Good day and welcome to the Crown Castle Second Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Kris Hinson, Vice President of Corporate Finance and Treasurer. Please go ahead.

Thank you, Betsy, and good afternoon everyone. Thank you for joining us today as we discuss our Second Quarter 2024 Results. With me on the call this afternoon are Steven 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 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, July 17th, 2024, and we assume no obligation to update any forward-looking statements. In addition, today's call includes discussion 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. With that, let me turn the call over to Steven.

Thanks, Kris. Good afternoon, everyone. We appreciate you joining us for this call and as you can see from our second quarter results, we delivered solid operating and financial performance in all three of our businesses and reiterated our full year 2024 outlook. We're confident in our outlook based on having 95% of our expected tower revenue growth for this year contracted either as part of our holistic master license agreements with our major customers or with revenues from regional and local wireless customers, and also having implemented changes to our fiber segment, which will position us to generate more profitable business and increase our operating efficiencies. In the tower business, we anticipate organic revenue growth of 4.5% this year, and believe that as we look out over the next few years, our growth rate will be higher based on three factors. First, the holistic master license agreements we have with our largest customers provide us a stable and consistent level of growth over time. Second, industry forecasts estimate that long-term US wireless data demand growth will continue to drive the need for significant future communications infrastructure investments. And we are aware that major carriers still have lots of work to do to expand their networks in the 5G build cycle. Finally, we believe that as more tangible steps are taken by our company to be a best-in-class supplier of low-cost shared infrastructure solutions, we'll be better positioned to compete for a higher share of revenues as our customers continue to invest in their networks. Moving to our fiber and small cell businesses, we've completed many of the changes to our operating plans that we announced in June and have started to see the benefits of those changes through more profitable growth and greater operating efficiencies. As part of the operational review of our fiber segment, which we conducted earlier this year, we affirm that greater opportunity exists to provide additional customer solutions to enterprise fiber connections and small cell locations that are on or near our existing high-quality fiber footprint, which allows us to add revenue without the requirement to invest as much capital as we've done in the past. Implementing these changes in our small cell business, our commercial deployment teams have been working collaboratively with our customers on a mix of outcomes, many of which improve our project economics while also addressing our customers' evolving priorities around network densification and capital allocation. As part of this change in our operating plan, we plan to build fewer anchor nodes in the short run. However, given our large pipeline and our customers' long-term densification needs in geographies where we have robust assets in place, we continue to expect there is sufficient demand to grow small-cell revenues by double digits over the next several years. Turning to our fiber solutions business, we believe we can improve returns by focusing our sales efforts on or near-net opportunities that reduce discretionary capital expenditures going forward. To support these changes, we've already adjusted our go-to-market commercial plan. We've changed our sales incentive award system and increased our required rates of project returns, resulting in anticipated shorter payback periods on invested capital. So like in our small cell business, we analyzed the markets around our fiber assets to quantify the opportunities to utilize our existing fiber. We believe we have ample opportunities to improve capital efficiency while achieving long-term organic revenue growth in fiber solutions of 3% per year. As we announced in June, we believe our more focused effort to target on-net and near-net demand in both small cells and fiber solutions will drive a more efficient use of capital and will also generate approximately $100 million of annualized run rate cost savings. Importantly, we implemented most of these changes by the end of the second quarter, which keeps us on track to generate approximately $60 million of expected cost savings and reduce capital expenditures by about $300 million for this year. As we continue to deliver solid results and make operational changes, we remain focused on the fiber strategic review, which is active and ongoing. The management team and I continue working with the fiber review committee, the board of directors, and external consultants to evaluate strategic alternatives to determine how to maximize shareholder value. We can't share much more about the process and the timing. What we can share is that we remain actively engaged with multiple third parties who continue to show a lot of interest in our fiber solutions and small cell businesses. And we'll provide updates as the process unfolds. I'd like to conclude my comments by saying that over the past few weeks, I've been fortunate to have engaged in conversations with more than 50% of our company's employees through either in-person conversations and also video conference calls. The goal of my meetings with everybody was to be present and discuss the rationale behind our recent operational changes, answer questions that are on people's minds about the fiber segment, and start to set expectations for everybody in the company going forward. My takeaways from these discussions were that two major themes exist in the minds of Crown Castle employees. First, they care and have great pride in being part of Crown Castle, and they want our company to be seen as excellent in the minds of the constituents we serve, including shareholders, customers, and communities. Second, most recognize that to be excellent, we need to continue to make changes in how we operate, and they are engaged and energized about their ability to participate in and lead the process and develop new ways of doing things to help differentiate us as a leader in the sector. So I'd like to thank all the employees I met for being as open and transparent with me as they were, and to those employees I've yet to meet, but will at a time come soon. And to all of our employees, a big thanks for continuing to drive our business and deliver results over the past several months. I know there's been a lot of change, and it's reassuring that this team has been able to stay focused on delivering for customers during this period. Having said all that, I would ask all employees and our investors to keep in mind that change management is a process and it takes time. I appreciate your understanding as we continue to develop new goals that will improve our chances of taking higher shares of new revenue opportunities, convert a greater share of new revenue down to EBITDA, increase investment returns on the growth capital we deploy, bolster our balance sheet to generate more optionality for us in the future, and ultimately increase shareholder value. With that, let me turn it over to Dan to walk through the quarter results.

