SBA Communications Corporation

Welcome and thank you all for joining today's SBA second quarter 2025 results. Please note that this call is being recorded and currently all attendees are in a listen only mode. Please stand by one moment as we get our speakers connected. Thank you so much for your patience. With that, I'd now like to formally begin today's call and turn it over to Mark DeRusso, VP of Finance.

Thank you. Good evening. Thank you for joining us for SBA's second quarter 2025 earnings conference call. Here with me today are Brendan Cavanaugh, our President and Chief Executive Officer, and Marc Montagnier, our Chief Financial Officers. Some of the information we will discuss in 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, August 4th, 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.

Thank you, Mark. Good afternoon. I'm very pleased with our second quarter results, exceeding our internal projections. Both the U.S. and international businesses performed very well, and we are pleased to increase our full year guidance across all key metrics, both in total and on a constant currency basis. In the U.S., activity levels continue to improve. And this quarter represents the sixth sequential quarter where bookings increased. While not at the peak levels enjoyed back in 21 and 22, positive momentum continues to build, and we are encouraged by the sustained levels of activity as carriers continue investing in their wireless networks. In addition, the trend towards more co-locations continues, driving more new points of presence with our key customers across our portfolio. Our carrier customers are working hard, densifying their existing footprints, expanding fixed wireless access, as well as pushing out into rural parts of the United States where our portfolio is well positioned to capture that sustained network investment. The backlog also remains healthy, which bodes well for the remainder of the year and into 2026. Consistent with our strong U.S. bookings, our services business outperformed our expectations. And we are increasing our full year services revenue guidance by almost 20%. Most of the increase is related to construction services as carrier installations accelerate across the US. I am optimistic about domestic organic growth opportunities over the next year or two due to the specific initiatives of each of our major customers. But I am also optimistic about the long term. The growth in fixed wireless access subscribers for all of our M&O customers, the expanding number of AI-intensive applications, 5G-advanced enabled new use cases, and the opportunity for incremental spectrum auctions are all supportive of sustained long-term growth. With regard to the spectrum, the recently passed federal spending and tax bill included the reinstatement of the FCC's Spectrum Auction Authority. a positive development for us and our customers. In addition, as part of the new bill, 800 megahertz of spectrum will be identified and eventually auctioned to help boost network capacity and support the next generation of wireless technologies. This new spectrum will require new equipment at our cell towers, particularly at the higher bands that are not currently used for traditional wireless service today. Additionally, with bonus depreciation being permanently reinstated, improving available liquidity for our customers, we could see greater investment in their networks as they have more capital available to invest. Similar to the US, our international business continues to perform well as our customers invest in 5G upgrades and ongoing densification. We signed a growing number of new leases in our international markets and continue to expand our portfolio through high-quality strategic new tower builds. and elevated CPI rates continue to support healthy tenant lease escalations. While certain international markets continue to experience elevated levels of churn, we believe this to be temporary and necessary for the long-term health and success of our customers. One area of challenge internationally is with one of our carrier customers in Brazil, OI. As indicated in our updated full-year guidance, we are increasing international churn by $5 million, primarily related to OI. As previously disclosed, OY Wireline, the remaining OY business post the wireless business breakup, which is mostly point-to-point wireless backhaul, represents approximately $20 million of run rate revenue. On July 2nd, OY filed an amendment to their judicial reorganization plan citing unforeseen financial difficulties. While many things remain unknown and will take time to work through the court system, we have booked a bad debt allowance for certain outstanding receivable balances and are now assuming that a portion of the recurring revenue churns this year and next year. We will continue to monitor this situation closely and provide any updates to our thinking as the situation develops. Turning to our portfolio review, I'm very pleased with the progress we have made recently, both expanding our presence in key markets and exiting a market where we are currently subscale and could not see a path towards being a more meaningful player. On the former, we added approximately 4,300 sites through the partial early closing from the previously announced Millicom transaction, deploying $550 million towards enhancing our strategic positioning in Central America, making SBA the leading tower operator in that region. This early closing contributed to the increase in our full-year guidance. As previously mentioned, this portfolio has a 15-year MLA, tenant contracts with the leading mobile network operator, contracts denominated in U.S. dollars, and comes with a substantial bill to suit arrangement. We continue to expect the balance of the deal to fully close by September 1st. With regard to the market exit, we are announcing the sale of our tower business in Canada. We entered Canada back in 2009, and we have had reasonable success. However, we have been unable to meaningfully grow our portfolio, and as a result, we made the decision to explore strategic alternatives. On July 21st, we entered into an agreement to sell all of our towers and related operations to a leading global infrastructure fund. Today, Canada represents approximately $27 million of annual leasing revenue in Canadian dollars and 15 million Canadian of cash flow after taxes. As mentioned in our press release, we expect the deal to close sometime in the fourth quarter but given the uncertainty in closing timing, we have made no adjustments to our full year outlook related to this transaction. Upon closing, we expect this deal to be immediately accretive to AFFO per share. I would like to briefly thank our Canada-based team for all of their hard work and contributions to SBA over the last 16 years. The portfolio review remains ongoing and I look forward to providing further updates. In addition to portfolio acquisitions, you should expect SBA to continue to deploy capital towards a mix of share repurchases and or debt reduction as seen in our latest quarter and revised outlook. We continue to be committed to a balanced approach to capital allocation, opportunistically using each of these different options to invest in value-creating assets or to return capital to our shareholders.

