SBA(SBAC) - 2022 Q3 - Quarterly Report

FORM 10-Q Filing Information Filing Details This report provides basic filing details for the Form 10-Q of SBA Communications Corporation for the period ended September 30, 2022 - The report is a Quarterly Report (Form 10-Q) for the period ended September 30, 2022[2] - SBA Communications Corporation is identified as a Large Accelerated Filer[3][4] Filing Metrics | Metric | Value | | :--- | :--- | | Commission File Number | 001-16853 | | Trading Symbol | SBAC | | Exchange | The NASDAQ Stock Market LLC (NASDAQ Global Select Market) | | Class A Common Stock Outstanding (as of Oct 25, 2022) | 107,965,538 shares | PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for SBA Communications Corporation and its subsidiaries Consolidated Balance Sheets The balance sheets show the company's financial position, highlighting an increase in total assets and current liabilities Key Balance Sheet Metrics | Metric (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $9,949,014 | $9,801,699 | | Total Current Assets | $529,813 | $614,446 | | Total Current Liabilities | $1,338,379 | $616,331 | | Total Long-Term Liabilities | $13,934,850 | $14,451,522 | | Total Shareholders' Deficit | $(5,364,830) | $(5,283,404) | - Current maturities of long-term debt significantly increased from $24,000 thousand at December 31, 2021, to $663,181 thousand at September 30, 2022[9] Consolidated Statements of Operations The statements of operations show significant revenue and net income growth driven by site leasing and development revenues Key Operational Metrics | Metric (in thousands, except per share) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $675,584 | $589,305 | $1,947,360 | $1,713,696 | | Operating Income | $242,987 | $211,776 | $690,746 | $585,117 | | Net Income | $99,762 | $47,798 | $357,221 | $188,720 | | Net Income Attributable to SBA Communications Corporation | $100,009 | $47,798 | $358,150 | $188,720 | | Basic EPS | $0.93 | $0.44 | $3.32 | $1.72 | | Diluted EPS | $0.91 | $0.43 | $3.27 | $1.70 | - Site leasing revenue increased by 9.7% for the three months and 10.4% for the nine months ended September 30, 2022, year-over-year[11] - Site development revenue saw substantial growth, increasing by 64.0% for the three months and 48.0% for the nine months ended September 30, 2022, year-over-year[11] Consolidated Statements of Comprehensive Income These statements highlight the impact of non-owner changes in equity, particularly adjustments related to interest rate swaps Key Comprehensive Income Metrics | Metric (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $99,762 | $47,798 | $357,221 | $188,720 | | Adjustments related to interest rate swaps | $53,336 | $9,898 | $162,491 | $58,251 | | Foreign currency translation adjustments | $(40,757) | $(51,415) | $(14,277) | $(31,181) | | Comprehensive Income | $112,341 | $6,281 | $505,435 | $215,790 | | Comprehensive Income Attributable to SBA Communications Corporation | $112,588 | $6,281 | $506,565 | $215,790 | Consolidated Statements of Shareholders' Deficit This statement details changes in shareholders' deficit from net income, stock compensation, dividends, and stock repurchases Changes in Shareholders' Deficit | Metric (in thousands) | Sep 30, 2022 (9 Months) | Dec 31, 2021 | | :--- | :--- | :--- | | Balance, Beginning of Period | $(5,283,404) | $(5,283,404) | | Net income attributable to SBA Communications Corporation | $358,150 | $358,150 | | Common stock issued (net) | $23,800 | $23,800 | | Non-cash stock compensation | $75,566 | $75,566 | | Adjustments related to interest rate swaps | $162,491 | $162,491 | | Repurchase and retirement of common stock | $(431,666) | $(431,666) | | Foreign currency translation adjustments | $(14,076) | $(14,076) | | Dividends and dividend equivalents | $(231,196) | $(231,196) | | Adjustment to redemption amount related to noncontrolling interests | $(24,495) | $(24,495) | | Balance, End of Period | $(5,364,830) | $(5,283,404) | - The company repurchased and retired 1.3 million shares of common stock for $431.6 million during the nine months ended September 30, 2022[17] - Dividends and dividend equivalents on common stock totaled $231.2 million for the nine months ended September 30, 2022[17] Consolidated Statements of Cash Flows These statements show increased operating cash flow, decreased investing cash use, and a shift to cash used in financing Key Cash Flow Metrics | Metric (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $997,066 | $891,330 | | Net cash used in investing activities | $(591,311) | $(1,277,822) | | Net cash (used in) provided by financing activities | $(566,068) | $308,612 | | Net change in cash, cash equivalents, and restricted cash | $(155,752) | $(88,409) | | Cash, cash equivalents, and restricted cash, End of