American Tower Corporation Reports First Quarter 2020 Financial Results

CONSOLIDATED HIGHLIGHTS

First Quarter 2020

  • Total revenue increased 9.9% to $1,993 million
  • Property revenue increased 10.5% to $1,973 million
  • Net income increased 2.7% to $419 million
  • Adjusted EBITDA increased 14.1% to $1,271 million
  • Consolidated AFFO increased 5.3% to $907 million

 

BOSTON–(BUSINESS WIRE)–American Tower Corporation (NYSE: AMT) today reported financial results for the quarter ended March 31, 2020.

Tom Bartlett, American Tower’s Chief Executive Officer, stated, “Despite the challenges posed by the COVID-19 pandemic, we delivered a solid first quarter, including U.S. Organic Tenant Billings Growth of 5.6%, consistent international leasing activity and a 20% dividend increase. We believe that the resilience and stability of our business model, our investment-grade balance sheet, substantial liquidity and the secular global growth trends in mobile data usage will help us manage through the ongoing crisis.

As we stand together with our employees, tenants and communities, we are focused more than ever on advancing our mission of extending and enhancing the reach of mobile broadband. Connectivity is critical in challenging times like these, and we are proud to play a lead role in delivering it to billions of people around the world.”

CONSOLIDATED OPERATING RESULTS OVERVIEW

American Tower generated the following operating results for the quarter ended March 31, 2020 (all comparative information is presented against the quarter ended March 31, 2019).

($ in millions, except per share amounts.)

 

Q1 2020

 

Growth Rate

Total revenue

 

$

1,993

 

 

9.9

%

Total property revenue

 

$

1,973

 

 

10.5

%

Total Tenant Billings Growth

 

$

151

 

 

10.3

%

Organic Tenant Billings Growth

 

$

79

 

 

5.4

%

Property Gross Margin

 

$

1,430

 

 

14.0

%

Property Gross Margin %

 

72.5

%

 

 

Net income

 

$

419

 

 

2.7

%

Net income attributable to AMT common stockholders

 

$

415

 

 

4.4

%

Net income attributable to AMT common stockholders per diluted share

 

$

0.93

 

 

4.5

%

Adjusted EBITDA

 

$

1,271

 

 

14.1

%

Adjusted EBITDA Margin %

 

63.8

%

 

 

 

 

 

 

 

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

 

$

819

 

 

6.4

%

Consolidated AFFO

 

$

907

 

 

5.3

%

Consolidated AFFO per Share

 

$

2.03

 

 

4.6

%

AFFO attributable to AMT common stockholders

 

$

945

 

 

15.6

%

AFFO attributable to AMT common stockholders per Share

 

$

2.12

 

 

15.2

%

 

 

 

 

 

Cash provided by operating activities

 

$

800

 

 

1.9

%

Less: total cash capital expenditures(1)

 

$

225

 

 

(2.4)

%

Free Cash Flow

 

$

575

 

 

3.7

%

_______________

(1)

 

Q1 2020 cash capital expenditures include $12.7 million of finance lease and perpetual land easement payments reported in cash flows from financing activities in the condensed consolidated statements of cash flows.

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

CAPITAL ALLOCATION OVERVIEW

Distributions – During the quarter ended March 31, 2020, the Company declared the following regular cash distributions to its common stockholders:

Common Stock Distributions

 

Q1 2020(1)

Distributions per share

 

$

1.08

 

Aggregate amount (in millions)

 

$

479

 

Year-over-year per share growth

 

20.0

%

_______________

(1)

 

The distribution declared on March 12, 2020 was paid in the second quarter of 2020 to stockholders of record as of the close of business on April 14, 2020.

Stock Repurchase Program – During the first quarter of 2020, the Company repurchased a total of approximately 213 thousand shares of its common stock under its stock repurchase program for approximately $45 million. Subsequent to the end of the first quarter, through April 22, 2020, the Company repurchased approximately 48 thousand additional shares of its common stock pursuant to the program, for approximately $10 million, and had approximately $2.0 billion remaining under the Company’s existing stock repurchase programs.

Capital Expenditures During the first quarter of 2020, total capital expenditures were approximately $225 million, of which $32 million was for non-discretionary capital improvements and corporate capital expenditures. For additional capital expenditure details, please refer to the supplemental disclosure package available on the Company’s website.

Acquisitions During the first quarter of 2020, the Company spent approximately $49 million to acquire 193 communications sites, primarily in international markets.

