SBA Communications Corporation Reports Fourth Quarter 2018 Results

Provides Full Year 2019 Outlook

BOCA RATON, Fla.–(BUSINESS WIRE)–SBA Communications Corporation (Nasdaq: SBAC) (“SBA” or the “Company”)
today reported results for the quarter ended December 31, 2018.

Highlights of the fourth quarter include:

  • Net income of $57.2 million or $0.50 per share
  • AFFO per share growth of 15.2% over the year earlier period on a
    constant currency basis
  • Added 221 sites to our portfolio during the quarter, growing our
    portfolio 6.0% for the year
  • Repurchased 2.2 million shares during the quarter
  • Tower cash flow and Adjusted EBITDA margins of 80.2% and 70.5%,
    respectively

“We ended 2018 with our best quarter of the year, posting strong results
and seeing solid momentum as we move into 2019,” commented Jeffrey A.
Stoops, President and Chief Executive Officer. “In 2018 we saw increased
leasing activity domestically and internationally and we executed well.
We had our best domestic leasing year in four years in terms of revenue
added per tower. Tower cash flow margins continue to climb both
domestically and internationally, evidencing the quality of our assets
and the strength of our performance. We stayed fully invested,
allocating capital in substantial amounts to both portfolio growth and
stock repurchases. We met our portfolio growth goals, growing the
portfolio by 6% in 2018. We have moved into 2019 with solid customer
activity and backlogs right from the beginning of the year. We intend to
continue to work hard to capture that business. We anticipate staying
fully invested to our target net debt leverage range of 7.0x to 7.5x
annualized adjusted EBITDA, and to do so through a mix of portfolio
growth and stock repurchases. We believe that the combination of
favorable customer demand, our strong execution against that demand and
smart capital allocation will once again allow us to produce materially
increasing amounts of AFFO per share as we move through 2019.”

Operating Results

The table below details select financial results for the three months
ended December 31, 2018 and comparisons to the prior year period.

             
% Change
Q4 2018 Q4 2017

$ Change

% Change excluding FX (1)
 
Consolidated ($ in millions, except per share amounts)
Site leasing revenue $ 444.7 $ 414.1 $ 30.6 7.4% 9.9%
Site development revenue 39.1 29.0 10.1 34.9% 34.9%

Tower cash flow (1)

354.1 327.0 27.1 8.3% 10.3%
Net income 57.2 7.7 49.5 642.9% 53.5%
Earnings per share – diluted 0.50 0.06 0.44 733.3% 54.2%
Adjusted EBITDA (1) 339.3 310.1 29.2 9.4% 11.3%
AFFO (1) 229.9 211.8 18.1 8.6% 11.3%
AFFO per share (1) 2.00 1.78 0.22 12.4% 15.2%
 
(1)   See the reconciliations and other disclosures under “Non-GAAP
Financial Measures” later in this press release.
 

Total revenues in the fourth quarter of 2018 were $483.8 million
compared to $443.1 million in the year earlier period, an increase of
9.2%. Site leasing revenue in the quarter of $444.7 million was
comprised of domestic site leasing revenue of $358.2 million and
international site leasing revenue of $86.5 million. Domestic cash site
leasing revenue was $356.4 million in the fourth quarter of 2018
compared to $332.9 million in the year earlier period, an increase of
7.1%. International cash site leasing revenue was $85.4 million in the
fourth quarter of 2018 compared to $77.2 million in the year earlier
period, an increase of 10.5%, or 23.3% excluding the impact of changes
in foreign currency exchange rates.

Site leasing operating profit was $351.3 million, an increase of 8.5%
over the year earlier period. Site leasing contributed 97.2% of the
Company’s total operating profit in the fourth quarter of 2018. Domestic
site leasing segment operating profit was $291.7 million, an increase of
8.6% over the year earlier period. International site leasing segment
operating profit was $59.5 million, an increase of 8.2% over the year
earlier period.

Tower Cash Flow for the fourth quarter of 2018 of $354.1 million was
comprised of Domestic Tower Cash Flow of $295.4 million and
International Tower Cash Flow of $58.7 million. Domestic Tower Cash Flow
for the quarter increased 7.7% over the prior year period and
International Tower Cash Flow increased 11.6% over the prior year
period. Tower Cash Flow Margin was 80.2% for the fourth quarter of 2018,
as compared to 79.7% for the year earlier period.

