Operator:

Good day and welcome to the Crown Castle Second Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kris Hinson, Vice President of Corporate Finance and Treasurer. Please go ahead.

Steven Moskowitz :

Thanks, Chris. Good afternoon, everyone. We appreciate you joining us for this call and as you can see from our second quarter results, we delivered solid operating and financial performance in all three of our businesses and reiterated our full year 2024 outlook. We're confident in our outlook based on having 95% of our expected tower revenue growth for this year contracted either as part of our holistic master license agreements with our major customers or with revenues from regional and local wireless customers, and also having implemented changes to our fiber segment, which will position us to generate more profitable business and increase our operating efficiencies. In the tower business, we anticipate organic revenue growth of 4.5% this year, and believe that as we look out over the next few years, our growth rate will be higher based on three factors. First, the holistic master license agreements we have with our largest customers provide us a stable and consistent level of growth over time. Second, industry forecasts estimate that long-term US wireless data demand growth will continue to drive the need for significant future communications infrastructure investments. And we are aware that major carriers still have lots of work to do to expand their networks in the 5G build cycle. And finally, we believe that as more tangible steps are taken by our company to be a best-in-class supplier of low-cost shared infrastructure solutions, we'll be better positioned to compete for a higher share of revenues as our customers continue to invest in their networks. Moving to our fiber and small cell businesses, we've completed many of the changes to our operating plans that we announced in June and have started to see the benefits of those changes through more profitable growth and greater operating efficiencies. As part of the operational review of our fiber segment, which we conducted earlier this year, we affirm that greater opportunity exists to provide additional customer solutions to enterprise fiber connections and small cell locations that are on or near our existing high quality fiber footprint, which allows us to add revenue without the requirement to invest as much capital as we've done in the past. Implement these changes in our small cell business, our commercial and deployment teams have been working collaboratively with our customers on a mix of outcomes, many of which improves our project economics, while also addressing our customers' evolving priorities around network densification and capital allocation. As part of this change in our operating plan, we plan to build fewer anchor nodes in the short run. However, given our large pipeline and our customers' long-term densification needs in geographies where we have really robust assets in place. We continue to expect there is sufficient demand to grow small-cell revenues by double digits over the next several years. Turning to our fiber solutions business, we believe we can improve returns by focusing our sales efforts on or near-net opportunities that reduce discretionary capital expenditures going forward. And to support these changes, we've already adjusted our go-to-market commercial plan. We've changed our sales incentive award system and increased our required rates of project returns, resulting in anticipated shorter payback periods on invested capital. So like in our small cell business, we analyzed the markets around our fiber assets to quantify the opportunities to utilize our existing fiber. We believe we have ample opportunities to improve capital efficiency, while achieving long-term organic revenue growth in fiber solutions of 3% per year. As we announced in June, we believe our more focused effort to target on-net and near-net demand in both small cells and fiber solutions will drive a more efficient use of capital and will also generate approximately $100 million of annualized run rate cost savings. Importantly, we implemented most of these changes by the end of the second quarter, which keeps us on track to generate approximately $60 million of expected cost savings and reduce capital expenditures by about $300 million for this year. As we continue to deliver solid results and make operational changes, we remain focused on the fiber strategic review, which is active and ongoing. The management team and I continue working with the fiber review committee, the board of directors, and external consultants to evaluate strategic alternatives to determine how to maximize shareholder value. Now, we can't share much more about the process and the timing. What we can share is that we remain actively engaged with multiple third-parties who continue to show a lot of interest in our fiber solutions and small cell businesses. And we'll provide updates as the process unfolds. I'd like to conclude my comments by saying that over the past few weeks, I've been fortunate to have engaged in conversations with more than 50% of our company's employees through either in-person conversations and also video conference calls. The goal of my meetings with everybody was to be present and discuss the rationale behind our recent operational changes, answer questions that are on people's minds about the fiber segment, and start to set expectations for everybody in the company going forward. My takeaways from these discussions was that two major themes exist in the minds of Crown Castle employees. First, they care and have great pride. They are very proud of being part of Crown Castle and they want our company to be seen as excellent in the minds of the constituents we serve including shareholders and customers and communities. And second, most recognize that to be excellent, we need to continue to make changes in how we operate. And they are engaged and energized about their ability to participate in and lead the process and develop new ways of doing things to help differentiate us, as a leader in the sector. So I'd like to thank all the employees I met for being as open and transparent with me as they were, and to those employees I've yet to meet, but will at a time come soon. And to all of our employees, a big thanks for continuing to drive our business and deliver results over the past several months. I know there's been a lot of change, and it's reassuring that this team has been able to stay focused on delivering for customers during this period. Having said all that, I would ask all employees and our investors to keep in mind the change management is a process and it takes time. And I appreciate your understanding as we continue to develop new goals that will improve our chances of taking higher shares of new revenue opportunities, convert a greater share of new revenue down to EBITDA, increase investment returns on the growth capital we deploy, bolster our balance sheet to generate more optionality for us in the future and ultimately increase shareholder value. So with that, let me turn it over to Dan to walk through the quarter results.

Operator:

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Simon Flannery with Morgan Stanley. Please go ahead.

Daniel Schlanger:

Hey, Simon. It's Dan. I'm going to take the first two and leave the M&A point for Steven to hit. But the run rate of CapEx, as we had been talking about, we're focusing our CapEx on lower capital intensity projects, so that we go towards on-net and near-net opportunities, which means that over time we believe that the overall level of CapEx, the amount of revenue we generate, will come down. But ultimately, CapEx is going to be driven by how much opportunity we have in the business. So we can't really give a full run rate of what we think is going to happen until we understand what that activity looks like and we're able to give guidance in 2025 But I think one of the things you mentioned and you're right about is that this was a midyear move and we were able to save $300 million is what we expect for the year. So we would anticipate that somewhere in that neighborhood or potentially more going forward, but we're going to have to get to 2025 before we can really give specifics on that point. In terms of leverage, Our goal is to be at 5 times leverage. And obviously, we're elevated from that point now, but we believe as we continue to grow our EBITDA and not grow capital nearly as much because of the capital savings we just talked about. We think we will be able to organically bring that leverage down over time towards that 5 times goal.

Steven Moskowitz:

Hey, Simon, it's Steven. In terms of M&A, you know, we're aware of different assets that are either in the market or coming to market in the US. And, if it's a truly compelling proposition for us, which we would consider compelling being highly strategic and cost effective, so we have confidence in delivering future shareholder value, then if it has those types of characteristics, we definitely have interest. But overall right now, M&A is not necessarily the priority for us.

Operator:

The next question comes from Michael Rollins with Citi. Please go ahead.

Steven Moskowitz:

Yeah, okay, Michael. You know, it's tough to talk about next year and beyond. It's a little bit early from our vantage point, but what we see in the market today and conversations that we're having with our customers, it just gives us optimism that what we've forecasted for revenue growth is directionally correct. We also obviously have benefit of stability and visibility in our revenue from our MLAs. So we don't really see demand shifting directions in one way or another from our major carriers. Right now, to some degree, we look at things as steady state, as carriers work on their mid-band 5G rollouts. So that's pretty much how we are thinking about this year. And again, going into next year, ideally there is more opportunity for growth. But we'll be working through our budgets between now and then this year from that vantage point. As it relates to tangible things, the priorities right now for us are the strategic review of our fiber business, very critical. Spending cash, what we would say is wisely or differently, you know, with some changes that have already occurred in our fiber business as we've outwardly discussed with everybody. Cost management for us, which is key, and our leadership team is evaluating kind of other areas of the business to see how we can consider improving operating and EBITDA margins over time. And then business transformation. I think business transformation is probably the biggest thing that we need to work on. I mean, this company has grown significantly over the last decade. And when you're growing like crazy, you tend to be focused more on driving revenue and getting every opportunity you can for lease up. And now that things are a little bit more in a steady state, I think the key for us is to, do some transformation. And when I think about that, it is really evaluating the people, making sure we have the right people in the right roles. It's the business processes, so identifying root causes of inefficiencies for us and [figuring out] (ph) plans to fix them so things are more repeatable and reliable, and efficient. And improving our systems, which a lot of people have been starting to do with improved workflows in this company. We have some new asset management tools, CRM and on the enterprise side. So kind of wrapping that all up, if we're able to over the next year, year-and-a-half, you know, really improve the processes that we have, whether it's the application to on-air cycle time, making sure we have just better data and data governance around our assets. All those types of things are going to help keep us really focused and that'll lead to providing better customer service to maximize organic growth in the future.

Operator:

The next question comes from David Barden with Bank of America. Please go ahead.

Daniel Schlanger:

Sure. Thank you. Let me answer the first one, which is what are our return thresholds as we look at the small-cell business? You pointed them out right. Historically, we targeted 6% to 7% on the anchor build. All I can say now is that our target is higher than that, and we are going to work through the market and figure out exactly what that's going to look like. But what it does by going to a higher level of anchor build economics is it allows us upon lease up to get even a higher return on the lease up, so that we de-risk the business substantially, with our cost of capital being higher than it was when we first targeted 6% to 7%. We think that we can start making on the anchor build a return that accommodates that higher cost of capital and allows us to make money over time by leasing up those assets. But they are not yet in a position of quantifying exactly what that number is going to be or is at this point. On the service revenue question that you asked, yes the second quarter run rate is what I would put in for kind of generally what we think will happen over the course of the rest of this year. And then as you pointed out, we'll give additional guidance for 2025, when we update our guidance in January.

Operator:

The next question comes from Ric Prentiss with Raymond James. Please go ahead.

Daniel Schlanger:

Sure. That is part of what led us to it. I think that what we had noticed is that when we were giving our guidance in October, we were a full five months ahead of our peers. And what we had also noticed was whatever trend we started to talk about, we were kind of blazing a trail well before anybody else could talk about them. And so we would get an outsized amount of the questions and an outsized amount of the consternation ultimately about what we were saying about the subsequent year for a pretty long time. And by the time that our peers were giving guidance in February, that news had settled a bit and it didn't impact them as much. And so what we've noticed is, it's been hard to be the trailblazer on that front. One of the things that has led us down the path of giving guidance so early is that our business is relatively predictable. And so we like the idea that giving guidance in October expressed that predictability. We didn't miss very often even though we were giving guidance in October. We still believe our business is predictable. We still believe we could give guidance in October and be good with it. But we think giving ourselves another three months and being closer to our peers, makes it easier for us to maintain a good message to the market and for investors to understand what's going on. And gives us a little bit more time to incorporate any additional information in that last quarter that will help us give the best guidance we possibly can.

Ric Prentiss:

That makes sense. And the carrier budget cycle seems to really come to a head, bottoms up, tops down Halloween into the fourth quarter. So I think it makes sense from your customer standpoint, too.

Daniel Schlanger:

And it takes away -- one other thing, Rick, I would just mention. It takes away one of the issues that we were having, which was we would provide guidance based on what we thought that the fourth quarter was going to be and then it would be a jumping-off point. Now we actually will know what that is, so that we don't have that other -- that extra change to try to reconcile back to.

Daniel Schlanger:

Yes, it's a totally fair question. I think what we've said is that we are open to any alternative that maximizes shareholder value. And if that alternative is that somebody is willing to value the fiber solutions business apart from us higher than what we think we're getting credit for what we believe it's worth internally, then we would like to sell it separately. If that valuation metric goes only in combination with small cells, then we would do something with a combined business. So that's really how we are thinking about it. I can't tell you how a potential buyer would look at the pros and cons of whether they want it together or separate. That's up to them to try to figure out. We know that there have been good overlaps between towers, small cells, and fiber solutions. That's why we have them together, but we are open to somebody coming in and valuing each, however they think they see value and comparing that to what our own internal look is and making the best decision for shareholders.

Steven Moskowitz:

That's a great question. Yes. I mean, it's a bit of a mystery. I mean, obviously, you have a lot of private investors who are very excited about this business, about the business model and about the future growth prospects. And they're investing capital and they feel that whatever high multiples of investing capital at, that at some point down the road. They'll be able to sell the business and get a good return on their invested capital or recapitalize the business somehow or partner with somebody but they see a very good exit. And I think there is, from our perspective of dislocation. We just -- we're – again we're not being opportunistic in looking at some deals that are out there that are very non-accretive to this company. So we'll see what happens over time. And we are hoping, Ric, that the dislocation changes and it does give us an opportunity. So as our balance sheet strengthens over the next number of years, and we do have more flexibility and optionality to grow inorganically, that there's opportunities. And that may be multiples at that juncture will have come down a little bit, and it's something that we would be seeking to engage in conversations with some of these privates.

Daniel Schlanger :

Thanks Ric.

Jim Schneider:

Good afternoon and thanks for taking my question. Relative to the operational update and a lower number of small cell deliveries you expect to make in 2024, can you clarify whether that reflects a reduction in the amount of small cell activity that carriers intend to do overall this year? And do you believe there is any change in their intention to do more self-perform work on small cells?

Jim Schneider:

That's helpful. Thank you. And then Steven, relative to your comments on the potential opportunity for market share gains, is there a particular segment of your business where you think you have the greatest confidence in achieving that over the next two years?

Jim Schneider:

Thank you very much.

Nick Del Deo:

Hi, thanks for taking my questions. And I hope you guys and your team have been managing through the effects of the hurricane okay. Steven, you just touched on this a little bit in your prior answer, but I was hoping you could expand a bit more broadly on your high-level philosophies as it relates to MLAs, so we can kind of understand the puts and takes of what you think about or want to see when you're contemplating those sorts of arrangements.

Nick Del Deo:

Okay, that's helpful. Thank you for sharing that. I guess one other question on fiber solutions. I guess can you guys drill down a little bit on the changes to your sales tactics or sales incentives or the sales tools you are going to be using to enable you to sell more on or near-net versus what you've been doing historically?

Nick Del Deo:

Okay, that’s great. Thank you Steven.

Richard Choe:

Hi, I have one question regarding the strategic review. I mean, should we be thinking about an outcome kind of by the next earnings call, end of the year, or maybe longer than that? And then following up on the tower question, longer term, is the tower business still a 5% business? Or could that actually be a little bit higher, given maybe the changes that you are focusing on? Thank you.

Richard Choe:

Great. Thank you.

Ari Klein:

Thank you. Maybe just going back to small cells. Given the shift in strategy, I think you've previously talked about 50,000 nodes in backlog. How many of those are impacted, I guess, by the shifts that you are implementing?

Ari Klein:

Thanks. And then maybe you talked a little bit about increased flexibility which includes the balance sheet and maybe bringing leverage lower. Could that at some point, include shifting the dividend strategy and how you think about that?

Ari Klein:

Got it. All right. Thanks for the color.

Matt Niknam:

Hi guys. Thanks for taking the question. Just two on fiber as well, it seems to be the theme of the call. One, obviously, there is a sharpened focus on more profitable on or near-net build. So Dan, I want to go back to a point that was brought up before. I know we reduced discretionary CapEx for the fiber business $300 million this year. This is a business that typically has from what I remember, an 18-month to 36-month book-to-bill, so there is pretty decent visibility. And so I'm wondering as we sit here today how that maybe informs what 2025 can look like, just given sort of that longer book-to-bill window. And then secondly on fiber solutions, the core leasing number this quarter, $39 million, I believe that was the highest since 1Q '22. So just looking for any updates you can share there and anything notable you'd call out driving that strength. Thanks.

Matt Niknam:

Yes, more so just around discretionary spend for fiber in general.

Steven Moskowitz:

Yes. I guess, I'd like to also just add, in a recent meeting with our teams on the enterprise fiber side in New York, some of the sales teams were asking a question about greenfield builds. And the answer to that was it is not like it's binary, right? It is not a yes or no scenario. And the example that the individual brought up was if I'm able to get a deal done with a very well-known hedge fund who wants 15 floors of fiber built in Hudson Yards. And I think there is opportunity for colocation, and we can prove in that the returns from day one are going to be X and the payback is going to be within the realm of what we're looking at, is that something that I can compete on? And the answer was yes. So we are not counting out not doing greenfields at all. It is just from our perspective, it just has to be profitable.

Daniel Schlanger:

Yes. Unfortunately, you are not going to love the answer. It's going to be, you're going to need to sit tight till January because like I tried to say earlier, the amount of CapEx that we ultimately spend is going to be based on the amount of activity we see from our customers. Whatever that CapEx is, is a lower capital intensity than it would have been historically for us. But it still could be that there is lots of activity we can go out and get. To Steven's point, that would be very profitable. And so we don't want to give any guidance that says we will definitely have this amount of capital reduction going into next year. Plus we haven't given a forecast for 2025, so it's hard to give a reduction to a forecast that doesn't exist. So unfortunately, Matt I'm sorry, you are going to have to just sit tight and wait until January.

Steven Moskowitz:

No problem.

Batya Levi:

Great. Thank you. A couple of follow-ups. First on the small cell side, can you provide more color on how we should think about the pacing from here? Should we assume the 3,000 to 5,000 delayed build will be just tackled down to maybe the 10,000 annual deployments you were targeting next year? And then one more follow-up on the fiber CapEx reduction if you don't mind. The $300 million, can you give us a split on what the small cell versus fiber mix of that is?

Batya Levi:

Okay, thank you.

Eric Luebchow:

Great, thank you for taking the question. On the small cell backlog and what you expect to deliver the next couple of years, any change to the mix of colocations versus anchor tenant nodes? How should we think about that shifting as a result of the strategic review or the operational review that you announced last month?

Eric Luebchow:

Okay, great. And then just a higher level question on tower activity. So perhaps with the exception of DISH, is the majority of your activity today still amendment related from carriers upgrading mid-band spectrum? Or have you seen any activity out there related to new colocations to densify tower grids in any of your markets, particularly the more urban ones? And if you haven't seen that in a big way, any kind of visibility on when that tower densification phase may pick up in the next couple of years? Thanks.

Eric Luebchow:

Thank you.

Walter Piecyk:

Thanks. Just I was hoping you could remind me of the components of believe it or not, I'm asking about SG&A at $200 million, $204 million not much of a reduction from last year, especially given the reduction we saw in first quarter. Maybe there is just some non-cash things that moved back and forth. But can you just kind of talk about the components in there and what areas are targeted for reductions going forward?

Walter Piecyk:

That's fine. I'm just looking -- I mean, last year you had -- it kind of came up in the second quarter. But then I looked at prior years, and there doesn't seem to be seasonality there. So when you talk about $60 million, is it – that is all for the fourth quarter level and then that's just going to keep going down? Or maybe there was some proxy fees in there in the quarter but I guess there wasn't -- I mean, that was a big number last year.

