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spk07: Ladies and gentlemen, thank you for standing by. Welcome to the American Tower Second Quarter 2021 Earnings Conference Call. As a reminder, today's conference call is being recorded. Following the prepared remarks, we will open the call for questions. If you would like to ask a question, please press 1, then 0. You will hear acknowledgement that your line has been placed in queue. I would now like to turn the call over to your host, Igor Kislovsky, Vice President of Investor Relations. Please go ahead.
spk11: Good morning, and thank you for joining American Tower's second quarter 2021 earnings conference call. We've posted a presentation, which we will refer to throughout our prepared remarks under the Investor Relations tab of our website, www.americantower.com. On this morning's call, Tom Bartlett, our President and CEO, will provide a strategic update on our international business with a focus on our newly expanded European portfolio. And then, Rob Smith, our Executive Vice President, CFO, and Treasurer, will discuss our Q2 2021 results and revised full-year outlook. After these comments, we will open up the call for your questions. Before we begin, I'll remind you that our comments 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 2021 outlook, capital allocation, and future operating performance, our expectations regarding the impacts of COVID-19, our expectations regarding the closing of the remaining TELSIUS sites, our expectations regarding the closing of our signed agreements with CDPQ and Allianz, 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, 2020, 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. And with that, I'll turn the call over to Tom.
spk08: Mr. Thanks, Igor. Good morning, everyone. I hope that you are all healthy and well. You know, as is typical on our second quarter calls, my remarks today will center on our international business, now spans more than 171,000 communication sites and accounted for 37% of our property segment gross margin in the second quarter. Given our recent Telseus transaction, I'll focus much of my commentary on our European portfolio, but I do want to first cover some of the key tenets that drive our global strategy and touch on a few important metrics for our international business as a whole. Since entering Brazil and Mexico more than two decades ago to provide geographic diversification to our foundational U.S. assets, we've oriented our international growth around partnering with large, multinational wireless carriers in select markets with strong property rights, solid rules of law, and vibrant wireless industries. Since day one, our international expansion mandate has been clear, acquire, construct, and market franchise real estate assets to drive strong organic growth, long-term margin expansion, and compelling total returns, and do so with an emphasis on building leading market positions in the largest democracies around the world in various stages of wireless technology development, all while driving enhanced connectivity for billions of people and being a good corporate citizen. Bottom line, our goal was to replicate the model we built in the United States, to increase the slope of the growth curve and extend it. As a result of our adherence to these core principles and the tremendous contributions from our global leadership teams and employees, we have been able to drive solid results across our international business over the last decade. Markets outside the United States have made meaningful contributions to our long track record of generating strong organic growth while delivering double-digit annual consolidated AFFO per share growth and attractive returns on invested capital. In fact, as of the end of the second quarter, international sites that we've owned and operated since before 2010 were generating U.S. dollar NOI yields of 30%, with our oldest vintage of sites in Latin America driving NOI yields closer to 40%. And international sites we've built and acquired since 2010, excluding the Telseus assets that we just closed, are generating an average U.S. dollar NOI yield of 10%, with what we believe to be substantial future upside potential. Further, on sites we've constructed ourselves internationally across all vintages, the NOI yield as of the end of the second quarter was 25%, demonstrating the tremendous return potential of our new build program. Finally, it's important to note that just as we've done in the past, we expect to focus on constructing sites for high quality, primarily investment grade tenants as we drive toward our goal of 40 to 50,000 new builds worldwide over the next five years. We're focused not only on generating strong growth and returns internationally, but also in doing so in a sustainable way. This is reflected in our accelerating power-related investments in lithium-ion battery storage, solar, and other clean energy solutions as we seek to reduce our global carbon footprint and lead the overall telecom industry to a greener, more sustainable future. Moreover, we believe that shared use of renewable energy combined with storage has the potential to reduce operating costs over time, which can benefit the entire telecom ecosystem as demand for mobile data usage continues to rise. In addition, we're working to make a positive difference in our markets through programs like our Digital Communities Initiative, which seeks to expand access to education and technology to underserved populations by leveraging power and connectivity at our tower sites. To date, this program has enabled well over 100,000 students across six markets to gain critical access to the Internet while developing digital literacy skills, and has recently garnered recognition from the UN World Summit on Information Society. Looking forward, by working with partners, the World Economic Forum, and other stakeholders, we expect to meaningfully expand the reach of our digital communities efforts as part of our overall commitment to making a positive difference in our served markets, particularly given the critical need for pervasive mobile broadband connectivity. This criticality for broadband connectivity was amplified by the COVID-19 pandemic and fits squarely within our belief that the network technology evolution we've seen in the United States will be replicated internationally, and that as owners and operators of mission-critical communications real estate, our sights will be at the forefront. As mobile data usage continues to grow rapidly and as 2G and 3G networks outside of the United States are upgraded to 4G and 5G, We expect network densification and augmentation to take center stage, resulting in long-term, sustainable, predictable growth for us. Importantly, the international tower model, just like the U.S. business, is predicated on optimizing operating leverage, signing value-additive, strategic long-term contracts, and providing high levels of service to our customers, while carefully and selectively deploying capital to high-quality, accretive growth investments. With mobile network operators across our international markets spending upwards of $35 billion in wireless CapEx annually, and the need for communications infrastructure only expanding, we believe we position ourselves for long-term success. One critical element of our international strategy is a balanced approach to market selection. We've always sought to not only diversify the business from the perspective of the United States versus the international, but also to drive diversification within our international operations themselves. As a result, we operate in a mix of developed and developing markets, and as I mentioned earlier, have exposure to multiple concurrent technology cycles throughout our operations. We've been quite purposeful in ensuring that we are not too overweight in any one market or region, and that is reflected in our portfolio today. Our recent TELSIUS transaction is a clear reflection of this long-held strategy Not only were we able to secure what we believe to be premier assets centered in two highly attractive European countries, but the deal also enabled us to further balance our emerging market presence with communication sites in more mature markets. In fact, on a total company run rate basis, around 60% of our property revenue is now derived from developed technology advanced markets. We expect the incremental diversification we have gained through the TelSIS deal to yield benefits over the long term on many fronts, including with deeper access to the attractive European capital market, both public and private, the addition of incremental Euro-denominated revenues, and of course, a much stronger competitive position on the continent itself. So with that, I'd like to now take a deeper dive into why we're so excited about our European business, and particularly our newly scaled presence in Germany and Spain. We've always said that we view the concept of Europe being a singular tower market as a misnomer, and that remains true today. Europe is a collection of vastly different markets with highly variable characteristics on the regulatory wireless market structure and historical network development sides, among others. And we've