With that, I'll now turn the call over to Mark. Thank you, Brendan. As the positive momentum from last quarter continues, to increasing our full-year outlook for all key metrics, including site leasing revenue, tower cash flow, adjusted EBITDA, FFO, and FFO per share, as compared to our last quarter guidance. The primary drivers of these increases include the outperformance of second quarter results, higher straight-line revenue, the acquisition of malecon towers earlier than expected in two international markets, an improved outlook for services, favorable foreign currency movement, and a reduction in share count from recently completed share buybacks. Second quarter domestic organic leasing revenue growth over the second quarter of last year was 5% on the growth basis, 1% on the net basis, including 4% of churn. 11 million of the second quarter churn was related to spring consolidation, which we still anticipate to be approximately $50 to $52 million for the full year 2025. Our previously provided estimate of total spring-related churn over the next seven years remain unchanged. Beyond 2025, we anticipate approximately $50 million of churn in 2026 and $20 million thereafter. Non-sprint domestic annual returns continue to be between 1% and 1.5% of our domestic site leasing revenue. During the second quarter, 80% of consolidated cash site leasing revenue and 85% of adjusted EBITDA was denominated in U.S. dollars. International organic leasing revenue growth for the second quarter, which is calculated on a constant currency basis, was 0.8% net, including 7.5% return or 8.3% on a gross basis. Total international return remained elevated in the second quarter, mainly due to ongoing carrier consolidation, as well as the oil and water insurance in Brazil. During the second quarter of 2025, we acquired 4,329 sites for total cash consolidation of approximately $563 million, mostly related to the acquisition of sites for Millicom in Guatemala and Panama. The remaining 2,500 sites related to the Millicom transaction remain under contract, and the guidance continues to assume a September 1st closing date. The ultimate closing date is dependent upon regulatory approval and other requirements and may differ from this date. We also build 94 sites in a quarter, mostly outside of the U.S., Switching to the balance sheet, we have ample liquidity from both available cash and a $2 billion revolver, which, as of today, has a balance of $35 million outstanding. At the end of the second quarter, our weighted average interest rate was 3.7% across our total outstanding debt, and our weighted average maturity was 3.2 euro approximately. Including the impact of our current interest rate hedge, The interest rate on 97% of our current outstanding debt is fixed. And finally, our next debt maturity is a $750 million ABS security due in January 2026. I will conclude by discussing the recent credit rating update by S&P. We were pleased to see that on July 30th, S&P upgraded our corporate credit rating to BBB investment grade rating. driven mostly by S&P new criteria for digital infrastructure companies, the upgrade underscored the benefits of our stable and predictable cash flows and the positive impact on our U.S. revenue growth of anticipated increased wireless capital spending in the U.S. in 2026 and beyond. While we have made no change to our financial policy, this upgrade brings us one step closer to accessing the investment-grade debt markets. And now I will turn the call over to Mark.

Thanks, Mark. We ended the quarter with $12.6 billion of total debt and $12.3 billion of net debt. Our current leverage of 6.3 times net debt to adjusted EBITDA, as adjusted on a pro forma basis for the Milicom assets, remains near historical lows. Our second quarter cash net interest coverage ratio of adjusted EBITDA to net cash interest expense remains strong at 4.3 times. During the second and third quarter, we purchased 799,000 shares of our common stock for $172 million at an average price per share of $215.33. We currently have $1.45 billion of repurchase authorization remaining under our $1.5 billion stock repurchase plan. In addition, during the second quarter, we declared to pay a cash dividend of $119.4 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 September 18th, 2025 to shareholders of record as of the close of business on August 12th, 2025. This dividend represents an increase of approximately 13% over the dividend paid in the third quarter of 2024 and approximately 35% of the midpoint of our full year AFFO outlook. Operator, we're now ready for questions.

