10-QPeriod: Q3 FY2019

CROWN CASTLE INC. Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 4, 2019For Securities:CCI

Summary

Crown Castle Inc. (CCI) reported strong financial performance for the nine months ending September 30, 2019, characterized by robust revenue growth and increased profitability across its Towers and Fiber segments. Net revenues grew by 6% to $4.4 billion, driven by a 6% increase in site rental revenues and a significant 45% jump in services and other gross margin for the Towers segment. The company's strategic focus on expanding its communications infrastructure, particularly in small cells and fiber, is yielding positive results, as evidenced by the 7% growth in Fiber site rental revenues. Profitability also improved, with Net Income Attributable to CCIC Common Stockholders increasing by 73% to $644 million for the nine-month period. The company continues to prioritize returning capital to shareholders through dividends and has increased its quarterly common stock dividend. Significant financing activities, including the issuance of senior unsecured notes and amendments to its credit facility, have bolstered its liquidity and extended its debt maturities, positioning CCI for continued growth and shareholder value creation.

Financial Highlights

50 data points
Beta

Revenue

$1.48B

90.1% Gross Margin

Net Income

$242.00M

16.3% Net Margin

EPS (Diluted)

$0.51

Total Assets

$38.32B

Cash & Equivalents

$182.00M

Free Cash Flow

$663.00M

Financial Statements
Beta
Revenue$1.48B
Cost of Revenue$146.00M
Gross Profit$1.34B
SG&A Expenses$150.00M
Operating Expenses$1.06B
Operating Income$423.00M
Interest Expense$173.00M
Net Income$242.00M
EPS (Basic)$0.51
EPS (Diluted)$0.51
Shares Outstanding (Basic)416.00M
Shares Outstanding (Diluted)418.00M

Key Highlights

  • 1Net revenues increased by 6% year-over-year to $4.4 billion for the nine months ended September 30, 2019, driven by growth in both Towers and Fiber segments.
  • 2Site rental revenues, the core revenue driver, grew by 6% to $3.7 billion for the same period, reflecting strong tenant demand for communications infrastructure.
  • 3Towers segment continues to be the largest contributor, with site rental revenues up 6% and operating profit up 13% year-over-year for the nine-month period.
  • 4Fiber segment shows strong growth potential, with site rental revenues increasing by 7% and segment operating profit up 5% for the nine-month period, driven by demand for small cells and fiber solutions.
  • 5Net income attributable to common stockholders surged by 73% to $644 million for the nine months ended September 30, 2019, indicating improved profitability.
  • 6The company successfully raised $1.9 billion in senior unsecured notes and amended its credit facility, enhancing its liquidity and extending debt maturities.
  • 7Quarterly common stock dividend was increased by approximately 7% to $1.20 per share, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

The adoption of ASC 842 on January 1, 2019, significantly impacted Crown Castle's balance sheet by requiring the recognition of operating lease right-of-use (ROU) assets and lease liabilities. While this materially changed asset and liability figures, management states it did not materially impact the company's consolidated statement of operations or cash flows, nor did it affect operating practices, cash flows, or debt agreements.

Crown Castle actively managed its debt during the period, issuing $1.0 billion in February 2019 and $900 million in August 2019 in senior unsecured notes. Additionally, they amended their credit facility in June 2019 to increase commitments and extend maturity. As of September 30, 2019, total debt was $17.85 billion, with 85% being fixed rate and a weighted-average interest rate of 3.9%.

Crown Castle's strategy focuses on three key areas: 1) growing cash flows from its existing portfolio of communications infrastructure through tenant additions and contract escalations, 2) returning a meaningful portion of cash provided by operations to stockholders via dividends, and 3) investing capital efficiently to grow future cash flows and dividends per share. This includes constructing and acquiring new infrastructure, particularly in the growing small cell and fiber markets.

The company acknowledges the merger between T-Mobile and Sprint as a potential risk factor impacting revenue. For the nine months ended September 30, 2019, T-Mobile and Sprint collectively represented approximately 34% of consolidated site rental revenues. Crown Castle is closely monitoring this situation, noting that there are several years remaining on existing lease agreements and that they have previously accounted for expected non-renewals related to network decommissioning.