Walter Piecyk:

But that wasn't there last year in the second quarter which also was up, but whatever. I just -- it seems like obviously an important component but you don't think there is anything abnormal there? And so when are we going to see these reductions kick in? Obviously, the proxy fees drop out in the third quarter, so you'll get whatever that number is an immediate drop, and then we'll see some additional organic improvements in Q3 or are these all back-end loaded?

Walter Piecyk:

Okay. So I mean look, at the end of the day, next year assuming there is no more proxy fights and then you've got the reduction in whatever you announced in terms of guidance, you should get some much better efficiencies in 2025, hopefully, right?

Walter Piecyk:

Got it. All right, thank you.

Brandon Nispel:

Yeah. Hi, thanks for taking the questions. A lot have been answered already. But you guys have talked about, in the past the guidance 5% tower growth through '27, and that 75% of that is contracted. So I guess a simple question is how are lease applications trending today in terms of your confidence in achieving the remaining sort of 25% to hit that 5% growth rate? Thanks.

Brandon Nispel:

Great. Thanks.

Brendan Lynch:

Great. Thanks for taking my question. How should we interpret the changes in operations in the fiber and small cell businesses while the sales process is still ongoing? It sounds like you're engaged with multiple counterparties currently. And it seems like maybe it would be a little bit premature to make such changes that somebody else is going to be managing these assets somewhat imminently.

Brendan Lynch :

Okay, thank you.

Operator:

This concludes our question-and-answer session and concludes the conference call. Thank you for attending today's presentation. You may now disconnect.

Operator:

Hello, and welcome to the Crown Castle First Quarter 2024 Earnings Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to hand the call to Kris Hinson, Vice President, Corporate Finance and Treasurer. Please go ahead.

Robert Bartolo:

Thanks, Kris, and good morning, everyone. Thank you for joining us. I would like to start by welcoming our new CEO, Steven Moskowitz. As you know, the CEO search committee along with the full board has been actively engaged in a robust process to find our next leader. We worked with Russell Reynolds and evaluated a number of talented and highly qualified candidates. Ideally, we were looking for someone with strong operating experience in the tower industry, a track record of strategic capital allocation and value creation, as well as prior CEO experience. This process has resulted in the unanimous view of both the CEO search committee and the full board that Steven is the ideal person to lead Crown Castle going forward. A 25-year industry veteran, Steven is a proven executive with deep tower operating experience. Steven spent 12 years at American Tower, including the last seven years as EVP and President of the U.S. tower business. During his tenure, American Tower's U.S. operations became the largest and most profitable U.S. wireless infrastructure company, tripling in size to more than 20,000 sell sites. After American Tower, Steven served as the CEO of NextG Networks, a provider of fiber-based small cell solutions. At NextG, Steven produced market-leading returns on invested capital, while increasing the asset base to approximately 10,000 nodes. Most recently, Steven served as CEO of Centennial Towers, where he created a leading provider of build-to-suit cell sites in Brazil, Colombia, and Mexico by focusing on prudent capital allocation and operational excellence. As I've gotten to know Steven, it's clear that his experience and capabilities in the areas of operational efficiency, process improvement, capital allocation, and his proven ability to build strong leadership teams will serve our customers, shareholders, and employees extremely well. We are excited to welcome Steven and believe his leadership will enable Crown Castle to effectively execute on its strategic and operating plans and grow value for all shareholders. I would also like to thank Tony Melone for serving as our Interim CEO for the past three months. With the help of Tony's leadership, the company remains on track to meet its 2024 financial and operating goals and is well prepared for a seamless transition to Steven as the company's next CEO. I'm going to turn the call over to Steven in a few minutes to introduce himself and say a few words. But as you can imagine, after starting in the job late last week, he won't be in a position to take your questions at this time. But before I turn the call over to Steven, I would like to provide an interim update on our Fiber Review process. As you know, in January, the Board created a committee to direct a strategic and operating review of the company's fiber business with the goal of enhancing and unlocking shareholder value. The board engaged financial advisors, Morgan Stanley and Bank of America, as well as strategic and operating advisors, Altman Solon, as well as another leading management consulting firm to assess our businesses, core capabilities, competitive positioning, and organizational structure and also to perform market analysis and operational benchmarking. The goal of these assessments was to determine how to optimize the company's enterprise fiber and small cell businesses and determine the fit, value, and synergies both inside and outside of Crown Castle. As it relates to the overarching conclusion, this review confirmed that we have premier assets in attractive markets throughout the U.S. The next step was to determine the optimal path to maximizing the value of these assets, both within and/or outside of Crown Castle. To help assess the potential value creation opportunities, we have recently engaged with multiple parties, who have expressed interest in a potential transaction involving all or part of our fiber business. These discussions are ongoing. While we will not comment further on these discussions during the call, we are excited to have Steven on board to help us think through our strategic alternatives. We believe his extensive experience in the digital infrastructure sector will be extremely beneficial throughout this process. Regarding our operational review, we have concluded our work with our external consultants. The main conclusion is that they believe there are opportunities for operational improvement in both our enterprise fiber and small-cell businesses regardless of the outcome of our strategic review. We have begun sharing these insights with Steven, who will work with the board and the executive team to develop a revised operating plan that he will share with investors when appropriate. I speak on behalf of the board by saying how pleased we are to have concluded our CEO search with the appointment of such a talented and proven tower executive as well as progressing substantially on our Fiber Review. We are laser focused as a board and moving rapidly yet methodically on these initiatives that we laid out in late December. To reiterate what I said earlier, we believe Steven is the person best suited to lead Crown Castle through the next stages of our Fiber Review, as well as position the company for long-term success and value creation. We look forward to providing further updates as appropriate. Before I turn the call over to Steven, I would like to say, thank you to the talented employees at Crown Castle for continuing to serve our customers and deliver on the financial results we guided to for 2024. I'm impressed by your dedication and capability to stay focused even during these times of uncertainty. With that, let me turn it over to Steven.

Daniel Schlanger:

Thanks, and welcome, Steven. It's great to have you here as part of Crown Castle team and look forward to working with you. We delivered first quarter results in line with expectations and remain on track for our full year outlook as we continue to focus on executing for our customers and shareholders. Our first quarter results demonstrated our customers' consistent and growing demand for our shared infrastructure assets, leading to us generating 5% organic growth, excluding the impact of Sprint Cancellations. The 5% growth in the first quarter consisted of 4.6% growth from towers, 16% growth from small cells, which includes $5 million of higher than expected non-recurring revenue received in the period, and 2% growth from fiber solutions. As we had anticipated, the solid organic growth delivered in the quarter was offset by the following three items, leading to a year-over-year decrease in site rental revenues, adjusted EBITDA, and AFFO. First, a $50 million reduction in the site rental revenues related to the Sprint Cancellations. Second, a combined $54 million reduction into non-cash items, straight-line revenue, and prepaid rent amortization. And lastly, a $26 million decrease in services margin contribution due to the combination of lower tower activity and the decision we had made and implemented last year to discontinue offering construction and installation services. Turning to Page 5 of our earnings materials. Our full year outlook remains unchanged and reflects a year-over-year decrease in site rental revenues, adjusted EBITDA, and AFFO due to the non-cash and one-time items I just mentioned. On Page 6, our expected organic contribution to full year site rental billings remains unchanged with consolidated organic growth of 2% or 5% exclusive of the impact from Sprint Cancellations. The 5% consolidated organic growth consists of 4.5% growth from towers compared to 5% in 2023, 13% growth from small cells as we expect 16,000 new billable nodes in 2024 compared to 6% growth in 8,000 nodes in 2023 and 3% growth from fibers solutions compared to flat in 2023. Moving to Page 7. We continue to expect to deliver $65 million of AFFO growth at the midpoint, excluding the impact of the Sprint Cancellations and non-cash decrease in amortization of prepaid rent. Turning to the balance sheet. Since transitioning to investment grade in 2015, we have strengthened our balance sheet by extending our weighted average maturity from five to seven years, decreasing the percentage of secured debt from 47% to 6%, and increasing the percentage of fixed rate debt from 68% to 90%. In addition, we ended the quarter with approximately $6 billion of availability under our revolving credit facility and only $2 billion of debt maturities occurring through 2025, providing us with ample liquidity to fund our business. The steps we have taken to strengthen our balance sheet provide us with financial stability and flexibility as we evaluate strategic paths forward. Lastly, our 2024 outlook for discretionary capital remains unchanged at $1.5 billion to $1.6 billion or $1.1 billion to $1.2 billion net of $430 million of prepaid rent received. To wrap up, we continue to deliver good underlying growth across each of our businesses in the first quarter. At the same time, we made substantial progress on the strategic and operating review of our fiber business and successfully concluded our CEO search. I'm excited to welcome Steven to Crown Castle and look forward to working together with him and the board to enhance value for all shareholders. With that, M.J., I'd like to open the line for questions.

Michael Rollins:

Thanks, and good afternoon. Rob, great to have you on the call and Steven, congratulations on joining Crown Castle. I have two questions. One, just a clarification. Can you clarify the engagement that you mentioned with multiple parties? You referred to the fiber segment, I believe. Does that potentially include both fiber solutions and small cells or do those engagements refer only to the fiber solutions segment? And then second, just taking a step back, can you share a bit more of what you learned from shareholders over the last few months and the fiber strategic review that can help investors think about the direction that the board and management team want to take this company in over the next few years with respect to strategy and asset mix? Thanks.

Michael Rollins:

Yeah. Just taking a step back after conversations you have with the shareholders and then going through the fiber strategic review so far, just what you've learned and how you're thinking about kind of optimizing strategy and go forward asset mix over a multiple-year period of time?

Michael Rollins:

And just maybe lastly, timing. Is there any timing expectations for the next update or a goal in terms of when Crown wants to complete this part of the process?

Michael Rollins:

Thank you.

Jonathan Atkin:

Hi. Good afternoon and great to connect again. Maybe just a quick follow-up to the last question and that revolves around openness. You talked about maximizing shareholder value. Could that possibly include selling partial stake in fiber solutions and/or small cells? So that's maybe the follow-on question. And then my question would be just as we think about kind of the cadence for how second half momentum might shape up in the core tower business as well as in fiber solutions and small cells, anything you're seeing operationally around how to think about the next three quarters of the year and are we going to be seeing any kind of a different run rate going forward? Thanks.

Tony Melone:

Jonathan, it's Tony. Regarding the second question, as Dan mentioned, we grew tower revenue 4.6% and the annual guide is 4.5%. And while traditionally seasonality suggests that the second half activity generally is higher than the first. So far, what we've seen suggests that there's nothing that we see that would cause us to see something fall outside the range that we've already guided to, which if you recall was $105 million to $115 million for the year. So we still see ourselves in that range.

Daniel Schlanger:

Yeah, Jon. It's Dan. We, as you know, in July or August last year announced a consolidation of offices as well as a reduction in mostly our tower force. We have realized the benefits of all of those cost savings and they're coming through in our income statement this year and have been incorporated into our guide, but are coming true. So that was greater than $100 million of cost savings. With additional cost savings, we're always looking to try to find ways to optimize the business. And I would believe that Steven coming in will help us think through if there are other things we might be able to do, but there's -- there are no plans at this point that we would point to.

Operator:

Thank you. The next question comes from Ric Prentiss with Raymond James. Please go ahead.

Steven Moskowitz:

Thanks, Ric.

Robert Bartolo:

Hi, Ric. Thanks for the question. The dividend is extremely important to the board and the company. We recognize that our investors, many of which that's a significant component of return for the company as a REIT. We believe our balance sheet is strong and that our earnings and our balance sheet well support the dividend. So we're going to have to -- as we go through and the strategic review and everything else, we're going to have to go through that. But I want to just reiterate our support for the dividend and it's a key part of our capital and our philosophy as a board.

Robert Bartolo:

Yeah. So, Ric, there's many fiber companies and there's many small cell companies that operate without a fiber company, enterprise fiber companies such as ours. So part of the review, one of the learnings is that those businesses can be separated out. And so that increases our alternatives and informs our view as we progress through the strategic review.

Steven Moskowitz:

Thanks, Ric.

Operator:

Thank you. The next question is from Simon Flannery with Morgan Stanley. Please go ahead.

Daniel Schlanger:

Yeah, Simon. I'll take the first one. Yes. We still believe the first half will be the low point for AFFO per share and believe we will grow the AFFO per share through the course of the remainder or the second half of 2024.

Tony Melone:

Hello, Simon, it's Tony.

Tony Melone:

Good. Regarding activity levels, as I said earlier, we're extremely pleased with results for the first quarter, but as I said, there's nothing that we see right now that takes us outside of our guidance range that we previously provided. What I will say, on the -- I'll reiterate what I said last quarter regarding the carriers. To deliver on the promise of 5G throughout their footprint will require a significant amount of continued densification. Hard for me to predict over what period of time, but there's clearly still a lot of work I believe that they will do to densify their 5G network over years to come, and I think provides a great opportunity for Crown and our tower portfolio.

Tony Melone:

Yeah, Simon. As you know, we typically provide increments in 5,000 ranges. And so we don't have a further update on that for this quarter. What I can tell you is that the 16,000 sites that we expect, we continue to feel -- have line of sight on for 2024. And as you might expect in what you saw in previous years that is typically back end loaded.

Operator:

Thank you. The next question is from Nick Del Deo with MoffettNathanson. Please go ahead.

Robert Bartolo:

Well, here's what I would say, the operational review is primarily focused on the fiber segment. So we didn't have a deep dive into the tower cost structure. As Steven's remarks indicated, there are areas for operational efficiency, and he's an expert at extracting those on the tower side as well. So, like I said, it was more focused on the fiber segment, but stay tuned on the tower segment as well.

Nick Del Deo:

Okay.

Nick Del Deo:

Okay. That's helpful. Thanks for sharing all those details. And maybe in a similar vein, last quarter, I think Tony talked about implementing a change in how the segments are run. I think it was basically giving the COO's full P&L responsibility, which is an approach he liked. I guess it's early, but wondering if you're seeing any benefits from that yet, and if that sort of structure is generally consistent with how you like to run the business, Steven?

Tony Melone:

Yeah, Nick. And I'll add to that. It's hard to know exactly what contributed to our results, but I will say the fact that we're able to deliver results, solid results for the quarter, across all lines of business, despite the changes that were going on in the business, myself coming in, etc., gives me comfort that the added focus was helpful. But as I said to Steven, all these changes were made in mind that new CEO certainly is going to come in and provide their own influence on how the business should be run, and the team is adaptable.

Operator:

Thank you. The next question is from David Barden with Bank of America. Please go ahead.

Steven Moskowitz:

Hey, David. It's Steven. I couldn't hear part of your question, but I think you were asking how I'm thinking about my involvement in what the future strategy will be of the company.

Steven Moskowitz:

I mean, part of the reason why I came here was because I spent a lot of time with Rob, spent a lot of time with the different board members and Tony, obviously, and felt very comfortable that there was good chemistry between the team and myself, the team of board members and myself. And for me, chemistry is critical. I've had it for many, many years in many different roles, and it's allowed me to build trust, hopefully quickly with my bosses, I guess, and then implement and be empowered to implement in a way that I feel will best set the company up for future success. So I feel I'm going to be very involved, and I think maybe there's a little bit of frustration with, hey, the fiber review is to some degree, there's a lot of work that's been done and Moskowitz (ph) is coming in now and maybe there's a little bit of delay, but from my perspective, it's critical for me to really have a lot of exposure to what's been done to provide as an influencer for the strategy and then agreeing with Rob and the board on the best way to move forward. I'm not sure if that answers your question. I hope it does.

Daniel Schlanger:

Hey, Dave. I'm struggling with how to answer your question because I'm not exactly sure what you're looking at to conclude what you concluded. There was nothing that I would point to that is a new contract or an extension or anything that would significantly impact straight line and there wasn't a big jump in straight line. So I'm struggling with how I can address whatever you're thinking through.

Daniel Schlanger:

No. There was nothing that was pushed out or renewed. And I can't answer the question directly here, but I'm happy to follow up with you or anybody else who has the same question, but there was nothing that got renewed in the quarter.

Daniel Schlanger:

Yeah.

Richard Choe:

Hi. I just wanted to follow up. In the Fiber Review, there's the sale, full or partial, but then there's also the efficiency review. How should we think about the two processes going on simultaneously?

Tony Melone:

Yeah. Essentially, Richard, the work on the operational side with third parties has concluded. We've done the analysis with them and we've shared that work. Internally, we've analyzed the work and processed it, etc. And now we've passed all that work we've done to Steven, and he's going to work with the management team, as we said earlier, to take that input and obviously add his own insight and apply that to the business.

Robert Bartolo:

No. As we talked about, we think that the services, the contribution to margin that we have to service in the first quarter, when we talked about it last quarter, are generally going to be consistent across the quarters. So there's nothing that would have changed our view of that consistency at this point.

Operator:

Thank you. The next question is from Matt Niknam with Deutsche Bank. Please go ahead.

Daniel Schlanger:

Thank you, Matt. So on the booking side, the answer to your question is, that we have good line of sight as we talked about on the bookings for both small cells as well as fiber solution to give us comfort in the guides we provided both the 16,000 small cells for the year as well as the 3% growth for the year, so feel very comfortable with that. And so on your second question, in terms of pacing. No, there hasn't been any evidence -- any material change in terms of pacing within the quarter that would be of significance to comment on.

Operator:

Thank you. The next question is from Batya Levi with UBS. Please go ahead.

Tony Melone:

Regarding 5G, I think the last time we commented on 5G, we don't regularly update on that number. I think it was 50% and we'll provide an update at some point in the future. But we have no update for you today on that.

Tony Melone:

Yeah. Carrier activity on fixed wireless, really it's hard for us to – the activity. our activity, it's hard for us to determine whether it's being driven by fixed wireless or their general mobility services. And quite frankly, it's hard for them to determine that themselves. Just the nature of the cell site, their capacity needs as dictated by both and which one triggers that relief requirement is difficult to predict. So it's almost impossible for me to give you a feel for what's driving that and how much of it is fixed wireless.

Batya Levi:

Got it. Thank you.

Brendan Lynch:

Great. Thank you for taking my question and congrats, Steven, on the new role. Maybe just another one, on the strategic review. Obviously, you're considering what to do with the fiber and small cell business, but is there a component of the strategic review that is also considering how to manage the remaining business if you were to sell off those assets, whether that be to expand the tower business into new markets or enter a new vertical of some sort?

Brendan Lynch:

Okay. Thank you. That's helpful. And maybe one follow up, with the higher for longer rate environment, do you anticipate that this will affect carrier spending this year or next, or are they primarily responding to network needs when considering their deployment pace?

Brendan Lynch:

Okay. Very good. Thank you for taking my questions.

