Welcome, and thank you all for joining today's SBA's Second Quarter 2025 Results. Please note that this call is being recorded. With that, I'd now like to formally begin today's call and turn it over to Mark DeRussy, VP of Finance.

Thank you. Good evening. Thank you for joining us for SBA's Second Quarter 2025 Earnings Conference Call. Here with me today are Brendan Cavanagh, our President and Chief Executive Officer; and Marc Montagner, our Chief Financial Officer. Some of the information we will discuss on this call is forward-looking, including, but not limited to, any guidance for 2025 and beyond. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, August 4, 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 over to Brendan.

Thank you, Mark. Good afternoon. I'm very pleased with our second quarter results, exceeding our internal projections. Both the U.S. and international businesses performed very well, and we are pleased to increase our full year guidance across all key metrics, both in total and on a constant currency basis. In the U.S., activity levels continue to improve, and this quarter represents the sixth sequential quarter where bookings increased. While not at the peak levels enjoyed back in '21 and '22, positive momentum continues to build, and we are encouraged by the sustained levels of activity as carriers continue investing in their wireless networks. In addition, the trend towards more colocations continues driving more new points of presence with our key customers across our portfolio. Our carrier customers are working hard to densify their existing footprints, expanding fixed wireless access as well as pushing out into rural parts of the United States, where our portfolio is well positioned to capture that sustained network investment. The backlog also remains healthy which bodes well for the remainder of the year and into 2026. Consistent with our strong U.S. bookings, our services business outperformed our expectations and we are increasing our full year services revenue guidance by almost 20%. Most of the increase is related to construction services as carrier installations accelerate across the U.S. I am optimistic about domestic organic growth opportunities over the next year or two due to the specific initiatives of each of our major customers, but I am also optimistic about the long term. The growth in fixed wireless access subscribers for all of our MNO customers, the expanding number of AI-intensive applications, 5G advanced enabled new use cases and the opportunity for incremental spectrum auctions are all supportive of sustained long-term growth. With regard to the spectrum, the recently passed federal spending and tax bill included the reinstatement of the FCC's spectrum auction authority, a positive development for us and our customers. In addition, as part of the new bill, 800 megahertz of spectrum will be identified and eventually auctioned to help boost network capacity and support the next generation of wireless technologies. This new spectrum will require new equipment at our cell towers, particularly at the higher bands that are not currently used for traditional wireless service today. Additionally, with bonus depreciation being permanently reinstated improving available liquidity from our customers, we could see greater investment in their networks as they have more capital available to invest. Similar to the U.S., our international business continues to perform well as our customers invest in 5G upgrades and ongoing densification. We signed a growing number of new leases in our international markets, and continue to expand our portfolio through high-quality strategic new tower builds and elevated CPI rates continue to support healthy tenant lease escalations. While certain international markets continue to experience elevated levels of churn, we believe this to be temporary and necessary for the long-term health and success of our customers. One area of challenge internationally is with one of our carrier customers in Brazil, Oi. As indicated in our updated full year guidance, we are increasing international churn by $5 million, primarily related to Oi. As previously disclosed, Oi Wireline, the remaining Oi business post the wireless business breakup, which is mostly point-to-point wireless backhaul, represents approximately $20 million of run rate revenue. On July 2, Oi filed an amendment to their judicial reorganization plan citing unforeseen financial difficulties. While many things remain unknown and will take time to work through the court system, we have booked a bad debt allowance for certain outstanding receivable balances and are now assuming that a portion of the recurring revenue churn this year and next year. We will continue to monitor the situation closely and provide any updates to our thinking as the situation develops. Turning to our portfolio review. I'm very pleased with the progress we have made recently. Both expanding our presence in key markets and exiting the markets where we are currently subscale and could not see a path towards being a more meaningful player. On the former, we added approximately 4,300 sites through the partial early closing from the previously announced Millicom transaction, deploying $550 million towards enhancing our strategic positioning in Central America, making SBA the leading tower operator in that region. This early closing contributed to the increase in our full year guidance. As previously mentioned, this portfolio has a 15-year MLA, tenant contracts with the leading mobile network operator, contracts denominated in U.S. dollars, and comes with a substantial build-to-suit arrangement. We continue to expect the balance of the deal to fully close by September 1. With regard to the market exit, we are announcing the sale of our tower business in Canada. We entered Canada back in 2009, and we have had reasonable success. However, we have been unable to meaningfully grow our portfolio. And as a result, we made the decision to explore strategic alternatives. On July 21, we entered into an agreement to sell all of our towers and related operations to a leading global infrastructure fund. Today, Canada represents approximately CAD 27 million of annual leasing revenue in Canadian dollars and CAD 15 million of cash flow after taxes. As mentioned in our press release, we expect the deal to close sometime in the fourth quarter, but given the uncertainty in closing timing, we have made no adjustments to our full year outlook related to this transaction. Upon closing, we expect this deal to be immediately accretive to AFFO per share. I would like to briefly thank our Canada-based team for all of their hard work and contributions to SBA over the last 16 years. The portfolio review remains ongoing, and I look forward to providing further updates. In addition to portfolio acquisitions, you should expect SBA to continue to deploy capital towards a mix of share repurchases and/or debt reduction, as seen in our latest quarter and revised outlook. We continue to be committed to a balanced approach to capital allocation, opportunistically using each of these different options to invest in value-creating assets or to return capital to our shareholders.

