SBA Communications Corp (SBAC) 2021 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the SBA Fourth Quarter Results Call. (Operator Instructions) As a reminder, today's conference is being recorded. I'd now like to turn the conference over to Vice President of Finance, Mark DeRussy. Please go ahead.

Good evening, and thank you for joining us for SBA's Fourth 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 2022 and beyond. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, February 28, and we have no obligation to update any forward-looking statement 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 it over to Brendan to discuss our fourth quarter results.

Thanks, Mark. Good evening. SBA finished 2021 with our best quarter of the year. The quarter included financial and operating results ahead of our expectations and continued strong momentum into 2022. Total GAAP site leasing revenues for the fourth quarter were $539.4 million, and cash site leasing revenues were $529.8 million. Foreign exchange rates were generally in line with our previously forecasted FX rate estimates for the quarter. They were a headwind though on comparisons to the fourth quarter of 2020, negatively impacting revenues by $2.1 million on a year-over-year basis.

Same-tower recurring cash leasing revenue growth for the fourth quarter, which is calculated on a constant currency basis, was 4% over the fourth quarter of 2020, including the impact of 2.7% of churn. On a gross basis, same-tower growth was 6.7%. Domestic same-tower recurring cash leasing revenue growth over the fourth quarter of last year was 6.3% on a gross basis and 3.9% on a net basis, including 2.4% of churn.

Domestic operational leasing activity or bookings representing new revenue placed under contract during the fourth quarter was at its highest level of the year. This was the highest quarterly level since 2014. Even with this high level of execution, we continued to replenish our domestic new lease and new amendment application backlog, which remained very healthy at year-end. These backlogs support our expectations for continued strong domestic operational leasing activity throughout 2022.

During the fourth quarter, amendment activity represented 48% of our domestic bookings, with 52% coming from new leases. The big 4 carriers of AT&T, T-Mobile, Verizon and DISH represented 96% of total incremental domestic leasing revenue signed up during the quarter.

In the fourth quarter, reported domestic site leasing revenue was slightly impacted by the timing of revenue commencements versus our internal estimates, primarily with regard to new DISH leases. This is a timing issue only, as the number of leases executed exceeded our expectations.

During the quarter, we also had slightly less domestic churn than our internal estimates due to delays in timing versus our prior estimates. Internationally, on a constant currency basis, same-tower cash leasing revenue growth was 4.3% net, including 4.4% of churn or 8.7% on a gross basis.

International leasing activity increased again and was at the highest level of the year. As anticipated, the impact of international churn increased in the quarter as we began to see greater impacts from carrier consolidations and other network and contract modifications in Central America, although there were some churn timing delays that resulted in slightly lower reported international churn for 2021 than we previously forecasted.

In Brazil, our largest international market, we had another solid quarter of leasing activity. Gross same-tower organic growth in Brazil was 9.8% on a constant currency basis. During the fourth quarter, 84.9% 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 11.3% of consolidated cash site leasing revenues during the quarter and 8.1% of cash site leasing revenue, excluding revenues from pass-through expenses.

Tower cash flow for the fourth quarter was $434.1 million. Our tower cash flow margins remain very strong, with a fourth quarter domestic tower cash flow margin of 85% and an international tower cash flow margin of 70.1% or 91.6%, excluding the impact of pass-through reimbursable expenses.

Adjusted EBITDA in the fourth quarter was $409.1 million. The adjusted EBITDA margin was 69.8% in the quarter. Excluding the impact of revenues from pass-through expenses, adjusted EBITDA margin was 74.5%. Approximately 97% of our total adjusted EBITDA was attributable to our tower leasing business in the fourth quarter.

During the fourth quarter, our services business produced record results for the third quarter in a row, with $55.9 million in revenue and $12.9 million of segment operating profit.

Notwithstanding these record results, we were able to completely replenish our services backlog, finishing the year at an equal level to our company all-time high backlog from September 30. Based on this backlog and the continuing high activity levels by our customers, we are projecting another very strong contribution from our services business in 2022.

AFFO in the fourth quarter was $310.8 million. AFFO per share was $2.81, an increase of 13.3% over the fourth quarter of 2020 on a constant currency basis.

During the fourth quarter, we continued to expand our portfolio, acquiring 59 communication sites for total cash consideration of $38.4 million. We also built 88 new sites in the quarter, including our first 7 sites built in our new market, the Philippines. Jeff will touch on our expansion into the Philippines in a moment.

Subsequent to quarter end, on January 4, we closed on our previously announced deal to acquire towers from Airtel Tanzania. This transaction added 1,445 sites to our tower portfolio at a cash purchase price of $176.1 million, and the impact of this transaction is fully included in our 2022 full year outlook.

