Q3 2024 Summary
Published Feb 7, 2025, 7:58 PM UTC| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -10% | The decrease was primarily driven by a steep drop in Property Revenue (-12% YoY), notably in Latin America (-12% YoY) and Asia-Pacific (-98% YoY), which overshadowed the strong gains in Services (+100% YoY) and Data Centers (+10% YoY). |
Property Revenue | -12% | A pronounced decline in Asia-Pacific (-98% YoY) and lower activity in Latin America (-12% YoY) drove the overall property revenue down, despite modest growth in Europe (+6% YoY). |
Services Revenue | +100% | Accelerated carrier activity and new project deployments in the U.S. underpinned the doubling of services revenue relative to the prior period. |
Asia-Pacific Revenue | -98% | A sharp revenue contraction was largely due to reductions in tenant billings, currency headwinds, and the loss/restructuring of key customer contracts, resulting in a near-complete revenue drop compared to the prior year. |
Europe Revenue | +6% | Growth was supported by CPI-linked escalations and continued 5G amendment activity, offset by mild churn. |
Latin America Revenue | -12% | Reduced leasing demand, foreign currency pressures, and churn outweighed positive escalations and modest colocation activity, contributing to the overall revenue decline. |
Data Centers Revenue | +10% | Elevated demand for hybrid and multicloud IT solutions resulted in new lease commencements, higher power usage, and strong backlog conversions, driving double-digit growth. |
Operating Income | -30% | Lower top-line performance in key regions and higher expenses (e.g., foreign currency impacts and certain overhead costs) weighed on profitability, leading to a notable decrease in operating income. |
Net Income | - $792.3 million (down from $577.3 million) | A large net loss was driven by impairment charges, potential asset write-downs, and increased interest expense that collectively offset any gains from services or data centers; foreign currency swings also contributed to the negative figure. |
EPS (Diluted) | - $1.70 (from $1.25) | The net loss and accompanying higher expenses drove earnings per share sharply downward, reflecting the substantial reduction in net income and indicating ongoing challenges in core markets. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Property revenue | FY 2024 | Increased by approx. $20M from prior outlook | Increased by approx. $15M from prior outlook | raised |
Adjusted EBITDA | FY 2024 | Increased by $130M from prior outlook | Increased by $5M from prior outlook | raised |
Attributable AFFO per share | FY 2024 | $10.60 midpoint | $10.53 midpoint | lowered |
Dividend distribution | FY 2024 | no prior numeric guidance | $6.48 per share | no prior guidance |
Organic tenant billings growth (cons.) | FY 2024 | no prior guidance | ~5% | no prior guidance |
Organic tenant billings growth (intl.) | FY 2024 | no prior guidance | ~6% | no prior guidance |
Capital expenditures | FY 2024 | Increased by $55M from prior outlook | Removal of $105M (India), ≥$480M for data centers | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Property Revenue | Q3 2024 | Increase by $20 million | 2,469.9 | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
U.S. 5G densification | Previously projected ~4.7% organic growth for 2024, and around 5% long-term, referencing ongoing 5G densification. | Shift from ~6% to mid-4% organic growth in 2025, with a step-down to ~4% in Q4 2024. | New emphasis on mid-4% for 2025, down from ~6%. |
Sprint churn | Consistent mention of final churn in Q4 2024 limiting near-term growth (to ~4.7% in 2024). | Final tranche hits in October 2024, reducing Q4 growth to ~4%, recovering by 2025. | Churn finalization reaffirmed, with expected rebound in 2025. |
CoreSite data center growth | High growth in earlier calls, underpinned by hybrid multi-cloud, AI workloads, and strong pre-leasing. | Record leasing and AI-driven demand sustaining double-digit revenue growth; strong backlog. | Momentum sustained with AI demand as a key driver. |
Latin America churn | Less detail on WOM Colombia; churn mostly attributed to Oi. | WOM Colombia bankruptcy introduced, reducing revenues; Oi consolidation still a headwind. | WOM bankruptcy is a new factor adding churn pressure. |