Thank you, Brendan. As the positive momentum from last quarter continues, we're increasing our full year outlook for all key metrics, including site leasing revenue, tower cash flow, adjusted EBITDA, AFFO, and AFFO per share as compared to our last quarter guidance. The primary drivers of these increases included outperformance of second quarter results, higher straight-line revenue, the acquisition of Millicom towers earlier than expected in two international markets, an improved outlook for services, favorable foreign currency movement, and a reduction in the share count from recently completed share buybacks. Second quarter domestic organic leasing revenue growth over the second quarter of last year was 5% on a gross basis, 1% on a net basis, including 4% of churn. $11 million of the second quarter churn was related to Sprint consolidation, which we still anticipate to be approximately $50 million to $52 million for the full year 2025. Our previously provided estimate of total Sprint-related churn over the next several years remains unchanged. Beyond 2025, we anticipate approximately $50 million of churn in 2026 and $20 million thereafter. Non-Sprint domestic annual churn continues to be between 1% and 1.5% of our domestic site leasing revenue. During the second quarter, 80% of consolidated cash site leasing revenue and 85% of adjusted EBITDA was denominated in U.S. dollars. International organic leasing revenue growth for the second quarter, which is calculated on a constant currency basis, was 0.8% net, including 7.5% of churn or 8.3% on a gross basis. Total international churn remained elevated in the second quarter, mainly due to ongoing carrier consolidation as well as the Oi wireless churn in Brazil. During the second quarter of 2025, we acquired 4,329 sites for total cash consideration of approximately $563 million, mostly related to the acquisition of sites from Millicom in Guatemala and Panama. The remaining 2,500 sites related to the Millicom transaction remain under contract, and the guidance continues to assume a September 1 closing date. The ultimate closing date is dependent upon regulatory approval and other requirements and may differ from this date. We also built 94 sites in the quarter, mostly outside of the U.S. Switching to the balance sheet. We have ample liquidity from both available cash and a $2 billion revolver, which as of today, has a balance of $35 million outstanding. At the end of the second quarter, our weighted average interest rate was 3.7% across our total outstanding debt, and our weighted average maturity was 3.2 years approximately. Including the impact of our current interest rate hedge, the interest rate of 97% of our current outstanding debt is fixed. And finally, our next debt maturity is a $750 million ABS security due in January 2026. I will conclude by discussing the recent credit rating update by S&P. We were pleased to see that on July 30, S&P upgraded our corporate credit rating to BBB investment-grade rating, driven mostly by S&P's new criteria for digital infrastructure companies. The upgrade underscores the benefits of our stable and predictable cash flows and the positive impact on our U.S. revenue growth of anticipated increased wireless capital spending in the U.S. in 2026 and beyond. While we have made no change to our financial policy, this upgrade brings us one step closer to accessing the investment-grade debt market.

