SBA Communications Corp (SBAC) 2021 Q1 法說會逐字稿

Ladies and gentlemen, thank you for your patience in holding, and welcome to the SBA first quarter results call. (Operator Instructions) Just a brief reminder, today's conference is being recorded. Now happy to turn it over to VP of Finance, Mark DeRussy.

Good evening, and thank you for joining us for SBA's First Quarter 2021 Earnings Conference Call. Here with me today are Jeff Stoops, our President and Chief Executive Officer; and Brendan Cavanagh, our Chief Financial Officer.

Some of the information we will discuss on this call is forward looking, including, but not limited to, any guidance for 2021 and beyond. In today's press release and in our SEC filings, we detail material risks that may include our future result -- or may cause our future results to differ from expectations. Our statements are as of today, April 26, and we have no obligation to update any forward-looking statements we may make.

In addition, our comments will include non-GAAP financial measures and other key operating metrics. The reconciliation of and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our Investor Relations website.

With that, I will now turn the call over to Brendan to discuss our first quarter results.

Thank you, Mark. Good evening. SBA had a strong start to the year with first quarter results ahead of internal expectations for most of our key financial metrics. Total GAAP site leasing revenues for the first quarter were $505.1 million, and cash site leasing revenues were $504.5 million. Foreign exchange rates were generally in line with our previously forecasted FX rate estimates for the first quarter. They were, however, a significant headwind on comparisons to the first quarter of 2020, negatively impacting revenues by $12.6 million on a year-over-year basis.

Same tower recurring cash leasing revenue growth for the first quarter, which is calculated on a constant currency basis, was 3.6% over the first quarter of 2020, including the impact of 2.4% of churn. On a gross basis, same tower growth was 6%.

Domestic same tower recurring cash leasing revenue growth over the first quarter of last year was 5.6% on a gross basis and 3.1% on a net basis, including 2.5% of churn. Domestic operational leasing activity or bookings representing new revenue placed under contract during the first quarter was modestly lower sequentially than the prior quarter. But on the heels of our newly signed agreements with Verizon Wireless and DISH, we have seen substantial increases in our domestic new lease and new amendment application backlogs. These backlog increases are supportive of significant increases in domestic operational leasing activity throughout the balance of this year.

During the first quarter, amendment activity represented 77% of our domestic bookings with 23% coming from new leases. The big 3 carriers represented 86% of total incremental domestic leasing revenue signed up during the quarter.

Internationally, on a constant currency basis, same tower cash leasing revenue growth was 6.1%, including 1.3% of churn or 7.4% on a gross basis. International leasing activity remained steady during the first quarter. In Brazil, our largest international market, we had another solid quarter of leasing activity. Gross same tower organic growth in Brazil was 8.5% on a constant currency basis.

During the first quarter, 85.3% of consolidated cash site leasing revenue was denominated in U.S. dollars. The majority of non-U. S.-dollar-denominated revenue was from Brazil, with Brazil representing 11.1% of all cash site leasing revenues during the quarter and 8.1% of cash site leasing revenue, excluding revenues and pass-through expenses.

Tower cash flow for the first quarter was $411.8 million. Our tower cash flow margins continue to be very strong, with a first quarter domestic tower cash flow margin of 84.4% and an international tower cash flow margin of 70.8% or 91%, excluding the impact of pass-through reimbursable expenses.

Adjusted EBITDA in the first quarter was $390.1 million. Our industry-leading adjusted EBITDA margin was 71.2% in the quarter. Excluding the impact of revenues from pass-through expenses, adjusted EBITDA margin was 75.6%. Approximately 98% of our total adjusted EBITDA was attributable to our tower leasing business in the first quarter.

Our services business had a very strong first quarter with $43.6 million in revenue and a higher contribution to adjusted EBITDA than any quarter in 2020. Activity levels have picked up materially. The increasing activity levels with our carrier customers have led to increases in our services backlog and a resulting increase in our full year outlook for site development revenue.

AFFO in the first quarter was $286.3 million. AFFO per share was $2.58, an increase of 13.2% over the first quarter of 2020 and a 16.2% increase on a constant currency basis.

During the first quarter, we also continued to expand our portfolio, acquiring 731 communication sites, including wireless tenant licenses on 697 utility transmission structures from the previously announced PG&E transaction, for total cash consideration for all sites of $975.5 million. We also built 62 new sites in the quarter.

Subsequent to quarter end, we have purchased or agreed to purchase 413 additional sites in our existing markets for an aggregate price of $110.2 million. And we anticipate closing on the majority of the sites under contract by the end of the third quarter.

In addition to new tower assets, we also continue to invest in the land under our sites. During the quarter, we spent an aggregate of $6.5 million to buy land and easements and to extend ground lease terms. At the end of the quarter, we owned or controlled for more than 20 years the land underneath approximately 71% of our towers. And the average remaining life under our ground leases, including renewal options under our control, is approximately 35 years.

Looking ahead now. This afternoon's earnings press release includes our updated outlook for full year 2021. We have increased our outlook for most of our key metrics from the outlook previously provided with our prior quarter earnings release. In addition to our increased outlook for site development revenue, which I mentioned a moment ago, we have also increased our outlook for full year site leasing revenue. The majority of this increased leasing revenue outlook is due to our recently signed global amendment and agreement with Verizon Wireless.

