SBA Communications Corp  (NASDAQ:SBAC)
Q3 2018 Earnings Conference Call
Nov. 05, 2018, 5:00 p.m. ET

Contents:

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Image source: The Motley Fool.

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the SBA Third Quarter Results Conference Call. At this time, all participants are in a listen-only mode, and then later we will conduct a question-and-answer session. (Operator Instructions) As a reminder, the conference is being recorded. I'll now turn the meeting over to our host, Vice President of Finance, Mark DeRussy. Please go ahead, sir.

Mark DeRussy -- Vice President of Finance

Thank you, Laurie. Good evening, everyone, and thank you for joining us for SBA's third quarter 2018 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 2018 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, November 5th, 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'll turn the call over to Brendan.

Brendan Cavanagh -- Chief Financial Officer

Thank you, Mark. Good evening.

We had a great third quarter, with very positive operating results in both our leasing and services businesses. Total GAAP site leasing revenues for the third quarter were $435.3 million and cash site leasing revenues were $430.2 million. Foreign exchange rates were weaker than our estimates for the third quarter, which we previously provided with our second quarter earnings release, negatively impacting leasing revenue by $1.7 million.

Same-tower recurring cash leasing revenue growth for the third quarter, which is calculated on a constant currency basis, was 5.9% over the third quarter of 2017, including the impact of 1.8% of churn. On a gross basis, same-tower growth was 7.7%. Domestic same-tower recurring cash leasing revenue growth over the third quarter of last year was 7% on a gross basis and 5% on a net basis, including 2% of churn, approximately half of which was related to Metro, Leap and Clearwire terminations. Domestic same-tower recurring cash leasing revenue growth on a gross basis increased sequentially for the second quarter in a row and we expect it to increase again next quarter based on the strong year-to-date operational domestic leasing activity we have experienced.

Internationally, on a constant currency basis, same-tower cash leasing revenue growth was 10.4%, including 80 basis points of churn or 11.2% on a gross basis. Gross organic growth in Brazil was 12.9% on a constant currency basis, a solid increase over the second quarter, reflecting increased operational leasing activity in Brazil over the last 12 months.

Domestic operational leasing activity, representing new revenue signed up during the quarter, was very strong in the third quarter, up from second quarter levels and for the third quarter in a row well above year ago levels. During the third quarter, we again had solid contributions from each of the Big 4 carriers. Newly signed up domestic leasing revenue came about 60% from amendments and 40% from new leases, and the Big 4 carriers represented 95% of total incremental domestic leasing revenue that was signed up during the quarter. We have solid backlogs with each of our major US customers and we expect them to remain active, investing in their networks, resulting in a continued healthy level of new lease and amendment signings in the fourth quarter.

Internationally, we had another strong leasing quarter, with Brazil providing the biggest contribution. In Brazil we had solid contributions from Claro, Vivo and TIM. During the third quarter, 86. 8% of consolidated cash site leasing revenue was denominated in US dollars. The majority of non-US dollar-denominated revenue was from Brazil, with Brazil representing 11.6% of all cash site leasing revenues during the quarter and 8.3% of cash site leasing revenue excluding revenues from pass-through expenses.

With regard to third quarter churn, we continued to see churn from leases with Metro, Leap and Clearwire, consistent with our expectations. As of September 30th, we have approximately $13 million of annual recurring run rate revenue from leases, with Metro, Leap and Clearwire that we ultimately expect to churn off over the next two years. Domestic churn in the third quarter from all other tenants on an annual same-tower basis was 1.1%, and of that, less than 30 basis points was related to Big 4 tenants. We anticipate slightly higher churn in the fourth quarter due to the nonrenewal of certain legacy iDEN-related leases, the impact of which has been, and continues to be, included in our full year 2018 outlook.

Tower cash flow for the third quarter was $344.8 million. Our industry-leading domestic tower cash flow margin increased to 82.8% in the quarter. International tower cash flow margin was a very strong 68.6% and 89.5%, excluding the impact of pass-through reimbursable expenses.

Adjusted EBITDA in the third quarter was $328.1 million. Our adjusted EBITDA results in the quarter were again driven by strong performances in both our leasing and services businesses.

Services revenues in the third quarter were $32 million, up 25.8% over the third quarter of 2017, driving an increase of over 75% in services gross profit over the year-ago period.

Cash SG&A for the quarter was in line with expectations and continues to remain very low as a percentage of total revenue. Our industry-leading adjusted EBITDA margin was 71% in the quarter compared to 70.6% in the year-earlier period. Excluding the impact of revenues from pass-through expenses, adjusted EBITDA margin was 75.6%. Approximately 98% of our total adjusted EBITDA was attributable to our tower leasing business in the third quarter.

AFFO in the third quarter was $222.7 million. AFFO per share was $1.92, an increase of 9.7% over the third quarter of 2017 or 13.1% on a constant currency basis. AFFO was negatively impacted by $1 million or $0.01 per share due to weaker foreign exchange rates in the quarter than we had forecasted for our prior outlook which was given July 30th.

During the third quarter we continued to invest in expanding our tower portfolio, deploying incremental capital into both new tower builds and acquisitions. During the third quarter we acquired 679 communication sites for $106.9 million, with most of those sites located internationally. We also built 90 sites during the third quarter. Subsequent to quarter-end, we have acquired 46 additional communication sites for $17.1 million. And as of today we have 410 total additional sites under contract for acquisition at an aggregate price of $97.9 million.

