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.