Executive Summary / Key Takeaways

• SBA Communications, a leading wireless infrastructure REIT, is capitalizing on secular growth drivers like 5G, fixed wireless access, and increasing mobile data consumption, positioning its macro tower portfolio as mission-critical assets.
• The company's strategic focus on enhancing market scale and aligning with leading carriers is exemplified by the transformative Millicom acquisition in Central America, expected to significantly boost its international footprint and growth profile upon closing.
• Operational efficiency, underpinned by proprietary site development technology enabling faster deployments and the integration of new systems like AI into back-office functions, provides a competitive edge and supports profitability.
• Strong Q1 2025 financial results, including significant site development revenue growth and increased domestic leasing activity with growing backlogs, support an increased full-year 2025 outlook across key metrics.
• A robust balance sheet, low leverage, and flexible capital allocation strategy, including a new $1.5 billion share repurchase plan and a growing dividend, underscore management's confidence and provide avenues for shareholder value creation amidst ongoing market dynamics and international churn.

The Bedrock of Connectivity: SBA Communications' Enduring Thesis

For over 35 years, SBA Communications Corporation has stood as a foundational pillar of the wireless ecosystem, operating as a leading independent owner and operator of wireless communications infrastructure. Its portfolio, primarily comprising tower structures, rooftops, and other sites supporting antennas, spans the United States, South America, Central America, Canada, and Africa. The company's business model is bifurcated into two core segments: Site Leasing, which generated 98.1% of total segment operating profit in the first quarter of 2025, and Site Development, which provides complementary services to wireless carriers in the U.S.

At its heart, the investment thesis for SBA Communications is rooted in the insatiable global demand for mobile data. As smartphones become ubiquitous and new applications, from streaming video to the anticipated integration of generative AI capabilities into handsets, drive ever-increasing consumption, the need for robust, pervasive wireless network coverage intensifies. Macro tower sites remain the most effective and cost-efficient means for wireless service providers to expand coverage, deploy new spectrum, and add capacity. This fundamental dynamic underpins SBA's long-term revenue stability and growth potential.

The competitive landscape for wireless infrastructure is dominated by a few large players, including American Tower (AMT), Crown Castle (CCI), and Uniti Group (UNIT). While AMT boasts the largest global scale and CCI has a significant U.S. presence with a focus on fiber and small cells, SBA has strategically carved out a strong position, particularly in high-growth international markets. Its competitive approach emphasizes operational efficiency and deep relationships with leading carriers.

A key differentiator for SBA lies in its operational execution and technological integration. The company leverages proprietary site development technology that enables faster deployments for its customers, noted by management as contributing to reduced deployment cycle times. While specific quantitative metrics for this technology's speed advantage over all competitors are not detailed, the strategic intent is clear: to enhance customer relationships by providing efficient, high-quality service. Furthermore, SBA is actively integrating new technologies, including AI, into its systems, such as ERP and operational platforms. These initiatives aim to drive internal efficiencies, potentially leading to cost savings and creating opportunities for new revenue streams, reinforcing its cost leadership, particularly in international markets. This focus on operational technology supports SBA's competitive moat by enhancing its value proposition to carriers and improving its profitability profile.

Over the past year, SBA has undertaken a strategic review of its portfolio, particularly internationally, with a focus on achieving greater scale and aligning with the strongest carriers in each market to enhance long-term stability and growth. This review has informed significant capital allocation decisions, including both strategic acquisitions and market exits.

