American Tower Corp (AMT) — Q4 2024 Earnings Call Transcript

Good morning, and thank you for joining American Tower's fourth quarter and full year 2024 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 am 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 2025 outlook, capital allocation, 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 that will be set forth in our upcoming Form 10-K for the year ended December 31, 2024, and then 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 Steve.

Thanks, Adam. Good morning, everyone, and thanks for joining the call. When I stepped into the CEO role about a year ago, I expressed my excitement about leading American Tower through its next era of growth and evolution. We have an exceptional portfolio of assets, unmatched operating capabilities, and I believe we're in one of the most durable businesses, catalyzed by ever-increasing mobile network demand. Over the past year, activity across our platform has highlighted the criticality of our communications assets in meeting growing demand, as carriers in our U.S. and European markets deployed mid-band spectrum assets, emerging market players densified 4G networks and began rolling out 5G, and our CoreSite data center business delivered yet another record year of new leasing. My original perspective of the 5G cycle requiring continued network investments to support coverage has been realized and bolstered with incremental optimism through the next phase of AI-driven demand, which I believe will benefit our towers and data centers and unlock synergistic value between the two at the edge. Last year, I also laid out a set of strategic priorities centered on balance sheet streamlining, efficiency, portfolio quality, and capital allocation discipline, all meant to further enhance our customer value proposition and strengthen the durability and quality of earnings for our shareholders over the long term. Certain headwinds in 2024 underscore the importance of these initiatives, which better prepare us to weather challenges like carrier consolidation and FX and interest rate volatility. And although these global risks persist, thanks to significant efforts undertaken by the talented members of our global team, we are entering 2025 in a stronger position, and we'll remain focused on pursuing these strategies to prioritize higher quality earnings and sustained growth. We are currently on track to maintain our five times leverage target on a recurring basis this year, which is an acceleration from our initial deleveraging plan following our CoreSite acquisition at the end of 2021. In addition to managing our debt and capital structure, our net leverage profile was further supported by margin expansion, which we've largely delivered through systematic reduction of recurring SG&A costs. Cash SG&A, excluding bad debt, reduced by approximately $35 million in 2024 as compared to 2023, supported by various efficiency initiatives, including the thoughtful globalization of company-wide functions like finance, IT, and HR. Most recently, we appointed Bud Noel as our Chief Operating Officer, a role that will advance our efforts in driving efficiency and margin expansion by ensuring that we effectively leverage global operating expertise and apply the best of our processes, tools, and capabilities across all of our regions. At the same time, we were happy to further leverage our exceptional bench strength that announced Rich Rossi, who spent over 20 years with American Tower, to lead the U.S. and Canada business. Importantly, with these changes, we aim to further elevate the quality of business functions of customer service and anticipate further enhancing our already attractive margin profile along the way. We will use the next several months to diligently assess the optimal global operating structure and, in time, we'll communicate long-term efficiency targets. We have already made significant progress and have a long runway of opportunities still ahead. Over the past year, we continued to actively manage our global portfolio and forward-looking capital deployment priorities to right-size geographic risk and ensure a strong synergistic fit between our strategy, core competencies, and assets. Most notably, as we discussed on the third quarter call, we exited our India business and have since sold our modest land interests in Australia and New Zealand. We also recently signed an agreement to divest our South Africa fiber business and plan to close that transaction this quarter. We believe the quality of our earnings and growth profile is at a material premium to where we stood only a few years ago. In 2025, we expect our developed markets, which consist of our U.S., Canadian, and European operations, along with CoreSite, to contribute about 75% towards our unlevered AFFO, and we expect to further expand this portion through continued prioritization of capital into these developed segments. We've also increased the proportion of global tower cash flows to top operators in each market. Combined with reduced emerging market exposure, this should translate to a more attractive and predictable return profile moving forward. Our stronger portfolio and focused capital allocation plan paired with our best-in-class global operating capabilities and alignment with market leaders better enable us to benefit from positive industry trends. Global demand for mobile data continues to climb. The roughly 35% of mobile data traffic that runs over the 5G network today is expected to increase to 80% by 2030, prompting carriers to enhance and expand their increasingly stressed networks. Currently, with 5G upgrades that improve spectral efficiency and subsequently with incremental cell sites that will densify their footprints in areas identified as needing additional capacity. In our U.S. tower business, we've observed four quarters of sequential acceleration in application activity over the course of 2024, exiting the year with our big three customers having upgraded an average of 65% of their sites within our portfolio with mid-band spectrum, up from just over 50% a year ago. Carriers have begun to highlight the commercial benefits associated with our 5G investments; translating to enhanced network quality, customer retention, and stronger ARPUs, with commentary suggesting another active year of network investment in 2025. In fact, while we're between the two peaks of the 5G investment cycle, coverage, and capacity, the 2025 outlook for wireless CapEx spend is expected to return to higher levels again, totaling approximately $35 billion, which is roughly $5 billion above the average annual spend in 4G. As I will speak about in a moment, although we anticipate the positive momentum in U.S. activity to continue into 2025 with