SBA Communications' (SBAC) Q2 FFO & Revenues Beat, View Raised
SBA Communications Corporation SBAC reported second-quarter 2023 adjusted funds from operations (AFFO) per share of $3.24, beating the Zacks Consensus Estimate of $3.14. However, the figure reflects a rise of 5.5% from the prior-year quarter. Shares of SBAC have rallied 4.1% in the after-market trading, followed by the release of its second-quarter 2023 results.
SBAC’s site-leasing revenues improved year over year on healthy leasing activity amid elevated tower space demand. Moreover, it has continued to benefit from the addition of sites to its portfolio. The company also raised its 2023 outlook.
Quarterly total revenues increased 4.1% year over year to $678.5 million. The figure also beat the Zacks Consensus Estimate of $675.8 million.
SBAC signed a new long-term master lease agreement with AT&T, Inc. T. The agreement will help AT&T with the deployment of 5G and other advanced technologies by leveraging SBAC's vast U.S. tower portfolio, benefitting both companies mutually.
Per Jeffrey Stoops, the president and CEO of the company, “We continue to execute very well, growing both our Tower Cash Flow and Adjusted EBITDA margins on a year-over-year basis. We generated solid AFFO in the quarter, providing ample cash for discretionary spending.”
Quarter in Detail
Site-leasing revenues were up 7.9% year over year to $626.1 million, which surpassed our expectation of $618.3 million. Quarterly Site-leasing revenues consisted of domestic site-leasing revenues of $456.8 million and international site-leasing revenues of $169.4 million. The domestic cash site-leasing revenues came in at $450.3 million, growing 4.3% year over year. International cash site leasing revenues came in at $168.4 million, jumping 21.5% year over year.
However, site-development revenues decreased 27.1% year over year to $52.4 million. Our expectation for the same was $54.7 million.
The site-leasing operating profit was $511.1 million, marking an increase of 9% year over year. Moreover, 97.5% of SBAC’s total operating profit in the quarter came from site leasing.
The overall operating income improved 4.4% to $241.2 million.
The adjusted EBITDA totaled $471.7 million, up 7.8%, while the adjusted EBITDA margin increased to 70.3% from 68.2% in the prior-year quarter.
Portfolio Activity
In the second quarter, SBAC acquired nine communication sites for a total cash consideration of $7.2 million. The company also built 64 towers during this period. It owned or operated 39,426 communication sites as of Jun 30, 2023, of which, 17,426 were in the United States and its territories and 22,000 internationally.
SBA Communications also spent $10.1 million to purchase land and easements and extend lease terms. Total cash capital expenditure was $83.3 million in the reported quarter, of which, $68.6 million represented discretionary and $14.7 million was non-discretionary.
Subsequent to the quarter end, SBAC purchased or is under contract to buy 134 communication sites for a total consideration of $72.9 million in cash. It expects to complete the acquisition by the end of the fourth quarter of 2023.
Cash Flow & Liquidity
In the second quarter, SBA Communications generated nearly $486.9 million of net cash from operating activities compared with the year-ago quarter’s $372.1 million.
As of Jun 30, 2023, it had $179.2 million in cash and cash equivalents, up from $152.8 million recorded at the end of Mar 31, 2023. SBAC ended the quarter with a net debt-to-annualized adjusted EBITDA of 6.6X.
As of Jul 31, 2023, the company had $360 million outstanding under the $1.5 billion revolving credit facility.
During the second quarter of 2023, SBAC did not repurchase any shares of its Class A common stock. As of Jul 31, 2023, it had $504.7 million of authorization remaining under its approved repurchase plan.
Dividend Update
Concurrent with the earnings release, SBAC announced a cash dividend of 85 cents on its Class A common stock. The dividend will be paid out on Sep 20 to shareholders of record as of Aug 24, 2023.
2023 Guidance Raised
SBAC now expects AFFO per share in the range of $12.80-$13.16, up from the prior guided range of $12.55-$12.91. The Zacks Consensus Estimate for the same is currently pegged at $12.68, which is within the guided range.
Site-leasing revenues are now projected to be $2,502-$2,522 million, revised upward from $2,481-$2,501 million. Site-development revenue guidance remains unchanged, between $205 million and $225 million.
Further, the adjusted EBITDA has been raised from $1,855-$1,875 million to $1,878-$1,898 million.
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
SBA Communications Corporation Price, Consensus and EPS Surprise
SBA Communications Corporation price-consensus-eps-surprise-chart | SBA Communications Corporation Quote
Performance of Other REITs
Crown Castle Inc. CCI reported second-quarter 2023 AFFO per share of $2.05, outpacing the Zacks Consensus Estimate of $1.99. The reported figure climbed 13.9% from the year-ago quarter’s tally of $1.80.
Results reflect better-than-anticipated revenues, aided by robust site-rental revenue growth. However, the company lowered its outlook for 2023, citing that it expects a decline in tower activity for the remainder of the year due to reduced network spending by wireless carriers.
Digital Realty Trust DLR reported a second-quarter 2023 core FFO per share of $1.68, beating the Zacks Consensus Estimate of $1.65. However, the same witnessed a decline of 2.3% on a year-over-year basis.
Results reflected better-than-anticipated revenues, aided by strong enterprise leasing activity, robust renewal spreads and healthy organic growth. However, rise in rental property operating expenses was a concern. DLR also lowered its guidance for 2023 core FFO per share but maintained its expectations for full-year revenues.
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