Additionally, subsequent to year-end, we have purchased or are under agreement to purchase 371 sites in our existing markets for an aggregate price of $137.1 million. We anticipate closing on these sites under contract by the end of the third quarter.

In addition to new tower assets, we also continued to invest in the land under our sites. During the quarter, we spent an aggregate of $13.6 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 72% of our towers, and the average remaining life under our ground leases, including renewal options under our control, is approximately 37 years.

Looking ahead now, this afternoon's earnings press release includes our initial outlook for full year 2022. Our outlook reflects a significant increase in organic leasing revenue contributions from new leases and amendments. This increased organic leasing contribution is largely due to the increased pace of new leasing activity we experienced during 2021, as well as some contributions from anticipated continued strong organic leasing activity during 2022.

Our outlook for contributions from new leases and amendments is based in part on estimates of lease commencement timing with each of our customers and shifts in the timing of equipment installations may have minor impacts on these estimates as they did in the fourth quarter. We are also projecting increases in contributions from contractual escalations. Most of the increase is projected in our international markets, where inflationary increases are expected to drive increased rental escalations.

In addition, our leasing revenue outlook contemplates increased impacts from customer churn in 2022. The primary increase is in connection with the anticipated Sprint-related decommissioning. Our outlook incorporates a current estimate of approximately $30 million of churn in 2022 related to legacy Sprint leases, and our previously provided estimates of aggregate Sprint-related churn over the next several years remains unchanged.

Our total churn projections for 2022 are based in part on internal estimates of a variety of factors that can impact the timing of actual revenue cease dates. To the extent that there are variances from these internal estimates, there may be impacts on our reported 2022 churn. However, any differences in reported 2022 churn from these variances is a timing issue and does not change our expectations for long-term aggregate churn.

In addition to Sprint churn, our outlook includes increased churn in our international markets, primarily due to carrier consolidation in Central America.

Our full year 2022 outlook includes the projected impact of the Tanzania acquisition, but it does not assume any further acquisitions beyond those under contract today. 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 year.

Our outlook for net cash interest expense and for AFFO do not contemplate any further financing activity in 2022. However, we will continue to look for opportunities to optimize our balance sheet and our cost of debt.

Finally, our outlook for AFFO per share is based on an assumed weighted average number of diluted common shares of 110 million, which assumption is influenced in part by estimated future share prices.

We are very excited about 2022. Our customers are all very active, and we expect to produce very strong results as we help them to achieve their network build-out goals.

And with that, I'll now turn things back over to Mark, who will provide an update on our liquidity position and balance sheet.

Thanks, Brendan. We ended the quarter with $12.4 billion of total debt and $12 billion of net debt. Our net debt to annualized adjusted EBITDA leverage ratio was 7.3x. Our fourth quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 5.0x, the highest in the company's history.

During the fourth quarter, the company through an existing trust issued $895 million of 1.84% Secured Tower Revenue Securities Series 2021-2C, which have an anticipated repayment date of April 9, 2027 and a final maturity date of October 10, 2051. In addition, $895 million of 2.593% Secured Tower Revenue Securities Series 2021-3C, which have an anticipated repayment date of October 9, 2031 and a final maturity date of October 10, 2056. The aggregate $1.79 billion of these Tower Securities have a blended interest rate of 2.217% and a weighted average life through the anticipated repayment date of 7.8 years.

Also during the fourth quarter, the company repaid at par the entire aggregate principal amount of the 2013-2C Tower Securities, which had an anticipated repayment date of April 11, 2023. And we also redeemed the entire aggregate $1.1 billion principal amount of the 2016 4.875% senior notes, as well as paid all premiums and costs associated with such redemption.

As of the end of the year, the weighted average interest rate of our outstanding debt was 2.6% with a weighted average maturity of approximately 4.8 years. And the interest rate on 97% of our outstanding debt is fixed. As of today, we have $560 million outstanding under our $1.5 billion revolver.

During the fourth quarter, we repurchased approximately 786,000 shares of our common stock for $263.6 million at an average price per share of $335.26. Subsequent to year-end, we repurchased an additional 1.047 million shares for $350 million at an average price per share of $334.40. Since the beginning of 2021, we have repurchased 2.9 million shares of our stock at an average price of $318.59 per share. All of these shares repurchased were retired. We currently have $586.4 million of repurchased authorization remaining under our $1 billion stock repurchase plan. The company's shares outstanding at December 31, 2021 were 109 million compared to 109.8 million at December 31, 2020, a reduction of 0.8%. Pro forma for the repurchases after year-end, we have reduced our outstanding share count by 1.7%.

