Crown Castle today announced its Q1 2022 earnings, increased its full-year 2022 outlook, disclosed its latest return on invested capital (ROIC) yields for its towers and fiber segments, and revealed the financial impact of its previously announced tower and small cells agreement with T-Mobile.

Financial Performance in Q1 2022 – Crown Castle

In Q1 2022, Crown Castle reported total revenue of $1.74bn, a 5.3% increase quarter-over-quarter, and adjusted EBITDA of $1.1bn, an 11.3% increase quarter-over-quarter. Therefore, the company’s EBITDA margin was 62.9% in Q1 2022, a 3.4% improvement quarter-over-quarter.

As a subset of its total revenue, in Q1 2022, Crown Castle generated site rental revenues of $1.58bn (90.5% of total revenue), a 6.9% increase quarter-over-quarter. Bifurcating site rental revenues by segment, highlights that towers comprise $1.08bn (68%), fiber solutions make up $346m (22%), and small cells contribute $155m (10%).

Full-Year 2022 Outlook – Crown Castle

Crown Castle increased its full-year 2022 outlook for site rental revenues by $40m and adjusted EBITDA by $60m, as compared to the company’s prior outlook in Q4 2021. Particularly, the company attributes its outlook improvement to “a robust 5G leasing environment”.

Full-Year 2022 Outlook – as of April 2022
$ in millionsLowHighMid-Point% Raised
Site Rental Revenues$6,242$6,287$6,2650.6%
Adjusted EBITDA$4,309$4,354$4,3321.4%

For full-year 2022, Crown Castle projects site rental revenues of $6.26bn and adjusted EBITDA of $4.33bn at the mid-point. As compared to Crown Castle’s prior full-year 2022 outlook, the company has raised its expectations for site rental revenues by 0.6% and adjusted EBITDA by 1.4%. Additionally, the mid-point of the company’s revised 2022 outlook implies a year-over-year increase in site rental revenues and adjusted EBITDA of 10% and 14%, respectively.

In 2022, Crown Castle expects 6% organic tower revenue growth, which includes new leasing activity and contracted tenant escalations. At the same time, the company is seeking to scale its small cell deployment capabilities to install ~5.0k small cell nodes in 2022 and 10k+ per year starting in 2023. In turn, these deployments will help Crown Castle deliver on its existing backlog of 60k+ small cell nodes.

New Leasing Activity by Segment

SegmentCore Leasing
Towers$150m to $160m
Fiber Solutions$145m to $155m
Small Cells$25m to $35m
Total$320m to $350m

In full-year 2022, Crown Castle expects $320m to $350m of core leasing activity. Specifically, this includes contributions of $150m to $160m from towers, $145m to $155m from fiber solutions, and $25m to $35m from small cells.

Return on Invested Capital in Q1 2022 – Crown Castle

Below is a historical trending of Crown Castle’s towers and fiber segment cash yields on invested capital up to Q1 2022. These metrics highlight the economic returns on Crown Castle’s towers and fiber (including small cells) segments.

Return on Invested Capital – Towers and Fiber Segments
Crown Castle Return on Invested Capital Towers Fiber Q1 2022

In Q1 2022, Crown Castle’s return on invested capital was 11.7% for its towers segment and 7.8% for its fiber segment. As a comparison, in Q4 2021, Crown Castle’s return on invested capital was 11.3% (40 bps lower) for its towers segment and 7.9% (10 bps higher) for its fiber segment.

As shown above, Crown Castle’s towers segment return on invested capital has been consistently trending upwards over the past quarters. In contrast, Crown Castle’s fiber segment return on invested capital only recently inflected higher, over the past two quarters.

Capital Expenditures

Crown Castle’s capital expenditures during Q1 2022 totaled $281m. Specifically, of this total, $21m were maintenance and $260m were discretionary. Decomposing discretionary capital expenditures further, $209m was attributable to fiber and $45m was related to towers.

For full-year 2022, Crown Castle expects to make discretionary capital expenditures between $1.1bn to $1.2bn.

Operational Performance in Q1 2022 – Crown Castle

As of Q1 2022, Crown Castle’s digital infrastructure portfolio, which resides entirely in the United States, consists of 40.2k towers, 80k route miles of fiber, and 115k small cells on-air or under contract.

Notably, Crown Castle’s towers segment metrics improved during Q1 2022, in-part, driven by its previously announced tower agreement with T-Mobile. Below are the quarter-over-quarter impacts on Crown Castle’s total towers portfolio:

  • # of Tenants per Tower: increased to an average of 2.4 in Q1 2022, from an average of 2.3 in Q4 2021
  • Contracted Tenant Receivables: $37bn remaining as of Q1 2022, an $11bn (42%) increase, from $26bn remaining as of Q4 2021
  • Tenant Contract Term: 7 years remaining, on a weighted-average basis, as of Q1 2022, up from 6 years remaining as of Q4 2021

T-Mobile – Customer Concentration

Prior to any new agreement, T-Mobile was already Crown Castle’s single largest tenant, comprising 33% of its site rental revenues as of Q4 2021. Incorporating the impact of Crown Castle’s new agreement with T-Mobile, which became effective January 1, 2022, T-Mobile further concentrates its position as Crown Castle’s largest tenant – now making up 37% of its site rental revenues as of Q1 2022.

Additionally, based on site rental revenues, T-Mobile extended its weighted average remaining contract term with Crown Castle to 9 years as of Q1 2022, which is up from 5 years as of Q4 2021.

As a reference point, Crown Castle’s next largest tenants, AT&T and Verizon, each comprise 19% of its site rental revenues as of Q1 2022.

Adam Simmons is the Founder & CEO of Dgtl Infra. He started his career with an S&P 500-listed big box retailer, in an operations management role. Adam's entrepreneurial "itch" led him to start a 5G-driven company, focused on innovative retail solutions using augmented reality and shoppable videos, which was eventually sold to an advertising and consulting group. After, realizing the potential of 5G, Adam shifted his efforts towards investing in the "building blocks" of 5G - known as digital infrastructure, completing a number of strategic investments, buying cellular towers, data centers and fiber networks.

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