Brandon Nispel:

Hey. Thanks for getting me in and taking the questions. I was hoping to go back to the tower business. You obviously called out, your first quarter results were right in line with guidance. But I think, big picture, your level of leasing is well below historical levels that you've seen, and much closer to the trough than any sort of peak. So I was hoping you could talk about the confidence you have in terms of reacceleration. It didn't sound like that was in the guidance for this year, but something to get back to your 5% long term growth guidance? And I'll leave it at that. Thanks.

Steven Moskowitz:

Hey, Brendan. It's Steven. Yeah. I just say that there's always phases of builds, right, all the G’s that we've seen over the years, Phase 1 is pretty much massive building over two, three years. And then, there's kind of a pause, right? They still spend capital, they're still filling holes in their network and doing overlays, etc. And that takes typically, could take a year, could take a year and a half. In this market maybe it's taking a little bit longer, but then Phase 3 kicks in, and then there's a reacceleration. And so I think what we're saying is we're kind of in that Phase 2. And I think the good news for me, at least, is I'm coming in new here. But my goal is, again, to work with the team to make sure that we're exceptionally prepared so when Phase 3 comes, which we're anticipating, hopefully at some point in 2025 that we're able to really maximize our unfair share of business going forward.

Operator:

Thank you. This concludes our question-and-answer session. I would now like to turn the call back over to Tony Melone for closing remarks.

Steven Moskowitz:

Thanks, everybody.

Operator:

Good day and welcome to the Crown Castle Fourth Quarter 2023 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kris Hinson, Vice President of Corporate Finance and Treasurer. Please go ahead.

Tony Melone:

Thanks, Kris and good morning, everyone. Thank you for joining us. Before I begin, I’d like to take a moment to thank Jay Brown for his 25 years of service to Crown Castle, including the past 7 as CEO. We are grateful for his many contributions over those years and wish him well in his retirement. As we work to identify the next CEO, I am also thankful for the Board’s confidence in me to lead the company during this interim period. I am excited to serve in this capacity. I have been associated with Crown Castle for over 25 years, principally as a customer, but also as a joint venture partner in the early days and most recently as a member of Crown Castle’s Board of Directors. Over that time, I have witnessed the Crown Castle team of dedicated talented people grow the company into the nation’s leading provider of shared communications infrastructure. In my first few weeks in the new role, I have been impressed by the open, candid and thoughtful discussions I have had with teammates throughout the organization. I am enthusiastic and optimistic about our path forward. In the near term, I will be focused on the following priorities. First and foremost, I am committed to ensuring that our organization continues to execute for our customers, positioning us to meet or exceed our financial and operating goals in 2024. Secondly, I want to facilitate a seamless transition to the company’s next CEO. And lastly, I will assist the Board in evaluating the alternatives that may come out of our strategic fiber review and help position the company to maximize shareholder value regardless of the outcome of that review. My confidence in achieving these priorities is bolstered by having a closely aligned leadership team that is focused on delivering strong operational performance. To that end, I am pleased to announce that Dan Schlanger will continue serving as Crown Castle’s Chief Financial Officer. Dan has been a valuable member of our executive leadership team for the past 7 years. His expertise, leadership and institutional knowledge will be vital as we position the company for success in 2024 and beyond. In addition, Mike Kavanagh, currently, our Chief Commercial Officer, has been appointed Chief Operating Officer for the Tower segment. Chris Levendos will remain in the role of Chief Operating Officer for the Fiber segment. The Tower, Small Cell and Fiber Solutions sales teams currently under Mike will be distributed across these two organizations. I believe this change in leadership structure provides an enhanced focus on generating the highest returns in each business segment and will best enable us to maximize value across our portfolio. We have also recently taken steps to further strengthen our company’s Board with the addition of three new directors. Jason, Sunit and Brad each bring valuable financial, operational and industry experience. We look forward to benefiting from their unique insights and expertise as we work to leverage our strong foundation and position Crown Castle for the future. At this point, I’d like to share some of my personal insights into how I see Crown Castle positioned. In my 30 plus years of experience in the wireless industry, I have seen the Tower business grow tremendously, particularly during periods of generational upgrades. During my time at Verizon, the shift from 3G to 4G required more tower densification than initially expected and more than initially deployed. The coverage and capacity from the new 4G technology and corresponding new spectrum that it was deployed on was not sufficient to meet the promised performance levels of that technology. This was especially true at CellEdge [ph] and resulted in further densification over time. I think a similar dynamic is in play with 5G. The remaining densification required to deliver on the promise of 5G performance will drive not only robust tower growth, but also significant demand for small cells. As the largest shared communications infrastructure provider in the U.S., with a unique portfolio of towers, small cells and fiber, I am excited to see how we can take advantage of these industry trends and deliver value to our shareholders. As a final note, the work of the CEO Search Committee is underway and the Fiber Review Committee is well into its work as it oversees the Board and management’s review of strategic and operational alternatives that maximize value across our enterprise. We will provide updates on each as developments warrant. With that, I will turn the call over to Dan.

Operator:

We will now begin the question and answer session. [Operator Instructions] The first question comes from Simon Flannery with Morgan Stanley. Please go ahead.

Tony Melone:

Simon thanks for the questions. I appreciate it. Let’s start with the shape and trajectory. It’s hard to speculate, obviously, on the progress that the carriers might make in terms of – a lot depends on their own personal capital allocation decisions. My personal opinion based on history is that it will likely be fairly non-lumpy approach over time. But it’s very hard to speculate exactly how it will play out. In terms of some of the commentary recently, it’s too early for us. We have not seen anything that will cause us to change our view of 2024.

Dan Schlanger:

And I’ll take the CapEx question, Simon. Thanks. Most of what we have on the small cell side of our business is committed, because we have customer obligations to build the small cells, the 16,000 that we have coming on air that we are building throughout 2024. But we obviously are going to be looking at – through the strategic review anything we can to drive the most value possible, including what our CapEx plans are, so we’ll have that in mind. And if anything does change out of that, we’ll update anybody. But as of right now, we see the same capital going for 2024 than we expected when we gave guidance in October.

Dan Schlanger:

Sure. I think we discussed it a lot of the small cell node build that we had for 2023 was going to be back-end loaded, it was. And we built some at the very end of the year that we weren’t able to start billing until the beginning part of 2024. So we are talking about something crossing over a year, so being a month later than we expected or even less than that. It just – when we get into trying to figure out exactly when a node is going to be completed, it’s hard to pick to a day. But we feel like we have made the progress we expected to make during the year in 2023 of delivering for our customers and the fact that the billing didn’t happen just kicks it over into 2024.

Dan Schlanger:

Sure.

Ric Prentiss:

Thanks. Good morning, everyone. And Tony, good to talk to you again.

Ric Prentiss:

A couple of questions. First, Dan, I appreciate the color on the 2,000 nodes for Simon. How should we think about what the disconnected nodes were in ‘23? And then I think there is another disconnected nodes in ‘24, probably around the middle of the year. Can you kind of help us understand, was that like maybe [Technical Difficulty] 2,000 to 3,000 disconnected last year and maybe 3,000 to 4,000 getting disconnected this year from that Sprint and other?

Ric Prentiss:

Okay. And then I think previously, one of the churn slides had anticipated maybe 25 million of small cell churn split between ‘24 and ‘25, is that still the case?

Ric Prentiss:

Okay. And then one more esoteric question. American Tower has started recognizing some capital expenditures for exercising purchase options from carrier transactions. I think in your 10-K, you all talk about you maybe have $9 billion of purchase options that could come due over the next many years. How should we think about how that flow of money comes in? Is it ratably equal over those different periods, whether it was an AT&T set of towers or a T-Mobile set of towers or any thought of giving us a table at some point about when the $9 billion worth of value would come in? And I think I did see a note that less than $10 million would come in before ‘25. Just want a little more color on that, if I could.

Ric Prentiss:

Okay. Very good. Thanks, everybody. Stay well.

Michael Rollins:

Thanks. Good morning. Tony, I’m curious, based on the experience you have over a whole number of years on the network side. As you look at the Fiber segment for Crown, how do you see the opportunities for Crown to improve marginal returns on capital? And how quickly that could potentially happen within the organization with some of the changes that you’re making and maybe some of the opportunities that you’ve been able to identify why you’ve been on the board and now serving as the CEO? Thanks.

Michael Rollins:

Thanks. And then just one other question. Over – I suppose it was a few months ago, there are reports about Crown Castle considering selling or monetizing, I should say, part of its land portfolio. And there was some discussion of that on the last earnings call. Has Crown come to a decision about what to do in terms of monetizing land on a go-forward basis as part of capital location for the company?

Michael Rollins:

Thanks.

David Barden:

Hi, guys. Thanks so much for taking the questions. Dan, we welcome back. Good to have you. I guess, Tony, my first question is, could you talk a little bit about the order of operations of what’s going on? Is the plan to make a plan with respect to fiber and then find the right CEO to fit with the plan? Or is the plan to find a CEO to help create the plan to own that plan and execute that plan? It would be interesting to hear what is actually the plan and what the timetable is going to be. And then, Dan, when we set 2024 guidance, lots hasn’t changed. But what has changed is the rates environment, attitudes, opinions, consensus views around rates in 2024. And can you kind of elaborate a little bit on how that element of the 2024 outlook didn’t change from what we were thinking in the third quarter guide? Thank you.

Dan Schlanger:

Yes. And Dave, on the interest expense. As you are well aware, market perception of interest rates, it moves around quite a bit. It moved up. It moves down. There are plenty of things in our guidance where we have ranges and what we think there are reasonable expectations of what could happen. Some of those sometimes go better, some of those sometimes go worse and very rarely do we get it right. So what we do when we’re talking about guidance is think about things in an overall perspective. And we believe at this point, there isn’t enough clarity around what interest rates are going to do. And even in the last, I don’t know, 2 weeks the perception of what interest rate cut likelihood is in March is dramatically. So we’re not comfortable enough with what the interest rate environment looks like over the course of 2024 to make a change at this point. And like I said, there would be some impact at the AFFO level. And there is going to be positive negatives throughout the course of the year based on what we thought was going to happen and what actually happened only when they start to exceed the ranges that we’ve given, we will really consider changing the guidance.

Operator:

The next question comes from Brendan Lynch with Barclays. Please go ahead.

Dan Schlanger:

Sure. Just to clarify the comment you made, we’ve given some disclosure that through 2027 we believe our Tower growth will average 5% and 75% of that is contracted to date. And I think you could understand it. There is more contracted in the early years than there is in late years. But we believe that the amount of activity will support our 5% growth going forward. And in terms of volatility on a quarter-to-quarter basis, our business is very stable. But that doesn’t mean that every quarter is the same. So we will have volatility quarter-to-quarter. But over the course of the year, I think it is a pretty stable growth pattern. And that has been proven over time. But even in the years, we grew at 5% in 2023. We expect to grow 4.5% in 2024. That level of volatility will likely remain something in that vicinity. But when you’re talking about a business of our size and scale, that’s not a huge amount of volatility overall. So we feel good about both the stability of our cash flows and the growth of those cash flows over the next several years.

Dan Schlanger:

Yes. We have said that what we believe our churn is going to be between 1% and 2% per year. We were on the low end of that, obviously, in 2023, as you pointed out. We – there is nothing that would say we’re going to be outside of the 1% to 2% range, but we do think we will be on the lower end of it over – in the near-term, just given some of the churn historically have been related to consolidation churn that is not earning any more other than the Sprint consolidation that you just spoke of. And we think that churn in the industry is very low. It’s one of the reasons that it makes the Tower business such an attractive business is that we have growth driven by the things that Tony was talking about densification, continuation of data demand, limited capital expenditure requirements and limited churn, so we can have long-term growth without having to spend a lot of money. That’s a great place to be, and we believe that churn will remain relatively low on the lower side of that range for a bit.

Operator:

Next question comes from Nick Del Deo with MoffettNathanson. Please go ahead.

Tony Melone:

Nick, thanks for the question. Yes. So in my time here, I’ve spoken to a great number of employees. And I would say that the morale is good. I mean, obviously, change is unsettling for people. But people – the employees want to just get down the work. They want to serve their customers. They want to drive the business forward. And I think they are excited about moving forward. So I am not experienced in my short time here, any evidence to say that people are reacting in a way that I would be concerned about our ability to execute our plan in 2024 and beyond. So I’ve been happy with everything I’ve seen so far, and I think the employee morale is very good.

Nick Del Deo:

Okay. That’s terrific to hear. If I can ask one more about fiber solutions, your bookings in that segment in Q4 were – we are at a level that would get you to your 2024 guidance if they were sustained over the course of the year. And it was a nice step-up from what we have seen over the last 1.5 years or so. I guess can you talk a little bit about what’s behind the improvement, so we can get additional comfort and its sustainability?

Nick Del Deo:

Okay. Got it. Thank you, guys.

Operator:

Next question comes from Jon Atkin with RBC Markets. Please go ahead.

Dan Schlanger:

Jon, thanks for the question. I would answer that by saying that review will be a very thorough holistic review that will take into account all aspects of our operations. So, to get more specific than that in terms of the nuances, you can be assured, it will be a very thorough process. And obviously, will allow the Board and management team to be very informed in terms of what the best path forward would be.

Tony Melone:

We have not going to speculate on how long the process will take. What I will tell you is we are very, very much into the process now. The Board and management has been active in this since the beginning of the year. But I can’t give you a timeline on when that will complete.

Dan Schlanger:

Let me take the first one on this, Jon. In the backlog, we have about 50,000 nodes in our backlog, of which about 60% are co-location nodes. So, as we have talked about, that number has moved over time where the majority of our nodes had been anchor builds for a long time and the majority of the nodes in our backlog now or co-location nodes. We are seeing a progression there. And I think that that does speak to over time, a decrease in capital intensity to get the same amount of growth. On the product mix of our fiber acquisitions or our fiber business around infrastructure versus managed solutions, I think I would go back to what I have said earlier, which is what we really focus on is trying to deliver the right products to a larger base of – base of larger customers that are generally more sophisticated than the general fiber market, which leads us more towards in many times an infrastructure build. But as the market does move and managed services becomes important, we are evaluating our product set to make sure that we remain top of mind with our customers and are delivering exactly what they need. But the vast majority of what we do is aimed at kind of those large-scale enterprises and they generally do have more sophistication in how they manage their networks internally and require less of the services that have become more in vogue recently in the fiber solutions business.

Operator:

Our next question comes from the line of Batya Levi with UBS. Please go ahead.

Dan Schlanger:

Let me take the first one on leverage. Our target leverage is around 5x debt to EBITDA. We understand that given the spending of capital over the course of 2024, along with some of the non-cash reductions that are going to reduce our – our non-cash impacts that are going to reduce our EBITDA that our leverage will tick-up a bit. But we believe that over time, the growth in our business will allow us to naturally de-lever back to our 5x and believe that we are in a good shape to do so. I wouldn’t talk about a maximum leverage at this point. I don’t think we need to talk about it that way. What we want to do is maintain somewhere close to our 5x. And then when we take above it, like we have recently and we will continue to in 2024, have very good line of sight and how we can bring it down with good capital management and good operating performance, which is what we think will happen.

Dan Schlanger:

Sure. On the pacing of leasing, it’s generally level loaded through the year. Like we said, we believe the level of activity in 2024 approximates what we saw in the back half of 2023, and we think that will remain relatively consistent. There is a little bit, as is typical, that is back-end loaded. There is a little bit more in the second half than the first half typically when we see these, the leasing, mostly because our customers act that way. They spend more money in the second half of the year than we do in the first half of the year. But it’s nothing that I would speak to would cause a significant change in pacing of leasing activity in 2024.

Batya Levi:

Thank you very much.

Richard Choe:

Hi. I just wanted to follow-up on the backlog for small cells. Is that still being added to, but the overall level should come down given the higher build base that you are having for 2024? And then I have a follow-up.

Richard Choe:

And then given the transition and strategic review period, is there potentially a shift maybe to allocate more capital to towers in terms of builds or acquisitions, or is that something that you have largely stayed away from and will continue?

Richard Choe:

Great. Thank you.

Operator:

Our final question today comes from the line of Eric Luebchow with Wells Fargo. Please go ahead.

Tony Melone:

Eric thanks. I think it’s – it would be pure speculation on my part. I think as I have said, all options were on the table. I would not dismiss any option or would not suggest any option is more likely than another at this point in time.

Tony Melone:

I think we can improve how we operate the business and without impacting the future growth prospects, yes.

Operator:

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

Operator:

Good morning and welcome to the Crown Castle Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Kris Hinson, VP of Corporate Finance and Treasurer. Please go ahead.