If you would like to ask a question, please pound 2 on your telephone keypad to enter the question queue. You are going to hear a notification when your line has been unmuted, at which time you can then please state your name, your organization, and your question. Once again, pressing pound two on your telephone keypad will indicate that you wish to ask a question. Please stand by just one moment as our queue assembles. Moving to the first question in our queue, John Atkin with RBC. Your line is unmuted.

Please go ahead, sir. Thanks very much. I'm interested, first of all, in kind of the durability of the demand drivers that you indicated in your preparative remarks around FWA intensification and coverage and so forth. Any sense as to how far that kind of takes us through end of 25 and 2026 and the directionality around that? And then secondly, any thoughts on kind of the drivers of churn or maybe rent reduction initiatives on the part of some of your customers that occasionally comes up and how that might kind of tie into your forecasting as well as thoughts on MLA? Thank you.

Sure. Yeah. So on the demand drivers, all the things that we mentioned, we feel pretty good about from an extended standpoint. You know, these things always obviously ebb and flow a little bit, but the fixed wireless piece being one of those, you've obviously seen what our customers have reported and the significant growth that they're seeing in terms of subscribers there. And, of course, as we've mentioned before, what each of the subscribers represents relative to the typical wireless subscriber, which is a significant amount of additional traffic. I think the more of that that we see and their expectations in terms of the number of subscribers they expect to have three and four years from now would suggest that we're going to see significant network capacity taken up over the coming years. So I think as a long-term driver, that's definitely a positive. Some of the other things I mentioned, obviously the new spectrum bands being auctioned off over the coming years, that's an extended period of contribution. Yeah, each of these things and just generally the uptake in the amount of broadband traffic that's traveling through these wireless networks is significant. And I think more of these AI enabled products and other things that kind of come into play is just going to continue to weigh on that. So I feel pretty good about the durability of it. And I think it'll continue to require investment in the networks that we will benefit from for many years. In terms of churn, I think you're asking specifically about the U.S. based on how you said the question, John. But there's no real – obviously, our customers always want to pay less if they can, but there's no specific initiatives underway that would result in lowering rents on any material basis. So I think the effort for us is just around continuing to work with our customers to allow them to achieve their network goals. at a price that's fair and is balanced to them, but also is fair to us in terms of the capacity that we're providing and the help we're providing. And I think we've struck that balance pretty well.

Thank you.

Yep.

Moving to our next question. Richard Cho with JP Morgan. Your line is unmuted. You can please go ahead.

Hi, I just wanted to ask about the activity levels. It seems like there is a lot of collocation activity, but the revenue hasn't quite come through yet. Can you talk a little bit more about the timing there that you're expecting?

Sure, yeah, yeah, we definitely are seeing, as I mentioned in our remarks, we're definitely seeing an increase in activity. in terms of business being signed up. We also mentioned that we've seen the trend of it moving towards more new collocations versus amendments compared to what we've historically seen. That trend has continued for us, and that's great in terms of a number of aspects of it, including the number of sites that we're now engaged with our customers at. But one thing that it does do typically is delay a little bit the timing of when revenue commences because you have more new leases. It typically takes a little bit longer to start to see those leases getting installed and revenue commencing than we used to see with amendments being a bigger share. But that's really just a timing thing. And if you notice, we've left our full year outlook for contributions from new leases and amendments the same. And as we see this If you look at what's been contributed in the first half of the year, it clearly indicates that the second half of the year will have to have greater contributions in order to meet that target that we put out there.

Great. And a quick follow-up on the services. I mean, a real step up, and it's going well. You mentioned a little bit about what's driving it, but can you give us a little bit more color on what is driving the services business?

Yeah, it's really the same thing. I mean, they're kind of related to each other, right? What we're seeing that's driving our leasing activity is also driving services. So on the SIDAC side, you have more effort to find new locations and to get more deployments done, so we're supportive there. On the construction side, which is also up significantly, that's obviously more actual work being done, particularly with some of these builds that are expanding out into the more rural areas. And we at SBA are actually doing more services work now, not just on our own sites, but on other people's sites as well. And so that's been a driver of increased activity, too. And I think the more we're able to partner with our carrier customers broadly across everybody's towers, it creates a better relationship between us and them, and we can be counted on more. I think it helps us in the leasing game as well.

