What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-09 compared with 2022-11-03 · 119 added, 307 removed, 308 unchanged (58% of the section changed)

2 unchanged sentences

In addition, we own and operate towers in South America, Central America, Canada, South Africa, the Philippines, and Tanzania.

Our primary business line is our site leasing business, which contributed 96.3% of our total segment operating profit for the nine months ended September 30, 2022.

Our primary business line is our site leasing business, which contributed 97.2% of our total segment operating profit for the three months ended March 31, 2023.

In our site leasing business, we (1) lease space to wireless service providers and other customers on assets that we own or operate and (2) manage rooftop and tower sites for property owners under various contractual arrangements.

As of September 30, 2022, we owned 36,519 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.

As of March 31, 2023, we owned 39,362 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.

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, South Africa, the Philippines, and Tanzania.

As of September 30, 2022, no U.S.

As of March 31, 2023, 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 nine months ended September 30, 2022.

In addition, as of September 30, 2022, approximately 30% of our total towers are located in Brazil and no other international markets (each country is considered a market) represented more than 5% of our total towers.

state or territory accounted for more than 10% of our total revenues for the three months ended March 31, 2023.

In addition, as of March 31, 2023, approximately 30% of our total towers are located in Brazil and no other international market (each country is considered a market) represented more than 5% of our total towers.

We derive site leasing revenues from all the major carriers in each of the 16 countries in which we operate.

1 unchanged sentence

Our tenant leases are generally for an initial term of five years to 15 years with multiple renewal periods at the option of the tenant.

Our tenant leases either (1) contain specific annual rent escalators, (2) escalate

annually in accordance with an inflationary index, or (3) escalate using a combination of fixed and inflation adjusted escalators.

In addition, our international site leases may include pass-through charges, such as rent related to ground leases and other property interests, utilities, and fuel.

Our tenant leases either (1) contain specific annual rent escalators, (2) escalate annually in accordance with an inflationary index, or (3) escalate using a combination of fixed and inflation adjusted escalators.

In addition, our international site leases may include pass-through charges, such as rent related to ground leases and other property interests, utilities, property taxes, and fuel.

Cost of site leasing revenue primarily consists of:

 Cash and non-cash rental expense on ground leases and other underlying property interests;

 Cash and non-cash rental expense on ground leases, right-of-use, and other underlying property interests;

 Property taxes;

4 unchanged sentences

Ground leases and other property interests are generally for an initial term of five years or more with multiple renewal periods, which are at our option.

Our ground leases either (1) contain specific annual rent escalators, (2) escalate annually in accordance with an inflationary index or (3) escalate using a combination of fixed and inflation adjusted escalators.

As of September 30, 2022, approximately 72% 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.

Our ground leases typically either (1) contain specific annual rent escalators or (2) escalate annually in accordance with an inflationary index.

As of March 31, 2023, approximately 70% 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.

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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.

In Ecuador, El Salvador, Guatemala, Nicaragua, and Panama, significantly all of our revenue, expenses, and capital expenditures arising from our new build activities are denominated in U.S.

Specifically, most of our ground leases and other property interests, tenant leases, and tower-related expenses are paid in U.S.

1 unchanged sentence

In Brazil, Canada, Chile, South Africa, and the Philippines, 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, Peru, and Tanzania, 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.

In Argentina, Colombia, Costa Rica, Peru, and Tanzania, 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.

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 information regarding our operating segments, see Note 14 to our Consolidated Financial Statements included in this quarterly report.

For the three months ended

For the nine months ended

Segment operating profit as a percentage of

September 30,

total operating profit

2 unchanged sentences

Total site leasing

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.

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.

18 unchanged sentences

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.

For information regarding our operating segments, see Note 14 to our 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 continue to believe that our priority is to make investments focused on increasing Adjusted Funds From Operations per share.

While the addition of a cash dividend to our capital allocation strategy has provided us with an additional tool to return value to our shareholders, we continue to believe that our priority is to make investments focused on increasing Adjusted Funds From Operations per share.

Key elements of our capital allocation strategy include:

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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, 2021.

For a detailed discussion on the application of these and other accounting policies, see Note 2 to our Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2022.

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.

3 unchanged sentences

This report presents our financial results and other financial metrics on a GAAP basis and, with respect to our international and consolidated results, 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 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.

