SBA COMMUNICATIONS CORP Q2 2026 earnings call

Good evening. Thank you for joining us for SBA's second quarter 2026 earnings conference call. Here with me today are Brendan Cavanagh, our President and Chief Executive Officer, and Marc Montagner, our Chief Financial Officer. Some of the information we will discuss on this call is forward-looking, including, but not limited to, any guidance for 2026 and beyond. In today's press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, August 3rd, and we have no obligation to update any forward-looking statements we may make. In addition, our comments will include non-GAAP financial measures and other key operating metrics. The reconciliation of, and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our investor relations website.

With that, I will now turn it over to Marc to comment on the second quarter results and 2026 outlook.

Thank you, Louis. We had another good quarter, and our results were in line with our expectation. Given the solid performance in the second quarter, we're modestly increasing our full-year outlook for site leasing revenue, FFO, and FFO per share as compared to our prior 2026 guidance. The primary drivers of these increases include higher straight-line revenues and improved net cash interest expenses. In the second quarter, FFO per share was $3.05, and we paid a cash dividend of $1.25 per share. We continue to operate efficiently, controlling direct costs, and achieving company-wide Tower Cash Flow margins of just under 80%. In the U.S., we added approximately $9 million of domestic new lease and amendment billings in the second quarter. The bulk of the activity continues to come from new co-locations as carrier both densify and expand their network footprints.

With respect to churn, our prior outlook for both Sprint and EchoStar related churn for the year remains unchanged. With regard to EchoStar, we continue to litigate the matter in federal court and believe strongly in our contractual rights. Internationally, we continue to see healthy demand for our infrastructure, and we added approximately $4 million of new lease and amendment billings in the second quarter. International churn continues to be elevated due to carrier consolidations, carrier bankruptcy, restructuring, and wireless operators networks rationalizations. Moving to our balance sheet. I'm very pleased to discuss our recent debt offering, where in July we issued our first unsecured investment-grade bonds. The total amount raised was $3.5 billion, and net proceeds we used to pay in full both our Term Loan B and amounts outstanding on our revolving credit facility.

As of today, the revolver is fully paid down, and we currently have a $570 million of cash on our balance sheet. For format for this transaction, the amount of secured versus unsecured debt is now below 50%. The transaction generated very strong demand for each of the three tranches we issued. The three tranches include $1.350 billion due 2030, with a cash coupon of 4.78%, $1.350 billion 2031 with a cash coupon of 5.15%, and $800 million due 2033 with a cash coupon of 5.45%. In aggregate, the $3.5 billion, a blended cash coupon of 5.11%, and a weighted average maturity of five years. In addition to the new bond offering, we put in place a new, larger revolving credit facility with $2.5 billion of capacity, which is unsecured.

We now have a solid base of investors for our investment-grade debt, and we plan to continue to issue investment-grade notes in the future to refinance our upcoming maturing ABS and high-yield securities. I would also like to point out that in June, SBA was upgraded from BBB- to BBB by S&P, another positive step in our new investment-grade journey. Consistent with our prior outlook, we continue to assume that at $1.2 billion November ABS maturity will be refinanced in November of this year at 5.25%. We ended the quarter with approximately $13 billion of total debt. Our current leverage of 6.4x net debt to Adjusted EBITDA remains near historical lows and within our target range of 6x-7x. During the second quarter, we declared and paid a cash dividend of $132.7 million or $1.25 per share.

Today, we announce that our board of directors declare a quarter dividend of $1.25 per share, payable of September 17, 2026 to shareholders of record as of the close of business on August 20, 2026. This dividend represent an increase of approximately 13% over the dividend paid in the prior year period and an annualized rate of approximately 41% of the midpoint of our full year FFO outlook. I will now turn the call over to Brendan.

Thanks, Marc. The second quarter represented another solid period of both financial and operating results. We continue to lead the industry in AFFO per share and dividend growth. Throughout the quarter, the level of customer activity remained steady and in line with the first quarter. In the U.S., our customers continue to invest in their networks, expanding 5G coverage with new spectrum, including C-band, technology upgrades such as Massive MIMO antennas, and growth in Fixed Wireless Access subscribers. Internationally, we continued the solid progress we made last quarter, integrating the Millicom assets and expanding our new tower build capabilities. We built 99 new towers, up from 75 in the last quarter. We expect this number will increase steadily over time. New tower builds continue to be a good use of capital, and we expect the risk-adjusted returns to exceed our cost of capital, often on day one.

