Ladies and gentlemen, thank you for standing by. Welcome to the SBA Fourth Quarter Results Call. At this time, all lines are in a listen-only mode, and later we will conduct a question-and-answer session. [Operator Instructions] As a reminder today’s call is being recorded. I would now like to turn the call over to our host Mark DeRussy, Vice President of Finance. Please go ahead.

Good evening, everyone and thank you for joining us for SBA’s fourth quarter 2018 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer; and Brendan Cavanagh, our Chief Financial Officer. Some of the information we will discuss on this call is forward-looking, including but not limited to, any guidance for 2018 and beyond. In today's press release and in our SEC filings, we detailed material risks that may cause our future results to differ from our expectations. Our statements are as of today, February 21, and we have no obligation to update any forward-looking statement we may make. In addition, our comments will include non-GAAP financial measures and other key operating metrics. The reconciliation of and information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our Investor Relations website. With that, I’ll turn the call over to Brendan.

Thanks Mark. Good evening. We had a tremendous fourth quarter with very strong results across all areas of our business, including very positive operating and financial results in both our leasing and services businesses. Total GAAP site leasing revenues for the fourth quarter were $444.7 million, and cash site leasing revenues were $441.8 million. Foreign exchange rates were generally in line with our estimates for the fourth quarter, which we previously provided with our third quarter earnings release, only modestly impacting our results in comparison to our 2018 outlook that we provided last quarter. They were much more of a headwind on year-ago comparisons, but we still did very well. Same-tower recurring cash leasing revenue growth for the fourth quarter, which is calculated on a constant currency basis, was 6% over the fourth quarter of 2017, including the impact of 2.1% of churn. On a gross basis, same-tower growth was 8.1%. Domestic same-tower recurring cash leasing revenue growth over the fourth quarter of last year was 7.4% on a gross basis, and 5.1% on a net basis, including 2.3% of churn, over half of which was related to Metro/Leap, Clearwire and iDEN termination. Domestic same-tower recurring cash leasing revenue growth on a gross basis increased to its highest point in over two years, reflecting our strong 2018 operational domestic leasing activity. Domestic operational leasing activity, representing new revenue signed up during the quarter, was very strong in the fourth quarter and once again well above the year-ago levels. During the fourth quarter, we again had solid but varied contributions from each of the Big Four carriers. Newly signed up domestic leasing revenue came about 53% from amendments and 47% from new leases, and the big four carriers represented 84% of total incremental domestic leasing revenue signed up during the quarter.…

Thanks Brendan. SBA ended the year with $9.9 billion of net debt, and our net debt-to-annualized adjusted EBITDA leverage ratio was 7.3x, within our targeted range of 7x to 7.5x. Our fourth quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 3.5x. The weighted average coupon on our outstanding debt is 3.9% and our weighted average maturity is approximately 4.3 years. As of today, we have $205 million outstanding under our $1.25 billion committed revolver. On February 1, 2019, we entered into a four-year $1.2 billion interest rate swap, effectively fixing the interest expense at 4.495% on approximately half of our outstanding 2018 Term Loan B. This rate is essentially flat with the rate we are paying under our term loan today. The unhedged portion of our Term Loan B will continue to accrue interest at one-month LIBOR plus a spread of 200 basis points. Pro forma for this transaction, approximately 88% of our non-revolver debt outstanding is fixed, which will reduce the impact of future interest rate fluctuations and create greater certainty in our future AFFO. With regard to stock repurchases, as Brendan mentioned earlier, during the fourth quarter, we spent $342 million to repurchase 2.2 million shares of our Class A common stock at an average price of $158.09 per share. All of the shares purchased were retired. As of today, we have $204.5 million of authorization remaining under our $1 billion stock repurchase plan. The company shares outstanding at December 31, 2018 are 112.4 million, down 3.4% from 116.4 million at December 31, 2017. With that, I'll now turn the call over to Jeff.

