American Tower Corporation (REIT)

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Ladies and gentlemen, thank you for standing by. Welcome to the American Tower first quarter 2023 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 on your device. 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 Tower's first quarter 2023 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, will provide an update on our U.S. Tower and Data Center businesses. And then Rod Smith, our Executive Vice President, CFO, and Treasurer, will discuss our Q1 2023 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 2023 outlook, capital allocation, and future operating performance, our collections expectations associated with Vodafone Idea in 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 set forth in our Form 10-K for the year ended 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 us this morning. As is customary for our first quarter call, My comments today will focus on our U.S. business, which is principally comprised of our tower and data center platforms, which made up 55% of our consolidated property revenue and 64% of our property operating profit in the first quarter of 2023. With regard to our tower platform, the secular tailwinds that have supported outstanding growth over the last two decades remain consistent. Every year, U.S. wireless subscribers consume more mobile data through a growing number of devices and applications, requiring faster speeds and lower latency performance. As a result of the increasing levels of data being consumed, our customers are deploying more equipment on our towers to meet that demand. In addition, and more than ever before, our customers are utilizing multiple bands of spectrum to to deliver those high-quality, ubiquitous levels of service. In 2022, US carriers deployed around $40 billion in network capital to provide nationwide 5G services on mid-band spectrum. This record level of activity is reflective of the first major wave of the typical investment cycles we've seen over the last 20 years, during which carriers amend existing sites to provide initial coverage and capacity with the new technology and harvest benefits from core network enhancements and spectral efficiencies. In previous cycles, these initial peaks have typically been followed by periods of moderation in overall spending, driven in part by reductions in spend on core upgrades, fiber, and other infrastructure assets. However, we've historically seen tower spend remain in focus as our customers look to support continuous growth in mobile data consumption. and provide market-leading network quality and reliability. And we would expect more of the same over the 5G cycle. In 2023, while we're still in the relatively early stages of the overall 5G rollout, we continue to see customers making significant investments into their networks as part of their broader coverage initiatives, having yet to invest in densification at scale. These investments into adding and modifying equipment on our sites which we've monetized through our MLAs, is driving 5.6% organic growth in Q1, or nearly 7% absent the impacts of the spring churn, our strongest quarter since Q1 of 2020. And for the full year, we expect $220 million in year-over-year growth contributions from co-locations and amendments, a record for our U.S. business. Looking out over the next several years, we see an environment that is supportive of continued strong performance in the U.S. as the 5G investment cycle progresses and densification occurs. At American Tower, we've underwritten this expectation into the comprehensive MLAs that underpin our expectation to deliver average annual organic growth of at least 5% or 6% excluding the sprint churn over the next five years. which closely mirrors the 6.2% average organic growth we experienced between 2016 and 2020. Further, industry estimates suggest total monthly mobile data consumption that will require increased speed and lower latency is set to grow at a compounded annual rate of above 20% over the next five years, which we expect to be driven by continuous increases in mobile network utility, irrespective of potential impacts from any one category of new applications. As a result, we believe our customers' networks will need to provide at least two times the network capacity they have today in three to four years, or roughly three times today's capacity as we approach the end of the decade. Over time, we expect our customers to meet this demand through continued network upgrade and densification initiatives, spectrum refarming, and the deployment of 5G on new spectrum. In this context, we believe our portfolio of over 43,000 sites is optimally positioned to serve our customers across the balance of the 5G cycle with significant capacity to accommodate additional equipment and new tendencies, even beyond what's been contractually locked in today. As we've done historically, we anticipate leveraging our best-in-class internal processes to generate incremental efficiency in the business and higher levels of service for our customers, with both resulting in increasing conversion of our top-line growth to AFFO. Through a combination of organic growth and M&A, we've added nearly $2.4 billion in annual property revenues to our U.S. and Canada segment since 2014, paired with less than $60 million in incremental SG&A expense, or roughly 2% of the corresponding revenue growth. This prudent approach to cost management and operational efficiency has helped to drive operating profit margin expansion in the segment by roughly 400 basis points over the period. Going forward, given the benefits of our established scale, demonstrated ability to maximize the operating leverage potential inherent to our model, and concerted efforts to further drive cost efficiencies at every level of the organization, we see a tremendous opportunity for capacity utilization in our existing assets to drive high margin growth and expanding returns on invested capital as the 5G landscape continues to mature. Now, with respect to our CoreSight US data center platform, we are equally excited about the prospects for value creation. Increasingly complex digital business demands require enhanced infrastructure performance and flexibility. CoreSight serves as an optimal nexus for the cloud service providers service integrators, networks, and enterprise customers interoperate to propel their business initiatives forward. We continue to see customers landing and expanding with CoreSight because it provides native access to key cloud service platforms and a diverse ecosystem, which allows them to serve their customers in a way that is flexible, scalable, and that drives growth and efficiency in their businesses. This is reflected in the continued strength of CoreSight's leasing results interconnection growth driven by both existing customers and new logos, as well as the ability to drive pricing, solid renewal rates, and generate industry-leading returns. We also recognize that we're still in the early stages of a broader digital transformation movement. Each year, data center workloads and compute instances continue to grow at a rate of approximately 12% and the vast majority of all new IT architecture is deployed into cloud and hybrid environments that CoreSight is uniquely positioned to support. Additionally, we continue to expect to generate long-term growth from enterprise digital transformations and IT hybridization as organizations face workload management challenges that require the operational optionality, agility, and critical interconnection capabilities that our CoreSight data center platform offers. Importantly, the absorption of this type of demand drives incremental value to our interconnection ecosystem and further builds on the momentum behind the core site flywheel and the value we can provide our customers. So we see a long tail of opportunity to continue growing and scaling our campuses, and we have the added benefit of being able to prudently select opportunities that are accretive to our ecosystem. As a result, we'll continue to invest cash flows generated in the data center segment back into the business, provide our customers incremental confidence in a long runway for growth with core site and generate highly attractive returns. Meanwhile, our teams continue working to develop solutions that leverage our combined communications real estate platforms to position American Tower as a leading infrastructure provider for the networks of the future and create incremental value for our customers and shareholders alike. In summary, Our foundational U.S. tower and data center platforms are set to deliver continued growth and strong returns. We believe that the long-term secular tailwinds that differentiated high-quality nature of both our U.S. tower portfolio and our data center interconnection platform, the value proposition they represent for our customers, and the seasoned, high-talented teams managing them uniquely positions American Tower to create significant incremental value for the industry, and our shareholders for many years to come. With that, I'll hand the call over to Rod to discuss our Q1 results and expectations for the balance of the year. Rod?

Thanks, Tom. Good morning, and thank you for joining today's call. As you saw in our press release, we are off to a solid start to the year, with performance exceeding our initial expectations across many of our key metrics. Before diving into the results and the revised outlook for 2023, I'll start with a few highlights from the quarter. First, despite ongoing macroeconomic volatility, strong demand trends continue to drive favorable leasing and growth across our global footprint, which is a testament to the resiliency and stability of our business. In Q1, we posted consolidated organic tenant billings growth of over 6%, our highest rate since 2017. and an over 300 basis point acceleration as compared to Q1 of 2022. This includes growth through co-locations and amendments of over 5%, our highest in three years, as carriers continue to leverage our leading macro tower portfolio to aggressively roll out their networks to meet customer demand. Organic lease and growth was further complemented by another quarter of strong new build volumes. As we continue to leverage our scale and capabilities to attract accretive development opportunities from our leading customers across our international business. Finally, we had another record quarter of leasing from CoreSight, continuing the momentum from what was a record-breaking 2022 and exceeding our initial underwriting plan. Complementing our solid top-line trends, our focus on cost management combined with the inherent operating leverage in the tower model, drove margin expansion of approximately 270 basis points as compared to Q1 of last year to 63.7%, with the benefits being more noticeable given the absence of material M&A. Going forward, we'll continue to manage our business with cost discipline, maximizing the profitability of our strong, reoccurring organic growth profile. Next, we accessed the debt capital markets, successfully issuing $1.5 billion in unsecured notes and $1.3 billion in secured notes at attractive terms. Proceeds from these offerings more than covered our Q1 maturities. And the remainder, together with the proceeds from various strategic initiatives, including the sale of the Mexico fiber business, were used to pay down floating rate debt. As a result, we've reduced our floating balance by nearly $800 million year to date, now representing slightly over 20% of our debt structure. We'll continue to evaluate opportunities to further manage this balance over the course of the year. Finally, we continue to have constructive discussions with potential investors as we assess strategic options for our India business. We remain focused on executing an outcome that maximizes value and optimizes our global portfolio mix and the risk-adjusted return profile for American Tower and its stakeholders. As we move forward, we will keep our investors informed of any new developments. With that, please turn to slide 6 and I'll review our property revenue and organic tenant billings growth for the quarter. As you can see, Q1 consolidated property revenue growth was over 4% and approximately 7% on an FX neutral basis over the prior year period. This included U.S. and Canada property revenue growth of over 4%, international growth of over 3%, or nearly 9% excluding the impacts of currency fluctuations, and approximately 10% growth in our U.S. data center business. In the quarter, we benefited from accelerated decommissioning-related settlements in Latin America, totaling approximately $39 million, partially offset by Vodafone IDEA or VIL revenue reserves of approximately $33 million, representing a modest improvement to payment trends as compared to the second half of 2022. Moving to the right side of the slide, organic tenant billings growth was a significant contributor to our overall revenue growth, standing at 6.4% on a consolidated basis, which, as I mentioned, was our highest quarter since Q3 of 2017. In our U.S. and Canada segment, organic tenant billings growth was 5.6%, and nearly 7% absent sprint-related churn, including a record quarter of co-location and amendment growth contributions of nearly $60 million. a nearly 65% increase as compared to the growth reported in Q1 of 2022. Growth modestly exceeded our expectations, driven by some delays in churn, which we still anticipate to occur in the year, and to a lesser extent, new business upside. Similarly, our international operations experienced improvements across nearly all reported segments, generating organic tenant billings growth of 7.5%. and over 180 basis point acceleration from Q4 of 2022, which includes the benefits of CPI-linked escalator commencements across various contracts. Africa generated its highest quarter on record, with organic tenant billings growth of 12.1%, including escalator contributions of over 10%, and a continuation of solid new business of nearly 7%. Growth in the quarter benefited from some delays in previously communicated carrier consolidation-driven churn, which we still expect to occur in the year. Turning to Europe, we saw growth of 8.2%, including over 6% from escalations, demonstrating our ability to monetize on CPI-linked escalators across the vast majority of our portfolio in the region. In Latin America, we saw growth of 6.1%, which includes relatively consistent escalator and new business growth, partially offset by the continued elevated churn as we've highlighted on past calls. Churn in the quarter was favorable relative to our initial expectations, as the decommissioning events have been slightly delayed to later in the year. Lastly, in Asia Pacific, we saw growth of 3.4%, demonstrating steady improvement over the past three quarters. This growth acceleration was mainly driven by co-location and amendment contributions as carriers ramp up 5G deployments. Organic tenant buildings growth was further complemented by the construction of over 1,300 sites in the quarter, representing our 11th consecutive quarter of exceeding 1,000 sites, primarily in Africa and Asia Pacific, as carriers continue to invest in their network coverage and densification needs across the regions. Initial returns remained solidly in the double digits, with Q1 constructed sites yielding nearly 14% on day one. Turning to slide seven, adjusted EBITDA grew nearly 9% to approximately $1.8 billion, or nearly 10% on an FX-neutral basis for the quarter. As I mentioned in my opening remarks, adjusted EBITDA margin demonstrated an approximately 270 basis point improvement year-over-year to 63.7%, and still an over 190 basis point improvement when normalizing both periods of VIL-related revenue and bad debt reserves in India. This margin expansion was achieved through a continued focus on cost controls, allowing for approximately 100% conversion of revenue to adjusted EBITDA growth, again on a normalized VIL basis, and driving cash SG&A as a percent of total property revenue down by approximately 50 basis points year-over-year, to approximately 7.1% for the quarter. Moving to the right side of the slide, attributable AFFO growth was 1.5%, while roughly flat on a per share basis, which includes financing cost headwinds of around 7.5% and 9.5% against attributable AFFO and attributable AFFO per share growth, respectively, primarily driven by the rise in rates over the past year. Let's now turn to our revised full-year outlook. As mentioned earlier, we had a strong first quarter, outperforming our initial expectations across the majority of our key metrics. While we are excited about the results to date and the sustainable demand trends that underpinned our performance, we have largely kept core and full-year assumptions consistent to our prior guide, given our early position in the year and some of the timing benefits I alluded to earlier. This approach for our Q1 guidance is relatively consistent to past years. This also includes our assumptions around VIL-related revenue reserves, which we've held at $75 million for the year. As noted earlier, we did record approximately $33 million in VIL reserves in Q1, with the guide implying an improvement for the duration of the year, notably in the back half. This assumption is supported by certain factors that we've considered in our risk assessment, including the customer's contractual obligations for 2023, our latest conversations with VIL management, where they've committed to meet these contractual obligations, and a demonstrated improvement in payments by the customer in Q1 relative to the second half of 2022. Key updates to our revised outlook include the impacts from the recent sale of the fiber business in Mexico, together with the upsides from FX derived using our standard methodology, and several small adjustments below EBITDA at the attributable AFFO level. With that, let's dive into the numbers. Turning to slide eight, we are reducing our expectations for property revenue by approximately $20 million versus our prior outlook, driven by $45 million related to the sale of the fiber business in Mexico, partially offset by $25 million associated with the positive impacts of FX. Moving to slide nine, we are reiterating our prior outlook expectations for organic tenant buildings growth across our regions. and we'll continue to assess the positive momentum coming from our strong first quarter as we work further into the year. Moving on to slide 10, we are reiterating our adjusted EBITDA outlook with a decline of approximately $25 million related to the Mexico fiber sale, offset by $25 million from positive impacts of FX. Turning to slide 11, we are raising our expectations for AFFO attributable to common stockholders by $20 million at the midpoint, and approximately $0.05 on a per share basis, moving the midpoint to $9.65 per share. Updates to our expectations, aside from FX, include the cash-adjusted EBITDA reduction driven by the Mexico fiber sale, offset by favorable net interest, in part due to the use of the sale proceeds to pay down debt and some cash tax savings. On an isolated basis, The Mexico fiber sale resulted in a $15 million decline to attributable AFFO as compared to our prior outlook midpoint. Moving on to slide 12, I'll review our balance sheet and capital allocation priorities for 2023. Beginning on the left side of the slide, our capital allocation priorities for 2023 remain consistent with our prior outlook, which includes approximately $3 billion towards our common dividends, subject to Board approval, representing 10% growth year-over-year on a per-share basis. In addition, our CAPEX outlook midpoints remain unchanged across all categories and support our initial plans to construct approximately 4,000 new sites across our international footprint. Moving to the right side of the slide, and as I highlighted earlier, we further strengthened our investment-grade balance sheet in the first three months of the year. extending our average maturity profile to nearly six years, while reducing our floating rate debt balance to slightly over 20%. Additionally, we closed the quarter with net leverage of approximately 5.2 times, well on track towards our deleveraging target of three to five times. Consistent with our past remarks, we remain focused on driving shareholder value through our growing dividend and accretive CapEx programs. while strengthening our balance sheet through deleveraging, maximizing liquidity, managing a diverse pool of capital sources, and an ongoing assessment of market conditions to potentially further term out floating rate debt and extend our maturity profile. Turning to slide 13, and in summary, Q1 was another strong quarter across our business, with incremental steps taken towards strengthening our balance sheet. Underpinned by sustained demand trends across our global footprint, Our leading portfolio of communications infrastructure assets generated accelerating leasing growth, while our capabilities as an operator and partner continue to afford us opportunities to deploy accretive capital towards high-yielding development projects. We believe we are well-positioned to drive compelling growth supported by attractive secular trends across our global footprint and deliver solid returns to our shareholders over the long term. With that, Operator, We can open the line for questions.

