And we’re continuing to be thoughtful about how can we make those revenue streams more sticky.
Jonathan Atkin: Great. Thank you very much.
Operator: The next question is from Ric Prentiss of Raymond James. Please go ahead.
Ric Prentiss: Thanks. Good morning, everyone. Dan enjoyed getting to know you over these last seven years.
Dan Schlanger: Yes, thanks, Ric. Me too.
Ric Prentiss: I want to start on the dividend side. You all know I really like looking at cash more than the AFFO reported metric, but it looks like the midpoint of ’24 AFFO, $3.005 billion and that amortization of prepaid rent, the non-cash item that you talk about, it was about $423 million. That kind of implies that a cash AFFO number would be more like ballpark $2.6 billion versus dividends might be like $2.7 billion. Am I thinking of that correctly? And what other ways are there to kind of bridge that, get to working capital or other ways to get to that kind of how you pay the cash dividend?
Dan Schlanger: So Ric, I would say yes, you’re thinking about that correctly. Looking at our AFFO, taking out the prepaid rent amortization to get to a cash level makes sense as a shorthand way to do so. And that number is going to be below our dividend at the midpoint when we look at 2024. And we believe, as Jay pointed out throughout his comments, is that given that we think that we’re going to be returning out to growth in past 2025, that it made a lot of sense to keep the dividend where it is. And we can fund that dividend all sorts of different ways. We don’t want to have a liquidity issue of trying to figure out where the cash comes from. What we have is what we’ll do is we’ll continue to pay out the dividend. And then, as the organic growth in the business continues to increase over the course of the next several years, we feel really comfortable with the trajectory of that dividend over time.
Ric Prentiss: Okay. And a couple of times, I think Jay mentioned, maintaining the dividend in ’24 obviously it’s a board decision. But should we assume this intent is to maintain the dividend ’25 as well? And to Dan’s point, there’s other ways to pay it if cash is short?
Jay Brown: Yes, Ric, obviously, we’re setting the dividend policy for 2024. So, I don’t want to get ahead of ourselves and start talking about ’25. But philosophically, the reason why we’re referencing the low point is to help give you a view of this multi-year work through that we’ve got with the consolidation of Sprint and some of the headwinds that we’ve been facing. As you kind of referenced and walked through the math there of the gap, in essence what we’re saying is we expect that gap to be smaller in 2025 than it is in 2024. So, historically, as we’ve looked at the business, what we’ve done is sized up the cash flow generation of the business and we’ve paid out to shareholders in the form of the dividend, the cash generated by the business in any given year.
That’s how we’ve set our dividend. As we got into this period of time, which we believe is an anomaly in the business, the consolidation of the carriers and work through the headwinds associated with more of the macroeconomic changes, what we tried to do was look through those specific events that we were seeing on the horizon and look out beyond those events and try to figure out where do we think the cash flow generation of the business would be as the business normalized. As we look through that, our view was it made sense to maintain the dividend in 2024. The gap will be the widest between that dividend payout and the generation of cash in the business in the first-half of 2024. And then, it will close as we go to the second-half of 2024 and then into ’25 and get beyond that.
And we believe we’ll return to a growth period of time once we get past 2025. So, we’re in essence looking through these movements in these events and try to set the dividend at a level that we could maintain in ’24. The gap between the current level of dividend and the cash generation will be smaller in ’25 and then we’ll return to growth, we believe, in 2026.
Ric Prentiss: That’s clear. Okay, thanks. One other question on my side on the small cells, I think you mentioned there were 5,000 nodes decommissioned in mid-’23 from Sprint. Was that within second quarter or there’s more of those to be decommissioned, sorry, in third quarter, I assume we’re done with it. And the 14,000 nodes for in 2024, is that a gross or net number? Are they almost the same?
Jay Brown: On the 5,000, there’s a little bit of movement. Most of those have come out at this point, which is why you saw our total nodes and contracted nodes come down from 120,000 to 115,000. That’s reflective of the churn. So, most of those have worked their way through. The number for 2024 when we talk about 14,000 gross and net are the same. So, we don’t expect any meaningful churn in 2024 of small cell nodes. So, there’s no offset there that you need to be made aware of.
Ric Prentiss: Good. And the $10 million Sprint churn in the ’24 guidance, is that basically enough? It’s kind of a half year then of the $10 million reflective?
Jay Brown: Yes, it basically is. Exactly, it’s the rollover of this year’s churn hitting 2024.
Ric Prentiss: And that gets back to that first-half versus second-half kind of concept that’s a contributing factor in the second-half being better then.
Dan Schlanger: Yes.
Ric Prentiss: Great, thanks so much. Dan, best wishes.
Dan Schlanger: Thank you.
Operator: The next question is from David Barden of Bank of America. Please go ahead.
David Barden: Hey guys, thanks for taking my questions. Just a couple on the small cell side, so Jay or Dan, with a 40% step-up in the rate of no deployment happening at the time when you’re kind of shrinking the organization, what has to happen? How does that happen to kind of make that step up because it is larger than we’ve kind of ever seen you guys do before? And then second question related is, should we assume that, that’s kind of the new normal, both in terms of discretionary CapEx and in terms of kind of no deployments for the foreseeable future? Or is this more of an anomaly and kind of more like the 10,000 node, $1.2 billion discretionary cash CapEx is more the norm? Thanks.
Jay Brown: Good morning, Dave. On your first question, the changes that we made in terms of reduction of staffing happened almost exclusively on the tower side. And what we were adjusting the internal costs related to were both in the services business on the tower side as well as on the tower operating side. And those were adjusted based on the volume of activity that we saw for tower leasing and the movement from those peaks of 5G down to the levels that we provided both — we think we’re going to deliver both in the second-half of ’23 and then as we go into 2024. As we think about resources on the small cell side, we believe our team and the growth in both use of technology and refining some of the processes and making ourselves more successful at navigating through municipalities, which I talked about in some of my comments, I don’t see a significant need for us to add additional resources to our fiber segment as we tackle this significant increase in the amount of nodes.
