American Tower Corporation (REIT)

Ladies and gentlemen, thank you for standing by. Welcome to the American Tower fourth quarter and full year 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'd like to ask a question, please press 1, then 0, and you will be acknowledged that your line has been placed in queue. I would now like to turn the call over to your host, Adam Smith, Vice President of Investor Relations. Please go ahead, sir.

Good morning, and thank you for joining American Tower's fourth quarter and full year 2021 earnings conference call. We have 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 of will provide an update on our stand and deliver strategy. And then Rod Smith, our Executive Vice President, CFO, and Treasurer, will discuss our 2021 results and 2022 outlook. After these comments, we will open up the call for your questions. Before we begin, I'll remind you that our comments contain forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include our expectations regarding future growth, including our 2022 outlook, capital allocation, and future operating performance, our expectations regarding the financing plan for the CoreSite acquisition, our expectations regarding the impacts of COVID-19, and any other statements regarding matters that are not historical facts. You should be aware that certain factors may affect us in the future and could cause actual results that differ materially from those expressed in these forward-looking statements. Such factors include risk factors set forth in this morning's earnings press release, those that will be set forth in our upcoming Form 10-K for the year ended December 31st, 2021, 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. With that, I'll turn the call over to Tom.

Thanks, Adam. Good morning, everyone. As you saw in today's press release, we generated strong results in 2021. While strategically deploying capital to assets that we believe will further enhance our future growth trajectory and augment our ability to continue to deliver compelling total shareholder returns for many years to come. The strength of our operational financial results reflects the high quality nature of our tower business model, the dedication of our talented global teams, and our commitment to provide best in class service to our customers. It also reflects our commitment to sustainability and being a good corporate citizen. which provides additional purpose and continues to be a focus at every level of the organization. Last year at this time, we presented multi-year targets for U.S. organic tenant billings growth and AFFO per share growth, and I'm pleased to be able to say that we're exactly where we thought we would be today as it relates to those targets. We continue to expect to average at least 4% in U.S. organic tenant billings growth from 2021 through 2027 on a reported basis. implying an average of at least 5% excluding the impacts of sprint churn. And as part of these projections, we anticipate an acceleration in U.S. organic tenant billings growth between 2023 and 2027, when we are targeting growth rates of at least 5% on a reported basis and at least 6% excluding the sprint churn. Similarly, on the AFFO side of the equation, We believe we are on track to average at least 10% growth in AFFO per share on average through 2027. This includes a year of more subdued growth in 2022, as expected, but also a recovery in growth rates in 2023 and beyond as the sprint churn impacts fade and global secular growth tailwinds continue. 5G is probably the most significant of these growth drivers, and in 2021, we saw the early stages of transformational 5G network upgrades in multiple markets, including nearly $105 billion spent by U.S. carriers for critical mid-band spectrum and over $65 billion in CapEx deployed by carriers into network investments across our global footprint. With mobile data consumption expected to grow at an average annual rate of more than 25% over the next five years in the United States, and at even higher rates in some of our international markets, we anticipate prolonged network investment cycles to drive compelling, sustained growth rates across our regions. And while we believe our macro tower assets will continue to drive the vast majority of growth and returns for the company as 5G advances, we're also excited about additional opportunities that we expect to arise from the accelerating cloud-based, interconnected, and globally distributed digital transformation that is in its early stages today. We expect our recently closed core site acquisition to augment our ability to capture potential upside from this transformation while enhancing the value of our existing portfolio of distributed communications real estate over time. We anticipate these expectations to be underpinned by the continued execution of the four strategic pillars in our Stand and Deliver strategy, growing our assets and capabilities, driving industry leadership, operational efficiency, and extending our platform. As part of our commitment to growing our assets and capabilities to meet our customers' needs, we deployed more than $10 billion for Tower M&A in 2021, focused on Europe, where we have meaningfully improved our long-term strategic positioning. We saw accelerated organic growth trends in the region throughout the last year, and we expect those trends to continue supported by data growth projected at a CAGR of 26% over the next five years across our major European markets. Separately, we added strategic financial partners, CDPQ and Allianz, who joined our existing partner, PDGM, creating a solid platform for future growth and investment ahead of what we anticipate being an exciting decade in the European marketplace. In addition to expanding through M&A, we further grew our asset base through our internal CapEx program by investing $1.4 billion, primarily to construct a record of nearly 6,400 new communication sites, along with deploying nearly $120 million towards our energy efficiency investments, primarily in Africa. These investments continue to generate returns that are among the highest in our portfolio. Through our talented teams and operational expertise, we expect to remain a preferred partner to support customers as they execute on their network build-outs, which we expect to drive continued acceleration in our new site construction for the next several years while advancing our sustainability efforts and commitment to a greener, mobile future. Through our commitment to enhance our industry leadership, we've continued our focus on sustainability by accelerating our efforts to combat climate change as evidenced by our recent adoption of science-based targets for carbon emission reductions. These targets represent direct and