Mark DeRussy – Director of Finance Brendan Cavanagh – SVP and CFO Jeff Stoops – President and CEO.

Jonathan Atkin – RBC Capital Markets Amir Rozwadowski – Barclays Capital David Barden – BofA Merrill Lynch Jonathan Schildkraut – Evercore Partners Simon Flannery – Morgan Stanley Richard Prentiss – Raymond James Michael Bowen – Pacific Crest Securities Colby Synesael – Cowen and Company Mike McCormack – Jefferies & Company.

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

Thank you, Tom. Good morning everyone and thank you for joining us for SBA’s first quarter 2014 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'll discuss on this call is forward-looking, including but not limited to, any guidance for 2014 and beyond. These forward-looking statements may be affected by the risks and uncertainties in our business.

Everything we say here today is qualified in its entirety by cautionary statements and risk factors set forth in last night's press release and our SEC filings, which documents are publicly available.

These factors and others that affected historical results may affect future results, and may cause future results to differ materially from those expressed in any forward-looking statement we may make. Our statements are as of today, May 2, 2014, and we have no obligation to update any forward-looking statement we may make.

Our comments will include non-GAAP financial measures as defined in Regulation G. The reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures and other information required by Regulation G has been posted to our website, sbasite.com. With that, I'll turn it over to Brendan..

Thank you, Mark. Good morning. As you saw from our press release last night we had another very strong quarter in all areas. We exceeded the high-end of our guidance for leasing revenue, tower cash flow, adjusted EBITDA and AFFO. GAAP site leasing revenues for the first quarter were $309.3 million or a 13.1% increase over the first quarter of 2013.

Domestic cash site leasing revenue increased 12.8% to $268.7 million and international cash site leasing revenue increased 67.2% to $29.6 million. Our leasing revenue growth was driven by organic growth and portfolio growth, including our acquisition of 2,113 towers from Oi in Brazil which closed in late November of 2013.

iDEN-related churn during the quarter had a negative impact of $1.4 million. We continued to experience strong leasing demand both domestically and internationally.

Amendment activity continues to be significant and contributed over 75% of incremental leasing revenue in the first quarter, reflecting a combination of coverage and capacity related 4G spending by our customers. The big four US carriers contributed over 90% of our consolidated incremental leasing revenue in the quarter.

We continued to maintain leasing backlogs at record levels. Tower cash flow for the first quarter of 2014 was $237.5 million or a 20.5% increase over the year earlier period. Tower cash flow margin was 79.6% compared to 77% in the year earlier period. Approximately 90% of our tower cash flow was generated from our domestic sites.

Our services revenues were $36.2 million compared to $39.6 million in the year earlier period. Services segment operating profit was $8.8 million in the first quarter compared to $7 million in the first quarter of 2013. Services segment operating profit margin was 24.3% compared to 17.6% in the year earlier period.

SG&A expenses for the first quarter were $24.7 million, including non-cash compensation charges of $4.5 million. SG&A expenses were $20.4 million in the year earlier period, including non-cash compensation charges of $3.8 million.

Increases are primarily attributable to increases in employee related costs and specifically to headcount increases in Brazil. Adjusted EBITDA was $226.7 million or an increase of 20.7% over the year earlier period. Adjusted EBITDA margin was 67.8% in the first quarter of 2014 compared to 63.5% in the year earlier period.

Approximately 96% of our total adjusted EBITDA is attributable to our tower leasing business. AFFO increased 21.8% to $153.8 million compared to $126.3 million in the first quarter of 2013. AFFO per share increased 20.4% to $1.18 compared to $0.98 in the first quarter of 2013.

Combined changes in the Brazilian and Canadian exchange rates during the first quarter versus our guidance positively impacted leasing revenue by a de minimus $224,000 and adjusted EBITDA and AFFO by $125,000 each. Net income during the first quarter was $1.4 million compared to a net loss of $22.4 million in the year earlier period.

Net income per share for the first quarter was $0.01 compared to a net loss of $0.18 per share in the year-earlier period. Net income for the quarter was positively impacted by $17.9 million gain on currency hedges related to the Oi acquisition of 2007 sites which closed March 31. Quarter end shares outstanding were 128.8 million.

