Q2 2023 SBA Communications Corp Earnings Call
Participants
Brendan Thomas Cavanagh; CFO & Executive VP; SBA Communications Corporation
Jeffrey A. Stoops; CEO, President & Director; SBA Communications Corporation
Mark DeRussy; VP of Finance; SBA Communications Corporation
Batya Levi; Executive Director and Research Analyst; UBS Investment Bank, Research Division
Brendan James Lynch; Research Analyst; Barclays Bank PLC, Research Division
Brett Joseph Feldman; MD; Goldman Sachs Group, Inc., Research Division
David William Barden; MD; BofA Securities, Research Division
Eric Thomas Luebchow; Associate Analyst; Wells Fargo Securities, LLC, Research Division
Gregory Bradford Williams; Director; TD Cowen, Research Division
Jonathan Atkin; MD & Senior Analyst; RBC Capital Markets, Research Division
Jonathan Chaplin; US Team Head of Communications Services; New Street Research LLP
Michael Ian Rollins; MD & U.S. Telecoms Analyst; Citigroup Inc., Research Division
Nicholas Ralph Del Deo; Senior Analyst; MoffettNathanson LLC
Philip A. Cusick; MD and Senior Analyst; JPMorgan Chase & Co, Research Division
Richard Hamilton Prentiss; Head of Telecommunication Services Equity Research & Research Analyst; Raymond James & Associates, Inc., Research Division
Simon William Flannery; MD; Morgan Stanley, Research Division
Walter Paul Piecyk; Partner & TMT Analyst; LightShed Partners, LLC
Presentation
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the SBA Second Quarter Earnings Results Conference Call. (Operator Instructions) I would now like to turn the conference over to our host, Vice President of Finance, Mark DeRussy. Please go ahead.
Mark DeRussy
Good evening, and thank you for joining us for SBA's Second Quarter 2023 Earnings Conference Call. Here with me today are Jeff Stoops, our President and Chief Executive Officer; and Brendan 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 2023 and beyond. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, July 31. We have no obligation to update any forward-looking statement 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 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 it over to Brendan to discuss our second quarter results.
Brendan Thomas Cavanagh
Thank you, Mark. Good evening. We had another steady quarter in Q2 with solid financial results that were slightly ahead of our expectations. Based on these results and our updated expectations for the balance of the year, we have increased our full year 2023 outlook for site leasing revenue, tower cash flow, adjusted EBITDA, AFFO and AFFO per share. Total GAAP site leasing revenues for the second quarter were $626.1 million, and cash site leasing revenues were $618.7 million. Foreign exchange rates represented a benefit of approximately $1.9 million when compared with our previously forecasted FX rate estimates for the quarter and a headwind of $4.2 million when compared to the second quarter of 2022. Same-tower recurring cash leasing revenue growth for the second quarter, which is calculated on a constant currency basis was 4.3% net over the second quarter of 2022, and including the impact of 3.9% of churn.
On a gross basis, same-tower recurring cash leasing revenue growth was 8.2%. The Domestic same-tower recurring cash leasing revenue growth over the second quarter of last year was 7.8% on a gross basis and 4.2% on a net basis, including 3.6% of churn. Domestic operational leasing activity or bookings representing new revenue placed under contract during the second quarter declined from the first quarter. While all major carriers remained active with their networks, agreement execution levels in the second quarter from several of our customers were below our prior expectations. Longer term, we continue to see significant runway for new 5G-related leasing activity based on the number of our sites that remain to be upgraded with mid-band spectrum deployments by the major mobile network operators.
In addition, today, we announced that we have entered into a new long-term master lease agreement with AT&T. This comprehensive agreement will streamline AT&T's deployment of 5G solutions across our tower portfolio while providing us with committed future leasing growth from AT&T for years to come. Based on this MLA, we have increased our projected contribution to 2023 leasing revenue from domestic organic new leases and amendments by $6 million from the full year projections we provided last quarter.
During the second quarter, amendment activity represented 42% of our domestic bookings and new leases represented 58%. The big 4 carriers of AT&T, T-Mobile, Verizon and DISH represented approximately 89% of total incremental domestic leasing revenue that was signed up during the quarter. Domestically, churn was slightly elevated during the quarter, primarily due to faster decommissioning of legacy Sprint leases than we had projected, which is the opposite of our experience last year. Based on our current analysis, we expect Sprint related churn for 2023 will be at the high end of our previously stated range for this year of $25 million to $30 million, resulting in a change to our full year domestic churn outlook of $4 million.
Our views around the ultimate multiyear cumulative impact of Sprint merger-related churn have not changed. Although we continue to update our outlook around timing as more information becomes available. We now project 2024 Sprint related churn to be in a range of $20 million to $30 million, 2025 to be between $35 million and $45 million. 2026 to be $45 million to $55 million and 2027 to be $10 million to $20 million. Just as last year ended up being well below our initial churn expectations and 2023 will likely be a little above our initial expectations, we anticipate that the exact timing will continue to be somewhat fluid, but in line with our provided projections. Non-Sprint-related domestic churn was in line with our prior projections.
