What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-07 compared with 2023-08-03 · 187 added, 150 removed, 452 unchanged (43% 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 97.4% of our total segment operating profit for the six months ended June 30, 2023.

Our primary business line is our site leasing business, which contributed 97.4% of our total segment operating profit for the nine months ended September 30, 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 June 30, 2023, we owned 39,426 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 September 30, 2023, we owned 39,546 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 June 30, 2023, no U.S.

As of September 30, 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 six months ended June 30, 2023.

In addition, as of June 30, 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.

state or territory accounted for more than 10% of our total revenues for the nine months ended September 30, 2023.

In addition, as of September 30, 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.

12 unchanged sentences

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

As of June 30, 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.

As of September 30, 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.

10 unchanged sentences

For the three months ended

For the six months ended

For the nine months ended

Segment operating profit as a percentage of

September 30,

total operating profit

48 unchanged sentences

There can be no assurance that actual results will not differ from those estimates and such differences could be significant.

We are in the process of reviewing the remaining estimated useful lives of our towers and intangible assets and are considering whether we should modify our current estimates for asset lives based on our historical operating experience.

We have retained an independent consultant to assist in completing this review and analysis.

If we conclude that a revision in the estimated useful lives of our towers and intangible assets is appropriate based on our review and analysis, we will account for any changes in the useful lives as a change in accounting estimate under Accounting Standards Codification 250 Accounting Changes and Error Corrections, which will be recorded prospectively beginning in the period of change.

We expect to conclude our analysis in 2024.

Reference Rate Reform

1 unchanged sentence

On June 21, 2023, we amended our interest rate swap to change from LIBOR as an interest rate benchmark to the replacement benchmark of Term SOFR effective on August 1, 2023.

We have elected the optional expedient which allows companies to change the reference rate and other critical terms related to the reference rate reform in derivative hedge documentation without having to dedesignate the hedging relationship, allowing us to continue applying hedge accounting to our cash flow hedge.

Subsequent to the second quarter, we amended our 2018 Term Loan and our Revolving Credit Facility to use Term SOFR as the benchmark rate.

We have elected the optional expedient which allows companies to change the reference rate and other critical terms related to the reference rate reform in derivative hedge documentation without having to de-designate the hedging relationship, allowing us to continue applying hedge accounting to our cash flow hedge.

On July 3, 2023, we amended our 2018 Term Loan and our Revolving Credit Facility to use Term SOFR as the benchmark rate.

The transition from LIBOR to Term SOFR did not have a material impact on the consolidated financial statements.

AT&T Master Lease Agreement

On July 30, 2023, we entered into a new 5-year master lease agreement with AT&T, Inc.

The comprehensive MLA will streamline AT&T’s deployment of 5G and other next generation technology across our extensive U.S.

tower portfolio.

RESULTS OF OPERATIONS

2 unchanged sentences

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 June 30, 2023 Compared to Three Months Ended June 30, 2022

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 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 $14.7 million for the three months ended June 30, 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 15 towers built since April 1, 2022, partially offset by lease non-renewals.

International site leasing revenues increased $31.2 million for the three months ended June 30, 2023, as compared to the prior year.

Domestic site leasing revenues increased $18.8 million for the three months ended September 30, 2023, as compared to the prior year, primarily due to (1) organic site leasing growth, primarily from monetary lease amendments, due in part to the new MLA with AT&T and additional equipment added to our towers as well as new leases and contractual rent escalators and (2) revenues from 76 towers acquired and 16 towers built since July 1, 2022, partially offset by lease non-renewals.

International site leasing revenues increased $31.4 million for the three months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, international site leasing revenues increased $26.6 million.

These changes were primarily due to (1) revenues from 2,943 towers acquired (including 2,632 sites from Grupo TorreSur (“GTS”) in Brazil) and 476 towers built since April 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.

These changes were primarily due to (1) revenues from 2,765 towers acquired (including 2,632 sites from Grupo TorreSur (“GTS”) in Brazil) and 461 towers built since July 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 15.7% 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 decreased $19.4 million for the three months ended June 30, 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.

Site development revenues decreased $43.2 million for the three months ended September 30, 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 activity from Verizon Wireless.