Jay Brown:

Thanks, Kris, and good morning, everyone. Thanks for joining us. Our third quarter results continue to demonstrate our ability to generate consistent growth in the face of changes in the industry environment, allowing us to maintain our full-year 2023 outlook for revenue, adjusted EBITDA, and AFFO. Based on the multi-year strength of our business model, we are confident in our ability to grow our dividend beyond 2025 once we get past the Sprint-related churn. Therefore, we are committed to maintaining our dividend in 2024 in the midst of the impact from the non-recurring Sprint Cancellations and lower contributions from services. Based on the timing of these headwinds, we expect the low point of AFFO to occur during first-half of 2024, before returning to growth in AFFO in the second-half of next year, and beyond. Demand for our assets has consistently been driven by our customers investing in their networks to keep pace with the rapid growth in mobile data demand. Through our shared infrastructure model we have helped our customers maximize the benefits of their investment by lowering the cost of deploying networks, networks that have significantly improved our ability as consumers to connect with the people and the world around us. The combination of persistent data demand growth and our ability to provide low-cost shared infrastructure solutions has enabled resilient underlying growth for us throughout generational upgrades and across macroeconomic cycles. Our full-year 2024 outlook demonstrates the benefits of complementing our tower business with a leading portfolio of small cells and fiber. As our customers increasingly focus on 5G network densification so that they can meet the needs of their end users, we expect the total demand for our diverse portfolio of assets to increase. For towers, we expect to generate organic revenue growth of 4.5% in 2024. For small cells, we expect to generate organic growth of 13% driven by around $60 million of core leasing activity as we increase new nodes, from 10,000 in 2023, to 14,000 in 2024. And for fiber solutions, we expect continued acceleration of leasing activity combined with lower churn to generate organic growth of 3%. Excluding the impact of Sprint Cancellations, the combination of organic revenue growth across our business is expected to generate consolidated organic growth of 5% in 2024, up from 4% in 2023. While our growth remains robust, we know we need to continue to get better. Therefore, we continue to simply, streamline, and centralize our business processes and operations, which will reduce our long-term costs and improve our customer experience. Since announcing the restructuring plan, in July, we have reduced our workforce and achieved $105 million of annual run rate savings. Having completed that plan, we have identified additional opportunities to drive further efficiencies, including a plan to move approximately 1,000 employee positions from several locations nationwide to a centralized location by the end of the third quarter, 2024. The strong organic growth and improved operating leverage from the actions we continue to take to reduce costs supports our maintaining our current annualized dividend of $6.26 per share. As reflected in our results and outlook, our differentiated strategy to invest in and build an unmatched portfolio of assets diversifies our sources of growth. Our 40,000 towers, 115,000 small cells on air and under contract, and 85,000 route miles of fiber concentrated in the top U.S. markets make us well-positioned to capitalize on long-term growth in data demand regardless of how carriers deploy spectrum and densify their networks. At the beginning of 5G, our customers moved quickly to deploy record amounts of newly acquired spectrum. This drove record tower activity levels. As this initial surge in tower activity ended, our small cell growth is accelerating as customers shift focus to densifying portions of their networks that have experienced the most traffic. In 2024, we expect to deploy a record 14,000 small cell nodes. Our ability to capture the accelerating growth in small cell demand is driven by the assets and core capabilities that we have built as the largest operator of shared infrastructure in the United States. Our 85,000 route miles of fiber include high strand counts in heavily populated areas where the density of demand is the highest, which makes them the most desirable locations for small cell deployments. We are a highly reliable operator of that fiber network. If fiber goes offline, small cells go offline. And for our wireless customers, network quality and reliability are paramount. We have a world-class team of network operators and engineers that ensures our network is designed to mitigate the impact of any outage, and is capable of fixing these outages quickly and efficiently. We have also developed expertise in navigating the permitting processes with multiple municipal organizations, regulatory agencies and utility companies across hundreds of disparate local markets, each with a unique set of regulations and stakeholders. This expertise allows us to navigate the difficult process of building small cells in the markets across the United States. Finally, we are consistently finding ways to build small cells and fiber more efficiently. These efficiencies allow us to provide the most cost-effective and reliable network solutions for customers. We look to deliver the highest risk-adjusted returns for our shareholders through continuously building on the core capabilities that I just mentioned that generate unique value in the businesses we own and operate. These capabilities reduce the overall cost of deploying and operating communications networks, which becomes even more compelling for our customers in times of increasing capital costs. Of course, higher capital cost impact us as well. Our disciplined approach to capital allocation means that as our cost of capital increases, so must the returns we require from our investments. We are continuously evaluating the expected returns of all of our investments against the rising cost of capital and other potential investment opportunities, including repurchasing our own shares. Consequently, we allocate capital to whatever we believe will generate the highest long-term returns. Being disciplined allocators of capital means that we appropriately adjust the scale and economics of our investments based on changes in technology, customers, and macroeconomic conditions. It doesn't mean that we stop investing. We apply a consistent, rigorous approach to pursue opportunities that generate superior expected returns for their given level of risk. Long-term value is created when we invest in those opportunities. We have a long history of success in towers built on investing through various macroeconomic cycles. And we believe the small cell business is another great example of how we can build a business where our unique capabilities drive sustainable advantages that can grow significant long-term value. In 2024, we plan to capitalize on these opportunities, resulting in approximately $1.2 billion in discretionary capital expenditures net of customer contributions, with $1.1 billion in our fiber segment. This capital is supporting the acceleration of expected 10,000 nodes in 2023, and 14,000 nodes in 2024, reflecting a 40% increase in new nodes with only a 20% increase in capital as we expect more than 50% of the nodes to be colocation nodes. Importantly, we expect to fund this with discretionary CapEx in 2024 without issuing equity. Compared to 2022, this means that we expect nodes deployed in 2024 will be up three times while fiber CapEx is only up 30%. Again, reflecting increasing colocation on our existing assets. The colocation and increasing yields on multi-tenant system continue to be similar to the development of the tower business over the last 25 years. There is one more item I wanted to discuss. As you saw on the release, Dan will be departing Crown Castle next March. While he is not leaving for another five plus months, I wanted to take the opportunity to thank him for the contributions that he has made to the company over the last seven years. He has been integral to the growth of our business and strategy. We are benefiting from the work he has led to increase the duration and predictability of our balance sheet. And he has developed a strong finance team. We will wish him all the best in his next endeavors. We have begun a search to find his replacement and will be considering both internal and external candidates. As a wrap up, we believe the low point for AFFO will be in the first-half of 2024 as we work through the non-recurring Sprint Cancellations and the services headwinds that I mentioned earlier. The consistent growth of each of our lines of business driven by persistent growth in data demand, gives us confidence in our ability to fund our CapEx budget in 2024, without issuing equity to maintain our current dividend in 2024 and to pursue sustainable dividend growth beyond 2025. And with that, let me turn the call over to Dan.

Operator:

We will now begin the question-and-answer session. [Operator Instructions] The first question is from Simon Flannery of Morgan Stanley. Please go ahead.

Jay Brown:

Sure. Good morning, Simon. On your first question around leasing activity, the tower guide for 2024 assumes a similar level of activity to what we've seen in the second-half of 2023, so underlying our view is, basically, a consistent level of activity as the surge, the initial activity from 5G came to an end during the first-half of the year. We saw the level of activity stabilize, and we think that carries into calendar year '24. I think we have good visibility around that. Much of the work, given the nature of the business, we go into the year with a significant portion of that revenue already contracted, and we have good visibility as to when we think it will actually come online. So, I would characterize our visibility from a reported results standpoint, pretty similar to what we've seen historically. And feel like that level of activity is sustainable over the long-term as the carriers continue to upgrade the sites that they're already on with 5G equipment and as well as densify the network using towers that they're not currently on. As I noted in my comments, we think that we will see and have seen a shift and a focus from the carriers as they start to use small cells to a greater degree to densify their network. So, our view is based on a pretty holistic view of the way the carriers are thinking about their networks as we wrap up 2023, and get into 2024, and feel good about the organic growth that we're showing in both segments there related to the wireless carriers. On the second question on the leverage trend, as Dan mentioned in his comments, obviously with some of the headwinds that we talked about in our comment, it's going to cause to leverage to tick up a bit. That's happened in the past, and we would expect, over time, that we'll see good growth in the business that will allow us to de-lever back down and get back at levels that -- or where our target would be. So, the headwinds will create some uplift around that leverage ratio. And then, we think, over time, we'll be able to bring it back down in line. On the last part of your question around ways to manage the business, and M&A, and other things, I don't think there's anything specific that I would comment on. But just generally the way we think about running our business, is there are three ways that we view we can create long-term shareholder value. The first way is to add additional revenue to the assets that we own. That organic growth comes at great incremental return. And the second way is we can invest in more assets that would extend -- we believe would extend the runway of growth into the future. And then, the third way is to lower the cost of capital. We think all three of those are ways of driving long-term shareholder value. And we are constantly working on all three of those. What's unique about the current environment that we're in is that, often times in periods of disruption, more opportunities arise. And I made reference to that in terms of the capital costs of our customers can create opportunities for us to invest capital that can drive returns over the long-term. That also happens sometimes around the way assets are priced. And so, us being really thoughtful about how we can create value on those three fronts. And we are always looking at those opportunities. And I would say, in periods of disruption, our experience has been that, often times, there are some pretty unique opportunities that arise. And so, we'll continue to work on all three, growing the revenues on the existing assets, looking for opportunities for new assets, and then trying to find ways to lower our cost of capital.

Jay Brown:

You bet.

Michael Rollins:

Thanks and good morning. I also want to send my best wishes to Dan as well. Two questions, if I could, today. The first one is, as you're just describing returns, curious if you can give us an update on how the returns for small cell, as the growth is now accelerating, how those returns are pacing versus your expectation, and if you're seeing any difference in pricing on a per-node basis relative to the current portfolio? And then just drilling down into the earlier question on assets, do you have a significant amount of non-core assets or non-core ground leases? And can you possibly unpack the size, if you have any of that, given the recent press reports?

Michael Rollins:

Thank you.

Nick Del Deo:

Hey, good morning. Thanks for taking my questions. First, to continue on the capital allocation theme, in the past you generally argued that the returns you see from small sales, I guess five or more generally, we're so far ahead of what you can get from repurchases that repurchases really weren't in your consideration set. I guess how would you describe that relationship today? Are repurchases starting to look more interesting versus fiber or other uses of capital?

Nick Del Deo:

Okay. Maybe turning to the employee relocation plan that you closed last night, it seems to reflect a pretty meaningful philosophical change in how you manage the company, at least from an outsider's perspective. I guess, why do you think a more centralized approach is better now? Has something changed in terms of your ability to better manage the business in a more centralized way than you once were, or am I kind of overthinking it?

Nick Del Deo:

Okay. Just one quick follow-up on that, any risk of an operational hiccup given all the changes taking place, or do you feel like you have that pretty well buttoned down?

Nick Del Deo:

Okay. Thank you, Jay.

Operator:

The next question is from Jonathan Atkin of RBC Capital Markets. Please go ahead.

Jay Brown:

Yes, Jon, I'll take the first one on the ATM. Yes, it means that we're not going to be issuing equity even under the ATM. Beyond 2025, I would look at the business and say based on the characteristics that we see for organic revenue growth and our long-term forecast for where we think the carriers are going to invest to continue to build out 5G, which is going to take the better part of the decade we expect, we see organic growth in AFFO returning to that targeted level of 7% to 8%. And so, feel good about the underlying demand drivers of how we're going to get there. And then, as we get closer to that date, we can talk more specifically about what we think the growth rate will be in 2026. But the underlying demand drivers, and as we look at it today, look to be healthy and intact, and we think those are sustainable, and as we get through these headwinds over 2024 and 2025, that we'll get back to a targeted level of growth in our AFFO.

Jay Brown:

Sure. Two big trends that are affecting that, as we've gone through the calendar year and moved past the churn events that we've been talking about. We've seen the net growth come back in line with where we expected to get, we still think we're going to exit this year at about 3%. You could see in our guide for next year that we're on pace to get, we believe we will be on pace to get to next year's level of growth by the time we exit this year. The two trends that we're seeing is both an uplift on the core leasing side. So, we're seeing more activity from both new logos and an opportunity to continue to sell to the logos that we're already selling to. We also see a reduction in churn. Our team has undertaken a number of really thoughtful activities over the last couple of years that are starting to bear fruit, and that results in a reduction in churn. And so both on the top as well as the reduction in churn is leading to that 3% growth that we see next year. The more macro drivers of that business are healthy as data demand, not only for wireless, which we've talked a lot about on this call, but also for connectivity on a wire line basis, those growth drivers continue to be healthy. The movement of enterprises towards moving data to the cloud and off-premises continues to create opportunities for that business. We think those trends are intact, especially for the customer base that we serve. Our fiber business primarily serves large enterprises. We have very little exposure to medium and small businesses, and we don't do anything direct-to-consumer. On the large enterprise side, we see those trends towards off-premises and movement to the cloud to be sustainable drivers that are going to drive growth for a long period of time. And we're continuing to be thoughtful about how can we make those revenue streams more sticky.

Operator:

The next question is from Ric Prentiss of Raymond James. Please go ahead.

Dan Schlanger:

Yes, thanks, Ric. Me too.

Dan Schlanger:

So Ric, I would say yes, you're thinking about that correctly. Looking at our AFFO, taking out the prepaid rent amortization to get to a cash level makes sense as a shorthand way to do so. And that number is going to be below our dividend at the midpoint when we look at 2024. And we believe, as Jay pointed out throughout his comments, is that given that we think that we're going to be returning out to growth in past 2025, that it made a lot of sense to keep the dividend where it is. And we can fund that dividend all sorts of different ways. We don't want to have a liquidity issue of trying to figure out where the cash comes from. What we have is what we'll do is we'll continue to pay out the dividend. And then, as the organic growth in the business continues to increase over the course of the next several years, we feel really comfortable with the trajectory of that dividend over time.

Jay Brown:

Yes, Ric, obviously, we're setting the dividend policy for 2024. So, I don't want to get ahead of ourselves and start talking about '25. But philosophically, the reason why we're referencing the low point is to help give you a view of this multi-year work through that we've got with the consolidation of Sprint and some of the headwinds that we've been facing. As you kind of referenced and walked through the math there of the gap, in essence what we're saying is we expect that gap to be smaller in 2025 than it is in 2024. So, historically, as we've looked at the business, what we've done is sized up the cash flow generation of the business and we've paid out to shareholders in the form of the dividend, the cash generated by the business in any given year. That's how we've set our dividend. As we got into this period of time, which we believe is an anomaly in the business, the consolidation of the carriers and work through the headwinds associated with more of the macroeconomic changes, what we tried to do was look through those specific events that we were seeing on the horizon and look out beyond those events and try to figure out where do we think the cash flow generation of the business would be as the business normalized. As we look through that, our view was it made sense to maintain the dividend in 2024. The gap will be the widest between that dividend payout and the generation of cash in the business in the first-half of 2024. And then, it will close as we go to the second-half of 2024 and then into '25 and get beyond that. And we believe we'll return to a growth period of time once we get past 2025. So, we're in essence looking through these movements in these events and try to set the dividend at a level that we could maintain in '24. The gap between the current level of dividend and the cash generation will be smaller in '25 and then we'll return to growth, we believe, in 2026.

Jay Brown:

On the 5,000, there's a little bit of movement. Most of those have come out at this point, which is why you saw our total nodes and contracted nodes come down from 120,000 to 115,000. That's reflective of the churn. So, most of those have worked their way through. The number for 2024 when we talk about 14,000 gross and net are the same. So, we don't expect any meaningful churn in 2024 of small cell nodes. So, there's no offset there that you need to be made aware of.

Jay Brown:

Yes, it basically is. Exactly, it's the rollover of this year's churn hitting 2024.

Dan Schlanger:

Yes.

Dan Schlanger:

Thank you.

David Barden:

Hey guys, thanks for taking my questions. Just a couple on the small cell side, so Jay or Dan, with a 40% step-up in the rate of no deployment happening at the time when you're kind of shrinking the organization, what has to happen? How does that happen to kind of make that step up because it is larger than we've kind of ever seen you guys do before? And then second question related is, should we assume that, that's kind of the new normal, both in terms of discretionary CapEx and in terms of kind of no deployments for the foreseeable future? Or is this more of an anomaly and kind of more like the 10,000 node, $1.2 billion discretionary cash CapEx is more the norm? Thanks.

David Barden:

Got it, thanks so much.

Operator:

The next question is from Greg Williams with Cowen. Please go ahead.

Dan Schlanger:

Yes. Thanks, Greg. Appreciate the comments. And then, I'll start with the first question on higher cost in 2024. You hit on a bunch of them. So, the major cost increases that we experienced, we do have ground leases under our towers as a single large line item that we have in our P&L on the expense side. And those ground leases increase at about 3% per year in cost. That has to be baked in. Secondly, we, like every other company, is faced with -- are faced with increasing cost for labor for people who work here, people we're hiring because the cost of people is going up with inflation. And then, lastly, we had some onetime savings in the back half of 2023 that won't occur going into 2024, which show a little bit more of an increase also. When you add those things up, you get to the type of cost increases you were just referencing.

Gregory Williams:

Great, thank you.

Matthew Niknam:

Hey guys, thanks for taking the questions. Just two quick ones, first, on AFFO per share growth, maybe if you can help us think through the moving parts driving the expectation for second-half AFFO per share in '24 to be better than the first-half. Is it improved leasing? Is there anything on the cost side in terms of ramp-up of savings to be cognizant of? And then secondly, on services, if you could just help us think through the progression from the, call it, 25-ish percent range in the third quarter to around the 50% exit rate by the end of next year. Is that linear? Is that more of a stair step higher? Just how to think about the path there? Thanks.

Jay Brown:

Matt, on your second question, I'm assuming you're referring to the margins in the business. Is that the question that you're asking, the extraction of the margins?

Jay Brown:

Yes, okay. The current margins, and there will some bleed over this into the beginning of 2024, and around the 25% range, has to do with our exit of the construction services, those would be project management services that, historically, we performed to help our customers install on the assets that we have. Those, the margins in that business are much lower than the margins that we have on a go-forward basis, the services that we'll perform on the pre-installation, pre-construction for our customers. So, what you're really seeing in the mix change over the course of the year as the legacy business ramps down and goes away, and the business that we will continue to perform on a long-going -- for the foreseeable future, the margins on that business are better. So, you're seeing that in the guide. And by the time we get to the second-half of next year, virtually all of those legacy services that will no longer be performing will have been moved out of the results.

Jay Brown:

You bet, Matt. Thanks.

Jay Brown:

Operator, and we can take one more question.

Brandon Nispel:

Great, thank you for taking the question. Dan, thanks a lot for all your help over the last several years, and best of luck. Hoping you guys could unpack the tower leasing both through 3Q and '24. You've always talked about the contracted nature of this business. But on the year-over-year basis, leasing went down roughly 40%. So, I was hoping you could unpack the drivers from like a sequential or year-over-year standpoint? And then talk about your first-half or second-half expectations for tower leasing in '24? And secondly, I was hoping you could unpack the churn that you've guided to, the $155 million just from a tower, fiber, and small cell side, and then the one-off churns from the remaining Sprint Cancellations? Thanks.

Dan Schlanger:

Yes, and the second question, on the $155 million of churn. On the towers side, it's going to be very similar churn in '24 to what we think we'll see in '23, which is on the low end of our 1% to 2%, on the $30 million range of churn on tower. On small cells, similarly, very similar to '23, we'll see about 1% of our small cells, so without -- as long as you take out the Sprint Cancellations. And fiber solutions, as Jay mentioned, we believe the churn is coming down from closer to the 10% in '23, to around 9% in '24, so in the neighborhood of $115 million, when you add all those up, maybe $120 million. So, when you add all those up you get to about $155 million total of churn.

Jay Brown:

You bet. Well, thanks, everyone, for joining the call this morning. Appreciate the continued support. And we look forward to seeing and talking with you soon. And just want to thank our team, broadly, for all the work that they have done to deliver the results for '23 so far. Got a good quarter ahead for us to finish out the year, and then excited about the opportunity to continue to grow the business as we get into 2024, and beyond. Thanks for joining, and we'll talk soon.

Operator:

Good morning and welcome to the Crown Castle Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Kris Hinson, Vice President of Corporate Finance and Treasurer. Please go ahead.