Great. Thank you.

Moving to the next question in our queue. Batia Levi with UBS. Your line is unmuted. You can please go ahead.

Great. Thank you. Maybe just a follow-up on the domestic activity. Just a slight slowdown into the queue. Is that mostly rounding? And looking ahead, you mentioned that Booking's growth is very strong. You had started the year strong. Are we seeing an acceleration in that growth rate? And I think in the beginning of the year, it was mostly one of the carriers that was very active. Are you seeing more broad-based activity now? Thank you.

Yeah. So, first of all, on the second quarter slowdown, it is mostly rounding. I mean, the differences were actually – we round to a million dollars, but the difference is probably a couple hundred thousand dollars, and it's not really indicative of anything in particular. In terms of the pacing – of activity. It definitely has increased this quarter. It was probably slightly ahead of last quarter, but last quarter was also very strong. And so we would expect that that will drive a pickup in the actual revenue recognized, as I mentioned a moment ago, as we head into the second half of this year and into next year.

Got it. Thank you.

Sure. Moving to our next question. Michael Rollins with Citi. Your line is unmuted. You can please go ahead. Michael Rollins with Citi. Sorry, Michael. We're not getting any audio from your line. We'll circle back. Brendan Lynch with Barclays. Your line is unmuted. You can please go ahead, sir.

Great, thank you. Brendan, I wanted to follow up on your comment about AI application growth and that being a driver. To what extent are you seeing this now and any outlook for the relatively near term would be helpful as well?

Yeah, so Brendan, some of these comments are a little bit thematic and they're based on conversations we have with our customers and just general traffic trends because it's hard for us where we sit in the value chain to have tremendous specificity around that. But based on conversation, based on reviews done by our own engineering folks, we are seeing a number of products start to get out there where AI is being embedded into the devices that we believe will be a strong driver of increased activity. And that ultimately, obviously, is positive in terms of the amount of infrastructure needed to support it.

Okay, thanks. That's helpful. And then just on the Canadian asset sale, can you give any of the details about these assets in particular and why you didn't think you were going to be able to scale more meaningfully in the Canadian market and how we should interpret that for any of the other markets where you have a relatively small footprint?

Yeah. So, you know, we've been in Canada a long time. As I mentioned earlier, it was actually the first international market that we went into 16 years ago. And so we've had a lot of time and experience there. The assets themselves were good assets. We had reasonable success in leasing them up over the years. The comment about the difficulty in growing is really about in growing the portfolio size to continue to get to a bigger scale and And honestly, some of that was based on the fact that the carriers own their sites. You may have seen Telus recently just kind of set up sort of a captive tower company with a private party investing in that, about 49% of that. And so, you know, breaking into that particularly not being a Canadian company, was a little bit challenging. And so we built sites. We had some modest growth there. But the ability to really move to a place where we were going to be a significant player in that market, we just found to be challenging. And really, we would have continued there and I think have made reasonable progress. But it was an opportunity for us when we started exploring strategic alternatives to actually realize a valuation on our assets that was certainly much higher than our public company valuation. And so there was a financial benefit. And given what we saw as a limited ability to continue to grow our portfolio, we thought that that was the right thing to do for us financially. I think it worked for us and the buyer because they have a local presence there and a different plan. And I think they'll be able to do well with it. But for us, it was, I think, just a better economic choice. And it positioned us to focus on the markets where we can be On the second part of your question, in terms of what it means for other markets, it doesn't mean anything in the sense that what happens here is not necessarily exactly what happens elsewhere. But all of the markets that we're in, we are looking at through a lens of what is our potential going forward. And if we're subscale on a particular market, it is something that we look at in terms of, okay, well, how can we change that dynamic in a way that is favorable to us? And if we can't see a way to do that, then, yes, we would look at it. And you've seen us exit a couple of markets, but you've also seen us expand in some of the markets where we were a little bit subscale, particularly Central America. And I think the expansion that we've done has made us much, much stronger. So if we can find that path, we frankly would prefer to do that. But if we can't, then we'll continue to look at what our options are in terms of downsizing, too.

Great. Thank you very much.

Moving to our next question, Jim Schneider with Goldman Sachs. Your line is unmuted. If you can please go ahead.

