate seamless, secure, nationwide low-latency interoperability, including native cloud access to a diverse set of customers. Critically, we believe that CoreSite's interconnection campus model, which can be extended to distributed endpoints to support the low-latency and cost-efficiency required for future use cases, represents a potentially distinct option for new synergistic revenue opportunities when combined with our tower assets at the edge. Today, I'm more convinced than ever that the mobile edge is going to present a meaningful addressable market for us, in part due to the rapid acceleration in AI deployments and the infrastructure required to accommodate future latency-sensitive workloads like inferencing. And while the timing might be delayed relative to our initial expectations, we continue to expect synergies between our Tower and CoreSite platforms over the long term. In the meantime, we're realizing the benefits of the step function of AI demand and our leasing results at CoreSite. AI-driven workloads are a growing component of CoreSite's signed leasing, and customer requirements are indicating that demand will only grow over the near to medium term. Over the past several quarters, enterprises have started to build their own GPU space architectures connecting to the cloud either through auto-ramps or our virtual OCX offering. These deployments resemble typical hybrid IT architecture, but they're larger and more power-dense. As with virtually all workloads across the AI spectrum, our facilities are well-equipped to accommodate this need. More indirectly, our data center portfolio is also benefiting from hyperscale AI absorption that's consuming a record level of capacity throughout our key markets, exacerbating the supply-and-demand imbalance and further supporting the favorable pricing environment for both new leasing and renewals into the foreseeable future. Given the healthy demand catalyst that we see persisting for many years to come, attractive rates of return that are de-risked through accelerated preleasing activity, we plan to allocate more capital to CoreSite over the next several years, likely meeting or exceeding the $480 million in development spend assumed at the midpoint of our 2024 guide. Recently, I've received questions as to whether we'd be interested in participating in the extensive hyperscale development taking place in the market today. We see a long runway ahead for CoreSite's retail-oriented approach, which has yielded industry-leading returns on a sustained basis as our facilities continue to meet and in certain cases exceed our initial expectations for mid-teen stabilized yields. Thus, single-tenant hyperscale opportunities are not a priority unless there was a clear opportunity for one to serve as a seed for a new campus or if there were compelling opportunities to invest with our JV partner, Stonepeak. Today, we're prioritizing the expansion of existing campuses, new ground-up facilities adjacent to existing campuses, or potentially selected expansion of our national ecosystem by establishing new campuses in new markets. We remain focused on developing multi-tenant colocation facilities, methodically curating the mix of customers deployed within our facilities to enhance the value of our interconnection ecosystem and effectively planning for long-term absorption and power needs. In closing, American Tower has built a global platform of assets that are well-positioned to capitalize on the exponential rise in data demand. Our CoreSite data center business and European tower operation are both differentiated by asset quality and best-in-class operations, creating a leading experience for our customers as they deploy the critical networks and applications of today and the future. These businesses are uniquely positioned to deliver attractive sustained organic growth and provide optionality for us to assess future opportunities for investment. This portfolio strength, combined with demand catalysts across our global portfolio and the ongoing progress we're making in executing the strategic priorities I laid out earlier this year, position American Tower extremely well to deliver high-quality earnings growth and total shareholder returns for many years to come. With that, I'll turn it over to Rod to discuss Q3 performance and our updated outlook.

