10-QPeriod: Q2 FY2019

CROWN CASTLE INC. Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 31, 2019For Securities:CCI

Summary

Crown Castle Inc. (CCI) reported solid revenue growth of 6% year-over-year for both the three and six months ended June 30, 2019, driven by both its Towers and Fiber segments. Net income attributable to common stockholders increased significantly by 43% for the quarter and 68% for the six-month period, reflecting operational efficiencies and strategic investments. A key development during the period was the adoption of the new lease accounting standard (ASC 842), which materially impacted the balance sheet by introducing significant operating lease right-of-use assets and liabilities, but did not materially affect the income statement or cash flows. The company also strengthened its financial position by amending its credit facility to increase commitments and extend maturity, and by establishing a commercial paper program. Crown Castle continues to focus on growing cash flows from its existing infrastructure, returning capital to stockholders through dividends, and investing in new communications infrastructure to drive long-term value. The company reiterated its positive outlook for 2019, expecting continued site rental revenue growth driven by tenant additions and increasing demand for data, particularly from 5G deployments.

Financial Highlights

50 data points
Beta

Revenue

$1.45B

90.5% Gross Margin

Net Income

$216.00M

14.9% Net Margin

EPS (Diluted)

$0.45

Total Assets

$38.12B

Cash & Equivalents

$288.00M

Free Cash Flow

$715.00M

Financial Statements
Beta
Revenue$1.45B
Cost of Revenue$137.00M
Gross Profit$1.31B
SG&A Expenses$155.00M
Operating Expenses$1.06B
Operating Income$389.00M
Interest Expense$169.00M
Net Income$216.00M
EPS (Basic)$0.45
EPS (Diluted)$0.45
Shares Outstanding (Basic)416.00M
Shares Outstanding (Diluted)418.00M

Key Highlights

  • 1Net revenues increased by 6% for both the three and six months ended June 30, 2019, compared to the prior year periods, reaching $1.48 billion and $2.90 billion, respectively.
  • 2Net income attributable to common stockholders saw substantial growth, increasing by 43% to $218 million for the quarter and 68% to $399 million for the six-month period.
  • 3The company adopted the new lease accounting standard (ASC 842) effective January 1, 2019, which resulted in the recognition of significant operating lease right-of-use assets and liabilities on the balance sheet.
  • 4Adjusted EBITDA, a key non-GAAP measure, increased by 11% to $857 million for the quarter and 10% to $1.68 billion for the six-month period, indicating strong operational performance.
  • 5Capital expenditures increased significantly, with discretionary capital expenditures of $941 million for the six months ended June 30, 2019, primarily for constructing new communications infrastructure.
  • 6The company amended its credit facility in June 2019 to increase commitments by $750 million to $5.0 billion and extend the maturity date to June 2024, enhancing its liquidity position.
  • 7Total assets grew substantially from $32.785 billion at year-end 2018 to $38.147 billion at June 30, 2019, largely due to the adoption of ASC 842 and capital expenditures.

Frequently Asked Questions

The adoption of ASC 842 effective January 1, 2019, materially impacted Crown Castle's balance sheet by introducing significant operating lease right-of-use (ROU) assets and operating lease liabilities. However, management states that this adoption did not materially affect the company's statement of operations or statement of cash flows, nor did it impact operating practices, cash flows, contractual arrangements, or debt agreements.

Both segments demonstrated strong performance. For the three months ended June 30, 2019, Towers site rental revenues grew 6% to $816 million, and Fiber site rental revenues also grew 6% to $422 million. For the six months ended June 30, 2019, Towers site rental revenues increased 6% to $1.62 billion, and Fiber site rental revenues increased 6% to $836 million. This consistent growth highlights strong demand across both infrastructure types.

Crown Castle's strategy is to create long-term stockholder value through a combination of growing cash flows from its existing infrastructure, returning a meaningful portion of operating cash flow to common stockholders via dividends, and investing capital efficiently to grow future cash flows and dividends per share. The company expects to pay cumulative common stock dividends of at least $4.50 per share over the next 12 months.

The company anticipates future growth driven by the increasing demand for data from new technologies (like 5G), increased usage of mobile entertainment and internet, growing smartphone penetration, wireless carriers' focus on network quality and capacity, and the adoption of bandwidth-intensive applications. Tenant additions on existing infrastructure and the construction/acquisition of new infrastructure are also key growth drivers.