Good afternoon. Thanks for taking my question. I was wondering if you could maybe follow on your comments earlier, Brendan, with respect to fixed wireless. Obviously, it seems like your customers are continuing to drive good traction there, but is the activity level you're seeing for densification better? You know, going beyond the sort of single lead customer that was most aggressive originally, has that broadened to two or three of your customers at this point from what you can tell?

Yes, I would say it has broadened. We're seeing more activity growing. you know, expanding among each of our bigger customers. So I do think that we'll continue. What we've seen is a shift in that where I would say that there's still one customer that's probably heavier than the others at this point, but that gap is closing. And I think based on the trends of applications and the conversations we're having, I would expect that to continue to narrow and we will see all of them very active. And fixed wireless is one driver of that for sure.

That's helpful. Thanks. And then maybe as a follow-up, you know, given the recent announcements from US Cellular with that deal closing as well as announcements from DISH, can you give us any kind of color on, again, just sort of reaffirming the level of exposure those represent for you and any color you have in terms of plan churn or any kind of sense of whether there's any kind of change to the revenue profile you expect to recognize over the next 18 months or so? Thank you.

Yeah, I mean, at this moment, there's no plan to churn specifically, but just in terms of exposures on the U.S. cellular piece, the total revenue that we have with U.S. cellular is about $20 million a year. That's the total. I don't think we would expect to see all of that go away. But, you know, even if even if it did, it would be over a number of years. So I would expect the impact to be rather small. In terms of DISH, our total revenue with DISH is roughly around $55 million a year. That's a whole different situation. Obviously, USL has sold and would have some overlap there with T-Mobile that would lead to some risk there. In the case of DISH, it's a different situation today. We continue to operate on an ongoing basis and serve them where we can. They still, in fact, sign some leases and some amendments, and so we'll just have to see where that goes.

Thank you.

Yep. Moving to the next caller in our queue, Nick Del Dio with Moffett & Nafis. If you can please go ahead, sir.

Oh, hey. Thanks, guys. First question on the Milcom Towers. You know, I'm sure you've had initial conversations with the other carriers in those markets about accessing that infrastructure. Can you share anything about the initial feedback you're getting and the degree to which it aligns with or is supportive of the lease-up assumptions you've made for those assets?

Yeah, it's been actually quite positive. We're very encouraged about the opportunity there. I think it may even be better than we were thinking. And if you think about it, it's pretty logical. I mean, Millicom, for the most part, in each of these markets, is the number one carrier in many of the markets. Um, that would suggest that they naturally have a deeper footprint and in order to close that gap, the opportunity to have some of those sites opened up to the other carriers they see as an as an opportunity to grow and to close the competitive gap there. So, you know, that's to our benefit. So we'll, we'll continue to see how it goes. Obviously, we just closed on.

majority of the sites we've bought so far we just closed on at the end of june so we haven't had a ton of time there but we certainly have been having those conversations and feel pretty good about the uh the potential okay okay that's great to hear um and then maybe one you know on canada you know but a different angle just the use of proceeds you know it looks like you're getting about 325 million u.s dollars you know which obviously a much more substantial chunk than you've gotten from some of the other markets that you've sold Any specific use of proceeds you're thinking about, or should we just think of that as sort of debt reduction?

Yeah, I think it's somewhat fungible, Nick. I mean, we have a variety of things that are going on. We obviously have another Millicom closing, so you could say it's used for that if you'd like. You could say it's used for debt reduction, share buybacks, dividends, whatever you want. We have kind of the pool of capital allocation, and this is just another source of proceeds that allows us to basically keep our leverage a little bit lower and manage those expenditures.

Okay, great. Thanks, Brendan.

Rick Prentice with Raymond James. Your line is unmuted. You can please go ahead.

Good afternoon, guys. Can you hear me okay? Hey, Rick. Hey. Yeah, there's a little feedback. Can you hear me? Yes, go ahead, Rick. Okay, thanks.

Um, yeah, one, uh, just clarification. So on the sprint churn, 50 million expected in 26 and then 20 million thereafter, that's a grand total of 20 million thereafter, right? That's not like 20 million a year. That's, that's the end of the sprint churn is a 20 million that's post 26.

That's right. Yeah. And I would expect most, if not all of that will be in 2027. Uh, really we said thereafter because the exact timing tends to change, but yes, it's a grand total.

And then back to the Canadian sale, I think you said 27 million Canadian lease revenue, and was that 15 million Canadian after-tax cash flow? Was that also Canadian? And is that like an AFFO type of number?

