Sba Communications Corp (SBAC) Q4 2021 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by and welcome to the SBA Fourth Quarter Results Call. At this time, all lines are in a listen-only mode. Later we will have a question-and-answer session. If you'd like to queue up for a question, please do so. 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 Jeffrey Stoops, our President and Chief Executive Officer, and Brendan Cavanagh, our Chief Financial Officer. Some of the information we'll 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. Statements are as of today, February 28th, 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 executions, 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 four 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 remained 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 backlogs finishing the year at an equal level to our company all-time high backlog from September 30th. 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 seven 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 fourth, 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. 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 continue 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 increases are in connection with anticipated Sprint-related decommissioning. Our outlook incorporates a current estimate of approximately $30 million of churn in 2022 related to legacy Sprint leases. Our previously provided estimates of aggregate Sprint-related churn over the next several years remain 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 small 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're 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 will 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 7.3 times. Our fourth-quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 5.0 times, 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 9th, 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 9th, 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 11th, 2023. 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 the shares repurchased were retired. We currently have $586.4 million of repurchase authorization remaining under our $1 billion stock repurchase plan. The company 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. 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 will 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're 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 seven 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 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 two 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're also excited about the potential from our two 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're 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 three 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 costs has 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 7.5x, 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 predominately 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, which are a reflection of the tremendous activity we're seeing from our customers with little signs of slowing. We allocated over $2 billion in 2021 towards acquisitions and new builds, share repurchases, and dividends. We added 991,335 sites through acquisitions and new builds in the year, following that, on January 4th, 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're 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. 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.

Okay. Our first question will come from the line of Phil Cusick with JPMorgan. Please go ahead, your line is open.

Hi, guys. Thank you. Two things. First, can you just talk about what's built in for DISH and AT&T in the current guide? Second, if I can, anything we should think about in terms of site development, either front-loaded or back-loaded, in the current guide anywhere? Thank you.

Well, we're not going to get too specific, Phil, but there will be quite a bit of activity from DISH that will be in our outlook as revenues for 2022. I'll speak generally with 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. Knowing our history and knowing that you really need all your leasing activity in the first nine 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. Regarding site development timing, 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 two-quarter forward look at activity.

Okay. Thanks, Jeff.

Our next question will come from the line of Brett Feldman with Goldman Sachs, please go ahead. Your line is open.

Yes. Thanks. A couple on M&A. 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 M&A opportunities look like over there? Second, 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, a few 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 niche? Thanks.

In Southeast Asia, there's a number of opportunities, Brett. Carrier dispositions we think will be coming. Just like anywhere else in the world, we will look at that mostly from its financial sensibilities, not because anything strategically combines North America with the Far East. So as with every other decision we make, it will be primarily made on its financial attributes. Having said that, we would love to continue to grow, and that remains our number one priority: using capital to grow the portfolio. On data centers, I think you'll continue to see our current pattern of behavior. We like data centers, but in terms of a big investment, much bigger than 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 tower sites. While there are certain pieces of evidence to suggest that, it has not really been proven out yet. So I think it's going to be the latter of the two paths you framed in your question. We will continue to learn the business and grow it modestly. It has turned out very good so far in the two 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 far so good, but it is not material today and it won't be material this year. We'll see where it goes in the future.

Thank you.

Next, we have the line of Michael Rollins with Citi, please go ahead.

Thanks and good afternoon. Two questions. First, Jeff, you're describing some of the visibility and the demand picture into 2023 and beyond. How is your visibility today different maybe from times in the past? Is there a sense of the type of average growth investors should be expecting over the next few years? Second, on the balance sheet and target leverage, given recent changes in rates, what's your current perspective on target net debt leverage in the current year and over time?

In terms of visibility, Mike, it hasn't really changed that much. The comments about this year's activity into 2023 are a combination of what our customers have said about how many sites they're going to be able to get to this year, what their capital plans are, and what our own internal backlogs are showing. Basically, there's going to be a lot of work still left to do by the end of this year. That's what gives us confidence about 2023 and why we don't think it will all be done by the end of 2023. On average growth rates over the next year, on a gross basis you're still looking at mid-to-high single digits. The budgets we've been talking about give us confidence in that. Regarding leverage, we've talked about this a lot over time. A 60 basis point movement in the 10-year, while it has had some impact to our trading multiple, really doesn't impact the way we think about structure, capital allocation, and balance sheet. So we haven't changed anything today based on where the 10-year is now. If it goes up materially from here, we would revisit that. The fact that we pay a dividend puts a bit more caution in where we want to take leverage or maintain leverage in an increasing rate environment, but the movement we've seen so far this year hasn't caused us to rethink any of the big picture balance sheet structural points.

Thanks.

Our next question will come from the line of Rick Prentiss with Raymond James, please go ahead.