Adjusted EBITDA for the quarter was $339.3 million, a 9.4% increase over
the prior year period. Adjusted EBITDA Margin was 70.5% in the fourth
quarter of 2018 compared to 70.6% in the fourth quarter of 2017.

Net Cash Interest Expense was $96.2 million in the fourth quarter of
2018 compared to $83.6 million in the fourth quarter of 2017, an
increase of 15.1%.

Net income for the fourth quarter of 2018 was $57.2 million, or $0.50
per share, and included a $24.0 million gain, net of taxes, on the
currency related remeasurement of U.S. dollar denominated intercompany
loans with a Brazilian subsidiary, while net income for the fourth
quarter of 2017 was $7.7 million, or $0.06 per share, and included a
$20.4 million loss on the currency related remeasurement of U.S. dollar
denominated intercompany loans with a Brazilian subsidiary.

AFFO for the quarter was $229.9 million, an 8.6% increase over the prior
year period. AFFO per share for the fourth quarter of 2018 was $2.00, a
12.4% increase over the fourth quarter of 2017.

Investing Activities

During the fourth quarter of 2018, SBA purchased 79 communication sites
for total consideration of $28.5 million. SBA also built 169 towers
during the fourth quarter of 2018. As of December 31, 2018, SBA owned or
operated 29,578 communication sites, 16,263 of which are located in the
United States and its territories, and 13,315 of which are located
internationally. In addition, the Company spent $21.5 million to
purchase land and easements and to extend lease terms. Total cash
capital expenditures for the fourth quarter of 2018 were $92.8 million,
consisting of $9.9 million of non-discretionary cash capital
expenditures (tower maintenance and general corporate) and $82.9 million
of discretionary cash capital expenditures (new tower builds, tower
augmentations, acquisitions, and purchasing land and easements).

Subsequent to the fourth quarter of 2018, the Company acquired 27
communication sites for an aggregate consideration of $10.7 million in
cash. In addition, the Company has agreed to purchase in the U.S. and
internationally 264 communication sites for an aggregate amount of $78.1
million. The Company anticipates that the majority of these acquisitions
will be consummated by the end of the second quarter of 2019.

Financing Activities and Liquidity

SBA ended the fourth quarter with $10.0 billion of total debt, $7.4
billion of total secured debt, $176.1 million of cash and cash
equivalents, short-term restricted cash, and short-term investments, and
$9.9 billion of Net Debt. SBA’s Net Debt and Net Secured Debt to
Annualized Adjusted EBITDA Leverage Ratios were 7.3x and 5.3x,
respectively.

As of the date of this press release, the Company had $205.0 million
outstanding under the $1.25 billion Revolving Credit Facility.

During the fourth quarter of 2018, the Company purchased 2.2 million
shares of its Class A common stock for $342.0 million, at an average
price per share of $158.09 under its $1.0 billion stock repurchase plan
authorized on February 16, 2018. All shares purchased were retired. As
of the date of this filing, the Company has $204.5 million of
authorization remaining under the plan.

On February 1, 2019, the Company, through its wholly owned subsidiary,
SBA Senior Finance II LLC, entered into a four year interest rate swap
on a portion of its 2018 Term Loan. The Company swapped $1.2 billion of
notional value accruing interest at one month LIBOR plus 200 basis
points for a fixed rate of 4.495% per annum.

Outlook

The Company is providing its initial full year 2019 Outlook for
anticipated results. The Outlook provided is based on a number of
assumptions that the Company believes are reasonable at the time of this
press release. Information regarding potential risks that could cause
the actual results to differ from these forward-looking statements is
set forth below and in the Company’s filings with the Securities and
Exchange Commission.

The Company’s full year 2019 Outlook assumes the acquisitions of only
those communication sites under contract at the time of this press
release. The Company may spend additional capital in 2019 on acquiring
revenue producing assets not yet identified or under contract, the
impact of which is not reflected in the 2019 guidance. The Outlook also
does not contemplate any additional repurchases of the Company’s stock
during 2019 other than repurchases completed as of the date of this
press release. The Outlook contemplates one new financing during the
third quarter of 2019 to refinance the Company’s 2014-1C Tower
Securities. The assumed interest rate of this new financing is 4.25%.
There are no additional new financings contemplated in our 2019 Outlook.

The Company’s Outlook assumes an average foreign currency exchange rate
of 3.80 Brazilian Reais to 1.0 U.S. Dollar and 1.30 Canadian Dollars to
1.0 U.S. Dollar for the full year 2019 outlook.