Yes, Rick. I mean, yes. The terminology we used was probably a little funny only because AFFO obviously takes into account interest, and there's no – that we really weren't counting out interest. But basically what that represents is adjusted EBITDA, less taxes. I guess less maintenance capex too, which is small, but basically less taxes because we're an income taxpayer up there. So it's essentially AFFO.

Yes. Right. And so your comment kind of pointing to that would imply like a 30-time multiple on an AFFO type basis up there, if I'm doing the math right.

Yes, that's right. In order to be totally fair, though, we will pay a capital gains tax on the gain on the sale of the assets. So it'll end up being in a mid to upper 20s is what the multiple for practical purposes will be.

That's not to you guys. Makes sense. But again, it just tees up the privates are paying more than publics, it seems. Help us understand as you look at your leverage. think you've said, you know, you want to keep looking for M&A opportunities, and that's why maybe you don't go investment grade yet. But just help us understand, it seems like it's really hard to win external growth opportunities if it really is winning when you have to pay up. And just kind of as you think through longer term, the balance sheet, the debt, investment grade, and what it might mean for ultimately kind of dividend growth rates.

Yeah, I think that that's obviously a fair statement. We've been saying it feels like for many years now that there's this disconnect between public and private market valuations. And as a result, you haven't seen a ton of M&A. You haven't seen what we did in the early part of our history. I mean, forever we were known and by design were the kind of highly levered M&A heavy growth company. And it's been harder to be that now. Uh, largely because obviously cost of debt has gone up, but we could absorb that if there was a reasonable adjustment in the valuations of assets, we just haven't seen that. And so it's, it's caused us to have to be on the sidelines more. So, yeah, I mean, it affects obviously the way we think about the future planning for our balance sheet and you've seen our leverage come down over the last year or two. Um, and if we can't see a place to continue to invest meaningful capital, because others are just simply willing to pay more, then that results in us doing other things, whether it's buying back our own stock or even moving our debt down and moving closer towards that investment grade rating.

What do you think you need to get at to get investment grade, given your mix-up portfolio in the U.S. and Latam and Africa?

Yeah, well, I mean, you heard Mark mentioned earlier that we were just upgraded by S&P. At least our corporate rating was upgraded to an investment grade rating just last week. So I don't believe we need to do a whole lot. It's really a matter of policy and probably the mix of our debt. The secured versus unsecured debt is really probably the main thing. In terms of leverage, though, I don't think we need to do much.

Right. Okay. Appreciate it. Thanks.

Sure.

Before we move to the next question, just a reminder for attendees, if you would like to enter the question queue, you can please press pound two on your telephone keypad to enter the question queue. Moving to our next caller, Michael Rollins with Citi. Your line is unmuted. You can please go ahead, sir.

Thanks. Can you hear me now? Yes, we can hear you now. Great. Thanks for the question. I'm trying to think about maybe longer term. Can you help us with what is the right or fair level that SBA should be able to grow AFFO for share on an annual basis? And when you think about working through some of the things that you've been talking about, whether it's international merger churn, domestic merger churns, normalizing domestic leasing, you know, absorbing a higher cost of debt? What inning are we in to get to that future annual run rate opportunity? Thanks.

Sure. Yeah, I think the biggest thing, Mike, I mean, we have some of these things, obviously, with the sprint churn and even the international churn to a certain degree, although it's not that much. The biggest issue is the interest rates. We have, You know that we have $12.5 billion of debt today. Much of that has a very low interest rate. We mentioned our average interest rate, I think, is 3.7%, and that includes some recent financing at much higher rates. So there's a lot of low-cost debt in there, which is great, but it will come due over a number of years, and that's a pretty significant headwind. If you normalize for that item, which eventually, obviously, we will get over, then you're looking at a mid to high single digits AFFO per share growth rate that I would be very comfortable we could maintain. But, you know, you ask what inning, it's hard to say what inning exactly, but we're several years really from getting to that, I believe, depending on what happens with interest rates. We may find that there's, you know, a more rapid reduction in interest rates and that would actually help us. But even without that, you know, our next three maturities, all have a one handle on their current interest rate coupon. So you can imagine that it's a significant difference in terms of that. So, you know, as we brought our leverage down, it's helped with that a little bit. But, you know, that's really the biggest issue. But as we move beyond that, I think, you know, the steadiness in terms of growing the business organically will continue and we're able to operate more and more efficiently all the time. So I feel good. We'll continue to grow it otherwise.

