SBA COMMUNICATIONS CORP 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS We are a leading independent owner and operator of wireless communications infrastructure, including tower structures, rooftops and other structures that support antennas used for wireless communications, which we collectively refer to as “towers” or “sites.” Our principal operations are in the United States and its territories. In addition, we own and operate towers in South America, Central America, Canada, and South Africa. Our primary business line is our site leasing business, which contributed 97.8% of our total segment operating profit for the three months ended March 31, 2021. In our site leasing business, we (1) lease antenna space to wireless service providers on towers that we own or operate and (2) manage rooftop and tower sites for property owners under various contractual arrangements. As of March 31, 2021, we owned 33,711 towers, a substantial portion of which have been built by us or built by other tower owners or operators who, like us, have built such towers to lease space to multiple wireless service providers. Our other business line is our site development business, through which we assist wireless service providers in developing and maintaining their own wireless service networks. Site Leasing Our primary focus is the leasing of antenna space on our multi-tenant towers to a variety of wireless service providers under long-term lease contracts in the United States, South America, Central America, Canada, and South Africa. As of March 31, 2021, no U.S. state or territory accounted for more than 10% of our total tower portfolio by tower count, and no U.S. state or territory accounted for more than 10% of our total revenues for the three months ended March 31, 2021. In addition, as of March 31, 2021, approximately 30% of our total towers are located in Brazil and less than 4% of our total towers are located in any of our other international markets (each country is considered a market). We derive site leasing revenues primarily from wireless service provider tenants, including T-Mobile, AT&T, Verizon Wireless, Oi S.A., Telefonica, Claro, Tigo, and TIM. Wireless service providers enter into tenant leases with us, each of which relates to the lease or use of space at an individual site. In the United States and Canada, our tenant leases are generally for an initial term of five years to 10 years with multiple renewal periods at the option of the tenant. These tenant leases typically contain specific rent escalators, which average 3-4% per year, including the renewal option periods. Tenant leases in South Africa and our Central and South American markets typically have an initial term of 10 years with multiple renewal periods. In Central America, we have similar rent escalators to that of leases in the United States and Canada while our leases in South America and South Africa escalate in accordance with a standard cost of living index. Site leases in South America typically provide for a fixed rental amount and a pass through charge for the underlying rent related to ground leases and other property interests. Cost of site leasing revenue primarily consists of:  Cash and non-cash rental expense on ground leases and other underlying property interests;  Property taxes;  Site maintenance and monitoring costs (exclusive of employee related costs);  Utilities;  Property insurance; and  Lease initial direct cost amortization. In the United States and our international markets, ground leases and other property interests are generally for an initial term of five years to 10 years with multiple renewal periods, at our option, and provide for rent escalators which typically average 2-3% annually, or in our South American markets and South Africa, adjust in accordance with a standard cost of living index. As of March 31, 2021, approximately 71% of our tower structures were located on parcels of land that we own, land subject to perpetual easements, or parcels of land in which we have a leasehold interest that extends beyond 20 years. For any given tower, costs are relatively fixed over a monthly or an annual time period. As such, operating costs for owned towers do not generally increase as a result of adding additional customers to the tower. The amount of property taxes varies from site to site depending on the taxing jurisdiction and the height and age of the tower. The ongoing maintenance requirements are typically minimal and include replacing lighting systems, painting a tower, or upgrading or repairing an access road or fencing. In our Central American markets and Ecuador, significantly all of our revenue, expenses, and capital expenditures arising from our new build activities are denominated in U.S. dollars. Specifically, most of our ground leases and other property interests, tenant leases, and tower-related expenses are paid in U.S. dollars. In our Central American markets, our local currency obligations are principally limited to (1) permitting and other local fees, (2) utilities, and (3) taxes. In Brazil, Canada, Chile, and South Africa significantly all of our revenue, expenses, and capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in local currency. In Colombia, Argentina, and Peru, our revenue, expenses, and capital expenditures, including tenant leases, ground leases and other property interests, and other tower-related expenses are denominated in a mix of local currency and U.S. dollars. 