The operator welcomes listeners to the Crown Castle Fourth Quarter 2023 Earnings Call and introduces Kris Hinson, Vice President of Corporate Finance and Treasurer. Kris thanks everyone for joining and introduces Tony Melone, Crown Castle's Interim Chief Executive Officer, and Dan Schlanger, Chief Financial Officer. Forward-looking statements and non-GAAP financial measures will be discussed and are available on the company's website. Tony thanks Jay Brown for his 25 years of service and expresses gratitude for the Board's confidence in him during the interim period.

The author is excited to serve in their new role at Crown Castle and has been associated with the company for over 25 years. They are impressed by the open and thoughtful discussions they have had with their teammates and are optimistic about the company's future. Their priorities include ensuring the organization continues to execute for customers, facilitating a smooth transition to the next CEO, and evaluating strategic alternatives for maximizing shareholder value. The author is confident in achieving these priorities with the support of a closely aligned leadership team, including the continued service of the Chief Financial Officer and the appointment of a new Chief Operating Officer for the Tower segment.

The sales teams for the Tower, Small Cell, and Fiber Solutions businesses will be divided into two organizations. This change in leadership structure aims to maximize returns and value for the company. Three new directors have also been added to the Board to bring valuable experience. The speaker, with over 30 years in the wireless industry, believes that the growth of the Tower business during periods of generational upgrades will also drive demand for small cells. Crown Castle, as the largest shared communications infrastructure provider in the U.S., is well-positioned to take advantage of these industry trends and deliver value to shareholders.

The CEO Search Committee and Fiber Review Committee are making progress in their work, and updates will be provided as developments occur. The CFO, Dan Schlanger, is pleased to continue serving and looks forward to delivering on the company's 2024 plans and growing long-term shareholder value. Despite a slowdown in tower activity, the company saw 4% growth in site rental revenues in 2023, with tower organic growth at 5% and small cell growth at 6%. Fiber solutions revenue remained flat. The company's full year 2024 outlook remains unchanged, with strong underlying growth driven by increasing data demand and network densification.

In summary, the company forecasts tower activity levels consistent with the second half of 2023 and accelerating small cell growth. They expect to deliver 16,000 new nodes this year and have returned to 3% growth in Fiber Solutions. However, they anticipate negative impacts on their 2024 results due to the absence of Sprint Cancellation payments, reduction in non-cash items, and lower contribution from services gross margin. Excluding these impacts, the company expects organic growth in site rental revenues, adjusted EBITDA, and AFFO in 2024. The expected organic contribution to full year 2024 site rental billings remains unchanged, with consolidated organic growth of 2% or 5% excluding the impact from Sprint Cancellations. This growth is expected to come from 4.5% growth in towers, 13% growth in small cells, and 3% growth in Fiber Solutions. The company's full year 2023 site rental revenues were $21 million above the 2023 outlook at the midpoint, including higher than expected non-recurring tower segment revenue in the fourth quarter.

The company's 2024 outlook for site rental billing remains unchanged and they expect growth in core leasing activity. They also expect to deliver $65 million of AFFO growth and have a strong balance sheet with a large amount of unutilized capacity. The company believes that the increasing data demand and network densification will continue to support their growth. They have contracted agreements in place for a multiyear period and believe this growth will support their current dividend and 2024 CapEx plan without issuing equity. The company's portfolio of tower, small cell, and fiber assets provides opportunities for value creation. During the Q&A session, the first question was about the shape of densification, which the company assumes will continue at the levels of the last couple of quarters.

The speaker is unsure about the future trajectory of traffic growth and whether it will be consistent or sporadic. They also mention recent comments from Nokia's CEO about potential improvements in the second half of the year. The speaker also addresses the committed nature of their small cell CapEx plans and the potential for changes as a result of their ongoing strategic review.

Dan Schlanger, the CEO of a telecommunications company, clarifies that the 2,000 nodes that were expected to be completed in 2023 were delayed and will now be completed in 2024. This was due to the small cell node build being back-end loaded and some nodes not being able to start billing until the beginning of 2024. The company expects to have completed the progress they had planned for 2023 and the delay in billing just pushed it into the next year. In response to a question about disconnected nodes, Dan explains that there were some cancellations from Sprint in 2023 and there will be more in 2024, possibly around 3,000 to 4,000.

In the previous year, the company churned about 5,000 small cells, reducing the total number from 60,000 to 55,000. However, they have since added 10,000 small cells, bringing the total back up to 65,000 generating revenue. There is no anticipated churn in 2024, but there will be some impact from the churn in the previous year. The company expects to churn 25 million small cells between 2024 and 2025. They also have $9 billion in purchase options from carrier transactions, but the timing of when this money will come in is not ratable and varies depending on the specific transactions. Less than $10 million is expected to come in before 2025.