We continue to see positive organic growth in our international portfolio, due in part to local CPI-linked rent escalators. While international churn remains elevated, we continue to focus on locking in stable, predictable operating cash flow through long-term contracts and high-quality customer partnerships. Looking ahead, I am excited about a number of prospects that I think will contribute to organic growth for years to come. On July 22nd, the FCC formally adopted a plan to auction 160 MHz of Upper C-band spectrum starting in April of next year. When combined with the existing Lower C-band spectrum previously auctioned, this auction will create a harmonized super band of 440 MHz of contiguous mid-band spectrum to be used for wireless.

In addition to the large amount of spectrum being made available and the accelerated pace of the auctions, we were very pleased with the stricter build-out requirements established by the FCC, requiring holders to deploy the spectrum or risk forfeiture with no review or waiver process. The Upper C-band's build-out requires 45% population coverage two years after the transition deadline and 80% coverage six years after, paired with automatic license termination for not fulfilling the second performance benchmark. In addition, the FCC made clear that alternative uses such as IoT, fixed point-to-point, and private networks do not count towards coverage milestones. These tougher build-out requirements are now expected to also extend to private investment firms and others that hold spectrum into the future. This structure will be helpful in ensuring that license winners are serious about deploying spectrum for the benefit of the American wireless consumer.

This will, of course, be good for SBA. As we invest in supporting our customers in meeting their network build-out goals, we expect to see incremental equipment deployed at our sites, driving organic growth for years to come. These opportunities do not only apply to the Upper C-band. The NTIA recently announced that 2.7 GHz spectrum can be repurposed for full power commercial licensed use. Once approved by Congress and coordinated with NOAA and the FAA, the FCC could auction 2.7 GHz spectrum as early as 2028. We expect that deployment of this spectrum will also require new equipment at the tower site and support long-term sustained site leasing organic growth. On Friday, the NTIA announced that it has cleared plans to study the 4.4 GHz band for full power commercial licensed use as well.

We now have the largest set of federal spectrum bands ever under consideration for repurposing, including 1.6 GHz, 2.7 GHz, 4.4 GHz, and the 7 GHz band. While it will be several years before these airwaves are made available for commercial use, real progress is being made that will be supportive of network investment on our infrastructure for the next decade. In addition to new spectrum deployments, I am excited for the prospect of other new organic growth drivers, including low latency edge compute demand and terrestrial complements to potential future satellite direct-to-device offerings. With regard to edge compute, we see a clear migration towards a distributed architecture with a significant increase in the required number of power and fiber-fed locations to improve speed and latency, enhance redundancy, and reduce the concentration of resources needed to support the growth in AI-oriented applications.

Our existing portfolio of assets are well suited to support this growing architecture. I believe we have the opportunity to realize meaningful incremental organic growth over the coming years as a result of this type of activity. With regard to satellite solutions, there's been a lot of discussion around direct-to-device satellite technology. Our view remains unchanged. Satellites are a complement to terrestrial wireless networks, not a substitute for them. However, depending on how the industry develops, the advancement of this technology is expected to provide growth opportunities for our business. Potential new entrants offering direct-to-device satellite-based coverage will require a terrestrial component to their networks in order to provide ubiquitous, high-quality coverage at a level competitive with traditional networks. As new providers arise, new opportunities to benefit from our extensive high-quality infrastructure portfolio and our experienced network deployment teams will grow as well.

I look forward to the potential of this incremental growth opportunity. Finally, turning to capital allocation, our dividend remains the fastest-growing in the industry and among the fastest-growing of all REITs. Nonetheless, as a percentage of AFFO, it remains relatively low, providing capacity to continue allocating significant capital for the benefit of our shareholders. Our leverage at quarter end was 6.4x net debt to Adjusted EBITDA, below the midpoint of our target range. As a result, we have ample liquidity to put to work. We will continue to build new towers and look for attractive acquisition opportunities. However, today, we believe share buybacks are the best use of capital at current valuation levels. As Marc mentioned earlier, we have now fully paid off our revolver balance. We intend to resume share buybacks in the second half of this year.

