SBA Communications Corp (SBAC) — Q1 2025 Earnings Call Transcript

Thank you. Good evening, and thank you for joining us for SBA's first quarter 2025 earnings conference call. Here with me today are Brendan Cavanagh, our President and Chief Executive Officer; and Marc Montagner, our Chief Financial Officer. Some of the information we will discuss on this call is forward-looking, including, but not limited to, any guidance for 2025 and beyond. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, April 28, and we have no obligation to update any forward-looking statement we may make. In addition, our comments will include non-GAAP financial measures and other key operating metrics. The reconciliation of and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our Investor Relations website. With that, I'll now turn it over to Brendan.

Great. Thank you, Mark, and good afternoon. 2025 got off to a good start in the first quarter. Results were broadly in line with our estimates, and activity levels continue to demonstrate a healthy level of growth. In the U.S., our mobile network operator customers continued growing their level of network investment around our macro tower sites. We had our best quarter going back several years in terms of new domestic leasing business signed up during the quarter. Most encouraging, though, is that our leasing backlog also grew from December 31, meaning we are adding new applications at a greater pace than we are signing up new business. This bodes well for the balance of the year. We also continued to see a higher percentage of our new U.S. leasing business coming from new lease colocations versus amendments to existing leases. And our U.S.-based Services business had a great quarter as well, with activity levels and results ahead of our expectations. We also saw our new business backlog grow for Services during the quarter and as a result of the strong start to the year and our growing backlog, we have increased our full year outlook for Services. In our international markets, we also saw a positive start to the year with solid leasing activity. In addition, elevated CPI rates in some of our markets have presented the potential for better existing lease escalations during the year. Across our markets, our customers have many network goals, which will require continued investment. Macro sites remain the most effective and cost-efficient way to advance wireless coverage and deploy new spectrum and technologies. Our portfolio is well-positioned to capture growth from these initiatives over the next several years. In addition to our operational achievements during the quarter, we also made progress in the areas of portfolio management and capital allocation. During the quarter, we completed our exit from the Philippines, and on last quarter's earnings call, we announced our planned exit from Colombia. We were able to finalize the required steps to complete this exit and formally sold our Colombian operations prior to quarter end. These steps have allowed us to improve our focus and allocation of resources. We continue to evaluate all of our operations to identify ways to improve our market positioning or gain further synergies. In addition, during the first quarter, we closed on a small portion of the Central American sites previously put under a purchase agreement with Millicom International. While there are numerous regulatory and diligence steps remaining, we will continue to explore opportunities for additional early closings. Against the backdrop of the current uncertain macroeconomic environment and the resulting market volatility, the stability and consistency of our company and our business stand out. We have not experienced nor do we foresee any direct impacts from the current tariff policies. Our business continues to generate steady cash flow, and the underlying needs of our customers remain robust. As a result, we have significant confidence in our company and our future. Subsequent to quarter end, we have demonstrated that confidence by repurchasing 583,000 shares of our stock at an average price per share of $210.87. We have also announced today that our Board has approved a new $1.5 billion share repurchase plan, supporting our ability to return significant value to our shareholders. The combination of this plan and our industry-leading dividend growth provide a direct line of shareholder returns, while our existing capital structure allows us the flexibility to still pursue meaningful asset investment opportunities. We are very well positioned. For the balance of 2025, SBA will be focused on operational execution, driving efficiencies in our processes, particularly through the incorporation of new technologies and systems, enhancing our relevance to and relationships with our largest customers, and bringing a balance of entrepreneurial spirit and informed financial discipline to capital allocation and expansion. Some of these focus areas may seem straightforward or mundane, but our ability to excel in each of these areas will be what sets SBA apart from our peers. The wireless ecosystem will continually evolve, providing new opportunities for those willing to take them. I believe we have the people, experience, and DNA makeup to maximize these opportunities. Before turning it over to Marc, I'd like to thank our team members who represent that experience in D&A. Our team members represent SBA well every day and continually put the goals and objectives of our customers first. I look forward to sharing our progress with you throughout the balance of the year. With that, I'll turn it over to Marc, who will provide additional details on our results.

