We are a leading independent owner and operator of wireless communications infrastructure, including tower structures, rooftops, and other structures that support antennas used for wireless communications, which we collectively refer to as "towers" or "sites." Our principal operations are inthe United States and its territories. In addition, we own and operate towers inSouth America ,Central America ,Canada ,South Africa ,the Philippines , andTanzania . Our primary business line is our site leasing business, which contributed 97.2% of our total segment operating profit for the three months endedMarch 31, 2023 . In our site leasing business, we (1) lease space to wireless service providers and other customers on assets that we own or operate and (2) manage rooftop and tower sites for property owners under various contractual arrangements. As ofMarch 31, 2023 , we owned 39,362 towers, a substantial portion of which have been built by us or built by other tower owners or operators who, like us, have built such towers to lease space to multiple wireless service providers. Our other business line is our site development business, through which we assist wireless service providers in developing and maintaining their own wireless service networks.
Our primary focus is the leasing of antenna space on our multi-tenant towers to a variety of wireless service providers under long-term lease contracts inthe United States ,South America ,Central America ,Canada ,South Africa ,the Philippines , andTanzania . As ofMarch 31, 2023 , noU.S. state or territory accounted for more than 10% of our total tower portfolio by tower count, and noU.S. state or territory accounted for more than 10% of our total revenues for the three months endedMarch 31, 2023 . In addition, as ofMarch 31, 2023 , approximately 30% of our total towers are located inBrazil and no other international market (each country is considered a market) represented more than 5% of our total towers. We derive site leasing revenues from all the major carriers in each of the 16 countries in which we operate. Our tenant leases are either individual leases by tower site or governed by master lease agreements, which provide for the material terms and conditions that will govern the terms of the use of the site. Our tenant leases are generally for an initial term of five years to 15 years with multiple renewal periods at the option of the tenant. Our tenant leases either (1) contain specific annual rent escalators, (2) escalate annually in accordance with an inflationary index, or (3) escalate using a combination of fixed and inflation adjusted escalators. In addition, our international site leases may include pass-through charges, such as rent related to ground leases and other property interests, utilities, property taxes, and fuel. Cost of site leasing revenue primarily consists of: ?Cash and non-cash rental expense on ground leases, right-of-use, and other underlying property interests; ?Property taxes; ?Site maintenance and monitoring costs (exclusive of employee related costs); ?Utilities; ?Property insurance; ?Fuel (in those international markets that do not have an available electric grid at our tower sites); and ?Lease initial direct cost amortization. Ground leases and other property interests are generally for an initial term of five years or more with multiple renewal periods, which are at our option. Our ground leases typically either (1) contain specific annual rent escalators or (2) escalate annually in accordance with an inflationary index. As ofMarch 31, 2023 , approximately 70% of our tower structures were located on parcels of land that we own, land subject to perpetual easements, or parcels of land in which we have a leasehold interest that extends beyond 20 years. For any given tower, costs are relatively fixed over a monthly or an annual time period. As such, operating costs for owned towers do not generally increase as a result of adding additional customers to the tower. The amount of property taxes varies from site to site depending on the taxing jurisdiction and the height and age of the tower. The ongoing maintenance requirements are typically minimal and include replacing lighting systems, painting a tower, or upgrading or repairing an access road or fencing. InEcuador ,El Salvador ,Guatemala ,Nicaragua , andPanama , significantly all of our revenue, expenses, and capital expenditures arising from our new build activities are denominated inU.S. dollars. Specifically, most of our ground leases and other property interests, tenant leases, and tower-related expenses are paid inU.S. dollars. In our Central American markets, our local currency obligations are principally limited to (1) permitting and other local fees, (2) utilities, and (3) taxes. InBrazil ,Canada ,Chile ,South Africa , andthe Philippines , significantly all of our revenue, expenses, and capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in local currency. InArgentina ,Colombia ,Costa Rica ,Peru , andTanzania , our revenue, expenses, and capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in a mix of local currency andU.S. dollars. 19
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As indicated in the table below, our site leasing business generates substantially all of our total segment operating profit. For information regarding our operating segments, see Note 14 to our Consolidated Financial Statements included in this quarterly report.