One component of this agreement involved the extension of the current lease terms across our existing lease agreements with Verizon, resulting in average noncancelable terms of approximately 8 years. These term extensions increased our outlook for straight-line revenue for 2021 by approximately $22.5 million. While we anticipate higher levels of operational leasing activity throughout the year as a result of the Verizon agreement that will contribute to improved organic leasing revenue growth in future years, we do not expect it to materially impact our previously provided 2021 outlook for tower cash flow and adjusted EBITDA. With regard to site leasing revenue, in addition to the Verizon straight-line impact, we also increased our outlook for better leasing revenue recognition in the first quarter than we previously projected and for other increases in straight-line revenue associated with term extensions separate from the Verizon agreement.

We anticipate our domestic same tower revenue growth will begin to increase in the second half of the year and that we will exit 2021 at the highest rate of the year. Our updated outlook for adjusted EBITDA and AFFO incorporate increased expectations for contributions from our services business, and AFFO is also projected to benefit from slightly better nondiscretionary capital expenditures and cash taxes than we previously anticipated. Our customers ramping efforts around 5G give us great confidence in our projected growth.

As is always the case, our full year 2021 outlook does not assume any further acquisitions beyond those under contract today, and the outlook also does not assume any share repurchases other than those completed as of today. However, we are likely to invest in additional assets or share repurchases or both during the rest of the year.

Our outlook for net cash interest expense does not contemplate any further financing activity in 2021. Finally, our outlook for AFFO per share is based on an assumed weighted average number of diluted common shares of 111.4 million, which assumption is influenced in part by estimated future share prices.

With that, I will now turn things over to Mark, who will provide an update on our liquidity position and balance sheet.

Thanks, Brendan. We ended the quarter with $12.1 billion of total debt and $11.9 billion of net debt. Our net debt to annualized adjusted EBITDA leverage ratio was 7.6x. This leverage ratio is elevated slightly above our target range of 7.0 to 7.5x due to the PG&E acquisition during the first quarter. Our first quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 4.4x.

On January 29, the company issued $1.5 billion of unsecured senior notes due February 1, 2029. These notes accrue interest at a rate of 3.125% per year, and interest is due semiannually on February 1 and August 1 of each year beginning on August 1, 2021. The net proceeds from this offering were used to fully redeem all the outstanding 4% senior notes, to pay all premiums and costs associated with such redemption, and to repay the amounts outstanding at the time under the revolving credit facility and for general corporate purposes. As of today, we have $530 million outstanding under our revolver, and the weighted average interest rate of our outstanding debt is 3% with a weighted average maturity of approximately 4.3 years.

During the first quarter, we repurchased 654,000 shares of our common stock for $168.9 million or average price of $258.33 per share. All shares repurchased were retired. As of today, we have $475.1 million of repurchase authorization remaining under our $1 billion stock repurchase plan.

The company's shares outstanding at March 30, 2021, were 109.3 million compared to 111.6 million at March 31, 2020, a reduction of 2%. In addition, during the quarter, we declared and paid a cash dividend of $63.4 million or $0.58 per share. And today, we announced that our Board of Directors declared a second quarter dividend of $0.58 per share, payable on June 15, 2021, to shareholders of record as of the close of business on May 20, 2021.

With that, I'll now turn the call over to Jeff.

Thanks, Mark, and good evening, everyone. As you have heard, we had a strong start to the year with solid financial and operating results. Activities in the first quarter provide a solid foundation for the rest of 2021 and for the next couple of years.

During the quarter, each of our largest domestic customers provided public disclosures expanding upon their 5G deployment plans, making it clear that upgrades to their existing macro networks will be a key component of their network investment strategies over the next several years. We've begun to see direct evidence of this with significant growth in our leasing application backlog and increasing volumes in our services business. In fact, our services business had its biggest quarter in nearly 7 years. But notwithstanding that strong first quarter performance, our services backlogs have continued to grow substantially, setting us up to have our best services year in a very long time.

The increased services volume and backlog are due to growing network planning and deployment efforts by our largest customers and are supportive of our anticipated growth in domestic organic leasing activity over the coming quarters. Our growing leasing application backlogs further support our expectations around future new leasing activity.

Since our last earnings call, the results of the C-band auction were disclosed. Verizon, AT&T and T-Mobile were all meaningful participants in the auction. Verizon and AT&T both paid premium prices for AWS spectrum, a clear indication that the ability to move quickly in building out the top markets is a priority for them.

On April 1, we signed a new global agreement with Verizon to facilitate their 5G network buildout, including the deployment of their newly acquired C-band spectrum. This new agreement addresses several items, including the extension of committed terms under our existing agreements with Verizon; establishing equipment-specific pricing; terms and conditions for upgrades to Verizon's existing leases; and establishing parameters and volume incentives for new site leases. We are excited to expand our existing strong partnership with Verizon, and we believe both Verizon and SBA will benefit from years of incremental new business between our organizations.

