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SBA Communications Corporation Reports Second Quarter 2018 Results

July 30, 2018

BOCA RATON, Fla.--(BUSINESS WIRE)--Jul 30, 2018--SBA Communications Corporation (Nasdaq:SBAC) (“SBA” or the “Company”) today reported results for the quarter ended June 30, 2018.

“We continued our strong operational performance in the second quarter,” commented Jeffrey A. Stoops, President and Chief Executive Officer. “Adjusting for currency, leasing revenue, tower cash flow and Adjusted EBITDA were all ahead of our expectations for the quarter, evidencing the underlying strength in our business. In the U.S., the four major wireless service providers are all active investing in their networks, and our leasing and services backlogs continue to grow. Demand in our international markets also remains solid, particularly in Brazil. Against this favorable demand environment, we continue to execute very well and continue to post the highest tower cash flow and adjusted EBITDA margins in our industry. We continued, and expect to continue, to allocate capital to a mix of portfolio growth and stock repurchases such as to maintain a target leverage rate of 7.0x to 7.5x net debt/adjusted EBITDA to maximize long-term growth in AFFO per share. We look forward to a busy and productive second half of 2018, which we expect to continue into 2019.”

Operating Results

The table below details select financial results for the three months ended June 30, 2018 and comparisons to the prior year period.

(1) See the reconciliations and other disclosures under “Non-GAAP Financial Measures” later in this press release.

Total revenues in the second quarter of 2018 were $456.3 million compared to $427.3 million in the year earlier period, an increase of 6.8%. Site leasing revenue in the quarter of $429.9 million was comprised of domestic site leasing revenue of $346.7 million and international site leasing revenue of $83.2 million. Domestic cash site leasing revenue was $343.5 million in the second quarter of 2018 compared to $325.0 million in the year earlier period, an increase of 5.7%. International cash site leasing revenue was $81.3 million in the second quarter of 2018 compared to $73.8 million in the year earlier period, an increase of 10.0%, or 18.5% excluding the impact of changes in foreign currency exchange rates.

Site leasing operating profit was $336.2 million, an increase of 7.2% over the year earlier period. Site leasing contributed 98.3% of the Company’s total operating profit in the second quarter of 2018. Domestic site leasing segment operating profit was $278.9 million, an increase of 7.2% over the year earlier period. International site leasing segment operating profit was $57.3 million, an increase of 6.9% over the year earlier period.

Tower Cash Flow for the second quarter of 2018 of $337.6 million was comprised of Domestic Tower Cash Flow of $281.9 million and International Tower Cash Flow of $55.7 million. Domestic Tower Cash Flow for the quarter increased 5.8% over the prior year period and International Tower Cash Flow increased 9.9% over the prior year period. Tower Cash Flow Margin was 79.5% for both the second quarter of 2018 and the year earlier period.

Adjusted EBITDA for the quarter was $318.9 million, a 6.7% increase over the prior year period. Adjusted EBITDA Margin was 70.7% in the second quarter of 2018 compared to 70.6% in the second quarter of 2017.

Net Cash Interest Expense was $92.0 million in the second quarter of 2018 compared to $75.5 million in the second quarter of 2017, an increase of 21.9%.

Net loss for the second quarter of 2018 was $57.4 million, or $(0.50) per share, and included a $58.7 million loss, net of taxes, on the currency related remeasurement of U.S. dollar denominated intercompany loans with a Brazilian subsidiary, while net income for the second quarter of 2017 was $9.2 million, or $0.08 per share, and included a $20.4 million loss on the currency related remeasurement of a U.S. dollar denominated intercompany loan with a Brazilian subsidiary.

AFFO for the quarter was $213.5 million, a 1.1% increase over the prior year period. AFFO per share for the second quarter of 2018 was $1.83, a 5.8% increase over the second quarter of 2017.

Investing Activities

During the second quarter of 2018, SBA purchased 224 communication sites for total consideration of $152.3 million. SBA also built 87 towers during the second quarter of 2018. As of June 30, 2018, SBA owned or operated 28,604 communication sites, 16,239 of which are located in the United States and its territories, and 12,365 of which are located internationally. In addition, the Company spent $18.1 million to purchase land and easements and to extend lease terms. Total cash capital expenditures for the second quarter of 2018 were $205.3 million, consisting of $9.1 million of non-discretionary cash capital expenditures (tower maintenance and general corporate) and $196.2 million of discretionary cash capital expenditures (new tower builds, tower augmentations, acquisitions, and purchasing land and easements).