Moving now to international results. On a constant currency basis, same-tower cash leasing revenue growth was 4.8% net, including 4.9% of churn or 9.7% on a gross basis. International leasing activity was strong in the second quarter and ahead of our internal expectations. These positive results and our solid backlogs have allowed us to increase our projected contribution to 2023 leasing revenue from international organic new leases and amendments by $1 million. Inflation-based escalators also continued to make steady contributions to our organic growth. However, decreases in actual and projected Brazilian CPI rates have caused us to moderate our outlook for international escalation contributions for the full year by approximately $1 million.
Overall, Brazil, our largest international market, had another very good quarter. The same-tower organic growth rate in Brazil was 5.7% on a constant currency basis, including the impact of 5.6% of churn, which amount was significantly impacted by our previously discussed TIM agreement. While international churn remains elevated, it continues to be in line with expectations and our previously provided outlook.
As a reminder, our 2023 outlook does not include any churn assumptions related to the Oi consolidation other than that associated with the TAM agreement. However, if during the year, we were to enter into any further agreements with other carriers related to the Oi consolidation that would be expected to have an impact on our current year, we would adjust our outlook accordingly at that time. During the second quarter, 77.5% of consolidated cash site leasing revenue was denominated in U.S. dollars. The majority of non-U.S. dollar-denominated revenue was from Brazil, with Brazil representing 16.2% of consolidated cash site leasing revenues during the quarter and 13.1% of cash site leasing revenue, excluding revenues from pass-through expenses.
Tower cash flow for the second quarter was $503.5 million, Tower cash flow in the quarter benefited by approximately $7.3 million in accounting-driven cost reclassifications. Our tower cash flow margins remain very strong, with second quarter domestic tower cash flow margin of 85.5% and an international tower cash flow margin of 70.3% or 92.3%, excluding the impact of pass-through reimbursable expenses.
Adjusted EBITDA in the second quarter was $471.7 million. The adjusted EBITDA margin was 70.3% in the quarter. Excluding the impact of revenues from pass-through expenses, adjusted EBITDA margin was 75.9%. Approximately 98% of our total adjusted EBITDA was attributable to our tower leasing business in the second quarter. During the second quarter, our services business had another strong quarter with $52.4 million in revenue and $13.1 million of segment operating profit. While off year ago activity levels, our carrier customers remained busy deploying new 5G-related equipment during the quarter, and we have retained our full year outlook for our site development business due in part to the strength of our first half results. Adjusted funds from operations or AFFO in the second quarter was $352.7 million. AFFO per share was $3.24, an increase of 6.2% over the second quarter of 2022 on a constant currency basis.
During the second quarter, we continued to invest in additions to our portfolio, acquiring 9 communication sites for total cash consideration of $7.2 million and building 64 new sites. Subsequent to quarter end, we have purchased or are under agreement to purchase 134 sites, all in our existing markets for an aggregate price of $72.9 million.
We anticipate closing on these sites under contract by the end of the year. In addition to new towers, we also continue to invest in the land under our sites, and during the quarter, we spent an aggregate of $10.1 million 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 70% of our towers, and the average remaining life under our ground leases, including renewal options under our control, is approximately 36 years.
With that, I will now turn things over to Mark, who will provide an update on our balance sheet.
Mark DeRussy
Thanks, Brendan. We ended the quarter with $12.7 billion of total debt and $12.4 billion of net debt. Our net debt to annualized adjusted EBITDA leverage ratio was 6.6x, below the low end of our target range and the lowest level in decades. Our second quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was a strong 4.9x. During a subsequent to quarter end, we repaid amounts under our revolving credit facility. And as of today, we have $360 million outstanding under our $1.5 billion revolver. The current weighted-average interest rate of our total outstanding debt was 3.1%, with a weighted-average maturity of approximately 3.5 years. The current rate on our outstanding revolver balance was 6.3%. The interest rate of 95% of our current outstanding debt is fixed.
During the quarter, we did not purchase any shares of our common stock, choosing instead to reduce revolver balances. We currently have $505 million of repurchase authorization remaining under our $1 billion stock repurchase plan. The company shares outstanding at June 30, 2023, were 108.4 million. In addition, during the quarter, we declared and paid a cash dividend of $92.1 million or $0.85 per share. And today, we announced that our Board of Directors declared a third quarter dividend of $0.85 per share payable on September 20, 2023, to shareholders of record as of the close of business on August 24, 2023. This dividend represents an increase of approximately 20% over the dividend we paid in the year ago period, and only 26% of our projected full year AFFO.
With that, I'll now turn the call over to Jeff.
Jeffrey A. Stoops
Thanks, Mark, and good evening, everyone. The second quarter was another very solid one for SBA. We produced good financial results across all areas of our business, and we continue to deliver high-quality service and operating results for our customers. Each of our largest U.S. customers remained active with their networks. Our customers continue to add equipment to sites in support of 5G through the deployment of new spectrum bands as well as to expand coverage through brand new co-locations. We did, however, see the same slowdown in activity that many others have discussed. While we had always anticipated domestic leasing growth to moderate as we move through 2023, organic leasing activity levels were lower than we anticipated in Q2 from some of our customers.
Some of this was due, we believe, to slower activity from AT&T in anticipation of our new MLA as would be expected. We believe that these variations in activity are part of the normal cycle of carrier network investment that we have seen over time, a large initial burst of coverage activity as the next generation of technology starts to be deployed, followed by many years of coverage completion and capacity building.