We also continued to invest in the land under our sites, which provides both strategic and financial benefits. During the quarter we spent an aggregate of $14.6 million to buy land and easements and to extend ground lease terms. At the end of the quarter, we owned or controlled for more than 20 years the land underneath approximately 71% of our towers. And the average remaining life under our ground leases, including renewal options under our control, is approximately 35 years.

Our across-the-board strong third quarter results have allowed us to increase the midpoint of our full year 2018 outlook in almost every category. We increased at the midpoint our full year leasing revenue and tower cash flow outlook by $6 million, adjusted EBITDA by $11 million, AFFO by $9.5 million and AFFO per share by $0.115.

Consistent with our historical practice, our updated full year 2018 outlook does not assume any further acquisitions beyond those closed or under contract today and it does not assume any additional debt financings or share repurchases beyond those completed prior to today. We have, however, increased the midpoint of our full year outlook for net cash interest expense by $3 million, primarily to account for increased borrowings under our revolver which was used to fund share repurchases during the third and fourth quarters.

I will now turn things over to Mark who will provide an update on our liquidity position and balance sheet.

Mark DeRussy -- Vice President of Finance

Thanks, Brendan.

SBA ended the third quarter with $9.7 billion of net debt and our net debt to annualized adjusted EBITDA leverage ratio was 7.4 times, within our targeted range of 7 times to 7.5 times. Our third quarter net cash interest coverage ratio of adjusted EBITDA to net cash interest expense was 3.5 times. The weighted average coupon of our outstanding debt is 3.9% and the weighted average maturity is approximately 4.5 years.

We continue to believe that we manage our balance sheet very effectively, and we are pleased to see the recent upgrade of our corporate credit rating by S&P to BB.

During the third quarter we borrowed under our $1.25 billion revolving credit facility in order to fund share repurchases. And as of today, we have $215 million outstanding under the revolver. During the third quarter we spent $108 million under our $1 billion stock repurchase plan to repurchase 696,000 shares of our Class A common stock at an average price of $155.16. Subsequent to September 30th, we repurchased 937,000 shares for $142 million or $151.55 per share. All the shares we purchased were retired.

As of today we have $404.5 million of authorization remaining under the repurchase plan. The company's shares outstanding at the end of September 30th, 2018, are 114.2 million, down from 118.4 million at September 30th, 2017, which is a 3.5% reduction.

With that, I'll turn the call over to Jeff.

Jeffrey Stoops -- President, Chief Executive Officer & Director

Thanks, Mark, and good evening, everyone.

We had another very solid quarter with financial results that exceeded our expectations and showed continued strength in operational leasing activity. Our positive third quarter results and expectations of a strong fourth quarter have allowed us to increase our full year 2018 financial outlook in all of our key metrics.

In the US, new business signed up continued to be healthy, increasing from Q2 levels. This activity came primarily from the Big 4 carriers, with all of them contributing to our results. Our leasing and services backlogs remain high, giving us comfort in a strong finish to the year.

Domestic wireless data consumption continues to climb, including heavy bandwidth usage applications like mobile video streaming. In order to meet the constantly growing needs of their networks, our customers continue to deploy more spectrum and advanced technologies at our sites.

In addition, contributions continue to come from the rollout of FirstNet and the early stage activities being done ahead of 5G, including the deployment of MIMO antennas and the 600 megahertz and 2.5 gigahertz spectrum bands. We are working really hard for our customers in both leasing and services, doing whatever it takes to get the job done on time and on budget. We're happy to do it to meet our customers' needs as they're very busy, busier than they have been in years, and we are here to meet those needs.

Internationally, we also had another very strong leasing quarter, with Brazil once again leading the charge. In Brazil we had one of our biggest quarters in years in terms of new business signed up, with solid contributions from all four major wireless carriers. We also had another nice jump in organic same-tower revenue growth in Brazil on a constant currency basis, reflecting the positive leasing trends in that market over the last 12 months.

The contractual revenue signed up during this quarter in our international markets came about 53% from new leases and 47% from amendments, which is similar to the mix we would expect going forward.

During the third quarter, we once again saw a sizable decline in the Brazilian real, which negatively affected our reported results. However, with some of the uncertainties related to the recently completed Brazilian elections now behind us we've seen the exchange rate subsequent to quarter-end improve and stabilize somewhat. President Bolsonaro is the first President elected in Brazil outside of the Workers' Party during our period of investment and he ran on a platform of debt reduction and fiscal and economic reform. We are optimistic as to the future under his leadership.

Regardless of some of the noise created by the volatile movements in FX rates we're extremely pleased with the performance of our Brazilian operations. Not only have we seen continued strengthening in the organic growth trends we've seen a clear acceptance and a sense of normalcy adopted around the basic operations of the tower industry by regulatory authorities, landowners and our customers in Brazil. And, as we mentioned in our second quarter earnings call, the underlying Brazilian economy seems to continue to be improving which is supportive of continued growth opportunities for both us and our customers.