Subsequent to the second quarter of 2018, the Company acquired 23 communication sites for an aggregate consideration of $5.0 million in cash. In addition, the Company has agreed to purchase in the U.S. and internationally 867 communication sites for an aggregate amount of $168.9 million. These sites include the previously announced 811 sites in El Salvador being purchased from a subsidiary of Millicom International Cellular, S.A., the majority of which the Company expects will close in the third quarter and a portion of which the Company now expects will close in 2019. The Company anticipates that the remaining acquisitions will be consummated by the end of 2018.

Financing Activities and Liquidity

SBA ended the second quarter with $9.8 billion of total debt, $7.2 billion of total secured debt, $159.7 million of cash and cash equivalents, short-term restricted cash, and short-term investments, and $9.6 billion of Net Debt. SBA’s Net Debt and Net Secured Debt to Annualized Adjusted EBITDA Leverage Ratios were 7.6x and 5.5x, respectively.

On April 11, 2018, the Company, through its wholly owned subsidiary, SBA Senior Finance II LLC, obtained a new $2.4 billion, seven-year, senior secured Term Loan B (the “2018 Term Loan) under its amended and restated Senior Credit Agreement. The 2018 Term Loan was issued at 99.75% of par value and will mature on April 11, 2025. The Company also amended its Revolving Credit Facility to (1) increase the total commitments under the Facility from $1.0 billion to $1.25 billion, (2) extend the maturity date of the Facility to April 11, 2023, (3) lower the applicable interest rate margins and commitment fees under the Facility, and (4) amend certain other terms and conditions under the Senior Credit Agreement.

As of the date of this press release, the Company had $90.0 million outstanding under the $1.25 billion Revolving Credit Facility.

During the second quarter of 2018, the Company purchased under its $1.0 billion stock repurchase plan 1.9 million shares of its Class A common stock for $306.9 million, at an average price per share of $163.44. Shares purchased were retired. As of the date of this filing, the Company had $654.5 million of authorization remaining under the plan.

Outlook

The Company is updating its full year 2018 Outlook for anticipated results. The Outlook provided is based on a number of assumptions that the Company believes are reasonable at the time of this press release. Information regarding potential risks that could cause the actual results to differ from these forward-looking statements is set forth below and in the Company’s filings with the Securities and Exchange Commission.

The Company’s full year 2018 Outlook assumes the acquisitions of only those communication sites under contract at the time of this press release. The Company may spend additional capital in 2018 on acquiring revenue producing assets not yet identified or under contract, the impact of which is not reflected in the 2018 guidance. The Outlook also does not contemplate any new financings or any additional repurchases of the Company’s stock during 2018 other than those financings and repurchases completed as of the date of this press release.

The Company’s Outlook assumes an average foreign currency exchange rate of 3.80 Brazilian Reais to 1.0 U.S. Dollar and 1.32 Canadian Dollars to 1.0 U.S. Dollar throughout the last two quarters of 2018. When compared to the Company’s full year 2018 Outlook provided April 30, 2018, the variances in the actual second quarter foreign currency exchange rates versus the Company’s assumptions, and the changes in the Company’s foreign currency rate assumptions for the remainder of the year negatively impacted the full year 2018 Outlook by approximately $11.0 million for Site Leasing Revenue, $7.0 million for Tower Cash Flow, and $6.0 million for Adjusted EBITDA and AFFO. Applying the same foreign currency exchange rate assumptions as the outlook provided April 30, 2018, the Company would have increased the mid-point for Site Leasing Revenue by $3.0 million, Tower Cash Flow by $2.5 million, Adjusted EBITDA by $2.0 million, and AFFO per share by $0.01.

(1) The Company’s Outlook for site leasing revenue includes revenue associated with pass through reimbursable expenses.

(2) See the reconciliation of this non-GAAP financial measure presented below under “Non-GAAP Financial Measures.”

(3) Net cash interest expense is defined as interest expense less interest income. Net cash interest expense does not include amortization of deferred financing fees or non-cash interest expense.

(4) Consists of tower maintenance and general corporate capital expenditures.

(5) Outlook for AFFO per share is calculated by dividing the Company’s outlook for AFFO by an assumed weighted average number of diluted common shares of 117.0 million. Our Outlook does not include the impact of any repurchases of the Company’s stock during 2018 other than those completed as of the date of this press release.

(6) Consists of new tower builds, tower augmentations, communication site acquisitions and ground lease purchases. Does not include expenditures for acquisitions of revenue producing assets not under contract at the date of this press release.