Good afternoon, everybody. On DISH's call last week, Charlie Ergen mentioned the potential for spectrum sharing, particularly in the 3.45 DoD band, and perhaps other bands. How do you look at that and how would you monitor it?

There are certain filings that would allow you to monitor it. You have to work at it. There is a certain reliance on customer transparency, because our leases really talk only about deploying and using spectrum that is owned or controlled by the lessee. That would not be allowed under our current leases without additional discussions and modifications. In terms of detecting it, it's not necessarily going to show new equipment on the tower, but you could figure it out through RF tests based on each customer's signal strength in a particular area. If they're not on the tower officially but they're broadcasting a strong signal in 3.45, you'd know there's a sharing issue.

You also called out that CPI-driven escalators in Latin America could be higher. The math suggests you might be in the sixes rather than the fours. Where does CPI go and how should we think about the pacing in Latin America or all your international markets on escalators, Brendan?

Rick, the majority of our international escalators are in Brazil, with Brazil and South Africa being our largest markets. We do have some concentration of leases and a couple of timing points during the year based on acquisitions we've done and leasebacks associated with those, but otherwise over time it's fairly well spread. For guidance, we've put in our best estimates as to where CPI will be at the point that the biggest escalator concentration happens. I think those estimates are reasonable, if not a touch conservative.

Are those concentration points more in the middle of the year? I recall some of those fall in the late spring or late fall.

One of them is in the late spring and one is in the late fall.

You also mentioned Sprint churn. Can you remind us what the cumulative Sprint churn expectation is and how much might hit in '23 or '24?

Our assumptions are consistent with what we've disclosed before. For 2022 we estimated somewhere in the $30 to $35 million range for Sprint-related churn; we're currently thinking we're on the lower end of that range. Projections for '23 and '24 that we've given before are $10 million to $20 million in each year. If some of 2022 shifts in timing, that would slightly affect '23, but overall we have a fairly small level of churn expected for the next couple of years. The bigger Sprint-related churn years will be in 2025 and 2026.

Makes sense. Thanks for the extra color, we'll see you next week.

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

Jeff, I just paid $600 to have Roto-Rooter clear a drain for me, which I think is double the last time. Can you give us a sense of the labor market and whether that's having any impact on the construction activities of the telcos, and whether that has any impact on their speed at the moment? Are operators playing games? In your services business, do you think this is impacting margins? It’s hard to believe that's not having some impact.

That is more information than I needed to hear. It is having some impact in absolute terms, but we are managing it pretty well. There is wage pressure everywhere. In the services business, site consulting (zoning) is generally fixed-fee. Construction is mostly bid contemporaneously, so we're able to pass a lot of that on assuming we win the bid. We're managing it okay. It started over a year ago and we're very happy with the profits and margins we're producing in that business, and our outlook implies we'll do it again. So yes, it's happening, but we are managing it in a good way; some of it gets passed through to the customer because of how work is awarded.

When you said DISH 'rolled over' activity, does that mean leases that were expected to hit in 2021 are now expected to hit in 2022?

Yes. The leases were signed, but revenue recognition on those leases lags based on either a fixed end date or the earlier of construction. We estimated some of that would hit in 2021, but the leases signed up and rolled into this year, which gives us solid confidence for DISH's revenue contribution in 2022.

Okay. My last question: you highlighted a payout ratio of 25% of AFFO per share and have mentioned growing dividends faster than AFFO per share historically. For yield investors, would it make sense to provide a predictable dividend growth rate?

We will continue to grow the dividend and historically we've grown it faster than AFFO per share because we started with a low payout. We want to pay a dividend to expand our investor base, but we also believe shareholders are best served by compounding capital through portfolio growth and share repurchases. We've talked about growth in five-year increments and historically around 20% annually in the past.

We've said in the past that we expect to grow AFFO per share by at least 20% per year for the next several years, and we've demonstrated progress toward that.

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

Hey, guys. Thanks for taking questions. First, Jeff, can you talk more about your aspirations for the Philippines? Magnitude of the greenfield opportunity over the coming years, and the competition you expect to see. Second, you've repurchased a lot of stock so far in 2022; any updated thoughts on the relative appeal of M&A versus repurchases? Any observations about trends in the M&A market?

The Philippines has about 110 million people and roughly 24,000 cell sites, so there's a huge opportunity to expand wireless networks. Many greenfield sites will need to be built. There are over 20 tower companies in-country because you must get a license to operate as a tower company in the Philippines, but we think only five or six of them, including us, are strong and have the confidence of customers to get meaningful build-to-suit opportunities. The customers are very discerning and careful in who they partner with. Our history, experience, and people on the ground will help differentiate us. We think thousands of towers will be built in the Philippines every year for the next 10 years. If we get our fair share, that will build a nice business there. On M&A versus repurchases, at a $303 stock price in the midpoint of our guidance, that's about a 26x AFFO per share multiple. There are transactions selling for higher multiples, which leads us to conclude that while we want to grow the portfolio, we'll only do so when it makes financial sense. Stock repurchases at today's prices relative to private market values are extremely attractive.

