SBA Communications Corporation — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; comparisons are with Q1 2020 unless noted. SBA owns and operates wireless communications infrastructure, principally multi-tenant towers. It reported 33,711 towers at quarter-end; site leasing generated 97.8% of segment operating profit.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change / context |
|---|---|---|---|
| Site leasing revenue | $505.1 million | $492.4 million | Up 2.6%; domestic growth partly offset by foreign exchange effects |
| Site development revenue | $43.6 million | $24.7 million | Up 76.6%, primarily on increased carrier activity |
| Total revenue | $548.7 million | $517.1 million | Up 6.1% reported; up 8.6% on a constant-currency basis |
| Operating income | $173.6 million | $151.2 million | Up 16.6%; operating margin was 31.6% versus 29.2% |
| Net loss attributable to SBA | $11.7 million | $127.1 million | Loss per diluted share of $0.11 versus $1.14 |
| Adjusted EBITDA | $390.1 million | $369.9 million | Up 5.4% reported; up 7.6% constant currency |
| Cash from operations | $285.5 million | $277.7 million | Up $7.8 million |
Net loss improved mainly because foreign-exchange remeasurement losses on intercompany loans were lower than in Q1 2020, alongside higher operating income and lower cash interest expense. Other expense included an $86.3 million loss from remeasurement of U.S.-dollar-denominated intercompany loans. The filing’s constant-currency figures are non-GAAP measures.
Cash, debt and capital allocation
- At March 31, cash and cash equivalents were $176.6 million and restricted cash was $62.9 million. Current assets were $389.9 million and current liabilities were $560.8 million.
- Debt principal totaled $12.134 billion, compared with $11.180 billion at year-end 2020; long-term debt, net of current maturities, was $12.020 billion. The company reported covenant compliance and expected cash, revolver availability and operating cash flows to cover debt service for the next 12 months.
- Operating cash flow was more than offset by investing outflows of $1.077 billion, primarily the $954 million PG&E transaction for rights to lease and operate 697 utility transmission structures. Financing provided $701.3 million.
- In January, SBA issued $1.5 billion of 3.125% senior notes due 2029 and used proceeds in part to redeem $750 million of 2017 notes and repay revolver borrowings. It reported $590 million outstanding on the revolving credit facility at quarter-end; $495 million was outstanding after a subsequent $95 million repayment.
- The company repurchased 653,841 shares for $168.9 million and paid $63.4 million in dividends during the quarter. It declared a subsequent $0.58-per-share dividend.
Material changes, outlook and risks
- Domestic site leasing revenue increased 4.5%, supported by acquired and built towers and organic leasing growth. International revenue fell 4.5% reported but rose 7.6% constant currency. Site development growth was driven primarily by T-Mobile activity.
- The PG&E structure rights acquisition was a major investment; the related payment will be recognized over an approximately 70-year weighted-average period. After quarter-end, SBA agreed to acquire 401 additional sites for $110.8 million and priced $1.165 billion of tower securities, expected to close in May, to refinance 2017 tower securities and for general purposes.
- Management expected organic site leasing revenue in both domestic and international segments to increase over 2020 for the remainder of 2021, partly due to carrier deployment of unused spectrum. Estimated 2021 cash capital expenditures were $36–$46 million for maintenance and general corporate needs and $1.225–$1.245 billion discretionary, including acquisitions, builds, upgrades and ground lease purchases.
- Management said COVID-19 had minimally affected operations to date, while noting that future effects remained uncertain. Key risks include carrier consolidation and spending, acquisition execution, foreign exchange and international operations, debt refinancing and interest rates, and changes to LIBOR. A 10% adverse move in the Brazilian real was estimated to reduce quarterly revenue by about 0.9% and operating income by 0.6%; a 10% move in currencies underlying unsettled intercompany debt could produce about $65.9 million in unrealized gains or losses.
- A litigation dispute is ongoing regarding the closing of the purchase of the remaining 6% interest in a South African joint venture; the $13.7 million consideration remains reflected as redeemable noncontrolling interest pending resolution. The filing also disclosed no contract modifications yet for reference-rate reform.
Important facts for investors to verify
- Whether expected organic leasing growth materializes and carrier deployments support the outlook.
- Completion, funding and returns of the PG&E transaction, planned site acquisitions and elevated 2021 discretionary capital spending.
- Debt levels, refinancing execution, covenant headroom and sensitivity to rates and LIBOR transition.
- Foreign-exchange exposure, particularly intercompany-loan remeasurement and Brazil-related operating exposure.
- Resolution and potential financial effects of the South African joint-venture litigation and earnout.
- Future cash available for dividends and repurchases after investment and debt-service needs.