In addition, during the fourth quarter, we declared and paid a cash dividend of $63.1 million or $0.58 per share. And today, we announced that our Board of Directors declared a first quarter dividend of $0.71 per share, an increase of 22.4% over last quarter, payable on March 25, 2022 to shareholders of record as of the close of business on March 10, 2022. Today's dividend announcement represents a payout ratio of 25% of fourth quarter AFFO per share.

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

Thanks, Mark, and good evening, everyone. We had a very strong finish to the year. again, generating double-digit percentage growth in AFFO per share. We produced record results in several categories, and we are set up well for a very strong 2022.

2021 lease-up activity levels were ahead of plan in both the U.S. and internationally. The U.S. market was particularly strong, with the highest level of organic new leasing revenue per tower signed up in over 7 years during the fourth quarter. T-Mobile remained extremely busy investing in their continued nationwide deployment of 2.5 gigahertz and 600 megahertz spectrum; DISH continued signing up a large number of new lease agreements in support of their brand-new nationwide 5G network; Verizon continued its ramp-up for their C-band deployments and AT&T remained a steady contributor. These significant activity levels have also translated into meaningful U.S. services results where we produced record services revenue and margin results for the third quarter in a row.

Domestic activity has remained strong through the first 2 months of 2022, and both our leasing and services backlogs have remained very healthy, notwithstanding the solid fourth quarter results we produced in both segments of the business. Based on this backlog, commentary from our largest U.S. customers disclosing robust capital expenditure plans for 2022, and the size and scope of our customers' 5G deployment plans, we expect to continue seeing elevated domestic leasing and services activities throughout 2022, into 2023 and perhaps beyond.

Internationally, we had our strongest leasing quarter of the year. Demand remains high in many of our largest international markets, and we expect to continue to see it remain strong throughout 2022. During the fourth quarter, we signed up 68% of new international revenue through new leases and 32% through amendments to existing leases. We had strong leasing results in Central America, Brazil and South Africa. In addition, the recent 5G spectrum auction in Brazil and the upcoming 5G spectrum auction in South Africa give us confidence that we will continue to see increasing network investment, and thus, leasing demand throughout our largest international markets.

We are also excited about the potential from our 2 newest international markets. In early January, we closed on our previously announced acquisition of over 1,400 sites from Airtel Tanzania. We believe this market has great promise for us, not only in terms of organic lease-up on our acquired sites, but also in terms of new tower build opportunities. Significant wireless investment will be needed over the upcoming years, and we are well positioned to support our customers in Tanzania and participate in the growth of wireless throughout this market.

In addition, during the fourth quarter, we built our first brand-new greenfield sites in the Philippines. The Philippines is a market that we have studied for a number of years, and we are very excited about the prospects for favorable growth over the next few years. We have established operations in the market, opening a local office, hiring staff, working with the appropriate government agencies for all necessary permits and establishing strong positive relationships with each of the 3 major mobile network operators in the market.

We are initially and primarily focused on a greenfield new build strategy in the Philippines, and we anticipate the demand to support significant new tower build numbers for the next several years. We believe our significant long-standing tower operation expertise will provide meaningful value to our customers in this market and will give us a competitive advantage. I look forward to sharing results with you in the future as we continue to grow in the Philippines. Overall, internationally, we have a lot of very exciting things happening, and we believe 2022 will be a very good year.

Throughout the last year, we have done an excellent job with regard to our balance sheet and capital allocation priorities. During the last year, we have completed a number of significant low-cost refinancings, which have meaningfully improved our balance sheet positioning, particularly ahead of a period with potentially increasing interest rates. Our early refinancing of several of our outstanding debt securities during 2021 extended out maturity dates and produced the lowest weighted average interest rate in our company's history at 2.6%. The substantial majority of our interest cost is also locked in at fixed rates.

We have continued to target our net debt to annualized adjusted EBITDA leverage in a range of 7 to 7.5 turns, and have invested the available capital produced by that strategy into portfolio growth and share repurchases. Since the beginning of 2021, we have grown our site portfolio by over 8%, and we have repurchased 2.9 million shares of our outstanding stock.

We have also been able to continue to meaningfully increase our quarterly dividend, today announcing an increase in our dividend of over 22%, while still retaining over 75% of our projected AFFO for additional discretionary investment. We believe that all of these factors will be additive to AFFO per share, and as a result, shareholder value creation.

I'd like to take a moment to reflect on full year results. They were very good. Year-over-year, we grew cash site leasing revenue, tower cash flow, adjusted EBITDA and AFFO per share by 6.3%, 6.5%, 7.6% and 13.9%, respectively. We posted industry-leading tower cash flow and adjusted EBITDA margins of 81.7% and 70.5%.

