Q1 2024 Earnings Summary
- Crown Castle grew tower revenue by 4.6% in Q1 and expects to meet its annual guidance of 4.5% growth, indicating steady performance and confidence in hitting the yearly target of $105 million to $115 million.
- Management is optimistic about future growth due to expected network densification and increased data demand, which will require more spectrum or densification efforts.
- The company anticipates a reacceleration of tower leasing activity in Phase 3 of 5G deployment, expected around 2025, providing significant growth opportunities.
- Tower leasing levels are well below historical levels and are closer to a trough, with uncertainty about reacceleration to the company's long-term 5% growth guidance.
- There is a decrease in site rental revenues, adjusted EBITDA, and AFFO due to $50 million of Sprint cancellations, $54 million reduction in noncash items, and a $26 million decrease in services margin from lower tower activity, indicating financial challenges.
- The timing of future growth in the tower business is uncertain, and the company cannot predict when densification efforts will pick up, potentially impacting future revenue growth.
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Dividend Policy
Q: How will you approach funding and growing the dividend?
A: Management emphasized that the dividend is extremely important to the Board and the company, recognizing that many investors view it as a significant component of their return. They believe their strong balance sheet and earnings will support the dividend. While they will consider the dividend during the strategic review, they reiterated their support for it and stated it's a key part of their capital philosophy. -
Fiber and Small Cell Separation
Q: Can you separate small cells from Fiber Solutions?
A: Management noted that many fiber and small cell companies operate independently without an enterprise fiber segment like theirs. They believe these businesses can be separated, increasing their strategic alternatives and informing their view as they progress through the strategic review. -
5G Densification Outlook
Q: Update on carriers moving to 5G densification?
A: Management reiterated that delivering on the promise of 5G will require significant continued densification over years to come. While it's hard to predict the timing, they believe there's still a lot of work for carriers to do to densify their 5G networks, providing a great opportunity for their tower portfolio. -
AFFO per Share Outlook
Q: Is first half still the low point for AFFO per share?
A: Management confirmed they still believe the first half will be the low point for AFFO per share and expect growth through the remainder of the second half of 2024. -
Cost Cutting Initiatives
Q: Any further cost optimization expected?
A: They have realized over $100 million in cost savings from office consolidation and workforce reductions announced last year. While always looking to optimize the business, they believe the new CEO, Steven, will help identify additional opportunities. -
Tower Revenue Guidance
Q: Any changes to tower revenue outlook?
A: They grew tower revenue by 4.6%, aligning with their annual guidance of 4.5% growth. While second-half activity is generally higher due to seasonality, they currently see nothing that would cause results to fall outside their guided range of $105 million to $115 million for the year. -
CEO's Strategic Role
Q: How involved will you be in shaping strategy?
A: The new CEO, Steven, feels very involved in constructing the company's strategy. He emphasized the importance of chemistry with the Board and management team, which allows for building trust and empowerment to implement plans that will set the company up for future success. -
Small Cell Deployment
Q: Update on small cell nodes deployment?
A: They expect to deploy 16,000 small cell sites in 2024, up from 8,000 previously. They continue to have line of sight on these deployments, which are typically back-end loaded, and have no further update for this quarter.