seen this reflected in many portfolios we've evaluated over the years that we ultimately did not acquire. To that point, our Telseus transaction is less an indication of a sea change across Europe as a whole and much more a reflection of the assets themselves being superior in our view. The wireless market structure and dynamics, regulatory regimes, and carrier CapEx trends in Germany and Spain are favorable, and Telefonica is a high-quality anchor tenant. We also perform significant due diligence on the sites and accompanying contracts, both on the customer side and on the landlord side, and viewed the outcome of that diligence as a positive differentiator as compared to some of the other portfolios we've evaluated. As a result, we're confident that we can drive attractive economics across the portfolio, including high margin flow through from collocation and amendment growth, complemented by a new bill program that we expect will further accelerate over the next few years. This confidence is underpinned by strong underlying wireless market trends in both countries. Mobile data usage from 2019 through 24, for example, is projected to grow at a CAGR of more than 25% in Germany and Spain, similar to the United States. Meanwhile, ARPUs have been relatively steady over an extended period of time. The mobile network operators are solidly profitable, and 5G device penetration, like in the United States, is still in its infancy. Wireless market structure is also favorable, with significant carrier consolidation having already occurred, leaving three major incumbent carriers in Germany and four in Spain. Consequently, we believe the downside risk related to further consolidation in these markets is modest for us. Critically, carriers in both Germany and Spain possess significant spectrum assets across multiple bands. For instance, the three incumbents in Germany, along with one in one, all have at least 50 megahertz in the 3.5 to 3.7 gigahertz range, which is now starting to be deployed for 5G rollouts. Meanwhile, in Spain, all four major carriers have at least 80 megahertz in this same globally harmonized mid-band range, along with significant spectrum assets from 800 megahertz to 2.1 gigahertz and 700 megahertz spectrum coming to auction shortly. Further, between the two markets, mobile wireless carriers are spending more than $6 billion in wireless capex annually, with a new entrant in Germany and accelerating 5G deployments potentially leading to enhanced CapEx deployment in the future. Finally, over the last several years, unlike in many other European markets, communication site counts have been increasing, and we believe that substantial further densification efforts will be necessary to augment existing 4G deployments and upcoming 5G rollouts. Just like in the United States, as higher band spectrum is deployed for 5G, Networks will need to become denser to provide a true 5G experience. With our expanded footprint focused in the urban areas where these deployments are likely to be concentrated, we are well positioned to drive strong growth over a number of years. In fact, as we laid out when we announced the transaction, we are confident in being able to deliver organic tenant buildings growth at least in the mid-single digits on the European Telsea sites over the next several years and likely beyond. This growth rate trajectory would be roughly two times what our legacy European business is generating today. On the surface, that may seem like a disconnect, but peeling back the onion a bit reveals that the math is quite straightforward. In large part, the difference is driven by churn. On our legacy sites, we are working through the impacts of some carrier consolidation, and as a result, our churn rates over the past few years have been in the 2.5% to 3% range. On the Telsea sites, on the other hand, we expect minimal cancellations for the foreseeable future, given most of the existing tenancies represented by Telefonica, with an average non-cancellable lease term of between seven and eight years. Simply put, even without assuming any inflection in demand from 5G or new entrants, that churn differential alone should put us solidly in the mid single digits for organic tenant buildings growth on the Telsea sites. And to the extent that there is an uptick in activity from 5G, and the other dynamics I referenced earlier, we believe that we have the potential to outperform that range over time. One of the key elements that we expect to backstop this strong growth is the fundamental structure of both our tenant leases of our rooftop and ground leases. This has been a much debated topic across the region, and we've seen a variety of different contract terms and various portfolios that we've evaluated over the years. In many cases, those terms, in our view, were such that future growth and profitability would have been significantly constrained. This is not the case on the Telusias assets, which was a critical element of why they were so attractive to us. There are revenue shares in place on certain sites, and there are some capacity constraints with respect to a portion of the rooftop assets. But overall, we expect to drive conversion rates on organic growth that will be nearly comparable to what we've seen in the United States, which is extremely important for us. One additional element of our European business that I want to address is our plans for future expansion. As is, we believe that we now have the scale we need to be successful in both Germany and Spain. With more than 26,000 sites between the two markets, performer for the additional German rooftops we expect to close over the next week or so, we are solidly established as a significant player in European communications real estate. Further, we expect to leverage our new build program to drive additional scale over time in the region, including 2,400 or so contracted BTS sites in Germany that we anticipate building over the next three to five years. As 4G and 5G-driven densification accelerates, the need for new sites in select markets should continue to grow. On the M&A front, we expect to continue to use our longstanding proven capital deployment methodology to evaluate potential transactions in the future. We have been patient, deliberate, and selective in Europe to this point, and that will continue going forward. Each portfolio will be examined on its own merits with long-term growth potential, AFFO per share accretion, and long-term return on invested capital continuing to guide our M&A strategy. With CDPQ and Allianz joining PGGM as our strategic partners in the region, we believe that we are in a better position than ever to prudently expand the business through M&A, should the right opportunities present themselves. And if not, we will do what we have always done, deploy capital elsewhere on a global basis to drive the best possible risk-adjusted return across the business. We also believe that our broader European footprint can further enhance the competitive advantage that we derive from our worldwide shared infrastructure platform. Digital transformation on a global scale is being driven by cloud computing and ubiquitous connectivity, and we believe that our existing and future distributed real estate can play a pivotal role in providing mission-critical applications with access to the cloud on-ramps required to support them. One example of this is on the edge compute side where a significantly expanded presence in Europe rounds out our position as a global provider of edge compute solutions to support the transition to cloud-native telecom functions. Similar to the United States, we are still years away from deploying meaningful capital and generating significant revenue from edge compute in Germany, Spain, and France, but the same long-term trend is pointing to a sizable market opportunity in the U.S. also exists in these markets. In addition, we are continuing to explore smart city connectivity, private and shared indoor networks, and other innovative next-generation solutions based on Wi-Fi, ORAN, and 5G. In closing, we continue to believe that our comprehensive existing global portfolio and ability to be flexible, strategic, and selective with respect to future international growth investments positions us well for a prolonged period of solid sustainable growth. With our newly expanded presence on the continent, Europe is going to be a significantly more important component of this path forward. We're also excited about adding high-quality strategic partners in the region to potentially further enhance our growth profile. Meanwhile, the rest of our international business, spread across attractive markets in various stages of wireless technology deployment, continues to provide meaningful opportunities for both organic and inorganic growth. Taken together with our foundational U.S. asset base, we believe this diverse international portfolio will not only help us drive compelling returns over the long term, but will also enable us to bring critical mobile broadband connectivity to billions of people, advancing our vision of making wireless communications possible everywhere. With that, let me hand it over to Rod to go through the details of our results and the updated outlook. Rod?