a solid pipeline supporting it, our outlook for organic tenant billings growth in the U.S. and Canada steps down modestly compared to 2024. This is a function of the cadence of our contracted use fees and also the commencement timing associated with non-contracted new business such as new colocations outside of our MLAs or a customer that may not be under a comprehensive agreement, not a softening in demand. So far, the 5G investment cycle is largely in line with our expectations, with recent carrier commentary, dialogue, and activity further reinforcing our conviction in sustained higher CapEx needs moving forward. Over the next five years, underwritten by projected total mobile network profit growth of over 15% annually given the existing service terms, we expect the required network capacity to more than double, with more connected devices, data-intensive applications, and growing uplink transmission requirements while placing significant strength in the networks. Today, we'd expect roughly half of this incremental capacity need to be solved through current spectrum holdings and real-life spectral efficiency. That leaves a sizable capacity gap that can only be resolved through densification, additional spectrum coming to market, or a combination of both. Additionally, the mainstream use of new applications, such as multi-mobile AI, could further exacerbate capacity shortages and prompt even more activity. Taken all together, we see an attractive addressable market that our portfolio is well-equipped to accommodate with equipment upgrades, colocations, and selective new site development over the next several years and beyond. Similar trends generally hold true internationally; our true 5G mid-band coverage continues to progress each year and stands at roughly 45% in Europe, 15% in Latin America, and 10% in Africa. Data consumption has grown at a CAGR of around mid-teens to roughly 20% across these regions since 2020. And we've seen a corresponding increase in cell site density that complements existing site upgrade efforts. Importantly, these mid-band coverage stats illustrate the need for continued investment over the next several years. As we anticipate similar annual data growth across these same geographies, carriers will continue to utilize the most cost-effective ways to bolster their network capacity and coverage, which will include a mix of macro towers, rooftop sites, small cells, and, in remote areas where terrestrial networks are not economically efficient, satellites. In our CoreSite business, the team delivered a tremendous quarter results around another exceptional year. These results reinforce the strength of the demand and pricing durability for interconnection-centric, retail-oriented colocation. And while we continue to evaluate hyperscale, we remain convinced of our core business model and the tangible demand catalysts we see today, including AI-related demand. This allows us to stay disciplined in our lease-up approach to ensure a high-quality customer mix at the right economics and support our continued long-term expectation of mid-teens or higher stabilized yields. To build on this momentum in 2025 and beyond and continue to meet the growing needs of our customers across our global platform, we will maintain the following priorities. First, we continue to evolve our value proposition to our customers and our investment opportunity to our shareholders. I firmly believe that we are the best operator of towers and distributed real estate in the world, which allows us to pass along certain benefits and efficiencies to our customers, including powers of service, security and monitoring, data and asset quality, customer service delivery, speed of deployment, and a suite of services capabilities. Additionally, I recognize that investor attraction to American Tower's equity option requires that we operate the highest quality portfolio with strategic fit among our geographies, demonstrate trustworthy stewardship of shareholder capital through disciplined investments, and leverage an operating structure that yields outsized efficiency margins and returns. We have an incredibly talented team that lets us do that. And further globalizing our organization will drive additional economies of scale, centralization, and global automation, drawing our savings across multiple business functions, ensuring that we're able to continue demonstrating synergistic value creation across our 20-plus markets at an exciting time in global connectivity. Next, as Rod will discuss in more detail, we'll continue to actively manage our capital to prioritize funding of opportunities that yield the most attractive risk-adjusted rates of return over the long term. We are continuing to direct most discretionary capital towards our developed market platforms, including over $600 million for data center development on existing campuses underwritten at mid-teens stabilized yields, with some optionality to pursue smaller tuck-in inorganic opportunities where appropriate, and also the construction of six of our tower sites in Europe, where we anticipate low double-digit day one yields. At the same time, we are reducing emerging market discretionary CapEx to just over $300 million in 2025, a reduction of over 60% from 2021 and over 15% compared to 2024. Spend across our Latin American and African/APAC segment will be primarily focused on the construction of about 1,650 previously committed tower sites for strategic customers, underwritten at mid-teens day one NOI yields. We expect this number to come down over time as we satisfy those commitments and redirect new discretionary capital to develop regions. In conclusion, macroeconomic uncertainty persists across the global landscape, but consumer demand for connectivity and bandwidth-intensive applications and the associated work requirements remain resilient. The macro tower remains the most cost-effective manner to deliver a gigabyte of mobile data, and our global portfolio of assets and leading capabilities exceptionally equips us to support our customers' multi-year investment needs. Further, we've taken appropriate steps to ensure a higher degree of durable growth and returns generated by our leading business. I'm confident that our focus on operating and actively managing the highest-quality global portfolio of assets, offering best-in-class customer service and delivery through our experienced global teams and leveraging our investment-grade balance sheet positions American Tower to profit from attractive long-term secular demand trends across the wireless and technology industries and drive sustained quality growth and returns for our shareholders over the long term. Now I'll turn it over to Rod to discuss full year '24 results and our 2025 outlook.

