SBA Communications Corporation (SBAC) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary and Q&A reveal a generally positive outlook. The company has increased its full-year outlook for leasing and site development revenue, signed a significant agreement with Verizon, and has a supportive macro environment for future investments. Despite some uncertainties and legal issues with DISH, the overall sentiment is bolstered by optimistic guidance and strategic partnerships, indicating a likely positive stock price movement over the next two weeks.

Key Financial Performance

FFO per share $3.19, with a cash dividend of $1.11 per share, an increase of 13% compared to the fourth quarter of 2024. The increase was attributed to solid operational performance and higher-than-forecasted bad debt expenses related to EchoStar.

Domestic new leases and amendment billings Approximately $10 million. This growth was driven by new colocations as carriers densify and expand their network footprint.

Service business revenue Increased by 13% in the fourth quarter compared to the fourth quarter of 2024. This was mostly due to construction-related projects focused on network expansion.

Sprint-related churn Approximately $17 million in the quarter. This is part of the ongoing consolidation churn in the U.S.

International new leases and amendment billings Approximately $6 million in the fourth quarter. This reflects healthy demand despite elevated international churn.

International churn Approximately $8 million of revenue lost in the quarter due to carrier consolidation, bankruptcy restructuring, and wireless operators' network optimization.

Share buybacks $213 million spent to retire 1.1 million shares at an average price of $191.07 in the fourth quarter. In total, $500 million was spent in 2025 to repurchase 2.5 million shares. This reflects the company's strategy to create shareholder value over time.

Cash dividend $118.2 million or $1.11 per share declared or paid in the fourth quarter, representing an increase of approximately 13% over the dividend paid in the first quarter of 2025.

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Operating Highlights

Domestic new leases and amendment billings: Added approximately $10 million in the fourth quarter, driven by new colocations for network densification and expansion.

Service business revenue: Increased by 13% in the fourth quarter, primarily due to construction-related projects for network expansion.

International new leases and amendment billings: Added approximately $6 million in the fourth quarter, despite elevated churn from carrier consolidation and network optimization.

Millicom acquisition in Central America: Integration of newly acquired sites is ongoing, with a ramp-up in the new build program to establish a leading position in the region.

Brazil market opportunities: Focus on network densification and spectrum auctions, with Brazil having 4 sites per 10,000 people compared to 16 in the U.S., indicating growth potential.

Share buybacks: Spent $213 million in Q4 to retire 1.1 million shares, totaling $500 million for 2025. $1.1 billion remains authorized for future buybacks.

Debt management: Paid off $750 million of ABS debt using a revolving credit facility and plans to refinance $1.2 billion ABS maturity in November 2026.

6G preparation: Anticipates a shift in network architecture with 6G, requiring denser footprints, higher capacity radios, and more compute at tower sites.

International diversification: Millicom acquisition in Central America and investments in Africa provide growth opportunities in early-stage 5G markets.

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Risk or Challenges

Bad Debt Expenses: Higher-than-forecasted bad debt expenses related to EchoStar impacted financial results.

Churn in U.S. Market: Sprint-related churn of approximately $17 million in the quarter and an expected $55-$56 million in 2026, slightly higher than previous estimates.

International Churn: Elevated churn in international markets, with $8 million lost in Q4 due to carrier consolidation, bankruptcy restructuring, and network optimization. Expected churn of $36-$40 million in 2026.

EchoStar Revenue Loss: Removal of all future recurring revenue from EchoStar, with ongoing legal efforts to recover these revenues.

Debt Refinancing: $750 million ABS debt paid off using revolving credit facility, with plans to refinance $1.2 billion ABS maturity in November 2026 at 5.25%, subject to market conditions.

Brazil Market Challenges: Elevated churn due to industry consolidation and network rationalization, impacting operational performance.

Service Revenue Decline: Guidance for 2026 service revenues is lower than the strong results delivered in 2025.

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Guidance & Outlook

2026 Domestic Revenue Growth: The 2026 outlook reflects a similar level of new revenue growth from leasing activity as experienced in 2025.

Sprint Churn Impact: The outlook assumes a range of $55 million to $56 million related to Sprint churn, slightly higher than previously estimated. Sprint churn in 2027 and beyond is expected to be less than $20 million.

International Revenue Growth: The outlook reflects a full year contribution from the acquisition of Millicom in Central America and assumes steady network investment from customers in 2026. Guidance for new leases and amendments is $19 million to $21 million, slightly up from 2025.

International Churn: The outlook assumes a range of $36 million to $40 million related to churn, including $14 million related to Oi wireline, which will not continue into 2027. International churn is expected to trend down over the next couple of years.

Service Revenue Guidance: Guidance for service revenues is in the range of $190 million to $210 million, higher than the initial outlook for 2025 but lower than the strong results delivered last year. Service backlogs support continuous carrier network activity in 2026.

Debt and Refinancing Plans: The company plans to use free cash flow to pay down the current outstanding amount on its credit facility over time. It also assumes refinancing $1.2 billion ABS maturity in November 2026 at 5.25% and issuing an inaugural investment-grade bond in 2026, depending on market conditions.

Dividend Growth: The first quarter dividend of $1.25 per share represents a 13% increase over the first quarter of 2025 and approximately 41% of the midpoint of the full-year FFO outlook.

Share Repurchase Plans: The outlook does not assume further share repurchases or acquisitions beyond those under contract or expected to close by year-end. However, additional investments in assets or share buybacks are anticipated during the year, potentially impacting the full-year outlook.

