SBA Communications Corp (SBAC) Q1 2025 Earnings Call Highlights: Strong Start with New Share ...

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Tue, Apr 29, 2025, 1:04 AM 4 min read

Domestic Organic Leasing Revenue Growth: 5.2% gross, 1% net, including 4.2% churn.
International Organic Leasing Revenue Growth: 1.6% net, 7.2% gross, including 5.6% churn.
First Quarter Churn: $20 million related to Sprint consolidation.
Site Acquisitions: 344 sites acquired for $58 million, primarily in Nicaragua.
New Sites Built: 67 new sites, mostly outside the US.
Share Repurchase: 583,000 shares repurchased for $123 million at an average price of $210.87 per share.
New Share Repurchase Plan: $1.5 billion authorized, replacing the prior plan.
Quarterly Dividend: $1.11 per share, a 13% increase over the previous year.
Total Debt: $12.5 billion, with $11.8 billion net debt.
Net Debt to Adjusted EBITDA Ratio: 6.4 times.
Weighted Average Interest Rate: 3.7% across outstanding debt.
Cash Dividend Paid: $122.3 million or $1.11 per share.

Warning! GuruFocus has detected 6 Warning Signs with SBAC.
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Release Date: April 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

SBA Communications Corp (NASDAQ:SBAC) reported a strong start to 2025 with results broadly in line with estimates and a healthy level of growth in activity levels.
The company experienced its best quarter in several years for new domestic leasing business, with a significant increase in leasing backlog.
SBA Communications Corp (NASDAQ:SBAC) increased its full-year outlook for services due to strong performance and growing backlog.
The company completed its exit from the Philippines and Colombia, allowing for improved focus and resource allocation.
SBA Communications Corp (NASDAQ:SBAC) announced a new $1.5 billion share repurchase plan, demonstrating confidence in the company's future and commitment to returning value to shareholders.

Negative Points

The company experienced a 4.2% churn in the first quarter, with $20 million related to the Sprint consolidation, which is expected to be $50 million to $52 million for the full year 2025.
International churn remained elevated due to key area consolidation, impacting growth in some markets.
The company faces challenges in the international markets, particularly in Brazil, due to ongoing consolidation impacts and rationalization needs.
SBA Communications Corp (NASDAQ:SBAC) noted that private valuations for US tower assets remain much higher than public valuations, making acquisitions challenging.
The company is experiencing a negative straight-line revenue trend, which may indicate a maturing portfolio and potential impacts on future results.

Q & A Highlights

Q: Can you comment on the overall carrier environment in the US and their plans for fixed wireless access? Also, how are you approaching capital allocation given the current interest rate environment? A: The carrier environment in the US is positive, with increased leasing activity and growing backlogs indicating continued investment needs. Fixed wireless access is a significant driver of network usage, necessitating further investment. Regarding capital allocation, despite higher interest rates, our strong leverage position allows flexibility. We are committed to a balanced approach, including share buybacks, asset investments, and debt repayments, alongside our dividend.

Q: What is your outlook for US leasing activity by the end of the year, and how do you manage bilateral contracting relationships with major customers? A: We expect US leasing activity to be higher by year-end compared to the first quarter, which saw approximately $9 million from new leases and amendments. Regarding bilateral contracting, we typically have master lease agreements with customers, with AT&T being an exception where we have a holistic agreement. We remain open to similar agreements with other customers.

Q: Can you explain the drivers behind the higher network services business and the slight increase in domestic churn? Also, how do you approach M&A opportunities in Canada? A: The higher network services business is driven by one customer operating at a faster pace than expected. Domestic churn is within our expected range, with a slight increase due to timing. For M&A in Canada, we evaluate opportunities thoroughly and pursue them if they offer value and competitive pricing.

Q: What are DISH's long-term plans, and have there been any inquiries from cable companies regarding spectrum deployment? A: We have limited specific information on DISH's plans, but they are focused on their stand-alone network. There have been no significant inquiries from cable companies about spectrum deployment on our towers, although we have had discussions about CBRS.

Q: How is the visibility for organic growth and churn dynamics in international markets, particularly in Latin America? A: In Latin America, we are nearing the end of churn impacts from consolidations in several markets, which should lead to more network investment and growth. However, Brazil is still experiencing churn due to ongoing consolidation impacts. We expect elevated churn internationally for the next few years but anticipate growth acceleration once these dynamics stabilize.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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