Thanks, Steve, and thank you all for joining the call. We had a strong close to 2024, supported by the execution of our strategic priorities, as Steve highlighted in his remarks. Before I review our 2024 performance, which was in line with prior outlook, and expectations for 2025, I'll touch on several highlights from the quarter. First, demand for our assets remained solid. In the U.S., while fixed use fees in our comprehensive master lease agreements mean that new business growth is somewhat independent of actual carrier activity levels, we were encouraged to see the sequential acceleration in applications continue through Q4. We view this as critical evidence of the importance of mid-band spectrum and our customers' commitment to achieving portfolio coverage. In fact, Q4 volumes more than doubled year-over-year, reinforcing our conviction that our customers will continue to deploy 5G on their existing sites and densify their networks over the next several years to meet surging data demands. Internationally, consistent organic new business contributions were complemented by the construction of nearly 1,000 sites with strategic anchor tenants, which includes record volumes in Europe. In our U.S. data center business, demand for our interconnection campuses and associated new leasing remained elevated, resulting in fourth quarter revenue growth of nearly 10%. Next, consistent with past quarters, conversion of consolidated cash top-line growth was bolstered by vigilant cost management, supporting year-over-year cash adjusted EBITDA margin expansion of over 200 basis points. As I'll touch on in a moment, our focus on driving cost efficiencies across our global business remains a critical priority and is evident in our 2025 outlook. Finally, we continue to strengthen our investment-grade balance sheet. In Q4, we opportunistically addressed a portion of our 2025 debt refinancing needs, successfully issuing $1.2 billion in senior unsecured notes at an average coupon of 5.2% and average tenor of 7.5 years. Furthermore, our 2025 plan is in line with our net leverage target, and we began the year with a strong liquidity position and reduced floating rate debt exposure, providing flexibility and optionality as we address 2025 maturities. Also, in January, we amended and extended our bank facilities with a leading banking syndicate, which improved our applicable margin pricing by 12.5 basis points on drawn debt to 100 basis points, further optimizing our cost of capital. Moving to Slide 6. I'll first remind you that property revenue and adjusted EBITDA exclude discontinued operations associated with our India sale in both the current and prior-year periods. Property revenue growth for the year was nearly 1% and 3% on an FX-neutral basis. Performance was supported by organic tenant billings growth of over 5%, the construction of nearly 2,400 sites, and U.S. data center growth of over 10%, partially offset by a 2% negative headwind associated with a reduction in non-cash straight-line revenue. Adjusted EBITDA growth was approximately 2% and over 4% on an FX-neutral basis. Growth was negatively impacted by 3.5% associated with a reduction in non-cash straight-line revenue. As we have communicated throughout the year, focus on cost management supported a reduction in cash SG&A, excluding bad debt, of approximately $35 million as compared to 2023, contributing to cash margin expansion of 140 basis points to 66.8%, demonstrating our commitment to driving efficiency throughout our global organization. Finally, attributable AFFO per share of $10.54 represented nearly 7% growth year-over-year and over 9% on an FX-neutral basis. I'll now summarize a few key points and themes to contextualize our 2025 outlook. First, the drivers supporting our plan are generally consistent with the preliminary indications we provided on our Q3 2024 earnings call. As you'll see on Slide 7, solid recurring revenue growth with elevated conversion rates to AFFO through strategic global cost management initiatives spanning operating expenses, SG&A, maintenance CapEx, and cash taxes fundamentally position our 2025 plan in line with our long-term growth algorithm, partially offset by FX devaluation and interest costs associated with refinancing needs. Although FX and interest rates have proven to be volatile and unique considerations could move results above or below our mid-to-high single-digit growth rate target in any given year, we believe our business is positioned to deliver solid, durable recurring AFFO per share growth and attractive returns, and we are committed to actively managing the portfolio to ensure that expectation is achieved. Next, as Steve mentioned, we recently signed an agreement to sell our fiber assets in South Africa, which we assume to close on March 1 in our outlook, highlighting another step towards enhancing our portfolio of quality and focus. Annualized contributions from the South Africa fiber business were approximately $25 million and $20 million in property revenue and adjusted EBITDA, respectively. Turning to Slide 8, our 2025 outlook reflects total company organic tenant billings growth of approximately 5%, and around 5.5% absent the impacts of the final tranche of Sprint churn. Organic tenant billings growth in the U.S. and Canada is expected to be greater than or equal to 4.3%, and greater than or equal to 5.3% excluding the impacts of Sprint churn, a modest reduction compared to 2024 as contracted use fees stepped down and contributions from non-contracted leasing, which is sensitive to commencement timing, begin to accelerate. Growth includes contributions from organic new