SBA Communications Corporation Q2 FY2025 earnings call

• U.S. Performance: Bookings increased for the sixth consecutive quarter, services business outperformed expectations, backlog remains healthy, and carrier investments in wireless networks continue with trend towards more colocations.
• International Performance: Customers invest in 5G upgrades, signed new leases, elevated CPI rates support tenant lease escalations, but some markets have temporary churn.
• Portfolio Review: Added ~4,300 sites from Millicom transaction, sold Canada tower business, expect Millicom deal to close by September 1.
• Financials: Increased full-year guidance for key metrics, second quarter cash net interest coverage ratio 4.3x, repurchased 799,000 shares, declared dividend increase of $1.11 per share.

U.S. Business: Second quarter domestic organic leasing revenue growth over the second quarter of last year was 5% on a gross basis, 1% on a net basis, including 4% of churn. Services revenue guidance increased by almost 20% due to construction services acceleration. Bookings increased for the sixth sequential quarter, with positive momentum building as carriers invest in wireless networks and trend towards more colocations. International Business: Organic leasing revenue growth for the second quarter (constant currency basis) was 0.8% net, including 7.5% of churn. Total international churn remained elevated mainly due to carrier consolidation and Oi in Brazil. Acquired 4,329 sites for total cash consideration of approximately $563 million, mostly related to Millicom in Guatemala and Panama.

• Increased full-year outlook for site leasing revenue, tower cash flow, adjusted EBITDA, AFFO, and AFFO per share due to outperformance of second quarter results, Millicom acquisition earlier than expected, improved services outlook, favorable foreign currency movement, and share buybacks.
• Sprint-related churn outlook: ~$50M-$52M in 2025, ~$50M in 2026, ~$20M thereafter. Non-Sprint domestic annual churn between 1%-1.5%.

• International churn, particularly related to Oi in Brazil, with $5M increase in international churn due to Oi's unforeseen financial difficulties and booked bad debt allowance.
• Uncertainty surrounding Oi's judicial reorganization plan and its impact on receivables.
• Potential competition from satellite constellations affecting market dynamics.

Q: Interested in durability of demand drivers like FWA and densification and directionality through end of '25 and 2026, and drivers of churn or rent reduction initiatives.

A: Brendan Cavanagh said demand drivers like FWA, densification, etc., are durable with extended potential, and no specific rent reduction initiatives underway with customers.

Q: Activity levels and timing of colocation revenue coming through.

A: Brendan Cavanagh said trend towards more new colocations delays revenue timing but full-year outlook for new leases and amendments remains same.

Q: Durability of demand drivers and churn forecasting.

A: Brendan Cavanagh reiterated demand drivers are durable and no specific rent reduction initiatives affecting churn forecasting.

Q: Follow-up on AI application growth and Canadian asset sale details.

A: Brendan Cavanagh said AI applications are driving increased activity and Canadian asset sale was due to limited portfolio growth potential and financial benefit.

Q: Fixed wireless activity level and exposure to U.S. Cellular and DISH.

A: Brendan Cavanagh said fixed wireless activity has broadened, exposure to U.S. Cellular is ~$20M annually with small impact, and exposure to DISH is ~$55M annually with ongoing operations.

Q: Millicom towers initial feedback and Canadian sale proceeds use.

A: Brendan Cavanagh said initial feedback on Millicom towers is positive, and Canadian sale proceeds are fungible for various capital allocation uses.

Q: Sprint churn and Canadian sale AFFO multiple.

A: Brendan Cavanagh clarified Sprint churn timeline and Canadian sale AFFO multiple considerations.

Q: Leverage, investment grade, and AFFO growth.

A: Brendan Cavanagh discussed leverage, investment grade status, and AFFO growth prospects considering interest rates and organic growth.

Q: Domestic leasing outlook and future growth.

A: Brendan Cavanagh said domestic leasing outlook is positive with growing backlogs but premature to predict 2026 growth.

Q: New spectrum auction timing and satellite competition.

A: Brendan Cavanagh discussed new spectrum auction timing and satellite constellations as complementary to tower business.

Q: Guidance lift from Millicom and AI app traffic quantification.

A: Brendan Cavanagh mentioned $16M revenue from Millicom earlier closing and no specific AI app traffic quantification yet.