01—Abstract
Summary
Summary of the 10-K filed February 25, 2022. Cited figures are marked; the original filing is the authoritative source.
American Tower (AMT) closed 2021 as one of the largest global REITs, with revenue of $9.36 billiona (up 16% year over year) and net income of $2.57 billion, up 52%.
Property operations generated 97% of revenue. The year was dominated by two large acquisitions: the Telxius Acquisition of roughly 31,000 European and Latin American towers for about $9.6 billionb, and the CoreSite Acquisition of 27 U.S. data center facilities for $10.4 billion, completed in December 2021. Total acquisition spending was about $19.3 billion, funded with debt, $2.4 billion of common equity, and $3.1 billion of noncontrolling interest contributions from CDPQ and Allianz in ATC Europe.
Adjusted EBITDA rose 16% to $5.98 billionc, Nareit FFO (common stockholders) rose 35% to $4.75 billion, and AFFO (common stockholders) rose 14% to $4.28 billion. Leverage rose sharply. Total debt was $43.5 billion at year end, and the company says it was in compliance with its covenants, with a Total Debt to Adjusted EBITDA ceiling of 7.50x that steps down to 6.00x.
Liquidity was $6.1 billiond. Key risks flagged in the filing include customer concentration (T-Mobile, AT&T and Verizon together produced 52% of revenue), elevated churn in India and from the T-Mobile master lease agreement, and foreign currency exposure, since 44% of revenue is denominated in foreign currencies and the company has not historically hedged it.
Management expects 2022 capital expenditures of $2.0 to $2.1 billion and total distributions of $2.8 billion. Internal control over financial reporting excluded Telxius and CoreSite from its assessment, and both acquisitions are still being integrated.
02—Key points
Key Highlights
- Total revenue grew 16% to $9.36 billion, driven by acquisitions and colocations; property operations were 97% of revenue.
- Net income rose 52% to $2.57 billion, helped by $557.9 million of foreign currency gains versus $216.4 million of losses in 2020.
- Adjusted EBITDA increased 16% to $5.98 billion, and Nareit FFO (common stockholders) increased 35% to $4.75 billion.
- Acquisitions totaled about $19.3 billion, including the Telxius Acquisition (about 31,000 sites, roughly $9.6 billion) and the CoreSite Acquisition (27 data centers, $10.4 billion).
- Total debt reached $43.5 billion, with $4.6 billion current and $6.1 billion of liquidity; the company reports covenant compliance.
- Customer concentration is high: T-Mobile (20%), AT&T (19%) and Verizon Wireless (13%) accounted for 52% of 2021 revenue.
- Churn was about 4% of tenant billings in 2021, with elevated expected churn from India and the T-Mobile MLA. The 2022 capex guidance is $2.0 to $2.1 billion.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 25, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $9.36B$8.04B | +16.4% |
| SG&A Expenses | $811.60M$778.70M | +4.2% |
| Operating Expenses | $6.22B$5.15B | +20.8% |
| Operating Income | $3.13B$2.89B | +8.5% |
| Interest Expense | $870.90M$793.50M | +9.8% |
| Net Income | $2.57B$1.69B | +51.9% |
| EPS (Basic) | $5.69$3.81 | +49.3% |
| EPS (Diluted) | $5.66$3.79 | +49.3% |
| Shares Outstanding (Basic) | 451.50M443.64M | +1.8% |
| Shares Outstanding (Diluted) | 453.29M446.10M | +1.6% |
05—Questions
Frequently Asked Questions
How did American Tower's 2021 growth break down between organic and acquired revenue?
The filing attributes most of the growth to acquisitions and new sites. Europe revenue rose 232%, mainly from the Telxius Acquisition, and Latin America rose 17%, partly from Telxius. U.S. & Canada revenue rose 9%, of which about $168 million came from new or acquired sites, including InSite, and about $129 million came from colocations and amendments. Acquisitions completed in 2021 contributed an estimated $424 million of revenue. Organic growth from colocations and escalators was real but smaller than acquisition-driven growth.
Why did net income rise so much in 2021?
Net income rose to $2.57 billion from $1.69 billion, mainly because of $557.9 million of foreign currency gains in 2021 versus $216.4 million of losses in 2020. Operating income also increased, to $3.13 billion from $2.89 billion. These gains are non-cash and largely reflect intercompany debt revaluation, so investors may prefer to focus on AFFO and Adjusted EBITDA, which exclude them.
What are the main risks from the increased leverage?
Total debt rose to $43.5 billion, and the company's total leverage covenant is 7.50x Adjusted EBITDA, which steps down to 6.00x. The filing discloses about $0.7 billion of capacity for an Adjusted EBITDA decline before the total leverage covenant is breached. Interest expense rose to $871 million. A downgrade below investment grade could raise borrowing costs. A 10% rise in interest rates would add $16.3 million to annual interest expense on variable-rate debt, and a 10% adverse move in EUR rates would cause about $0.9 billion of FX losses on EUR-denominated debt.
How significant is the India churn issue and the T-Mobile master lease agreement?
Both are material. Carrier consolidation in India produced elevated churn starting in late 2017 and compressed Asia-Pacific margins, and the AGR court ruling adds uncertainty about tenant payments. The company carries $1.0 billion of tower intangibles and $0.9 billion of tenant-related intangibles in India, so further impairments are possible. The T-Mobile MLA, entered into in September 2020, will keep U.S. & Canada churn elevated for several years as legacy Sprint leases are cancelled or not renewed. Management expects this to weigh on U.S. growth through the medium term.
Are the Telxius and CoreSite acquisitions fully integrated and included in internal controls?
Not yet. Management excluded Telxius (17% of total assets and 4% of revenue) and CoreSite (16% of total assets and 0% of 2021 revenue) from its assessment of internal control over financial reporting, as permitted for acquisitions completed during the year. The company says it is integrating both businesses' internal controls. Deloitte's report carries the same exclusion. Investors should watch the 2022 filing for whether these entities are brought into the assessment and whether integration costs, which were $50.4 million in 2021 and are expected to continue, decline.
06—Continue