Thank you. Once again, for questions, it's 1 and then 0, and you can remove yourself from queue at any time by repeating that 1-0 command. We'll go to the line of Brett Feldman. Please go ahead.

Yeah, thank you so much for taking the question. I was hoping I could ask about some background on the sale of the Mexican fiber asset. You know, what led to that? Was that something you were actively shopping, or was there an inbound that came there And then if we maybe just take a higher-level approach to this, you gave us an update. You're considering and evaluating a potential equity sale on the India business. You just sold a piece of your Mexican business. Are you undertaking a broader portfolio rationalization strategy? And if that is the case, or even if it was just India where you were to pull some additional proceeds in, how do we think about applying those proceeds, especially now that you're getting close to the high end of your target leverage range? Thank you.

Yeah, hey, Brett, I'll start, and Rod can also obviously add on here. You know, we look at every one of our assets in our markets repeatedly and continually are looking at, you know, where are the best rates of return that we can drive? Are there better places for us to reallocate capital? And so this is just an ongoing process that we do internally. We also do it with our boards. every year as well. And the business that we've had in the fiber business that we've had in Mexico, we've had for several years, was really part of our kind of initial innovation and platform extension approach. And the piece of that particular business was just a business that we couldn't generate the kinds of returns on that we had expected. And we felt that it would be in better, you know, and could be in better hands with somebody who had broader scale in the marketplace. And so as a result of our kind of ongoing review, it was a business that we've actively marketed over the last several months. And this is consistent with how we're thinking about, you know, even a market like India, as we've talked about in the past. It goes through that same kind of disciplined approach that we have. And we look at, okay, in each given market, again, like India, is there a better place to be able to reallocate some of that capital or invest in other products and services? And so that's the process that we're going through right now. And Rod and I talked about it on the last call with you all. And we'll look to, as we did with the fiber, I mean, our goal from a balance sheet perspective is to delever, as we've talked about right now. And we use those proceeds from the fiber sale to do just that. And we will continue to look at kind of delevering the balance sheet, you know, really over the next 12 to 18 months until we get it to a spot that we're really comfortable with.

Hey, Brad, if I could just add a couple of points there. Thanks for the question. You see in our quarterly numbers here, we got our leverage down to 5.2%. And, of course, as Tom said, we did use the proceeds from the fiber business to pay down debt, not just to delever, but to actually reduce our exposure to floating rate debt, which we did, and we're down around that 20% number. And that really shows our commitment to our investment-grade balance sheets. In this environment, looking to delever, that's definitely top of the list when it comes to capital allocation, you know, once you get beyond paying the dividend and the dividend growth that we have. And we'll continue to focus on delevering the business until we get down within our target range of three to five times. And we're also continuing to focus on reducing our exposure to floating rate debt. So we're within our policy now right at about 20%, but we're going to be looking at that and working to try to reduce that exposure on the floating rate side even more than that in the coming quarter. So you'll see us pretty active in that space.

Great. If you don't mind, just a quick follow-up question. I mean, just being at 5.2 turns, which is so close to the high end of your range, it doesn't seem like it would take 12 to 18 months to get into that target range. And so is the right interpretation of that statement to say that in this environment, all things being equal, you would likely just continue to de-lever and particularly to pay down floating rate debt absent something that's highly compelling, meaning you may drift below five times and closer to three if that's just the case.

Absolutely, Brett. You're exactly right. And, you know, whether we go back down to three times could be a bit of a stretch. But clearly we want to get sub five. And as Rod said, we really do want to lessen the exposure to the floating rate debt that we have on the balance sheet. Thank you, Brett.

One thing is,

One thing, Brett, that I'll just alert you to is don't be surprised if you see the 5G float back up a little bit, even maybe a 5.3 in the coming quarters before you see it trending back down. That'll just be a function of kind of where our EBITDA, our quarterly annualized EBITDA might end up landing. But that should not make you think that our commitment to delevering isn't as strong as we're suggesting it is because it is. But you may see it float back up just a touch before you see it come back down. Thanks for that, Cutler.

Thank you. We'll go next to the line of Simon Flannery with Morgan Stanley.

Good morning. This is Landon Park on for Simon. Thanks for taking the questions. I'm wondering if we can start on the data center side. You mentioned another record bookings quarter for CoreSight. You know, can you maybe provide any more color there in terms of what you're seeing in the market and where that demand is coming from? And on the data center side, can you give us an update on your edge data center? project that you were trying to get built out this year to start scaling on that front?

Yeah, sure. Let me start and then Rod can add to it. You know, it's a continuation of what we saw in 2022. I mean, the demand for the kind of the digital infrastructure that we have just continues to be strong throughout the country. And, you know, it's a really nice balance between enterprise accounts, between operators, as well as the cloud. So the pipeline remains really healthy. And we've been able and have taken advantage of the opportunity to capture some strong pricing actions throughout the year, particularly as we really continue to drive all the interconnection growth. So, you know, we're really pleased with what the team has done with the types of business that they've generated. And it really resulted, again, in a really strong Q1. And we continue to have really strong expectations for the business going forward. With regards to kind of all of the edge work, you know, we continue to work internally on identifying particular locations where We can actually drive a meg or two meg of power. We have a number of sites that are shovel-ready at this point, and we're looking to move on them. We continue to have conversations with all the service operators as well as the hyperscalers and all the cloud players to continue to move forward and figure out that value proposition that we think can be a profitable one for all of us. And so, as we've said, it's still early stages of it, but we continue to remain really excited about the ultimate opportunity.

And just one follow-up on that. Where are you at in terms of the design phase for that sort of edge data center that you guys were hoping, I think, to design this year and something that could be scaled relatively easily going forward?

You know, from a design and engineering perspective, we really have the specs really well laid out such that, as I said before, we're, you know, shovel ready on a couple of locations to start to deploy it. And so the teams know exactly what it's going to look like, have identified who the vendors are that are going to be providing a lot of the resources and pieces of it. And so we're really far along on the overall design.

What does the cost per megawatt look like for that design?

You know, I don't know that I want to get into it at this point in time. When we're ready to roll it and deploy it, we'll give more specifics as to the overall economics.

Understood. Thanks for taking the questions. You bet.

We'll go next to the line of Rick Prentice with Raymond James.

Thanks. Good morning, everybody.

Hey, Rick.

Great. I want to follow up on Brett's questions a little bit on the Mexico fiber sale. Let's go deeper into what lessons that you learned there. I think you were hoping to see some small cell, but is it just that the fiber business is dramatically different than the power business and small cells weren't playing? But what specifically did you learn? And I've got a U.S. question.