For the three months ended Segment operating profit as a percentage of March 31, total operating profit 2023 2022 Domestic site leasing 75.3% 78.7% International site leasing 21.9% 18.2% Total site leasing 97.2% 96.9% We believe that the site leasing business continues to be attractive due to its long-term contracts, built-in rent escalators, high operating margins, and low customer churn (which refers to when a customer does not renew its lease or cancels its lease prior to the end of its term) other than in connection with customer consolidation or cessations of specific technology. We believe that over the long-term, site leasing revenues will continue to grow as wireless service providers lease additional antenna space on our towers due to increasing minutes of network use and data transfer, network expansion and network coverage requirements. During the remainder of 2023, we expect organic site leasing revenue in both our domestic and international segments to increase over 2022 levels due in part to wireless carriers deploying unused spectrum. We believe our site leasing business is characterized by stable and long-term recurring revenues, predictable operating costs and minimal non-discretionary capital expenditures. Due to the relatively young age and mix of our tower portfolio, we expect future expenditures required to maintain these towers to be minimal. Consequently, we expect to grow our cash flows by (1) adding tenants to our towers at minimal incremental costs by using existing tower capacity or requiring wireless service providers to bear all or a portion of the cost of tower modifications and (2) executing monetary amendments as wireless service providers add or upgrade their equipment. Furthermore, because our towers are strategically positioned, we have historically experienced low tenant lease terminations as a percentage of revenue other than in connection with customer consolidation or cessations of a specific technology. Site Development Our site development business, which is conducted inthe United States only, is complementary to our site leasing business and provides us the ability to keep in close contact with the wireless service providers who generate substantially all of our site leasing revenue and to capture ancillary revenues that are generated by our site leasing activities, such as antenna and equipment installation at our tower locations. Site development revenues are earned primarily from providing a full range of end to end services to wireless service providers or companies providing development or project management services to wireless service providers. Our services include: (1) network pre-design; (2) site audits; (3) identification of potential locations for towers and antennas on existing infrastructure; (4) support in leasing of the location; (5) assistance in obtaining zoning approvals and permits; (6) tower and related site construction; (7) antenna installation; and (8) radio equipment installation, commissioning, and maintenance. We provide site development services at our towers and at towers owned by others on a local basis, through regional, market, and project offices. The market offices are responsible for all site development operations.
For information regarding our operating segments, see Note 14 to our Consolidated Financial Statements in this quarterly report.
Capital Allocation Strategy
Our capital allocation strategy is aimed at increasing shareholder value through investment in quality assets that meet our return criteria, stock repurchases when we believe our stock price is below its intrinsic value, and by returning cash generated by our operations in the form of cash dividends. While the addition of a cash dividend to our capital allocation strategy has provided us with an additional tool to return value to our shareholders, we continue to believe that our priority is to make investments focused on increasing Adjusted Funds From Operations per share. Key elements of our capital allocation strategy include: Portfolio Growth. We intend to continue to grow our asset portfolio, domestically and internationally, primarily through tower acquisitions and the construction of new towers that meet our internal return on invested capital criteria. Stock Repurchase Program. We currently utilize stock repurchases as part of our capital allocation policy when we believe our share price is below its intrinsic value. We believe that share repurchases, when purchased at the right price, will facilitate our goal of increasing our Adjusted Funds From Operations per share. 20
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Dividend. Cash dividends are an additional component of our strategy of returning value to shareholders. We do not expect our dividend to require any changes in our leverage and believe that, due to our low dividend payout ratio, we can continue to focus on building and buying quality assets and opportunistically buying back our stock. While the timing and amount of future dividends will be subject to approval by our Board of Directors, we believe that our future cash flow generation will permit us to grow our cash dividend in the future.
Critical Accounting Policies and Estimates
We have identified the policies and significant estimation processes listed below and in our Annual Report on Form 10-K as critical to our business operations and the understanding of our results of operations. The listing is not intended to be a comprehensive list. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted inthe United States , with no need for management's judgment in their application. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. The impact and any associated risks related to these policies on our business operations is discussed throughout "Management's Discussion and Analysis of Financial Condition and Results of Operations" where such policies affect reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 2 to our Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year endedDecember 31, 2022 . Our preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting periods. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates and such differences could be significant. RESULTS OF OPERATIONS This report presents our financial results and other financial metrics on a GAAP basis and, with respect to our international and consolidated results, after eliminating the impact of changes in foreign currency exchange rates. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period's financial results by the average monthly exchange rates of the prior year period, as well as by eliminating the impact of realized and unrealized gains and losses on our intercompany loans.