Thanks Mark and good evening everyone. The fourth quarter was a particularly strong one for SBA. We exceeded our expectations across all financial metrics. We continue to see robust operational leasing activity in our services business at one of its strongest quarters in years. Importantly, we ended the year with a very healthy backlog of leasing applications, setting us up for a nice start to 2019. Operationally, we continue to perform at a high level of efficiency, managing our costs and growing our margins. In the fourth quarter, we once again produced industry-leading operating margins, demonstrating the high quality of our assets and the effectiveness and efficiency of our operations. Our tower cash flow margin was 80.2% and our adjusted EBITDA margin was 70.5%. Our domestic tower cash flow margin hit an all-time high of 82.9% this quarter. We will continue our focus on being an industry leader in this area. In the U.S., the strong operational leasing activity we saw throughout 2018 has left us well positioned for good financial results in 2019. All four major U.S. wireless carriers were active during the year, with each of them continuing to invest in their networks, deploying new and incremental equipment in order to address the continual growth in wireless data consumption. Contributions continue to come from new spectrum deployments, the rollout of FirstNet, new coverage and capacity build-outs and early-stage activities as a precursor to 5G. In the fourth quarter, we also began to execute leases with DISH, which activity has continued into 2019. Internationally, we had another strong leasing quarter with organic leasing activity exceeding our internal expectations in most of our markets. The contractual revenue signed up during this quarter in our international markets came about 43% from new leases and 57% from amendments. We had another very…

All right, thank you. [Operator Instructions] And we now go to line of Jon Atkin from RBC Capital Markets. Please go ahead. Sir, your line is open.

Thanks very much. So, a couple of questions. One, I wondered if the U.S. wireless industry were to see major consolidation, if you can kind of update us on your thoughts and philosophy around MLAs, holistic MLAs. And then secondly, I wondered if you can maybe talk a little bit about DAS and small cells. Your website actually mentions a number of very interesting use cases in healthcare, hospitality, retail. And to the extent that you get further involved in those activities, is that the services line item? Or is that rental revenue – source of rental revenues for you going forward as you kind of see that developing? Thank you.

Hey, John, it's Jeff. We are open and willing and have in the past entered into MLAs. It's entirely term and transaction specific. And we have no issues with entering into one and have in fact as you know entered into MLAs in the past with both T-Mobile and Sprint. And in terms of the small cells and DAS, we have a growing line of business here, which we call our exclusive asset or exclusive real estate business where we focused on unique and underlying pieces of real estate that we think have very unique attributes and we are developing alternate to macro uses in these facilities, whether it be DAS or small cells or in the future we're focused on CBRS potentials. And those will most certainly be in our site lease and are today – a little bit immaterial today. And as they grow, they will be in the site leasing line of our income statement. We have some actual pretty neat facilities today. Again, they're immaterial, but we have some hospital chains. We actually manage and own the DAS system inside the Macy's Herald Square building.

Great. Thank you very much.

Thank you. And now to the line of Nick Del Deo from MoffettNathanson. Please go ahead.

Hey, thanks for taking my question. I'm not sure how much details you can share with respect to customer-specific activity, but you called out DISH, I figured it's fair game to ask. Can you expand at all on what you're seeing from them? What sort of work they are doing? And how durable you think that leasing contribution might be in future periods?

Well, they're very active. They're signing leases. They have a strong backlog of applications. They are – from all intents and purposes based on what we can tell, they are firmly committed to a very active 2019.

Okay. It's good to hear. And then looking at your domestic and leasing guidance for 2019, looks like it's about equal to what we saw in the fourth quarter of 2018 annualized. So, should we basically expect the 2019 leasing volumes will be relative flat over the course of the year? Or will there some sort of cadence to it that we should bear in mind?

Hey, Nick, it's Brendan. It is similar to what the fourth quarter contribution is, but again, it is driven by activity. As we talked about in the past, you have leasing activity that when you sign stuff up and there is some delay in the timing on when it kind of kicks in. So a decent percentage of our guidance is obviously based on stuff that we already know, what's already been signed up in the second half of the year. So I'm pretty confident that we'll see similar levels to the end of the year as we get to the first half of the year, maybe even slightly higher. It's hard to say for sure whether the cadence changes at all in the back half of the year, but I would expect it to be a little bit flatter than it was during 2018.

