01—Abstract
Summary
Summary of the 10-K filed March 1, 2018. Cited figures are marked; the original filing is the authoritative source.
SBA Communications Corporation (SBAC) reported that its site leasing business generated 98.7%a of total segment operating profit in 2017.
Total revenues rose to $1.73 billionb in 2017 from $1.63 billion in 2016, with domestic site leasing revenue of $1.31 billion, international site leasing revenue of $314.8 million, and site development revenue of $104.5 million. Net income was $103.7 million, or $0.86 per diluted share, compared with $76.2 million in 2016. Adjusted EBITDA was $1.20 billion, up from $1.11 billion.
The company owned 27,909 towers at year-end, of which 11,930 were international, and it had 1,205 executed but not yet commenced leases contractually providing about $9.2 millionc of annual revenue. The balance sheet carries significant leverage. Total principal indebtedness was $9.405 billion at December 31, 2017, up from $8.875 billion, and shareholders' deficit widened to $(2.60) billion.
The company issued $750.0 milliond of 4.0% senior notes due 2022 and $760.0 million of 2017-1C Tower Securities during 2017, and it agreed in February 2018 to issue $640.0 million of 2018-1C Tower Securities to refinance the 2013-1C and 2013-1D securities. Cash from operating activities was $818.5 million. The company repurchased $850.0 million of Class A common stock during 2017, and the board authorized a new $1.0 billion repurchase plan on February 16, 2018.
The company operates as a REIT, effective January 1, 2016, and has never paid a dividend on its common stock. Management states that future distributions depend on available net operating losses, and that $956.7 million of federal NOLs are attributable to the REIT.
The 2017 Tax Cuts and Jobs Act produced a $52.4 million one-time transition tax inclusion and a $31.5 million reduction in deferred tax assets, both reported as provisional. Investors should weigh the company's concentration in four large wireless carriers, which together accounted for 72.0% of 2017 total revenues, and the Oi S.A. reorganization in Brazil.
02—Key points
Key Highlights
- Total revenues increased to $1,727.7 million in 2017 from $1,633.1 million in 2016, and site leasing generated 98.7% of total segment operating profit.
- Net income was $103.7 million ($0.86 per diluted share) in 2017, up from $76.2 million in 2016, with operating income of $458.5 million.
- Adjusted EBITDA rose to $1,204.1 million in 2017 from $1,106.5 million in 2016.
- Total principal indebtedness reached $9,405.0 million at December 31, 2017, up from $8,875.0 million, and the shareholders' deficit was $(2,599.1) million.
- The company repurchased $850.0 million of Class A common stock in 2017 and authorized a new $1.0 billion repurchase plan on February 16, 2018.
- Cash provided by operating activities was $818.5 million in 2017, compared with $742.5 million in 2016.
- Customer concentration remains high: AT&T Wireless, T-Mobile, Verizon Wireless, and Sprint represented 25.0%, 16.5%, 15.2%, and 15.1% of 2017 total revenues, respectively.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Sba Communications kept $0.06.
- Revenue$1.73B100.0%
- Cost of revenue−$446.3M25.8%
- Gross profit$1.28B74.2%
- Operating costs−$822.9M47.6%
- Operating income$458.5M26.5%
- Interest, other & tax−$354.8M20.5%
- Net income$103.7M6.0%
Where FY2017 revenue went
$1.73B- Other operating costs: $692.2M, 40% of revenue
- Cost of revenue: $446.3M, 26% of revenue
- Interest, other & tax: $354.8M, 21% of revenue
- Net income: $103.7M, 6.0% of revenue
- SG&A: $130.7M, 7.6% of revenue
Kept 6.0% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed March 1, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $1.73B$1.63B | +5.8% |
| Cost of Revenue | $446.31M$420.90M | +6.0% |
| Gross Profit | $1.28B$1.21B | +5.7% |
| SG&A Expenses | $130.70M$143.35M | −8.8% |
| Operating Expenses | $1.27B$1.25B | +1.9% |
| Operating Income | $458.50M$387.31M | +18.4% |
| Net Income | $103.65M$76.24M | +36.0% |
| EPS (Basic) | $0.86$0.61 | +41.0% |
| EPS (Diluted) | $0.86$0.61 | +41.0% |
| Shares Outstanding (Basic) | 119.86M124.45M | −3.7% |
| Shares Outstanding (Diluted) | 121.02M125.14M | −3.3% |
05—Questions
Frequently Asked Questions
How did SBAC's revenue and profitability change in 2017?
Total revenues grew to $1,727.7 million from $1,633.1 million, and net income rose to $103.7 million from $76.2 million. Domestic site leasing revenue increased $34.5 million, international site leasing revenue increased $50.6 million, and site development revenue increased $9.4 million. Selling, general, and administrative expenses fell to $130.7 million from $143.3 million, partly because of the $16.5 million Oi reserve recorded in 2016.
How much debt does SBAC carry and how has it changed?
Total principal indebtedness was $9,405.0 million at December 31, 2017, compared with $8,875.0 million a year earlier. The increase came mainly from the $750.0 million 2017 Senior Notes and the $760.0 million 2017-1C Tower Securities, partly offset by repayments. The company states that its cash, revolver capacity, and operating cash flow will be sufficient to service its debt for the next twelve months.
Does SBAC pay dividends?
No. The company states it has never paid a dividend on any class of common stock. As a REIT, it must distribute at least 90% of its REIT taxable income, but it may use available net operating losses to offset that requirement. Management says future distributions will be at the board's discretion and depend on many factors.
What are the main risks tied to SBAC's customers?
The company depends on a small number of wireless carriers. AT&T Wireless, T-Mobile, Verizon Wireless, and Sprint together accounted for 72.0% of 2017 total revenues, and consolidation among carriers could lead to non-renewed leases. Oi S.A., the largest Brazilian customer, filed for judicial reorganization in June 2016, and Oi comprised approximately 7.5% of 2017 total site leasing revenue.
What is SBAC's international exposure?
International operations generated approximately 18.2% of consolidated revenues in 2017. Brazil is the largest international market, with 30.1% of total towers and 13.4% of total site leasing revenue. The company reports that currency movements affect results, and an intercompany loan with a Brazilian subsidiary produced an $8.8 million remeasurement loss in 2017.
06—Continue