Operating Profit

Domestic site leasing segment operating profit increased $16.0 million for the three months ended June 30, 2023, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since April 1, 2022, (2) organic site leasing growth as noted above, and (3) continued control of our site leasing cost of revenue.

International site leasing segment operating profit increased $26.4 million for the three months ended June 30, 2023, as compared to the prior year.

Domestic site leasing segment operating profit increased $18.4 million for the three months ended September 30, 2023, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since July 1, 2022, (2) organic site leasing growth as noted above, and (3) continued control of our site leasing cost of revenue.

International site leasing segment operating profit increased $25.4 million for the three months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, international site leasing segment operating profit increased $21.9 million.

These changes were primarily due to (1) additional profit generated by towers acquired and built since April 1, 2022 and (2) organic site leasing growth as noted above, 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 $4.2 million for the three months ended June 30, 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.

These changes were primarily due to (1) additional profit generated by towers acquired and built since July 1, 2022 and (2) organic site leasing growth as noted above, 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 $9.1 million for the three months ended September 30, 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 activity from Verizon Wireless.

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 $0.1 million for the three months ended June 30, 2023, as compared to the prior year.

On a constant currency basis, selling, general, and administrative expenses increased $0.3 million.

These changes were primarily as a result of the $3.1 million Oi reserve recorded in the second quarter of 2023 and an increase in personnel and other support related costs, partially offset by a decrease in non-cash compensation expense.

Selling, general, and administrative expenses decreased $1.0 million for the three months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, selling, general, and administrative expenses decreased $1.3 million.

These changes were driven primarily by a decrease in non-cash compensation expense, partially offset by an increase in personnel and other support related costs and a $0.7 million Oi Reserve recorded in the third quarter of 2023.

Acquisition and New Business Initiatives Related Adjustments and Expenses:

For the three months ended

September 30,

Currency Impact

3 unchanged sentences

International site leasing

Acquisition and new business initiatives related adjustments and expenses decreased $1.9 million for the three months ended June 30, 2023, as compared to the prior year.

Acquisition and new business initiatives related adjustments and expenses decreased $1.2 million for the three months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, acquisition and new business initiatives related adjustments and expenses decreased $1.3 million.

These changes were primarily as a result of a decrease in our third party acquisition and integration costs as compared to the prior year .

These changes were primarily as a result of a decrease in our third party acquisition and integration costs as well as lower new business initiative activity as compared to the prior year .

Asset Impairment and Decommission Costs:

For the three months ended

September 30,

Currency Impact

3 unchanged sentences

International site leasing

Total site leasing

Asset impairment and decommission costs increased $24.3 million for the three months ended June 30, 2023, as compared to the prior year.

Asset impairment and decommission costs increased $24.5 million for the three months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, asset impairment and decommission costs increased $24.3 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 and an increase in tower and equipment related decommission costs.

For further information regarding our asset impairment and decommission costs, see Note 2 to our Consolidated Financial Statements in this quarterly report.

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 $5.2 million for the three months ended June 30, 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 April 1, 2022.

International site leasing depreciation, accretion, and amortization expense increased $10.3 million for the three months ended June 30, 2023, as compared to the prior year.

Domestic site leasing depreciation, accretion, and amortization expense decreased $7.3 million for the three months ended September 30, 2023, as compared to the prior year.

International site leasing depreciation, accretion, and amortization expense increased $13.7 million for the three months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, depreciation, accretion, and amortization expense increased $11.7 million.

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

These changes were primarily due to an increase in the number of towers we acquired and built since July 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 decreased $4.2 million for the three months ended June 30, 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 $13.6 million for the three months ended June 30, 2023, as compared to the prior year.

Domestic site leasing operating income increased $10.6 million for the three months ended September 30, 2023, as compared to the prior year, primarily due to higher segment operating profit and decreases in depreciation, accretion, and amortization expense and acquisition and new business initiatives related adjustments and expenses , partially offset by an increase in asset impairment and decommission costs.

International site leasing operating income increased $3.3 million for the three months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, international site leasing operating income increased $2.2 million.

