Sba Communications Corp (SBAC) March 3, 2026 Conference Transcript

Well, good morning and welcome back to City's 2026 Global Property CEO Conference. I'm Mike Rollins with City Research and we're pleased to have with us SBA Communications and CEO Brendan Cavanaugh. This session is for City clients only and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to liveqa.com and enter the code GPC26 to submit questions. Brendan, we'll turn it over to you in just a moment to introduce your company and team, provide any opening remarks, and if you can share with the audience the top reasons an investor should buy your stock today and then we'll get into Q&A.

It's nice to be here. Thanks for hosting us again. So as you said, I'm Brendan Cavanaugh, the CEO of SBA Communications. I have with me today, Louis Friend, our Vice President of Capital Markets and Finance. You know, so that's always an interesting question, what's the top reason to buy our You know, I think, I hate to say this, but in part the reason is that it's valued way below where it should be in our view, and that's something that we typically historically would never comment on because that's really for you guys to figure out, but we see where assets like ours are valued in the private markets and there's quite a disconnect and we recognize that our valuations are below historical norms and also below where they really should be in terms of the predictability and steady cash flow that we can continue to produce and will continue to grow over time and our ability to provide shareholder remuneration and part of the way we've been capitalizing on that phenomenon recently is just through increased share buybacks and that's something we'll probably continue to do while we're valued at these levels.

Thanks. And maybe building on the points that you just made, can you share with us the priorities for SBA this year and how that's going to drive over time the growth in revenue and cash flows?

Sure. yeah so our priorities aren't really all that different than they've been historically one of the great things about our business is that it doesn't change that much over time the critical nature of the assets that we own for the wireless carriers continues to be the same as it was a decade ago and so our focus is really on making sure that we're building strong relationships with the carriers one of the things that has changed a little bit is that there's been some consolidation among our customer base over the last so many years which i think most people are well aware of and that has made it even more critical that the strength of the relationship that we have with our customers remains a top priority so that's something we're focusing on but beyond that it's really the allocation of capital in the best way possible we've always prided ourselves on being very strong allocators of capital and really there's a few different buckets that we evaluate and those haven't changed that much either the first one is to continue investing in new assets both new tower builds and acquisitions that's ideally where we would like to prioritize our spending but given the disconnect that i mentioned before between the private markets and public markets that's made that more challenging and so it's moved us more into that second bucket which is share repurchases right now we're seeing the opportunity to buy shares that

immediately accretive prices and we have great confidence in the future so it seems to us like it's the best investment available to us and of course I didn't mention it we have a dividend that we're continuing to grow at a very high level with the fastest growing dividend in the industry and that will continue I think to be the case for many years to come and so maybe digging into this a little bit more you know we talk about the financial flexibility you have just to help our group here can you frame the financial flexibility this year whether you know dollars or size of market cap that you can use for whether it's you know asset opportunities uh bill to suits

repurchases and you know how that how you're thinking about those priorities of spend you know obviously just had your earnings and you gave us an update on some of those projects all right yeah so first we start with our leverage target which is something that we've recently changed although we changed it to a level that we've been operating at for the last several years so our target leverage range is six to seven turns of net debt to adjusted EBITDA. Today fourth quarter we finished the year at 6.4 turns so kind of right in the middle of that range. And given that we historically have always seen our EBITDA grow year over year that creates increased capacity. But in addition we are generating $1.3 billion of AFFO each year. so that's just available cash to be redistributed into the business and at that within that context we're able to take that amount plus the additional capacity that's created through ebitda growth and keeping our leverage the same and invest it into all the items that i mentioned before ideally in a mix of new assets that we add to the portfolio as well as share buybacks and dividends and i think those will be the primary areas that you'll continue to see us invest we we will occasionally look at other things that are complementary to what we do and we've done that at times throughout our history and I think we'll

continue to do that if we see something that fits well with our skill set and complements the assets that we have but the first few buckets are really the primary areas will will invest that capital as we maybe jump into the operating businesses and leasing trends, you know, on the earnings call you gave some updates in terms of churn, both within the domestic business and in the international businesses. So can you talk about, you know, how you see these churn events in terms of a possible clearing opportunity for SBA to sort of get back on serve and get back to more of the organic growth rates that have been underlying this business for some time.