Beyond the impressive growth rates and margins, the quality of revenue and cash flow shine through, backed by predominantly U.S. macro towers. In our services segment, we had a banner year finishing 2021 with $205 million in revenue and $46 million in gross profit, among the highest in company history. Each quarter throughout the year, SBA posted sequentially higher results, a reflection of the tremendous activity we're seeing from our customers, with little signs of slowing. We allocated over $2 billion in 2021 and with the lion's share going towards acquisitions and new builds, share repurchases and dividends. We added 991 and 335 sites through acquisitions and new builds, respectively, in the year following that on January 4 with over 1,400 sites acquired in Tanzania.

Finally, we published our second corporate sustainability report at the end of the year, evidencing our continued focus on and success in environmental, social and governance matters. We take great pride in our performance throughout 2021, and we are very excited about the upcoming year. The current operating environment for our industry and our internal excellence of operational execution combined to give us great confidence that we will produce very strong results this year. And I believe our full year 2022 outlook provided in today's earnings release supports that confidence.

Our customers are all very busy, and we believe we are well positioned to help them achieve their operational and network goals. I want to thank our team members and our customers for their commitment and contributions to our success, and I look forward to sharing our 2022 results with you as we move through the year.

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

(Operator Instructions) Our first question will come from the line of Phil Cusick with JPMorgan.

Two things. So for -- can you just talk about what's built in for DISH and AT&T in the current guide?

Well, we're not going to get too specific, Phil. But we -- there will -- DISH has rolled over quite a bit of activity that will be in our outlook as revenues for 2022. I'll speak generally to AT&T and really just track their public comments, which is that they anticipate a step-up in their level of activity when the 3.45 equipment becomes available midyear so that they can combine that with C-band equipment and do a one-stop or a one-truck roll stop.

So if -- I mean, knowing our history and knowing that you really need all your leasing activity in the first 9 months of the year to impact that fiscal year's results, I would say you have more probably in there from DISH as opposed to any kind of incremental step up this fiscal year for AT&T, although we would certainly expect to see that quite a bit greater in 2023.

Okay. And then second, if I can, anything we should think about in terms of site development either front-loaded or backloaded in the current guide anyway?

I think it's matching up pretty well with anticipating where leasing revenue is and will be headed for at least the next couple of quarters. So I think it's a current to 2-quarter forward look at activity.

Our next question will come from the line of Brett Feldman with Goldman Sachs.

Two about M&A, if you don't mind. I mean, first, now that you're in the Philippines, I understand you're mostly going to be doing that through greenfield builds. But how are you thinking about that as maybe a beachhead for broader expansion across Asia? And what do the M&A opportunities look like over there?

And then just on the data center side of things, you've gotten further into operating a very small portfolio. We've clearly seen some of your peers get bigger through M&A in the data center space. Are you at a point where you're thinking that might become a more interesting priority for your capital allocation? Or do you still think that this is mostly a bit of a niche period for you as you understand the synergy between those assets and your tower assets?

Yes. In Southeast Asia, there's a number of opportunities, Brett. Carrier dispositions, we think, will be coming. And just like anywhere else in the world, we will look at that mostly from its financial sensibilities, not that anything strategic, as we know, necessarily combines North America with the Far East or anywhere in between. So just like with every other decision we make, it will be primarily made on its financial attributes. But having said that, we would love to continue to grow. And that is our goal and remains our #1 priority is using capital to grow the portfolio. The second question.

Data centers.

Yes. I think we're going to -- you're going to continue to see our kind of current pattern of behavior remain there. We like data centers. But in terms of a big investment, much bigger than kind of what we've been doing, we'd really have to get to the point where it was absolutely clear that there were great synergies and the data centers would lead to expanded activity at the tower site.

And while there are certain pieces of evidence towards that, it has not really been proven out yet. So I think it's going to be the latter of the 2 paths that you framed in your question, and we will continue to learn the business and grow the business very, very modestly. It actually has turned out to be very good so far, and the 2 that we've had, we've had demands for increased capacity. We're actually investing additional capital to grow the capacity in both Jacksonville and Chicago, and that's based on contracted tenant demand.

So I mean, so far, so good, but not -- it's not material today. It won't be material this year, and we'll see where it goes in the future.

Next we go to the line of Michael Rollins with Citi.

Two questions, if I could. First, Jeff, you're describing some of the visibility and the demand picture in 2023 and beyond. And just curious what -- how's your visibility today different maybe from times in the past? And if there's a sense of the type of average growth investors should be expecting over the next few years.

And then just on the balance sheet, on target leverage, just given some of the recent changes in rates, curious what your current perspective is on target net debt leverage, maybe in the current year and then over time.