The agreement with Verizon as well as the substantial minimum lease commitment under our new master lease agreement with DISH, and our existing activity levels and building backlogs for both T-Mobile and AT&T are all part of the foundation for a strong couple of years of heightened activity. Our domestic leasing backlogs are as high as they have been in quite some time. We have not incorporated any material amount of revenue from these climbing backlogs in our 2021 outlook because of the timing uncertainty and lags between applications, execution and recommencement, but the future is certainly bright in this regard.

In addition to the exciting events around our domestic leasing and services businesses, our international leasing activity also was solid during the first quarter. During the quarter, we signed up 50% of new international revenue through new leases and the other 50% through amendments to existing leases. We had strong leasing results in Brazil and South Africa, our 2 largest international markets, notwithstanding continued challenges in these markets from the COVID-19 pandemic. We believe the underlying fundamentals for wireless network growth are strong in these markets. And once we see a return to normalcy due to increased vaccine availability and other steps to reduce the COVID impact in these markets, we will be well positioned for increased network investment and organic leasing growth.

In addition to our first quarter operational successes, we also made advances through positive capital allocation and opportunistic financing activities. As discussed on our prior call, we added a large number of high-quality assets to our portfolio through the PG&E transaction during the quarter. And while it's only been about 2 months since we closed on the majority of this transaction, we're very pleased with what we are seeing so far.

We have received significant interest from our customers around these sites, and we have established a very positive working relationship with PG&E, which should allow us to maximize these opportunities through providing efficient access to these assets for our customers.

In addition to the PG&E transaction, we have closed and placed under contract a number of new high-quality assets that should be supportive of incremental future organic growth. We also continue to deploy capital into share repurchases during the quarter, successfully deploying almost $170 million to opportunistically take advantage of dislocations in our stock price while also effectively managing our leverage ratio. I'm particularly pleased that we were able to finish the quarter with a net debt to adjusted EBITDA leverage ratio of 7.6x, just above our target range of 7 to 7.5x. We knew that we would be above our target range temporarily due to the PG&E transaction, but we are ahead of schedule on delevering back into our target range due to our strong first quarter results. In fact, on a pro forma basis for a full quarter's contribution to PG&E -- to EBITDA from PG&E, we would have reported leverage of 7.5x for the first quarter. This result demonstrates the tremendous ability of our company to quickly organically delever even after substantial capital investments.

During the first quarter, we also completed a $1.5 billion unsecured bond offering at the lowest price for unsecured debt in our history. This combination of steadily growing EBITDA and access to low-cost debt gives us great confidence in our long-standing approach to leverage and capital allocation as a key component to growing AFFO per share and creating incremental shareholder value. Our access to low-cost debt continues today, and I'm confident we will have other opportunities to improve our cost of debt financing during this year.

In the first quarter, we produced $2.58 of AFFO per share, over 16% higher than the first quarter of last year on a constant currency basis. We also increased our first quarter dividend by 25% over the prior year while still achieving a very low AFFO per share payout ratio of 22.5%. Our ability to manage our balance sheet, optimize our operations and opportunistically allocate capital will allow us to continue to generate long-term returns for our shareholders that capitalize on the quality and foundation of the strong underlying macro tower business.

So I want to close with some comments about our performance through the pandemic. We're currently operating our Boca Raton headquarters, representing about 33% of our global workforce at 50% capacity, with plans to fully return to the offices at 100% by early July. Our other offices are at varying attendance percentages with U.S. offices generally at higher levels of attendance than our international offices. I can thankfully say that the pandemic has had no material impact on our U.S. business; and internationally, I believe we have navigated the pandemic as well as anyone. In every case, we have worked carefully with local health care experts and our team members to prioritize safety first.

I could not be more proud of the way we have navigated this pandemic to achieve focused safety of our team members and meeting the needs of our customers and communities. I want to thank our team members and our customers for their commitment, collaboration during these challenging times and their contributions to our success. We look forward to an exciting rest of the year and sharing our results with you next quarter.

And with that, Justin, we are now ready for questions.

(Operator Instructions) First, we go to the line of Jon Atkin, RBC.

So I was interested in whether you have seen any actual equipment installed on your U.S. towers kind of the C-band or ORAN variety. And then I had a kind of a bigger question -- bigger picture question about escalators, which historically have been fixed. And we get a lot of questions sometimes about why that couldn't eventually become more CPI-based over time in kind of the core U.S. business.

So on C-band type things, I'll just speak generically, Jon. Signed leases and amendments, yes. Actual installs yet? No. And I -- and you shouldn't read anything more into that other than the typical time it takes to go from execution to installation.

And on the fixed escalators versus variable, I mean that's an age-old question. It obviously depends on which side of the historical inflation you fall on as to what you prefer. It's been discussed. And in every case that I know of in the U.S. is people have landed on the fixed escalator concept. So I don't know what really to tell you to beyond it's a regular topic of discussion and fixed is the way folks have gone.

Got it. And then any more color you could provide on Brazil and just kind of macro topics, economy, carrier landscape, sector and how other people...

Yes. I mean brazil is -- Brazil struggles still with COVID. There's no question the economy is feeling the effects. I believe I saw that the employment rate in Brazil is now currently around 15%. Our folks are optimistic that better times are shortly ahead, but we'll need to see all that.

