SBA Communications Corporation

Ladies and gentlemen, thank you for standing by and welcome to the third quarter results for SBA. At this time, all lines are in a listen-only mode. Later, we will have a question and answer session. If you'd like to queue up for a question, you can press 1 then 0 at any time during today's call. If you need assistance during the call, please press star then 0. As a reminder, today's conference is being recorded. I'd now like to turn the conference over to Vice President of Finance, Mark DeRussy, please go ahead.

Good evening, and thank you for joining us for SBA's third quarter 2021 earnings conference call. Here with me today are Jeff Stoops, our president and chief executive officer, and Brendan Cavanaugh, our chief financial officer. Some of the information we will discuss in this call is forward-looking, including but not limited to any guidance for 2021 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, November 1st, 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 will now turn it over to Brendan to discuss our third quarter results.

Thank you, Mark. Good evening. SBA had another great quarter with financial and operating results ahead of our expectations and continued strong momentum into the end of the year. Total GAAP site leasing revenues for the third quarter were $535.5 million, and cash site leasing revenues were $525.1 million. Foreign exchange rates were generally in line with our previously forecasted FX rate estimates for the quarter. They were a tailwind, though, on comparisons to the third quarter of 2020, positively impacting revenues by $3.2 million on a year-over-year basis. Same-tower recurring cash leasing revenue growth for the third quarter, which is calculated on a constant currency basis, was 3.6 percent over the third quarter of 2020, including the impact of 2.5 percent of churn. On a gross basis, same-tower growth was 6.1 percent. Domestic same-tower recurring cash leasing revenue growth over the third quarter of last year was 5.7 percent on a gross basis and 3.3 percent on a net basis, including 2.4 percent of churn. Domestic operational leasing activity, or bookings, representing new revenue placed under contract during the third quarter, was at a similar level to the second quarter, which had represented the highest quarterly level since 2014. Even with this high level of execution, our domestic new lease and new amendment application backlog continued to grow during the quarter and finished the quarter higher and at a new multi-year high. These backlogs support our expectations for continued strong domestic operational leasing activity throughout the balance of this year and into 2022. During the third quarter, amendment activity represented 45 percent of our domestic bookings, with 55 percent coming from new leases. The big four carriers of AT&T, T-Mobile, Verizon, and DISH represented 96 percent of total incremental domestic leasing revenue signed up during the quarter. Internationally, on a constant currency basis, Same-tower cash leasing revenue growth was 5.2 percent net, including 2.7 percent of churn, or 7.9 percent on a gross basis. International leasing activity increased again quarter over quarter and was the highest in over a year. Churn grew some in the quarter as well and is anticipated to increase further as we experience the impacts of carrier consolidations and other network and contract modifications in Central America. In Brazil, our largest international market, we had another quarter of increased leasing activity. Gross same-tower organic growth in Brazil was 9.5 percent on a constant currency basis. During the third quarter, 84.5 percent of consolidated cash site leasing revenue was denominated in U.S. dollars. The majority of non-U.S. dollar denominated revenue was from Brazil, with Brazil representing 11.7 percent of consolidated cash site leasing revenues during the quarter and 8.4% of cash site leasing revenue, excluding revenues from pass-through expenses. Tower cash flow for the third quarter was $428.1 million. Our tower cash flow margins remain very strong, with a third quarter domestic tower cash flow margin of 84.6% and an international tower cash flow margin of 69.9% or 90.8 percent, excluding the impact of pass-through reimbursable expenses. Adjusted EBITDA in the third quarter was $407 million. The adjusted EBITDA margin was 70.3 percent in the quarter. Excluding the impact of revenues from pass-through expenses, adjusted EBITDA margin was 74.7 percent. Approximately 97 percent of our total adjusted EBITDA was attributable to our tower leasing business in the third quarter. During the third quarter, our services business produced record results for the second quarter in a row, with $53.8 million in revenue and $12.5 million of segment operating profit. Activity levels remained very high in the quarter, and backlogs also continued to grow, finishing the quarter at another all-time high level in our company's history. Based on our strong third quarter and the growing backlog, we have increased our full year 2021 outlook for site development revenue for the third quarter in a row, now expecting $200 million of site development revenue at the midpoint of our outlook range. AFFO in the third quarter was $302.5 million. AFFO for share was $2.71, an increase of 13.9 percent over the third quarter of 2020. During the third quarter, we continued to expand our portfolio, acquiring 144 communication sites for total cash consideration of $57.1 million. We also built 87 new sites in the quarter. Subsequent to quarter end, we have purchased or are under agreement to purchase approximately 1,700 additional sites in our existing markets for an aggregate price of $231 million, including approximately 1,400 sites and approximately $175 million related to the previously announced deal to acquire towers from Airtel Tanzania. We anticipate closing on these sites under contract by the end of the second quarter of next year, and we anticipate the Airtel Tanzania transaction to close in stages starting in the fourth quarter of this year. Consistent with our prior outlook, our updated 2021 outlook assumes that the Airtel acquisition closes at the end of the year, And thus, we have included the entire purchase price in our outlook for discretionary capital expenditures. But we have included no revenue or tower cash flow associated with these assets. In addition to new tower assets, we also continue to invest in the land under our sites. During the quarter, we spent an aggregate of $11.6 million to buy land and evens and to extend ground lease terms. At the end of the quarter, we owned or controlled for more than 20 years the land underneath approximately 72% of our towers, and the average remaining life under our ground leases, including renewal options under our control, is approximately 37 years. In this afternoon's earnings press release, we included our updated outlook for full year 2021. Notwithstanding our assumption of weaker fourth quarter foreign exchange rates, our updated outlook includes increased expectations for site leasing revenue, site development revenue, tower cash flow, adjusted EBITDA, AFFO, and AFFO per share. These increases result from high services activity levels with our carrier customers, anticipated timing shifts and domestic consolidation churn, reduced cash interest expense as a result of recent refinancings, and the impact of recent share repurchases. We anticipate that our strong domestic leasing bookings during the second and third quarters will be supportive of improved incremental organic domestic leasing revenue in 2022, which we will share on our fourth quarter earnings call. With that, I will now turn things over to Mark, who will provide an update on our liquidity position and balance sheet.