American Tower Corporation — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. American Tower is a global communications infrastructure REIT, primarily leasing space on wireless towers and other sites; it also operates U.S. data centers and provides U.S. tower-related services.
Business context
At year-end, the company reported 224,768 communications sites and 28 U.S. data center facilities across ten markets. Property operations generated 98% of revenue. The CoreSite acquisition, completed in December 2021, was reflected in a full year of data center operations in 2022. In 2022, Stonepeak invested approximately $3.1 billion in the U.S. data center business; American Tower retained approximately 72% of its common equity.
Key financial results
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $10.71 billion | $9.36 billion | +14% |
| Operating income | $2.35 billion | $3.13 billion | -25% |
| Net income | $1.70 billion | $2.57 billion | -34% |
| Diluted net income per common share | $3.82 | $5.66 | -33% |
| Adjusted EBITDA | $6.64 billion | $5.98 billion | +11% |
| AFFO attributable to common stockholders | $4.52 billion | $4.28 billion | +6% |
| Cash from operating activities | $3.70 billion | $4.82 billion | -$1.12 billion |
| Capital expenditures | $1.90 billion | $1.41 billion | +35% |
Reported operating margin was approximately 22% of revenue, versus 33% in 2021; net income margin was approximately 16%, versus 27%. These declines reflect higher depreciation and amortization, impairment charges, interest expense and lower foreign currency gains. Adjusted EBITDA and AFFO are non-GAAP measures and are not substitutes for GAAP income or operating cash flow.
At December 31, 2022, total outstanding debt was $38.9 billion, including $4.5 billion current. Cash and equivalents were $2.03 billion, and total available liquidity was $7.13 billion, including undrawn credit facilities. Total assets were $67.2 billion and total liabilities were $54.8 billion. The company reported compliance with its debt covenants at year-end.
Material changes versus 2021
- Revenue increased 14%, driven by acquisitions and growth in Africa, Europe, Latin America and data centers. Data center revenue was $766.6 million, versus $23.2 million in 2021, primarily reflecting CoreSite.
- Asia-Pacific revenue declined 10% to $1.08 billion, reflecting Vodafone Idea Limited (VIL) payment shortfalls, revenue reserves and adverse currency translation. U.S. & Canada revenue grew 2%; churn-related declines partly offset colocation and amendment growth.
- Total impairment charges rose to $655.9 million from $173.7 million. India impairments included $411.6 million related to VIL tenant intangibles and $97.0 million related to tower and network-location intangibles.
- Interest expense rose to $1.14 billion from $870.9 million, with the filing citing higher average debt and weighted-average interest rates. Cash paid for interest increased to $1.09 billion from $791.2 million.
- Operating cash flow decreased, partly due to working-capital movements, lower unearned revenue compared with prior-year customer advances, and higher cash interest and tax payments.
Outlook, risks and unusual items
- Outlook: Management expects 2023 capital expenditures of $1.65–$1.76 billion, including approximately $360 million for data centers and construction of roughly 3,450–4,550 communications sites. It expects 2023 common-stock distributions declared to total $3.0 billion. No clear revenue or earnings guidance is provided in the supplied filing text.
- VIL and India: VIL said in early 2023 that it would continue partial rather than full contractual payments. American Tower is considering strategic alternatives to reduce India exposure, including a possible sale of an equity interest; no transaction is assured. Further impairments remain possible. A proposed VIL convertible-debenture arrangement is subject to conditions that may not be met.
- Churn and customer concentration: 2022 churn was approximately 5% of tenant billings, versus a historical average of about 1%–2%. Management expects U.S. & Canada churn to remain elevated through 2025 due to T-Mobile lease cancellations and non-renewals. T-Mobile, AT&T and Verizon accounted for 46% of consolidated revenue in 2022.
- Debt, rates and currency: The company has substantial debt and significant upcoming maturities, including $4.51 billion due in 2023 and $7.50 billion in 2025. A 10% increase in current interest rates was estimated to add $42.4 million of annual interest expense. A 10% adverse currency move on outstanding euro debt was estimated to produce $0.9 billion of foreign-currency losses.
- Other risks: The filing highlights inflation and rising rates, foreign exchange volatility, customer consolidation or financial distress, regulation and zoning, REIT qualification, data center power needs and outages, cybersecurity, natural disasters, and rights to leased land. Estimated undiscounted future asset-retirement outlays were $4.2 billion.
- Distributions and financing: The company paid $5.69 per share during 2022 and issued 9.185 million shares for approximately $2.3 billion net proceeds. Its REIT status generally requires annual distributions of at least 90% of REIT taxable income, subject to applicable restrictions and board discretion.
- Audit: Deloitte issued an unqualified opinion on the financial statements and reported effective internal control over financial reporting. India asset recoverability and revenue recognition for a significant contract modification were identified as critical audit matters.
Important facts for investors to verify
- VIL’s actual payment performance, any recovery of receivables, and whether the proposed debenture arrangement closes.
- Whether India operations face additional impairments or a strategic transaction, and the associated financial impact.
- Realized U.S. churn from T-Mobile through 2025 and its effect on tenant billings, revenue and AFFO.
- Debt refinancing costs, maturity management, covenant headroom and liquidity after subsequent borrowings.
- Whether 2023 capital spending and distributions remain consistent with operating cash flow and the company’s leverage objectives.
- How much reported growth is organic versus acquisition-related, pass-through revenue, straight-line lease accounting and foreign exchange effects.