Strategic Evolution and Performance Highlights

The strategic review culminated in a landmark agreement announced in the third quarter of 2024: the acquisition of over 7,000 sites from Millicom in Central America for approximately $975 million in cash. This transaction is transformative, positioning SBA as the largest tower operator in the region with over 10,500 pro forma sites. Beyond sheer scale, the deal secures Millicom, a leading regional carrier, as a long-term tenant under a 15-year leaseback agreement, with payments largely denominated in U.S. dollars, enhancing revenue stability. The agreement also includes the extension of Millicom's existing leases on SBA's current assets for another 15 years and a significant build-to-suit component, under which SBA will exclusively construct up to 2,500 new sites for Millicom over seven years. This build-to-suit commitment is a major driver for SBA's plan to construct up to 800 new sites in 2025, representing the largest number of new builds in over two decades and offering attractive initial development yields with potential for future lease-up. A small portion of this acquisition, 321 sites in Nicaragua, closed earlier than anticipated in the first quarter of 2025, contributing positively to the updated outlook. The bulk of the transaction is expected to close around September 1, 2025, contingent on regulatory approvals.

Conversely, the strategic review also led to exits from markets where SBA was subscale and saw limited paths to leadership or alignment with dominant carriers. The company officially exited the Philippines in January 2025 and sold its operations in Colombia prior to the end of the first quarter of 2025. While these markets were immaterial to the overall financials, these exits reflect a disciplined approach to portfolio management, focusing resources on opportunities with greater long-term potential.

Financial performance in the first quarter of 2025 demonstrated solid execution and momentum. Site leasing revenue totaled $616.21 million, a slight decrease from $628.28 million in the prior-year quarter, primarily impacted by foreign currency headwinds and domestic churn. However, on a constant currency basis, international site leasing revenue increased, driven by organic growth from new leases, amendments, and contractual escalators, as well as contributions from towers acquired and built in 2024 and early 2025. Domestic organic leasing revenue growth was 5.2% gross and 1.0% net, with 4.2% churn, including approximately $20 million related to Sprint consolidation. Encouragingly, the first quarter saw the best level of new domestic leasing business signed in several years, and the leasing backlog grew, indicating a healthy pace of new applications. Approximately 75% of the new U.S. leasing revenue added in Q1 came from new lease colocations, a notable shift from prior periods predominantly driven by amendments.

The Site Development segment saw significant growth, with revenues increasing 62.4% to $48.04 million in Q1 2025, up from $29.59 million in Q1 2024. This surge was attributed to increased carrier activity, contributing to a 53.7% increase in segment operating profit to $9.85 million. This strong performance led to an improved outlook for the Services business for the full year.

Operating expenses saw some favorable movements. Selling, general, and administrative expenses decreased year-over-year, partly due to lower non-cash compensation. Depreciation, accretion, and amortization expense also decreased as some assets became fully depreciated, partially offset by additions from new towers. Asset impairment and decommission costs decreased domestically but increased internationally, largely reflecting the impact of the Philippines and Colombia divestitures.

Interest expense increased to $104.15 million in Q1 2025 from $96.39 million in Q1 2024, driven by a higher average principal amount of debt and higher weighted-average interest rates. However, interest income also increased significantly to $10.78 million from $7.31 million, benefiting from higher interest-bearing deposits and rates. Other income/expense included a notable non-cash gain from the remeasurement of intercompany loans, partially offset by a loss on the sale of divested assets.

Overall, net income attributable to SBA Communications Corporation increased to $220.73 million ($2.04 per diluted share) in Q1 2025, compared to $154.54 million ($1.42 per diluted share) in Q1 2024. This improvement was influenced by the factors mentioned above, including the gain on intercompany loan remeasurement and the loss on asset sales.

Financial Strength and Capital Allocation

SBA maintains a robust balance sheet, ending Q1 2025 with a net debt to annualized Adjusted EBITDA leverage ratio of 6.4 times, below the low end of its historical target range. This strong financial position is supported by ample liquidity, including a fully undrawn $2 billion Revolving Credit Facility as of the Q1 earnings call date. The company has proactively managed its debt profile, executing refinancings that have extended maturities and fixed interest rates on a large portion of its outstanding debt (98% fixed as of March 31, 2025, including hedges). Notably, the company repaid over $1.2 billion in Tower Securities in January 2025. The weighted-average interest rate across its total debt was 3.7% at quarter-end, and the next significant net debt maturity is a $750 million ABS security due in January 2026.

