Ladies and gentlemen, thank you very much for standing by. Welcome to the SBA Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Mark DeRussy, VP of Finance. Please go ahead, sir.

Good evening and thank you for joining us for SBA's second quarter 2022 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 2022 and beyond. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, August 01, and we have no obligation to update any forward-looking statements that 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 will now turn it over to Brendan to discuss our second quarter results.

Thanks Mark. Good evening. SBA continued building on our strong first quarter with an even better second quarter with across the board results ahead of our expectations and backlog supportive of an equally good or possibly even better second half of the year. Total GAAP site leasing revenues for the second quarter were $580.2 million and cash site leasing revenues were $570.4 million. Foreign exchange rates were largely in line with our previously forecasted FX rate estimates for the quarter, but we're a tailwind on comparisons to the second quarter of 2021, positively impacting revenues by $3.4 million on a year-over-year basis. Same-tower recurring cash leasing revenue growth for the second quarter, which is calculated on a constant currency basis was 4.4% over the second quarter of 2021, including the impact of 3.7% of churn. On a gross basis same-tower growth was 8.1%. Domestic same-tower recurring cash leasing revenue growth over the second quarter of last year was 7.1% on a gross basis and 4.1% on a net basis, including 3% of churn. Domestic operational leasing activity or bookings representing new revenue placed under contract during the second quarter was very strong again and incrementally higher than the first quarter of this year. In addition, our domestic new lease and new amendment application backlogs remain very healthy as well. The combination of our strong second quarter leasing activity level and our backlogs have allowed us to increase our outlook for new 2022 domestic site leasing revenue from organic lease up. During the second quarter, amendment activity represented 66% of our domestic bookings with 34% coming from new leases. The big four carriers of AT&T, T-Mobile, Verizon and Dish; represented 96% of total incremental domestic leasing revenue signed up during the quarter. Internationally, on a constant currency basis, same-tower cash leasing…

Thanks, Brendan. We ended the quarter with $12.6 billion of total debt and $12.3 billion of net debt. Our net debt to annualize adjusted EBITDA leverage ratio was 7.0 times, which is at the low end of our target range. Our second quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 5.3 times equaling last quarter, the highest in the company's history. As of the end of the quarter, the weighted average interest rate of our outstanding debt was 2.9% with a weighted average maturity of approximately 4.3 years and the interest rate on 93% of our outstanding debt is fixed. And as of today, we have $480 million outstanding under our $1.5 billion revolver. During the second quarter, we did not repurchase any shares of our common stock as we chose instead to pursue the Brazil acquisition. We currently have $504.7 million of repurchase authorization remaining under our $1 billion stock repurchase plan. The company shares outstanding at June 30, 2022 were 107.9 million compared to 109.5 million at June 30, 2021, which is a reduction of 1.5%. In addition, during the second quarter, we declared and paid a cash dividend of $76.6 million or $0.71 cents per share and today we announced that our board of directors declared a third quarter dividend of $0.71 a share an increase of 22.4% over the third quarter of last year. The dividend will be payable on September 20, 2022 to shareholders of record as the be close of business on August 25, 2022. With that, I'll now turn the call over to Jeff.

Thanks, Mark and good evening, everyone. As you have heard, we had another great performance in the second quarter. All areas of our operations were very busy and executed at a very high level producing better than expected financial results and setting us up well for the second half of the year. Despite higher interest rates and weaker FX rates, we have meaningfully increased our full year outlook in all areas, including a $64 million increase in anticipated total revenue. Our strong results and increased outlook are driven by the current network investment initiatives around the globe. While there is a range in the degree of activity from each of our customers around the globe, collectively, they are producing very high levels of demand, which we expect will keep us very busy for the remainder of this year and well into 2023. As of this moment, we are not seeing any material adverse impact on our activity levels from supply chain labor or COVID-19 issues. In the US, each of our carrier customers remain busy during the quarter signing up new leases and amendments primarily associated with the build out of their networks through the deployment of new spectrum. T-Mobile was very active during quarter and continued their nationwide deployment of 2.5 gigahertz and 600 megahertz spectrum. Verizon and AT&T each increased their 5G related signings with us from the first quarter with each focused on C-band deployments and AT&T beginning to incorporate 3.45 gigahertz spectrum into their deployments as well. And Dish also contributed to the quarter continuing to sign up new lease agreements in support of their nationwide 5G network build out. We are excited about the upcoming 2.5 gigahertz auction, which will result in even more spectrum being deployed Internationally, we also had one of our best…

And first we go to the line of Michael Rollins with Citi. Please go ahead.

