American Tower Corporation Reports Second Quarter 2023 Financial Results

CONSOLIDATED HIGHLIGHTS


Second Quarter 2023

Total revenue increased 3.6% to $2,772 million

Property revenue increased 4.4% to $2,729 million

Net income decreased 48.2% to $462 million(1)

Adjusted EBITDA increased 4.7% to $1,749 million

Net income attributable to AMT common stockholders decreased 47.0% to $476 million(1)

AFFO attributable to AMT common stockholders decreased 0.4% to $1,151 million

BOSTON–(BUSINESS WIRE)–American Tower Corporation (NYSE: AMT) today reported financial results for the quarter ended June 30, 2023.

Tom Bartlett, American Tower’s Chief Executive Officer, stated, “The momentum from the start of the year carried on into the second quarter, as our customers continued to invest in their networks to meet growing demand. We saw Consolidated Organic Tenant Billings Growth exceed 6% for the second consecutive quarter, solid leasing in our U.S. Data Center segment, and demonstrated a focus on cost controls, all supporting strong growth and attractive margin expansion. Additionally, we delivered another quarter of approximately 10% dividend per share growth, while making significant progress toward strengthening our investment grade balance sheet. As a result, we are pleased to raise our full year outlook for property revenue, Adjusted EBITDA and Attributable AFFO.

As the 5G investment cycle continues, we believe our portfolio of globally distributed communications assets is well positioned to drive sustained, elevated leasing growth, which combined with our focus on cost management, capital allocation discipline and dividend growth, sets us up well to deliver attractive shareholder returns over the long-term.”

CONSOLIDATED OPERATING RESULTS OVERVIEW

American Tower generated the following operating results for the quarter ended June 30, 2023 (all comparative information is presented against the quarter ended June 30, 2022).

($ in millions, except per share amounts.)

 

Q2 2023

 

Growth Rate

Total revenue

 

$

2,772

 

 

3.6

%

Total property revenue

 

$

2,729

 

 

4.4

%

Total Tenant Billings Growth

 

$

133

 

 

7.2

%

Organic Tenant Billings Growth

 

$

115

 

 

6.2

%

Property Gross Margin

 

$

1,919

 

 

5.4

%

Property Gross Margin %

 

 

70.3

%

 

 

Net income(1)

 

$

462

 

 

(48.2

)%

Net income attributable to AMT common stockholders(1)

 

$

476

 

 

(47.0

)%

Net income attributable to AMT common stockholders per diluted share(1)

 

$

1.02

 

 

(47.7

)%

Adjusted EBITDA

 

$

1,749

 

 

4.7

%

Adjusted EBITDA Margin %

 

 

63.1

%

 

 

 

 

 

 

 

Nareit Funds From Operations (FFO) attributable to AMT common stockholders(1)

 

$

1,133

 

 

(31.3

)%

AFFO attributable to AMT common stockholders

 

$

1,151

 

 

(0.4

)%

AFFO attributable to AMT common stockholders per Share

 

$

2.46

 

 

(2.0

)%

 

 

 

 

 

Cash provided by operating activities

 

$

1,209

 

 

32.1

%

Less: total cash capital expenditures(2)

 

$

417

 

 

10.5

%

Free Cash Flow

 

$

792

 

 

47.4

%

Q2 2023 growth rates impacted by foreign currency losses of approximately $107.6 million in the current period as compared to foreign currency gains of approximately $394.7 million in the prior-year period.

Q2 2023 cash capital expenditures include $11.9 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 June 30, 2023, the Company declared the following regular cash distributions to its common stockholders:

Common Stock Distributions

 

Q2 2023(1)

Distributions per share

 

$

1.57

 

Aggregate amount (in millions)

 

$

732

 

Year-over-year per share growth

 

 

9.8

%

(1) The distribution declared on May 24, 2023 was paid on July 10, 2023 to stockholders of record as of the close of business on June 16, 2023.

Capital Expenditures – During the second quarter of 2023, total capital expenditures were approximately $417 million, of which $34 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 second quarter of 2023, the Company spent approximately $30 million to acquire 60 communications sites, as well as other communications infrastructure assets, primarily in France and Spain.

Other Events – On May 31, 2023, the Company completed the sale of its subsidiary in Poland (“ATC Poland”) for total consideration of €6.7 million (approximately $7.2 million at the date of closing), resulting in a gain on the sale of $1.1 million, which was included in Other operating expenses. Prior to the divestiture, ATC Poland’s operating results were included within the Europe property segment. The divestiture did not qualify for presentation as a discontinued operation.

LEVERAGE AND FINANCING OVERVIEW

Leverage – For the quarter ended June 30, 2023, the Company’s Net Leverage Ratio was 5.3x net debt (total debt less cash and cash equivalents) to second quarter 2023 annualized Adjusted EBITDA.

