Uniti Group Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 1, 2024

There are 6 speakers on the call.

Operator

Good morning, and welcome to today's conference call to discuss Uniti's Q2 2024 Earnings Results. My name is Latif, and I will be your operator for today. Today's call is being recorded and a webcast will be available on the company's Investor Relations website, investor. Unity.com, beginning today and will remain available for 3 65 days. At this time, all participants are in a listen only mode.

Operator

Participants on the call will have the opportunity to ask questions following the company's prepared comments. It is now my pleasure to introduce Bill D'Tullio, Uniti's Vice President of Investor Relations and Treasury. Please begin.

Speaker 1

Good morning, everyone, and thank you for joining today's conference call to discuss Uniti's Q2 2024 results. Speaking on the call today will be Kenny Gunderman, our CEO and Paul Bullington, Uniti's CFO. Before we get started, I would like to quickly cover our Safe Harbor statement. Please note that today's remarks may contain forward looking statements. These statements include, but are not limited to, statements about the benefits of the proposed transaction between Uniti and Windstream, including future financial and operating results of either company or the combined company.

Speaker 1

Statements related to the expected timing of the completion of the transaction and combined company plans and other statements that are not historical facts. Any forward looking statements contained in today's discussion and materials speak only as of the particular date or dates indicated in the materials. Please also note that Uniti and Windstream, through the entity that will be combined that will be the combined parent company following the merger, recently filed a preliminary Form S-four registration statement with the SEC that includes a proxy statement and prospectus regarding the transaction that has not yet become effective. Investors are urged to read that proxy statement and prospectus as it contains important information about the transaction. In addition, Uniti and Windstream and the directors and officers may be deemed to be participating in the solicitation of proxies in favor of the transaction.

Speaker 1

You may find information about Uniti's directors and executive officers in the company's most recent proxy statement. You may also obtain a copy of the preliminary proxy statement and prospectus through the SEC website, Uniti's and Windstream's websites or by requesting a copy from either company's Investor Relations website. More information on how to request these documents is available in the presentation that accompanies this call. Uniti does not undertake any obligation to update or revise any of this information in today's remarks, whether as a result of new information, future events or otherwise. Numerous factors could cause actual results to differ materially from those described in the forward looking statements.

Speaker 1

And for more information on those factors, please see the section titled Forward Looking Statements in the presentation and the Risk Factors section of the recently filed preliminary Form S-four. With that, I would now like to turn the call over to Kenny.

Speaker 2

Thanks, Bill. Good morning, everyone, and thank you for joining. Starting on Slide 4, Uniti delivered another solid quarter of performance led by the continued strong demand for our mission critical fiber infrastructure. As a result, we're reiterating our consolidated full year 2024 revenue and adjusted EBITDA outlook. Our core recurring strategic fiber business grew 3% in the 2nd quarter fueled by exceptional growth in enterprise wholesale and dark fiber revenue of 12%, 15% 18%, respectively.

Speaker 2

When paired with our industry leading 0.3% churn, we remain on track to deliver 4% to 6% MRR growth for the full year. We continue to execute well on our unique strategy of being a pure play fiber provider in Tier 2 and 3 metro markets and on intercity routes. We believe that if you build fiber first in less competitive markets, you secure a right to win for many years into the future. Turning to Slide 5. We had a strong quarter of new bookings.

Speaker 2

As we have discussed previously, the demand from hyperscalers driven by generative AI is real and represented approximately 40% of this quarter's bookings. We're increasingly confident that this demand will be sustained as a meaningful percentage of our entire wholesale sales funnel is from hyperscalers. With wireless bookings for the quarter while wireless bookings for the quarter were muted, we continue to expect a pickup in wireless in the second half of this year. We're not only seeing a meaningful pickup in wireless RFPs, but we're also starting to have conversations about 25 gig upgrades at tower sites. Growth in mobile broadband, fixed wireless and fiber to the home connectivity are all driving substantial data traffic growth and we do not see any of those trends dissipating.