We are confident that there will be additional material network investment over the next several years. We believe this for a number of reasons. Most importantly, wireless demand continues to grow at a fast clip, consuming more and more of current network capacity. We have a large remaining number of sites that have not been upgraded yet to accommodate the mid-band spectrum holdings acquired by our customers over the last couple of years, some of which spectrum is not even available for deployment yet. DISH has their next phase of regulatory coverage requirements to meet in 2025, and we have our newly signed MLA with AT&T. We believe all of these items and others are supportive of multiyear continued development activity. While there will always be ebbs and flows in leasing activity levels based on a variety of factors, we believe that there will remain a need for continuous network investment just as we have seen throughout our history in this business. With regard to our announced master lease agreement with AT&T, we're very excited about this next chapter in our long-standing successful relationship.
This new agreement highlights the long-term importance of SBA sites to AT&T's future network deployment plans. The agreement will improve operating efficiencies between our organizations and enhance stability with regard to future leasing growth. We look forward to working closely with AT&T for years to come under this mutually beneficial framework. In the second quarter, our services business remained busy helping our carrier customers meet deployment objectives in an efficient and effective manner. While our services business is down on a year-over-year basis, 2023 will still represent the second biggest service this year in our company's history behind only 2022. We believe our legacy and reputation in the Services business keeps us well positioned to be a go-to provider for our customers to meet their network rollout goals.
Internationally, we also had another solid quarter with greater organic leasing activity than we had anticipated. During the quarter, 62% of new international business signed up in the quarter came from amendments to existing leases and 38% came through new leases with strong contributions broadly for many of our markets, including Central America, Brazil and South Africa. Brazil, our largest market outside of the U.S. was ahead of our internal expectations with contributions from each of the big 3 carriers in that market. I continue to be pleased with our operational performance, cost management and customer relationships in Brazil, which has made us a leader in the market. And we have recently seen positive movements in the currency exchange rate, providing some financial benefit and increased U.S. dollars for repatriation as well as contributing to our increased full year outlook. We remain excited about our opportunities in Brazil.
During the quarter, we again generated solid AFFO providing significant cash for discretionary allocation. While our strong financial position allows us to retain flexibility for future further opportunistic investment in portfolio growth and stock repurchases, we dedicated the majority of our available cash in the quarter to paying down the outstanding balance on our revolver.
We immediately benefit from this by reducing our floating rate cash interest obligations which today represent among the highest cost debt in our capital structure. With the continuing high cost and limited availability of private market tower acquisition opportunities, we believe this is currently our best use of discretionary spending. Our quarter ending net debt to adjusted EBITDA leverage ratio was 6.6%, which I believe to be the lowest in our history, at least as a public company. As always, we will continue to be opportunistic around investments, but for the near term, likely direct future cash flows into the repayment of debt as the most accretive short term and certainly a long-term beneficial use of capital. Our balance sheet is in great shape with no debt maturities until October 2024. And since that maturity could easily be refinanced under our revolver, we are comfortable now to remain opportunistic around timing of future financings. We are a preferred issuer in the debt markets we routinely use and retain very good access to capital.
We finished the quarter with 95% of our debt fixed and thus, we are only modestly exposed for now to significant interest rate fluctuations. Our exposure to floating rate debt is also expected to decline further as we continue paying down our outstanding revolver balance throughout the year. We feel very good about our current capital position. We feel fortunate to be in a sound, stable business with tremendous fundamentals and significant long-term opportunity ahead. Our customers continue to have significant network needs, and we will be there to support them in meeting those needs. I want to thank our team members and our customers for their contributions to our shared success.
And with that, Eric, we are now ready for questions.
Question and Answer Session
Operator
(Operator Instructions) And first, we will hear from Ric Prentiss with Raymond James.
Richard Hamilton Prentiss
Obviously, I have some questions on the AT&T MLA, big news item there. I appreciate, I think, Brendan, you said $6 million of the increase in new lease activity was really driven by AT&T MLA it...
Jeffrey A. Stoops
Ric, can you speak up? We're having trouble hearing you. Ric?
Richard Hamilton Prentiss
How about now? can you hear me better now?
Jeffrey A. Stoops
That's much better. Thank you.
Richard Hamilton Prentiss
You bet. Yes, I'm sorry about that. I had another phone call come in. I was like no, doing something busy. Yes, I appreciate some of the color on the MLA with AT&T. A couple of questions around it. Why now? And any others that you're working on? And then also suggesting that $6 million increase in guidance came from that, it looks like we should be thinking maybe of kind of flattish new lease activity over the next couple of quarters. And as we exit '23, is that the way we should be thinking about it.
Brendan Thomas Cavanagh
Yes. So on the MLA, first of all, on the numbers, the $6 million increase is basically due to the MLA. Obviously, that was our -- the 72% is what we reported last time, we increased to 78%, and activity was a little bit slower in the second quarter. So we expect that the MLA will kick in right away based on the terms of it and will be a contributor going forward.