You know, Rick, it's consistent with some of the experiences candidly that we've had in the past in the business and, and, And we thought we might be able to do things differently and unique. That particular asset came with tens of thousands of sites in Mexico City, which was also very interesting to it and remains very interesting to us. And we still have the right to those particular assets as our customers deploy and densify in Region 9 or in Mexico City itself. But what we continue to learn on the retail side, just how difficult it is to be able to provision circuits and make money providing lit services to enterprise accounts, and just how competitive it is, and the SLAs that go along with them, how difficult it is to be able to maintain them in a very profitable manner. There's a tremendous amount of competition in the marketplace, And so as a result, it just made sense for us to put those particular capabilities in the hands of somebody that just does that, you know, 24-7. And hopefully that, you know, they will find more success there. But it's consistent with what we see in the fire business, you know, in all of our markets, including the U.S., you know, where we think that there's really an opportunity for fiber is when you're bringing it to the tower. you know, that's kind of a slam dunk for us because that's obviously improving the capability and the capacity of a particular site. But when we start to get into the retail aspects of it, it's just such a competitive, capital-intensive, low-margin opportunity that it just made sense for us to move out of it.

Yeah. In this debt environment, good to reduce your voting rate and save some interest. Right. On the U.S. side, can you update us as far as In aggregate, what kind of percent of your towers do you think have been touched with mid-band spectrum by the carriers? And we've heard a lot of talk that private networks are going slowly but starting to ramp, but that some of the carriers are wanting to see private networks before we get to the edge. So just trying to gauge in the U.S. where we're at as far as mid-band touches and what you're seeing on private networks.

Yeah, I mean, Rick, it still is in that kind of that 50% range. You know, some are a bit higher, some are a bit lower. But in the aggregate, it's at that 50% range, I think, that have been touched. Again, it's largely been coverage. There's some pockets of densification going on. Still largely amendment-driven, if you will, in terms of getting that ubiquitous coverage on a nationwide basis. So, you know, the carriers all remain active. And as Rod mentioned, the overall capital spend, we expect it to be lower. in 23 versus 22. But as you well know, our comprehensive MLAs really protect us from that type of volatility, if you will. And so while the carriers may spend at different levels and in a consolidated basis, slow down a bit, as would be expected in 23, we really are protected from that. On the private side, Yeah, there is a lot more dialogue going on, candidly, relative to private networks. I mean, I won't say it's a surge of deployments, but I do see our sales teams entering in some different types of conversations with carriers, enterprises, looking at deploying kind of private 5G types of networks. We have some that we're experimenting with and deploying. I think there's more to come on that, but clearly 5G, I think, plays a significant role in developing that aspect of the market.

Great. Well, hopefully continued growth here and everyone stay well. Thanks. Thanks, Rick.

We'll go next to the line of Michael Rawlings with Citi.

Thanks. Just following up on the domestic leasing environment, curious how much the leasing strength is coming from outside of the big three national wireless carriers and what's the sensitivity to performance both for 23 and as you look out to your multi-year guidance you know if that activity from these others which could include dish were to significantly increase or significantly decrease and if i could just throw in a second question um the common theme from some of the market by market commentary was a delay of churn So just curious if there's more to unpack in what's causing those delays in certain markets, and if those delays should help the 23 outlook and just be something we should be considerate of in terms of a possible headwind for part of 2024. Thanks. Hey, Michael.

Good morning. Thanks for joining, and thanks for the question. We've talked about in the past we are seeing an acceleration in the leasing environment in the U.S. in terms of our numbers and specifically the incremental revenue that we're seeing from new business coming from co-locations and amendments. So we had a really strong quarter in Q1 in the U.S. We booked about $60 million of incremental co-location amendment revenue. That's well on track to achieve our $220 million target for the year, which is a nice step up over last year. which was about $150 million. So that's the acceleration. That is primarily coming from the primary carriers, the big three, certainly. And DISH is also a contributor in that. And I think you know, and most everyone on the call knows, that we have holistic deals with the carriers in the U.S. environment. So not that we'll go through any specifics with how they – you know, work carrier by carrier. But what it does is it has our revenue contracted in there. So we have about 90% of our revenue and revenue growth for this year fully contracted. And there's no variability in that. So we feel really good about that. And then when you look at the long term going out through 2027, you've heard us talk about that 5% on average OTBG in the U.S. We have about 75% visibility out over that long period of time of the underlying revenue as well as the revenue growth. So we feel really good about that. But the vast majority of that activity is the big three plus dish. Certainly we have kind of this other category with some broadcasters, some local independent radio companies, and other people that use our towers like government agencies. And they always contribute a piece there, and they're kind of in the range that they've always been at. But the vast majority really is the big guys in the U.S., When you think about churn, we did have delays in churn, which helped support our growth rates for the quarter. So we're up to about 6.4%. Our churn came in at about 3.4% for the quarter. And the places where it's noticeable, it's a slight improvement in the U.S. because of churn, but that's not the biggest piece. It's probably more dropping down into Latin America. Within our overall guide for Latin America, we had eight percentage points in for churn. And that is primarily coming from, you know, two big carriers, Telefonica, which everyone knows what's happening with Telefonica in Mexico, as well as Oi, you know, down in Brazil. Oi represents about 2% within that 8%. And what's happening is just a delay. So we fully expect the churn to for the Telefonica churn as well as the OI churn to kind of catch up here during the year. That's why you're not seeing a change to our organic tenant billings outlook for the full year. So we do expect to kind of catch up with that. So we'll take the positive benefits for Q1 and we're still kind of being realistic and maybe a little conservative in terms of keeping our organic tenant billings growth consistent. But that's really where it is. You know, we also have elevated churn in Africa with South Sea down in South Africa and even Airtel Tigo. over in Ghana. Again, we're not changing our full year outlook. Just the timing is moving around just a bit. Thanks.

Thank you. We'll go next to the line of Matt Nicknam with Deutsche Bank.

Hey, guys. Thank you for taking the questions. Just two, if I could. First, on India, if there's any more color you can give or updates in terms of where that process is and when you may expect to have that resolved. And then maybe to dovetail on the prior question, obviously this year has been impacted by interest, FX, some VIL reserves. As we kind of move past that, is high single-digit type AFFO per share growth maybe a more viable aspirational target to consider in 2024 onwards? Or are there other maybe headwinds we should be contemplating as we start to roll the calendar? Thanks.

Hey, Nick, good morning. Let me hit the India process first, and then I'll jump into the next question. So, you know, we are running a process, as Tom and I have talked about here on this call and the prior call. It's very similar to the process we walked through when we sold an equity stake in our data center business in the U.S., as well as the European joint venture that we did. So we've gone out to, you know, the top couple dozen companies highly professional, large investors that are in the infrastructure space. Our goals remain the same, you know, that in the other transactions we did really, which is to partner to or sell the equity, you know, to a very strong investor that understands the space that can help run the business, has government connections, has carrier connections, all those sorts of things. So bringing more than just capital, but also a willingness and some experience to be a, um, strategic partner in the business. So that process continues. I would say at this point it's progressing and we've got the list worked down from the full couple dozen to a smaller list here, still very active. And I think we'll figure out where we head and what that transaction might look like in the coming quarter. So there'll be more to update you on probably in the next call. But we'll be patient, we'll be opportunistic as we kind of work through it and we'll see, you know, what, uh, what, uh, the opportunities there look like. And when we decide what we're going to do, we'll have the best interests of the shareholders in mind, of course, and as well as the employees and the, uh, and the customers there in India. But it's a very similar process that we've kind of gone through before. I guess when you think about the, you know, jumping into the next question here in terms of KFFO, um, You know we have AFFO per share growth in our guide here that's a little less than zero, so a negative growth rate. And I'll just remind you that the headwind there, as you highlighted, is really the financing interest cost, but also the issuance of the shares that we did middle of last year to help finance the core site business as well as FX. So, you know, we are seeing roughly an 8% headwind for the year around the financing side. pieces, including the spike in interest rates. We're seeing about a 1% headwind roughly on FX. And the VIL reserve that we're taking, that $75 million that we talked about, that represents about a 2% headwind as well. So when you put all that together, the core underlying business is in fact growing in that 8% to 9% range this year. And we think that feels like a pretty good place for us. So to the extent that we drive 5% organic tenant billings growth in the U.S., we drive a little bit higher organic tenant billings growth in our international markets. We complement that with another 100 basis points or so with new bills. We expand margins as we drop down through the P&L. And then we deploy capital in a prudent way. We certainly think that upper single-digit growth rate is achievable. Now, with that said, there are a few things that could still – you know, be items that we need to watch. You know, the VIL situation is a situation that's ongoing that we continue to need to watch. We don't know exactly where interest rates will go. So we're, you know, we're certainly being prudent in trying to reduce our exposure to floating rate debt, get ahead of refinancings and reduce refinancing risk. And this year we've already issued just under $3 billion of new bonds, new notes, and that removes the refinancing risk from 23 entirely. Now we're beginning to look at 24 to remove that. But you put all that, you know, together as long as interest rates, you know, cooperate, if that fact kind of hangs in there, which we're seeing favorability in the spot rates. So that's kind of trending in, in a good direction. And if we sort out the VIL kind of India volatility, then upper single digits certainly is, is achievable in this business. We've got a great portfolio of assets and a lot of really good places. And we've got customers that, uh, that are actively leasing the site. So we feel really good about the underlying core performance of this portfolio.

That's great. Thanks, Rod. You're welcome.

We'll go next to the line of David Barden with Bank of America.

Hey, guys. Thanks so much for taking the questions. So two, if I could. So first one for Rod. I just want to make sure I understand this Vodafone idea. So when we came out of the second half and you gave guidance for 2023, you said that you assumed that the collections rate would be roughly equivalent to the second half run rate for 2023, and that number was – and then you changed to a cash accounting method, maybe 70% to 80% of what you expected would be realized. And yet then you said today that you're actually – in the first quarter had better than expected collections. But then you also made a provision which was almost half the reserves that you expected for the whole year. So I don't know if I understand how all that's working. So if you could kind of help us through that and how it all worked, that would be super helpful. And then the second piece would be, Tom, you know, DISH, you know, stock is hitting a 24-year low. The bonds are yielding 20% to 30% for the next three years. It's in a distressed position. And there's a lot of questions I field from people about kind of how comfortable you feel with your contractual relationship. How does that contribute to growth? And then for those of us who maybe aren't as grizzled as some of us veterans, how do you think if a bankruptcy emerged in the wireless space, how would that work in this day and age? Thanks.

Hey, David, good morning.

I'll take the first one on VOTA. So the collections rate that we're seeing in Q1, it's not better than our expectation. It's right in line with our expectation. We expect the level of collections that we had in Q1 to continue into Q2 is kind of the way we're thinking about it. I'm not sure if I heard all the detail in your question, but I'll try to clarify for you. That collections rate that we experienced in Q1 is slightly better than what we experienced in Q4 of last year and what we experienced in Q3 of last year. So that's where we talk about the improvement in terms of the collections from Vodafone. It's really the first half of this year, let's say, compared to the last half of last year. The other part of your question, I think it kind of leads into what's happening later in the year. And we do expect an improvement in collections from Vodafone as we enter into the second half of this year. And so that's kind of where we're looking. And, you know, we talk to Voda quite frequently. You have seen, we've seen that the government converted their equity. That does kind of clear the way a little bit for Voda to work on their balance sheet and to potentially raise equity in debt. And we gather that they're working aggressively on that. You may have seen a new board appointment over in India. We think that's a really good fact as well. And we do believe that voter management is committed to and capable of increasing their payments to less than the second half of the year, and that's reflected in our outlook. So that's kind of how those bits and pieces work. Most of the $75 million that we have in there will be booked and realized in the first half of this year.