Thank you, Brendan. Given the solid start to the year, we are increasing our full year outlook for all key metrics, including Site Leasing Revenue, Tower Cash Flow, Adjusted EBITDA, AFFO, and AFFO Per Share as compared to our initial 2025 guidance. The primary drivers of these increases include in-line first quarter results, the closing of a small portion of the acquisition of Towers from Millicom earlier than expected, an improved outlook for Services, slightly higher straight-line revenue due to the extension of some leases, and a reduction in the share count from recently completed buybacks. First quarter domestic organic leasing revenue growth over the first quarter of last year was 5.2% on a gross basis, 1% on a net basis, including 4.2% of churn. $20 million of our first quarter churn was related to the Sprint consolidation, which we anticipate to be approximately $50 million to $52 million for the full year 2025. Our previously provided estimate of aggregate Sprint-related churn over the next seven years remains unchanged. Beyond 2025, we anticipate approximately $50 million in 2026 and $20 million thereafter. Non-Sprint related domestic annual churn continues to be between 1% and 1.5% of our Domestic Site Leasing Revenue. During the first quarter, 80% of consolidated Cash Site Leasing Revenue was denominated in U.S. dollars. International organic leasing revenue growth for the first quarter, which is calculated on a constant-currency basis, was 1.6% net, including 5.6% of churn or 7.2% on a gross basis. Total international churn remained elevated in the first quarter due mostly to carrier consolidation. We believe that post-carrier consolidation in some of our international markets, the remaining wireless operators will be stronger in a better position to invest for the long term. This will support a steady growth rate for our operation in those countries. During the first quarter of 2025, we acquired 344 sites for a total cash consideration of $58 million, mostly related to the acquisition of sites from Millicom in Nicaragua. The contribution to the 2025 outlook from closing earlier than previously assumed is $4 million of site leasing revenue and $3 million of tower cash flow. The remaining 6,700 sites related to the Millicom transaction remain under contract, and the guidance continues to assume the September 1 closing date. The closing date is dependent upon regulatory approval and other requirements and may differ from this date. We also built 67 new sites in the quarter, mostly outside of the U.S. Our balance sheet remains strong, and we have ample liquidity from both cash on the balance sheet and a fully undrawn $2 billion revolver. The recent share buybacks were funded fully with excess cash and did not require any borrowing. Our current leverage of 6.4 turns, net debt to adjusted EBITDA remains near historical low. As of the end of the first quarter, our weighted-average interest rate was 3.7% across our total outstanding debt, and our weighted-average maturity was approximately four years. Including the impact of our current interest rate hedge, the interest rate on 98% of our current outstanding debt is fixed. And finally, our net debt maturity is a $750 million ABS security due in January of 2026. Now, let me turn the call over to Mark.

Thank you, Marc. We ended the quarter with $12.5 billion of total debt and $11.8 billion of net debt. As Marc mentioned, our net debt to annualized adjusted EBITDA leverage ratio was 6.4 times, below the low end of our target range. Our first quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense remained strong at 4.9 times. During the second quarter, we repurchased 583,000 shares of our common stock for $123 million at an average price per share of $210.87. On April 27, 2025, the Company's Board of Directors authorized a new $1.5 billion share repurchase plan, replacing the prior plan that was authorized in October of 2021, which had a remaining authorization of $82 million. This new plan authorizes the company to purchase from time-to-time up to $1.5 billion of our outstanding Class A common stock. The new plan has no time deadline and will continue until otherwise modified or terminated by the Board of Directors. In addition, during the first quarter, we declared and paid a cash dividend of $122.3 million, or $1.11 per share. And today, we announced that our Board of Directors declared a quarterly dividend of $1.11 per share payable on June 17, 2025, to shareholders of record as of the close of business on May 22, 2025. This dividend represents an increase of approximately 13% over the dividend paid in the second quarter of 2024 and approximately 35% at the midpoint of our full year AFFO outlook. Operator, we are now ready for questions.

Hi, good afternoon. Thanks for taking my question. Maybe first on the overall carrier environment. It sounds like fairly constructive commentary on the direction of travel here. Maybe just was wondering if you could comment on any updates in terms of carriers' plans in the U.S. and their willingness to devote any capacity to fixed wireless access, as far as you can see at this point? And then secondly, on the capital allocation front, the buyback of $1.5 billion was encouraging to see. How are you thinking about just the overall environment for capital allocation at this point? Rates are obviously probably a little bit higher than you might have thought six, nine, 12 months ago. How are you thinking about the refinancing needs potentially for 2026 and the level of buybacks you'd want to do right now, assuming nothing changes in the rates environment today? Thank you.