Yes. In terms of visibility, Mike, it hasn't really changed that much. And our views around -- and the comments really about this year's activity rolling into 2023 really are a combination of what our customers have said as to how many sites that they're going to be able to get to this year, what their capital plans are and what our own internal backlogs are showing. And basically, to oversimplify it, there's going to be a lot of work still left to do by the end of this year. So that's what gives us confidence about 2023 -- and not sure it will all be done by the end of 2023.

So average growth rates over the next year, I mean, I think, on a gross basis, you're still looking at the mid- to high-single digits that we've been talking about. We feel good about that. And in terms of leverage, we've talked about this a lot over time. A 60 basis point movement in the 10-year, while it seemingly had done quite a bit of impact to our trading multiple, it really doesn't impact the way we think about structure and capital allocation and balance sheet. So we're not really changing anything today based on where the 10-year is. Now if it -- hopefully, it doesn't. But if it goes up materially from here, we have to revisit that. The fact that we do pay a dividend puts a little bit more caution and conservatism in where we ultimately want to take leverage or maintain leverage in an increasing rate environment.

But the movement that we've seen so far this year really hasn't caused us to rethink any of the big picture balance sheet structural points.

Next question will come from the line of Rick Prentiss with Raymond James.

Let me ask a couple of questions. Jeff, on DISH's call last week, Charlie Ergen mentioned how, in the future, maybe there is some ability to share spectrum particularly in the 3.45 DoD spectrum band, but maybe some of the other spectrum bands as well. How do you guys look at that? And how do you actually even monitor it?

There are certain filings that would allow you to monitor it. You have to work at it. But there's a certain reliance on customer transparency because all the leases really talk only about deploying and using spectrum that is owned or controlled by the lessee. So that's really not -- it's not something that would be allowed under our current leases without some additional discussions and modifications to the lease.

But in terms of actually -- it's not like there's necessarily going to be new equipment on the tower to do that. But you would be able to figure that out through RF tests based on each customer's signal strength in that particular area. And if they're not on the -- they're not on the tower officially, but for some reason, they're broadcasting a strong signal of 3.45, you know you got a sharing issue.

Yes, exactly. I think you also called out that, obviously, CPI is going to be up, escalators up in LatAm. Quicky math suggest, instead of being in the 4s, you might be in the 6s, but where does CPI go? And how should we think about the pacing in Latin America or all your international markets on what we should think of in CPI and escalators?

Brendan?

Yes, Rick, I mean, there -- obviously, the majority of our international escalators are in Brazil, Brazil and South Africa being our largest market. We do have some concentration of leases in a couple of time periods during the year based on acquisitions that we've done over the years and the leaseback associated with those. But otherwise, over time, it's fairly well evenly spread in.

So we've put in certain basic assumptions for purposes of guidance. Obviously, some of those are our best estimate today as to where it will be at the point that the biggest escalator concentration happens. But I think that they are reasonable, if not, maybe a touch conservative.

And those concentration points, are they kind of more in the middle of the year? I'm trying to remember back from some of those old acquisitions.

Yes. I mean, one of them is in the late spring and one is sort of in the late fall.

Okay. And last one for me. You also touched on that Sprint churn is not going to be as low in the current calendar year '22 as might have been first thought. Can you update us and just remind us what is the cumulative Sprint churn you're expecting? And can you give us a feeling as far as how much you're thinking right now might hit '23 or '24?

Yes. I mean our assumptions right now are pretty much the same as what we've disclosed before. When we talked about '22 in last year when we gave our projections for it, we said we'd be somewhere in the $30 million to $35 million range. We actually are thinking we're somewhere on the lower end of that right now based on just some slight movements in timing around various decommissionings and stuff. So all that means is that, that probably rolls into next year.

Our projections for '23 and '24 that we've given before, $10 million to $20 million in each year, that's still the case. But obviously, if numbers shift in '22 at all, that would slightly affect '23. But really, we have a fairly small level of churn expected for the next couple of years before we see our bigger years...

After this year.

Yes, after this year, which -- so '25 and '26 are the bigger years where we expect to see the majority of our Sprint-related churn.

Our next question comes from the line of Walter Piecyk with LightShed.

Jeff, I just paid like $600 to have Roto-Rooter clear a drain for me, which I'm pretty sure was definitely double the last time I had to do it. Can you give us a sense of the labor market and whether that's having any impact in all the construction activities of these telcos out there and whether you think that has any impact on their speed at the moment?

Walt, that is more information than I needed to hear. But it's early...

