Ladies and gentlemen, thank you for standing by and welcome to the SBA Fourth Quarter Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mark DeRussy, Vice President of Finance. Please go ahead.

Good evening and thank you for joining us for SBA’s fourth quarter 2022 earnings conference call. Here with me today are Jeff Stoops, our President and Chief Executive Officer and Brendan Cavanagh, our Chief Financial Officer. Some of the information we will discuss on this call is forward-looking, including, but not limited to, any guidance for 2023 and beyond. In today’s press release and in our SEC filings, we detail material risks that may cause our future results to differ from our expectations. Our statements are as of today, February 21 and we have no obligation to update any forward-looking statements we may make. In addition, our comments will include non-GAAP financial measures and other key operating metrics. The reconciliation of and other information regarding these items can be found in our supplemental financial data package, which is located on the landing page of our Investor Relations website. With that, I will now turn the call over to Brendan.

Thank you, Mark. Good evening. We finished up an outstanding 2022 with another very strong quarter. Our fourth quarter results were ahead of our expectations and allowed us to finish at or near the high end of our full year 2022 outlook for most metrics. Total GAAP site leasing revenues for the fourth quarter were $609.6 million and cash site leasing revenues were $600.5 million. Foreign exchange rates represented a benefit of approximately $800,000 when compared with our previously forecasted FX rate estimates for the quarter and a benefit of $2.2 million when compared to the fourth quarter of 2021. Same tower recurring cash leasing revenue growth for the fourth quarter, which is calculated on a constant currency basis, was 5.1% net over the fourth quarter of 2021, including the impact of 4.2% of churn. On a gross basis, same-tower recurring cash leasing revenue growth was 9.3%. Domestic same-tower recurring cash leasing revenue growth over the fourth quarter of last year was 8.5% on a gross basis and 5% on a net basis, including 3.5% of churn. Domestic operational leasing activity or bookings representing new revenue placed under contract during the fourth quarter was not as strong as the third quarter, but still solid. We saw meaningful and balanced contributions from each of our largest customers. Full year organic leasing contributions to domestic site leasing revenue ended up in line with our outlook provided on our prior earnings call. During the fourth quarter, amendment activity and new leases each represented 50% of our domestic bookings. The big four carriers of AT&T, T-Mobile, Verizon and DISH represented approximately 95% of total incremental domestic leasing revenue signed up during the quarter. Domestically, we again experienced less churn than we had projected due to timing of merger-related decommissionings being later than we had…

Thanks, Brendan. We ended the quarter with $13 billion of total debt and $12.8 billion of net debt. Our net debt to annualized adjusted EBITDA leverage ratio was 6.9x, which is below the low end of our target range, notwithstanding our significant Brazilian GTS acquisition during the fourth quarter. Our fourth quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was a very strong 4.7x. During the fourth quarter, the company through an existing trust issued $850 million of secured tower revenue securities, which have an anticipated repayment date of January 11, 2028 and a final maturity date of November 9, 2052. The fixed interest rate on these securities is 6.599%. The net proceeds of this offering were used to repay the entire $640 million principal amount of our 2018 1C tower securities, which had an anticipated repayment date of March 2023 as well as to pay certain amounts outstanding under the company’s revolving credit facility and for general corporate purposes. Subsequent to quarter end, we continue to use cash on hand to repay amounts outstanding under the revolver. And as of today, we have $585 million outstanding under our $1.5 billion revolver. The current weighted average interest of our total outstanding debt is 3.1% with a weighted average maturity of approximately 4 years. The current rate on our outstanding revolver balance is 6.0%. The interest rate on 93% of our current outstanding debt is fixed. During the quarter, we did not repurchase any shares of our common stock as we allocated capital to repay amounts outstanding under revolver as a result of the GTS acquisition. We currently have $504 million of repurchase authorization remaining under our $1 billion stock repurchase plan. The company’s shares outstanding at December 31, 2022, were 108 million compared to 109 million at December 31, 2021, a reduction of 0.9%. In addition, during the fourth quarter, we declared and paid a cash dividend of $76.7 million or $0.71 per share. And today, we announced that our Board of Directors declared a first quarter dividend of $0.85 per share payable on March 24, 2023, to shareholders of record as of the close of business on March 10, 2023. This dividend represents an increase of approximately 20% over the dividend paid in the fourth quarter. And with that, I will now turn the call over to Jeff.