business in the mid-3% range and a 3% escalator, partially offset by non-Sprint related churn and other adjustments of roughly 1%. It is important to note that our guidance assumes the first three quarters of 2025 will be impacted by approximately 140 basis points of Sprint churn, likely keeping growth below 4% during that time period, before recovering to over 5.5% in Q4, which will not have any negative growth impacts from Sprint churn. Growth in Africa and APAC of approximately 12% includes roughly 7% in escalators, 6% organic new business as ongoing 4G densification and initial 5G upgrades continue, and less than 1% in other billings adjustments, partially offset by approximately 2% in churn, which is a notable improvement from prior years. Growth in Europe of approximately 5% includes 2% in escalators and steady organic new business contributions of around 4%, partially offset by churn of approximately 1%. In Latin America, growth of approximately 2% includes contributions from escalators of around 5% and organic new business of over 2%. Gross growth is partially offset by another year of carrier consolidation-driven churn, which we expect to persist through 2027, resulting in elevated churn of approximately 5% in 2025 and other billing adjustments of less than 1%. Turning to Slide 9, you'll see organic tenant billings support property revenue growth of over 0.5% or approximately 3% on an FX-neutral basis, which is impacted by a year-over-year FX-neutral reduction of $217 million in straight line revenue and over 2% negative headwind to reported growth. Complementing organic tower growth, net of a reduction due to the non-recurrence of certain one-time revenue benefits in 2024, is a continuation of solid performance in our U.S. data center business, growing at nearly 12% at the midpoint. Moving to Slide 10, cash property revenue growth is converting at a high rate to adjusted EBITDA, representing year-over-year growth of approximately 1% and over 3% on an FX-neutral basis, which includes an approximately 3% negative headwind associated with non-cash straight-line revenue. Complementing property contributions, we anticipate the positive momentum we saw in our U.S. services segment in 2024 to continue into 2025, resulting in an increase to services gross margin of nearly $30 million. The operating leverage inherent in our business model is expected to be amplified by prudent cost controls and lower bad debt expense, including another year of cash SG&A declines of approximately $20 million. Turning to Slide 11, 2025 attributable AFFO per share of $10.40 represents growth of over 4% relative to 2024 attributable AFFO per share as adjusted of $9.96 and growth of approximately 7% on an FX-neutral basis. Performance is supported by a strong conversion of cash adjusted EBITDA growth through tightly managed cash taxes and maintenance CapEx, partially offset by net interest headwinds of $80 million, a roughly 1.7% negative impact on growth. On Slide 12, I'll review our capital allocation plans for 2025. We expect to resume dividend growth in the mid-single-digit range subject to Board approval, which corresponds to an approximately $3.2 billion distribution to our shareholders. Next, we're planning for $1.7 billion in capital deployment, of which $1.5 billion is discretionary in nature and includes the construction of 2,250 sites at the midpoint. Approximately 80% of our discretionary spend is centered on our developed market platforms, including over $600 million in success-based investments towards our data center campuses to replenish the record level of capacity sold over the past several years, increased spend in the U.S., primarily towards land buyouts under our tower sites, and continued acceleration in European new tower construction with 600 new sites planned. While overall capital spend is moderately increasing year-over-year as we execute on attractive development opportunities across the U.S., Europe, and CoreSite, we continue to reduce spend across our emerging markets. In 2025, investments in Latin America, Africa, and APAC will primarily consist of augmenting sites to accommodate incremental tenants in meeting multiyear agreement obligations with leading carriers primarily through new builds. Execution of our strategic balance sheet priority since closing the CoreSite acquisition has us well-positioned to deliver more sustained and durable earnings growth, partially mitigate market risk and volatility, and provide financial flexibility to execute opportunistic and strategic growth opportunities at an attractive cost of capital. Our liquidity position of $12 billion, including $10 billion of bank facility capacity, along with our low floating rate debt exposure, provides optionality to manage the $3.7 billion of fixed note maturities in 2025. Our plan continues to target maintaining floating rate debt exposure below 10%, which we believe is a reasonable target for the foreseeable future. Moving to Slide 13, and in summary. Our fundamental business proved resilient throughout a volatile macroeconomic backdrop in 2024 as carriers continue to invest in their networks across our global footprint to address growing mobile data demand. Although market volatility persists, including interest rate and FX uncertainty, the quality of our assets, people, counterparties, and contract terms, combined with the strategic steps we executed over the course of 2024 to strengthen our balance sheet and enhance earnings quality, have us well-positioned to deliver stronger growth and returns for our shareholders over the long term. With that, operator, we can open the line for questions.

