American Tower Corporation (REIT)

Ladies and gentlemen, thank you for standing by. Welcome to the American Tower Second Quarter 2026 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 star 11 on your phone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the conference over to your host, Spencer Kern, Senior Vice President of Investor Relations. Please go ahead.

Thank you and good morning. Welcome to our second quarter 2026 earnings call. I'm Spencer Kern, Head of Investor Relations for American Tower. Joining me on the call today are Steve Vondran, our President and CEO, and Rod Smith, our Executive Vice President, CFO, and Treasurer. Following our prepared remarks, we will open the call for your questions. Before we begin, I need to call your attention to our safe harbor statement. It says that some of our comments today may be forward-looking. As such, they are subject to risks and uncertainties described in American Tower SEC filings, and results may differ materially. Additional information is available on our investor relations website. I'll now turn the call over to Steve. Steve?

Thanks, Spencer. Good morning, everybody, and thanks for joining today's call. We delivered another strong quarter fueled by robust leasing demand across our Global Tower portfolio, record leasing activity at CoreSite, and continued operational discipline. The strength and consistency of our execution, combined with the momentum we're seeing across the business, enabled us to raise our full-year outlook for the second time this year. Our performance reinforces what we believe is one of the most compelling long-term growth stories in digital infrastructure. Around the world, mobile data consumption continues to grow at an extraordinary pace. Cloud adoption remains resilient, AI-driven workloads are accelerating, and network architectures are becoming increasingly complex. Together, these trends are driving a growing need for the critical infrastructure that American Tower provides. Against this backdrop, we remain focused on the three strategic priorities we outlined at the start of the year, driving durable revenue growth, enhancing operational efficiency, and maintaining disciplined capital allocation. Starting with revenue growth, this year we remain on track to deliver approximately 4% organic tenant buildings growth across our global tower business, excluding one-time disrelated impacts. and we're raising our outlook to approximately 15% revenue growth from our data center business. The long-term outlook for wireless infrastructure remains exceptionally strong. Mobile data usage continues to expand globally, supported by increases in smartphone penetration, 5G adoption, fixed wireless access and a growing range of enterprise and consumer applications that rely on ubiquitous, high-quality connectivity. In the U.S., industry analysts estimate that mobile network capacity will need to at least double over the next five years to meet projected traffic demand. Notably, these forecasts largely reflect existing use cases and may not fully capture the incremental requirements associated with emerging technologies such as AI native applications, autonomous systems, or the transition to 6G. As carriers work to deliver this capacity, we believe the industry is approaching an inflection point. For the first time in several years, we see a path to four major catalysts creating multiple overlapping demand drivers that could support network investment well into the next decade. First, the industry is entering the next phase of the 5G investment cycle. While early deployments focus primarily on coverage, the next phase is expected to be focused on capacity. Based on our discussions with CARE customers, Supporting future traffic growth will require meaningful network densification, creating additional opportunities across our portfolio. Second, the industry is preparing for a significant new spectrum deployment cycle. With approximately 800 megahertz of new mobile spectrum expected to become available over the next few years, starting with the upper C block in 2027, operators will have new opportunities to expand network performance and capacity. Historically, new spectrum deployments have translated into incremental equipment installations and lease amendments, and we believe this cycle could represent another meaningful source of growth. Third, the eventual transition to 6G will bring another meaningful infrastructure investment cycle. Early indications point toward architectures that leverage higher frequency spectrum, greater intelligence at the network edge, and more distributed deployments. These characteristics would likely require both additional equipment and increased site density across wireless networks. And perhaps the most exciting catalyst is the emergence of AI applications. We believe AI has the potential to fundamentally reshape how people, enterprises, and machines interact with wireless networks. From AI-powered smartphones and smart glasses to connected vehicles, autonomous systems, robotics, and real-time edge computing applications, Future traffic patterns are expected to be more persistent, more data intensive, and increasingly bidirectional than those of today's networks. According to Erickson's most recent mobility report, AI-enabled applications