Sba Communications ((SBAC)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call for SBA Communications painted a mixed picture, reflecting both optimism and challenges. On the positive side, the company highlighted its robust domestic performance, strategic acquisitions, and ambitious plans for tower builds in 2025. However, these positives were tempered by significant international churn challenges, foreign exchange and interest rate headwinds, and ongoing impacts from Sprint churn.
Strong Domestic Performance
SBA Communications reported a strong domestic performance, with new carrier activity and bookings increasing sequentially from the third quarter. The US-based services business experienced its best quarter of the year, and leasing application backlogs grew, reaching the highest level of the year.
Strategic Millicom Acquisition
The company entered into an agreement to purchase approximately 7,000 towers from Millicom in Central America. This strategic acquisition positions SBA as the leading tower operator in the region, expanding their footprint to over 10,500 pro forma sites.
Financial Health and Capital Allocation
SBA Communications invested over $550 million in asset acquisitions, stock repurchases, and new tower builds while growing the dividend at an industry-leading 15%. The company improved its balance sheet and liquidity position, achieving a net debt to adjusted EBITDA ratio of 6.1, the lowest in its history.
Record Tower Builds Planned for 2025
The company is planning to build up to 800 new towers in 2025, marking the largest number for SBA in over 20 years. The majority of these towers will be located in Central America, further strengthening their presence in the region.
International Churn Challenges
International churn remains a significant challenge for SBA, particularly due to customer consolidations in Brazil, which negatively impacts cash flows. The churn rate was reported at 6% in the fourth quarter of 2024.
Foreign Exchange and Interest Rate Headwinds
The macroeconomic environment, characterized by high interest rates and a strong dollar, has hindered SBA’s stock performance. The company expects foreign exchange to have a negative $25 million year-over-year impact on site leasing revenue for 2025.
Sprint Churn Impact
Sprint-related churn continues to affect SBA’s revenue, with an anticipated impact of $50 million to $52 million in 2025. This ongoing issue remains a concern for the company.
Forward-Looking Guidance
Looking ahead, SBA Communications anticipates a strong start to 2025, with projected increases in new leasing business and services. The company expects domestic new leases and amendments to generate between $35 million and $39 million, while international leases and amendments are projected to bring in $16 million to $18 million in revenue. Despite expected churn due to consolidation activities, SBA remains optimistic about its strategic acquisition of towers from Millicom, which is expected to close by September 2025 and contribute significantly to cash site leasing revenue.
In conclusion, SBA Communications’ earnings call highlighted a balanced mix of optimism and caution. The company is poised for growth with strategic acquisitions and ambitious tower build plans, yet it remains vigilant of the challenges posed by international churn and macroeconomic factors. Investors will be keenly watching how SBA navigates these dynamics in the coming year.