It was amazing, $600 to have a drain clogged -- couldn't (expletive) believe it. Well, the point is that we're all seeing this, we're all seeing our expenses go up, right? It's not -- who knows how transitory it is. But are the operators, do they play these games? Like when you look at the services businesses, I mean do you think this has any impact on the business? Because a lot of times you, in the last couple of quarters, you guys, meaning collectively, the tower industry, "Oh, it's not a big deal. Everything is fine." It's just hard to believe given what we see in the market right now that, that's not having some impact on...

Yes, it is having some impact in absolute terms. But we are, I think, we're managing it pretty well. So here's what's going on. So there is wage pressure everywhere. So in the services business, we generally work on fixed fees in the site consulting business, which is the zoning business. In the construction business, though, which was most of the revenue and will be this year, that's all bid, and it's bid contemporaneously. So we're able to pass a lot of that on, assuming we win the bid. So we're actually managing it okay.

I mean, it has started over a year ago, and we're very happy with the profits and the margins that we're producing in that business, and our outlook implies that we're going to do it again. So yes, it is happening, but we are managing it in a good way, some of which gets passed on through to the customer because of the bid process and the way the work is awarded.

And when you said -- I think it was Phil had asked about DISH, and I think you used the term rolled over. Does that -- when you say rolled over, that does that mean that, that was lease revenue that maybe a little while ago, you thought would have hit in 2021 and now it's going to be hitting in 2022 instead. Is that what you mean by rolled over?

Yes.

Yes. It means the leasing activity has been tremendous. The revenue recognition on those leases lags based on either a fixed end date or the [earlier of] construction. So that's where we manage and estimate that. We were estimating a little bit higher last year, but the reality is the leases are signed up. They rolled over into this year, and it gives us obviously solid confidence for where DISH's revenue contribution will be this year.

Okay. The last question is that...

Leases that were signed up that had not been done accruing revenue in 2021.

Right. So it's just better visibility for '22. So my last question, on the divi policy, I think you had mentioned in the prepared comments, you highlighted 25% AFFO per share. Obviously, 20% growth was good. So when I think about like a company like Cogent, which gets a very elevated valuation, it's because they -- Schaeffer goes out there and predictably says like the same dividend increase every quarter, right? So is the 25% of AFFO per share, is that what we should just use as kind of the benchmark and then yield investors can just look at AFFO and then just predict the dividend growth as a result of the growth of the AFFO per share? Or does it make more sense maybe for you guys to do more of a...

No. No, I think we will grow. I think, what we have done, we will continue to do, which is grow our dividend faster than our AFFO per share growth. Now we have that luxury because we started with a low payout. And on a yield basis, it's still low. But as we've always said, going back to before we pay the dividend, while we want to pay a dividend to expand the base of our investor universe, we believe that we will make our shareholders more money by keeping the money inside the company and compounding it through portfolio growth and stock repurchases.

Right. So why not then rather than like tie it to say, "Hey, we're growing at fast AFFO." Just put like, just tell the yield investor, it will grow minimum X percent, whether that's 10%, 15% or whatever the number is you want to pick, and then just give them a very predictable growth rate that you can bring all these people in, in order to drive the stock.

We have talked about an amount of growth in 5-year increments, and I think we've talked about 20% annually.

Yes. We've said, I mean, in the past, Walt, we've been pretty clear that we expect to grow it for the next several years by at least 20% per year.

And I guess you just need to repeat it on your prepared remarks every quarter like Dave does, and then you can get that benefit.

Our next question comes from the line of Nick Del Deo with MoffettNathanson.

I guess, first, Jeff, I was hoping you could talk a bit more about your aspirations for the Philippines, maybe a bit more about the magnitude of the greenfield opportunity over the coming years? And maybe describe the level of competition you're seeing or expect to see? Because if I'm not mistaken, several other tower cos have jumped into that market, too, since it opened up. And then second -- sorry, go ahead.

I was going to answer your question, but...

Sure, sure.

So the Philippines has 110 million people and growing, and they have about 24,000 cell sites. So there is a huge opportunity based on those numbers to expand wireless networks and a lot of greenfield sites will need to be built. The market, we like it from a stability point of view, from a land use, a regulation point of view.

There are 20 -- over 20 tower companies in country. We know that because you have to get a license to operate as a tower company in the Philippines. But we think there's only 5 or 6 of them, including us, that are strong and have the confidence of the customers to get meaningful build-to-suit opportunities going forward. We found the customers in the Philippines to be very smart and very careful in terms of who they partner with. And I think those are the kinds of relationships where our history, experience and our people on the ground will distinguish themselves and we will excel.

So I think thousands of towers will be built in the Philippines every year for the next 10 years. And I think if we get our fair share of that, we'll build a nice business there.

Okay. Okay. That's terrific. And it sounds like the headline competition may not be as intense as it first seems, which is good to hear.

