AMERICAN TOWER CORPORATION This Quarterly Report on Form 10-Q (this "Quarterly Report") contains forward-looking statements relating to our goals, beliefs, plans or current expectations and other statements that are not of historical facts. For example, when we use words such as "project," "believe," "anticipate," "expect," "forecast," "estimate," "intend," "should," "would," "could," "may" or other words that convey uncertainty of future events or outcomes, we are making forward-looking statements. Certain important factors may cause actual results to differ materially from those indicated by our forward-looking statements, including those set forth under the caption "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2021 (the "2021 Form 10-K"). Forward-looking statements represent management's current expectations and are inherently uncertain. We do not undertake any obligation to update forward-looking statements made by us. The discussion and analysis of our financial condition and results of operations that follow are based upon our consolidated and condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States ("GAAP"). The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities at the date of our financial statements. Actual results may differ from these estimates and such differences could be material to the financial statements. This discussion should be read in conjunction with our consolidated and condensed consolidated financial statements herein and the accompanying notes, information set forth under the caption "Critical Accounting Policies and Estimates" in the 2021 Form 10-K, and in particular, the information set forth therein under Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations." During the fourth quarter of 2021, as a result of the acquisition ofCoreSite Realty Corporation ("CoreSite," and the acquisition, the "CoreSite Acquisition"), we updated our reportable segments to add a Data Centers segment. The Data Centers segment is included within our property operations. We now report our results in seven segments -U.S. &Canada property (which includes all assets inthe United States andCanada , other than our data center facilities and related assets),Asia-Pacific property,Africa property,Europe property,Latin America property, Data Centers and Services. We believe this change provides greater visibility into our operating segments and aligns our reporting with management's current approach of allocating costs and resources, managing growth and profitability and assessing the operating performance of our business segments (see note 15 to our consolidated and condensed consolidated financial statements included in this Quarterly Report). This change applied to our business operations results beginning with the fourth quarter of 2021 and had no impact on our consolidated financial statements for any prior periods. Historical financial information included in Management's Discussion and Analysis of Financial Condition and Results of Operations has been adjusted to reflect the change in reportable segments.
Overview
We are one of the largest global real estate investment trusts and a leading independent owner, operator and developer of multitenant communications real estate. Our primary business is the leasing of space on communications sites to wireless service providers, radio and television broadcast companies, wireless data providers, government agencies and municipalities and tenants in a number of other industries. In addition to the communications sites in our portfolio, we manage rooftop and tower sites for property owners under various contractual arrangements. We also hold other telecommunications infrastructure, fiber and property interests that we lease primarily to communications service providers and third-party tower operators, and, as discussed further below, we hold a portfolio of highly interconnected data center facilities and related assets inthe United States . Our customers include our tenants, licensees and other payers. We refer to the business encompassing the above as our property operations, which accounted for 98% of our total revenues for each of the three and six months endedJune 30, 2022 and includes ourU.S. &Canada property,Asia-Pacific property,Africa property,Europe property,Latin America property and Data Centers segments.
We also offer tower-related services in
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The following table details the number of communications sites, excluding
managed sites, that we owned or operated as of
Number of
Number of Operated Number of
Owned Towers Towers (1) Owned DAS Sites
U.S. & Canada :
Canada 224 - -
United States 27,291 15,350 456
U.S. & Canada total 27,515 15,350 456
Asia-Pacific: (2)
Bangladesh 367 - -
India 74,877 - 857
Philippines 281 - -
Asia-Pacific total 75,525 - 857
Africa:
Burkina Faso 707 - -
Ghana 3,533 661 29
Kenya 3,268 - 9
Niger 819 - -
Nigeria 7,335 - -
South Africa 2,956 - -
Uganda 3,848 - 12
Africa total 22,466 661 50
Europe:
France 3,556 307 8
Germany 14,746 - -
Poland 51 - -
Spain 11,543 - -
Europe total 29,896 307 8
Latin America:
Argentina 492 - 11
Brazil 20,653 2,065 121
Chile 3,737 - 138
Colombia 4,976 - 6
Costa Rica 695 - 2
Mexico 9,749 186 92
Paraguay 1,445 - -
Peru 3,928 450 1
Latin America total 45,675 2,701 371
_______________
(1)Approximately 95% of the operated towers are held pursuant to long-term
finance leases, including those subject to purchase options.
(2)We also control land under carrier or other third-party communications sites
in
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As of June 30, 2022 , our property portfolio included 27 operating data center
facilities across ten markets in the United States that collectively comprise
approximately 3.1 million net rentable square feet ("NRSF") of data center
space, as detailed below:
Number of Data Centers Total NRSF (1)
(in thousands)
San Francisco Bay, CA 8 940
Los Angeles, CA 3 670
Northern Virginia, VA 5 536
New York, NY 2 237
Chicago, IL 2 216
Boston, MA 1 143
Denver, CO 2 35
Miami, FL 1 30
Orlando, FL 1 129
Atlanta, GA 2 128
Total 27 3,064
_______________(1)Excludes approximately 0.4 million of office and light industrial NRSF acquired as part of the CoreSite Acquisition.