I will say that notwithstanding the overall bleaker environment there certainly compared to the U.S., our business and our operations continue to do just fine. So we're obviously thankful for that. And communications continues to be a key need there, and carriers continue to answer that need. But in general, it's -- I mean, everyone reads the same things that I do and the same folks I talk to. There's still -- they still have some room to go in terms of improving their COVID position.

Lastly for me, just on the PG&E assets. What -- are there any kind of metrics around portion of the portfolio that is a legitimate quality for lease-up, what types of use cases you're finding when people do submit a lease application And just how to kind of think about the growth profile there?

Well, obviously, all the ones that we've talked about are [end] use. We have interest in some of the other 28,000 that are currently not end use. And the demand has been both for amendments by existing customers and new leases. So we're pretty pleased with how things have gone first couple of months.

Next up, we have Michael Rollins of Citi.

Just first, just following up on your comments regarding the activity levels with the Verizon deal in the books and you had a couple more months of discussions in activity. Is 1Q the trough for domestic organic gross site leasing growth that was reported at 5.6%? And how do you think about what the peak range could be for this metric again now that you have a couple of more months of conversations and agreements? And then just secondly, are there any updates on the possible timing for merger-related churn relating to the T-Mobile and Sprint deal?

Yes. Mike, on the same tower growth rates, Q1 is certainly right around the trough. It's possible that Q2 also would be at a similar level based on what we've got in line today. A lot -- just as a reminder that metric is a calculation based on the trailing 12 months, so it's really backward looking. And a lot of the increasing -- significant increases we've seen in the organic leasing activity has just started to happen recently here. And so I expect that it'll start to increase in the second half of the year, and we'll exit the year at a higher rate and frankly, continue to increase as we move into next year.

As far as how high could it be, I can't really say for sure. I think on our previous call, we talked about, on a net basis, getting to mid-single digits. I think that, that is certainly achievable. The big question mark is the timing of the churn, which maybe leads me to your third question, which is about the Sprint, T-Mobile overhang. The numbers that we gave on our previous call are still pretty much the same. We don't have -- nothing's occurred that would make us change our expectations.

Just as a refresher, on this year, we have about $8 million or so of impact to 2021, is what we're anticipating. We've already incurred a decent portion of that. So that's probably about the right number for this year. Next year is expected to be a little bit bigger, closer to $30 million of impact next year before it steps down the following couple of years to somewhere around $10 million to $15 million per year until we see the biggest impacts potentially in 2025 and '26.

Having said all that, that's an estimate based on the timing of when those leases -- the overlapping leases come up for their maturity dates. It's certainly possible that T-Mobile's plans will change them in terms of what sites they need to keep. And so we'll have to keep our eyes on that, and we'll certainly inform you if anything changes.

Next up, we have the line of Phil Cusick with JPMorgan.

Can you help us think about activity ramping from this year to next year as we go from the guided activity and talking about an exit run rate accelerating from here? I just want to pull the churn discussion out and really think about what activity could be doing.

Well, it's clearly going to accelerate, Phil, as the C-band spectrum gets cleared. Verizon themselves stated that one of the reasons for the dream was to be able to get ahead of the actual clearing and have the equipment already in place and ready to go. But I think it's a practical matter there will be a fair amount of just-in-time delivery of new C-band equipment as it relates to when they get the spectrum cleared. And AT&T's commentary was that much of their C-band spending does not occur until the beginning of 2022. So if you take what our customers set at face value, we should go through this year continuing to grow as we move through 2022.

And if I was to use 2019 as a good example of what happens when 2 carriers are really spending, do you think 2022 activity could be better than that $63 million or something in 2019?

I mean it could. Well, I don't want to get too far ahead of ourselves. But I don't -- if you take your premise of all 4 carriers being very, very busy, I think 2022 will be that year.

Okay. Last thing, the service this quarter, just really strong. Anything that we should think of as sort of like a onetime or not repeatable in the second quarter? Or is that a good new run rate?

I don't know how long we'd take it out, but it's -- there's nothing that we know of today as to why Q2 should be materially different.

Next, we have the line of Spencer Kurn, New Street Research.

I was wondering if you could elaborate on the deal you struck with Verizon. One of your peers signed a more holistic deal where a certain amount of revenue was contracted annually, and you guys didn't. So I was curious why did you take that approach.

We historically have thought it best for all parties to operate on a more a la carte basis, Spencer. So you're correct. Our straight line only includes the results of the term extensions. It does not include any type of use right because that's a different deal. And that's just the way we historically have run the business and like to do things. I don't know if it's any more complicated than chocolate versus vanilla.

Well, no, it's worked out favorably for you in the past, so we'll have to see how things shake out. And one follow-up. In your prepared remarks, I think you said that you didn't include any benefit from the increase in your backlog that you saw this quarter because of the uncertainty around the commencement timing. Is it the case that you had already baked in some impact of the C-band into the guide, and the application that you saw this quarter basically got your expectation? Or is it the case that if these sites do commence, it could be incremental to your expectations that you laid out last quarter?