Thanks, Steve. Good morning, and thank you for joining today's call. As you saw in this morning's press release, adjusted for certain non-cash items in the quarter, including the loss taken upon closing our ATC India sale, our solid third quarter results continue to highlight strong demand across our exceptional portfolio of global assets. These durable demand trends, combined with our disciplined approach to capital allocation, continued focus on cost management, and strong balance sheet, position us to deliver sustained high-quality earnings, growth, and shareholder returns over the long term. Before I dive into our results, I want to highlight a key reporting change as it relates to the successful closing of our ATC India sale on September 12th. You will now see historical results associated with our India business reported as discontinued operations, represented as a standalone line item on the income statement, balance sheet, and in our reconciliations to attributable AFFO. As such, certain reported measures, including revenues and expenses within the income statement and non-GAAP measures such as adjusted EBITDA and tenant billings, will now be presented to exclude discontinued operations. I encourage you to refer to the definitions and footnotes throughout our Q3 earnings presentation and press release for added clarity on how the discontinued operations treatment is reflected in our results. Additionally, we have introduced new metrics, AFFO attributable to AMT common stockholders or attributable AFFO as adjusted, and AFFO attributable to AMT common stockholders per share or attributable AFFO per share as adjusted. These new metrics represent results from continuing operations adjusted for a full period of interest expense savings associated with the use of proceeds from the India sale. The intent of these as adjusted metrics is to provide investors with what we believe our continuing operations would produce in attributable AFFO and attributable AFFO per share. We believe this will be useful in determining an appropriate baseline for future periods. Now, a few highlights from the quarter. First, in the third quarter, demand for our global portfolio of assets remained strong as we saw a continued acceleration in application volumes in the US, which nearly doubled those of the prior year period and similar growth in our services gross margin. Internationally, mid-single-digit organic tenant billings growth was supported by another quarter of accelerating new business contributions in Europe and double-digit organic growth in Africa. International organic growth was complemented by selective new site construction, including the fourth consecutive quarter of over 100 sites in Europe and approximately 500 new sites overall. As Steve mentioned, demand in our US data center business remains exceptionally strong and well in excess of our initial underwriting as CoreSite is on track for its third consecutive record year of new leasing, supporting year-over-year revenue growth of over 10%. Next, complementing the demand trends driving our top line results, we continue to execute strategic priorities laid out earlier this year. On the cost management side, third quarter SG&A, excluding bad debt declined nearly 2% year-over-year, supporting cash-adjusted EBITDA margin expansion of roughly 30 basis points as compared to the prior year period. We also made progress in optimizing our portfolio, closing our India sale and signing agreements to sell our land interests in Australia and New Zealand. Additionally, we further strengthened the balance sheet by using ATC India sale proceeds to reduce gross debt, and we expect further reductions from efficient repatriation in the near term. Importantly, S&P upgraded our credit rating to BBB flat from BBB-minus during the quarter, signaling our momentum in executing key financial and operating strategies to enhance our balance sheet strength, financial flexibility, and portfolio quality. These achievements reinforce our commitment to actively assess our global portfolio to focus on platforms where we can drive high-quality earnings and earnings growth, outsized returns, and compelling total shareholder value over the long term. Finally, on the customer front, we took certain provisions in Colombia related to WOM, who filed for the equivalent of US bankruptcy earlier this year. Any outcome of the potential reorganization is uncertain and it would be premature to speculate, but we began recognizing revenue on a cash basis and reserved a portion of outstanding receivables as bad debt. In the third quarter, this resulted in revenue reserves of $13 million, including $3 million in straight line and another $8 million recognized as bad debt expense. For context, WOM Colombia's gross revenue makes up approximately 1.5% and less than 0.5% of our total Latin America and consolidated property revenues respectively. Turning to third quarter property revenue and organic tenant billings growth on Slide 6. Consolidated property revenue declined approximately 1% year-over-year and increased nearly 1% excluding non-cash straight-line revenue. Growth was negatively impacted by roughly 3% due to FX as well as by the non-recurrence of certain one-time benefits in the US in the prior year period and revenue reserves taken in the current period in Colombia. As I mentioned, performance was supported by the third consecutive quarter of double-digit growth in our US data center business. Moving to the right side of the slide, consolidated organic tenant billings growth was over 5%. In our US and Canada segment, growth was 5% or approximately 6% absent Sprint-related churn. As we have previously indicated, we expect to see a step-down towards 4% growth in Q4 due to the commencement of the final tranche of Sprint churn, consistent with prior outlook assumptions. On the international side, growth was 5.7%, representing an enhancement of over 100 basis points compared to prior expectations through the exclusion of the India business. Turning to Slide 7, adjusted EBITDA declined approximately 1% year-over-year, primarily due to the revenue drivers I just discussed. Growth excluding non-cash straight-line was just over 2%, benefiting from disciplined cost management and a roughly 100% increase in our services gross margin associated with an increase in tower activity. Growth