Jay Brown:

Thanks, Kris, and good morning everyone. Thanks for joining us. Before I begin, I’d like to welcome Kris. We’re very excited to have him here on the Crown Castle team. Turning to our earnings release, I wanted to provide some context for the wireless industry environment that led us to reduce our outlook for 2023, and Dan is going to speak to the specifics of the changes. Across each U.S. wireless generation, the deployment of new spectrum, followed by cell site densification has increased network capacity and enabled exponential mobile data demand growth. For us this has played out with an initial surge in tower activity to build out the latest generation network, followed by a consistent level of activity over a long period of time to support our customers. As a part of the most recent upgrade to 5G, the U.S. wireless carriers spent more than $100 billion to acquire spectrum from 2020 to 2022. Our customers move quickly to deploy their newly acquired spectrum driving record tower level activity and dividend per share growth of almost 11% per year over that same period. I believe this initial surge in tower activity has ended. In the second quarter, we saw tower activity levels slowed significantly. As a result, we are decreasing our 2023 outlook primarily as a result of lower tower services margin. Importantly, our tower organic revenue growth outlook remains at 5% despite this lower level of activity. The resilience of our tower revenues is the result of our decision to pursue holistic long-term agreements with each of our major customers. In each of these agreements, our strategy has been to maximize the economic value while simultaneously providing visibility and stability and our long-term cash flows. To illustrate this point, Slide 4 shows our organic tower revenue growth since 2013. Over this period, we’ve consistently worked with our customers to provide them with enhanced flexibility to move quickly and deploying their networks while increasing our level of contracted activity. Due to our focus on reducing risk and generating resilient organic growth, we have contracted 75% of our expected annual tower organic growth of 5% through 2027, while also delivering record tower growth in 2021 and 2022 during the initial phases of 5G rollout. In addition to the benefits we’ve captured from our long-term customer agreements, we’ve complemented our portfolio of towers with fiber and small cells, making us uniquely positioned to capitalize on the long-term growth and data demand regardless of how carriers deploy spectrum and densify their networks. Our current backlog of 60,000 small cells provides a line of sight to doubling our on-air nodes over the next several years, which we expect will drive double digits small cell revenue growth beginning in 2024. To provide additional visibility on how our fiber solutions and small cell businesses are progressing, we have updated our analysis across the five markets we have previously highlighted since 2021 as highlighted on Slide 10. We continue to generate solid returns from the benefits of co-locating additional customers on our existing fiber assets, offsetting the churn related to the legacy Sprint rationalization. Phoenix, which was not impacted by Sprint churn, is a good illustration of what we can achieve with our fiber strategy as we add nodes to existing fiber. There we have seen our yield expand from 9% a year ago to over 11% today as we roughly doubled our nodes on-air from 1,400 to 2,800 nodes. Los Angeles and Philadelphia also illustrate the benefit of our shared infrastructure model. Here with a combination of small cells and enterprise fiber, we see yields of 8% to 9% with the potential to grow yields as we have done in Phoenix and Orlando as we add small cells. Overall, I’m encouraged by these results, particularly as we accelerate small cell deployments. With 60,000 nodes in our backlog, the majority of which are co-location nodes, we have line of sight to attractive incremental returns and double digit small cell revenue growth. Zooming back out to the consolidated level, we are consistently looking to deliver the highest risk adjusted returns for our shareholders. Our strategy has delivered growth and driven improvements on both the risk and the return side of the equation. Several years ago, it became clear to us that small cells would become an important component of the wireless carrier network densification required to support data growth. We saw an acceleration in small cells towards the back half of the 4G era as the vast majority of the 60,000 nodes we have on air today are 4G nodes that were deployed because towers alone could not support the continued rise in mobile traffic. Now as we’ve passed the initial 5G surge in tower activity, we are seeing our customers accelerate the selection and identification of new small cell locations to densify portions of their networks that have experienced the most traffic. The results of our early move into establishing a leading portfolio is reflected in our double digit, small cell organic revenue growth in 2024, and provides a platform for continued growth throughout the 5G era. With our diversified asset base, we have positioned ourselves to benefit from carrier activity on towers and small cells. Additionally, we have reduced our risk by increasing the resiliency of our business through our long-term customer agreements and improving the strength of our balance sheet. As a result of these actions, despite a significant reduction in tower activity in the back half of 2023, we continue to expect 5% organic tower revenue growth, 10,000 small cell node deployments, and 3% fiber solutions growth by the end of this year. This resilient underlying growth across our business underpins our expectation of returning to our long-term annual dividend per share growth target of 7% to 8% beyond 2025. And with that, I will turn the call over to Dan.

Operator:

We will now begin the question-and-answer session. [Operator Instructions] The first question is from David Barden of Bank of America.

Jay Brown:

You bet. Good morning, Alex. Thanks for the question. On your first question around the MLAs, this has been something that we’ve done over a long period of time. We did it during the 4G cycle and have continued to do it as we’ve entered into the 5G cycle. There’s benefits to us because it gives us line of sight and visibility into the cash flows and the contracted growth that Dan and I both spoke about. There’s also a benefit to our customers of those MLAs. They are better able to predict the cost of network deployment, and it eases the amount of interaction on a site-by-site basis between our companies. So there’s value there. I think the economic value is clear from the comments that we laid out this morning. And then there’s also the operating benefits of those MLAs. And I think they benefit both parties. As to the specifics of those contracts, we don’t disclose customer-by-customer agreements or the specifics. So I’ll stop with just sort of a high-level view of why we do it and the benefits to both of us. On your second question around new leasing in the fiber business, this is the way we expected the year to play out. Obviously, we had a difficult year-over-year comp in the first quarter, and then we expected a rebound in the second quarter, which we saw. And we expect the second half of the year to be better than the first half of the year. And by the time we exit 2023, we think we’ll be back at that 3% growth on a year-over-year basis as we go into 2024. And what we’re seeing in the market in terms of activity, backlog, the conversations we’re having with customers, et cetera, would suggest that’s the pace that we’re on.

Operator:

The next question is from Greg Williams of TD Cowen. Please go ahead.

Jay Brown:

Sure. On your first question around the slowdown in activity, I think history serves really helpful lessons, both in terms of what we’ve seen in 4G as well as what we saw in 2G and 3G. On Page 4 of the presentation, you can see historically, basically through the period of time with 4G, we had that initial surge of activity where our leasing results were kind of around 4% – 5%. And then it did drop off a bit. But that initial surge didn’t mean the end of activity or the end of growth. We saw really good, consistent growth throughout that entire 4G cycle of deploying the network. So I don’t know if, when we’ll see a pickup in activity but our view of the business is that we will see consistent growth over a long period of time. And obviously, we have the contracted benefit of that. But I believe those contracts as much as they represent stability and resilience in our cash flow stream, what they also represent is a view by our customers who have needed continued investment that they will do around towers and particularly our towers over a long period of time. So as I look out, I think we’re through the initial surge of 5G and we’ve benefited well from that. And then as we get into the – as we get past this initial surge and into activity beyond this, I think we’re going to continue to see good consistent growth as the demand for towers continues to drive over a long period of time. On the services business, that business is as you can go back and look at our results over a long period of time, that’s just going to track with whatever the activity is on tower sites. So as we see a move downward in terms of activity and you’ll see that reflected in the outlook that we gave for the second half of the year for services, the future periods of time and the activity that we see around towers will drive what that services outcome is. So over a long period of time, I’m not – I can’t really give you guidance as to how to think about your model, but it’s going to track we would expect largely in line with the activity – tower leasing activity that we see in the business.

Greg Williams:

Got it. That’s helpful. Thank you.

Ric Prentiss:

Yes. Sorry about that. Can you hear me?

Ric Prentiss:

Yes. Good morning, guys. Yes. Hey, I want to follow along the lines on the services business first. Obviously a big change from the prior guidance a $90 million change on services business. Was it really related to one carrier or more so than the whole group? Just trying to gauge what really caused a pretty big change on the services business although it’s a low multiple business in our opinion.

Ric Prentiss:

Okay. And the margins, I assume it’s moving from kind of planning to deployment, so the cost side probably reflects some further pressure maybe on the services business as well.

Ric Prentiss:

Yes. Okay. Last one for me might be a bit wonky on the supplement. There’s a chart in there that talks about consolidated annualized rental cash payments at time of renewal. And it shows a big chunk for T-Mobile coming up in 2025. It shows a very large chunk for AT&T here in 2023. Is that suggesting that there’s an AT&T renewal coming up this year? And then also on the all other line just want to make sure I understanding how that plays out over time because that remains to be a pretty high number every year out there. Just trying to think of how I should be thinking about that.

Jay Brown:

I’ll just add a couple things there, Ric. One, you pointed out the one on T-mobile is being a big number in 2025, that is the already predisposed sprint cancellation that’s going to happen on the tower side, but that chart is for all of our businesses together. So a lot of the all other is outside of the wireless as well.

Dan Schlanger:

Right. If the – so we have fiber – obviously, we have fiber contracts that roll off over time. That’s part of what we already disclosed. As Jay pointed out, there’s no difference in the fiber churn overall, we still think that’s in the high single digits range, which has been our experience for a long time. But there are always going to be contracts that roll off. It doesn’t mean that the revenue goes away. We contract a lot of those businesses too. Generally speaking, the average term of the fiber businesses in the neighborhood of five years and you would always – so you would always see a pretty consistent level of non-renewals in any given year.

Jay Brown:

Yes. And that’s a very normal thing to happen for the customers over time. So I – we’ve seen that over a lot of years and what you’re seeing in the disclosure, whether it’s their initial period and some of those leases, frankly, are not even their initial period, they’re already into their option terms and then they’re renewing, we would expect those options will renew into a new term, a new option period. And then the term of that will then be reflected in that supplement.

Operator:

The next question is from Batya Levi of UBS. Please go ahead.

Jay Brown:

Batya, a little bit of a hard time following your first question. I’m really sorry, but could – either could you restate that? So I can try to answer the question you’re getting at?

Jay Brown:

Yes. I think what I would point you to is there was nothing specific that moved from 2023 to 2026. This is just the normal course of our business, where we have lots of contracts that have lots of provisions in them and they move around. And when we’re talking about numbers of the size on the business, it’s just – this is the normal course of how our contracts flow through that schedule. I think the important parts that I would point to are obviously, I pointed to him earlier the T-Mobile in 2025, but also just as Ric had just pointed out, the all others is in line with what our fiber business typically does. What we would say from a non-renewal perspective is that what we see our customer activity being supports our view that the tower business we generally see 1% to 2% churn, small cell business generally 1% to 2% churn and in the fiber business in the high single digits. And nothing has changed from that perspective. So as we think about the long-term health of the business, this cash payment at time of renewal chart can move around just based on what the underlying contract say. But for a long period of time, I would just continue to bake in that 1% to 2% for towers and small cells in the 9% to 10% for fiber.

Jay Brown:

We’re not going to speak to specific customers or specific contracts that we would do with customers. The question broadly around MLA though, we’ve not changed terms of our MLA. So what you’re seeing in that schedule is just – as Dan said, is just the normal activity of leases coming up to their natural end. And that could be in – that could be a small cell lease, it could be a tower lease, it could be a fiber lease and then pushing that out to it’s now new term. And so the numbers in those schedules are moving. The passage of time, obviously to your question about 2023 is also impactful, because we’re just a quarter further into the year. So some leases came up for their renewal during the second quarter and would’ve adjusted out of the 2023 column and into some future columns. So it’s going to constantly move.

Operator:

The next question is from Simon Flannery of Morgan Stanley. Please go ahead.

Jay Brown:

Sure, Simon. It’s difficult to reconcile because we don’t speak to individual customers, which we’re going to continue to not do. It’s difficult to reconcile to the public comments of individual carrier is what we’re seeing. What I would tell you is, we expected there to be an initial surge in 5G, which at some point would come back down. And we would get to the point as we have in the past and past cycles where we see good growth over a long period of time. And I think what our results reflect is that we’re at that point where we’ve moved from that beyond that initial surge of activity and into a period of time, which we think will continue for a long period of time of good growth that we can count on. And our customer agreements, I think reflect that as well. So the customers are going to continue to spend inside of a – specifically inside of the year, obviously, we lowered our expectation for services. So the back half of 2023, we did see a change relative to what we previously expected. The first half of 2023 came in exactly where we thought it was going to, and we saw the change in activity during the quarter. And that’s what affected our second half of the year, the activity that we’ll see in the – we believe we’ll see in the third and the fourth quarter.

Dan Schlanger:

It hasn’t moved much, Simon. It’s not going to move in the course of a quarter. And I don’t think we’re going to update that quarter to quarter. That was try to give people a sense for where we were overall in terms of the 5G deployment. But it really hasn’t moved that much from the last quarter when we gave the guidance.

Jay Brown:

We’re going to be on our normal course of giving guidance for the next year in October. And when we give that guidance for next year, we’ll also update where we are with the dividend as we have done in past year. So I think you’ll see us continue to follow that same historical pattern.

Operator:

The next question is from Brett Feldman of Goldman Sachs. Please go ahead.

Jay Brown:

Sure. Good morning, Brett. The driver for small cells is the constraint on the network that happens from a capacity standpoint. And as we see activity from consumers increase and where those concentrations of that increase occur, there’s a need to increase network capacity. Initially, whenever there’s a new generation of network deployed, they touch the macro sites as they’ve done over multiple cycles than in the history of the company. And they have done that with 5G. So they’ve gone out and covered a significant portion of the country, provided capacity and coverage through that initial overbuild. And that’s a very efficient and effective way to deploy spectrum. The places where they supplement with small cells are places where that capacity that’s been created by overlaying 5G on towers has been consumed quickly. So underlying all of the conversations that we’re having around network capacity and densification is the consumer demand and data growth from that consumer demand. And that traffic increase at the consumer level has continued to grow exponentially during this period of time. And so the pain points of that significant growth by the consumer and consumption of data usage is the places that drive the need for small cells. And as I think about what we’ve seen at kind of the market level, you can see that reflected in those – in our results as we’ve co-located nodes across fiber that we built for other carriers at previous periods of time. And then over time, as data growth increases, carriers come back to those same locations because of the density of the population, they need to densify the network in those same areas. And so they come back and lay additional small cells across that fiber asset that we own. And I think you’ll continue to see that that play out. So if we’re in a period of time, specifically to your question about spectrum bands, if we’re in a period of time where the carriers have new spectrum or they haven’t deployed spectrum in a particular market, our expectation would be that the first place that they’ll go and deploy that spectrum would be across the macro sites that they’re already on. And then as that spectrum bands starts to begin to be used, then the pain points will be created around network capacity, and they’ll solve that problem by using small cells in those areas of densification where the growth in data traffic drives the need for additional capacity. And I think that’s what we’re seeing. That’s consistent with our conversations, the contractual arrangements that we have with the customers and the activity that we expect, both in terms of the growth we’re talking about for 2023 and then moving to double-digit revenue growth in 2024 for small cells.

Jay Brown:

I think it is having some impact. And we talked about this a little bit on our last quarter call. Fixed wireless is a good example of a 5G use case. It’s driven nice margins for our carrier customers. It is – so it’s good to see the revenue growth there and the returns from – associated from the adoption of that product mix. And I think we believe we will see other uses for 5G beyond fixed wireless, but it does illustrate the pain points and the using up of capacity. And we’ve certainly seen areas in the country where fixed wireless has been deployed that – I don’t want to say, which is first between the chicken and the egg, but the point is those are places where there have been increases in activity on the 5G networks. And they correlate with locations that we’ve also seen increases in small cell nodes and investment along those lines.

Jay Brown:

You bet.

Michael Rollins:

Thanks, and good morning. Just a few follow-ups if I could. First, as you think about maybe the reasoning for the slower activity beyond just getting through the initial 5G surge, are you hearing from your customers that the mid-band spectrum they’re deploying is getting better propagation so they just didn’t need as much as maybe they initially thought in this first round of 5G capacity deployments? And I have a couple of others that I could ask afterwards if I could, please.

Michael Rollins:

And then second, you’ve held on to a larger services business than some of your peers. And does the recent variability of performance or as we’re getting into these next phases of the 5G cycle, does this lead you to reconsider whether the services business is strategically important to Crown or whether there’s opportunities to maximize value in someone else’s hands?

Michael Rollins:

And then just lastly, and thanks for taking all these questions. On the cost side, so you announced cost cuts for the second half of the year. Does that provide a follow-on benefit into the first half of 2024? And can you just unpack some of the sources of cost savings that the company has been able to identify?

Michael Rollins:

And sorry, does this – sorry I missed, so does this extrapolate into the first half of 2024 as an expense benefit as well?

Michael Rollins:

Thanks very much.

Phil Cusick:

Hi, guys. Thanks. Just following up on a couple things. You talked about looking at history carriers would move to densification after deployment. And you’ve talked about that in small cells. What do you see in towers? Is there any sign of that?

Phil Cusick:

And are you seeing any acceleration in that discussion?

Phil Cusick:

Okay. And then second, without an acceleration in the business, it looks like your 2025 leverage is going to be more like mid five times than the lower we are now. How should we think about your comfort with that and agencies as we get closer to it? Thank you.

Phil Cusick:

That helps. Thanks, Dan.

Matthew Niknam:

Hey guys. Thanks for taking the question. I’m just curious if maybe you can speak to how some of the services activity progressed over the course of the quarter, because it seems to be maybe more of a precipitous drop off in June. But if you can comment on that and then as we think about the follow on effect, I’m just wondering, I know there was a $10 million [ph] reduction for core new leasing on the tower side this year. Presumably there may be more of a spillover effect into 2024. And so I’m not necessarily asking for the guide, we’ll wait three months for that. But I am just curious in the sense that are you comfortable with that 5% number each year between now and 2027 ex-Sprint churn, or could that fluctuate and the 5% is more of like a multi-year average to consider? Thanks.

Matthew Niknam:

That’s great. Thank you.

Brendan Lynch:

Good morning. Thanks for taking my question. I just wanted to dig in a little bit more on the MLA’s from a high level. Can you just remind us what creates the volatility quarter-to-quarter in the tower core leasing activity? Is it simply timing of demand above and beyond the contracted minimum step up or is it related to leasing outside the MLAs or anything else?

Brendan Lynch:

Great. That’s helpful. And then another one on the reduction in sustaining CapEx guidance by $25 million, it’s going to be at the lowest level in five years. I’m wondering if that CapEx is just being deferred until next year or there’s another reason for the change?

Dan Schlanger:

Yeah. I just wanted to clarify one thing there, Brendan. The reduction in sustaining capital is $15 million, not $25 million.

Operator:

The next question is from Brandon Nispel of KeyBanc Capital Markets. Please go ahead.