Yes. Spencer, it's Brendan. The -- we did certainly expect and included our original guidance an increasing amount of leasing activity throughout the year. The backlogs are supportive of that. And the big question mark, which we did mention in our prepared remarks, it's just simply the timing of those applications turning into signed agreements and then the next step of the signed agreement getting dates at which the rents would kick in. And so we've got certain assumptions we've made around how that's going to play out. It certainly will be increasing as we move through the rest of the year, but that was already assumed. So to the extent that we are off it all and it is a little bit faster, I guess it could be higher. But I think as we get later in the year, any potential for that to be a material impact is very limited.

Next, we have the line of Rich Prentiss of Raymond James.

Was a little surprised with the cash taxes change. How did you get there?

You broke up a little bit. I think you're asking about the change in our cash taxes.

Why did our cash taxes lower.

Yes. So the cash taxes for the balance of the year is actually in part due to expected benefits that we have now from the PG&E acquisition in terms of amortization of that asset that was not, I think, fully more when we gave the original guidance because that deal actually just closed right before we gave the last guidance. So that's something we're going to benefit from. Any other things that affected it are fairly minor differences in some of our international markets, but PG&E was really the biggest difference.

As we think longer term, how should we think about cash taxes [moving on]?

Well, obviously, as a...

I mean they're going to go up.

Yes, they're certainly going to go up. It's interesting because, as a REIT, we obviously have limited federal cash taxes at any point, but there are currently state cash taxes that we do pay because we're not paying our full AFFO out as a dividend. So there's some opportunity to improve on that front. But on the other side, the more impactful thing will be our international taxes, which, as we continue to grow in those markets and some of the depreciation shields run off, you'll see that cash taxes in the international markets decline.

Makes sense. And how should we think about the CBRS opportunity? What's the timing and size of being able to put capital work?

The timing is now. The primary, I think, interest right now will come from municipalities, private networks. We're actually building some school systems to help bridge the digital divide that are focused on CBRS. And while some of our cable customers are also active, I think in terms of the national wireless carriers, they're going to focus really on the mid-band and use the CBRS stuff really as more of a niche solution for them. So the biggest opportunities really are with CBRS, in particular, are with outside of the national wireless carriers today.

Makes sense. And have you thought about giving us a table showing Sprint or as far as colo versus other sites as one of your peers did recently?

We haven't thought about it, but we will think about it.

Next, we have the line of Batya Levi, UBS.

First of all, just (inaudible). How do you think [the next] would change toward the end of the year and maybe into next year or as C-band becomes more of the mix down the road? And how does the amendment revenue compare to prior upgrades?

You broke up on a lot of that. And I don't think any of the 3 of us here heard everything you said. Could you try that again?

Sure. I'll try again. I was asking about the amendment revenue mix. I think it was 77% this quarter. How do you think about that trending towards the year-end and maybe with the C-band deployment becoming a part -- bigger mix of -- bigger part of the mix. And [just in] average in terms of how do these amendment revenues compare on a monthly basis now versus prior upgrades.

Okay. The 77%, and this is purely a guess, but I'm going to guess it goes down as we hit year-end mostly because all the DISH business is going to be new leases. So that's probably going to -- to the extent it changes, it'll be for that reason because most of the other activity is -- from the other 3 carriers is definitely going to the amendments.

And in terms of the pricing, we really never get into that. But I will tell you that based on a load and a usage basis, the pricing is entirely consistent with what our history has been.

Okay. Got it. Maybe one quick follow-up. The new tower purchases, 413, can you tell us where they were? And how was the M&A activity in those markets?

Those are actually under contract, most of those, Batya, and they're mostly located internationally in existing markets of ours.

Next to the line of David Barden, Bank of America.

I guess a few questions. So on the services activity, in the past, we've had 1 or 2 carriers being the driver of that. I guess how democratically distributed would you describe services activity running ahead of expectations at this stage be?

I guess the second question was just on this commencement question, Mark, and some of the comments that John Stankey made about "skittishness" with respect to supply chain. Any observations, Jeff, maybe that you guys have from your approach as to how you see the probability, the confidence interval around accelerating activity given those questions [from the start]?

Yes. On your last one -- well, your first one, it's still not too democratically spread out. It's still -- our services revenues are still disproportionately coming from a few actors, which actually is good because we have the opportunity to expand that base as we move through the year. In terms of your second question, we haven't really seen any supply issues yet, David. That's not to say if somebody says that they're out there and they are, we haven't seen them yet.

And in terms of what it's going to mean for us, as I think we've explained many, many times, once a lease or amendment is executed, when it actually begins to accrue revenue is the later -- or excuse me, the earlier of the date certain or when we actually install the equipment. So we're all rooting for fast equipment availability and dates of install that are earlier than the specified end date in the contract. If that happens, we'll begin to accrue greater revenue earlier. But I mean right now, as we think about life and how this year and next year is going to play out, we're not really thinking about equipment delays.

Okay. Great. And then if I could do one more follow-up. Just in light of the PG&E deal, obviously, now that that's kind of ripened and closed and -- has there been an elevated or any amount of inbounds from other corners of the world looking to kind of do what PG&E has done? Or was that more of a forced situation that was kind of unique?

