SBA Communications today announced its Q1 2022 earnings, increased its full-year 2022 outlook, detailed its U.S. and International tower segments, and disclosed further M&A activity in towers, as well as a data center acquisition in São Paulo, Brazil.

As of Q1 2022, SBA owns or operates 36.0k communication sites, 17.4k of which are in the United States and 18.7k that are located internationally (primarily Brazil and South Africa).

Financial Performance in Q1 2022 – SBA Communications

In Q1 2022, SBA Communications’ total revenue was $619.8m, which grew 4.1% quarter-over-quarter. Decomposing this revenue figure further, SBA reported:

  • Site Leasing: revenue of $559.4m, an increase of 3.7% quarter-over-quarter. Of this total, $433.0m (77% of total) was generated in the United States, while $126.4m (23% of total) was produced internationally
  • Site Development: revenue of $60.3m (record result), an increase of 8.0% quarter-over-quarter. Furthermore, SBA’s services / site development backlog finished the quarter at its highest level in the company’s history

Additionally, SBA Communications delivered adjusted EBITDA of $423.8m, a 3.6% increase quarter-over-quarter. Therefore, the company’s adjusted EBITDA margin was 68.4% (reported as 69.3%) in Q1 2022, a ~35 bps decline quarter-over-quarter.

Note: SBA Communications’ quarter-over-quarter growth rates benefit from the company’s acquisition of 1.4k towers from Airtel Tanzania, which closed in Q1 2022.

Outlook for 2022 – SBA Communications

SBA Communications increased its full-year 2022 outlook for site leasing revenue by $38m (up 1.7%), site development revenue by $27m (up 13%), and adjusted EBITDA by $31m (up 1.8%), as compared to the company’s prior outlook in Q4 2021. This increase was due to several factors, including lower U.S. churn impact during 2022 as a result of longer decommissioning cycles (i.e., shifting churn to 2023) and higher International CPI-based escalators.

Full-Year 2022 Outlook – as of April 2022
$ in millionsLowHighMid-Point% Raised
Site Leasing Revenue$2,273$2,293$2,2831.7%
Site Development Revenue$220$240$23013.3%
Total Revenues$2,493$2,533$2,5132.7%
Adjusted EBITDA$1,704$1,724$1,7141.8%

For full-year 2022, SBA Communications projects site leasing revenue of $2.28bn, site development revenue of $230m, and adjusted EBITDA of $1.71bn at the mid-point. Additionally, the mid-point of the company’s revised 2022 outlook implies a year-over-year increase in site leasing revenue, site development revenue, and adjusted EBITDA of 8.5%, 12%, and 6.7%, respectively.

Below is a further breakdown of the company’s site leasing revenue outlook for 2022:

Site Leasing

SBA projects $2.28bn of site leasing revenue in 2022, an 8.5% increase year-over-year, at the mid-point. Geographically, SBA expects to derive its site leasing revenue as follows: $1.75bn (76.5%) from the U.S. and $536m (23.5%) from international markets.

In terms of new leases and amendments, SBA expects $82m of total activity during 2022. Of this total, the U.S. will contribute $65m and International markets will account for the remaining $17m of new leases and amendments.

United States Operations – SBA Communications

U.S. Organic Revenue Growth

SBA Communications’ U.S. gross organic revenue growth rate of 6.4% continued on an upward trajectory in Q1 2022. Indeed, this level of U.S. gross organic revenue growth is the highest the company has experienced since Q2 2020. However, the company’s U.S. net organic revenue growth rate declined to 3.7% in Q1 2022, following an uptick in churn of 2.7% for the quarter.

SBA Communications U.S. Organic Revenue Growth Rates Q1 2022
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U.S. Leasing Drivers and Customers

SBA Communications’ new leases comprised 45% of the company’s U.S. signings, while amendments made-up 55% of U.S. signings. Overall, the Big-4 wireless carriers of Verizon, T-Mobile, AT&T, and DISH Network represented 95% of total incremental U.S. lease signings during the quarter.