are already contributing to uplink traffic growth rates that in many cases exceed downlink traffic growth by more than 50%. This is a significant development because today's networks were primarily designed around downstream consumption. As AI adoption accelerates, operators may need to invest beyond their existing network roadmaps to support these evolving requirements, creating an additional layer of infrastructure demand on top of traditional traffic growth. Taken together, these trends point toward a future that requires significantly more capacity, greater network density, lower latency, and enhanced connectivity. Terrestrial wireless networks will unquestionably remain the foundation of that future, and our global portfolio of communications infrastructure is exceptionally well positioned to support this next era of wireless innovation and investment. Many of these same secular tailwinds continue to drive exceptional performance at CoreSight. CoreSight continues to differentiate itself as a premier digital infrastructure platform at the convergence of network connectivity, cloud ecosystems, enterprise workloads and AI-driven demand. CoreSight remains the fastest growing segment of our business, and this quarter delivered another record leasing performance, reinforcing our conviction that 2026 has the potential to be another record year for the business. Demand remains broad-based, spanning hyperscale cloud providers, enterprises, network operators, AI innovators, and a growing number of cloud-to-cloud connectivity deployments. What we're seeing is not simply an expansion of demand, but an evolution in how customers are architecting their digital infrastructure with CoreSight serving as the central hub. CoreSight's campuses have become critical destinations for AI traffic and data exchange. Today, nine of the top 10 AI companies and three of the top five NeoClouds are deployed within our facilities. These customers are moving beyond traditional co-location use cases, establishing private on-ramps that enable the direct transfer of massive data volumes Thank you for joining us today. Since acquiring CoreSight in 2021, we've grown our megawatts in service by one and a half times, and our development pipeline provides a clear path to nearly triple our capacity from here. We believe these investments create a substantial runway for sustained double-digit revenue growth. And given the strength of customer demand, we continue to evaluate opportunities to expand our development pipeline even further to accelerate value creation for our shareholders. Moving to our second strategic priority, operational efficiency. Operational excellence has long been a defining characteristic of American Tower. Over the past three years, we've expanded Tower Cash EBITDA margins by more than 300 basis points while leading the industry in profitability. We continue to identify opportunities to operate our global portfolio more efficiently, and we remain on track to deliver an additional two to 300 basis points of Tower Cash EBITDA margin expansion In parallel, we're exploring ways to leverage AI and automation to enhance productivity across the organization. While still early, we believe these technologies have the potential to create meaningful incremental value over time. Our third strategic priority is disciplined capital allocation. We continue to allocate capital with a focus on driving industry-leading AFFO per share growth while generating the highest risk-adjusted returns. Over the last several years, We've deliberately shifted our investment focus toward developed markets and higher quality earnings streams. Consistent with that strategy, during the quarter we completed the sale of our operations in the Philippines and Bangladesh, marking our exit from the APAC region. We expect the transaction to be neutral to AFFO per share growth, while enhancing the quality and focus of our global tower portfolio. Our balance sheet remains in an excellent position. We ended the quarter with leverage within our targeted range of three to five times, and we continue to maintain one of the strongest credit profiles in our peer group. Combined with our significant cash flow generation, our balance sheet provides substantial flexibility as we evaluate opportunities across M&A, share repurchases, and further deleveraging. Taken together, we believe American Tower has one of the highest quality growth profiles in the digital infrastructure sector. Supported by industry-leading U.S. tower assets, Faster growing international tower assets and a differentiated data center platform. In summary, I'm extremely pleased with our performance through the first half of the year. American Tower has never been better positioned to capitalize on the powerful secular trends shaping our industry. Our portfolio of towers and data centers is uniquely positioned to benefit from growing mobile data consumption, expanding cloud adoption, and the accelerating proliferation of AI-driven workloads and applications. I want to thank our employees around the world for their continued dedication and execution, as well as our customers, shareholders, and business partners for their ongoing trust and support. With that, I'll turn the call over to Rod to review the financial results and allocate more details. Rod?