Speaker 2

Finally, fiber to the home carriers are driving an increasing amount of demand procuring middle mile and inner city backhaul to connect our neighborhoods. The amount of bookings Unity saw relating to fiber to the home carriers increased 3 fold in 2023 versus 2022, and we expect a similar level in 2024. On a consolidated basis, our net capital intensity during the quarter was 31%, down from 44% in the same prior year period, and we believe it will continue to decline. There are a number of encouraging trends in bookings driving that capital efficiency, including our continued focus on lease up and a higher mix of hyperscaler deals that generally come with higher NRCs and therefore better than our typical anchor yields. We also continue to see price stability especially in dark fiber sales.

Speaker 2

Turning to Slide 6. Our growth capital investment program continues provide positive results for Uniti. And given our pending merger with Windstream, we wanted to highlight a few key points, which we believe the market is underappreciating. First, Kinetic and Uniti have invested a substantial amount of capital in its network with over $2,000,000,000 invested since 2015. These historical investments include backhaul fiber and ultimately fiber to the node.

Speaker 2

In fact, prior to starting the Fiber to the Home program in 2019, close to 100% of all broadband customers at Kinetic were already served by fiber backed DSLAMs. Each of these DSLAMs has a minimum 1 gig link to the market level central office and a minimum 10 gig link from that CO to the network core. This historical investment helps enable Kinetics approximately $6.50 per home passing cost as we estimate that backhaul equates roughly 20% of the total cost of building fiber to the home for others. I'll speak more on our pending merger shortly, but to complete our earnings discussion, I'll now turn the call to Paul.

Speaker 3

Thank you, Kenny. I'd like to begin by reviewing our 2nd quarter performance followed by an overview of our current 2024 outlook. We had another solid quarter highlighted by near record consolidated bookings MRR of $1,100,000 3% core recurring strategic fiber revenue growth and declining consolidated net success based capital intensity, which stood at 31% for the quarter. As I'll cover in more detail in just a bit, our 2024 outlook for consolidated revenue and adjusted EBITDA remains unchanged as we expect to end the year within the previous guidance ranges provided. We have also provided Windstream's 2nd quarter financial information in an 8 ks filed with the SEC earlier this morning.

Speaker 3

Please turn to Slide 7, and I'll start with comments on our Q2. We reported consolidated revenues of $295,000,000 consolidated adjusted EBITDA of $237,000,000 AFFO attributed to common shareholders of $92,000,000 and AFFO per diluted common share of $0.34 At Uniti Leasing, we reported segment revenues of $218,000,000 and adjusted EBITDA of $211,000,000 representing an adjusted EBITDA margin of 97% for the quarter. During the Q2, Uniti Leasing deployed approximately $70,000,000 towards growth capital investment initiatives with the majority of the investments relating to the Windstream GCI program. With the GCI amount funded subsequent to the Q2 in July, Windstream has now reached its GCI funding limit for 2024 and there will be no further GCI payments for the remainder of the year. At Uniti Fiber, we reported revenues $77,000,000 and adjusted EBITDA of $31,000,000 during the 2nd quarter, achieving margins of approximately 40%.

Speaker 3

Both revenue and adjusted EBITDA during the quarter were higher than expected due to onetime non recurring revenue items. Uniti Fiber net success based CapEx was $21,000,000 in the 2nd quarter. We also incurred about $2,000,000 of maintenance CapEx during the quarter.

Speaker 2

Please turn

Speaker 3

to Slide 8, and I'll now cover our updated 2024 guidance. We're revising our guidance for business unit level revisions, the recent $300,000,000 add on to our 10.5 percent secured notes and the impact of transaction related and other costs incurred to date. Our outlook excludes the impact from the expected merger with Windstream, future acquisitions, capital market transactions and future transaction related and other costs not specifically mentioned herein. Actual results could differ materially from these forward looking statements. Our 2024 outlook for consolidated revenue and adjusted EBITDA remains unchanged.

