American Tower Corporation (REIT)

Ladies and gentlemen, thank you for standing by. Welcome to the American Tower fourth quarter and full year 2018 earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Now, if you've given the operator your name already, you may press star, then 1 for questions. We ask that you please limit yourselves to one question per queue. If you wish to ask a second question, please re-queue. All other participants, if you have not given the operator your name, please press star zero anytime. Give the operator your information for the Q&A session. As a reminder, this call is being recorded. Your hosting speaker today, Igor Kislovsky. Please go ahead, sir.

Thanks, Kevin. Good morning, and thank you for joining American Tower's fourth quarter and full year 2018 earnings conference call. We've posted a presentation, which we'll refer to throughout our prepared remarks, under the Investor Relations tab of our website, www.americantower.com. Our agenda for this morning's call will be as follows. First, I will provide a few highlights from our financial results for the quarter and full year 2018. Next, Jim Taklett, our Chairman, President, and CEO, will provide a brief update on our Stand and Deliver strategy and our key priorities for 2019. And finally, Tom Bartlett, our Executive Vice President and CFO, will provide a more detailed review of our 2018 results and 2019 outlook. After these comments, we'll open up the call for your questions. Before I begin, I'll remind you that this call will contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include our expectations regarding future growth, including our 2019 outlook, capital allocation, and future operating performance. the pacing and magnitude of the Indian carrier consolidation process and its impacts on American Tower, and any other statements regarding matters that are not historical fact. You should be aware that certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements. Such factors include the risk factors set forth in this morning's earnings press release, those set forth in our Form 10-K, for the year ended December 31st, 2017, as updated in our Form 10-Q for the quarter ended June 30th, 2018, and in other filings we make with the SEC. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained in this call to reflect subsequent events or circumstances. Now, please turn to slide four of our presentation, which highlights our financial results for the fourth quarter and full year. And both periods were positively impacted by our settlement with Tata, partially offset by the negative impacts of Indian carrier consolidation-driven churn. During the quarter, our property revenue grew 25.3% to $2.1 billion. Our adjusted EBITDA grew more than 38% to $1.4 billion. And our consolidated AFFO and consolidated AFFO per share increased by about 51% and to $1.07 billion and $2.40 respectively. Finally, net income attributable to American Tower Corporation common stockholders increased by 26.4% to $278 million or $0.62 per diluted common share. From a full year perspective, our property revenue grew 11.4% to $7.3 billion Our adjusted EBITDA grew more than 14% to $4.7 billion, and our consolidated AFFO grew by 22% to over $3.5 billion, while our consolidated AFFO per share rose by nearly 19% to $7.99. Finally, net income attributable to the American Tower Corporation common stockholders increased by 6.6% to more than $1.2 billion for the year, or $2.77 per diluted common share. Before turning the call over to Jim, I also want to note that many of our comments around the fourth quarter and full year 2018 results in our 2019 outlook will be focused on growth rates normalized for the impacts of both the Tata settlement and the carrier consolidation driven churn in India. We view these normalized results as important indicators of the underlying trends of the business. We've included reconciliations of these normalized metrics to our GAAP results in the back of our earnings presentation, in our press release, and in our supplemental package. And with that, I'll turn the call over to Jim.