Okay. Understood. Thanks, guys.

Thank you. And now to the line of Batya Levi from UBS. Please go ahead.

Great. Thank you. Just to follow-up on your churn commentary. Can you quantify how much more churn we should expect from iDEN and maybe the pacing of the $11 million left from Metro, Leap and Clearwire? And the normal churn I think you guided to 1% to 1.5%. Is there any reason why it should be at the higher end? One other question I had was mostly related to your comments on interest from infrastructure fund. Given that do you find valuations are increasing as you look at new portfolio acquisition opportunities internationally and in the U.S.?

Hi, Batya. On the churn questions, Metro, Leap and Clearwire as we said has about $11 million of annualized churn, but we have not yet received any notification. In pacing, I would expect it's going to take place over the next two years. Hard to say what the exact time it will be but based on our expectations, we'll see it fairly evenly over that time period, maybe a little bit heavier in 2019, but it's not that noticeable. On the iDEN side, we had some leftover iDEN leases from the TowerCo deal that expired October 1, 2018. So the vast majority of the iDEN impact has already taken place. But in our year – from a year-over-year standpoint, you see most of that impact in 2019, because it happened later in the year. And on the other churn, it's hard to say whether it will be at the high end or the middle of that range or the low end of it, as some of our assumptions or estimates we're making around churn has not actually been realized yet. We haven't received any notifications. But if anything, it's really just a timing issue when we receive a particular notice, when there's a particular firm end date, that kind of thing. So it's possible that it would be toward the high-end of the 1% to 1.5%, but it's just as easily be toward the lower half.

Yes, on the infrastructure question, Batya, I think the fact that they've emerged and have been seeing in processes and been the winner in those processes which really hadn't seen really heretofore shows that they are a factor in valuation. And I think that's really a function of the time horizon that they apply to their decision-making and also, of course, the return requirements that they're underwriting to. And really my comments are – they're pretty straightforward. There's a whole new asset class out there of investor that is looking at things that is finding value at multiples or assets that I know are nearly as good SBA's at much higher values and we certainly take a lot of optimism from things like that.

All right. Thank you.

Thank you. And now to line of Ric Prentiss from Raymond James. Please go ahead, sir.

Thanks. Good afternoon, guys.

Hi.

Hey. I want to follow-up from Batya's question a little bit. So, is there anything you've seen on the historical churn that would cause you to think it should go up to the 1% to 1.5% since you've been kind of running in the sub-1% sort of quite a while?

Yes. I mean, there's not anything that I would point to as being a specific item. We saw – we had some legacy leases with one particular carrier, where they actually were never on air. And so we saw some notifications I think where they have decided to clean up some of that or maybe they made a poor decision five years ago. So the timing of that may cause it to be a little bit higher. A lot of the churn that we're seeing, I'm talking about domestically obviously – specifically, is related to narrowband tenants. So the timing of when those guys are going to close up shop or cancel leases, it's a little hard for us to peg down, but it can happen in waves. So, that's all I can really say about it is that it's a matter of timing and a specific customer can kind of ship things one way or the other.

Okay. That helps. And then Jeff, you shared a little bit on Jonathan's question about small cell/DAS. Hospital chains and Macy's Herald Square building sounds more like indoor. Are you looking at outdoor? Are you looking at fiber solutions? Or is it really the exclusive real estate business is kind of more like an indoor system? Just trying to get a little more color.

It's mostly indoor but it will be outdoor when it can meet the exclusive attributes we're looking for. But you should assume that that would be kind of limited in its application.

So, maybe more campus situations?

Yes.