Got it.

Dave, with regards to DISH, they remain very active in the market. They are investing throughout the country to meet all of their FCC requirements. They have always been a good partner. I have a lot of faith in their leadership team there in terms of being able to develop the network and drive strategies that make sense for them. So, you know, from our perspective, you know, they have been a very strong player and a very strong partner. I'm not going to speculate on bankruptcies and all the other types of things, candidly. But just to let you know that, you know, I believe that they're a really strong leadership team, really smart, and being, I think, very, intelligent in terms of how they're building out their network.

Tom, if I could just follow up, you know, I think that there's a spectrum of relationships that tower companies have with this. Some are activity related. Some are kind of, you know, minimum take rates with contractual escalators and such. And I think that you're in the latter camp. Is that fair to say?

I mean, we've been working with DISH for a number of years in terms of helping them look at the engineering of their network and building out their network. And I would say that our U.S. leadership team has had, I think, a really strong relationship with them right out of the gate. I can't speculate on other types of relationships with some of the other tower codes, but But, you know, we've been really comfortable with the relationship and how it's been built over the years. And I think that there's a mutual respect between both entities.

Got it. All right. Thanks, guys. Appreciate it.

Thanks, David.

We'll go next to Laina Bhatia-Levy with UBS.

Great, thank you. Can you talk a little bit about how you will approach M&A? There seems to be a number of portfolios available in some of the Asian markets that you don't currently have a presence in, and maybe some in Europe. If you could just talk about your interest and how you would prioritize portfolio growth in the next couple of years, that would be great. And a second question, maybe just specifically in Europe. what do you see in terms of the carrier activity and if there's any update on how one-on-one is contributing to your growth and if they decide to grow the MVNO route, should we expect any impact on your growth outlook? Thank you.

Hey, Bhatia. Good morning. Thanks for the question. So, regarding M&A, you know, our view today is consistent with where it's been in the last couple of the last few months, certainly the last couple of quarters. which is in this environment given what's available and kind of the differences that we see in pricing between private tower sales and let's say public tower equities along with some terms and conditions that of course are important when you look at portfolio by portfolio and region by region. We continue to look at the pipeline and And in our evaluation, there's nothing in there that we see that's compelling at the moment, nothing in there that we see that would, you know, require us or prompt us to make any kind of a move. So then we settle back in and we're firmly kind of committed to our capital allocation approach here going forward. And one of the things that, you know, helps guide us is the uncertainty around rates and ensuring that we're reducing our leverage getting back below our five times in a prudent amount of time, also reducing that floating rate exposure, making sure we're aggressively managing interest rates, along with providing a dividend and a growing dividend to our shareholders. So when you look at the totality of opportunities available, we're fully committed to the dividend and growth. Next, we allocate capital to our capital programs, our internal programs where we build towers. We'll build around 4,000 this year around the globe. Those come in at very high day one NOI yields, roughly mid-teens, 14% is the number for Q1, so we feel that that's really good. We're also allocating some capital within our capital number for this year towards core site in the mid-300s, let's call it $360 million or so, and as we've discussed, that's kind of within their cash flow generation. They produce EBITDA or gross margin, let's say, of in the mid-400s, so we're you know, we're comfortably kind of reinvesting their cash flow back into their business and make sure that we have capacity to continue to satisfy the customers and keep up with the record demand that we experienced last year in the first quarter of this year. And I'll highlight again for the folks on the call here that our capital programs this year are slightly below last year, not materially below, but You know, they're slightly below, and that's kind of a function of allocation capital, you know, towards balance sheet and reducing leverage and reducing our floating rate exposure. When you think about, you know, Europe and Asia, like, we would want to be larger in Europe. We think that market's very constructive for us. We do think there are some interesting portfolios there, but nothing that we've seen yet in terms of terms and conditions and pricing and all the different pieces lining up where it would need to be. we don't expect that to happen anytime soon but over the next you know several years you know let's call it two to five years europe is a place where you know we could be active in looking at different portfolios we uh we think there's really good backdrop in in europe with that said if we don't buy anything in europe we've got a really good portfolio and feel good about our position you know day one um and when you think of asia you know where we we spent a lot of time in the last couple years looking at different transactions in Asia. And again, nothing kind of lined up and met our criteria. We're very disciplined when it comes to pricing, terms and conditions, counterparty, and also country evaluations and things like that. We'll continue to be disciplined. And I do think you'll see us, you know, be very committed to balance sheet, reducing leverage, reducing floating rate debt, and not active in any major way in M&A in the near term. And then maybe in Europe, the other thing, just to hit your other question, we're seeing good activity across Europe. When you think about Germany, kind of the central point that Dros 101 is just beginning to ramp up their network build and a full greenfield 5G build. So we're seeing a little bit of revenue activity from that, but we're excited to support them in their endeavor to build out a network there. And we do think that we'll see more activity with them in the second half of this year and certainly in years to come. But then when you think about, you know, France and Germany and Spain across the board, we think there's a really good backdrop, a good set of counterparties and carriers there for us to support. And we feel really good about the growth rates and our position within those markets. You know, we guided when we did the Telpius transaction that we would be achieving mid-single-duty. know organic tenant buildings growth we've been above that uh you know since we acquired the portfolio initiative we're again looking at upper single digits in that seven to eight percent range which is a really nice place we're benefited from the activity that we're seeing uh from the carriers in terms of the leasing we're also benefited from the contract terms where we have uncapped escalators in germany and in spain which is very helpful and then we're seeing very low churn rates Again, because of the demand that we see from the carriers to build out networks and also the way the contracts work that we've been able to negotiate. So we feel really good about our position in Europe. We feel really good about our ability to support the carriers' endeavors to build out networks in Europe, and we think there are some good things to come in Europe.

Very helpful. Thanks a lot.

You're welcome.

Thank you. We'll go next to the line of Brandon Nispel with KeyBank Capital Markets.

Great. Thank you for getting me in. I guess when we look at the U.S. leasing COLO line, $60 million, I think, was a record for the company ever. Are we at the point where that COLO number is peaking? And just because if we look at the midpoint of the guide, $220, it would imply some deceleration. And then can you just help us, just refresh us in terms of how your master lease agreements work in terms of the use fee provided to your customers? I guess my understanding is in year one, of those contracts. There's typically the highest use fee contribution and that those generally fall off as the term of the contract extends. But I was hoping you can help explain it for us. Thanks. Yeah, good morning, Brandon.

Thanks for the question. So, you are correct in terms of the organic new biz, the incremental new biz we get from co-locations and amendments. That $60 million number, we do see that as a peak for the year. but with that said you know it'll be we expect that number on a quarterly basis to be between 50 and 60 million uh for the next three quarters for the full year so it's not as though we're going to see a big drop off it is it is pretty linear um there the way things work so but you will see it drift down a little bit and that is kind of a function of um of the timing of the mlas and the use right fees i don't want to get into too much detail about the contracts and the way the contracts work but You can have timing differences here where you have use rate fees that step up in a certain quarter. They're mostly front-end loaded. And then you also have the ability to get additional revenue over and above that, which can be more variable kind of throughout the quarter. I would say that the $220 million that we're seeing this year, there is kind of a function there with the MLAs and some of the transition periods that we had kind of moving in and out of different MLAs that that does help support that number a bit. So, you know, I wouldn't be surprised if that number is a little bit lower next year, you know, but we, with that said, we're still seeing kind of the acceleration of, of that revenue kind of as we enter the beginning of this year. And again, it'll, it'll paper off on a quarterly basis, but we'll hit, we'll hit the 220 million for the full year. That again is up, you know, almost 50% from the one 50 that we, that we hit last year. And we continue to feel really good about everything. that we see and work on in terms of the U.S. business being in a strong position to achieve 5% organic tenant buildings growth on average out over the time period through 2027. Great. Thank you.

You're welcome.

And we have time for one more question. That will come from the line of Eric Lubko of Wells Fargo.

Great. Thanks for squeezing me in. Just quickly touching on the data center business, obviously continuing to perform well. Maybe you could talk about the accelerated growth you're seeing there and kind of disaggregated between just new leasing and then also pricing. We've heard that supply is really historically tight in data centers and a lot of operators are continuing to push rents. And then you made a comment, I think, that you're seeing some pockets of densification in certain markets. Maybe you could talk about how you think the cadence of that evolves over the next few years, especially as some of the some of the mid band spectrum upgrades, uh, amendment revenues start to taper off in the next couple of years.

Thank you. Hey, good morning. Thanks for joining the call. So we're, we're very excited about the data center business that we have. I think you've heard us say in the past that it is a, it's a differentiated set of assets, um, to the extent that it's a cloud rich center facilities, multiple cloud on ramps and lots of the facilities that we have, their network then, and, uh, lots of enterprise customers in there. And that really means there's a lot of interconnection. People come into these facilities for those multiple cloud on-ramps and to interconnect with everyone else, the clouds, the networking companies, and the other enterprise companies. That is helping drive this record growth that we've seen. So as we've talked about, we saw record new bids for CoreSight through the full year 2022. We also saw a continuation of that where we had a record – new biz performance for Q1, kind of quarter over quarter from prior year, I should say, from Q1 of last year. So that strong performance certainly is continuing. That resulted in a 10% revenue growth year on year for that business. That's higher than what we underwrote that business for. We've talked about it kind of upper single digit, 6% to 8% economic growth in that set of assets. That's the way we underwrote it. And We outperformed last year. We've got a really good start this year. Maybe that 10% sinks back a little bit, but we should be solidly in the upper single-digit growth rate and within our underwriting targets for that business. We're also seeing really strong growth in interconnection revenue, up about 9.5%. And that's really key because that really represents what these customers are doing within our facilities and why they're there. And it makes the revenue that we have a lot more durable, dependable, and sticky because they've got these relationships with other enterprise customers and into all these networking companies. So that is a really good fact. We're also increasing prices within that market, being sensitive to customers as well, but also trying to drive growth in that business and making sure we're getting the value that these assets are contributing to our customers. So we continue to see cash mark to market increases, you know, in the three to 5% range, uh, three to 4% range, which is, uh, which is going well, we have escalators and lots of our contracts. So we generally see a 3% escalator kind of in our underlying contracts. The churn rate continues to be in the mid single digits in that business, in the, in the six and a half percent range, well within our six to 8% target. And, um, You know, and our maintenance cap X is right within our target range of about 2% of revenue. It runs in between $20 and $30 million a year. So we're really pleased with the way that the team is running that business and the way those assets are performing for us and, quite frankly, what those assets do for our customers, which they're really important, you know, assets for the customers. And we're continuing at a gross margin that's almost 60%, you know, 60%. We couldn't be more thrilled with the performance of the data center business and the future outlook, quite frankly, and the optionality that those assets provide us when you think about the edge and potentially connecting those assets into our towers and into edge compute facilities closer to our customers, base radios on the wireless side, but also closer to network companies as well as enterprise customers that are scattered throughout the U.S., That business and the future outlook there is really strong.

Great.

Thank you. You're welcome. Thank you.

Great. Thank you, everybody, for joining today's call. If you have any questions, please feel free to reach out to myself or the investor relations team. Thanks, everyone.

Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.

We're sorry. Your conference is ending now.