19 Table of Contents As indicated in the table below, our site leasing business generates substantially all of our total segment operating profit. For information regarding our operating segments, see Note 14 of our condensed notes to consolidated financial statements included in this quarterly report. For the three months ended March 31, Segment operating profit as a percentage of total 2021 2020 Domestic site leasing 80.8% 80.3% International site leasing 17.0% 18.5% Total site leasing 97.8% 98.8% We believe that the site leasing business continues to be attractive due to its long-term contracts, built-in rent escalators, high operating margins, and low customer churn (which refers to when a customer does not renew its lease or cancels its lease prior to the end of its term) other than in connection with customer consolidation or cessation of a particular technology. We believe that over the long-term, site leasing revenues will continue to grow as wireless service providers lease additional antenna space on our towers due to increasing minutes of network use and data transfer, network expansion and network coverage requirements. During the remainder of 2021, we expect organic site leasing revenue in both our domestic and international segments to increase over 2020 levels due in part to wireless carriers deploying unused spectrum. We believe our site leasing business is characterized by stable and long-term recurring revenues, predictable operating costs and minimal non-discretionary capital expenditures. Due to the relatively young age and mix of our tower portfolio, we expect future expenditures required to maintain these towers to be minimal. Consequently, we expect to grow our cash flows by (1) adding tenants to our towers at minimal incremental costs by using existing tower capacity or requiring wireless service providers to bear all or a portion of the cost of tower modifications and (2) executing monetary amendments as wireless service providers add or upgrade their equipment. Furthermore, because our towers are strategically positioned, we have historically experienced low tenant lease terminations as a percentage of revenue other than in connection with customer consolidation or cessations of a specific technology. Site Development Our site development business, which is conducted in the United States only, is complementary to our site leasing business and provides us the ability to keep in close contact with the wireless service providers who generate substantially all of our site leasing revenue and to capture ancillary revenues that are generated by our site leasing activities, such as antenna and equipment installation at our tower locations. Site development revenues are earned primarily from providing a full range of end to end services to wireless service providers or companies providing development or project management services to wireless service providers. Our services include: (1) network pre-design; (2) site audits; (3) identification of potential locations for towers and antennas on existing infrastructure; (4) support in leasing of the location; (5) assistance in obtaining zoning approvals and permits; (6) tower and related site construction; (7) antenna installation; and (8) radio equipment installation, commissioning, and maintenance. We provide site development services at our towers and at towers owned by others on a local basis, through regional, market, and project offices. The market offices are responsible for all site development operations. For information regarding our operating segments, see Note 14 of our condensed notes to consolidated financial statements in this quarterly report. Capital Allocation Strategy Our capital allocation strategy is aimed at increasing shareholder value through investment in quality assets that meet our return criteria, stock repurchases when we believe our stock price is below its intrinsic value, and by returning cash generated by our operations in the form of cash dividends. While the addition of a cash dividend to our capital allocation strategy in 2019 has provided us with a new tool to return value to our shareholders, we will also continue to make investments focused on increasing Adjusted Funds From Operations per share. To achieve this, we expect to continue to deploy capital to portfolio growth and stock repurchases, subject to compliance with REIT distribution requirements, available funds and market conditions, while maintaining our target leverage levels. Key elements of our capital allocation strategy include: Portfolio Growth. We intend to continue to grow our asset portfolio, domestically and internationally, primarily through tower acquisitions and the construction of new towers that meet our internal return on invested capital criteria. Stock Repurchase Program. We currently utilize stock repurchases as part of our capital allocation policy when we believe our share price is below its intrinsic value. We believe that share repurchases, when purchased at the right price, will facilitate our goal of increasing our Adjusted Funds From Operations per share. 20 Table of Contents Dividend. Cash di vidends are an additional component of our strategy of returning value to shareholders. We do not expect our dividend to require any changes in our leverage and, we believe, it will allow us to continue to focus on building and buying quality assets and opportunistically buying back our stock. While the timing and amount of future dividends will be subject to approval by our Board of Directors, we believe that our future cash flow generation will permit us to grow our cash dividend in the future. COVID-19 Update We have experienced minimal impact to our business or results of operations from the coronavirus (COVID-19) pandemic. The extent to which COVID-19 could adversely affect our future business operations will depend on future developments such as the duration of the outbreak, new information on the severity of COVID-19 or its variants, and methods taken to contain or treat the outbreak of COVID-19 including a vaccine distribution program. While the full impact of COVID-19 is not yet known, we will continue to monitor these developments and the potential effects on our business. Critical Accounting Policies and Estimates We have identified the policies and significant estimation processes listed below and in our Annual Report on Form 10-K as critical to our business operations and the understanding of our results of operations. The listing is not intended to be a comprehensive list. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management’s judgment in their application. In other cases, management is required to exercise judgment in the application of accounting principles with respect to particular transactions. The impact and any associated risks related to these policies on our business operations is discussed throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” where such policies affect reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 2 of our consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020. Our preparation of our financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting periods. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. There can be no assurance that actual results will not differ from those estimates and such differences could be significant. Reference Rate Reform ASU 2020-04 and ASU 2021-01, Reference Rate Reform, provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. An entity may elect to apply the amendments prospectively through December 31, 2022. The ICE Benchmark Administration Limited (“IBA”) intends to cease the publication of USD LIBOR as follows: the 1 week and 2 month tenors on December 31, 2021 and all other tenors on June 30, 2023. As of March 31, 2021, we have not modified any contracts as a result of reference rate reform and are evaluating the impact this standard may have on our consolidated financial statements. RESULTS OF OPERATIONS This report presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period’s financial results by the average monthly exchange rates of the prior year period, as well as by eliminating the impact of realized and unrealized gains and losses on our intercompany loans. ‎ 21 Table of Contents Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020 Revenues and Segment Operating Profit: For the three months ended Constant March 31, Foreign Constant Currency 2021 2020 Currency Impact Currency Change % Change Revenues (in thousands) Domestic site leasing $ 403,579 $ 386,345 $ — $ 17,234 4.5% International site leasing 101,524 106,011 (12,578) 8,091 7.6% Site development 43,636 24,711 — 18,925 76.6% Total $ 548,739 $ 517,067 $ (12,578) $ 44,250 8.6% Cost of Revenues Domestic site leasing $ 65,120 $ 63,905 $ — $ 1,215 1.9% International site leasing 30,248 31,894 (4,249) 2,603 8.2% Site development 34,406 19,715 — 14,691 74.5% Total $ 129,774 $ 115,514 $ (4,249) $ 18,509 16.0% Operating Profit Domestic site leasing $ 338,459 $ 322,440 $ — $ 16,019 5.0% International site leasing 71,276 74,117 (8,329) 5,488 7.4% Site development 9,230 4,996 — 4,234 84.7% Revenues Domestic site leasing revenues increased $17.2 million for the three months ended March 31, 2021, as compared to the prior year, primarily due to (1) revenues from 858 towers acquired (including wireless tenant licenses on 697 utility transmission structures from the PG&E transaction) and built since January 1, 2020 and (2) organic site leasing growth, primarily from monetary lease amendments for additional equipment added to our towers as well as new leases and contractual rent escalators, partially offset by lease non-renewals. International site leasing revenues decreased $4.5 million for the three months ended March 31, 2021, as compared to the prior year. On a constant currency basis, international site leasing revenues increased $8.1 million. These changes were primarily due to (1) revenues from 106 towers acquired and 356 towers built since January 1, 2020 and (2) organic site leasing growth from new leases, amendments, and contractual escalators. Site leasing revenue in Brazil represented 11.0% of total site leasing revenue for the period. No other individual international market represented more than 4% of our total site leasing revenue. Site development revenues increased $18.9 million for the three months ended March 31, 2021, as compared to prior year, as a result of increased carrier activity driven primarily by T-Mobile. Operating Profit Domestic site leasing segment operating profit increased $16.0 million for the three months ended March 31, 2021, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since January 1, 2020 and organic site leasing growth as noted above, (2) continued control of our site leasing cost of revenue, and (3) the positive impact of our ground lease purchase program. International site leasing segment operating profit decreased $2.8 million for the three months ended March 31, 2021, as compared to the prior year. On a constant currency basis, international site leasing segment operating profit increased $5.5 million. These changes were primarily due to additional profit generated by (1) towers acquired and built since January 1, 2020 and organic site leasing growth as noted above, (2) continued control of our site leasing cost of revenue, and (3) the positive impact of our ground lease purchase program. Site development segment operating profit increased $4.2 million for the three months ended March 31, 2021, as compared to the prior year, as a result of increased carrier activity driven primarily by T-Mobile. ‎ 22 Table of Contents Selling, General, and Administrative Expenses: For the three months ended Constant March 31, Foreign Constant Currency 2021 2020 Currency Impact Currency Change % Change (in thousands) Domestic site leasing $ 28,056 $ 27,323 $ — $ 733 2.7% International site leasing 7,760 7,931 (314) 143 1.8% Total site leasing $ 35,816 $ 35,254 $ (314) $ 876 2.5% Site development 5,789 4,456 — 1,333 29.9% Other 9,996 9,907 — 89 0.9% Total $ 51,601 $ 49,617 $ (314) $ 2,298 4.6% Selling, general, and administrative expenses increased $2.0 million for the three months ended March 31, 2021, as compared to the prior year. On a constant currency basis, selling, general, and administrative