Well, PG&E had its own unique needs, but we have had many, frankly, inquiries from other utilities around the country.

Next is the line of Nick Del Deo, MoffetNathanson.

First, returning to PG&E sites. If you think back to other assets you've acquired that may not have been adequately marketed, about how long would it take for them to kind of hit their stride and start seeing the benefits of being plugged into your sales engine? Was it basically right away? Or did it take a little time?

No. It always takes time, always takes time. I mean 6 months to a year to really get to the point where it's just like a homegrown asset.

Okay. Okay. That's helpful. And then maybe one on the M&A front. I would say a lot of talk of higher capital gains taxes this year. Would you expect that to potentially increase the pool of towers for sale in the U.S.? Or are you not hearing much on that front?

It has historically, Nick. So I would expect it to do so again, but if I don't know that the magnitude will be so great that it'll be like a tsunami of deals. But clearly, there will be tax sensitivity if the capital gains rates are increased.

Okay. So maybe you pick up a few more but not enough to really change the trajectory or anything.

I wouldn't say we're going to get to 20% portfolio growth off the tax law changes.

Next, we have Tim Long from Barclays.

Two questions if I could. First, I think you guys mentioned something on CBRS and kind of digital divide, some benefits there. Could you talk a little more broadly about some of the government push for more rural broadband and what you think that might mean overall for your business? And then second, can you just update us on any updated developments on kind of the whole edge compute data center world where we know you guys are kind of kicking the tires right now?

Yes. The government involvement in broadband and bringing broadband to more rural areas is right in the middle of that, Tim. The initial bills have been mostly focused on fiber because they are trying to establish a minimum uplink and downlink speed, which for fixed wireless today is not available. And there's a tremendous amount of lobbying going on right now to basically free that money up for wireless as well as fiber, and that all remains to be seen.

In addition, the other aspect of the legislation that's been proposed is it's mostly for CapEx. And we've tried to make it clear through our industry channels that it's really not CapEx that you need. There's a lot of CapEx out there. If somehow the relief could be structured in the way that guarantees rental payments and OpEx for periods of time, then I think you really have something that's going to be impactful for our industry.

So the work that we're doing so far actually has not revolved so much on any federal programs. There is an E-Rate program that is for education and it's federally administered. That's part of it. Mostly, we have been working with counties, school districts and actually private funding that's interested in economic development to make this stuff happen.

So we're excited about the potential. What we've done to date hasn't really involved much of any federal funding because that cake is still not baked yet.

The edge compute, it continues to be a focus of ours. I continue to think it's going to bear a lot of fruit. We actually have 2 new customers and 2 new facilities that are under construction since our last call. But what really needs to happen, and we've been very clear on this, I think, from day 1, is you need to have a use case world where you need computing power right at the sell side. And that's -- we're not there yet. I think we're going to get there, but until we get there, that's when you're really going to know that the edge computing opportunity is the good one that we think it's going to do.

Next, we have Walter Piecyk with LightShed.

Jeff, I want to go back to Phil's question just drilling on '22. But do you think '22 is the peak year for colo and amendments?

I don't know. I mean we'll see -- it all depends on how quickly our customers want to spend, Walt. You had AT&T saying they're not really going to start their C-band work until 2022. So I mean it could be, but it also may not be.

Got it. But I was I think Phil had you drilled down pretty nicely and it's $60 million versus $63 million, whatever. So you have a good sense of where '22 is and how much of Verizon and maybe a smattering of DISH and stuff like that's in there. So I'm just curious if you think there's much left over to take that number even higher in '23.

Yes. I don't think we -- I mean I would disagree that we know enough now to have 2022 fully baked and compare that to what ultimately will be the full build-out plans for our customers, and this is going to be multiyear. It's not just a 2-year gig. And it's not even really starting until late this year at the earliest. So I know the more we talk, the less I'm prepared to say 2022 will be the [top end].

Got it. And then, Brendan, I think when you were talking about -- I mean, in the last 2 quarters, you gave us a good sense of the churn that was ordered out of T-Mobile and Sprint. So I think you reiterated that 8-ish number, 9-ish, whatever. But I think, Brendan, you also mentioned a lot of that has already been loaded in the first quarter, so I mean -- so was it a couple of million in Q1 of that 8-ish or 9 that has already kind of hit your numbers?

Yes. It was a little less than 2 million. It was probably about 1.8 million or so. So it'll be a little bit bigger. So yes, I mean we saw -- a bunch of these were leases that ended right at the end of last year, at the beginning of this year. So that piece, we already knew about. And then there are some other extra pieces that we're assuming happen that may or may not, but they're relatively small.

So when you talk about, Brendan, the mid-single-digit growth, is it -- should we think about that including that Sprint number or Sprint, NEXTEL -- or, NEXTEL, T-Mobile number? Or is it after that?

Yes. No. Long term -- the question that I was answering was what do we think it could get to in terms of the organic growth rate. And -- so yes, that's a net number, but it's also...

Including Sprint because obviously, that Sprint churn is going to start cranking up and...