Thanks, Mark and good evening, everyone. The fourth quarter was a strong end to one of the best operational years in our history. For the full year 2022, we beat the midpoint of our original full year guidance for revenue by almost 8% for AFFO per share by 5%. We grew our tower portfolio by over 15%, including entering into a new market in Tanzania, which has gone very well. We had a very strong year for lease-up, including one of the best ever internationally. Our Services business had its best year ever, beating the midpoint of our original outlook for services revenue by 46%, and we grew and expanded our relationships with our largest customers worldwide, setting us up for a bright future. During the fourth quarter, our domestic same tower leasing revenue growth was the highest of the year. All of our largest U.S. customers remain busy during the quarter with relatively balanced contributions from each of them as they continued adding equipment to sites in support of the deployment of new spectrum bands. As evidenced by our full year 2023 outlook, we expect the contribution to revenue growth from domestic leases and amendments to be good again this year, and we expect all of our largest customers to stay relatively busy with additional network deployment during 2023, although perhaps at levels slightly below the peak periods of activity we experienced in 2022. Each of the largest U.S. carriers still have significant remaining network needs. So we are confident we will see solid activity on our domestic power portfolio for years to come. Internationally, we ended the year with another very strong organic leasing quarter. During the fourth quarter, 60% of new business signed up in the quarter came from amendments to existing leases and 40% gain through…

[Operator Instructions] And our first question comes from the line of Ric Prentiss with Raymond James. Please go ahead.

Thanks, Jess. First, Jeff, congrats. Grandbabies are fine. I know you’re going to have fun with them as I am and Brendan, looking forward to working with you in your new role.

Thank you, Rick.

Thanks, Rick.

You bet. Two questions, if I could. First, as you think about carrier spending for wireless, obviously, they need to make sure there is revenue and demand out there, what do you all think are the most exciting 5G applications that are coming? And when do customers actually start to get what 5G means? So that’s the first question.

Yes, I think that is the seminal question, Rick. And I think, to be honest with you, I can’t name a 5G application that exists today that is kind of in the got to have category. And I think that’s what the whole ecosystem of wireless is waiting on. And when that happens, and I believe it’s a question of when, not if, you’re going to see a heightened sense of needing to invest and make sure that the competition doesn’t get too far ahead. But until that comes along, I think it’s sensible for our customers, particularly ones that have some promises to the Street on free cash flow and things like that, I think, to moderate. And based on all the commentary and what we heard from Ericsson yesterday, I mean that’s what’s going on.

And then more boring question for the second one. How should we think about the site leasing revenue growth pacing into the years in kind of the front-end loaded versus rear-end loaded. And it looked like that have a couple of major revenue items for other, $12 million in the U.S. and $8 million for international. So maybe unpack that a little bit about what those are.

Yes, Ric. So the pacing this year, we would expect will be higher growth in the first half of the year with a slight step down in the second half of the year. That obviously is dependent somewhat on how leasing activity goes in terms of signing up new business here in the first half of the year. But the first half is pretty much locked in for the most part based on the success of the leasing activity we saw at the end of last year. I mean your second part you were breaking up just a little bit. I think you were asking about the other on international. Is that...

And U.S., it was like $12 million U.S., $8 million international. What should we think those are?

Yes. So it’s a variety of things. In the case of international, there are some increases to pass-through expenses, which is the main driver. And then in the U.S., it’s a mixed bag. There is some other, what we kind of call, cash basis revenue that we’ve assumed will come in the first half. So it’s things like that. That’s really just our estimate of the year-over-year change as opposed to an absolute change as the business gets a little bit bigger, those things tend to grow.

Again, congrats, Jeff, and enjoy the time of the grandbabies.

Thanks, Ric.

And our next question comes from the line of Phil Cusick with JPMorgan. Please go ahead.

Hey, congratulations to both of you, Jeff and Brendan. Well deserved.

Thanks, Phil.

Thank you, Phil.

I wonder if we could just talk about the sort of pace that you assume of either acceleration or deceleration among your carrier customers this year. It seems like through last year, you were sort of looking for somebody to pick up. And maybe they haven’t yet, while others sort of expectation will be slowing down this year. What kind of visibility do you have today?