During the third quarter we also continued to add to our international portfolio, acquiring 663 towers in several transactions, including 463 towers in El Salvador as part of our acquisition of sites there for Millicom International and 179 towers acquired in Ecuador. We also built 83 towers in our international markets during the quarter.

We expect to continue to add sites in our existing markets through disciplined builds and acquisitions. Our primary focus for portfolio expansion remains the western hemisphere but we also continue to be open to, and regularly explore, opportunities in other markets. Our tower additions year-to-date across our entire tower portfolio have ensured we will once again grow our portfolio by 5% to 10% in 2018.

Ahead of our dividend obligations which we currently estimate to start in 2021, we continue to target 7 times to 7.5 times net debt leverage, notwithstanding the recent increase in interest rates. Our bias has always been, and remains today, toward portfolio growth. However, we are always willing to repurchase our stock when we believe it is undervalued, particularly in times like now where we are seeing such strong organic growth. Our balance sheet management and focus on quality portfolio growth and opportunistic share repurchases has been a key component of our value creation throughout our history.

In addition to tower portfolio growth, we are excited about our prospects and some of our recent success associated with investments we are making in other strategic real estate. These efforts are built around securing exclusive wireless rights to world-class venues. Some of the solutions we are able to provide to these venues include rooftop and exterior wireless management, small cell solutions and in-building wireless networks including DAS, Wi-Fi and CBRS solutions.

While we are in the early stages of some of these initiatives, we believe the quality of the real estate we are accumulating will drive extremely attractive returns on our investments. In addition, we continue to work on initial prototype mobile edge computing locations built around our existing property locations. It's still very early in the development of these solutions, but we believe we have a distinct advantage with the quality locations we are targeting and we're excited about the potential for this additional business line down the road.

Operationally, we continue to perform at a high level of efficiency, managing our cost and growing our margins. In the third quarter we once again produced industry-leading operating margins, demonstrating the quality of our assets and effectiveness of operations. Our tower cash flow margin was 80.2% and our adjusted EBITDA margin was 71%, both up from the third quarter of last year as well as sequentially over the second quarter of this year. This will continue to be an area of focus for us as it always has been.

We're in a great time in this industry. We've had a tremendous 2018 so far and we are optimistic about the end of the year and our prospects for 2019. We intend to use our strong cash flows and access to attractive financing to make disciplined yet opportunistic capital allocation decisions. These investments, along with the strength of our current customer demand and our operational excellence will allow us to drive growth in shareholder value through growth in AFFO per share.

I'd like to thank our employees and our customers for their contributions to our success. And Laurie, at this time we are ready for questions.

Questions and Answers:

Operator

(Operator Instructions) Our first question from Phil Cusick with J.P. Morgan. Please go ahead.

Richard Webb -- J.P. Morgan -- Analyst

Hi, this is Richard for Phil. Just wanted to go into the organic growth rate increase on the domestic side from 6.4% to 7%, despite churn kind of ticking up. Can you give us a little bit more detail on what you're seeing there and how it should trend going forward?

Jeffrey Stoops -- President, Chief Executive Officer & Director

It's not despite churn. It's before churn. But it's just more activity. I mean, as we have been telegraphing all year we expected to see a pickup in those rates. And remember, those are trailing 12-month rates, so it's also a function of the year-ago periods not being as strong. So the comparison to the year-ago periods are in fact helping this. So one way to look at it is we've had successive periods that we're stronger than the year-ago period. Third quarter just completed much stronger than the year-ago period which dropped off stronger than the fourth quarter of last year. So you've seen just successive increases in those periods of revenue added, new revenue added. But don't confuse the churn. I'd say we exclude the churn from the gross numbers and you can see that in the supplemental materials.

Richard Webb -- J.P. Morgan -- Analyst

I guess what I was trying to get at is, are you seeing an increase in activity? Or is this more of a --?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Yes. By definition we have to be seeing more revenue added per tower for those growth -- for those growth rates to be increasing. So yes.

Operator

Our next question from the line of Ric Prentiss with Raymond James. Please go ahead.

Richard Prentiss -- Raymond James -- Analyst

Yes, good afternoon, guys.

Jeffrey Stoops -- President, Chief Executive Officer & Director

Hey, Ric.

Richard Prentiss -- Raymond James -- Analyst

Hi, a couple of questions. First, we noted that there was a change in your 2019 straight line adjustment in the supplement -- appreciate the supplement. You guys don't do a lot of NLAs, but how should we think about that? Look like maybe it was a -- the delta was maybe $5 million to $6 million. Have you done an NLA? Is that an indicator of some new business coming in '19?

Brendan Cavanagh -- Chief Financial Officer

Well, Ric, we had done an agreement with Sprint last year, which has incorporated the potential for term extensions as amendments were done, plus the agreements that were signed as new leases have longer term. So when we gave you those 2019 numbers it's really just to give you a guide but it's at a moment in time. And so a quarter ago when we gave it to you it's whatever was in the system at that time. But as we sign up additional amendments that extent terms or leases with longer terms, it affects that. So those numbers are going to move around a little bit. I'm sure they're going to be a little different again next quarter too, but that's one of the primary drivers.

Richard Prentiss -- Raymond James -- Analyst

Okay. And I think I noticed that Sprint's now about 19.5% of your domestic revenue. What's the remaining life then on those leases? And also maybe update what T-Mobile average life is.