Thanks, Steve, and thank you all for joining the call. As Steve mentioned, we've carried our strong momentum into the second quarter and increased our 2026 outlook for the second time this year. I'll start by reviewing our second quarter results and then I'll touch on our revised full year outlook. Slide 7 shows a snapshot of our second quarter highlights. Consolidated property revenue grew over 5% year-over-year when excluding non-cash straight line revenue and FX impacts. Normalized for the impact of one-time dish churn, property revenue grew over 7% on a cash FX neutral basis. Our growth was primarily driven by organic tenant billings growth of nearly 2%, or 4% normalized for the impact of one-time dish churn and complemented by data center cash revenue growth of approximately 12%. Adjusted EBITDA grew over 3% when excluding net straight line and FX impacts. Normalized for the impact of one-time dish churn, adjusted EBITDA grew over 6% on a cash FX neutral basis. Cash-adjusted EBITDA margins declined approximately 40 basis points year-over-year, primarily due to dish-related churn and SG&A timing. Excluding dish-related churn, cash-adjusted EBITDA margins expanded approximately 30 basis points. Attributable FFO per share grew approximately 1% when excluding FX impacts. Normalized for the impact of one-time dish churn and excluding the impact of refinancing costs, attributable FFO per share grew over 5% on an FX neutral basis. Moving to Q2 organic growth and data center growth on slide eight, we delivered consolidated organic tenant buildings growth of nearly 2% or approximately 4% when excluding dish term. Across each of our tower segments, organic growth was in line with the expectations we laid out earlier this year, driven by solid demand across our global portfolio. In the US and Canada, organic growth was nearly 1% and approximately 5% when excluding dish churn, consistent with our expectations for durable growth in the mid-single digits. In Africa and APAC, organic growth was nearly 11%. As a reminder, churn is expected to be back half-weighted, resulting in approximately 10% organic growth in the first half of the year and approximately 7% expected in the second half of the year. In Europe, organic growth was approximately 4%. And in Latin America, organic growth declined over 2%, primarily driven by elevated churn in Brazil, consistent with our expectations laid out at the start of the year. We remain encouraged by the prospects of an earlier-than-expected market repair in Brazil and the forthcoming acceleration in organic growth in 2027. Finally, on the right side of the slide, Data Center property revenue growth was approximately 12% when excluding non-cash straight-line revenue. As Steve mentioned, this quarter marked another record quarter of new leasing revenue for CoreSite. In fact, we added more new business this quarter than we did for the entire year of 2021. And the continued strength in underlying demand drove double-digit revenue growth for the fifth consecutive quarter. Now, let's turn to our revised full-year outlook. We are raising guidance across all of our key consolidated financial metrics, primarily driven by consistent growth across our global tower portfolio, data center outperformance, operating expense benefits, and FX tailwinds. In addition, as Steve mentioned, we completed the divestiture of our Philippines and Bangladesh portfolios this quarter. The divestitures occurred in mid to late June. And our revised outlook now excludes contributions from Bangladesh and Philippines for the remainder of the year. Starting with property revenue outlook on slide 9, we are raising our outlook by $110 million at the midpoint, representing a 1% increase to our prior outlook. Our revised outlook now implies nearly 4% year-over-year growth when excluding non-cash straight-line revenue and FX impacts. Normalized for the impact of one-time dish-related churn, our outlook implies approximately 6% growth on a cash FX neutral basis. The increase to outlook was primarily driven by approximately $35 million of FX tailwinds, $25 million of data center outperformance, and $65 million from other items, including pass-through and straight-line revenue. Partially offset by approximately $15 million related to Philippines and Bangladesh divestitures, our underlying operating trends remain consistent with the assumptions embedded in our prior outlook. We are reiterating organic growth assumptions across all regions and continue to expect organic tenant buildings growth of approximately 1% or approximately 4% when excluding dish churn and data center growth of approximately 15% year-over-year, which represents a significant acceleration versus our prior outlook of 13% growth. Moving to adjusted EBITDA on slide 10, We are raising our adjusted EBITDA outlook by $45 million at the midpoint, representing an approximately 1% increase to our prior outlook. Our revised outlook now implies over 2% growth year-over-year, excluding non-cash net straight line and FX impacts. Normalized for one-time impact of DISH-related churn, our outlook for adjusted EBITDA implies approximately 5% growth on a cash FX neutral basis. The increase to outlook was driven by approximately $20 million of FX tailwinds, $30 million of data center outperformance, and approximately $35 million of one-time benefits, primarily related to an indirect tax recovery in Latin America, partially offset by approximately $10 million related to the Philippines and Bangladesh divestitures, and $30 million of other items, primarily comprised of non-cash straight-line impacts. Turning to AFFO on slide 11, we are raising our attributable AFFO outlook by $0.09 per share, representing a 1% increase to our prior outlook. Our revised outlook now implies growth of approximately 3% year-over-year. Normalized for the impact of one-time dish-related churn and excluding the impact of refinancing costs, our outlook for attributable AFFO per share growth implies nearly 6% growth on an FX neutral basis. The increase to outlook was primarily driven by adjusted EBITDA outperformance of approximately 12 cents and FX tailwinds of approximately 6 cents. Higher cash taxes related to the EBITDA outperformance represent approximately 4 cents of downside and higher net interest expense also represents approximately 4 cents of downside. Finally, the Philippines and Bangladesh divestitures represent 1 cent of downside. As a reminder, We continue to expect our services business growth to represent an approximately 100 basis point headwind to attributable AFFO per share growth this year. Due to higher interest rates, we now expect our debt refinancings to be an approximately 150 basis point headwind to attributable AFFO per share growth this year, up from an approximately 100 basis point headwind in our prior outlook. Our ability to raise outlook while absorbing an additional 50 basis point headwind from higher interest rates highlights the strength of our underlying business and the benefits of the proactive steps we've taken to reduce floating rate debt. We believe this year represents a trough for attributable AFFO per share growth. As these headwinds ease heading into 2027, we're confident that we can deliver a meaningful inflection in growth in return to our long-term expectation of AFFO per share growth in the mid to high single-digit range. Turning to capital allocation in our balance sheet on slide 12, our capital allocation strategy remained focused on balance sheet strength, disciplined investment, and long-term value creation. The work we've done over the past several years to strengthen our financial position has created significant flexibility. We ended the quarter with leverage of 4.9 times within our target range of 3 to 5 times in the highest credit rating among our peer group. In today's environment, where opportunities across digital infrastructure continue to expand, balance sheet capacity remains an important competitive advantage. In 2026, our growth capital plan remains consistent with our prior outlook. We continue to expect to spend approximately 85% of our discretionary capital within our developed markets platforms, including over $700 million to develop more capacity in our data center portfolio, approximately $370 million to construct new towers globally, and approximately $210 million to purchase land beneath our towers. In addition, Year to date, we have allocated over $230 million to acquisitions of towers and data center land and over $200 million to share repurchases. Turning to slide 13, our second quarter results reflect the durability of our business model and the consistent execution of our strategy. We continue to see resilient demand trends supported by increasing mobile data consumption, Thank you. At this time, we will conduct the question and answer session.