Well, we’ve got decent visibility. As I just mentioned to Ric, generally, we expect things to be declining in terms of the growth rate from the first half of the year into the second half of the year. The mix varies by carriers. We had a couple of carriers that were extremely busy last year. We expect them to still be busy this year, but perhaps not at the same pace. So I think that’s probably the main driver, those that are picking up and will really just be dependent on the timing of when we see that accelerate. So I think if you look at last year and you look at the pace at which it increased throughout the year, it’s probably a little bit more of a modest decline this year than it was an increase last year.

We still see several or more than one, let’s say, picking up. And really, it’s just the delta between what decelerates versus what accelerates. But they are not all moving, I think. As you know, they are not all equal in terms of their build-outs and what they have accomplished. So the ones that are furthest ahead are likely to have more on the deceleration side, and the ones that still have a long way to go will be accelerating.

Jeff, we’ve mentioned a few years in the past where you’ve been pretty cautious to build in that acceleration in your guidance until you see the orders coming through. Is it fair to say that you’re fairly cautious on that acceleration in the current guide?

In the aggregate, yes, with respect to certain individual U.S. carriers, I mean we know that there will be some acceleration in 2023. But again, the guide is to the aggregate, not just an individual carrier.

Thank you. And then if I can, one more, just how do you think about the math on buybacks now, right? Last quarter, you made clear that borrowing money at the current rates and buying stock where it was then just didn’t make a lot of sense in terms of accretion. I thought your comment today about sort of waiting for better opportunities was interesting. Do you think that either the private markets are going to start coming around given where rates are? Or do you anticipate that the sort of ratio between the current stock price and the current borrowing rates will change?

Well, with the revolver, you have a guaranteed return 6%, right, to pay that back. And the corollary to that is a 16x, at least on today’s AFFO accretion, a 16x acquisition or stock repurchase. We’re always going to be stock repurchases, Phil, and it’s really a question of picking the right time against the right cost of debt capital and that may – there may be very well opportunities to do that this year and we will do that. In terms of acquisitions, I do think the market is starting to narrow the gap a little bit, but there is still a gap. And if we see opportunities like we did Tanzania or GTS, we will take a hard look. But we’re very financially-driven. And something we will have to look better, short, long, medium term than repaying our revolver. I mean we do think that interest rates will come down over time. We are going to be betting on the side of the Fed that they reduce inflation to 2% over time, and we know what effect that will have on interest rates. And when that plays itself out, we will have put ourselves in a great position to access incremental debt at prices that will be much more accretive to what we’re doing, and we’re happy to do that and wait for that time.

Great. Okay, thank you. Congratulations again.

Thanks.

And the next question comes from the line of Simon Flannery with Morgan Stanley. Please go ahead.

Thank you. Good evening, and congrats to you, Jeff and Brendan. On leverage, I think you’ve noted a couple of times, 6.9%, below the target leverage level. So it sounds like even though you referenced perhaps getting to mid-6s, there is really no change despite the rate environment in your long-term target of 7% to 7.5%. Just wanted to clarify that? And then one of your peers noted on their earnings call in January that they are only seeing the big three carriers adding mid-band spectrum to about half of the towers in their portfolio. It would be great if you could just comment on what you’re seeing with your activity from those companies?

Yes. You’re – what you said about how we’re thinking about leverage is absolutely correct, Simon. This is a period of time that we’re tactically steering – and we may not. We may see an acquisition tomorrow that looks much better than paying down the revolver at 6%. And if we do, that’s what we will do. But if we don’t, the natural result of the cash flows that we generate will be deleveraging, but it will only be temporary until such time as we believe incremental debt at the prices then available will create additional value, and that’s what we will do.

Yes. And then on the carriers adding mid-band only half the sites, I can’t speak to what the others are talking about. I think it’s our belief and expectation that they will add it to the vast majority of their sites. That comment may have been related to where they are today, which parity. And there is still a long way to go, I think, is the overarching message here. A lot of our sites have not been touched yet. But based on backlogs and communications with our customers, we expect that, that will come over the coming years.

Yes. And actually, if you’re speaking today, Simon, we actually think that we’re a little bit less than that on the aggregate for all three. So there is a lot of work left to be done. But it ties into the question Ric asked me first that is the – what is going to cause the carriers to really spend everything this year to get there, and I think we have to see the killer 3G app that is going to provide the impetus to do that. I said 3G app, 5G app.

Right. So this is probably not a year where you necessarily will hit that 5% to 10% portfolio growth. You were strong last year. But if the opportunity is there, you’ll do it, but you’re not going to just do it to keep up that sort of target.