was negatively impacted approximately 3% by FX headwinds. Moving to the right side of the slide, AFFO attributable to American Tower common stockholders increased 2.6% year-over-year, driven by the high conversion of cash-adjusted EBITDA growth to AFFO through the effective management of interest costs, maintenance CapEx, and cash taxes, partially offset by the timing of our India sale. On an as adjusted per share basis, growth would have stood at nearly 3%. Now shifting to our revised full year outlook. I'll start with a few key updates. First, outlook has been adjusted for the close of our India transaction. As a result, historical India results will now be treated as discontinued operations, and as such, our property revenue, organic tenant billings, and adjusted EBITDA will exclude India contributions for the full year. Our reported AFFO attributable to AMT common stockholders will include contributions from discontinued operations up to the date of closing. Prior year periods have been adjusted accordingly. Next, our core business and the drivers that underpin our performance remain solid. As a company, we're focused on executing on a strong pipeline of new business demand, driving cost discipline and margin expansion across the global business, and effectively allocating our capital in a manner that supports sustained value creation. As you'll see, we're absorbing provisions in our outlook related to WOM, consisting of $21 million in incremental revenue reserves, including $3 million in straight-line and an additional $15 million in bad debt expense, which combined represent $36 million in downside to adjusted EBITDA and $33 million to AFFO relative to our prior outlook. However, we're more than offsetting that exposure through direct expense savings and an anticipated settlement with a customer in Brazil associated with the cancellation of future lease obligations, the latter contributing $35 million of upside. Lastly, our revised FX assumptions include an incremental headwind of $25 million, $20 million, and $17 million to property revenue, adjusted EBITDA, and AFFO attributable to AMT common stockholders respectively. Turning to Slide 8, we are increasing our expectations for property revenue from continuing operations by approximately $15 million. This outperformance includes $15 million of core upside, primarily driven by our data center segment and the one-time customer settlement in Brazil, partially offset by WOM-related reserves and an anticipated delay in certain non-run rate reimbursements in the US, which we now expect to receive in 2025. Non-core outperformance is driven by increases in pass-through revenue and straight-line. Total outperformance was partially offset by FX. Moving to Slide 9. Organic tenant billings growth expectations for consolidated US and Canada, Africa, Europe, and Latin America remain unchanged, with trends and catalysts consistent with our prior assumptions. The removal of the lower-growth India business did increase our international expectation by roughly 100 basis points from the prior outlook to approximately 6% and provides a modest benefit to our consolidated company expectations, though not enough to move our expectation of approximately 5%. Turning to Slide 10. We are increasing our outlook for adjusted EBITDA from continuing operations by $5 million. This outperformance is driven by the revenue drivers I just mentioned, together with incremental operating expenses upside achieved through a combination of recurring savings from various strategic initiatives as well as certain non-recurring benefits; gross margin expectations for our US services business remain intact. Although certain anticipated project delays into 2025 will likely bring our revenue modestly below initial estimates. Partially offsetting the benefits to adjusted EBITDA, we've assumed $15 million of additional bad debt expense associated with WOM and another $20 million in FX unfavorability. Moving to Slide 11. Adjusting our prior attributable AFFO per share outlook midpoint of $10.60 to the timing of the India closing resulted in approximately $0.12 of dilution, leading to a midpoint of $10.48 per share. This is directionally consistent with the dilution expectations communicated on past calls. Relative to prior outlook, adjusted for the ATC India closing, our revised outlook reflects upside of $0.05, moving the midpoint to $10.53 per share. Improvements include approximately $0.05 in outperformance from our India business through the September 12th closing date and the 100% conversion of cash adjusted EBITDA upside from our continuing operations on a currency neutral basis, which is largely offset by the impacts of FX. On an as adjusted basis, the outlook midpoint remains consistent at $9.95 per share, reflecting the core outperformance in our continuing operations, offset by FX. Moving to Slide 12. Our capital allocation plans remain relatively consistent, except for the removal of $105 million of capital expenditures allocated to India in our prior outlook. Our planned dividend distribution remains at $6.48 per share with the expectation to resume growth in 2025, all subject to Board approval. In summary, at the start of the year, we laid out a compelling set of expectations for 2024, reflective of the strong durable data demand trends that continue to highlight the criticality of our real-estate assets. Our top line financial targets assumed accelerating demand in the US and Europe, ongoing growth through 5G coverage and 4G densification across our emerging markets, and a continuation of near-record setting leasing in our data center segment. To capture that demand, we established a set of strategic priorities aimed to effectively support our customers' needs and drive new business opportunities, manage our costs and capital structure, and optimize our portfolio through selective asset sales and refined capital allocation priorities to enhance margins and the quality of our earnings profile. Our accomplishments to date and expectations for the duration of the year reflect the successful execution across each of these priorities, we believe this momentum will position us for an even stronger future, enabling us to drive attractive high-quality growth and shareholder value for years to come. With that, operator, we can open the line for questions.

