American Tower Corporation Reports Second Quarter 2019 Financial Results

CONSOLIDATED HIGHLIGHTS

Second Quarter 2019

  • Total revenue increased 6.1% to $1,890 million
  • Property revenue increased 5.7% to $1,849 million
  • Net income increased 38.1% to $434 million
  • Adjusted EBITDA increased 9.2% to $1,183 million
  • Consolidated AFFO increased 7.8% to $910 million

BOSTON–(BUSINESS WIRE)–American Tower Corporation (NYSE: AMT) today reported financial results for the quarter ended June 30, 2019.

Jim Taiclet, American Tower’s Chief Executive Officer, stated, “We had another strong quarter in Q2 2019, highlighted by 7.5% Organic Tenant Billings Growth in the U.S. and sustained momentum across our international operations. U.S. consumer demand for mobile data continues to expand more than 30% per year, with broadly similar usage growth rates in our overseas markets fueling ongoing demand for tower space. In addition, initial 5G deployments are now picking up in the U.S. and we are seeing increasing signs that low and mid-band spectrum on macro towers will serve as a substantial component of next generation networks.

Our strong second quarter results indicate that our Stand and Deliver strategy of leading wireless connectivity around the globe predominantly with macro towers, innovating for a mobile future, driving efficiency both internally and for the industry and selectively growing our portfolio to serve our tenants is the right course for American Tower and our stockholders. Moreover, the success of this strategy and effective operational execution across our served markets has led us to raise our full year expectations for all of our key metrics as we drive towards a successful second half of 2019.”

CONSOLIDATED OPERATING RESULTS OVERVIEW

American Tower generated the following operating results for the quarter ended June 30, 2019 (all comparative information is presented against the quarter ended June 30, 2018).

($ in millions, except per share amounts.)

 

Q2 2019(1)

 

Growth Rate

Total revenue

 

$

1,890

 

 

6.1

%

Total property revenue

 

$

1,849

 

 

5.7

%

Total Tenant Billings Growth

 

$

80

 

 

5.6

%

Organic Tenant Billings Growth

 

$

49

 

 

3.4

%

Property Gross Margin

 

$

1,300

 

 

8.4

%

Property Gross Margin %

 

70.3

%

 

 

Net income(2)

 

$

434

 

 

38.1

%

Net income attributable to AMT common stockholders(2)

 

$

429

 

 

39.9

%

Net income attributable to AMT common stockholders per diluted share(2)

 

$

0.96

 

 

39.1

%

Adjusted EBITDA

 

$

1,183

 

 

9.2

%

Adjusted EBITDA Margin %

 

62.6

%

 

 

 

 

 

 

 

Nareit Funds From Operations (FFO) attributable to AMT common stockholders

 

$

829

 

 

16.5

%

Consolidated AFFO

 

$

910

 

 

7.8

%

Consolidated AFFO per Share

 

$

2.04

 

 

7.4

%

AFFO attributable to AMT common stockholders

 

$

893

 

 

15.3

%

AFFO attributable to AMT common stockholders per Share

 

$

2.01

 

 

15.5

%

 

 

 

 

 

Cash provided by operating activities

 

$

1,037

 

 

10.3

%

Less: total cash capital expenditures(3)

 

$

248

 

 

8.4

%

Free Cash Flow

 

$

789

 

 

10.9

%

_______________

(1)

Inclusive of the negative impacts of Indian Carrier Consolidation-Driven Churn (ICCC). For reconciliations of these impacts on key metrics, please see tables below.

(2)

Q2 2019 growth rates positively impacted by the nonrecurrence of an approximately $33 million impairment charge primarily related to assets in India recognized in Q2 2018.

(3)

Q2 2019 cash capital expenditures include $6.7 million of finance lease and perpetual land easement payments reported in cash flows from financing activities in the condensed consolidated statements of cash flows.

