You for
your patience in holding and welcome to the SBA First Quarter Results Call. Just a brief reminder, today's conference is being recorded. Now happy to turn it over to VP of Finance, Mark D'Ulisse.
Good evening, and thank you for joining us for First Quarter 2021 Earnings Conference Call. Here with me today are Jeff Stoopes, our President and Chief Executive Officer and Brandon Cavanagh, Our Chief Financial Officer, some of the information we will discuss on this call is forward looking, including, but not limited to, any guidance for 20 21 and beyond. In today's press release and in our SEC filings, we detail material risks that may include our future results or may cause our future results to differ from expectations. Our statements are as of today, April 26, and we have no obligation to update any forward looking statements we may make. In addition, our comments will include non GAAP financial measures and other key operating metrics.
The reconciliation of and other information regarding these items can can be found in our supplemental financial data package, which is located on the landing page of our Investor Relations website. With that, I will now turn the call over Thank you, Mark. Good evening. SBA had a strong start to the year with first Quarter results ahead of internal expectations for most of our key financial metrics. Total GAAP site leasing revenues for the 1st Foreign exchange rates were generally in line with our previously forecasted FX rate estimates for the Q1.
They were, however, a significant headwind on comparison for the Q1 of 2020, negatively impacting revenues by $12,600,000 on a year over year basis. Same tariff recurring cash leasing revenue growth for the Q1, which is calculated on a constant currency basis, was 3 point 6% over the Q1 of 2020, including the impact of 2.4% of churn. On a gross basis, same tower growth was 6%. Domestic same tower recurring cash leasing revenue growth over the Q1 of last year With 5.6% on a gross basis and 3.1% on a net basis, including 2.5% of churn. Domestic operational leasing activity or bookings representing new revenue placed under contract during the Q1 was modestly lower sequentially than the prior quarter.
But on the heels of our newly signed agreements with Verizon Wireless and DISH, We have seen substantial increases in our domestic new lease and new amendment application backlogs. These backlog increases are supportive of Significant increases in domestic operational leasing activity throughout the balance of this year. During the Q1, amendment activity represented 77% of our domestic bookings with 23% coming from new leases. The big three carriers represented 86 Percent of total incremental domestic leasing revenue signed up during the quarter. Internationally, on a constant currency basis, same tower cash leasing revenue growth was 6.1%, including 1.3% of churn or 7.4% on a gross basis.
International leasing activity remained steady during Q1. In Brazil, our largest international market, we had another solid quarter leasing activity. Gross same tower organic growth in Brazil was 8.5% on a constant currency basis. During the first Quarter 85.3 percent of consolidated cash site leasing revenue was denominated in U. S.
Dollars. The majority of non U. S. Dollar denominated revenues was from Brazil, with Brazil representing 11.1% of all cash site leasing revenues during quarter and 8.1 percent of cash site leasing revenue excluding revenues from pass through expenses. Tower cash flow for the Q1 was $411,800,000 Our tower cash flow margins continue to be very strong With a 1st quarter domestic tower cash flow margin of 84.4% and an international tower cash flow margin of 70.8 percent or 91%, excluding the impact of pass through reimbursable expenses.
Adjusted EBITDA in the first quarter was $390,100,000 Our industry leading adjusted EBITDA margin was 71.2% in the quarter. EBITDA margin was 71.2% in the quarter. Excluding the impact of revenues from pass through expenses, Adjusted EBITDA margin was 75.6%. Approximately 98% of our total adjusted EBITDA was attributable to our tower leasing business in the Q1. Our services business had a very strong first quarter With $43,600,000 in revenue and a higher contribution to adjusted EBITDA than any quarter in 2020, Activity levels have picked up materially.
The increasing activity levels with our carrier customers have led to increases in our services backlog and a resulting increase in our full year outlook for site development revenue. AFFO in the Q1 was $286,300,000 AFFO per share was $2.58 an increase of 13.2% over the Q1 of 2020 A 16.2% increase on a constant currency basis. During the Q1, we also continued to expand our portfolio, mode. Acquiring 731 communication sites, including wireless tenant licenses on 697 utility transmission structures From the previously announced PG and E transaction for total cash consideration for all sites of $975,500,000 We also built 62 new sites in the quarter. Subsequent to quarter end, we have purchased or agreed to purchase 413 additional sites in our existing markets for an aggregate price of $110,200,000 and And we anticipate closing on the majority of the sites under contract by the end of the Q3.
In addition to new tower assets, We also continue to invest in the land under our segments. During the quarter, we spent an aggregate of $6,500,000 to buy land and easements and to extend ground lease terms. At the end of the quarter, we owned or controlled for more than 20 years the land underneath approximately 71% of our towers And the average remaining life under our ground leases, including renewal options under our control, is approximately 35 years. Looking ahead now, this afternoon's spring's press release includes our updated outlook for full year 2019 2021. We have increased our outlook for most of our key metrics from the outlook previously provided with our prior quarter earnings release.
