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01/10 16:02
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights a strong financial outlook with raised expectations for revenue and AFFO, a robust pipeline, and positive growth in CoreSite. Despite some uncertainties like the book-to-bill delay and churn, the overall sentiment is optimistic with strategic investments in high-return projects and a significant dividend plan. The Q&A session reinforces this with confidence in long-term growth and efficiency improvements, though some details were unclear. The positive guidance and strategic asset management suggest a likely positive stock reaction.
Consolidated organic tenant billings growth 4.7% year-over-year growth. Driven by strong demand across the global portfolio, including a 3.7% growth in the U.S. and Canada segment (greater than 5% excluding Sprint-related churn) and 6.5% growth in the International segment. Slightly lower contributions from escalators and churn in the International segment impacted growth.
U.S. services business gross profit Greater than 100% year-over-year increase. Propelled by outsized construction services and strong application volumes among the big 3 customers, which were up over 50% year-over-year.
CoreSite revenue growth Double-digit revenue growth and gross margin expansion. Fueled by hybrid cloud demand and AI-related use cases, including inferencing, machine learning models, and GPU as a service.
Property revenue 1.2% year-over-year growth (more than 3% excluding noncash straight-line revenue). Negatively impacted by 2% due to a change in nonrecurring revenue and 70 basis points of FX headwinds. U.S. and Canada property revenue declined by more than 0.5% but grew approximately 3% excluding noncash straight-line revenue. International property revenue grew approximately 1% year-over-year and 3% excluding FX fluctuations. Data center property revenue grew over 13%.
Adjusted EBITDA 1.8% year-over-year growth (approximately 4.5% excluding noncash net straight-line revenue). Growth was supported by direct expense management and a high conversion of cash property revenue, partially offset by nonrecurring revenue benefits in the prior year, increased bad debt in Latin America, and other nonrecurring costs.
Attributable AFFO and AFFO per share Declined by approximately 6.7% and 6.8%, respectively. This was primarily due to more than $65 million of prior year revenue reserve reversals in the India business. On an as-adjusted basis, AFFO per share growth was approximately 2.4%, driven by effective management of below-the-line costs and high conversion of cash adjusted EBITDA growth to AFFO.
CoreSite Data Center Business: Exceptional performance with double-digit revenue growth and gross margin expansion. Increased 2025 expectations due to the acquisition of the DE1 facility and elevated demand for hybrid and multi-cloud IT architecture.
5G Network Expansion: Carriers in developed markets are expanding 5G networks aggressively, while emerging markets are completing 4G rollouts and starting selective 5G deployments.
International Market Growth: Africa shows robust growth with stabilized carrier landscape and early 5G deployments. Latin America sees modest growth with consolidation in Brazil and regulatory commitments driving new activities.
Leasing Momentum: Strong leasing momentum with a 4.7% growth in consolidated organic tenant billings. U.S. services business had a near-record quarter with a 200% year-over-year increase in co-locations.
Financial Performance: Adjusted EBITDA grew 1.8%, with a 4.5% increase when excluding noncash net straight line. AFFO per share growth is expected to be 6% year-over-year on an as-adjusted basis.
Capital Allocation: Deployed over 75% of discretionary capital in developed markets, rising to over 85% when including acquisition capital. Strengthened balance sheet by issuing EUR 500 million in senior unsecured notes.
Mobile Data Consumption Decline: Mobile data consumption continues to decline, which could impact network capacity demand and revenue generation.
5G Rollout Variability: Significant differences in mid-band rollout progress across the portfolio could lead to uneven revenue opportunities and operational challenges.
Latin America Growth Challenges: Growth in Latin America remains muted with persisting low single-digit growth expectations through 2027, elevated churn levels, and carrier infrastructure rationalization.
Customer Collection Issues in Latin America: Increased bad debt associated with Latin America customer collections poses financial risks.
Slower Commencements in U.S.: Slower-than-anticipated commencements related to a U.S. customer could impact organic tenant billings growth and revenue timing.
Churn from Sprint in U.S. and Canada: Sprint-related churn continues to negatively impact property revenue in the U.S. and Canada.
Foreign Exchange Headwinds: FX headwinds have negatively impacted property revenue and adjusted EBITDA.
Energy and Momentum in Europe: Spectrum extensions and 5G rollout obligations in Germany could lead to long-term investment needs, posing financial and operational challenges.
Consolidation in Brazil: Carrier consolidation in Brazil has normalized but continues to result in elevated churn and infrastructure rationalization.
Bad Debt and Nonrecurring Costs: Increased bad debt and other nonrecurring costs have negatively impacted adjusted EBITDA.
Mobile Traffic Growth: Mobile traffic growth rates in developed markets (U.S., Canada, Europe) are expected to slightly outpace global averages over the next 5 years, driven by data-intensive use cases like mobile video, AI, and new devices.
5G Network Expansion: Carriers in developed markets are working towards 2026 5G coverage goals, with early densification and colocation activities expected to improve network quality. Emerging markets are focusing on 4G rollouts with selective 5G deployments in urban areas.
Application Volumes: Total application volumes increased by more than 50% year-over-year, with colocations comprising a growing share of the application mix for major customers.
Europe Market Trends: Mid-band coverage in Europe stands at 55%, slightly ahead of the continental average, with significant runway for coverage-oriented activity as carriers pursue 2030 rollout targets. Spectrum extensions in Germany are expected to unlock long-term investments.
Emerging Markets Outlook: Africa shows robust growth with stabilized carrier landscapes and early 5G deployments in urban areas. Latin America growth remains muted, with low single-digit growth expected through 2027, though Brazil shows signs of stabilization and new activity.
Data Center Business: CoreSite's 2025 expectations have been increased due to growth from the DE1 facility acquisition and elevated demand for hybrid and multi-cloud IT architectures. AI-related workloads are driving sustained favorable pricing and pre-leasing environments.
Financial Projections: 2025 property revenue expectations increased by $165 million, adjusted EBITDA by $120 million, and AFFO per share by $0.12, reflecting FX tailwinds and core property outperformance.
Capital Expenditures: 2025 capital expenditures are projected at $1.7 billion, with a reduction in Latin America site builds and consistent data center spending.
Dividend Distribution: We continue to expect to distribute approximately $3.2 billion to our shareholders as a common dividend, which remains unchanged from our prior expectation and subject to Board approval.
The earnings call summary shows mixed signals: strong growth in application volumes and positive financial projections, but challenges with DISH and uncertainties in guidance due to ongoing lawsuits and unclear management responses. The Q&A highlights risks, such as the EchoStar lawsuit and potential impacts from space-based players. While there are positives like increased demand for hybrid cloud and AI installations, the negative aspects and lack of clarity in some areas balance out the positives, leading to a neutral sentiment.
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