In terms of the cadence, it would be fairly flat. I would expect actually that we'll see an uptick in terms of the contribution to the third quarter as a result of the MLA and then you'll see it be a little bit lower into the fourth quarter. And that lower trajectory has nothing to do with the MLA. That's really based on slowing activity from other carriers. If you recall correctly, we had kind of a trajectory expected that was downward leaning throughout the year, and I would expect that will continue as it relates to other contributors.
In terms of why, Ric, this agreement with AT&T has been in the works for well over a year. And it's a deal that we believe is beneficial to both organizations. We've been working on it for that period of time and trying to signal and be transparent to our openness for this type of agreement knowing that we were likely to enter into this agreement, which we have. We really don't want to comment too much on what's going on with other customers. But just as we have always said, we are not hung up so much on structure as we are on finding mutually beneficial agreements with our customers.
Richard Hamilton Prentiss
Okay. And one other one for me on the -- paying down the revolver. When does the calculus move back towards stock buyback? Because it sounds like there's still not a lot of M&A out there, which would be probably your first choice. But how do we think about when the lever moves since you're down to 6.6 leverage to more stock buyback? Is that like a next year item? Is that further out?
Brendan Thomas Cavanagh
Yes. I think if rates stay the same and stock prices stay the same, it's -- it will continue to be more accretive. And obviously, good for the overall capital position to continue to pay down the revolver to 0. So when we get to that point, Ric, we should -- you could ask that question again.
Operator
And next, we'll hear from Michael Rollins with Citi.
Michael Ian Rollins
Just curious, just a follow-up on the comprehensive deal with AT&T. Can you share some of the multiyear components of this deal? Is there going to be a straight-line element that sometimes comes up with these types of multiyear or comprehensive opportunities? And does it change the way investors should think about leasing overall for SBA in 2024 in the domestic side?
Brendan Thomas Cavanagh
Yes, Mike. So it will certainly smooth the way that we operate with AT&T. So I think from that perspective, perhaps it impacts our reported growth numbers in terms of ebbs and flows. There may be a little bit less of that, at least as it relates to this particular agreement. From a straight-line impact, we would expect that over the course of the agreement that we will have some straight-line impacts, but there are no straight line -- or very minimal straight-line impacts in the short term.
Michael Ian Rollins
And just on the commentary on leasing. So the site development revenues are unchanged from the prior guidance. But you did note that there was some slower activity levels. Was this just something that you were maybe more prepared for earlier in the year? Or is there anything different about your site development business that maybe gave your expectation a little more durability in spite of some of the changes that you observed?
Jeffrey A. Stoops
Yes. I think we know our site development business very well. You know it primarily centers around work -- almost entirely work on our towers. So we have a very good feel for it. And there's just enough work out there Mike, that was already booked earlier in the year and actually some of it probably spilling over from last year, that's now working itself through our services backlog that gives us the comfort to continue with the guidance that we have. So a lot of it is more a reflection of activity levels that occurred Q1, Q4 of last year.
Operator
And next, we'll hear from Simon Flannery with Morgan Stanley.
Simon William Flannery
Great. I was just wondering on the leverage point, have you had any more consideration of targeting investment-grade status? Or is that -- is this going to be just a temporary that change in your overall leverage targets. And then you could just talk on...
Jeffrey A. Stoops
Yes. Right now, I think you should assume it's temporary so that we can continue to watch interest rates and see where they go. If interest rates stay high, it may not be temporary. We haven't made that decision yet. Actually, we're paying down the revolver because it's the most economic and best use of our cash today. It just so happens that as we continue to do that, we further decrease leverage, which makes the path of going to investment grade, if we were to so choose that path easier to obtain. But I really don't think you should look at it, Simon, as a conscious effort to get to investment grade as much as it is just the best financial use of our discretionary cash.
Simon William Flannery
Great. Yes. And just one follow-up. You mentioned earlier that you still got a lot of sites that have not been upgraded to 5G. Do you think as given some of the rural SKU of your portfolio, do you think that would advantage to your portfolio in the next several years versus to that initial build out?
Jeffrey A. Stoops
Yes. I think if history is any guide, I guess, that's exactly how it works. It starts out in the NFL cities, it goes from there.
Operator
And next, we'll hear from Phil Cusick with JPMorgan.
Philip A. Cusick
Two, if I can. How should we think about the exit run rate in activity this year versus going into next year? AT&T, it sounds like is steady in 3Q and 4Q and then from there and others are decelerating through this year. Should we think of the fourth quarter as a decent run rate for next year or maybe a little bit lower than that? And then second, Jeff, I didn't understand your comment just a second ago on the service revenue now for activity earlier in the year. And it sounds like services are still running well ahead of historical levels. Do you expect them to come in -- it sounds like you expect them -- you're going to make the guide this year, but next year, it sounds like things are going to be probably well below. Does that make sense?
Jeffrey A. Stoops
Go ahead, Brendan.
Brendan Thomas Cavanagh
Yes. So on the first question, we do -- we expect that the fourth quarter run rate, you're talking specifically, just to be clear about domestic organic leasing contribution to be around approximately $17 million to $17.5 million. But I would definitely caution you as to using that as an indicator of next year. As I mentioned earlier, the trajectory based on activity levels is declining. And as a result, we would expect those numbers to step down as we move into next year. We're obviously not ready to give 2024 guidance yet at this point. but just kind of broadly when you think about it, the way we've always explained it and just the way that it actually happens is that you get a lot of growth, for instance, the 2023 growth is based heavily on the leasing activity that took place at the end of last year, 2022. And next year's numbers will be based heavily on the leasing activity that's taking place this year.