Thanks and good morning. First, can you give us some additional details on what you're seeing in the domestic leasing environment, including the mix of COLO versus amendments? And is that mix affecting the book-to-bill for the OTPG metrics over the course of '25? And then just maybe second, to the point about domestic leasing opportunities, can you give us an update on the multiyear growth opportunity? And do you still see annual growth in the mid-single-digit range going through 2027? Thanks.

Yes. Thanks for the question, Mike. We're not changing our long-term guidance in terms of what we believe the average to be from that 2023 through 2027 time period. When we look at this year's OTPG in particular, there is a little bit of a mix, but it's a bit more nuanced than just COLOs versus amendments. We do have a sequential step-down in our contracted use right fee under our comprehensive agreements. As we told you, we had more visibility early in that process. It gets a little less each year. Our organic tenant billings growth is a factor of those use fees plus the incremental amendments and new leases that are outside of those contracted use fees. We still have one customer that's not on a comprehensive agreement with respect to amendments. We also have colocations that are outside of the contracted use fees with some other customers as well. What we're seeing from an activity level is a robust pipeline from all of our carriers. It is broad-based across the three national carriers. There is still a healthy mix of amendments and colocations. We are seeing a rise in new colocations across our portfolio, a combination of continuing to extend the reach of the network, so going into some more rural areas, but also some early-stage densification that we're seeing. This mix is changing a little bit. When you look at the 2025 guide, because less of that revenue is part of the comprehensive use fees, we are more subject to timing on that. We see a little bit more of a delay in the signing and commencing of those. Those use-right fees tend to be front-end loaded in the year, and these others will come in throughout the year. That OTPG metric is sensitive to the in-year revenue piece; even a 30-day, 60-day, 90-day delay in commencements can make a difference. So we are not providing a flat-out number, we're giving it greater than or equal to 4.3% because we'll see what the commencement timing is on that. But that is a combination of the amendments from the customers that are outside of the agreement and the co-locations. This does extend the book-to-bill timeline up just a little bit.

Michael, maybe I'll just add a point here that roughly 4.3% that Steve talked about in terms of organic tenant billings growth for the U.S., is in line with our prior expectation and does fit in and support our full year outlook for 2024, as well as that longer-term multiyear guide that we provided earlier, which was roughly 5% organic tenant billings growth in the U.S. on average from 2017 out to 2024. We are pretty well on track with that. The other thing I would highlight is within that equal to or greater than 4.3%, includes 2 percentage points contributed from churn. Roughly half of that is from Sprint churn, which will not be reoccurring next year. So that will be an inflection point where that number certainly is expected to be higher going into next year.

Yes. Just to clarify, that guidance is 2023 to 2027.

Okay, great. Thank you.

Great. Thank you very much. Good morning. Steve, if I could come back to the data center business. Great to see the strong performance there. Just want to get a sense of how the original concept of the integration of the data center connectivity, the towers, AI inference, and so forth, how are you thinking about that today? And I guess one of the concerns is we've got this massive multiple gap between data centers and towers. And are you getting full recognition for the assets that you hold given the predominance of the tower business? So I'd love to get your thoughts about is it worth owning this versus separating that? And then I think there was a reference, Rod, maybe to more money on U.S. land purchases. Can you just give us a sense of what's driving that? How are you thinking about the economics now that's leading you to lean into that this year? Thanks.

