American Tower Corporation (REIT)

Ladies and gentlemen, thank you for standing by. Welcome to the American Tower fourth quarter and full year 2022 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 followed by 0 on your device now. I would now like to turn the call over to your host, Adam Smith, Senior Vice President of Investor Relations. Please go ahead, sir.

Good morning. And thank you for joining American Towers' fourth quarter and full year 2022 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 Barlett, our president and CEO, will provide an update on our strategy. And then Rod Smith, our executive vice president, CFO and treasurer, will discuss our 2022 results and 2023 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 2023 outlook, capital allocation, and future operating performance, our collections expectations associated with Vodafone, Idea, and India, 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 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 that will be set forth in our upcoming Form 10-K for the year end of December 31st, 2022, 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, and thanks to everyone for joining the call this morning. You know, five years ago, when we rolled out the Stand and Deliver strategy that would guide us over the following decade, we emphasized driving the business forward through four key pillars, enhancing operational efficiency, growing our assets and capabilities, investing in innovation and platform extensions, and augmenting industry leadership. Since that time, we've seen carriers across our global footprint invest over $300 billion in network assets, and methodically deploy next-generation networks to support rapidly increasing data demand in their served markets. Our commitment to execute on each pillar of Stand and Deliver not only aligns with our customers' needs in this context, but it also enhances American Tower's position to serve as a strategic provider of critical infrastructure for the networks of the future. So before highlighting the key strategic objectives we'll focus on in 2023 and over the next several years, I'd like to spend a moment reviewing achievements from the past five years that have driven our success to date. On the operational front, we've signed comprehensive master lease agreements with T-Mobile, AT&T, DISH, and most recently Verizon in the United States. These agreements represent a commitment to a mutually beneficial relationship predictable growth path and strategic alignment between American Tower and its customers, while also demonstrating the value and criticality of our nationwide 43,000 plus site portfolio to support 4G, 5G, and future network generations. Such agreements also bring with them efficiency innovations designed to deliver simplicity in leasing processes and accelerated time to market for the carriers. To extend on these benefits, we've invested in technologies to build a holistic, standardized data set, mapping the vast majority of our U.S. assets, which can be leveraged to eventually bring application cycle times down to a matter of hours. We believe this type of capability will be a particularly attractive customer value proposition in the context of a 5G densification cycle, and one we believe can be scaled across our global footprint over time. Our focus on operational efficiency has extended throughout our international business as well. Notably, since the beginning of 2018, we've invested nearly $350 million, primarily in Africa, on improving site-level performance through our Power as a Service program. This includes the installation of lithium-ion batteries and solar arrays for primary and backup power delivery. which has resulted in a sizable reduction in average fuel consumption per site across our African portfolio and has extended the replacement cycles of critical power sources, all while providing over a 99.9% average uptime for our customers' networks. At the same time, we've established a centralized procurement organization that aims to drive down material costs, and we've leveraged shared best practices in our scale as a multinational operator to strengthen our global vendor relationships. By streamlining these critical operational functions, we've been able to continue to drive solid investment returns on our capital deployments and efficiently meet the infrastructure needs of our customers, all against a challenging backdrop of price volatility and supply chain disruptions. In fact, since the start of 2018, we've added nearly 26,000 sites to our international portfolio through new builds more than two times the volume of the previous five-year period. Today, these sites are contributing approximately $250 million in tower cash flow and an NOI yield of approximately 21%, demonstrating meaningful expansion from the already attractive low double-digit day one yields we typically see on these new build opportunities. On the M&A front, we've executed a number of transactions that have been transformational in terms of delivering additional critical scale in existing and new markets ahead of major network investment cycles, the benefits of which we are seeing in our results, and forward-looking expectations today. These include Insight in the United States, the Eden portfolio in Africa, as well as Telseus in Europe and Latin America, which augmented our scale in Germany and provided entry to Spain in a leadership position, just as 5G investments were beginning to ramp up on the continent. More recently, through our efforts to selectively expand our platform and position American Tower as a market leader in the next generation of network architecture development, we entered the data center space through the acquisition of CoreSight. CoreSight delivers an interconnection and cloud on-ramp rich platform, as well as exposure to a resilient, high-demand communications infrastructure business, which we believe will deliver strong performance as demonstrated by its record-signed new business in 2022 and provide accretive returns on a standalone basis over time. Most importantly, we believe the combination of CoreSight and American Tower's platform of distributed tower real estate positions us to enhance the value of our existing assets as the edge proliferates. Finally, I'm particularly proud of the steps we've made toward augmenting our leadership in several areas. Organizationally, we've made ESG core to our operations through initiatives such as our commitment to science-based targets, localized DE&I initiatives designed to facilitate an inclusive organization for our employees and stakeholders, and through the growth of our digital communities program, which