Thank you.

Sure. Moving to our next question. Eric with Wells Fargo. Your line is unmuted. You can please go ahead, sir.

Great. Thanks for taking the question. Brendan, I wonder if you could talk just about the investment-grade conversation a little bit, like what type of, you know, spread differential you think you could get on your debt. versus potentially giving up flexibility to lever up if you see some more compelling investment opportunities down the road or opportunities to buy back your stock? How are you thinking about balancing that over the next couple of years?

Yeah, well, right now, we have not gone investment grade, and part of it has been to retain that flexibility. But We also have seen our leverage come down meaningfully, so that has allowed us to have a lot of capacity. I mean, you saw, obviously, we did a billion-dollar deal here with Millicom, and it hardly has an impact. So we have a lot of capacity. It would really only be for something really, really sizable, and it's hard to change your whole policy hoping for or waiting for something of that magnitude to come along. You know, I think as we think about it, we'll continue to look at our options as our upcoming maturities come along. In terms of the impact on cost of debt, I think it's not huge, and it's not huge mainly because we've been an issuer of a substantial amount of our debt in the ABS market, and that has been investment-grade rated paper in that market. And so we've been able to achieve what we're very close to investment grade type of rate through the use of that market. Where we would be able to see a benefit, I think, is on the unsecured paper. We would probably be able to see that at a better rate than what we've historically been able to get in the high yield market. And even perhaps our term loan, we could improve slightly. But, you know, we do that math around all those things. And we think about what might it look like if we made a shift there and what are the things we're giving up. I actually don't think we would be giving up too much. And so we continue to explore this a little bit further, frankly, because it's just naturally moving in that direction.

I appreciate that. And just maybe one follow up on the domestic leasing outlook. I know you kept it stable for this year. You should be at, you know, 10 or 11 million or so in the back half. I just wanted to think through some of the moving pieces. I know it's a little premature to talk about 2026, but based on the bookings of the last six quarters, Do you see an opportunity to accelerate that further, that run rate going into 26? Or are there any other mitigating factors that we should keep in mind?

Thanks. Yeah, I think it's a little premature for me to speak to that. You're right that the run rate at the end of the year will certainly be higher, probably in that $10, $11 million range. So we'll be at a run rate leaving the year that's certainly higher than this year's contribution was. As to whether that can go higher, it certainly can, but I think it's too early. You know, usually we have to see something that's in that six-month window prior to the period that we're reporting on. We feel very good about what the second half of the year looks like. It's a little harder to say with absolute certainty about next year, but the trends are good. The backlogs continue to grow. The carriers are active. And so, you know, right now I feel good about things, but I don't know whether that means it stays at the same level or it grows, and we'll let you know that when we give 2026 guidance.

I appreciate it. Thank you.

Sure.

Moving to our next caller, David Guarino with Green Street. Your line is unmuted. Please go ahead.

Thank you, Brendan. On your question about new spectrum potentially being an option, I was wondering if you could share some thoughts on how high the frequency can go before it won't propagate well from a macro tower site. And also, how quickly do you think the FCC could get auction the spectrum into the hands of the carriers if it was to be auctioned?

Yeah, I think, well, certainly the new spectrum that's talked about being auctioned as part of the bill that was recently passed in Congress, there will be different periods and different bands that will be auctioned along the way. The stuff that's longer term that hasn't been explicitly identified, but there are bands that have been named to be considered are the higher band stuff. I think it will propagate fine, but it will definitely require different and new radios and antennas in order to do that. So that's favorable to us. And I still believe that macro sites will be the primary way to get that spectrum deployed and used. It will still be the most efficient way. So I think, you know, what's being talked about is still very much a macro-oriented solution. And I'm sorry, David, what was the second part of your question?

just on the timing of when you think it could get in the hands of the carriers?

Oh, yeah. So I think the stuff that's going to be auctioned, there's 100 megahertz that has to be auctioned by next summer, I believe, is the deadline, mid-2026. And I would expect that that piece probably would be able to be cleared in the carrier's hands within two years or so following that. The other stuff I think is going to be much later, even if it's auctioned in 28 or 29. You're looking at several years to get it cleared. You have DOD spectrum in there. So it's probably into the next decade before we start to see that.

Great. That's helpful. And then one quick one on the guidance list. Did you guys – sorry if I missed this, but did you say how much of the earnings guidance list was a result of the NOLICOM hours closing earlier than anticipated?