Thanks, Marc. We ended the quarter with $12.6 billion of total debt and $12.3 billion of net debt. Our current leverage of 6.3x net debt to adjusted EBITDA, as adjusted on a pro forma basis for the Millicom assets, remains near historical lows. Our second quarter cash net interest coverage ratio of adjusted EBITDA to net cash interest expense remained strong at 4.3x. During the second and third quarters, we purchased 799,000 shares of our common stock for $172 million, at an average price per share of $215.33. We currently have $1.45 billion of repurchase authorization remaining under our $1.5 billion stock repurchase plan. In addition, during the second quarter, we declared to pay a cash dividend of $119.4 million or $1.11 per share. And today, we announce that our Board of Directors declared a quarterly dividend of $1.11 per share payable on September 18, 2025, to shareholders of record as of the close of business on August 12, 2025. This dividend represents an increase of approximately 13% over the dividend paid in the third quarter of 2024 and approximately 35% of the midpoint of our full year AFFO outlook. Operator, we are now ready for questions.

Moving to the first question in our queue, Jon Atkin with RBC.

I'm interested, first of all, in kind of the durability of the demand drivers that you indicated in your prepared remarks around FWA and densification and coverage and so forth. Any sense as to how far that kind of takes us through end of '25 and 2026 and the directionality around that? And then secondly, any thoughts on kind of the drivers of churn or maybe rent reduction initiatives on the part of some of your customers that occasionally comes up and how that might kind of tie into your forecasting as well as thoughts on MLAs.

Sure. We feel confident about the demand drivers we mentioned earlier. These factors typically fluctuate, but fixed wireless has shown significant growth in subscriber numbers, indicating increased traffic compared to typical wireless subscribers. We expect this growth to substantially utilize network capacity in the coming years. Additionally, the new spectrum bands being auctioned will also contribute over an extended period. The increase in broadband traffic through wireless networks is substantial, and the emergence of AI-enabled products will likely add to this trend. We are optimistic about the long-term durability of these factors, which will require ongoing investment in networks that we will benefit from for many years. Regarding churn in the U.S., while customers prefer to pay less, there are no significant initiatives currently aimed at reducing rents. Our focus remains on collaborating with customers to meet their network needs at a fair price that benefits both parties, and we believe we have achieved a good balance in this regard.

Moving to our next question, Richard Choe with JPMorgan.

I just wanted to ask about the activity levels. It seems like there is a lot of colocation activity, but the revenue hasn't quite come through yet. Can you talk a little bit more about the timing there that you're expecting?

We're definitely observing an increase in business activity as I mentioned earlier. We've noted a shift towards new colocations rather than amendments, which contrasts with our historical trends. This change has persisted and is beneficial in several areas, such as the number of customer sites we're working with. However, this typically results in a slight delay in when we start recognizing revenue because new leases usually take longer to implement compared to amendments. It's primarily a timing issue. We've maintained our full-year outlook for contributions from new leases and amendments, but based on the contributions we've seen in the first half of the year, it's clear that the second half will need to show stronger contributions to reach our targets.

Great. And a quick follow-up on the services. I mean, a real step up and it's going well. You mentioned a little bit about what's driving it. But can you give us a little bit more color on what is driving the services business?