Yes. But in any given year -- but obviously, in any given year, it could be higher or lower because the Sprint churn is lumpy. So depending on the year. Some years will be below that, and I guess, conceivably, it could be higher than that if you had really low churn and high leases themselves.

I -- it's certainly like a game -- it's like a game shaper long term, where it's like that number we're always waiting for. So -- and then last question is on the DISH massive -- or DISH, are they using Massive MIMO antennas in terms of their new lease activity? Or is that -- are they using a more traditional approach?

More traditional.

Next, we have Brett Feldman from Goldman Sachs.

Two questions if you don't mind. We're talking a lot about C-band and the historical conventional wisdom has always been higher frequencies are more useful in dense areas and less useful in less dense areas, and your portfolio seems to skew a little more less dense. Now that you actually have insight from some conversations with carriers about how you're thinking about using the C-band, what level of visibility or confidence you have that they're actually going to go to all of the towers they currently use with you in markets where they hold C-band licenses and upgrade them to support C-band? Or do you think there are some towers where it won't fit? And the other side of it, if you put your optimist hat on is to what extent do you actually think they're going to increase their density with you, meaning going on sites they maybe historically have not as they deploy C-band?

And then the second question, if I sort of think back on some of the earlier questions before, it sounds like you really haven't changed your approach to your leases. You're sticking with fixed escalators. You still like a la carte. And there are some emerging operators who have signaled that maybe that has created opportunity for them as they've been able to get into some spaces where maybe you're not winning business because you haven't been as flexible. How have you gotten comfortable with that trade-off that as you went through this fast iteration of major negotiations, it doesn't seem like you budged a lot?

Well, I would put out our historical results as the reason why we're comfortable with that, in our first quarter results and where we will be this year and where we'll be next year and kind of leave it at that. In terms of the -- your first question on density, I think we've seen enough so far to know that it's going to be fairly broad. I mean I would never tell you to count on 100% of every lease, but it is going to be broad. It's going to be closer to 100 than it was to 50.

And we won't really know, I think, until we get into it a little bit, particularly with the existing carriers as to how much new leasing will come about this because, clearly, they're all pursuing co-locations first because that's faster. It's cheaper. It's just a smart way to go about it. And it'll be a little bit of time before we see the demand for new leases, but it would be like anything else. I mean if the demand is good enough and there's money to be named, they're going to co-locate.

Next, we have Eric Luebchow of Wells Fargo.

Just wanted to follow up on that last point. You mentioned in the Verizon deal, there were some parameters around new site builds, and it seems like recently, the big 3 wireless carriers haven't done as much with the public [towercos] on new builds. So you see an opportunity beyond just the initial amendment activity from new sites either with Verizon or any of the other carriers? Or is it just too early to tell at this point?

No. We definitely see an opportunity, and this agreement will facilitate that.

Okay. Great. And then just one more for me. Just wondering in the initial discussions with the C-band winners, your large customers. Do you see any -- and then the opportunity beyond just C-band radios perhaps then looking at lower frequency spectrum upgrades to support uplink to allow them to get better propagation out of their mid-band spectrum?

Yes. I mean there's a variety of requests and equipment configs that go about this. It's not just strictly C-band radios. A big part of this is the Massive MIMO antennas. That's different than what your question was. But we're seeing a whole variety of different things, Eric, which, really, the unleashing of the C-band has now given everybody the reason to go back to the macro networks that they knew was coming. So here we are.

Next, we have the line of Colby Synesael of Cowen.

I appreciate with the Verizon MLA that there's not a use [even]. I'm curious in deals like that, if you put in place some type of an incentive to potentially go on to X amount of their sites faster than otherwise, and if, for example, they do that, they get pricing lower than they might otherwise. I'm just curious if there's those types of structures in deals like this. And then secondly...

Yes. We do have an incentive, Colby. And you say deals like this. I mean this is the first global master agreement we've ever done with Verizon. So...

Okay. But I guess to your point, there's an incentive that if they go on to X amounts of sites by X amount of date, it would be more cost effective on a per site basis than if they took longer.

Yes. That's about X price, X day equals X discount.

Got it. And then secondly, Brendan, I'm curious if there's any more refi opportunities. Obviously, that was a nice savings. And then lastly, I'm just curious what drove the AFFO beat. I think that's where, in terms of revenue, EBITDA, AFFO, that's where we saw the biggest beat. And if I just take your first quarter number and annualize that, that already gets me to the midpoint of your 2021 guidance. Just curious if there's anything onetime in there.

Yes. Colby, so refi opportunities, there definitely are opportunities without doubt. We have some bets that is reaching points where it can be refinanced. And based on the current market environment, we would expect to be able to refinance it at better rates than we're currently paying on several of those instruments. So I'd just say stay tuned because we're constantly looking at that, and I would expect us to take advantage of those opportunities.

On the AFFO beat, we -- I think you're referring to basically our increase in our outlook for it in addition to the beat. But yes, I mean, I guess they're onetime in some sense. One of the main contributors was in the services area, which we already talked about. We actually had a very strong quarter. So the margin contribution from services was very high. That's not a recurring business. So I guess you could call it onetime. But we do expect to continue to see a similar level of activity throughout the year based on the backlog that we have. We also...