Three Months Ended September 30, 2022 Compared to Three Months Ended September 30, 2021

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Revenues and Segment Operating Profit:

For the three months ended

September 30,

Currency Impact

12 unchanged sentences

Site development

Domestic site leasing revenues increased $22.8 million for the three months ended September 30, 2022, as compared to the prior year, primarily due to (1) 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 and (2) revenues from 103 towers acquired and 9 towers built since July 1, 2021, partially offset by lease non-renewals.

International site leasing revenues increased $29.0 million for the three months ended September 30, 2022, as compared to the prior year.

Domestic site leasing revenues increased $21.8 million for the three months ended March 31, 2023, as compared to the prior year, primarily due to (1) 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 and (2) revenues from 63 towers acquired and 14 towers built since January 1, 2022, partially offset by lease non-renewals.

International site leasing revenues increased $36.0 million for the three months ended March 31, 2023, as compared to the prior year.

On a constant currency basis, international site leasing revenues increased $38.5 million.

These changes were primarily due to (1) revenues from 2,248 towers acquired (including 1,445 towers under the deal with Airtel Tanzania) and 465 towers built since July 1, 2021, (2) an increase in reimbursable pass-through expenses due primarily to increases in CPI escalators on our ground leases, and (3) organic site leasing growth from new leases, amendments, and contractual escalators, partially offset by lease non-renewals.

These changes were primarily due to (1) revenues from 3,296 towers acquired (including 2,632 sites from Grupo TorreSur (“GTS”) in Brazil) and 499 towers built since January 1, 2022, (2) an increase in reimbursable pass-through expenses due primarily to increases in consumer price index escalators on our ground leases, and (3) organic site leasing growth from new leases, amendments, and contractual escalators, partially offset by lease non-renewals.

Site leasing revenue in Brazil represented 15.2% of total site leasing revenue for the period.

No other individual international market represented more than 5% of our total site leasing revenue.

Site development revenues increased $34.5 million for the three months ended September 30, 2022, as compared to prior year, as a result of increased carrier activity driven primarily by T-Mobile and Verizon.

Site development revenues decreased $2.1 million for the three months ended March 31, 2023, as compared to prior year, as a result of decreased carrier activity driven primarily by T-Mobile and DISH Wireless, partially offset by an increase in Verizon Wireless activity.

Operating Profit

Domestic site leasing segment operating profit increased $21.7 million for the three months ended September 30, 2022, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since July 1, 2021 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 increased $16.8 million for the three months ended September 30, 2022, as compared to the prior year.

Domestic site leasing segment operating profit increased $17.9 million for the three months ended March 31, 2023, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since January 1, 2022 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 increased $27.0 million for the three months ended March 31, 2023, as compared to the prior year.

On a constant currency basis, international site leasing segment operating profit increased $28.6 million.

These changes were primarily due to additional profit generated by (1) towers acquired and built since July 1, 2021 and organic site

leasing growth as noted above and (2) the positive impact of our ground lease purchase program, partially offset by our increased site leasing cost of revenues largely as a result of our new site additions and expansion into new markets.

Site development segment operating profit increased $10.3 million for the three months ended September 30, 2022, as compared to the prior year, as a result of increased carrier activity driven primarily by T-Mobile and Verizon.

These changes were primarily due to additional profit generated by (1) towers acquired and built since January 1, 2022 and organic site leasing growth as noted above and (2) the positive impact of our ground lease purchase program, partially offset by our increased site leasing cost of revenues largely as a result of our new site additions.

Site development segment operating profit decreased $0.5 million for the three months ended March 31, 2023, as compared to the prior year, as a result of decreased carrier activity driven primarily by T-Mobile and DISH Wireless, partially offset by an increase in Verizon Wireless activity.

Selling, General, and Administrative Expenses:

For the three months ended

September 30,

Currency Impact

5 unchanged sentences

Site development

Selling, general, and administrative expenses increased $14.8 million for the three months ended September 30, 2022, as compared to the prior year.

Selling, general, and administrative expenses increased $10.1 million for the three months ended March 31, 2023, as compared to the prior year.

On a constant currency basis, selling, general, and administrative expenses increased $10.6 million.

These changes were primarily as a result of an increase in non-cash compensation, personnel, and other support related costs due in part to our entry into new markets.

The decrease in Domestic site leasing (which has been allocated to International site leasing and Other selling, general, and administrative expenses) was primarily due to changes in our internal cost allocations.

These changes were primarily as a result of an increase in non-cash compensation, personnel, and other support related costs.

Asset Impairment and Decommission Costs:

For the three months ended

September 30,

Currency Impact

3 unchanged sentences

International site leasing

Asset impairment and decommission costs decreased $1.3 million for the three months ended September 30, 2022, as compared to the prior year.