Thanks, Steven, and good afternoon, everyone. We delivered second quarter results in line with expectations and remain on track for our full-year outlook after implementing the operational changes we announced in June. Looking at the second quarter results on page 4 of our earnings presentation, the underlying business continued to perform well in the quarter, highlighted by 4.7% consolidated organic growth, excluding the impact of Sprint cancellations. The 4.7% organic growth in the second quarter consisted of 4.4% growth from towers, 11% from small cells, and 3.2% from fiber solutions. We are encouraged by these levels of growth at this time with our tower business generating growth in line with our current expectations, the uptick in small cell activity resulting in higher growth compared to the last couple of years, and our fiber solutions business delivering growth above our 3% expectation, despite the changes we made to our operating plan. This growth underscores the stability and attractiveness of our business, as we are well positioned to capitalize on the growing demand for data in the US. As anticipated, the solid organic growth delivered in the quarter was more than offset by several one-time and non-cash items, including a $106 million reduction to site rental revenues related to the Sprint cancellations, a combined $105 million reduction in straight-line revenues and prepaid rent amortization, both of which are non-cash items, a $22 million decrease in service margin contribution due to the combination of lower tower activity and the decision we made to exit the construction and installation business, which we implemented in the second half of last year, and $20 million of advisory fees primarily related to our recent proxy contest. Turning to page 5, we are reiterating the full-year outlook we released in June, which reflects a year-over-year decrease in site rental revenues, adjusted EBITDA, and AFFO, primarily due to the one-time and non-cash items I just mentioned. Our expected organic growth contribution to full-year site rental billings remains unchanged, with organic growth of 2% or 5% excluding the impact of Sprint cancellations. The 5% consolidated organic growth excluding the impact of Sprint cancellations consists of 4.5% from towers compared to 5% in 2023, 15% from small cells, as we expect 11,000 to 13,000 new billable nodes in 2024 compared to 8,000 nodes in 2023, and 2% from fiber solutions. As we announced in June, the small-cell organic growth of 15% includes a $25 million increase in non-recurring revenues, primarily related to early termination payments. Excluding this impact, small-cell organic growth is expected to be 10% this year. Moving to page 7, we expect to deliver $105 million of AFFO growth at the midpoint, excluding the impact of the Sprint cancellations and non-cash decrease in amortization of prepaid rent. Included in this AFFO growth is a $10 million increase in cost, which includes normal operating cost increases, as well as $25 million of advisory fees related to our recent proxy contest, all of which is expected to be offset by approximately $60 million decrease in costs related to the reduction in staffing levels and office closures we announced in June. Turning to the balance sheet, we ended the second quarter with leverage at 5.9 times EBITDA or 5.7 times excluding the impact of the non-recurring advisory fees. Looking ahead to the third quarter, we expect our leverage metrics to improve as we believe our second quarter EBITDA will be the low point for the year and we benefit from our operating cost reductions. Since transitioning to investment grade in 2015, we have strengthened our balance sheet by extending our weighted average maturity from five years to seven years, decreasing the percentage of secured debt from 47% to 6%, and increasing the percentage of fixed-rate debt from 68% to 89%. In addition, we ended the quarter with approximately $5.5 billion of availability under our revolving credit facility and only $2 billion of debt maturities through 2025, providing us with ample liquidity to fund our business. We believe the steps we have taken to strengthen our balance sheet provide us with financial stability and flexibility as we evaluate strategic paths forward. As we announced in June, we decreased our outlook for discretionary CapEx as a result of the modified investment parameters we recently implemented, and now expect $1.2 billion to $1.3 billion of gross discretionary CapEx, or $900 million to $1 billion after taking into account $355 million of prepaid rent we expect to receive. In summary, the business is performing well, delivering organic growth, and keeping us on track for our full-year outlook after implementing the operational changes we announced in June. With the operating review complete, our focus is on maximizing shareholder value by continuing to progress the fiber strategic review and delivering operational and financial results across our portfolio of tower, small cell, and fiber solutions assets. Before starting Q&A, I'd like to note that we are changing the timing of when we provide guidance for the upcoming year. Going forward, we will provide forward-year guidance with fourth quarter earnings, as opposed to our past practice of providing guidance in our third-quarter release. This means you should expect to receive our full-year 2025 guidance with earnings in January. With that, Betsy, I'd like to open the call for questions.