Yes. Thanks for the question, Simon. We are very happy with the performance of CoreSite and how it is doing as a stand-alone business. As you mentioned, the original reason we bought CoreSite strategically was, number one, we knew it was a good business, and number two, we thought it would give us an advantage when the industry moves to edge compute. We still believe there will be a convergence of the wireless edge and the wireline edge, and we still have strong conviction that that will happen. In the meantime, we are focused on maximizing the value of CoreSite. So when we think about whether we're the right owner of that asset, as long as we are maximizing the value of that asset, we think it makes sense for us to hold it and to continue to grow it, because we believe that long-term strategy will play out. If for some reason, it looks like that doesn't play out or it is not a strategic fit, we'll reassess that when the time comes. But at this point, everything that we are seeing leads us to believe that you will continue to see an evolution to the edge and we believe having that interconnection ecosystem. To be clear, it is not just about having a data center company, but having a highly interconnected ecosystem with multi-cloud environments is essential for edge to work. That's also what we're already seeing in terms of AI; those multi-cloud environments are ideal places for inferencing for AI. So as this whole ecosystem evolves over time, we think we are well placed to capture that demand as it evolves. We believe that we are the right owner for that asset as we continue to maximize its value and evolve that future offering. But like I said, we'll continue to assess it. If at any point, we think that somebody else can create more value than we can, we'll make that assessment at that time.

Hi, Simon, good morning. The second question you had was around land purchases under our towers in the U.S. You could see in the numbers that we put out for the guide for '25, we are driving that up to about $200 million invested in 2024; that was about $144 million. So a nice inflection point there and a higher level of investment. The key there is a couple of things that I would highlight. One is we're very selective in terms of which parcels of land we purchase. We look to purchase land under our very best towers to secure the revenue over the long term, to either extend, we certainly look to extend those leases out 20, 30 years and also buy them or get perpetual easements when and where we can. One of the metrics that you've heard us talk about in the past is the percentage of land or percentage of towers where we have long-term security on the land. We've got that up to north of the high 70s at this point. That's partly through the execution of extending leases, but also purchasing these leases. And not only does the purchase of the land under the towers secure the future revenue and cash flow of the tower, it is also a great use of capital in terms of the outright returns. We get returns that are well above our hurdle rates in the U.S. And again, we can be selective in terms of which towers and where the returns are. So all in all, it is a great use of capital. It helps drive growth, secure revenue and gives us more returns.

Thank you.

Thank you. A couple of follow-ups on the domestic activity. I think you mentioned 65% of towers in the U.S. have been upgraded. What does that metric look like for the carriers that are outside of the comprehensive deal? And maybe in terms of the pacing, new leasing pacing for the year, I think you mentioned mid-3s, so about $170 million versus the $180 million we saw last year. How should we think about the cadence through the year? And one final question, if I could. On capital allocation, with leverage inside your target now and dividend growth potentially starting, how do you think about buybacks? Thank you.

Okay. I'll take the first one. When you think about the carrier activity, I don't want to get too specific because my customers get mad at me about that. I'll just reiterate that we have one customer that's upgraded mid-band 5G on over 80%, one customer that's about 65%, and one that's still a little bit under half. With some of their public statements, you guys can probably figure out who those are. In terms of the timings for the new business throughout the year, I think you were asking about cadence. The impact of the Sprint churn is probably the biggest factor that will change that. The last tranche of Sprint churn hit in October of 2024. So that will weigh on that OTPG metric for the first three quarters. Those three quarters should show lower growth because of that churn, coming out to a higher growth rate on the back end of that. In terms of activity cadence, we are exiting 2024 after four quarters of sequential growth. We expect 2025 to have a roughly similar volume of applications on our sites. It may be a little more front-end loaded this time. But it is hard to tell exactly what cadence that will take as the carriers finalize their plans. The early indications are that last year, it ramped up from the first half of the back. There might be a slight ramp-down this year. It's too early to know for sure how that's going to pan out.

Yeah, Batya, maybe I would just add a couple of things. One is, in the U.S., we do have Sprint churn. The timing of that will impact the organic tenant billings numbers over the first three quarters and then it will be absent in Q4. So the churn numbers are looking like about $98 million to $100 million of churn revenue in 2025. We're going to start off the year at roughly a run rate of about $30 million a quarter of churn, and that includes Sprint churn. Sprint churn is a little more than half, about 140 basis points over those first three quarters, and then that churn number in Q2 will reduce down to about $10 million or so.

Got it. And the buyback?