The Company’s operational and financial results during the second quarter of 2019 were impacted by churn driven by carrier consolidation in India (Indian Carrier Consolidation-Driven Churn, “ICCC”). We are disclosing the additional financial metrics below to provide insight into the underlying long-term trends across the Company’s business excluding these impacts. We expect ICCC to impact our operational and financial results at varying rates throughout the remainder of 2019 and to result in an overall reduction in Indian contracted tenant revenue. The impacts of ICCC on net income are not provided, as the impact on all components of the net income measure cannot be reasonably calculated.

Reconciliation of Indian Carrier Consolidation-Driven Churn Impact to Operating Results:

($ in millions, except per share amounts. Totals may not add due to rounding.)

 

Q2 2019 Results

 

Q2 2018 Results

 

Growth Rates vs. Prior Year

($ in millions)

As

Reported

Impact of

ICCC(1)(2)

Normalized

 

As

Reported

Impact of

ICCC(1)

Normalized

 

As

Reported

Impact of

ICCC(1)(2)

Normalized

Total property revenue

$

1,849

 

$

88

 

$

1,937

 

 

$

1,749

 

$

42

 

$

1,792

 

 

5.7

%

2.4

%

8.1

%

Adjusted EBITDA

1,183

 

59

 

1,243

 

 

1,084

 

24

 

1,108

 

 

9.2

%

2.9

%

12.1

%

Consolidated AFFO

910

 

47

 

957

 

 

844

 

19

 

864

 

 

7.8

%

3.0

%

10.8

%

Consolidated AFFO per Share

$

2.04

 

$

0.11

 

$

2.15

 

 

$

1.90

 

$

0.04

 

$

1.94

 

 

7.4

%

3.5

%

10.8

%

Consolidated Organic Tenant Billings

49

 

63

 

112

 

 

76

 

25

 

100

 

 

3.4

%

4.3

%

7.7

%

International Organic Tenant Billings

(19

)

63

 

44

 

 

14

 

25

 

39

 

 

(3.6

)%

11.6

%

8.0

%

_______________

(1)

Reflects the cumulative impacts of ICCC since 2017.

(2)

Includes the benefit of approximately $9 million of settlement payments related to ICCC in prior periods.

Please refer to “Non-GAAP and Defined Financial Measures” below for definitions and other information regarding the Company’s use of non-GAAP measures. For financial information and reconciliations to GAAP measures, please refer to the “Unaudited Selected Consolidated Financial Information” below.

CAPITAL ALLOCATION OVERVIEW

Distributions – During the quarter ended June 30, 2019, the Company declared the following regular cash distributions to its common stockholders:

Common Stock Distributions

 

Q2 2019(1)

Distributions per share

 

$

0.92

 

Aggregate amount (in millions)

 

$

407

 

Year-over-year per share growth

 

19.5

%

_______________

(1)

The distribution declared on May 22, 2019 was paid in the third quarter of 2019 to stockholders of record as of the close of business on June 19, 2019.

Capital Expenditures During the second quarter of 2019, total capital expenditures were $248 million, of which $39 million was for non-discretionary capital improvements and corporate capital expenditures. For additional capital expenditure details, please refer to the supplemental disclosure package available on the Company’s website.

Acquisitions During the second quarter of 2019, the Company spent approximately $43 million to acquire 256 communications sites and other related assets, primarily in international markets.

Additionally, as previously disclosed, the Company has entered into a definitive agreement to acquire Eaton Towers Holding Limited (“Eaton Towers”) for total consideration, including the assumption of existing debt, of $1.85 billion. Eaton Towers’ portfolio includes approximately 5,500 communications sites across five African markets and the transaction is expected to close by the end of 2019, subject to customary closing conditions and regulatory approvals.

On July 24, 2019, the Company entered into a definitive agreement to acquire approximately 400 towers and other related property interests in the United States for approximately $0.5 billion. The transaction is expected to close in the third quarter of 2019, subject to customary closing conditions.