Yes, it's really the same thing. I mean, they're kind of related to each other, right? What we're seeing that's driving our leasing activity is also driving services. So on the site AC side, you have more effort to find locations and to get more deployments done, so we're supportive there. On the construction side, which is also up significantly, that's obviously more actual work being done, particularly with some of these builds that are spanning out into the more rural areas. And we are at SBA are actually doing more services work now, not just on our own sites but on other people's sites as well. And so that's been a driver of increased activity, too. And I think the more we're able to partner with our carrier customers broadly across everybody's towers, it creates a better relationship between us and them, and we can be counted on more. I think it helps us in the leasing gain as well.

Moving to the next question in our queue, Batya Levi with UBS.

Great. Maybe just a follow-up on the domestic activity. Just a slight slowdown in 2Q. Is that mostly rounding? And looking ahead, you mentioned that bookings growth is very strong. You had started the year strong. Are we seeing an acceleration in that growth rate? And I think in the beginning of the year, it was mostly one of the carriers that was very active. Are you seeing more broad-based activity now?

Yes. Regarding the slowdown in the second quarter, it is primarily due to rounding. The differences amount to about a couple of hundred thousand dollars, which is not particularly significant. Activity has definitely picked up this quarter, slightly exceeding last quarter, which was also strong. We anticipate that this will lead to an increase in recognized revenue as we move into the second half of this year and into next year.

Moving to our next question, Michael Rollins with Citi. Sorry, Michael, we're not getting any audio from your line. We'll circle back. Brendan Lynch with Barclays. Please go ahead, sir.

Brendan, I just wanted to follow up on your comment about AI application growth and that being a driver. To what extent are you seeing this now? And any outlook for the relatively near term would be helpful as well.

Yes. Brendan, some of these comments reflect broader themes based on discussions with our customers and general traffic trends. Given our position in the value chain, we can’t provide detailed specifics. However, from conversations and reviews by our engineering team, we are noticing several products being released that incorporate AI technology. We believe this will significantly boost activity, which is ultimately beneficial in terms of the infrastructure required to support it.

Okay. That's helpful. And then just on the Canadian asset sale, can you give any details about these assets in particular and why you didn't think you're going to be able to scale more meaningfully in the Canadian market? And how we should interpret that for any of the other markets where you have a relatively small footprint.

Yes. So we've been in Canada a long time, as I mentioned earlier, it was actually the first international market that we went into 16 years ago. And so we've had a lot of time and experience there. The assets themselves were good assets. We had reasonable success in leasing them up over the years. The comment about the difficulty in growing is really about growing the portfolio size to continue to get to a bigger scale. And obviously, some of that was based on the fact that the carriers own their sites. You may have seen TELUS recently just kind of set up a captive tower company with a private party investing in that, about 49% of that. And so breaking into that particularly not being a Canadian company was a little bit challenging. And so we built sites. We had some modest growth there, but the ability to really move to a place where we were going to be a significant player in that market, we just found to be challenging. And really, we would have continued there and I think have made reasonable progress. But it was an opportunity for us when we started exploring strategic alternatives to actually realize a valuation on our assets that was certainly much higher than our public company valuation. And so there was a financial benefit. And given what we saw as a limited ability to continue to grow our portfolio, we thought that that was the right thing to do for us financially. And I think it worked for us and the buyer because they have a local presence there and a different plan, and I think they'll be able to do well with it. But for us, I think it's just a better economic choice, and it positioned us in order to focus on the markets where we can be of scale. On the second part of your question, in terms of what it means for other markets, it doesn't mean anything in the sense that what happens here is not necessarily exactly what happens elsewhere. But all of the markets that we're in, we are looking at through a lens of what is our potential going forward. And if we're subscale in a particular market, it is something that we look at in terms of, okay, well, how can we change that dynamic in a way that is favorable to us. And if we can't see a way to do that, then yes, we would look at it. And you've seen us exit a couple of markets, but you've also seen us expand in some of the markets where we were a little bit subscale, particularly Central America. And I think the expansion that we've done has made us much, much stronger. So if we can find that path, we frankly would prefer to do that. But if we can't, then we'll continue to look at what our options are in terms of downsizing, too.

