SBA Communications' Q2 AFFO Beat, Revenues Fall Y/Y

SBA Communications Corporation SBAC reported second-quarter 2024 adjusted funds from operations (AFFO) per share of $3.29, beating the Zacks Consensus Estimate by a whisker. Moreover, the figure reflects a rise of 1.5% from the prior-year quarter.

Results reflect a decent improvement in site leasing revenues. It continues to benefit from the addition of sites to its portfolio. However, lower revenues posted by site development hurt the results to some extent. The company lowered its 2024 outlook.

Quarterly total revenues decreased 2.7% year over year to $660.5 million. The figure also missed the Zacks Consensus Estimate of $664.5 million.

Brendan Cavanagh, president and CEO of the company, said, "New business execution in the U.S. continued at a similar pace to the levels we have experienced the last few quarters, and internationally, we saw a pick-up in new leasing activity that will increase the full year revenue contribution from new leases and amendments. During the second quarter, we also continued a balanced approach to capital allocation with a mix of portfolio expansion, stock repurchases, dividends and debt reduction."

Quarter in Detail

Site-leasing revenues increased marginally year over year to $626.5 million. Quarterly Site-leasing revenues consisted of domestic site-leasing revenues of $463.2 million and international site-leasing revenues of $163.3 million. The domestic cash site-leasing revenues came in at $457.4 million, growing 1.6% year over year. International cash site leasing revenues came in at $163.6 million, decreasing 2.9% year over year.

However, site development revenues decreased 35% year over year to $34 million.

The site-leasing operating profit was $512.3 million, marking a marginal increase year over year. Moreover, 98.7% of SBAC's total operating profit in the quarter came from site leasing.

The overall operating income rose 46.9% to $354.5 million.

The adjusted EBITDA totaled $467.1 million, decreasing 1%, while the adjusted EBITDA margin increased to 71.3% from 70.3% in the prior-year quarter.

Portfolio Activity

In the second quarter, SBAC acquired 117 communication sites for a total cash consideration of $26.5 million. The company also built 100 towers during this period. It owned or operated 39,744 communication sites as of Jun 30, 2024, of which 17,461 were in the United States and its territories and 22,283 internationally.

SBA Communications also spent $13.3 million to purchase land and easements and extend lease terms. Total cash capital expenditure was $91.6 million in the reported quarter, of which $78.5 million represented discretionary and $13.1 million was non-discretionary.

Subsequent to the quarter end, SBAC purchased or is under contract to buy 106 communication sites for a total consideration of $49.3 million in cash. It expects to complete the acquisition by the end of the fourth quarter of 2024.

Cash Flow & Liquidity

In the second quarter, SBA Communications generated nearly $425.6 million of net cash from operating activities compared with the year-ago quarter's $486.9 million.

As of Jun 30, 2024, it had $309.4 million in cash and cash equivalents, short-term restricted cash and short-term investments, up from $261.8 million recorded as of Mar 31, 2024. SBAC ended the quarter with a net debt-to-annualized adjusted EBITDA of 6.4X.

As of Jul 29, 2024, the company had $30 million outstanding under the $2 billion revolving credit facility.

In April 2024, SBAC repurchased 0.4 million shares of its Class A common stock for $93.9 million. After this, it had $204.7 million of authorization remaining under its $1 billion stock repurchase plan.

Dividend Update

Concurrent with the earnings release, SBAC announced a cash dividend of 98 cents on its Class A common stock. The dividend will be paid out on Sep 18 to shareholders of record as of Aug 22, 2024.

2024 Guidance Lowered

SBAC now expects AFFO per share in the range of $13.06-$13.43, down from the prior guided range of $13.09-$13.46. The Zacks Consensus Estimate for the same is currently pegged at $13.20, which is within the guided range.

Site-leasing revenues are now projected to be $2,507-$2,527 million, revised downwards from $2,517-$2,537 million guided earlier. Site-development revenue guidance range is revised downwards to $135 million and $145 million from the previous guidance of $140 million and $160 million.

Further, the adjusted EBITDA has been decreased from $1,889-$1,909 million to $1,876-$1,896 million.

The company currently carries a Zacks Rank #3 (Hold).

Performance of Other REITs

Cousins Properties' CUZ second-quarter 2024 FFO per share of 68 cents beat the Zacks Consensus Estimate of 66 cents. The figure remained unchanged on a year-over-year basis.

Results reflect decent leasing activity and better-than-anticipated revenues. However, rental property operating and interest expenses increased year over year. CUZ also raised its 2024 outlook for FFO per share.

Healthpeak Properties, Inc. DOC reported second-quarter 2024 FFO as adjusted per share of 45 cents, beating the Zacks Consensus Estimate by a penny. The reported figure remained unchanged from the prior-year quarter.

Results reflect better-than-anticipated revenues. Moreover, growth in total merger-combined same-store cash (adjusted) net operating income was witnessed across the portfolio. DOC also revised its 2024 outlook.

Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.

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