expenses increased $2.3 million. These changes were primarily as a result of an increase in noncash compensation, partially offset by decreases in personnel and other support related costs as well as travel related expenses. Acquisition and New Business Initiatives Related Adjustments and Expenses: For the three months ended Constant March 31, Foreign Constant Currency 2021 2020 Currency Impact Currency Change % Change (in thousands) Domestic site leasing $ 3,332 $ 2,597 $ — $ 735 28.3% International site leasing 1,669 1,202 81 386 32.1% Total $ 5,001 $ 3,799 $ 81 $ 1,121 29.5% Asset Impairment and Decommission Costs: For the three months ended Constant March 31, Foreign Constant Currency 2021 2020 Currency Impact Currency Change % Change (in thousands) Domestic site leasing $ 3,871 $ 10,826 $ — $ (6,955) (64.2%) International site leasing 1,032 3,529 (37) (2,460) (69.7%) Total $ 4,903 $ 14,355 $ (37) $ (9,415) (65.6%) Asset impairment and decommission costs decreased $9.5 million for the three months ended March 31, 2021, as compared to the prior year. This change was primarily as a result of a $7.9 million decrease in impairment charges resulting from our regular analysis of whether the future cash flows from certain towers are adequate to recover the carrying value of the investment in those towers and a $1.6 million decrease in the impairment charge related to sites decommissioned in the first quarter of 2021 compared to the prior year period. Depreciation, Accretion, and Amortization Expense: For the three months ended Constant March 31, Foreign Constant Currency 2021 2020 Currency Impact Currency Change % Change (in thousands) Domestic site leasing $ 137,054 $ 133,806 $ — $ 3,248 2.4% International site leasing 43,121 46,612 (5,297) 1,806 3.9% Total site leasing $ 180,175 $ 180,418 $ (5,297) $ 5,054 2.8% Site development 2,082 616 — 1,466 238.0% Other 1,624 1,545 — 79 5.1% Total $ 183,881 $ 182,579 $ (5,297) $ 6,599 3.6% 23 Table of Contents Depreciation, accretion, and amortization expense increased $1.3 million for the three months ended March 31, 2021, as compared to the prior year. On a constant currency basis, depreciation, accretion, and amortization expense increased $6.6 million. These changes were primarily due to an increase in the number of towers we acquired and built since January 1, 2020, partially offset by the impact of assets that became fully depreciated since the prior year period. Operating Income (Expense): For the three months ended Constant March 31, Foreign Constant Currency 2021 2020 Currency Impact Currency Change % Change (in thousands) Domestic site leasing $ 166,146 $ 147,888 $ — $ 18,258 12.3% International site leasing 17,694 14,843 (2,762) 5,613 37.8% Total site leasing $ 183,840 $ 162,731 $ (2,762) $ 23,871 14.7% Site development 1,359 (76) — 1,435 1,888.2% Other (11,620) (11,452) — (168) 1.5% Total $ 173,579 $ 151,203 $ (2,762) $ 25,138 16.6% Domestic site leasing operating income increased $18.3 million for the three months ended March 31, 2021, as compared to the prior year, primarily due to higher segment operating profit and a decrease in asset impairment and decommission costs, partially offset by increases in depreciation, accretion, amortization expense, acquisition and new business initiatives related adjustments and expenses, and selling, general, and administrative expenses. International site leasing operating income increased $2.9 million for the three months ended March 31, 2021, as compared to the prior year. On a constant currency basis, international site leasing operating income increased $5.6 million. These changes were primarily due to higher segment operating profit and a decrease in asset impairment and decommission costs, partially offset by increases in depreciation, accretion, and amortization expense and acquisition and new business initiatives related adjustments and expenses. Site development operating income increased $1.4 million for the three months ended March 31, 2021, as compared to the prior year, primarily due to higher segment operating profit driven by more activity from T-Mobile, partially offset by an increase in selling, general, and administrative expenses . Other Income (Expense): For the three months ended Constant March 31, Foreign Constant Currency 2021 2020 Currency Impact Currency Change % Change (in thousands) Interest income $ 632 $ 885 $ (101) $ (152) (17.2%) Interest expense (90,095) (95,851) (3) 5,759 (6.0%) Non-cash interest expense (11,804) (2,406) — (9,398) 390.6% Amortization of deferred financing fees (4,891) (5,139) — 248 (4.8%) Loss from extinguishment of debt, net (11,652) (16,864) — 5,212 (30.9%) Other expense, net (88,436) (226,299) 143,591 (5,728) (143.7%) Total $ (206,246) $ (345,674) $ 143,487 $ (4,059) 3.5% Interest expense decreased $5.8 million for the three months ended March 31, 2021, as compared to the prior year primarily due to a lower weighted average interest rate due in part to the interest rate swap entered into during the third quarter of 2020, partially offset by a higher average principal amount of cash-interest bearing debt outstanding. Non-cash interest expense increased $9.4 million for the three months ended March 31, 2021, as compared to the prior year primarily related to amortization of accumulated losses related to our interest rate swaps de-designated as cash flow hedges. Loss from extinguishment of debt was $11.7 million for the three months ended March 31, 2021 representing the payment of a $7.5 million call premium and the write-off of $4.2 million of unamortized financing fees related to the repayment of the 2017 Senior Notes. Loss from extinguishment of debt was $16.9 million for the three months ended March 31, 2020 representing the 24 Table of Contents payment of a $9.1 million call premium and the write-off of $7.7 million of the original issuance discount and financing fees related to the redemption of the 2014 