These changes were primarily as a result of a decrease in impairment charges resulting from our regular analysis of whether the anticipated future discounted cash flows from certain towers are sufficient to recover the carrying value of the investment in those towers.

Total site leasing

Asset impairment and decommission costs increased $17.9 million for the three months ended March 31, 2023, as compared to the prior year.

On a constant currency basis, asset impairment and decommission costs increased $18.1 million.

These changes were primarily as a result of an increase 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 due in part to increased churn from Sprint .

Depreciation, Accretion, and Amortization Expense:

For the three months ended

September 30,

Currency Impact

5 unchanged sentences

Site development

Domestic site leasing depreciation, accretion, and amortization expense decreased $1.6 million for the three months ended September 30, 2022, as compared to the prior year.

This change was primarily due to the impact of assets that became fully

depreciated since the prior year period, partially offset by an increase in the number of towers we acquired and built since July 1, 2021.

International site leasing depreciation, accretion, and amortization expense increased $4.5 million for the three months ended September 30, 2022, as compared to the prior year.

Domestic site leasing depreciation, accretion, and amortization expense decreased $3.6 million for the three months ended March 31, 2023, as compared to the prior year.

This change was primarily due to the impact of assets that became fully depreciated since the prior year period, partially offset by an increase in the number of towers we acquired and built since January 1, 2022.

International site leasing depreciation, accretion, and amortization expense increased $11.5 million for the three months ended March 31, 2023, as compared to the prior year.

On a constant currency basis, depreciation, accretion, and amortization expense increased $12.4 million.

These changes were primarily due to the increase in the number of towers we acquired and built since July 1, 2021, partially offset by the impact of assets that became fully depreciated since the prior year period.

These changes were primarily due to the increase in the number of towers we acquired and built since January 1, 2022, partially offset by the impact of assets that became fully depreciated since the prior year period.

Operating Income (Expense):

For the three months ended

September 30,

Currency Impact

5 unchanged sentences

Site development

Domestic site leasing operating income increased $21.9 million for the three months ended September 30, 2022, as compared to the prior year, primarily due to higher segment operating profit and decreases in selling, general, and administrative expenses and depreciation, accretion, and amortization expense, partially offset by an increase in asset impairment and decommission costs.

International site leasing operating income increased $10.0 million for the three months ended September 30, 2022, as compared to the prior year.

On a constant currency basis, international site leasing operating income increased $10.3 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 selling, general, and administrative expenses and depreciation, accretion, and amortization expense.

Site development operating income increased $9.3 million for the three months ended September 30, 2022, as compared to the prior year, primarily due to higher segment operating profit driven by more activity from T-Mobile and Verizon .

Domestic site leasing operating income decreased $0.4 million for the three months ended March 31, 2023, as compared to the prior year, primarily due to increases in asset impairment and decommission costs and selling, general, and administrative expenses, partially offset by higher segment operating profit and a decrease in depreciation, accretion, and amortization expense.

International site leasing operating income increased $11.0 million for the three months ended March 31, 2023, as compared to the prior year.

These changes were primarily due to higher segment operating profit, partially offset by increases in depreciation, accretion, and amortization expense, asset impairment and decommission costs, and selling, general, and administrative expenses.

Site development operating income decreased $1.4 million for the three months ended March 31, 2023, as compared to the prior year, primarily due to higher selling, general, and administrative expenses and lower segment operating profit driven by less activity from T -Mobile and DISH Wireless, partially offset by an increase in Verizon Wireless activity.

Other Income (Expense):

For the three months ended

September 30,

Currency Impact

5 unchanged sentences

Amortization of deferred financing fees

Other expense, net

Interest income increased $1.9 million for the three months ended September 30, 2022, as compared to the prior year.

This change was primarily due to a higher amount of interest-bearing deposits held as well as higher effective interest rates on those deposits as compared to the prior year.

Interest expense decreased $2.2 million for the three months ended September 30, 2022, as compared to the prior year.

This change was primarily due to a lower weighted average interest rate, partially offset by a higher average principal amount of cash-interest bearing debt outstanding.

Other expense, net includes a $37.4 million loss on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries for the three months ended September 30, 2022, while the prior year period included a $67.6 million loss.

(Provision) Benefit for Income Taxes:

For the three months ended

September 30,

Currency Impact

Currency Change

(in thousands)

(Provision) benefit for income taxes

Provision for income taxes increased $13.7 million for the three months ended September 30, 2022, as compared to the prior year.