Brendan Cavanagh -- Chief Financial Officer

Well, specifically on the overlap sites, Sprint is about five years on average remaining and T-Mobile is about three years left, which is not that different than the portfolio at large.

Richard Prentiss -- Raymond James -- Analyst

Right. Okay. And my last question. Jeff, you talked a little bit about your stock buyback packing. How should we think about as you guys look at the potential for M&A out there versus obviously a volatile market? And when do you need to reop (ph) I think you're down -- Mark, was saying you're down to about $405 million left on the authorized program. So how should we think about the pacing of the buyback versus portfolio and also when you might reup the program?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Well, as has been always the case we would like to spend all the money on high-quality portfolio growth to reach our investment goals. If we can't do that then we turn our attention toward staying fully invested through stock repurchases, so it's really hard to say. Some quarters will be more than others. And we have the ability through a very decisive and promptly reactive board to kind of reup that stock plan whenever we need to. So obviously we'd do it before we ran out. But I can't really tell you when that would be and it's all going to be a function of the quality and the investment returns that we see on the portfolio side.

Richard Prentiss -- Raymond James -- Analyst

Okay. Thanks a lot. Good luck, heading into fourth quarter.

Brendan Cavanagh -- Chief Financial Officer

Thanks, Ric.

Operator

And we'll go next to Nick Del Deo with Moffettnathanson. Please go ahead.

Nicholas Del Deo -- Moffettnathanson -- Analyst

Hey, thanks for taking my questions. First on churn. It's like churn in the US, excluding Metro, Leap and iDEN -- or Clearwire stepped up a bit to 1.1% this quarter. And Brendan, in your prepared remarks you said that 30 basis points of it came from the Big 4 carriers. Can you talk about where the other 80 basis points came from and how persistent it will be? It seems like a fairly high number given we only got 10% or so your revenue comes from non-Big 4 customers.

Brendan Cavanagh -- Chief Financial Officer

Yes. I mean, they certainly represent a disproportionate amount of the churn, though, so it's really a wide-ranging -- it's a very long list of a lot of small numbers, Nick. So it includes companies that are even paging companies, other miscellaneous broad -- narrowband providers, that kind of stuff. It's a lot of cats and dogs.

Nicholas Del Deo -- Moffettnathanson -- Analyst

Okay. Should we think of this as persisting for a few quarters until it kind of (multiple speakers)?

Brendan Cavanagh -- Chief Financial Officer

Yes. I think you -- you should, from the standpoint that historically our churn level excluding these consolidations that we've had that have boosted it up, has been in the 1% to 1.25% range. Over the last year or two, it's been a little bit lower than that. But I don't think you should assume that it -- that that is the new norm. It should be somewhere in that 1% to say 1.25% probably range in the future.

Nicholas Del Deo -- Moffettnathanson -- Analyst

Okay. That's helpful. And then, Jeff, you spent a little more than time normal talking about some of your non-macro initiatives, like indoor solutions. Recognizing that they're growing off a pretty small base, what should we expect from those from a growth perspective? And should they ever be more than a few percentage points of total revenue?

Jeffrey Stoops -- President, Chief Executive Officer & Director

I think it will take a while -- they're going to grow really fast but it's going to be a while before they get to the -- about 1% or 2% of revenue. We're excited about them because it's things that we're very happy with some of the early results in terms of the quality of the venues and what we think will be some very, very good results on a per project basis for us, Nick, but still a long way from being material. But these are the kind of things that you have to get started at some point to get there and we're doing it.

Nicholas Del Deo -- Moffettnathanson -- Analyst

What sort of venues are you finding in your sweet spot?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Hospitals, educational facilities, multifamily facilities -- large retail organizations are the primary ones and then some extremely unique industrial properties would be ones that come to mind. And these are all, I'm being a little coy because we have some very big name brand things that we're not quite ready to talk about yet but we will hear in the not-too-distant future.

Nicholas Del Deo -- Moffettnathanson -- Analyst

Okay. Great. Well, thanks for that detail, Jeff.

Operator

And we'll go to Michael Rollins with Citi. Your line is open.

Michael Rollins -- Citi -- Analyst

Hi, thanks for taking the questions. Just a few if I could. First, can you give us a sense of what the escalators on average are for the domestic and the international segments on a cash basis when you look at the revenue bridge for the third quarter? And then second, can you -- based on the backlog that you have in the pipeline, can you frame where that gross revenue gains in the domestic business can get to on whether it's a 12 or a 24-month perspective? Thanks.

Brendan Cavanagh -- Chief Financial Officer

Yes, Mike. On the escalators, domestically they are about 3.2% approximately annually on average. And internationally, they fluctuate a little bit because the Brazil piece is such a big component of it and they are obviously CPI based and CPI has been moving a little bit down there. We do have some floors though on some of our leases in Brazil out the Oi leasebacks. So when you blend all that together along with other internationals, we're close to 5% is about the average but that can move a little bit depending on how CPI moves.

Jeffrey Stoops -- President, Chief Executive Officer & Director

Yes. And on the backlog question, Mike, we don't -- in all due respect, we don't want to get too much into 2019 guidance. But I will tell you the backlogs domestically right now are materially similar to where they were three months ago, so very substantial and very supportive of additional very strong bookings.