In the first quarter, we acquired 2,188 sites for $900.6 million in cash, including the acquisition of 2007 sites from Oi. SBA also built 57 sites during the first quarter. We ended the quarter with 22,263 sites, 15,034 of these sites are in the US and its territories and 7,229 are in international markets.

Total cash capital expenditures for the first quarter of 2014 were $947.5 million, consisting of $4.7 million of nondiscretionary cash capital expenditures such as tower maintenance and general corporate CapEx and $942.8 million of discretionary cash capital expenditures.

Discretionary cash CapEx for the first quarter includes $900.6 million incurred in connection with tower acquisitions, excluding working capital adjustments and paid earn-outs. Discretionary cash CapEx also included $16.3 million in new tower construction, including construction in progress and $11.1 million gross augmentations and tower upgrades.

The substantial majority of augmentation CapEx was reimbursed by our customers. With respect to the land underneath our towers, we spent an aggregate of $9.3 million to buy land and easements [ph] and to extend ground lease terms. Our investments in land are both strategically beneficial and almost always immediately accretive.

At the end of the quarter we owned or controlled for more than 20 years the land underneath approximately 72% of all of our towers and 74% of our domestic towers. At the end of the quarter, the remaining life under our ground leases, including renewal options under our control is approximately 31 years.

At this point, I am going to turn things over to Mark who will provide an update on our liquidity position and balance sheet..

Thanks, Brendan. SBA ended the first quarter with $6.9 billion of total debt. We had cash and cash equivalents, short-term restricted cash and short-term investments of $363.2 million. Our net debt to annualized adjusted EBITDA leverage ratio was 7.2 times.

Pro forma assuming a full quarter of operational results from the Oi acquisition, our leverage ratio was 6.9 times. Our first quarter net cash interest coverage ratio of adjusted EBITDA to cash interest expense was 3.4 times. During the quarter, we obtained a new seven-year delayed draw $1.5 billion term loan B.

The note was issued at a 25 basis point discount to par. The first funding of $750 million occurred in early February and the remaining $750 million funded in late March. Interest will accrue at LIBOR plus 250 basis points with the 75 basis point LIBOR floor.

Net proceeds from this financing were used to repay in full the $290 million balance on our existing term loan B to repay the $390 million outstanding balance on the revolver to fund our [indiscernible] of our 4% convertible notes in cash and to settle any premium with shares of common stock.

Concurrent with any conversion, we will settle the call portion of the associated bond hedge whereby we will receive an equal number of shares as those issued to the noteholders. As a result, outstanding share count will not be impacted by the conversion of these notes under the current settlement election.

We anticipate settling the remaining warrant portion of the associated hedge in cash no later than the first quarter of 2015. Based on the recent stock prices, our current cash obligation to settle these warrants is approximately $750 million.

We received conversion notices totaling 259,000 of principal during the first quarter and 121.3 million thus far in the second quarter all of which conversions will settle in the second quarter. As of the end of the first quarter, the weighted average coupon of our outstanding debt is 4.1% and our weighted average maturity is just under five years.

We currently have no outstanding balances under our $770 million revolver. Based on specified covenants we have available to us today $675 million under the revolt. We did not repurchasing any shares of our common stock during the quarter and currently have $150 million remaining under our existing $300 million authorization.

I will turn the call over to Jeff..

execute well against the favorable macro-environment, add quality growth assets and continue to take advantage of what is expected to remain a favorable financing market.

With our annual portfolio growth goal already achieved, leverage within our targeted range and tremendous liquidity, we look forward to continuing to realize strong revenue and tower cash flow growth of our high quality assets. We believe we have SBA ideally positioned for future success.

We expect to once again produce material growth across a number of key metrics, including growth in a AFFO per share. Before we open it for questions, I want to recognize the contributions of our employees and customers to our success. Our operational results were very strong in the first quarter, the strongest in recent memory.

Those results come from the efforts of many and I thank all of those who contributed to our first quarter success. We look forward to reporting continued success as we move through 2014. And Tom, at this time we’re ready for questions..

(Operator Instructions) Our first question today comes from the line of Emrie Love [ph]..