Thanks, Igor, and good morning to everybody on the call today. My comments will center on two topics, our early progress on the Stand and Deliver 10-Year Strategic Plan that I announced last year, and our specific priorities there for 2019. But first, I'll quickly touch on our 2018 results and a few highlights. 2018 was another year of strong organic growth for American Tower, particularly in the US, as well as disciplined portfolio expansion and continuously improving operational execution. All these factors resulted in double-digit growth and consolidated AFFO for share for the 11th consecutive year. Notably, throughout 2018, our business performed at a high level despite increased macroeconomic, political, and capital markets volatility. I believe this resiliency is a reflection of several things. First, the fundamental driver of our business globally is the continued advancement of mobile technology from 2G through 3G and then 4G, ultimately to 5G, and the related expansion in the number of highly capable smartphones and other devices along with the corresponding growth in mobile data usage on those devices. And second, we've made a concerted effort over the last 15-plus years to enhance the resiliency embedded within the business model through our innovative contract structures, prudent balance sheet management, diversification strategy, and many other areas. Over the next decade, we expect to use our Stand and Deliver strategy to continue to augment that resiliency while driving attractive growth and returns for our shareholders. The balance of my remarks today will center on a short overview of our progress in year one of our strategy and our priorities for 2019. The first focus area of Stand and Deliver is to drive operational efficiency throughout the business and even throughout the industry. This includes improving the experience for both our tenants through site level enhancements and process improvements, while expanding our margins. In 2018, we continued to drive cycle times down to enable tenants to get onto our sites as fast as possible, which also starts the billing cycle as fast as possible. We also invested more than $30 million in green energy solutions, such as advanced batteries, solar installations, and other initiatives primarily in our African markets as we sought to optimize the fuel management component of our business there. Not only do these investments have the potential to drive significant efficiencies for us and the broader industry as well, they're also helping us reduce our carbon footprint. Meanwhile, in our foundational US business, the benefits of our strong revenue growth paired with our cost controls and operating efficiency led to cash gross margins that were approximately 80 basis points higher than 2017. The second platform for Stand and Deliver is to grow our portfolio and capabilities across our served markets. In 2018, we added more than 24,000 sites through acquisitions and new builds and entered Kenya as our 17th market. We're well on our way to integrating these new assets into our comprehensive global portfolio and systems. And as always, these investments were made utilizing our proven return-based capital allocation methodology, which has enabled us to build an unmatched and highly diversified global portfolio over the last two decades. A focus on innovation is the third component of our Stand and Deliver strategy. And while we are still in the early stages of our innovation initiative, 2018 yielded some tangible progress towards our long-term goals. Our fiber-related assets in Latin America and South Africa, for example, are today generating cash flow, driving co-location on our newly fiber-connected towers there, and helping position us to benefit from small-cell-driven densification in urban areas like Sao Paulo and Mexico City. Earlier stage projects are also underway and include everything from edge data centers to a potentially significant expansion of our in-building coverage capabilities through CBRS spectrum to exploring a possible role in future autonomous driving and drone control networks. In all cases, we're looking for business models that are either based upon or complementary to our existing macro towers. Our innovation initiatives are pursued within the framework of the franchise real estate characteristics that made our existing operations so durable and profitable over the long term. These are commercially shareable assets, long-term contracts, and high operating leverage. And the final element of standards that deliver is our commitment to enhancing American Tower's industry leadership as the only true global mobile infrastructure provider to best support our existing and new customers as we enter a 5G future. For example, we're working with leading universities in the field of distributed power generation and power management to optimize site uptime, to minimize ongoing energy costs, and potentially dramatically reduce the mobile industry's carbon footprint in emerging markets by replacing or minimizing the runtime of diesel generators. Furthermore, as I mentioned earlier, we're actively implementing these kinds of solutions already in our major African markets and in India. resulting in a material reduction in our generator runtimes already in 2018. From a broader perspective, we worked closely in 2018 with several non-government organizations and government bodies to bring the transformational capabilities of mobile broadband to more and more people. In addition to expanding our digital village concept in India, we've now brought that solution to Nigeria and have begun deployments in Latin America as well. In 2019, we expect to continue to make progress on the Stand and Deliver strategy in all the areas I just mentioned. And within that general objective, there are several particular items of note. First, as you may have seen in the 2019 outlook we issued this morning, we expect another very strong year of new leasing business in the U.S. with organic tenant buildings growth of approximately 7%. To turbocharge that robust demand trend that drives our top line, we're also continuing our efforts on the operational efficiency front in the U.S. market. This includes initiatives to drive down maintenance expenses and a continued focus on using the latest technology to capture and organize all relevant site-level lease data and the structural engineering characteristics of our towers. We're then leveraging that data mining to inform our commercial, operational, and engineering decision making. In our international markets, we have several key points of emphasis. In India, we're focused on managing through the latter stages of the carrier consolidation process and positioning our business there for attractive long-term growth, which we expect to occur. In Africa, we expect to make meaningful investments in fuel management in 2019 while continuing to selectively look for new assets and drive co-location and build-to-suit opportunities with key regional customers. And in Latin America, we're focused on capitalizing on the current 4G build-outs occurring across the region. From a corporate perspective, we expect to further strengthen our balance sheet in 2019 as part of our continuing commitment to our investment-grade credit rating, maintaining strong liquidity, opportunistically terming out floating late borrowings into fixed-rate instruments, and selective debt retirement and refinancings along the way are all potential components of this strategy in 2019. Simultaneously, we expect to grow our dividend by around 20%, subject to our Board discretion, and continue to view that dividend as a critical component of our return profile. Finally, we anticipate deploying additional discretionary capital towards a combination of site development and construction, acquisitions, and share of purchases consistent with our long-term return criteria. In closing, everyone here at American Tower is proud of our long track record of delivering results and even more energized about taking advantage of our unique position in the industry to lead the way into a 5G future. With that, I'll turn it over to Tom to take you through our 2018 results and detailed outlook for 2019.