SBA COMMUNICATIONS CORP Q4 2025 earnings call

Good evening, thank you for joining us for SBA's fourth quarter 2025 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, February 2026, 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 over the call to Marc to comment on the fourth quarter results and our 2026 outlook.

Thank you, Louis. The fourth quarter was a solid finish to the year. Results for the quarter were in line with our estimates, even with higher than forecasted bad debt expenses related to EchoStar. In the fourth quarter, the FFO per share was $3.19, with a cash dividend of $1.11 per share, an increase of 13% compared to the fourth quarter of 2024. Operationally, we added approximately $10 million of domestic new leases and abandoned buildings. The bulk of the activity continues to come from new colocations, as carriers both intensify and expand their network footprints. Our service business also continues to perform well, increasing revenue by 13% in the fourth quarter compared to the fourth quarter of 2025. This was mostly due to construction-related projects focused on network expansion.

With respect to churn, we are getting closer to the end of consolidation churn in the U.S., with Sprint-related churn of approximately $17 million in the quarter. Internationally, we continue to see healthy demand, adding approximately $6 million of new leases and abandoned buildings in the fourth quarter. International churn continues to be elevated, we lost approximately $8 million of revenue in the quarter from carrier consolidation, bankruptcy, restructuring, and wireless operators' network optimizations. The team has been working around the clock to integrate the newly acquired sites for Millicom in Central America. We're also ramping up our new build program in the region, setting up our business for future success as a leading independent power producer in Central America. In the quarter, we deployed significant capital to buy back our shares, spending $213 million to retire 1.1 million shares at an average price of $191.07.

In total, in 2025, we spent $500 million to repurchase 2.5 million shares. As of today, we have $1.1 billion remaining on our share buyback authorization. We continue to believe that share buybacks play a significant role in creating shareholder value over time. Today's earnings press release includes our initial 2026 outlook. Domestically, our 2026 outlook reflects a similar level of new revenue growth from carriers' leasing activity to what we experienced in 2025. The outlook also assumes a range of $55 million-$56 million related to Sprint churn, which is slightly higher than we estimated last quarter. The increase is due to timing. We now expect Sprint churn in 2027 and beyond to be less than the $20 million previously provided. In addition, our churn outlook removes all future recurring revenue from EchoStar. We'll continue to pursue legal rights to recover these revenues from EchoStar.

For our international segment, our outlook reflects a full-year contribution from the acquisition of sites from Millicom in Central America. The outlook also assumes steady network investment from our customers in 2026. We're guiding to a range of $19 million-$21 million for new leases and abandonments, up slightly from 2025. Our outlook assumes a range of $36 million-$40 million related to churn. The current churn range includes $14 million related to Oi wireline, which will not continue into 2027. Bearing any unforeseen events, we expect international churn to trend down over the next couple of years. Turning to services, we are guiding to a range of $190 million-$210 million in revenues, higher than our initial outlook for 2025, lower than the extremely strong results we delivered last year. Our services backlogs are supportive of continuous carrier network activity in 2026.

Regarding our balance sheet, in January, we successfully paid off $750 million of ABS debt with our revolving credit facility. Our outlook assumes that we will use our free cash flow to pay down the current outstanding amount on this credit facility over time. We also assume that our $1.2 billion November ABS maturity will be refinanced in November of 2026 by 5.25%. The 40 communities will be community investment grade issuers. We look to make our initial inaugural investment grade bond at some point in 2026, depending on market conditions. During the fourth quarter, we declared a pay of cash dividend of $118.2 million or $1.11 per share. Today, we announced that our board of directors declared our first quarter dividend of $1.25 per share, payable of March 27, 2026, to shareholders of record as of close of business of March 13, 2026.

This dividend represents an increase of approximately 13% over the dividend paid in the first quarter of 2025 and approximately 41% of the midpoint on our full-year FFO outlook. Please also note that our outlook does not assume any further share repurchase or acquisition beyond those which, as of today, are under contract or expected to close by the end of the year. We anticipate that we invest in additional assets or share buyback or both during the year. This will potentially have an impact on our full-year outlook. I will now turn the call over to Brendan.