Other Events – In April 2019, Tata Teleservices Limited (“Tata Teleservices”) served notice of exercise of its put options with respect to 100% of its remaining combined holdings with Tata Sons in ATC Telecom Infrastructure Private Limited (“ATC TIPL”). The Company expects to complete the redemption of the remaining put shares in Q3 2019 for total consideration of approximately INR 24.8 billion (approximately $359.4 million as of June 30, 2019), subject to regulatory approval. After the completion of the redemption, the Company will hold an approximately 92% ownership interest in ATC TIPL.

LEVERAGE AND FINANCING OVERVIEW

Leverage For the quarter ended June 30, 2019, the Company’s Net Leverage Ratio was 4.2x net debt (total debt less cash and cash equivalents) to second quarter 2019 annualized Adjusted EBITDA.

Calculation of Net Leverage Ratio

($ in millions, totals may not add due to rounding)

As of June 30, 2019

Total debt

$

21,058

 

Less: Cash and cash equivalents

1,192

 

Net Debt

19,866

 

Divided By: Second quarter annualized Adjusted EBITDA(1)

4,734

 

Net Leverage Ratio

4.2x

 

_______________

(1)

Q2 2019 Adjusted EBITDA multiplied by four.

Liquidity As of June 30, 2019, the Company had $5.5 billion of total liquidity, consisting of $1.2 billion in cash and cash equivalents plus the ability to borrow an aggregate of $4.3 billion under its revolving credit facilities, net of any outstanding letters of credit.

On April 22, 2019, the Company completed its previously announced redemption of all of its outstanding 5.050% senior unsecured notes due 2020 for an aggregate principal amount of $700 million.

On June 13, 2019, the Company issued $650.0 million aggregate principal amount of 2.950% senior unsecured notes due 2025 and $1.65 billion aggregate principal amount of 3.800% senior unsecured notes due 2029. The Company used the net proceeds to repay existing indebtedness under its credit facilities.

FULL YEAR 2019 OUTLOOK

The following full year 2019 financial and operational estimates are based on a number of assumptions that management believes to be reasonable and reflect the Company’s expectations as of July 31, 2019. Actual results may differ materially from these estimates as a result of various factors, and the Company refers you to the cautionary language regarding “forward-looking” statements included in this press release when considering this information.

The Company’s outlook is based on the following average foreign currency exchange rates to 1.00 U.S. Dollar for July 31, 2019 through December 31, 2019: (a) 46.90 Argentinean Pesos; (b) 3.85 Brazilian Reais; (c) 700 Chilean Pesos; (d) 3,270 Colombian Pesos; (e) 0.89 Euros; (f) 5.45 Ghanaian Cedi; (g) 69.80 Indian Rupees; (h) 102 Kenyan Shillings; (i) 19.50 Mexican Pesos; (j) 360 Nigerian Naira; (k) 6,260 Paraguayan Guarani; (l) 3.35 Peruvian Soles; (m) 14.40 South African Rand; and (n) 3,770 Ugandan Shillings.

The Company is raising the midpoint of its full year 2019 outlook for property revenue, net income, Adjusted EBITDA and Consolidated AFFO by $60 million, $15 million, $60 million and $70 million, respectively.

The Company’s outlook reflects estimated unfavorable impacts of foreign currency exchange rate fluctuations to property revenue, Adjusted EBITDA and Consolidated AFFO, of approximately $3 million, $3 million and $6 million, respectively, as compared to the Company’s prior 2019 outlook. The impact of foreign currency exchange rate fluctuations on net income is not provided, as the impact on all components of the net income measure cannot be calculated without unreasonable effort.