Speaker 3

However, we are slightly increasing our Uniti Fiber revenue and EBITDA to reflect the one time revenues I referenced earlier, while slightly lowering our Uniti Leasing revenue and adjusted EBITDA estimate due to lower than expected non cash straight line revenue and the timing of delivery on a recent lease up award that is now expected to start billing in early 2025. Given the expected timing of one time sales, including strategic dark fiber sales to hyperscalers, we expect the second half revenue and adjusted EBITDA to be more heavily weighted in the Q4 versus the Q3. And I will point out that current consensus estimates do not reflect this expectation as 3rd quarter estimates are currently higher than our expectations, while 4th quarter estimates are lower. We are also lowering our AFFO estimate for full year 2024, primarily due to higher interest expense related to the recent $300,000,000 add on to our 10.5 percent secured notes. At Uniti Leasing, we expect $250,000,000 of net success based CapEx at the midpoint of our guidance, of which approximately $230,000,000 relates to Windstream GCI Investments.

Speaker 3

Net success based CapEx for Uniti Fiber this year is now expected to be $100,000,000 at the midpoint of our guidance, representing a capital intensity of 34%, down from 40% in 202345% in 2022, further demonstrating the success we are having in transitioning to less capital intensive, higher return lease up deals. We expect full year AFFO to range between $1.33 1 $0.40 per diluted common share with a midpoint of $1.36 per diluted share. As a reminder, guidance ranges for key components of our outlook are included in the appendix to our earnings presentation. At quarter end, we had approximately $619,000,000 of combined unrestricted cash and cash equivalents and undrawn revolver capacity. Our leverage ratio at quarter end was 5.97 times based on net debt to Q2 2024 annualized adjusted EBITDA, excluding the debt and adjusted EBITDA impact from the ABS loan facility.

Speaker 3

As it relates to the ABS market, we continue to view it as an attractive alternative source of financing that complements our existing capital structure well. To that end, we continue to make good progress on replacing our current ABS bridge financing with a permanent ABS solution, which we expect to be in place later this year or early next year. With that, I'll now turn the call back over to Kenny.

Speaker 2

Thanks, Paul. As a reminder, we announced last quarter that we've reached a definitive agreement to merge Uniti and Windstream, creating a national fiber powerhouse. We continue to expect the transaction to close in the second half of twenty twenty five, and we're making great progress on our time line. In fact, we've already received 6 of 18 required PUC approvals, including from Washington, D. C.

Speaker 2

Given the transformative nature of this transaction, I wanted to reiterate a few key highlights. Slide 12 showcases the reach of new Unity's insurgent fiber network, extending our successful strategy of targeting Tier 2 and 3 markets for wholesale and enterprise now into residential fiber to the home. Our true north is building fiber first in less competitive markets, giving us the right to win for many years into the future. Including connected buildings, fiber to the tower and small cell connections, connected pops and data centers and the 4,300,000 total homes within Kinetic's current footprint, Uniti will have the potential to reach over 5,000,000 connected on ramps in largely unique locations, each driving increasing amounts of bandwidth onto our owned wholesale network. Please turn to Slide 13.

Speaker 2

Kinetic is a unique fiber to the home platform for a number of reasons. First, fiber to the home is indisputably a superior product from a latency and reliability perspective and will be for our lifetimes and beyond. 2nd, incumbent providers have a big advantage when providing fiber to the home given the embedded network benefiting from years of investment. And ironically, incumbents are now share takers with fiber to the home after many years of playing defense against cable and wireless. Thirdly, over 50% of Kinetic's footprint is located in the Southeast.