In addition to our increased outlook for site development revenue, which I mentioned a moment ago, we have also increased our outlook for full year site leasing revenue. The majority of this increased leasing revenue outlook is due to our recently signed global eminent agreement with Verizon Wireless. One component of the agreement is a multi extension of the current lease terms across our existing lease agreements with Verizon, resulting in average non tangible terms of approximately 8 years. Deturn extensions increased our outlook for straight line revenue for 2021 by approximately $22,500,000 While we anticipate higher levels of operational leasing activity throughout the year as a result of the Verizon agreement that will contribute to improved organic lead revenue growth in future years, we do not expect it to impact our previously provided 2021 outlook for cash flow and adjusted EBITDA. With regard to site leasing revenue, In addition to the Verizon straight line impact, we also increased our outlook for better leasing revenue recognition in the Q1 than we previously projected Other increases in straight line revenue associated with term extension separate from the Verizon agreement.
We anticipate our domestic same tower revenue growth will begin to increase in the second half of the year and that we will exit 2021 at the highest rate of the year. Our updated outlook for adjusted EBITDA and AFFO incorporate increased expectations for contributions from our services business And AFFO is also projected to benefit from slightly better non discretionary capital expenditures and cash taxes than we previously anticipated. Our customers' ramping efforts around 5 gs give us great confidence in our projected growth. As is always the case, our full year 2021 outlook does Not assume any further acquisitions beyond those under contract today, and the outlook also does not assume any share repurchases other than those completed as of today. However, we are likely to invest in additional assets or share repurchases or both during the rest of the year.
Our outlook for net cash interest expense does not contemplate any further enhancing activity in 2021. Finally, our outlook for AFFO share is Based on an assumed weighted average number of diluted common shares of 111,400,000, which assumption influenced in part by estimated future share prices. With that, I will now turn things over to Mark, who will provide an update on our liquidity position and balance sheet. Thanks, Brandon. We ended the quarter with $12,100,000,000 of total debt and $11,900,000,000 of net debt.
Our net debt to annualized adjusted EBITDA leverage ratio was This leverage ratio is elevated slightly above our target range of 7.0 to 7.5 times Due to the PG and E acquisition during the Q1, our 1st quarter net cash interest coverage ratio of adjusted EBITDA The net cash interest expense was 4.4 times. On January 29, the company issued $1,500,000,000 of unsecured senior notes Due February 1, 2029, these notes accrue interest at a rate of 3.125 percent per year And interest is due semi annually on February 1 August 1 each year, beginning on August 1, 2021. The net proceeds from this offering were used to fully redeem all the outstanding 4% senior notes, to take all premiums and costs associated with such redemption, and to repay the amounts outstanding at the time under the revolving credit facility and for general corporate purposes. As of today, we have $530,000,000 outstanding under our revolver and the weighted average interest rate of our outstanding debt is 3% with a weighted average maturity of approximately 4.3 years. During the Q1, we repurchased 654,000 shares of stock for $168,900,000 or average price of $258.33 per share.
All shares repurchased were retired. As of today, we have $475,100,000 of repurchase authorization remaining under a $1,000,000,000 stock repurchase plan. The company shares outstanding at March 30, 2021 were $109,300,000 compared to $111,600,000 at March 31, 2020, a reduction of 2%. In addition, during the quarter, we declared to pay a cash dividend of $63,400,000 or $0.58 per share. And today, we announced that our Board of Directors declared a 2nd quarter dividend of $0.58 per share, payable on June 15, 2021 to shareholders of record as to the close of business on May 20, 2021.
With that, I'll now turn the call over to Jeff. Thanks, Mark, and good evening, everyone. As you have heard, we had a strong start to the year with solid financial and operating results. Activities in the Q1 provide solid foundation for the rest of 2021 and for the next couple of years. During the quarter, each of our largest mode.
Domestic customers provided public disclosures expanding upon their 5 gs deployment plans, making it clear that upgrades to their mode. In fact, our services business had its biggest quarter in nearly 7 years. Notwithstanding that strong Q1 performance, our services backlogs have continued to grow substantially, setting us up to have our best services in a very long time. The increased services volume and backlog are due to growing network planning and deployment efforts by our largest customers They are supportive of our anticipated growth in domestic organic leasing activity over the coming quarters. Our growing leasing application backlogs further support our expectations around future new leasing activity.
Since our last earnings call, the results of the C band auction was closed. Verizon, AT and T and T Mobile were all meaningful participants in the auction. Verizon and AT and T both paid premium prices for aBLOC Spectrum, a A clear indication that the ability to move quickly and building out the top markets is a priority for them. On April 1, We signed a new global agreement with Verizon to facilitate their 5 gs network build out, including the deployment of their newly acquired C band spectrum. This new agreement addresses several lines, including the extension of committed terms under our existing agreements with Verizon, Establishing equipment specific pricing, terms and conditions for upgrades to Horizon's existing leases and establishing parameters and volume incentives We are excited to expand our existing strong partnership with Verizon, and we believe both Verizon and SBA We'll benefit from years of incremental business between our organization.