So the number is a little bit higher than we said before because of the impacts of the MLA for the fourth quarter, but I don't believe will be indicative of the numbers for next year.
Jeffrey A. Stoops
Yes. And as far as the services revenue, Phil, the first half of what we report in 2024 will be largely dictated by what we do now operationally with leasing. We have 2 different components of that. We have the site acquisition component, which is the planning stuff, and then we have the construction, which is where a lot of the current activity is taking place because that's the last part of the cycle. So we'll see. We'll see where we come out with the guidance on services, but it will be obviously heavily impacted by how we finish out the rest of the year.
Operator
And next, we'll hear from Jonathan Atkin with RBC.
Jonathan Atkin
So I was interested in doing just to contextualize the AT&T MLA, how much of your revenues for kind of this year next year, the following year, can we be considered to be fairly locked in as opposed to usage based -- segmental revenue.
Brendan Thomas Cavanagh
Yes, you mean just the percentage of the AT&T revenue or overall revenue?
Jonathan Atkin
Overall revenue for the whole company, how do we kind of think about how much is kind of a lock versus more of a (inaudible) as well.
Brendan Thomas Cavanagh
Right. Jon, we can't give specific numbers out. And obviously, a number of our agreements with other customers are fluid and where those amounts end up or -- is obviously unknown. So as a percentage, it's hard to say as well. So we can't be very specific about it, but we do have some portion of our revenue base that is locked in now under this agreement that wasn't before.
Jeffrey A. Stoops
And a greater portion of the AT&T then probably exists under other agreements, although we still have some of that. And I mean I don't think that's not a number that we have focused on. So the best we can answer, Jonathan, is that it's a much greater extent under the AT&T revenue.
Jonathan Atkin
Then -- and you're comparing that to your agreements with other carriers as opposed to other TowerCos agreements with AT&T, I'm assuming?
Jeffrey A. Stoops
Correct. Yes. correct.
Jonathan Atkin
Got it. Yes, understood. And then maybe just give us some directional guidance around the trajectory around building new towers and ground lease and easements activity.
Jeffrey A. Stoops
Yes. I mean we continue to look for good, financially smart new build opportunities. We're doing those mostly outside the United States primarily Brazil and South Africa, our 2 largest markets outside the United States. And we have a steady focus on ground lease purchases and extensions, which hasn't changed at all. It's moved a little bit more international in terms of the mix just because we've been at it so long in the United States. But nothing's really changed there. We would put more capital into particularly the land purchases and extensions if the opportunities arose.
Jonathan Atkin
And then in terms of purchasing other portfolios, maybe thinking about Africa and your operating history there and maybe some tuck-in opportunities, either that geography or elsewhere, what are your thoughts on increasing your scale in existing markets versus expanding the footprint?
Jeffrey A. Stoops
Yes. I mean, the answer to that question is pretty much the same as it has been for years, for the right deal, we will do it. We have no strategic hole that we feel needs to be filled. In market growth because of the existing base is going to be preferred over new market growth, but we would still go into a new market, if we found the right deal. And I would point back to the Tanzania investment as a good example of that. But because it's all financially driven, it makes our decision to use discretionary cash to pay down the revolver that much more straightforward.
Jonathan Atkin
Lastly, I might have missed this, but the duration of the AT&T MLA?
Brendan Thomas Cavanagh
It's 5 years, Jonathan.
Operator
And next, we'll hear from David Barden with Bank of America.
David William Barden
So I guess maybe 2. The first one, Jeff, just with respect to some of the actions that your competitors are taking pros and cons for being in the construction business for towers at all? Is there may be an opportunity to redirect resources in more optimal ways? Or is there an opportunity if people are willing to give up business for you guys to lean in at the margin as we think about the go ahead business? And then second, maybe for Mark, as we think about the 25 term loan and its maturity what should the Street be doing in terms of expectations in the model with respect to how we address that cost fixed, long-term roll it? What is the plan?
Jeffrey A. Stoops
Dave, I'm going to defer that to our expert here, Brendan.
Brendan Thomas Cavanagh
On the services question, David, we've had a lot of history. Actually, you recall, that's how SBA started. So we have a very flexible cost structure that allows us to ramp up, ramp down we use a lot of subcontracted tower crews. We have our own, but we also use subcontracted tower crews. And one of the things that has really served us well and our customers give us high praise for this is by using our services people for work on our towers for them, they are greatly benefited in terms of speed to market and efficiencies. So I don't think that changes. So I guess if I had to choose 1 of your 2 options lean out or lean in, we'll look to lean in and not be afraid to do that because of our confidence in how we manage that business.
Mark DeRussy
And Dave, on the term loan, your question of modeling, if I can only say into the future enough, but we, yes. I mean, the best thing, I think, for people to do when looking at it is probably to assume a similar like-for-like refinancing. And I would expect that spreads will be similar to up slightly from where they are today, but we'll have to see how that plays out. And then it's just a matter of using the forward curve in terms of the benchmark, SOFR Rate. But that doesn't mean that that's necessarily how it will play out. We will probably have -- we will be evaluating multiple different options. There may be a mix of different instruments that we use. Some may be fixed and some may be floating, but all things are on the table for us right now, and we look at that, frankly, every day. But if you're just simply modeling out long term, I think the best thing to do is to assume a like-for-like instrument.