We will now begin the question-and-answer session. The first question today comes from Simon Flannery with Morgan Stanley. Please go ahead.

Great, thank you very much. Good afternoon. Steven, thanks for all the color on the CapEx and OpEx review there. I wanted to get more color on what is the new run rate of CapEx, presumably since this was sort of a mid-year review, some of the spending was already done. You may have more spending contracted in the second half of the year. So any color you can provide us at what sort of you think the more usual rate given this sort of higher hurdle rate and new more focused approach will be going forward. And then maybe Dan one for you, you talked about the leverage coming down to 5.7 times on an adjusted basis. What are you targeting in terms of leverage over the next couple of years here? And there's Bloomberg's reporting that there may be a Verizon portfolio out there. How are you thinking about M&A in the context of that? Thank you.

Hey, Simon. It's Dan. I'm going to take the first two and leave the M&A point for Steven to hit. But the run rate of CapEx, as we had been talking about, we're focusing our CapEx on lower capital intensity projects, so that we go towards on-net and near-net opportunities, which means that over time we believe that the overall level of CapEx, the amount of revenue we generate, will come down. But ultimately, CapEx is going to be driven by how much opportunity we have in the business. So we can't really give a full run rate of what we think is going to happen until we understand what that activity looks like and we're able to give guidance in 2025. But I think one of the things you mentioned, and you're right about, is that this was a midyear move and we were able to save $300 million, which is what we expect for the year. So we would anticipate that that will be somewhere in that neighborhood or potentially more going forward, but we're going to have to get to 2025 before we can really give specifics on that point. In terms of leverage, our goal is to be at 5 times leverage. And obviously, we're elevated from that point now, but we believe as we continue to grow our EBITDA and not grow capital nearly as much because of the capital savings we just talked about, we think we will be able to organically bring that leverage down over time towards that 5 times goal.

Hey, Simon, it's Steven. In terms of M&A, you know, we're aware of different assets that are either in the market or coming to market in the US. If it's a truly compelling proposition for us, which we would consider compelling being highly strategic and cost effective, so we have confidence in delivering future shareholder value, then if it has those types of characteristics, we definitely have interest. But overall right now, M&A is not necessarily the priority for us.

Great. Thank you.

Thanks and good afternoon. I was curious, Steven, on some of the comments that you made about the tower business. You talked about three things that you thought could drive a higher organic annual growth rate. I'm curious if you can give us an update within that context of what you're seeing in terms of carrier activity and are there any early signals that you're seeing as you look at the visibility that you have in this business and what could come in 2025. And then you also mentioned more tangible steps the company is taking to be a best-in-class provider. I'm curious if you could share some of those steps and how you think that will translate into better share and results going forward.

Yeah, okay, Michael. You know, it's tough to talk about next year and beyond. It's a little bit early from our vantage point, but what we see in the market today and conversations that we're having with our customers just gives us optimism that what we've forecasted for revenue growth is directionally correct. We also obviously have the benefit of stability and visibility in our revenue from our MLAs. So we don't really see demand shifting directions in one way or another from our major carriers. Right now, to some degree, we look at things as steady state as carriers work on their mid-band 5G rollouts. So that's pretty much how we are thinking about this year. And again, going into next year, ideally there is more opportunity for growth. But we'll be working through our budgets between now and then this year from that vantage point. As it relates to tangible things, the priorities right now for us are the strategic review of our fiber business, which is very critical. Spending cash, what we would say is wisely or differently, you know, with some changes that have already occurred in our fiber business as we've outwardly discussed with everybody. Cost management for us, which is key, and our leadership team is evaluating other areas of the business to see how we can consider improving operating and EBITDA margins over time. Then business transformation, I think business transformation is probably the biggest thing that we need to work on. I mean, this company has grown significantly over the last decade. When you're growing like crazy, you tend to focus more on driving revenue and getting every opportunity you can for lease up. Now that things are a little bit more in a steady state, I think the key for us is to do some transformation. When I think about that, it is really evaluating the people, making sure we have the right people in the right roles. It's the business processes, so identifying root causes of inefficiencies for us and figuring out plans to fix them to make things more repeatable, reliable, and efficient. Improving our systems, which a lot of people have been starting to do with improved workflows in this company. We have some new asset management tools, CRM on the enterprise side. So kind of wrapping that all up, if we're able to over the next year, year and a half, really improve the processes that we have, whether it's the application to on-air cycle time, making sure we have just better data and data governance around our assets. All those types of things are going to help keep us focused and that'll lead to providing better customer service to maximize organic growth in the future.