The Company’s full year 2019 outlook also reflects estimated cumulative expected unfavorable impacts of ICCC on property revenue, Adjusted EBITDA and Consolidated AFFO of approximately $375 million, $261 million and $209 million, respectively, inclusive of an expected reduction in pass-through revenue of approximately $85 million and the benefit of approximately $9 million of settlement payments related to ICCC in prior periods, which was not contemplated within the Company’s prior outlook. The expected 2019-specific impacts of ICCC to property revenue, Adjusted EBITDA and Consolidated AFFO are $186 million, $141 million and $113 million, respectively, including $24 million in lower pass-through revenue and the expected benefit of the settlement payments. At this time, the Company expects the impacts of ICCC to last throughout 2019 and anticipates that churn rates in India will return to lower levels in 2020 and beyond. The Company is providing key outlook measures adjusted to quantify the impacts of ICCC on such measures and the impact of ICCC and the Company’s settlement with Tata Teleservices and related entities (“Tata”) in the fourth quarter of 2018 on growth rates as it believes that these adjusted measures better reflect the long-term trajectory of its recurring business and provide investors with a more comprehensive analysis of the Company’s operations. The impacts of ICCC and the Tata settlement on net income are not provided, as the impact on all components of the net income measure cannot be calculated without unreasonable effort.

Additional information pertaining to the impact of foreign currency, London Interbank Offered Rate (“LIBOR”) fluctuations and ICCC on the Company’s outlook has been provided in the supplemental disclosure package available on the Company’s website.

2019 Outlook ($ in millions)

Full Year 2019

 

Midpoint Growth Rates

vs. Prior Year

Total property revenue(1)

$

7,205

 

to

$

7,335

 

 

(0.6)%

Net income

1,590

 

to

1,660

 

 

28.5%

Adjusted EBITDA

4,490

 

to

4,570

 

 

(2.9)%

Consolidated AFFO

3,460

 

to

3,530

 

 

(1.2)%

_______________

(1)

Includes U.S. property revenue of $3,960 million to $4,020 million and international property revenue of $3,245 million to $3,315 million, reflecting midpoint growth rates of 4.4% and (6.1)%, respectively. The U.S. growth rate includes a negative impact of over 2% associated with a decrease in non-cash straight-line revenue recognition. The international growth rate includes estimated negative impacts of approximately 15% attributable to ICCC and the non-recurrence of the Tata settlement, and approximately 3% from the translational effects of foreign currency exchange rate fluctuations. International property revenue reflects the Company’s Latin America, EMEA and Asia segments.

2019 Outlook for Total Property revenue, at the midpoint, includes the following components(1):

($ in millions, totals may not add due to rounding.)

U.S. Property

 

International

Property(2)

 

Total

Property

International pass-through revenue

N/A

 

$

1,000

 

 

$

1,000

 

Straight-line revenue

(25

)

 

40

 

 

15

 

 

 

 

_______________

(1)

For additional discussion regarding these components, please refer to “Revenue Components” below.

(2)

International property revenue reflects the Company’s Latin America, EMEA and Asia segments.

2019 Outlook for Total Tenant Billings Growth, at the midpoint, includes the following components(1):

(Totals may not add due to rounding.)

U.S. Property

 

International

Property(2)

 

Total Property

Organic Tenant Billings

≥7%

 

~(2)%

 

~4%

New Site Tenant Billings

<0.5%

 

~5-6%

 

~2%

Total Tenant Billings Growth

>7%

 

~3-4%

 

~6%

_______________

(1)

For additional discussion regarding these components, please refer to “Revenue Components” below.

(2)

International property revenue reflects the Company’s Latin America, EMEA and Asia segments.

Reconciliation of Indian Carrier Consolidation-Driven Churn Impact to 2019 Outlook:

($ in millions, except per share amounts. Totals may not add due to rounding.)

 

FY 2018 Results

 

2019 Outlook, at the Midpoint

 

Midpoint Growth Rates

vs. Prior Year

($ in millions)

As Reported

Impact of

Tata

Settlement(1)

Impact of

ICCC(2)

Normalized

 

As Reported

Impact of

ICCC(2)(3)

Normalized

 

As Reported

Impact of

ICCC and

Tata

Settlement(3)(4)

Normalized

Total property revenue(5)

$

7,315

 

$

(334

)

$

189

 

$

7,170

 

 

$

7,270

 

$

375

 

$

7,645

 

 

(0.6

)%

7.2

%

6.6

%

Adjusted EBITDA

4,667

 

(327

)

120

 

4,459

 

 

4,530

 

261

 

4,791

 

 