Three Months Ended
For the three months ended Constant March 31, Foreign Constant Currency Currency Currency 2023 2022 Impact Change % Change Revenues (in thousands) Domestic site leasing$ 454,833 $ 432,986 $ -$ 21,847 5.0% International site leasing 162,435 126,446 (2,515) 38,504 30.5% Site development 58,248 60,338 - (2,090) (3.5%) Total$ 675,516 $ 619,770 $ (2,515) $ 58,261 9.4% Cost of Revenues Domestic site leasing$ 69,750 $ 65,804 $ -$ 3,946 6.0% International site leasing 50,369 41,351 (871) 9,889 23.9% Site development 44,185 45,773 - (1,588) (3.5%) Total$ 164,304 $ 152,928 $ (871) $ 12,247 8.0% Operating Profit Domestic site leasing$ 385,083 $ 367,182 $ -$ 17,901 4.9% International site leasing 112,066 85,095 (1,644) 28,615 33.6% Site development 14,063 14,565 - (502) (3.4%) Revenues
Domestic site leasing revenues increased
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our towers as well as new leases and contractual rent escalators and (2)
revenues from 63 towers acquired and 14 towers built since
International site leasing revenues increased$36.0 million for the three months endedMarch 31, 2023 , as compared to the prior year. On a constant currency basis, international site leasing revenues increased$38.5 million . These changes were primarily due to (1) revenues from 3,296 towers acquired (including 2,632 sites from Grupo TorreSur ("GTS") inBrazil ) and 499 towers built sinceJanuary 1, 2022 , (2) an increase in reimbursable pass-through expenses due primarily to increases in consumer price index escalators on our ground leases, and (3) organic site leasing growth from new leases, amendments, and contractual escalators, partially offset by lease non-renewals. Site leasing revenue inBrazil represented 15.2% of total site leasing revenue for the period. No other individual international market represented more than 5% of our total site leasing revenue.
Site development revenues decreased
Operating Profit
Domestic site leasing segment operating profit increased$17.9 million for the three months endedMarch 31, 2023 , as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built sinceJanuary 1, 2022 and organic site leasing growth as noted above, (2) continued control of our site leasing cost of revenue, and (3) the positive impact of our ground lease purchase program. International site leasing segment operating profit increased$27.0 million for the three months endedMarch 31, 2023 , as compared to the prior year. On a constant currency basis, international site leasing segment operating profit increased$28.6 million . These changes were primarily due to additional profit generated by (1) towers acquired and built sinceJanuary 1, 2022 and organic site leasing growth as noted above and (2) the positive impact of our ground lease purchase program, partially offset by our increased site leasing cost of revenues largely as a result of our new site additions.
Site development segment operating profit decreased
Selling, General, and Administrative Expenses:
For the three months ended Constant March 31, Foreign Constant Currency 2023 2022 Currency Impact Currency Change % Change (in thousands) Domestic site leasing$ 31,743 $ 23,373 $ - $ 8,370 35.8% International site leasing 16,730 15,494 (520) 1,756 11.3% Total site leasing$ 48,473 $ 38,867 $ (520) $ 10,126 26.1% Site development 6,077 5,522 - 555 10.1% Other 17,659 17,735 - (76) (0.4%) Total$ 72,209 $ 62,124 $ (520) $ 10,605 17.1% Selling, general, and administrative expenses increased$10.1 million for the three months endedMarch 31, 2023 , as compared to the prior year. On a constant currency basis, selling, general, and administrative expenses increased$10.6 million . These changes were primarily as a result of an increase in non-cash compensation, personnel, and other support related costs. ? 22
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Asset Impairment and Decommission Costs:
For the three months ended Constant March 31, Foreign Constant Currency 2023 2022 Currency Impact Currency Change % Change (in thousands) Domestic site leasing$ 19,435 $ 5,483 $ - $ 13,952 254.5% International site leasing 4,886 3,029 (174) 2,031 67.1% Total site leasing$ 24,321 $ 8,512 $ (174) $ 15,983 187.8% Other 2,069 - - 2,069 -% Total$ 26,390 $ 8,512 $ (174) $ 18,052 212.1% Asset impairment and decommission costs increased$17.9 million for the three months endedMarch 31, 2023 , as compared to the prior year. On a constant currency basis, asset impairment and decommission costs increased$18.1 million . These changes were primarily as a result of an increase in impairment charges resulting from our regular analysis of whether the future cash flows from certain towers are adequate to recover the carrying value of the investment in those towers due in part to increased churn from Sprint.
Depreciation, Accretion, and Amortization Expense:
For the three months ended Constant March 31, Foreign Constant Currency Currency 2023 2022 Currency Impact Change % Change (in thousands) Domestic site leasing$ 119,487 $ 123,133 $ -$ (3,646) (3.0%) International site leasing 60,412 48,881 (893) 12,424 25.4% Total site leasing$ 179,899 $ 172,014 $ (893)$ 8,778 5.1% Site development 916 588 - 328 55.8% Other 1,600 1,721 - (121) (7.0%) Total$ 182,415 $ 174,323 $ (893)$ 8,985 5.2% Domestic site leasing depreciation, accretion, and amortization expense decreased$3.6 million for the three months endedMarch 31, 2023 , as compared to the prior year. This change was primarily due to the impact of assets that became fully depreciated since the prior year period, partially offset by an increase in the number of towers we acquired and built sinceJanuary 1, 2022 . International site leasing depreciation, accretion, and amortization expense increased$11.5 million for the three months endedMarch 31, 2023 , as compared to the prior year. On a constant currency basis, depreciation, accretion, and amortization expense increased$12.4 million . These changes were primarily due to the increase in the number of towers we acquired and built sinceJanuary 1, 2022 , partially offset by the impact of assets that became fully depreciated since the prior year period.