Sure, Jim. In the overall carrier environment, things are looking quite positive here in the U.S. There is still a lot of work ahead. We're experiencing higher leasing activity than we have in the past two years, which makes us feel optimistic. The growing backlogs indicate that there is plenty more to do, which is perhaps the most encouraging point. Regarding fixed wireless access, we believe it plays a significant role. Our customers' recent results show that a large part of their subscriber growth is coming from this area. This product consumes a lot of broadband, driving substantial usage of network capacity and creating a need for additional investment in their infrastructure. While I can't specify the exact impact since it shares frequencies and spectrum with their mobile networks, we believe it is a contributing factor. We're generally encouraged by the increase in activity. On capital allocation, interest rates remain high for a longer period. It's uncertain when rates might decrease, but our current positioning is strong. Our leverage ratio is well below historical levels, providing us with considerable flexibility. We repurchased shares in April because we identified a good opportunity amid market dislocations caused by certain announcements. If further opportunities arise, we will continue to capitalize on them. Our Board's new plan demonstrates our intention to allocate capital towards share buybacks. As previously mentioned, our approach will still involve a combination of buybacks, new investments in promising assets, debt repayment, and dividends. This strategy remains unchanged, and we feel comfortable with our ability to adapt as opportunities come our way.

Thank you.

Hi.

Hi, Jon.

Thanks. So I was curious about just given what you said about the current activity level, the backlog. Where do you think you might end the year on a run rate basis for U.S. leasing? Any kind of products, and metrics you could share with us?

Yes. I mean, it's a little hard to say absolutely at this point because I got to see how things continue to build, but I certainly would expect to end at a higher level than we're at in terms of what we produced here in the first quarter, and that was approximately $9 million from new leases and amendments here in the U.S. I definitely expect to be higher than that when we get to the fourth quarter, but I'll refrain from giving an absolute number there until we see how the rest of the year progresses.

And then secondly, I was interested just where you stand in terms of the bilateral contracting relationships you have with major customers in terms of pay by the drink or things like amendments, colocations, and just give us kind of a refresh on MLAs?

Yes, we typically do not have the kind of comprehensive master lease agreements that you mentioned. We have always had agreements with our customers, but they have generally been focused on specific equipment use. The exception was the agreement we reached with AT&T a few years ago, which took a more holistic approach. We are open to similar arrangements with our customers, but it ultimately depends on the negotiations surrounding those agreements. At this point, the only true comprehensive agreement we have in the U.S. is still the one with AT&T from a couple of years ago.

Thanks very much.

Sure.

Thank you. I have a couple of quick questions. First, can you explain what is driving the increase in your network services business compared to what you anticipated earlier this year? Additionally, regarding domestic churn, it seems to have increased slightly, excluding Sprint. What factors contributed to that? Lastly, on the M&A front, there are some tower portfolios available for sale in Canada. Given your presence in the region, which has a slower growth market, could you share how you would approach M&A in Canada? Thank you.

Sure. The first question was about why our Services segment is growing faster than anticipated. It's primarily due to one of our customers accelerating their network investments at a pace that exceeded our expectations. We are seeing them act more swiftly, which is quite straightforward. Given the increasing backlogs, I anticipate they will maintain this rapid pace for the remainder of the year, which is why we've adjusted our full-year outlook. We will continue to meet their needs and keep up with their demands. Regarding U.S. churn, you mentioned it has increased. It's essentially in line with our earlier forecasts, so it's not outside our expectations. I'm not sure if you were inquiring about year-over-year comparisons.

No, it's - I guess it's - yes, it's within the range you've given, it's just picked up slightly versus the last two quarters, maybe.

Yes. I think that's really just a timing thing. If you look at our full year outlook, we didn't change it. And I think the implied percentage for the full year for the U.S. is around 1.2%. So it was 1.4% in the first quarter. So you should take that to imply that it will be a little bit lower at other points during the rest of the year. And then on the Canada side, really, we approach that the way we approach most major M&A opportunities and portfolios that come to market anywhere, really around the globe, particularly obviously in the markets where we already have operations. We will look thoroughly at any of those opportunities. And if we can see value there and see it at a price point that we think makes sense and is competitive and is better than, we certainly will be interested in pursuing that. I think you've heard us talk about our approach to our international markets over the last year or so in terms of what we'd like our positioning to be. Obviously, in Canada, if you have the mobile network operators up there divesting of their towers, whoever ends up buying those will certainly be in a lead position in terms of their size and scale in the market. So that would be something that we would consider in our analysis of any deal. But at this stage, you should expect that we'll look at any opportunities that come to market. And I can't say whether it will work or not, but if it does, it's something we will certainly pursue.