Jay Brown:

I’ll take the first question; Dan, can take the second one. Brandon, I don’t – I don’t know that we’re going to give you much clarity – much more clarity than we’ve already done around what we think the future leasing is going to look like. We think in a – in a normal go forward period of time over a multi-year period we’re going to see about 5% tower organic revenue growth. And it’s likely to move a little above, a little below that in certain periods. But I think generally that’s what our expectation would be and that’s what’s driving our longer term. If we think about value creation, when we talk about being able to get back to a point where we’re growing the dividend 7% to 8%, once we’re beyond the Sprint site rationalization process that we’re in the middle of once we’re past that point, returning to being able to grow the dividend at 7% to 8% over a long period of time, underlying that is our assumption around top line growth. And we think that’s going to be in and around 5% for a long period of, a long period of time. So, in particular, as to what it’s going to be in certain periods, we’ll continue to do as we’ve done in the past. And when we get to October, we’ll give you a view for 2024 what that lease up will be. And would expect we’ll continue to try to give you some view of what our longer term forecast will be for revenue growth. At the moment, that’s about 5% as we think our best guess of what a normal leasing environment is going to look like.

Brandon Nispel:

Good. Thank you.

Operator:

The next question is from David Guarino of Green Street Advisors. Please go ahead.

Jay Brown:

Sure. It’s a combination of spectrum. When you say new spectrum, the way I would think about that is spectrum that’s in the hands of carriers today that has not been deployed. Based on the spectrum that could be deployed over the next several, could be auctioned off in the next several years. I think inside of the timeframe that we’re talking about predicted growth; we’re not assuming that there’s an FCC auction followed by then a build out of that spectrum. There is spectrum in the hands of carriers that has not been built out yet. And some portion of our future leasing is related to that, that spectrum that’s in the hands of carriers and has not been built out yet. And also as you referenced, there’s also the expectation that spectrum that has been built out, they’ll continue to densify that. So there’s a component of both of those elements, but not an expectation that an additional spectrum will be auctioned and then deployed in the next several years.

Jay Brown:

We have not seen any behavior change from our carrier customers, and so I’ll let them speak to what the impact to their business will be of those recent news reports. But obviously, they’re very healthy and have a long history of being able to navigate through various cycles. And the wireless business and the demand from the consumer, we think is going to continue unabated. And so we would expect to see continued investment as they improve their network and improve the margins in their business over a long period of time from improving their network associated with that growth in demand.

Jay Brown:

You bet. Thanks everyone for joining the call this morning. We look forward to catching you up in October as we give our guidance for 2024. If we don’t see you before then, thanks for joining. [Call Ends Abruptly]

Operator:

Good morning, everyone, and welcome to the Crown Castle First Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the floor over to Ben Lowe, Senior Vice President of Corporate Finance. Please go ahead.

Jay Brown:

Thanks, Ben, and good morning, everyone. Thanks for joining us on the call. We continue to see positive underlying demand trends as 5G has developed across the U.S., driving first quarter results that were in line with our expectations and no changes to our 2023 outlook. As we discussed in the press release, we expect our near-term results to be impacted by a combination of the Sprint network rationalization and a higher interest rate environment, which will result in minimal dividend growth in 2024 and 2025, despite strong projected underlying growth throughout our business. Looking past these discrete items, we believe our strategy will allow us to deliver on our long-term target of growing dividends per share at 7% to 8% per year. Our strategy is to grow revenues on our shared infrastructure and invest in new assets that will generate additional future growth. By executing this strategy, we aim to deliver the highest risk adjusted returns by consistently returning money to our shareholders through a growing dividend. This strategy is underpinned by the durability of the underlying demand trends we see in the U.S. Growth in our business has consistently been driven by our customers investing in their networks with the deployment of more spectrum and cell sites to keep pace with the rapid growth and mobile data demand. The need for substantial investment in networks has persisted from 2G through 5G. Slide 4 focuses on wireless capital spending since the early days of 4G to support mobile data demand that has increased by a factor of 62 times since 2011. While industry-wide capital may vary year-to-year, particularly as new spectrum is acquired, wireless capital spending throughout the deployment of 4G was relatively consistent, averaging approximately $30 billion per year. During this time, priorities shifted back and forth between acquiring new spectrum and deploying that spectrum with the addition of new cell sites, with both being essential for our customers to keep up with the increasing data demand. With our shared infrastructure model, we have helped our customers to maximize the benefits of these investments by lowering the cost of deployment. This value proposition has allowed us to generate significant growth in our towers business throughout the 4G rollout, and we added to that growth with investment in small cells, which began to play a critical role in helping our customers keep up with the increasing demand in the later stages of 4G. Each new generation of wireless technology has provided expanded capacity for connectivity and over time, it also created a platform for innovation that expanded how we use and rely on our mobile devices, driving ever-increasing demand for data and connectivity. As a result, we expect our customers’ network and investment in the 5G era to exceed what they spent – deploying 4G. Since we are still in the early innings of 5G, we believe these positive underlying demand trends will support our ability to sustain at least 5% organic tower revenue growth and continued acceleration in our small cell business. In the first two years of 5G deployment at scale, we led the industry with organic tower growth of greater than 6%. Additionally, we believe our current small cell backlog provides line of sight into doubling our on-air nodes over the next several years, which we expect will drive double-digit small cell revenue growth beginning in 2024. Looking at how our overall strategy is performing, since we established our long-term dividend per share growth target of 7% to 8% per year in 2017, we've delivered 9% compounded annualized dividends per share growth, returning $12 billion or 20% of our current market capitalization to our shareholders over that period. And we have been able to deliver these results while limiting our risk by focusing on the U.S., which we continue to believe is the best market in the world for wireless infrastructure ownership. Over the long-term, the durability and scale of wireless data growth in the U.S. combined with our unmatched opportunity to benefit from the likely decade long 5G development gives us confidence in our ability to deliver on our long-term target of growing dividends per share, 7% to 8% per year. We believe this growth paired with a dividend that currently yields about 5%, provides the potential for shareholders to compound double-digit total returns over a long period of time. And with that, I'll turn the call over to Dan.

Operator:

Ladies and gentlemen, at this time, we'll begin the question-and-answer session. [Operator Instructions] Our first question today comes from Simon Flannery from Morgan Stanley. Please go ahead with your question.

Jay Brown:

You bet. Good morning, Simon.

Jay Brown:

On the first question, feel good about where we are in the year from a leasing standpoint. The first quarter as we mentioned, as Dan and I mentioned in our comments came in, is in line with what we expected for the first quarter. Obviously, we have the great benefit in the vast majority of our business for both towers and small cells of a long visibility cycle. And so have a pretty good view as to when we'll see that revenue growth over the balance of the year. We think this year will ultimately be a year that's level loaded for the most part from first half to second half, which is a little different than kind of our historical experience. If we go back over the last 20 years or so in most years, we would see somewhere between 35% and 40% of the total year's activity in the first half of the year and then the balance of it in the second half and we think this year is a little bit more level loaded between first half and second half of the year. So good start to the year, pleased with where we're at and visibility as suggested by our numbers that were unchanged for revenue growth from prior guidance. Coming in as expected and the pipeline looks like it's shaping up as we would've expected when we originally gave guidance last October. On your second question around small cells, the big driver here, as we saw and I mentioned this in my comments with 4G, certainly have seen a significant amount of site densification that frankly, towers just can't serve that need for densification of the network. We saw that at the end of 4G and both, I think in terms of the number of small cells that we've seen thus far in 5G commitments from the carrier customers as well as the conversations that we're having about what is to come in the future suggest that that opportunity is significantly more than what we saw during the 4G era. So I don't know whether it's – are we going to see a double or are we going to see a quadruple from here? I think time will tell but certainly the trajectory of that business would suggest we're going to see a growing total addressable market. And then the portion of that will be interesting to us will be a combination of those opportunities that fall on the assets that we already own and improve the yield on those assets and the co-location, which is we've seen even thus far in the early commitments that we've seen out of our customers in 5G. And then the portion of further expansion beyond there will come down to whether or not we think it meets the rigorous test that we put through each of our capital expenditures as to whether or not the returns are such that they're appropriate and will drive long-term growth in our dividend and drive a good outcome for equity holders based on the returns of those and we’ll just have to see how it plays out.

Jay Brown:

Yes. The vast majority of the activity thus far as related to the where we own our fiber is in those top 30 markets. We’ve seen some activity outside of that and certainly believe that the carriers will build and need to build small cells beyond the top 30 markets in the U.S. probably all the way out to the top 100 and beyond. And our willingness to play there will again come down to what are the – what do we believe are the return opportunities there. And if we think its highest and best use, then we’ll continue to follow the carriers there and – but we’ll have to wait and see as that that opportunity developed.

Operator:

Our next question comes from Brett Feldman from Goldman Sachs. Please go ahead with your question.

Jay Brown:

Hey Brett, good morning, Brett. On your first question, the vast majority of our business comes from government, education, and medical. That’s the big driver of our solutions business as well as large enterprise. We have not historically seen that business be as sensitive to economic movements. Small and medium businesses tend to have much more volatility and sensitivity to economic movements. Those are not a customer base that we serve in our business. So we’re very focused on the types of customers. The activity that we’ve seen thus far in the calendar year, as well as when we look at the pipeline for the balance of the year looks in line with the expectations that we gave last October. The first quarter comp is difficult in part answer to your second question, but also following on from the first question. The comparison in the first quarter of 2022 had the benefit of about $10 million of – out of run rate activity in it. So when you compare that to the current quarter, you need to adjust for that to get kind of an apples-to-apples comparison. We think based on the pipeline that, that both we expect to build as well as where we sit now that by the end of 2023 as we exit the year, we’ll be back in, in line with kind of our expectation of being able to grow that business at about 3% at the revenue line. And all the growth in data not just wireless data, but the growth in data would suggest kind of our core markets and core customer segments will continue to need additional services and that our fiber is well placed to be able to capture that opportunity.

Operator:

Our next question comes from Michael Rollins from Citi. Please go ahead with your question.

Jay Brown:

Good morning, Mike. We don’t like to speak to individual customers in terms of the activity that we’re seeing. I think as we’ve said many times about DISH, we have seen them behave in a very consistent way with desiring to build a nationwide network. Our teams are doing everything that we can to help them get sites on air and get them there quickly. DISH has made a very significant commitment to us in terms of the number of sites necessary for their network and a financial commitment around that. And so we’re committed to doing everything we can to help them get those sites on air. Broadly beyond the carriers that are deploying nationwide networks we’re continuing to see what the space that we refer to as verticals we’re seeing that vertical space continue to develop. And there are a number of companies that are looking at wireless plays, and they need access to our infrastructure in order to deploy either licensed or unlicensed spectrum. Those tend to be more market by market decisions and we’ve got a team focused on capturing as much of that opportunity as there is and feel good about the longer-term opportunities. It’s not so much meaningful in our short-term results, but we think over the next decade as 5G is deployed, that it’s another way that spectrum will be used to meet the growing data minutes that are happening from a wireless standpoint. And we’ll see a number of opportunities in our business to capture some of that growth both on the tower side as well as small cells.

Jay Brown:

When it comes to towers, we have pretty long visibility and the majority of our revenue growth is contracted as we look at 2023. So by this point of the year, we have pretty good view as to where we’re going to come out from a tower standpoint and things that we would see positively and negatively might affect a little bit of our run rate as we go into 2024, but are unlikely to have a material impact in calendar year 2023. So we’d have to update you as we get into the year. The biggest drivers – this is always the case in the business, the biggest drivers over the long-term are the investment of the carriers of improving their network and in cycles where they’re upgrading as they are now upgrading to 5G the biggest driver is the number of sites that they go out and upgrade from in this case 4G to 5G shows up in the form of amendments on our existing site. And then as the adoption cycle happens and devices gets in – get into the hands of consumers that enables 5G, we would expect densification to be required. We’re still in the early stages, as I mentioned in my comments of the deployment of 5G, which means the majority of the activity that we’re seeing would still be amendments to existing sites and upgrading those sites to 5G. And then we’ll get into the next phase in the coming years as we start to see more site densification, which will be a combination we believe of both towers and small cells. The big driver though is minutes of use and that trend line appears to be really healthy and the carriers have acquired a significant amount of spectrum over the last several years for 5G. And our business is about putting that spectrum to work and getting it deployed the best indication of what our future growth will be.

Operator:

Our next question comes from Brendan Lynch from Barclays. Please go ahead with your question.

Jay Brown:

Good morning, Brendan. Thanks for the question. We think about the business, let me step back big picture and talk about how we think about capital allocation. Our goal is to distribute virtually all of the cash flow that we produce in the business to shareholders. We think that that’s the best way to operate the business because we think it drives the most value for shareholders over the long period of time. And it creates a lot of discipline internally about how we think about capital allocation. It makes the capital scarce, and in order to make investments, we need to come to the debt market or to the equity market in our case basically the debt market to make the case for why these investments should be made. And that scarcity of resource, I think creates good discipline around capital allocation. So we start with a view that we’re going to distribute all of the cash flow. So the amount of capital that we spend whether it goes a little up or a little down really does not impact how we think about the dividend. So my comments around the minimal dividend growth and below our target for 2024 and 2025 relate to the two discrete items that we highlighted in the press release. And Dan and I mentioned in our comments around the rationalization that’s ongoing in the Sprint network and the increase of the interest rate environment between those two items over the next – over 2024 and 2025, as we’ve given you guidance that, that, that would suggest the number that’s in the neighborhood of $350 million of headwind that we’re facing over those two years. So that’s the reason why we’re giving you some view as to the dividend. We’re giving you both the numbers and our view and then where the cash flow comes up will ultimately determine how we set the dividend.

Dan Schlanger:

Yes. Brendan, I’m going to take – Jay just to take a step back just talk about how we think about the revolver and our balance sheet in general. We have a $7 billion revolver, and the reason for that is we – when we size the revolver, we want to look out for the next 18 months or so and ensure that we have liquidity that is sufficient to pay for any upcoming debt maturities, plus any capital expenditures we would need to run the business. The thinking behind that is that there are times when the debt capital market shut down, and we don’t want to be caught in a position where we have to access a really bad market. And in order to pay off our maturities or spend our capital. So with $5 billion remaining on that revolver, it depends on what the market is of how we’re going to refinance the $750 million maturity. We’ll either utilize the revolver for what it was in place for, which is to take advantage of that liquidity when if in this case what would happen would be a bad debt market would keep us out of the debt markets, or if the debt markets are really good, we might access them in order to refinance the maturity or pay down or reduce the borrowings on our revolver. So that’s a decision we make all the time, depending on what the debt market looks like and what we think is coming in terms of our maturities and capital expenditures. But like I said, we feel really good about this because we’ve spent the last several years trying to manage our balance sheet so that we would not be caught accessing a dislocated debt market or in a position where we have too much debt that is necessary to be refinanced in any given year, which is why the total the weighted average maturity life has been so important to us over the last several years. We’re at eight years. The reason that we’ve been focused on that number is so that we don’t get caught with any one stack of maturities in one year that would cause us some difficulty in refinancing. So when you put it all together, it depends on the debt markets, but we feel really good about our opportunities and the flexibility we’ve put into the business.

Operator:

Our next question comes from Greg Williams from TD Cowen. Please go ahead with your question.

Jay Brown:

Good morning, Greg. On your first question, at this point in the year, laying aside customer commitments that we’ve received. At this point in the year, the time to – the time required from application and approved application and known lease amendment, if you will, as you’re asking the question to when it’s actually on air. That generally takes kind of six to nine months. So by the time, we’re at the end of April of any given year, we have really good visibility as to what we’re going to put on air in that calendared year, just from a pure timeline standpoint. So from – as we mentioned in our commentary, the majority of our revenue growth is contracted. We were in that position in October of last year. Today, we not only have the majority of that contracted, but we also have visibility to where those applications are in the specific sites that they’re going on. And we’re all diligently working in order to get them on air. So the impact to our numbers at this point from movements one way or the other, either to the positive or to the negative is relatively limited just because of our longer term visibility. I don’t know if that answers kind of both of the way you’re thinking about your questions there, but the visibility that we have and we feel really good about where we are for the balance of this year, both in terms of the applications we’ve received to date as well as the contracted revenues. On the second part of your question more specifically to amendments and new leases, I mentioned this earlier in one of my answers, but we’re still at a point in time in the deployment cycle where the majority – the vast majority of the activity is amendments to existing leases. That has been true and is true in typical technology upgrade cycles of the past we’re finding that to be true in 5G. So the vast majority of the activity that we’ve seen thus far and would expect really frankly in this calendar year, it’s going to be more amendment driven. And then as they’ve touched – once it gets to the point where they’ve touched the vast majority of their existing sites with 4G upgrades to 5G, then we’ll start to see the shift towards first time installs on new sites in order to densify the network. And that work has begun. You can see some of that in small cells, which is probably the best place to see that discrete activity. Those for the most part are infill sites where they’re increasing the density of the network in order to improve the 5G network that they’re delivering for consumers.

Greg Williams:

Got it. Thanks for the color.

Matthew Niknam:

Hey guys, thank you for taking the questions. Just two, if I could. First on small cells, any incremental color you can share on the backlog and the percent of the nodes in the backlog that are either co-lo relative to maybe newer sort of greenfield build. And then on leverage, there was some illusions to this before, but you’ve obviously got benefits this year to EBITDA from the spring termination payments and some of the accelerated amortization of prepaid rent in 2025. You obviously have the loss of $200 million of sprint tower rent that churns off. So I’m just wondering in the context of those headwinds, how do you think about leverage the next two years relative to that five churn sort of target we’ve talked about as a more maybe long-term level? Thanks.

Dan Schlanger:

Yes. And on the leverage point, I think everything you said is true, and the way we think about our leverage is we want to maintain leverage that’s close to our target of 5 times net debt to EBITDA, which we were this quarter. But that number does fluctuate. As we’ve seen over the course of the last several years, that number can be a little bit below a little bit above, and we believe that the long-term growth of the business allows us to grow into that additional leverage that we will take on to pay for the CapEx, as Jay was mentioning earlier. And keep us around that 5 times debt to EBITDA, but if there’s any one-year that we’re a little bit above, I think we’re okay, we have some flexibility there as long as we have a plan over time to get back to close to our leverage target. That’s how we’ve managed it for the past five years, and I believe that’ll be very similar to how we’ll manage over the next five years.

Operator:

Our next question comes from Ric Prentiss from Raymond James. Please go ahead with your question.

Jay Brown:

Good morning, Rick.

Jay Brown:

Yes, we think we’re a little north of 50% at the moment across all of the carriers.

Jay Brown:

Exactly.