FX headwinds | Significant headwinds noted in prior periods (e.g., ~$51M in Q2). | ~$25M revenue, $20M EBITDA, $17M AFFO impact; persistent exposure in emerging markets. | Continues as a major recurring challenge. |
India business sale | Pending approval in prior calls, with expected ~$0.08-$0.09 per share impact if closing in late 2024. | Transaction closed on September 12, 2024; ~$0.12 AFFO dilution, establishing a new baseline of ~$9.95. | Completion provides clarity; short-term AFFO dilution. |
Dividend growth outlook | Previously held flat for 2024; expected to align with AFFO in the long term. | Planned resumption of increases in 2025, aiming for mid-single-digit growth tied to AFFO. | Unchanged guidance; resumed increases reaffirmed. |
Financial management & leverage | Consistent emphasis on SG&A reductions (~$40M in Q2) and leverage near 5x. | Focus on cost control, reducing SG&A by ~$17M and lowering floating-rate debt. | Continued drive for efficiencies, reinforcing balance sheet. |
Consumer data usage | Q2 invoked 20%-30% usage growth, while Q1 referenced rising average consumption (~30GB/month). | No explicit 20%-30% metric; only mention of ~20% CAGR in Europe. | Less direct spotlight on precise usage increases. |
Sustained AFFO growth | Upper single-digit outlook in prior calls, supported by robust data center business and 5G developments. | Expects mid- to high single-digit growth, driven by AI data center expansion and 5G rollout. | Confidence remains with AI and 5G as long-term catalysts. |
-
2025 U.S. Lease Activity
Q: Directionally, how should we think about '25 new lease activity versus '24 in North America?
A: Management expects the U.S. growth rate for next year to be in the mid-4% range. This considers the final Sprint churn hitting in October, which will weigh on results by about 100 basis points. Without the Sprint churn, growth would be in the mid-5% range. They are beginning to see the densification phase from customers, which aligns with expectations. There are still some uncertainties with one customer not on a comprehensive agreement and potential new colocations outside of MLAs. -
AFFO per Share Guidance
Q: How should we think about stepping down from $10.60 to $10.48 to $9.95 in AFFO per share, and is $9.95 our jump-off point for 2025 growth?
A: The original AFFO per share outlook was $10.60. Selling India in Q4 removed $0.12 per share, bringing it to $10.48. India outperformed by $22 million, offset by a $17 million FX headwind, leading to $10.53 AFFO per share. Excluding India's contributions and accounting for interest savings from debt repayment reduces AFFO per share by $0.58 to $9.95. This $9.95 is the best representation of continuing operations and serves as a starting point for 2025, which they expect to grow to around $10.50. -
AFFO Growth Rate Outlook
Q: Is AFFO per share now a mid-single-digit growing business? Can you get back to high single digits? What tailwinds or headwinds could affect this?
A: Management believes achieving a mid-single-digit AFFO per share growth rate is possible and getting above that is absolutely possible. They are pleased with the portfolio's strength and increased earnings quality after selling India. The U.S. business can grow in the mid-single digits, aligning with their long-term guide of at least 5% growth. Latin America can grow faster but expects low single-digit growth in the next few years due to churn from carrier consolidation. Factors like FX volatility and interest rates are headwinds to watch. Over time, they can get beyond mid-single-digit growth. -
CoreSite Record Leasing
Q: What are the leasing numbers for CoreSite, and how does the pipeline support double-digit revenue growth?
A: While specific numbers aren't provided, current leasing is significantly higher than before the acquisition. They have over 40 megawatts of construction ongoing, about 60% pre-leased. The backlog is around $70 million, with most revenue commencing between now and the first half of 2025. They expect double-digit growth for several years due to continued strong demand. -
Reporting Adjusted AFFO
Q: Will adjusted attributable AFFO be reported ongoing as the anchor for 2025 growth discussions?