period | $279,874 | $254,399 | - Cash paid for interest decreased from $298.6 million in 2021 to $277.2 million in 2022 for the nine-month period[24] - Right-of-use assets obtained in exchange for new operating lease liabilities increased substantially from $27.7 million in 2021 to $137.1 million in 2022[24] Condensed Notes to Consolidated Financial Statements (Unaudited) This section provides detailed disclosures for the financial statements, covering accounting policies, debt, equity, and segments 1. BASIS OF PRESENTATION This note outlines the basis for preparing the interim financial statements, including policies for foreign currency and intercompany loans - The Company recorded a $25.5 million loss (net of taxes) on intercompany loan remeasurement for the three months ended September 30, 2022, and a $4.3 million gain (net of taxes) for the nine months[30] - As of September 30, 2022, the aggregate outstanding amount under intercompany loan agreements subject to remeasurement was $855.5 million[30] 2. FAIR VALUE MEASUREMENTS This note describes fair value measurements for assets and liabilities, including asset retirement obligations and financial instruments Asset Impairment and Decommission Costs | Asset Impairment and Decommission Costs (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Asset impairment | $6,952 | $8,323 | $21,626 | $13,691 | | Write-off of carrying value of decommissioned towers | $1,275 | $1,130 | $3,599 | $3,718 | | Other | $305 | $407 | $340 | $1,151 | | Total | $8,532 | $9,860 | $25,565 | $18,560 | - Short-term investments increased significantly from $0.8 million at December 31, 2021, to $21.1 million at September 30, 2022[35] 3. CASH, CASH EQUIVALENTS, AND RESTRICTED CASH This note breaks down cash balances, highlighting the significant portion held in securitization escrow accounts for debt service Cash and Restricted Cash Balances | Metric (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $201,211 | $367,278 | | Securitization escrow accounts | $69,478 | $64,764 | | Payment, performance bonds, and other | $5,688 | $797 | | Surety bonds and workers compensation | $3,497 | $2,787 | | Total cash, cash equivalents, and restricted cash | $279,874 | $435,626 | - Securitization escrow accounts are required by Tower Securities terms, with funds used for debt service, ground rents, taxes, and insurance[38][39] 4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS This note details costs and estimated earnings on uncompleted contracts, showing an increase in both metrics Uncompleted Contract Metrics | Metric (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Costs incurred on uncompleted contracts | $119,320 | $75,967 | | Estimated earnings | $44,147 | $28,851 | | Billings to date | $(98,398) | $(61,628) | | Costs and estimated earnings in excess of billings | $81,665 | $48,844 | | Billings in excess of costs and estimated earnings | $(16,596) | $(5,654) | - The eight largest customers accounted for 99.8% of the net costs and estimated earnings in excess of billings on uncompleted contracts as of September 30, 2022[42] 5. PREPAID EXPENSES AND OTHER CURRENT ASSETS AND OTHER ASSETS This note breaks down prepaid, current, and other long-term assets, highlighting a substantial increase in short-term investments Key Asset Balances | Metric (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Prepaid Expenses and Other Current Assets: | | | | Short-term investments | $21,139 | $778 | | Total prepaid expenses and other current assets | $54,805 | $30,813 | | Other Assets: | | | | Straight-line rent receivable | $378,836 | $348,519 | | Interest rate swap asset | $189,150 | $60,324 | | Total other assets | $744,202 | $575,644 | 6. ACQUISITIONS This note details acquisition activities, including tower purchases and land buyouts, with significant transactions in Tanzania and Brazil Acquisition Capital Expenditures | Acquisition Activity (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Acquisitions of towers and related intangible assets | $57,439 | $48,255 | $343,967 | $217,140 | | Acquisition of right-of-use assets | — | $694 | $2,220 | $948,392 | | Land buyouts and other assets | $7,704 | $8,954 | $72,534 | $22,222 | | Total cash acquisition capital expenditures | $65,143 | $57,903 | $418,721 | $1,187,754 | - During the nine months ended September 30, 2022, the Company acquired 2,148 towers and related assets, including 1,445 sites in Tanzania for $176.1 million[46][47] - Subsequent to September 30, 2022, the Company completed the acquisition of 2,632 sites from Grupo TorreSur in Brazil for $725.0 million and is under contract to purchase an additional 34 sites[48][49] 7. PROPERTY AND EQUIPMENT, NET This note details the composition of property and equipment, showing an increase in towers and construction-in-process