Operator
And next, we'll hear from Walter Piecyk with LightShed.
Walter Paul Piecyk
Can you hear me?
Jeffrey A. Stoops
Yes.
Walter Paul Piecyk
All right. Perfect. Sorry. The -- if you didn't have the AT&T MLA, would the 72 still stick? Or would that fall off accelerating faster than you thought in terms of the second half of the year?
Brendan Thomas Cavanagh
I can't really answer that question, Walt, because there's so many elements that go into it. What would the activity be with AT&T, otherwise, those types of things. So I can't really say for sure what it would be, given that we were working on this for quite a while.
(technical difficulty)
First, we don't like to discuss the individual customers, but obviously, DISH has just gotten through a major deadline that they had. There's a little bit of a slowdown or pause, if you will, related to that. And we would expect that will eventually pick up. But given the delay between signings and revenue recognition, I would expect that will weigh year-over-year on next year. and T-Mobile was frankly very, very busy as well, and you have somewhat of a similar dynamic there. But that's what we're going into for next year. But longer term, there's still a lot to do there. So we tend (inaudible).
Walter Paul Piecyk
So if there was something incremental like qualitatively, what do you think those issues are?
Brendan Thomas Cavanagh
If there was something incremental in what sense?
Walter Paul Piecyk
You just -- in the response you just gave, meaning in Q2 was a little bit less, and you're saying you're expecting that to continue into the third and fourth quarter because, again, I think you guys did a good job historically already talking about a slowdown in the second half of the year? And also maybe how that would carry into 2024. And I'm just trying to get a sense of is there something new or worse?
Brendan Thomas Cavanagh
Yes. I don't think there's something particularly new. I think it's been a little bit slower than what we had anticipated before. But directionally, it's still the same. So what does that mean for next year? Does that mean $5 million difference or $10 million. I can't tell you yet. We're not ready to get there and we still have half the year to go. But it's marginally worse than what we thought in terms of the balance of the other carriers.
Jeffrey A. Stoops
Yes. And I mean, the qualitative benefits or the positives to look forward to Walt, I mean, DISH has to get started, whether it's late Q4 or early Q1 on their 2025 bill, which is going to be large. T-Mobile hasn't even got the C-band and the 3.45 spectrum yet. You got the -- you got some folks waiting on availability of dual band equipment. So there's all kinds of things to look forward to as we move through the year and into next.
Walter Paul Piecyk
Are you seeing anything from cable, Jeff?
Jeffrey A. Stoops
Little bit, but not enough to give anyone the impression it's going to move the needle.
Operator
And the next we'll hear from Batya Levi with UBS.
Batya Levi
Great. A quick follow-up on the AT&T MLA. Does it cover all the towers that AT&T has equipment on your sites? And should we assume that the escalator in there is similar to the 3%, 3.5% that you have? And another one, I believe you said 42-58 mix for amendments and new leases. Can you give us a sense of how that will look like if we just exclude DISH?
Brendan Thomas Cavanagh
Yes. So I'm sorry, what was the first part of the question?
Batya Levi
AT&T MLA, if it includes all the sites they have with you and the escalator.
Brendan Thomas Cavanagh
Right. So it does -- there may be a few exceptions because of specific issues around individual sites, but the vast majority of our sites are covered by the MLA.
Jeffrey A. Stoops
That have AT&T on.
Brendan Thomas Cavanagh
Yes, that have AT&T on of course. And then on the escalator piece, I can't really get into the specifics around what the escalator is, but our historical escalator with AT&T has been north of 3%, and we would expect that to continue.
Batya Levi
Great. And the amendments without DISH, is that much higher than the 42%?
Brendan Thomas Cavanagh
It would be. It would be if you took DISH out of the mix, you would have a much higher percentage of amendments of the total.
Batya Levi
Okay. Maybe just a quick one. As you -- can you give us a sense on what the guidance assumes for DISH as we exit the year?
Brendan Thomas Cavanagh
No, we can't give you that kind of specificity now. But it's much less it was -- but it's much less than it was exiting last year.
Operator
And next, we'll hear from Nick Del Deo with MoffettNathanson.
Nicholas Ralph Del Deo
First, regarding the AT&T deal, should we think of that as pulling forward some revenue that you otherwise would have expected in the latter years into the near future? And do you feel that the totality of the revenue that you'll get from AT&T over the course of the contract is similar to what it otherwise would have been.
Jeffrey A. Stoops
The answer to the last part of your question is yes, Nick. The answer to the first part, I don't think it's a pull forward.
Brendan Thomas Cavanagh
I mean it's hard to say because, obviously, previously, it would be very specific to the timing of when they were signing things. We don't know exactly what that timing would be. So could be pulling forward, could be pushing.
Jeffrey A. Stoops
Yes. The answer to your question will be only known in hindsight by the levels of AT&T's activity.
Nicholas Ralph Del Deo
Okay. Okay. So we should think of it more, call it, smoothing a bit, but not necessarily sort of a mass reallocation of what the revenue would have been. Is that fair?