A: Yes, they will discuss this metric for as long as it's applicable until they lap the India sale. -
Dividend Growth Outlook
Q: Is mid-single-digit AFFO growth the right way to think about dividend growth, and how does it affect payout ratios and leverage?
A: Management expects dividend growth to resume in 2025 and anticipates it will closely mirror the mid-single-digit AFFO per share growth rate over time. The dividend payout ratio would remain around 60% to mid-60%, leaving $1.5 to $2 billion for capital deployment. -
CoreSite CapEx Plans
Q: Would you increase CoreSite CapEx beyond $480 million, and what are the parameters for capital commitment to data centers?
A: They are not constraining CoreSite's capital and could see CapEx grow into the $600 to $700 million range. They can underwrite mid-teens or better development yields, and high pre-leasing levels make it low risk. They will continue to fund developments aggressively and will provide 2025 expectations later. The numbers suggested are reasonable. -
European Tower Acquisitions
Q: Would you consider acquiring European tower assets if they become available?
A: They are open to replicating what they did with Telxius but don't feel compelled to do so. They have adequate scale in Germany and Spain, and would like more in France. They are patient and disciplined and will not buy assets that don't meet their investment criteria or have unfavorable terms. -
CoreSite Expansion and Inference
Q: Is the large land purchase for CoreSite's new development, and can you elaborate on inferencing progress?
A: Yes, the land purchase in L.A. is to expand CoreSite's campus and continue serving customers. They see robust demand for inferencing and are writing contracts, but are selective about counterparty risk. While the edge is developing slower than expected, the inferencing layer shows strong demand. -
Domestic Colocation Trends
Q: Are you seeing changes in colocation versus amendment mix, and will network expansion be included in current agreements or offer upside?
A: The mix is consistent but there's increased interest in new colocations as customers enter the densification phase. Some MLAs include limited colocations; once maximums are reached, additional colocations will be incremental. They expect new colocations outside of comprehensive agreements to contribute to growth in the coming years. -
Domestic Gross Margins
Q: Domestic gross margins were down year-on-year; is there anything to highlight?
A: Reported margins decreased by about 50 basis points, primarily due to a 90 basis point negative impact from non-cash straight-line adjustments. On a cash basis, margins actually increased 40-50 basis points. Some non-recurring items affected prior year comparisons. -
Mobile Edge Opportunities
Q: What increases your conviction that mobile edge computing will be an opportunity despite delays?
A: They have proof of concepts with partners and see a trend toward decentralization and distributed architectures. Cloud and AI providers are diversifying to more regions, and carriers are moving to 5G stand-alone infrastructure, which supports mobile edge compute. Both wireline and wireless trends suggest a need for more compute at the edge. -
Emerging Markets CapEx Strategy
Q: Have customers reacted to your decision to reduce CapEx in emerging markets?
A: Customers understand the need to manage capital and are working with them to find solutions. They continue to support Tier 1 MNOs globally but are reducing capital spend in emerging markets while focusing more on developed markets. Customers have been receptive and collaborative. -
MLA Contracted Growth
Q: Why does contracted growth under your MLAs step down next year? Is another customer ending their MLA?
A: No customer is rolling off a comprehensive agreement. Agreements are structured to align revenue with activity levels, leading to a small step down next year. This corresponds with an expected increase in new colocations as customers enter the densification phase. -
Churn Assumptions in U.S. Growth
Q: Does the mid-4% U.S. growth assumption for next year include churn excluding Sprint remaining below 1%?
A: They expect churn to be at the lower end of the historical 1-2% range. It's too early to provide specific numbers, but they are still assessing this. -
Cost Management and Divestitures
Q: Can you update on cost management initiatives and potential divestitures in markets lacking scale?
A: They continue cost management efforts, reducing cash SG&A by about $17 million or 3% year-over-year excluding bad debt. Regarding divestitures, they have nothing specific to announce similar to India. They sold some third-party land in Australia and New Zealand and continue to evaluate the portfolio, but there's no active process.