U.S. Market Growth Drivers: Future growth is expected from ongoing network investments, including amendments for spectrum upgrades, densification, and expansion. Fixed wireless access adoption is growing, with over half of wireless network capacity currently supporting it. The upper C-band auction in 2027 is expected to add another growth driver.

6G Development: The transition to 6G is expected to drive significant growth opportunities, requiring new radios, denser footprints, and advanced antenna configurations. Legislative tailwinds and spectrum auctions are anticipated to support this transition.

Brazil Market Opportunities: Opportunities include network densification, spectrum auctions, and site consolidation. Brazil is expected to remain a key growth market due to its younger demographic and increasing mobile data usage.

Central America and Africa Growth: The Millicom acquisition positions the company as a leading independent tower operator in Central America, with predictable operating results and durable cash flow. Select African markets continue to deliver high returns on invested capital.

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Shareholder Return Plan

Dividend per share for Q4 2025: $1.11 per share, an increase of 13% compared to Q4 2024

Dividend declared for Q1 2026: $1.25 per share, payable on March 27, 2026, representing a 13% increase over Q1 2025 and 41% of the midpoint of the full-year FFO outlook

Share buyback in Q4 2025: $213 million spent to retire 1.1 million shares at an average price of $191.07

Total share buyback in 2025: $500 million spent to repurchase 2.5 million shares

Remaining share buyback authorization: $1.1 billion as of today

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Key Q&A

Q:Do you expect to see domestic colocation revenue growth through this year? And can you give us a sense of what the carriers are looking for?

A:The company expects $35 million of incremental revenue from new leases and amendments in the U.S. this year, with activity levels expected to remain steady. Growth will come from a mix of densification and expansion of coverage.

Q:How should we think about the difference between builds, upgrading to 5G densification, and spectrum in Brazil over the next few years?

A:Most growth in Brazil will come organically through new lease-ups rather than building new sites. Drivers include new spectrum auctions and network expansion/densification. Brazil has fewer sites per person compared to the U.S., indicating a need for increased investment.

Q:Can you provide more color on how much visibility you have for the year ahead versus maybe last year? And what could drive the low end of your guidance range?

A:The company has good visibility but provides a range due to uncertainties, especially early in the year. The midpoint of the range is the best estimate, with a slight decrease compared to last year. The Verizon MLA signed last year is expected to increase contributions despite Verizon's lower CapEx guidance.

Q:What is the status of the DISH contract and lawsuit?

A:The company filed a lawsuit against DISH for default and lack of payment, terminated the contract, and accelerated rents due. They are enforcing their rights under the agreement and have removed DISH entirely from their outlook for this year.

Q:How much T-Mobile USM churn might affect you, and what is the timeline?

A:The company estimates $1 million to $2 million of churn this year related to T-Mobile USM. The total revenue under U.S. Cellular leases is $20 million, with churn expected to occur evenly over the next five years.

Q:What is the impact of direct-to-device satellite technology on terrestrial wireless and towers?

A:The company views direct-to-device satellite technology as complementary, addressing areas not economically viable for terrestrial solutions. It is not expected to significantly impact their business due to limitations in speed, latency, and coverage.

Q:What are the longer-term expectations for net organic growth domestically?

A:The company expects long-term domestic net organic growth in the 4% to 5% range, driven by 3% from escalators, 1% churn, and 2% to 3% from organic lease-ups. Growth will vary by quarter but is expected to stabilize in this range.

Q:What is the split between colocations and amendments, and when will new spectrum activity pick up?

A:The company sees more revenue from colocations than amendments. New spectrum activity, such as upper C-band, is expected to impact around 2029-2030. Current spectrum in carriers' hands will drive activity before then.

Q:Do you view 2026 as the bottom for organic leasing, and what consolidation churn remains?

A:2026 is likely the bottom for organic leasing. Remaining consolidation churn includes less than $20 million from Sprint, U.S. Cellular churn, and minor international overlaps. Most major consolidation impacts have already occurred.

Q:Can the company get back to 5% growth, and when?

A:Yes, the company expects to return to 5% growth, with partial recovery by 2027 and more fully by 2028-2029. International markets are expected to grow faster due to less maturity and more network build-out needs.

Q:What are the business trends from Verizon regarding C-band deployments and small cells?

A:Verizon has largely completed C-band upgrades, with some remaining activity. Small cell deployments are not a significant part of the company's business. Verizon's AWS and PCS spectrum upgrades are expected to drive amendment activity.

Q:How does the company determine its Brazilian real forecast?

A:The company assumes a 5.2 BRL/USD exchange rate for 2026, based on factors like Brazil's trade surplus and high short-term interest rates. This is an estimate and subject to change.

Q:Why not take more aggressive action against DISH for non-payment?

A:The company is following legal processes to enforce its rights and cannot disclose specific actions. They are evaluating all options to address the situation.

Q:How was the land purchase in Guatemala underwritten, and are there plans for more land acquisitions?

A:The land purchase in Guatemala was underwritten at a mid-single-digit multiple, making it accretive and reducing risk. The company continuously evaluates opportunities to buy land under its towers for financial and risk management reasons.

Q:Will the company invest more heavily in data centers?

A:The company does not plan to invest in large stand-alone data centers but is exploring edge computing opportunities at tower sites. They see potential in supporting AI-based solutions closer to the edge.

Q:Review of Unclear Management Responses

A:Management avoided providing specific percentages for the split between colocations and amendments, citing nuances in master agreements. They also did not provide detailed actions being taken against DISH beyond legal processes, citing confidentiality. Additionally, they gave a broad range for the Brazilian real forecast, acknowledging uncertainty in their assumptions.

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Earnings Word Cloud

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