Michael Rollins -- Citi -- Analyst

And then how -- maybe on the other side of the equation, the churn side, is there some help that we should think about in terms of where that churn may get to based on some of the processing that you've described for some of the past carrier consolidations that had taken place?

Brendan Cavanagh -- Chief Financial Officer

Yes. I mean, on the churn if you're talking specifically domestically, I assume you are, we've got some remaining Metro, Leap and Clearwire that will run off. We mentioned that number was about $13 million of annualized revenue that we expect we'll lose over the next two years approximately. We have a little bit of iDEN churn in the fourth quarter. When you kind of move away from those that's where we think roughly that 1% to 1.25% range for all other stuff basically is where we'll be. So for the time being, the next so many years that's probably a reasonable level. Maybe a little bit lower in certain periods and slightly higher in others depending on timing of notices, but otherwise that's where we think it will fall out. And eventually it obviously comes down because as the revenue base continues to grow, the amount of other types of leases that are churning off is naturally reducing. So -- but that's been our historical level and we expect it to be similar going forward.

Michael Rollins -- Citi -- Analyst

Thanks.

Brendan Cavanagh -- Chief Financial Officer

Yes.

Operator

And we have a question from Walter Piecyk with BTIG. Please go ahead.

Walter Piecyk -- BTIG -- Analyst

Thanks. So you maintain the guidance at $45 million for the amendments and colos (ph). Obviously, you're going to see another nice sequential step-up in the fourth quarter. I mean, simple math gets me to about $15 million or so for the quarter which is a 30% increase. When I look at past years, fourth quarter new leasing activity amendments on the colos seems to kind of roll over into Q1, meaning that you do a certain number of -- you do a similar level in Q1 as to Q4. Is there any reason I think that's different this year, particularly back-end loaded that that would kind of drop down in Q1? Or how should we think about that cadence?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Yes, I don't think we know anything today, Walter, that would say there should be an abrupt change, particularly given the fact that a lot of the stuff is coming from projects that are multiyear in nature. And frankly, a lot of this nice buildup that we've seen through the year, and the reason you're seeing this nice step-up in the growth rate as we get to the exit of the year, is, again, frankly because the end of 2017 was not that strong.

Walter Piecyk -- BTIG -- Analyst

Right. But even on an absolute basis, if you can maintain those levels that's going to set it up for -- looks like a pretty continual acceleration in the organic growth rate for the Company.

Jeffrey Stoops -- President, Chief Executive Officer & Director

Well, the -- I mean, the business -- getting back to your first question, the work that's coming in and that's filling the backlog today is coming from multiyear projects. No reason why there should be a calendar stop just because the -- just because it's December 31.

Walter Piecyk -- BTIG -- Analyst

Got it. Thank you.

Operator

Our next question from Simon Flannery with Morgan Stanley. Please go ahead.

Simon Flannery -- Morgan Stanley -- Analyst

All right. Thanks very much. Good evening. Jeff, could you just talk a little bit more about the services strength and how sustainable do you think that is or what's driving it? And then on the pipeline, you talked a lot about the strong activity by the Big 4. What are you seeing in pipeline from potentially new tenants or other nontraditional carriers? Thanks.

Jeffrey Stoops -- President, Chief Executive Officer & Director

I will tell you that a lot of our services business is predominantly weighted toward T-Mobile and Sprint, and you'll see that as we file the Q and things. So that should all continue to do very well. The only thing that of course could possibly change all that would be some changes that could fall out of the announced combination. But short of that, both companies continue to work really hard and go down a path that shows no change at all based on the pending transactions. And in terms of other folks, Simon, we are actually seeing a fair amount of activity from Dish and that would probably be the most notable outside of the Big 4.

Simon Flannery -- Morgan Stanley -- Analyst

Activity in terms of conversations or in terms of leasing?

Jeffrey Stoops -- President, Chief Executive Officer & Director

All the way through to signed leases.

Simon Flannery -- Morgan Stanley -- Analyst

Thank you.

Operator

And our next question from the line of Spencer Kurn with New Street Research. Your line is open.

Spencer Kurn -- New Street Research -- Analyst

Hey, guys, thanks for taking the question. So as you look across the tower space in the US, AMT is growing gross -- organic growth about 9% versus your 7% today. And it sounds like the 7% is going to climb higher in the fourth quarter. But my question is, is there anything structurally different between your two businesses? Why they should be growing faster? Or, as activity continues to build, is the level, as you know, it's 9%, within reach over the coming years? Thanks.

Jeffrey Stoops -- President, Chief Executive Officer & Director

I would say two things to that. I don't think the calculations are apples-to-apples, point one. And no, I don't think there's anything structurally different.

Spencer Kurn -- New Street Research -- Analyst

Great. And just a follow-up. It looks like the biggest increase to your guide came in the other category for revenue. I was just wondering if you can provide some color on what those actions were. Thanks.