On a constant currency basis, provision for income taxes increased $2.9 million primarily due to increases in current state taxes and withholding taxes offset by a decrease in deferred withholding taxes.

For the three months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Net income increased $52.0 million for the three months ended September 30, 2022, as compared to the prior year.

On a constant currency basis, net income increased $32.8 million due to increases in operating income and interest income and a decrease in interest expense, partially offset by an increase in provision for income taxes.

Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021

Revenues and Segment Operating Profit:

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Site development

Cost of Revenues

Domestic site leasing

International site leasing

Site development

Operating Profit

Domestic site leasing

International site leasing

Site development

Domestic site leasing revenues increased $75.4 million for the nine months ended September 30, 2022, as compared to the prior year, primarily due to (1) 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 and (2) revenues from 863 towers acquired (including wireless tenant licenses on 715 utility transmission structures from the PG&E transaction) and 12 towers built since January 1, 2021 , partially offset by lease non-renewals.

International site leasing revenues increased $86.8 million for the nine months ended September 30, 2022, as compared to the prior year.

On a constant currency basis, international site leasing revenues increased $84.4 million.

These changes were primarily due to (1) revenues from 2,276 towers acquired (including 1,445 towers under the deal with Airtel Tanzania) and 622 towers built since January 1, 2021, (2) an increase in reimbursable pass-through expenses due primarily to increases in CPI escalators on our ground leases, and (3) organic site leasing growth from new leases, amendments, and contractual escalators, partially offset by lease non-

Site leasing revenue in Brazil represented 12.2% of total site leasing revenue for the period.

No other individual international market represented more than 5% of our total site leasing revenue.

Site development revenues increased $71.5 million for the nine months ended September 30, 2022, as compared to prior year, as a result of increased carrier activity driven primarily by T-Mobile and Verizon.

Operating Profit

Domestic site leasing segment operating profit increased $71.8 million for the nine months ended September 30, 2022, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since January 1, 2021 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 increased $49.1 million for the nine months ended September 30, 2022, as compared to the prior year.

On a constant currency basis, international site leasing segment operating profit increased $47.3 million.

These changes were primarily due to additional profit generated by (1) towers acquired and built since January 1, 2021 and organic site leasing growth as noted above and (2) the positive impact of our ground lease purchase program, partially offset by our increased site leasing cost of revenues largely as a result of our new site additions and expansion into new markets.

Site development segment operating profit increased $21.9 million for the nine months ended September 30, 2022, as compared to the prior year, as a result of increased carrier activity driven primarily by T-Mobile and Verizon.

Selling, General, and Administrative Expenses:

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Total site leasing

Site development

Selling, general, and administrative expenses increased $34.7 million for the nine months ended September 30, 2022, as compared to the prior year.

On a constant currency basis, selling, general, and administrative expenses increased $35.4 million.

These changes were primarily as a result of an increase in non-cash compensation, personnel, and other support related costs due in part to our entry into new markets .

Asset Impairment and Decommission Costs:

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Total site leasing

Asset impairment and decommission costs increased $7.0 million, on an actual and constant currency basis, for the nine months ended September 30, 2022, as compared to the prior year.

These changes were primarily as a result of an increase 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 due in part to increased churn from Sprint.

Depreciation, Accretion, and Amortization Expenses:

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Total site leasing

Site development

Domestic site leasing depreciation, accretion, and amortization expense decreased $22.9 million for the nine months ended September 30, 2022, as compared to the prior year.

These changes were primarily due to the impact of assets that became fully depreciated since the prior year period, partially offset by an increase in the number of towers we acquired and built since January 1, 2021.

International site leasing depreciation, accretion, and amortization expense increased $17.1 million for the nine months ended September 30, 2022, as compared to the prior year.

On a constant currency basis, depreciation, accretion, and amortization expense increased $16.0 million.

These changes were primarily due to the increase in the number of towers we acquired and built since January 1, 2021, partially offset by the impact of assets that became fully depreciated since the prior year period.

Operating Income (Expense):

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Total site leasing

Site development

Domestic site leasing operating income increased $96.6 million for the nine months ended September 30, 2022, as compared to the prior year, primarily due to higher segment operating profit and decreases in depreciation, accretion, and amortization expense and selling, general, and administrative expenses, partially offset by an increase in asset impairment and decommission costs.

International site leasing operating income increased $12.3 million for the nine months ended September 30, 2022, as compared to the prior year.

On a constant currency basis, international site leasing operating income increased $10.8 million.