We operate in seven reportable segments:U.S. &Canada property,Asia-Pacific property,Africa property,Europe property,Latin America property, Data Centers and Services. In evaluating operating performance in each business segment, management uses, among other factors, segment gross margin and segment operating profit (see note 15 to our consolidated and condensed consolidated financial statements included in this Quarterly Report). The 2021 Form 10-K contains information regarding management's expectations of long-term drivers of demand for our communications sites, as well as key trends, which management believes provide valuable insight into our operating and financial resource allocation decisions. The discussion below should be read in conjunction with the 2021 Form 10-K and, in particular, the information set forth therein under Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations-Executive Overview." In most of our markets, our tenant leases with wireless carriers generally have initial non-cancellable terms of five to ten years with multiple renewal terms. Accordingly, the vast majority of the revenue generated by our property operations during the three and six months endedJune 30, 2022 was recurring revenue that we should continue to receive in future periods. Most of our tenant leases for our communications sites have provisions that periodically increase the rent due under the lease, typically based on an annual fixed escalation (averaging approximately 3% inthe United States ) or an inflationary index in most of our international markets, or a combination of both. In addition, certain of our tenant leases provide for additional revenue primarily to cover costs (pass-through revenue), such as ground rent or power and fuel costs. Based upon existing customer leases and foreign currency exchange rates as ofJune 30, 2022 , we expect to generate over$60 billion of non-cancellable customer lease revenue over future periods, before the impact of straight-line lease accounting. The revenues generated by our property operations may be affected by cancellations of existing tenant leases. As discussed above, most of our tenant leases with wireless carriers and broadcasters are multiyear contracts, which typically are non-cancellable; however, in some instances, a lease may be cancelled upon the payment of a termination fee. Revenue lost from either tenant lease cancellations or the non-renewal of leases or rent renegotiations, which we refer to as churn, has historically not had a material adverse effect on the revenues generated by our consolidated property operations. During the six months endedJune 30, 2022 , churn was approximately 5% of our tenant billings, primarily driven by churn in ourU.S. &Canada property segment, as discussed below. 35 -------------------------------------------------------------------------------- We expect that our churn rate in ourU.S. &Canada property segment will remain elevated for a period of several years due to contractual lease cancellations and non-renewals by T-Mobile, including legacySprint Corporation leases, pursuant to the terms of our master lease agreement with T-Mobile US, Inc. (the "T-Mobile MLA") entered into inSeptember 2020 . As further set forth under the caption "Risk Factors" in Part I, Item 1A of the 2021 Form 10-K, the ongoing coronavirus ("COVID-19") pandemic, as well as the response to mitigate its spread and effects, may adversely impact us and our customers and the demand for our communications infrastructure inthe United States and globally. We have taken a variety of actions to ensure the continued availability of our communications infrastructure assets, while ensuring the safety and security of our employees, customers, vendors and surrounding communities. We will continue to actively monitor the situation and may take further actions as may be required by governmental authorities or that we determine are in the best interests of our employees, customers and business partners. Non-GAAP Financial Measures Included in our analysis of our results of operations are discussions regarding earnings before interest, taxes, depreciation, amortization and accretion, as adjusted ("Adjusted EBITDA"), Funds From Operations, as defined by theNational Association of Real Estate Investment Trusts ("Nareit FFO") attributable toAmerican Tower Corporation common stockholders, Consolidated Adjusted Funds From Operations ("Consolidated AFFO") and AFFO attributable toAmerican Tower Corporation common stockholders. We define Adjusted EBITDA as Net income before Income (loss) from equity method investments; Income tax benefit (provision); Other income (expense); Gain (loss) on retirement of long-term obligations; Interest expense; Interest income; Other operating income (expense); Depreciation, amortization and accretion; and stock-based compensation expense. Nareit FFO attributable toAmerican Tower Corporation common stockholders is defined as net income before gains or losses from the sale or disposal of real estate, real estate related impairment charges, real estate related depreciation, amortization and accretion and dividends on preferred stock, and including adjustments for (i) unconsolidated affiliates and (ii) noncontrolling interests. In this section, we refer to Nareit FFO attributable toAmerican Tower Corporation common stockholders as "Nareit FFO (common stockholders)." We define Consolidated AFFO as Nareit FFO (common stockholders) before (i) straight-line revenue and