Got it. Thanks, Jeff.

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

Thanks for taking my questions. First, on the international guide, Tanzania appears to be contributing about $45 million in revenue. How much is contributed in terms of EBITDA and AFFO per share for Tanzania? Second, on the telco versus cloud debate, cloud providers offering network-as-a-service — does that lighten the equipment load for you, maybe not the top of the towers but at the base? How do you see that dynamic unfolding?

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

On the telco versus cloud question, we view ourselves primarily as housing antennas and radios. While there's movement toward compute at the tower site, we haven't seen it materially impact the need for antenna and radio locations. It doesn't materially change how we structure leases or think about our business so far.

Got it. Thank you.

Next question will come from the line of Sami Badri with Credit Suisse. Please go ahead.

Hi. Two questions. First, regarding wage inflation: what measures would you take if costs do not normalize and this new pricing level is the new normal? Second, with more formal MLAs in place with telcos, does that make renegotiation of fees and managing margin more complex?

We'll do what we always do: take a fine pencil and work through our costs and make changes where necessary. Fortunately, the impact is relatively small for us because of our 70%-plus EBITDA margin and strong operating leverage; a small number of people can manage a lot of towers. Regarding MLAs, they make the business relationship less complex during the life of the MLA. If renegotiation of MLAs and fees were necessary to address inflation, that would be considered, but we don't believe wage inflation will be a material issue based on our outlook showing increasing margins.

To add, our actual cash SG&A is about 6% of our total revenues, so personnel cost impacts are relatively small. Our largest expense in the tower business is ground leases, which have fixed escalators, so many inflationary pressures don't directly adjust that expense.

Thanks. One more question: you focus on emerging markets as seen by recent acquisitions; competitors are going after developed markets in Europe. Is there a reason you haven't tilted toward Europe for M&A instead of sticking to emerging markets?

It's entirely due to our assessment of return on invested capital. We have liked the European market historically, but competition for assets there is intense and many buyers denominate returns in euros and could borrow at very low rates, making valuations less compelling for us from a shareholder value creation perspective. It's still a good market, but not as attractive for our capital deployment compared to markets like Tanzania and the Philippines.

Thanks very much.

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

Hey, thanks. On the $65 million of domestic new leasing activity this year: is that a sustainable pace going forward or is 2022 an outsized year? Also, regarding the Philippines, which MNOs will be tenants on your new builds? And what's the day-one tower cash flow yield you expect on new builds?

For 2023 we think it will be really good too; that's as far as the crystal ball goes right now. We wouldn't say 2022 is definitely the high watermark. On the Philippines, our tenants will include Globe and Smart. Regarding day-one yield on tower builds, we're targeting double-digit tower cash flow yields, comparable to other emerging markets we're in.

Okay, thank you.

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

Great. Thanks. You grew your site portfolio about 8% since last February. How are you thinking about the 5% to 10% long-term target? Is that still achievable given the M&A environment, and will it be more driven by build-to-suit? Also, what is critical mass for you in the Philippines — 500 towers, 1,000 towers?

We will definitely need build-to-suit to reach those numbers. I still feel pretty good about the 5% to 10% range. The 5% is certainly achievable. We will need to find opportunities as we do every year. We plan to build a lot more towers this year than last year, and if we get one good-sized acquisition, we'll hit at least the bottom end of that range. For critical mass in the Philippines, at least 500 towers is our target as a starting point.

Thanks a lot.

And the final question in queue comes from the line of Brandon Nispel with KeyBanc Capital Markets. Please go ahead.

A couple for Brendan. Could you share what the backlog of lease applications was year-over-year in the fourth quarter? Also, regarding the $65 million in new leasing in 2022, I would imagine that's second-half-weighted. Is it possible you could exit the year with, say, $20 million in new leases on a year-over-year basis?

Brandon, I don't want to be too specific on the backlog. It's up significantly from last year. We came out of last year with a reasonably good backlog; we had a slow first quarter and then it began to ramp and has been at a high level fairly consistently through the second half of the year. I don't want to get into specifics. If you look at the growth in activity, the $65 million we projected versus roughly $38 million last year, that's almost doubling the backlog in terms of dollars. Regarding the pacing, I expect leasing activity to increase every quarter this year. Your math is in the right range — you'd need to see high teens to low $20 million in new leasing by the fourth quarter to hit the guide, which is consistent with our expectations.

Okay. Thank you.

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.

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