These changes were primarily due to higher segment operating profit and decreased asset impairment and decommission costs, partially offset by increases in selling, general, and administrative expenses and depreciation, accretion, and amortization expense.

Site development operating income increased $19.9 million for the nine months ended September 30, 2022, as compared to the prior year, primarily due to higher segment operating profit driven by more activity from T-Mobile and Verizon.

Other Income (Expense):

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Interest income

Interest expense

Non-cash interest expense

Amortization of deferred financing fees

Loss from extinguishment of debt, net

Other income (expense), net

Interest income increased $4.8 million for the nine months ended September 30, 2022, as compared to the prior year.

This change was primarily due to a higher amount of interest-bearing deposits held as well as higher effective interest rates on those deposits as compared to the prior year.

Interest expense decreased $16.3 million for the nine months ended September 30, 2022, as compared to the prior year primarily due to a lower weighted-average interest rate, partially offset by a higher average principal amount of cash interest bearing debt outstanding.

Loss from extinguishment of debt was $13.7 million for the nine months ended September 30, 2021 representing the payment of a $7.5 million call premium and the write-off of $4.2 million of the unamortized financing fees related to the redemption of the 2017 Senior Notes in February 2021, as well as the write-off of $2.0 million of unamortized financing fees related to the repayment of the 2017-1C in May 2021.

Other income, net

Interest expense increased $19.0 million for the three months ended March 31, 2023, as compared to the prior year.

This change was primarily due to a higher weighted-average interest rate on a higher average principal amount of cash-interest bearing debt outstanding.

Based on the current rising interest rate environment, we expect interest expense will increase in future periods.

Other income, net includes a $41.9 million gain on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries for the nine months ended September 30, 2022, while the prior year period included a $42.6 million loss.

dollar denominated intercompany loans with foreign subsidiaries for the three months ended March 31, 2023, while the prior year period included a $109.6 million gain.

Provision for Income Taxes:

For the nine months ended

September 30,

For the three months ended

Currency Impact

2 unchanged sentences

Provision for income taxes

Provision for income taxes increased $24.3 million for the nine months ended September 30, 2022, as compared to the prior year.

On a constant currency basis, provision for income taxes increased $2.8 million.

These changes were primarily due to an increase in state taxes offset by a decrease in deferred foreign taxes.

Net Income (Loss):

For the nine months ended

September 30,

Provision for income taxes increased $3.0 million for the three months ended March 31, 2023, as compared to the prior year.

On a constant currency basis, provision for income taxes increased $27.2 million primarily due to increases in current and deferred foreign taxes.

For the three months ended

Currency Impact

1 unchanged sentence

(in thousands)

Net income increased $168.5 million for the nine months ended September 30, 2022.

On a constant currency basis, net income increased $138.0 million.

These changes were primarily due to increases in operating income and interest income and decreases in interest expense and loss from the extinguishment of debt, partially offset by an increase in provision for income taxes.

Net income decreased $87.8 million for the three months ended March 31, 2023, as compared to the prior year.

On a constant currency basis, net income decreased $43.0 million due to increases in provision for income taxes, interest expense, and non-cash interest expense and a decrease in other income, net, partially offset by an increase in operating income.

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.

As discussed above, this report also presents our financial results and other financial metrics after eliminating the impact of changes in foreign currency exchange rates.

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.

8 unchanged sentences

For the three months ended

September 30,

Currency Impact

4 unchanged sentences

Non-cash compensation

Other expense (income), net

Acquisition and new business initiatives

related adjustments and expenses

Asset impairment and decommission costs

Interest income

Interest expense (1)

Depreciation, accretion, and amortization

Provision (benefit) for income taxes (2)

Adjusted EBITDA

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Non-cash straight-line leasing revenue

Non-cash straight-line ground lease expense

Non-cash compensation

Loss from extinguishment of debt, net

Other (income) expense, net

Other income, net

Acquisition and new business initiatives

7 unchanged sentences

(1) Total interest expense includes interest expense, non-cash interest expense, and amortization of deferred financing fees.

(2) Provision for taxes includes $287 and $229 of franchise taxes for the three months ended September 30, 2022 and 2021, respectively, and $1,782 and $684 of franchise taxes for the nine months ended September 30, 2022 and 2021, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statements of Operations.

Adjusted EBITDA increased $39.8 million for the three months ended September 30, 2022, as compared to the prior year period.

On a constant currency basis, Adjusted EBITDA increased $41.6 million.