Calculation of Net Leverage Ratio

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

 

As of June 30, 2023

Total debt

 

$

38,795

Less: Cash and cash equivalents

 

 

2,016

Net Debt

 

$

36,779

Divided By: Second quarter annualized Adjusted EBITDA(1)

 

 

6,998

Net Leverage Ratio

 

5.3x

Q2 2023 Adjusted EBITDA multiplied by four.

Liquidity and Financing Activities – As of June 30, 2023, the Company had approximately $8.2 billion of total liquidity, consisting of approximately $2.0 billion in cash and cash equivalents plus the ability to borrow an aggregate of approximately $6.2 billion under its revolving credit facilities, net of any outstanding letters of credit.

On May 16, 2023, the Company issued an aggregate of €1.1 billion (approximately $1.2 billion at the date of issuance) in senior unsecured notes and on May 25, 2023, the Company issued an aggregate of $1.5 billion in senior unsecured notes. The net proceeds of both offerings were used to repay existing indebtedness under its revolving credit facilities.

On June 15, 2023, the Company repaid $700.0 million aggregate principal amount of its 3.000% senior unsecured notes due 2023 using borrowings under its $4.0 billion revolving credit facility. Upon completion of the repayment, none of the 3.000% senior unsecured notes remained outstanding.

Additionally, in June 2023, the Company amended its revolving credit facilities and $1.0 billion term loan to, among other things, extend the maturity dates under the revolving credit facilities and adopt an Adjusted Term SOFR (as defined in the amendment agreements) pricing benchmark. Additionally, the Company repaid all amounts outstanding under its $1.5 billion two-year unsecured term loan due December 2023.

FULL YEAR 2023 OUTLOOK

The following full year 2023 estimates are based on a number of assumptions that management believes to be reasonable and reflect the Company’s expectations as of July 27, 2023. 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.

The Company’s outlook is based on the following average foreign currency exchange rates to 1.00 U.S. Dollar for July 27, 2023 through December 31, 2023: (a) 339 Argentinean Pesos; (b) 1.49 Australian Dollars; (c) 111.10 Bangladeshi Taka; (d) 4.85 Brazilian Reais; (e) 1.33 Canadian Dollars; (f) 805 Chilean Pesos; (g) 4,250 Colombian Pesos; (h) 0.92 Euros; (i) 11.35 Ghanaian Cedis; (j) 82.20 Indian Rupees; (k) 141 Kenyan Shillings; (l) 17.50 Mexican Pesos; (m) 1.63 New Zealand Dollars; (n) 765 Nigerian Naira; (o) 7,260 Paraguayan Guarani; (p) 3.65 Peruvian Soles; (q) 55.80 Philippine Pesos; (r) 18.70 South African Rand; (s) 3,700 Ugandan Shillings; and (t) 600 West African CFA Francs.

The Company’s outlook reflects estimated negative impacts of foreign currency exchange rate fluctuations to property revenue, Adjusted EBITDA and AFFO attributable to AMT common stockholders, each by less than $5 million, relative to the Company’s prior 2023 outlook. The impact of foreign currency exchange rate fluctuations on net income metrics is not provided, as the impact on all components of the net income measure cannot be calculated without unreasonable effort.

The Company is raising the midpoints of its full year 2023 outlook for property revenue, Adjusted EBITDA, AFFO attributable to AMT common stockholders and AFFO attributable to AMT common stockholders per Share by $125 million, $75 million, $25 million and $0.05, respectively, primarily driven by core property outperformance. The Company is reducing the midpoint for net income and net income attributable to AMT common stockholders, each by $10 million, primarily due to foreign currency losses.

Additional information pertaining to the impact of foreign currency and Secured Overnight Financing Rate (“SOFR”) fluctuations on the Company’s outlook has been provided in the supplemental disclosure package available on the Company’s website.

2023 Outlook ($ in millions, except per share amounts.)

Full Year 2023

 

Midpoint Growth Rates

vs. Prior Year

Total property revenue(1)

$

10,790

to

$

10,970

 

3.9

%

Net income

 

1,785

to

 

1,845

 

7.0

%

Net income attributable to AMT common stockholders

 

1,845

to

 

1,905

 

6.2

%

Adjusted EBITDA

 

6,950

to

 

7,030

 

5.2

%

AFFO attributable to AMT common stockholders

 

4,490

to

 

4,570

 

0.3

%

AFFO attributable to AMT common stockholders per Share

$

9.61

to

$

9.79

 

(0.6

)%

Includes U.S. & Canada segment property revenue of $5,165 million to $5,225 million, international property revenue of $4,810 million to $4,910 million and Data Centers segment property revenue of $815 million to $835 million, reflecting midpoint growth rates of 3.8%, 3.5% and 7.6%, respectively. The U.S. & Canada growth rate includes an estimated negative impact of approximately 1.5% associated with a decrease in non-cash straight-line revenue recognition. The international growth rate includes an estimated negative impact of approximately 3% from the translational effects of foreign currency exchange rate fluctuations. International property revenue reflects the Company’s Africa, Asia-Pacific, Europe and Latin America segments. Data Centers segment property revenue reflects revenue from the Company’s data center facilities and related assets.