Jay Brown:

It was the 15-year agreement that we signed with them. And Ric, we gave that number, we talked about the number of sites and a 15-year commitment that they were making to us. We don’t give more specific than that because we were careful about guarding their deployment plans. So it’s a 15-year commitment that they’re making to us. Maybe the other point that’s important is obviously the timing of the cash flow have impacts as we think about the guidance that we give around organic tower revenue growth that would be a component of that. And so our view of our ability to both deliver the 2023 numbers that are in our outlook as well as the longer term commentary that both Dan and I have made around being able to be – able to grow at 5% at the tower line, a part of that commitment that they’ve made plays into our view of that over the longer-term.

Dan Schlanger:

Sorry, Ric. I was just going to add, I think you understand that the contract as Jay was alluding to gives us a minimum contractual payment. That grows over time as well, regardless of how many sites they’re on. So they have the opportunity to go on up to 20,000 of our sites, but not an obligation to do so. And our view has been that that provides us a tremendous amount of value, because we want them on as many sites as possible for us, because we believe that this is a long-term network investment and the more sites we’re on, the more sites we can grow on going forward. But also it provides us an opportunity to be very early on in the planning of that network and understanding what they’re going to do. And I think that that’s just a good relationship for us to have. So it’s not just the 20,000 sites that’s important. It’s the minimum contractual payment that goes along with those up to 20,000 sites they can go on.

Dan Schlanger:

Yes, not necessarily. We will – that chart is there to give you a general view, but we have a lot of customers that aren’t called out specifically, and DISH is just one of a lot of customers that aren’t called out specifically.

Dan Schlanger:

Yes. So the way you characterize where we are in prepaid rent in this year is true. The tower number will come down about $50 million and it’ll be offset primarily by small cells, which is generally because of the cancellation payments accelerate some of that prepaid rent to get us back to about flat on prepaid rent amortization. Going forward, as we’ve talked about a lot, those tables are not projections. They’re just as we sit today as statically what would happen. And we believe we will continue to add CapEx and generate additional prepaid rent amortization as we get reimbursements for our customers for that CapEx over the course of the year. But as you mentioned, like in 2023, the drop-off will be more likely to happen in towers with an acceleration in small cells to offset that drop-off in towers.

Jay Brown:

You too.

Nick Del Deo:

Hey, good morning guys. Thanks for taking my questions. First one on fiber solutions. I was wondering if you could talk about any changes you may be seeing in the competitive environment for fiber solutions. I think some of your large competitors are reorganizing internally and may be taking as more aggressive steps to try to grow the cable guys are push in that direction a little bit. So any observations there and the degree to which you’re observing and responding to change or not seeing change even would be helpful.

Nick Del Deo:

Okay. Okay. That’s helpful. And then maybe one more on fiber more generally. Any sort of update you can share as it relates to supply chain. I know a couple players have talked about that loosening up a bit. I think you’ve historically said that permitting has generally been a bit more of a hurdle for you than supply chain specifically. So, any comments there and the degree which it may influence your growth path in coming periods?

Nick Del Deo:

Okay. Got it. Thank you, Jay.

Jonathan Atkin:

Thanks very much. Couple questions. Small cell ramp that you’re talking about, what are the implications for discretionary CapEx going forward? Because you’re up this year on a year-on-year basis, and then given the potential opportunities that you see going forward, maybe just review with us the directionality for that trend for CapEx discretionary.

Jonathan Atkin:

And the timeframe to get a note on air, I think you’ve talked about 24 to 36 months. And any changes in that sort of co-location cycle time or node deployment time that you’ve shared with that.

Jonathan Atkin:

And then two more quick ones. Just the MLA question that you alluded to, if we’re entering into an environment where a lot of the operators for various reasons have kind of hit or are about to hit their medium term milestones for mid band spectrum deployments and overlays. If we do enter a period of kind of tapering growth, what commentary can you provide that might –would your revenue growth relatably go down or do the MLA kind of perhaps provide a little bit of downside protection? Any comment on that would be interesting? And then the last one, I’ll kind of throw it on 5% to 3% growth number. What products are you seeing demand for that underlie that growth assumption? Is it number of connections around dark fiber or wavelengths, or you talked about bandwidth as a driver, but is it more – maybe more dark in infrastructure type products that driving the growth? Or is it more network – traditional network products that are driving the growth assumption provided?

Jonathan Atkin:

Thank you very much.

Brandon Nispel:

Great. Thank you for taking the questions. Two, if I could. Jay, I think you had mentioned bookings not really having a big impact on growth this year. I think that’s pretty understandable. I think what I’d like to hear, if you guys could characterize what bookings are looking like in terms of new lease applications and how that’s been trending on a year-over-year basis, year-to-date are they trending lower or higher compared to the change in core leasing that we’ve seen? And then Dan question on the guidance. If we look at the guide for towers, I think it was $140 million in core leasing and for fiber it was $125 million just given where you guys started this year. And I think Jay commented that it was more of a level loaded year for leasing. How do you get to where you expect to be by the end of the year given the run rate at the beginning of the year was so much lower than what would be needed to hit the guide? Thanks.

Dan Schlanger:

And taking the second question on the new leasing, as Jay mentioned before, the level loaded comment that we made is that this year will not have in the tower business, a first half, second half difference as much as our previous years have. That doesn’t mean that every quarter is going to be exactly the same. Our business does operate with a little bit of variability. And I think we saw some of that in the first quarter. But it doesn’t give us any reason to believe that our full year guidance won’t come true. So everything that we’ve talked about, we still have a lot of confidence in our ability to deliver on the tower business. On the fiber side, as Jay mentioned, there’s one thing that just a comparison period of the first quarter of 2022, the first quarter of 2023, is that the first quarter of 2022 had $10 million of out of period bookings in it. So if you normalize for that, the bookings growth, we look a lot more in line with our longer with our full year guidance. But we also said through the year that we knew that the back half of 2022 had a little less activity, which is driving the flat fiber solutions growth in 2023. And that activity would pick up through the year, which is why when we exit the year, we believe we’ll be back to the 3% revenue growth. So we do expect some increase in activity in the fiber business to be able to reach our $125 million of new leasing activity forecast for 2023.

Operator:

Our next question comes from David Barden from Bank of America. Please go ahead with your question.

Jay Brown:

Sure Dave. Dan, you want to take the first question, then I’ll do the second?

David Barden:

Thanks.

David Barden:

Thanks, Jay.

Operator:

Our final question today comes from Walter Piecyk from LightShed. Please go ahead with your question.

Jay Brown:

Well, so that’s a level of detail of a customer contracts we wouldn’t get into.

Dan Schlanger:

Yes, well, I think the one thing that might be a little different than what you just expressed is the 19 of growth, you would have to amend by $10 million because what happened was $10 million you pull out of the previous year, which means the growth from Q1 to the growth to 2022 to [ph] Q1 2023 was actually 30 or 29, not 19. So you can’t just back it out of the new leasing activity from the previous quarter. You got to back it out of the run rate revenue at that point to show what the growth would’ve been. And that gets you much closer to the growth that we’re talking about for the full year. And we have visibility as we’ve been talking about, to the extent to what Jay was speaking to earlier, we do have visibility to that activity level increasing over time. But I don’t think it’s such a large leap that it would be not understandable to an external party to say, okay, it makes sense that 30 could be 35 or something like that. We’ve seen those types of quarters in the past. And as we grow through the course of the year, we believe we will get more activity as data demand continues to grow for the reasons Jay expressed earlier.

Dan Schlanger:

Yes. So it’s 19 in that case and we should see the increase in over time to get to 35 plus of growth in a certain quarter. But like we were talking about, we do think there is activity that’s growing through the course of the year in order for us to get there.

Jay Brown:

Well, the second part of your question, just zooming out from the specific numbers in the year, and you alluded to kind of the difference between towers and small cells and maybe fiber solutions. Obviously, those businesses are different. Our fiber solutions business is more transactional. And so we don’t typically see multi-year commitments from our customers in the same way that we do from a tower small cell, meaning for future business. Obviously, there are multi-year contracts and commitments when we sign. But we don’t have multi-year visibility as to what the revenue growth is going to be. So it’s more transactional in nature and we have a shorter timeline of visibility of what that growth is going to be. We feel good as Dan and I have mentioned in a couple of answers to a couple of different questions, we feel good about where our guidance is and where we expect the year to fall. But if you are looking for differences among kind of our business lines, certainly, there is a difference in terms of the number of months of visibility that we would have and then also the more transactional nature of that fiber solutions business.

Jay Brown:

You bet.

Operator:

And ladies and gentlemen, with that, we’ll end today’s conference call and presentation. We thank you for joining. You may now disconnect your line.

Operator:

Good morning and welcome to the Crown Castle Fourth Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ben Lowe, Senior Vice President. Please go ahead.

Jay Brown:

Thanks, Ben and thank you everyone for joining us on the call this morning. As you saw from our results, 2022 was another successful year for Crown Castle and the positive trends across our business remain intact. With fourth quarter 2022 results coming in as we expected and no changes to our 2023 outlook, I plan to keep my prepared remarks brief before handing it over to Dan to talk through the numbers in a bit more detail. As I reflect on 2022, I am proud of what our team accomplished. We led the industry again with nearly 6.5% organic tower revenue growth as our customers upgraded existing tower sites with additional spectrum and added equipment to thousands of tower sites they were not previously on to support nationwide deployment of 5G. And we deployed 5,000 small cells to support initial network densification efforts while growing our fiber solutions revenue by 2%. The positive operating trends in 2022 exceeded our initial expectations for the year and offset the impact of the rapid increase in interest rates, demonstrating the resilience of our business model and strategy. As a result, we were able to deliver strong bottom line growth that supported more than 9% dividend per share growth. As we discussed when we initially provided guidance in October, we believe that a positive operating momentum will carry into 2023, driving another year of expected strong growth with 5% organic growth in towers and a doubling of our small cell deployments to 10,000 nodes. With respect to tower leasing trends, the established national wireless operators are deploying mid-band spectrum in earnest as a part of the initial phase of their 5G build-out. To-date, only about half of our sites across our top three customers have been upgraded with mid-band spectrum, providing a significant opportunity for additional revenue growth as additional sites are upgraded over time before their focus will likely shift to more infill with new co-locations. Adding to the substantial long-term growth opportunity, we continue to support DISH with their nationwide build-out of a new wireless network. And I believe we are in a great position to continue to capture an outsized share of that opportunity. Turning to small cells, we expect to double the rate of small cell deployments this year to 10,000 nodes with over half co-located on existing fiber to meet the growing demand from our customers as 5G networks will require small cells at scale. With approximately 60,000 nodes on air and another 60,000 contracted in our backlog, I believe 2023 will represent the first year in a sustained acceleration of growth for our small cell business. We also continue to see opportunities to add to the returns we are generating from small cells by leveraging the same shared fiber assets to pursue profitable fiber solutions growth and we expect to return to 3% growth as we exit 2023. Looking at the bigger picture beyond this year and why I am so excited about our growth opportunity, we are still in the early innings with 5G as the industry is only a couple of years into what we expect will be a decade-long growth opportunity. Our customers are seeing significantly higher levels of monthly data consumption as consumers upgrade to 5G, providing the need for significant network investment for years to come to keep pace with this persistent growth in mobile data demand. As we have seen in our industry throughout its history, generational upgrades to the wireless network occur in phases with an initial push to provide nationwide coverage followed by periods of continued network augmentation and densification that has led to long periods of sustained growth. We believe we are in the initial phase of the 5G build-out with many phases to follow over the coming years. Consistent with their past practice, we believe our customers will first deploy their spectrum on the majority of their existing sites as they are currently doing before shifting their focus to cell site densification to get the most out of their spectrum assets by reusing it over shorter and shorter distances. The nature of wireless networks requires that cell site densification will continue as the density of data demand grows and we expect 5G densification to require both towers and small cells at scale to fill in the network. With that view in mind, we have invested more than $40 billion of capital to-date in towers and more recently, small cells and fiber that are mission-critical for wireless networks to capture as much of this growth opportunity as possible. Importantly, we are already generating a 10% return on our total invested capital with the opportunity to increase that return over time as we add customers to our tower and fiber assets and grow our cash flow. As a result, I believe Crown Castle is an excellent investment that will generate compelling returns by providing investors with access to the most exposure to the development of next-generation networks in the U.S. with our comprehensive offering of towers, small cells and fiber, providing the opportunity to benefit from the best growth and lowest risk market, an attractive total return profile with a current yield of 4% and a long-term annual dividend per share growth target of 7% to 8% and the development of attractive new assets that we believe will extend our runway of growth and create shareholder value. And with that, I will turn the call over to Dan.

Operator:

[Operator Instructions] The first question is from Michael Rollins of Citi. Please go ahead.

Jay Brown:

You bet. Good morning, Mike. Thanks for the comments. On the first question around leasing, as you noted and I made a mention of this in my prepared remarks, we did increase the total number of nodes on air and under contract by 5,000 during the fourth quarter. So we didn’t sign any large deals with customers, but this is just ongoing activity that represents additional commitment for nodes beyond the large commitments that we previously announced. And to my comments around cell site densification, we believe we are going to continue to see this throughout the 5G cycle of upgrades and deployments and beyond as the carriers move past touching the sites, the tower sites that they are on and starting to look at densification of their network. And I think the activity that we saw in the fourth quarter is representative of exactly those longer term plans, which ties really closely to your second question around the backlog and the timeline. I think we see and have visibility to what they are going to need in their network, particularly in small cells, 24 to 36 months in advance of when these nodes will actually be put on air. And as I mentioned in my comments, we think the acceleration that we are seeing in 2023, doubling the number of nodes that we expect to put on air from 2022 to 10,000, we think that’s the start of an acceleration of growth and deployment of small cells. So I am not really ready to give guidance on how many we will put on in ‘24 and ‘25. But given the backlog and the timing, we do think this is the start of an acceleration of growth in that business.

Operator:

The next question is from David Barden of Bank of America. Please go ahead.

Jay Brown:

Good morning, Dave. On your first question around the agreements with the carriers, I think you are going to see over time in that business, a combination of large scale agreements with the carriers where whether they give us whole markets or a number of markets, we will probably see large-scale agreements with carriers over time. We expect those large-scale agreements to be lumpy. So we wouldn’t expect to see them every quarter or even every year, but it will be dependent upon the way that the carriers are thinking about the network and where the holes are and where the need is. I think there is value in some of those large-scale agreements, particularly with respect to securing the resources when concentrated in some -- in a few markets. So I think you will continue to see those. I also think you will continue to see what we saw in the fourth quarter, where carriers give us business and they are not at large scale and we do them in smaller chunks. So I think both are going to be there. I don’t think one or the other is representative of an underlying trend or nature of the business. The carriers, I think, as I say, will contract with us, I think on both basis. And I think over time, big picture and we have talked about this for years, because of our disciplined and rigorous approach to capital allocation and our view of where small cells are going to be needed, everywhere that small cells are needed is not necessarily attractive for us to put capital to work. So we’re going to pick and choose where we decide to put capital to work, which means the carriers are either going to need to find other providers who are willing to deploy capital at lower return thresholds than what we’re comfortable with or alternatively, they’ll self-perform. And today, we have seen the carriers self-perform in -- for the most part, in places where we were not willing to do it. And I think that will continue. You’ll continue to see self-perform for the carriers. Again, I don’t think that’s indicative of the business. I think it’s more indicative of the way that we think about return thresholds and our desire to both grow the dividend, elongate the timeline of returns and be thoughtful about the risks that we underwrite. On the second question around the backlog and carrier CapEx contribution, the way the agreements are structured relates to the -- pricing is related to the return based on the underlying cost to deploy nodes. So the CapEx will move, the CapEx contributions from the carriers will move in unison with the way that it’s -- the cost of actually deploying the networks that we’re deploying in the locations that we’re deploying them. So in a market where they are more expensive to deploy, the capital contribution is going to be higher. In places where it’s less expensive to deploy, those capital contributions will be less. I don’t think at this point beyond the guidance that we’ve given around CapEx for calendar year ‘23, we’re not going to provide guidance for ‘24 and ‘25. But as we give outlook for each individual year, we will give you a view of what’s the backlog, what do we think we’re going to turn on air and then break out for you what we think our total CapEx for the year is going to be and then what portion of that will be carrier CapEx, carrier contribution offsetting that play.

Jay Brown:

You’ve articulated it correctly. So we will receive cash as we go through the process of deploying the nodes and incurring capital expenditures. And then we would start to run it through the income statement once we’ve completed the work of -- the operational work necessary to complete and deliver the node to the carrier. At that point, we would then amortize it over the term of the lease. One thing I would I would say, and I’m not sure exactly what you’re trying to decipher in terms of this question. You’ve articulated it correctly. Maybe one additional piece of information that’s helpful, the backlog and the timeline to build when we talk about 24 to 36 months to build is our average. Obviously, there are nodes that take longer than that, [Technical Difficulty] construction period of time is relatively short. And it occurs at the back half of the last portion of that long-dated period of time. So the majority of the costs that we incur up until construction are soft cost, and they would be a smaller percentage of the overall CapEx. So you shouldn’t expect -- just to be extreme, you shouldn’t expect on a 36-month timeline to construct a node that we would have significant CapEx in the first 12 months of that and then receive carrier contributions at that time. Most of the actual outlays would be towards the back half of that process and the cash being received. So the timeline between receipt of cash and booking the node is not 36 months or not likely.

Operator:

The next question is from Simon Flannery of Morgan Stanley. Please go ahead.

Jay Brown:

Sure. On your first question, I don’t want to comment specifically on Verizon and T-Mobile. I’ll let them comment on their longer-term network plans. As I mentioned in my comments, we think about half of our sites have been touched for the mid-band spectrum at this point. They are obviously across the board, all of the carriers are working on touching the vast majority of the rest of those. And that will take some period of time in order for that to be accomplished. We’re 2 to 3 years into the work that’s been done to date, and it’s taken about that long just to touch half the sites with just the mid-band spectrum. So I think you’re going to see other spectrum bands that are going to be deployed for 5G on existing sites as well as the completion of the mid-band spectrum across the balance of the sites. Each of the carriers will think about how they deploy capital, how they budget that capital a little bit differently. But those offsets generally over a long period of time in the tower business have mostly offset each other to the point where we just haven’t seen a lot of movement and a lot of movements up and down in terms of the overall CapEx. And I think we will see in spending and focus on network deployment, I think we will see a similar thing during 5G. Thus far, as I made in my -- pointed to in my comments, thus far, 5G has looked relatively similar in terms of its deployment activity as what we saw when 2.5G, 3G, 4G were deployed where the carrier is focused on upgrading the sites that they were already on and then the discussions start to move towards the second half of it and start to think about infill sites. I think what’s different about 5G that we’re seeing, obviously, in our small cell business as alluded to previously on the increase in the number of nodes that we signed as well as the larger transactions that we announced previously, those infills are going to come from a combination of both tower sites and small cells. So I think the unique thing about 5G, we saw a little bit of this at the end of 4G, but the unique thing about 5G is the necessity in those infill sites to use both towers and small cells. And we’re starting to see the real beginnings of that as we start to accelerate. So similar to past and excited about our forward growth, excited about our 5% plus organic tower growth this year. We think there is a long runway of continuing at that level of north of 5% growth in tower site.