A moment ago I referred to some of the consolidation that's taken place with our customers in each of our largest markets. And as a result of those consolidations, it's caused some amount of churn. The Sprint churn, obviously T-Mobile buying Sprint years ago, we're kind of in our last big year of churn that we're recognizing related to that consolidation. There still will be some, a little bit left, somewhere in the $15-20 million range into the future over the next several years, but really the bulk of it is gone after this year. In addition, we've of course had the situation with EchoStar Dish, who sold much of their spectrum earlier this year and has essentially said that they're moving out of the wireless business. I'm paraphrasing, but that's basically what's happening. and so given the situation with them and the fact that they frankly stopped paying their bills we pulled forward all the churn related to our contracts with them into this year as well so we had a heavy amount of US churn primarily driven by those two items and internationally the other big one was in Brazil where OI which was the fourth carrier down in Brazil was essentially bought their wireless business was bought and split up among the other three incumbent carriers in Brazil we've seen some churn related to that in addition they're shutting down their wireline operations of which there was a big wireless component and we had a number of leases and so that churn has also been basically pulled forward into this year so that makes this year a little bit rough in the way that it looks but but the idea is to essentially pull all that stuff forward clear it out and allow us to get back to a little bit but more of a normalized growth level in future years. And so that's essentially what we've done.

And since you mentioned the Echostar churn, what are the potential paths or remedies that you have to try to get your contract value from your customer? And is regulatory an option? There's been some press and some filings with the FCC on meetings regarding this topic. I'm curious if that's a possible remedy or opportunity to make forward progress.

Well, it's certainly a possible remedy, and our belief is, and this is not just SBA, but our industry as a whole, believes that the FCC ideally should make the approvals of these transactions contingent upon making the vendors that made it possible for DISH to be in the situation that they are to be made whole. And we've made that case to the FCC and to other officials. And we hope that they will help step in and do what's right because otherwise there's a chilling effect to future investment potentially. There's a lot of spectrum that's about to be auctioned off by the FCC, and if they expect infrastructure companies and services companies and fiber providers to all step up and to be there to support any new build out of that, we have to know that they're going to support enforcement of contracts and that there can't be some windfall to a party based on the spectrum that they were fortunate enough to acquire years ago. So, yes, hopefully there will be a regulatory result, but either way, whether there is or there isn't, the contracts are what they are, and it's our intention to enforce to the extent that we can. I think I mentioned on the last call that we have filed suit against DISH, Echo Star, to basically enforce our rights and their obligations under those agreements, and so we'll pursue that as far as we can. and really there's not much else I can say about it at this point but we'll see how it shakes out in any case we've taken the churn as I mentioned for the full year so you know any recovery at this point as it relates to our numbers would be upside in terms of reporting very helpful so maybe getting into domestic leasing can you talk about the leasing activity that you're seeing for your portfolio and what's embedded into the guidance for 2026 sure yeah so we're seeing well let's start with the US we are seeing activity from all the carriers there's obviously different situations that each one is in so I'll start with Verizon because we signed a master agreement with Verizon last year late last year at the end of the year. So we're just now starting to get into activity under that agreement as we've gotten into the beginning of this year. And we're very pleased with that agreement. We're very pleased with our relationship with Verizon. They have a lot of work to do. It's very heavily focused on new siting activity, which is great for us in the sense that not only are those touches worth more than the average amendment in terms of their value, but they're also creating more points of presence across our portfolio of assets. And we think that's great in terms of enhancing the value of the portfolio, but also the future opportunities for upgrades and the introduction of new spectrum bands down the road and the ability for that to contribute to growth for us for a long term. And it's a long term agreement. So I think there will be a lot of opportunity there and we'll start to see that grow throughout this year. we're already seeing it in our backlogs AT&T is also quite busy we have a different structured agreement with them that goes back a number of years and so for the time being it's it's the difference with AT&T is that when they acquired in particular the 3.45 spectrum from dish although that although that transaction has not been approved they were able to essentially sublease that spectrum for the time being. They kind of shifted focus on overlaying their network with that spectrum. I think that's a timing issue and we'll start to see them shift back to some further densification in the future. So it's been a little bit slower for us really because of the structure of our agreement with them, which is not allowing us to capture as much growth from amendments because they essentially paid for it up front through bonus escalators so it's just a different different structure but as I get back more to new leasing activity I think that will be a positive contributor for sure going forward and T-Mobile has been extremely busy over the last couple of years I'd say that that you know there's a little bit of pause there as they reset but they have a tremendous amount to do as well as they're integrating the US cellular assets that they've acquired they're dealing with certain regulatory requirements as well we expect to see them continue to be the the strong market participant that they've always been in our relationship there is very very strong so when you pull all that together how do you see that long-term algorithm for domestic organic site leasing growth yeah so you basically have three components to organic growth I think I mentioned this actually on our earnings call last week, you have the built-in escalators that are built into the contracts that in the U.S. average about 3% annually. So that's kind of a fixed component of growth across our U.S. business. The second piece, of course, is new lease-up activity in the form of both new leases and amendments to existing leases. That's typically the most variable component of the three. and that we expect that that will be over the long run somewhere in that two to three percent range and it may vary from year to year and period to period depending on what activity the carriers are undertaking what new spectrum they have in hands you know all those things so that's that's a second piece and then the third piece is the negative item which is any churn that we experience the churn as I just mentioned a moment ago is elevated for this year but once Once we get beyond this kind of what I would call more specialized consolidation churn and we get back to a more normal level, that's typically been historically for us somewhere between 1 and 2 percent. And I believe that as we get a little bit further down the road, given the consolidations that have happened and a lot of the clearing that's taken place, that we'll be a little bit closer. We should probably normalize out somewhere closer to 1 percent. So basically you have 3% plus 2 to 3 minus 1 in the long term. And so somewhere in that 4 to 5% range.