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Ladies and gentlemen, thank you for standing by. Welcome to the American Tower first quarter 2023 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 on your device. 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 Tower's first quarter 2023 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, will provide an update on our U.S. Tower and data center businesses. And then Rod Smith, our executive vice president, CFO, and treasurer, we'll discuss our Q1 2023 results and revised four-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 2023 outlook, capital allocation, and future operating performance, our collections expectations associated with Vodafone Idea in 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 set forth in our Form 10-K for the year ended 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 us this morning. As is customary for our first quarter call, my comments today will focus on our U.S. business, which is principally comprised of our tower and data center platforms, which made up 55% of our consolidated property revenue, and 64% of our property operating profit in the first quarter of 2023. With regard to our tower platform, the secular tailwinds that have supported outstanding growth over the last two decades remain consistent. Every year, US wireless subscribers consume more mobile data through a growing number of devices and applications, requiring faster speeds and lower latency performance. As a result of the increasing levels of data being consumed our customers are deploying more equipment than our towers to meet that demand. In addition, and more than ever before, our customers are utilizing multiple bands of Spectrum to deliver those high-quality, ubiquitous levels of service. In 2022, U.S. carriers deployed around $40 billion in network capital to provide nationwide 5G services on mid-band Spectrum, This record level of activity is reflective of the first major wave of the typical investment cycles we've seen over the last 20 years, during which carriers amend existing sites to provide initial coverage and capacity with the new technology and harvest benefits from core network enhancements and spectral efficiencies. In previous cycles, these initial peaks have typically been followed by periods of moderation in overall spending. driven in part by reductions in spend on core upgrades, fiber, and other infrastructure assets. However, we've historically seen tower spend remain in focus as our customers look to support continuous growth in mobile data consumption and provide market-leading network quality and reliability. And we would expect more of the same over the 5G cycle. In 2023, while we're still in the relatively early stages of the overall 5G rollout, We continue to see customers making significant investments into their networks as part of their broader coverage initiatives, having yet to invest in densification at scale. These investments into adding and modifying equipment on our sites, which we've monetized through our MLAs, is driving 5.6% organic growth in Q1, or nearly 7% absent the impacts of the spring churn, our strongest quarter since Q1 of 2020. And for the full year, we expect $220 million in year-over-year growth contributions from co-locations and amendments, a record for our U.S. business. Looking out over the next several years, we see an environment that is supportive of continued strong performance in the U.S. as the 5G investment cycle progresses and densification occurs. At American Tower, we've underwritten this expectation into the comprehensive MLAs that underpin our expectation of to deliver average annual organic growth of at least 5% or 6% excluding the spring churn over the next five years, which closely mirrors the 6.2% average organic growth we experienced between 2016 and 2020. Further, industry estimates suggest total monthly mobile data consumption that will require increased speed and lower latency is set to grow at a compounded annual rate of above 20% over the next five years, which we expect to be driven by continuous increases in mobile network utility, irrespective of potential impacts from any one category of new applications. As a result, we believe our customers' networks will need to provide at least two times the network capacity they have today in three to four years, or roughly three times today's capacity as we approach the end of the decade. Over time, we expect our customers to meet this demand through continued network upgrade and densification initiatives, spectrum refarming, and the deployment of 5G on new spectrum. In this context, we believe our portfolio of over 43,000 sites is optimally positioned to serve our customers across the balance of the 5G cycle with significant capacity to accommodate additional equipment and new tenancies, even beyond what's been contractually locked in today. As we've done historically, we anticipate leveraging our best-in-class internal processes to generate incremental efficiency in the business and higher levels of service for our customers, with both resulting in increasing conversion of our top-line growth to AFFO. Through a combination of organic growth and M&A, we've added nearly $2.4 billion in annual property revenues to our U.S. and Canada segment since 2014, paired with less than $60 million in incremental SG&A expense, or roughly 2% of the corresponding revenue growth. This prudent approach to cost management and operational efficiency has helped to drive operating profit margin expansion in the segment by roughly 400 basis points over the period. Going forward, given the benefits of our established scale, demonstrated ability to maximize the operating leverage potential inherent to our model, In concerted efforts to further drive cost efficiencies at every level of the organization, we see a tremendous opportunity for capacity utilization in our existing assets to drive high margin growth and expanding returns on invested capital as the 5G landscape continues to mature. Now, with respect to our CoreSight U.S. data center platform, we are equally excited about the prospects for value creation. Increasingly complex digital business demands require enhanced infrastructure, performance, and flexibility. CoreSight serves as an optimal nexus where the cloud service providers, service integrators, networks, and enterprise customers interoperate to propel their business initiatives forward. We continue to see customers landing and expanding with CoreSight because it provides native access to key cloud service platforms and a diverse ecosystem. which allows them to serve their customers in a way that is flexible, scalable, and that drives growth and efficiency in their businesses. This is reflected in the continued strength of CoreSight's leasing results, interconnection growth driven by both existing customers and new logos, as well as the ability to drive pricing, solid renewal rates, and generate industry-leading returns. We also recognize that we're still in the early stages of a broader digital transformation movement. Each year, data center workloads and compute instances continue to grow at a rate of approximately 12%, and the vast majority of all new IT architecture is deployed in the cloud and hybrid environments that CoreSight is uniquely positioned to support. Additionally, we continue to expect to generate long-term growth from enterprise digital transformations and IT hybridization as organizations face workload management challenges that require the operational optionality, agility, and critical interconnection capabilities that our CoreSight data center platform offers. Importantly, the absorption of this type of demand drives incremental value to our interconnection ecosystem and further builds on the momentum behind the CoreSight flywheel and the value we can provide our customers. So we see a long tail of opportunity to continue growing and scaling our campuses and we have the added benefit of being able to prudently select opportunities that are accretive to our ecosystem. As a result, we'll continue to invest cash flows generated in the data center segment back into the business, provide our customers incremental confidence in a long runway for growth with core site, and generate highly attractive returns. Meanwhile, our teams continue working to develop solutions that leverage our combined communications real estate platforms to position American Tower as a leading infrastructure provider for the networks of the future and create incremental value for our customers and shareholders alike. In summary, our foundational U.S. Tower and data center platforms are set to deliver continued growth and strong returns. We believe that the long-term secular tailwinds that differentiated high-quality nature of both our U.S. Tower portfolio and our data center interconnection platform, the value proposition they represent for our customers, and the seasoned, high-talented teams managing them uniquely positions American Tower to create significant incremental value for the industry and our shareholders for many years to come. With that, I'll hand the call over to Rod to discuss our Q1 results and expectations for the balance of the year. Rod?

Thanks, Tom. Good morning, and thank you for joining today's call. As you saw in our press release, we are off to a solid start to the year, with performance exceeding our initial expectations across many of our key metrics. Before diving into the results and the revised outlook for 2023, I'll start with a few highlights from the quarter. First, despite ongoing macroeconomic volatility, strong demand trends continue to drive favorable leasing and growth across our global footprint, which is a testament to the resiliency and stability of our business. In Q1, We posted consolidated organic tenant billings growth of over 6%, our highest rate since 2017, and an over 300 basis point acceleration as compared to Q1 of 2022. This includes growth through co-locations and amendments of over 5%, our highest in three years, as carriers continue to leverage our leading macro tower portfolio to aggressively roll out their networks to meet customer demand. Organic leasing growth was further complemented by another quarter of strong new build volumes as we continue to leverage our scale and capabilities to attract accretive development opportunities from our leading customers across our international business. Finally, we had another record quarter of leasing from CoreSight, continuing the momentum from what was a record-breaking 2022 and exceeding our initial underwriting plan. Complementing our solid top-line trends, Our focus on cost management, combined with the inherent operating leverage in the tower model, drove margin expansion of approximately 270 basis points as compared to Q1 of last year, to 63.7%, with the benefits being more noticeable given the absence of material M&A. Going forward, we'll continue to manage our business with cost discipline, maximizing the profitability of our strong, reoccurring organic growth profile. Next, we access the debt capital markets. successfully issuing $1.5 billion in unsecured notes and $1.3 billion in secured notes at attractive terms. Proceeds from these offerings more than covered our Q1 maturities. And the remainder, together with the proceeds from various strategic initiatives, including the sale of the Mexico fiber business, were used to pay down floating rate debt. As a result, we've reduced our floating balance by nearly $800 million year to date. now representing slightly over 20% of our debt structure. We'll continue to evaluate opportunities to further manage this balance over the course of the year. Finally, we continue to have constructive discussions with potential investors as we assess strategic options for our India business. We remain focused on executing an outcome that maximizes value and optimizes our global portfolio mix and the risk-adjusted return profile for American Tower and its stakeholders. As we move forward, we will keep our investors informed of any new developments. With that, please turn to slide six, and I'll review our property revenue and organic tenant billings growth for the quarter. As you can see, Q1 consolidated property revenue growth was over 4%, and approximately 7% on an FX neutral basis over the prior year period. This included U.S. and Canada property revenue growth of over 4%, international growth of over 3%, or nearly 9%, excluding the impacts of currency fluctuations, and approximately 10% growth in our U.S. data center business. In the quarter, we benefited from accelerated decommissioning-related settlements in Latin America, totaling approximately $39 million, partially offset by Vodafone Idea or VIL, revenue reserves of approximately $33 million, and representing a modest improvement to payment trends as compared to the second half of 2022. Moving to the right side of the slide, organic tenant billings growth was a significant contributor to our overall revenue growth, standing at 6.4% on a consolidated basis, which, as I mentioned, was our highest quarter since Q3 of 2017. In our U.S. and Canada segment, organic tenant billings growth was 5.6%, and nearly 7% absent sprint-related churn, including a record quarter of co-location and amendment growth contributions of nearly $60 million, a nearly 65% increase as compared to the growth reported in Q1 of 2022. Growth modestly exceeded our expectations, driven by some delays in churn, which we still anticipate to occur in the year, and to a lesser extent, new business upside. Similarly, Our international operations experienced improvements across nearly all reported segments, generating organic tenant billings growth of 7.5%, and over 180 basis point acceleration from Q4 of 2022, which includes the benefits of CPI-linked escalator commencements across various contracts. Africa generated its highest quarter on record, with organic tenant billings growth of 12.1%, including escalator contributions of over 10%, and a continuation of solid new business of nearly 7%. Growth in the quarter benefited from some delays in previously communicated carrier consolidation-driven churn, which we still expect to occur in the year. Turning to Europe, we saw growth of 8.2%, including over 6% from escalations, demonstrating our ability to monetize on CPI-linked escalators across the vast majority of our portfolio in the region. In Latin America, we saw growth of 6.1%, which includes relatively consistent escalator and new business growth, partially offset by the continued elevated churn, as we've highlighted on past calls. Churn in the quarter was favorable relative to our initial expectations, as the decommissioning events have been slightly delayed to later in the year. Lastly, in Asia Pacific, we saw growth of 3.4%, demonstrating steady improvement over the past three quarters. This growth acceleration was mainly driven by co-location and amendment contributions as carriers ramp up 5G deployments. Organic tenant buildings growth was further complemented by the construction of over 1,300 sites in the quarter, representing our 11th consecutive quarter of exceeding 1,000 sites, primarily in Africa and Asia-Pacific, as carriers continue to invest in their network coverage and densification needs across the regions. Initial returns remain solidly in the double digits, with Q1 constructed sites yielding nearly 14% on day one. Turning to slide seven, adjusted EBITDA grew nearly 9% to approximately $1.8 billion, or nearly 10% on an FX neutral basis for the quarter. As I mentioned in my opening remarks, Adjusted EBITDA margin demonstrated an approximately 270 basis point improvement year-over-year to 63.7%, and still an over 190 basis point improvement when normalizing both periods for VIL-related revenue and bad debt reserves in India. This margin expansion was achieved through a continued focus on cost controls, allowing for approximately 100% conversion of revenue to adjusted EBITDA growth. again on a normalized VIL basis, and driving cash SG&A as a percent of total property revenue down by approximately 50 basis points year over year to approximately 7.1% for the quarter. Moving to the right side of the slide, attributable AFFO growth was 1.5%. While roughly flat on a per share basis, which includes financing cost headwinds of around 7.5% and 9.5% against attributable AFFO and attributable AFFO per share growth, respectively, primarily driven by the rise in rates over the past year. Let's now turn to our revised full-year outlook. As mentioned earlier, we had a strong first quarter, outperforming our initial expectations across the majority of our key metrics. While we are excited about the results to date and the sustainable demand trends that underpinned our performance, we have largely kept core and full-year assumptions consistent to our prior guide, given our early position in the year and some of the timing benefits I alluded to earlier. This approach for our Q1 guidance is relatively consistent to past years. This also includes our assumptions around VIL-related revenue reserves, which we've held at $75 million for the year. As noted earlier, We did record approximately $33 million in VIL reserves in Q1, with the guide implying an improvement for the duration of the year, notably in the back half. This assumption is supported by certain factors that we've considered in our risk assessment, including the customer's contractual obligations for 2023, our latest conversations with VIL management, where they've committed to meet these contractual obligations. and a demonstrated improvement in payments by the customer in Q1 relative to the second half of 2022. Key updates to our revised outlook include the impacts from the recent sale of the fiber business in Mexico, together with the upsides from FX derived using our standard methodology, and several small adjustments below EBITDA at the attributable AFFO level. With that, let's dive into the numbers. Turning to slide eight, we are reducing our expectations for property revenue by approximately $20 million versus our prior outlook, driven by $45 million related to the sale of the fiber business in Mexico, partially offset by $25 million associated with the positive impacts of FX. Moving to slide nine, we are reiterating our prior outlook expectations for organic tenant billings growth across our regions, and we'll continue to assess the positive momentum coming from our strong first quarter as we work further into the year. Moving on to slide 10, we are reiterating our adjusted EBITDA outlook with a decline of approximately $25 million related to the Mexico fiber sale, offset by $25 million from positive impacts of FX. Turning to slide 11, we are raising our expectations for AFFO attributable to common stockholders by $20 million at the midpoint and approximately 5 cents on a per share basis, moving the midpoint to $9.65 per share Updates to our expectations, aside from FX, include the cash-adjusted EBITDA reduction driven by the Mexico fiber sale, offset by favorable net interest, in part due to the use of the sale proceeds to pay down debt and some cash tax savings. On an isolated basis, the Mexico fiber sale resulted in a $15 million decline to attributable AFFO as compared to our prior outlook midpoint. Moving on to slide 12. I'll review our balance sheet and capital allocation priorities for 2023. Beginning on the left side of the slide, our capital allocation priorities for 2023 remain consistent with our prior outlook, which includes approximately $3 billion towards our common dividend subject to Board approval, representing 10% growth year-over-year on a per-share basis. In addition, our CapEx outlook midpoints remain unchanged across all categories. and support our initial plans to construct approximately 4,000 new sites across our international footprint. Moving to the right side of the slide, and as I highlighted earlier, we further strengthened our investment grade balance sheet in the first three months of the year, extending our average maturity profile to nearly six years, while reducing our floating rate debt balance to slightly over 20%. Additionally, we closed the quarter with net leverage of approximately 5.2 times well on track towards our deleveraging target of three to five times. Consistent with our past remarks, we remain focused on driving shareholder value through our growing dividend and accretive CapEx program, while strengthening our balance sheet through deleveraging, maximizing liquidity, managing a diverse pool of capital sources, and an ongoing assessment of market conditions to potentially further term out floating rate debt and extend our maturity profile. Turning to slide 13, and in summary, Q1 was another strong quarter across our business, with incremental steps taken towards strengthening our balance sheet. Underpinned by sustained demand trends across our global footprint, our leading portfolio of communications infrastructure assets generated accelerating leasing growth, while our capabilities as an operator and partner continue to afford us opportunities to deploy accretive capital towards high-yielding development projects, We believe we are well positioned to drive compelling growth supported by attractive secular trends across our global footprint and deliver solid returns to our shareholders over the long term. With that, operator, we can open the line for questions.