spk14: Thanks, Tom, and thank you, everyone, for joining today's call. I hope you and your families are well. As you saw in our press release, we had a strong second quarter, driven by solid global demand for our communication sites as carriers continued to deploy meaningful capital to augment and extend their networks. We expect carriers across our global portfolio to spend upwards of $70 billion in CapEx for the full year, which is expected to support attractive growth for our global business. Before getting into the details of our second quarter results and Ray's full year outlook, I want to touch on a few key achievements for the quarter. First, we closed on approximately 27,000 sites across Europe and Latin America as part of our Celsius acquisition and are on track to add the remaining 4,000 or so German rooftop sites in early August. Overall, including the Telseus deal, other small-scale M&A, and our new build program, we expanded our global site count by nearly 15% in the quarter. Second, we financed the Telseus transaction in what we believe to be an optimal way, including agreements to add CDPQ and Allianz as strategic minority partners in Europe. We also raised approximately $2.4 billion in the Euro debt markets at highly attractive rates and issued more than $2 billion in common equity. We are well positioned to continue to deploy growth capital while at the same time effectively managing our leverage and maintaining our strong investment grade balance sheet. Finally, as expected, demand for both existing and new assets across our global footprint accelerated in the quarter with sequentially higher organic growth and continued strong new build activity. In addition, we booked a record quarter in our U.S. services segment, reflecting an attractive demand environment that, combined with our existing comprehensive MLAs, is expected to drive higher levels of gross new business in our property segment in the coming quarters. With that, please turn to slide six and I'll review our Q2 property revenue in organic tenant buildings growth. As you can see, our consolidated property revenue of $2.2 billion grew by approximately 18% year-over-year. or nearly 16% on an FX neutral basis. This included US property revenue growth of 13% and international property revenue growth of 24% or 19% on a constant currency basis. These growth rates reflect the advantages of our global diversification and our ability to benefit from multiple concurrent deployments of network technology around the globe. Growth was also favorably impacted by one month of contributions from the Telsea sites, US M&A transactions that closed late in 2020, higher levels of pass-through and straight-line revenue, and some non-recurring settlements and revenue reserve reversals. Moving to the right side of the slide, organic growth was again a significant contributor to our overall revenue growth. On a consolidated basis, organic tenant billings growth was 4.8%, reflecting a sequential acceleration of around 70 basis points. This included a step up in our U.S. and Canada growth from 3.6% last quarter to 4.4% in Q2, driven primarily by the flow-through of activity under our comprehensive MLAs. We saw a nearly 20% sequential acceleration in the contribution of co-locations and amendment activity to organic tenant buildings growth. Escalators were over 3%, and churn was 1.9%. 5G activity in the marketplace continues to advance, and all of the major U.S. carriers were active in their deployments during the quarter. Outside of the U.S. and Canada, we drove organic tenant billings growth of 5.3%, up from 5% last quarter. Latin America led the way with organic tenant billings growth of 8.4%, driven by solid new business commencements in higher escalators, primarily in Brazil. Organic tenant billings growth across our African markets was 8.2%, including 11% growth in Nigeria, where we continue to benefit from an MLA signed last year with a major customer. We also had a solid quarter in Europe, with organic tenant billings growth rising more than 100 basis points sequentially to 4.4%. Notably, our legacy German business drove gross organic growth of more than 8%. driven by accelerating 5G deployments and continuing investments in 4G. Meanwhile, in India, we saw an organic tenant billings decline of 1.7%, essentially flat to the first quarter. This included fairly healthy gross new business activity, but also continued elevated levels of churn. Turning to slide 7, our Q2 adjusted EBITDA grew nearly 22%. or around 20% on an FX neutral basis to $1.5 billion. Adjusted EBITDA margin was 64.2%, up 90 basis points over the prior year, driven by continued organic growth, prudent cost controls throughout the business, and benefits from higher levels of straight line revenues. Cash, SG&A, as a percent of total property revenue, was around 7.7%. Moving to the right side of the slide, Consolidated AFFO growth was nearly 19%, with per share growth of about 17%. Continued solid organic trends, contributions from our newly acquired and constructed assets, and cost controls throughout the business, along with cost-efficient balance sheet management and about $20 million in FX favorability, were the main drivers of this growth. On an FX neutral basis, consolidated AFFO growth would have been over 16%. and consolidated AFFO per share growth would have been around 15%. AFFO attributable to AMT common stockholders per share was $2.39, reflecting a year-over-year growth rate of right around 19%. Let's now turn to our raised outlook for the full year. I'll start by reviewing a few of the key updated assumptions. we have layered in the impacts of the more than 27,000 Celsius sites we have closed to date, as well as the remaining 4,000 Celsius rooftop sites in Germany that we expect to purchase in the first week of August. Second, we have assumed that our agreements with CDPQ and Allianz close in mid-Q3. We expect to receive over $3 billion in total proceeds from these transactions, and after the closing, CDPQ will own 30% of ATC Europe. with Allianz owning 18%. This is higher than the initial 10% that we discussed as Allianz has exercised its option to increase its stake in the business. Additionally, PGGM has converted its prior holdings in ATC Europe to minority stakes in our local German and Spanish operating companies. Given this more meaningful minority interest component, we have added net income attributable to AMT common stockholders and AFFO attributable to AMT common stockholders as outlook metrics, and would expect to feature both in our financial reporting going forward. Finally, as a result of recent favorable FX trends in many of our markets, our current outlook reflects positive FX impacts of $41 million for property revenue, $26 million for adjusted EBITDA, and $20 million for consolidated AFFO as compared to our prior expectations. With that, let's move to the details of our increased full-year expectations. As you can see on slide 8, we are now projecting consolidated year-over-year property revenue growth of nearly 14% at the midpoint, up 6% versus our prior outlook. The increase includes approximately $383 million in total revenue from Telseus, including $141 million in pass-through. Further, we now expect about $58 million in additional pass-through revenue throughout the rest of the business, mostly due to higher fuel prices in India, as well as $19 million or so in higher global straight-line revenue. Moving to slide 9, you'll see that as part of our property revenue outlook increase, we are raising our organic tenant buildings growth projections on a consolidated basis to around 4%. up from between 3% and 4% previously as a result of higher growth expectations