Thanks.

Hey guys. Thanks so much for taking the questions. A nice straightforward quarter. I guess my first question would be, Dan we – if we go backwards and we start thinking about the small cell return thresholds, right? It was always whatever the CapEx is times 6% and then if we get a second tenant that goes into the double digits, and if we get a third tenant it goes north of there. Could you kind of come back to that and kind of give us what the new language around return threshold expectations is for the company now that we've kind of undertaken the operational review? And then I guess the second question would be just in terms of the service revenue kind of run rate in the quarter. I think Steve, to your point, that this might be kind of run rate, you know, from a tower activity level. Is this the new run rate for kind of services for the foreseeable future before we start guiding to 2025? Thank you.

Sure. Thank you. Let me answer the first one, which is what are our return thresholds as we look at the small-cell business? You pointed them out right. Historically, we targeted 6% to 7% on the anchor build. All I can say now is that our target is higher than that, and we are going to work through the market and figure out exactly what that's going to look like. But what it does by going to a higher level of anchor build economics is it allows us upon lease up to get an even higher return on the lease up, so that we de-risk the business substantially, with our cost of capital being higher than it was when we first targeted 6% to 7%. We think that we can start making on the anchor build a return that accommodates that higher cost of capital and allows us to make money over time by leasing up those assets. But they are not yet in a position of quantifying exactly what that number is going to be at this point. On the service revenue question that you asked, yes the second quarter run rate is what I would put in for kind of generally what we think will happen over the course of the rest of this year. And then as you pointed out, we'll give additional guidance for 2025 when we update our guidance in January.

Appreciated. Thank you, Dan.

Yeah. Thanks everybody. Hey, I want to start with the change in given guidance, slipping it to the 4Q call from the 3Q call. I know we had chatted about it in NAREIT, Dan, but kind of help us understand what kind of led to that change. I know your peers do it from the 4Q call.

Sure. That is part of what led us to it. I think that what we had noticed is that when we were giving our guidance in October, we were a full five months ahead of our peers. And what we had also noticed was whatever trend we started to talk about, we were kind of blazing a trail well before anybody else could talk about them. And so we would get an outsized amount of the questions and an outsized amount of the consternation ultimately about what we were saying about the subsequent year for a pretty long time. By the time that our peers were giving guidance in February, that news had settled a bit and it didn't impact them as much. What we've noticed is, it's been hard to be the trailblazer on that front. One of the things that has led us down the path of giving guidance so early is that our business is relatively predictable. We like the idea that giving guidance in October expressed that predictability. We didn't miss very often even though we were giving guidance in October. We still believe our business is predictable. We still believe we could give guidance in October and be good with it. But we think giving ourselves another three months and being closer to our peers makes it easier for us to maintain a good message to the market and for investors to understand what's going on. And gives us a little bit more time to incorporate any additional information in that last quarter that will help us provide the best guidance we possibly can.

Hey Ric, it's Steven. I'd add to that. This company has started the budget process at the beginning of August. Most companies I've been with in August, September, October, we are driving home to try to finish out the year as strongly as we can. So I also felt compelled to ask the team to reconsider, and start the budget process a little bit later. And if we need to move guidance out since it gives us a little bit more opportunity to really understand the market before we completely finalize what we have for our outlook.

That makes sense. And the carrier budget cycle seems to really come to a head, bottoms up, tops down Halloween into the fourth quarter. So I think it makes sense from your customer standpoint, too.

That's exactly right.

I would like to mention one more thing, Ric. It resolves one of the issues we were facing, which was that we would provide guidance based on our expectations for the fourth quarter, and that would serve as a starting point. Now we will actually know what the situation is, so we don't have to deal with that extra adjustment anymore.

I understand what you mean. I plan to approach the strategic review carefully, but I believe it will be effective. In the last quarter, we discussed fiber and small cells, and I wonder if it makes sense from both the seller and buyer perspectives to separate fiber solutions from small cells. Could you provide an update on the advantages and disadvantages from a high-level view regarding whether a strategic review outcome would combine both or separate them? Is that a reasonable question? I believe it is.