And we're getting questions just about some of the changes from some of your carrier customers this year. You know, some cutbacks, layoffs, cost cutting as they're responding to the competitive landscape. Are you seeing any adverse indications on how that rolls down to their network spending plans and the leasing activity, even if it's on a temporal basis?

Yeah, I think it's probably a little bit different for each one, but I would say that there's been some impact. In fact, it's hard to draw the direct correlation because there's always been throughout my history, I've been at SBA for over 28 years and have seen many different cycles, but there's always been this tug and pull between the needs of the network and the constant additional strain that's been placed on it through consumption, particularly broadband consumption, versus costs and how do we manage the financial side of the house. And so at various points in time, one side tends to win a little bit more. It's kind of like a tug of war. And then the other side tends to have to step back in. And I think as we start to see growth in applications like fixed wireless access in particular, we're going to see the network needs increase again and put pressure on the ability of the network to perform. and therefore the carriers will have to continue to invest to create that additional capacity and to densify their networks.

And just thinking about this, the decision for Verizon, for example, to do a co-location comprehensive deal with you that you were describing earlier is different than the traditional types of comprehensive MLAs that we've seen from these big three carriers over time. Is there something more significant that investors should be mindful of when thinking about that agreement and what that could mean for future comprehensive deals that you could enter into with the carriers?

I don't know. I think in this particular case, they had their specific needs that they foresee over the next decade, because it's a 10-year agreement. And they recognize the need for increased points of presence, whether that's driven, and you really have to ask them, whether that's driven by fixed wireless access as one item or just general densification over time or further expansion into rural or really all of those things, which is what I think it is. It's a mix of everything. They recognize that they had a need for a lot more locations. And I think, you know, it just, the agreement was built around what their needs were. It's not driven by us. It's driven by really what they need. And we try to meet them there and come up with an agreement that is mutually beneficial for both parties.

And as you think about the addressable market for revenue, you've talked about the historical and continued interest to expand through build-to-suits and acquisitions. What are the opportunities in the U.S., whether it's from either of those two activities or other things that you could do to just help grow your revenue pie and, you know, squeeze a little more juice out of the lemon?

Yeah. So there are assets that come available. Not as many as there used to be in terms of the acquisition landscape. And I think the biggest challenge, of course, is that it's very competitive out there because you have a lot of private money that is heavily invested in this business and continues to look for ways to grow as well. And quite frankly, as a private company, are able to stretch more and to do things that are dilutive in the early days, and that's much harder to do as a public company. And so you've seen, I think, all of the publics be less acquisitive in the U.S. And that's not, I can assure you, and I'm sure this is true for our peers as well, that That is not because of a lack of desire, that is really just the economics of the situation. That's been more of a challenge, but having said that, we do have strong relationships with a number of developers. We've done many deals historically, and there are a lot of people that I'm proud to say prefer us, even we'll take a little bit less money because they know that they can count on us to get the deal closed, to do it right, to not change things at the end. and and so we'll continue to lean into those relationships where we can and on the new build side you know it's been a little bit more challenging historically be and this is over the last several years because the carriers have had much more leverage in that capacity and they've they've offered up arrangements that weren't necessarily all that attractive but because of the desire for growth and assets in the US they were able to get it from some smaller players I think though that there is a recognition now with some of the things we just talked about a moment ago for instance with Verizon that there's a need for more siting more points of presence and the ability to rely on established companies like ours to make sure that it gets done and gets done well and on time it's starting to matter a little bit more and so actually am hopeful and optimistic that we will see an increase in the number of new tower builds we're able to do here in the U.S. over the coming years, and it's something that we're going to focus on internally quite a bit.