Jeffrey A. Stoops
Yes.
Brendan Thomas Cavanagh
Yes.
Nicholas Ralph Del Deo
Yes. Okay. Great. And then kind of 2 clarifications for Brendan. One, it looks like your forecast for other international revenue went up by about $9 million versus last quarter's guidance. What was that? And was it in this quarter's results? And then second, can you elaborate a bit on the $7 million in cost reclassifications that you noted in your prepared remarks -- what was it reclassified to and from? What was behind it, which segment?
Brendan Thomas Cavanagh
Yes. So the other international was -- roughly half of that was in the second quarter. There is some that is in the balance of the year. And it's frankly a mix of things. It's not 1 thing in particular. There was some increased cash basis revenue recovery that we did not necessarily forecast and some that we've actually even seen subsequent to quarter end. And then also some termination fees. And just other frankly, cats and dogs, Nick, but they did add up and we actually have higher expectations for the balance of the year. So that's that piece of it.
On the accounting reclassification it basically has to do with the decommissioning of some carrier-related equipment, basically Sprint oriented equipment at some of our tower sites that we previously had expected or had been recording as a cost of revenue -- a direct cost of revenue. But after discussion with our accountants, it was determined that the best classification for that was impairment and decommissioning costs. So basically, it's just a move of those costs out of cost of revenue and into impairment and decommission costs.
Nicholas Ralph Del Deo
Okay. So sort of a onetime true-up?
Brendan Thomas Cavanagh
There was some onetime true-up in there, but that's the way to also be going forward, and that's assumed within the guidance that we've given around tower cash flow.
Nicholas Ralph Del Deo
Okay. Can you share anything about how much of the change was attributable to that beyond the $7 million recognized in the quarter, what it would be for the full year?
Brendan Thomas Cavanagh
Yes. It's another roughly $4 million.
Operator
And next, we'll hear from Brett Feldman with Goldman Sachs.
Brett Joseph Feldman
Two questions, if you don't mind. When some of your peers announced their own versions of MLAs or holistic agreements or whatever they call it, it's not uncommon when they announce it for them, they come out and say, "Oh, by the way, we're raising our guidance for straight-line revenue. I know you got a question about this earlier, but it's typically because there's some incremental commitment that was made in that agreement, maybe use escalators or some other amount of leasing. And you didn't do that with this agreement. So I can imagine a question we're going to get is, ultimately, what do you feel like you accomplished through the MLA because you've been very selective and entering into these larger agreements? And I know there's been some questions on it, but I'm trying to think about the right way of framing that.
And then the second question is portfolio growth has been a focus for SBA for a very long time. I remember the analyst meeting, I don't know, 15-plus years ago when you first started talking about those long-term targets. And it's understandable why paying down your revolver right now is probably the economically most accretive thing to do. But whenever we get past this moment, do you think portfolio growth is going to be the same priority and same opportunity? Or are you starting to suspect that maybe the tower portfolios that you don't own in the markets you're in or might want to be and are not nearly as attractive as the types of portfolios you could just develop on your own, particularly outside the U.S.
Jeffrey A. Stoops
I will take the last one first. I believe portfolio growth will always be our most desirable and highest potential allocation of capital. Where it falls today, I mean, keep in mind, we grew the portfolio 15% last year. Where it falls today is purely a function of cost of debt and availability and pricing of assets. But as long as all that works out, Brett, to achieve an investment result that we want, I don't see the preference and prioritization of portfolio growth changing.
Brendan Thomas Cavanagh
Yes. And Brett, on the question around the straight line for the MLA, there actually was you couldn't see it, but there is actually some small impact to straight line that was actually offset by a decrease in straight line associated with some of the accelerated Sprint churn that we mentioned earlier. So there is a small impact. But in terms of what it looks like going forward, obviously, what our peers have done and what we've done, they're probably not exactly the same agreements. I'm sure there are terms that are different. I can't speak to their specifically. But really, it's a function of timing in terms of when certain commitments take place. And in the future, I would expect that there will be some straight-line impact as a result of this deal, but it's a little more activity driven than it is upfront.
Jeffrey A. Stoops
It will -- you will see straight-line benefits over time over the course of the 5 years, Brett, based on various triggers and activity levels as opposed to upon signing.
Operator
And next, we'll hear from Jonathan Chaplin with New Street.
Jonathan Chaplin
One just very basic question. How do you assess that paying down the revolver is the most accretive use of free cash flow? How do you sort of put that up against the accretion you get from share repurchase? Is it as simple as what the yield of the debt is relative to your AFFO yield? And are you taking the direction of rates into consideration when you make that determination? Or is it just sort of a moment-by-moment decision that drives whether you're in the market buying back stock or paying down the revolver? And then just a follow-up question on DISH. Is there anything assumed in new leasing activity for the second half of this year from DISH in your guidance?
Brendan Thomas Cavanagh
So the accretion analysis takes into account a number of things. There's certainly the basic straightforward piece that you mentioned, which is what's the yield of buying back our stock today versus what can we save by paying down the revolver or any debt. And right now, that actually is more accretive to pay down the revolver today. But we also look at it long term, and we look at our expectations for growth and cash flow as well as what we think our future financing or refinancing costs will be and that positioning relative to our balance sheet as a whole is also relevant to it.