Quick question, you said that the majority of the revenue leasing activity is coming on the amendment side.

Can you give any color as to what the trend is of that split, amendments versus new installations and maybe what you see as the outlook for the balance of the year?.

We – starting last year, about middle of the year we began to see a shift towards more new leases, more co-locations versus amendments, although even through perhaps the lowest contributing quarter from amendment it was still around 50%.

Then in the fourth quarter we actually saw very big jump, again in the amount of amendment activity and that amendment activity has carried through the first quarter, it’s carried through our existing backlogs.

And we do -- I don't know exactly how much of the splits between new leases and amendments when 2014 is all said and done will be the case, but we do expect for the full year to have sizable contributions from amendments..

Next question today comes from the line of Jonathan Chaplin..

So at the beginning of the year, I think you were baking in about 9% to 10% organic site leasing growth in your guidance. And you’re obviously coming in well ahead of that, I think it was – I think you said it was 12% so far this year.

What are you basing in for the full year now and then what are – is that a rate that we can expect you to be able to grow out for the next few years?.

Well, it’s hard to answer the last part of your questions. But the levels of activity that have produced these growth rates today we think should stay substantially the same for years to come.

Now what we have in our current and updated outlook is a 10% net cash revenue growth, is that correct, Brendan?.

That’s right..

So up from where we initially put forth guidance but not quite as high as what we actually experienced in Q1..

And what would cause revenue growth, organic revenue growth to slow down from Q1? It sounds like there is a lot more activity coming in the back half of the year but it isn’t included in guidance, if anything it seems like it should accelerate?.

Yes, I think it’s just a healthy dose of conservatism..

Our next question today comes from the line of Jonathan Atkin [RBC Capital Markets].

I wondered if you could give us a sense of what’s happening at your site in terms of the eight physical decommissioning of iDEN gear and then the same question as it relates to the – taking down of CDMA by T-Mobile?.

We’re not seeing much take down of CDMA by T-Mobile, Jon. On the iDEN sites there are a number of towers and we started this process a year ago where we’ve evaluated what we think of the asset post iDEN termination. And in some cases we decided to decommission those towers.

I think we have some more of that yet to come this year but as we move into 2015 and beyond those decommissioning numbers should to begin to slow..

I mean you’ve made certain assumptions with regard to the financial impact but I was curious when the actual physical de-installation keeping pace, so that is kind of behind the question, and if you can also maybe give us a sense of M&A thought outside of the US, there may be further assets for sale for instance in Brazil or nearby or even further out markets and just curious kind of to get your sense to your appetite for participating in that type of deal?.

Yeah, just to be clear on your first question about the iDEN, you were talking about Sprint decomming their equipment as opposed to us decomming towers, is that right?.

Correct..

We are seeing Sprint decom equipment at the site, for the most part they have shut down their network.

It's really more a function of just getting to all the sites I think from a resource standpoint to actually remove equipment but that doesn't necessarily sync up with the timing of the leases decomming or churning off which will take place over several year period. So I would say we’re only partly through the actual physical decommissions..

On the M&A side, Jon, we continue to be interested, we’ve had a long history of creating shareholder value through successful portfolio growth. I do believe we have more of that in our future. I think it is safe to say that the opportunity set is probably greater outside the United States than it currently is in the United States.

So we will continue to look around the globe as I mentioned in the comments, we are more interested in continued Western Hemisphere growth. But we do -- we are interested in the right portfolio growth where we’re confident that it’s going to lead to increased value..

Our next question today comes from line of Amir Rozwadowski [Barclays Capital]..

Jeff, you mentioned on prior, response to a prior question that there is a healthy dose of conservatism to your outlook [indiscernible] to ask is how much conservatism?.

I didn’t, we didn’t really quantify it. I mean if you extrapolate the rate of same tower revenue or same tower cash revenue growth in Q1 at 10.4 versus 10 on a net basis that’s implied in the outlook, you probably could come up with some numbers..

And then you mentioned – you’re still seeing a healthy amount of amendment activity in the marketplace.

If we’re thinking about sort of the opportunity set for new tower leases, I mean there has been a lot of questions around the amount of investment that would be required for densification purposes, I would love to hear sort of any insight you have as to when you expect to see down level of investment pickup in earnest and how we should think about the opportunity set there relative to the amendment activity?.