And I guess to that point -- just to interrupt you, sorry. And I guess I think Cusick asked this, but are you assuming a similar margin profile to that as well?

Yes. Yes. We are. And that is subject to shift a little bit depending on the mix of [site acq] type work versus construction. Construction is typically a little bit lower margin. But as of right now, most of the work that's happening is -- a lot of it's preconstruction. So I would expect that to stay similar. And as we get towards the latter part of the year, you'd probably start to see more construction work, and so maybe the margin starts to shift down slightly at that point. So the projects have much higher dollar -- they have higher volumes. That's right.

So -- and then other contributions on AFFO, it's a couple of different things. We obviously had a little bit better cash taxes, which we talked about on an earlier question. We also had lower nondiscretionary CapEx than we had expected. We even lowered our guidance for the full year slightly for that as well. So it's a mix of each of those things. And frankly, the -- on the per share number, the share buyback helped a little bit as well in reducing our share count. So a mix of all of those things.

Okay. And I mean, I guess the point, though, is that when I look at your -- taking that number, I already get to the midpoint of your guidance. It would seem that, that number should be going up through the course of the year.

Yes. I mean some of it's timing related. I mean we did do well in the first quarter in certain areas like the CapEx and, frankly, even our SG&A costs that we expect to be -- both of those items to be a little bit higher as we move through the year. So some of it's just a timing issue, but overall, we were able to improve our full year guidance in part because of the performance in the first quarter.

Next, we have the line of Brandon Nispel from KeyBanc Capital Markets.

Great. Two questions. Jeff, a question for you. Can you quantify the year-over-year change in the backlog of signed but not commenced new leases? And I guess when was the last time backlogs were this high? And the second question was around the minimum commitment that you would have with DISH. How do the minimum commitments trend throughout the life of the contract?

Well, they do have certain time periods, which we're not going to disclose. So there's X business by Y day, and so it's broken out in more discrete periods over the contract. So there's definitely incentives and commitments to move things along during the life of the lease.

In terms of the dollar volume and the backlog, we generally internally talk about backlogs in terms of the number of amendments and the number of leases. And where we are today versus where we were a year ago, which is -- remember, we haven't even got to the T-Mobile and Sprint -- or maybe we just got to the finish line right about now. I mean they're more than twice as high, but it's a different time.

And I guess when was the last time that backlogs were this high?

It's been a few years.

It's been a number of years.

Yes. I mean we've had periods -- obviously, when you go back to the LTE upgrades, they were high. They probably were higher than they are now, although we're still building and that may very well be eclipsed in the future here. But if you go back a couple of years ago when T-Mobile was particularly active, we saw some higher levels. But we're definitely at a high level by historical standards even if it's not the highest, and it's continuing to build, which is the most...

Well, a recent high. Yes. I mean the LTE, the one thing we've made clear before is back going from 3G to 4G, the average amendment price was much higher because of heavy equipment nodes that were being added. We certainly expect volumes to evolve with that, but pricing will be a little bit different this time around given the less heavy additional wave loads that were being requested as part of the upgrades.

Next, will come from David Guarino, Green Street.

A question for you on data center. So since the start of the year, we've seen a pickup in the number of transactions. Have you guys evaluated any other acquisitions since the one last time in Jacksonville. And I guess what's the company's appetite to grow the data center footprint?

The -- we have a greater appetite provided that it comes along with edge deployments at our cell sites. So as that continues to grow and as we continue to demonstrate the synergy between a regional data center and the next centers at our tower sites, which is what we're beginning to now experience in Jacksonville, in particular, we would continue to look.

We're very mindful of what we are, though. We're a wireless infrastructure company. And these regional data centers, if any, would be pursued only because of the success or the perceived success we'll be having around the cell sites.

That's helpful. And then is that just in the U.S., you would be looking? Or could we see you guys look internationally as well?

The concept applies everywhere.

The final question comes from the line of Matthew Niknam of Deutsche.

Can you give any more color in terms of the latest you're seeing from DISH and when we should anticipate them to maybe become a more meaningful driver for cash site leasing revenue growth in upcoming quarters? And then one housekeeping item maybe for Brendan, if you can give us the contribution from a revenue and tower cash flow perspective from PG&E in 1Q. And should we effectively double that into 2Q given the full quarter?

Gladly. Yes. On PG&E one, I believe the contribution was somewhere between $4 million and $5 million of tower cash flow and only slightly higher on the revenue side because the costs are very limited there. And you should pretty much double that because it closed pretty close to the middle of the quarter.

Yes. And on DISH, Matt, a lot of signed leases times 10 for applications, so tremendous amount of activity. But what -- whether we see revenue out of that this year will depend solely on how quickly DISH moves through the site acquisition, permitting, construction phase of things. And that's -- I can't give you any more guesstimate than what I've said because that's what we -- that's what's going to drive revenue recognition this year, is the pace of the installs for DISH. But the -- I mean it's all moving in the right direction.

Thank you. And thanks, everyone, for joining us. We think it's going to be a great year. And we look forward to sharing our progress with you next quarter.

Ladies and gentlemen, that does conclude the presentation for this afternoon, and thank you for all your participation. You may now disconnect.