Operating Income (Expense):
For the three months ended Constant March 31, Foreign Constant Currency Currency 2023 2022 Currency Impact Change % Change (in thousands) Domestic site leasing$ 211,186 $ 211,594 $ -$ (408) (0.2%) International site leasing 27,213 16,186 9 11,018 68.1% Total site leasing$ 238,399 $ 227,780 $ 9$ 10,610 4.7% Site development 7,070 8,455 - (1,385) (16.4%) Other (21,328) (19,456) - (1,872) 9.6% Total$ 224,141 $ 216,779 $ 9$ 7,353 3.4% Domestic site leasing operating income decreased$0.4 million for the three months endedMarch 31, 2023 , as compared to the prior year, primarily due to increases in asset impairment and decommission costs and selling, general, and administrative expenses, partially offset by higher segment operating profit and a decrease in depreciation, accretion, and amortization expense. 23
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International site leasing operating income increased$11.0 million for the three months endedMarch 31, 2023 , as compared to the prior year. These changes were primarily due to higher segment operating profit, partially offset by increases in depreciation, accretion, and amortization expense, asset impairment and decommission costs, and selling, general, and administrative expenses. Site development operating income decreased$1.4 million for the three months endedMarch 31, 2023 , as compared to the prior year, primarily due to higher selling, general, and administrative expenses and lower segment operating profit driven by less activity from T-Mobile andDISH Wireless , partially offset by an increase inVerizon Wireless activity. Other Income (Expense): For the three months ended Constant March 31, Foreign Constant Currency Currency Currency 2023 2022 Impact Change % Change (in thousands) Interest income $ 2,816$ 2,502 $ (17) $ 331 13.2% Interest expense (101,226) (82,252) 1 (18,975) 23.1% Non-cash interest expense (14,239) (11,526) - (2,713) 23.5% Amortization of deferred financing fees (4,988) (4,881) - (107) 2.2% Other income, net 37,558 108,161 (68,849) (1,754) 109.0% Total$ (80,079) $ 12,004 $ (68,865) $ (23,218) 23.7% Interest expense increased$19.0 million for the three months endedMarch 31, 2023 , as compared to the prior year. This change was primarily due to a higher weighted-average interest rate on a higher average principal amount of cash-interest bearing debt outstanding. Based on the current rising interest rate environment, we expect interest expense will increase in future periods. Other income, net includes a$41.9 million gain on the remeasurement ofU.S. dollar denominated intercompany loans with foreign subsidiaries for the three months endedMarch 31, 2023 , while the prior year period included a$109.6 million gain. Provision for Income Taxes: For the three months ended Constant March 31, Foreign Constant Currency Currency 2023 2022 Currency Impact Change % Change (in thousands)
Provision for income taxes
Provision for income taxes increased$3.0 million for the three months endedMarch 31, 2023 , as compared to the prior year. On a constant currency basis, provision for income taxes increased$27.2 million primarily due to increases in current and deferred foreign taxes. Net Income: For the three months ended Constant March 31, Foreign Constant Currency Currency Currency 2023 2022 Impact Change % Change (in thousands) Net income$ 100,554 $ 188,306 $ (44,735) $ (43,017) (37.3%) Net income decreased$87.8 million for the three months endedMarch 31, 2023 , as compared to the prior year. On a constant currency basis, net income decreased$43.0 million due to increases in provision for income taxes, interest expense, and non-cash interest expense and a decrease in other income, net, partially offset by an increase in operating income.