These changes were primarily due to higher segment operating profit and a decrease in acquisition and new business initiatives related adjustments and expenses, partially offset by increases in depreciation, accretion, and amortization expense, selling, general, and administrative expenses, and asset impairment and decommission costs.

Site development operating income decreased $3.7 million for the three months ended June 30, 2023, as compared to the prior year, primarily due to lower segment operating profit driven by less activity from T -Mobile and DISH Wireless, partially offset by an increase in Verizon Wireless activity.

Other operating expense decreased $4.5 million for the three months ended June 30, 2023, as compared to the prior year, primarily due to a decrease in non-cash compensation expense.

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, selling, general, and administrative expenses, and acquisition and new business initiatives related adjustments and expenses.

Site development operating income decreased $8.7 million for the three months ended September 30, 2023, as compared to the prior year, primarily due to lower segment operating profit driven by less activity from T -Mobile and DISH Wireless, partially offset by an increase in activity from Verizon Wireless.

Other Income (Expense):

For the three months ended

September 30,

Currency Impact

5 unchanged sentences

Amortization of deferred financing fees

Other income (expense), net

Interest income increased $3.2 million for the three months ended June 30, 2023, as compared to the prior year.

Other expense, net

Interest income increased $2.4 million for the three months ended September 30, 2023, as compared to the prior year.

This change was primarily due to interest received on a loan to an unconsolidated joint venture, 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 increased $17.0 million for the three months ended June 30, 2023, as compared to the prior year.

Interest expense increased $12.4 million for the three months ended September 30, 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.

Non-cash interest expense decreased $4.0 million for the three months ended June 30, 2023, as compared to the prior year.

Non-cash interest expense decreased $3.6 million for the three months ended September 30, 2023, as compared to the prior year.

This change was primarily due to lower amortization of accumulated losses related to our interest rate swaps de-designated as cash flow hedges which reached their term end date in 2023.

Other expense, net includes a $43.3 million gain on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries for the three months ended June 30, 2023, while the prior year period included a $63.7 million loss.

Benefit for Income Taxes:

Other expense, net includes a $46.5 million loss on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries for the three months ended September 30, 2023, while the prior year period included a $37.4 million loss.

Provision for Income Taxes:

For the three months ended

September 30,

Currency Impact

1 unchanged sentence

(in thousands)

Benefit for income taxes

Benefit for income taxes increased $25.6 million for the three months ended June 30, 2023, as compared to the prior year.

On a constant currency basis, benefit for income taxes increased $62.2 million primarily due to a decrease in domestic deferred taxes related to the release of the full valuation allowance on the net deferred tax assets of the U.S.

taxable REIT subsidiary ("TRS").

Provision for income taxes

Provision for income taxes increased $5.0 million for the three months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, provision for income taxes increased $8.5 million primarily due to an increase in domestic and foreign deferred taxes.

For the three months ended

September 30,

Currency Impact

1 unchanged sentence

(in thousands)

Net income increased $132.8 million for the three months ended June 30, 2023, as compared to the prior year.

On a constant currency basis, net income increased $64.4 million.

These changes were primarily due to increases in benefit for income taxes, international site leasing operating income, interest income, and other income (expense), net and a decrease in non-cash interest expense, partially offset by an increase in interest expense and decreases in domestic site leasing operating income and site development operating income.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

Net income decreased $14.4 million for the three months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, net income decreased $10.5 million.

These changes were primarily due to increases in cash interest expense and provision for income taxes, and a decrease in site development operating income, partially offset by increases in site leasing operating income and interest income, and a decrease in non-cash interest expense.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

Revenues and Segment Operating Profit:

For the six months ended

For the nine months ended

September 30,

Currency Impact

12 unchanged sentences

Site development

Domestic site leasing revenues increased $36.5 million for the six months ended June 30, 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 72 towers acquired and 16 towers built since January 1, 2022 , partially offset by lease non-renewals.

International site leasing revenues increased $67.2 million for the six months ended June 30, 2023, as compared to the prior year.