I don't know that we gave it. I think we said $16 million of revenue was due to the earlier closing of Millicom. So of the revenue increase, leasing revenue increase, $16 million of that was Millicom.

Okay, thanks. Yep. Moving to our next question, Benjamin Swinburne with Morgan Stanley. Your line is unmuted. You can please go ahead, sir.

Thank you. Good afternoon. Brendan, I'm not sure if you heard Equistar's call on Friday, not to put you on the spot, but they announced a big LEO project. Not sure how they're going to fund it, but nonetheless, their pitch on the call was really about offering this satellite constellation network to carriers, making the argument that it would create more efficient network structures, particularly in rural areas where they're inefficient today, given how much they have to spend on terrestrial coverage, et cetera. I know we've talked about satellite as a player in the market and whether that is or isn't a competitor to the tower business, but this was a little bit of a new angle on it. I was curious if you had any thoughts or any comments on how you see the growing satellite business potentially competing or not or complementing towers.

Yeah, I think just generally our belief, we spent a lot of time looking at this. As you can imagine, it's been a question that's come up for a while. And just for our own sake, we want to kind of have an informed view on it. And we're pretty comfortable that it is a complementary solution. What it really comes down to is locations that are challenging to cover economically to cover from a traditional macro standpoint. Everything could be covered that way, but the cost In some of these more rural areas where you have less pops or it's harder to get fiber-based backhaul, that kind of thing, satellites become a pretty good solution to do that. But it's modest coverage. You can't do some of the things that you could do in an urban or suburban community with your device. But you can get basic connectivity. So I don't really look at it as something that is truly competitive. I look at it as something that is complementary. And in the case of EchoStar, I don't know. anything more about it than what they said, and I'm sure you're more informed than I am, Ben, on it. But what I gathered from that is that if they are able to come up with that solution, that that would certainly be something I would consider very favorable for the tower industry in that it's a complementary solution to go with their existing terrestrial solution and that they would be able to be somebody who could provide solutions sort of a distinct competitive offering compared perhaps to the other carriers. And so, you know, we would be supportive of that certainly in whatever way we could be. But, you know, in terms of the viability of it and all that, I just don't know. I guess we'll have to see.

Yeah. Yeah, no, it makes sense. And then just a quick one on the guidance. I think there was an increase in the domestic straight line revenue for the year versus your prior guidance. Correct me if I'm wrong. I don't know if you talked about that in prepared remarks, but is that just a lease amendment or something you could explain?

Yes, there was an increase there, and what that basically is is under the AT&T MLA that we signed a couple of years ago, one of the things that exists in that is to the extent that they do any upgrades at any sites, there is an extension to the term.

of that existing lease and so when the term is extended it ends up having a favorable uh straight line impact so that's really what you're seeing there I see got it thank you very much sure just as a final reminder for attendees if you would like to ask a question you can please press pound two on your telephone keypad to enter the question queue We do have another hand raised, Michael Funk from Bank of America. If you can please go ahead.

Yeah, thanks for taking the questions. On the call, you mentioned bonus depreciation increase in carrier cash flow. I think most carriers mentioned earmarking that primarily for fiber builds, among other projects. Just curious for conversations with the carriers have discussed incremental tower or wireless network builds as well.

Yeah, I mean, we don't have a discussion with the carriers that's explicitly related to what they're doing with bonus depreciation benefits. But what we do talk to them about is their general network plans over the longer term and the needs that they have, which we believe will support continued network investment in the wireless side. You know, I'm sure some of the benefits that they'll get from a tax savings will go into fiber as well. And, you know, As I said in response to a question about our own capital allocation earlier, to some degree, it's fungible. What's good about it is that there's excess cash available to them to invest broadly in their network initiatives, whether that be fiber-based or wireless. I think wireless will benefit from that, too.

It is curious, an AI app comment you made earlier as well, but your engineer is looking at the AI apps and the usage. Do you have any quantification of the increase in traffic or usage of AI apps?

I do not have anything specific that I can give you now, but perhaps over time that's something we'll be able to share more with. I think as it develops, there will be more data available on it, but it's a little premature for that. Great. Thank you so much.

Yep.

There are no further questions in the queue. Great. Thank you, Silas. Thank you, everybody, for joining the call, and we look forward to following up next quarter.

Thank you to all of our speakers, and thank you, all of the audience, for joining us today. With that, our call is concluded, and you may now disconnect.