expense; (ii) stock-based compensation expense; (iii) the deferred portion of income tax and other income tax adjustments; (iv) non-real estate related depreciation, amortization and accretion; (v) amortization of deferred financing costs, capitalized interest, debt discounts and premiums and long-term deferred interest charges; (vi) other income (expense); (vii) gain (loss) on retirement of long-term obligations; (viii) other operating income (expense); and adjustments for (ix) unconsolidated affiliates and (x) noncontrolling interests, less cash payments related to capital improvements and cash payments related to corporate capital expenditures. We define AFFO attributable toAmerican Tower Corporation common stockholders as Consolidated AFFO, excluding the impact of noncontrolling interests on both Nareit FFO (common stockholders) and the other adjustments included in the calculation of Consolidated AFFO. In this section, we refer to AFFO attributable toAmerican Tower Corporation common stockholders as "AFFO (common stockholders)." Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO and AFFO (common stockholders) are not intended to replace net income or any other performance measures determined in accordance with GAAP. None of Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO or AFFO (common stockholders) represents cash flows from operating activities in accordance with GAAP and, therefore, these measures should not be considered indicative of cash flows from operating activities, as a measure of liquidity or a measure of funds available to fund our cash needs, including our ability to make cash distributions. Rather, Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO and AFFO (common stockholders) are presented as we believe each is a useful indicator of our current operating performance. We believe that these metrics are useful to an investor in evaluating our operating performance because (1) each is a key measure used by our management team for decision making purposes and for evaluating our operating segments' performance; (2) Adjusted EBITDA is a component underlying our credit ratings; (3) Adjusted EBITDA is widely used in the telecommunications real estate sector to measure operating performance as depreciation, amortization and accretion may vary significantly among companies depending upon accounting methods and useful lives, particularly where acquisitions and non-operating factors are involved; (4) Consolidated AFFO is widely used in the telecommunications real estate sector to adjust Nareit FFO (common 36 -------------------------------------------------------------------------------- stockholders) for items that may otherwise cause material fluctuations in Nareit FFO (common stockholders) growth from period to period that would not be representative of the underlying performance of property assets in those periods; (5) each provides investors with a meaningful measure for evaluating our period-to-period operating performance by eliminating items that are not operational in nature; and (6) each provides investors with a measure for comparing our results of operations to those of other companies, particularly those in our industry. Our measurement of Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO and AFFO (common stockholders) may not, however, be fully comparable to similarly titled measures used by other companies. Reconciliations of Adjusted EBITDA, Nareit FFO (common stockholders), Consolidated AFFO and AFFO (common stockholders) to net income, the most directly comparable GAAP measure, have been included below. 37 -------------------------------------------------------------------------------- Results of Operations Three and Six Months EndedJune 30, 2022 and 2021 (in millions, except percentages) Revenue Three Months Ended June 30, Percent Increase Six Months Ended June 30, Percent Increase 2022 2021 (Decrease) 2022 2021 (Decrease) Property U.S. & Canada$ 1,235.9 $ 1,230.9 0 %$ 2,468.3 $ 2,459.7 0 % Asia-Pacific 298.0 298.2 (0) 596.5 579.6 3 Africa 285.5 248.0 15 553.3 483.7 14 Europe 178.8 87.8 104 377.3 132.4 185 Latin America 425.2 365.6 16 844.5 702.3 20 Data Centers 191.1 2.5 7,544 375.4 5.0 7,408 Total property 2,614.5 2,233.0 17 5,215.3 4,362.7 20 Services 59.8 65.9 (9) 119.3 94.7 26 Total revenues$ 2,674.3 $ 2,298.9 16 %$ 5,334.6 $ 4,457.4 20 %
Three Months Ended
U.S. &Canada property segment revenue growth of$5.0 million was attributable to: • An increase of$9.7 million in other revenue, which included a$9.2 million increase due to straight-line accounting; • Partially offset by a decrease in tenant billings of$4.7 million , which was driven by: • A decrease of$34.0 million resulting from churn in excess of contractual escalations (as discussed above, we expect that our churn rate will be elevated for a period of several years due to the terms of the T-Mobile MLA); • A decrease of$1.3 million from other tenant billings; and • A decrease of$0.5 million from sites acquired or constructed since the beginning of the prior-year period ("newly acquired or constructed sites"), which includes the impact of the disposition of certain operations acquired in connection with our acquisition ofInSite Wireless Group, LLC . (the "InSite Acquisition"); • Partially offset by an increase of$31.1 million due to leasing additional space on our sites ("colocations") and amendments.
Segment revenue growth was not meaningfully impacted by foreign currency translation related to fluctuations in Canadian Dollar ("CAD").