As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Michael from Goldman Sachs. Your line is now open.

Good morning. Thank you for the question. I just had one and one follow-up. First, on capital allocation, A&T is clearly on better strategic footing given the delivering and reduced emerging market exposure. Now that A&T's leverage is in the target range, APAC has been exited. What's next? What are the best investment opportunities today? Any comments on how we should think about Thank you very much. Thanks, Michael. Rod, I'll take the first part of the question and you can jump in. Okay. When we think about the opportunities to invest capital,

Can I refer you back to the four major catalysts that I talked about in the prepared remarks that we think are setting towers up for a good run of growth going forward, starting with the densification phase of 5G, the additional spectrum that's coming to market, some starting in 2027, some a little bit later, AI applications starting to put more traffic on the networks, and then that leading into the 6G technology cycle. So when we look at our portfolio and the other areas where we can invest capital, we think that investing in towers in domestic markets and also developed markets is a really good use of our capital. Those same factors will provide benefits in the emerging markets. They'll be a little bit later in the cycle. But as we've said about our capital allocation strategy, we are allocating more of our capital toward developed markets. We'll continue to do that. And so really the amount of those investments in towers will depend on the opportunities. We have had the opportunity to invest more capital in Europe by doing build-a-suits in that market. And we're like that business. We've got some good day one yields and we see some good growth prospects there. We haven't been able to invest as much in the US just because we haven't had the opportunities that met our financial criteria that we thought were actionable in the US. But certainly if those opportunities come to market, That's kind of our first priority is Towers because we think Towers are poised for another good growth cycle going forward. The other area where we are investing more capital and we would like to continue to accelerate the investment is CoreSite. It is a rapidly growing segment of our business and we're able to continue to underwrite mid-teens or better stabilized yields on all our incremental new investments there. So to the extent that we can continue to find opportunities to invest in CoreSite, expanding that model and earning those types of returns, we'll do it. From my perspective, the top priorities are domestic and developed market towers and data centers. Our internal CapEx program has provided us a lot of opportunities to invest, and that's been through Build-A-Suits and its organic builds in CoreSight. Rod, anything you want to add to that?

Yeah, good morning, Michael. Thank you for the question, and it's great having you on the call. Just a couple of things that I would add to Steve's comments relative to capital allocation. Number one is I'll just highlight our long-standing consistent and disciplined approach to capital allocation. It really is designed to optimize long-term shareholder value. And I like, Michael, the way you brought a couple of things in there. Certainly subset for us of optimizing long-term shareholder value is driving purposefully the quality of our earnings and our balance sheet strength. And you kind of picked that up on the rotation out of Bangladesh and Philippines and in the way we allocate capital. So that is a couple of keys for us. When we think about our capital allocation approach, first and foremost, it's supporting the dividend and a growing dividend. We think that is a very important part of our business in relationship with our shareholders. And with that, we aim to dividend out 100% of our retaxable income each year. This year, that will equal about $3.3 We then next look at internal uses of capital. We have a capital program in an outlook this year that is nearly $1.9 billion. We have allocated, we expect to allocate nearly 85% of that towards developed markets. with nearly 700 million of that into data centers, as Steve talked about. That is purposeful, of course, and it relates to driving that quality of earnings and achieving stability in our cash flows and our cash flow growth. After the internal CapEx programs, as Steve said, we look at M&A opportunities. We always scan the market there. Our goal there is not to be bigger in terms of assets, but bigger in terms of AFFO and AFFO for share growth over the long term. Really with a keen eye on driving total shareholder return over the long term. We're happy to continue to reduce debt. We are below our target range of five times at the moment, which puts us in a really strong position relative to other companies.

Thank you for joining us today.

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