has now reached more than 400 communities and serves more than 335,000 people across 15 countries. As I mentioned on this call last year, we're also a member of the Edison Alliance One Billion Lives Challenge, which provides us the opportunity to contribute to the development of affordable and accessible digital healthcare, finance, and education solutions for communities in need. Over the past year, we've developed partnerships with healthcare providers, that have resulted in the launch of several telehealth locations that provide primary, preventative, and specialty teleconsultation services in underserved areas. While this is just one positive first step, we believe that what we've achieved over the last year clearly demonstrates the value we can create in the communities we serve through a commitment to multi-stakeholder collaboration and partnerships. And we hope more organizations will join us in efforts like these over the coming years. Which brings us to today and our focus for 2023 and beyond. We believe we're poised to build on and accelerate the successes of Stand and Deliver that we've achieved thus far. As I mentioned in the opening, our teams are focused on key strategic objectives that will continue to guide our operations and management teams at American Tower over the next several years. The first of these is to leverage our premier platform of assets to drive strong recurring growth, both organically and through our disciplined capital allocation framework and our investment grade balance sheet as we seek to capture new business opportunities against the backdrop of secular demand trends that remain as strong as ever. We refer to this internally as scale the core. To this end, we expect an acceleration in organic growth in 2023 representing an improvement of around 100 basis points relative to our prior five-year average. Beginning with our U.S. and Canada segment, the benefits of our comprehensive MLAs and ongoing 5G deployments are driving an expectation for organic tenant billings growth of approximately 5% in 2023, including approximately $220 million in year-over-year co-location and amendment growth. which would be a record year for American Tower by a significant margin. We also see a path to solid organic growth in our international segment, led by regions like Europe and Africa, where we're capturing activity from multiple network upgrade and densification cycles and are realizing the benefits of CPI-linked escalators on the vast majority of our leases. This will be complemented by what we expect to be yet another year of solid new build activity primarily in international markets, where concurrent 4G and 5G network rollouts continue to drive strong demand for new infrastructure. And in our data centers business, where we're entering 2023 with record backlog, we'll continue to focus on driving increasing growth, both on an organic basis and through high-yield development opportunities that are ongoing today. Operationally, our teams are working to continue to build on the many efficiency and growth initiatives we've developed in recent years, which hits on another key objective within the organization, being the most trusted strategic partner for our customers. The most concrete example of our efforts on this front is probably the long-term multi-market agreement we recently announced with Airtel in Africa, which includes a meaningful new build pipeline, a joint commitment to build in accordance with new low-carbon emissions guidelines, which we're calling GreenSites, and a partnership framework to enhance the impacts of both companies' digital communities and kiosks programs on the continent. This agreement exemplifies the benefits of our scale, best-in-class operations, and ability to deliver innovative solutions while advancing both American Tower and our customers' long-term sustainability and fossil fuel consumption reduction targets. Going forward, we'll continue to work on building alignments with our global customers to leverage our scale to execute on opportunities that drive growth and maximize shareholder returns in a sustainable and responsible way. This includes an effort to accelerate our platform extensions. As I mentioned previously, demand trends in the data center space remain robust, driven by digital platforms leveraging distributed computing and by the early stages of a sustained enterprise migration from on-prem to hybrid IT and multi-cloud architectures. As a result, we see a long runway of opportunity to drive strong returns by investing in the expansion of our existing CoreSight campuses and leveraging the open cloud exchange to extend their interconnection rich ecosystem. At the same time, we're working to position our combined platforms for outside success as demand for the workloads and compute functions are drawn closer to the end users at the mobile edge. And as we evaluate opportunities to accelerate growth through platform extensions going forward, we'll continue to focus on how we can leverage our core competencies in real estate, power provision, and connectivity to drive incremental value to the ecosystem while delivering increasing shareholder returns. Meanwhile, as a management team, we're laser focused on positioning our global teams for the future, while growing and maintaining a healthy cultural foundation. These together represent perhaps our most critical key objectives, as our world-class team members are the most valuable asset at American Tower. As we position the company to be a market leader in an evolving landscape, we recognize that developing, empowering, and retaining diverse and talented team members is fundamental to our success as a company. Through this lens, we've renewed our focus on management development and institute region-specific programs designed to support a balanced life for our teams amongst many other initiatives. We also appreciate that facilitating a culture that is inclusive and equitable is not only shown to drive better decision-making and business outcomes, but more importantly, it's the right thing to do for the people who dedicate so much of their time to growing this business and delivering value to our customers and shareholders. In summary, the long-term secular demand trends underpinning growth in our industry remain resilient. We believe we're optimally positioned to capitalize on the successes of our stand and deliver strategy to date, and we're more energized than ever as we look to execute on our initiatives in 2023 and deliver strong, sustainable returns for many years to come. With that, I'll turn the call over to Rod to discuss our 2022 results and expectations for 2023. Rod?