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SBA Communications Sees Healthy Level of New Lease, Amendment Signings

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The second quarter was another very solid quarter for SBA Communications Corp. The company continued to gain momentum in both its leasing and services businesses and produced very positive operating results.

According to Brendan Cavanagh, EVP and CFO, on the firm’s Q2 earnings call, total GAAP site leasing revenues for the second quarter were $429.9 million, and cash site leasing revenues were $424.7 million. Foreign exchange rates were significantly weaker than our estimates for the second quarter, which we’ve previously provided with our first quarter earnings release, negatively impacting leasing revenue by $1.4 million, he said.

Same tower recurring cash leasing revenue growth for the second quarter, which is calculated on a constant-currency basis, was 5.4% over the second quarter of 2017, including the impact of a 1.5% of churn, he explained. On a gross basis, same-tower growth was 6.9%.

Domestic same-tower recurring cash leasing revenue growth over the second quarter of last year was 6.4% on a gross basis and 4.7% on a net basis, including 1.7% of churn, a little less than half of which was related to Metro/Leap and Clearwire terminations.

Domestic same-tower recurring cash leasing revenue growth on a gross basis increased sequentially over the first quarter. As operational domestic leasing activity and backlog levels continue to be strong, we expect to see the year-over-year domestic gross same-tower growth rate increase sequentially throughout 2018.

Internationally, he explained, on a constant-currency basis, same-tower cash leasing revenue growth was 8.9%, including 80 basis points of churn or 9.7% on a gross basis.

“Gross organic growth in Brazil was 10.6%, which was also a sequential increase over the first quarter. Domestic operational leasing activity, representing new revenue signed up during the quarter, remained strong in the second quarter and well above year-ago levels with solid contributions from each of the big four carriers.”

In addition, Cavanagh said, “Newly signed up domestic leasing revenue came about 2/3 from amendments and 1/3 from new leases, and the big four carriers represented 96% of total incremental domestic leasing revenue that were signed up during the quarter.

Each of our major U.S. customers remained active, investing in their networks, and we expect to continue to see a healthy level of new lease and amendment signings throughout the balance of the year.”

Internationally, the REIT had another solid leasing quarter, particularly in Brazil, where the company had good contributions from both Claro and Vivo. During the second quarter, 85.9% of consolidated cash site-leasing revenue was denominated in US dollars.

With regard to second quarter churn, he said that “we continue to see churn from leases with Metro/Leap and Clearwire consistent with our expectations. As of June 30, we have approximately $16 million of annual recurring run rate revenue from leases with Metro/Leap and Clearwire that we ultimately expect to churn off over the next 2 to 3 years.”

During the second quarter, the company continued to invest in expanding its tower portfolio, deploying incremental capital into both new tower builds and acquisitions. During the second quarter, the REIT also acquired 224 communication sites for $152.3 million, with most of those sites located in the US. The REIT also built 87 sites during the second quarter.