SBA Communications SBAC notched another strong firstquarter result, highlighted by better-than-expected earnings and another guidance upgrade. First-quarter revenues grew by 62% year over year to $313 million–roughly 4% above consensus. The growth was driven by a 64.1% increase in the firm’s tower base, which now stands at 17,539. Once again, however, SBA’s growth was in both quality and quantity. The firm was able to expand its adjusted funds from operations (AFFO) margin as a percentage of revenue by nearly 100 basis points to 40.3%. These results, coupled with its current backlog and positive view on future leasing activity, prompted management to raise its 2013 outlooks for revenue and AFFO by 3.3% and 4%, respectively. Despite the upgrades, our projections still outpace the high end of guidance (historically, management raises guidance multiple times per year), thus we do not plan on revising our $83 fair value estimate at this time.

The strong earnings performance also helped lower the firm’s leverage ratio by 0.3 turns sequentially to 7.0 times EBITDA. Two weeks ago, the firm sold $1.33 billion in bonds at a blended interest rate of 3.22% Some of the proceeds were used to repay its $100 million outstanding balance on its revolver, as well as paying off $500 million in term loans. Having the financial flexibility to make accretive acquisitions is an integral part of owning an economic moat in this sector. We appreciate SBA’s commitment to keeping its leverage ratio at manageable levels.