NON-GAAP FINANCIAL MEASURES
This report contains information regarding Adjusted EBITDA, a non-GAAP measure. We have provided below a description of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure and an explanation as to why management utilizes this measure. This report also presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our 24
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business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period's financial results by the average monthly exchange rates of the prior year period, as well as by eliminating the impact of the remeasurement of our intercompany loans. Adjusted EBITDA We define Adjusted EBITDA as net income excluding the impact of non-cash straight-line leasing revenue, non-cash straight-line ground lease expense, non-cash compensation, net loss from extinguishment of debt, other income and expenses, acquisition and new business initiatives related adjustments and expenses, asset impairment and decommission costs, interest income, interest expenses, depreciation, accretion, and amortization, and income taxes. We believe that Adjusted EBITDA is useful to investors or other interested parties in evaluating our financial performance. Adjusted EBITDA is the primary measure used by management (1) to evaluate the economic productivity of our operations and (2) for purposes of making decisions about allocating resources to, and assessing the performance of, our operations. Management believes that Adjusted EBITDA helps investors or other interested parties to meaningfully evaluate and compare the results of our operations (1) from period to period and (2) to our competitors, by excluding the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization, and accretion) from our financial results. Management also believes Adjusted EBITDA is frequently used by investors or other interested parties in the evaluation of REITs. In addition, Adjusted EBITDA is similar to the measure of current financial performance generally used by our lenders to determine compliance with certain covenants under our Senior Credit Agreement and the indentures relating to the 2020 Senior Notes and 2021 Senior Notes. Adjusted EBITDA should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance. For the three months ended Constant March 31, Foreign Constant Currency Currency Currency 2023 2022 Impact Change % Change (in thousands) Net income$ 100,554 $ 188,306 $ (44,735) $ (43,017) (37.3%) Non-cash straight-line leasing revenue (6,849) (8,001) 41 1,111 (13.9%) Non-cash straight-line ground lease expense 723 1,053 (60) (270) (25.6%) Non-cash compensation 26,206 24,747 (226) 1,685 6.8% Other income, net (37,558) (108,161) 68,849 1,754 109.0% Acquisition and new business initiatives related adjustments and expenses 6,057 5,104 (66) 1,019 20.0% Asset impairment and decommission costs 26,390 8,512 (174) 18,052 212.1% Interest income (2,816) (2,502) 17 (331) 13.2% Interest expense (1) 120,453 98,659 (1) 21,795 22.1% Depreciation, accretion, and amortization 182,415 174,323 (893) 8,985 5.2% Provision for income taxes (2) 43,765 41,711 (24,120) 26,174 532.8% Adjusted EBITDA$ 459,340 $ 423,751 $ (1,368) $ 36,957 8.7% (1)Total interest expense includes interest expense, non-cash interest expense, and amortization of deferred financing fees. (2)Provision for taxes includes$257 and$1,234 of franchise taxes for the three months endedMarch 31, 2023 and 2022, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statements of Operations. Adjusted EBITDA increased$35.6 million for the three months endedMarch 31, 2023 , as compared to the prior year period. On a constant currency basis, Adjusted EBITDA increased$37.0 million . These changes were primarily due to an increase in segment operating profit, partially offset by an increase in cash selling, general, and administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
SBA Communications Corporation ("SBAC") is a holding company with no business operations of its own. SBAC's only significant asset is 100% of the outstanding capital stock ofSBA Telecommunications, LLC ("Telecommunications"), which is also a holding company that owns equity interests in entities that directly or indirectly own all of our domestic and international towers and assets. We conduct all of our business operations through Telecommunications' subsidiaries. Accordingly, our only source of cash to 25
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pay our obligations, other than financings, is distributions with respect to our ownership interest in our subsidiaries from the net earnings and cash flow generated by these subsidiaries.
A summary of our cash flows is as follows:
For the three months ended March 31, 2023 2022 (in thousands) Cash provided by operating activities$ 311,168 $
292,482
Cash used in investing activities (146,761)
(255,881)
Cash used in financing activities (160,728)
(151,750)
Change in cash, cash equivalents, and restricted cash 3,679
(115,149)
Effect of exchange rate changes on cash, cash equiv., and restricted cash
220
15,961
Cash, cash equivalents, and restricted cash, beginning of period
189,283
435,626
Cash, cash equivalents, and restricted cash, end of period$ 193,182 $ 336,438 Operating Activities Cash provided by operating activities was$311.2 million for the three months endedMarch 31, 2023 as compared to$292.5 million for the three months endedMarch 31, 2022 . The increase was primarily due to an increase in operating profit partially offset by an increase in cash interest expense and cash selling, general, and administrative expenses.