On the new business piece, you’re right; we had about $180 million of new business in '24. That’s going down to about $165 million, in that range, $170 million. We see a dip as Steve talked about from the end of last year going into Q1 and Q2, but we do think there is a modest acceleration that could be seen at the end of the year. Regarding buybacks, we are at about 5.1 times leverage at the end of 2024. We believe we will be at or below 5 times early in 2025. That returns us to full financial flexibility, so leverage will not be an overweight consideration. We must monitor interest rates; there’s uncertainty in the macroeconomic backdrop. Depending on where rates go, we’ll make decisions on capital allocation. We might de-lever further if it’s in the best interest of our shareholders due to uncertainty around rates. Otherwise, we see constructive ways to deploy growth capital in developed markets, clearing hurdle rates and delivering good long-term growth and value creation – possibly through M&A or buybacks. We will be disciplined and look to drive shareholder value over the long term.

Great. Thank you.

Thanks, good morning, everyone. First, I want to acknowledge my friend Simon, who we'll miss. Following Simon's questions about the data center side, what kind of yields are you achieving on the over $600 million investment in data centers? Also, how does AI impact towers, and when might we see that effect? I'm trying to understand how that could develop. Then I have one more question.

So all of our development in CoreSite is being underwritten at mid-teens stabilized yields. That's the number they've achieved as a stand-alone company, and we have maintained those underwriting standards over time. There’s a potential opportunity to do better than that if we outperform the business case on those, but everything is being underwritten at that. So again, we think that's a really good place to deploy capital. Regarding AI on towers, it’s tough to predict exactly when you'll see it. If you look at how AI is developing, the time gap between desktop and mobile is pretty much disappeared. People want to do things on mobile like they can on desktop. So as these activities evolve, I think of what's going to be bandwidth-intensive. Currently, interacting with AI on your phone is largely text or still photographs, which are not huge bandwidth hogs. It comes down to video. I'm encouraged by developments in the AI space. OpenAI has launched Sora to a select group, and that hasn't been broadly released yet. But when it becomes more mainstream, it will demand more bandwidth. Google announced VO2, Adobe announced Firefly. So we're seeing new video AI applications. As they become more widely used, this will add stress on networks, resulting in a need for densification over time. The question is when will we be creating videos on our phones?

Sorry, Rick. I'll just add a couple of comments here briefly around the data center comments that Steve made. We’ve seen accelerating revenue growth in the data center business, now up to double-digit growth. Along with that certainly comes some pretty good pricing power on our side. Demand is strong, driving our average monthly recurring rent per cab up by a couple of hundred dollars over the last couple of years. We can be very selective in terms of who’s coming into our spaces, ensuring they fit into that ecosystem. The modest increases in CapEx over the last couple of years directly contribute to our backlog, which is now at an all-time high of north of $80 million, sustaining solid revenue growth over the next couple of years. This business is well-positioned and performing well for the foreseeable future. We're also increasing capital in the data center business and in Europe, increasing capital in the U.S. tower business through the land purchases that Simon asked about while decreasing capital investments on the development side across Africa, LatAm, and APAC.

Okay. And then following from Batya's point, go ahead, Rod.

There's nothing else that we are seeing out there right now, Rick. I mean there are a few portfolios that people are talking about, but nothing at this point looks compelling enough for us to take action on. For us to do M&A, it has to be strategically important, where we can create more value than anyone else. We're exploring some small portfolios domestically that we could use our teams to outperform. But at the end of the day, it has to be better than a stock buyback for us. We'll maintain high standards before approving anything in the M&A world. Nothing on the horizon looks compelling right now.

Great, thanks for that update. Appreciate it.

Hi, guys. Thanks for taking my questions. First, Steve, achieving cost efficiencies has been a real area of focus for you, and you've been quite successful on that front over the past couple of years. I guess in your prepared remarks, you alluded to sharing long-term efficiency targets with us in the future. I don't need you to share anything before you're comfortable, but can you expand on that high level and maybe tell us about the magnitude of savings American Tower can potentially achieve over time?

Sure. But I'm still not going to give you a target yet. Our focus initially was on SG&A. As we've localized our markets, we’ve rethought our organization and identified short-term savings. Those are durable, recurring SG&A savings on functions we either didn’t need anymore or could do regionally. We’ve been globalizing our business for some time, and we're accelerating that now. We've asked Bud to look at global operations to find further savings. SG&A was our initial target. This next phase addresses operations in maintenance, utilities, supply chain. We know there are savings available but are not prepared to share specifics yet because we’re still assessing. I look forward to sharing that as soon as Bud and I can pin down numbers.