Asia-Pacific property segment revenue decrease of$0.2 million was attributable to: • A decrease of$13.6 million attributable to the negative impact of foreign currency translation related to fluctuations in Indian Rupee ("INR"); and • A decrease of$1.2 million in other revenue; • Partially offset by an increase of$2.7 million in pass-through revenue, primarily due to an increase in fuel prices, and tenant billings growth of$11.9 million , which was driven by: •$9.4 million due to colocations and amendments; and •$5.8 million generated from newly acquired or constructed sites; • Partially offset by: ?A decrease of$3.1 million resulting from churn in excess of contractual escalations; and ?A decrease of$0.2 million from other tenant billings.Africa property segment revenue growth of$37.5 million was attributable to: • An increase of$38.6 million in pass-through revenue, primarily due to an increase in fuel prices; and • Tenant billings growth of$28.4 million , which was driven by: •$14.6 million due to colocations and amendments; •$11.9 million generated from newly acquired or constructed sites; and 38 -------------------------------------------------------------------------------- •$2.0 million from contractual escalations, net of churn; • Partially offset by a decrease of$0.1 million from other tenant billings; • Partially offset by a decrease of$7.0 million in other revenue, primarily due to an increase in revenue reserves. Segment revenue growth included a decrease of$22.5 million , attributable to the impact of foreign currency translation, which included, among others, negative impacts of$12.2 million related to fluctuations in Ghanaian Cedi ("GHS"),$3.7 million related to fluctuations in South African Rand ("ZAR"),$2.5 million related to fluctuations in West AfricanCFA Franc ("CFA") and$2.4 million related to fluctuations inKenyan Shilling .Europe property segment revenue growth of$91.0 million was attributable to: • Tenant billings growth of$67.8 million , which was driven by: •$60.9 million generated from newly acquired or constructed sites, primarily attributable to our transaction withTelxius Telecom, S.A. ("Telxius," and the acquisition, the "Telxius Acquisition") and our agreements with Orange S.A.; •$3.5 million resulting from contractual escalations, net of churn; •$3.2 million due to colocations and amendments; and •$0.2 million from other tenant billings; and • An increase of$45.7 million in pass-through revenue, primarily attributable to the Telxius Acquisition; • Partially offset by a decrease of$10.3 million in other revenue.
Segment revenue growth included a decrease of
Latin America property segment revenue growth of$59.6 million was attributable to: • Tenant billings growth of$32.1 million , which was driven by: •$12.2 million generated from newly acquired or constructed sites, primarily attributable to the Telxius Acquisition; •$10.3 million from contractual escalations, net of churn; •$9.2 million due to colocations and amendments; and •$0.4 million from other tenant billings; and • An increase of$21.4 million in pass-through revenue, primarily attributable to the Telxius Acquisition and increased pass-through ground rent costs inBrazil ; • Partially offset by a decrease of$1.6 million in other revenue. Segment revenue growth included an increase of$7.7 million , attributable to the impact of foreign currency translation, which included, among others, a positive impact of$13.0 million related to fluctuations in Brazilian Real ("BRL"), partially offset by negative impacts of$3.7 million related to fluctuations in Chilean Peso ("CLP") and$1.7 million related to fluctuations in Colombian Peso ("COP"). Data Centers segment revenue growth of$188.6 million was attributable to data centers acquired in the fourth quarter of 2021, including through the CoreSite Acquisition.
Services segment revenue decrease of
Six Months Ended
U.S. &Canada property segment revenue growth of$8.6 million was attributable to: • An increase of$4.6 million in other revenue, which includes a$2.5 million increase due to straight-line accounting; and • Tenant billings growth of$4.0 million , which was driven by: •$67.5 million due to colocations and amendments; and •$1.6 million generated from newly acquired or constructed sites, which includes the impact of the disposition of certain operations acquired in connection with the InSite Acquisition; • Partially offset by: • A decrease of$62.1 million resulting from churn in excess of contractual escalations (as discussed above, we expect that our churn rate will be elevated for a period of several years due to the terms of the T-Mobile MLA); and • A decrease of$3.0 million from other tenant billings. 39 --------------------------------------------------------------------------------
Segment revenue growth was not meaningfully impacted by foreign currency translation related to fluctuations in CAD.
Asia-Pacific property segment revenue growth of$16.9 million was attributable to: • Tenant billings growth of$20.7 million , which was driven by: •$20.2 million due to colocations and amendments; and •$11.4 million generated from newly acquired or constructed sites; • Partially offset by: ?A decrease of$10.3 million resulting from churn in excess of contractual escalations; and ?A decrease of$0.6 million from other tenant billings; and • An increase of$13.4 million in pass-through revenue, primarily due to an increase in fuel prices; and • An increase of$5.0 million in other revenue, primarily due to a decrease in revenue reserves.
Segment revenue growth included a decrease of
Africa property segment revenue growth of$69.6 million was attributable to: • An increase of$63.4 million in pass-through revenue, primarily due to an increase in fuel prices; • Tenant billings growth of$54.5 million , which was driven by: •$26.9 million due to colocations and amendments; •$23.9 million generated from newly acquired or constructed sites; •$3.5 million from contractual escalations, net of churn; and •$0.2 million from other tenant billings; • Partially offset by a decrease of$15.0 million in other revenue, primarily due to an increase in revenue reserves. Segment revenue growth included a decrease of$33.3 million , attributable to the impact of foreign currency translation, which included, among others, negative impacts of$17.8 million related to fluctuations in GHS,$4.5 million related to fluctuations in ZAR,$4.3 million related to fluctuations in Nigerian Naira and$4.0 million related to fluctuations in CFA.Europe property segment revenue growth of$244.9 million was attributable to: • Tenant billings growth of$159.6 million , which was driven by: •$145.9 million generated from newly acquired or constructed sites, primarily attributable to the Telxius Acquisition and our agreements with Orange S.A.; •$7.3 million resulting from contractual escalations, net of churn; •$6.2 million due to colocations and amendments; and •$0.2 million from other tenant billings; and • An increase of$115.9 million in pass-through revenue, primarily attributable to the Telxius Acquisition; • Partially offset by a decrease of$15.2 million in other revenue.