Thank you, Marc. Good afternoon. Today, I want to share our perspective on SBA's near and long-term outlook and the opportunities ahead, starting with the U.S. market and the key drivers of future growth. For our U.S. customers, in a stabilized three-carrier market, maintaining a high quality end-user experience remains paramount. Offering superior network quality, reliability, and speeds that meet the needs of today and tomorrow requires significant ongoing investment. We've seen this demonstrated in numerous cycles over the last several decades. It is perhaps even more the case today. Mobile data use continues to climb as Americans rely on their devices across everyday experiences. According to CTIA, in 2024, Americans consumed more than 132 trillion MB of mobile data, up 35% compared to the prior year, marking the single largest jump in history. The way to keep up with this level of demand remains relatively unchanged.

It typically starts with a wave of amendments to efficiently upgrade existing towers, deploying new spectrum bands if available, adding or swapping equipment, followed by a shift toward densification. Today, we are still seeing upgrades, but certain customers have seen a clear increase in new colocation activity tied to both densification and expansion. On the amendment side, we've seen new technology upgrades such as Massive MIMO, largely tied to new spectrum, including C-band and DOD, and are starting to see initial Massive MIMO deployments in legacy AWS and PCS bands, significantly increasing network capacity. With regard to colocation activity, our customers work to address coverage gaps in the U.S., meet regulatory requirements, and support 5G use cases like fixed wireless access. On fixed wireless access, growth and adoption have been impressive, with total subscribers of approximately 15 million, initially driven by excess 5G capacity.

Today, it's estimated that more than half of overall wireless network capacity is being used to support fixed wireless access, a figure that could increase over time as carriers look to grow their subscriber base and lean further into convergence, bundling home internet, mobile, and enterprise services. As 5G continues to build out, we expect further support from the upper C-band auction, adding another growth driver for our industry. At least 100 MHz of upper C-band is expected to be auctioned by mid-2027. Looking beyond the near term, we're increasingly excited about 6G. We've already seen legislative tailwinds, including restoring the FCC's auction authority and 800 MHz of spectrum to be studied and eventually auctioned, including the aforementioned 100 MHz of upper C-band in 2027. Other bands currently being evaluated include 2.7-2.9 GHz, 4.4-4.9 GHz, and 7.25-7.4 GHz.

These new bands will require new radios and likely a denser footprint given the higher band properties, creating future growth opportunities for SBA. Beyond spectrum, we see a fundamental shift in the network architecture, most evident in the transition from 5G to 6G. With 5G, traffic follows an 80/20 downlink to uplink mix, as users primarily consume data, streaming videos, shopping, connecting on social media, or gaming online. Looking ahead, we anticipate a more balanced figure with 6G, driving significantly more data upstream to support increasingly AI-driven interactions. Technology that seamlessly integrates into everyday experiences, with data interpreted in real time, is what will truly differentiate 6G. Many of these use cases are likely to emerge first in the home or enterprise using Wi-Fi or private networks, eventually, though, migrating outdoors for a fully mobile experience reliant on the terrestrial network. We expect a wide range of use cases.

Today, we are starting to see the early signs of the preparation for 6G. AI is beginning to move from the core to the RAN. True 6G cannot be done with just software. It will also require physical components. That means more compute at the tower site, with higher capacity radios and denser and more intelligent antenna configurations to send and receive growing volumes of data. With regards to the compute element, the specifics are really still just starting to develop. Rapid advances in AI, particularly as it becomes more performative, we believe will drive the need for compute to be closer to end users, where devices rely on real-time, ultra-low-latency environments. We believe our large distributed U.S. portfolio makes this a real opportunity for SBA. Turning now to our international markets, let me start with Brazil.

With a portfolio of over 12,000 sites, Brazil remains our second-largest market. We intend to continue to harvest and grow cash flow organically in Brazil. We believe the country itself is very well positioned to be a leader in Latin America over the coming years. It's a commodity superpower with meaningful exports of food, energy, and metals. It has a population of over 200 million and a younger demographic that drives higher mobile data usage. Operationally, we've performed well in Brazil, though we faced elevated churn, largely driven by industry consolidation and network rationalization. In the Brazilian wireless market more broadly, we see several opportunities. As operators continue to rationalize their networks, reducing redundant infrastructure while increasing tenancy, there's a clear opportunity to improve both the carriers and the tower companies' returns through site consolidations and increased colocations.