Thanks and good afternoon. First curious if you give us an update on the domestic leasing environment and in particular, are you seeing any change in activity from AT&T after announced some of the progress it's made on mid band spectrum deployment and also what you're seeing out of dishes build, and then just secondly, with regards to the acquisition, can you talk a little bit more about how the valuation might be contemplating that 17% of leasing that could be subject to some future RA rationalization? Thanks.

Well, clearly I'll take the last one first Mike. Clearly, 10.5 times is extremely attractive price that takes into account exactly that. We don't really believe any of the next revenue will stay on and we have heavily discounted the oil revenue as well in our underwriting. So yes, all that was taken into account when we arrived at the price. In terms of AT&T, I listened to their call and heard their comments and based on our observations in our markets, which are mostly suburban highway corridor and rural. I think the numbers that they were talking about mostly came from dense urban markets, which makes a lot of sense because that's how all new -- that's where all new generational upgrades start. So we still have in our opinion, a very, very long way to go with, AT&T and their C-band and 3.45 work and Dish is a very active contributor. They would represent most all of the new leases that we are signing domestically. So there will be some ebbs and flows as they work around their will have a -- they have already worked around their 2022 regulatory requirements and are now going to be working towards their 2023 regulatory requirements, but still a very, very active participant.

Next, we'll go to line of Batya Levi with UBS. Please go ahead.

With the leasing activity ramping up towards the end of the year, do you think that bodes well for the activity we should expect for '23? I know you're going to provide formal guidance later, but in terms of trajectory, some comments would be helpful to think about puts and takes into next year. And another question on churn it has been coming lower than you had expected. Is that pushed out to next year or are you seeing lower decommissioning than you had prior expectations? Thank you.

Yeah, I think Batya, the most we could say about the trajectory is that the fourth quarter of this year we believe will be the highest growth rate of the year and we'll let you extrapolate what that means going forward. And obviously we'll give a full review when we give our 2023 guidance. Brendan, I'm going to let you take the churn question.

Yeah, the churn is -- it is mostly you should think of it as rolling into next year or future year it's largely timing related as opposed to below our expectations. It's just the timing primarily around the Sprint, T-Mobile decommissioning is a little bit more deferred than the estimates that we had made, but we don't expect the total to really be any different.

Great. Maybe just to follow up on that, Brendan, I think you had originally said maybe it's $30 million in '22. Should we assume that it's closer to $27 million now, and then if you could give us a guidance for '23, that'd be great.

Yeah, it was well, last quarter we actually brought it down about $3 million and we brought it down about another $3 million this quarter. So this year is probably closer to '24 that's what's assumed in our numbers right now for '22, for 2022. And next year we're probably somewhere in the $15 million to $25 million range. It's a fairly wide range, but obviously there are some uncertainties around exact timing, but somewhere in that $20-ish million level.

And next, we'll go to the line of Ric Prentiss with Raymond James. Please go ahead.

Want to follow up on some of Michael's questions? Why was now the right time? Was it just the right price as far as doing the GTS deal and help us understand maybe as we should think about total exposure to Nextel and timing for Nextel to affect your international operations and I've got a follow up.

Yeah, it was the right time because the opportunity presented itself at a time and on terms where we thought it was very attractive for our future value creation. What's going on in Brazil right now is, they've got a fairly hawkish central bank. They have -- I think they're little bit ahead of the US in terms of their economy having, being dancing around a recession. The demand, notwithstanding that for cellular and 5G continues to mushroom in Brazil. You have, you know, this rationalization going on with the oil transaction for three carriers who now have bought a lot of new spectrum that needs to be deployed and are in a better market share position to do all that. So we like the dynamic a lot, Rick and we know these assets well and we know the sellers well, and all things kind of came together in the right way.