No, no. And if you look at what we’ve done over the last 10 years on that metric of portfolio growth, I think we’re north of 10%. So it’s not every year necessarily. This may not be the year that we do that, but we did 15% last year. So I think overall, our views around portfolio growth and leverage have not changed.

Great. Thanks a lot.

And the next question comes from the line of Greg Williams with Cowen. Please go ahead.

Great. Thanks for taking my question. Just echoing the congrats to Jeff and Brendan. Just wanted to revisit the M&A landscape question. I mean there seems to be two camps on where multiples are headed in the private assets. One is – some believe private capital is going to – that’s on the sideline is eventually going to dry up and private multiples could come down a bit. The other camp, the scarcity of assets, especially U.S. assets and the tower multiples should stay elevated. It sounds like you’re waiting for rates to come down so the multiples will stay higher. I’m just curious to hear your thoughts on those views. Second question is just on service margins. I mean your service revenue is coming down understandably from record levels. But how should we think about the type of service activity and the margins year-over-year? Thanks.

Well, I mean rates versus multiples. If you look at any kind of traditional economic analysis, there should be a relationship between one and the other. We didn’t see a lot of that over the last couple of years. As rates have gone up, multiples really did not drop the way they should have had, at least using our math. That’s starting to change a little bit, and we will have to see. We will have to see whether the amount of private capital on the sidelines will long-term push returns down in the acquisition market across the board. We’re not prepared to invest with those returns. We’ve got higher goals, and we pick and choose. And so far, I think we’ve been pretty pleased with the capital we’ve invested versus the return that we’re seeking, but I think it remains to be seen.

And then Greg, on your services margin question, our outlook assumes a slightly lower margin for services work this year, and that’s based on primarily just a slight shift mix – sorry, shift in the mix of whether it’s construction or site act type of work. So the construction stuff is usually a little bit lower margin, also a mix on the type of work and who we’re doing the work for has some impact. But from a big picture standpoint, it’s a fairly small drop from what we had last year, and we will see how it shakes out. If it ends up being the same, we will have slightly better results than we projected.

Got it. Thank you.

And the next question comes from the line of Michael Rollins with Citi. Please go ahead.

For the first question, I’ll preface this by saying that I realize it hasn’t even been 2 hours since you’ve given the full year 2023 guidance. But a question that keeps coming up is if the second half of 2023 in the U.S. business decelerates, what does that mean for growth in 2024? And Jeff, I realized you made some comments both in the release and on today’s call about some of those prospects. But just wondering if you could put more color on how you’d like investors to feel about this multiyear transition and leasing opportunity, if you could put some guardrails around it. And then just secondly, if you can give us an update on what the build-to-suit opportunities might look like more broadly over the next few years. And is there a way to accelerate that program to get greater portfolio growth?

Yes. I think the way we think about leasing, Michael, is there is a lot of work left to be done on our assets domestically and internationally to deploy 5G, multiple years’ worth of work. But ultimately, whether – how far that goes and at what pace will depend on how much and how fast carriers want to spend money. So we – it’s going to – we’re confident it’s going to occur. It’s just a question of when and at what pace. But the physical work that is yet to be done is tremendous. There is just a lot left to be done. Now I guess you could take the – because if you were a naysayer, you could take the position that, well, they are just never going to deploy all that spectrum that they spend all that money on, but that seems to be a bit forward. So, those are the guardrails that we are looking at. And right now, and this could certainly change based on pickups in activity, that we are going to have a very strong 2023, where the first half is weighted more heavily than the back half. And in terms of build-to-suits, we are pushing that business line, both in the U.S. and internationally. We continued to be financially-driven in the investments that we make in that area. So, not every build-to-suit is necessarily, at least in our view, an appropriate return on capital. But we are going to seek out and try and take all the ones that we think do fit those goals.

And just a curiosity, where are year one returns for the build-to-suit program?

We are looking for 9%, 10%, 11% cash-on-cash returns, and that’s not every opportunity that’s out there.

Yes. And that’s a multiyear. Year one will obviously vary depending on the specific situation. And frankly, Mike, that is the analysis around new build opportunities is not that different than it is for M&A, where a lot of these opportunities are competitively bid like the M&A deals are. They are just competitively bid with typically with carriers handing out those opportunities. So, we do our best when we are able to find strategic opportunities to build, but the volume there is obviously less. On the build-to-suit opportunities, we are making a financial decision. So, we would certainly like to continue to boost our portfolio numbers, but it’s all about the financial returns, and so we will be selective there just like we are on the M&A market.