Yes. The numbers are higher. The folks with real capabilities, though, are much lower.

Got it. No, got it. Got it. And then maybe second question, you've repurchased a lot of stock so far in 2022. Maybe just some updated thoughts on the relative appeal of M&A versus repurchases here? And maybe any general observations about trends in the M&A market and what you're seeing?

Based on $303 stock price in the midpoint of our guidance, that's a 26x AFFO per share multiple if I'm not mistaken. And that currently -- while I think there is some rationalization going on in the markets, both domestic and internationally, there are a number of transactions that are selling for quite a bit more than that on a multiple basis. So that should lead you to conclude that while we continue to want to grow our portfolio, and we'll make every effort to do that, we will do it only in those circumstances where it makes financial sense and that stock repurchases at today's price relative to private market values are extremely attractive.

Our next question will come from the line of Greg Williams with Cowen.

The first one just on the international guide. It looks like Tanzania is contributing about $45 million in revenue. But how much is being contributed in terms of EBITDA and AFFO per share for Tanzania?

Second question is just maybe more philosophical on the telco versus cloud debate. There's an ongoing debate of cloud providers offering, Network as a Service, AWS in the fray. Does that lighten up the equipment load for you guys? Maybe not at the top of the towers, but at the bottom of the towers? And how do you see that dynamic unfolding?

The contribution from Tanzania is approximately $22 million to EBITDA. That would be very similar to AFFO.

And on your second question, I mean, we have always thought of ourselves, first and foremost, as houses and housing antennas and radios. So while there is some movement as to the compute that's going on at the tower site, we really haven't seen that impact, and it really doesn't impact our thoughts in terms of antenna and radio locations. So while a lot is going on there, we really don't see or expect a material impact, at least in terms of the way we structure our leases and think about our business.

Our next question will come from the line of Sami Badri with Credit Suisse.

I have 2 questions. So the first one is regarding just the wage inflation conversation you had earlier. Now we all are operating with this idea that prices and costs of labor are going to be reduced or normalized. But what if they don't? What measures will you have to take if they don't actually normalize and this new pricing level is actually the new normal?

Well, we will do what we always do, which is take a fine pencil and work through the aspects of our costs where we can do something about it. In some cases, we may be able to improve upon that. And in some cases, we won't. What is good, though, in this conversation is for people to realize how small, frankly, for us compared to other businesses that these changes can really have on our bottom line because of the 70%-plus EBITDA margin.

I mean, we have great operating leverage in this business, and thankfully, we've demonstrated over the years, and that continues to be true, that a little amount of people can manage and operate a lot of towers. So we have that going for us. But we'll do what we always do. We'll execute and make changes as necessary to make sure we have the best team on the field at the best possible expense levels for the company.

And then maybe just for us to know, because there are some new contracts in place with the MLAs and all the telcos more formalizing what they plan on spending or what they prefer to spend. So does the fact that there are MLAs in place make the renegotiation process more complex or no difference at all?

It makes things much less complex in terms of the business that you're doing with your counterparty during the life of the MLA. I'm not sure I got your question. The renegotiation of what? With employees? Or the renegotiation of an MLA?

Renegotiation of the MLA and the fees you're getting, the contributing payments from your customer, and where are you relatively matching the wage inflation against price, right? So just managing your margin just to get an idea on where you're going to be turning the levers.

Well, when we get to that point, that certainly will be a consideration. But I would just say, I think you're focused on something that we don't believe will be a material issue at all. And I think if you look at our outlook, you'll see increasing margins.

Yes. Maybe I can just add to that, that our actual cash SG&A is about 6% of our total revenues. So its impact from a personnel standpoint is not that much. Our largest expense on our tower business are our ground leases, which also have -- they have fixed escalators. So that's an expense that can be controlled. It doesn't adjust with any of these inflationary pressures that you're talking about.

Yes, I got it.

I hope you could tell from our comments, Sami, that we don't really worry about that, that much, and we're fully aware of where the market is today and where it might go.

No. Absolutely. I just -- these are questions that I get on my side. So I was just hoping I could run them by you guys.

The other kind of question I actually do get as well from investors, I was hoping you could share your take on is -- you are very focused on emerging market opportunities, as seen by the acquisitions and the announcements you've made. And then there are just your competitors going after -- or your competitor going after developing -- or developed markets, sorry, within the European region. And that seems to be a very compelling and digestible opportunity in the wake of international and geopolitical dynamics. Is there a reason why you guys haven't really tilted on the European side as an opportunity for M&A rather than sticking to emerging markets?