We're actively working with our customers to find more efficient ways to help them meet their network needs. This is a key focus area for SBA in 2026. Another structural opportunity is network density. According to a UBS research report from October 2025, Brazil has an estimated four sites for 10,000 people compared with roughly 16 sites for 10,000 people in the U.S. We see that gap providing a meaningful opportunity for additional colocations as carriers densify their networks. Lastly, there is spectrum. The government is planning to auction both 450 MHz and 700 MHz spectrum bands. While the timing remains uncertain, recent estimates suggest this could happen in 2027. Each of these factors gives us confidence in the long-term prospects for Brazil. In the meantime, operators continue to invest in advancing 5G coverage.

Beyond Brazil, Central America and Africa offer diverse customer bases, attractive opportunities to deploy capital through new site builds, and organic growth as these markets remain earlier in the 5G deployment cycle. As we've discussed previously, the Millicom transaction has positioned us as the leading independent tower company in Central America, supported by long-term master lease agreements with the leading carrier. We expect that agreement to drive predictable operating results and durable cash flow. Our select African markets have continued to deliver superior risk-adjusted returns as well and our highest return on invested capital across our company. In addition to strong operational and technology indicators, we feel good about the future due to the strength of our balance sheet and capital return profile.

As discussed on our prior earnings call, we have recently achieved investment-grade ratings from two major rating agencies and have operated comfortably between six and seven turns of leverage for the last three years. While investing meaningfully in new assets and share repurchases, we've still delivered the fastest-growing dividend in our industry. We believe the strength of our capital structure will allow us to consistently provide meaningful and growing shareholder renumeration going forward in the form of share buybacks and dividends while also preserving the flexibility and opportunistically invest in U.S. market and minimizing the cost of debt. In summary, SBA is very well positioned to play a meaningful role in future network deployments, helping our customers meet their network needs. Our towers remain the backbone of the network and offer a truly turnkey option with ground space, power, and most importantly, location.

Before opening it up for questions, I'd like to thank our team members. We strive to be the industry's leader in digital infrastructure. It is only possible because of the incredible team members we have at SBA. I'd also like to thank our customers for their trust in us. Lastly, I'd like to thank our shareholders for their ongoing support. With that, operator, we are now ready for questions.

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

Hi, Richard. In terms of our domestic colocation expectations, we obviously gave our outlook for the full year, which assumes $35 million of incremental revenue added through new leases and amendments in the U.S. We would expect that will be contributed perhaps slightly heavier in the beginning of the year, but we would expect activity levels with the carriers in terms of new business being signed up to be pretty steady throughout the year. That's our assumption. Based on the way things are starting, that's what we think will continue to happen. It'll be a mix, as we said in some of our prepared comments, of densification as well as expansion of coverage.

One quick one on Brazil. As we look at the buckets of growth that could drive your revenue there, how should we think about the difference between maybe builds, upgrading to, I guess, 5G, densification, and spectrum over the next few years? Where do you expect to see kind of most of the growth come from there eventually?

Yeah. I think we're not building that many sites down there, so most of the growth is going to come organically through new lease-up. In terms of the drivers of that new lease-up, some of that will be just new spectrum that's going to be auctioned off, we believe, over the next couple of years. Some of that's going to be just further expansion and densification of the network. I think if you heard in the prepared comments, one of the things we pointed out was a statistic about the amount of sites per person in Brazil. They're basically four times more in the U.S. than there are in Brazil. With that sort of dynamic, it leads to the need for increased investment in the network and expansion of the network by each of the remaining carriers.

It's been, I'd say, a little bit muted over the last couple of years since the consolidation of Oi into the big three carriers that are remaining there. As they've worked through sort of the rationalization of that's been a big focus. As we kind of get on the back end of that, I would expect significant investment into expanding the network and competing on network quality.

Great. Thank you.

Sure.