Brendan Cavanagh -- Chief Financial Officer

Yes, Spencer, it's a handful of variety of different things. We had some additional revenues that came, what we call cash basis, basically our tenants that we don't book revenue on accrual basis based on the category that we put them in, was a little bit higher in terms of collections. We had some -- a little bit of collections that were higher than what we had included in our projections from out-of-period billings. We had some termination fees. We had some holdover fees for customers that had canceled leases long ago but hadn't removed their equipment on time. So it's just a wide variety of stuff. But usually -- and just to give you kind of perspective on it, when we project that out and we gave you the bridge, we kind of use historical norms but we also are a little bit cautious because that stuff is a little bit uncertain. So sometimes we have a tendency to see a little bit more than what we project out of a little bit of caution there.

Spencer Kurn -- New Street Research -- Analyst

Okay. Thank you.

Brendan Cavanagh -- Chief Financial Officer

Yes.

Operator

And we'll go next with David Barden with Bank of America. Please go ahead.

Joshua -- Bank of America -- Analyst

Hi, guys. It's Josh on for Dave. Thanks for taking the questions. On Brazil, I know it's quick but is there any tangible change to the market since the election? And have you had any conversations with the carriers down there that might give you -- make you feel better or worse kind of going forward?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Hard to say that we've seen a tangible change there. It looks like they may be lifting the spectrum cap which could be very good for the market in terms of activity down there. We'll see. The other thing that may happen, was not going to happen certainly before the election, would be the addressing of the concessions down there that would need to happen along with spectrum cap lifting before the -- any kind of large M&A or kind of structural changes can occur in that market. We believe Bolsonaro was in favor of both. So we'll see. But the spectrum cap was positive and all that was kind of wrapped up in our comments as to why we are optimistic now that he is -- has been elected.

Joshua -- Bank of America -- Analyst

Great. Thanks for that. And did you have any conversations with the carriers, not naming them individually, leading into the election about what they may or may not do depending on who was ultimately elected?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Not that we can comment on.

Joshua -- Bank of America -- Analyst

Okay. Great. Thanks for taking the question.

Operator

And our next question from the line of Amir Rozwadowski with Barclays. Your line is open.

Amir Rozwadowski -- Barclays -- Analyst

Thanks very much, and good afternoon, folks.

Jeffrey Stoops -- President, Chief Executive Officer & Director

Hey, Amir.

Amir Rozwadowski -- Barclays -- Analyst

Hey. A couple of questions, if I may. In thinking about sort of the growth trajectory of the business, your exit run rate for 2018 seems to be fairly healthy and recognizing that -- we don't really want to get into 2019 too much here -- are there any potential limitations that are out there right now that could cap some of the growth? I don't know if it's more tower climbers or just the ability to move at the pace that the carriers would like to move out, is there anything along those lines that you're seeing, either through yourselves or through the industry at the moment that could put an upward limit in terms of the potential for growth?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Besides just the basic law of demand, no, I don't think it's going to be anything other than just the amount of orders that ultimately come in the door.

Amir Rozwadowski -- Barclays -- Analyst

That's really helpful. And then thinking about sort of the sustainability of the investment environment at this point, I think that there's still been some debate in terms of how some of the new spectrum that could come to market would be optimized or deployed either via small cells or macro site investment. And I'm thinking about ranges like 3.7, 3.5, 3.7 to 4.1. How do you think about sort of the opportunity set from a macro perspective for those types of spectrum bands?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Well, based on -- I think there's still a lot of work and thought to be put into it. But I think the C-band would be mostly at the greater macro opportunities. The CBRS will be more of a in-building, perhaps Wi-Fi substitute which is actually good because it may break through a lot of in-building resistance with owners where economics previously didn't make sense. Small cells, probably going to benefit from both but that's not an area that we have certainly the greatest expertise in. But as to the macro sites, probably more of the C-band than the CBRS. But all in all, very good for the ecosystems. The more things you have out there and the greater the money and the folks who are participating, particularly if we can get some other players involved, maybe some of the nontraditional, the Googles, Amazons, and these are folks who are keenly interested in the CBRS ecosystem, I think it can only be good for infrastructure as a whole.

Amir Rozwadowski -- Barclays -- Analyst

Thank you very much for the incremental color.

Operator

We'll go next to Jonathan Atkin with RBC Capital Markets. Please go ahead.

Jonathan Atkin -- RBC Capital Markets -- Analyst

Hi, there. A couple of questions. You mentioned rooftops in the script alongside all the other things that you're talking about. And I thought that was sort of a low-margin business compared to indoor DAS and venues and so forth. So just wondering what you see in rooftops that might have changed over the years. And then secondly, I was interested in the -- you talked about strength across the Big 4 in the US and have you noticed any sequential changes in a negative direction in terms of leasing volumes from any single of the Big 4? Or has that been universally flat to positive in terms of leasing volumes sequentially from Big 4?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Yes. I'll cover the last one first. I mean, it's -- we were speaking more as a whole. I mean, not -- there's not total equality in terms of the strength among the Big 4, Jonathan, and I prefer not to get into who's red hot and who's not. I think you can derive all that from your own readings of their CapEx reports. But in terms of rooftops, you're absolutely right, but the beauty rooftops is you can generally secure them with relationships that require little to no CapEx. And as you know, return on invested capital is something we're very much focused on and you can do pretty well there with the right asset.

Jonathan Atkin -- RBC Capital Markets -- Analyst

Are you planning to leverage rights that you had for the better part of the last 10 years? Or are there new assets coming into the portfolio where you would deploy these?