Got it. Thank you.

Walt?

What about now?

Hi.

Sorry about that. I'll ask about our friends at DISH. There have been press reports about them wanting to lease or looking to lease their spectrum, possibly in some rural areas. There might not be any impact there, but can you characterize what they've shared regarding their longer-term plans and the role you may play? Additionally, have you received any inquiries from cable companies considering available spectrum in the market and looking to redeploy their own? I would assume they want to conduct some due diligence to understand the expenses involved. So, essentially, I have the same question regarding DISH.

Yes. Well, you're probably not going to love my answer because there's not a lot of detail to offer there. I'll take the cable one first. There really hasn't been much in the way of direct conversation. We talk to them periodically, but there's nothing really along the lines of what you just described. So, I think until they have something firmer in hand, they frankly don't really need to spend a lot of time talking to the tower companies just yet, but we'll see how it develops.

Can I just interject on that one before you go back to it?

Sure.

Even regarding CBRS, I believe Comcast has mentioned in some investor meetings that their initial efforts with CBRS may have been associated with a vendor that didn’t perform well. They switched to another provider, possibly Samsung, and while much of that is focused on in-home use, I see an opportunity, particularly with the current SEC, to enhance the capabilities of CBRS so they can start connecting to towers. Are there any early signs of them considering offloading the increasing expenses at Verizon?

Very limited, Walt. I mean, we have conversations with them. We've actually talked with them about CBRS over the years at various times. But when I look at it from a materiality standpoint to us, it's really completely immaterial.

Got it. And then regarding DISH, have you heard about them leasing out spectrum in rural areas? Does that impact any part of your contract, and what are they communicating about their plans for the intermediate term?

Yes. At this stage, there haven't really been any specific discussions regarding leasing. If they choose to lease their spectrum, their contract does not permit that to change hands without a conversation, which we have not had yet. In terms of their broader feedback, we collaborate closely with them. They are quite clear about their intention to continue developing their standalone greenfield network. Currently, leasing activity is much slower with them. We are hopeful that this will change, but for now, we are just addressing some very basic needs. There are some basic upgrades happening, and they are signing a few leases here and there, but it's quite minimal at this time. I don't have much feedback for you, but I would be interested to hear what they have to mention on their call.

Got it. Thanks. Sorry for the technical difficulties.

No, no worries. Thanks.

Thanks, and good afternoon. Two topics, if I could. So first, on the international front, just curious if you could share an update on how the visibility is trending for organic growth as well as the churn dynamics, and specifically in Latin America, both for this year and over the next few years? And then second, I was just looking at the supplemental, and thanks for the refresh, I think you began on this last quarter. The supplemental, looking at the straight-line revenue, and what caught my attention was the straight-line revenue is negative this year for the first time in like five years, and goes more negative next year. And so, as these contracts on average are getting further into their life, does that increase the potential for some renewals? And is that something that could significantly just impact the way GAAP results look over the next few years, that might be different than what the schedule is currently inferring.

Let me try to answer that second one first while I'm thinking about it. I don't think so. I mean, basically, if you think about what straight-line revenue is, it's essentially revenue that, from an accounting standpoint, we're booking, but we haven't actually received the cash. So eventually, it's going to all go negative and reverse out and end up at zero cumulatively. I think what you're seeing is that as we've had less new leases and moved further in terms of the dates and the timing of our portfolio as it gets more mature, you should expect that it would move back towards that sort of breakeven point. Now, having said that, we are signing more new leases today, and perhaps that will have an impact. And as we, in some cases, extend out the length of the terms, we'll see some adjustments up, and actually, that did happen in the first quarter. We extended some leases out. So that pushes the timing. But I don't think that there's anything to be read into it other than just we're a more mature business and we're in a more mature place in terms of our life cycle with our biggest customers. So it's going to move up and down over time, but eventually, if you went to the end of time, it would be zero cumulatively. And so the other question was on international, I think, Mike, right, organic growth and churn, is that what your question was on dynamics?

