American Tower Corp. (AMT - Analyst Report) announced strong financial results for the first quarter of 2012, easily surpassing the Zacks Consensus Estimates. On a GAAP basis, net income in the reported quarter, was $221.3 million or 56 cents per share compared with a net income of $91.8 million or 23 cents per share in the prior-year quarter. First-quarter 2012 earnings per share of 56 cents were significantly above the Zacks Consensus Estimate of 40 cents. Quarterly total revenue was $696.5 million, up 23.8% year over year, surpassing the Zacks Consensus Estimate of $671 million.
Adjusted EBITDA in the first quarter of 2012 was $462.5 million, up 22.7% year over year. Adjusted EBITDA margin was 66% compared with 67% in the prior-year quarter.
Gross margin in the reported quarter was 75.5% compared with 76% in the year-ago quarter. Selling, general & administrative expense was $79.6 million compared with $66.1 million in the year-ago quarter. Quarterly operating income was $274.4 million, up 25.7% year over year. In the previous quarter, American Tower repurchased 0.1 million shares of its Class A common stock for a total consideration of $4.9 million.
During the first quarter of 2012, American Tower generated around $402 million of cash from operations compared with $283.8 million in the year-ago quarter. Recurring free cash flow in the previous quarter was $299.2 million compared with $248.3 million in the prior-year quarter. Quarterly recurring free cash flow per share climbed 21% year over year to $0.75. Proforma adjusted funds from operations (AFFO) in the reported quarter was $295.8 million compared with $261.3 million in the year-ago quarter. Quarterly proforma AFFO per share was $0.74, up 13.8% year over year.
At the end of the first quarter of 2012, the company had $504.1 million in cash & marketable securities and around $7,288.4 million in outstanding debt on its balance sheet compared with $330.1 million in cash & marketable securities and $7,236.3 million in outstanding debt at the end of 2011. At the end of the reported quarter, debt-to-capitalization ratio was 0.67 compared with 0.68 at the end of 2011.
Domestic Rental and Management Segment
Quarterly revenue was $487.1 million, up 16.6% year over year. Gross margin came in at 80.9% compared with 80.1% in the year-ago quarter.Operating margin was 77% compared with 76% in the year-ago quarter.
International Rental and Management Segment
Quarterly revenue was $196.9 million, up 52.6% year over year. Gross margin for the segment was 66% compared with 68.1% in the year-ago quarter.Operating margin was 54% compared with 55% in the year-ago quarter.
Network Development Services Segment
Quarterly revenue was $12.5 million, down 21.9% year over year. Gross margin was 44.1% compared with 53.4% in the year-ago quarter.Operating margin was 41% compared with 43% in the year-ago quarter.
On March 31, 2012, AmericanTowermanaged 46,782 communications towers, of which 46,309 are for Wireless network and 473 for Broadcasting. Additionally, the company manages 265 in-building and outdoor for DAS (Distributed Antenna System) networks. Geographically, the company operates 21,214 wireless towers and 274 broadcast towers in the U.S. in addition to 25,095 wireless towers and 199 broadcast towers outside the U.S.
Future Financial Outlook by Management
For 2012, total revenue from the Rental & Management segment is expected to range from $2,745 million - $2,795 million. Adjusted EBITDA is anticipated in the $1,795 million - $1,845 million range. AFFO is estimated around $1,170 million - $1,202 million. Net income is estimated around $675 million - $715 million. Capital expenditure is expected in the band of $500 million - $600 million.
We believe the wireless tower industry will continue to perform extremely well, primarily on the back of huge demand for mobile data and video services. However, stiff competition from Crown Castle International Corp. (CCI - Analyst Report) coupled with higher operating expenses and huge debt may act as headwinds for the stock going forward. We maintain our long-term Neutral recommendation on American Tower. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.