Thank you. Once again, for questions, it's one and then zero, and you can remove yourself from queue at any time by repeating that one zero command. We'll go to the line of Brett Feldman. Please go ahead.

Yeah, thank you so much for taking the question. I was hoping I could ask about some background on the sale of the Mexican fiber asset. You know, what led to that? Was that something you were actively shopping or was there an inbound that came there? And then if we maybe just take a higher level approach to this, you know, you gave us an update. You're considering and evaluating a potential equity sale on the India business. You just sold a piece of your Mexican business. Are you undertaking a broader portfolio rationalization strategy? And if that is the case, or even if it was just India where you were to pull some additional proceeds in, how do we think about applying those proceeds, especially now that you're getting close to the high end of your target leverage range? Thank you.

Yeah, hey, Brett, I'll start, and Rod can also obviously add on here. You know, we look at every one of our assets in our markets repeatedly and continually are looking at, you know, where are the best rates of return? that we can drive. Are there better places for us to reallocate capital? And so this is just an ongoing process that we do internally. We also do it with our board every year as well. And the business that we've had in, the fiber business that we've had in Mexico, we've had for several years. It was really part of our kind of initial innovation and platform extension approach. And a piece of that particular business was just a business that we couldn't generate the kinds of returns on that we had expected. And we felt that it could be in better hands with somebody who had broader scale in the marketplace. And so as a result of our kind of ongoing review, it was a business that we've actively marketed over the last several months. And this is consistent with how we're thinking about even a market like India, as we've talked about in the past. It goes through that same kind of disciplined approach that we have. And we look at, okay, in each given market, again, like India, is there a better place to be able to reallocate some of that capital or invest in other products and services? And so that's the process that we're going through right now and Rod and I talked about it on the last call with you all. And we'll look to, as we did with the fiber, I mean, our goal from a balance sheet perspective is to delever, as we've talked about right now. And we use those proceeds from the fiber sale to do just that. And we will continue to look at kind of delevering the balance sheets you know, really over the next 12 to 18 months until we get it to a spot that we're really comfortable with.

Hey, Brad, if I could just add a couple of points there. Thanks for the question. You see in our quarterly numbers here, we got our leverage down to 5.2%. And, of course, as Tom said, we did use the proceeds from the fiber business to pay down debt, not just to delever, but to actually reduce our exposure to floating rate debt, which we did, and we're down around that 20%. number. And that really shows our commitment to our investment grade balance sheet. In this environment, looking to de-lever, that's definitely top of the list when it comes to capital allocation, you know, once you get beyond paying the dividend and the dividend growth that we have. And we'll continue to focus on de-levering the business until we get down within our target range of three to five times. And we're also continuing to focus on reducing our exposure to floating rate debt. So, we're within our policy now right at about 20%, but we're going to be looking at that and working to try to reduce that exposure on the floating rate side even more than that in the coming quarter. So, you'll see us pretty active in that space.

Great. If you don't mind, as a quick follow-up question, I mean, just being at 5.2 turns, which is so close to the high end of your range, it doesn't seem like it would take 12 to 18 months to get into that target range. And so, Is the right interpretation of that statement to say that in this environment, all things being equal, you would likely just continue to de-lever and particularly to pay down floating rate debt absent something that's highly compelling, meaning you may drift below five times and closer to three if that's just the case?

Absolutely, Brett. You're exactly right. And, you know, whether we go back down to three times could be a bit of a stretch there. But clearly we want to get sub five. And as Rod said, we really do want to lessen the exposure to the floating rate debt that we have on the balance sheet.

Thank you.

One thing, Brett, that I'll just alert you to is don't be surprised if you see the five float back up a little bit, even maybe a 5.3 in the coming quarters before you see it trending back down. That'll just be a function of kind of where our EBITDA, our quarterly annualized EBITDA might end up landing. But that should not make you think that our commitment to delevering isn't as strong as we're suggesting it is because it is. But you may see it float back up just a touch before you see it come back down. Thanks for that, Cutler.

Thank you. We'll go next to the line of Simon Flannery with Morgan Stanley.

Good morning. This is Landon Park on for Simon. Thanks for taking the questions. I'm wondering if we can start on the data center side. You mentioned another record bookings quarter for CoreSight. Can you maybe provide any more color there in terms of what you're seeing in the market and where that demand is coming from? And on the data center side, can you give us an update on your edge data center project that you were trying to get built out this year to start scaling on that front?

Yeah, sure. Let me start and then Rod can add to it. You know, it's a continuation of what we saw in 2022. I mean, the demand for the kind of the digital infrastructure that we have just continues to be strong throughout the country. And, you know, it's a really nice balance between enterprise accounts, between operators, as well as the cloud. So, The pipeline remains really healthy, and we've been able and have taken advantage of the opportunity to capture some strong pricing actions throughout the year, particularly as we really continue to drive all the interconnection growth. So, you know, we're really pleased with what the team has done with the types of business that they've generated, and it really resulted, again, in a really strong Q1. and we continue to have really strong expectations for the business going forward. With regards to kind of all of the edge work, we continue to work internally on identifying particular locations where we can actually drive a meg or two meg of power. We have a number of sites that are shovel-ready at this point, and we're looking to move on them. We continue to have conversations with you know, all the service operators as well as the hyperscalers and all the cloud players to continue to move forward and figure out, you know, that value proposition that we think can be a profitable one for all of us. And so, as we've said, it's still early stages of it, but we continue to remain really excited about the ultimate opportunity.

And just one follow-up on that. Where are you at in terms of the design phase for that sort of edge data center that you guys were hoping, I think, to design this year, and it's something that could be scaled relatively easily going forward.

You know, from a design and engineering perspective, we really have the specs really well laid out, such that, as I said before, we're, you know, shovel ready on a couple of locations to start to deploy it. And so, The teams know exactly what it's going to look like, have identified who the vendors are that are going to be providing a lot of the resources and pieces of it. And so we're really far along on the overall design.

What does the cost per megawatt look like for that design?

You know, I don't know that I want to get into it at this point in time. When we're ready to roll it and deploy it, we'll give more specifics as to the overall economics

Understood. Thanks for taking the questions. You bet.

We'll go next to the line of Rick Prentice with Raymond James.

Thanks. Good morning, everybody.

Hey, Rick.

Great. I want to follow up on Brett's questions a little bit on the Mexico fiber sale. Let's go deeper into what lessons that you learned there. I think you were hoping to see some small sale, but is it just that the fiber business is dramatically different then the power business and small cells weren't playing. But what specifically did you learn? And I've got a U.S. question.

