American Tower Corporation — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited consolidated results. American Tower is a global communications-infrastructure REIT, with tower and related property operations, U.S. data centers, and tower-related services. Property operations generated 98% of quarterly revenue.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Total revenue | $2.767 billion | $2.660 billion | +4% |
| Operating income | $775.6 million | $725.1 million | +7% |
| Operating margin | 28.0% | 27.3% | +0.7 percentage points |
| Net income | $315.0 million | $702.7 million | -55% |
| Net income attributable to common stockholders | $335.8 million | $711.7 million | -53% |
| Diluted EPS | $0.72 | $1.56 | Down from prior year |
| Adjusted EBITDA (non-GAAP) | $1.763 billion | $1.624 billion | +9% |
| Nareit FFO attributable to common stockholders (non-GAAP) | $1.083 billion | $1.400 billion | -23% |
| AFFO attributable to common stockholders (non-GAAP) | $1.185 billion | $1.167 billion | +2% |
Operating income improved, but GAAP net income and EPS fell sharply, principally reflecting the swing from foreign-currency gains to losses, higher interest expense, and increased other operating expense. Adjusted EBITDA and AFFO increased; the company cautions that non-GAAP measures are not substitutes for GAAP results or operating cash flow.
Cash flow, debt and liquidity
- Cash provided by operating activities was $1.071 billion, compared with $663.6 million; investing activities used $276.8 million and financing activities used $1.013 billion.
- Cash and cash equivalents were $1.803 billion at quarter-end; restricted cash was $122.4 million. Cash, cash equivalents and restricted cash declined $215.3 million during the quarter.
- Management reported total liquidity of $7.721 billion, including $5.918 billion available under revolving credit facilities. It also reported $585 million of additional net borrowings under the 2021 Credit Facility after quarter-end.
- Outstanding indebtedness was approximately $38.8 billion, including a $3.9 billion current portion. Long-term obligations, including current maturities, were $38.5 billion on the balance sheet. Interest expense rose 30% to $340.2 million; cash interest paid was $388.9 million.
- Common-stock distributions paid during the quarter were $726.3 million ($1.56 per share); a further $1.56 per share was declared for payment in April.
Material changes and unusual items
- Property revenue increased 4%. U.S. & Canada grew 4%, Africa 18%, Latin America 11%, and Data Centers 10%; Asia-Pacific declined 16%, Europe 3%, and Services revenue 11%.
- India customer Vodafone Idea Limited (VIL) continued partial payments rather than resuming full contractual payments. American Tower recorded about $33 million of deferred revenue related to an Indian customer and revenue reserves associated with the VIL shortfall. It received VIL optionally convertible debentures with a stated face value of approximately $193 million, recorded at fair value; a $15.7 million unrealized loss was recognized.
- The March sale of Mexico Fiber generated $252.5 million consideration and an $80 million loss. Other operating expenses rose to $127.5 million, including $29.8 million of impairment charges.
- Other expense was $407.2 million versus nominal other income in the prior-year quarter. Foreign-currency results shifted to an $84.1 million loss from a $242.1 million gain; net interest expense also increased.
- American Tower issued $1.5 billion of senior notes at 5.500% due 2028 and 5.650% due 2033, and completed a $1.3 billion tower-revenue securitization to fund repayment of $1.3 billion of prior securitized debt. It also repaid $1.0 billion of 3.50% notes at maturity.
Outlook, risks and contingencies
- Management expects 2023 capital expenditures of $1.65–$1.76 billion, including approximately 3,450–4,550 communications sites in discretionary projects and about $360 million of anticipated data-center spending. No full-year revenue or earnings guidance is provided in the supplied filing text.
- Management believes operating cash flow and credit-facility capacity will be sufficient for 2023 distributions, capital spending, debt service and signed acquisitions. It reported compliance with credit-facility covenants at March 31.
- India remains a significant uncertainty: VIL’s payment shortfall, customer credit risk and possible further impairment or strategic alternatives—including a potential sale of interests in Indian operations—could affect results. No such transaction is assured.
- U.S. & Canada churn was approximately 3% of tenant billings. Management expects elevated churn through 2025 from T-Mobile lease cancellations and non-renewals, including legacy Sprint leases.
- Market risks include variable-rate debt and foreign exchange exposure. A 10% increase in current interest rates was estimated to add $10.5 million of interest expense for the quarter; a 10% adverse currency move on outstanding euro debt was estimated to produce $0.9 billion of foreign-currency losses. Management reported no material pending litigation expected to materially affect financial position, results or liquidity.
Most important facts for investors to verify
- VIL’s actual payment performance, recoverability and fair value of its debentures, and whether India assets require further impairment.
- Drivers and persistence of the gap between improving Adjusted EBITDA/AFFO and sharply lower GAAP net income and Nareit FFO.
- Debt maturities, refinancing costs, variable-rate exposure, post-quarter borrowing and available liquidity.
- Whether announced 2023 capital spending and site-development plans proceed as expected, and how T-Mobile-related churn affects U.S. revenue.
- Currency effects and the extent to which reported growth reflects underlying operations rather than exchange rates, pass-through costs or one-time items.