Crown Castle today announced its Q3 2021 earnings, provided its full-year 2022 outlook, and disclosed its latest return on invested capital (ROIC) yields for its towers and fiber (including small cells) segments.

Financial Performance in Q3 2021 – Crown Castle

In Q3 2021, Crown Castle reported total revenue of $1.62bn, a 2.2% increase quarter-over-quarter, and adjusted EBITDA of $976m, a 1.9% increase quarter-over-quarter. Therefore, the company’s EBITDA margin was 60.3% in Q3 2021, a ~20 bps decline quarter-over-quarter.

Importantly, in Q3 2021, Crown Castle generated site rental revenues of $1.45bn (90% of total revenue), a 1.8% increase quarter-over-quarter. Bifurcating site rental revenues by segment shows that towers comprise $972m (67%), while fiber and small cells encompass $479m (33%).

A driver of this site rental revenue growth has come from Crown Castle increasing the tenancy ratio on its 40.1k towers, from 2.2x to 2.3x during Q3 2021. This follows a comparable increase in the company’s tenancy ratio from 2.1x to 2.2x in Q2 2021.

Full-Year 2022 Outlook – Crown Castle

For full-year 2022, Crown Castle projects site rental revenues of $5.97bn at the mid-point and adjusted EBITDA of $4.02bn at the mid-point. In turn, the mid-point of the company’s outlook implies a year-over-year increase of 5% and 6% in site rental revenues and EBITDA, respectively. By segment, Crown Castle expects site rental revenue growth contributions of ~5.5% from towers, ~5% from small cells, and ~3% from fiber.

In 2022, Crown Castle will continue supporting customer upgrades at existing cell sites for the first phase of the U.S. 5G build-out. Indeed, this view is driven by record tower application volumes in 2021, which Crown Castle expects will translate into a 20% increase in core leasing activity for the company’s towers segment for full-year 2022, as compared to 2021.

New Leasing Activity by Segment

Crown Castle New Leasing Activity by Segment Q3 2021
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In full-year 2022, Crown Castle expects $325m to $355m of core leasing activity. Specifically, this includes contributions of $155m to $165m from towers, $25m to $35m from small cells, and $145m to $155m from fiber. Notably, tower core leasing is projected to accelerate meaningfully from 2021. Whereas small cells and fiber are both expected to have lower core leasing activity in 2022, as compared to 2021.

Return on Invested Capital for Crown Castle – Q3 2021

Crown Castle’s Q3 2021 earnings provided updated disclosures for towers and fiber segment cash yields on invested capital. Indeed, these metrics provide insight into the economic returns on Crown Castle’s towers and fiber (including small cells) segments.

In Q3 2021, return on invested capital was 11.2% for Crown Castle’s towers segment and 7.3% for its fiber segment. As a comparison, in Q2 2021 return on invested capital was 11.0% (20 bps lower) for Crown Castle’s towers segment and 7.3% (unchanged) for its fiber segment.

Notably, Crown Castle’s fiber segment return on invested capital for Q3 2021 of 7.3% represents the lowest the metric has been since the company began disclosing its segment cash yields in Q2 2020. In contrast, the company’s towers segment return on invested capital for Q3 2021 of 11.2% represents its highest on record.

Capital Expenditures

Crown Castle’s capital expenditures during Q3 2021 totaled $283m. Specifically, of this total, $21m were maintenance and $262m were discretionary. Decomposing discretionary capital expenditures further, $217m was attributable to fiber and $42m was attributable to towers.

For full-year 2022, Crown Castle expects discretionary capital expenditures to be between $1.1bn to $1.2bn. Lower levels of capital expenditures in 2021/2022, versus 2020, is primarily attributable to the company’s slower deployment of small cells. Recall that Crown Castle lowered its small cell deployment target to 5.0k nodes in each of 2021 and 2022. This is relative to the company’s 10k small cells deployed in 2020.

Adam Simmons covers Towers for Dgtl Infra, including American Tower (NYSE: AMT), Crown Castle (NYSE: CCI), SBA Communications (NASDAQ: SBAC), Cellnex Telecom (BME: CLNX), Vantage Towers (ETR: VTWR), IHS Holding (NYSE: IHS), and many more. Within Towers, Adam focuses on the sub-sectors of ground-based cell towers, rooftop sites, broadcast / radio towers, and 5G. Adam has over 7 years of experience in research and writing for Towers.


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