Thanks. Good morning, everybody.

Good morning, Ric.

Hey, I have two areas of questions. One at the top line and one at the bottom line. Last year on the third-quarter call, you gave some color on new lease activity in North America, kind of saying, 'Hey, we're going to split the goalpost, no guidance given at the time, but kind of directionally, we'll split the goalpost, we'll be above '22 level, but below '23 levels.' As we look at the green shoots and the positive stuff you just went through on your presentation, directionally, how should we think about '25 new lease activity versus '24 in North America?

Yes. I'll take that, Ric. It's still too early to give guidance for next year. There's still some moving pieces in it. But if you look at, in particular, the US business, we are hearing a lot of good conversation from our customers about the beginnings of the densification phase. And that's right in line with what we thought was going to happen. And so if you think about next year, in terms of the leasing in the US, we still have this final tranche of Sprint churn that's hitting in October this year that will weigh on the US a bit. And so when you couple that with the kind of leasing environment that we're seeing, what's contractually already committed growth under our comprehensive MLAs, which does tick down just a little bit next year, that's most likely you're going to see us kind of in that mid-4s range in terms of the US growth rate for next year. And that's consistent with our long-term guide of at least 5% from '23 to '27, because if you think about '26 and '27, at that point, we're through the Sprint churn. And so if you look at 2025 through that lens, we still have about 100 basis points of churn coming in from that final Sprint churn tranche. So if you normalize that out, that's kind of be in the mid-5s for next year. So that's kind of the way to think about sizing it and exactly where in that mid-4s range we're going to be, we're not sure yet. We do have one customer that's not comprehensive. So there's some volume-driven things with that. We also are hearing some interest from customers in new colocations that would be outside of our comprehensive MLAs. We don't know if that's going to fall in the early part of '25 or the later part of '25 or '26. We're still trying to figure that out. There's a few moving pieces there, but directionally, you can think about it kind of being in that mid-4s range.

Hey, Ric. Maybe I would just add to that. In terms of 2024 levels of new business, we had provided you guys all a range of between $180 million and $190 million. And the way the year is shaping up, it's pretty consistent each quarter in terms of the amount of new business that we loaded on. We expect that to be similar for Q4 as well, so pretty similar to the last three quarters which was all in and around a quarterly contribution of about mid-40s, $45 million or so. That would end up landing us at kind of the lower end of that range around $180 million and that's all kind of supportive of then transitioning into next year and hitting the numbers that Steve just talked about.

Okay. Regarding the bottom line question, Slide 11 is helpful, and I appreciate it. I want to make sure I completely understand, as I'm not a CPA and discontinued operations accounting is a bit confusing for me. We initially thought that India would contribute approximately $0.08 per quarter, or about $0.32 a year, in terms of net impact. How should we consider the decrease from $10.60 to $10.48 to $9.95, which I will refer to as AAA FFO adjusted attributable adjusted funds from operations? How should we approach the reduction from $10.60 to $10.48 to $9.95, which seems like our starting point for evaluating growth in 2025?

I understand that the numbers can be a bit complex due to the sale of India and how it's accounted for under discontinued operations. I'll highlight a few key points. For those on the call interested in more detailed information, our Investor Relations team is available to assist. Starting from our original outlook of $10.60 per share, we sold India at the beginning of the fourth quarter, leading to a decrease of $0.12 in our AFFO per share for Q4, bringing it down to $10.48. On an apples-to-apples basis, India actually outperformed by approximately $22 million, mainly due to cash tax refunds and other factors, contributing to a $20 million outperformance in cash-adjusted EBITDA. There was also an adverse foreign exchange impact of around $17 million, primarily from Latin American countries, which leads us to the adjusted $10.53 that still includes India in the first three quarters. When we reduce this figure to $9.95, it reflects a decrease of $0.58, accounting for the elimination of India’s contributions to AFFO and the interest savings from utilizing the proceeds of $2 billion and an earlier cash amount of nearly $350 million to pay down debt. So, the combined effect of removing India’s contributions and considering interest savings gives us the $0.58 drop to arrive at $9.95. Some timing issues and outperformance, especially the $22 million from India’s discontinued operations, also factor into this number. The $9.95 represents our continuing operations AFFO per share for 2024, serving as a good baseline for understanding projected growth. We anticipate mid-single-digit growth rates moving forward, which we expect to maintain into 2025. This positions us to potentially grow to the $10.50 range for 2025 from continuing operations. I know there are many numbers to process, and it will take a bit of time with our Investor Relations team to clarify everything. However, once you review it, it should become clearer. I recognize that the press release was shared earlier today, and there's a lot to take in, but after some reflection, it should make sense.

Understood. Helpful. And bottom line for me, that is attributable AFFO per share now that's kind of cleaned up. Is it really a mid-single-digit growing business? Can you get back to high single-digits? Kind of what kind of tailwinds, headwinds kind of would keep you in mid-single-digit versus high single-digits?