Well, it’s interesting because what we're seeing now in large part on the amendments is densification. As I mentioned a lot of these amendments are going on sites where there already has been an initial 4G rollout.

So we’re literally seeing another amendment on top of that and in some cases the second amendment all after the initial 4G deployment has been rolled out. So we view that as densification as well. But I think all the factors that are at play increasing wireless demand that you’re going to end up with shrinking cell densities.

And I think that bodes very, very well for not only increase amendments but also increased new cell co-efficiency..

And our next question is from David Barden [BofA Merrill Lynch]..

Two questions if I could.

Jeff, just with respect to your comments about the loading of the towers increasing, could you elaborate a little bit, is that really about an increased deployment of remote ratio head ends or is there some other kind of structural change in the network architecture you're seeing that’s going to be incrementally additive to growth? And then second question I guess is there is a constant kind of chatter about the T-Mobile Sprint merger, one of the theories is that Sprint might be slowing down its network build in order to preserve some of the upside opportunities that might exist down the road by building one combined network rather than two separate networks.

Are you seeing any -- in your pipeline of business with Sprint that would suggest that there is hedging or slow rolling to builds to maybe accomplish some of those goals, if you could just shed some color on that would be great?.

I mean it’s possible, David, because what we've seen out of Sprint is a lot of activity but it's all about the initial network vision project.

So going beyond the network vision project, other than just 2.5G business which is just really get started, I don't know that we've seen certainly the levels of activity from Sprint that we’ve seen from say AT&T or Verizon. So you may be right there.

Sprint has been very busy but it’s still pretty much all centered around the initial network vision project. And on the loads, most of the action is now going on, or comprised of the remote radio heads and it's really just the volume of equipment, we’re seeing many many installations now where there is north of 20 lines and 20 antennas..

And we have a question from Jonathan Schildkraut [Evercore Partners]..

Two, if I may. First, just going through the release last night, I noticed there was a big jump in the straight-line assumption for the year.

Obviously, you had some really good leasing, but I was wondering if there was a little bit more behind that? And then second, I was wondering if there was any color in terms of what you're seeing on the tower, the two-transmitter, two-radio design I think that most of the carriers went out with initially.

Everybody's been talking about an upgrade here to 4T4R, and I was wondering in terms of your towers, where you thought that was?.

Jon, first on the straight line, basically all of that increase is associated with Brazil and specifically the two Oi transactions that we did, just over the last two quarters the leaseback from Oi includes a minimum escalator although all of the lease escalation down there are tied to the Brazilian CPI index, there is a minimum that’s built into the leaseback from OI in both of those deals, which creates a very large straight-line component, that quite honestly wasn't contemplated in the initial guidance numbers that we gave out, we only included the cash piece as there were still a lot of information to process around calculating that straight-line.

And so we started to recognize in the first quarter, have included the increase in our guidance associated with that..

Yeah, on the equipment Jonathan, we’re not seeing a lot yet on the new architecture, most of what we’re experiencing now is the historic radios on ground and radios on the tower business and that’s -- we think there's a lot of that business left to go before we get into the next generation of architecture..

And our next question comes from Phil Cusic [ph]..

Hi this is Richard for Phil. Just wanted to ask a follow-up on the equipment. I guess you're saying that there is first and second amendments on the initial deployment.

Can you give us a sense on how far along that process that we're in? Is it 10%, 20%, or few first few [indiscernible] or has this been going on for a while? And I guess with that, in the outlook, are we still looking at a 75%/25% amendment co-location mix for the year or do we expect ago to more of a 50:50 by some point later this year?.

I think it will be somewhere between 75 and 50 as we move through the whole year.

And I'm sorry what’s your question again?.

In terms of hitting those -- can you give us a sense of how many initial 4G deployments have been hit the first or second time and where do you think that might go?.

Well that is a great but difficult question to answer, because it’s really all going to be driven by the local site traffic patterns, how much data is being promulgated over that particular site.

But I mean our history has, as you know any future applicability maybe half of the sites over time are going to see second, third amendments, for the basic 4G deployments..