Domestic site leasing revenues increased $55.3 million for the nine months ended September 30, 2023, as compared to the prior year, primarily due to (1) organic site leasing growth, primarily from monetary lease amendments , due in part to the new MLA with AT&T and additional equipment added to our towers as well as new leases and contractual rent escalators and (2) revenues from 116 towers acquired and 19 towers built since January 1, 2022 , partially offset by lease non-renewals.

International site leasing revenues increased $98.6 million for the nine months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, international site leasing revenues increased $100.6 million.

These changes were primarily due to (1) revenues from 3,297 towers acquired (including 2,632 sites from GTS) and 644 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.

leasing revenue in Brazil represented 15.6% of total site leasing revenue for the period.

Site leasing revenue in Brazil represented 15.6% 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 decreased $21.5 million for the six months ended June 30, 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.

Site development revenues decreased $64.7 million for the nine months ended September 30, 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 activity from Verizon Wireless.

Operating Profit

Domestic site leasing segment operating profit increased $33.9 million for the six months ended June 30, 2023, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since January 1, 2022, (2) organic site leasing growth as noted above, and (3) continued control of our site leasing cost of revenue.

International site leasing segment operating profit increased $53.4 million for the six months ended June 30, 2023, as compared to the prior year.

Domestic site leasing segment operating profit increased $52.3 million for the nine months ended September 30, 2023, as compared to the prior year, primarily due to additional profit generated by (1) towers acquired and built since January 1, 2022, (2) organic site leasing growth as noted above, and (3) continued control of our site leasing cost of revenue.

International site leasing segment operating profit increased $78.8 million for the nine months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, international site leasing segment operating profit increased $79.8 million.

These changes were primarily due to (1) additional profit generated by towers acquired and built since January 1, 2022 and (2) organic site leasing growth as noted above, 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 $4.7 million for the six months ended June 30, 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.

Site development segment operating profit decreased $13.8 million for the nine months ended September 30, 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 activity from Verizon Wireless.

Selling, General, and Administrative Expenses:

For the six months ended

For the nine months ended

September 30,

Currency Impact

5 unchanged sentences

Site development

Selling, general, and administrative expenses increased $10.2 million for the six months ended June 30, 2023, as compared to the prior year.

Selling, general, and administrative expenses increased $9.2 million for the nine months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, selling, general, and administrative expenses increased $9.6 million.

These changes were primarily as a result of an increase in personnel and other support related costs and the $3.8 million Oi reserve recorded in 2023, partially offset by a decrease in non-cash compensation expense.

Acquisition and New Business Initiatives Related Adjustments and Expenses :

For the nine months ended

September 30,

Currency Impact

Currency Change

(in thousands)

Domestic site leasing

International site leasing

Acquisition and new business initiatives related adjustments and expenses decreased $2.2 million for the three months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, acquisition and new business initiatives related adjustments and expenses decreased $2.0 million.

These changes were primarily as a result of a decrease in our third party acquisition and integration costs as well as lower new business initiative activity as compared to the prior year .

Asset Impairment and Decommission Costs:

For the six months ended

For the nine months ended

September 30,

Currency Impact

4 unchanged sentences

Total site leasing

Asset impairment and decommission costs increased $42.2 million for the six months ended June 30, 2023, as compared to the prior year.

On a constant currency basis, asset impairment and decommission costs increased $42.5 million.

Asset impairment and decommission costs increased $66.8 million for the nine months ended September 30, 2023, as compared to the prior year.

For further information regarding our asset impairment and decommission costs, see Note 2 to our Consolidated Financial Statements in this quarterly report.

Depreciation, Accretion, and Amortization Expenses:

For the six months ended

For the nine months ended

September 30,

Currency Impact

5 unchanged sentences

Site development

Domestic site leasing depreciation, accretion, and amortization expense decreased $8.9 million for the six months ended June 30, 2023, as compared to the prior year.

Domestic site leasing depreciation, accretion, and amortization expense decreased $16.2 million for the nine months ended September 30, 2023, 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, 2022.

International site leasing depreciation, accretion, and amortization expense increased $21.8 million for the six months ended June 30, 2023, as compared to the prior year.

International site leasing depreciation, accretion, and amortization expense increased $35.5 million for the nine months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, depreciation, accretion, and amortization expense increased $35.9 million.