Yes, it's a totally fair question. I think what we've said is that we are open to any alternative that maximizes shareholder value. If that alternative is that somebody is willing to value the fiber solutions business apart from us higher than what we think we're getting credit for what we believe it's worth internally, then we would like to sell it separately. If that valuation metric goes only in combination with small cells, then we would do something with a combined business. So that's really how we are thinking about it. I can't tell you how a potential buyer would look at the pros and cons of whether they want it together or separate. That's up to them to try to figure out. We know that there have been good overlaps between towers, small cells, and fiber solutions. That's why we have them together, but we are open to somebody coming in and valuing each, however they think they see value, and comparing that to our own internal look and making the best decision for shareholders.

Okay. Last one for me, Steven, we believe you are in a unique position. We continue to observe private multiples significantly surpassing public multiples. Can you share your insights on whether you are noticing this? What do you think is driving it, and why has it continued for such an extended period?

That's a great question. Yes, it's somewhat of a mystery. There are many private investors who are enthusiastic about this business and its model, along with its growth potential. They are investing capital, believing that the high multiples they are paying will eventually allow them to sell the business and achieve a good return or re-finance it or find a partner, as they foresee a favorable exit. From our side, in terms of dislocation, we’re not looking opportunistically at deals that wouldn't benefit this company. We'll see how things unfold over time. We hope that the dislocation improves and provides us with opportunities. As our balance sheet strengthens in the coming years, we will gain more flexibility to pursue growth through acquisitions, and we anticipate that multiples might decline by then, which would enable us to engage in discussions with some of these private investors.

Great, appreciate the color. Thanks guys.

Good afternoon and thanks for taking my question. Relative to the operational update and a lower number of small cell deliveries you expect to make in 2024, can you clarify whether that reflects a reduction in the amount of small cell activity that carriers intend to do overall this year? And do you believe there is any change in their intention to do more self-perform work on small cells?

Yes, I'll address that. We have made the shift because the returns on our invested capital have not yet reached our expectations. However, we are confident that if we execute effectively, we can maximize our business in the future, particularly around our fiber backbone. We are observing the carriers' needs as they implement network changes and expand with various solutions, influenced by several factors. Currently, the carriers are focused on deploying mid-band spectrum, which is their top priority. For us, our main focus is on improving returns on the capital we deploy. We are actively working with these customers on solutions and believe we can align their needs with ours in the short term, especially through the remainder of this year and into next year. Regarding future demand, this business is constantly evolving, and there can be fluctuations on a quarterly basis. Overall, we remain very optimistic about future data demand growth, which we believe will lead to increased densification and a greater need for small cells over time, resulting in the double-digit revenue growth we anticipate moving forward.

That's helpful. Thank you. And then Steven, relative to your comments on the potential opportunity for market share gains, is there a particular segment of your business where you think you have the greatest confidence in achieving that over the next two years?

We have these holistic agreements with our major customers where we have one that's going to be coming up for kind of a new negotiation over the next year. So we are hopeful that that leads to kind of sanctifying our relationship even further and kind of taking our relationship or partnership up to a next level of excellence with that customer, which hopefully will enable them to consider us as being a real preferred supplier. That's one element of it. There's a whole host of kind of mid and smaller regional customers out there that we've been focused on. I think with a greater effort, a greater sales effort and different rewards for our sales teams, we should be able to garner a higher share of business than we have in the past. So I think the combination of those two things should give us the chance to be able to generate more of our unfair share of business than we are taking now.

Thank you very much.

Hi, thanks for taking my questions. And I hope you guys and your team have been managing through the effects of the hurricane okay. Steven, you just touched on this a little bit in your prior answer, but I was hoping you could expand a bit more broadly on your high-level philosophies as it relates to MLAs, so we can kind of understand the puts and takes of what you think about or want to see when you're contemplating those sorts of arrangements.

Yes. I mean, Nick, obviously we've been able to achieve good growth and create significant shareholder value by negotiating these types of comprehensive MLAs. The key for me is to be able to find ways where we are really kind of getting to a yes-yes situation or a win-win situation between both parties, where we are able to realize kind of more guaranteed growth over a multi-year period of time, in a way that maximizes the value of our assets while giving the carriers a much better degree of certainty as it relates to how they budget. It also enables them to get on to our sites more quickly, more efficiently, which then lowers their overall cost of operations. The goal here is to have them be really beneficial to both our customers in providing that framework to leverage our assets and also for us in order to be able to drive more revenue. Obviously, there are key elements of that that include pricing, packaging, volume and annual escalations in addition to the types of needs that the carriers feel that they need over time in terms of entitlements on these assets. So there are a number of things that come into play, which I know you know a lot of those, but that's kind of how I think about it broadly.