Exactly. Yes, the visibility into this year as well as into the next few years, as you're managing through some of the Latin American churn dynamics.

Yes, each market is somewhat unique. In several markets, we have faced churn over the past few years due to consolidations, but we are nearing the end of that phase. In many Central American markets, the consolidation has occurred, and the necessary adjustments to leases have largely been made. I believe we will be in a favorable position there, as carriers will become more focused on network development and investing in their infrastructure, which will lead to increased activity in that sector. In other regions, such as Brazil, we are still dealing with the consequences of consolidation. We have discussed this frequently over the past year. It is known that Oi has been replaced by three other carriers, but this results in significant overlap and a need for rationalization, which we are currently observing. We are also still feeling the effects of Claro's acquisition of Nextel, which occurred years ago. Therefore, I anticipate that for the next few years, we may experience heightened churn internationally due to these factors. The underlying challenge is not only the churn itself but also how rationalization draws focus away from existing carriers, shifting their attention from organic growth and new lease-ups. I would characterize the upcoming years as a period of slower growth specifically in Brazil, which represents the majority of our international business. However, as we progress further through the maturity cycle, I expect to see an increase in leasing activity, based on our experiences in other markets, including the U.S.

Thanks.

Sure.

Hi, guys. Thanks so much for taking the questions. Just two, if I could. First, on the macro front. I'm wondering if sales cycles, conversations with carrier customers, particularly in the U.S., are lengthening at all? Or are you seeing carriers even potentially reevaluating spending plans in light of what's developing into a choppier macro backdrop? And then just secondly on the U.S. as well. If you can give us any color on the mix of colo relative to amendment for new leases signed in 1Q and how that compares to prior quarters? Thanks.

Yes, in response to your first question, Matt, we have not noticed any impact on our sales or leasing discussions with our customers. However, I believe the situation is still quite new, and I can't guarantee that there won't be changes in the coming months. I feel reassured that there are no direct impacts from tariffs. Our carrier customers are relatively less affected compared to most international companies, so I don't anticipate significant changes since there is still a strong demand for network services and a competitive environment that supports ongoing investment. We'll need to monitor how this situation develops and its potential effects, but as of now, we haven't experienced any impact. Your second question was about colos versus amendments, correct?

That's right.

Yes. So we've definitely seen a pickup in the colocations that started last year and has continued into this period now where we're seeing the vast majority actually of new revenue added in the U.S. coming from new lease colocations versus amendments. I don't actually have the percentage handy to give you, but that's something our team can probably provide to you in a follow-up call afterwards, but most of it is coming from new leases. And based on the backlogs and the way they're building, I would expect that to continue for the balance of the year.

Thank you.

Thanks for taking my questions. First, Brendan, in your prepared remarks, you noted that driving efficiencies through new technologies and systems was a priority for the year. Can you expand on that at all, and maybe frame some of the areas that you're looking at, the sorts of savings that you're expecting? And then second, you decommissioned a lot of towers overseas this quarter. Is that all oil-related, or are there other drivers, anything we should be aware of there? And how should that trend in the coming periods?

Sure. We are focused on driving efficiencies, which is something we would be doing anyway. I mention it as it is a key internal area for us. We are implementing several new systems across different parts of our business, including operational and front-end systems related to leasing, as well as back-office operations and a complete refresh of our ERP systems. As we incorporate AI and other advancements into our solutions, we will seek efficiencies in how we operate these processes. This approach should not only lead to cost savings but also create opportunities for additional revenue. While it is too early to provide specific quantification at this stage, I hope to share insights on where we have realized significant savings that positively impact our financials in the future.

Only thing you mentioned…

Yes.

Sorry to jump in. You mentioned the ERP system. I know sometimes that's been problematic for some companies when they change that out. Do you feel comfortable from a risk profile because that's typically a big change for folks.

I do. It is a big change, and it's actually a multi-year project, but I feel very good about where we are today and the progress we're making on that. But yes, okay.

Okay. Good.

No worries. Yes.

Okay. And then the decommissioning question?

Yes, the decommissioning is important to clarify. The total number for international includes the divestitures of Colombia and the Philippines that have occurred. Just to clarify, that's the vast majority.

Okay. Yes. Okay.