1 unchanged sentence

Operating Income (Expense):

For the six months ended

For the nine months ended

September 30,

Currency Impact

5 unchanged sentences

Site development

Domestic site leasing operating income decreased $4.6 million for the six months ended June 30, 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 $24.6 million for the six months ended June 30, 2023, as compared to the prior year.

On a constant currency basis, international site leasing operating income increased $25.7 million.

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

Site development operating income decreased $5.1 million for the six months ended June 30, 2023, as compared to the prior year, primarily due to lower segment operating profit driven by less activity from T -Mobile and DISH Wireless, partially offset by an increase in Verizon Wireless activity.

Other operating expense decreased $2.6 million for the six months ended June 30, 2023, as compared to the prior year, primarily due to a decrease in non-cash compensation expense.

Domestic site leasing operating income increased $15.6 million for the nine months ended September 30, 2023, as compared to the prior year, primarily due to higher segment operating profit and decreases in depreciation, accretion, and amortization expense and acquisition and new business initiatives related adjustments and expenses, offset by an increase in asset impairment and decommission costs.

International site leasing operating income increased $27.9 million for the nine months ended September 30, 2023, as compared to the prior year, 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 $13.8 million for the nine months ended September 30, 2023, as compared to the prior year, primarily due to lower segment operating profit driven by less activity from T -Mobile and DISH Wireless, partially offset by an increase in activity from Verizon Wireless.

Other operating expense increased $6.4 million for the nine months ended September 30, 2023, as compared to the prior year, primarily due to an increase in selling, general, and administrative expenses.

Other Income (Expense):

For the six months ended

For the nine months ended

September 30,

Currency Impact

6 unchanged sentences

Other income, net

Interest income increased $3.5 million for the six months ended June 30, 2023, as compared to the prior year.

Interest income increased $5.9 million for the nine months ended September 30, 2023, as compared to the prior year.

Interest expense increased $35.9 million for the six months ended June 30, 2023, as compared to the prior year.

Interest expense increased $48.3 million for the nine months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, interest expense increased $48.4 million.

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 an $85.3 million gain on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries for the six months ended June 30, 2023, while the prior year period included a $45.9 million gain.

Non-cash interest expense decreased $4.9 million for the nine months ended September 30, 2023, as compared to the prior year.

This change was primarily due to lower amortization of accumulated losses related to our interest rate swaps de-designated as cash flow hedges which reached their term end date in 2023.

Other income, net includes a $38.8 million gain on the remeasurement of U.S.

dollar denominated intercompany loans with foreign subsidiaries for the nine months ended September 30, 2023, while the prior year period included an $8.5 million gain.

Provision for Income Taxes:

For the six months ended

For the nine months ended

September 30,

Currency Impact

2 unchanged sentences

Provision for income taxes

Provision for income taxes decreased $22.6 million for the six months ended June 30, 2023, as compared to the prior year.

Provision for income taxes decreased $17.6 million for the nine months ended September 30, 2023, as compared to the prior year.

On a constant currency basis, provision for income taxes decreased $26.5 million.

These changes were primarily due to a decrease in domestic deferred taxes related to the release of the full valuation allowance on the net deferred tax assets of the TRS, partially offset by an increase in current and deferred foreign taxes.

Net Income (Loss):

For the six months ended

These changes were primarily due to a decrease in domestic deferred taxes related to the release of the full valuation allowance on the net deferred tax assets of the U.S.

taxable REIT subsidiary, partially offset by an increase in current and deferred foreign taxes.

For the nine months ended

September 30,

Currency Impact

1 unchanged sentence

(in thousands)

Net income increased $45.1 million for the six months ended June 30, 2023.

Net income increased $30.7 million for the nine months ended September 30, 2023.

On a constant currency basis, net income increased $10.9 million.

These changes were primarily due to increases in international site leasing operating income and interest income and a decrease in provision for income taxes, partially offset by an increase in interest expense and decreases in site development operating income and domestic site leasing operating income.

These changes were primarily due to increases in site leasing operating income and interest income, and decreases in provision for income taxes and non-cash interest expense, partially offset by increases in interest expense and other operating expense and decreases in site development operating income and other income, net.