The agreement with Verizon as well as the substantial minimum lease commitment under our new Nestor Lase branded DISH Our leasing activity levels and building backlogs with both T Mobile and AT and T are all part of the foundation for a strong couple of years of heightened net income. Our domestic leasing backlogs are as high as they have been in quite some time. We have not incorporated any material in our funding backlogs in our 20 20 lab Because of the timing of uncertainty lies between application execution and rent commencement, the future is certainly bright and is broad. In addition to the exciting events around our domestic leasing and services businesses, our international leasing activity also was solid during the Q1. During the quarter, we signed up 50% of new international revenue through new leases and the other 50% through amendments to existing We had strong leasing results in Brazil and South Africa, our 2 largest international markets, notwithstanding mode.
We believe the underlying fundamentals for wireless Network growth are strong in these markets. And once we see a return to normalcy due to increased vaccine availability and other steps To reduce the COVID impact in these markets, we will be well positioned for increased network investment and organic leasing growth. In addition to our Q1 operational successes, we also made advances through positive capital allocation and opportunistic financing activities. As discussed on our prior call, we added a large number of high quality assets to our portfolio through the PG and E transaction during the quarter. And while it's only been about 2 months since we closed on the majority of this transaction, we're very pleased with what we're seeing so far.
We have received significant interest from our customers around these sites, and we have established a very positive working relationship with PG and E, which should allow us to maximize these opportunities through providing efficient access to these assets for our customers. In addition to the PG and E transaction, we have closed and placed under contract a number of new high quality assets that should be supported We also continue to deploy capital into share repurchases during the quarter, successfully deploying almost $70,000,000 to opportunistically take advantage of dislocations in our stop rights, while also effectively managing our leverage ratio. I'm particularly pleased that we were able to finish the quarter with a net debt to adjusted EBITDA leverage ratio of 7.6x, just above our target range 7 to 7.5 times. We knew that we would be above our target range temporarily due to the PG and E transaction, But we are ahead of schedule and delevering back into our target range due to our strong first quarter results. In fact, on a pro form a basis for a full quarter's Due to PG and E, the EBITDA from PG and E, we would have reported less than 75 times for the Q1.
This result demonstrates the tremendous ability of our company to quickly organically delever EBITDA after substantial capital investments. During the Q1, we also completed a $1,500,000,000 unsecured bond offering at the lowest price for unsecured debt in our history. This combination of steadily growing EBITDA access to low cost debt gives us great confidence in our long standing approach to leverage And capital allocation is a key component to growing AFFO per share and creating incremental shareholder value. Our access to low cost debt continues to mode. And I'll copy that we will have other opportunities to improve our cost of debt financing going this year.
In the first quarter, We produced $2.58 of AFFO per share, over 16% higher than the Q1 of last year on a constant currency basis. We also increased our Q1 dividend by 25% over the prior year, while still achieving a very low AFFO per share payout ratio of 20 Our ability to manage our balance sheet, optimize our operations and opportunistically allocate capital Will allow us to continue to generate long term returns for our shareholders and capitalize on the quality and foundation of the strong underlying macroeconomic business. So I want to close with some comments about our performance through the pandemic. We're currently operating our Boca Raton headquarters, representing about 33% of our global workforce at 50% capacity, with plans to fully return to the offices at 100% by early July. Our other offices are at varying attendance percentages with U.
S. Offices generally at higher levels of attendance than our international offices. I can thankfully say that the pandemic has had no material impact on our U. S. Business.
And internationally, I believe we have navigated the pandemic as well as anyone. In every case, we have worked carefully with local health care experts and our team members to prioritize safety first. I could not be more proud of the way we have navigated this pandemic to achieve total safety of our team members and meeting the needs of our customers and I want to thank our team members and our customers for their commitment, collaboration during these challenging times and their contributions to our success. We look forward to an exciting rest of the year and sharing our results with you next quarter. And with that, Justin, we are now ready for questions.
Mode.
First, we go to the line of John Atkin, RBC. Your line is open. Thanks very much. So I was interested in Whether you have seen any actual equipment installed on your U. S.
Towers of kind of the C band or OAN variety? And then I had a kind of a bigger question bigger picture question on escalars, which historically have been fixed. And we get a lot of questions sometimes about why That could eventually become more CPI based over time in kind of the core U. S. Business?
Thanks.
So on C band type things, I'll just speak generically, John. Signed leases and amendments, Yes. Actual installs, yes, no. And I and you should read anything more into that other than the typical Time it takes to go from execution to installation. And on the fixed escalators versus Variable, I mean, that's an age old question.
It obviously depends on which side of the historical inflation you fall on as to what you prefer. It's been discussed. And in every case that I know of in the U. S, people have landed on the fixed escalator concept. So I don't know what really to tell you beyond it's a regular topic of discussion and fixed is the way folks are doing.
Got it. And then any more color you could provide on Brazil And just
kind of
macro topics, economy, carrier landscape, sector
of how Yes. Brazil is struggling still with COVID. There's no question. The economy is feeling the effects. I believe I saw that the Employment rate in Brazil is now currently around 15%.
Our folks are optimistic That better times are shortly ahead, but we'll need to see all I will say that notwithstanding the overall bleaker environment there certainly compared to the U. S, Our business and our operations continue to do just fine. So we're obviously thankful for that and communications Continues to be a key need there and carriers continue to answer that need. But in general, it's I mean, Yes. I really read the same things that I do and the same folks I talk to.
They still have So we're ready to go in terms of improving their COVID position.