Property and Equipment Balances | Metric (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Towers and related assets | $5,544,056 | $5,323,803 | | Construction-in-process | $72,470 | $47,565 | | Total property and equipment, net | $2,658,366 | $2,575,487 | | Accumulated depreciation | $(3,899,352) | $(3,703,871) | - Depreciation expense was $68.3 million for the three months and $205.0 million for the nine months ended September 30, 2022[51] 8. INTANGIBLE ASSETS, NET This note provides the carrying amounts for major classes of intangible assets, primarily current contract and network location intangibles Intangible Asset Balances | Intangible Asset (in thousands) | Sep 30, 2022 Net Book Value | Dec 31, 2021 Net Book Value | | :--- | :--- | :--- | | Current contract intangibles | $2,060,638 | $2,140,833 | | Network location intangibles | $641,301 | $662,414 | | Total intangible assets, net | $2,701,939 | $2,803,247 | - Amortization expense for intangible assets was $100.4 million for the three months and $303.0 million for the nine months ended September 30, 2022[52] 9. ACCRUED EXPENSES This note details the components of accrued expenses, showing increases in salaries, taxes, and acquisition-related holdbacks Accrued Expense Balances | Accrued Expense (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Salaries and benefits | $25,161 | $24,962 | | Real estate and property taxes | $10,118 | $8,336 | | Unpaid capital expenditures | $12,666 | $7,295 | | Acquisition related holdbacks | $25,408 | $957 | | Other | $22,823 | $26,520 | | Total accrued expenses | $96,176 | $68,070 | 10. DEBT This note provides a comprehensive overview of the company's debt instruments, including principal, interest rates, and covenants Debt Instrument Balances | Debt Instrument (in thousands) | Sep 30, 2022 Principal Balance | Dec 31, 2021 Principal Balance | | :--- | :--- | :--- | | Revolving Credit Facility | $410,000 | $350,000 | | 2018 Term Loan | $2,298,000 | $2,316,000 | | Tower Securities (various series) | $6,725,000 | $6,725,000 | | Senior Notes (2020 & 2021) | $3,000,000 | $3,000,000 | | Total debt | $12,438,000 | $12,396,000 | | Current maturities of long-term debt | $663,181 | $24,000 | | Total long-term debt, net of current maturities | $11,696,068 | $12,278,694 | Cash Interest Expense | Interest Expense (in thousands) | 3 Months Ended Sep 30, 2022 Cash Interest | 3 Months Ended Sep 30, 2021 Cash Interest | 9 Months Ended Sep 30, 2022 Cash Interest | 9 Months Ended Sep 30, 2021 Cash Interest | | :--- | :--- | :--- | :--- | :--- | | Revolving Credit Facility | $4,896 | $996 | $10,778 | $4,717 | | 2018 Term Loan | $13,038 | $11,156 | $35,565 | $33,220 | | Total Cash Interest | $86,961 | $89,199 | $253,528 | $269,839 | - The Revolving Credit Facility had an outstanding balance of $410.0 million as of September 30, 2022, with an interest rate of 4.540%[58][59][60] 11. SHAREHOLDERS' EQUITY This note details shareholders' equity activities, including stock repurchases under a $1.0 billion plan and quarterly cash dividends - The Board of Directors authorized a new $1.0 billion stock repurchase plan on October 28, 2021, with $504.7 million remaining as of the filing date[64] Share Repurchases | Share Repurchases (in millions) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total number of shares purchased | — | 0.4 | 1.3 | 1.1 | | Average price paid per share | $— | $340.70 | $332.00 | $291.48 | | Total price paid | $— | $150.0 | $431.6 | $318.9 | Dividends Paid | Dividends Paid (in millions) | Date Declared | Cash Paid Per Share | Aggregate Amount Paid | | :--- | :--- | :--- | :--- | | Q1 2022 | Feb 27, 2022 | $0.71 | $76.9 | | Q2 2022 | Apr 24, 2022 | $0.71 | $76.6 | | Q3 2022 | Jul 31, 2022 | $0.71 | $76.7 | | Q4 2022 (declared post-period) | Oct 30, 2022 | $0.71 | N/A (to be paid) | 12. STOCK-BASED COMPENSATION This note summarizes the company's stock-based compensation plans, including stock options, RSUs, and PSUs Stock Option Activity | Stock Option Activity (in thousands, except per share) | Number of Shares | Weighted-Average Exercise Price Per Share | | :--- | :--- | :--- | | Outstanding at Dec 31, 2021 | 1,899 | $157.76 | | Granted | 10 | $328.99 | | Exercised | (203) | $142.94 | | Outstanding at Sep 30, 2022 | 1,703 | $160.49 | | Exercisable at Sep 30, 2022 | 1,436 | $155.10 | - The weighted-average per share fair value of options granted during the nine months ended September 30, 2022, was $82.28[69] RSU and PSU Activity | RSU and PSU Activity (in thousands) | RSUs (Number of Shares) | PSUs (Number of Shares) | | :--- | :--- | :--- | | Outstanding at Dec 31, 2021 | 243 | 298 | | Granted | 105 | 140 | | Vested | (116) | (2) | | Outstanding at Sep 30, 2022 | 224 | 430 | 13. INCOME TAXES This note explains the company's income tax position, influenced