Brendan Cavanagh -- Chief Financial Officer

Both. Both.

Jonathan Atkin -- RBC Capital Markets -- Analyst

And then lastly, I was interested in just organic portfolio growth opportunities in the US and do you see the pace changing notably from what we've seen in the last couple of quarters?

Jeffrey Stoops -- President, Chief Executive Officer & Director

I don't see the pace changing. I think the quality assets in the US will continue to be elusive.

Jonathan Atkin -- RBC Capital Markets -- Analyst

Thank you very much.

Operator

And our next question from the line of Colby Synesael with Cowen and Company. Please go ahead.

Colby Synesael -- Cowen and Company -- Analyst

Great. Two questions, if I may. In your press release you noted that you executed new domestic leasing that was at the highest level since 2014. And I'm just curious if you adjust for the law of large numbers on an absolute -- on a percentage basis, would you anticipate based on the leasing that you saw in the third quarter that you can get to a point where you'd see the same level of absolute growth that we saw in 2014 somewhere over the next two quarters? And then secondly...

Jeffrey Stoops -- President, Chief Executive Officer & Director

Absolute growth on a percentile basis?

Colby Synesael -- Cowen and Company -- Analyst

No, not on a percentile basis. So I appreciate that you can't get the same percentage rates because of the law of large numbers. But..

Jeffrey Stoops -- President, Chief Executive Officer & Director

Like on a revenue per tower base is you mean?

Colby Synesael -- Cowen and Company -- Analyst

Yes, like in terms of growth, yes.

Brendan Cavanagh -- Chief Financial Officer

Probably not, Colby. I mean, it depends on what period you're talking about. I mean, when we said we're at -- that was the highest lease-up since 2014 that is on a dollars added per site basis. So from that perspective it is what you're saying. It is more dollars at signed up on a per tower basis than it has been at any time in the past.

Jeffrey Stoops -- President, Chief Executive Officer & Director

But not as high as our peak metrics in 2014.

Brendan Cavanagh -- Chief Financial Officer

Exactly.

Jeffrey Stoops -- President, Chief Executive Officer & Director

On that particular metric.

Colby Synesael -- Cowen and Company -- Analyst

Got it. So there's still a notable gap between what was done in the third quarter and '14 even though the next comparable high water mark would be 2014?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Correct.

Colby Synesael -- Cowen and Company -- Analyst

Okay. Thank you. And then the second question. In your script you mentioned massive MIMO, and you mentioned you're seeing activity in the 600 and the 2.5. I'm just curious are those the only two band that you're currently seeing demand for massive MIMO?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Let's -- call us back tomorrow because I'm not sure I will -- can give you a perfect answer on that. I want to make sure that I don't misspeak. Those are certainly the two predominant ones.

Colby Synesael -- Cowen and Company -- Analyst

Okay. Thank you.

Operator

Our next question from Matthew Niknam with Deutsche Bank. Please go ahead.

Matthew Niknam -- Deutsche Bank -- Analyst

Hi, guys. Thanks for taking the question. Just two on rates and debt. Can you talk about the impact of rising rates on forward AFFO per share growth given I think a little over 20% of your debt is floating rate? And then just leverage-wise, with rates rising, does that change at all how you're thinking about capital allocation and optimal leverage you'd like to operate the business at giving you've been a little bit closer to the higher end of that 7% to 7.5% range of late? Thanks.

Jeffrey Stoops -- President, Chief Executive Officer & Director

Well, I mean, you can -- that's a great question for all of you modelers because you can take our floating rate debt, which is very clearly laid out, and you can apply the forward curve because it's a LIBOR based instrument that's very clearly laid out, and you can make your own assumptions as to what our interest expense will be going forward. And that's the great question, right? What's -- and you can actually figure it out to the penny, Matt. So you can answer that question. So what was your second question?

Matthew Niknam -- Deutsche Bank -- Analyst

Just about you're thinking about leverage, with rates rising. I know you guys have been fairly comfortable where you are, but with the 7% to 7.5% -- you've been operating at about 7.5%, is there any change to the way you're thinking optimal leverage in the current environment?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Probably not because of rate, but as we get -- we're a quarter away from the calendar turn into 2019. That brings us within two years of a dividend. So as we've talked about before we're going to want to -- as we enter into that period, have probably a six handle on our net debt leverage. So we are thinking about it more today than we were a year ago and how we're going to segue into that time period. But it's more because of the dividend than it is because of interest rates.

Matthew Niknam -- Deutsche Bank -- Analyst

Okay. Understood. Thanks.

Operator

(Operator Instructions) We'll go to Brandon Nispel with KeyBanc Capital. Please go ahead.

Brandon Nispel -- KeyBanc Capital -- Analyst

Great. Thank you for taking the questions. Two for Jeff. Number one, Jeff, are you guys seeing any changes in the prices that sellers of tower portfolios that are expecting to get if interest rates rise? Number two, are you having any conversations with any of your customers in the US on LTE spectrum band refarming for 5G? Are you primarily seeing amendments at this point from 2G and 3G to LTE?