Jay Brown:

Yes. On the M&A side, no change to the comments that we’ve made historically, we are focused on making sure we deploy capital at very high returns that increase the dividend and elongate our opportunity for growth. We have chosen based on the opportunities and price sets that have been in front of us and assets that we have looked at. We’ve made the decision that the best opportunity has been to invest in assets that we’re building. But we think about acquisitions the same way we think about CapEx. We look at it as what’s the best alternative for that use of capital. And thus far, we think the best opportunity at scale for the use of capital has been to deploy fiber and small cells. And so we will continue to look, and we would be open to it if we found an asset that was -- met our return criteria for what I articulated previously of growing the dividend and elongating the growth rate could be interesting to us and -- but really excited about the opportunity for us to continue to invest capital to deploy small cells.

Operator:

The next question is from Philip Cusick of JPMorgan. Please go ahead.

Jay Brown:

Good morning.

Jay Brown:

Yes. On the tower side, I think we will see the second half of the other half of the towers be upgraded to mid-band spectrum. Took about 2 to 3 years to do the first half. So I think that’s probably a reasonable assumption that it will take that long to do the second half of the assets roughly on the tower side. I think the announcements that we’ve made previously with small cell commitments to be constructed are already a combination of overlaying on nodes that they were previously on with other technologies and upgrading those two technologies as well as infilling sites along the same fiber, increasing the number of nodes per mile, if you will, in a given geography. We’re already seeing infill and densification on that front. We’ve talked about in the two large announcements that we made with the T-Mobile nodes, the committed T-Mobile nodes that the vast majority of those were co-located on existing fiber. So those largely represent upgrades and densification and then a mix of about 50-50 on the Verizon nodes, a combination of upgrades, co-location on existing fiber. And then the other component would be where we’re building new sites and new locations. So I think, we will continue to see a mix as we said in our comments. For 2023, we think the vast majority of the nodes that will turn on air will be on existing fiber.

Dan Schlanger:

No, it’s a pretty normal pace, Phil. And the only thing I would point out is something I said in my prepared remarks that the second quarter will likely be the high watermark because we have some decommissioning work that comes with services activity that will hit in the second quarter, but a relatively normal pace where we are today.

Operator:

The next question is from Ric Prentiss of Raymond James. Please go ahead.

Jay Brown:

Good morning, Ric.

Jay Brown:

We’re doing well, came through the storm well, but there were a lot of damage in the city.

Jay Brown:

Yes, thanks. You are correct. We did say there is about $30 million of -- I’m sorry, $40 million of churn that we expect in our fiber segment and split about equally between small cells and fiber solutions in calendar year ‘23. The churn expected, you correctly stated, of about 5,000, we expect about half of those to churn in calendar year 2023. The balance would be in ‘24 and beyond.

Jay Brown:

Yes, I think that’s probably right, somewhere in the neighborhood of 1% to 2%. I mean, honestly, to date, we really have not seen hardly any churn in that business, except for the event of the consolidation of Sprint into T-Mobile. Churn has been near zero or very low other than that event. So -- but I think long term, it probably plays itself out like towers. So if you’re thinking about your long-term model, assuming churn of 1% to 2% is probably right.

Jay Brown:

It’s possible. A good portion of our fiber business is leases that we have with the carriers where they use our fiber. So depending on the locations that T-Mobile were to desire, then our assets could be very attractive for that. But it’s a case-by-case, location-by-location analysis that would have to be done.

Jay Brown:

You too.

Brandon Nispel:

Hi, guys. Thanks for taking the questions. And appreciate the disclosures as well. I was hoping you could talk us through the run rate in terms of tower core leasing throughout ‘23. Is first half any stronger than second half? And maybe the other way to ask the question is, as you look at the backlog of new lease applications that you’re receiving today, are those trending up or down at this point? Thanks.

Jay Brown:

Your second question on the trends we’re seeing in the backlog, no change in what we’re seeing from what we talked about in October, so seeing good demand across all three of our business lines, towers, small cells and fiber solutions. The pipeline, you heard my comments in my prepared remarks, but we think by the back half of this year, we’re going to exit 2023 with fiber solutions back at kind of a 3% growth area. And tower leasing, as Dan just mentioned, we think that’s going to be really similar across the year. So not back half loaded, but level loaded across the year. And then small cells, we obviously had a good fourth quarter in ‘22. And we will see what builds over the course of ‘23 and update you as we get orders on that front.

Operator:

The next question is from Greg Williams of Cowen. Please go ahead.

Jay Brown:

Sure. On your first question, I would say it’s -- on some level, it’s probably a function of price. It’s more likely a function of our targeted approach to which assets we want to own. In order for a fiber asset acquisition to be attractive to us, it needs to be in dense urban areas. It needs to have high fiber strand count, and we need to have visibility that those areas are going to have or likely to have significant lease-up for small cells. And the reason why you haven’t seen us do any fiber acquisitions in the last 5 years is much more related to the fact that we haven’t seen anything meet those criteria than, frankly, it is price. We just haven’t seen the opportunity to acquire assets that meet the criteria that’s going to drive long-term growth from the wireless carriers from the deployment of small cells. And we are going to remain disciplined on that front, continue to believe the vast majority of the fiber that we will accumulate over time will be as a result of building it rather than acquiring it because we just don’t see a lot of assets in the market that meet our criteria for assets that we would want to own. On your second question, I believe that cable over the long-term is a very attractive opportunity for us to increase our growth rates and think that we will see leasing from the cable operators. We will see some of that on macro side. Frankly, I think we will probably see more of that in our small cell business, given the places that they tend to deploy infrastructure as they think about the density of population and users. So, I think it’s more likely that we will benefit from the deployment of network by the cable operators using their various spectrum bands. We will see -- we are more likely, I think to see that in small cells over a long period of time than we are in macro sites, but do think macro sites will benefit from cable.

Operator:

The next question is from Nick Del Deo of SVB MoffettNathanson. Please go ahead.

Jay Brown:

Sure. On the location point, I probably would not draw a lot of distinction between central business districts and urban, more suburban areas that are densely populated. The usage, as you think about it on a per subscriber basis, while there is some differences over time, there has been less of a differentiation by the consumer in terms of usage. And therefore, the network reflects that. So, when we see the carriers deploy the first phase, there are a mix of dense suburban markets as well as what you would think of as the most dense part markets down in the central business district. We will see leasing in both of those kind of areas initially. Less likely for us to see that leasing early -- in the early phases of deployment of a generational change. Less likely to see that in more rural applications or rural assets. So, we have not seen that as much. To the second part of your question, how far do they need to go before they start to do infill, it’s -- some of it is a matter of how they allocate their capital and the need to provide geographic coverage. The other part of the answer is where do they see traffic growth and where are the holes in the network that they need to do infill in order to improve the network. And there is not a big picture answer really, frankly, to give to that question. It varies market-by-market. And so in some markets, 2 years or 3 years ago at the very beginning of the launch of 5G, they already knew where they were going to need infill sites. We started seeing small cells and demand for small cells as they started to think about infill long before even devices were out and usage has started to increase. So, they had a view based on population usage, their customer base, etcetera, that there was going to need to be an infill of sites in certain geographies. And so in other geographies, we haven’t seen that yet. So, it really is -- it’s not a big picture question that I could give you an answer that would be helpful. But it’s driven by underlying data usage. And that is why so often in my prepared remarks, I talk about what we are seeing in terms of data usage, what the carriers are seeing in terms of data usage because that long-term is the driver of the need of our infrastructure. And we believe that macro trend is very healthy and will continue. And we will continue to see the need for both macro sites and small cells from an infill standpoint.

Jay Brown:

Well, first, we are doing everything we can to help DISH get launched, and we have got teams of people that are very focused on that. DISH has been working hard to get their nationwide network deployed. And I hope that they would say about us, we have been a good partner to help them get there. I know our teams are focused on it 24/7, 365. So, it’s been a good partnership with them, and we are happy to have them as a customer. It has accomplished what we expected. We expected that the fact that we got them locked up first would mean that our network would benefit from them designing their network around our existing assets. We have seen that play out. We believe we have gotten an outsized share of the overall opportunity as they deploy the network. And I think the nature of our agreement with them, we have the opportunity to continue to get an outsized share of their network deployment. So, I think in that respect, it has accomplished exactly what we had hoped. And as we said at the time, and I think this has played out, our visibility to that network with the combination of providing fiber as a part of their backbone as well as providing tower sites has deepened that relationship and deepened our understanding of how they are thinking about the deployment of the network and probably led to us being able to capture more opportunities than we would have had if we were towers only.

Operator:

The next question is from Jonathan Atkin of RBC Capital Markets. Please go ahead.

Jay Brown:

Hey. Good morning Jon. I don’t know that it will get all the way to exactly 100%, but we would expect, over time, it will get pretty close to about 100% of the network will be upgraded, yes.

Jay Brown:

Yes. Consistent with my comments around the vast majority of the activity is on sites that they are already on. The vast majority of the total activity that we are seeing from the carriers is amendments to existing sites where they are adding additional equipment. And therefore, we are getting rent added to the leases that we already had. We are seeing some first-time installations on sites as a part of their desire to infill. But the vast majority of the activity that we are seeing would be from amendments.

Jay Brown:

No, we didn’t -- we haven’t seen any change from kind of middle of last year. And certainly, as we are sitting here today in early 2023, haven’t seen any change from our expectations when we laid them out in October of last year.

Jay Brown:

Yes. The biggest driver there is the increased traffic, overall data traffic that’s happening in the market. I mean our business and our focus for customers is mostly large enterprise, universities, hospitals. And in those markets, the primary driver of what drives our revenue growth is data traffic and the movement of -- in essence, the movement of data among their facilities, locations, offices, etcetera. And that’s the biggest corollary.

Jay Brown:

Sure. We continue to be optimistic about the long-term opportunities around Edge. I feel like our assets are really well positioned to capture that opportunity. In order for Edge to work, you have got to have connectivity, and you have got to have power. And our hub sites for small cells and our towers are both ideal locations for aggregating the traffic out of mobile networks at the Edge. And think that opportunity will develop as 5G ultimately develops. I think you probably heard us say a number of times that the first benefit from the activities that will ultimately lead to the benefit around the Edge, we think we will see in spades in the deployment of small cells and a lot of activity related to it with small cells. And then the follow-on will be the opportunity around the Edge. So, we certainly believe it’s there. And I think we are really well positioned to capture that opportunity when it does materialize as the applications that need increased data and compute power move to the very edge of mobile networks, when that -- when those applications are starting to be used both on an industrial level as well as the consumer level, feel like our assets are really well positioned to capture that opportunity.

Operator:

And the final question is from Jonathan Chaplin of New Street Research.

Jay Brown:

Yes. We didn’t provide specific guidance on when we will get that done. But as I mentioned in my comments, we think that ‘23 is the start of an acceleration of growth in small cells. So, it does imply that there will be an acceleration beyond the 10,000 nodes per year that we expect to do in calendar year ‘23.

Jonathan Chaplin:

Can you give me just a little bit more color on why it isn’t sort of complete within 3 years? Is it the carriers are really looking sort of 4 years or 5 years out in terms of what they are contracting for small cells today?

Jonathan Chaplin:

Okay. Got it. And then is there a way to contextualize what DISH is contributing to growth at the moment? And have they reached a steady state with you at this point, or do you think that their contribution could still accelerate for you?

Jonathan Chaplin:

Okay. And then last one for me. You spoke about the sort of the three phases of network deployment. And the first phase is lots of sites of amendments and then just sort of the next big phase is moving to. I would assume, fewer sites a bit with 4x or 5x the revenue per site. As you look through the sort of the multiyear period that -- as you work through these phases, is the revenue growth you get similar in the first phase and the second phase and the third phase, or is it heavily weighted towards the first phase just because of the number of sites that they are touching?

Jonathan Chaplin:

Great. Thanks very much guys.

Operator:

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

Operator:

Good day, everyone, and welcome to Crown Castle's Q3 2022 Earnings Call. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Ben Lowe, Senior VP of Corporate Finance. Please go ahead, sir.

Jay Brown:

(Audit Start) Thanks, Ben, and thank you, everyone, for joining us on the call this morning. As you saw from our third quarter results and the 6.5% increase to our dividend, we are seeing the benefits of a strong leasing environment, as we support our customers’ growth initiatives with their deployment of 5G. With this increase, we have grown dividends per share at a compound annual growth rate of 9%, since we established our long-term growth target of 7% to 8% per year in 2017, returning over $10 billion or 20% of our current market capitalization to shareholders over that period of time. Our customers have focused on utilizing towers during their initial deployment of 5G, resulting in the second consecutive year of 6% organic revenue growth in our tower business as we continue to outpace the industry. We expect this momentum to carry into 2023 with another year of solid organic growth of at least 5% for our tower business. In addition, we expect to double the rate of small cell deployments next year, compared to the 5,000 nodes we expect to install this year to meet the growing demand for our customers, as 5G networks will require small cells at scale. For fiber solutions, we expect revenue to be flat in 2023, compared to 2022, as a result of several discrete items that Dan will discuss later. We expect revenue growth to return to approximately 3% by the end of the year. Consistent with what we have previously disclosed, we also expect the rationalization of a portion of Sprint's legacy network by T-Mobile to have some near-term impacts on our financial results, without altering our long-term growth potential of our strategy. We continue to believe the total impact of the Sprint network rationalization will be approximately $275 million of annualized churn, concluding in 2025. As I'll speak to in just a moment, I see tremendous opportunities ahead of us, giving us confidence in our ability to deliver on our long-term target of growing dividends 7% to 8% per year. However, with $225 million of remaining Sprint churn and $140 million of additional run-rate interest expense, we expect dividend per share growth in 2024 and 2025 to be below our long-term target. Looking back over the last several decades in the wireless industry, we have experienced periods of network rationalization by our customers, following consolidation events. In each of those instances, we saw increased demand for our assets over times, as our customers reinvested the synergies gained from those combinations back into their networks to further improve their competitive positions, and keep pace with wireless data growth. I expect we'll see a similar dynamic play out this time around. As such, over the long-term, I believe our strategy and unmatched portfolio of 40,000 towers, 115,000 small cells on air under contract and 85,000 route miles of fiber concentrated in top U.S. markets have positioned Crown Castle to deliver significant value to shareholders for many years to come. We are focused on the U.S. because we believe it represents the best market in the world for wireless infrastructure ownership when considering both growth and risk. The relative strength of the U.S. market has been clear to us during times of global economic prosperity. And I believe that gap and performance is widening further in current challenging macroeconomic environment. The operating conditions underlying our shared infrastructure model have been better in the U.S. than any other market in the world. We have benefited over time from persistent growth and mobile data that has required hundreds of billions of dollars of network investment by our customers. As a result of the quality of the networks and the user experience enabled by this level of investment, U.S. consumers have used their wireless devices more and more and have been willing and able to pay for that improving mobile experience. In turn, the wireless carriers have taken the higher cash flows generated from their customers and invested even more in the networks and the cycle continues. When we assess the global landscape for wireless infrastructure ownership, we do not see evidence of that same virtuous cycle in any other market. The combination of persistent growth and mobile data and the value we deliver to our customers by providing a low cost shared infrastructure solution has enabled us to consistently generate growth through various macroeconomic cycles. Further, I believe our core value proposition of reducing the overall cost of deploying and operating communications networks is even more compelling for our customers in times of increasing capital costs. Adding to our positive view of the opportunity we have in the U.S., I believe we are still in the early stages of 5G development, providing a long runway of growth and demand for our comprehensive communications infrastructure, offering across towers, small cells and fiber. Similar to other generational network upgrades, we expect 5G to drive sustained growth in our tower business as our customers add equipment to our 40,000 towers. We also believe 5G will be different as it will require the deployment of small cells at scale to increase the capacity and density of wireless networks, as more spectrum deployed across macro towers will not be sufficient to keep up with the growth in mobile data demand. As a result of the requirement to build out this denser network, we believe the duration and magnitude of 5G investment will likely exceed prior network investment cycles, further extending our long-term growth opportunity. With this view in mind, we have invested $6 billion of capital in high capacity fiber and small cells that are concentrated in top U.S. markets. That capital has a weighted average life of approximately five years and is yielding more than 7% today. With more than 60,000 contracted small cell nodes in our backlog, including a record number of colocation nodes, we expect the yield to increase over time as we put those small cells on air. In 2023, we expect to double our small cell deployments, with over half of the nodes co-located on existing fiber. With the increased mix and colocation, we expect our net CapEx to increase by only 10% over 2022 levels, reflecting attractive incremental lease up return. The resulting incremental returns are consistent with our expectation for small cell co-location to drive two tenant system returns to low-double digit yields on invested capital, just like we have achieved in towers. As we proven out the value proposition for our tower assets over time, those assets now generate a yield on invested capital of approximately 12% with meaningful capacity to support additional growth. Looking at how well our overall strategy is performing, since 2017, we have increased our consolidated return on invested capital by 160 basis points to 9.5% and returned over $10 billion to shareholders through our dividend that has increased at a compound annual growth rate of 9%, while also investing $7 billion of capital into attractive assets we believe will generate returns well in excess of our cost of capital and contributed to dividend growth in the future. I believe that the combination highlights how compelling and differentiated our strategy is. We provide investors with the most exposure to the development of next generation that works with our comprehensive offering of towers, small cells, and fiber, a pure play U.S. wireless infrastructure provider with exposure to the best growth and the lowest risk market, a compelling total return profile with a current yield of nearly 5%, and a long-term annual dividend growth target of 7% to 8% and the development of an attractive – of attractive new assets that we believe will extend our runway of growth and shareholder value creation. (Audit End) In the context of our 6.5% dividend per share growth this year, it is remarkable to consider that the underlay -- to consider the underlying strength of our business can absorb the significant headwinds of interest expense increases, and Sprint cancellations in the near term without disrupting the long-term growth of the business. I believe this durability of the underlying demand trends we see in the U.S. that provides significant visibility into the anticipated future growth of our business, the deliberate decisions we have made to reduce the risks associated with our strategy and our history of steady execution makes Crown Castle an excellent investment that will generate compelling returns over time. And with that, I'll turn the call over to Dan.