Last week for me, just on the PG and E assets. What Are there any kind of metrics around portion of the portfolio that is a legitimate candidate for lease up? What types of use cases you're finding when people do submit a lease application, and just how to kind of think about the growth profile there?
Well, obviously, all the ones that we've talked about are in use. We have interest in some of the other New leases. So we're pretty pleased with how things have gone in the 1st couple of months. Justin, I think we're ready for next question.
Next up, we have Michael Rollins of Citi. Your line is open. Hi, thanks and good afternoon. Just first, just following up on your mode. Comments regarding the activity levels.
With the Verizon deal in the books, I mean, you had a couple more months of discussions and activity. Is 1Q the trough for domestic organic growth site leasing growth that was reported at 5.6 And how do you think about what the peak range could be for this metric? Again, now that you have Couple more months of conversations and agreements. And then just secondly, are there any updates on the possible timing for merger related churn relating to the T Mobile and Sprint deal. Thanks.
Yes. Hey, Mike. On the Same tower growth rates, Q1 is certainly right around the trough. It's possible that Q2 also Would be at a similar level based on what we've got in mind today. A lot just as a reminder that metric is a calculation based on Trailing 12 months, so it's really backward looking.
And a lot of the increasing significant increases we've seen in the organic leasing activity has just started to happen Recently here, and so I expect that it will start to increase in the second half of the year and we'll exit the year at a higher rate and frankly continue to Increase as we move into next year. As far as how high could it be, I can't really say for sure. I I think on our previous call, we talked about on a net basis getting to mid single digits. I think that that is certainly achievable. The big question, Mark, is the timing of the churn, which maybe leads me to your third question, which is about the Sprint T Mobile overhang.
Mode. The numbers that we gave on our previous call are still pretty much the same. We don't have nothing's occurred that would make us Change our expectations. Just as a refresher, on this year, we have about $8,000,000 or so of impact to 2021 It's what we're anticipating. We've already incurred a decent portion of that.
So that's probably about the right number for this year. Next year is expected to be a little bit bigger, closer to $30,000,000 of impact next year before it steps down the following Couple of years to somewhere around $10,000,000 to $15,000,000 per year until we see the biggest impacts potentially in 2025 and 'twenty six. Having said all that, that's an estimate based on the timing of when those leases, the overlapping leases come up for their maturity date. It's certainly possible that T Mobile's plans will change them in terms of what sites they need to keep. And so we'll have to keep our eyes on that, and we'll certainly inform you if anything changes.
Next up, we have the line of Phil Fusen from JPMorgan. Your line is open. Hey, guys. Thanks. Can you help us think about activity ramping from this year to next year As we go from the guided activity and talking about an exit run rate accelerating from here, I just want to pull the churn discussion out and really think about what activity could be doing.
Thanks.
Well, it's Clearly going to accelerate, Phil, as the C band spectrum gets cleared. Verizon them I've stated that one of the reasons for the agreement was to be able to get ahead of the actual clearing and have the mode. Already inflation ready to go. But I think it's a practical matter that it will be fair amount of Just in time delivery of new C band equipment as it relates to when they get mode. Clear.
And AT and T's commentary was that much of their C band spending does not even occur mode until we get into 2022. So if you take what our customers have said at face value, We should move through this year
and continue to grow, as we move through 2022. And if I was to look at 2019, as a good example of what happens when 2 carriers are really spending, do you think 2022 activity could be better than that $63,000,000 saw in 2019.
Honey, you could. We don't want to get too far ahead of ourselves. But mode. I don't if you take your premise of all 4 carriers being very, very busy, I think 2022 will be that year.
Okay. Last thing, the service this quarter, just really strong. Anything that we should think of as sort of a like a one timer or not repeatable in the Q2? Or is that a good new run rate?
I don't know how long to take it out, but it's there's nothing that we know of today as to why Q2 should be materially different. Good. Thanks, Jeff. Yeah.
Next, we have the line of Spencer Curran with New Street Research. Your line is open. Hey, guys. Thanks for taking
the question. I was wondering if
you could elaborate on the deal you struck with Verizon. One of your peers Signed a more holistic deal, where a certain amount of revenue was contracted annually. And you guys didn't. So I was curious, why didn't you take that approach?
We historically have Thought it's best for all parties to operate on a more a la carte based suspension. So you're Correct. Our straight line only includes the results of the term extensions. It does not include any type of use right because that's a different deal. And that's just the way we historically have run the business and like to do things.
Mode. Got it. I don't know if it's any more complicated than chocolate versus vanilla. Mode. Well, it's worked out favorably for you
in the past. So we'll have to see how things shake out. And one follow-up. In your prepared remarks, I think you said that you didn't include any benefit from the increase in your backlog That you saw this quarter because of the uncertainty around the commencement timing. Is it the case that you had already baked in some impact mode.
The C band InstaGuide and the application that you saw this quarter basically met your expectation? Or is it the case, Thadio, if these sites do commence, it could be incremental to your expectations that you laid out last
Yes. Hey, Spencer, it's Brendan. We did certainly expect and included our Original guidance and increasing amounts of leasing activity throughout the year. The backlogs are supportive of that. And the big question mark, which we did mention in our prepared remarks, is just simply the timing of those Applications turning into signed agreements and then the next step of the signed agreements hitting dates at which the rents would And so we've got certain assumptions we've made around how that's going to play out.