indirect greenhouse gas emissions reduction targets of at least 40% by 2035 against the 2019 baseline, as well as targets to reduce indirect supply chain emissions by at least 40%. To date, we've invested over $275 million in CapEx towards energy efficiency and reduction solutions which directly support our committed targets and initiatives. Concurrent with our emissions reduction targets and renewable energy investments, we are actively working on various land stewardship and social impact initiatives. We're a member of the World Economic Forum's Edison Alliance One Billion Lives Challenge, which aims to spur development of affordable and accessible digital solutions across health, finance, and education to the underserved. Through our involvement, we engaged with an array of high-level country and regional platforms and committed our time, expertise, and ideas to make digital access a top priority for all. Also this past year, American Tower was awarded a 2021 World Summit on the Information Society Prize for our Digital Communities Program, which spans across India, Africa, and Latin America and seeks to improve the quality of life and increase economic opportunity through connectivity. At the end of 2021, we reached the significant milestone of launching our 200th digital community in India and have set a goal to grow to 2,000 digital communities globally over the next five years, focusing on education, healthcare access, financial inclusion, and career development. Finally, we advanced our commitment to diversity, equity, and inclusion by implementing customized plans focused on talent development, recruitment, and education to enhance our inclusive culture across our global footprint. We also continued our partnership with HBCUs supporting critical infrastructure enhancement projects and engaging in academic and professional development opportunities for their talented students. Further, we extended our leadership position and NAREIT's Dividends Through Diversity, Equity, and Inclusion CEO Council, which addresses opportunities related to DE&I in the REIT and publicly traded real estate industry. Also, we stay on top of the best ESG practices, policies, and actions within the REIT sector through active participation on NAREIT councils and initiatives. These accomplishments and areas of focus are reflections of our unwavering commitment operating our global business in a sustainable way while guided by our core principles. We are also steadfast in driving operational efficiency throughout the business. Over the past several years, we've implemented shared service center models, executed on various cost control and process improvement initiatives, and implemented site-level enhancements that not only drive value to American Tower, but also for our customers. An example of these initiatives is our use of drone technology to help us ensure the structural integrity of our sites. In 2021, our US team demonstrated its capabilities to scale up driving service revenue to its highest level in over a decade and supporting major carrier activity in preparation for 5G deployments. Looking ahead, we believe the investments we have made and the operating structures and processes that have been put in place are competitive advantages that will facilitate scalable expansion while converting meaningful top-line growth to AFFO. At the same time, through our platform expansion initiatives, we've evaluated a range of new communications real estate models to identify long-term growth opportunities that could complement and leverage our global tower presence, further advance our position as a market leader ahead of emerging technological trends, and create attractive returns for our stakeholders. Through this process, we believe advanced wireless network technologies in conjunction with the shift of computing power from the core to the edge will accelerate digital transformation across many industries. We've only begun to understand the true capabilities and performance of widespread 5G coverage, and with new applications on the horizon, we think mobile edge computing will become a critical component of converged neutral host infrastructure. We believe today's 5G edge deployed in public or private networks with regional site hosting, and will evolve to distributed tower-centric locations. We think future AI and machine learning edge-optimized solutions supporting massive IoT devices and immersive experiences enabled with AR and VR, such as gaming, healthcare, and education, will drive latency-sensitive edge deployments across our strategically positioned set of assets. We expect this evolution and these deployments to drive a meaningful TAM with our distributed macro tower assets ideally located to host such computing infrastructure in an integrated grid that enhances our competitive position and service offerings. Together with the core site and our other data center assets, we have the scale to enable a richly interconnected hub and spoke edge computing model that extends today's data center multi-cloud ecosystem out to our distributed neutral host sites. greatly enhancing our probability of success at the edge. On that note, I'd like to welcome the CoreSight team to the American Tower family, and together I look forward to executing on our long-term development plan while driving meaningful incremental value to our macro tower sites over time. As we move forward, we remain focused on further enhancing our investment-grade balance sheet. which has been a critical element that has enabled us to grow, and we expect it to remain an important component of our future success as well. We are committed to maintaining our investment-grade credit rating, and with the strength of our balance sheet as our foundation, we will continue to apply our Stand and Deliver strategic framework to capture value as 5G and growing mobile demand present compelling growth opportunities for American Tower. In closing, we believe that our comprehensive global portfolio Strong balance sheet, prudent capital allocation strategy, and continued focus on sustainability position us to extend our track record, driving solid growth and returns as we embark upon an exciting new era of digital transformation enabled by 5G. We will continue to execute on our Stand and Deliver strategy and follow the same values and discipline that have fueled our track record over the last two decades. As we continue to build and strengthen our diverse, comprehensive portfolio while enhancing our operational capabilities, we believe American Tower is well positioned to support our global customer base as we enter a hyper-connected, digitally-driven world. With that, let me turn the call over to Rod to go through our 2021 results and the details of our 2022 outlook.