Thanks.

And next, we will go to Brett Feldman with Goldman Sachs. Please go ahead.

Thanks. And I will just echo everyone else’s congrats both, Jeff and Brendan. Two questions. One, the SG&A looked a little higher than we thought. I wasn’t sure if that’s a step-up related to some of the assets you acquired in the quarter, if maybe there is any inflationary pressures that are flowing through the P&L that we need to be thoughtful about as we model out next year or this year. And then you pointed out that the dividend payout is still a very low percentage of your AFFO. I am just wondering where are you in terms of the payout relative to your taxable income? And do you anticipate that the payout is going to be able to remain at a relatively low portion of your AFFO, or could something on the tax component of that change quickly over the next few years? Thanks.

Yes. Just so on the – I will do the dividend one first. We have pretty significant NOL still. I believe the number is somewhere around $585 million of NOLs as of the end of the year. So, that gives us a decent runway, and we should be able to keep our percentage of AFFO at a manageable level. And although it will grow certainly each year, if we continue to grow our dividend at the same pace we have been, I still think we have got many, many years left based on how we model it out. On the SG&A side, going forward, we did include certain bigger increases in our outlook that are largely around inflationary-type costs. Most of our SG&A is people-related costs. And on average, we are giving bigger increases to people this year than we have in past years. Just cost of living is increasing, and also to be competitive in the marketplaces that we are in. So, it’s mostly that, there is nothing in particular, I think to call out on it otherwise.

Yes. But I would echo you ought not assume that that’s going to be the same pace of increase over a multiyear period, Brett. Thanks.

Thank you.

And the next question comes from the line of Nick Del Deo with SVB MoffettNathanson. Please go ahead.

Hey. Thanks for taking my questions and Jeff and Brendan, again, I also want to echo the other’s comments and congratulate both of you on the upcoming changes. I guess first, you noted in your prepared remarks that revenue placed under contract in Q4 wasn’t quite as strong as in Q3 and your backlogs have ticked down a bit. Are these changes of the magnitude you consider kind of typical in the course of business and to be expected? And can you share anything about what you have seen year-to-date in ‘23 along those lines?

I mean they are clearly part of the cycle of wireless deployments over the last 20 years, Nick. We actually – we are looking at charts – internal charts today about the pace of activities on a quarterly basis, and this period of time really was some – one of the longest that we have seen going back to before the 3G to 4G upgrades. So, it’s not unusual. And deep down, there is two things that our customers really care about. Are they losing ground because there is some kind of great competitive pressure coming from somewhere, and what’s their free cash flow, and what did they promise the investment community. And what I think is going on now is simply a balance of that. But I would steer people to the comments we made earlier about this being a temporal thing because the physical amount of work yet to be done to bring 5G, at least to our assets, there is still a lot left.

Okay. And then I also wanted to drill down a little bit into the agreement you reached with TIM. I think you said there would be about $10 million in churn from that in 2023. Does that take care of all of your expected Oi churn from TIM. Are there any benefits to SBA aside from the term extension? And just think about Oi more generally. I think in the past, you said you expected about $20 million to $30 million in total churn. With this deal done, should we assume, call it, $10 million to $20 million from the other acquirers, or are you now able to tighten that up some?

Yes. First, yes. This would account for all of the Oi consolidation-related churn with TIM. There should not be any more based on the agreement that we struck. The total remaining would be – in the ballpark, I would say that it’s a little bit higher because of the GTS acquisition if you recall. So, I would call it 23% to 33% is – I am sorry, that’s a total $23 million to $33 million, minus the $10 million. So, yes, I mean I think we are – we will see where things go with the other carriers down there as we have conversations. So, those are to be seen, but for TIM, this would be it. Nick?

Yes, sorry. And then aside from the term extension, nothing else to consider from our side of the deal?

Yes. I mean there are some other things. There are some other business commitments that are part of the agreement as well, and there is a variety of smaller things. But the main gist of this is some accelerated discount to their leases, long-term commitments across the entire portfolio, including non-Oi related agreements and some future business commitments.

Okay. Thank you.

And our next question comes from the line of David Barden with Bank of America. Please go ahead.