It certainly will be increasing as we move to the rest of the year, but that was already assumed. So yes, to the extent that we are off at all and it is a little bit faster, I guess it could be higher. But I think as we get later in the year, the potential for that The material impact is very limited.
Next, we have the line of Ric Prentiss of Raymond James. Your line is open. Great. Thank you, Matthew.
Hey, Rick. Hey. We were little surprised for the cash taxes change. How did you get there? You broke up a little bit.
I think you're asking about the change in our cash taxes. Yes. So the cash taxes for the balance of the year, it's actually in part due to Expected benefits that we have now from the PG and E acquisition in terms of amortization of that asset, that was not, I think, fully More when we gave the original guidance, because that deal actually just closed right before we gave the last guidance. So that's something we're going to benefit from. And the other things that affected it Fairly minor differences in some of our international markets, but PG and E was really the biggest difference.
As we think longer term, how should we think
Well, obviously as They mean they're going to go up. Yes, they're certainly going to go up. It's interesting because as a REIT, we obviously have limited federal cash Taxes at any point, but there are currently state cash taxes that we do pay, because we're not seeing our full AFFO So there is some opportunity to improve on that front. But on the other side, the more impactful thing will be our international taxes, Which as we continue to grow in those markets and some of the depreciation shields run off, you'll see the cash taxes in the international markets climb.
Makes sense. And how should we think about the CBRS opportunity? What's the timing and size of being able to put capital work?
The timing is now. The primary, I think, interest Right now, we'll come from municipalities, private networks. We're actually building some school systems to help bridge the digital divide that are focused on CBRS. And while some of our cable customers are also Active. I think in terms of the National Wireless Carriers, They're going to focus really on the mid band and use the CBRS stuff really as more of a niche side of the national wireless carriers today.
Makes sense. And have you thought about giving us a table showing Sprinter As far as Colo versus other sites, as we appears to be listening?
We haven't thought about it, but we will. Mode. That would be great.
All right.
Thanks guys. Stay well. Next, we have the line of Batya Levi, UBS. Your line is open.
Great. Thank you. How do you think that this mix could change over the end of the year and maybe into next year or As the event becomes more of the mix down the road. And how does the management revenue compare to higher rates? Thank you.
You broke up on a lot of that, and I don't think any of the 3 of us here I heard everything you said. Could you try that again?
Sure. I'll try that. I was asking about the amendments revenue mix. I think it was 77% this quarter. How do you think about that trending towards the year end and maybe with the C band mode.
Becoming a part of a bigger mix bigger part of the mix. And if you could just have made an average in terms of How do these amendment revenues compare to monthly basis now versus prior upgrades?
Okay. The 77 Per said, and this is purely a guess. But I'm going to guess it goes down as we 5th year end, mostly because all the DISH business is going to be new leases. So that's probably going to To the extent it changes, it will be for that reason because most of the other activity is from the other 3 carriers is Definitely going to be amendments. And in terms of the pricing, we really Never get into that, but I will tell you that based on a load and a usage basis, The pricing is entirely consistent with what our history has been.
Okay. Got
it. Maybe one quick follow-up. The new tower purchases 413, can you tell us where they were and how will Does there have an accident in those markets?
Those are actually under contract, most of those, Atia, and they're mostly located internationally in existing markets of ours.
Got it. Okay. Thank you.
Next, we have the line of David Gardin, Bank of America. Your line is open. Mode. Hi, guys. Thanks so much.
I guess a few questions. So On the services activity, in the past, we've had 1 or 2 carriers being the driver of that. I guess, how democratically distributed would you describe services activity running out of expectations at this stage being? I guess the second question was just on the commencement question mark, mode. Some of the comments that John Stankey made about skittishness with respect to supply mode.
Any observations, Jeff, maybe that you guys have from your approach as to how you see The probability, the confidence interval around accelerating to be given those questions? Thanks.
Yes. On your last one well, your first one, it's still not too democratically spread out. It's still our services revenues are still And that base as we move through the year. In terms of your second question, we haven't really seen any supply issues Yes, David. That's not to say if somebody says that they're out there, they are.
We haven't seen them yet. And in terms of What it's going to mean for us, as I think we've explained many, many times, once a lease or amendment is Executed. When it actually begins to accrue revenue is the later or excuse me, the earlier Of the date certain or when we actually install the equipment. So we're all rooting for fast equipment availability And dates of install that are earlier than The specified end date in the contract, if that happens, can be in the rate of revenue earlier. But I mean, Right now, as we think about life and how this year and next year is going to play out, we're not really thinking about equipment delays.
Okay, great. And then if I could do one more follow-up. Just in light of the PG and E deal, Obviously, now that that's kind of ripened and closed, has there been an elevated or any amount of inbounds From other corners of the world looking to kind of do what PG and E has done? Or was that more of a forced situation That was kind of unique.
Well, PG and E had its own unique needs, but we have had Many, frankly, inquiries from other utilities around the country. Okay. Good. Thank you, guys. Thanks.