internationally. In the U.S., we're maintaining our projections for approximately 3% organic tenant billings growth, including the impacts of Sprint churn in Q4. We continue to expect 5G deployments to drive accelerating gross new business activity and believe we have a long runway of solid growth ahead of us as carriers invest in network densification over a multi-year period. In Latin America, we're raising our organic tenant buildings growth expectations to over 7% for the year, as customers continue to increase their mobile data usage and carriers respond with incremental network investments, despite some continued challenges associated with COVID-19. As compared to our prior outlook, we now expect slightly lower churn across the region. although we do still expect churn to trend higher in the back half of the year as some carrier consolidation occurs in markets like Mexico. We continue to drive value-additive contractual arrangements in the region and recently signed a significant co-location deal with a major customer in Colombia, which we expect to inflect growth higher in that market in the coming quarters. Meanwhile, in Africa, We are reaffirming our expectations of organic tenant billings growth in excess of 8%, as we continue to see encouraging leasing trends in the region. As I alluded to earlier, growth rates in Nigeria are especially strong, where we are continuing to benefit from an MLA signed last year with a major customer. This, along with solid trends in other African markets, are expected to drive an acceleration in regional organic tenant billings growth to above 9% in the second half of the year. Moving on to Europe, we now expect organic tenant billings growth of over 5% for the full year, up around 150 basis points versus our prior outlook. This is being driven primarily by two factors. First, we expect higher levels of gross new business in our legacy Europe business, where we're continuing to see strong 5G-driven activity, particularly in Germany. Organic tenant billings growth for our legacy European assets is now expected to come in at above 4%, up more than 50 basis points as compared to our prior expectations. And second, the co-location and amendment growth that we expect to see in the second half of the year on the TELSIUS assets, which is included in our organic tenant buildings growth metric, is driving another 100 basis points or so of upside. We view this expected activity as reinforcing our long-term expectations for compelling growth on the TELSIUS assets. Finally, in India, we continue to expect roughly flat organic tenant billings for the year. We are seeing encouraging levels of gross activity in the market, but also continued elevated levels of churn. And while we remain optimistic that the market will return to solid growth over the long term, we're not expecting a significant inflection point in growth in 2021, which is consistent with our prior outlook. Moving to slide 10, We are raising our adjusted EBITDA outlook and now expect year-over-year growth of nearly 15%, including a $183 million contribution from the Celsius assets, roughly $26 million in positive translational FX impacts as compared to our prior outlook, and about $20 million in higher net straight line. In addition, we now expect $25 million in incremental expected services gross margin, as services activity in the U.S. continues to outstrip our expectations. For the year, we expect to book roughly $105 million in services operating profit from total services revenue of $220 million. These positive items are being partially offset by roughly $30 million in incremental bad debt assumed for the full year, the majority of which is in India. Overall collections trends in the market remain solid. but we are taking a slightly more conservative approach for the back half of the year within our projections. The remaining bad debt is focused in Mexico, where Altan has recently filed for the equivalent of Chapter 11 bankruptcy. Given its government backing and recent progress within the business, we remain optimistic on the prospects of collecting billings with Altan in full, but because we expect the collections to be slow, we have made the bad debt entries for now. consistent with our historical approach in similar instances. Turning to slide 11, we are also raising our expectations for full-year consolidated FFO and now expect year-over-year growth of nearly 14%, with an implied outlook midpoint of $9.50 per share. The flow-through of incremental cash-adjusted EBITDA, as well as around $20 million in FX tailwinds, are being offset by approximately $15 million $31 million, and $25 million in incremental maintenance capex, cash taxes, and net cash interest expense, respectively, primarily driven by the Telseus transaction. On a per share basis, we now expect growth of right around 12% for the year. Finally, AFFO attributable to ATC common stockholders per share is expected to grow by nearly 10% versus 2020. This takes into account the expected closing of our transactions with CDPQ and Allianz in mid Q3 and the corresponding minority interest impacts. The growth rates for the attributable metric is about 2% lower than our projected consolidated AFFO per share growth, primarily due to the fact that the one-time cash interest expense item associated with our prior African joint venture in 2020 did not apply to the AFFO attributable metric. to ATC common stockholders. Notably, across both of these metrics, we are well positioned to meet our target of driving double-digit growth for 2021. Moving on to slide 12, let's review our updated capital deployment expectations for 2021, which now contemplate the Telseus transaction and reflect our consistent focus on driving strong sustainable growth in AFFO per share. We continue to expect to dedicate approximately $2.3 billion towards our dividend in 2021, implying a year-over-year growth rate of around 15%, subject to Board approval. With regards to CapEx, we are raising our overall projections by $125 million at the midpoint. This includes around $65 million in startup CapEx attributable to the Telsea sites, as well as $65 million in additional deployment CapEx as part of our revised expectations of constructing 7,000 sites this year, up from our previous outlook of 6,500. We continue to drive highly attractive returns through our new build program, and including our revised 2021 expectations, we have added around 24,000 new sites since 2016. Notably, our average day one NOI yields on builds so far this year have been 11%. We are also adding $15 million in maintenance capex, as we are accelerating a few maintenance projects over the rest of the year. This is being partially offset by about $20 million in lower anticipated land capex. On the acquisition front, we have deployed just under $9 billion so far this year, primarily on the Telseus transaction, and expect to spend another $600 million in early August to purchase the remaining 4,000 Telseus rooftop sites located in Germany. Of our nearly $14 billion in expected capital deployments for the year, over 80% is composed of discretionary CapEx in M&A. On the debt side of the equation, we ended the second quarter with net leverage of 5.7 times and expect that metric to trend down into the mid-five times range after closing the CDPQ and Allianz stake sales. We remain firmly committed to our investment grade rating and continue to expect that solid long-term adjusted EBITDA growth will allow us to naturally delever to the upper end of our three to five times range over a multi-year period. Over the next few quarters, we expect to be opportunistic in evaluating the potential benefits of terming out a portion of our floating rate debt into