(2.9

)%

10.4

%

7.4

%

Consolidated AFFO

3,539

 

(313

)

96

 

3,322

 

 

3,495

 

209

 

3,704

 

 

(1.2

)%

12.8

%

11.5

%

Consolidated AFFO per Share(6)

$

7.99

 

$

(0.71

)

$

0.22

 

$

7.50

 

 

$

7.85

 

$

0.47

 

$

8.32

 

 

(1.8

)%

12.7

%

10.9

%

Consolidated Organic Tenant Billings

275

 

 

128

 

403

 

 

216

 

210

 

426

 

 

~4%

~3-4%

>7%

International Organic Tenant Billings

32

 

 

128

 

160

 

 

(42

)

210

 

169

 

 

~(2)%

~10%

~8%

_______________

(1)

Includes the one-time net positive impacts to 2018 property revenue, Adjusted EBITDA and Consolidated AFFO related to the Company’s settlement with Tata. Churn associated with the settlement is reflected in the ICCC column.

(2)

Reflects the cumulative impacts of ICCC since 2017.

(3)

Includes the impacts of settlement payments of approximately $9 million related to ICCC in prior periods.

(4)

Reflects the cumulative impacts of ICCC since 2017 and the 2018 impacts of the Tata settlement.

(5)

Expected ICCC impacts include a cumulative decline of approximately $61 million and $85 million in pass-through revenue for 2018 and 2019, respectively.

(6)

Assumes 2019 weighted average diluted share count of 445 million shares.

Outlook for Capital Expenditures:

($ in millions, totals may not add due to rounding.)

 

 

 

Full Year 2019

Discretionary capital projects(1)

$

350

 

to

$

380

 

Ground lease purchases

150

 

to

160

 

Start-up capital projects

70

 

to

90

 

Redevelopment

270

 

to

290

 

Capital improvement

150

 

to

170

 

Corporate

10

 

10

 

Total

$

1,000

 

to

$

1,100

 

_______________

(1)

Includes the construction of 3,000 to 4,000 communications sites globally.

Reconciliation of Outlook for Adjusted EBITDA to Net income:

($ in millions, totals may not add due to rounding.)

 

 

 

Full Year 2019

Net income

$

1,590

 

to

$

1,660

 

Interest expense

820

 

to

810

 

Depreciation, amortization and accretion

1,760

 

to

1,800

 

Income tax provision

135

 

to

125

 

Stock-based compensation expense

100

 

to

110

 

Other, including other operating expenses, interest income, gain (loss) on retirement of long-term obligations and other income (expense)

85

 

to

65

 

Adjusted EBITDA

$

4,490

 

to

$

4,570

 

Reconciliation of Outlook for Consolidated AFFO to Net income:

($ in millions, totals may not add due to rounding.)

 

 

 

Full Year 2019

Net income

$

1,590

 

to

$

1,660

 

Straight-line revenue

(15

)

(15

)

Straight-line expense

42

 

42

 

Depreciation, amortization and accretion

1,760

 

to

1,800

 

Stock-based compensation expense

100

 

to

110

 

Deferred portion of income tax

3

 

3

 

Other, including other operating expense, amortization of deferred financing costs, capitalized interest, debt discounts and premiums, gain (loss) on retirement of long-term obligations, other income (expense), long-term deferred interest charges and distributions to minority interests

140

 

to

110

 

Capital improvement capital expenditures

(150

)

to

(170

)

Corporate capital expenditures

(10

)

(10

)

Consolidated AFFO

$

3,460

 

to

$

3,530

 

Conference Call Information

American Tower will host a conference call today at 8:30 a.m. ET to discuss its financial results for the quarter ended June 30, 2019 and its updated outlook for 2019. Supplemental materials for the call will be available on the Company’s website, www.americantower.com. The conference call dial-in numbers are as follows:

U.S./Canada dial-in: (800) 260-0718

International dial-in: (612) 288-0318

Passcode: 469119

When available, a replay of the call can be accessed until 11:59 p.m. ET on August 14, 2019. The replay dial-in numbers are as follows:

U.S./Canada dial-in: (800) 475-6701

International dial-in: (320) 365-3844

Passcode: 469119

American Tower will also sponsor a live simulcast and replay of the call on its website, www.americantower.com.