Okay. And the final question is on – and Batya has also pointed about the institutional infrastructure investor. We've obviously been watching, AFFO has become a primary measure of valuation in the tower world, but it seems like the prepaid rent item can kind of skew things. Now how do you guys view looking at AFFO or prepaid rent? And when you see the infra funds come in, what are they looking at do you think?

Well, I think they're looking at AFFO, but they're also looking at true cash – true cash generation. And so I think they're probably looking at that and basically the real cash that's there for distribution, which is the way we've always run the business.

Cash on cash. Okay. Very good. Thanks, guys.

Thank you. And now to the line of Michael Rollins from Citi. Please go ahead. One moment, please. Sorry, I have a little computer issue here, one moment please. Computer is frozen one moment please. Sorry for the delay, we did have a technical issue here. [Operator Instructions] And we go to the line of Michael Rollins from Citi. Please go ahead.

Hi, can you hear me now?

Yes, we can.

That's good. You're hired. So, two questions. Thank you for patiently waiting for my questions. First, if you can just talk about the new activity that you're guiding to for both the domestic and the international operations for 2019? If you kind of think of the visibility that you have now going into 2019, how would you rate that relative to a year ago? Trying to reverse the thought and you're thinking about the visibility going into 2018. And then the second question I had just on the topic of the infrastructure funds, would there be an interest to just maybe even a portion of your portfolio and just raise money at the tower level not dissimilar to some of the ways that you securitize towers in the past and think about that as a funding mechanism for your business?

Well, I'll start with the second one first. I'm not sure that we're not doing that through the securitization. So, if we ever did need equity financing, I have no doubt that that type of thing would be available. But as you know, we've been equity reducers and not equity expanders. But I have no doubt that should we find something that would cause us to want to issue equity for an opportunity that that source would be there. In terms of the visibility, we do have much greater visibility frankly because a lot of the projects that are under way today hadn't really started this time last year. And basically everything that's going on now as the calendar turned, you'd have the typical beginning-of-the-year hesitation or pause that's so very typical with our customers. So we did have greater visibility, but you still have the same limited duration of visibility, which lasts about six months. So we hit the ground running in January 1, but we still can only see about six months out. But in terms of seeing the activity levels, they're just much greater than they were at this time a year ago.

Thanks very much.

Thank you. And now to the line of Simon Flannery from Morgan Stanley. Please go ahead.

Great. Thank you. Good evening. I wonder if you could just update us on the NOL status and the dividend timing and how you plan to kind of take the leverage down. And then any comments on pricing trends and competitive build activity as we go into 2019? Thanks.

Yes. Simon, on the NOLs, our current federal NOLs as of the end of the year for the REIT structure are about $755 million. We do have additional NOLs, just as a side note of little over $100 million for our TRS entities. Our expected timing is similar to what it's been in the past in terms of running through those NOLs, which would be mid-2021. As of right now, our intention is to continue to use those NOLs for paying the dividend.

Yes. And there's nothing out in the market, Simon, that has impacted our pricing decisions. They've been fairly consistent for years now.

Great. And are you seeing any change in the volume of competitive build, activity build-to-suit? Seems like there's a lot of press releases but what are you seeing on the ground?

Nothing that's material or – no, it would be the answer to your question.

Great. Thank you.

Thank you. And now to the line of Spencer Kurn from New Street Research. Please go ahead.

Hey, guys. Thanks. So you talked a little bit about your backlog. But I just wonder if you can just provide a little bit more color on how it's been trending in the back half of 2018 and even today. Is it still rising? Or have you sort of reached your cruising altitude which should carry you through the year?

Yes. I would say more cruising altitude type, Spencer, maybe with slight variations, but we've reached good strong levels of operational conversion of that backlog but it continues to replenish itself.

Got it. Thanks. And then just one follow-up, it looks like you've guided to lower non-organic revenue in 2019. Could you just comment on what you're seeing in the M&A landscape? And if you're seeing it improve, are there more deals coming in 2019 versus last year? Thanks.