Okay, that's helpful. Thank you for sharing that. I guess one other question on fiber solutions. I guess can you guys drill down a little bit on the changes to your sales tactics or sales incentives or the sales tools you are going to be using to enable you to sell more on or near-net versus what you've been doing historically?

Well again, from an enterprise perspective or fiber solutions, the shift is in sales and marketing primarily, basically going kind of from a wide-angle lens to more of a zoom lens, I guess. We've been dealing a lot with retail type of clients, and we're trying to move a bit away from retail clients that are more transactional, that create a little bit more churn, that aren't as financially sound. We are trying to move to customers and increase time spent with the larger customers out there that are in telecom, financials, what we call GEM, which is Government, Education, and Medical. Those folks tend to remain loyal for longer contractual periods of time which help, and they also have more financial wherewithal to contribute more capital to any type of new project. The goal really is to kind of shift more into that, what we call complex sale area. Between the review that our teams did over the last number of months and some input from an adviser who's very steeped in this industry, both felt collectively that there is a lot of headroom or opportunity to shift a bit from retail to more complex selling. We've put some pretty good sales incentives in place. We have some automated systems that also help us in terms of kind of defining where there is upside in our footprint.

Okay, that’s great. Thank you, Steven.

Hi, I have one question regarding the strategic review. I mean, should we be thinking about an outcome kind of by the next earnings call, end of the year, or maybe longer than that? And then following up on the tower question, longer term, is the tower business still a 5% business? Or could that actually be a little bit higher, given maybe the changes that you are focusing on? Thank you.

Yes. Regarding the strategic review, it's challenging to establish a timeline at this point. We are actively involved and working with various potential counterparties. We hope for a quicker resolution so that we can make a decision, which would benefit our company, our people, and our shareholders, depending on the outcome. We appreciate your patience as we aim to provide updates as the year progresses. Concerning the outlook for the tower business, we're uncertain if achieving over 5% growth is readily attainable. Ideally, we would like it to be possible. We have discussed cycles with the carriers and believe we are currently at a mid-cycle trough. We anticipate an increase in carrier capital spending, potentially reaching $32 billion to $33 billion this year overall. While not all of that will be directed towards our networks, if spending adjusts—perhaps benefiting from stabilizing interest rates—we might see increased demand by mid-next year. This could enhance growth towards the completion of 5G expansion between 2026 and 2027. If this occurs and we capture a larger share of that growth, we believe we could reach the 5% or higher range.

Great. Thank you.

Thank you. Maybe just going back to small cells. Given the shift in strategy, I think you've previously talked about 50,000 nodes in backlog. How many of those are impacted, I guess, by the shifts that you are implementing?

As of right now, we don't have a change. We still have the 50,000 nodes in backlog. We're working through all of those in the discussions with our customers. Nothing at this point has changed that would change that 50,000. As we come to some sort of decisions with our customers and figure out what we want to do, should there be changes, we will obviously update that number, but it hadn't happened yet.

Thanks. And then maybe you talked a little bit about increased flexibility which includes the balance sheet and maybe bringing leverage lower. Could that at some point include shifting the dividend strategy and how you think about that?

Yes. I think given the fact that we're in the middle of the strategic review which would include thought around capital allocation, dividend policy, everything else ultimately. We are really not in a great place to talk about what's going forward until we have more of a conclusion on what businesses we have and where we're going to be in the future.

Got it. All right. Thanks for the color.

Hi guys. Thanks for taking the question. Just two on fiber as well; it seems to be the theme of the call. One, obviously, there is a sharpened focus on more profitable on or near-net build. So Dan, I want to go back to a point that was brought up before. I know we reduced discretionary CapEx for the fiber business $300 million this year. This is a business that typically has from what I remember an 18-month to 36-month book-to-bill, so there is pretty decent visibility. I'm wondering as we sit here today how that maybe informs what 2025 can look like, just given sort of that longer book-to-bill window. Secondly, on fiber solutions, the core leasing number this quarter, $39 million, I believe that was the highest since 1Q '22. Just looking for any updates you can share there and anything notable you'd call out driving that strength. Thanks.

Yes. Matt, I just want to clarify that your first question was about small cells, not fiber solutions, right?

Yes, more so just around discretionary spend for fiber in general.