About American Tower

American Tower, one of the largest global REITs, is a leading independent owner, operator and developer of multitenant communications real estate with a portfolio of approximately 171,000 communications sites. For more information about American Tower, please visit the “Earnings Materials” and “Company & Industry Resources” sections of our investor relations website at www.americantower.com.

Non-GAAP and Defined Financial Measures

In addition to the results prepared in accordance with generally accepted accounting principles in the United States (GAAP) provided throughout this press release, the Company has presented the following Non-GAAP and Defined Financial Measures: Gross Margin, Operating Profit, Operating Profit Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Nareit Funds From Operations (FFO) attributable to American Tower Corporation common stockholders, Consolidated Adjusted Funds From Operations (AFFO), AFFO attributable to American Tower Corporation common stockholders, Consolidated AFFO per Share, AFFO attributable to American Tower Corporation common stockholders per Share, Free Cash Flow, Net Debt, Net Leverage Ratio and Indian Carrier Consolidation-Driven Churn (ICCC). In addition, the Company presents: Tenant Billings, Tenant Billings Growth, Organic Tenant Billings Growth and New Site Tenant Billings Growth.

These measures are not intended to replace financial performance measures determined in accordance with GAAP. Rather, they are presented as additional information because management believes they are useful indicators of the current financial performance of the Company’s core businesses and are commonly used across its industry peer group. As outlined in detail below, the Company believes that these measures can assist in comparing company performance on a consistent basis irrespective of depreciation and amortization or capital structure, while also providing valuable incremental insight into the underlying operating trends of its business.

Depreciation and amortization can vary significantly among companies depending on accounting methods, particularly where acquisitions or non-operating factors, including historical cost basis, are involved. The Company’s Non-GAAP and Defined Financial Measures may not be comparable to similarly titled measures used by other companies.

Revenue Components

In addition to reporting total revenue, the Company believes that providing transparency around the components of its revenue provides investors with insight into the indicators of the underlying demand for, and operating performance of, its real estate portfolio. Accordingly, the Company has provided disclosure of the following revenue components: (i) Tenant Billings, (ii) New Site Tenant Billings; (iii) Organic Tenant Billings; (iv) International pass-through revenue; (v) Straight-line revenue; (vi) Pre-paid amortization revenue; (vii) Foreign currency exchange impact; and (viii) Other revenue.

Tenant Billings: The majority of the Company’s revenue is generated from non-cancellable, long-term tenant leases. Revenue from Tenant Billings reflects several key aspects of the Company’s real estate business: (i) “colocations/amendments” reflects new tenant leases for space on existing sites and amendments to existing leases to add additional tenant equipment; (ii) “escalations” reflects contractual increases in billing rates, which are typically tied to fixed percentages or a variable percentage based on a consumer price index; (iii) “cancellations” reflects the impact of tenant lease terminations or non-renewals or, in limited circumstances, when the lease rates on existing leases are reduced; and (iv) “new sites” reflects the impact of new property construction and acquisitions.

New Site Tenant Billings: Day-one Tenant Billings associated with sites that have been built or acquired since the beginning of the prior-year period. Incremental colocations/amendments, escalations or cancellations that occur on these sites after the date of their addition to our portfolio are not included in New Site Tenant Billings. The Company believes providing New Site Tenant Billings enhances an investor’s ability to analyze the Company’s existing real estate portfolio growth as well as its development program growth, as the Company’s construction and acquisition activities can drive variability in growth rates from period to period.

Organic Tenant Billings: Tenant Billings on sites that the Company has owned since the beginning of the prior-year period, as well as Tenant Billings activity on new sites that occurred after the date of their addition to the Company’s portfolio.

Contacts

Igor Khislavsky

Vice President, Investor Relations

Telephone: (617) 375-7500

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