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Crown Castle International's (CCI) CEO Ben Moreland on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Conference Call

April 22, 2016 10:30 ET

Executives

Son Nguyen - Vice President, Finance and Investor Relations

Ben Moreland - Chief Executive Officer

Jay Brown - Chief Financial Officer

Dan Schneider - Senior Vice President

Analysts

Simon Flannery - Morgan Stanley

Brett Feldman - Goldman Sachs

Phil Cusick - JPMorgan

David Barden - Bank of America

Jonathan Atkin - RBC Capital Markets

Ric Prentiss - Raymond James

Matthew Heinz - Stifel

Amir Rozwadowski - Barclays

Michael Rollins - Citi

Colby Synesael - Cowen

Spencer Kurn - New Street Research

Matt Niknam - Deutsche Bank

Walter Piecyk - BTIG

Nick Del Deo - MoffettNathanson

Michael Bowen - Pacific Crest

Batya Levi - UBS

Operator

Good day and welcome to the Crown Castle Q1 2016 Earnings Call. Today’s call is being recorded. At this time, I would like to turn the call over to Son Nguyen. Please go ahead, sir.

Son Nguyen

Thank you, Melanie, and good morning, everyone. Thank you for joining us today as we review our first quarter 2016 results. With me on the call this morning are Ben Moreland, Crown Castle’s Chief Executive Officer; Jay Brown, Crown Castle’s Chief Financial Officer; and Dan Schneider, Crown Castle’s Senior Vice President. To aid the discussion, we have posted supplemental materials in the Investors section of our website at crowncastle.com which we will refer to throughout the call this morning.

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 factors section for the company’s SEC filings. Our statements are made as of today, April 22, 2016 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 Investors section of the company’s website at crowncastle.com.

With that, I will turn the call over to Jay.

Jay Brown

Thanks, Son and good morning, everyone. As highlighted on Slide 3, our first quarter results exceeded the midpoint of our first quarter outlook and allowed us to raise our full year 2016 outlook. Our increased midpoint for full year 2016 outlook for AFFO per share of $4.70 represents an increase of over 9% compared to 2015. During the quarter, we also strengthened our balance sheet by accessing the bond market with our inaugural investment grade issuance. This was another successful step in our effort to lower our cost of debt and equity capital. Operationally, we continue to invest in both small cells and towers, which we believe will drive future growth. These continued investments, together with our portfolio of approximately 40,000 towers and 16,500 miles of fiber supporting small cell deployments position us as the leading U.S. wireless infrastructure provider with unique capabilities and aspects to provide network solution throughout the country and across a variety of different network architectures.

Shifting to the first quarter results on Slide 4, site rental revenue grew 9%. The organic site rental revenue growth of $55 million represents growth of 8% year-over-year comprised of approximately 7% growth from new leasing activity and 3% from cash escalations, net of approximately 2% from tenant non-renewals.

Moving to Slide 5, our first quarter results for site rental gross margin, adjusted EBITDA, AFFO and AFFO per share exceeded the midpoint of our previously provided first quarter 2016 outlook. Site rental gross margin benefited from approximately $1 million of one-time items that were not expected in the previously provided outlook comprised of a benefit to site rental revenues of approximately $4 million and offset by an increase to site rental cost of operations of $3 million. Additionally, AFFO for the first quarter 2016 benefited from $10 million and lower than expected sustaining capital expenditures, which is due to timing as full year 2016 outlook for sustaining capital expenditures remains unchanged. Excluding the benefit of these non-recurring and timing items, we still would have exceeded the midpoint of our previously provided first quarter 2016 outlook for each of these metrics.