We believe in the strength of our business, the future growth potential, and our ability to execute. As a result, we see share repurchases at current valuations as a low-risk, high-return opportunity. Before opening it up for questions, I'd like to thank our team members and customers for their trust in SBA. The company's ability to achieve our vision to be our customers' first choice provider and the industry leader in quality infrastructure solutions is what we work towards every day. I'm excited about the future with new bands of spectrum becoming available, new edge use cases for our existing tower infrastructure, towers being at the center of all future wireless deployments. I'd also like to thank our shareholders for your ongoing support. With that, operator, we are now ready for questions.

Great. Thank you. Could you provide a little bit more color on the application volume that you're seeing in the second half? If any early indications of the activity that you talked about, higher colocation and the spectrum held by the carriers, if that could show up as an acceleration in the growth rate into next year. Thank you.

Sure. Batya. The volumes that we're seeing in terms of applications are relatively consistent with the first half of the year. I assume this question is specific to the U.S. market, so that's how I'm answering it. In the U.S. market, one of our customers is a little bit busier than the others with us today, but that's not really that dissimilar from where we are at various points in time where there's some cyclicality and rotation among who's the busiest. Overall, if you added up the application volumes, they're relatively consistent with where they've been throughout the year.

In terms of the drivers of growth opportunities into the future, particularly around the new spectrum bands, most of what we talked about is something that is longer term in its nature, so that's something that's going to happen over the next five-plus years. I don't necessarily expect it to have a significant impact on next year, but we're also not ready to give our outlook for next year's leasing growth yet. Stay tuned for that for next year.

That's great. Thank you.

Sure.

Hey, good afternoon, guys.

Hey, Ric.

Hey. Couple questions. One, I got to admit, I'm a little confused by why change guidance at all when it's like rounding points. Obviously, Adjusted EBITDA down a little bit, unchanged without FX, seems like the ranges were wide enough. What's kind of the philosophical thought on guidance? I have a couple other quick ones.

Yeah, we didn't really change much, right? Most of the stuff at the top end is changed slightly because of FX and because we're changing the specific FX assumption, which is really driven by what's happened specifically with the Brazilian real. While it's small, just the math without making a change is driven in large part because of the FX, which is why we break out what the change is excluding FX, You can see most of those did not change. As you get a little bit further down the P&L, there's a few minor changes that are mostly to do with things like interest expense, which is changed in part because of the financing that we did, that causes an impact. Really, we're just flowing those into the numbers.

Basically, there's no change in our outlook from what we gave last time, except for a couple of these specific things that occurred, that we felt that we should modify the ranges for. Generally, you're correct. I would expect everything to still end up in the same ranges that we gave before.

Okay. Glad to hear the news on the stock buyback. Earlier today, we had EchoStar say they're going to do a $5 billion buyback, it didn't seem like there was pacing there. I appreciate you're saying that you could resume in second half 2026. I think it's $1.1 billion you guys have left, how should we think about your pacing of the buyback, how it works with leverage and your other capital allocation items?

Yeah. Obviously, I don't want to say exactly and specifically what we would do, but we were trying to be pretty clear that we fully expect to be active during the second half of the year in buying back our stock. If you look at where we were before, we had a fairly large amount outstanding on our revolver. We had some refinancing that we needed to get done. We completed that in July, just a few weeks ago. With that now behind us, we feel like we're in a very strong position to lean into what we think is a very good value in our stock today, unfortunately.

Yeah. No, I appreciate that. Last one from me. On the competition from satellite, we agree it seems more complementary, but how should we think about what percent of your base is really rural? What percent of your towers? Because we think that's probably the better venue for satellite direct-to-cell. We like to differentiate direct-to-cell versus direct-to-device. How do you think about that? Are there some sites on the fringe that might be better served by satellite, and what kind of magnitude is that for you guys?

Yeah. It's hard to say, obviously, exactly. I think when we look at our portfolio, we've done some of our own analysis about what might be those fringe sites. It's probably no more than 2%-3%, Ric. Even that I'm hesitant to really quantify because this remains to be seen how this all plays out, and I'm not so sure that it's going to be all that impactful at all.

It's a small number. In fact, it might actually find some sites that need to be built, I guess, as you look at when people start using satellite connectivity, that they might want to actually say, "Oh, we need a cell site here."

Yeah, for sure. I think I've shared in the past some stories that I've heard in anecdotal evidence of the need for incremental sites that might come through satellite activity. I know that our carrier customers today have used the data that they've gathered from some of the satellite service that has been provided through partners to identify places where they had needs to maybe put a tower site to serve a greater amount of usage than they were expecting in a particular location. I think there will be some balance. There will probably be some fringe sites that perhaps aren't economical to maintain, and there will be other places where the opposite is true, and there'll be new infrastructure added.