If we exclude that, we are decommissioning some sites, mainly in Brazil, as part of the consolidation process. We have identified towers that we don't see having much potential. In those instances, we will remove those towers to reduce costs, but most of that figure is from the sales in those two countries.

Okay. Okay. Great. Thank you, Brendan.

Sure.

Good. Thanks for taking the question. Brendan, I think you talked a little bit about the increasing colo mix in your backlog. Any sense for how much might be related to regulatory requirements that certain carriers have, that have specific time to be deployed, versus kind of any early signs of densification in your footprint from your early mid-band deployments.

Yes. Firstly, I appreciate the opportunity to address Matt's question regarding the percentages. Approximately 75% of the new leasing business in the U.S. for the first quarter was derived from colocation services rather than amendments. In response to your question, it's a combination of factors. The regulatory requirements certainly play a role. I can say this with confidence because when we analyze a specific carrier customer and their chosen locations, particularly the more rural areas, it provides us insight into their objectives. However, it's challenging to determine this consistently, as there are various network needs in different locations. Whether the motive is commercial or regulatory, we often lack clarity, but I anticipate a continued balance of both factors influencing our operations.

Okay, great. I appreciate that. And on the services guide uplift, I believe you over-indexed to one carrier in particular there. So would you attribute that uptick to that customer, or is it a little bit more broad-based than that? And I guess, do you think there's any correlation here between the services upside and some of the higher leasing activity that you've talked about in your backlog? Thanks.

Yes. I do think that there is a correlation to the leasing at least a little bit because most of the work that we're doing, virtually all the services work we're doing now is on our own power sites. So it's definitely tied into leasing activity. And yes, I mean, we do have a significant percentage of our Services business with one particular carrier, but the increase at least proportionally among them is more broad-based. But obviously, that one customer makes up a bigger percentage, and therefore, as they get busier, that makes more of an impact to our outlook.

Thanks, Brendan.

Sure.

Thanks for taking the question. Brendan, I want to go back to your comments around new bookings and backlog. From a historical standpoint, what period is most comparable to the new bookings you saw this quarter? And then I was hoping you could help us contextualize what the book-to-bill ratio looks like today. Thanks.

Sure. Yes, I don't know if I could say absolutely, but it's been a couple of years. It's been over two years, I'd say, since we saw this level of applications that drive our backlog. So it's pretty good in terms of recent history. We were pretty busy back in the '22-'23 window. So, it's probably as good as it was any time since then. I'm sorry, Brandon, your second question.

I was just curious about what the book-to-bill backlog looks like today.

Yes. The shift towards new leases has resulted in a longer timeframe than we've typically seen in the past. It generally takes about six to nine months for a new colocation, but we've noticed some improvement. So far this year, it seems to have averaged a bit shorter than that. They are turning them around and deploying them quicker. I would estimate it could be around three to nine months, recognizing that each lease varies, but that’s the usual timeframe.

Great. Thanks for taking the questions.

Sure.

Thank you all for the questions today. So, first one, just what do you attribute the increase in new leasing activity from the carriers based on your conversations with them? And then maybe split between the carriers would be helpful as well. And then second one kind of more bookkeeping. You mentioned during the prepared remarks that CPI rates have a potential for better escalators throughout the year internationally. If you can quantify, that would be helpful.

Yes, the increase is attributed to a variety of factors, but I don't want to get too detailed by customer regarding their specific activities. You can refer to their reports to see what they're focusing on with regards to leasing on macro tower sites. Generally, we are seeing increased subscriber activity, especially with certain product offerings that require more network bandwidth, like fixed wireless access. There are also some regulatory requirements for T-Mobile, one of our customers, related to downlink speeds and coverage that they committed to during the Sprint acquisition, which continues to drive demand. We anticipate a mix of these factors moving forward, but overall, it's creating strain on the network amid competitive pressures between carriers. Regarding the CPI, we’ve noticed an increase in CPI rates in Brazil, and we will have to see if this trend continues. We haven't adjusted our outlook for international escalator contributions this year, but if high CPI rates persist, there's a chance we could raise our leasing outlook. However, the impact would likely be modest, around one to two million dollars for the year, which is a reasonable increase in percentage terms.

Great. Thank you for the question.

Sure.

Hi, Good afternoon, everybody. I think I messed up my pound too here. I appreciate the questions.

Sure.