2023 Outlook for Total Property revenue, at the midpoint,

includes the following components(1):

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

U.S. & Canada

Property(2)

 

International

Property(3)

 

Data Centers

Property(4)

 

Total Property

International pass-through revenue

N/A

 

$

1,550

 

N/A

 

$

1,550

Straight-line revenue

383

 

 

45

 

20

 

 

448

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

U.S. & Canada property revenue includes revenue from all assets in the United States and Canada, other than data center facilities and related assets.

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

Data Centers property revenue reflects revenue from the Company’s data center facilities and related assets.

2023 Outlook for Total Tenant Billings Growth, at the midpoint, includes the

following components(1):

(Totals may not add due to rounding.)

U.S. & Canada

Property

 

International

Property(2)

 

Total Property

Organic Tenant Billings

~5%

 

>6.5%

 

~5.5%

New Site Tenant Billings

~0%

 

~2%

 

~1%

Total Tenant Billings Growth

~5%

 

>8.5%

 

~6.5%

For additional discussion regarding the component growth rates, please refer to “Revenue Components” below. Tenant Billings Growth is not applicable to the Data Centers segment. For additional details related to the Data Centers segment, please refer to the supplemental disclosure package available on the Company’s website.

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

Outlook for Capital Expenditures:

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

 

 

 

 

 

Full Year 2023

Discretionary capital projects(1)

$ 785

 

to

 

$ 815

Ground lease purchases

85

 

to

 

105

Start-up capital projects

120

 

to

 

140

Redevelopment

485

 

to

 

515

Capital improvement

165

 

to

 

175

Corporate

10

 

 

10

Total

$ 1,650

 

to

 

$ 1,760

Includes the construction of 3,450 to 4,550 communications sites globally.

Reconciliation of Outlook for Adjusted EBITDA to Net income:

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

 

 

 

 

 

Full Year 2023

Net income

$

1,785

 

to

 

$

1,845

Interest expense

 

1,420

 

to

 

 

1,400

Depreciation, amortization and accretion

 

3,050

 

to

 

 

3,080

Income tax provision

 

180

 

to

 

 

190

Stock-based compensation expense

 

190

 

 

 

190

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

   obligations and other income (expense)

 

325

 

 

 

325

Adjusted EBITDA

$

6,950

 

to

 

$

7,030

Reconciliation of Outlook for AFFO attributable to AMT common stockholders to Net

income:

($ in millions, except share and per share data, totals may not add due to rounding.)

 

 

 

 

 

Full Year 2023

Net income

$ 1,785

 

to

 

$ 1,845

Straight-line revenue

(448)

 

 

(448)

Straight-line expense

32

 

 

32

Depreciation, amortization and accretion

3,050

 

to

 

3,080

Stock-based compensation expense

190

 

 

190

Deferred portion of income tax and other income tax adjustments

(128)

 

 

(128)

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

439

 

 

439

Capital improvement capital expenditures

(165)

 

to

 

(175)

Corporate capital expenditures

(10)

 

 

(10)

Consolidated AFFO

$ 4,745

 

to

 

$ 4,825

Minority interest

$ (255)

 

 

$ (255)

AFFO attributable to AMT common stockholders

$ 4,490

 

to

 

$ 4,570

Divided by weighted average diluted shares outstanding (in thousands)

467,000

 

 

467,000

AFFO attributable to AMT common stockholders per Share

$ 9.61

 

to

 

$ 9.79

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 June 30, 2023 and its updated outlook for 2023. 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: (844) 291-4185

International dial-in: (409) 207-6997

Passcode: 9195827

When available, a replay of the call can be accessed until 11:59 p.m. ET on August 10, 2023. The replay dial-in numbers are as follows:

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

International dial-in: (402) 970-0847

Passcode: 6812094

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 nearly 226,000 communications sites and a highly interconnected footprint of U.S. data center facilities. 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, AFFO attributable to American Tower Corporation common stockholders per Share, Free Cash Flow, Net Debt and Net Leverage Ratio. 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 customer settlements, fiber solutions revenue and data centers revenue.

Non-GAAP and Defined Financial Measure Definitions

Tenant Billings Growth: The increase or decrease resulting from a comparison of Tenant Billings for a current period with Tenant Billings for the corresponding prior-year period, in each case adjusted for foreign currency exchange rate fluctuations. The Company believes this measure provides valuable insight into the growth in recurring Tenant Billings and underlying demand for its real estate portfolio.

Organic Tenant Billings Growth: The portion of Tenant Billings Growth attributable to Organic Tenant Billings. The Company believes that organic growth is a useful measure of its ability to add tenancy and incremental revenue to its assets for the reported period, which enables investors and analysts to gain additional insight into the relative attractiveness, and therefore the value, of the Company’s property assets.

Contacts

Adam Smith

Senior Vice President, Investor Relations

Telephone: (617) 375-7500

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