   
(in millions, except per share amounts) Full Year 2019
 
Site leasing revenue (1) $ 1,820.0 to $ 1,840.0
Site development revenue $ 105.0 to $ 125.0
Total revenues $ 1,925.0 to $ 1,965.0
Tower Cash Flow (2) $ 1,465.0 to $ 1,485.0
Adjusted EBITDA (2) $ 1,370.0 to $ 1,390.0
Net cash interest expense (3) $ 383.0 to $ 393.0
Non-discretionary cash capital expenditures (4) $ 32.0 to $ 42.0
AFFO (2) $ 910.0 to $ 965.0
AFFO per share (2) (5) $ 7.95 to $ 8.44
Discretionary cash capital expenditures (6) $ 225.0 to $ 245.0
 
(1)   The Company’s Outlook for site leasing revenue includes revenue
associated with pass through reimbursable expenses.
(2) See the reconciliation of this non-GAAP financial measure presented
below under “Non-GAAP Financial Measures.”
(3) Net cash interest expense is defined as interest expense less
interest income. Net cash interest expense does not include
amortization of deferred financing fees or non-cash interest expense.
(4) Consists of tower maintenance and general corporate capital
expenditures.
(5) Outlook for AFFO per share is calculated by dividing the Company’s
outlook for AFFO by an assumed weighted average number of diluted
common shares of 114.4 million. Our Outlook does not include the
impact of any repurchases of the Company’s stock during 2019 other
than those completed as of the date of this press release.
(6) Consists of new tower builds, tower augmentations, communication
site acquisitions and ground lease purchases. Does not include
expenditures for acquisitions of revenue producing assets not under
contract at the date of this press release.
 

Conference Call Information

SBA Communications Corporation will host a conference call on Thursday,
February 21, 2019 at 5:00 PM (EST) to discuss the quarterly results. The
call may be accessed as follows:

When:     Thursday, February 21, 2019 at 5:00 PM (EST)
Dial-in Number: (800) 230-1074
Conference Name: SBA fourth quarter results
Replay Available: February 21, 2019 at 8:00 PM to March 7, 2019 at 11:59 PM (TZ:
Eastern)
Replay Number: (800) 475-6701
Access Code: 463369
Internet Access:

www.sbasite.com

Information Concerning Forward-Looking Statements

This press release and our earnings call include forward-looking
statements, including statements regarding the Company’s expectations or
beliefs regarding (i) customer demand and its ability to capture demand,
(ii) the impact of customer demand, operational performance, and capital
allocation on its ability to increase AFFO per share, (iii) capital
allocation and the Company’s target net debt leverage range, (iv) the
Company’s financial and operational guidance for the full year 2019, (v)
the timing of closing for currently pending acquisitions, (vi)
additional capital spending in 2019, (vii) financing of indebtedness in
2019, and (viii) foreign exchange rates and their impact on the
Company’s financial and operational guidance.