Yeah, Rick, we've been kind of ballparking on our portfolio of at about $20 million to $30 million US over the next many years. This portfolio actually reduces our exposure to oil on a percentage basis in Brazil, but would probably add somewhere in the $3-ish million of incremental oil churn would be our current estimate.

Okay. And you all know me. I really harp on this whole amortization of prepaid rent. I don't like it. I know you have to account for it. It's just -- it's not cash. Yours has been very tiny. I think about $25 million. Crown did acknowledge and provide a table, this earning season on where their level was at $560 million, drop it to maybe $450 million maybe going in and lower American tower talked about theirs had been maybe $140 million dropping to $110 million. Should we think of your kind of $25 million a year as a good number because again, we really think cash, AFO and funds available for distribution is the right way to do valuations.

Yeah. That's -- obviously it's been trending down. Part of the reason it's trending down Rick is because as we've done amendments and had longer terms to some of our tenant leases, you amortize it over a longer period of time. So it's actually had a reducing effect. So it really is just a function of how much augmentation work we do that we get reimbursed for and which leases that relates to how much time they have. But I think based on the way that it's trended, that number that you just mentioned of $25 million or so is probably a reasonable estimate, but it's been higher in the past and it's been lower. So, we'll see how it goes, but, I think that's a reasonable estimate.

Yeah. We're always going to disclose it very specifically, Rick, but it's not necessarily a bad thing. This is…

I love getting paid, right?

Understand it for what it is. So it's not something we look to discourage but you can depend on us that it's always going to be clearly marked out.

It's great for return on capital. I just like to think of it as net capital return on yield kind of thing, as opposed to an AFFO number. I just don't like it an AFFO.

Yeah, no, I hear you.

Next we'll go to line of Simon Flannery - Morgan Stanley. Please go ahead.

Great. Thank you. Good evening. On the M&A market obviously the transaction multiple, you said it's accretive. It's certainly lower than we've seen elsewhere. Do you think this was a particular situation given the oil exposure, given the Brazil market, or do you sense a turn that maybe it's going to be easier to be a buyer in the private markets than it has been for the last couple of years? Anything changing there either in towers or for ground leases, etcetera. And then on the leverage you came down to seven point times, obviously rates have been rising, you've got a great liquidity profile, but any updates you want to stay more towards the lower end or are you still happy right within that 7 to 7.5 going forward in this rate environment?

Yeah, I think as long as we can continue to produce the organic growth Simon, we're fine in the 7 to 7.5 times. But, if we don't find good things to buy, it'll obviously be trending lower. In terms of your first question, I think there are some breaks on the margins that are happening around the world in terms of seller and buyer expectations coming more together. But in this particular case, this was more a situation of these particular assets, our familiarity with them, the fact that it was the last tranche of towers that the seller had and needed to sell them to basically liquidate some funds and do some things that private equity needs to do. So I would attribute it more to this deal that I would a wholesale change in the buying environment. Although I do think that is improving.

And what sort of clarity can you give us on the -- or what have you assumed on the timing of the next oil churn for these assets?

It's over the next several years. Some of it is specific to the timeframes that of the terms of those agreements, Simon and they're all spread out to different dates but you should assume over the next three years roughly on average, but it won't be even, it'll be certain amount each.

So, that's $68 million includes presumably some churn in the next 12 months after closing.

A little bit. Yes.

Next, we'll go to the line of Nick Del Deo with MoffettNathanson. Please go ahead.

Thanks for taking my questions. First, two quick clarifications first for Brendan. Brendan, you said that you expect about $3 million in oil churn from the GTS towers. Can, you share what your expectation is for the next churn?

Yeah, I don't want to give the exact number but, there the oil, well, as Jeff said, we're assuming that all of the next revenue goes away. The total for oil and next tell is about 17%. So Nextel is roughly half of that. So you can probably do the math from there.

Okay. That's great. Thanks. And then your expectation for other revenue in the US in '22, went from zero last quarter to $5 million this quarter, what that a function of, and was that realized this quarter?

