SBA Communications' CEO Discusses Q2 2012 Results - Earnings Call Transcript

SBA Communications Corporation (SBAC)

Q2 2012 Earnings Call

August 03, 2012 10:00 am ET

Executives

Mark DeRussy - Director of Finance

Jeff Stoops - President & CEO

Brendan Cavanagh - SVP & CFO

Analysts

Jonathan Atkin - RBC Capital Markets

Phil Cusick - JPMorgan

David Barden - Bank of America

Jonathan Schildkraut - Evercore Partners

James Ratcliffe - Barclays

Jason Armstrong - Goldman Sachs

Simon Flannery - Morgan Stanley

Colby Synesael - Cowen

Chris Larson - Piper Jaffray

Kevin Smithen - Macquarie

Imari Love - Morningstar

Presentation

Operator

Ladies and gentlemen thank you for standing by and welcome to the SBA second quarter earnings call. For the conference, all the participants are in a listen-only mode. There will be an opportunity for your questions; instructions will be given at that time. (Operator instructions) As a reminder, today's call is being recorded.

With that being said, I will turn the conference now over to the Director of Finance, Mr. Mark DeRussy. Please go ahead.

Mark DeRussy

Good morning and thank you for joining us for SBA second quarter 2012 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 in this call is forward-looking including but not limited to any guidance for 2012 and beyond. These forward-looking statements maybe affected by the risks and uncertainties in our business. Everything we say here today is qualified in its entirety by cautionary statements and risk factors set forth in last night’s press release and our SEC filings which documents are publicly available.

These factors and others have affected historical results, may affect future results and may cause future results to differ materially from those expressed in any forward-looking statement we may make. Our statements are as of today, August 3, 2012 and we have no obligation to update any forward-looking statement we may make.

Our comments will include non-GAAP financial measures as defined in Regulation G. The reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and other information required by Regulation G has been posted on our website, www.sbasite.com.

With that, I will it over to Brendan to comment on our second quarter results.

Brendan Cavanagh

Thank you, Mark. Good morning everyone. As you saw from our press release last night, our second financial and operational results were excellent. We exceeded the high end of our guidance across all of our most important financial metrics including leasing revenue Tower cash flow, adjusted EBITDA and AFFO.

Total revenues were $229.1 million, up 34% of the year earlier period. Site leasing revenues for the second quarter were $203.6 million or a 35.6% increase over the second quarter of 2011. Our leasing revenue growth was driven by organic growth and portfolio growth, including the impact of the Mobilitie acquisition which closed on April 2nd.

The vast majority of our site leasing revenue comes from the US and its territories, with approximately 5.7% of total leasing revenue coming from international operations. Site leasing segment operating profit was a $158.8 million or an increase of 34.5% over the second quarter of 2011. Site leasing contributed 97.5% of our total segment operating profit.

Tower cash flow for the second quarter of 2012 was $152.3 million or a 28.4% increase over the year earlier period. Tower cash flow margin was 79.3% compared to 80.1% in the year earlier period. Margins were slightly impacted by the addition of the less mature Mobilitie portfolio and are expected to be similarly impacted by the TowerCo acquisition and then resume their growth thereafter.

We continue to experience strong leasing demand both domestically and internationally. Amendments which were predominantly from AT&T, Verizon and Sprint continue to be numerous and contributed approximately 80% of US leasing revenue added in the quarter. The big four US carriers contributed approximately 0.75 of our consolidated incremental leasing activity in the quarter. We have a solid leasing backlog and expect that the third quarter will be another strong one in terms of customer activity. We are off to a good start in the quarter.

Our services revenues were $25.6 million compared to $20.9 million in the year earlier period. Services segment operating profit was $4.1 million in the second quarter compared to $2.9 million in the second quarter of 2011. Services segment operating profit margin was 16.1% compared to 13.9% in the year earlier period.

SG&A expenses for the second quarter were $17.7 million including non-cash compensation charges of $3.8 million. SG&A expenses were $15.7 million in the year earlier period including non-cash compensation charges of $3.1 million. As a percentage of revenue, SG&A declined 150 basis points compared to the second quarter of 2011 reflecting the efficiency by which we can materially add assets.

Adjusted EBITDA was $142.9 million or a 30.5% increase over the year earlier period. Adjusted EBITDA margin was 65.6% in the second quarter of 2012 up from 64.8% in the year earlier period, an 80 basis point increase.

AFFO increased 46% to $95.3 compared to $65.2 million in the second quarter of 2011. AFFO per share increased an industry leading 34.5% to $0.78 compared to $0.58 in the second quarter of 2011.

Net loss attributable to SBA Communications Corporation during the second quarter was $53.5 million compared to a net loss of $29.8 million in the year earlier period. Contributing to net loss in the second quarter were $15.8 million in acquisition related expenses primarily associated with the Mobilitie transaction and a $27.1 million charge related to the early retirement of a portion of our 8% and 8.25% senior notes. We expect to incur similar type of charge in the third quarter and an anticipated amount of approximately $23 million primarily in connection with the early retirement of our remaining 8% senior notes and the Mobilitie bridge loan.

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