These changes were primarily due to an increase in segment operating profit in each of our three segments, partially offset by an increase in cash selling, general, and administrative expenses.

Adjusted EBITDA increased $111.0 million for the nine months ended September 30, 2022, as compared to the prior year period.

(2) Provision for taxes includes $257 and $1,234 of franchise taxes for the three months ended March 31, 2023 and 2022, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statements of Operations.

Adjusted EBITDA increased $35.6 million for the three months ended March 31, 2023, as compared to the prior year period.

On a constant currency basis, Adjusted EBITDA increased $37.0 million.

These changes were primarily due to an increase in segment operating profit in each of our three segments, partially offset by an increase in cash selling, general, and administrative expenses.

These changes were primarily due to an increase in segment operating profit, partially offset by an increase in cash selling, general, and administrative expenses.

LIQUIDITY AND CAPITAL RESOURCES

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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.

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 nine months ended September 30,

For the three months ended March 31,

(in thousands)

1 unchanged sentence

Cash used in investing activities

Cash (used in) provided by financing activities

Cash used in financing activities

Change in cash, cash equivalents, and restricted cash

3 unchanged sentences

Operating Activities

Cash provided by operating activities was $997.1 million for the nine months ended September 30, 2022 as compared to $891.3 million for the nine months ended September 30, 2021.

The increase was primarily due to an increase in operating profit, partially offset by an increase in cash outflows associated with working capital changes.

Cash provided by operating activities was $311.2 million for the three months ended March 31, 2023 as compared to $292.5 million for the three months ended March 31, 2022.

The increase was primarily due to an increase in operating profit partially offset by an increase in cash interest expense and cash selling, general, and administrative expenses.

Investing Activities

A detail of our cash capital expenditures is as follows:

For the nine months ended September 30,

For the three months ended March 31,

(in thousands)

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Net cash used in investing activities

(1) During the nine months ended September 30, 2022, we closed on 1,445 sites from Airtel Tanzania for $176.1 million.

Legal title has been fully transferred for 1,234 of the towers.

The remaining 211 towers are pending post-closing due diligence and continue to be accounted for as acquired and other right-of-use assets, net on the consolidated balance sheet until transfer of title for these towers is completed, which we anticipate to be in tranches through the end of the second quarter of 2023.

Upon legal transfer, these assets will be reclassified to tower related assets.

During this period of time, we have all the economic rights and obligations related to these towers.

(2) The nine months ended September 30, 2021 includes $77.1 million of acquisitions completed during the fourth quarter of 2020 which were not funded until the first quarter of 2021.

(3) During the nine months ended September 30, 2021, we acquired the exclusive right to lease and operate utility transmission structures, which included existing wireless tenant licenses from PG&E for $969.9 million , net of working capital adjustments.

(4) Excludes $10.6 million and $11.3 million spent to extend ground lease terms for the nine months ended September 30, 2022 and 2021, respectively.

(5) The nine months ended September 30, 2022 includes amounts paid related to the acquisition of a data center in Brazil during the second quarter of 2022.

(6) The nine months ended September 30, 2022 includes amounts paid for the purchase of and received from the sale of short-term investments.

On October 11, 2022, we completed the previously announced acquisition of 2,632 sites from Grupo TorreSur in Brazil for $725.0 million in cash, net of working capital adjustments.

We used borrowings under the Revolving Credit Facility and cash on hand to fund the acquisition.

Additionally, subsequent to September 30, 2022, we purchased or are under contract to purchase approximately 34 communication sites for an aggregate consideration of $28.5 million in cash.

We anticipate that these acquisitions will be consummated by the end of the first quarter of 2023.

(1) The three months ended March 31, 2022 includes $176.1 million of acquisitions related to our purchase of sites from Airtel Tanzania.

(2) Excludes $5.1 million and $3.8 million spent to extend ground lease terms for the three months ended March 31, 2023 and 2022, respectively.

(3) The three months ended March 31, 2023 includes a $78.0 million loan to an unconsolidated joint venture.

Additionally, subsequent to March 31, 2023, we purchased or are under contract to purchase 66 communication sites for an aggregate consideration of $63.7 million in cash.

We anticipate that these acquisitions will be consummated by the end of the fourth quarter of 2023.

For 2023, we expect to incur non-discretionary cash capital expenditures associated with tower maintenance and general corporate expenditures of $54.0 million to $64.0 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 $330.0 million to $350.0 million.

We expect to fund these cash capital expenditures from, among other sources, cash on hand, cash flow from operations, and borrowings under the Revolving Credit Facility or new financings.