Moving to our next question Jim Schneider with Goldman Sachs.

I was curious if you could expand on your earlier comments, Brendan, regarding fixed wireless. It appears that customers are continuing to show interest in that area. Has the level of activity for densification increased beyond just one lead customer who was initially very proactive, and are you now seeing engagement from two or three of your customers at this point?

Yes, I would say it has broadened. We're seeing increased activity among our larger customers. While one customer is still leading at this time, that gap is closing. Based on the trends in applications and the discussions we're having, I expect this trend to continue, with all customers becoming more active, and fixed wireless is definitely a contributing factor.

That's helpful. And then maybe as a follow-up, given the recent announcements from U.S. Cellular with that deal closing as well as announcements from DISH, can you give us any kind of color on, again, just sort of reaffirming the level of exposure those represent for you? And any color you have in terms of planned churn or any kind of sense of whether there's any kind of change in revenue profile that you expect to recognize over the next 18 months or so?

Yes. I mean at this moment, there's no planned churn specifically, but just in terms of exposures on the U.S. Cellular piece, the total revenue that we have with U.S. Cellular is about $20 million a year. That's the total. I don't think we would expect to see all of that go away. But even if it did, it would be over a number of years. So I would expect the impact to be rather small. In terms of DISH, our total revenue with DISH is roughly around $55 million a year. That's a whole different situation. Obviously, U.S. Cellular has sold and would have some overlap there with T-Mobile that would lead to some risk there. In the case of DISH, it's a different situation today. We continue to operate on an ongoing basis and serve them where we can. They still, in fact, sign some leases and some amendments. And so we'll just have to see where that goes.

Moving to the next caller in our queue, Nick Del Deo with MoffettNathanson.

My first question on the Millicom towers. I'm sure you've had initial conversations with the other carriers in those markets about access to net infrastructure. Can you share anything about the initial feedback you're getting and the degree to which it aligns with or is supportive of the lease-up assumptions you've made for those assets?

Yes. It's been actually quite positive. We're very encouraged about the opportunity there. I think it may even be better than we were thinking. And if you think about it, it's pretty logical. I mean, Millicom for the most part in each of these markets is the #1 carrier in many of the markets. And so that would suggest that they naturally have a deeper footprint. And in order to close that gap, the opportunity to have some of those sites opened up to the other carriers, they see as an opportunity to grow and to close the competitive gap there. So that's to our benefit. So we'll continue to see how it goes. Obviously, we just closed on the majority of the sites we've bought so far. We just closed on at the end of June. So we haven't had a ton of time there, but we certainly have been having those conversations and feel pretty good about the potential.

Okay. Okay. That's great to hear. And then maybe one on Canada, but a different angle, just the use of proceeds. It looks like you're getting about USD 325 million. It's obviously a much more substantial chunk than you've gotten from some of the other markets that you sold. Any specific use of proceeds you're thinking about? Or should we just think of that as sort of debt reduction?

Yes, you could say it's somewhat flexible, Nick. We have various initiatives in progress, including another Millicom closing. So it could be used for that, or for debt reduction, share buybacks, dividends, or whatever you prefer. This is just another source of capital that enables us to maintain lower leverage and manage our expenses effectively.

Moving to our next caller, Ric Prentiss with Raymond James.

Yes, there's a little feedback first. Can you hear me?

Yes. Go ahead, Rick.

Yes. One just a clarification. So on the Sprint churn, $50 million expected in '26 and then $20 million thereafter, that's a grand total of $20 million thereafter, right? That's not like $20 million a year. That's the end of the Sprint churn is the $20 million that's post '26?

That's right. Yes. And I would expect most, if not all of that will be in 2027. Really, we said thereafter because the exact timing tends to change. But yes, it's a grand total.

