10-QPeriod: Q2 FY2018

CROWN CASTLE INC. Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 6, 2018For Securities:CCI

Summary

Crown Castle Inc. (CCI) reported solid financial results for the second quarter and first half of 2018, demonstrating robust growth driven by its core Towers and expanding Fiber segments. Net revenues increased significantly, primarily fueled by strong performance in site rental revenues, up 35% year-over-year for the quarter and 35% for the half-year. The Fiber segment, boosted by the recent Lightower acquisition, showed exceptional growth, with site rental revenues surging 164% in the quarter and 170% year-to-date. Financially, the company generated substantial operating cash flow, reinforcing its strategy of returning capital to shareholders through dividends while reinvesting in growth. Debt management remains a focus, with the company actively refinancing and extending maturities, maintaining a diversified debt portfolio with a majority at fixed rates. The company reaffirmed its commitment to being a REIT, allowing for tax-efficient operations and dividend distributions.

Financial Highlights

51 data points
Beta

Revenue

$1.32B

92.6% Gross Margin

Net Income

$170.00M

12.9% Net Margin

EPS (Diluted)

$0.34

Total Assets

$32.35B

Cash & Equivalents

$206.00M

Free Cash Flow

$658.00M

Financial Statements
Beta
Revenue$1.32B
Cost of Revenue$98.00M
Gross Profit$1.22B
SG&A Expenses$138.00M
Operating Expenses$984.00M
Operating Income$335.00M
Interest Expense-$158.00M
Net Income$170.00M
EPS (Basic)$0.34
EPS (Diluted)$0.34
Shares Outstanding (Basic)415.00M
Shares Outstanding (Diluted)416.00M

Key Highlights

  • 1Significant year-over-year revenue growth, with total site rental revenues increasing by 35% for both the second quarter and the first half of 2018, driven by both Towers and substantial growth in the Fiber segment.
  • 2The Fiber segment experienced a revenue surge of 164% in Q2 2018 and 170% for the first half, largely attributable to the successful integration of the Lightower acquisition.
  • 3Operating income increased in both the Towers (8%) and Fiber (170% in Q2, 179% in H1) segments, reflecting operational efficiency and revenue growth.
  • 4Strong net cash provided by operating activities of $1.11 billion for the first half of 2018, supporting the company's dividend payouts and investment strategy.
  • 5The company actively managed its debt, issuing new notes and extending maturities, resulting in a weighted average interest rate of 3.9% and a weighted average maturity of over six years post-July 2018 refinancing.
  • 6Continued commitment to shareholder returns, with planned common stock dividends totaling at least $4.20 per share over the next 12 months, amounting to approximately $1.7 billion.
  • 7The company operates as a REIT, benefiting from tax advantages by distributing at least 90% of its REIT taxable income to stockholders.

Frequently Asked Questions

The significant increase in Fiber segment revenue, particularly the 164% growth in Q2 2018, is primarily due to the acquisition of Lightower in November 2017. This acquisition has substantially expanded Crown Castle's fiber footprint, complemented by increasing demand for small cells and fiber solutions from customers needing greater network capacity and data capabilities.

Crown Castle is actively managing its debt through refinancing and extending maturities. As of June 30, 2018, its total debt was approximately $15.96 billion. The company has strategically increased its fixed-rate debt, with 83% of its debt being fixed-rate following the July 2018 refinancing. The weighted-average interest rate is 3.9% and the weighted-average maturity is over six years, demonstrating a well-managed and long-dated debt structure.

Crown Castle reiterates its commitment to returning capital to shareholders. The company expects to pay common stock cash dividends totaling at least $4.20 per share over the next 12 months, which aggregates to approximately $1.7 billion. This reflects their strategy of translating strong operational cash flows into stable capital returns for stockholders, with future dividend increases expected to align with cash flow growth.

The potential merger between T-Mobile and Sprint, announced in April 2018, could impact Crown Castle by potentially decreasing or delaying demand for its infrastructure and services due to network integration and consolidation. This could lead to reduced revenues or cash flows and may trigger an impairment review of certain long-lived assets.