Shifting to the international markets and specifically Latin America, you mentioned earlier that you pulled forward some churn. So what's the opportunity now for that portfolio to get back to growth in 2027 and beyond, and how does that growth compare to what you anticipate out of the U.S.?

Yeah, when you say that portfolio, I mean internationally, broadly. Well, there's plenty of opportunity. In fact, the primary reason that we're invested internationally is really because it is so far behind in many of the markets that we're in, so far behind the U.S. in terms of the network development in those areas. And so what it allows for is a much greater runway in terms of growth, and we've seen it play out here in the U.S., and we have a good sense of what's needed to support each of the new generations of technology and each of the spectrum bands that are becoming available in these various markets. And so I would expect that the growth over time will be much greater than it is in the U.S. in terms of organic growth. It really should be because of the needs. So I'm kind of excited about that. The challenge has been recently, and it was, by the way, if you go back to the earlier days of our investment in these markets, you saw that it clearly grew faster. pressure. And I think we will get back to that. Really what has offset that is a lot of the consolidation that has happened in a number of these markets. And when you had markets that were a fraction of the size of the U.S. and they had more national carriers than we did here, that dynamic was not going to last long term. And so we have seen that happening and so it has put pressure. Our lease-up has actually been pretty decent, percent, but the churn has kind of offset that, and even the lease-up has been somewhat negatively impacted over these couple of years due to the consolidations because the carriers have had to focus their attention on integrating those two networks into one combined network.

As we start to move beyond that, I think we will see a return to an increased pace of growth in these markets, and we're excited to get back to that, and I think it will happen you know in the coming years one question that we're asking all the companies attending this conference is how you're approaching AI within your company and the mix of building or buying or partnering for AI solutions and how do you decide if you know you want to build a solution yourself or you know buy it in from the outside yeah well we're certainly adapting AI based

solutions within our organization for our own processes and systems and just operating efficiencies. Some of those, many of those are internally facing, but some are starting to become externally facing and things that we can offer to our customers, too, in terms of view of what's happening at the tower sites with their equipment, with their network, something that we can do more real time and more electronically. It's actually reducing the number of site visits and tower climbs that have to happen. But internally, the way that we're approaching it at this stage is a little bit more of a broad-based approach. We're not getting too specific into using just one particular tool. We use a number of the top-named tools that you're familiar with. For different purposes, each one is applied differently based on where we think it is most capable of being helpful. And I think over time it will allow us to make more informed decisions about what we use. The reality is things change. Something that's the best today may not be the best tomorrow because something new seems to come along. The rapid pace of change is quite significant in this space. But, you know, for us it's really just about kind of being selective where we introduce it and also being disciplined in it.

We're not just jumping in without kind of understanding what the risks are and i think we'll start to see uh operating efficiencies and synergies that we gain uh over these coming years that will be will start to become quite impactful actually another question that we get is regarding uh satellite and there's two ways you know we get the questions and so one way is you know what is the risk that satellite LEO constellations can start to take the place of towers, particularly whether it's in rural areas or emerging market areas that are not well populated. But the second side of it, and it's something that I think that you've been asked before, is are you seeing any interest also in leasing from these companies to try to bolster their networks?

Yeah, I think I definitely think there's opportunity and we have been having some conversations with some of these folks to understand what their needs are and I think the truth is that they're still very much in the planning phase and trying to understand what's possible and what companies like us can offer and I'm encouraged by how some of those early conversations have gone and I do think it may be a hidden opportunity that people weren't really thinking about early on because as you said most folks look at it and think of it as a threat I don't really see it as a threat the places that you're talking about where it may displace a traditional terrestrial solution are ones where it's not that cost-effective to provide that terrestrial solution today typically and so it's really a financial decision because the quality of what can be provided is not nearly as good through a satellite solution. But if you're talking about a sparsely populated area or providing broad-based coverage for basic functions, then sure, then that may be the way to do it, and it's probably less expensive than trying to have all these individual locations out there. And frankly, we've seen that for years anyway, prior to the satellites coming along. There were a lot of places that just aren't covered at all because they weren't financially accretive investments and so that already existed so this may provide I think more of a complementary solution to cover those areas in terms of the more densely populated areas though what is what is needed to provide the types of solutions and it's growing by the way as we move into the world of AI and the types of uplink capacity that will be needed to support more generative AI solutions the satellite solution is just simply not going to be able to provide it with the same kind of latency low latency that's required and the speeds that are required so I feel pretty good about our positioning in this and I'm hopeful in terms of the growth potential from it as as these networks are potentially developed and you have a complementary sort of hybrid solution and that's a mix of terrestrial and satellite coverage.