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.

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A detail of our financing activities is as follows:

For the nine months ended September 30,

For the three months ended March 31,

(in thousands)

Net borrowings (repayments) under Revolving Credit Facility (1)

Proceeds from issuance of Senior Notes, net of fees (1)

Repayment of Senior Notes (1)

Proceeds from issuance of Tower Securities, net of fees (1)

Repayment of Tower Securities (1)

Net (repayments) borrowings under Revolving Credit Facility (1)

Repurchase and retirement of common stock (2)

Payment of dividends on common stock

Proceeds from employee stock purchase/stock option plans, net of taxes

Proceeds from employee stock purchase/stock option plans

Payments related to taxes on stock options and restricted stock units

Other financing activities

Net cash (used in) provided by financing activities

Net cash used in financing activities

(1) For additional information regarding our debt instruments and financings, refer to “Debt Instruments and Debt Service Requirements” below.

(2) For additional information, refer to Item 2.

Issuer Purchases of Equity Securities.

For the nine months ended September 30, 2022, we paid the following cash dividends:

(2) As of the date of this filing, we had $504.7 million remaining under the current authorized share repurchase plan.

For the three months ended March 31, 2023, we paid the following cash dividends:

Payable to Shareholders

7 unchanged sentences

March 24, 2023

April 24, 2022

$76.6 million

June 14, 2022

July 31, 2022

August 25, 2022

$76.7 million

September 20, 2022

Dividends paid in 2023 were ordinary taxable dividends.

Subsequent to September 30, 2022, we declared the following cash dividends:

Subsequent to March 31, 2023, we declared the following cash dividends:

Payable to Shareholders

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Date to be Paid

October 30, 2022

November 17, 2022

December 15, 2022

June 21, 2023

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.

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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 nine months ended September 30, 2022, we did not issue any shares of Class A common stock under this registration statement.

As of September 30, 2022, we had approximately 1.2 million shares of Class A common stock remaining under this registration statement.

During the three months ended March 31, 2023, we did not issue any shares of Class A common stock under this registration statement.

As of March 31, 2023, we had approximately 1.2 million shares of Class A common stock remaining under this registration statement.

We have on file with the Commission an automatic shelf registration statement for well-known seasoned issuers on Form S-3ASR, 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.

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Interest Rate

September 30, 2022 (1)

September 30, 2022 (2)

September 30, 2022

March 31, 2023 (1)

March 31, 2023 (2)

March 31, 2023

Revolving Credit Facility

2 unchanged sentences

(2) The rate reflected includes a 0.010% reduction in the applicable commitment fee as a result of meeting certain sustainability-linked targets as of December 31, 2022 .

The table below summarizes the Company’s revolving credit facility activity during the three and nine months ended September 30, 2022 and 2021 (in thousands):

For the three months

For the nine months

ended September 30,

The table below summarizes the Company’s Revolving Credit Facility activity during the three months ended March 31, 2023 and 2022 (in thousands):

For the three

ended March 31,

Beginning outstanding balance

Ending outstanding balance

Subsequent to September 30, 2022, we borrowed $625.0 million and repaid an additional $40.0 million under the Revolving Credit Facility, and as of the date of this filing, $995.0 million was outstanding.

Subsequent to March 31, 2023, we repaid $80.0 million under the Revolving Credit Facility, and as of the date of this filing, $595.0 million was outstanding.

Term Loan under the Senior Credit Agreement

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The 2018 Term Loan was issued at 99.75% of par value.

As of September 30, 2022, the 2018 Term Loan was accruing interest at 4.870% per annum.

As of March 31, 2023, the 2018 Term Loan was accruing interest at 6.600% per annum.

During the three months ended March 31, 2023, we repaid an aggregate of $6.0 million of principal on the 2018 Term Loan.

As of March 31, 2023, 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.

During the three and nine months ended September 30, 2022, we repaid an aggregate of $6.0 million and $18.0 million of principal on the 2018 Term Loan, respectively.

As of September 30, 2022, the 2018 Term Loan had a principal balance of $2.3 billion.

The 2018 Term Loan has a blended interest rate of 2.569% which includes the impact of the interest rate swap.

The ICE Benchmark Administration Limited (“IBA”) ceased the publication of USD LIBOR for the 1 week and 2 month tenors on December 31, 2021 and intends to cease all other tenors on June 30, 2023.

Since LIBOR will be ceasing, we will need to amend our credit facility to transition the 2018 Term Loan and the interest rate swap to an alternative benchmark rate before June 30, 2023.

