Shares in tower operator SBA Communications dive in wake of third-quarter guidance
Shares in SBA Communications, Boca Raton, Fla., plunged nearly 50 percent, from 80 cents to 41 cents, today after the company announced that it was lowering its third-quarter EBITDA guidance from $21-23 million to $18.5-20 million. A year ago, a share of SBAC priced at $16.60.
Referring to the reduced guidance, a statement from the company said, “Of the difference, $2 million is expected to result from lower services gross profit, reflecting lower services revenue and margin than anticipated. In addition, cost of leasing revenues is expected to be $1 million higher than anticipated, reflecting primarily increased costs for property taxes and maintenance.”
EBITDA is defined as earnings before interest, taxes, depreciation, amortization, non-cash charges, and unusual or non-recurring expenses. Excluded from SBAC’s anticipated third quarter 2002 EBITDA is what the company said was an expected $1.5 million net restructuring expense related to the cost of abandoning new tower build projects, and additional employee layoffs and office closings that SBA implemented in the third quarter.
SBA reaffirmed its total revenue guidance for the third quarter of at least $65 million, but said that it expects total revenue to be below second quarter 2002 total revenue of $69.6 million. Sequentially, the company said it anticipated that third-quarter increases in leasing revenue would be offset by a greater decline in services revenue. Its net loss per share for the third quarter is now expected to be 60 to 70 cents.
The company said that financial results that meet the new guidance would satisfy its lenders financial covenants as of Sept. 30. SBA said that, on that date, the company had net debt of $963 million, including cash and cash equivalents of $42 million and senior bank debt of $248 million.
In the third quarter, SBA added annualized gross leasing revenue of $4,700 per tower. SBA built 23 towers during the quarter, ending the period with 3,875 towers. The company said that it was working on an additional 23 new tower build projects that it expected to complete in the fourth quarter.
“While carrier activity certainly continues, at this time we do not believe that wireless carrier capital expenditures will meet our prior expectations for the second half of 2002 in either the leasing or the services areas,” said Jeffrey A. Stoops, SBAC’s president.
“In fact, activity declined from the second quarter to the third quarter, as customer projects were delayed and, in some cases, halted mid-stream. The services work that we did secure produced lower margins than anticipated, as competition remains strong for the work that is available. We expect continued weakness in wireless carrier capital expenditures through at least the end of 2002,” he said. “We remain focused on working through the current business climate. Throughout the quarter we continued to reduce our overhead cost structure and our capital expenditures, and we ended the quarter with a strong cash position. Although the picture for improved wireless carrier capital expenditures remains unclear, our goals remain the same: maintain liquidity, cut expenses, attain positive free cash flow and produce year over year growth. We believe we continue to make progress on those goals,” Stoops said.
In light of the changes in both expected third quarter financial results and the environment for wireless carrier capital expenditures, the SBA said it is reviewing its full year financial guidance and will update such guidance on or before a scheduled conference call to discuss third quarter results.
SBA is set to release its third quarter results on Nov. 5 at 4:30 p.m. EST. The company will conduct a conference call on Nov. 6 to discuss the results.
SBAC is an owner and operator of wireless communications towers in the United States and Puerto Rico. The company generates revenues from its two primary businesses, site leasing and site development. In its site leasing business, the SBAC leases antenna space on towers and other structures that it owns or manages for others. In its site development business, the company offers wireless service providers assistance in developing their own networks, including designing a network with signal coverage, identifying and acquiring locations to place their antennas and transmission equipment, obtaining zoning approvals, building towers when necessary and installing their antennas and transmission equipment.