Senior Notes. Other expense, net includes an $86.3 million loss on the remeasurement of U.S. dollar denominated intercompany loans with foreign subsidiaries for the three months ended March 31, 2021, while the prior year period included a $230.1 million loss. Benefit for Income Taxes: For the three months ended Constant March 31, Foreign Constant Currency 2021 2020 Currency Impact Currency Change % Change (in thousands) Benefit for income taxes $ 20,922 $ 66,538 $ (44,594) $ (1,022) 9.4% Net Loss: For the three months ended Constant March 31, Foreign Constant Currency 2021 2020 Currency Impact Currency Change % Change (in thousands) Net loss $ (11,745) $ (127,933) $ 96,131 $ 20,057 80.4% Net loss decreased $116.2 million for the three months ended March 31, 2021, as compared to the prior year. This change was primarily due to fluctuations in foreign currency exchange rates including changes recorded on the remeasurement of the U.S. dollar denominated intercompany loans with foreign subsidiaries, an increase in operating income, and decreases in cash interest expense related to the interest rate swaps and loss from extinguishment of debt. This was partially offset by a decrease in benefit for income taxes and an increase in non-cash interest expense. NON-GAAP FINANCIAL MEASURES This report contains information regarding Adjusted EBITDA, a non-GAAP measure. We have provided below a description of Adjusted EBITDA, a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure and an explanation as to why management utilizes this measure. This report also presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates. We believe that providing these financial results and metrics on a constant currency basis, which are non-GAAP measures, gives management and investors the ability to evaluate the performance of our business without the impact of foreign currency exchange rate fluctuations. We eliminate the impact of changes in foreign currency exchange rates by dividing the current period’s financial results by the average monthly exchange rates of the prior year period, as well as by eliminating the impact of the remeasurement of our intercompany loans. Adjusted EBITDA We define Adjusted EBITDA as net income excluding the impact of non-cash straight-line leasing revenue, non-cash straight-line ground lease expense, non-cash compensation, net loss from extinguishment of debt, other income and expenses, acquisition and new business initiatives related adjustments and expenses, asset impairment and decommission costs, interest income, interest expenses, depreciation, accretion, and amortization, and income taxes. We believe that Adjusted EBITDA is useful to investors or other interested parties in evaluating our financial performance. Adjusted EBITDA is the primary measure used by management (1) to evaluate the economic productivity of our operations and (2) for purposes of making decisions about allocating resources to, and assessing the performance of, our operations. Management believes that Adjusted EBITDA helps investors or other interested parties to meaningfully evaluate and compare the results of our operations (1) from period to period and (2) to our competitors, by excluding the impact of our capital structure (primarily interest charges from our outstanding debt) and asset base (primarily depreciation, amortization and accretion) from our financial results. Management also believes Adjusted EBITDA is frequently used by investors or other interested parties in the evaluation of REITs. In addition, Adjusted EBITDA is similar to the measure of current financial performance generally used by our lenders to determine compliance with certain covenants under our Senior Credit Agreement and the indentures relating to the 2016 Senior Notes, 2020 Senior Notes, and 2021 Senior Notes. Adjusted EBITDA should be considered only as a supplement to net income computed in accordance with GAAP as a measure of our performance. ‎ 25 Table of Contents For the three months ended Constant March 31, Foreign Constant Currency 2021 2020 Currency Impact Currency Change % Change (in thousands) Net loss $ (11,745) $ (127,933) $ 96,131 $ 20,057 80.4% Non-cash straight-line leasing revenue (576) (2,341) (98) 1,863 (79.6%) Non-cash straight-line ground lease expense 2,641 3,848 10 (1,217) (31.6%) Non-cash compensation 20,422 16,278 (53) 4,197 25.8% Loss from extinguishment of debt, net 11,652 16,864 — (5,212) (30.9%) Other expense, net 88,436 226,299 (143,591) 5,728 (143.7%) Acquisition and new business initiatives related adjustments and expenses 5,001 3,799 81 1,121 29.5% Asset impairment and decommission costs 4,903 14,355 (37) (9,415) (65.6%) Interest income (632) (885) 101 152 (17.2%) Total interest expense (1) 106,790 103,396 3 3,391 3.3% Depreciation, accretion, and amortization 183,881 182,579 (5,297) 6,599 3.6% Benefit for income taxes (2) (20,702) (66,311) 44,593 1,016 9.2% Adjusted EBITDA $ 390,071 $ 369,948 $ (8,157) $ 28,280 7.6% (1) Total interest expense includes interest expense, non-cash interest expense, and amortization of deferred financing fees. (2) Benefit for taxes includes $220 and $227 of franchise taxes for the three months ended March 31, 2021 and 2020, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statements of Operations. Adjusted EBITDA increased $20.1 million for the three months ended March 31, 2021, as compared to the prior year period. On a constant currency basis, Adjusted EBITDA increased $28.3 million. These changes were primarily due to an increase in segment operating profit and a decrease in cash selling, general, and administrative expenses. LIQUIDITY AND CAPITAL RESOURCES SBA Communications Corporation (“SBAC”) is a holding company with no business operations of its own. SBAC’s only significant asset is 100% of the outstanding capital stock of SBA Telecommunications, LLC (“Telecommunications”), which is also a holding company that owns equity