Secured Tower Revenue Securities

Tower Revenue Securities Terms

As of September 30, 2022, we, through the Trust, had issued and outstanding an aggregate of $6.7 billion of Secured Tower Revenue Securities (“Tower Securities”).

As of March 31, 2023, we, through the Trust, had issued and outstanding an aggregate of $6.9 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 9,902 tower sites owned by the Borrowers as of September 30, 2022.

The mortgage loan will be paid from the operating cash flows from the aggregate 9,892 tower sites owned by the Borrowers as of March 31, 2023.

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 the date of this filing:

The table below sets forth the material terms of our outstanding Tower Securities as of March 31, 2023:

Amount Outstanding

‎ (in millions)

Anticipated Repayment Date

1 unchanged sentence

2014-2C Tower Securities

$620.0 million

2019-1C Tower Securities

$640.0 million

2020-1C Tower Securities

$1.165 billion

2020-2C Tower Securities

$750.0 million

2021-1C Tower Securities

$600.0 million

2021-2C Tower Securities

$1.165 billion

2021-3C Tower Securities

$895.0 million

2022-1C Tower Securities

$895.0 million

(1) Interest payable monthly

(1) Interest paid monthly

Risk Retention Tower Securities

The table below sets forth the material terms of our outstanding Risk Retention Tower Securities as of the date of this filing:

The table below sets forth the material terms of our outstanding Risk Retention Tower Securities as of March 31, 2023:

Amount Outstanding

‎ (in millions)

Anticipated Repayment Date

1 unchanged sentence

2019-1R Tower Securities

$33.7 million

2020-2R Tower Securities

$61.4 million

2021-1R Tower Securities

$71.1 million

2021-3R Tower Securities

$61.4 million

2022-1R Tower Securities

$94.3 million

(1) Interest payable monthly

(1) Interest paid monthly

To satisfy certain risk retention requirements of Regulation RR promulgated under the Exchange Act, SBA Guarantor, LLC, a wholly owned subsidiary, purchased the Risk Retention Tower Securities.

Accordingly, principal and interest payments made on the 2018-1R Tower Securities, 2019-1R Tower Securities, 2020-2R Tower Securities, 2021-1R Tower Securities, and 2021-3R Tower Securities eliminate in consolidation.

As of September 30, 2022, 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.

The table below sets forth the material terms of our outstanding senior notes as of September 30, 2022:

Principal and interest payments made on the 2019-1R Tower Securities, 2020-2R Tower Securities, 2021-1R Tower Securities, 2021-3R Tower Securities, and 2022-1R Tower Securities eliminate in consolidation.

Debt Covenants

As of March 31, 2023, 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.

The table below sets forth the material terms of our outstanding senior notes as of March 31, 2023:

Amount Outstanding

‎ (in millions)

Interest Rate Coupon

6 unchanged sentences

We may redeem each of the senior notes during the time periods and at the redemption prices set forth in the indentures.

As of September 30, 2022, 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.

The following table illustrates our estimate of our debt service requirement over the next twelve months based on the amounts outstanding as of September 30, 2022 (in thousands):

As of March 31, 2023, 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.

The following table illustrates our estimate of our debt service requirement over the next twelve months ended March 31, 2024 based on the amounts outstanding as of March 31, 2023 and the interest rates accruing on those amounts on such date (in thousands):

Revolving Credit Facility (1)

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Total debt service for the next 12 months

(1) As of September 30, 2022, $410.0 million was outstanding under the Revolving Credit Facility.

(1) As of March 31, 2023, $675.0 million was outstanding under the Revolving Credit Facility.

Subsequent to March 31, 2023, we repaid an additional $80.0 million under the Revolving Credit Facility, and as of the date of this filing, $595.0 million was outstanding.

(2) 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.

(3) Estimate of debt service requirements reflects the repayment of $640.0 million principal due on the 2018-1C Tower Securities and 12 months of interest at the current rate.

We expect to refinance these securities prior to the maturity date at current market rates that are expected to be higher than the current interest rate.

The impact of inflation on our operations has not been significant to date.

However, to the extent the Federal Reserve continues to increase interest rates to combat inflation, this may impact our operating results.

We cannot assure you that a high rate of

inflation in the future will not adversely affect our operating results particularly in light of the fact that our site leasing revenues are governed by long-term contracts with pre-determined pricing that we will not be able to increase in response to increases in inflation other than our contracts in South America, South Africa, the Philippines, and Tanzania which have inflationary index based rent escalators.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis