10-QPeriod: Q3 FY2018

CROWN CASTLE INC. Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 5, 2018For Securities:CCI

Summary

Crown Castle Inc. (CCI) reported solid revenue growth in the third quarter of 2018, with total net revenues reaching $1.375 billion, a 33% increase compared to the prior year period. This growth was primarily driven by a significant 139% surge in Fiber site rental revenues, largely attributable to the acquisition of Lightower in late 2017, and a consistent 8% increase in Towers site rental revenues. Net income attributable to common stockholders rose to $136 million, or $0.33 per diluted share, up from $85 million, or $0.21 per diluted share, in the prior year quarter. The company generated $1.775 billion in net cash from operating activities for the nine months ended September 30, 2018. Despite increased interest expenses and depreciation, the company's strategic investments, particularly in its Fiber segment, are yielding positive results, supported by strong demand for communication infrastructure.

Financial Highlights

51 data points
Beta

Revenue

$1.36B

91.3% Gross Margin

Net Income

$151.00M

11.1% Net Margin

EPS (Diluted)

$0.30

Total Assets

$32.62B

Cash & Equivalents

$323.00M

Free Cash Flow

$663.00M

Financial Statements
Beta
Revenue$1.36B
Cost of Revenue$118.00M
Gross Profit$1.24B
SG&A Expenses$145.00M
Operating Expenses$1.01B
Operating Income$346.00M
Interest Expense-$160.00M
Net Income$151.00M
EPS (Basic)$0.30
EPS (Diluted)$0.30
Shares Outstanding (Basic)415.00M
Shares Outstanding (Diluted)416.00M

Key Highlights

  • 1Total net revenues increased by 33% to $1.375 billion for the three months ended September 30, 2018, driven by strong performance in both Towers and Fiber segments.
  • 2Fiber site rental revenues saw a substantial 139% increase to $402 million, significantly boosted by the Lightower acquisition and rising demand for small cells and fiber solutions.
  • 3Towers site rental revenues grew by 8% to $782 million, reflecting ongoing tenant additions and network enhancements by wireless carriers.
  • 4Net income attributable to common stockholders increased by 60% to $136 million, with diluted EPS rising to $0.33 from $0.21 year-over-year.
  • 5Net cash provided by operating activities for the first nine months of 2018 was $1.775 billion, a 26% increase from the prior year, showcasing strong operational cash generation.
  • 6The company amended its credit facility in June 2018 to increase commitments by $750 million to $4.25 billion and extend the maturity to June 2023, enhancing financial flexibility.
  • 7Crown Castle continues to return capital to shareholders, with common stock dividends paid totaling $1.3 billion for the nine months ended September 30, 2018, and a declared quarterly dividend of $1.125 per share for the next period.

Frequently Asked Questions

The substantial increase in Fiber site rental revenues is primarily attributed to the Lightower Acquisition, completed in November 2017, which significantly expanded Crown Castle's fiber footprint. Additionally, the growing demand for small cells and fiber solutions from wireless carriers and businesses seeking higher bandwidth is a key contributing factor.

Crown Castle maintains a diverse debt portfolio with long-dated maturities, with 81% of its debt at a fixed rate. The company recently completed several debt and equity financing transactions in 2018, including issuing new senior notes and amending its credit facility to increase borrowing capacity and extend maturity. Crown Castle aims to maintain a leverage ratio of approximately five times Adjusted EBITDA and uses a combination of operating cash flow and financing to fund its capital expenditures and dividends.

Crown Castle acknowledges that the proposed merger between T-Mobile and Sprint could lead to a decrease or delay in demand due to network integration and potential overlap. However, the company's strategy relies on the broader trend of increasing data demand, new technologies, and the ongoing need for network quality and capacity from wireless carriers and businesses, which is expected to continue driving demand for their communication infrastructure.

As a Real Estate Investment Trust (REIT), Crown Castle is generally entitled to a deduction for dividends paid to stockholders, which means it typically does not pay U.S. federal corporate income tax on its net taxable income that is distributed. To maintain its REIT status, the company is generally required to distribute at least 90% of its REIT taxable income annually. This status significantly influences its tax liabilities and dividend payout strategy.