Speaker 2

We believe the Southeast is a terrific place to invest from a competitive and demographic point of view as evidenced by our success in Uniti Fiber. Just as importantly, 75% of Kinetic's footprint has 20,000 or fewer households, enforcing our focus on Tier 2 and 3 markets. Kinetic is also building fiber passings at what we believe to be an industry leading cost of $6.50 per passing. As I highlighted earlier, the historical GCI TCI investments have given Kinetic a head start a cost and network quality perspective. In addition, owning the backhaul network will be a tool to disincentivize overbuilders from entering our markets as in many cases, our backhaul network is the only one available.

Speaker 2

This helps segue into the final point. Over only 15% of the footprint today has a true overbuilder and that's held relatively constant for the last 5 years. We certainly don't expect this number to grow meaningfully in the future given we're increasing our offensive posture on a combined basis. Slide 14 highlights how Kinetic compares favorably to other providers in the industry. I've already discussed the dearth of overbuilders and the attractive cost to pass, but you can also see on this page that Kinetic compares favorably on penetration levels, ARPU and of course, the support of the expansive owned backhaul network.

Speaker 2

Moving to Slide 15, you can see Kinetic has been demonstrating strong success the past few years. Initial penetration levels on early cohorts have consistently averaged between 15% to 18% in the 1st year, increasing to above 25% on average by the 2nd year. Recent cohorts have been demonstrating initial penetration rates of up to 30% as Kinetic has really ramped up a more customer focused, digitally enhanced, local go to market strategy. As I said earlier and as Kinetic is beginning to demonstrate, an insurgent mentality really matters and can move the needle on penetration and churn. Windstream reported solid quarterly results yesterday.

Speaker 2

So on Slide 16, we've taken the liberty of showing a consolidated year to date view of revenue and adjusted EBITDA for new Unity by each segment we expect to report on post close. Both Connecticut and fiber infrastructure consists of a highly predictable core recurring revenue base that continues to grow and yield attractive margins. As a reminder, our Fiber to the Home platform will continue to be branded as Kinetic. Fiber Infrastructure will include our current Unity Fiber and Unity Leasing segments along with the Windstream Wholesale segment, all of which are highly complementary and will combine to create a premier fiber infrastructure company with both national and deep regional capabilities and a fiber network that is predominantly owned and operated. As you can see, the core fiber business demonstrated solid top line growth for the quarter.

Speaker 2

Managed Services is made up of Windstream's cloud based enterprise business and is not core to our fiber infrastructure strategy. The current strategy at Managed Services is to focus on retaining existing customers and upselling those customers versus focusing on top line growth. This strategy has led to very stable to growing adjusted EBITDA. New Unity intends to continue that strategy in addition to evaluating other value accretive alternatives. Importantly, on a consolidated basis, the combined business is demonstrating solid EBITDA growth.

Speaker 2

Turning to Slide 17. We expect steady, predictable top line and EBITDA growth well into the future, and the combined business should be free cash flow positive in 2026. In the meantime, our current build plan and the next 2 years of cash burn are fully funded with on hand or available liquidity. We believe this is another key highlight of new Unity and gives us confidence in our long term leverage target and our ability to generate outsized equity returns. Our fully funded plan, steady predictable results and unique hard to replicate fiber assets all suggest substantial intrinsic value in the new Unity as highlighted on Slide 18.

Speaker 2

Recent industry valuation multiples in the ABS market, the M and A market and publicly traded comparables all reinforce this value. Further, we recently filed the proxy statement for our transaction, which includes a history of both strategic and financial interest in the combined assets of the company. The valuation metrics on this slide are further supported by those historical indications of interest. Turning to Slide 19. While the closing of the transaction is still a number of months out, we have begun and will continue to make progress on key priorities, including continuing to demonstrate strong results at both companies and educating the market on the merits of the combined transaction.