Okay. And then back to the Canadian sale, I think you said CAD 27 million lease revenue. And was that CAD 15 million after-tax cash flow? Was that also Canadian? And is that like an AFFO type of number?

Yes, Rick. The terminology we used was likely a bit unusual since AFFO includes interest and we weren't excluding interest. Essentially, what that represents is adjusted EBITDA minus taxes and also maintenance CapEx, which is minimal, but fundamentally it’s less taxes since we are subject to income tax there. So yes, it's essentially AFFO.

Right. And so your comment kind of pointing to that would imply like a 30x multiple on an AFFO type basis up there, if I'm doing the math right?

Yes, that's right. In order to be totally fair, though, we will pay a capital gains tax on the gain on the sale of the assets. So it will end up being in the mid to upper 20s is what the multiple for practical purposes will be.

Makes sense. But again, it just tees up the privates are paying more than public, it seems. Help us understand as you look at your leverage, I think you've said you want to keep looking for M&A opportunities, and that's why maybe you don't go investment grade yet. But just help us understand, it seems like it's really hard to win external growth opportunities, if it really is winning when you have to pay up. And just kind of as you think through longer term, the balance sheet, debt, investment grade and what it might mean for ultimately kind of dividend growth rates.

Yes, I believe that's a valid statement. We've been mentioning for several years now that there is a disconnect between public and private market valuations. Consequently, there hasn’t been a significant amount of mergers and acquisitions, unlike what we experienced early in our history. We were well-known for being a highly leveraged, M&A-focused growth company, but it’s become more challenging to maintain that approach mainly because the cost of debt has increased. We could handle that if asset valuations were adjusted reasonably, but that hasn't happened, which has led us to remain more on the sidelines. This situation impacts how we consider future planning for our balance sheet, and you've observed that our leverage has decreased over the past year or two. If we can't find viable opportunities to invest capital because others are willing to pay more, we will look at alternatives, such as repurchasing our own stock or reducing our debt to move closer to an investment-grade rating.

What do you think you need to get at to get investment grade given your mix of portfolio in the U.S. and LatAm and Africa?

Yes. Well, I mean you heard Marc mention earlier that we were just upgraded by S&P, at least our corporate rating was upgraded to an investment-grade rating just last week. So I don't believe we need to do a whole lot. It's really a matter of policy and probably the mix of our debt. The secured versus unsecured debt is really probably the main thing. In terms of leverage, though, I don't think we need to do much.

Moving to our next caller, Michael Rollins with Citi.

Can you hear me now?

Yes, we can hear you, Mike.

So I'm just trying to think about maybe longer term, can you help us with what is the right or fair level that SBA should be able to grow AFFO per share on an annual basis? And when you think about working through some of the things that you've been talking about, whether it's international, merger churn, domestic merger churn, normalizing domestic leasing, absorbing a higher cost of debt. What inning are we in to get to that future annual run rate opportunity?

Sure. I think the main point, Mike, is that we have some challenges, particularly with the Sprint churn and to a lesser extent, international churn. However, the primary issue is the interest rates. We currently have $12.5 billion in debt, much of which carries a low interest rate. Our average interest rate is around 3.7%, which includes some recent financings at higher rates. There is a significant amount of low-cost debt, which is positive, but it will mature over several years, presenting a notable challenge. If we account for that factor, which we will eventually overcome, we can expect a mid- to high single digit AFFO per share growth rate that we should be able to sustain comfortably. As for your question on timing, it's difficult to pinpoint exactly, but I believe we are a few years away from that, depending on the trajectory of interest rates. A quicker decrease in interest rates could benefit us, but even in the absence of that, our upcoming maturities all have interest rate coupons in the single digits. This creates a significant difference. As we reduce our leverage, it has somewhat alleviated the situation, but the interest rates remain our biggest challenge. Moving past this, I believe our organic business growth will continue steadily, and our operational efficiency is improving. Therefore, I am optimistic about our continued growth.