It's entirely due to our assessment of return on invested capital for those opportunities versus what we believe we will achieve in Tanzania, Philippines and markets like that. I mean, we've talked a lot, Sami, over the years about how we like the European market. But when you look at what -- who's competing for assets over there and the fact that a number of them are -- they denominate their investors and their results in euros and you can borrow euros, at least, you could, I'm not sure what today is, but you could borrow at less than 0. It just became a market that we did not find compelling from an investment perspective and from a shareholder value creation perspective. Is it otherwise a good market? Sure.

Our next question will come from the line of David Guarino with Green Street.

On the $65 million of domestic new leasing activity this year, I believe if you hit that, that would be a record for the company. I just want to know, do you think that's a sustainable pace going forward? Or is '22 just an outsized year?

There's -- 2023, we think is going to be really good, too. And that's kind of as far as the crystal ball goes right now. So while we're not making any promises or guaranteeing anything, we don't -- we would not sit here today and tell you that we were sure that 2022 will be the high-water mark. It may not be.

Okay. That's definitely encouraging. Maybe going back to the Philippines comment. I don't think you mentioned it, but could you share which MNO is the anchor tenant on your new builds? It would be interesting to know just in light of the tower dispositions that several of the carriers have hinted at recently. And then with the opportunities...

Yes. It's both Globe and Smart.

Okay. That's very helpful. And then could you just tell us what's the day 1 yield that you're going to achieve on the tower build given the large opportunities that you talked about?

Double digit.

Better than what you would get in LatAm? Or is it comparable to the other emerging markets you're in?

It's comparable, and that's on a tower cash flow yield. But that's kind of what we look for when we're putting new towers up.

Our next question will come from the line of Simon Flannery with Morgan Stanley.

Jeff, you talked a little bit about the M&A environment. you grew your site portfolio about 8% since last February. How are you thinking about the 5% to 10% long-term guidance? Is that still something you see as achievable in this M&A environment or might it more be through M&A? Or is it more maybe some build-to-suit to hit those sort of numbers?

Well, we're definitely going to need to build to suit, Simon, to get to any number. But I still feel pretty good about the 5% to 10%. Certainly 5%. And that is still a goal of ours. We'll need do a bit of work around that like we do every year, but we managed to look a lot and find some things that work for us. We certainly did that between the PG&E deal in Tanzania. We're going to build a lot more towers this year than we built in the prior year. And if we get one good size acquisition out there somewhere, we'll hit at least the bottom end of that range.

Great. And on the Philippines, you talked about the large market opportunity. What is sort of critical mass for you in a market like that? Is that 500 towers? 1,000 towers?

Yes, those are good guesses. It's at least 500. So we have gone in there with the belief and the expectation that we will get to at least 500 towers in that market.

And the final question we have in queue comes from the line of Brandon Nispel with KeyBanc Capital Markets.

Awesome. Maybe 2 questions for Brendan. Could you share what the backlog of lease applications, what that was up year-over-year in the fourth quarter? Then going back on the $65 million in new leasing in 2022. I would imagine that, that is predominantly second half weighted. Is it possible that you could exit the year with, say, $20 million in new leases on a year-over-year basis?

Yes. Brandon, I don't want to be too specific on the backlog. It's obviously up a good bit from where it was last year. But we came out of last year with a reasonably good backlog. We had a slow first quarter, and then it began to ramp. And it's been at a pretty high level that's been fairly consistent throughout at least the second half of the year and as much as back into the second quarter of last year. So I don't want to get into the specifics too much, but...

I mean, if you look at who was in that backlog in December of 2020, you didn't really have DISH.

Yes, no DISH, yes.

And you really didn't have Verizon C-band. So it's up big. December 31 to December 31.

Yes. Yes. I mean the question is how much of it was sitting there at the time that hadn't yet been signed. I mean, if you look at the growth, though in the actual number, that $65 million that we just printed versus $38 million, I believe, for last year. I mean, that percentage from the time that activity was down to when it started to pick up, that's representative of what we saw on the growth in the backlog. So that's almost doubling the backlog in terms of dollars. And I'm sorry, the second question? I apologize.

Yes. I guess, just looking at the new leasing again, on my numbers, you're at $11 million in new leasing today. To get to the guide, to $65 million, would suggest that you need to get to something like a high teens, low $20 million number for the fourth quarter. I'm just making sure that, that's...

That's right. Yes. No, that's accurate. That's accurate. I expect that it's going to go up every single quarter, I would expect during the course of this year just based on what we've already signed up and the timings of when we're estimating the commencements. So your numbers are in the right range.

And we have no further questions in queue.

Great. I want to thank everybody for joining us to wrap up our 2021 results, and we greatly look forward to reporting as we move through 2022. Thank you very much.

Okay. Ladies and gentlemen, that does conclude today's conference. I'd like to thank you for your participation. You may now disconnect.