long-term fixed rate instruments. as we continually work to optimize our balance sheet. Looking back over the last decade, we have utilized this strategy to essentially reduce our weighted average cost of debt by half to 2.4% as of Q2. Turning to slide 13, I want to take a few minutes to highlight several elements of our disciplined capital deployment strategy, honing in on two international regions where we have been quite active recently, Europe and Africa. Since the end of 2019, our most transformational international investments have been in Africa, through our acquisition of Eaton Towers, and most recently in Europe through the Telseus deal. As the chart to the left shows, organic co-locations and amendment contributions in both regions have been accelerating. More importantly, we expect gross co-location and amendment activity to remain at elevated levels over a multi-year period. positioning us well to drive strong growth and attractive returns across our recently acquired assets in both regions. In addition to acquiring high-quality strategic site portfolios, we have also been ramping up our new build programs across both regions, as you can see in the middle chart on the slide. In fact, we've gone from constructing an average of less than 100 sites annually back in the early 2010s to a forecast of around 1,600 sites in 2021, primarily in Africa. Importantly, the return characteristics of these builds have remained extremely attractive, with average day one NOI yields of approximately 10% expected this year. As you can also see, yields have risen sharply on older vintages of new build sites as a result of the strong lease-up trends I just mentioned, and we expect to continue to drive meaningful co-location and amendment revenue on our new build sites in the future. We continue to focus on building and leasing sites to high quality large investment grade tenants who we believe will drive the bulk of the network investments in these regions for the foreseeable future. We anticipate the demand for new builds across Africa and also in Europe where we have inherited a robust pipeline with Telefonica as part of the Telseus acquisition to remain strong as carriers address their coverage and capacity needs to meet 4G and 5G demand. We are also focused on growing our business sustainably while driving industry leadership and innovation. A perfect example of this is what we've been doing in Africa with energy efficiency and renewable energy, where by the end of 2021, we will have invested upwards of $250 million on lithium ion batteries, solar power solutions, and other energy efficient technology. While we are still fairly early in the overall progression of these investments, the initial results have been compelling. with average diesel consumption per site declining by around 35%, coupled with improved battery and generator efficiency and elevated uptime levels that we believe are best in class. Through these initiatives, not only are we earning an attractive return on investment, but we are also helping to build and enhance a sustainable global digital ecosystem. This approach to capital deployment in Africa and Europe is indicative of our overall global investment philosophy. We continue to look for compelling opportunities to deploy capital in responsible, sustainable ways where we can generate attractive long-term returns and solid growth while partnering with large multinational mobile network operators as they bring enhanced connectivity to their customers. And we believe that the global diversification that we've built into the business will benefit us for years to come. Finally, On slide 14, and in summary, Q2 is another quarter of solid organic growth, margin expansion, meaningful new build activity, and consistent dividend growth. This was achieved while closing on and beginning to integrate the vast majority of our Celsius acquisition, issuing over $2 billion in Euro-denominated debt at record low rates, completing a successful common equity issuance, and partnering with two world-class strategic investors in CDPQ and Allianz. For all of this, I'd like to offer a huge thank you to our nearly 6,000 global employees, including those who have recently joined us from Celsius. Their hard work, unwavering dedication, and numerous talents have positioned us extremely well to continue driving compelling total returns for our stockholders. We look forward to finishing 2021 strong and are more excited than ever about our long-term growth trajectory. based on the continuing global rise in mobile data demand and our durable competitive advantage throughout our served markets. With that, I'll turn the call back over to the operator for Q&A.
spk07: Ladies and gentlemen, as a reminder, if you would like to ask a question, please press 1 then 0 on your telephone keypad. Once again, 1 then 0 on your telephone keypad. And our first question goes to the line of Rick Prentice with Raymond James. Please go ahead.
spk03: Thanks. Good morning, guys. Hey, Rick.
spk07: Hey. Good morning, Rick.
spk03: Good summer for you. Good morning. Busy summer for you guys. It has been.
spk08: Very.
spk03: Hey, appreciate you guys breaking out the guidance between consolidated and proportionate AFFO. I think, as you know, that's one of the three things we adjust for from AFFO to FAD. But looking at that item, the $110 million minority interest adjustment for calendar 21, how should we think about what that magnitude looks like when you have a full year of the minority interest in Europe, just as we think into 22 or 23, what should that delta be looking like?
spk14: Yeah, absolutely. So that one there, Rick, let me give you the, let me give you the big pieces of what's actually driving those numbers. And of course it's Celsius is in there. Celsius is in there for the proportionate share of 2021. So of the 110,000, million roughly the vast majority that of course is all in the in the tells the only other one is with Celsius and then PG GM of course which we now have down in in our Germany and Spain areas and then we have the small minority interest in India that's about 8% of the business there so the way to think about the the 10 million roughly 85 million of that or so is Celsius the remainder is India and So think about the $85 million and being in for roughly, I guess, seven months of the year, and then you can extrapolate from that. But, of course, Celsius is going to grow into next year. We're not giving guidance next year. But that will give you some indication of kind of where to head and put it in the right magnitude.
spk03: Yeah, sorry, Tom. Seven months of Celsius or mid-third quarter? I'm sorry, Rick. I missed the question. So Telseus for seven months or is it just mid-third quarter? Would it be more like five months in there? Mid-third quarter.
spk08: Okay.
spk03: I'm sorry, Tom. Go ahead.
spk08: I was just going to say, Rick, I mean, if you kind of step back and think about it, going forward, my sense is it will be really proportional to 2021 going forward. So, you know, unless some other M&A transaction, you know, drives, you know, kind of a similar mix of, allocated capital is Celsius, but my sense going forward will be similar to 21. Okay.
spk03: One of the other things we adjust for from AFFO to FAD is prepaid amortization of revenue. And we like the fact that you guys exclude that from your organic growth. That non-cash prepaid amortization revenue did tick up in the quarter. It looks like a spike in Europe as well. $48 million in the quarter is for this non-cash prepaid amortization revenue item. Is that something also we should think, is that like a good run rate going forward, maybe $50 million a quarter, $200 million for a year?