Next, we have the line of Nick Del Deo, MoffettNathanson. Your line is open. Hey, thanks for taking my questions. First, returning to PG and E sites. If you think back
to other assets you've acquired that may not
have been adequately marketed, about how long did it take them to kind of hit their stride and start seeing the benefits of being plugged into your sales engine?
Was it basically right away or did it
take a little time?
No, it always takes time. Always takes time. I mean 6 months to a year To really get to the point where it's just like a homegrown asset.
Okay. Okay. That's helpful. And then maybe one on the M and A front, Obviously, a lot of talk of higher capital gains taxes this year. Would you expect that to potentially increase the pool
of towers for sale in the U. S? Were you not hearing much from that front? It has historically, Nick. So I would expect it to do so Again, but if it I don't know that the magnitude will be so great that it will be like a A tsunami of deals.
But clearly, there will be tax sensitivity if the capital gains rates are increased.
Okay. So maybe you pick up a few more, but not enough to really change the trajectory or anything.
I I wouldn't say we're going to get to 20% portfolio growth off the tax law changes.
Okay, fair enough. Thank you, Jeff. Next, we have Tim Long with Barclays. Your line is open. Thank you.
Two questions, if I could. First, I think you guys mentioned something on CBRS and kind of digital drive, some benefits there. Could you talk a little more broadly about mode. Some of the government push for more rural broadband and what you think might mean a lot for your business. Mode.
And it's Ken, can you just update us on any updated developments on kind of the old edge compute data center world where we know you guys are kind mode.
Yes. The government involvement In broadband and bringing broadband to more rural areas is right in the middle of that, Jim, the initial bills have been mostly focused on fiber because they are Trying to establish a minimum uplink and download speed before fixed wireless today mode. And there's a tremendous amount of lobbying going on right now to basically free that money up For wireless as well as fiber, and that all remains to be seen. In addition, the other aspect of the legislation that's been proposed is it's mostly For CapEx, and we've tried to make it clear through our industry channels that It's really not CapEx that you need. There's a lot of CapEx out there.
If somehow the relief could be structured in a way that guarantees Rental payments and OpEx for periods of time, then I think you really have something that's going to be impactful for our industry. So the work that we're doing so far actually has not revolved so much on any federal mode. There is an E Rate program that is for education that is federally administered that's part of it. Mostly, we have We've been working with counties, school districts and actually private funding that's interested in economic development mode to make this happen. So we're excited about the potential.
What we've done to date Has it really evolved much of any federal funding because that cake is still not baked yet? The edge compute, no, it continues to be a focus of ours. I continue to think It's going to bear a lot of fruit. We actually have 2 new customers and 2 new facilities that are under construction since our last But what really needs to happen, and we've been very clear on this, I think, from day 1 is you need to have a Use case world where you need computing power right at the cell site. And that's We're not there yet.
I think we're going to get there. But until we get there, that's when you really want to know that the edge computing opportunity mode.
Next, we have Walter Pieper with Wedbush Head. Your line is open. Thanks. Jeff, I want to go back to Phil's question. He was drilling on 2022, but do you think 2022 is a peak year for co loan
amendments? I mean, we'll see it all depends on how quickly our customers will have They're really going to start their C band work until 2022. So I mean, it could be, but it also may not be.
Got it. But I would feel how you drill down pretty nicely in the
60 versus 63 whatever. So You have a
good sense of what 'twenty two is and how much of Verizon and maybe a smattering of DISH and stuff like that's in there. So I'm just Curious if you think there's much left over to take that number even higher in 2023.
Yes. I don't think we and I would disagree that we know enough now To have 2022 fully baked and compare that to what ultimately will be for build out plans for Our customers and this is going to be multi year, it's not just a team. And it's not even really starting until late this year at the earliest. So The more we talk, the less I'm prepared to say 122 will be the top.
Got it. And then Brandon, I think When you were talking about the last 2 quarters, you gave us a good sense of the churn that was ordered out of T Mobile and Sprint. So I think you reiterated that 8 ish number, 9 ish whatever.
But I
think, Brandon, you also mentioned a lot of that has already been loaded in the Q1. So I mean, was it a couple of 1,000,000 in Q1 Of that 8 ish or 9 that has already kind of hit your numbers?
Yes, it was a little less than 2,000,000 Probably about $1,800,000 or so. So it will be a little bit bigger. So yes, I mean we saw A bunch of these releases that ended right at the end of last year or beginning of this year. So that piece we already knew about. And then there's some other Extra pieces that we're assuming happen that may or may not, but they're relatively small.
So when you talk about, Brandon, the mid single digit growth, is it should we think about that including that Sprint number or Sprint we're selling next mode. Or is it after that?
Yes. No, long term, the question that I was answering was what do we think you We get to in terms of your big growth rate. And so yes, that's a net number,
but it's also Including spring because obviously that Sprint churn is
going to start cranking up and
Yes. But in any given year, but obviously in any given year, it could be higher or lower because the Sprint churn is lumpy. So depending on the year, Some years will be below that and I guess, conceivably, it could be higher than that if you had really low churns and high lease up. So mode. I just hope it's not like a Dave, it's like a Dave Schafer long term, where it's
like that number we're always waiting for. And then last question is on the DISH mode. Massive or DISH, are they using massive MIMO antennas in terms of their new lease activity? Or is that, are they using more traditional approach? Or traditional.