Other Events – During the first quarter of 2020, the Company completed its previously announced acquisition of MTN Group Limited’s (“MTN”) noncontrolling interests in each of the Company’s joint ventures in Ghana and Uganda for total consideration of approximately $524 million, which resulted in an increase in the Company’s controlling interest in those joint ventures from 51% to 100%. The closing of the transaction resulted in a one-time negative impact of approximately $63 million to the Company’s first quarter 2020 Consolidated AFFO from the payment of previously deferred cash interest related to joint venture debt.

In April 2019, Tata Teleservices Limited served notice of exercise of its put options with respect to 100% of its remaining combined holdings with Tata Sons in ATC Telecom Infrastructure Private Limited (“ATC TIPL”). The Company expects to pay INR 24.8 billion (approximately $328 million at the March 31, 2020 exchange rate) to redeem the put shares in 2020, subject to regulatory approval. After the completion of the redemption, the Company will hold an approximately 92% ownership interest in ATC TIPL.

LEVERAGE AND FINANCING OVERVIEW

Leverage For the quarter ended March 31, 2020, the Company’s Net Leverage Ratio was 4.6x net debt (total debt less cash and cash equivalents) to first quarter 2020 annualized Adjusted EBITDA.

Calculation of Net Leverage Ratio

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

 

As of March 31, 2020

Total debt

 

$

24,577

 

Less: Cash and cash equivalents

 

1,326

 

Net Debt

 

23,251

 

Divided By: First quarter annualized Adjusted EBITDA(1)

 

5,084

 

Net Leverage Ratio

 

4.6

x

_______________

(1)

 

Q1 2020 Adjusted EBITDA multiplied by four.

Liquidity As of March 31, 2020, the Company had $4.2 billion of total liquidity, consisting of $1.3 billion in cash and cash equivalents plus the ability to borrow an aggregate of $2.9 billion under its revolving credit facilities, net of any outstanding letters of credit.

On January 10, 2020, the Company issued $750.0 million aggregate principal amount of 2.400% senior unsecured notes due 2025 and $750.0 million aggregate principal amount of 2.900% senior unsecured notes due 2030. The Company used the net proceeds to repay existing indebtedness under its $2.25 billion senior unsecured revolving credit facility, as amended and restated in December 2019 (the “2019 Credit Facility”).

On January 15, 2020, the Company completed the redemption of all of its outstanding 5.900% senior unsecured notes due 2021 for a total aggregate redemption price of $539.6 million, including $6.1 million in accrued and unpaid interest. Upon completion of the redemption, none of the 5.900% notes remained outstanding.

On February 13, 2020, the Company entered into a loan agreement for a new $750.0 million unsecured term loan due February 12, 2021. The Company used the net proceeds of this new term loan, together with borrowings under the 2019 Credit Facility and cash on hand, to repay outstanding indebtedness under its $1.3 billion unsecured term loan entered into on February 14, 2019.

Subsequent to the end of the first quarter, on April 3, 2020, the Company entered into a $1.14 billion unsecured term loan due April 2, 2021, which was subsequently increased to $1.19 billion effective April 21, 2020 (the “April 2020 Term Loan”), the net proceeds of which were used to repay outstanding indebtedness under the 2019 Credit Facility. Pro forma for the April 2020 Term Loan, the Company had $5.4 billion of total liquidity.

Additionally, on April 9, 2020, the Company announced the planned redemption of all of its outstanding 2.800% senior unsecured notes due 2020 for a price equal to the principal amount of the 2.800% Notes, together with accrued interest, if any, up to, but excluding, the redemption date, which has been set for May 11, 2020. The Company intends to fund the redemption with borrowings under the 2019 Credit Facility and cash on hand.

FULL YEAR 2020 OUTLOOK

The following full year 2020 financial and operational estimates are based on a number of assumptions that management believes to be reasonable and reflect the Company’s expectations as of April 29, 2020. Actual results may differ materially from these estimates as a result of various factors, and the Company refers you to the cautionary language regarding “forward-looking” statements included in this press release when considering this information.

As of April 29, 2020, based on currently available information and outside of the foreign currency translation effects outlined below, the Company does not anticipate significant impacts to its underlying operating results in 2020 as a result of the coronavirus (“COVID-19”) pandemic. This is subject to change depending on future developments, which are highly uncertain and cannot be predicted at this time. Additional information pertaining to the impact of COVID-19 on the Company will be provided in our upcoming Form 10-Q for the three months ended March 31, 2020 (the “Q1 Quarterly Report”).