Segment revenue growth included a decrease of
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• Tenant billings growth of $70.1 million , which was driven by:
• $30.4 million generated from newly acquired or constructed sites, primarily
attributable to the Telxius Acquisition;
• $19.9 million from contractual escalations, net of churn;
• $18.8 million due to colocations and amendments; and
• $1.0 million from other tenant billings;
• An increase of $49.6 million in pass-through revenue, primarily attributable
to the Telxius Acquisition and increased pass-through ground rent costs in
Brazil ; and
• An increase of $17.9 million in other revenue as a result of tenant
settlements in Mexico .
Segment revenue growth included an increase of $4.6 million , attributable to the
impact of foreign currency translation, which included, among others, a positive
impact of $18.0 million related to fluctuations in BRL, partially offset by
negative impacts of $6.4 million related to fluctuations in CLP, $4.6 million
related to fluctuations in COP and $1.7 million related to fluctuations in
Mexican Peso.
Data Centers segment revenue growth of $370.4 million was attributable to data
centers acquired in the fourth quarter of 2021, including through the CoreSite
Acquisition.
Services segment revenue growth of
Gross Margin
Three Months Ended June 30, Percent Increase Six Months Ended June 30, Percent Increase
2022 2021 (Decrease) 2022 2021 (Decrease)
Property
U.S. & Canada $ 1,023.3 $ 1,020.1 0 % $ 2,055.9 $ 2,051.9 0 %
Asia-Pacific 116.3 114.4 2 239.7 220.3 9
Africa 173.6 162.3 7 343.7 317.1 8
Europe 103.5 57.9 79 209.7 94.7 121
Latin America 291.7 253.5 15 581.0 489.0 19
Data Centers 112.1 1.5 7,373 219.8 3.1 6,990
Total property 1,820.5 1,609.7 13 3,649.8 3,176.1 15
Services 30.9 41.3 (25) % 62.5 59.1 6 %
Three Months Ended
•The increase inU.S. &Canada property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of$1.8 million .
•The increase in
•The increase inAfrica property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of$35.1 million , primarily due to an increase in costs associated with pass-through revenue, including fuel costs. Direct expenses also benefited by$8.9 million from the impact of foreign currency translation. •The increase inEurope property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of$49.9 million , primarily due to the Telxius Acquisition. Direct expenses also benefited by$4.5 million from the impact of foreign currency translation. •The increase inLatin America property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of$19.4 million , primarily due to the Telxius Acquisition and an increase in costs associated with pass-through revenue. Direct expenses were also negatively impacted by$2.0 million from the impact of foreign currency translation. 41 -------------------------------------------------------------------------------- •The increase in Data Centers segment gross margin was attributable to data centers acquired in the fourth quarter of 2021, including through the CoreSite Acquisition.
•The decrease in Services segment gross margin was primarily due to the decrease
in revenue described above and an increase in direct expenses of
Six Months Ended
•The increase inU.S. &Canada property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of$4.6 million . •The increase inAsia-Pacific property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of$10.9 million . Direct expenses also benefited by$13.4 million from the impact of foreign currency translation. •The increase inAfrica property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of$56.6 million , primarily due to an increase in costs associated with pass-through revenue, including fuel costs. Direct expenses also benefited by$13.6 million from the impact of foreign currency translation. •The increase inEurope property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of$135.1 million , primarily due to the Telxius Acquisition. Direct expenses also benefited by$5.2 million from the impact of foreign currency translation. •The increase inLatin America property segment gross margin was primarily attributable to the increase in revenue described above, partially offset by an increase in direct expenses of$49.4 million , primarily due to the Telxius Acquisition. Direct expenses were also negatively impacted by$0.8 million from the impact of foreign currency translation. •The increase in Data Centers segment gross margin was attributable to data centers acquired in the fourth quarter of 2021, including through the CoreSite Acquisition. •The increase in Services segment gross margin was primarily due to the increase in revenue described above, partially offset by an increase in direct expenses of$21.2 million . 42 --------------------------------------------------------------------------------
Selling, General, Administrative and Development Expense ("SG&A")
Three Months Ended June 30, Percent Increase Six Months Ended June 30, Percent Increase
2022 2021 (Decrease) 2022 2021 (Decrease)
Property
U.S. & Canada $ 43.5 $ 41.1 6 % $ 86.3 $ 79.4 9 %
Asia-Pacific 6.1 24.1 (75) 54.0 31.2 73
Africa 22.0 17.5 26 44.5 36.4 22
Europe 14.1 7.9 78 29.0 13.5 115
Latin America 25.9 30.0 (14) 54.7 53.3 3
Data Centers 15.5 1.3 1,092 31.9 2.3 1,287
Total property 127.1 121.9 4 300.4 216.1 39
Services 5.1 4.1 24 11.1 8.3 34
Other 90.7 81.2 12 205.3 165.4 24
Total selling, general, administrative and
development expense $ 222.9 $ 207.2 8 % $ 516.8 $ 389.8 33 %
Three Months Ended
•The increases in our
•The decrease in our
•The decrease in ourLatin America property segment SG&A was primarily driven by a decrease in bad debt expense of$8.8 million , partially offset by increased personnel costs to support our business, including as a result of the Telxius Acquisition.
