Yahoo Finance American Tower Corp (AMT) Q1 2024 Earnings Call Transcript Highlights: Strong Performance and ...
Revenue: Q1 consolidated property revenue growth was 3.3%, or over 4.5% excluding noncash straight line revenue.
Net Income: Not specifically mentioned, but positive financial performance indicated by exceeding initial Q1 expectations.
Earnings Per Share (EPS): Attributable AFFO per share grew by 9.8%.
Free Cash Flow: Not directly mentioned, but implied positive performance through AFFO growth.
Gross Margin: Cash-adjusted EBITDA margins improved approximately 240 basis points year-over-year to 64.9%.
Organic Tenant Billings Growth: Consolidated organic tenant billings growth was 5.4%.
Same-Store Sales: Not applicable as AMT does not operate retail stores.
Store Locations: Not applicable as AMT operates tower and data center platforms, not retail locations.
Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Congrats on the quarter. Just 2, if I could. First, on the U.S., maybe if you can get a little bit more color on the acceleration in activity you saw in the quarter and maybe what that implies for services and new leasing expectations going forward. I'm more curious whether this was broad-based across the big 3 and maybe even DISH or more limited in nature. A: Steven O. Vondran - American Tower Corporation - President, CEO & Director: In the U.S., we're seeing an acceleration in Q1 relative to Q4. Our application pipeline coming in, in Q1 was about 70% higher than Q4. Our services gross margin came in at about $16 million in the quarter, which was higher than we had expected. So what we're seeing is an acceleration in activity that really underpins the guidance that we gave last quarter. And just to kind of reiterate what that is, on our services, we're expecting our services about $195 million in revenue, about $100 million in gross margin. And look, while that services is inherently hard to predict sometimes, the activity we're seeing in Q1 along with the conversations we're having with kind of the boots on the ground teams from our customers, that gives us confidence that we're going to hit that services guide for the year. And so we'll continue to watch it and see how that cadence goes throughout the rest of the year. But everything we're seeing in Q1 gives us some optimism there.
Q: And then secondly, on Data Centers, I think you talked about your highest quarter of signed retail leasing since 4Q '20, any color you can share in terms of what's driving the uptick in new business? And it seems to imply there isn't much in the way of macro headwinds or caution that some of your peers have talked about. But again, just curious if there are any signs of macro caution there. A: Steven O. Vondran - American Tower Corporation - President, CEO & Director: When it comes to CoreSite, yes, we have 2 years of kind of record sales and we have a healthy pipeline this year. And we've got a tough comp compared to last year. So I don't know that we'll achieve another record year of sales, but we're hoping. And we did have a very strong quarter on retail this year, and that was really exciting to see. In terms of the headwinds for that business, we're very optimistic about what we're seeing. Again, what's underpinning the growth in CoreSite right now, the bulk of that growth is being driven by enterprises that are going to hybrid cloud IT infrastructure. And there's a long tail event that we see out there. There's still a lot of companies that have their own data centers, and there are a lot of companies that went cloud native or that had moved everything to the cloud, and they're looking for a different cost structure, and they're going to this hybrid environment. And that's still the biggest driver we have, and we see a very, very long tail of that activity out there.
Q: Just following up on your comments regarding the pickup in domestic activity in the first quarter. Do you see this as a rising tide for the tower category? Or do you see American Tower taking share from your competitors? A: Steven O. Vondran - American Tower Corporation - President, CEO & Director: So what we're seeing in the U.S., it's clearly -- it's 1 quarter results. And again, the conversations that we're having give us the optimism that our guide for the year is kind of spot on in terms of the customer is starting to ramp up. I don't have a lot of visibility into what my competitors are seeing. So I don't think I can give an opinion on whether what we're seeing is materially different than what they're seeing. But when I reflect on what the customers need to do to complete their mid-band 5G rollouts and when I think about what their long-term goals are on their network, there's a lot of work yet to be done. So what I think that we're seeing play out is the same cycle we saw in 4G, the same cycle we saw in 3G, where there's an initial push, then there's a little bit of a slowdown while they're optimizing their network and then there's another push. And I think that we're starting to see that.
Q: Great. Steve, thanks for the comments on the portfolio review. Maybe you could just review the M&A market more broadly. Are there things that you might be looking at doing either buying or selling beyond the India situation? And how you think about that? And then any other things that come out of that, any sort of portfolio assessment? A: Steven O. Vondran - American Tower Corporation - President, CEO & Director: Yes. Sure. I'll start with India. No updates at this point. It's very hard to predict when that approval will come through. So we're still expecting second half of the year. But we'll let you know as soon as we know what's happening on that. In terms of broader M&A, our team is looking at everything that's kind of out there for sale. And that's just part of our standard practice. There's nothing that we're seeing that's compelling that would take us off of our capital allocation priorities that we laid out at the beginning of the year, and that is our first priority of any of our capital allocations paying our dividend, but then we're really focused on delevering after that, making sure we get down to our 5x net leverage. And so when we're looking at the M&A that's out there, there's nothing that we're seeing today that is strategically important or at the right price that would make us change our mind on that at this point.
Q: I want to follow up on Simon's question there on the dividend. I appreciate you can't give a lot of color there yet. But what kind of payout ratio are you trying to achieve that? Is it in like 100% of attributable AFFO per share? Was it more like 90% and the growth rate is going to be more on that long term, again Board decision? But is it more a payout ratio? Or is it an absolute level? Or is it growth that you're kind of pairing up dividend per share with attributable AFFO per share? A: Steven O. Vondran - American Tower Corporation - President, CEO & Director: Well, if we continue to grow it kind of in line with our AFFO per share growth, you can think of that payout ratio staying kind of in that 60% to 65% range.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
