01—Abstract
Summary
Summary of the 10-K filed February 25, 2020. Cited figures are marked; the original filing is the authoritative source.
American Tower (AMT) closed 2019 with total operating revenues of $7.58 billiona (up 2% year over year), operating income of $2.69 billion (up 41%, helped by lower impairments), and net income attributable to stockholders of $1.89 billion.
Adjusted EBITDA rose 2% to $4.74 billionb, and Nareit FFO (common stockholders) grew 9% to $3.49 billion. Growth was held back by carrier consolidation-driven churn in India, which cut Asia property revenue 21% and gross margin 40%; churn for the year was about 6% of tenant billings, versus a historical 1-2%. Outside Asia, the U.S. (55% of property revenue) and Latin America grew steadily.
The company's contracted growth base is large: management expects nearly $46.9 billionc of non-cancellable tenant lease revenue, and AT&T, Verizon, T-Mobile and Sprint make up 54% of revenue for the four largest tenants. Acquisitions were a major 2019 theme, including Eaton Towers (about 5,800 African sites, $2.0 billion including assumed debt), the Entel Latin American deal (first tranche closed), and U.S. and other asset purchases. Acquisitions and capital expenditures totaled about $4.0 billion in investing cash outflows, funded largely by $4.9 billion of senior notes and $5.75 billion of credit facility borrowings.
Liquidity was $4.4 billiond at year-end, with total debt of $24.2 billion and a current portion of $2.9 billion. The company refinanced aggressively in early 2020, including $1.48 billion of net proceeds from new notes and a $750 million term loan, and it plans to redeem India put shares (about $348 million) and buy out MTN's stakes in Ghana and Uganda (about $523 million). Key risks include the October 2019 Indian Supreme Court ruling on adjusted gross revenue, which could strain tenants like Vodafone Idea, plus tenant concentration, foreign currency exposure and REIT distribution requirements.
02—Key points
Key Highlights
- Total operating revenues of $7.58B (+2% YoY); property segment is 98% of revenue, with the U.S. at 55% of property revenue.
- Operating income rose to $2.69B from $1.91B, mainly from lower impairment charges (other operating expenses fell to $166M from $513M).
- Adjusted EBITDA of $4.74B (+2%) and Nareit FFO (common stockholders) of $3.49B (+9%); AFFO attributable to common stockholders rose 8% to $3.44B.
- India carrier consolidation drove churn to about 6% of tenant billings (vs. a 1-2% historical norm), reducing Asia property revenue by $323M (-21%) and cutting Asia gross margin by 40%.
- Acquisitions were heavy: Eaton Towers (~5,800 African sites, $2.0B incl. debt), Entel (~2,400 Latin American sites closed, with more tranches due in 2020), and ~$3.0B in total acquisition spend.
- Liquidity of $4.4B at year-end and total debt of $24.2B; $4.9B of senior notes issued in 2019 and further refinancing in early 2020, with a December 2019 bank facility amendment removing the interest coverage covenant.
- Contracted growth base of ~$46.9B in non-cancellable tenant lease revenue; the AT&T master lease added $13.7B in future rent receipts.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, American Tower Corp kept $0.25.
- Revenue$7.58B100.0%
- Cost of revenue−$43.1M0.6%
- Gross profit$7.54B99.4%
- Operating costs−$4.85B64.0%
- Operating income$2.69B35.5%
- Interest, other & tax−$800.6M10.6%
- Net income$1.89B24.9%
Where FY2019 revenue went
$7.58B- Other operating costs: $4.12B, 54% of revenue
- Net income: $1.89B, 25% of revenue
- Cost of revenue: $43.1M, 0.6% of revenue
- SG&A: $730.4M, 9.6% of revenue
- Interest, other & tax: $800.6M, 11% of revenue
Kept 25% as net incomeCost of revenue $43.1M · 0.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 25, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $7.58B$7.44B | +1.9% |
| Cost of Revenue | $43.10M$49.10M | −12.2% |
| Gross Profit | $7.54B$7.39B | +2.0% |
| SG&A Expenses | $730.40M$733.20M | −0.4% |
| Operating Expenses | $4.89B$5.54B | −11.6% |
| Operating Income | $2.69B$1.91B | +41.1% |
| Interest Expense | $814.20M$825.50M | −1.4% |
| Net Income | $1.89B$1.24B | +52.7% |
| EPS (Basic) | $4.27$2.79 | +53.0% |
| EPS (Diluted) | $4.24$2.77 | +53.1% |
| Shares Outstanding (Basic) | 442.32M439.61M | +0.6% |
| Shares Outstanding (Diluted) | 445.52M442.96M | +0.6% |
05—Questions
Frequently Asked Questions
How much revenue does AMT expect to collect from existing tenant leases?
AMT expects to generate nearly $46.9 billion of non-cancellable tenant lease revenue over future periods, before straight-line accounting. Most leases run five to ten years with escalators averaging about 3% in the U.S. and inflation-linked escalators internationally.
Why did operating income increase so much in 2019?
Operating income rose 41% to $2.69 billion, mainly because impairment charges fell sharply (other operating expenses dropped to $166M from $513M in 2018, which included $394M of impairments and a Tata-related accelerated amortization charge in depreciation). Gross margin also rose 2%, to $5.37 billion.
What is the main risk to the Indian business?
Carrier consolidation has driven elevated churn, which cost about $361M of consolidated property revenue in 2019. The October 2019 Indian Supreme Court ruling on adjusted gross revenue could strain tenants financially, potentially raising churn further and triggering impairments; the India reporting unit's fair value exceeded carrying value by only about 7%.
How concentrated is AMT's tenant base?
Four tenants accounted for 54% of 2019 revenue: AT&T (22%), Verizon Wireless (15%), T-Mobile (10%) and Sprint (8%). T-Mobile and Sprint announced a planned 2020 merger, which could drive consolidation-related churn in the U.S. market.
Is the dividend sustainable, and what will AMT do with excess capital?
AMT paid $3.78 per share in 2019 and must distribute at least 90% of REIT taxable income. After distributions, capex, debt repayment and acquisitions, excess capital may be returned through buybacks; $2.1 billion remains under the buyback programs, but repurchases in 2019 were only $19.6 million as the company prioritized acquisitions and deleveraging.
06—Continue