Brendan T. Cavanagh
President and Chief Executive Officer at SBA Communications
Thank you, Mark, and good afternoon. The second quarter was another solid one with good execution operationally and financial results in line with our expectations. Accounting for recent weakening in foreign exchange rates, we have modestly lowered our full-year outlook for most financial measures. However, on a constant currency basis, we have slightly increased our projected full-year results. The year has largely unfolded as we had expected. Steady carrier activity across our markets, but no material inflection in new lease and amendment executions thus far into the year. In the U.S., we have continued to receive increased inquiries from our customers, which is a good sign, but to date we have only seen a modest increase in new business executions. Looking out over the next several years though, we are very excited about the prospects for further increased demand.
Mobile network consumption continues to grow at a very healthy pace, adding strain to existing networks. The offering of fixed wireless access by all three of our major customers will only add to this network strain. I have mentioned it before but I believe it bears repeating. The average fixed wireless access user consumes 15 to 25 times the data that a typical mobile wireless user consumes. As a result, the equivalent mobile subscriber additions to our customers networks is significantly higher than it has been in the past. This phenomenon will require continued network investment by our customers to keep pace with the demand. And all have publicly discussed plans to continue to grow fixed wireless access subscribers over the next several years. We also expect that the eventual incorporation of new Generative AI capabilities into handsets will further increase network consumption.
In addition, the percentage of our existing leases with the big three carriers that have been upgraded with mid-band 5G spectrum still remains at just over 50%, leaving a significant growth opportunity ahead of us. Varying rates of 5G progress among our largest customers creates competitive pressures that we believe will also be a driver of future network investment, just as it has been in past cycles.
Incidentally, mid-band 5G spectrum upgrades in our international markets are at even lower percentages of completion than in the U.S. Beyond all these demand-oriented drivers, we expect increased network spending driven by 5G coverage commitments made in connection with past regulatory approvals. Some of these commitments not only require coverage of POPs, but also minimum downlink speeds. This means that denser build outs and expansion into areas not previously prioritized, particularly rural areas, will become more important as deadlines approach. We believe we are well situated to assist our customers in meeting their objectives with both our assets and our services support solutions. We are in the business of long-term assets and long-term customer relationships. Things don't change materially overnight, but the signs of numerous demand drivers are all there, and we are confident in our long-term organic growth prospects. In our services business, we had another good quarter as well. Revenue was up 15% from the first quarter and our gross profit contribution was ahead of our internal expectations. We have lowered our full year outlook for services revenue by $10 million at the midpoint due to a lower anticipated level of construction work, although we still expect to increase that number in the second half of the year over first half levels.
Notwithstanding this lowered revenue outlook, we have not reduced our expected gross profit contributions to our full year adjusted EBITDA outlook as we continue to secure higher margin work. Our services teams continue to perform very well for our customers, helping them to significantly reduce their deployment cycle times. Internationally, results were also in line with expectations in the prior quarter, although we did see a pick-up in new leasing activity during the quarter, increasing the contribution to full year revenue from new leases and amendments. Each of our markets has opportunities for increased organic growth as new spectrum and new generations of wireless technology are rolled out. Challenging macroeconomic factors and imbalanced market share among mobile network operators in some of our markets has led to consolidations and increased network rationalizations, presenting some near-term challenges, but ultimately bolstering the strength and sustainability of our customers' prospects.
We continue to work toward enhancing our own market positioning and our alignment with the leading carriers in each of our markets. We believe our efforts will ultimately enhance the long-term strength and stability of our cash flows and increase our opportunities to capture incremental organic leasing revenue growth. During the second quarter, we also continued a balanced approach to capital allocation with a mix of portfolio expansion, stock repurchases, dividends, and debt reduction. I anticipate that we will continue to balance our capital allocation for the remainder of the year.
Since our last earnings call, we have largely focused on debt reduction and have reduced our outstanding revolver balance to just $30 million as of today. We have some upcoming debt maturities that we anticipate refinancing in the near future. But until that time, we will likely continue to prioritize debt reduction and liquidity. The debt markets are wide open to us and have also improved over the last few months as we have seen some tightening of rates. Our quarter-end net debt to adjust to EBITDA leverage ratio was 6.4 times. So, while our current priority is debt reduction, we have preserved the flexibility to take advantage of material value enhancing investment opportunities if they arise.
We continue to explore and stay educated about the numerous asset portfolios available throughout our markets, but we'll retain an informed financial discipline in our approach to these opportunities. Our approach has really not changed, but our increased cost of capital has certainly underscored the emphasis we place on precise valuation and strategic rationale. I still believe we are the best in the business at valuing, integrating, and operating tower assets. So I believe we can continue to create value through asset acquisitions. We have a great long-term steady cash flow, low-risk business. The underlying strength of wireless dependent products and services will continue to drive increased needs for enhanced infrastructure solutions, and we have positioned ourselves as a key partner for our customers in meeting the challenges of addressing those needs.
Before turning it over to Marc to share some more specifics on our second quarter results, I'd like to thank our team members and our customers for their contributions to our success. With that, I'll now turn things over to Marc who will provide additional details.