spk14: Yeah, I think there's nothing significant there that's going to vary. So I think you can think about that as a run rate going forward for at least the foreseeable future here. Of course, there's changes, and as we do things, that could change. But barring any other material changes that would drive that, you can think about that as a run rate.
spk03: Okay, makes sense. Obviously, much lower than one of your peers is looking, about $550 million a year in that non-cash item. But, no, appreciate the breakout on these items, and stay busy and well. Thanks, Rick. You too.
spk07: And our next question is from Simon Flannery with Morgan Stanley. Please go ahead.
spk06: Good morning. Tom, I wonder if you'd just give us a little bit of color. You've done a lot of deals. How does the Telseus initial integration go? Any kind of initial learning solutions, reactions there? And I think you also made some comments in your opening remarks about new growth areas, one of them being private networks. We've seen electric utilities sign some deals to work with private spectrum. Where are you seeing most interest there, and when do you think that starts to scale?
spk08: Hey, thanks, Simon. Hope you're doing well. You know, on the integration front, I mean, it's going very, very well. I mean, we do have a lot of experience with these types of transactions, but I'm really proud of the teams working through, obviously, a difficult pandemic situation. in terms of getting things done. But all early signs are really positive for us. The people, the teams, the expertise. You've seen some of the outer size even results in the quarter and the expectation for the year as a result of what we're seeing in both of those critical markets. I mean, for us, from a European perspective, the TAM is large. We see new spectrum being deployed So 5G growth is strong. You know, the organic growth that we see, particularly even in Germany, is stronger than we originally even had thought. And from a portfolio perspective, you know, we had done a lot of due diligence, as I mentioned and as Rod mentioned, on the sites themselves. We know them quite well. And they're continuing to perform just like we thought. So as I said in my remarks, in our view, this was the best portfolio possible. there with a really solid, high-quality anchor tenant. So everything is going very, very well for us. And we're expecting a good, strong year. And then, you know, obviously strength going into 22. I think the organic billings growth is going to continue to uptick. And it will be stronger out of the back end of this year, leading us into providing great foundation for growth in 22. So really all very positive. You know, on the private network side, we continue to look at a number of different initiatives utilizing different spectrums. And so, you know, I don't know how quickly they're going to be rolled out, candidly, Simon. And we're participating, as I said, we have a sizable group, you know, looking at what the opportunity could be. We have significant DASH networks. as you well know, and we're really looking at how can we migrate them to kind of the next technology. We'd like to be able to lower the overall cost in the venues that we're in, and so we're looking at available spectrum and looking at technology, but we're still really in the early stages of that deployment. We're in the CBRS alliance as as you well know, and taking advantage of that knowledge and seeing whether there are opportunities leveraging that technology, that spectrum, to be able to even increase the overall value proposition that we have for our customers.
spk07: Great.
spk06: Thanks a lot.
spk07: You bet. And our next question is from Matt Nicknam with Deutsche Bank. Please go ahead. Okay.
spk12: Hey, guys. Thank you for taking the question. Two on the U.S. First off, just I guess broadly, nice bump up sequentially in terms of COLO and amendment activity. I'm just wondering if you could give us any more color in terms of drivers, whether it's broad-based across carriers and how to think about the potential for sort of incremental improvements from here. And then within that, maybe just thinking about DISH on a more go-forward basis. Any updates you can give us in terms of discussions you're having with them? And does the new agreement they've got with AT&T impact, if at all, how you think about their network build opportunity?
spk14: Thanks. Hey, Matt. Good morning. I'll start here, and Tom can jump in kind of as we go. So, yes, we are seeing an uptick in activity in the U.S., as you suggested. We expected that, so we're actually realizing kind of what we expected. When you look at the full year in terms of the gross new business that we expect to drive in the U.S. on an incremental monthly run rate, we expect that to be more than a 20%, 25% growth rate for the U.S. So we expect that kind of monthly run rate addition to be strong. It is broad-based, so we see activity through all the carriers. The one thing that I would point out is with DISH, we will see revenue from their activity on our organic tenant billings really begin to to impact the numbers in 2022, not so much in 2021. Uh, but they're certainly out active doing the planning for the network. They're active in our services business, which you saw the numbers this morning. We're increasing our services outlook to 220 million. That's up again from our prior outlook of 175, which was up from our original 120. So that's the early indication of where you're seeing that, that level of activity, but where We're excited about what we see in the U.S. We're excited about that incremental monthly run rate growth, new business growth of north of 25%. And we do think that given the new C-band spectrum and everything that's going on, that we're at the beginning of a multi-year stretch of activity that we expect to see in the U.S.
spk12: Rod, can I just follow up also on services? I think the implied margin is about – it's a little under 50%. Traditionally, you've done, I think, closer to 60%. So any explanation on maybe what's driving that delta?
spk14: Yeah, really, I mean, I think you can think about it, Matt, as just a mixed issue in terms of the types of services that we're actually doing. It's – And it's actually a little higher than what you are suggesting. Our original public had the gross margin for services in around 54%. It's still in the mid 50s with the latest guidance with the 220 million. We have about 120, 125 million in directs that we're assuming. But if you did see any inflection there in the margin, it would really be a mixed issue with the services. We're not seeing anything from a labor cost or labor shortages that's driving any kind of an impact on our services business. Things are working very well, and a lot of it is done internally. Got it. Thank you.
spk07: And our next question is from David Barton with Bank of America. Please go ahead.
spk04: Hey, guys. Thanks for taking the questions. I guess, too, if I could, the first one is maybe Tom or Rod. You know, the availability of private capital kind of really changed the complexion of your footprint in Europe, starting with PGGM and then scaling up with the Telstra Steel now with Allianz and CDPQ. Is that kind of money at that kind of scale available only in the developed market? Or could those relationships or new relationships pivot and kind of change the complexion of some of the work you're doing in the emerging markets next? And I guess the second question is, Tom, in your opening remarks, you mentioned that Brazil was doing well, improving even. I think that that was kind of an unknown factor with respect to the oil situation, you know, and the carriers kind of splitting up assets down there. Is that an American Tower specific thing, or is just the entire wireless market, irrespective of the oil situation, just doing better? Thanks.