Moving our next question, Eric Luebchow with Wells Fargo.

Brendan, I wonder if you could talk just about the investment-grade conversation a little bit, like what type of spread differential you think you could get on your debt versus potentially giving up flexibility to lever up if you see some more compelling investment opportunities down the road or opportunities to buy back your stock. How are you thinking about balancing that over the next couple of years?

Yes. Well, right now, we have not gone investment grade and part of it has been to retain that flexibility. But we also have seen our leverage come down meaningfully. So that has allowed us to have a lot of capacity. I mean, you saw, obviously, we did a $1 billion deal here with Millicom, and it hardly has an impact. So we have a lot of capacity; it would really only be for something really, really sizable. And it's hard to change your whole policy, hoping for or waiting for something of that magnitude to come along. So I think as we think about it, we'll continue to look at our options as our upcoming maturities come along. In terms of the impact on cost of debt, I think it's not huge, and it's not huge mainly because we've been an issuer of a substantial amount of our debt in the ABS market, and that has been investment-grade rated paper in that market. And so we've been able to achieve what were very close to investment-grade type of rates through the use of that market where we would be able to see a benefit, I think, is on the unsecured paper, we would probably be able to see that at a better rate than what we've historically been able to get in the high-yield market and even perhaps our term loan, we could improve slightly. But if we do that math around all those things, and we think about what might it look like if we made a shift there and what are the things we're giving up, I actually don't think we would be giving up too much. And so we continue to explore this a little bit further, frankly, because it's just naturally moving in that direction.

I appreciate that. And just maybe one follow-up. On the domestic leasing outlook, I know you kept it stable for this year. You should be at $10 million or $11 million or so in the back half. And just wanted to think through some of the moving pieces. I know it's a little premature to talk about 2026, but based on the bookings of the last 6 quarters. Do you see an opportunity to accelerate that further that run rate going into 2026? Or are there any other mitigating factors that we should keep in mind?

Yes. I think it's a little premature for me to speak to that. You're right that the run rate at the end of the year will certainly be higher, probably in that $10 million, $11 million range. So we'll be at a run rate leaving the year that's certainly higher than this year's contribution was. As to whether that can go higher, it certainly can, but I think it's too early. Usually, we have to see something that's in that six-month window prior to the period that we're reporting on. We feel very good about what the second half of the year looks like; it's a little harder to say with absolute certainty about next year. But the trends are good. The backlogs continue to grow; the carriers are active. And so right now, I feel good about things. But I don't know whether that means it stays at the same level or it grows, and we'll let you know that when we give 2026 guidance.

Moving to our next caller David Guarino with Green Street.

Brendan, on your question about new spectrum potentially being auctioned. I was wondering if you could share some thoughts on how high the frequency can go before it won't propagate well from a macro tower site. And then also how quickly do you think the FCC could give auctioned spectrum into the hands of the carriers if it was to be auctioned?

Certainly, the new spectrum mentioned in the recently passed bill in Congress will be auctioned in various phases and across different bands. While some of the longer-term bands have not been specifically identified, higher band frequencies are being considered. I believe these will propagate effectively, but they will necessitate new radios and antennas. This is advantageous for us. I still think macro sites will be the primary method for deploying and utilizing this spectrum, as it remains the most efficient approach. What was the second part of your question, David?

Just on the timing of when you think it could get in the hands of carriers?

Yes. So I think the stuff that's going to be auctioned, there's like 100 megahertz that has to be auctioned by next summer, I believe, is the deadline mid-2026. And I would expect that, that piece probably would be able to be cleared in the carriers' hands within two years or so following that. The other stuff, I think, is going to be much later. Even if it's auctioned in '28 or '29, you're looking at several years to get it cleared; you have DoD spectrum in there. So it's probably into the next decade before we start to see that.

That's helpful. One quick question regarding the guidance increase. Could you clarify how much of the earnings guidance increase was due to the Millicom towers closing earlier than expected?