Jeffrey Stoops -- President, Chief Executive Officer & Director

I don't think anybody's refarming any 4G because the --there's really no 5G devices or even true equipment out there yet and my understanding is the 4G is going to sit with the 5G for quite some time. So none of that yet. And are sellers expecting changes? Sellers never expect changes. But do they actually get them? I think all that starting to work through. And it just takes time, but interest rates clearly are something that we certainly take into consideration when we bid for assets. And I think other serious and disciplined buyers do as well. So it will have an impact. Should have an impact, will have an impact.

Brandon Nispel -- KeyBanc Capital -- Analyst

Great. Thank you.

Operator

Our next question from the line of Robert Gutman with Guggenheim Securities. Please go ahead.

Robert Gutman -- Guggenheim Securities -- Analyst

Thanks for taking the question. With escalating activity through the year coming from the areas that you mentioned, FirstNet, 600 and 2.5, where would you say we are these days right about now in terms of how far those initiatives have worked through your entire footprint percentage-wise or in some sort of buckets or innings, however you choose to describe it?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Maybe the third inning. I'm innings kind of guy. How about the third inning?

Robert Gutman -- Guggenheim Securities -- Analyst

That works. But I think it's still pretty early. Thanks.

Jeffrey Stoops -- President, Chief Executive Officer & Director

I think that's our last question. Right, Laurie?

Operator

We do have one remaining question in the queue.

Jeffrey Stoops -- President, Chief Executive Officer & Director

Okay. We'll take that last one and we'll call it a night.

Operator

We'll go back to Ric Prentiss with Raymond James. Your line is open.

Richard Prentiss -- Raymond James -- Analyst

(inaudible) any questions are asked. Jeff, I want to press you a little bit on your comment about open to exploring other markets beyond the western hemisphere. Can you share with us what would make an attractive market? I know people have looked at European assets but none of the US guys have really jumped at it. So help us understand as you look at portfolio growth outside of the markets you're already in, what would make an attractive market and what -- obviously you look at every book but kind of walk us through how you think about other markets.

Jeffrey Stoops -- President, Chief Executive Officer & Director

Well, something where we feel after taking into account all of the risks and potential negatives weighed appropriately against the potential growth and the upsides we can make a appropriate positive spread on our whack (ph). I mean, we're pretty good at this stuff in terms of operations and we have found that particularly Latin America and South America, Brazil in particular, where I think everyone has really kind of been blinded by the movements in the real is to actually how we've really -- well we've done on every other aspect, we take those things and we can take those skills to other markets. Europe for us has been a problem just because the returns haven't been there based on the competition from the European infrastructure funds who fund in euros and can borrow money at 0% and things like that. So we'd be looking at other, conceivably higher-risk parts of the globe. That of course would have to be carefully looked at and evaluated would have to come with obviously double-digit plus returns for them to make sense for us. But assuming they did, and we did our homework, we would not be afraid to go there.

Richard Prentiss -- Raymond James -- Analyst

Okay, good. And is it -- do you check how many carriers are on (inaudible) think about the checking the boxes and what makes an attractive market?

Jeffrey Stoops -- President, Chief Executive Officer & Director

Yes. I mean, you're going to obviously have to have the right multiplicity of carriers to make the model work. It's going to be a very rare, if ever, situation where you can go into a two carrier market. We have been able to do that in Nicaragua, for example, and done very, very well but that's I think much more the exception rather than the rule. So you're generally going to be looking at a three-carrier market and a relatively evenly spread three-carrier market, not a disproportionate three-carrier market. You're going to need -- in a lot of these other markets, you're going to need to understand the politics and are they all basically feeding off of the telecom industry because there's a lot of that in parts of the world. It's -- there's a lot to it. We would never take it lightly. But we would never say unequivocally never. I don't think that's what our shareholders expect us to do. They expect us to get in there, do the work and make the right decision.

Richard Prentiss -- Raymond James -- Analyst

Great. Thank you, Jeff.

Jeffrey Stoops -- President, Chief Executive Officer & Director

Yes.

Operator

I'll turn it back to our speakers for closing remarks.

Jeffrey Stoops -- President, Chief Executive Officer & Director

Yes. Well, thanks to everyone for joining us, and we look forward to our next call where we will wrap up our year results and give you our 2019 outlook.

Operator

Ladies and gentlemen, this will conclude our teleconference for today. Thank you for your participation and for using AT&T executive teleconference service. You may now disconnect.

Duration: 55 minutes

Call participants:

Mark DeRussy -- Vice President of Finance

Brendan Cavanagh -- Chief Financial Officer

Jeffrey Stoops -- President, Chief Executive Officer & Director

Richard Webb -- J.P. Morgan -- Analyst

Richard Prentiss -- Raymond James -- Analyst

Nicholas Del Deo -- Moffettnathanson -- Analyst

Michael Rollins -- Citi -- Analyst

Walter Piecyk -- BTIG -- Analyst

Simon Flannery -- Morgan Stanley -- Analyst

Spencer Kurn -- New Street Research -- Analyst

Joshua -- Bank of America -- Analyst

Amir Rozwadowski -- Barclays -- Analyst

Jonathan Atkin -- RBC Capital Markets -- Analyst

Colby Synesael -- Cowen and Company -- Analyst

Matthew Niknam -- Deutsche Bank -- Analyst

Brandon Nispel -- KeyBanc Capital -- Analyst

Robert Gutman -- Guggenheim Securities -- Analyst

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