Investing Activities
A detail of our cash capital expenditures is as follows:
For the three months endedMarch 31, 2023 2022 (in thousands)
Acquisitions of towers and related intangible assets (1)
(1,309)
-
Land buyouts and other assets (2) (7,149)
(7,318)
Construction and related costs (21,566)
(16,477)
Augmentation and tower upgrades (15,791) (9,274) Tower maintenance (10,743) (9,327) General corporate (1,035) (2,930) Other investing activities (3) (77,697)
(2,692)
Net cash used in investing activities$ (146,761)
(1)The three months endedMarch 31, 2022 includes$176.1 million of acquisitions related to our purchase of sites fromAirtel Tanzania . (2)Excludes$5.1 million and$3.8 million spent to extend ground lease terms for the three months endedMarch 31, 2023 and 2022, respectively. (3)The three months endedMarch 31, 2023 includes a$78.0 million loan to an unconsolidated joint venture. Additionally, subsequent toMarch 31, 2023 , we purchased or are under contract to purchase 66 communication sites for an aggregate consideration of$63.7 million in cash. We anticipate that these acquisitions will be consummated by the end of the fourth quarter of 2023. For 2023, we expect to incur non-discretionary cash capital expenditures associated with tower maintenance and general corporate expenditures of$54.0 million to$64.0 million and discretionary cash capital expenditures, based on current or potential acquisition obligations, planned new tower construction, forecasted tower augmentations, and forecasted ground lease purchases, of$330.0 million to$350.0 million . We expect to fund these cash capital expenditures from cash on hand, cash flow from operations, and borrowings under the Revolving Credit Facility or new financings. The exact amount of our future cash capital expenditures will depend on a number of factors, including amounts necessary to support our tower portfolio, our new tower build and acquisition programs, and our ground lease purchase program. 26
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Financing Activities
A detail of our financing activities is as follows:
For the three months endedMarch 31, 2023 2022 (in thousands)
Net (repayments) borrowings under Revolving Credit Facility (1)
$ (45,000) $
330,000
Repurchase and retirement of common stock (2) -
(431,667)
Payment of dividends on common stock (93,933)
(76,873)
Proceeds from employee stock purchase/stock option plans
11,942
10,836
Payments related to taxes on stock options and restricted stock units (26,658)
(9,228)
Other financing activities (7,079)
25,182
Net cash used in financing activities$ (160,728) $
(151,750)
(1)For additional information regarding our debt instruments and financings,
refer to "Debt Instruments and Debt Service Requirements" below.
(2)As of the date of this filing, we had
Dividends
For the three months endedMarch 31, 2023 , we paid the following cash dividends: Payable to Shareholders of Record at the Close Cash Paid Aggregate Amount Date Declared of Business on Per Share Paid Date Paid February 20, 2023 March 10, 2023$0.85 $93.9 million March 24, 2023
Dividends paid in 2023 were ordinary taxable dividends.
Subsequent to
Payable to Shareholders Cash to of Record at the Close be Paid Date Declared of Business on Per Share Date to be Paid May 1, 2023 May 26, 2023$0.85 June 21, 2023 The amount of future distributions will be determined, from time to time, by our Board of Directors to balance our goal of increasing long-term shareholder value and retaining sufficient cash to implement our current capital allocation policy, which prioritizes investment in quality assets that meet our return criteria, and then stock repurchases when we believe our stock price is below its intrinsic value. The actual amount, timing, and frequency of future dividends will be at the sole discretion of our Board of Directors and will be declared based upon various factors, many of which are beyond our control.
Registration Statements
We have on file with theSecurities and Exchange Commission (the "Commission") a shelf registration statement on Form S-4 registering shares of Class A common stock that we may issue in connection with the acquisition of wireless communication towers or antenna sites and related assets or companies who own wireless communication towers, antenna sites, or related assets. During the three months endedMarch 31, 2023 , we did not issue any shares of Class A common stock under this registration statement. As ofMarch 31, 2023 , we had approximately 1.2 million shares of Class A common stock remaining under this registration statement. We have on file with the Commission an automatic shelf registration statement for well-known seasoned issuers on Form S-3ASR, which enables us to issue shares of our Class A common stock, preferred stock, debt securities, warrants, or depositary shares as well as units that include any of these securities. We will file a prospectus supplement containing the amount and type of securities each time we issue securities under our automatic shelf registration statement on Form S-3ASR. No securities were issued under this registration statement through the date of this filing. 27
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Debt Instruments and Debt Service Requirements
Revolving Credit Facility under the Senior Credit Agreement
The Revolving Credit Facility consists of a revolving loan under which up to$1.5 billion aggregate principal amount may be borrowed, repaid and redrawn, based upon specific financial ratios and subject to the satisfaction of other customary conditions to borrowing. Amounts borrowed under the Revolving Credit Facility accrue interest, atSBA Senior Finance II's election, at either (1) the Eurodollar Rate plus a margin that ranges from 112.5 basis points to 150.0 basis points or (2) the Base Rate plus a margin that ranges from 12.5 basis points to 50.0 basis points, in each case based on the ratio of Consolidated Net Debt to Annualized Borrower EBITDA, calculated in accordance with the Senior Credit Agreement. In addition,SBA Senior Finance II LLC , our wholly owned subsidiary ("SBA Senior Finance II") is required to pay a commitment fee of between 0.15% and 0.25% per annum on the amount of unused commitment. If not earlier terminated bySBA Senior Finance II , the Revolving Credit Facility will terminate on, andSBA Senior Finance II will repay all amounts outstanding on or before,July 7, 2026 . Furthermore, the Revolving Credit Facility provides mechanics relating to a transition away from LIBOR as a benchmark interest rate and the replacement of LIBOR by an alternative benchmark rate and incorporates sustainability-linked targets which will adjust the Facility's applicable interest and commitment fee rates upward or downward based on how the Company performs against those targets. Borrowings under the Revolving Credit Facility may be used for general corporate purposes.SBA Senior Finance II may, from time to time, borrow from and repay the Revolving Credit Facility. Consequently, the amount outstanding under the Revolving Credit Facility at the end of the period may not be reflective of the total amounts outstanding during such period.