I believe that achieving growth above mid-single digits is certainly within reach. We are pleased with our global portfolio and have been actively working to enhance the quality of our earnings. Selling the India business has reduced volatility, which is a positive development. The long-term growth expectations remain consistent with what we've discussed before. We anticipate that our US business can grow in the mid-single digits, in line with our earlier guidance of an average of 5% for US OTBG. Next year, we expect the final phase of the Sprint churn to be the lowest point, after which we'll see growth rebound in '26 and '27. Overall, our long-term outlook averages around 5%, and we are still on track. The international business has the potential for faster growth. CoreSite, in particular, has exceeded our initial expectations, with double-digit growth this quarter and ongoing annual growth anticipated. Over the past two years, we've achieved record levels of new business in CoreSite, and we are positioned to possibly match or surpass that record in 2024. We're focused on managing costs, improving margins, overseeing cash taxes, monitoring our balance sheet, and reducing floating-rate debt exposure. All of these efforts contribute to strengthening our portfolio as the quality of our earnings improves and we navigate through interest rate challenges. In the long run, we believe we can surpass that mid-single-digit growth rate, although we need to keep an eye on foreign exchange as 25% of our earnings come from Latin America and Africa. Interest rates also present some uncertainty, which we will continue to monitor.

Yeah. And I would just add in, Ric, if you think about kind of our long-term growth algorithm, couple of components to watch out for there. The first is Latin America. Over time, we believe that will come back to high single-digit growth. But for the next few years, we are projecting low single-digit growth in there based on carrier consolidation churn that's primarily related to operational issues, but it's also some potential consolidation that we see kind of on the map. We're seeing some challenges with WOM and there may be a little bit more consolidation there. And that's why we think for the next few years, that's going to be low single-digits. Once we get past that, that won't be a headwind for us. And we are past the US Sprint churn after the end of this year. So that will be a positive for us. And so the swing factors will really be on what's going to happen with FX over time. And while we have reduced our exposure to it, 25% of our attributable AFFO is still attributable to our emerging markets. So there is still some FX risk there. And just in the last few weeks, we've seen a negative trend in that, that's resulted in a little bit of degradation for next year, just in the past few weeks. And then the other piece is interest rate headwinds and I think it's anybody's guess as to what exactly happens with interest rates over the next few years. So those are the things we'll be watching. But that long-term algorithm of mid to high single-digits holds true even while absorbing some of those costs in there.

Great. Appreciate all the color, guys. Thanks.

You're welcome.

Thank you for the insights, Rod. Steve, regarding the CoreSite business, you've mentioned the record leasing, but I noticed you haven't disclosed the specific numbers. Can we discuss the leasing figure and its historical context, as well as the book-to-bill situation related to the available pipeline that can support double-digit revenue growth? Additionally, Rod, to follow up on this topic, I believe Ric referred to it as the AAA adjusted attributable AFFO. Will this be a number you report consistently moving forward, serving as a foundation for our quarterly discussions about growth in 2025? Thank you.

Yeah, David, we'll certainly talk about that metric for as long as it's applicable, which will be a little while until we lap this India sale. But while the India sale and the discontinued operations are in our base number or the comparable prior year numbers, we will let you know what it is.

And when it comes to CoreSite, I don't think we've given a specific number in terms of what sales are, but you can think about it as a factor of what they were doing pre-acquisition. That build pipeline, just for reference, we've got about over 40 megawatts of construction ongoing today. It's about 60% pre-leased today and that's replacing the capacity we've sold. So the way to think about that is, their leasing today is significantly higher than the year before we bought them. And the majority of our $70 million backlog that we have today is commencing between now and kind of the first half of 2025 and the remainder is beyond that. So we haven't given a specific sale number. We are giving you guys the backlog and that's the way to think about that revenue growth. We feel very confident in a high single or double-digit, most likely double-digit growth rate for the next several years in terms of revenue commencing there. And that continued strength continues to feed that sales pipeline and we're expecting to have a healthy pipeline in 2025 as well. At this point, all those general dynamics we're seeing in the industry are just continue to accelerate and that is demand for hybrid. Hybrid cloud infrastructure by enterprises is our bread and butter. That's where you continue to see strength in it. And we're starting to see those enterprises now deploy GPUs, their own kind of AI based models and that again is kind of the perfect customer for CoreSite. So we're seeing our existing customers increasing the size of their installations and that's going to keep feeding that pipeline for years to come. So we feel like that growth rate is durable for the foreseeable future right now.

Yeah. And, David, maybe I would just add, in terms of the relationship with the prior numbers, our backlog in that $70 million range, that's up from a number in the range of $40 million or so when we bought CoreSite in those first couple of years. So it's up 75% or so. And that's a similar level of increase that we're seeing in the new business roughly.