And one final one, in terms of the network services margin, can we see this level above 20% versus the historical high teens going forward?.

I think we’re going to have strong margins, I don't know if we’re going to have north of 20% margins every quarter throughout the year but I do think we’re in an environment here where over the course of the year we’re going to have probably the strongest margins that we’ve had..

And we have a question from Simon Flannery [Morgan Stanley]..

There has been a lot of talk in the earnings season about the rapid growth in data and people deploying small cells and the increasing use of Wi-Fi.

Can you update us on ExteNet and your position towards small cells and how you think macro cells versus small cells versus Wi-Fi will play out over time?.

Well, we continue to enjoy our relationship with ExteNet. They’re busier today than they were several years ago, we think that’s going to continue to grow and we think small cells are definitely going to have a place in network architecture.

But clearly from our results they’re not cutting into the macro business and we really see continued strong growth in both small cells and the macro side of the network architecture..

Is there any sense of you becoming -- getting a bigger ownership in ExteNet or are you comfortable with where things are today?.

We will see, we will see, we do not have the right to control that issue. But we have a relationship with ExteNet and should the opportunity arise we certainly would take a look..

And next, we will go to the line of Ric Prentiss [Raymond James].

Thanks, good morning, guys. Obviously very strong organic growth, also appreciate the domestic versus international break-outs.

As you think about that 10.4% net of churn 1Q experience, how would you think that looks international, domestic, as you look at your ‘14 guidance? I would assume iDEN churn also needs to come up through the year since it was pretty low in 1Q..

Yes, it will come up a little bit and to be honest with you, our domestic same tower growth rate was slightly higher than our international, because we’re still progressing and making, trying to get up to hitting on all eight cylinders in our Brazilian market.

And we had -- the only towers in Brazil that were included in those calculations were 800 towers that we acquired at the end of 2012 and we’re seeing all kinds of great prospects and momentum with – getting these leasing agreements in place to get that up. But candidly the domestic same tower growth rate was slightly higher than international..

And then you mentioned a large build order in Brazil, but you didn't change I don't think your build guidance.

Has that been something you've been working on for a while and what kind of magnitude are we looking at?.

We just got it, that may prove to give us cause to increase that over the year, it’s about 500 tower new builds award that we got..

And obviously, some of it will probably slip into ‘15 as well given the time?.

Oh, yes, absolutely..

And then the final question is, thinking through the M&A outside the US question, how do you manage the visibility of a great business with the volatility of some of the FX things we've seen? Do you feel you're getting large enough in Brazil? I'm just trying to think of how you manage the risk, if you will, of a diversified portfolio..

Brazil is a great market, it’s got a tremendous future for new network investment, but it does have the FX issues.

Over time, over 10, 20 year history, the FX of the reais versus the US dollar has moved in a fairly predictable pattern but that is definitely something that would mitigate our desire to get even larger in – and I can’t give you a mathematical answer, Ric, as to how much of our overall exposure that we would be willing to subject to FX risk, there are definitely limits there that will factor into how big we will ultimately get in any non-US market [ph]..

And obviously doing builds also get you a lower-cost of asset down there too?.

Yes, I mean the reason we are down there is really for this new – for the new build business because there’s so much to be done down there, we acquired some scale and some operating competency but we’re just now on the cusp of doing what we really want to be doing down there which is lot of new builds..

And I think I've heard Brendan say in the past, two-thirds of the pops, but one-third of the towers in Brazil, is that still kind of the thinking?.

Yeah their average cell site services 4000 people versus the 1000 in the US..

And our next question is from Michael Bowen [Pacific Crest Securities]..

Can you talk a little bit about organic growth going forward? Because we keep on getting a lot of questions with regard to how good can it get and really what inning are we in? And then second question, with regard to core growth rates, you guys have talked about 9% to 10% pre-iDEN churn, can you help split that out domestic versus international?.

Yeah, the domestic gross number was 12.2 and the international number was slightly less than that. Those are the gross numbers.

And in terms of how far it goes, again that’s a question the answer to which will be definitely and driven by how far wireless data goes, the things that will drive that will be some additional spectrum auctions which are on the horizon 600 MHz we think will have a very large impact in terms of additional core organic growth in the US.