•The increase in our Data Centers segment SG&A was attributable to data centers acquired in the fourth quarter of 2021, including through the CoreSite Acquisition.
•The increase in other SG&A was primarily attributable to an increase in
stock-based compensation expense of
Six Months Ended
•The increases in our
•The increase in our
•The increase in ourLatin America property segment SG&A was primarily driven by increased personnel costs to support our business, including as a result of the Telxius Acquisition, partially offset by a decrease in bad debt expense of$7.0 million .
•The increase in our Data Centers segment SG&A was attributable to data centers acquired in the fourth quarter of 2021, including through the CoreSite Acquisition.
•The increase in other SG&A was primarily attributable to an increase in stock-based compensation expense of$29.0 million , including expense associated with certain equity awards related to the CoreSite Acquisition, and an increase in corporate SG&A, including an increase in personnel costs to support our business. 43 --------------------------------------------------------------------------------
Operating Profit
Three Months Ended June 30, Percent Increase Six Months Ended June 30, Percent Increase
2022 2021 (Decrease) 2022 2021 (Decrease)
Property
U.S. & Canada $ 979.8 $ 979.0 0 % $ 1,969.6 $ 1,972.5 (0) %
Asia-Pacific 110.2 90.3 22 185.7 189.1 (2)
Africa 151.6 144.8 5 299.2 280.7 7
Europe 89.4 50.0 79 180.7 81.2 123
Latin America 265.8 223.5 19 526.3 435.7 21
Data Centers 96.6 0.2 48,200 187.9 0.8 23,388
Total property 1,693.4 1,487.8 14 3,349.4 2,960.0 13
Services 25.8 37.2 (31) % 51.4 50.8 1 %
•The increase in operating profit for the three months ended June 30, 2022 for
our U.S. & Canada property segment was primarily attributable to an increase in
our segment gross margin, partially offset by an increase in our segment SG&A.
The decrease in operating profit for the six months ended June 30, 2022 for our
U.S. & Canada property segment was primarily attributable to an increase in our
segment SG&A, partially offset by an increase in our segment gross margin.
•The increases in operating profit for the three and six months ended June 30,
2022 for our Africa and Europe property segments were primarily attributable to
increases in our segment gross margin, partially offset by increases in our
segment SG&A.
•The increase in operating profit for the three months ended June 30, 2022 for
our Asia-Pacific property segment was primarily attributable to an increase in
our segment gross margin and a decrease in our segment SG&A. The decrease in
operating profit for the six months ended June 30, 2022 for our Asia-Pacific
property segment was primarily attributable to an increase in our segment SG&A,
partially offset by an increase in our segment gross margin.
•The increase in operating profit for the three months ended June 30, 2022 for
our Latin America property segment was primarily attributable to an increase in
our segment gross margin and a decrease in our segment SG&A. The increase in
operating profit for the six months ended June 30, 2022 for our Latin America
property segment was primarily attributable to an increase in our segment gross
margin, partially offset by an increase in our segment SG&A.
•The increase in operating profit for the three and six months ended June 30,
2022 for our Data Centers segment was attributable to data centers acquired in
the fourth quarter of 2021, including through the CoreSite Acquisition.
•The decrease in operating profit for the three months ended June 30, 2022 for
our Services segment was primarily attributable to a decrease in our segment
gross margin and an increase in our segment SG&A. The increase in operating
profit for the six months ended June 30, 2022 for our Services segment was
primarily attributable to an increase in our segment gross margin, partially
offset by an increase in our segment SG&A.
44
--------------------------------------------------------------------------------Depreciation, Amortization and Accretion
Three Months Ended June 30, Percent Increase Six Months Ended June 30, Percent Increase
2022 2021 (Decrease) 2022 2021 (Decrease)
Depreciation, amortization and accretion
49 %$ 1,642.3 $ 1,077.3
52 %
The increases in depreciation, amortization and accretion expense for the three and six months endedJune 30, 2022 were primarily attributable to the acquisition, lease or construction of new sites since the beginning of the prior-year periods, including due to the Telxius Acquisition and the CoreSite Acquisition, which resulted in increases in property and equipment and intangible assets subject to amortization.
Other Operating Expenses
Three Months Ended June 30, Percent Increase Six Months Ended June 30, Percent Increase
2022 2021 (Decrease) 2022 2021 (Decrease)
Other operating expenses $ 19.7 $ 39.8 (51) % $ 45.8 $ 90.2 (49) %
The decrease in other operating expenses during the three months ended June 30,
2022 was primarily attributable to decreases in acquisition related costs,
including pre-acquisition contingencies and settlements, of $22.4 million . The
decrease in other operating expenses during the six months ended June 30, 2022
was primarily attributable to decreases in acquisition related costs, including
pre-acquisition contingencies and settlements, of $55.4 million , partially
offset by an increase in impairment charges and losses on sales or disposals of
assets of $9.4 million .