Thanks so much. Good morning. And, Rod, you talked about the dividend policy. Perhaps you could just give us some context around how you're thinking about that. If you're growing the bottom line, call it, mid-single-digits, is that the right way to think about dividend growth from here and how that works into payout ratios and leverage and so forth? And just coming back to the CoreSite CapEx, I think you said it could be ahead of the $480 million. I know in the past when you bought this, you were kind of to some extent ring-fencing how much you would spend on CapEx. Can you sort of update that for us? I mean, would you be prepared to go to say $600 million or $700 million or what are the parameters you're thinking about how much money you do commit to data centers? Obviously, a great opportunity and you don't want to go hyperscale at this point, but love to understand how big that might go. Thanks.

Sure, Simon. I'll address the dividend question and then Steve will discuss the CapEx for CoreSite. Regarding the dividend, as we mentioned in our last call, we anticipate resuming dividend growth as we approach 2025. I won't go into specifics about the growth rate, but similar to our previous discussions, we expect the long-term dividend growth rate to align closely with the average growth rate of AFFO per share over time. If we maintain a mid-single-digit AFFO per share growth rate, we would expect the dividend growth rate to reflect that same trend over the same period. This approach may vary annually due to fluctuations, but the overall trajectory should be clear. It's important to note that each quarter, we seek Board approval for the dividend declaration and distribution, so all of this is subject to their approval. Our portfolio remains strong and is improving with enhanced earnings quality and a stronger balance sheet. Thus, achieving that mid-single-digit AFFO per share growth rate can support our dividend growth. If dividends grow in accordance with AFFO per share, we expect the payout ratio to stay around 60 to mid-60s percent. This would leave us with about $1.5 billion to $2 billion available for CapEx programs globally, share buybacks, or debt reduction, providing us with ample capital to operate the business.

And on the CapEx for CoreSite, we're not constraining the business. So the business has the opportunity to deploy as much capital as it wants. And so you could see that number grow kind of into that range that you're talking about. And I would also just reiterate that the beauty of how we've constructed our CoreSite entity with our private capital partners is, we have a lot of optionality in terms of how we fund that additional capital growth. So we'll be able to make the determination how much American Tower wants to put in versus how much we rely on our partners kind of real-time as we're looking at the budgets for next year. So it's too early to tell you what the budget is going to be and what percentage we're going to pay. But it's a very good use of capital. We're still able to underwrite those mid-teens or better development yields and stabilization. And because the pre-leasing is at historically high levels, it's a very low-risk way to deploy capital. And we actually get a stabilization even sooner. So we think it's a great use of our capital to do that. We'll continue to fund those developments in our campuses as aggressively as we can sell and build. And so we'll let you know kind of when we lay out our expectations for 2025 where that lands, but the numbers that you're suggesting are in the ballpark of something that could be very reasonable for us to do.

Great. Thanks a lot, Steve.

Good morning. Thank you for addressing my question. First, Steve, you've highlighted some appealing aspects of the European Tower business on an organic level. However, some owners of European Tower assets have expressed their willingness to consider potential sales. Given that, is it reasonable to think that this could be a sector where you might explore a significant acquisition in the next few quarters or years? Additionally, regarding the CoreSite business, I noticed a large land purchase made this quarter. Is that connected to CoreSite and the upcoming site development you are planning? I also recall you mentioning that some expectations regarding inference may be taking longer to realize than initially anticipated. Could you elaborate on these two points? Thank you.

Sure. I'll start with the CoreSite. We recently made a land purchase in Los Angeles to expand our LA campus, ensuring we have the capacity to continue serving our customers there. We will keep investing in land around our campuses, which allows us to build and grow over time. Regarding inferencing, I don't think its development has been slower than we anticipated; rather, the edge aspect has taken a bit longer than expected. We're seeing strong demand for the inferencing layer, and we can be very selective about the counterparty risk we take on. We believe we are in an ideal position for inferencing, as it's a key distribution channel for interacting with large learning models. There's significant interest, and we are negotiating contracts in this area, but we are cautious due to the presence of many unproven businesses. In Europe, we would like to replicate our success with Telxius in other markets, but we don’t feel an urgent need to do so. We have sufficient scale in Germany and Spain, and we aim to achieve more scale in France, where we are currently underrepresented. However, we need to remain patient and disciplined. We've observed numerous portfolios trading in Europe with terms and conditions not conducive to long-term shareholder value, which we prioritize. We maintain very low churn in our European operations and acquired towers at low tenancy, resulting in minimal risk amid the consolidation trends in Spain and elsewhere. Moreover, competitive dynamics in Europe are improving, with rising competition based on network quality compared to the past decade, fostering new builds. Government initiatives to ensure ubiquitous coverage, even in rural areas, present great opportunities for us. If suitable portfolios with favorable terms and conditions became available in Europe, I would definitely be interested, but we will not rush into any purchases that do not align with our long-term investment criteria.