The speaker discusses the potential for improved returns on capital in Crown's Fiber segment and mentions the strategic fiber review currently taking place as a way to achieve this goal. They also mention their three priorities and the importance of improving performance in order to reach their 2024 results and prepare for the future. The speaker acknowledges their own experience and the collaboration with the management team in this effort.

The speaker discusses their plan to gather information from various sources in order to gain insight into potential improvements for the company. They also mention a change in management structure and potential levers that could be pulled, such as capital allocation and cost structure, to improve performance. The speaker also confirms that they are considering monetizing part of their land portfolio, but only if it would generate more value than keeping the asset.

The speaker discusses the company's assets and reassures investors that if any issues arise, they will be addressed. The next question asks about the company's plan for the future, specifically regarding fiber and the CEO search. The speaker explains that both committees are currently working on their respective reviews and it is too early to speculate on the outcome. The speaker expresses confidence in the committees and their process. The next question pertains to the 2024 outlook and the potential impact of changing attitudes towards interest rates. The speaker states that the committees' work will provide clarity on the company's future plans.

The speaker discusses the volatility of market perception of interest rates and how it affects their guidance. They state that they are not comfortable enough with the interest rate environment to make changes, and that there may be positive or negative impacts on AFFO throughout the year. The speaker also clarifies that 75% of their projected 5% organic Tower growth through 2027 is already contracted. They believe that the amount of activity will support their growth going forward.

The speaker discusses the stability of their business and the expected growth pattern over the next few years. They mention a slight amount of volatility on a quarter-to-quarter basis, but overall, the business is stable. The speaker also mentions that churn (customer turnover) has been low and is expected to remain within a range of 1% to 2% in the near future. This low churn rate is beneficial for the business and allows for long-term growth without significant spending.

Nick Del Deo from MoffettNathanson asks about the recent changes and uncertainty within the company, including a reduction in force, leadership and board changes, and the fiber review. He asks about the state of employee morale and if there will be any negative impacts on operations or loss of human capital. Tony Melone responds that employee morale is good and they are focused on moving forward. Dan Schlanger adds that Tony has engaged with employees and they appreciate his plans and direction, despite the changes and uncertainty.

The speaker discusses how Tony's leadership has helped the company stay focused and deliver on their goals, even during a turbulent fourth quarter. Employees are eager to get back to work and continue delivering for customers. The speaker also addresses the improvement in bookings for the fiber solutions segment and the reasons behind it.

The company is seeing increased demand for data connectivity due to general macro trends like artificial intelligence and the growth of data. This is expected to continue into 2024, with 3% growth projected. The new Board members and acting CEO will be examining operating metrics related to small cells and fiber, including same tenancy growth, to inform their strategic review.

The speaker explains that the review process will be thorough and take all aspects of the company into account. They cannot provide a timeline for completion but are actively involved in the process. They also mention that 60% of their backlog consists of co-location nodes, indicating a decrease in capital intensity over time.

The speaker discusses the product mix of their fiber acquisitions and how they focus on delivering the right products to sophisticated customers, primarily in infrastructure building. They also mention evaluating their product set to remain top of mind with customers. In terms of capital allocation, their target leverage is 5x debt to EBITDA and they expect it to tick up due to capital spending and non-cash reductions. They also mention positive relocations and a 4.5% leasing activity for 2024, which may be more second half weighted.

The company believes that their business growth will naturally reduce their leverage back to their desired level. They do not want to specify a maximum leverage, but aim to maintain a level close to 5x. They expect their leasing activity to remain consistent throughout 2024, with a slight increase in the second half of the year. The reorganization of COOs with P&L responsibility is expected to improve operational efficiency. The consolidation efforts in 2023 have already shown benefits and will continue to positively impact their 2024 results.

The speaker is confident that the company will achieve the efficiency goals despite cancelling a consolidation plan. The backlog for small cells is still being added to, but it is expected to decrease in the future due to the higher build base for 2024. The majority of the backlog is from orders from T-Mobile and Verizon, and the company expects to deliver 16,000 nodes in 2024, which will decrease the backlog and generate revenue.

During a strategic review period, Verizon is considering all options for capital allocation, including potentially investing more in towers. They are open to all possibilities and will be informed by the review and market opportunities. When asked if they would consider divesting their fiber solutions business while retaining their small cell business, Verizon stated that all options are on the table and they would not dismiss any option or suggest one as more likely than another. They also believe they can improve the efficiency of their business without sacrificing future growth.

The operator thanks the audience for attending the presentation and informs them that the conference has ended. They are now able to disconnect.

This summary was generated with AI and may contain some inaccuracies.