spk08: Yeah, sure, Dan. I mean, on the first one, you know, we're obviously very opportunistic in terms of looking at various forms of capital. But I can tell you that the pension funds, infra funds, there is an extensive amount of capital that's available in all of the markets that we're servicing. So, yeah, it is there. And we'll take a look at whether it makes sense for us, whether they're the right partners for us. Our intent here is on looking and diversifying the pools of capital that we're using is to provide a platform for us to be able to expand and expand aggressively if it makes sense to do so. And so in Europe, you know, we've set ourselves up with, I think, really solid partners in the marketplace, and it really provides a very efficient platform for us to be able to expand. Now, the transactions need to be there, and, you know, they need to make sense for us and and all of those things. But having those kinds of partners and that kind of capital available really, I think, helps us significantly in terms of being able to expand in those areas quickly. With regards to Brazil, you know, Brazil, and I'll do a shout out to our teams in Brazil, because we think that the splitting of the OI portfolio is going to be a long-term positive for the marketplace. And candidly, there are better funded carriers that picked up those particular assets. And it rationalized the portfolios down there quite a bit. And now the spectrum is in the hands of entities, customers in the market that really want to deploy it and really want to advance the technology deployments in the marketplace. So we think it's that particular transaction event in the marketplace was a net positive for us. And as I said, I remain, you know, really optimistic on the opportunities in the marketplace and the way our teams are really taking advantage of it.
spk04: I think so.
spk08: You bet, Dave.
spk07: And our next question is from Tim Horan with Oppenheimer. Please go ahead.
spk02: Thanks, guys. Two questions. One, can you maybe just talk about the benefits to the private finance partners of going private as opposed to just buying your public stock and And secondly, congratulations on the lithium batteries, and I know you've been doing some fiber backhaul. Is there a way over time to move into more and more active elements of the carrier networks to get more outsourcing of the carrier networks? And, you know, I guess with that being net positive, and particularly in emerging markets, yeah, thanks. Sure.
spk08: You know, Tim, I'm on the private capital side. We looked at the private capital as a very cost-effective way of aligning ourselves with very attractive partners with deep pools of cash to be able to position us and provide us with a platform for some sizable growth going forward. That's not an indication that we've got deals in the hopper that we're ready to roll on, but there are some significant portfolios in the marketplace that that may make sense for us going forward. We'll look at each one individually and whether it does. But having that pool of capital makes sense from a diversification perspective. I'm big on diversification, as you can see through our portfolio. We have a very broad sense of diversification between U.S. and international and within international with developed and developing markets. And I think that rule proves true for forms of capital. that we want to ensure that we've got access into all different forms of capital that's available to us and take advantage of that going forward. So that's really it, I think, on the capital side. On the active versus passive, we've been very successful on the passive side of this. And our intent is to try to continue to stay in that type of a role and leverage that kind of a model. There are certain elements on the active side that we are involved in. Power, for example. We have a number of initiatives in many of our, actually all of our markets from a power perspective. Some on the primary power side where we're the primary supplier of power in markets like Africa and India. And so from that standpoint, we are part of the kind of the active management of ensuring that their networks are running properly. And we've done, as Rod pointed out, we've done some significant investment in areas, whether it's in solar or lithium, to be able to improve our capabilities and to be able to offer that value to our customers, as well as generate value for ourselves, as well as generate value from an eco perspective. in those markets and really provide kind of a sustainable platform going forward. We're also very involved in the secondary power side. You look at the United States, for example, and your developed markets, you know, we have thousands of generators in those markets and providing secondary power and backup for our customers there. And we're even looking from a power perspective is kind of a virtual power source from a storage perspective that we might be able to provide, particularly in our international markets as we continue to really leverage solar as well as lithium-ion. We're even exploring with wind. We have sites there that have solar panels where we've deployed 50,000 to 60,000 panels in the region, and we've got wind turbines. So we're trialing a lot of different things, and we're working with a number of different external parties to really be able to leverage their expertise. But when you start to get up into the real active side of the network, as I said, you know, we have really tried to stay away from that. And we'll continue to do so. Our customers are looking for more involvement in that area. But that hasn't been our strength, you know. going going there and but I mean to the extent that there are opportunities and they make sense for us and we get the right resources and talent to be able to do so you know we'll look at it but but that's not part of our major strategy right now.
spk02: Thanks Tom.
spk07: You bet Tim. And our next question is from Jonathan Atkin with RBC. Please go ahead.
spk09: Thanks. A question on U.S. and on India's So U.S., the growth outlook was unchanged at 3%. I just wondered if there's any operational or maybe non-operational factors to think about as we kind of head into the year, into the second half of the year, that might lead to maybe some upside or is so much locked in under MLAs that you really don't expect much variability. So that's the U.S. question. And then for India, you kind of laid out why you're kind of still at that 0% number, but if it were to deviate during the second half of the year, would it be due to higher gross activity or lower churn, which is the more plausible outcome for India? Thanks.
spk14: Yeah, Jonathan, this is Rod. So I'll take the first one here, certainly. So in the U.S., we are projecting organic tenant buildings growth right in that 3% range. It's been consistent, so we did not change that. in the outlook and i'll just highlight a couple of things the first one is we are seeing an acceleration in activity and co-location and amendment in the us that we're very excited about but that is that acceleration was contemplated when we executed the mlas that we have in place so a lot of that activity is kind of built in priced in and uh in within our guidance so we think certainly for this year it's very stable we also gave longer term guidance for the us which you can go back and refer to A lot of in that guidance, you can see that the growth rates in the U.S. are accelerating over the next several years. A lot of things for the sprint churn. So the other point that I would make is we do have the sprint churn that will begin to roll off in Q4 of this year. The largest effect, single year effect that we'll see from that will be in 2022. It'll continue out to 2024. So it'll be four years of kind of sprint churn And again, the biggest impact will be in 2022. But you'll see it in our numbers in the end of this year. But that's all baked in within our 3% organic tenant billings outlook. So we could be more excited about the U.S. and its trajectory going forward. And once we get through this spring churn, we are expecting kind of an acceleration. And again, I would ask you to go back and refer to our long-term guidance, and you'll see what I'm referring to in terms of the out-eat. acceleration and overall organic growth that we are expecting over the long term.