Jeffrey A. Stoops
Yes. And that bodes towards stock repurchases, Jonathan, with one major exception today, which is we don't know that interest rates have stopped going up. And when interest rates go up, it immediately affects the cost on the revolver. We can always buy our stock back. And that -- we take comfort in that. But when you have an increasing interest rate environment where we don't know when it's over, we just think both from a business perspective and certainly a balance sheet perspective and from an accretion perspective, pay down the revolver balance while we have one is the way to go.
Brendan Thomas Cavanagh
And DISH in terms of the impact for the second half of the year, as we mentioned, it's obviously been slower in terms of new business being signed up with them. There's still a significant contributor to the second half numbers because of all the business that they did with us over the last year. But we expect that we'll continue to see, at least for this year, less executions with them. But ultimately, they have a ton to do, as we talked about to meet their 25% goal, and we would expect that, that will turn around sometime at the end of the year or into next year.
Operator
And next, we'll hear from Eric Luebchow with Wells Fargo.
Eric Thomas Luebchow
Just going back to the question on investment grade. I know that's clearly not part of the plan right now. But theoretically, if you did make that decision, what type of leverage do you think you'd have to target to get there? And how quickly do you think you could get there based on where your leverage is at today?
Brendan Thomas Cavanagh
Well, based on the thresholds that are there by the agencies or at least by one of the agencies right now, we're getting very close to being there, certainly within a half turn of leverage of being there. But it would be more about the commitment to staying there than it would be about hitting the leverage above that trigger.
Eric Thomas Luebchow
Yes. Understood. And then just another question on the comprehensive MLA. I mean does this it all indicates that you guys would still be open to entering into simpler arrangements with some of the other carriers to maybe smooth out some of the leasing volatility? Or is it really just a case-by-case basis what you think would be NPV positive for your business?
Jeffrey A. Stoops
Yes. I mean it's really the latter. But I mean, we've always said we would be open to a variety of structures I mean this, I think, evidences that openness. So for the right deal, Eric, we would do any number of structures with our customers.
Operator
And next will hear from Brendan Lynch with Barclays.
Brendan James Lynch
At the risk of belaboring the point, I have a few on the MLA. Maybe just high level, given the MLA with Tim and now with AT&T, has the market changed? Have customers changed? Or has your perspective changed? And then maybe if you could give us any specifics along the number of sites, minimum payment schedule. You mentioned it was sort of 5 years, but I'd imagine the leases are for much longer. Any details around that would be helpful.
Brendan Thomas Cavanagh
Yes. I think in terms of the details, we need to keep -- stay away from most of those. There's a lot of specific things that you asked about there that obviously are somewhat important for us to keep confidential for both us and our customers. But it is a 5-year agreement and there will be a lot of ramifications that I would expect would extend beyond the 5 years.
In terms of the M&A in general, I think Jeff kind of mentioned -- answered this earlier. It's -- we've always been open to different structures, obviously, at different points in time in our history. We haven't necessarily found terms that we found to be beneficial to us or they didn't work for our customers, whatever the case may be. So we've done less of those. But we've done MLAs over the years in various structures, we have in MLA today with Verizon, we've had MLAs with T-Mobile and with DISH. So we've done these agreements before, but each one is dependent upon the specifics around that carrier and their needs at the time and what works for both parties. So I don't know that anything has holistically changed out in the market broadly.
Jeffrey A. Stoops
Yes. I mean, we are trying to be responsive to our customers, while at the same time being responsible to ourselves and our shareholders. and that will continue to be kind of the big picture as to how we approach these things, and it could lead to more or if this could be the only one.
Brendan James Lynch
Maybe just to clarify a point. I think you've described some of your past MLAs as being pricing menus. Is that how you would characterize this arrangement with AT&T or is there a better way to think about it?
Jeffrey A. Stoops
Yes. This would be a little different than that. This would be payments in exchange for AT&T having certain rights to use our towers.
Operator
And now we'll hear from Greg Williams with TD Cowen.
Gregory Bradford Williams
Just first question on any further developments with Oi beyond Tim with the other carriers, any ongoing discussions are you having them? And are you hopeful you can get anything done by year-end? And then just second, on the site development, it sounds like it'll hang out in the low 50s for the next few quarters. Anything to think about in terms of service margins from here?
Brendan Thomas Cavanagh
Yes. On the Oi question, you're talking specifically about deals with the other carriers that took over Oi Wireless I believe. Yes, we are having conversations with those other carriers. And it's possible that there would be some other arrangements truck with them, but it's premature for us to say. And obviously, if we do reach one, we'll let you know at that time. And then on the site development question, I would expect that the margins will stay pretty similar on a percentage basis to what you've seen during the first half of this year. The volume may be a hair lower, but pretty flat. Your estimate of around 50 or so quarters is probably about right.
Operator
And we have no further questions at this time.
Jeffrey A. Stoops
Great. Well, I want to thank everyone for joining us this evening, and we look forward to getting back together in late October for our third quarter report. Thank you.
Operator
And that does conclude our conference for today. Thank you for your participation and for using AT&T Event Conferencing. You may now disconnect.