The Company’s outlook is based on the following average foreign currency exchange rates to 1.00 U.S. Dollar for April 29, 2020 through December 31, 2020: (a) 75.60 Argentinean Pesos; (b) 5.25 Brazilian Reais; (c) 855 Chilean Pesos; (d) 3,990 Colombian Pesos; (e) 0.92 Euros; (f) 5.75 Ghanaian Cedis; (g) 76.50 Indian Rupees; (h) 106 Kenyan Shillings; (i) 24.20 Mexican Pesos; (j) 390 Nigerian Naira; (k) 6,710 Paraguayan Guarani; (l) 3.45 Peruvian Soles; (m) 18.65 South African Rand; (n) 3,850 Ugandan Shillings; and (o) 600 West African CFA Francs.

The Company’s outlook reflects estimated unfavorable impacts of foreign currency exchange rate fluctuations to property revenue, Adjusted EBITDA and Consolidated AFFO of approximately $300 million, $165 million and $140 million, respectively, as compared to the Company’s prior 2020 outlook. The impact of foreign currency exchange rate fluctuations on net income is not provided, as the impact on all components of the net income measure cannot be calculated without unreasonable effort.

Primarily as a result of these unfavorable impacts, the Company is reducing the midpoint of its full year 2020 outlook for property revenue, net income, Adjusted EBITDA and Consolidated AFFO by $300 million, $160 million, $165 million and $140 million, respectively. The ongoing impacts of COVID-19 on global capital markets have contributed to the volatility in foreign currency exchange rates since the issuance of the Company’s prior 2020 outlook.

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

2020 Outlook ($ in millions)

Full Year 2020

 

Midpoint Growth Rates

vs. Prior Year

Total property revenue(1)

$

7,675

 

to

$

7,825

 

 

3.8%

Net income

1,790

 

to

1,890

 

 

(4.0)%

Adjusted EBITDA

4,920

 

to

5,020

 

 

4.8%

Consolidated AFFO

3,600

 

to

3,700

 

 

3.7%

_______________

(1)

 

Includes U.S. property revenue of $4,385 million to $4,445 million and international property revenue of $3,290 million to $3,380 million, reflecting midpoint growth rates of 5.4% and 1.8%, respectively. The U.S. growth rate includes an estimated positive impact of nearly 1% associated with an increase in non-cash straight-line revenue recognition. The international growth rate includes an estimated negative impact of approximately 9% from the translational effects of foreign currency exchange rate fluctuations. International property revenue reflects the Company’s Latin America, Africa, Europe and Asia segments.

2020 Outlook for Total Property revenue, at the midpoint, includes

the following components(1):
($ in millions, totals may not add due to rounding.)

U.S. Property

 

International

Property(2)

 

Total Property

 

International pass-through revenue

N/A

 

 

$

1,006

 

 

$

1,006

 

Straight-line revenue

185

 

 

28

 

 

213

 

 

_______________

(1)

 

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

(2)

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

2020 Outlook for Total Tenant Billings Growth, at the midpoint, includes

the following components(1):
(Totals may not add due to rounding.)

U.S. Property

 

International

Property(2)

 

Total Property

Organic Tenant Billings

~5%

 

~5%

 

~5%

New Site Tenant Billings

<0.5%

 

~13%

 

~5%

Total Tenant Billings Growth

~5-6%

 

~18%

 

~10%

_______________

(1)

 

For additional discussion regarding the component growth rates, please refer to “Revenue Components” below.

(2)

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

Outlook for Capital Expenditures:

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

 

 

 

Full Year 2020

Discretionary capital projects(1)

$

360

 

to

$

390

 

Ground lease purchases

175

 

to

185

 

Start-up capital projects

130

 

to

150

 

Redevelopment

230

 

to

250

 

Capital improvement

145

 

to

165

 

Corporate

10

 

10

 

Total

$

1,050

 

to

$

1,150

 

_______________

(1)

 

Includes the construction of 5,000 to 6,000 communications sites globally.