Great. Thanks, guys. Have a good afternoon.

Sure.

Thanks. Good afternoon. Two questions, if I could. Just one, in terms of just overall asset strategy, where are you in terms of the process of continuing to optimize your assets, thinking about monetization opportunities, whether it's for a particular market or portions of a market? Secondly, is there anything, now that we're in August, and you kind of look back and you mentioned your observations on the stock on this call, is there anything that you're able to share about any processes that you did employ during the first half of the year, or through July that might also be informing you of your view of how to value your own company? Thank you.

In terms of our efforts around optimizing our assets, and really what we talked about two years ago, we've been on a consistent journey around that. Throughout the last couple of years, you've seen a number of activities where we have expanded our presence in certain markets to improve our positioning. In other places, we have exited certain markets. We continue on that, Mike. It's not the kind of thing that every quarter there's something specific to announce, but you can be assured that it's an ongoing effort here at the company. I expect in the future there will be steps taken to improve our positioning as it relates to a variety of markets and businesses that we're in, where they are either subscale or we see greater opportunity to enhance what we're doing there.

I guess all I'd say on that is stay tuned and we continue to pursue that effort. On the second question, there's really not much I can say. We're always looking at opportunities in the market in all different ways, and what we see there, as well as conversations with our customers, inform our views on the value of our company. I can just reiterate that I think today our stock is at a price that would suggest a valuation below where we think our intrinsic value is, and that is usually why you see us lean into buying it at times like that.

Thanks.

Sure.

Thank you. Couple questions. One, in LatAm, one of the Brazilian carriers talked about expense controls, when it comes to things like tower rent, and I wondered if you'd give us an update on what you're doing and how your contracts are structured to maybe prevent exposure to that, if there is anything adverse to be aware of. Then secondly, ground lease buybacks and what's going on in that segment of the market in terms of multiples, your activity level and pace. If I can maybe lob in a third one, the returns that you're seeing on new tower builds. Thanks.

Sure. On the LatAm question about tower rents, it's not really that different in Latin America versus our other markets in the sense that all of our customers are always looking at ways to be more efficient and to control costs, and one of those costs is their rents on towers. It's really a matter of making sure that what we're delivering to them is of greater value than the costs that they're incurring in order to be there. I think, generally speaking, we're able to do that through having high-quality locations, providing service and support that meets their needs and provides them a better outcome than they might see from somebody else.

We continue to work with all of our customers in LatAm and otherwise on how we can provide them the most value for what they need out of the sites that we're leasing to them. I think we've done a pretty good job with that. There's always going to be situations where there's a site that they don't need, or they have some other alternative, and it's more cost-effective. I'd say that those are more the exception than the rule. In terms of ground land buyouts, that's something we continue to do. That's something we've been doing for 15-20 years now. Here we have a well-established function inside of the company that focuses on buying out land, both for strategic purposes as well as financial purposes, and I think we've done a very good job.

One of the downsides to having done it so well for so long is that the opportunity set is a little bit smaller than perhaps it's been in the past, particularly in places like the U.S., where we've been at it for a long time. Most of the new opportunities that we see are with the new assets that we've added in some of the other markets, including Central America. We continue to lean into it there. In terms of the values, though, we continue to find opportunities to do immediately financially accretive deals, as well as secure our assets for the long term.

In places like Brazil and others where you have passthroughs of land costs, we're able to share a little bit of that with our customers, and that goes to your first question in that it helps reduce some of that cost for them and make it a better value proposition. Your last question, I think, was on new tower builds, if I remember correctly, the returns on new tower builds. It's been tough in the U.S. to see very strong returns because we've had competition from folks who've been willing to accept, frankly, returns that we just really weren't willing to accept.

Our ability to deliver timely for our customers and to do a quality job, I think, is going to allow us some incremental opportunities here over the next couple of years, I would expect to see us do a little bit more. Having said that, I don't expect it to be overly material. Internationally, though, we're building a lot of sites. We have some great opportunities in both Africa and in Central America in particular, and you're seeing us build more and more sites. As mentioned in my prepared comments, as we move through the balance of the year, I would expect that you'll see us build a greater amount of sites each of the successive quarters throughout the rest of the year.