Fiber overall is experiencing a distinct trend. The 18-month to 36-month book-to-bill cycle resembles that of small cells, while fiber solutions operate at a quicker pace. We've made cuts to discretionary capital expenditures, which we believe will influence the number of nodes we build and the revenue we can achieve. Our discussions with customers and their outcomes will play a role in our projections for 2025, which we will address in January during our guidance update. The reductions in capital expenditures on the fiber solutions side pertain to our focus on existing fiber locations rather than expanding into new areas. Both trends may affect our performance in 2025. We see substantial opportunities within our existing fiber infrastructure in key markets across the top 30 U.S. markets, where most of our fiber assets are located. We are optimistic about returning to a 3% growth in fiber solutions despite having a narrower focus on close-net and near-net opportunities instead of broader expansion. Regarding core leasing activities in fiber solutions, this quarter was strong for us, indicating that our strategic changes can still yield a 3% growth over time. This marks one of the best performances we’ve seen in core leasing for some time. Our sales team's focus on making strategic decisions, partnering with the right customers, and selling the appropriate products has been crucial. Our leadership has effectively motivated this effort, leading to encouraging findings in opportunities near our existing assets.

Yes. I guess, I'd like to also just add, in a recent meeting with our teams on the enterprise fiber side in New York, some of the sales teams were asking a question about greenfield builds. The answer to that was, it is not like it's binary, right? It is not a yes or no scenario. The example that the individual brought up was if I'm able to get a deal done with a very well-known hedge fund who wants 15 floors of fiber built in Hudson Yards. I think there is opportunity for colocation, and we can prove that the returns from day one are going to be X and the payback is going to be within the realm of what we're looking at. Is that something that I can compete on? The answer was yes. We are not counting out not doing greenfields at all. It just has to be profitable.

If I could just follow up on the first question. I know there was a reduction of about $300 million that was announced, and I think that was reaffirmed in today's release for discretionary spend in totality for fiber. That is six months of this year, so is it fair to extrapolate that and say next year could look more like an $800 million number? Or is that too much of a generalization and we should just sit tight till January to get additional color?

Yes. Unfortunately, you are not going to love the answer. It's going to be, you're going to need to sit tight til January because like I tried to say earlier, the amount of CapEx that we ultimately spend is going to be based on the amount of activity we see from our customers. Whatever that CapEx is, is a lower capital intensity than it would have been historically for us. But it still could be that there is lots of activity we can go out and get. To Steven's point, that would be very profitable. We don't want to give any guidance that says we will definitely have this amount of capital reduction going into next year. Plus we haven't given a forecast for 2025, so it's hard to give a reduction to a forecast that doesn't exist. Unfortunately, Matt, I'm sorry, you are going to have to just sit tight and wait until January.

I had to ask. Appreciate it. Thank you both.

Great. Thank you. A couple of follow-ups. First on the small cell side, can you provide more color on how we should think about the pacing from here? Should we assume the 3,000 to 5,000 delayed build will be just tackled down to maybe the 10,000 annual deployments you were targeting next year? One more follow-up on the fiber CapEx reduction if you don't mind. The $300 million, can you give us a split on what the small cell versus fiber mix of that is?

Sure, Batya. On the first point again, we don't have a plan for 2025 that we've talked about publicly around the small cell nodes that we would deploy. But the push-out of the 3,000 to 5,000 nodes from 2024, we do believe some of those will hit in 2025 because it is a deferral of those nodes going into a future period, a lot of which will happen in 2025. We think we have a pretty good sense or a good starting point for 2025 and think that the small cell business will continue to grow as we've talked about; we think we can grow that business in the double digits over the next several years. The majority of that $300 million reduction is in small cells as opposed to fiber solutions.

Great, thank you for taking the question. On the small cell backlog and what you expect to deliver in the next couple of years, any change to the mix of colocations versus anchor tenant nodes? How should we think about that shifting as a result of the strategic review or the operational review that you announced last month?

Hi, Eric. It's Steven. The fact that we are going to be shifting down on the anchor nodes means that a higher percentage of our nodes going forward will be colocations. I think we've already communicated that of the 50,000 backlog a big chunk of those, the majority of those are colocations. When you look at our overall mix, you're going to see a higher percentage of colos versus anchors.

Okay, great. And then just a higher-level question on tower activity. With the exception of DISH, is the majority of your activity today still amendment related from carriers upgrading mid-band spectrum? Or have you seen any activity out there related to new colocations to densify tower grids in any of your markets, particularly the more urban ones? If you haven't seen that in a big way, any kind of visibility on when that tower densification phase may pick up in the next couple of years? Thanks.