The Company wishes to caution readers that these forward-looking
statements may be affected by the risks and uncertainties in the
Company’s business as well as other important factors may have affected
and could in the future affect the Company’s actual results and could
cause the Company’s actual results for subsequent periods to differ
materially from those expressed in any forward-looking statement made by
or on behalf of the Company. With respect to the Company’s expectations
regarding all of these statements, including its financial and
operational guidance, such risk factors include, but are not limited to:
(1) the ability and willingness of wireless service providers to
maintain or increase their capital expenditures; (2) the Company’s
ability to identify and acquire sites at prices and upon terms that will
provide accretive portfolio growth; (3) the Company’s ability to
accurately identify and manage any risks associated with its acquired
sites, to effectively integrate such sites into its business and to
achieve the anticipated financial results; (4) the Company’s ability to
secure and retain as many site leasing tenants as planned at anticipated
lease rates; (5) the impact of continued consolidation among wireless
service providers, including the impact of the potential T-Mobile and
Sprint merger, on the Company’s leasing revenue; (6) the Company’s
ability to successfully manage the risks associated with international
operations, including risks associated with foreign currency exchange
rates; (7) the Company’s ability to secure and deliver anticipated
services business at contemplated margins; (8) the Company’s ability to
maintain expenses and cash capital expenditures at appropriate levels
for its business while seeking to attain its investment goals; (9) the
Company’s ability to acquire land underneath towers on terms that are
accretive; (10) the economic climate for the wireless communications
industry in general and the wireless communications infrastructure
providers in particular in the United States, Brazil, and
internationally; (11) the Company’s ability to obtain future financing
at commercially reasonable rates or at all; (12) the ability of the
Company to achieve its long-term stock repurchases strategy, which will
depend, among other things, on the trading price of the Company’s common
stock, which may be positively or negatively impacted by the repurchase
program, market and business conditions; (13) the Company’s ability to
achieve the new builds targets included in its anticipated annual
portfolio growth goals, which will depend, among other things, on
obtaining zoning and regulatory approvals, weather, availability of
labor and supplies and other factors beyond the Company’s control that
could affect the Company’s ability to build additional towers in 2019;
and (14) the Company’s ability to meet its total portfolio growth, which
will depend, in addition to the new build risks, on the availability of
sufficient towers for sale to meet our targets, competition from third
parties for such acquisitions and our ability to negotiate the terms of,
and acquire, these potential tower portfolios on terms that meet our
internal return criteria. With respect to its expectations regarding the
ability to close pending acquisitions, these factors also include
satisfactorily completing due diligence, the amount and quality of due
diligence that the Company is able to complete prior to closing of any
acquisition and its ability to accurately anticipate the future
performance of the acquired towers, the ability to receive required
regulatory approval, the ability and willingness of each party to
fulfill their respective closing conditions and their contractual
obligations and the availability of cash on hand or borrowing capacity
under the Revolving Credit Facility to fund the consideration. With
respect to the repurchases under the Company’s stock repurchase program,
the amount of shares repurchased, if any, and the timing of such
repurchases will depend on, among other things, the trading price of the
Company’s common stock, which may be positively or negatively impacted
by the repurchase program, market and business conditions, the
availability of stock, the Company’s financial performance or
determinations following the date of this announcement in order to use
the Company’s funds for other purposes. Furthermore, the Company’s
forward-looking statements and its 2019 outlook assumes that the Company
continues to qualify for treatment as a REIT for U.S. federal income tax
purposes and that the Company’s business is currently operated in a
manner that complies with the REIT rules and that it will be able to
continue to comply with and conduct its business in accordance with such
rules. In addition, these forward-looking statements and the information
in this press release is qualified in its entirety by cautionary
statements and risk factor disclosures contained in the Company’s
Securities and Exchange Commission filings, including the Company’s
Annual Report on Form 10-K filed with the Commission on March 1, 2018.

This press release contains non-GAAP financial measures. Reconciliation
of each of these non-GAAP financial measures and the other Regulation G
information is presented below under “Non-GAAP Financial Measures.”

This press release will be available on our website at www.sbasite.com.

About SBA Communications Corporation

SBA Communications Corporation is a first choice provider and leading
owner and operator of wireless communications infrastructure in North,
Central, and South America. By “Building Better Wireless,” SBA generates
revenue from two primary businesses – site leasing and site development
services. The primary focus of the Company is the leasing of antenna
space on its multi-tenant communication sites to a variety of wireless
service providers under long-term lease contracts. For more information
please visit: www.sbasite.com.

       

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

 
For the three months For the year
ended December 31, ended December 31,
2018 2017 2018 2017
Revenues: (unaudited) (unaudited) (unaudited)
Site leasing $ 444,748 $ 414,084 $ 1,740,434 $ 1,623,173
Site development   39,101     28,989     125,261     104,501  
Total revenues   483,849     443,073     1,865,695     1,727,674  
Operating expenses:
Cost of revenues (exclusive of depreciation, accretion,
and amortization shown below):
Cost of site leasing 93,497 90,457 372,296 359,527
Cost of site development 28,806 24,073 96,499 86,785
Selling, general, and administrative (1) 35,626 30,520 142,526 130,697
Acquisition related adjustments and expenses 1,789 5,510 10,961 12,367
Asset impairment and decommission costs 4,356 10,789 27,134 36,697
Depreciation, accretion, and amortization   169,454     162,643     672,113     643,100  
Total operating expenses   333,528     323,992     1,321,529     1,269,173  
Operating income   150,321     119,081     544,166     458,501  
Other income (expense):
Interest income 1,760 2,689 6,731 11,337
Interest expense (97,939 ) (86,334 ) (376,217 ) (323,749 )
Non-cash interest expense (638 ) (733 ) (2,640 ) (2,879 )
Amortization of deferred financing fees (5,024 ) (5,336 ) (20,289 ) (21,940 )
Loss from extinguishment of debt, net (14,443 ) (1,961 )
Other income (expense), net   24,550     (18,636 )   (85,624 )   (2,418 )
Total other expense, net   (77,291 )   (108,350 )   (492,482 )   (341,610 )
Income before income taxes 73,030 10,731 51,684 116,891
Provision for income taxes   (15,878 )   (3,071 )   (4,233 )   (13,237 )
Net income $ 57,152   $ 7,660   $ 47,451   $ 103,654  
Net income per common share
Basic $ 0.50   $ 0.07   $ 0.41   $ 0.86  
Diluted $ 0.50   $ 0.06   $ 0.41   $ 0.86  
Weighted average number of common shares
Basic   113,517     117,231     114,909     119,860  
Diluted   115,010     118,931     116,515     121,022  
 
