SBA Communications Corporation — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing also reports fourth-quarter results. SBA owns and operates wireless communications sites; recurring site leasing generated 98.4% of segment operating profit. At year-end, it owned 32,923 towers, including 16,546 in the U.S. and 16,377 internationally.
Financial performance
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $2.083 billion | $2.015 billion |
| Operating income | $633.7 million | $583.5 million |
| Net income attributable to SBA | $24.1 million | $147.0 million |
| Diluted earnings per share | $0.21 | $1.28 |
| Adjusted EBITDA (non-GAAP) | $1.493 billion | $1.411 billion |
| Cash provided by operations | $1.126 billion | $970.0 million |
| Cash used in investing activities | $446.4 million | $947.2 million |
- Site leasing revenue was $1.954 billion, up 5.0%; site development revenue was $128.7 million, down 16.3%. Total revenue increased 3.4%.
- Operating income rose 8.6%. Adjusted EBITDA increased 5.8% as reported and 9.0% on the company’s constant-currency basis.
- Fourth-quarter revenue was $535.9 million versus $513.7 million a year earlier; operating income was $165.1 million versus $153.9 million. Net income attributable to SBA was $105.8 million, or $0.94 diluted EPS, compared with $67.4 million, or $0.59.
- Year-end cash and cash equivalents were $308.6 million, with $31.7 million of restricted cash. Cash from operations exceeded cash used in investing activities by $679.7 million.
- Principal debt was $11.18 billion at year-end, versus $10.414 billion a year earlier. The revolving facility had $380 million outstanding of $1.25 billion; SBA reported compliance with its financial covenants. Long-term operating lease liabilities were $2.09 billion.
Material changes and unusual items
- Domestic site leasing revenue increased 4.8%. International site leasing revenue increased 25.1% on a constant-currency basis, but foreign exchange reduced reported growth. Site development weakness was attributed mainly to lower T-Mobile and Sprint activity.
- Net income fell sharply despite higher operating income. Other expense included a $220.4 million loss from remeasurement of U.S.-dollar intercompany loans; the filing reports a $145.6 million after-tax loss on those loans. Debt extinguishment costs were $19.5 million, and non-cash interest expense increased $21.7 million.
- In August 2020, SBA paid $176.2 million to terminate an existing interest-rate hedge and entered a new swap covering $1.95 billion of the term loan at a fixed 1.874% rate through maturity.
- 2020 operating cash flow benefited partly from working-capital timing, including customer payment timing. The company repurchased $859.3 million of shares and paid $207.7 million in dividends.
Outlook, risks and contingencies
- Management expected organic site leasing revenue in both domestic and international segments to increase in 2021, partly as carriers deploy unused spectrum. No quantified revenue or earnings guidance was provided.
- For 2021, SBA forecast $37–$47 million of non-discretionary cash capital expenditures and $1.20–$1.22 billion of discretionary expenditures, including acquisitions, new builds, upgrades and ground-lease purchases. It expected to fund these with cash, operating cash flow and borrowings or new financings.
- After year-end, SBA closed on $954 million of wireless tenant licenses on 697 utility transmission structures in the PG&E transaction; the remaining transaction was expected to close by the end of Q3 2021. It also agreed to acquire 299 sites for $72.7 million.
- The T-Mobile/Sprint merger reduced the number of U.S. national carriers to three. SBA reported merger-related lease non-renewals beginning in the second half of 2020 and expected further churn. The three largest customers accounted for 72.7% of total 2020 revenue.
- International exposure remains material: approximately 19% of consolidated revenue came from international operations. The Brazilian real weakened 22.8% against the U.S. dollar on an average-rate comparison with 2019, affecting reported results. Oi-related tower lease overlap and renewal risk may arise following the approved sale of Oi’s wireless tower assets in Brazil.
- The company said COVID-19 had minimal impact on 2020 operations, but future effects remained uncertain. Other key risks include high leverage, interest-rate and refinancing exposure, LIBOR transition, competition, permitting delays, land-right renewals, and REIT qualification and distribution requirements.
- Management said ordinary-course legal matters were not expected to have a material adverse effect. The auditor issued an unqualified opinion on the financial statements and internal controls.
Investor verification priorities
- Track T-Mobile/Sprint-related non-renewals and any resulting effect on domestic lease growth and tenant concentration.
- Check progress, funding and expected returns for the PG&E transaction and the broader 2021 capital spending and acquisition plan.
- Review debt maturities, revolving-facility usage, covenant headroom, and the effect of rate or benchmark changes despite the term-loan swap.
- Separate underlying international growth from currency effects, and monitor Brazil, Oi and foreign-exchange exposure.
- Assess whether operating cash flow and the company’s capital allocation remain compatible with planned investment, share repurchases, dividends and leverage targets.