You mentioned earlier in the conversation the contrast, actually a couple times, of private companies versus public companies. And so just curious what your perspective is on the opportunity for SBA to consider alternative forms, whether it makes sense to be a private company, whether there's financial capacity to be a private company over time, and do you think about some of those pros and cons maybe differently today versus the way you would have looked at it previously?

Yeah. I mean, I would say it's not a top of mind thing that we spend a lot of time on because we have enough to do in our day job trying to run the company that we've got. I think there are moments where we see the benefits that certain private parties have, But there are also benefits that we have as a public company as well that sometimes they So I think, you know, there's tradeoffs in both directions. But it's not frankly something that I spend a ton of time thinking about.

Thanks. And so a question that we've received from our group here today is, you know, they're asked about the debt rolling off over the next two years, your incremental cost of debt, and how much of a drag on AFFO growth or AFFO per share growth of that could be. Maybe it's an opportunity to kind of frame the underlying growth of AFFO per share and then maybe unpacking some of the headwinds that might be slowing it down over this period.

Well, really, outside of this year with this elevated churn that we talked about earlier, where the primary drag on AFFO per share growth is interest cost. I think our next three maturities or maybe counting the one that just matured all have a one handle on the coupons that we have in ABS paper that we hold. And I think our high yield debt that's coming up, the next two high yield pieces of paper both have a three handle on them. So when you look at that relative to where we could finance today, where the market is, obviously the interest costs are going up. And so that certainly is a headwind to AFO per share growth, and I think any of you that are looking at a model on SBA know that. You can simply take all of it's disclosed. You know exactly what our debt is, when it matures, and what the interest rate is, and you can probably make a fair assumption about what the cost of debt would look like to refinance that debt. So you will see that there's significant increases to our interest costs for the next couple of years. If it weren't for the interest expense headwinds, if you normalize that, I think as we get into the next couple of years you would see very nice returning to that kind of mid to high single digit growth in AFFO per share. But the next couple of years we will have definitely a headwind. But really once you get out, I would say about two years or so from now, that will start to normalize out because we will start to get a number of these refinancings behind us. And hopefully, knock on one, maybe interest rates will come down a little bit quicker between now and the time of some of these refinancings, and it will actually improve from what today's projections might be.

What is your services business inferring about the leasing activity, and what are you seeing in terms of that trajectory that it's on?

Yeah, so our services business has been very strong in the last several years. Last year, 2025, was actually the second biggest services year in our history. So we saw a lot of activity that was correlated with that. So there is a correlation to some degree, although we're very focused in terms of the work that we do. It's really focused on two of the carriers primarily. So sometimes it doesn't tell you everything that's going on, but it definitely gives you sense with those particular customers as we look forward into 2026 we've guided to a range that is below what we did last year although above what we guided to at the beginning of last year because it ended up being much better than we thought at the beginning of the year and so it's still very strong by historical standards and that is an indicator that the carriers still have a lot of activity going on and we would expect that to translate at least in part into leasing growth There are some level of services activity that we do that isn't necessarily one-for-one with new leasing activity, but it is an indicator. And we do services work across the industry. It's not all just on our towers as well, so we get a good sense of what's happening broadly with the networks.

Are you ready for our rapid fire?

I guess.

I thought we were already doing rapid fire. All right, go ahead. So what will be the most pertinent same-store growth KPI for your property sector overall, not your company, in 2027, and do you have a prediction of what that will grow at?

In 2027? Well, we historically always look at AFFO per share as being kind of the key item, But I think to some degree, AFFO per share, excluding the impact of interest headwinds is probably the most important thing because it's an indicator of the steady state long term.

And do you have a prediction on the growth rate for the category, not for your company?

Yeah, well, you have to take out the interest costs because everybody's in a different place in timing, but I think if you do that, somewhere in that mid to high single digits percentage range.

Great. And will your property sector have more, fewer, or the same number of public companies a year from now? I assume the same. Great. Thank you so much for joining us today. Great. Thanks, Mike. Appreciate it.

It's great to see you.