by its REIT election and utilization of net operating losses - The Company elected to be taxed as a REIT starting December 31, 2016, generally exempting it from U.S. federal corporate income tax on distributed net income[72] - A full valuation allowance is applied to the net deferred tax assets of the U.S. taxable REIT subsidiary (TRS)[71] - The Company had approximately $654.7 million in federal net operating losses (NOLs) as of December 31, 2021, which can offset REIT taxable income[72] 14. SEGMENT DATA This note presents financial data by the company's two principal business segments: site leasing and site development Segment Revenues | Segment (in thousands) | 3 Months Ended Sep 30, 2022 Revenues | 3 Months Ended Sep 30, 2021 Revenues | 9 Months Ended Sep 30, 2022 Revenues | 9 Months Ended Sep 30, 2021 Revenues | | :--- | :--- | :--- | :--- | :--- | | Domestic Site Leasing | $449,595 | $426,758 | $1,324,666 | $1,249,291 | | International Site Leasing | $137,707 | $108,734 | $402,301 | $315,523 | | Site Development | $88,282 | $53,813 | $220,393 | $148,882 | | Total Revenues | $675,584 | $589,305 | $1,947,360 | $1,713,696 | Segment Operating Profit | Segment (in thousands) | 3 Months Ended Sep 30, 2022 Operating Profit | 3 Months Ended Sep 30, 2021 Operating Profit | 9 Months Ended Sep 30, 2022 Operating Profit | 9 Months Ended Sep 30, 2021 Operating Profit | | :--- | :--- | :--- | :--- | :--- | | Domestic Site Leasing | $383,172 | $361,498 | $1,126,671 | $1,054,836 | | International Site Leasing | $92,117 | $75,328 | $269,614 | $220,468 | | Site Development | $22,742 | $12,456 | $54,584 | $32,710 | | Total Operating Profit | $498,031 | $449,282 | $1,450,869 | $1,308,014 | - Site leasing business contributed 96.3% of total segment operating profit for the nine months ended September 30, 2022[73] 15. EARNINGS PER SHARE This note details the calculation of basic and diluted earnings per share, showing an increase in both metrics EPS Calculation | EPS Metric (in thousands, except per share) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income attributable to SBA Communications Corporation | $100,009 | $47,798 | $358,150 | $188,720 | | Basic weighted-average shares outstanding | 107,916 | 109,577 | 107,950 | 109,487 | | Diluted weighted-average shares outstanding | 109,358 | 111,565 | 109,416 | 111,329 | | Basic EPS | $0.93 | $0.44 | $3.32 | $1.72 | | Diluted EPS | $0.91 | $0.43 | $3.27 | $1.70 | 16. REDEEMABLE NONCONTROLLING INTERESTS This note outlines the accounting for redeemable noncontrolling interests, which are recognized at their carrying or redemption value Changes in Redeemable Noncontrolling Interests | Metric (in thousands) | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Beginning balance | $17,250 | $15,194 | | Net loss attributable to noncontrolling interests | $(929) | — | | Foreign currency translation adjustments | $(201) | — | | Adjustment to redemption amount | $24,495 | $2,806 | | Ending balance | $40,615 | $17,250 | 17. DERIVATIVES AND HEDGING ACTIVITIES This note describes the company's use of interest rate swaps to hedge variable rate debt and their impact on comprehensive loss - The Company uses an interest rate swap for $1.95 billion notional value of its 2018 Term Loan, fixing the rate at 1.874% per annum through maturity[81] - As of September 30, 2022, the interest rate swap had a fair value of $189.2 million (asset), up from $60.3 million at December 31, 2021[81] Impact of Derivatives on Comprehensive Loss | Derivative Impact (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Change in fair value recorded in Accumulated other comprehensive loss, net | $42,114 | $(1,324) | $128,826 | $24,586 | | Amount reclassified from Accumulated other comprehensive loss, net into Non-cash interest expense | $11,222 | $11,222 | $33,665 | $33,665 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, condition, and results of operations Business Overview SBA Communications Corporation is a leading independent owner and operator of wireless communications infrastructure - The company's primary business is site leasing, contributing 96.3% of total segment operating profit for the nine months ended September 30, 2022[86] - As of September 30, 2022, the company owned 36,519 towers across the United States, South America, Central America, Canada, South Africa, the Philippines, and Tanzania[86] Site Leasing The site leasing business involves leasing antenna space on multi-tenant towers under long-term contracts with stable revenues - Tenant leases generally have initial terms of five to 15 years with multiple renewal periods and include annual rent escalators[88][89] - Approximately 72% of tower structures are on owned land, perpetual easements, or leasehold interests extending beyond 20 years[90] Segment Operating