Hey, James. In Europe, I want to point out a couple of revenue highlights. We've previously mentioned that we're pleased with our European business, which is exceeding our initial expectations. Specifically, our organic tenant billings growth has performed well, reaching over 6% for this quarter in Europe, and we're anticipating about 6% for the entire year, which is quite balanced. This quarter contributed a bit over 4% from organic new business, and this trend has been gaining momentum over the last few quarters, exceeding performance from any of the previous six quarters. We're noticing a higher level of market activity, which is encouraging. The escalator sits around 3%, and our churn rate remains below 1%. Overall, we've developed a balanced revenue generation model that we’re enthusiastic about, and the growth potential of this business resembles what we see in the US.

No, thank you. That's great.

Great. Thank you. Back to the domestic operations. Can you talk about if you're seeing any change in the colocation versus amendment mix? And to the extent that DISH starts to expand its network, is it mostly included in the holistic agreement that you have right now or could there be upside? And one thing quickly on domestic gross margins. I think they were down a little bit year-on-year. Is there anything to call out there? Thank you.

Sure. I'll discuss the demand trends, and Rod can address the gross margin. Overall, the mix we're observing is quite stable, but we are noticing increased interest in new colocations. We are receiving requests for information regarding available RAD centers and structural capacity. These inquiries typically precede the applications as we plan. The discussions we're having suggest that they are entering a densification phase, which will lead to a greater focus on new colocations. This trend is encouraging. Regarding our comprehensive agreements, each one operates a bit differently. Some are just amendments, meaning all new colocations are additional. In some cases, there may be a specified limit on colocations, and once that limit is reached, any additional colocations would be outside the comprehensive agreements. As we formulated our long-term guide, we anticipated reaching this densification phase, and we expect the contribution from new colocations outside the comprehensive agreements to grow significantly over the next few years. We expect to see an increase in colocations that will contribute to the growth we are forecasting in the coming years, which aligns with what we are hearing from customers as they plan for the next stage of their network development.

Hey, Batya, thanks for joining the call. Regarding the margins, I will discuss the overall margins, which also apply to the domestic margins since my comments pertain primarily to the domestic business. Last year for Q3 of 2023, our margins were approximately 74.7%, and this has decreased to 74.2%. This reflects a reduction of 50 basis points. The most significant factor I want to highlight is that there was about a negative 90 basis point impact from the straight-line method. As we know, straight-line is a non-cash item and its impact is diminishing as we move along that straight-line curve. Therefore, on a cash basis, margins actually increased by 40 to 50 basis points, rather than decreased. Additionally, there were a few minor items, such as one-time settlements from the previous year that are not recurring. Overall, the straight-line balance is the main reason for the reported margins decreasing, while cash margins are actually improving.

Got it. Okay.

Batya, one quick clarification on the MLAs. This is largely a new lease comprehensive agreement. So that when the new colocations would be included until they get to the maximum number of leases under that agreement, which we don't expect to happen for some time.

Got it. Thank you.

Sure.

Hey, good morning, guys. Steve, in your prepared remarks, I think you said that you're more convinced than ever that mobile edge is going to eventually be an opportunity even if it's taking a bit longer to transpire. I guess, are there specific conversations or data points or other things you can point to help us understand that increased level of conviction?

We are currently working on several proofs of concept with partners focusing on niche use cases. A noticeable trend in the entire ecosystem, particularly at CoreSite, is the move towards decentralization. Cloud and AI providers are increasingly exploring more distributed architectures, starting with regional centers. This shift is driving much of the hyperscale activity as companies look to diversify into more regions. Some of this shift is motivated by the desire to benefit from lower power costs, while other factors include the need to be closer to end users to reduce latency and transportation costs. As this trend evolves, we believe it will continue, with ongoing discussions indicating that these players are keen on diversifying further. They are eyeing regional facilities for the foreseeable future and exploring Tier-2 markets, similar to our previous expansion in Miami. This diversification will eventually extend to the wireless edge. Simultaneously, our carrier customers are increasingly discussing the move to 5G standalone infrastructure, moving away from the non-standalone 5G that has been previously deployed. Global trends show that carriers adopting 5G standalone are also looking at mobile edge computing more seriously. Both wireline and wireless sides of the ecosystem are aligning towards an architecture that demands more compute at the edge. Our discussions with them about future infrastructure needs at the edge reinforce our belief in this direction. Although it is taking longer than anticipated, with the necessary developments in 5G standalone for wireless and the evolution of wireline infrastructure, we remain optimistic that once momentum builds, it will continue to push closer to the consumer.

