Q4 2022 Uniti Group Inc Earnings Call
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
[music].
Okay.
Welcome to Uniti group's fourth quarter 2022 conference call. My name is Jonathan and I will be your operator for today a webcast of this call will be available on the company's website www dot <unk> dot com, beginning today and will remain available.
14 days at this time, all participants are in a listen only mode participants on the call will have the opportunity to ask questions. Following the company's prepared comments the company would like to remind you that today's remarks include forward looking statements and actual results could differ materially from those projected in these statements.
The factors that could cause actual results to differ artists gust in the company's filings with the SEC. The company's remarks. This morning will reference slides posted on its website and you are encouraged to refer to those materials. During this call discussing during this call will also include certain finance.
Youll measures that were not prepared in accordance with general accepted accounting principles reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the company's current report on form 8-K dated today I would now like to turn the call over to Uniti group's chief.
Executive Officer, Kenny Gunderman. Please go ahead Mr Gunderman.
Thank you good morning, everyone and thank you for joining.
Starting on slide three I wanted to briefly cover our key accomplishments in 2022 and our priorities for 2023.
I'm very pleased with how we executed on our disciplined growth plan throughout 2022.
The growth of broadband continues to accelerate as being fueled by fiber.
<unk> core IP backbone peaked at around 30 gigs in 2017 and grew to approximately 100 gig just before the pandemic.
As of last week, our IP backbone peaked at 300 gigs a 10 times increase from just six years ago.
We expect this acceleration to continue growth across both our IP and transport networks, especially given that three out of our four wireless carriers.
Some of our largest customer our consumers of capacity are just beginning to upgrade towers from one gig to 10 gig.
As I said many times before we do not have a lack of demand in our industry. However, profitable demand is key.
In 2022, we had record levels of consolidated new bookings and gross installs.
But as importantly, the bookings and installs were balanced between anchor and lease up in wholesale and non wholesale.
Along with sub 100 day meantime to deliver on our installs in our industry, leading monthly churn of 2% unity is demonstrating the outstanding economics of shared fiber infrastructure.
Also on the enterprise recurring revenue were up 10% and 13% respectively in 2022 from the prior year.
While dark fiber lease up at Uniti leasing was up over 50% from prior from the prior year.
On an overall basis, we continue to target and deliver mid single digit top line growth, increasing adjusted EBITDA and declining capital intensity.
2022 was also an important year with respect to positioning unity to control its own destiny.
We recently recently completed two successful financings that pushed out our most meaningful debt maturities, while also providing additional liquidity to an increasingly positive free cash flow trajectory.
Combined with our organic growth runway in our steady performance. We now have a growth plan that is virtually fully funded aside from potential future refinancings.
As we turn to our priorities for 2023, many remain the same as they were in 2022.
We're still focused on driving high margin recurring revenue through lease up on both our metro fiber and on our long haul routes to span the country with.
We will selectively like more and more fiber with anchor economics with a clear path to lease up.
We will closely monitor and adapt to macro economic conditions and potential supply chain and labor challenges and we remain confident we're in a good position to withstand any disruptions that may occur.
As it relates to M&A, we will continue to take a disciplined approach and do not expect any transactions in the immediate future given the current interest rate and macro economic environment.
In the meantime, we are focused on delivering strong organic growth and operating results, while creating value for our stakeholders.
Turning to slide four our strategy continues to focus on buying and building mission critical fiber infrastructure and internal leasing that infrastructure to anchor customers as well as the additional lease up customers, while driving cumulative cash yields well above anchor yields.
This strategy strategy has resulted in unity, becoming the second largest independent fiber operator in the country.
We're often asked what distinguishes uniti from other facilities based fiber operators, so I'd like to highlight a few.
Many other sizable fiber companies were built through dozens of company acquisitions acquisitions that come with integration challenges and seven percentage of legacy revenue.
This often leads to years of challenges on growth elevated churn and profitability.
Conversely unity is only acquired three meaningful operating companies in its history, which are now fully integrated and brought over no legacy services.
However, through additional sale leaseback and other other asset acquisitions, we've acquired over 100000 fiber route miles that come with one or two anchor customers.
Said differently, 75% of our network was acquired with no legacy services, no integration challenges and substantial amounts of unused fiber for lease up.
Slide five demonstrates this substantially underutilized fiber network is helping drive our shared infrastructure economics.
We're driving cumulative cash flow yields today of 23% of more than three fold increase from the anchor yields on these projects.
Slide six demonstrates the second distinguishing characteristic.
The majority of our revenue is wholesale in nature, which comes with longer term contracts lower churn and less required overhead.
As a result, our business and underlying performance are less susceptible to macroeconomic conditions.
The vast majority of these wholesale customers are the large wireless providers hyper scaler in international and domestic carriers.
These carriers are purchasing large price community to connect towers small cells data centers fiber to the home and inner city Pops, which further highlights that our business is diversified across numerous numerous fiber use cases.
These use cases are all on ramps that are driving traffic into our core network.
Turning to slide seven scale matters, and fiber, especially with a wholesale heavy business like ours.
Having an owned national network as a meaningful competitive advantage for unity.
Especially given that it would take billions of dollars of many years to build a new national network.
We estimate there are only five truly own national networks in two independent fiber providers with national networks in the U S today with unity being one of them.
Thus, our ability to deploy dark fiber and wave services present unity with a unique growth opportunity with minimal competition.
Today dark fiber in North America is an approximately one $5 billion annual market opportunity and is expected to grow about 10% annually over the next several years.
A growing component of our wholesale strategy or wavelength services, which represent a $2 billion annual revenue opportunity today and are expected to grow 7% over the next several years.