Yes. I mean, most of our activity is amendments. There are a few colocations in the mix but it is not a large percentage. Some of the colocations we are getting are coming from, as I said before, kind of the smaller regional players out there, not necessarily the Big 3 or DISH. We expect that same type of cadence to happen over the next number of quarters.

Thanks. Just I was hoping you could remind me of the components of I believe it or not, I'm asking about SG&A at $200 million, $204 million not much of a reduction from last year, especially given the reduction we saw in the first quarter. Maybe there are just some non-cash things that moved back and forth. But can you just kind of talk about the components in there and what areas are targeted for reductions going forward?

Yes. Well, I’m happy to talk about the components that are in there. The majority of our G&A, as you would imagine, are people that are working on the back office functions that we have, whether those are accounting or finance things of that nature, legal and IT. We've been able to offset all of the labor inflation that we've seen over the course of the last several years by the operating plan we have. We are targeting the G&A and believe that we will have reductions over time, which is part of the $60 million reduction that we talked about and that we will realize in 2024. You'll have to just allow me, I don't have the number off the top of my head of what quarter-over-quarter.

That's fine. I'm just looking at last year when it came up in the second quarter. However, I checked prior years, and there doesn't seem to be a seasonal pattern. So when you mention $60 million, is that entirely for the fourth quarter and then expected to decrease? Or were there some proxy fees included in that quarter, even though there wasn't such a large figure last year?

Yes, there were $20 million of proxy fees.

But that wasn't there last year in the second quarter which also was up, but whatever. It seems like obviously an important component but you don't think there is anything abnormal there? And so when are we going to see these reductions kick in? Obviously, the proxy fees drop out in the third quarter, so you'll get whatever that number is an immediate drop, and then we'll see some additional organic improvements in Q3 or are these all back-end loaded?

Yes. As you mentioned, the proxy fees will decrease, leading to a lower run rate compared to 2023, especially since we restructured in 2023, significantly reducing our G&A in Q2. The savings we achieved will mostly manifest from the end of Q2, and you'll notice the effects in Q3 and thereafter. So, in response to your question, yes, the reductions are somewhat back-end loaded. Looking at the 2023 numbers, a similar trend can be observed from Q1 to Q4, with a major decrease beginning in Q3, aligning with last year's restructuring timing. I do expect a reduction in G&A, and the increase in the second quarter was mainly due to proxy-related fees.

Okay. So I mean look, at the end of the day, next year assuming there are no more proxy fights and then you've got the reduction in whatever you announced in terms of guidance, you should get some much better efficiencies in 2025, hopefully, right?

That is the plan. As we've talked about a few times today, we announced the restructuring, the changes we were going to make in June. We have completed those changes for the most part and believe that we will see the savings that we are talking about roll through our income statement over the course of the last half of this year.

Yeah. Hi, thanks for taking the questions. A lot have been answered already. You guys have talked about, in the past the guidance 5% tower growth through 2027, and that 75% of that is contracted. A simple question is how are lease applications trending today in terms of your confidence in achieving the remaining sort of 25% to hit that 5% growth rate? Thanks.

Yes. What I would say there is that the 5% growth rate is based off of, as Steven talked about earlier, the MLAs we have in place and then additional growth we see going forward. The application volumes are much more akin or much more linked to what we see as near-term growth in our tower business. What we've talked about is, we maintained our 4.5% guidance for 2024 because we see activity levels that are very much in line with what we expected when we gave guidance last year. It is all very much in line with what we would have expected to get to that longer-term growth.

Great. Thanks.

Great. Thanks for taking my question. How should we interpret the changes in operations in the fiber and small cell businesses while the sales process is still ongoing? It sounds like you're engaged with multiple counterparties currently. It seems like it would be a little bit premature to make such changes that somebody else is going to be managing these assets somewhat imminently.

Yes. I mean, I guess we look at it, the process really was two different processes under one, where strategic obviously is trying to figure out what makes the most sense for the fiber division as it relates to shareholder value in the future. From an operations perspective, we are trying to have that continuous improvement mindset going forward with this company in all elements of our businesses. We just felt there was opportunity. We wanted to take it. We felt it was something that was going to be good for our business, good for the division, and good for the profitability of our business as we move forward, which in essence creates more shareholder value. We want to take the opportunity now and implement these changes because it is kind of separate apart from how we think about the strategic part of a potential sale.

Okay, thank you.

This concludes our question-and-answer session and concludes the conference call. Thank you for attending today's presentation. You may now disconnect.