Speaker 2

We're also using the time between now and close to actively evaluate refinancing opportunities that would allow us to collapse the dual silo capital structure. We're also actively working with Kinetic on an integration plan to achieve our synergy goals as well as refining our fiber to the home build plan to incorporate up to an additional 1,000,000 homes. Lastly, we're never idle when it comes to M and A and And with this new exciting portfolio of assets together, there's no shortage of interested counterparties with whom we're engaging. In summary, on Slide 20, let me reiterate our excitement for this fantastic combination and future prospects for Uniti. We'll be a premier insurgent fiber provider in the U.

Speaker 2

S. With a scaled platform for growth and a differentiated position in Tier 2 and 3 markets. Our enhanced balance sheet and cash flow generation will support growth, increasing our ability to expand the fiber to home builds. Looking ahead, this combination will deliver additional value accretive opportunities through meaningful synergies and M and A optionality. With that, we'd be happy to take your questions.

Operator

Thank you. Our first question comes from the line of Greg Williams of TD

Speaker 4

Cohen. Great. Thanks for taking my questions. And congrats on some solid bookings here. And that's what my question is really about is, what sort of the cadence of the deals going forward?

Speaker 4

Are we going to see plus $1,000,000 in bookings in many quarters going forward? And I think you mentioned 40% of that is from Genii. Is that percentage mix going to maybe hold as well? How many Huntsville type deals are in the funnel and for how long? Any color there would be great.

Speaker 4

Thanks.

Speaker 2

Hey, Greg. Good morning. I don't think you should expect $1,000,000 plus quarters sequentially. I think they'll be a little lumpy. Wholesale deals are lumpy as we've always said, including the hyper deals.

Speaker 2

But I think in general, you're going to continue to see solid bookings. And over the mid to longer term, that's going to persist. We're increasingly confident in a more regular cadence of hyperscaler deals. And we're confident in saying that just based upon the building funnel that we have. And obviously, a funnel is a leading indicator of bookings.

Speaker 2

And we've got an increasing number of opportunities in there that are that have been through costing and pricing, have been vetted through sales engineering and vetted through grant of authority approval levels at our at Unity and presumably at our customers. And so we feel good about those opportunities. But equally importantly, when you hear what the hyperscalers say publicly about the opportunity around AI, they're extremely bullish on it. Comments ranging from there's greater risk to underinvesting than there is to overinvesting and raising CapEx guidance and materially higher CapEx related to AI next year, for example. So I just think that we just think that the opportunity is meaningful.

Speaker 2

It will persist for some time and we expect to achieve our at least our fair share of it, especially given we continue to hear a trend of the hyperscalers looking to grow into markets that have less stressed power grids and less stressed distribution grids. We're interacting more and more with our utility partners in some of these markets to talk about ways to collaborate because they also are view the hyperscaler opportunities a big one for them. So I think view it as a terrific opportunity and we're going to get our fair share of it. We're also going to continue pushing on all the other wholesale threads that are driving broadband growth, including wireless, including fiber to the home, including traditional wholesale. As we've said many times, we're diversified as a wholesale provider against which use case eventually is the most successful.

Speaker 2

And frankly, one of the most encouraging comments I've heard from the hyperscalers publicly recently is that even if they don't use the infrastructure capacity that they're procuring for AI, they're going to use it for something else. And that's music to my ears because it just says there's going to be broadband growth. They're going to need this infrastructure for all manner of things, including and especially AI. So very bullish on it, hard to predict the cadence, but the funnel is building and we're excited about the opportunity.

Speaker 4

Got it. Thanks, Kenny.

Operator

Thank you. Our next question comes from the line of David Barden of Bank of

Speaker 5

America. Hi, thank you. This is Shipra calling in for David today. Thank you for all the details on the call. We went through the S-four, of course, it was pretty dense.

Speaker 5

So just wondering from your point of view, what in the filing on the merger are the most important pieces of information that we don't already have that we should take away from the filing? And if you could just go over the moving parts to achieving that positive free cash flow goal in 2026, particularly the CapEx outlook and how fiber expansion plans might impact the current outlook? Thank you.