Well, remember, we only guide to what we have signed up. So it's purely a function of what's under contract. So you should never think that that's a reflection of what the market may bring our way. And there's – there will be the same I think level of opportunities out there that will give us a chance to spend a lot more capital if we see the right deals. But what we have in there is just a function of what's signed up today and I do think there'll be a lot of other things to look at. Now whether we find them acceptable and good returns on where we want to spend our money or not is yet to be seen.

Got it. Thanks so much.

Thank you. And now to the line of Walter Piecyk from BTIG. Please go ahead.

Jeffrey, are you happy with the – with about $13 million of new leasing activity you booked in the fourth quarter? Was there anything left on the table from an execution standpoint?

Was there anything left on the table? We could always – I'm never happy, Walter. I always want more. But yes, I thought we did OK. I mean the way things happen in reality is there's a lot of things that looks like it's going to get signed up but then for one reason or another it slips. But that's life.

I mean the other thing about that Walter is that that $13 million of growth that you're referring to is the revenue growth into the quarter. A lot of that was kind of rebate based on the stuff that was signed before. I mean really we're just going is what did we sign up during the quarter and do we sign up as much as we would like to? And obviously we always like to sign up more, which would benefit us in the future quarters.

Yes. The stuff I'm talking about hasn't hit the financials yet.

All right. So, Verizon talked about I guess if they got a new spectrum as opposed to the small cell strategy throughout three to six months of putting into the network. So, presumably when you're looking at your annual guidance, I think about four or five months left as part of the new signings to drop additional new leasing activity. Is that sound about right?

Yes, that's about right.

My second question, I guess maybe third, but first had had two parts. The second question is there's been a laundry list of potential buyers for Zayo. I'm surprised you guys haven't appeared on the list. Can you just give us your latest thinking on fiber and whether you would have any interest in acquiring Zayo?

Well, we don't really want to comment that specifically. But in general, our theory which kind of goes through the comments that I made to John Atkins and Ric Prentiss is we're looking to expand the things that we do but in areas that we call exclusive real estate that will have some barriers to entry and our ability to control our destiny going forward. So, I'll leave it up to you to decide how interested we would be in that asset.

Historically, that's been not very interesting, but it seems like they're on the block. And if they're willing to sell it, $30 or $35 a share, is that a compelling-enough evaluation for that type of business?

Yes, I can't comment on that.

All right. Thank you.

Thank you. And now to the line of Colby Synesael from Cowen & Company. Please go ahead.

All right, great. My questions are bit more boring. So the first one is on AT&T and FirstNet, can you give us a sense of how far long you think they are in that process and that's still building or do you think we've already, I guess, reached the tipping point there? And then secondly, as it relates to T-Mobile and Sprint, I know that was asked the first question by Atkin, but yes, it's specific to an MLA. But can you remind us, I mean, it seems like that deal is more likely now than not to occur. Do you think that that when they actually start to get everything together and start to tighten up the network, would you anticipate that having a material impact on growth rates not just for SBA but for the sector and really the question is just a matter of timing? Thanks.

Yes. On the FirstNet then called the I – I mean they're pretty busy and it's hard for me to judge exactly where they are in the process, but I still think there's a long way to go. I think activity goes well into 2020 there. And on the – we continue to believe that if T-Mobile were approved to acquire Sprint that initially the activity levels would revolve around T-Mobile leading to bring on equipment to allow the migration of the Sprint subscribers over to the T-Mobile network. So you're going to have some positive amendments for the industry before you have any kind of decline through for decommissionings and that should be a multi-year period. And we continue to think that that's how it goes.

To that point on the MLA that was asked earlier, I mean, if they were willing to give you something like we're going to be putting all those 2.5 on our towers rather than pay us charges for all that, we'll promise you less churn I guess years out. Is that conceptually something you would consider?

I mean, at the broadest level, we would agree to any MLA that makes good sense for both parties. We have no religious or political objections to MLAs.

Okay. Thank you.

Thank you. We have no one else in queue. Please continue.

Thank you, everyone for joining us. We look forward to continue reporting as we move through 2019.

Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.