The 700 MHz in Brazil we think the same, so the combination of wireless data growth and new spectrum we think gives us a pretty long runway here..

And lastly in Brazil, there are some pretty sizable portfolios down that are still potentially up for sale.

How should we think about it or how are you guys thinking about timing, price, and how long these processes typically take, so we can potentially start at least thinking about layering this into a long-term model?.

Yeah, we have an interest in some of those assets for the right price, going back to the comment I made to Ric that we do think that there is a limit on how much we would want to grow in Brazil. We don't think we’re at that limit yet. So those, there are some assets out there that for the right price we would have an interest in..

One last quick one.

With your guidance, can we also assume that you're still not including the additional 50 million pop coverage from Sprint and the 100 million with 2.5 at Sprint?.

Yes, on the leasing side, little bit in the services, there is little bit of that in the services outlook but not on the leasing side..

And we have a question from the line of Colby Synesael [Cowen and Company].

Two questions.

First off, on international and the escalators, can you remind us what percentage of your escalators are fixed outside the US versus tied to CPI? And then what your assumptions are in your guidance for those that are tied to CPI? And then my other question just real quickly, just wanted to reaffirm your thoughts on REIT in terms of timing?.

Yeah, on the escalators Colby, all of our escalators internationally are fixed with the exception of Brazil where all of the escalators in Brazil are tied to CPI, the one exception to that as I mentioned earlier in discussing the straight line component is that the Oi deals that we did, both of them have a leaseback from Oi on those sites, so that’s over 4000 leases.

Those do have a minimum escalators, so they’re tied to the CPI but at no less than a minimum which is 6.5%. So all of our Central America leases have fixed escalators that mirror generally what we see here in the US in the 3% to 4% range..

Yeah on the REIT status, as we’ve said many times we do see REIT election in our future. It’s probably as every month goes by, getting closer, I don't know that it will be something that we do this year. We’re watching a lot of the goings on around proposed law changes in that area, and that is something that may cause us to accelerate things.

We're not at a point yet and it will not be this year where we would have positive earnings and profits, for purposes of making an encouraging [ph] distribution which we think is an important timing event as to when we might otherwise elect status.

So I mean in general without giving you exact date I would say we probably stepped up our work on the area of ultimately electing REIT status..

Yeah but I think previously you had said maybe 2020 or even beyond and it sounds like I guess that's potentially changing now?.

I think it will be before that..

The next question today comes from the line of Mike McCormack [Jefferies & Company].

Jeff, maybe just a quick comment on this Sprint build. You said it's obviously fairly small right now, but just wondering if you're seeing that, is it widespread and small or is it very concentrated? And then secondly, Wi-Fi, the small cell opportunity, a lot of cable companies out there are talking about trying to do a build.

Do you view that as a threat or a potential opportunity, if we were to see Wi-Fi deployed on more of a macro basis?.

I think the Sprint is wide, there is a lot of geographic areas where that is, so it’s not narrow macro although as I mentioned the volume is not quite there yet, we think that's yet to come. And on the cable, on the Wi-Fi method of delivering signal is really still more of a fixed location type of technology.

So we really don't see it as a threat to macro sites, all of these cable companies that are talking about this, at least the ones that I have seen have talked about having roaming deals with the one, the cellular providers. And you really have to have macro sites to provide the mobility aspect of wireless service.

So much as we don't believe that small cells will impact the macro sites, we feel that it’s been way about Wi-Fi..

Jeff, do you think though that as cable companies become more ubiquitous in trying to offer some sort of, whether it's a retention strategy or a wireless strategy and right now they're doing these Sprint networks in each individual home, but maybe an opportunity at some point down the road for you guys to have that deployed in a more widespread basis?.

Certainly there will be a lot of money spent in that area. I'm not exactly sure that the economics will prove as interesting to us as our core tower business..

And gentlemen there are no further questions queuing up at this time..

Great. Well, I appreciate everybody joining us today on the call and we look forward to our second quarter earnings call. Thank you..

Ladies and gentlemen that does conclude our conference for today. We thank you for your participation and using the AT&T executive teleconference. You may now disconnect..