You know, Rick, it's consistent with some of the experiences, candidly, that we've had in the past in the business. And we thought we might be able to do things differently and unique. That particular asset came with tens of thousands of sites in Mexico City, which was also – very interesting to it and remains very interesting to us. And we still have the right to those particular assets as our customers deploy and densify in Region 9 or in Mexico City itself. But what we continue to learn on the retail side, just how difficult it is to be able to provision circuits and make money providing lit services to enterprise accounts. And that just how competitive it is and, and the SLAs that go along with them, how difficult it is to be able to maintain them in a, in a very profitable manner. There's a tremendous amount of competition in the, in the marketplace. And so as a result, it just made sense for us to put those particular capabilities in the hands of, of somebody that just does that, you know, 24 seven. And, and, and hopefully that they, you know, they, they will find more success there, but it's, It's consistent with what we see in the fire business in all of our markets, including the US. Where we think that there's really an opportunity for fiber is when you're bringing it to the tower. That's kind of a slam dunk for us because that's obviously improving the capability and the capacity of a particular site. But when we start to get into the retail aspects of it, it's just such a competitive, capital-intensive, low-margin business. that it just made sense for us to move out of it.

Yeah. In this debt environment, good to reduce your voting rate and save some interest. Right. On the U.S. side, can you update us as far as an aggregate? What kind of percent of your towers do you think have been touched with mid-band spectrum by the carriers? And we've heard a lot of talk that private networks are going slowly but starting to ramp. but that some of the carriers are wanting to see private networks before we get to the edge. So just trying to gauge in the U.S. where we're at as far as mid-band touches and what you're seeing on private networks.

Yeah, I mean, Rick, it still is in that kind of that 50% range. You know, some are a bit higher, some are a bit lower. But in the aggregate, it's at that 50% range, I think, that have been touched. Again, it's largely been coverage. There's some pockets of densification going on. still largely amendment-driven, if you will, in terms of getting that ubiquitous coverage on a nationwide basis. So, you know, the carriers all remain active. And as Rod mentioned, the overall capital spend, we expect it to be lower in 23 versus 22. But as you well know, our comprehensive MLAs really protect us from that type of volatility, if you will. And so while the carriers may spend at different levels and in a consolidated basis, slow down a bit, as would be expected in 23, we really are protected from that. On the private side, yeah, there is a lot more dialogue going on, candidly, relative to private networks. I mean, I won't say it's a surge of deployments, but I do see our sales teams entering into different types of conversations with carriers, enterprises, looking at deploying kind of private 5G types of networks. We have some that we're, you know, experimenting with and deploying. I think there's more to come on that. But clearly 5G, I think, will play a significant role in developing that aspect of the market.

Great. Well, hopefully continued growth here and everyone stay well. Thanks. Thanks, Rick.

We'll go next to the line of Michael Rawlings with Citi.

Thanks. Just following up on the domestic leasing environment, curious, you know, how much of the leasing strength is coming from outside of the big three national wireless carriers? And what's the sensitivity to performance, both for 23 and as you look out to your multi-year guidance, you know, if that activity from these others, which could include DISH, were to significantly increase or significantly decrease? And if I could just throw in a second question, the common theme from some of the market-by-market commentary was the delay of churn. So just curious if there's more to unpack in what's causing those delays in certain markets and if those delays should help the 23 outlook and just be something we should be considerate of in terms of a possible headwind for part of 2024. Thanks.

Hey, Michael. Good morning. Thanks for joining and thanks for the question. We talked about in the past, we are seeing an acceleration in the leasing environment in the U.S. in terms of our numbers and specifically the incremental revenue that we're seeing from new business coming from co-locations and amendments. So, we had a really strong quarter in Q1 in the U.S. We booked about 60 million of incremental co-location amendment revenue that's well on track to achieve our 220 million target for the year, which is a nice step up over last year, which was about a hundred and 150 million. So that's the acceleration that we're seeing that is primarily coming, you know, from the, uh, the primary carriers, the big three, certainly, and dish is also a contributor in that. Uh, and I think, you know, and, and most everyone on the call, uh, knows that we have holistic deals with the carriers, um, you know, in the U.S. environment. So not that we'll go through any specifics with how they, you know, work carrier by carrier. But what it does is it has our revenue contracted in there. So we have about 90% of our revenue and revenue growth for this year fully contracted. And there's no variability in that. So we feel really good about that. And then when you look at the long term going out through 2027, you've heard us talk about that 5% on average OTBG growth. In the US, we have about 75% visibility out over that long period of time of the underlying revenue as well as the revenue growth. So we feel really good about that. But the vast majority of that activity is the big three plus dish. Certainly, we have kind of this other category with some broadcasters, some local independent radio companies and other people that use our towers like government agencies. And they always contribute a piece there, and they're kind of in the range that they've always been at. But the vast majority really is the big guys in the U.S. When you think about churn, you know, we did have delays in churn, which helped support our growth rates for the quarter. So we're up to about 6.4%. Our churn came in at about 3.4% for the quarter. And the places where it's noticeable, you know, a slight, improvement in the U.S. because of churn, but that's not the biggest piece. It's probably more dropping down into Latin America. Within our overall guide for Latin America, we had eight percentage points in for churn, and that is primarily coming from two big carriers, Telefonica, which everyone knows what's happening with Telefonica in Mexico, as well as Oi down in Brazil. OY represents about 2% within that 8%. And what's happening is just a delay. So we fully expect the churn for the Telefonica churn as well as the OY churn to kind of catch up here during the year. That's why you're not seeing a change to our organic tenant billings outlook for the full year. So we do expect to kind of catch up with that. So we'll take the positive benefits for Q1, and we're still kind of being realistic and maybe a little conservative in terms of keeping our organic tenant billings growth. But that's really where it is. You know, we also have elevated churn in Africa with South Sea down in South Africa and even Airtel Tigo over in Ghana. And, you know, again, we're not changing our full year outlook. We're just the timing is moving around just a bit. Thanks.

Thank you. We'll go next to the line of Matt Nicknam with Deutsche Bank. Okay.

Hey, guys. Thank you for taking the questions. Just two, if I could. First, on India, if there's any more color you can give or updates in terms of where that process is and when you may expect to have that resolved. And then maybe to dovetail on the prior question, obviously this year has been impacted by interest, FX, some VIL reserves. As we kind of move past that – Is high single-digit type AFFO per share growth maybe a more viable aspirational target to consider in 2024 onwards, or are there other maybe headwinds we should be contemplating as we start to roll the calendar? Thanks.

Hey, Nick. Good morning. Let me hit the India process first, and then I'll jump into the next question. So, you know, we are running a process, as Tom and I have talked about here on this call and the prior call. It's very similar to the process we had We walked through when we sold an equity stake in our data center business in the U.S. as well as the joint venture that we did. So we've gone out to, you know, the top couple dozen highly professional large investors that are in the infrastructure space. Our goals remain the same, you know, in the other areas. transactions we did, really, which is to partner to or sell the equity to a very strong investor that understands the state, that can help run the business, has government connections, has carrier connections, all those sorts of things. So bringing more than just capital, but also a willingness and some experience to be a strategic partner in the business. So that process continues. I would say at this point, it's... you know, it's progressing and we've got the list worked down from the full couple dozen to a smaller list here, still very active. And I think, you know, we'll figure out where we head and what that transaction might look like in the coming quarter. So there'll be more to update you on probably in the next call, but we'll be patient. We'll be opportunistic as we kind of work through it and we'll see, you know, what the opportunities there look like in When we decide what we're going to do, we'll have the best interests of the shareholders in mind, of course, as well as the employees and the customers there in India. But it's a very similar process that we've kind of gone through before. I guess when you think about the, you know, jumping into the next question here in terms of AFFO, you know we have AFFO per share growth in our guide here that's a little less than zero, so a negative growth rate. And I'll just remind you that the headwinds there, as you highlighted, is really the financing interest costs, but also the issuance of the shares that we did middle of last year to help finance the core site business as well as FX. So, you know, we are seeing roughly an 8% headwind for the year around the financing pieces, including the spike in interest rates. We're seeing about a 1% headwind roughly on FX. And the VIL reserve that we're taking, that $75 million that we talked about, that represents about a 2% headwind as well. So when you put all that together, the core underlying business is, in fact, growing in that 8% to 9% range this year. And we think that feels like a pretty good place for us. So to the extent that we drive 5% organic tenant buildings growth in the U.S., we drive a little bit higher. organic tenant billings growth in our international markets. We complement that with another 100 basis points or so with new bills. We expand margins as we drop down through the P&L. And then we deploy capital in a prudent way. We certainly think that upper single-digit growth rate is achievable. Now, with that said, there are a few things that could still be items that we need to watch. The VIL situation is a situation that's ongoing that we continue to the need to watch. We don't know exactly where interest rates will go. So we're, you know, we're certainly being prudent in trying to reduce our exposure to floating rate debt, get ahead of refinancing and reduce refinancing risk. And this year, we've already issued just under $3 billion of new bonds, new notes, and that removes the refinancing risk from 23 entirely. Now we're beginning to look at 24 to remove that. But you put all that You know, together, as long as interest rates, you know, cooperate, if that fact kind of hangs in there, which we're seeing favorability in the spot rate. So that's kind of trending in a good direction. And if we sort out the VIL kind of India volatility, then upper single digit certainly is achievable in this business. We've got a great portfolio of assets in a lot of really good places. And we've got customers that are actively leasing the site. So we feel really good about the underlying core performance of this portfolio.

That's great. Thanks, Rod. You're welcome.

We'll go next to the line of David Barden with Bank of America.

Hey, guys. Thanks so much for taking the questions. So two, if I could. So first one for Rod, I just want to make sure I understand this Vodafone idea situation. So when we came out of the second half and you gave guidance for 2023, You said that you assumed that the collections rate would be roughly equivalent to the second half run rate for 2023, and that number was – and then you changed to a cash accounting method, maybe 70% to 80% of what you expected would be realized. And yet then you said today that you actually in the first quarter had better than expected collections, but then you also made a provision which was almost half the reserves – that you expected for the whole year. So I don't know if I understand how all that's working. So if you could kind of help us through that and how it all worked, that'd be super helpful. And then the second piece would be Tom, you know, Dish, you know, stock is hitting a 24 year low. The bonds are yielding 20 to 30% for the next three years. It's in a distressed position. And there's a lot of questions I field from people about kind of how, comfortable you feel with your contractual relationship, how does that contribute to growth? And then for those of us who maybe aren't as grizzled as some of us veterans, how do you think if a bankruptcy emerged in the wireless space, how would that work in this day and age? Thanks.

Hey, David, good morning.

I'll take the first one. on VOTA. So the collections rate that we're seeing in Q1, it's not better than our expectation. It's right in line with our expectation. We expect the level of collections that we had in Q1 to continue into Q2 is kind of the way we're thinking about it. I'm not sure if I heard all the detail in your question, but I'll try to clarify for you. That collections rate that we experienced in Q1 is slightly better than what we experienced in Q4 of last year and what we experienced in Q3 of last year. So that's where we talk about the improvement in terms of the collections from Vodafone. It's really the first half of this year, let's say, compared to the last half of last year. The other part of your question, I think it kind of leads into what's happening later in the year. And we do expect an improvement in collections from Vodafone as we enter into the second half of this year. And so that's kind of where we're looking. And, you know, we talk to Voda quite frequently. You have seen, we've seen that the government converted their equity. That does kind of clear the way a little bit for Voda to work on their balance sheet and to potentially raise equity in debt. And we gather that they're working aggressively on that. You may have seen a new board appointment over in India. We think that's a really good fact as well. And we do believe that voter management is committed to and capable of increasing their payments to less than the second half of the year, and that's reflected in our outlook. So that's kind of how those bits and pieces work. Most of the $75 million that we have in there will be booked and realized in the first half of this year.