Speaker 2

Good morning, Shipper. I'll take the first one and then Paul, you can take the second. I think a lot of information in there for sure, pro form a financials, which obviously folks have been asking for. So I think that should be a focus area and there shouldn't be any surprises and we look forward to engaging with the market and answering whatever questions arise from that. But we still feel very bullish and confident in the forward trajectory of the business.

Speaker 2

And Paul will comment on that as it relates to the bridge to free cash flow positive. I think a section that really should get a lot of focus and attention is the background reading of the merger, and those are always sections that provide juicy details. But in this case, we think there's a lot of very interesting facts and circumstances in there, including number 1, that Unity and really Windstream began thinking about our relationship in a much more strategic manner going back to the bankruptcy and even before. And I think when you think about the settlement and the bankruptcy and how we decided to invest materially in overbuilding the copper with fiber, that was meaningful. When you look at bifurcating the MLAs in the way we did to provide for strategic optionality and also just opening up the CLEC network to Uniti's use.

Speaker 2

All were very intentional and strategic in nature, which many of those things led to a substantial amount of strategic and M and A related dialogue post the bankruptcy. And I think that's the second point that there has been and continues to be a lot of financial and strategic interest in our collective assets and at valuation metrics that we think are validating of what we believe the intrinsic value to be. And while you can take a point of view on whether those multiples are where those multiples should be at any point in time, I think one thing that's indisputable is they validate intrinsic value, which is substantially higher than where we currently trade and where we've traded recently. So we're just very excited about the intrinsic value of the business. And I think many of the data points in that background reading validate that.

Speaker 2

And the final point I would make is just on the background is, as you can see, we never sit on our hands when it comes to having strategic dialogue. We're regularly, constantly engaging with the market and even when transactions aren't being announced publicly, which up until recently there hadn't been any from our perspective. We would always say that we were very active regardless. And I think that's important to note because it's hard to flip a switch off and on M and A. You need to stay engaged with the market and that's always been a core tenant of ours and I think something that will persist going forward.

Speaker 2

So Paul, you want to

Speaker 3

take that? Yes. Hey, Sherpa, this is Paul. I'll take your second question. Yes, so as you mentioned and as Kenny mentioned earlier, this is a fully funded business plan to get us through the combined company plan and cash flow inflection to cash flow positive in 2026.

Speaker 3

And really the pieces of that are really just executing on both companies' plans as they have in place today. Continuing to at Kinetic continuing to drive fiber deeper into that business replacing copper and hitting those marks and hitting those the penetration goals for the fiber product, fiber to the home product at Kinetic is going to be key. Doing that at a cost that's as projected and that's been going really well. As Kenny mentioned, the cost per passing at Kinetic is coming in at $6.50 per home, which we think is an industry leading number. And so that continuing to execute on that capital plan, bringing fiber to those homes and then achieving the penetration rates that Kinetic is showing good progress toward achieving are certainly important.

Speaker 3

And then at fiber infrastructure, it's really continuing to execute, continuing to execute on just what we've been talking about, lowering capital intensity, delivering more and more lease up higher return type deals. But investment levels in that fiber infrastructure business are relatively consistent with what they are today. And then also for that Windstream business continuing to drive efficiencies, drive TDM cost out of that business, which is a big part of their plan over the next couple of years and they're making great progress with regard to doing that. We saw some nice efficiency gains in their costs this quarter. The results that were just published today in our 8 ks saw some good efficiency gains in that business, so continuing to drive that through.

Speaker 3

So it's really just executing on that plan that's in front of both of our companies that we're executing on today, going through the completion of that fiber to the home build plan at Kinetic and kind of 20 26, 2027 zone gets us to that free cash flow profile that we were talking about. One other thing I will mention is synergy. There's some synergy built into that as well. So we're going to have to do our job in achieving those synergies, which we are confident at. We think the $100,000,000 kind of run rate of synergies that we've got baked into the plan are conservative and highly achievable.