Hi everyone. This is Alex on for Dave. First off, I just want to send our congratulations to you both Jeff and Brendan. Maybe just first on the international new leasing just flat year-over-year, does the expected cadence for that, should that – should we see that kind of ramp up through the year and exiting 2023? And then I know you just kind of touched on some of the carrier dynamics in Brazil. Could you maybe just touch on the spectrum auction as well as the recent presidential election last year? Thanks.

Yes. The international leasing revenue cadence should be fairly balanced throughout the year. Unlike in the U.S., when we talked about a decline, that’s really U.S.-related. Internationally, we would expect it to be pretty steady throughout the year. And then on the other – I am sorry, the other carriers in the 5G auctions. Yes, I mean we are – those auctions have put spectrum into the hands of these carriers. With the consolidation now of Oi, it’s going to – we believe it’s going to actually be positive long-term. Once they kind of get beyond these synergies, there is some work to be done here in this first year or 2 years post merger. But I think as they get beyond that in order to compete as we believe they will now much more on network quality and 5G services, we expect that to be a big driver of leasing growth going forward. And just as it happens here in the U.S. and in other markets, the need to put that spectrum to work is the only way to get that investment to pay off. So, we believe there is a lot of opportunity longer term now in Brazil as a result.

And in terms of the political landscape, Lula obviously took the presidency, but the Bolsonaro group took the rest of Congress. So, you have what you have similar to the United States, which is a split Congress. And when that typically happens, it’s the same that occurs here, which is it’s very hard to get anything done there materially. And that ultimately, I think endures to the benefit of existing businesses. So, we don’t – in the current landscape, where you have that kind of a split representation, we don’t anticipate anything material coming out.

Thank you.

And our next question comes from the line of Brendan Lynch with Barclays. Please go ahead.

Great. Thank you And congrats to Jeff and Brendan on the new developments. There was a lot of questions on M&A. Maybe you could discuss potential new markets and give us an update on the Philippines and Tanzania. And then secondly, Brendan, if I heard you correctly, there weren’t any collections issues related to Oi, but accounts receivable did tick up about $67 million quarter-over-quarter. Maybe you could provide some color what’s behind that. Thanks.

Yes. On the last one, the tick-up is really actually just a timing issue in terms of collections because of the year-end. It’s as simple as where the holidays fall and where payments were made, plus there were some services-related AR that we expect will actually come down over time.

Yes. In terms of M&A, I mean we continued to take an opportunistic approach to new markets. We will go into a new market based on our demographic and operational analysis as well as country stability, risk, taxation, currency. So, with certainly some exceptions that we would never look to go into under current circumstances, any country that we are not in today is a potential opportunity. And Tanzania is doing very well. Tanzania is ahead of our internal projections and the modeling that we did at the time of the acquisition. It is a dynamic country that is growing, and we are very optimistic about the future in Tanzania.

Okay. Thank you.

Next question.

Next question comes from the line of Batya Levi with UBS. Please go ahead.

Great. Thank you. Congrats to both. A couple of questions. First, on the domestic churn, you have been pushing it out throughout the last year or so. Is it truly just timing, or do you think that some of that decommissioning activity that the carrier anticipated is actually not going to pan out, or is it a mixture of both? And to the extent that you see activity from carriers where they support fixed wireless service, have you started to see some incremental amendment activity in that region, or is it too early to tell? Thank you.

On the domestic churn, the timing, which is all Sprint, T-Mobile merger-related is truly just timing. We expect that the total amount that we will incur will be the same as what we have kind of guided to in the past. We just think it takes a little bit longer to get some of that done, but we don’t expect any changes.

Yes. And in terms of the fixed wireless, we believe what our customers say that it basically is a product that results from excess capacity that currently exists in the network after at least where they have deployed a lot of mid-band spectrum. That really just works off the existing macros bat yet, so we haven’t seen anything that we would clearly and particularly identify as incremental. Although there have been some reports where microwave, millimeter wave spectrum would be broadcast off the macro sites to help with the fixed wireless initiative. We hope that comes to pass, obviously, but we haven’t seen that happen just yet.

Alright. Thank you.

And our next question comes from Brandon Nispel with KeyBanc. Please go ahead.