Got it.

And, Dave, with regards to DISH, you know, they remain very active in the market. They are investing throughout the country to meet all of their FCC requirements. They have always been a good partner. You know, I have a lot of faith in their leadership team there in terms of being able to – develop the network and drive strategies that make sense for them. So, you know, from our perspective, you know, they have been a very strong player and a very strong partner. I'm not going to speculate on bankruptcies and all the other types of things, candidly. But just to let you know that, you know, I believe that they're a really strong leadership team, really smart, and being, I think, very, intelligent in terms of how they're building out their network.

Tom, if I could just follow up, you know, I think that there's a spectrum of relationships that tower companies have with this. Some are activity related. Some are kind of, you know, minimum take rates with contractual escalators and such. And I think that you're in the latter camp. Is that fair to say?

I mean, we've been working with DISH for a number of years in terms of helping them look at the engineering of their network and building out their network. And I would say that our U.S. leadership team has had, I think, a really strong relationship with them right out of the gate. I can't speculate on other types of relationships with some of the other tower codes, but But, you know, we've been really comfortable with the relationship and how it's been built over the years. And I think that there's a mutual respect between both entities.

Got it. All right. Thanks, guys. Appreciate it. Thanks, David.

We'll go next to Lana Batya-Levy with UBS.

Great, thank you. Can you talk a little bit about how you will approach M&A? There seems to be a number of portfolios available in some of the Asian markets that you don't currently have a presence in, maybe some in Europe. If you could just talk about your interest and how you would prioritize portfolio growth in the next couple of years, that would be great. And a second question, maybe just specifically in Europe. What do you see in terms of the carrier activity, and if there's any update on how one-on-one is contributing to your growth, and if they decide to grow the MVNO route, should we expect any impact on your growth outlook? Thank you.

Hey, Bhatia. Good morning. Thanks for the question. So regarding M&A, you know, our view today is consistent with where it's been in the last couple of the last few months, certainly the last couple of quarters. which is in this environment given what's available and kind of the differences that we see in pricing between private tower sales and let's say public tower equities along with some terms and conditions that of course are important when you look at portfolio by portfolio and region by region. We continue to look at the pipeline and And in our evaluation, there's nothing in there that we see that's compelling at the moment, nothing in there that we see that would, you know, require us or prompt us to make any kind of a move. So then we settle back in, and we're firmly kind of committed to our capital allocation approach here going forward. And one of the things that, you know, helps guide us is the uncertainty around rates and ensuring that we're reducing our leverage getting back below our five times in a prudent amount of time, also reducing that floating rate exposure, making sure we're aggressively managing interest rates, along with providing a dividend and a growing dividend to our shareholders. So when you look at the totality of opportunities available, we're fully committed to the dividend and dividend growth. Next, we allocate capital to our capital programs, our internal programs where we build towers. We'll build around 4,000 this year around the globe. Those come in at very high day one NOI yields, roughly mid-teens, 14% is the number for Q1, so we feel that that's really good. We're also allocating some capital within our capital number for this year towards core site in the mid-300s, let's call it $360 million or so, and as we've discussed, that's kind of within their cash flow generation. They produce EBITDA or gross margin, let's say, of in the mid-400s, so we're you know, we're comfortably kind of reinvesting their cash flow back into their business to make sure that we have capacity to continue to satisfy the customers and keep up with the record demand that we experienced last year in the first quarter of this year. And I'll highlight again for the folks on the call here that our capital programs this year are slightly below last year, not materially below, but You know, they're slightly below, and that's kind of a function of allocation capital, you know, towards balance sheet and reducing leverage and reducing our floating rate exposure. When you think about, you know, Europe and Asia, like, we would want to be larger in Europe. We think that market's very constructive for us. We do think there are some interesting portfolios there, but nothing that we've seen yet in terms of terms and conditions and pricing and all the different pieces lining up where it would need to be. And we don't expect that to happen anytime soon. But over the next several years, let's call it two to five years, Europe is a place where we could be active in looking at different portfolios. We think there's really good backdrop in Europe. With that said, if we don't buy anything in Europe, we've got a really good portfolio and feel good about our position day one. And when you think of Asia, where we spent a lot of time in the last couple of years looking at different transactions in Asia. And again, nothing kind of lined up and met our criteria. We're very disciplined when it comes to pricing, terms and conditions, counterparty, and also country evaluations and things like that. We'll continue to be disciplined. And I do think you'll see us, you know, be very committed to balance sheet, reducing leverage, reducing floating rate debt, and not active in any major way in M&A in the near term. And then maybe in Europe, the other thing, just to hit your other question, we're seeing good activity across Europe. When you think about Germany, kind of the central point that Dros 101 is just beginning to ramp up their network build and a full greenfield 5G build. So we're seeing a little bit of revenue activity from that, but we're excited to support them in their endeavor to build out a network there. And we do think that we'll see more activity with them in the second half of this year and certainly in years to come. But then when you think about, you know, France and Germany and Spain across the board, we think there's a really good backdrop, a good set of counterparties and carriers there for us to support. And we feel really good about the growth rates and our position within those markets. You know, we guided when we did the TELSIUS transaction that we would be achieving mid-Singleton 2020. know organic tenant billing growth we've been above that uh you know since we acquired the portfolio and this year we're again looking at upper single digits and that's seven to eight percent range which is a really nice place we're benefited from the activity that we're seeing uh from the carriers in terms of the leasing we're also benefited from the contract terms where we have uncapped escalators in germany and in spain which is very helpful and then we're seeing very low churn rates again, because of the demand that we see from the carriers to build out networks and also the way the contracts work that we've been able to negotiate. So we feel really good about our position in Europe. We feel really good about our ability to support the carriers' endeavors to build out networks in Europe, and we think there are some good things to come in Europe.

Very helpful. Thanks a lot.

You're welcome.

Thank you. We'll go next to the line of Brandon Nispel with KeyBank Capital Markets.

Great. Thank you for getting me in. I guess when we look at the U.S. leasing COLO line, $60 million I think was the record for the company ever. Are we at the point where that COLO number is peaking? And just because if we look at the midpoint of the guide, $220, it would imply some deceleration. And then can you just help us, just refresh us in terms of how your master lease agreements work in terms of the use fee provided to your customers? I guess my understanding is in year one, of those contracts. There's typically the highest use fee contribution and that those generally fall off as the term of the contract extends. But I was hoping you can help explain it for us. Thanks.

Yeah, good morning, Brandon. Thanks for the question. So you are correct in terms of the organic new biz, the incremental new biz we get from co-locations and amendments. That $60 million number, we do see that as a peak for the year. But with that said, we expect that number on a quarterly basis to be between $50 and $60 million for the next three quarters for the full year. So it's not as though we're going to see a big drop-off. It is pretty linear there, the way things work. But you will see it drift down a little bit, and that is kind of a function of the timing of the MLAs and the use-right fees. I don't want to get into too much detail about the contracts and the way the contracts work, but You can have timing differences here where you have use rate fees that step up in a certain quarter. They're mostly front-end loaded. And then you also have the ability to get additional revenue over and above that, which can be more variable kind of throughout the quarter. I would say that the $220 million that we're seeing this year, there is kind of a function there with the MLAs and kind of some of the transition periods that we have kind of moving in and out of different MLAs that that does help support that number a bit. So, you know, I wouldn't be surprised if that number is a little bit lower next year. Um, you know, but we, with that said, we're still seeing kind of the acceleration of, um, of that revenue kind of, as we enter the beginning of this year. And again, it'll, it'll paper off on a quarterly basis, but we'll hit, we'll hit the 220 million for the full year. That again is up, you know, almost 50% from the one 50 that we, that we hit last year. And we continue to feel really good about everything. that we see and work on in terms of the U.S. business being in a strong position to achieve 5% organic tenant buildings growth on average out over the time period through 2027. Great.

Thank you. You're welcome.

And we have time for one more question. That will come from the line of Eric Lupko of Wells Fargo.

Great. Thanks for squeezing me in. Just quickly touching on the data center business, obviously continuing to perform well. Maybe you could talk about the accelerated growth you're seeing there and kind of disaggregated between just new leasing and then also pricing. We've heard that supply is really historically tight in data centers and a lot of operators are continuing to push rents. And then you made a comment, I think, that you're seeing some pockets of densification in certain markets. Maybe you could talk about how you think the cadence of that evolves over the next few years, especially as some of the some of the mid band spectrum upgrades, uh, amendment revenues start to taper off in the next couple of years.

Thank you. Hey, good morning. Thanks for joining the call. So we're, we're very excited about the data center business that we have. I think you've heard us say in the past that it is a, it's a differentiated set of assets, um, to the extent that it's a cloud rich center facilities, multiple cloud on ramps and lots of the facilities that we have, they're networked and, and, uh, lots of enterprise customers in there. And that really means there's a lot of interconnection. People come into these facilities for those multiple cloud on-ramps and to interconnect with everyone else, the clouds, the networking companies, and the other enterprise companies. That is helping drive this record growth that we've seen. So as we've talked about, we saw record new biz for CoreSight through the full year of 2022. We also saw that a continuation of that where we had a record new biz performance for Q1, kind of quarter over quarter from prior year, I should say, from Q1 of last year. So that strong performance certainly is continuing. That resulted in a 10% revenue growth year on year for that business. That's higher than what we underwrote that business for. We've talked about it kind of upper single digit, 6% to 8% economic growth in that set of assets. That's the way we underwrote it. And We outperformed last year. We've got a really good start this year. Maybe that 10% sinks back a little bit, but we should be solidly in the upper single-digit growth rate and within our underwriting targets for that business. We're also seeing really strong growth in interconnection revenue, up about 9.5%. And that's really key because that really represents what these customers are doing within our facilities and why they're there. And it makes the revenue that we have a lot more durable, dependable, and sticky because they've got these relationships with other enterprise customers and into all these networking companies. So that is a really good fact. We're also increasing prices within that market, being sensitive to customers as well, but also trying to drive growth in that business and making sure we're getting the value that these assets are contributing to our customers. So we continue to see cash mark to market increases, you know, in the three to 5% range, uh, three to 4% range, which is, uh, which is going well, we have escalators and lots of our contracts. So we generally see a 3% escalator kind of in our underlying contracts. The churn rate continues to be in the mid single digits in that business, in the, in the six and a half percent range, well within our six to 8% target. And, um, You know, and our maintenance cap X is right within our target range of about 2% of revenue. It runs in between $20 and $30 million a year. So we're really pleased with the way that the team is running that business and the way those assets are performing for us and, quite frankly, what those assets do for our customers, which they're really important, you know, assets for the customers. And we're continuing at a gross margin that's almost 60%, you know, 60%. We couldn't be more thrilled with the performance of the data center business and the future outlook, quite frankly, and the optionality that those assets provide us when you think about the edge and potentially connecting those assets into our towers and into edge compute facilities closer to our customers, base radios on the wireless side, but also closer to network companies as well as enterprise customers that are scattered throughout the U.S., That business and the future outlook there is really strong.

Great. Thank you.

You're welcome. Thank you.

Great. Thank you, everybody, for joining today's call. If you have any questions, please feel free to reach out to myself or the investor relations team. Thanks, everyone.

Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation.