Dan Schlanger: Yes. Matt, on the first question on what’s driving second-half, it’s really a combination of just normal kind of seasonality in our business, which we didn’t see in 2023 and called out in 2023. It’s returned more to how that works in 2024, and our business typically works in the second-half of the year a bit better than the first. In addition to some of the churn events that Ric was mentioning, we kind of hit the first-half of the year not the second. And so, we think that all of that added up would lead to the low point in AFFO being in the first-half of 2024.
Jay Brown: Matt, on your second question, I’m assuming you’re referring to the margins in the business. Is that the question that you’re asking, the extraction of the margins?
Matthew Niknam: Right, yes.
Jay Brown: Yes, okay. The current margins, and there will some bleed over this into the beginning of 2024, and around the 25% range, has to do with our exit of the construction services, those would be project management services that, historically, we performed to help our customers install on the assets that we have. Those, the margins in that business are much lower than the margins that we have on a go-forward basis, the services that we’ll perform on the pre-installation, pre-construction for our customers. So, what you’re really seeing in the mix change over the course of the year as the legacy business ramps down and goes away, and the business that we will continue to perform on a long-going — for the foreseeable future, the margins on that business are better.
So, you’re seeing that in the guide. And by the time we get to the second-half of next year, virtually all of those legacy services that will no longer be performing will have been moved out of the results.
Matthew Niknam: That’s great. Thank you both.
Jay Brown: You bet, Matt. Thanks.
Dan Schlanger: Thanks.
Jay Brown: Operator, and we can take one more question.
Operator: Okay. The final question is from Brandon Nispel of KeyBanc Capital Markets. Please go ahead.
Brandon Nispel: Great, thank you for taking the question. Dan, thanks a lot for all your help over the last several years, and best of luck. Hoping you guys could unpack the tower leasing both through 3Q and ’24. You’ve always talked about the contracted nature of this business. But on the year-over-year basis, leasing went down roughly 40%. So, I was hoping you could unpack the drivers from like a sequential or year-over-year standpoint? And then talk about your first-half or second-half expectations for tower leasing in ’24? And secondly, I was hoping you could unpack the churn that you’ve guided to, the $155 million just from a tower, fiber, and small cell side, and then the one-off churns from the remaining Sprint Cancellations? Thanks.
Jay Brown: Sure, I’ll take the first question, and Dan can walk through the numbers on the second question. Brandon, as we came to our tower leasing guide for ’24, we looked at the activity that we were seeing from the customers. And embedded in that activity, about 85% of what’s in the guide for 2024, at this point, is contracted. So, there is some amount of rollover of activity that we’ll see in this calendar year, where the tenant goes on the tower this year and then shows up for a full 12 months in calendar year ’24. There is, by definition, about 15% that we still got to go get in calendar year ’24 that we don’t have line of sight to. And our view has been, as we came off of the peak of 5G, that there is absolutely going to be a needed addition to tower side of our carriers investing to add additional equipment to build out 5G.
We’re not done with 5G, and they’re not done with macro sites. So, that activity will continue. And based on the conversations that we’ve had with them, the activity that we’ve seen, and the work that we see ahead, still believe that there is good activity on the macro tower side. Feel good about where the guidance is. And feel good about where we’ll be, not only in ’24, but in the years beyond as the towers are still the most efficient way to deploy network capacity. And so, to the extent that macro tower sites can solve the need, the carriers, we believe, will continue to prioritize those assets, and in the portfolio. And we’ll continue to see good growth in towers for a long period of time. So, we’ve reset our expectations from where we were at the peak of 5G, but feel good about where we are from this point forward.
Dan Schlanger: Yes, and the second question, on the $155 million of churn. On the towers side, it’s going to be very similar churn in ’24 to what we think we’ll see in ’23, which is on the low end of our 1% to 2%, on the $30 million range of churn on tower. On small cells, similarly, very similar to ’23, we’ll see about 1% of our small cells, so without — as long as you take out the Sprint Cancellations. And fiber solutions, as Jay mentioned, we believe the churn is coming down from closer to the 10% in ’23, to around 9% in ’24, so in the neighborhood of $115 million, when you add all those up, maybe $120 million. So, when you add all those up you get to about $155 million total of churn.
Brandon Nispel: Great, thank you for taking the questions.
Jay Brown: You bet. Well, thanks, everyone, for joining the call this morning. Appreciate the continued support. And we look forward to seeing and talking with you soon. And just want to thank our team, broadly, for all the work that they have done to deliver the results for ’23 so far. Got a good quarter ahead for us to finish out the year, and then excited about the opportunity to continue to grow the business as we get into 2024, and beyond. Thanks for joining, and we’ll talk soon.
Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.
