Crown Castle Inc Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Simon Flannery - Morgan Stanley & Co. LLC - Analyst : Great. Thank you very much. Good afternoon. Steven, thanks for all the color on the CapEx and OpEx review there. What I wanted to get more color on what was -- what is the new run rate of CapEx, presumably since this was sort of a mid-year review, some of the spending was already done. You may path more spending contracted in the second half of the year. So any color you can provide us at what sort of do you think the more usual right, given this for a higher hurdle rate and your more focused approach will be going forward? And then maybe Dan one for you, you talked about the leverage coming down to 5.7 on an adjusted basis. What are you targeting in terms of leverage over the next couple of years here? And there's numerous reporting that there may be a Verizon portfolio out there, how you're thinking about M&A in the context of that? Thank you.

Question: Michael Rollins - Citigroup Global Markets Inc. - Analyst : Thanks, and good afternoon. I was curious, Steven, on some of the comments that you made about the tower business. You talked about three things that you thought could drive a higher organic annual growth rate. I'm curious if you can give us an update within that context of what you're seeing in terms of carrier activity? And are there any early signals that you're seeing as you look at the visibility that you have in this business and what could come in '25? And then you also mentioned more tangible steps the company is taking to be a best-in-class provider. And curious if you could share some of those steps and how you think that'll translate into better share and results going forward?

Question: David Barden - BofA Global Research - Analyst : Hey, guys. Thanks so much for taking the questions. A nice straightforward quarter. I guess my first question would be, Dan -- if we go backwards and we start thinking about the small cell return thresholds, right? It was always whatever the CapEx is times [6%] and then if we get a second tenant, that goes into the double digits, and if we get a third tenant, it goes north of there. Could you kind of come back to that and kind of give us what the new language around return threshold expectations is for the company now that we've kind of undertaken the operational review? And then I guess the second question would be just in terms of the service revenue kind of run rate in the quarter, I think, Steve, to your point, that this might be kind of run rate from a tower activity level. Is this the new run rate for services for the foreseeable future before we start guiding to 2025? Thank you.

Question: Ric Prentiss - Raymond James & Associates, Inc. - Analyst : Yeah. Thanks, everybody. Hey, I want to start with the change in given guidance, slipping it to the 4Q call from the 3Q call. I know we had chatted about it in Nareit, Dan, but help us understand what kind of led to that change. I know your peers do it on the 4Q call.

Question: Ric Prentiss - Raymond James & Associates, Inc. - Analyst : 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.

Question: Ric Prentiss - Raymond James & Associates, Inc. - Analyst : Makes sense to me. Kind of talk to the strategic review delicately, but I think this will work. Last quarter, we talked about fiber, small cells, and would it make sense from a seller standpoint or the buyer standpoint to separate fiber solutions from small cells? Is it possible to update us as to what are the pros and cons from a very 30,000-foot level to say, what about -- is there a strategic review outcome that's including both of them together? Or what if it's something that splits them apart? Is that a fair question? I think it is.

Question: Ric Prentiss - Raymond James & Associates, Inc. - Analyst : Okay. Last one for me, Steven. Unique position, we think you're in. We continue to see private multiples well above public multiples. Can you give us your opinion on -- are you seeing that? Why are we seeing it, and why has it persisted so long if it is there?

Question: Jim Schneider - Goldman Sachs & Company, Inc. - Analyst : Good afternoon, and thanks for taking my question. Relative to the operational update and the 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?

Question: Jim Schneider - Goldman Sachs & Company, Inc. - Analyst : 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 few years?

Question: Nick Del Deo - MoffettNathanson LLC - Analyst : 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.

Question: Nick Del Deo - MoffettNathanson LLC - Analyst : Okay. That's helpful. Thank you for sharing that. I guess one other question on fiber solutions. 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?

Question: Richard Choe - J.P. Morgan Securities LLC - Analyst : 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're focusing on? Thank you.

Question: Ari Klein - BMO Capital Markets Corp. - Analyst : 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 our impacted, I guess, by the shifts that you're implementing?

Question: Ari Klein - BMO Capital Markets Corp. - Analyst : 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 (technical difficulty) shifting dividend strategy and how you think about that?

Question: Matt Niknam - Deutsche Bank Securities Inc. - Analyst : Hey, 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- 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

Question: Matt Niknam - Deutsche Bank Securities Inc. - Analyst : Yeah. More so just around discretionary spend for fiber in general.

Question: Matt Niknam - Deutsche Bank Securities Inc. - Analyst : If I could just follow up on the first question, I know that there was a reduction of about $300 million that was announced, and I think that was reaffirmed in today's release for discretionary spend in totality for fiber. That's six months of this year. So is it fair to extrapolate that and say, next year, it could look more like an $800 million number? Or is that too much of a generalization, and we should just sit tight till January to get additional color?

Question: Batya Levi - UBS Securities LLC - Analyst : Great. Thank you. 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 tackle 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 what the small-cell versus fiber mix of that is?

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : 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 co-locations versus anchor tenant note? How should we think about that shifting as a result of the strategic review and/or the operational review that you announced last month?

Question: Eric Luebchow - Wells Fargo Securities, LLC - Analyst : 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 co-locations to densified power grids in any of your markets, particularly the more urban ones? And if you haven't seen that the big way, any kind of visibility on when that tower densification phase may pick up in the next couple of years? Thanks.

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

Question: Walter Piecyk - LightShed Partners LLC - Analyst : That's fine. I'm just looking -- I mean, last year you had a -- 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're talking about $60 million, is it -- that's off of the fourth-quarter level and that's just going to keep going down or any way there were some proxy fees in there -- in the quarter? But I guess, there was a big number last year.

Question: Walter Piecyk - LightShed Partners LLC - Analyst : But that wasn't there last year in the second quarter, which also was up (multiple speakers) Whatever. I just -- it seems like obviously an important component, but you don't think there's anything abnormal there? And so when are we going to see these reductions kick in? Obviously, the proxy fees dropped 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 these are all back-end loaded?

Question: Walter Piecyk - LightShed Partners LLC - Analyst : 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 and then whatever you announced in terms of guidance, you should get some -- much better efficiencies in 2025, hopefully, right?

Question: Brandon Nispel - KeyBanc Capital Markets - Analyst : Yeah. Hey. Thanks for taking the questions. A lot have been answered already. But you guys just talked about in the past, the guidance, 5% tower growth through '27, and 75% of that is contracted. So I guess, simple question is, how are our lease applications trending today in terms of your confidence in achieving the remaining sort of 25% to hit that 5% growth rate? Thanks.

Question: Brendan Lynch - Barclays Capital Inc. - Analyst : 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? 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 if somebody else was going to be managing these assets somewhat imminently.