Crown Castle Inc.

Good afternoon and welcome to the fourth quarter 2024 Crown Castle Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask questions, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Chris Henson, Vice President of Corporate Finance and Treasurer. Please go ahead.

Thank you, Barstein. Good afternoon, everyone. Thank you for joining us today as we discuss our fourth quarter 2024 results. With me on the call this afternoon are Stephen Moskowitz, Crown Castle's Chief Executive Officer, and Dan Schlanger, Crown Castle's Chief Financial Officer. To aid the discussion, we have posted supplemental materials in the investor section of our website at crowncastle.com that will be referenced throughout the call. This conference call will contain forward-looking statements which are subject to certain risks, uncertainties, and assumptions, and actual results may vary materially from those expected. Information about potential factors which could affect our results is available in the press release and the risk factor sections of the company's SEC filings. Our statements are made as of today, March 13th, 2025, and we assume no obligation to update any forward-looking statements. In addition, today's call includes discussions of certain non-GAAP financial measures. Tables reconciling these non-GAAP financial measures are available in the supplemental information package in the investor section of the company's website at crowncastle.com. With that, let me turn the call over to Stephen.

Thank you, Chris, and good afternoon, everyone. Today our company announced very exciting news, that we successfully signed a definitive agreement to sell our fiber segment to a combination of companies, EQT, Active Core Infrastructure Fund, and Xeo Group Holdings. EQT has agreed to acquire Crown Castle's small cell business, and Xeo has agreed to acquire Crown Castle's commercial enterprise fiber business. The transaction will be subject to customary regulatory approvals, and we expect the transaction to close sometime in the first half of 2026. I'm happy to say that with this announced transaction, we have officially concluded Crown Castle's fiber strategic review. Let me repeat. we have officially concluded Crown Castle's Fiber Strategic Review. As we've conveyed in the past, the Board of Directors dedicated a tremendous amount of time to conduct a comprehensive strategic and operational review of our fiber businesses with the end game in mind to maximize shareholder value. After considering a variety of transaction structures and potential counterparties, We believe the sale of these businesses to EQT and Zayo will maximize the long-term value to Crown Castle's shareholders from the combination of the proceeds from this transaction and Crown Castle's ability to enhance the value of our tower business by creating a focused and premium pure play U.S. tower company. In consultation with financial, legal, and strategic advisors and the executive management team of Crown Castle, Crown Castle made the decision to sell the businesses at this time for the following reasons. Although the 90,000 root miles of high strand count fiber located in the largest markets in the U.S. are great assets, the fiber solutions business has a different business model. and different customer base than towers and requires different operational capabilities. Because the similarities between towers and fiber solutions are somewhat limited, we determined they should be separated to enhance focus on the systems, structure and capabilities needed to maximize the value of towers. And while towers and small cells share similar market dynamics, We ultimately decided that the operating capabilities needed to run a tower business and a small cell business were dissimilar enough that the synergies between the two businesses were more than offset by the enhanced value. We believe we will unlock in the tower business by creating a focused and premium pure play us tower company. Lastly, We felt that if we were able to secure enough value for the fiber portfolio, it would position the tower business well for future growth and maximize shareholder value. After the anticipated transaction closes, we will generate substantial cash proceeds from the sale of our fiber segment that we expect to use to transform our tower business by repaying debt, strengthening our balance sheet, and returning capital to shareholders through dividends and share repurchases. We believe this greater financial flexibility and optionality will help us to grow into the future as the only pure public U.S. tower company, which I'll comment a little bit later in this discussion. Additionally, we believe in the attractive value of our U.S. tower business and that share repurchases are a compelling opportunity in the current market environment. So before I move on, I would like to send a message of thanks and appreciation to the Crown Castle employees, particularly those on the fiber side, and those who have been providing extensive corporate support to the fiber businesses. Their tireless work has allowed us to continue delivering solid results as we've evaluated strategic alternatives. As part of the strategic and operating review, we announced a realignment of our operational strategy to focus on free cash flow generation, as opposed to top-line revenue growth. We increased the hurdle rates of our project pipeline, increased the efficiency of our capital spending, and updated our 2024 forward forecast. And through all of this, our fiber solutions, our small cells, and our corporate support teams remain positive, intent on delivering for customers at the same rate as always and focused on achieving solid financial and operating results. So thank you. Thank you to the Crown Castle team members. I also want to send a shout out to our lead advisors, Marco and Calvin at Morgan Stanley, Dan and Chris at Bank of America, Andrew and Scott at Paul Weiss, David and Harry at Morgan Lewis, and Sarah at Ernst & Young. We appreciate you and your team's dedication. to helping us complete this transaction. Now let me focus for a few minutes on our results for last year. I'm pleased to report that our teams delivered solid operating and financial performance for the fourth quarter and full year 2024 across our towers, fiber solutions, and small cell businesses. Our results continue to validate our ability to deliver for our customers and shareholders in a year where we implemented significant changes to how we operate and invest in our business. In fact, we drove structural reductions in operating costs of $100 million on an annualized basis and reduced net CapEx by almost $200 million versus the revised 2024 full-year forecast that we announced in June. and $400 million versus the original 2024 guidance we provided in October of 2023. We achieved these cost reductions while delivering organic growth net of spring churn of 4.5% in towers, 12% in small cells, and 2% in fiber solutions. There is a point I want to emphasize, and that is The 12% organic growth in small cells was driven by over 12,500 revenue-generating nodes that we added during 2024. And not only is that in line with the updated guidance we gave in conjunction with our operating plan changes that we announced in June, it happens to be the highest level of incremental annual node production in the company's history. There are a couple of additional items we noted in our press release that I would like to comment on briefly. First, we've enhanced the way we report our organic growth to provide investors with more specificity around recurring revenue. And these changes are reflected in the numbers that I just mentioned, 4.5 percent growth in towers, 12 percent growth in small cells, and 2 percent growth in fiber solutions. With this more granular approach to organic growth reporting, which you can find in our earnings supplement, we've separated out other billings and other revenues, which capture the impact of items unrelated to recurring leasing activity, including non-recurring revenue items like back billings, like pass-through taxes, and tenant cancellation fees. We believe providing this additional level of transparency is a better indication of recurring growth and will help investors better track our underlying business in progress. We will continue to look at ways to improve our disclosures and provide investors with more granularity and transparency, which we hope is helpful to understand the financial and operating performance of the business. As is always the case, in the fourth quarter, we performed our annual goodwill impairment test, which indicated that the carrying amount of the fiber reporting unit, which includes both our small cells and fiber solutions businesses, exceeded its estimated fair value. As a result, we recorded a goodwill impairment charge of about $5 billion for full year 2024. have no goodwill remaining for the fiber reporting segment. The reduction to fair value is driven primarily by our decision to reduce and defer our small cell development plans because of the changes we made in our return thresholds. Also, the work that we did with our customers on their recalibrated network deployment plans in the short and midterm, and the higher cost of capital we've experienced as interest rates have stayed higher for longer