Got you. Thank you very much. Sure. Next, we have Brett Feldman from Goldman Sachs. Your line is open.
Yes. Thank you. Two questions, if you don't mind. We're talking a lot about C band and the historical conventional wisdom has always been Higher frequencies are more useful in dense areas and less dense areas and your portfolio seems to feel a little more less dense. Now that you actually have insight from some conversations with carriers about how you're thinking about using the C band, what level of visibility or confidence do you have that they're actually going to go to all of Towers they currently use with you in markets where they hold C band licenses and upgrade and support C band?
Or do you think there's some towers where it won't fit? And the other side of it, if you're Add on is, to what extent do you actually think they're going to increase their density with you being building sites they may be historically, if not, as the demand? And then the second question, if I just sort of think Back to some of the earlier questions before, it sounds like you really haven't changed your approach to your leases. You're sticking with fixed escalators, you still like a la carte. And there are some emerging operators who have signaled that maybe that has created opportunity for them, that they've been able to get into some situations where maybe You're not winning business because you haven't been as flexible.
How have you gotten comfortable with that trade off, as you went through this last iteration of major negotiations? It doesn't seem like you really bugged a lot.
Well, I would put out our historical results That's the reason why we're comfortable with that in our Q1 results and where we will be this year and where we'll be next year And kind of leave it at that. In terms of the your first question on density, I think we've seen enough so far to know that it's going to be fairly broad. I mean, I would never tell you to mode. Count on 100% of the release, but it is going to be broad. It's going to be closer to 100, then it's 50.
And we won't really know, I think, until we get into it a little bit, Particularly with the existing carriers, as to how much new leasing will come about as clearly, they're all Pursuing co locations first because that's faster, it's cheaper, it's just a smart way to go about it. And it will be a little bit of time before we see the demand for new leases. What would be left to anything else? I mean, if the demand is good enough and there's money to be made, they're going to co locate.
Thank you. Next, we
have Eric Rupchak of Wells Fargo.
Your line is open.
Thanks for taking the question. Just wanted to follow-up on that last point. You mentioned in the Verizon deal, there were some parameters around new site builds and Seems like recently the big three wireless carriers haven't done as much with the public power codes on new bills. So you see an opportunity beyond just the initial amendment activity I see that Verizon or any of the other carriers or is it just too early to tell
at this point? No. We definitely see opportunity. And this agreement will take it. Okay, great.
And then just one more for me. I'm just wondering in the initial Discussions with the C band winners, your large customers. Do you see any and then the opportunity beyond just C band radios perhaps Then looking at lower frequency spectrum upgrades to support Uplink, to allow them
to get their profit in
other mid band spectrum? Yes.
I mean, there's a variety of requests, equipment configs that go about this. It's not just strictly C band radios. Mode. A big part of this is the massive MIMO antennas. That's different than what your question was.
But we're seeing a whole variety of different Thanks, Eric. I wish really the unleashing of the C band has now given everybody the reason to go Back to the macro networks that they knew was coming. So here we are. Okay, great. Thank you.
Next, we have the line of Colby Synesael from Cowen. Your line is open. Great. Thank you. I appreciate with the Verizon MLA, that there's not a use, Steve.
I'm curious in deals like that if you put in place some type of an incentive to potentially You'll go on to X amount of their sites faster than otherwise. And if, for example, they do that, they get pricing lower than they might otherwise. I'm just curious if there's those types of structures and deals like this. And then
We do have an incentive, Colby. And you're saying deals like Yes. I mean, this is the 1st global master agreement we've ever done with Verizon.
Okay. But I guess to your point, there's an incentive that They've gone to X amount of sites by X amount of date, it would be more cost effective amount of per second than if they took longer?
Yes. Ex amount, ex price, ex date equals ex discount.
Got it. And then secondly, Brendan, I'm curious if there's
any more refi opportunities. Obviously, that was
a nice savings. And then lastly, I'm just curious what drove the AFFO beat. I think that's where in terms of revenue EBITDA, AFFO, that's where we saw the biggest beat. If I just take your Q1 number and annualize that, that already gets me to the midpoint of your 2021 guidance. Just curious if there's anything one time in there.
Thank you.
Yes. Hey, Colby. So refi opportunities, there definitely are opportunities about some debt that is Reaching points where it can be refinanced. And based on the current market environment, we would expect to be able to refinance it at better rates than we're currently Pain on several of these instruments. So I'd just say stay tuned because we're constantly looking at that, and I would expect us to Take advantage of opportunities.
On the AFFO beat, we and I think you're referring to basically our increase And our outlook for it in addition to the beat. But yes, I mean, I guess, they're one time in some sense, one of the main contributors Was in the services area, which we already talked about. We actually had a very strong quarter. So the margin contribution from services was very high. That's not a recurring business.
So I guess you could call it one time, but we do expect to continue to see a similar level of activity throughout the year based on the backlog mode.
And I guess to that point, just to interrupt you, sorry, and I guess I think Cusick asked this, but are you assuming a similar margin profile to that as well?