More specifically, Verizon and AT&T increased their 5G-related signings with SBA – with a focus on C-band deployments, T-Mobile sustained their nationwide deployment of 600 MHz and 2.5 GHz spectrum, and DISH Network “continued signing up new lease agreements actively in support of their nationwide 5G network build-out”.

Based on its backlog and conversations with customers, SBA expects “elevated” U.S. leasing activities to continue throughout 2022 and into 2023.

International Operations – SBA Communications

International Organic Revenue Growth

SBA’s International gross organic revenue growth rate was 11.8% in Q1 2022, spiking by 3.1% quarter-over-quarter. In particular, Brazil’s gross organic revenue growth rate was 13.3%, on a constant currency basis.

To this end, SBA notes that International segment growth in Q1 2022 “was very strong, driven by organic lease-up, increased CPI-based escalators and portfolio growth”. Furthermore, with spectrum auctions now complete in Brazil and South Africa, SBA expects 5G deployments from its customers, in its two largest international markets, to begin to accelerate.

Also, SBA’s International net organic revenue growth rate was 7.0% in Q1 2022, an improvement of 2.7% quarter-over-quarter. Still, SBA is experiencing heightened levels of churn in its international markets, which stood at 4.8% in Q1 2022, up by 0.4% for the quarter.

SBA Communications International Organic Revenue Growth Rates Q1 2022
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In April 2022, Digicel Panama, one of SBA’s primary customers in Panama, announced that they intend to apply for voluntary liquidation and withdraw from the telecommunications market in Panama. As such, SBA has increased its projected 2022 churn impact by ~$6m to account for the loss of all leasing revenue from Digicel Panama for the remainder of 2022.

Tower Acquisitions and Build Activity

Tower Acquisitions

During Q1 2022, SBA acquired 1,807 communication sites for total cash consideration of $215.4m, implying a valuation of $119k per tower. Of this total, 9 sites were in the United States and 1,798 sites were in international markets. Notably, 1,445 (80%) of these international sites relate to SBA’s previously announced deal with Airtel Tanzania for $176.1m.

Additionally, subsequent to quarter-end, SBA purchased or is under contract to purchase 358 communication sites for $127.9m, signifying a valuation of $357k per tower. In terms of mix, these sites are “largely international” and are all in “existing markets” where the company operates. Finally, SBA expects these acquisitions will close by the end of Q4 2022.

New Builds and Land Purchases

During Q1 2022, the company built-out 86 towers, of which, 1 site was in the United States and 85 sites were in international markets (e.g., the Philippines). In addition, the company spent $8.7m to purchase land and easements and to extend ground lease terms.

Data Center Acquisition in São Paulo, Brazil – SBA Communications

Subsequent to quarter-end, SBA Communications acquired one data center in São Paulo, Brazil for $49.2m. Presently, the data center produces ~$8.3m of revenue and $3.5m of adjusted EBITDA annually, implying a 42% EBITDA margin. In terms of valuation, SBA paid ~14x EBITDA for the data center in São Paulo, Brazil.

This acquisition will support SBA’s evaluation and efforts around the potential expansion of mobile edge computing to its tower sites. Specifically, SBA plans to position this facility as a hub for tower edge data centers and C-RAN deployments for its wireless carrier customers in Brazil.

Adam Simmons is the Founder & CEO of Dgtl Infra. He started his career with an S&P 500-listed big box retailer, in an operations management role. Adam's entrepreneurial "itch" led him to start a 5G-driven company, focused on innovative retail solutions using augmented reality and shoppable videos, which was eventually sold to an advertising and consulting group. After, realizing the potential of 5G, Adam shifted his efforts towards investing in the "building blocks" of 5G - known as digital infrastructure, completing a number of strategic investments, buying cellular towers, data centers and fiber networks.

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