Profit Contribution | Segment Operating Profit as % of Total Operating Profit | Sep 30, 2022 | Sep 30, 2021 | | :--- | :--- | :--- | | Domestic site leasing | 76.9% | 80.5% | | International site leasing | 18.5% | 16.7% | | Total site leasing | 95.4% | 97.2% | Site Development The site development business offers a full range of services to wireless service providers, complementing the site leasing business - Services include network pre-design, site audits, location identification, leasing support, zoning approvals, and equipment installation[96] - This business line helps maintain close contact with wireless service providers and captures ancillary revenues[96] Capital Allocation Strategy The capital allocation strategy prioritizes shareholder value through portfolio growth, stock repurchases, and cash dividends - Key elements include growing the asset portfolio through tower acquisitions and new tower construction that meet internal return criteria[98] - Stock repurchases are utilized when the share price is believed to be below its intrinsic value to increase Adjusted Funds From Operations per share[99] - Cash dividends are an additional component, with future growth expected due to strong cash flow generation and a low payout ratio[100] Critical Accounting Policies and Estimates This section highlights critical accounting policies and significant estimation processes fundamental to the company's financial reporting - Management's estimates are based on historical experience and various reasonable assumptions, but actual amounts may vary significantly[101] RESULTS OF OPERATIONS This section provides a detailed analysis of the company's financial performance for the three and nine months ended September 30, 2022 Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021 The company experienced significant growth in revenues and net income, driven by strong performance across all segments Key Financial Results (3 Months) | Metric (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $675,584 | $589,305 | $89,551 | 15.2% | | Total Operating Expenses | $432,597 | $377,529 | $38,733 | 27.7% | | Operating Income | $242,987 | $211,776 | $31,571 | 14.9% | | Net Income | $99,762 | $47,798 | $32,799 | 35.1% | Revenues and Segment Operating Profit (3 Months) Domestic and international site leasing revenues increased, and site development revenues surged, driving overall growth Segment Revenues (3 Months) | Segment (in thousands) | Sep 30, 2022 Revenues | Sep 30, 2021 Revenues | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Domestic site leasing | $449,595 | $426,758 | $22,837 | 5.4% | | International site leasing | $137,707 | $108,734 | $32,245 | 29.7% | | Site development | $88,282 | $53,813 | $34,469 | 64.1% | Segment Operating Profit (3 Months) | Segment (in thousands) | Sep 30, 2022 Operating Profit | Sep 30, 2021 Operating Profit | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Domestic site leasing | $383,172 | $361,498 | $21,674 | 6.0% | | International site leasing | $92,117 | $75,328 | $18,858 | 25.0% | | Site development | $22,742 | $12,456 | $10,286 | 82.6% | - International site leasing revenue growth was primarily due to 2,248 acquired towers and 465 built towers since July 1, 2021[106] Selling, General, and Administrative Expenses (3 Months) SG&A expenses increased by 30.0% on a constant currency basis, primarily due to higher non-cash compensation and personnel costs SG&A Expenses (3 Months) | Metric (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Total SG&A | $65,843 | $51,000 | $15,287 | 30.0% | Asset Impairment and Decommission Costs (3 Months) Asset impairment and decommission costs decreased by 13.0%, primarily due to a reduction in impairment charges Asset Impairment and Decommission Costs (3 Months) | Metric (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Total Asset Impairment and Decommission Costs | $8,532 | $9,860 | $(1,286) | (13.0%) | Depreciation, Accretion, and Amortization Expense (3 Months) Total D&A expense increased by 2.3% on a constant currency basis, primarily due to an increase in acquired and built towers D&A Expense (3 Months) | Segment (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Domestic site leasing | $122,149 | $123,705 | $(1,556) | (1.3%) | | International site leasing | $49,530 | $45,035 | $5,545 | 12.3% | | Total | $173,825 | $170,916 | $3,959 | 2.3% | Operating Income (Expense) (3 Months) Operating income increased across all segments, driven by higher segment operating profit and cost management Operating Income (3 Months) | Segment (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Domestic site leasing | $222,681 | $200,786 | $21,895 | 10.9% | | International site leasing | $24,412 | $14,455 | $10,317 | 71.4% | | Site development | $16,407 | $7,100 | $9,307 | 131.1% | | Total | $242,987 | $211,776 | $31,571 | 14.9% | Other Income (Expense) (3 Months) Interest income significantly increased, while interest expense slightly decreased, and other expense improved Other Income (Expense) (3 Months) | Metric (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Interest income | $2,858 | $945 | $1,918 | 203.0% | | Interest expense | $(86,961) | $(89,199) | $2,243 | (2.5%) | | Other expense, net | $(39,756) | $(69,804) | $(279) | 20.1% | | Total Other Expense, net | $(140,342) | $(174,812) | $4,153 | (3.9%) | - Other expense, net, included a $37.4 million loss on intercompany loan remeasurement in 2022, an improvement from a $67.6 million loss in 2021[122] (Provision) Benefit for Income Taxes (3 Months) The provision for income taxes increased by 24.3% on a constant currency basis, primarily due to increases in state and withholding taxes Income Tax Provision (3 Months) | Metric (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | (Provision) benefit for income taxes | $(2,883) | $10,834 | $(2,925) | 24.3% | Net Income (3 Months) Net income increased by 35.1% on a constant currency basis, driven by higher operating income and lower interest expense Net Income (3 Months) | Metric (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Net income | $99,762 | $47,798 | $32,799 | 35.1% | Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021 The company achieved substantial increases in revenues and net income, reflecting strong organic growth and strategic acquisitions Key Financial Results (9 Months) | Metric (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $1,947,360 | $1,713,696 | $231,253 | 13.5% | | Total Operating Expenses | $1,256,614 | $1,128,579 | $90,203 | 22.2% | | Operating Income | $690,746 | $585,117 | $104,118 | 17.8% | | Net Income | $357,221 | $188,720 | $137,974 | 63.4% | Revenues and Segment Operating Profit (9 Months) Domestic and international site leasing revenues increased, and site development revenues grew, contributing to robust overall expansion Segment Revenues (9 Months) | Segment (in thousands) | Sep 30, 2022 Revenues | Sep 30, 2021 Revenues | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Domestic site leasing | $1,324,666 | $1,249,291 | $75,375 | 6.0% | | International site leasing | $402,301 | $315,523 | $84,367 | 26.7% | | Site development | $220,393 | $148,882 | $71,511 | 48.0% | Segment Operating Profit (9 Months) | Segment (in thousands) | Sep 30, 2022 Operating Profit | Sep 30, 2021 Operating Profit | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Domestic site leasing | $1,126,671 | $1,054,836 | $71,835 | 6.8% | | International site leasing | $269,614 | $220,468 | $47,341 | 21.5% | | Site development | $54,584 | $32,710 | $21,874 | 66.9% | - International site leasing revenue growth was primarily due to 2,276 acquired towers and 622 built towers since January 1, 2021[127] Selling, General, and Administrative Expenses (9 Months) SG&A expenses increased by 22.6% on a constant currency basis, mainly due to higher non-cash compensation and personnel costs SG&A Expenses (9 Months) | Metric (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Total SG&A | $191,241 | $156,546 | $35,350 | 22.6% | Asset Impairment and Decommission Costs (9 Months) Asset impairment and decommission costs increased by 38.2%, primarily due to higher impairment charges from tower carrying value analysis Asset Impairment and Decommission Costs (9 Months) | Metric (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Total Asset Impairment and Decommission Costs | $25,565 | $18,560 | $7,094 | 38.2% | Depreciation, Accretion, and Amortization Expenses (9 Months) Total D&A expense decreased by 1.3% on a constant currency basis, with a decrease in domestic leasing offset by an international increase D&A Expense (9 Months) | Segment (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Domestic site leasing | $367,853 | $390,730 | $(22,877) | (5.9%) | | International site leasing | $150,008 | $132,900 | $16,042 | 12.1% | | Total | $524,541 | $530,266 | $(6,791) | (1.3%) | Operating Income (Expense) (9 Months) Operating income significantly increased across all segments, driven by higher segment operating profit and cost management Operating Income (9 Months) | Segment (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Domestic site leasing | $651,919 | $555,353 | $96,566 | 17.4% | | International site leasing | $60,858 | $48,589 | $10,758 | 22.1% | | Site development | $36,308 | $16,409 | $19,899 | 121.3% | | Total | $690,746 | $585,117 | $104,118 | 17.8% | Other Income (Expense) (9 Months) Interest income increased, interest expense decreased, and the company recorded a gain on intercompany loan remeasurement Other Income (Expense) (9 Months) | Metric (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Interest