Okay. That's super helpful. Thank you, Steve. And then one other on, thinking about some of your emerging tower markets. You've been clear in your words and actions that you're tightening up CapEx there. I guess, has there been any sort of customer reaction to that decision? So for example, customer engagement with respect to discussing larger commitments, maybe if you're not willing to put as much CapEx behind new builds or anything along those lines?

We have been engaging with our customers about this. They are aware of the challenges we face. Being savvy businesspeople, they would prefer that we invest more capital, but they recognize the importance of operating our business in a manner that enhances shareholder value. For instance, we have publicly shared that we renegotiated an agreement resulting in reduced capital expenditures and increased co-locations. This reflects a customer’s understanding of our situation and our collaboration to achieve a mutually beneficial outcome. We believe there is potential to continue this partnership with our customers. Supporting our Tier-1 MNOs globally is crucial for us, and we expect to see growth in these emerging markets over time. We are not eliminating capital expenditure entirely; rather, we are reducing it in certain areas while prioritizing investments in developed markets. Customers have played a significant role in this process and have been very open to collaborating with us to identify the best solutions for both parties.

Okay. Thanks, Steve.

So I guess I should say thank you to all of our customers who are listening for understanding and working with us on that.

Great. Thank you for taking the question. Steve, I think I heard in your answer to Ric's question earlier that you said contracted growth under your MLAs steps down next year. Why is that? Do you guys have another customer who comes off their holistic MLA next year? And then for Rod or Steve, do the assumptions for mid-4% organic billings growth next year in the US include the assumption that churn excluding Sprint should be maintained in the sub 1% range, which it's been the last couple of quarters? Thanks.

We currently do not have anyone coming off a comprehensive agreement. When we create these agreements, we generally align the revenue with the activity levels we're experiencing because we want to preserve the time value of money. In cases of densification or when building a 5G network in phases, it's important not to completely smooth out the process. While smoothing can help with some peaks and valleys, it's crucial not to lose the time value of money for the early phases. Therefore, there is a slight reduction in that regard. However, this reduction aligns with an increase in new colocations during the densification phase. Regarding our expectations for churn, we anticipate it will remain at the lower end of our historical range of 1% to 2%, but we prefer not to specify exact figures just yet as it is still early, and we need more time to assess the situation before providing precise numbers.

Hey, Brandon. I would just add onto the churn question. We have been consistent to indicate that we see churn generally here kind of in futures based on historical performance in the range of 1% to 2%. And so being at the low end of that is where we would expect us to be, but we also, as Steve mentioned, want to continue to see that where the final tranche of Sprint churn is occurring. So we have taken that into consideration, and again, I think we're generally in line with where we've indicated historically.

Great. Thanks for taking the questions.

Hi. I just wanted to get an update on the cost management initiatives. And I guess along with that, you pulled back on CapEx on some of the emerging markets, but how should we think about potential divestitures in some of these markets where you feel like you're not of enough scale or the trends can take a long time to turn around? Thank you.

Sure. So we continue to work on cost management, and SG&A has been a particular focus for us because that's kind of the low hanging fruit and we continue to make progress on that. And so if you look at kind of cash SG&A excluding bad debt, kind of year-over-year September year-to-date '24 versus '23, excluding the bad debt, it's down about $17 million or 3% over that period of time. So we're still seeing some savings there. Our cost management overall though is more comprehensive than that. We're looking at different ways to globalize parts of our business that'll take longer to realize some of the synergies that we think we can get in terms of looking at a more global approach to things like finance and operations. And we'll continue to explore those. So I do think over time you'll see some savings. It probably won't be as rapid as the savings we had in SG&A, but we think we can continue to expand margins over time with that. And sorry, what was the second part of your question there, Richard?

And then on the emerging markets that I guess where you don't feel like you have enough scale or the...

Yeah. So there's nothing I would point to, certainly nothing on the scale of India. In the quarter, we did sign an agreement to sell some third-party land that we had in Australia, New Zealand. And we do have a few land portfolios, fiber businesses, things like that. If we were able to realize the right price line, you might see us look at that, but there's no kind of active process that I would point you to on that. But just to kind of reiterate, we've divested India, Mexico fiber, we divested, we exited Poland. So we are continuing to look at the portfolio. And for us, the real question is can someone else realize more value on our business than we can? And if they can, then that probably creates more value for our shareholders to monetize it. And so there's nothing specific that I would point to, but the Board and the management team is always looking at all aspects of the business, trying to figure out what the right solution is for each market.

Great. Thank you.

Thank you for everyone for joining the call today. Like Rod said earlier, if there's any questions regarding the representation of discontinued operations or if you have any other questions regarding the results and outlook in general, please feel free to reach out to Investor Relations. Thank you.