interests in entities that directly or indirectly own all of our domestic and international towers and assets. We conduct all of our business operations through Telecommunications’ subsidiaries. Accordingly, our only source of cash to pay our obligations, other than financings, is distributions with respect to our ownership interest in our subsidiaries from the net earnings and cash flow generated by these subsidiaries. A summary of our cash flows is as follows: For the three months ended March 31, 2021 March 31, 2020 (in thousands) Cash provided by operating activities $ 285,498 $ 277,742 Cash used in investing activities (1,076,584) (132,012) Cash provided by (used in) financing activities 701,343 (43,335) Change in cash, cash equivalents, and restricted cash (89,743) 102,395 Effect of exchange rate changes on cash, cash equiv., and restricted cash (10,880) (13,900) Cash, cash equivalents, and restricted cash, beginning of period 342,808 141,120 Cash, cash equivalents, and restricted cash, end of period $ 242,185 $ 229,615 Operating Activities Cash provided by operating activities was $285.5 million for the three months ended March 31, 2021 as compared to $277.7 million for the three months ended March 31, 2020. The increase was primarily due to an increase in operating profit and a decrease in cash selling, general, and administrative expenses, partially offset by a decrease in cash inflows associated with working capital changes primarily from timing of customer payments, the negative impact on cash from changes in foreign currency exchange rates, and an increase in net cash interest paid. 26 Table of Contents Investing Activities A detail of our cash capital expenditures is as follows: For the three months ended March 31, 2021 2020 (in thousands) Acquisitions of towers and related intangible assets $ (101,630) $ (82,274) Acquisition of right-of-use assets (1) (945,915) — Land buyouts and other assets (2) (5,131) (7,257) Construction and related costs on new builds (8,823) (17,031) Augmentation and tower upgrades (7,560) (13,031) Tower maintenance (7,313) (8,194) General corporate (840) (1,035) Other investing activities 628 (3,190) Net cash used in investing activities $ (1,076,584) $ (132,012) (1) On February 16, 2021, the Company acquired the exclusive right to lease and operate 697 utility transmission structures, which included existing wireless tenant licenses from PG&E. (2) Excludes $2.8 million and $1.7 million spent to extend ground lease terms for the three months ended March 31, 2021 and 2020, respectively. Subsequent to March 31, 2021, we acquired 17 tower and related assets for $6.0 million in cash. In addition, we agreed to purchase 401 additional sites for $110.8 million. For 2021, we expect to incur non-discretionary cash capital expenditures associated with tower maintenance and general corporate expenditures of $36.0 million to $46.0 million and discretionary cash capital expenditures, based on current or potential acquisition obligations, planned new tower construction, forecasted tower augmentations, and forecasted ground lease purchases, of $1,225.0 million to $1,245.0 million. We expect to fund these cash capital expenditures from cash on hand, cash flow from operations, and borrowings under the Revolving Credit Facility or new financings. The exact amount of our future cash capital expenditures will depend on a number of factors, including amounts necessary to support our tower portfolio, our new tower build and acquisition programs, and our ground lease purchase program. Financing Activities A detail of our financing activities is as follows: For the three months ended March 31, 2021 March 31, 2020 (in thousands) Net borrowings (repayments) under Revolving Credit Facility (1) $ 210,000 $ (5,000) Proceeds from issuance of Senior Notes, net of fees (1) 1,485,670 988,516 Repayment of Senior Notes (1) (757,500) (759,143) Repurchase and retirement of common stock (2) (168,923) (203,330) Payment of dividends on common stock (63,412) (52,201) Other financing activities (4,492) (12,177) Net cash provided by (used in) financing activities $ 701,343 $ (43,335) (1) For additional information regarding our debt instruments and financings, refer to the Debt Instruments and Debt Service Requirements below. (2) For additional information, refer to Item 2. Issuer Purchases of Equity Securities. ‎ 27 Table of Contents Dividend For the three months ended March 31, 2021, we paid the following cash dividends: Payable to Shareholders of Record At the Close Cash Paid Aggregate Amount Date Declared of Business on Per Share Paid Date Paid February 19, 2021 March 10, 2021 $0.58 $63.4 million March 26, 2021 Dividends paid in 2021 and 2020 were ordinary dividends. Subsequent to March 31, 2021, we declared the following cash dividends: Payable to Shareholders Cash to of Record At the Close be Paid Date Declared of Business on Per Share Date to be Paid April 26, 2021 May 20, 2021 $0.58 June 15, 2021 The amount of future distributions will be determined, from time to time, by our Board of Directors to balance our goal of increasing long-term shareholder value and retaining sufficient cash to implement our current capital allocation policy, which prioritizes investment in quality assets that meet our return criteria, and then stock repurchases when we believe our stock price is below its intrinsic value. The actual amount, timing and frequency of future dividends, will be at the sole discretion of our Board of Directors and will be declared based upon various factors, many of which are beyond our control. Registration Statements We have on file with the Securities and Exchange Commission (the “Commission”) a shelf registration statement on Form S-4 registering shares of Class A common stock that we may issue in connection with the acquisition of wireless communication towers or antenna sites and related assets or companies who own wireless communication