I don't have the exact figure, but I believe we mentioned that $16 million of revenue came from the earlier closing of Millicom. So, of the overall revenue increase, leasing revenue contributed $16 million from Millicom.

Moving to our next question, Benjamin Swinburne with Morgan Stanley.

Brendan, I'm not sure if you caught EchoStar's call on Friday, but they announced a significant LEO project, and I'm curious about how they plan to fund it. Their presentation centered on providing the satellite constellation network to carriers, emphasizing that it would lead to more efficient network infrastructures, especially in rural areas where current terrestrial coverage is costly. I know you've mentioned satellites as a factor in the market and their relationship to the tower business, but this perspective seems to present a new angle. I would like to hear your thoughts on how you view the expanding satellite business in terms of competition or potential collaboration with towers.

Yes. We have spent a lot of time analyzing this issue, as it's been a topic of discussion for a while. We want to have an informed perspective on it and feel fairly confident that it serves as a complementary solution. The key point is that in economically challenging locations, traditional macro coverage can be difficult. While traditional methods could cover all areas, the costs in more rural regions with fewer points of presence or where establishing fiber-based backhaul is tougher make satellite solutions quite appealing. However, the coverage is limited, and the capabilities are not comparable to those in urban or suburban areas; you can achieve basic connectivity, but that’s about it. Thus, I don’t see this as a true competitive threat but rather as a complementary option. Regarding EchoStar, I don't have any additional information beyond what they disclosed, and I'm sure you're more informed on that. From what I understand, if they manage to develop their solution, it would certainly be beneficial for the tower industry as it would work alongside their existing terrestrial services, giving them a unique competitive edge compared to other carriers. We would definitely support that in any way we can, but in terms of its overall viability, I just don’t know at this point. We'll have to wait and see.

Yes. Yes. No, makes sense. And then just a quick one on the guidance. I think there was an increase in the domestic straight-line revenue for the year versus your prior guide. Correct me if I'm wrong. I don't know if you talked about that in the prepared remarks, but is that just a lease amendment or something that you could explain?

Yes, there was an increase. What this means is that under the AT&T Master Lease Agreement we signed a couple of years ago, any upgrades at any sites result in an extension of the lease term. When the lease term is extended, it creates a favorable straight-line effect. That’s essentially what you're observing.

Michael Funk from Bank of America. Brendan Cavanagh, CEO, responded that there was indeed an increase. Essentially, under the AT&T MLA signed a few years back, any upgrades at the sites result in an extension of the existing lease term. This extension creates a positive straight-line impact, which is what you are observing.

On the call, you mentioned bonus depreciation and increase in carrier cash flow. I think most of the carriers mentioned earmarking that primarily for fiber build among other projects. Just curious if your conversations with the carriers have discussed incremental tower or wireless net builds as well?

Yes. I mean we don't have a discussion with the carriers that's explicitly related to what they're doing with bonus depreciation benefits. But what we do talk to them about is their general network plans over the longer term and the needs that they have, which we believe will support continued network investment in the wireless side. I'm sure some of the benefits that they'll get from a tax savings will go into fiber as well. And as I said in response to your question about our own capital allocation earlier, to some degree, it's fungible. What's good about it is that there is excess cash available to them to invest broadly in their network initiatives, whether that be fiber-based or wireless. So I think wireless will benefit from that, too.

And just curious on AI app comments you made earlier as well, but your engineers looking at the AI app and the usage. Do you have any quantification of the increase in traffic or usage of AI app?

I do not have anything specific that I can give you now. But perhaps over time, that's something we'll be able to share more with. I think as it develops, there will be more data available on it, but it's a little premature for that.

With that, there are no further questions in the queue.

Great. Thank you. Thanks to everybody for joining the call, and we look forward to following up next quarter.

Thank you to all of our speakers, and thank you all in the audience for joining us today. With that, our call is concluded, and you may now disconnect.