Speaker 2

Yes. And I agree with all that. I think one thing to add, Shipra, and tying it back to the question about the hyperscalers. I do think that when we look at capital intensity going forward, we don't anticipate pulling back on investing in our fiber infrastructure business, as Paul mentioned, so just to be clear on that. But I do think that there's an increasingly amount of our bigger deals, whether it be anchor deals or lease up deals that have higher NRCs as a part of them, which will drive down capital intensity, as I mentioned in our prepared remarks.

Speaker 2

And I also think independent of NRCs, there's a likelihood that we'll see higher IRU fees going forward as well. And so that those things are both, I'd say, additions to our original plan when we think about bridging to that free cash flow period in 2026. So that's a trend that's developing and we're excited about it.

Speaker 5

Thank you.

Operator

Thank you. Our next question comes from the line of Frank Louthan of Raymond James.

Speaker 3

Hey, guys. Good morning. This is Rob on for Frank. You might have spoken to this earlier, so I didn't catch it. Are you expecting to do any builds for bead within Unity Fiber, not within Windstream in 2025?

Speaker 3

Or is that more likely to be a 2026 event at this point?

Speaker 2

Good morning, Rob. So we're currently not having conversations related to bead at Unity. The bead related conversations are entirely at Kinetic, which as an aside gives us the ability to communicate directly with Windstream about that as opposed to being competing bidders. I do think on a combined basis, once we're once the transaction is closed and on a go forward basis, there will be opportunities to build in or around or off of our Uniti Fiber network. There are some really attractive metro fiber markets that we have, as you know, and taking the build and execution expertise of Kinetic and expanding that into that footprint, I think, is an opportunity that we really haven't started to fully evaluate yet, but we do believe it's an opportunity that's on the dashboard.

Speaker 2

But that will be post closing. And when you look at the bead opportunity, we entirely agree with the way Paul Sanou and Drew Smith over at Windstream communicate about BEAT. It's a once it's a terrific opportunity for Kinetic. It's really targeting the Tier 2 and Tier 3 markets where Kinetic operates and thrives today. And so we think it's a real opportunity and it's a big part of us expanding the number of homes targeted with fiber up to 1,000,000.

Speaker 2

So we're really leaning into that on a combined basis and we're excited about the opportunity that we think it's going to bring.

Speaker 3

Great. Thank you, guys.

Operator

Thank you. I would now like to turn the conference back to Kenny Gunderman for closing remarks. Sir?

Speaker 2

Great. We appreciate your interest in Uniti Group and look forward to updating you further on future calls. Thank you for joining us today.

Operator

This concludes today's conference call. Thank you for participating. You may now

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Key Takeaways

  • Uniti reported a solid Q2 with 3% growth in core recurring strategic fiber revenue, 12% enterprise wholesale growth and industry‐leading 0.3% churn, keeping full‐year MRR growth on track at 4%–6%.
  • Hyperscaler-driven AI demand comprised ~40% of Q2 bookings, helping reduce net capital intensity to 31% (from 44% a year ago) and underpinning expectations for continued high-margin deals and stable dark fiber pricing.
  • The pending Uniti-Windstream merger will create a national fiber platform with over 5 million on-ramps, combining Uniti’s Tier 2/3 network with Kinetic’s fiber-backed DSLAM footprint and $6.50 per passing fiber-to-the-home cost.
  • Unchanged 2024 guidance for consolidated revenue and adjusted EBITDA was reiterated, while full-year AFFO was lowered due to higher interest expense from a $300 million secured notes add-on and lease-up timing shifts.
  • New Unity expects to achieve positive free cash flow by 2026 under a fully funded two-year build plan, driven by $100 million of run-rate synergies, higher NRCs and lower capital intensity from increased lease-up deals.
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Earnings Conference Call
Uniti Group Q2 2024
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