First question, I want to follow along the lines. A lot of people touched on the colocation amendment. Appreciate the 75, 25 for 1Q number. Was that revenue-based, I assume instead of application-based, because I would expect new colocations come in at a significantly higher amount of revenue than an amendment?

Yes. Yes, that's revenue-based dollars.

Okay. This also leads to activity. Regarding the comparison between new colocations and amendments, what is your outlook on the potential for new spectrum auctions beyond the secondary market that could be introduced and contribute to more spectrum deployments instead of simply splitting sites? Do you have any updates from Washington on the spectrum situation, including when we might see some blocks available and when they could be integrated into your towers?

Yes. I don't obviously have any insight that is specific to when you're going to see it. But the general commentary that we get back in the conversations that we have and that our industry association WIA has is that there's definitely much more of an interest in this administration and the FCC to get new spectrum out there and auctioned off. And so we're encouraged by that. I think even if they get that done in relatively short order by the time it gets cleared and is available and then is actually deployed, I mean, you're talking four or five years from now probably before we would see an opportunity for increased leasing activity as a result of that, Ric. So it's a ways off. But the faster that we get it done and out there and get this process started, the quicker we can get to that point. So, we're definitely pushing for that from our industry.

All right. Industry could definitely use more spectrum, but it's going to take time, which means we should probably count on colocations, more so than amendments being a trend it feels like.

Yes, which obviously isn't bad. I mean, we're fortunate in terms of where we're placed in the ecosystem, and that if you don't have the spectrum, the only solutions you've got are to densify your network, and that typically means more locations for us and more equipment, which is a good thing.

Great. Yes. Well, appreciate it. Thanks, guys.

Sure.

Thank you. Good afternoon. I have two questions. Brendan, we've touched on this in several of your responses. Could you provide some clarity on your visibility regarding the domestic site leasing growth for the full year? Should we relate the activity to the growth in service revenue and the shift towards colocations to enhance that visibility? I'm looking to understand the outlook for improving revenue trends in the domestic business as we move through the rest of the year. Additionally, could you update us on any changes to the Millicom contribution to revenue and gross profit, assuming the remainder of the acquisition closes on September 1? Thank you.

Yes. So, we do break out in our press release, our outlook for the contribution to leasing that we expect during the full year, and the range that we set for that for the U.S., we did not change after this quarter. It's only been two months since we gave that outlook originally. And I think at this stage, while my commentary is accurate in terms of the accelerating pace, and that we're feeling very good about it as the backlogs have been bigger and the lease up was a little bit ahead of pace. I think that it's a little early to think that we're going to be outside of the range that we gave. But we'll see where we are next quarter, we'll certainly have a much better sense by then as to whether there's an opportunity to beat the range. But, perhaps we'll be more towards the higher end of the range if things continue on this track. So stay tuned on that. At least we're talking about it being towards the higher end and not towards the lower end.

Okay.

Regarding the Millicom question, our initial outlook remains largely unchanged except for the sites that we closed early, which we have accounted for. I'm not sure if you're looking for something specific, but essentially the overall expectations we communicated in our original press release remain the same. There are no significant changes, but we are eager to wrap this up as soon as possible.

Okay. The only change, I guess, is just part of that acquisition is closed already, right?

Yes, just a timing difference.

Yes.

So it's a fairly small piece of it. There were 320 sites that we were involved with. If we can close other pieces early, we will do that too. I don't think there's as great an opportunity to break off other pieces. In this particular market, there was an opportunity to buy the asset separately instead of as an entity. That allowed us to close a few early. We'll see how it goes, and if we can close them early, we will.

Great. Thank you so much.

Thanks.

I had a follow-up on the Services side. Was the increase more in near-term activity, or is it just feeling more confident about the level through the year? And then also, how much more services revenue could you fulfill, or how much capacity do you have in that Services business kind of from this 180 to 200 level?

The increase in guidance for Services results from our better-than-expected performance in the first quarter and the increase in backlogs, which boosts our confidence for the remainder of the year compared to our original projections. Regarding capacity, our updated outlook for this year is between $180 million and $200 million. We've had years in the past where Services revenue reached nearly $300 million. We have the capabilities and scalability to manage increased volume if we can find the right projects. If such opportunities arise, we hope to continue to grow, and we are not limited by our capabilities or capacity.

Great. Thank you.

Sure.

