American Tower Corp Earnings - Q1 2025 Analysis
Positives
- The company exceeded its initial expectations across property revenue, adjusted EBITDA, and attributable AFFO per share for Q1.
- The company's US services business delivered its highest quarter of revenue and gross profit since 2021, with applications rising nearly 30% compared to Q4 of 2024 and up roughly 60% versus Q1 of 2024.
- The company had a very strong, very good quarter in Q1, with EBITDA and AFFO.
- The company complemented durable top-line performance with prudent cost management, providing YoY cash-adjusted EBITDA margin expansion of nearly 70 bps to 68.2%.
Q&A Highlights - Q1 2025
Analyst asked about American Tower's portfolio and potential acquisitions, specifically in Canada.
American Tower has an authorization from the board to use up to $2 billion for stock buybacks. The company is currently focused on delevering and creating long-term value, and will consider stock buybacks, M&A opportunities, internal CapEx programs, and further delevering when making capital allocation decisions. The company has closed a small transaction in the US this year and will continue to be opportunistic in the M&A market. Canada is an interesting market for American Tower, and the company has a small portfolio there that is performing well. The company has the ability to operate in Canada from the US and would consider a transaction if the terms and conditions and valuation are favorable. The company is patient and will wait for the right deal.
Analyst asked about the breakdown of colocation amendments and new revenue in Q1.
The company saw an increase in both colocation amendments and new leases, with the percentage of contribution from colocations increasing slightly. The base has gotten bigger, so the proportion shift is not huge. There is still a lot of amendment business to be done on their portfolio, with one carrier being at 80% deployed, another at 65% to 70%, and another at 50%.
Analyst asked about the contribution of service revenue growth from one carrier's RAN upgrade versus traditional service revenue.
The service revenue growth is broadly based, with construction services being more regional for one carrier but not indicating anything specific. The rest of the services business is also broadly based.
Analyst asked about the organic growth of the company's services business, specifically whether it is dependent on one carrier's RAN upgrades.
Steven O. Vondran, CFO of American Tower Corp, explained that the company's services business growth is not dependent on one carrier's RAN upgrades, but rather a combination of factors, including new colocations, amendments, and general activity levels on the towers. He mentioned that the company captures a high degree of this activity in its services business.