spk08: Go ahead, Rod. I was going to say, you can fill in some pieces on the India question. You know, it's probably tough to kind of have any major inflection given that we're already halfway through. The pandemic held back a little bit of our build in Q2, and so I would expect actually a pickup in our build program. So at least from an inorganic perspective in the second half. As you saw, our churn did drop a bit in the quarter from prior year. And so I would continue to kind of expect that going forward. But generally speaking, I wouldn't expect any major inflections one way or the other in the market.
spk09: Thank you.
spk07: Next, we have a question from Colby Cinesale with Cowan. Please go ahead.
spk00: Great. Just to follow up on the new COLO and amendment expectations for the United States this year, I think on your fourth quarter earnings call, you guys had said that you thought that number would be up about 15% year over year. That number, I think, was $134 million in 2021. In response to Matt's question, I thought you might have been mentioning 20% or 25%, but I might have gotten that confused. I was just looking for clarification. And then secondly, Rod, you mentioned the opportunity to do some refis in the back half of the year. I'm presuming that's not included in your current per share guidance, but I was wondering if you could help try to quantify or size the amount of debt that you could potentially look to refinance. Thank you.
spk14: Yeah, Colby, so I'll just clarify here on the run rate to the U.S. When I spoke earlier on the call, it's the monthly run rate incremental addition. That'll be up around 20% or just north of 20%. And that's the driver that is really the long-term value creator that you should be thinking about.
spk00: Is that the key percentage you had guided to earlier still in place?
spk14: I'm trying to think. Yeah, the 15% is still in play. And then on the refi question, as always, we're going to be opportunistic in terms of refi. So we, as you probably know, we cleared off all of our senior maturities for 2021. When we think about refinancing, we're really looking into 2022. And again, we'll be opportunistic. We'll look at the rates. We'll look at where the market is. and we'll do our calculations and we'll execute when and if, and only if it's accretive and good for our shareholders to do so. In terms of just giving you a rough scale, we have next year in and around $1.5 billion maturing. So that's probably what you might look at in terms of a refinancing if we were to do anything later this year that would take out any kind of senior notes for 2022. Great. Thank you.
spk07: And our next question comes from Nick Del Deo with Moffitt Nathanson. Please go ahead.
spk13: Hey, good morning. Thanks for taking my questions. One in Europe, one in Mexico. First, are the Telseus leases structured as traditional leases or MSAs? And do you find that the carriers in Europe are gravitating towards one structure versus the other? And I guess at the end of the day, does the distinction matter? And then second, in Mexico, you noted in your prepared remarks that Red Compartido filed for bankruptcy, and you touched on the near-term financial impact. Can you mention what sort of contribution you've seen from them over the last few years, and beyond collecting the receivables that are currently outstanding, kind of how you expect things to play out as it relates to new business going forward?
spk14: Yes, sure. Sure, so in terms of the... Make sure I got the question, Sarah. So in terms of the structures in Europe, there's really no significant differences in terms of the structure of the contracts in Europe and in the U.S. Of course, any contract has minor differences, but structurally, they're similar and nothing that would drive any impact. It would be noticed in terms of the numbers in those sorts of issues. In terms of in Mexico, Altan is, you know, Altan has filed bankruptcy, so we're kind of working through that, I'll point out a couple of things here. Number one is they do have a remaining term on their leases that's quite long. So we have about six years remaining on all their leases. They might make up about 9% of Mexico revenue. And so that's kind of the size that they are in terms of the business there. And it's less than 1%, close to half a percent of the overall company revenue. With all that said, just because they filed for bankruptcy doesn't mean that they're going to the market. So we'll be working through that with them and hope that they will restructure and stay in play. I think they're an important player in the Mexico market. They're supported by the government and they have had a fair amount of success other than the fact that their overall balance sheet needs some support. So we do expect them to continue, but that'll be kind of up to them as we move forward. And if for any reason they did exit, we have that six-year protection, and then that service still needs to be provided. So those customers would have to move on to another network, and that could potentially drive higher CapEx from that perspective to support that customer based on a different network.
spk13: Got it. Thank you, Rod. You're welcome.
spk07: Our next question is from Batia Levi with UBS. Please go ahead.
spk01: Great. Thank you. A follow-up for the U.S. Can you provide some color on what your long-term guidance had assumed for DISH network bills and how you think the AT&T DISH wholesale deal would impact that? Thank you.
spk14: Good morning, Baki. So, yeah, we don't think that the new DISH deal will impact our longer-term guidance. Let me highlight here. In terms of our longer-term guidance, I don't want to get into the specifics around DISH in any specific contract terms. but they were in our longer-term guidance. So what we laid out was organic tenant buildings growth of at least 4% on average over the next seven years. That encompasses 2021 out through 2027. If you normalize that for the spring churn, it goes up to about 5%. There are two important chunks there in terms of time periods. If you isolate the 2021 and 2022 time period, we're looking at... at an average organic growth rate of about 2% in the U.S., including the Sprint churn that we've all discussed. Normalizing for that, it would be up around 5%. If you take that next step out to 2023 to 2027, we're projecting greater than 5%, even with the residual churn from Sprint. And normalized to that, we're projecting greater than 6% growth between 2023 and 2027. So DISH is in there. We're building sites for them today. Revenue will start for them in 2022 and ramp over the next few years. They're in that longer-term guidance, and you can see that longer-term guidance is higher in the out years than it is in the early years because we do expect to see acceleration and a build there as the carriers build out 5G kind of across the U.S. and deploy the new spectrum.
spk01: Great. Just one follow-up. To the extent that AT&T builds out DISH's spectrum, is that potentially an amendment to the current MLA, or do they have some flexibility?
spk14: Yeah, we're working through those issues. I don't want to talk about the specifics in that contract. We'll leave that between us and DISH and AT&T to kind of figure out But we'll be working with DISH and with AT&T to figure out exactly what it means. We do believe that DISH's intent is to build a network substantially in the U.S. That's what our dream contemplates. And the one thing that I would say is there is a firm revenue commitment within our contract that would not change depending on an altered build strategy there. So we do certainly have that protection. But we're very optimistic in terms of DISH's intent to build a network and our position to capture revenue there and support them and help them get that network built.
spk07: Got it. Thank you. And I will turn the conference back over to Mr. Kozlowski for final comments.
spk10: Great. Thank you, Leah, and thank you, everybody, for joining the call today. Have a great rest of your day.
spk07: Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T teleconference service. You may now disconnect.
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