The key terms of the Revolving Credit Facility are as follows:
Unused Financial Covenant Interest Rate Commitment Compliance as of Fee as of Status as of March 31, 2023 (1) March 31, 2023 (2) March 31, 2023 Revolving Credit Facility 6.037% 0.140% In Compliance (1)The rate reflected includes a 0.050% reduction in the applicable spread as a result of meeting certain sustainability-linked targets as ofDecember 31, 2022 . (2)The rate reflected includes a 0.010% reduction in the applicable commitment fee as a result of meeting certain sustainability-linked targets as ofDecember 31, 2022 .
The table below summarizes the Company's Revolving Credit Facility activity
during the three months ended
For the three ended March 31, 2023 2022 Beginning outstanding balance$ 720,000 $ 350,000 Borrowings 140,000 330,000 Repayments (185,000) - Ending outstanding balance$ 675,000 $ 680,000
Subsequent to
Term Loan under the Senior Credit Agreement
2018 Term Loan
OnApril 11, 2018 , we, through our wholly owned subsidiary,SBA Senior Finance II LLC , obtained a term loan (the "2018 Term Loan") under the amended and restated Senior Credit Agreement. The 2018 Term Loan consists of a senior secured term loan with an initial aggregate principal amount of$2.4 billion that matures onApril 11, 2025 . The 2018 Term Loan accrues interest, atSBA Senior Finance II's election at either the Base Rate plus 75 basis points (with a zero Base Rate floor) or the Eurodollar Rate plus 175 basis points (with a zero Eurodollar Rate floor). The 2018 Term Loan was issued at 99.75% of par value. As ofMarch 31, 2023 , the 2018 Term Loan was accruing interest at 6.600% per annum. 28
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During the three months endedMarch 31, 2023 , we repaid an aggregate of$6.0 million of principal on the 2018 Term Loan. As ofMarch 31, 2023 , the 2018 Term Loan had a principal balance of$2.3 billion . OnAugust 4, 2020 , we, through our wholly owned subsidiary,SBA Senior Finance II , entered into an interest rate swap for$1.95 billion of notional value accruing interest at one month LIBOR plus 175 basis points for a fixed rate of 1.874% per annum through the maturity date of the 2018 Term Loan. The 2018 Term Loan has a blended interest rate of 2.569% which includes the impact of the interest rate swap. TheICE Benchmark Administration Limited ("IBA") ceased the publication of USD LIBOR for the 1 week and 2 month tenors onDecember 31, 2021 and intends to cease all other tenors onJune 30, 2023 . Since LIBOR will be ceasing, we will need to amend our credit facility to transition the 2018 Term Loan and the interest rate swap to an alternative benchmark rate beforeJune 30, 2023 .
Tower Revenue Securities Terms
As ofMarch 31, 2023 , we, through the Trust, had issued and outstanding an aggregate of$6.9 billion ofSecured Tower Revenue Securities ("Tower Securities "). The sole asset of the Trust consists of a non-recourse mortgage loan made in favor of certain of our subsidiaries that are borrowers on the mortgage loan (the "Borrowers") under which there is a loan tranche for each Tower Security outstanding with the same interest rate and maturity date as the corresponding Tower Security. The mortgage loan will be paid from the operating cash flows from the aggregate 9,892 tower sites owned by the Borrowers as ofMarch 31, 2023 . The mortgage loan is secured by (1) mortgages, deeds of trust, and deeds to secure debt on a substantial portion of the tower sites, (2) a security interest in the tower sites and substantially all of the Borrowers' personal property and fixtures, (3) the Borrowers' rights under certain tenant leases, and (4) all of the proceeds of the foregoing. For each calendar month,SBA Network Management, Inc. , an indirect subsidiary ("Network Management"), is entitled to receive a management fee equal to 4.5% of the Borrowers' operating revenues for the immediately preceding calendar month.