Hey. Thanks for taking the questions. Brendan, a question for you, the guidance for leasing, I am afraid I am going to ask this just a different way than everybody else has it. But the guidance for leasing for $72 million, you exited at about $21 million this quarter on my numbers. So, it seems to imply an exit rate in ‘23 of $15 million to $16 million. I guess is that right? And then as we think about building our forecast for ‘24 if you are exiting around that level, historically, you guys have grown new leasing by the $40 million to $50 million cap. What would be the swing factors in terms of keeping that $15 million to $16 million exit rate holding steady in ‘24 versus maybe trending lower? Thanks.

Yes. That’s in the right ballpark, Brandon, in terms of where we would think that we will exit that sort of what’s assumed in our $72 million number. That is in that range. What would swing it in terms of what happens after that is really dependent on what happens in terms of new bookings signed up during the second half of this year, the pace of that. If it’s ahead of our pace, it’s not going to have much impact on our assumed pace, it’s not going to have much impact on 2023, but obviously, it will drive what happens in 2024. So, it’s a little early to be able to talk about that, obviously, but the biggest impact is going to be based on what’s happening in terms of new business we are signing up the second half of this year.

I guess just a follow-up on that. Two of your larger customers have sort of guided us to lower capital spending in ‘23 and ‘24. So, I am curious what would drive the leasing number to ever be better than $72 million. Do we need to see another spectrum auction? Is there going to be another sort of massive ground of densification of the existing spectrum bands? Is it a new customer? It’s going to be a new 5G use case, just trying to get a sense of sort of your thoughts around 5G more holistically in that regard.

Yes. I think that it’s really a function of how many of our customers are hitting on all cylinders at the same time. It’s usually just concentration more than it is anything else. Our biggest lease-up periods throughout our history have come when all of our customers have been busy at the same time. Usually, that’s the biggest driver. If you have them do it over time, it just basically spreads it out more, but it doesn’t necessarily change the total. So, that’s probably the biggest answer. I mean obviously, there are other things that are out there that are more specific. I mean DISH has certain obligations in 2025. That of course, could be a driver to activity levels with them. T-Mobile’s got C-band spectrum that’s clearing at the end of this year as well as 3.45. They haven’t really deployed any of that. So, there is a variety of specific things that you could point to by carrier that could be drivers of accelerated activity at a given point in time, but that’s really to be seen in terms of the timing. Ultimately, though we expect all of those things to drive incremental business to our site, it’s just a question of when that happens.

Yes. And I would just add, and this comment goes throughout all the comments. We have been careful with our guidance and with our commentary not to get ahead of our customers. I mean ultimately, the answer to your question is how much money they decide that they are going to – we are not going to change the amount of money they are going to spend. They are going to spend what they decided they need to spend under the current competitive capital and other dynamics.

Thank you.

And our last question comes from the line of David Guarino with Green Street. Please go ahead.

Hey. Thanks. Two questions on your guidance. I will ask on both upfront. The first one on the escalation guidance for your international markets, I was wondering if you could just comment on why given the higher CPI last year, why are we – we are seeing flat growth in that number year-over-year? And then on your discretionary CapEx guidance, I am assuming there is no acquisitions included in there, but it looks like it’s going to be up pretty significantly versus last year. Is that some data center investments, or is there any other type of CapEx that’s driving that higher in ‘23? Thanks.

Yes. So, on the international escalations, the dollar amount is flat. The CPI was certainly elevated during 2022. We are projecting it to be lower in Brazil, which is by far, our largest international market in 2023. But it’s – while it’s lower next year, the timing of when those escalations take place has an impact. So, some of the higher escalations of ‘22, some of that benefit carries over into 2023, and our assumed lower rate obviously then offset some of that benefit. Plus, we have a little bit bigger base of business, of course, with the GTS acquisition in particular. So, when you put it all together, we ended up with basically about the same dollar amount of growth impact, but we are assuming that the CPI rates come down year-over-year. So, that’s offsetting what you might otherwise see as an increase. And on the discretionary CapEx, there is a small amount of contracted M&A in there, which we actually disclosed how much is under contract in our press release. But the balance of that is made up of assumptions we have made around new builds, around data center upgrades, around some DAS networks that we are investing in, basically everything else. The only thing that we don’t include in there is an assumption around M&A because it’s obviously lumpier and hard to identify what that’s going to be sitting here today. But the rest of our discretionary investment plans, the guidance kind of reflects those assumptions.

Great. Thank you.

And we have no other questions in queue. I will turn the conference back over to you.

Thank you, Eric. And thank you everyone for joining us. We look forward to advising you on our progress in 2023 as we move through the year.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T conferencing service. You may now disconnect.