Yes, it was realized this quarter. It's basically there's a few different things in there, but it's essentially what we consider cash basis revenue, which is stuff that we're collecting kind of one off. Sometimes there's extra fees that are paid or holdover fees, things that are not part of the recurring ongoing lease. So we classify it as other, but the increase is really that we got more of that than we expected. So almost all of that is stuff that we realized in the second quarter. There may be a small amount of projected for the second half of the year, but most of it was actually realized.

Stuff that doesn't go in the $66 million bucket. Right because, we want to be careful as to how folks think about that year after year after year.

Okay. Got it. Great. That's terrific and then one more substantive question and any change in behaviour from you'll call it non-traditional customers like cable that might be worth calling out that would suggest, either they're more likely or less likely to be a meaningful customer in coming years.

No real change, Nick. No real change that comes to mind.

We'll go to the line of Phil Cusick with JPMorgan. Please go ahead.

Hey guys. Thanks. just to go back to the US for a second, can you tell us, is there sort of flat and running steady from here, or is there sort of an acceleration happening in that one? Just trying to get an idea of what's driving the back half strength and the durability there. Jeff, it was interesting you mentioned, continuing strength in '23 and maybe '24. So anything you can add to us there? And then second what's driving the service revenue growth and anything you can sort of help us on there if it's shifting at the margin. Thanks very much.

Well, the services revenue is pretty straightforward. It's just more activity, more stuff going and our services business is almost entirely gained gleaned from our own towers. So it's just a lot of activity, Phil. And in terms of the -- remember we report those growth rates on a trailing 12 month basis. So a lot of what you're going to see in our financial reports for the second or the third and the fourth quarter, we already know, it's already kind of on the books. So, that part of it there's much less risk, so to speak than those and as we move through the year as a calendar year company, the risk drops and drops and drops. So here we are in August, our year isn't entirely baked yet, but it's pretty close. Yeah. And so to your question on dish being a part of it, they're certainly a part of it because they've been a big part of our leasing activity success over the last really last year. And so the timing of when those leases commence is a driver. And so it's certainly a contributing factor to the increasing growth that we expect in Q3 and Q4.

Yep. Jeff, Jeff, you sort of cautioned us from taking that fourth quarter exit run rate from this year and extrapolating that onto next year each quarter. Do you think that that's starting to look more reasonable as you get closer to 23?

I think I'd like to save all that till my 2023 guidance Phil.

Next. We'll go to line of Matt Niknam with Deutsche Bank. Please go ahead.

I have one follow up and one other question. The follow up is just on the last question on services, any color you can share, just in terms of the breadth of carrier contributions across the big four in terms of what's driving the upside on services. And then just, secondly, in terms of the edge strategy, any thoughts, updates in terms of how you're thinking about it, many difference in terms of how you're thinking about the relative to any use cases internationally? Thanks.

Well internationally, recall and we talked about this last quarter, the data center we bought in Brazil. We are having more advanced discussions there around CRAN and other carrier deployments that, we'll tie into owning a data center and data center expertise. So that's encouraging, but in terms of the edge itself, we're adding couple three, four, five, maybe as many as 10 new many facilities a quarter, but it's still we're not yet prepared to say the edge is here and it's at the tower site. It's all going in the right direction, but it still needs more time, certainly is still a ways off from being material. Now in terms of the services contributions, I believe in our 10-Q we disclose who our top services customers are. So I will accelerate that for you that, and it is T-Mobile, Verizon and Dish are going to be the top three, right. Brendan. Yeah, for this quarter Tmobile, certainly the number one. Yeah. Yeah.

Great. All right, appreciate it. Thanks guys.

Next we'll go to line of Eric Luebchow with Wells Fargo. Please go ahead.

I wanted to check real quick. You mentioned the 2.5 gigahertz auction that's going on right now. Generally most people think T-Mobile will be the only meaningful bidder there, but just wondering if you have any thoughts and kind of service overlap with some of the -- some of the licenses that are up for auction. And whether you think that can maybe be a meaningful contributor for you looking out the next year or two?