The table below sets forth the material terms of our outstanding
Amount Outstanding Anticipated Final ?(in Interest Repayment Maturity Security Issue Date millions) ? Rate (1) Date Date 2014-2C Tower Securities Oct. 15, 2014$620.0 3.869% Oct. 8, Oct. 8, 2024 2049 2019-1C Tower Securities Sep. 13, 2019$1,165.0 2.836% Jan. 12, Jan. 12, 2025 2050 2020-1C Tower Securities Jul. 14, 2020$750.0 1.884% Jan. 9, Jul. 11, 2026 2050 2020-2C Tower Securities Jul. 14, 2020$600.0 2.328% Jan. 11, Jul. 9, 2028 2052 2021-1C Tower Securities May 14, 2021$1,165.0 1.631% Nov. 9, May 9, 2026 2051 2021-2C Tower Securities Oct. 27, 2021$895.0 1.840% Apr. 9, Oct. 10, 2027 2051 2021-3C Tower Securities Oct. 27, 2021$895.0 2.593% Oct. 9, Oct. 10, 2031 2056 2022-1C Tower Securities Nov. 23, 2022$850.0 6.599% Jan. 11, Nov. 9, 2028 2052 (1)Interest paid monthly
The table below sets forth the material terms of our outstanding
Amount Outstanding Anticipated Final ?(in Interest Repayment Maturity Security Issue Date millions) ? Rate (1) Date Date 2019-1R Tower Securities Sep. 13, 2019$61.4 4.213% Jan. 12, Jan. 12, 2025 2050 2020-2R Tower Securities Jul. 14, 2020$71.1 4.336% Jan. 11, Jul. 9, 2028 2052 2021-1R Tower Securities May 14, 2021$61.4 3.598% Nov. 9, May 9, 2026 2051 2021-3R Tower Securities Oct. 27, 2021$94.3 4.090% Oct. 9, Oct. 10, 2031 2056 2022-1R Tower Securities Nov. 23, 2022$44.8 7.870% Jan. 11, Nov. 9, 2028 2052 (1)Interest paid monthly 29
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To satisfy certain risk retention requirements of Regulation RR promulgated under the Exchange Act,SBA Guarantor, LLC , a wholly owned subsidiary, purchased theRisk Retention Tower Securities . Principal and interest payments made on the 2019-1RTower Securities , 2020-2RTower Securities , 2021-1RTower Securities , 2021-3RTower Securities , and 2022-1RTower Securities eliminate in consolidation.
Debt Covenants
As ofMarch 31, 2023 , the Borrowers met the debt service coverage ratio required by the mortgage loan agreement and were in compliance with all other covenants as set forth in the agreement.
Senior Notes
The table below sets forth the material terms of our outstanding senior notes as ofMarch 31, 2023 : Amount Outstanding Interest Optional ?(in Rate Interest Due Redemption Senior Notes Issue Date millions) Coupon Maturity Date Dates Date 2020 Senior Notes Feb. 4, 2020$1,500.0 3.875% Feb. 15, 2027
Aug. 15 2023 2021 Senior Notes Jan. 29, 2021$1,500.0 3.125% Feb. 1, 2029 Feb. 1 & Feb. 1, Aug. 1 2024
Each of our senior notes is subject to redemption, at our option, in whole or in part on or after the date set forth above. We may redeem each of the senior notes during the time periods and at the redemption prices set forth in the indentures.
Debt Service
As ofMarch 31, 2023 , we believe that our cash on hand, capacity available under our Revolving Credit Facility, and cash flows from operations for the next twelve months will be sufficient to service our outstanding debt during the next twelve months. The following table illustrates our estimate of our debt service requirement over the next twelve months endedMarch 31, 2024 based on the amounts outstanding as ofMarch 31, 2023 and the interest rates accruing on those amounts on such date (in thousands): Revolving Credit Facility (1)$ 41,907 2018 Term Loan (2) 82,717 2014-2CTower Securities 24,185 2019-1CTower Securities 33,409 2020-1CTower Securities 14,368 2020-2CTower Securities 14,159 2021-1CTower Securities 19,371 2021-2CTower Securities 16,752 2021-3CTower Securities 23,491 2022-1CTower Securities 56,362 2020 Senior Notes 58,125 2021 Senior Notes 46,875
Total debt service for the next 12 months
(1)As ofMarch 31, 2023 ,$675.0 million was outstanding under the Revolving Credit Facility. Subsequent toMarch 31, 2023 , we repaid an additional$80.0 million under the Revolving Credit Facility, and as of the date of this filing,$595.0 million was outstanding. (2)Total debt service on the 2018 Term Loan includes the impact of the interest rate swap entered into onAugust 4, 2020 , which swapped$1.95 billion of notional value accruing interest at one month LIBOR plus 175 basis points for a fixed rate of 1.874% per annum through the maturity date of the 2018 Term Loan.
Inflation
The impact of inflation on our operations has not been significant to date. However, to the extent theFederal Reserve continues to increase interest rates to combat inflation, this may impact our operating results. We cannot assure you that a high rate of 30
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inflation in the future will not adversely affect our operating results particularly in light of the fact that our site leasing revenues are governed by long-term contracts with pre-determined pricing that we will not be able to increase in response to increases in inflation other than our contracts inSouth America ,South Africa ,the Philippines , andTanzania which have inflationary index based rent escalators.
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