Uniti Group Inc. Q3 FY2024 earnings call

• Acknowledged the impact of hurricanes Helene and Milton and thanked Uniti's first responders. - Uniti delivered a solid quarter with strong demand for mission-critical fiber infrastructure, including from hyperscalers. - Core recurring strategic fiber business grew 3% in Q3. - New bookings showed encouraging trends, with a higher mix of hyperscaler deals. - Growth capital investment program provided positive results. - Pending merger with Windstream is progressing, with 13 of 18 required PUC approvals received. - Committed to key initiatives between signing and closing of the transaction, such as operational execution, balance sheet simplification, fiber-to-the-home build plan expansion, integration planning, and M&A.

Uniti reported consolidated revenues of $292 million, consolidated adjusted EBITDA of $235 million, AFFO attributed to common shareholders of $87 million, and AFFO per diluted common share of $0.33 for the third quarter. Uniti Leasing reported segment revenues of $223 million and adjusted EBITDA of $215 million, with an adjusted EBITDA margin of 97% for the quarter. Uniti Fiber reported revenues of $69 million and adjusted EBITDA of $26 million during the third quarter. The core recurring strategic fiber business grew 3% in the third quarter, driven by 10% growth in enterprise, 14% in wholesale, and 18% in dark fiber revenue. The core fiber business showed solid top-line growth, and the combined business demonstrated continued solid EBITDA growth.

• Slightly increased 2024 consolidated revenue outlook due to higher-than-expected one-time lease-up at Uniti Leasing. - Adjusted EBITDA remains unchanged, with a $2 million increase in Uniti Leasing's midpoint outlook offset by a $2 million increase in corporate expense outlook. - Full-year AFFO is expected to range between $1.32 and $1.39 per diluted common share, with a midpoint of $1.35 per diluted share. - Windstream simplified the post-merger capital structure, pushing out debt maturities and raising additional capital. - Progress on replacing current ABS bridge financing with a permanent ABS solution is expected by later this year or early next year.

• Forward-looking statements are subject to factors that could materially affect actual results, including those related to the proposed transaction with Windstream, regulatory approvals, and market conditions. - Uniti and Windstream have filed a Form S-4 registration statement with the SEC, and investors are urged to review the proxy statement and prospectus for important transaction information. - Numerous factors could cause actual results to differ from forward-looking statements, with more details in the filed Form S-4's risk factors section.

Q: Could you provide more color on the recent win with the Montgomery Metro rings in terms of MRR and bookings, and talk about competitive dynamics?

A: The Montgomery deal is part of strategic fiber builds in core network locations. NRCs in these deals are higher, reducing the urgency for lease-up. For hyperscaler deals, competitive dynamics differ from broad RFPs; Uniti has a scaled network, unique locations, and a proven ability to build on time and budget.

Q: Can you give color on anchor deals, market expansions, and revenue opportunity?

A: In anchor deals, a significant amount of fiber is built for both customers and internal network. Market expansions include Kinetic's fiber-to-the-home build, metro fiber in 300 markets, and unique Tier 2/3 markets. Revenue opportunity is substantial across Kinetic, Uniti Fiber, and wholesale businesses through disciplined and measured targeting.

Q: What's the status of regulatory approvals for the merger, and about the one-time revenue benefit guiding up revenue but not EBITDA?

A: Regulatory approvals are progressing well, with 13 of 18 PUC approvals received, and no concerning issues have been heard. The one-time revenue benefit for Uniti Leasing is a $3 million increase, with a corresponding $2 million increase in Uniti Leasing EBITDA guidance offset by a $2 million increase in corporate expenses due to performance-based comps.

Q: Drill down on the hyperscale selling process and how it works?

A: Hyperscaler deals vary; the sales cycle isn't traditional. Hyperscalers focus on land, power, and data centers first, then fiber. Uniti has an advantage with its scaled network, unique locations, and ability to build on time and budget in core markets.