NON-GAAP FINANCIAL MEASURES

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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

7 unchanged sentences

For the three months ended

September 30,

Currency Impact

4 unchanged sentences

Non-cash compensation

Other (income) expense, net

Other expense, net

Acquisition and new business initiatives

4 unchanged sentences

Depreciation, accretion, and amortization

Benefit for income taxes (2)

Provision for income taxes (2)

Adjusted EBITDA

For the six months ended

For the nine months ended

September 30,

Currency Impact

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

(2) Taxes includes $241 and $261 of franchise taxes for the three months ended June 30, 2023 and 2022, respectively, and $498 and $1,495 of franchise taxes for the six months ended June 30, 2023 and 2022, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statements of Operations.

Adjusted EBITDA increased $34.0 million for the three months ended June 30, 2023, as compared to the prior year period.

(2) Provision for income taxes includes $0.3 million of franchise taxes for the three months ended September 30, 2023 and 2022, and $0.8 million and $1.8 million of franchise taxes for the nine months ended September 30, 2023 and 2022, respectively, reflected in selling, general, and administrative expenses on the Consolidated Statements of Operations.

Adjusted EBITDA increased $35.4 million for the three months ended September 30, 2023, as compared to the prior year period.

On a constant currency basis, Adjusted EBITDA increased $31.9 million.

These changes were primarily due to an increase in domestic and international site leasing segment operating profit, partially offset by a decrease in site development segment operating profit and an increase in cash selling, general, and administrative expenses.

Adjusted EBITDA increased $69.5 million for the six months ended June 30, 2023, as compared to the prior year period.

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

Adjusted EBITDA increased $104.9 million for the nine months ended September 30, 2023, as compared to the prior year period.

On a constant currency basis, Adjusted EBITDA increased $105.7 million.

These changes were primarily due to an increase in domestic and international site leasing segment operating profit, partially offset by a decrease site development segment operating profit and an increase 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.

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.

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A summary of our cash flows is as follows:

For the six months ended June 30,

For the nine months ended September 30,

(in thousands)

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Operating Activities

Cash provided by operating activities was $798.1 million for the six months ended June 30, 2023 as compared to $664.6 million for the six months ended June 30, 2022.

The increase was primarily due to increases in domestic and international site leasing segment operating profit, cash inflows associated with working capital changes related to the timing of customer payments, and interest income, partially offset by increases in cash interest expense, cash selling, general, and administrative expenses, and cash asset impairment and decommission costs as well as a decrease in site development segment operating profit.

Cash provided by operating activities was $1.1 billion for the nine months ended September 30, 2023 as compared to $1.0 billion for the nine months ended September 30, 2022.

The increase was primarily due to increases in site leasing segment operating profit, cash inflows associated with working capital changes related to the timing of customer payments, and interest income, partially offset by increases in cash interest expense, cash selling, general, and administrative expenses, and cash asset impairment and decommission costs as well as a decrease in site development segment operating profit.

Investing Activities

A detail of our cash capital expenditures is as follows:

For the six months ended June 30,

For the nine months ended September 30,

(in thousands)

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Net cash used in investing activities

(1) The six months ended June 30, 2022 includes $176.1 million of acquisitions related to our purchase of sites from Airtel Tanzania.

(2) Excludes $7.9 million and $6.5 million spent to extend ground lease terms for the six months ended June 30, 2023 and 2022, respectively.

(3) The six months ended June 30, 2022 includes amounts paid related to the acquisition of a data center.

(4) Includes amounts paid for the purchase of and received from the sale of short-term investments during the six months ended June 30, 2023 and 2022.

(5) The six months ended June 30, 2023 includes an $83.0 million loan to an unconsolidated joint venture.

Additionally, subsequent to June 30, 2023, we purchased or are under contract to purchase 134 communication sites for an aggregate consideration of $72.9 million in cash.

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

(1) The nine months ended September 30, 2022 includes $176.1 million of acquisitions related to our purchase of sites from Airtel Tanzania.

(2) Excludes $15.0 million and $10.6 million spent to extend ground lease terms for the nine months ended September 30, 2023 and 2022, respectively.

(3) The nine months ended September 30, 2022 includes amounts paid related to the acquisition of a data center.