Total Other (Income) Expense
Three Months Ended June 30, Percent Increase Six Months Ended June 30, Percent Increase
2022 2021 (Decrease) 2022 2021 (Decrease)
Total other (income) expense $ (116.0) $ 28.5 (507) % $ (116.1) $ 154.6 (175) %
Total other (income) expense consists primarily of interest expense and realized and unrealized foreign currency gains and losses. We record unrealized foreign currency gains or losses as a result of foreign currency exchange rate fluctuations primarily associated with our intercompany notes and similar unaffiliated balances denominated in a currency other than the subsidiaries' functional currencies. The change in total other (income) expense during the three months endedJune 30, 2022 was primarily due to an increase in foreign currency gains of$247.8 million , partially offset by increases in net interest expense of$56.2 million , primarily due to increases in our weighted average interest rate and our average debt outstanding as compared to the prior-year period, and unrealized losses of$17.3 million from equity securities inthe United States , as compared to unrealized gains of$29.4 million in the prior-year period. The change in total other (income) expense during the six months endedJune 30, 2022 was primarily due to an increase in foreign currency gains of$395.2 million and a decrease in loss on retirement of debt of$25.7 million attributable to the repayment of all amounts outstanding under the securitizations assumed in connection with the InSite Acquisition (the "InSite Debt") in the prior-year period, partially offset by increases in net interest expense of$113.1 million , primarily due to increases in our weighted average interest rate and our average debt outstanding as compared to the prior-year period, and unrealized losses of$7.8 million from equity securities inthe United States , as compared to unrealized gains of$29.4 million in the prior-year period. Income Tax Provision Three Months Ended June 30, Percent Increase Six Months Ended June 30, Percent Increase 2022 2021 (Decrease) 2022 2021 (Decrease) Income tax provision$ 7.4 $ 72.8 (90) %$ 29.9 $ 123.1 (76) % Effective tax rate 0.8 % 8.9 % 1.8 % 8.1 % As a real estate investment trust forU.S. federal income tax purposes ("REIT"), we may deduct earnings distributed to stockholders against the income generated by our REIT operations. In addition, we are able to offset certain income by utilizing our net operating losses ("NOLs"), subject to specified limitations. Consequently, the effective tax rate on 45 --------------------------------------------------------------------------------
income from continuing operations for each of the six months ended
The decreases in the income tax provision during the three and six months endedJune 30, 2022 were primarily attributable to the reversal of valuation allowances of$42.5 million and$79.7 million , respectively, in certain jurisdictions. These valuation allowance reversals were recognized as a reduction to the income tax provision as the net related deferred tax assets were deemed realizable based on changes in facts and circumstances relevant to the assets' recoverability.
Net Income / Adjusted EBITDA and Net Income / Nareit FFO attributable to
Three Months Ended June 30, Percent Increase Six Months Ended June 30, Percent Increase
2022 2021 (Decrease) 2022 2021 (Decrease)
Net income $ 890.9 $ 747.9 19 % $ 1,593.6 $ 1,400.2 14 %
Income tax provision 7.4 72.8 (90) 29.9 123.1 (76)
Other income (378.3) (177.6) 113 (630.9) (272.8) 131
Loss on retirement of long-term
obligations - - - - 25.7 (100)
Interest expense 276.6 213.7 29 539.0 420.7 28
Interest income (14.3) (7.6) 88 (24.2) (19.0) 27
Other operating expenses 19.7 39.8 (51) 45.8 90.2 (49)
Depreciation, amortization and accretion 826.5 554.8 49 1,642.3 1,077.3 52
Stock-based compensation expense 42.2 31.9 32 98.9 69.9 41
Adjusted EBITDA $ 1,670.7 $ 1,475.7 13 % $ 3,294.4 $ 2,915.3 13 %
46--------------------------------------------------------------------------------
Three Months Ended June 30, Percent Increase Six Months Ended June 30, Percent Increase
2022 2021 (Decrease) 2022 2021 (Decrease)
Net income $ 890.9 $ 747.9 19 % $ 1,593.6 $ 1,400.2 14 %
Real estate related depreciation,
amortization and accretion 796.4 499.5 59 1,521.5 966.5 57
Losses from sale or disposal of real estate
and real estate related impairment charges
(1) 4.3 3.3 30 18.1 9.5 91
Adjustments for unconsolidated affiliates
and noncontrolling interests (42.6) (16.1) 165 (84.1) (36.2) 132
Nareit FFO attributable to American Tower
Corporation common stockholders $ 1,649.0 $ 1,234.6 34 % $ 3,049.1 $ 2,340.0 30 %
Straight-line revenue (113.3) (104.8) 8 (222.7) (224.7) (1)
Straight-line expense 10.7 15.4 (31) 21.3 30.4 (30)
Stock-based compensation expense 42.2 31.9 32 98.9 69.9 41
Deferred portion of income tax and other
income tax adjustments (74.2) 16.4 (552) (151.5) 60.9 (349)
GTP one-time cash tax settlement (2) 0.8 - 100 46.6 - 100
Non-real estate related depreciation,