income | $6,878 | $2,124 | $4,640 | 218.5% | | Interest expense | $(253,528) | $(269,839) | $16,319 | (6.0%) | | Loss from extinguishment of debt, net | — | $(13,672) | $13,672 | (100.0%) | | Other income (expense), net | $2,262 | $(49,390) | $1,199 | (19.4%) | | Total Other Expense, net | $(293,728) | $(380,903) | $36,616 | (10.8%) | - Other income, net, included an $8.5 million gain on intercompany loan remeasurement in 2022, compared to a $42.6 million loss in 2021[145] Provision for Income Taxes (9 Months) The provision for income taxes increased by 9.2% on a constant currency basis, primarily due to an increase in state taxes Income Tax Provision (9 Months) | Metric (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Provision for income taxes | $(39,797) | $(15,494) | $(2,760) | 9.2% | Net Income (9 Months) Net income increased by 63.4% on a constant currency basis, driven by higher operating income and reduced interest expense Net Income (9 Months) | Metric (in thousands) | Sep 30, 2022 | Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Net income | $357,221 | $188,720 | $137,974 | 63.4% | NON-GAAP FINANCIAL MEASURES This section defines and reconciles Adjusted EBITDA to net income, emphasizing its utility for evaluating financial performance - Adjusted EBITDA is defined as net income excluding non-cash leasing revenue/expense, non-cash compensation, debt extinguishment loss, other income/expenses, acquisition adjustments, asset impairment, interest, D&A, and taxes[150] - Adjusted EBITDA is used by management to evaluate economic productivity, allocate resources, and assess performance[151] Adjusted EBITDA Reconciliation (3 Months) | Metric (in thousands) | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $446,759 | $406,964 | $41,641 | 10.2% | | Net income | $99,762 | $47,798 | $32,799 | 35.1% | Adjusted EBITDA Reconciliation (9 Months) | Metric (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Constant Currency Change | Constant Currency % Change | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $1,197,227 | $1,308,261 | $108,808 | 9.1% | | Net income | $357,221 | $188,720 | $137,974 | 63.4% | LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's liquidity, detailing cash flows, dividend payments, and debt service requirements Cash Flow Summary The cash flow summary shows increased cash from operations, reduced cash used in investing, and a shift to cash used in financing Cash Flow Summary Table | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Cash provided by operating activities | $997,066 | $891,330 | | Cash used in investing activities | $(591,311) | $(1,277,822) | | Cash (used in) provided by financing activities | $(566,068) | $308,612 | | Change in cash, cash equivalents, and restricted cash | $(160,313) | $(77,880) | | Cash, cash equivalents, and restricted cash, end of period | $279,874 | $254,399 | Operating Activities Cash provided by operating activities increased to $997.1 million, primarily due to higher operating profit - Net cash provided by operating activities increased by $105.7 million, from $891.3 million in 2021 to $997.1 million in 2022[158] Investing Activities Cash used in investing activities decreased significantly to $591.3 million due to lower acquisition spending Investing Activities Summary | Investing Activity (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Acquisitions of towers and related intangible assets | $(343,967) | $(217,140) | | Acquisition of right-of-use assets | $(2,220) | $(948,392) | | Land buyouts and other assets | $(72,534) | $(22,222) | | Construction and related costs | $(72,275) | $(39,182) | | Augmentation and tower upgrades | $(39,514) | $(22,886) | | Tower maintenance | $(29,975) | $(25,243) | | Net cash used in investing activities | $(591,311) | $(1,277,822) | - The company expects to incur $48.0 million to $53.0 million in non-discretionary and $1,380.0 million to $1,390.0 million in discretionary cash capital expenditures for 2022[162] - Post-September 30, 2022, the company completed the $725.0 million acquisition of 2,632 sites in Brazil[160][161] Financing Activities Cash flows from financing shifted to a net outflow of $566.1 million due to increased stock repurchases and dividends Financing Activities Summary | Financing Activity (in thousands) | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net borrowings (repayments) under Revolving Credit Facility | $60,000 | $(380,000) | | Repurchase and retirement of common stock | $(431,666) | $(284,343) | | Payment of dividends on common stock | $(230,102) | $(190,456) | | Net cash (used in) provided by financing activities | $(566,068) | $308,612 | Dividends The company paid quarterly cash dividends of $0.71 per share, totaling $230.2 million for the nine months Dividend Summary | Dividend Details | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 (Declared Post-Period) | | :--- | :--- | :--- | :--- | :--- | | Cash Paid Per Share | $0.71 | $0.71 | $0.71 | $0.71 | | Aggregate Amount Paid (in millions) | $76.9 | $76.6 | $76.7 | N/A (to be paid) | Registration Statements The company maintains shelf registration statements to facilitate future equity issuance for acquisitions and other securities - Approximately 1.2 million shares of Class A common stock remained available under the Form S-4 registration statement for acquisitions[168] - An automatic shelf registration statement on Form S-3ASR allows for the issuance of various securities[169] Debt Instruments and Debt Service Requirements This section details the company's debt instruments, their terms, and anticipated repayment schedules - The Revolving Credit Facility allows for up to $1.5 billion in borrowings, with $410.0 million outstanding as of September 30, 2022[170][172] - The 2018 Term Loan has a principal balance of $2.3 billion, with an interest rate swap fixing $1.95 billion of notional value at 1.874%[173][174][175] - Total estimated debt service for the next 12 months is $1,011.2 million, including the repayment of $640.0 million principal on the 2018-1C Tower Securities[184][186] Debt Summary | Debt Instrument | Amount Outstanding (as of Sep 30, 2022) | Interest Rate | | :--- | :--- | :--- | | Revolving Credit Facility | $410.0 million | 4.540% | | 2018 Term Loan | $2.3 billion | 2.328% (blended) | | Secured Tower Revenue Securities | $6.7 billion | 1.631% - 3.869% | | Senior Notes | $3.0 billion | 3.125% - 3.875% | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to interest rate and foreign currency exchange rate risks Market Risk Exposure The company's primary market risks are interest rate fluctuations affecting its debt, managed through fixed-rate debt and swaps - Primary market risks include interest rate risk related to debt refinancing and variable rate debt[188] - An interest rate swap for $1.95 billion notional value of the 2018 Term Loan fixes the rate at 1.874% per annum[189] Debt Obligation Schedule | Debt Obligation (in thousands) | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | Fair Value | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revolving Credit Facility | $— | $— | $— | $— | $410,000 | $— | $410,000 | $410,000 | | 2018 Term Loan | $6,000 | $24,000 | $24,000 | $2,244,000 | $— | $— | $2,298,000 | $2,231,933 | | 2014-2C Tower Securities | $— | $— | $620,000 | $— | $— | $— | $620,000 | $603,359 | | 2018-1C Tower Securities | $— | $640,000 | $— | $— | $— | $— | $640,000 | $636,070 | | Total debt obligation | $6,000 | $664,000 | $644,000 | $3,409,000 | $2,325,000 | $5,390,000 | $12,438,000 | $11,331,166 | Foreign Currency Exchange Rate Risk The company is exposed to foreign currency risk from international operations, impacting revenues, expenses, and intercompany debt - Approximately 16.6% of revenues and 21.4% of total operating expenses for the nine months ended September 30, 2022, were denominated in foreign currencies[190] - A hypothetical 10% adverse movement in the Brazilian Real would cause revenues and operating income to decline by approximately 1.0% and 0.6%, respectively[191] - A 10% change in exchange rates for unsettled intercompany debt would result in approximately $79.6 million of unrealized gains or losses[192] Special Note Regarding Forward-Looking Statements This section provides a cautionary statement regarding forward-looking statements and outlines potential risk factors - The report contains forward-looking statements concerning future growth, demand for towers, customer capital investments, and competitive factors[193][194] - Key risk factors include consolidation among wireless service providers, risks of international operations, and acquisition integration challenges[196][197] - Other risks include the ability to secure tenants, manage rising interest rates, and maintain REIT qualification[197][201] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022 - The company's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2022[199] PART II – OTHER INFORMATION Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q, including CEO and CFO certifications and XBRL documents - Includes certifications by the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[200] - XBRL Instance Document, Taxonomy Extension Schema, Definition Linkbase, Calculation Linkbase, Label Linkbase, and Presentation Linkbase Documents are filed[200] SIGNATURES This section contains the authorized signatures of the CEO and CFO, affirming the submission of the report on November 3, 2022 - The report was signed by Jeffrey A. Stoops, Chief Executive Officer, and Brendan T. Cavanagh, Chief Financial Officer, on November 3, 2022[204]