Thank you. I have a clarifying question. Brendan, you mentioned previously that the 2.5 gigahertz and 3.5 gigahertz spectrum used by carriers is deployed at approximately 55% to 65% of the sites. Are you referring to your sites or the carriers' sites? I initially understood this to mean it was at 55% to 65% of their sites, which suggests there is significant growth potential remaining. I would have thought this would lead to more amendments, rather than the majority of growth coming from new leasing.

Yes. When we provide those statistics, we are referring to their presence on our sites and the leases we have with them. It does not reflect their overall position, which they can comment on. The carriers are not evenly matched in that regard. T-Mobile is leading because they secured 2.5 spectrum much earlier than the other incumbents who are now catching up with their mid-band C-band spectrum. This mix may be influencing the speed of their movement towards new leasing versus amendments. Overall, on a consolidated combined basis, nearly 60% of our leases with the three incumbents have been upgraded to mid-band spectrum.

Got it. So that's 60% of their sites where they've made amendments for mid-band spectrum already. There’s still another 40% where they could make amendments.

Yes, as a group, when we're discussing their leases on our sites.

Yes. And so they're not doing incremental. So, but that's not where the activity is coming from at the moment. It's mostly coming from them putting equipment on new sites.

Well, yes, I mean, we're still signing a bunch of amendments, and the amendment activity is largely around that. It was largely 5G-related upgrades. Yes.

Perfect. Thanks for that clarification.

Sure.

Yes. Thanks. Hi, Brendan, going back to your comment on the transaction front. You said the bid-ask spread might be too wide for some deals to cross the finish line. Was that comment in reference to the past few weeks and the volatility we've seen, or is that something you've observed over the course of the year?

Yes. No, it's something we've observed really for the last year or so internationally, where you're seeing we've seen a number of potential transactions come to market, processes run, some we participated in, others we have not, and there are a number of them that did not actually get completed. So it's been a dynamic that's been happening for the last few years. So really, if you look at the timing of when cost-of-capital started to increase sometime following on that time period, you started to see this dynamic.

It makes sense. And then you had a comment in your press release talking about the business having very reliable cash flow amidst economic uncertainty. And that's definitely been true in the past. But since the tenant landscape has evolved since that, we've really had any sort of economic stress-test. How should we think about SBA's portfolio performing if the U.S. economy were to hit a soft patch?

From a broader perspective, we have generated a significant amount of cash flow, with our AFFO at around $1.4 billion annually. Even if there are some weaknesses in the U.S. or other markets, the changes in leasing activity and additional revenue are relatively minor compared to the overall cash flow we produce and the returns we provide to our shareholders. There is no risk to our ability to continue operations or to sell our product, as it is already being sold. We are seeing positive incremental additions at this time. Even if there were to be a slowdown, the amounts involved would still be relatively small. Overall, compared to many other businesses, our cash flow is dependable, consistent, and positioned well in an unstable environment.

Good point. Thank you.

Sure.

Thanks for squeezing me in here. The commentary on domestic leasing activity and signing continues to get better. Based on the conversations with carriers, is that something you expect to continue to accelerate and maybe build here for the next couple of years, or does it level off kind of in the range where you're at now?

I find it difficult to predict multiple years ahead. We've observed various patterns over decades, with carriers experiencing different levels of activity that tend to cycle with different events. Currently, we're feeling optimistic and excited about the ongoing increase in activity driven by specific factors. However, various elements could either slow down or enhance this growth. Looking further ahead, we know that new spectrum will eventually be available, which will boost activity, and a 6G cycle is anticipated in the future. Overall, I believe that our customers will continue investing in networks, and we will benefit from that. However, it's challenging to precisely predict whether this year will be stronger or weaker than the previous one over multiple years. So, we'll see how things unfold, but you can be assured that another cycle of demand will always emerge.

Got it. If I can shift the leasing activity to backlog and then from backlog to leasing revenue. One thing to note is that the midpoint of this year's guidance is slightly lower compared to last year, even with the increase in activity. Should we anticipate a significant increase by 2026, considering how active you've been?

Yes. If the current trend continues for the rest of the year, it should positively impact next year. The reason this year shows a decline compared to last year, despite improved activity, is due to a delay between signing agreements and their impact on our financials. We will experience this benefit as we progress through this year, especially into next year as it continues forward.

Thanks for the color.

No problem. Well, thank you all for joining the call today, and we look forward to reporting our second quarter results at the end of July.