Conference Call Information

SBA Communications Corporation will host a conference call on Monday, July 30, 2018 at 5:00 PM (ET) to discuss the quarterly results. The call may be accessed as follows:

Information Concerning Forward-Looking Statements

This press release includes forward-looking statements, including statements regarding the Company’s expectations or beliefs regarding (i) market conditions and activity levels among the four major wireless carriers, (ii) the Company’s intentions for future capital allocation, including allocating capital to both stock repurchases and portfolio growth, (iii) the Company’s intention to maintain its target leverage range, (iv) the impact of the Company’s capital allocation and target leverage range on its AFFO per share goal, (v) the Company’s financial and operational guidance for the full year 2018, (vi) the timing of closing for currently pending acquisitions, (vii) the Company’s expectations regarding additional capital spending in 2018, and (vii) the Company’s expectations regarding foreign exchange rates and their impact on the Company’s financial and operational guidance.

The Company wishes to caution readers that these forward-looking statements may be affected by the risks and uncertainties in the Company’s business as well as other important factors may have affected and could in the future affect the Company’s actual results and could cause the Company’s actual results for subsequent periods to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company. With respect to the Company’s expectations regarding all of these statements, including its financial and operational guidance, such risk factors include, but are not limited to: (1) the ability and willingness of wireless service providers to maintain or increase their capital expenditures; (2) the Company’s ability to identify and acquire sites at prices and upon terms that will provide accretive portfolio growth; (3) the Company’s ability to accurately identify and manage any risks associated with its acquired sites, to effectively integrate such sites into its business and to achieve the anticipated financial results; (4) the Company’s ability to secure and retain as many site leasing tenants as planned at anticipated lease rates; (5) the impact of continued consolidation among wireless service providers, including the impact of the potential T-Mobile and Sprint merger, on the Company’s leasing revenue; (6) the Company’s ability to successfully manage the risks associated with international operations, including risks associated with foreign currency exchange rates; (7) the Company’s ability to secure and deliver anticipated services business at contemplated margins; (8) the Company’s ability to maintain expenses and cash capital expenditures at appropriate levels for its business while seeking to attain its investment goals; (9) the Company’s ability to acquire land underneath towers on terms that are accretive; (10) the economic climate for the wireless communications industry in general and the wireless communications infrastructure providers in particular in the United States, Brazil, and internationally; (11) the Company’s ability to obtain future financing at commercially reasonable rates or at all; (12) the ability of the Company to achieve its long-term stock repurchases strategy, which will depend, among other things, on the trading price of the Company’s common stock, which may be positively or negatively impacted by the repurchase program, market and business conditions and (13) the Company’s ability to achieve the new builds targets included in its anticipated annual portfolio growth goals, which will depend, among other things, on obtaining zoning and regulatory approvals, weather, availability of labor and supplies and other factors beyond the Company’s control that could affect the Company’s ability to build additional towers in 2018. With respect to its expectations regarding the ability to close pending acquisitions, these factors also include satisfactorily completing due diligence, the amount and quality of due diligence that the Company is able to complete prior to closing of any acquisition and its ability to accurately anticipate the future performance of the acquired towers, the ability to receive required regulatory approval, the ability and willingness of each party to fulfill their respective closing conditions and their contractual obligations and the availability of cash on hand or borrowing capacity under the Revolving Credit Facility to fund the consideration. Furthermore, the Company’s forward-looking statements and its 2018 outlook assumes that the Company continues to qualify for treatment as a REIT for U.S. federal income tax purposes and that the Company’s business is currently operated in a manner that complies with the REIT rules and that it will be able to continue to comply with and conduct its business in accordance with such rules. In addition, these forward-looking statements and the information in this press release is qualified in its entirety by cautionary statements and risk factor disclosures contained in the Company’s Securities and Exchange Commission filings, including the Company’s annual report on Form 10-K filed with the Commission on March 1, 2018.

This press release contains non-GAAP financial measures. Reconciliation of each of these non-GAAP financial measures and the other Regulation G information is presented below under “Non-GAAP Financial Measures.”

This press release will be available on our website at www.sbasite.com.

About SBA Communications Corporation

SBA Communications Corporation is a first choice provider and leading owner and operator of wireless communications infrastructure in North, Central, and South America. By “Building Better Wireless,” SBA generates revenue from two primary businesses – site leasing and site development services. The primary focus of the Company is the leasing of antenna space on its multi-tenant communication sites to a variety of wireless service providers under long-term lease contracts. For more information please visit: www.sbasite.com.

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