Reconciliation of Outlook for Adjusted EBITDA to Net income:

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

 

 

 

Full Year 2020

Net income

$

1,790

 

to

$

1,890

 

Interest expense

855

 

to

835

 

Depreciation, amortization and accretion

1,870

 

to

1,890

 

Income tax provision

140

 

to

150

 

Stock-based compensation expense

110

 

110

 

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

obligations and other income (expense)

155

 

to

145

 

Adjusted EBITDA

$

4,920

 

to

$

5,020

 

Reconciliation of Outlook for Consolidated AFFO to Net income:

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

 

 

 

Full Year 2020

Net income

$

1,790

 

to

$

1,890

 

Straight-line revenue

(213)

 

(213)

 

Straight-line expense

49

 

49

 

Depreciation, amortization and accretion

1,870

 

to

1,890

 

Stock-based compensation expense

110

 

110

 

Deferred portion of income tax

(12)

 

(12)

 

Other, including other operating expense, amortization of deferred financing costs, capitalized

interest, debt discounts and premiums, gain (loss) on retirement of long-term obligations, other

income (expense), long-term deferred interest charges and distributions to minority interests

161

 

161

 

Capital improvement capital expenditures

(145)

 

to

(165)

 

Corporate capital expenditures

(10)

 

(10)

 

Consolidated AFFO

$

3,600

 

to

$

3,700

 

Conference Call Information

American Tower will host a conference call today at 8:30 a.m. ET to discuss its financial results for the quarter ended March 31, 2020 and its revised outlook for 2020. Supplemental materials for the call will be available on the Company’s website, www.americantower.com. The conference call dial-in numbers are as follows:

U.S./Canada dial-in: (877) 692-8955

International dial-in: (234) 720-6979

Passcode: 4802432

When available, a replay of the call can be accessed until 11:59 p.m. ET on May 13, 2020. The replay dial-in numbers are as follows:

U.S./Canada dial-in: (866) 207-1041

International dial-in: (402) 970-0847

Passcode: 5017974

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

About American Tower

American Tower, one of the largest global REITs, is a leading independent owner, operator and developer of multitenant communications real estate with a portfolio of approximately 180,000 communications sites. For more information about American Tower, please visit the “Earnings Materials” and “Investor Presentations” sections of our investor relations website at www.americantower.com.

Non-GAAP and Defined Financial Measures

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

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

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

Revenue Components

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

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

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

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

International pass-through revenue: A portion of the Company’s pass-through revenue is based on power and fuel expense reimbursements and therefore subject to fluctuations in fuel prices. As a result, revenue growth rates may fluctuate depending on the market price for fuel in any given period, which is not representative of the Company’s real estate business and its economic exposure to power and fuel costs. Furthermore, this expense reimbursement mitigates the economic impact associated with fluctuations in operating expenses, such as power and fuel costs and land rents in certain of the Company’s markets. As a result, the Company believes that it is appropriate to provide insight into the impact of pass-through revenue on certain revenue growth rates.

Straight-line revenue: Under GAAP, the Company recognizes revenue on a straight-line basis over the term of the contract for certain of its tenant leases. Due to the Company’s significant base of non-cancellable, long-term tenant leases, this can result in significant fluctuations in growth rates upon tenant lease signings and renewals (typically increases), when amounts billed or received upfront upon these events are initially deferred. These signings and renewals are only a portion of the Company’s underlying business growth and can distort the underlying performance of our Tenant Billings Growth. As a result, the Company believes that it is appropriate to provide insight into the impact of straight-line revenue on certain growth rates in revenue and select other measures.

Pre-paid amortization revenue: The Company recovers a portion of the costs it incurs for the redevelopment and development of its properties from its tenants. These upfront payments are then amortized over the initial term of the corresponding tenant lease. Given this amortization is not necessarily directly representative of underlying leasing activity on its real estate portfolio, (i.e. does not have a renewal option or escalation as our tenant leases do) the Company believes that it is appropriate to provide insight into the impact of pre-paid amortization revenue on certain revenue growth rates to provide transparency into the underlying performance of our real estate business.

Foreign currency exchange impact: The majority of the Company’s international revenue and operating expenses are denominated in each country’s local currency. As a result, foreign currency fluctuations may distort the underlying performance of our real estate business from period to period, depending on the movement of foreign currency exchange rates versus the U.S. Dollar. The Company believes it is appropriate to quantify the impact of foreign currency exchange rate fluctuations on its reported growth to provide transparency into the underlying performance of its real estate business.

Other revenue: Other revenue represents revenue not captured by the above listed items and can include items such as tenant settlements and fiber solutions revenue.

Contacts

Igor Khislavsky

Vice President, Investor Relations

Telephone: (617) 375-7500

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