(4) Includes amounts paid for the purchase of and received from the sale of short-term investments during the nine months ended September 30, 2023 and 2022.

(5) The nine months ended September 30, 2023 includes a $93.0 million loan to an unconsolidated joint venture.

Additionally, subsequent to September 30, 2023, we purchased or are under contract to purchase 215 communication sites for an aggregate consideration of $74.0 million in cash.

We anticipate that these acquisitions will be consummated by the end of the second quarter of 2024.

For 2023, we expect to incur non-discretionary cash capital expenditures associated with tower maintenance and general corporate expenditures of $54.0 million to $59.0 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 $335.0 million to $345.0 million.

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A detail of our financing activities is as follows:

For the six months ended June 30,

For the nine months ended September 30,

(in thousands)

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

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

For the six months ended June 30, 2023, we paid the following cash dividends:

(2) For additional information regarding our share repurchase activity, refer to Part II Item 2 under “Issuer Purchases of Equity Securities” below.

For the nine months ended September 30, 2023, we paid the following cash dividends:

Payable to Shareholders

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June 21, 2023

July 30, 2023

August 24, 2023

$92.1 million

September 20, 2023

Dividends paid in 2023 were ordinary taxable dividends.

Subsequent to June 30, 2023, we declared the following cash dividends:

Subsequent to September 30, 2023, we declared the following cash dividends:

Payable to Shareholders

3 unchanged sentences

Date to be Paid

July 30, 2023

August 24, 2023

September 20, 2023

November 1, 2023

November 16, 2023

December 14, 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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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 six months ended June 30, 2023, we did not issue any shares of Class A common stock under this registration statement.

As of June 30, 2023, we had approximately 1.2 million shares of Class A common stock remaining under this registration statement.

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, 2023, we did not issue any shares of Class A common stock under this registration statement.

As of September 30, 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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Terms of the Senior Credit Agreement

On July 3, 2023, we, through our wholly owned subsidiary, SBA Senior Finance II LLC (“SBA Senior Finance II”), amended our Revolving Credit Facility to (1) replace LIBOR with Term SOFR as the benchmark interest rate and (2) amend certain other terms and conditions under the Senior Credit Agreement.

On July 3, 2023, we, through our wholly owned subsidiary, SBA Senior Finance II LLC (“SBA Senior Finance II”), amended our Revolving Credit Facility to replace LIBOR with Term SOFR as the benchmark interest rate and make related changes.

Revolving Credit Facility under the Senior Credit Agreement

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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, July 7, 2026.

Furthermore, the Revolving Credit Facility incorporates sustainability-linked targets which will adjust the Revolving Credit Facility’s applicable interest and commitment fee rates upward or

downward based on how we perform against those targets.

Furthermore, the Revolving Credit Facility incorporates sustainability-linked targets which will adjust the Revolving Credit Facility’s applicable interest and commitment fee rates upward or downward based on how we perform against those targets.

Borrowings under the Revolving Credit Facility may be used for general corporate purposes.

4 unchanged sentences

Interest Rate

June 30, 2023 (1)

June 30, 2023 (2)

June 30, 2023

September 30, 2023 (1)

September 30, 2023 (2)

September 30, 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 our Revolving Credit Facility activity during the three and six months ended June 30, 2023 and 2022 (in thousands):

The table below summarizes our Revolving Credit Facility activity during the three and nine months ended September 30, 2023 and 2022 (in thousands):

For the three months

For the six months

ended June 30,

For the nine months

ended September 30,

Beginning outstanding balance

Ending outstanding balance

Subsequent to June 30, 2023, we repaid $90.0 million under the Revolving Credit Facility, and as of the date of this filing, $360.0 million was outstanding.

Subsequent to September 30, 2023, we repaid $85.0 million under the Revolving Credit Facility, and as of the date of this filing, $285.0 million was outstanding.

Term Loan under the Senior Credit Agreement

4 unchanged sentences

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

As of June 30, 2023, the 2018 Term Loan was accruing interest at 6.950% per annum.

As of September 30, 2023, the 2018 Term Loan was accruing interest at 7.170% per annum.