towers, antenna sites, or related assets. During the three months ended March 31, 2021, we did not issue any shares of Class A common stock under this registration statement. As of March 31, 2021, we had approximately 1.2 million shares of Class A common stock remaining under this registration statement. On February 26, 2021, we filed with the Commission an automatic shelf registration statement for well-known seasoned issuers on Form S-3, which enables us to issue shares of our Class A common stock, preferred stock, debt securities, warrants, or depositary shares as well as units that include any of these securities. We will file a prospectus supplement containing the amount and type of securities each time we issue securities under our automatic shelf registration statement on Form S-3. No securities were issued under this registration statement through the date of this filing. Debt Instruments and Debt Service Requirements Revolving Credit Facility under the Senior Credit Agreement The Revolving Credit Facility consists of a revolving loan under which up to $1.25 billion aggregate principal amount may be borrowed, repaid and redrawn, based upon specific financial ratios and subject to the satisfaction of other customary conditions to borrowing. Amounts borrowed under the Revolving Credit Facility accrue interest, at SBA Senior Finance II’s election, at either (1) the Eurodollar Rate plus a margin that ranges from 112.5 basis points to 175.0 basis points or (2) the Base Rate plus a margin that ranges from 12.5 basis points to 75.0 basis points, in each case based on the ratio of Consolidated Net Debt to Annualized Borrower EBITDA, calculated in accordance with the Senior Credit Agreement. In addition, SBA Senior Finance II is required to pay a commitment fee of between 0.20% and 0.25% per annum on the amount of unused commitment. If not earlier terminated by SBA Senior Finance II the Revolving Credit Facility will terminate on, and SBA Senior Finance II will repay all amounts outstanding on or before, April 11, 2023. The proceeds available under the Revolving Credit Facility may be used for general corporate purposes. SBA Senior Finance II may, from time to time, borrow from and repay the Revolving Credit Facility. Consequently, the amount outstanding under the Revolving Credit Facility at the end of the period may not be reflective of the total amounts outstanding during such period. During the three months ended March 31, 2021, we borrowed $710.0 million and repaid $500.0 million of the outstanding balance under the Revolving Credit Facility. As of March 31, 2021, the balance outstanding under the Revolving Credit Facility was $590.0 million accruing interest at 1.590% per annum. In addition, SBA Senior Finance II was required to pay a commitment fee of 28 Table of Contents 0.20% per annum on the amount of the unused commitment. As of March 31, 2021, SBA Senior Finance II was in compliance with the financial covenants contained in the Senior Credit Agreement. Subsequent to March 31, 2021, we repaid $95.0 million of the outstanding balance under the Revolving Credit Facility. As of the date of this filing, $495.0 million was outstanding under the Revolving Credit Facility. Term Loan under the Senior Credit Agreement 2018 Term Loan On April 11, 2018, we, through our wholly owned subsidiary, SBA Senior Finance II LLC, obtained a new term loan (the “2018 Term Loan”) under the amended and restated Senior Credit Agreement. The 2018 Term Loan consists of a senior secured term loan with an initial aggregate principal amount of $2.4 billion that matures on April 11, 2025. The 2018 Term Loan accrues interest, at SBA Senior Finance II’s election at either the Base Rate plus 75 basis points (with a zero Base Rate floor) or the Eurodollar Rate plus 175 basis points (with a zero Eurodollar Rate floor). The 2018 Term Loan was issued at 99.75% of par value. As of March 31, 2021, the 2018 Term Loan was accruing interest at 1.860% per annum. Principal payments on the 2018 Term Loan are being made in quarterly installments on the last day of each March, June, September, and December in an amount equal to $6.0 million. During the three months ended March 31, 2021, we repaid an aggregate of $6.0 million of principal on the 2018 Term Loan. As of March 31, 2021, the 2018 Term Loan had a principal balance of $2.3 billion. On August 4, 2020, we, through our wholly owned subsidiary, SBA Senior Finance II, entered into an interest rate swap for $1.95 billion of notional value accruing interest at one month LIBOR plus 175 basis points for a fixed rate of 1.874% per annum through the maturity date of the 2018 Term Loan. Secured Tower Revenue Securities Tower Revenue Securities Terms As of March 31, 2021, we, through a New York common law trust (the “Trust”), had issued and outstanding an aggregate of $5.1 billion of Secured Tower Revenue Securities (“Tower Securities”). The sole asset of the Trust consists of a non-recourse mortgage loan made in favor of certain of our subsidiaries that are borrowers on the mortgage loan (the “Borrowers”) under which there is a loan tranche for each Tower Security outstanding with the same interest rate and maturity date as the corresponding Tower Security. The mortgage loan will be paid from the operating cash flows from the aggregate 9,988 tower sites owned by the Borrowers as of March 31, 2021. The mortgage loan is secured by (1) mortgages, deeds of trust, and deeds to secure debt on a substantial portion of the tower sites, (2) a security interest in the tower sites and substantially all of the Borrowers’ personal property and fixtures, (3) the Borrowers’ rights under certain tenant leases, and (4) all of the proceeds of the foregoing. For each calendar month, SBA Network Management, Inc., an indirect subsidiary (“Network Management”), is entitled to receive a management fee equal to 4.5% of the Borrowers’ operating revenues for the immediately preceding calendar month. The table below sets forth the material terms of our outstanding Tower Securities as of March 31, 2021: Security Issue Date Amount Outstanding Interest Rate Anticipated Repayment Date Final Maturity Date 2013-2C Tower Securities Apr. 18, 2013 $575.0 million 3.722% Apr. 11, 2023 Apr. 9, 2048 2014-2C Tower Securities Oct. 15, 2014 $620.0 million 3.869% Oct. 8, 2024 Oct. 8, 2049 2017-1C Tower Securities (1) Apr. 17, 2017 $760.0 million 3.168% Apr. 11, 2022 Apr. 9, 2047 2018-1C Tower Securities Mar. 9, 2018 $640.0 million 3.448% Mar. 9, 2023 Mar. 9, 2048 2019-1C Tower Securities Sep. 13, 2019 $1.165 billion 2.836% Jan. 12, 2025 Jan. 12, 2050 2020-1C Tower Securities Jul. 14, 2020 $750.0 million 1.884% Jan. 9, 2026 Jul. 11, 2050 2020-2C Tower Securities Jul. 14, 2020 $600.0 million 2.328% Jan. 11, 2028 Jul. 9, 2052 (1) On April 29, 2021, we, through the Trust, priced $1.165 billion of Secured Tower Revenue Securities Series 2021-1C which have an anticipated repayment date of November 9, 2026 and a final maturity date of May 9, 2051 (the “2021-1C Tower Securities”). This transaction is expected to close May 14, 2021. The 2021-1C Tower Securities have a fixed interest rate of 1.631% per annum, payable monthly. 29 Table of Contents Net proceeds from this offering will be used to repay the entire aggregate principal amount of the 2017-1C Tower Securities ($760.0 million) and the Secured Tower Revenue Securities, Series 2017-1R ($40.0 million) and for general corporate purposes. As of March 31, 2021, the Borrowers met the debt service coverage ratio required by the mortgage loan agreement and were in compliance with all other covenants as set forth in the agreement. Risk Retention Tower Securities In addition, to satisfy certain risk retention requirements of Regulation RR promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), SBA Guarantor, LLC, a wholly owned subsidiary, purchased (1) $40.0 million of Secured Tower Revenue Securities Series 2017-1R (the “2017-1R Tower Securities”) issued by the Trust with a fixed interest rate of 4.459% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2017-1C Tower Securities, (2) $33.7 million of Secured Tower Revenue Securities Series 2018-1R (the “2018-1R Tower Securities”) issued by the Trust with a fixed interest rate of 4.949% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2018-1C Tower Securities, (3) $61.4 million of Secured Tower Revenue Securities Series 2019-1R (the “2019-1R Tower Securities”) issued by the Trust with a fixed interest rate of 4.213% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2019-1C Tower Securities, and (4) $71.1 million of Secured Tower Revenue Securities Series 2020-2R (the “2020-2R Tower Securities”) issued by the Trust with a fixed interest rate of 4.336% per annum, payable monthly, and with the same anticipated repayment date and final maturity date as the 2020-2C Tower Securities. Principal and interest payments made on the 2017-1R Tower Securities, 2018-1R Tower Securities, 2019-1R Tower Securities, and 2020-2R Tower Securities eliminate in consolidation. On April 29, 2021, SBA Guarantor, LLC, a wholly owned subsidiary, agreed to purchase $61.4 million of Secured Tower Revenue Securities Series 2021-1R issued by the Trust. These securities have an anticipated repayment date of November 9, 2026 and a final maturity date of May 9, 2051 (the “2021-1R Tower Securities”). The fixed interest rate on the 2021-1R Tower Securities is 3.625% per annum, payable monthly. Principal and interest payments made on the 2021-1R Tower Securities will eliminate in consolidation. Senior Notes The table below sets forth the material terms of our outstanding senior notes as of March 31, 2021: Senior Notes Issue Date Amount Outstanding Interest Rate Coupon Maturity Date Interest Due Dates Optional Redemption Date 2016 Senior Notes Aug. 15, 2016 $1.1 billion 4.875% Sep. 1, 2024 Mar. 1 & Sep. 1 Sep. 1, 2019 2020 Senior Notes Feb. 4, 2020 $1.5 billion 3.875% Feb. 15, 2027 Feb. 15 & Aug. 15 Feb. 15, 2023 2021 Senior Notes Jan. 29, 2021 $1.5 billion 3.125% Feb. 1, 2029 Feb. 1 & Aug. 1 Feb. 1, 2024 The unsecured senior notes are subject to redemption in whole or in part at the redemption prices set forth in the indenture agreement plus accrued and unpaid interest. We may redeem each of the senior notes during the time periods and at the redemption prices set forth in the indentures. Debt Service As of March 31, 2021, we believe that our cash on hand, capacity available under our Revolving Credit Facility, and cash flows from operations for the next twelve months will be sufficient to service our outstanding debt during the next twelve months. 30 Table of Contents The following table illustrates our estimate of our debt service requirement over the next twelve months based on the amounts outstanding as of March 31, 2021 and the interest rates accruing on those amounts on such date (in thousands): Revolving Credit Facility $ 10,701 2018 Term Loan (1) 67,683 2013-2C Tower Securities 21,585 2014-2C Tower Securities 24,185 2017-1C Tower Securities (2) 24,318 2018-1C Tower Securities 22,270 2019-1C Tower Securities 33,409 2020-1C Tower Securities 14,368 2020-2C Tower Securities 14,159 2016 Senior Notes 53,625 2020 Senior Notes 58,125 2021 Senior Notes 46,875 Total debt service for the next 12 months (2) $ 391,303 (1) Total debt service on the 2018 Term Loan includes the impact of the interest rate swap entered into on August 4, 2020, which swapped $1.95 billion of notional value accruing interest at one month LIBOR plus 175 basis points for a fixed rate of 1.874% per annum through the maturity date of the 2018 Term Loan. (2) The 2017-1C Tower Securities are expected to be repaid on May 14, 2021 in connection with the issuance of the 2021-1C Tower Securities. Total amount excludes debt service with respect to the $1.165 billion aggregate principal amount of the 2021-1C Tower Securities.