Yes. Yes. Okay. We are. And that is subject to shift a little bit depending on the mix of Side act type work versus construction.
Construction is typically a little bit lower margin. But as of right now, most of the work that's happening is a lot of it's pre construction. So I would expect that to stay similar. And as we get towards the latter part of the year, you probably start to see more construction work. And so maybe the margin starts to shift down lightly at that point.
So the projects have much higher dollar amount. They have higher volumes, that's right. So and then other contribution on AFFO, It's a couple of different things. We obviously had a little bit better cash taxes, which we talked about on an earlier question. We also had lower nondiscretionary CapEx than we had expected.
We even lowered our guidance for the full year slightly for that as well. Yes, it's a mix of each of those things. And frankly, on the per share number, the share buyback helped a little bit as well in reducing Our share count, so
a mix of all those things. Okay. And I mean, I guess, that the point though is that when I look at your taking that number, I already get to the midpoint of your guidance. So it seems that number should be going up through the course of the year.
Yes. I mean, some of it's timing related. I mean, we did do well in the Q1 in certain areas like CapEx And frankly, even our SG and A costs that we expect to be both of those items to be a little bit higher as we move through the year. So some of it's just a timing issue. But overall, we were able to improve our full year guidance in part because of the performance.
Got it. Thank you. Next, we have Leonard Nimbus of KeyBanc Capital Markets. Your line is open. Great.
Two questions. Jeff, a question for you. Can you quantify the year over year change in the backlog of signed but not commenced new leases? And I guess when was the last time backlogs were this high? And the second question is around the minimum commitment That you have with DISH, how do the minimum commitments trend throughout the life of the contract?
Thanks.
Well, they do have certain time periods, which we're not going to disclose. So there's X business by Y day. And so it's broken out in more discrete periods over the contract. So there's definitely In terms of the dollar volume and the backlogs, we generally internally talk about backlogs in terms of the number of amendments And the number of leases and where we are today versus where we were a year ago, Which is, remember, we hadn't even got to the T Mobile spread, or maybe we just got to the finish line right about now. Mode.
I mean, they're more than twice as high. It's a different time.
And I guess when was the last time that backlogs were this high? It's been a
few years. It's been a number of years. Yes. I mean, we've had period obviously, when you go back to the LTE upgrades, they were Highs probably were higher than they are now, although we're still building and that may very well be eclipsed in the future here. But If you go back a couple of years ago, when T Mobile was particularly active, we saw some higher levels.
But We're definitely at a high level by historical standards, even if it's not the highest and it's continuing to build, which is the most Well, a recent high. Yes. I mean, the LTE, the one thing we've made clear before is back on from 3 gs to 4 gs, The average amendment price was much higher than the heavy equipment nodes that we've been adding. We certainly expect volumes to drive a lot, but pricing will be a little bit different this time given the less heavy additional weight loads that are being requested as part of the upgrades.
Got it. Thank you for taking the questions. Mode. We have time for some more questions. Thank you.
Next, we'll come from Damon Goringham, Green Street. Your line is open. Hey, thanks guys. A question for you on data center.
So since the start of
the year, we've seen a pickup in the number of transactions. Have you guys evaluated any The acquisition since the one last summer in Jacksonville and just what's the company's appetite to grow the data center footprint?
We have a greater appetite provided that it comes along with edge deployments at our sell sites. So as that continues to grow and as we continue to demonstrate the Synergy between a regional data center and next centers at our tower sites, which is what we're beginning to now experience in Jacksonville in We would continue to look. We're very mindful of what we are though. We're a wireless infrastructure company. Mode.
And these regional data centers, if any, would be pursued only because of the Success or the perceived success we'll be having around the cell sites.
That's helpful. And then is that just in the U. S. You would be looking or So we see you guys look internationally as well.
The concept applies everywhere. Great. Thank you.
And the final question comes from the line of Matthew Niknam of Deutsche. Your line is open. Hey, guys. Thanks for squeezing me in. Can you give any more color in
terms of the latest you're seeing from DISH and when
we should anticipate them to maybe become a more meaningful driver for cash, slightly through revenue growth in upcoming quarters. And then one housekeeping item maybe for Brendan. If you can give us the contribution from a revenue and tower cash flow perspective to PG and E in 1Q and should we effectively double that mode into Q2 given the full quarter. Thanks.
Yes. On the PG and E 1, I believe the contribution was somewhere between $4,000,000 $5,000,000 of seller cash flow And only slightly higher on the revenue side, because the costs are very limited there. And you should pretty much double that because it closed pretty close To the middle of the quarter. Yes. And on DISH, Matt, a lot of signed leases, Times 10 for applications, so tremendous amount of activity.
But what whether we see revenue out of that this year or not Will depend solely on how quickly DISH moves through the site acquisition, permitting, construction
mode.
I can't give you any more guesstimate Then what I've said, because that's what it would be. That's what's going to drive revenue recognition this year mode. It's all moving in the right direction.
Understood. Thank you.
Thank you. And thanks to everyone for joining us. We think it's going to be a great year and we look forward to sharing our progress We'll be with you next
quarter. Ladies and gentlemen, that does conclude the presentation for this afternoon. Thank you for all your participation. You may now disconnect.