On July 3, 2023, SBA Senior Finance II, amended our 2018 Term Loan to replace LIBOR with Term SOFR as the benchmark interest rate.

The amendment to Term SOFR includes a CSA of 0.10% which we include as part of interest expense.

On June 21, 2023, SBA Senior Finance II, amended our interest rate swap agreement for $1.95 billion of notional value to accrue interest at Term SOFR plus 175 basis points for an all-in fixed rate of 1.900% from August 1, 2023 through the maturity date of the 2018 Term Loan.

We concluded that the amendment to the interest rate swap qualifies for the relief provided by Accounting Standards Update (“ASU”) 2021-01 and ASU 2022-06 and as such, have not dedesignated our cash flow hedge.

During the three and six months ended June 30, 2023, we repaid an aggregate of $6.0 million and $12.0 million, respectively, of principal on the 2018 Term Loan.

As of June 30, 2023, the 2018 Term Loan had a principal balance of $2.3 billion.

On June 21, 2023, SBA Senior Finance II, amended our interest rate swap agreement which swapped $1.95 billion of notional value accruing interest at Term SOFR plus 185 basis points (inclusive of a CSA of 0.10%) for an all-in fixed rate of 1.900% from August 1, 2023 through the maturity date of the 2018 Term Loan.

During the three and nine months ended September 30, 2023, we repaid an aggregate of $6.0 million and $18.0 million, respectively, of principal on the 2018 Term Loan.

As of September 30, 2023, the 2018 Term Loan had a principal balance of $2.3 billion.

Secured Tower Revenue Securities

Tower Revenue Securities Terms

As of June 30, 2023, we, through the Trust, had issued and outstanding an aggregate of $6.9 billion of Secured Tower Revenue Securities (“Tower Securities”).

As of September 30, 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 9,893 tower sites owned by the Borrowers as of June 30, 2023.

The mortgage loan will be paid from the operating cash flows from the aggregate 9,895 tower sites owned by the Borrowers as of September 30, 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 June 30, 2023:

The table below sets forth the material terms of our outstanding Tower Securities as of September 30, 2023:

Amount Outstanding

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Risk Retention Tower Securities

The table below sets forth the material terms of our outstanding Risk Retention Tower Securities as of June 30, 2023:

The table below sets forth the material terms of our outstanding Risk Retention Tower Securities as of September 30, 2023:

Amount Outstanding

11 unchanged sentences

Debt Covenants

As of June 30, 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 June 30, 2023:

As of September 30, 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 September 30, 2023:

Amount Outstanding

8 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 June 30, 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 June 30, 2024 based on the amounts outstanding as of June 30, 2023 and the interest rates accruing on those amounts on such date (in thousands):

As of September 30, 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 September 30, 2024 based on the amounts outstanding as of September 30, 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 June 30, 2023, $450.0 million was outstanding under the Revolving Credit Facility.

Subsequent to June 30, 2023, we repaid an additional $90.0 million under the Revolving Credit Facility, and as of the date of this filing, $360.0 million was outstanding.

(1) As of September 30, 2023, $370.0 million was outstanding under the Revolving Credit Facility.

Subsequent to September 30, 2023, we repaid an additional $85.0 million under the Revolving Credit Facility, and as of the date of this filing, $285.0 million was outstanding.

(2) Total debt service on the 2018 Term Loan includes the impact of the interest rate swaps entered into on August 4, 2020, and amended on June 21, 2023, 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 July 31, 2023 and then at Term SOFR plus 185 basis points (inclusive of a credit spread adjustment (“CSA”) of 0.10%) for an all-in fixed rate of 1.900% per annum through the maturity date of the 2018 Term Loan.

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.

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

However, the impact of rising interest rates, due to actions by the Federal Reserve to combat inflation, has, and is expected to continue to, impact our growth rate and future operating results.

Increasing interest rates has, and is expected to continue to, impact the ability and willingness of wireless service providers to incur capital expenditures at prior levels to expand their networks, which would adversely affect our future revenue growth rates.

In addition, increased interest rates may adversely affect our costs to refinance our indebtedness at maturity.

In addition, persistent high rates of inflation could adversely affect our future 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