Well, a number of folks in addition to T-Mobile registered, I would agree with you only based on what I read, most folks expect T-Mobile to be the big winner and any kind of spectrum for us is new spectrum is going to prove valuable in one degree or another. Now, if it's folks who don't have existing 2.5 gigahertz spectrum to deploy, that's going to generally mean new radios and antennas. So that can be a little more impactful than not, but just having more spectrum and greater densification that will permit is a good thing. So, I'm not really going to speculate as to who else is going to put in bids that ultimately win the day. We're just happy that there's another auction, a very valuable mid band spectrum that we know ultimately gets deployed.

Fair enough, and just related to T-Mobile seems like they've been running at a pretty fast pace but based on what they've said, it sounds like they'll be mostly done with their 2.5 and 600 overlays at some point, maybe by mid next year. So wondering if you see any sign that they could moderate activity, or do you think maybe there's still some opportunity, especially with the C-band licenses and the 3.45 that they've get to deploy?

Yeah, I think there'll be opportunities. And I think when all of our customers talk about when this spectrum gets deployed, they they're generally talking about coverage and that's just really, the end of coverage is the beginning of densification and all the infill and other things that will ultimately be driven by consumer uptake of 5G apps and products. So when we think about these periods of additional investment, they have always in our history gone well beyond the dates that folks talk about achieving their pops, their desired pops coverage, because then you just -- then it gets to densification, which is much different.

Next we'll go to line of David Guarino with Green Street. Please go ahead.

Thanks. Just a quick one from me on the financing market. Did you guys mention how you're planning on funding the GTS transaction, and maybe for Brendan, if you could just comment on the relative attractiveness of a secured versus the unsecured markets today?

Yeah. On GTS, as of right now, we plan to be opportunistic in the financing markets. That financing, we haven't been specific about that. We do have the capacity on our revolver and with the cash that we're generating from operations to handle it if necessary, but we do intend to be opportunistic. We do have a maturity. Our next step maturity actually comes up in March of next year and so that will be refinanced at some point between now and then, and there's capacity within our ABS structure to actually raise more money. So that might be a contributor. So we'll see how that goes. In the general sense of secured versus unsecured, I don't think they're obviously all up right now in terms of pricing. For us there's still availability and any of the markets that we typically use. So it's not a question of access, it's really just a question of pricing and so we intend to be take our time and be opportunistic. And as was mentioned in the script, we have other than this one maturity that I mentioned, which represents about 5% of our outstanding debt. We don't have any maturities for over two years. So we have the flexibility to be a little bit patient with that. But, I think you should expect we'll continue to use the secured markets as we have in the past. But a mix of both will likely be the path for us.

Yeah. And while we may be opportunistic David and raise the money, from somewhere else for purposes of our outlook, it assumes cash on hand and a revolver draw.

Next we'll go to line of Greg Williams with Cowen. Please. Go ahead.

Great. Thanks for taking my questions. First one's just on the mix of colo versus amendments. I think you noted you're at elevated levels, like a third of the US, this new colo and two thirds amendments and I think International's a 51-49 split. Curious to hear your thoughts on where that could go from here. We had sort of pish-ish levels. Jeff, you mentioned we're going to go from coverage to densification. I would imagine that you'd see more amendments that way. So curious to hear your thoughts there. Second questions just on the service margin. If you are seeing this five quarters in a row record and you're going to more of a construction phase, would that mean the service margin could decline a bit as you shift away from like playing and designing towards construction? Thanks.

Well, the short answer to your last question is yes. So that could vary very well happen and I'm sorry, what was color versus amendments and the mix in terms of a shift, if you kind of go back really the colo side of it in the US is heavily driven by Dish. And so as you have a little less dish contribution, you see the percentage shifting more towards amendments and I think with that, and the mix towards infill, as we talked about amendments will probably be trending higher as a percentage.

Yeah. When you think about how this is going to go, and there'll be exceptions of course to this, but for the most part, the rollouts by T-Mobilem, Verizon and AT&T are going to be heavily amendment. For Dish it's going to be more colo. And then when we get to the densification part, Greg, you kind of lean towards amendment, but I believe that you will see I think a higher percentage of brand new leases when we get to the deification stage.

And at this time there's no one in queue.

Okay. Well, I want to thank everyone for joining us. We had a great quarter and we look forward to our next report. Thank you.

This concludes our conference for today. Thank you for your participation and for using AT&T conferencing service. You may now disconnect.