amortization and accretion 30.1 55.3 (46) 120.8 110.8 9
Amortization of deferred financing costs,
capitalized interest, debt discounts and
premiums and long-term deferred interest
charges 11.4 9.1 25 23.5 17.7 33
Other income (3) (378.3) (177.6) 113 (630.9) (272.8) 131
Loss on retirement of long-term obligations - - - - 25.7 (100)
Other operating expense (4) 15.4 36.5 (58) 27.7 80.7 (66)
Capital improvement capital expenditures (40.7) (35.0) 16 (68.4) (53.4) 28
Corporate capital expenditures (2.7) (1.3) 108 (4.0) (2.2) 82
Adjustments for unconsolidated affiliates
and noncontrolling interests 42.6 16.1 165 84.1 36.2 132
Consolidated AFFO $ 1,193.0 $ 1,096.6 9 % $ 2,394.5 $ 2,219.2 8 %
Adjustments for unconsolidated affiliates
and noncontrolling interests (5) (37.8) (17.1) 121 % (72.2) (39.9) 81 %
AFFO attributable to American Tower
Corporation common stockholders $ 1,155.2 $ 1,079.5 7 % $ 2,322.3 $ 2,179.3 7 %
_______________
(1)There are no material impairment charges for the three and six months ended
June 30, 2022 and June 30, 2021 .
(2)In 2015, we incurred charges in connection with certain tax elections wherein
MIP Tower Holdings LLC , parent company to Global Tower Partners ("GTP"), would
no longer operate as a separate REIT for federal and state income tax purposes.
We finalized a settlement related to this tax election in the six month period
ended June 30, 2022 . We believe that these related transactions are
nonrecurring, and do not believe it is an indication of our operating
performance. Accordingly, we believe it is more meaningful to present
Consolidated AFFO excluding these amounts.
(3)Includes gains on foreign currency exchange rate fluctuations of $394.7
million , $146.9 million , $636.8 million and $241.6 million , respectively.
(4)Primarily includes acquisition-related costs and integration costs.
(5)Includes adjustments for the impact on both Nareit FFO attributable to
American Tower Corporation common stockholders as well as the other line items
included in the calculation of Consolidated AFFO.
The increases in net income for the three and six months ended June 30, 2022
were primarily due to (i) increases in gains on foreign currency exchange rate
fluctuations, (ii) increases in our operating profit and (iii) decreases in the
income tax provision, partially offset by (a) increases in depreciation,
amortization and accretion expense and (b) increases in interest expense. Net
income for the six months ended June 30, 2021 included a loss on retirement of
long-term obligations of $25.7 million , attributable to the repayment of the
InSite Debt.
The increases in Adjusted EBITDA for the three and six months ended June 30,
2022 were primarily attributable to increases in our gross margin, partially
offset by an increases in SG&A, excluding the impact of stock-based compensation
expense of $5.4 million and $98.0 million , respectively.
47
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The growth in Consolidated AFFO and AFFO attributable to American Tower
Corporation common stockholders for the three and six months ended June 30, 2022
was primarily attributable to the increase in our operating profit, excluding
the impact of straight-line accounting, partially offset by (i) increases in
cash paid for taxes and cash paid for interest and (ii) an increase in capital
improvement capital expenditures. The growth in AFFO attributable to American
Tower Corporation common stockholders was also impacted by changes in
noncontrolling interests held in Europe and Asia-Pacific since the beginning of
the prior-year period.
48
--------------------------------------------------------------------------------Liquidity and Capital Resources
The information in this section updates as of
Overview
During the six months ended
•Repayment of debt assumed in connection with the CoreSite Acquisition, including senior unsecured notes previously entered into by CoreSite (the "CoreSite Debt"). •Redemption of our 2.250% senior unsecured notes due 2022 (the "2.250% Notes") upon their maturity. •Registered public offering in an aggregate amount of$1.3 billion of senior unsecured notes with maturities in 2027 and 2032. •Registered public offering of 9,185,000 shares of our common stock for aggregate net proceeds of$2.3 billion . •Repayment of an aggregate of$2.4 billion under the 2021 USD 364-Day Delayed Draw Term Loan (as defined below). As a holding company, our cash flows are derived primarily from the operations of, and distributions from, our operating subsidiaries or funds raised through borrowings under our credit facilities and debt or equity offerings.
The following table summarizes the significant components of our liquidity (in millions):
As of June 30 , 2022
Available under the 2021 Multicurrency Credit Facility $
1,454.5
Available under the 2021 Credit Facility
1,935.0
Letters of credit
(27.7)
Total available under credit facilities, net $ 3,361.8 Cash and cash equivalents 2,066.7 Total liquidity $ 5,428.5
Subsequent to
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