(1)   Includes non-cash compensation of $9,957 and $9,167 for the three
months ended December 31, 2018 and 2017, respectively, and $41,145
and $37,236 for the twelve months ended December 31, 2018 and 2017,
respectively.
   

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par values)

 
December 31, December 31,
2018 2017
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 143,444 $ 68,783
Restricted cash 32,464 32,924
Accounts receivable, net 111,035 90,673
Costs and estimated earnings in excess of billings on uncompleted
contracts
23,785 17,437
Prepaid expenses and other current assets   63,126     49,716  
Total current assets 373,854 259,533
Property and equipment, net 2,786,355 2,812,346
Intangible assets, net 3,331,465 3,598,131
Other assets   722,033     650,195  
Total assets $ 7,213,707   $ 7,320,205  
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable $ 34,308 $ 33,334
Accrued expenses 63,665 69,862
Current maturities of long-term debt 941,728 20,000
Deferred revenue 108,054 97,969
Accrued interest 48,722 48,899
Other current liabilities   9,802     8,841  
Total current liabilities 1,206,279 278,905
Long-term liabilities:
Long-term debt, net 8,996,825 9,290,686
Other long-term liabilities   387,426     349,728  
Total long-term liabilities 9,384,251 9,640,414
Shareholders’ deficit:
Prefer. stock-par value $.01, 30,000 shares authorized, no shares
issued or outst.

Common stock – Class A, par value $.01, 400,000 shares authorized,
112,433 and 116,446 shares issued and outstanding at December 31,
2018 and December 31, 2017, respectively

1,124 1,164
Additional paid-in capital 2,270,326 2,167,470
Accumulated deficit (5,136,368 ) (4,388,288 )
Accumulated other comprehensive loss   (511,905 )   (379,460 )
Total shareholders’ deficit   (3,376,823 )   (2,599,114 )
Total liabilities and shareholders’ deficit $ 7,213,707   $ 7,320,205  
 
   

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited) (in thousands)

 
For the three months
ended December 31,
2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 57,152 $ 7,660
Adjust. to reconcile net income to net cash provided by operating
activities:
Depreciation, accretion, and amortization 169,454 162,643
Non-cash asset impairment and decommission costs 4,046 10,107
Non-cash compensation expense 10,187 9,355
Amortization of deferred financing fees 5,024 5,336
(Gain) loss on remeasurement of U.S. denominated intercompany loans (24,037 ) 20,403
Other non-cash items reflected in the Statements of Operations 11,868 (959 )
Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable and costs and estimated earnings in excess of
billings on uncompleted contracts, net

(24,772 ) (8,943 )
Prepaid expenses and other assets (9,979 ) 1,280
Accounts payable and accrued expenses (248 ) (5,686 )
Accrued interest 14,536 29,231
Other liabilities   13,244     (3,429 )
Net cash provided by operating activities   226,475     226,998  
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions (47,994 ) (280,540 )
Capital expenditures (44,846 ) (40,734 )
Other investing activities   (5,190 )   7,082  
Net cash used in investing activities   (98,030 )   (314,192 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under Revolving Credit Facility 205,000 (390,000 )
Repayment of Term Loans (6,000 ) (5,000 )
Repurchase and retirement of common stock (342,042 ) (331,164 )
Proceeds from Senior Notes, net of fees and original issue discount 741,108
Other financing activities   25,694     8,084  
Net cash (used in) provided by financing activities   (117,348 )   23,028  
Effect of exchange rate changes on cash, cash equivalents, and
restricted cash
3,879 (4,001 )
NET CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 14,976 (68,167 )
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:
Beginning of period   163,324     172,462  
End of period $ 178,300   $ 104,295  
 

Contacts

Mark DeRussy, CFA
Capital Markets
561-226-9531

Lynne Hopkins
Media Relations
561-226-9431

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