Hi, Nick. I’d just add that the SG&A efficiency is one piece of the priorities we laid out a couple of years ago. We look at a multi-faceted priority plan: driving organic growth, operational efficiency, improving earnings quality, and strengthening the balance sheet. We’ve executed consistently across all these areas. We’ve sold our India business, other smaller businesses, signed an agreement to sell our fiber business in South Africa, and are exploring more opportunities. We’re focused on driving organic growth and maintaining balance sheet strength; we've rotated our balance sheet and reduced floating rate debt to about 3%, insulating ourselves from volatility. Additionally, we received an S&P upgrade.

Okay. Great. Thanks for all the color on that front, guys. I guess one on CoreSite for you as well. Historically, we would see the stats by metro; the capacity and demand were really skewed towards the Bay Area, LA, and Northern Virginia. Have you seen demand patterns change at all such that it's broadened out across your markets? Or do those three markets continue to garner a lopsided share of demand?

Certainly, those campuses continue to see increased demand. However, we’ve seen ecosystem development across all our markets pay off. We’re seeing Chicago and New York becoming just as desirable as Silicon Valley, LA, and Northern Virginia. It’s a testament to CoreSite’s business model, which curates customer mixes, bringing in networks, clouds, and enterprises. We’re focusing on maximizing value in our campuses. Is there a way to expand into other markets? We’re building new campuses, such as DE3 in Denver, to create new desirable locations. We’re seeing broader demand share than historical patterns.

Okay, great. Thank you.

Good morning, thanks for taking my question. I was wondering if you could comment on your view of the U.S. carrier activity relative to fixed wireless access. Specifically, are you seeing any of your carrier customers devoting new capacity specifically for that purpose as far as you can tell?

It would be tough to pinpoint specifically to fixed wireless. They're still using their existing networks to serve that demand. I think anything that puts demand on the network makes it more likely that they will add more equipment over time. The carrier commentary indicates they’re still using final capacity in their current networks. I'm encouraged by their raised targets for fixed wireless, as well as their returns on that product. It’s generally a boon for the industry, and we will see our piece of that as that business develops over time.

Thanks. And then as a follow-up, specifically relative to Europe, you are guiding for organic $10 billion, worth about 5%. Is that the right number on a multiyear basis? Do you believe there's potential for acceleration there in the out years? And then give us your view on M&A opportunities specifically in that region. Is that an area where you'd like to increase your focus or not? Thank you.

In terms of our longer-term view of Europe, mid-single digits is what we envision that market to be over time—a durable growth rate for us. We have some CPI-linked escalators that will vary over time, but the core business activity encourages us. We’re seeing a bit more competition and government expansion into rural areas; they are a bit behind on some of their 2030 targets to serve populations. There’s an opportunity to catch up if they keep investing. Their mid-band 5G penetration is also lagging behind the U.S. at roughly 45% population served. Carriers will be deploying networks, though we are witnessing some consolidation across markets, with fewer carriers but stronger carriers to deploy capital. We’re optimistic about Europe. Regarding M&A, we think it has potential, but the right portfolio with favorable terms and conditions is essential. The price for trading portfolios in Europe has kept us on the sidelines. We want to avoid portfolios that don't offer long-term durable growth; even if the price is right, we will refrain from buying.

Thank you.

Hi, I wanted to ask about the services business, the 30% growth and the margin contribution. Can you give us a sense of how that should grow through the year and what you're seeing there? And then I have one follow-up.

Yes. We do have a good backlog of projects for 2025. We expect to see nice ramp-up in this. It’s a combination of several service aspects; normal services on deployment for carriers, also construction services which is becoming larger. We only do construction services for a few customers in certain markets. We can provide larger margins and fulfill customers' needs on time. Overall, we expect activity up year-over-year and feel good about our guide. We will continue to monitor it, but there is substantial visibility in the first half of the year.

And then in terms of your Canadian business, can we get a little bit of color on how things are going there? Any desire to get bigger in Canada?

Sure. It is a very small business for us. We have just over a couple of hundred towers there. It's growing well, and we're seeing good activity levels. The Canadian market is interesting; carriers have not traditionally monetized their towers, and we'll monitor how that plays out. Developed markets have unique characteristics. The Canadian market has seen a lot of network sharing throughout its history. Carriers are building more differentiated networks today, leading to less sharing in some areas. We’ll evaluate any potential to grow in that market, ensuring the appropriate price and conditions.

Got it. Thank you.

Thank you all for joining the call. If you have any follow-up questions, please feel free to reach out to the Investor Relations team. Thanks, everyone.