The company's capital allocation strategy is designed to enhance shareholder value through a balanced approach. Priority is placed on investing in high-quality assets that meet return criteria, such as tower acquisitions and new construction. This is followed by opportunistic stock repurchases when the share price is believed to be below intrinsic value, and returning capital through a growing cash dividend. In Q1 2025, the company invested in tower acquisitions and land buyouts totaling $63.39 million. Subsequent to quarter-end, demonstrating confidence in its valuation, SBA repurchased 583,000 shares for $122.9 million at an average price of $210.87. Further reinforcing this commitment, the Board authorized a new $1.5 billion share repurchase plan in April 2025. The company also continued its dividend growth, declaring a quarterly dividend of $1.11 per share payable in June 2025, a 13% increase over the dividend paid in the same quarter of the prior year, representing approximately 35% of the midpoint of the full year AFFO outlook.

Expected cash capital expenditures for 2025 include $53.0 million to $63.0 million for non-discretionary items (maintenance, corporate) and a significant $1,255.0 million to $1,275.0 million for discretionary investments, primarily driven by the Millicom acquisition and planned new tower construction. These expenditures are expected to be funded through cash on hand, operating cash flows, and potential borrowings or new financings, which management believes are sufficient to cover debt service requirements over the next twelve months.

Outlook and Risk Assessment

Management increased its full year 2025 outlook for all key financial metrics, including Site Leasing Revenue, Tower Cash Flow, Adjusted EBITDA, AFFO, and AFFO Per Share. This upward revision is based on the solid Q1 performance, the earlier-than-expected closing of a portion of the Millicom deal, an improved outlook for the Services business, slightly higher straight-line revenue from lease extensions, and the impact of share repurchases. The outlook anticipates core leasing revenue growth (currency neutral) in both domestic and international segments compared to 2024, driven by ongoing carrier activity, spectrum deployment, and contributions from acquired and newly constructed towers.

Despite the positive outlook, several risks warrant investor attention. Foreign currency exchange rate fluctuations, particularly the volatility of the Brazilian Real, can significantly impact reported revenues and operating income. A hypothetical 10% adverse movement in the Real could reduce revenues and operating income by approximately 1.2% and 0.7%, respectively, based on Q1 2025 figures. The company is also exposed to interest rate risk, both in its ability to refinance maturing debt at favorable rates and the impact of rate movements on the variable portion of its debt. A hypothetical 1% increase in variable rates could increase interest expense by approximately 1.4% based on Q1 2025 levels. While the majority of debt is fixed, refinancing risk remains a factor. Tax assessments in foreign jurisdictions, such as the contested income tax deficiencies in Brazil, present potential liabilities, with an estimated range of reasonably possible losses up to $52.5 million (excluding penalties and interest) in excess of accruals. Furthermore, higher interest rates could potentially temper wireless carrier capital expenditures, impacting future revenue growth rates, and persistent inflation could pressure margins on existing leases with fixed escalators.

Conclusion

SBA Communications is executing a clear strategy to capitalize on the enduring demand for wireless connectivity. By strengthening its position in core markets through targeted, value-enhancing acquisitions like the transformative Millicom deal, exiting subscale operations, and leveraging its operational and technological efficiencies, the company is enhancing the quality and growth profile of its asset base. The improving domestic leasing activity and robust performance in the Services segment, coupled with a strong balance sheet and disciplined capital allocation, provide a solid foundation for future growth. While exposed to macroeconomic risks like currency fluctuations and interest rates, SBA's mission-critical infrastructure, long-term contracts, and strategic initiatives position it favorably to continue generating substantial cash flow and delivering shareholder value. The increased 2025 outlook reflects positive momentum, suggesting the company is well-equipped to navigate the competitive landscape and capitalize on the next wave of wireless network evolution.