We're selectively lighting more and more long haul routes to provide wave services and capitalize on growing demand while maintaining the same discipline on anchor in lease up economics.
For example, we recently signed a long term contract with a large global internet provider offering long haul dark fiber connectivity over 3100 route miles to Premier data centers located in 12 cities within the central and southeastern U S. The.
The total contract value of this deal was approximately $65 million, making it one of the largest customer contracts in <unk> history.
We expect these routes to be delivered throughout this year and next.
As I mentioned earlier, our wholesale heavy model produces economics that are very attractive with high margin.
<unk> managed revenue virtually no churn long term contracts that routinely have escalators and minimal capex requirements.
Slide eight demonstrates.
Distinguishing characteristic of your entities, which is our balanced approach to bookings.
Although the wholesale business will always be our focus on disciplined and controlled enterprise strategy can drive enhanced profitability with minimal capex and low churn, especially if there are no legacy services.
While greenfield bookings drive growth with anchor customers and expand the network in a cost effective manner for new lease up opportunities.
The majority of new bookings continue to be lease up in nature and are substantially less capital intensive.
Turning to slide nine our fourth distinguishing characteristic is that our enterprise strategy is highly disciplined and regional in nature.
As you can see from the map, we are only offering enterprise services and approximately 30 metros concentrated in the southeast.
Our product set is simple all cells are on our owned and controlled dense metro fiber network and we have no legacy services, such as legacy voice or Tdm.
The majority of our operational the majority of operational expenses within fiber businesses, our employees at off net fiber purchases because.
Because we are selling largely on net products and services in the majority of our employees, including sales field Techs site acquisition construction maintenance and others are concentrated in a certain geographic area, we're able to maximize efficiency and therefore drive 50% plus cash yields on our enterprise lease up sales.
In addition, our local brand and substantially enhanced in this region and our enterprise monthly churn is industry, leading at around 7%.
As a result of our consistent strong bookings activity enterprise recurring revenue was up 15% during the quarter, while gross install MLR was up 30% from the prior year.
Equally exciting and as we mentioned before we own dark metro fiber and about 300 markets nationwide with represents terrific capital and margin efficient growth potential for enterprise wireless backhaul and even small cells.
I'll now turn the call over to Paul.
Thank you Kenny and good morning, everyone.
I'd like to begin by reviewing our fourth quarter and full year 2022 performance followed by an overview of our 2023 outlook.
You highlighted 2022 was an outstanding year for unity from a performance perspective, our bookings and gross installs have never been higher and we expect these high levels to continue throughout 2023 as the demand for our product and service offerings remained strong.
<unk>.
Also recently completed two refinancing transactions that effectively pushed out our significant near term debt maturities by five years and added additional liquidity fortifying, our balance sheet and enhancing our ability to weather any financial market uncertainty.
As I will cover in more detail in just a bit our 2023 outlook reflects these trends and the continued strength, we're seeing in our fiber business today.
Finally, I will end with additional commentary on our current balance sheet and capital structure.
Please turn to slide 10, and I'll start with comments on our fourth quarter.
We reported consolidated revenues of $284 million consolidated adjusted EBITDA of $229 million <unk> attributable to common shareholders of $115 million and <unk> <unk> per diluted common share of <unk> 44.
Net income attributable to common shareholders for the quarter was approximately $41 million or <unk> 13 per diluted share, which includes a $24 5 million goodwill impairment charge related to our unity fiber segment that was driven by an increase in the macro interest rate environment.
At Uniti leasing, we reported segment revenues of $209 million and adjusted EBITDA of $203 million, excluding an $8 million onetime noncash adjustment in the fourth quarter of 2021 that related to the straight line revenue associated with dark fiber <unk> contracts and other assets, we acquired from Windstream as part of the settlement agreement revenue in <unk>.
Adjusted EBITDA grew 3%, respectively in the fourth quarter of 2022 compared to the prior year period.
Accordingly, Uniti leasing achieved an adjusted EBITDA margin of 97% for the quarter.
Turning to slide 11, our growth capital investment program continues to provide positive results for unity over the past six years, our tenet has invested over $1 billion of tenant capital improvements in our network.
Unity continues to invest its own capital and long term value accretive fiber largely focused on highly valuable last mile fiber, including fiber and commercial parks in fiber to the home.
Collectively these investments have resulted in 2800 route miles of newly constructed fiber and 23% of the legacy copper network being overbuilt with fiber.
Based on the investments made to date and our expectation that Windstream will utilize most if not all of the GCI program, we expect that nearly half of the legacy copper network will be overbuilt, but with fiber by 2030.
During the fourth quarter Uniti leasing deployed approximately $85 million towards growth capital investment initiatives with the majority of the investments relating to the Windstream GCI program.
These GCI investments added 1950 route miles of fiber to <unk> own network across several different markets.
As of December 31, Unity has invested approximately $544 million of capital to date under the GCI program with Windstream, adding around 15450 route miles and 755000 strand miles of fiber to our network. These.
These investments will be added to the master lease at an 8% initial yield at the one year anniversary of unity, making such investment they are subject to a 5% annual escalator and resulted in nearly 100% margin. The investments. We have made to date will ultimately generate approximately $44 million of annualized cash rent and increase the overall value of our network.
Kirk.
At Uniti fiber, we turned over 236 lit backhaul dark fiber and small cell sites for our wireless carriers across our southeast footprint during the fourth quarter. These installs at annualized revenues of approximately $2 6 million.
The full year of 2022, we installed over 1100 lit backhaul dark fiber and small cell sites, adding approximately $12 million of annualized revenue. We currently have around 3500 lit backhaul dark fiber and small cell sites remaining in our backlog that we expect to deploy over the next few years. This wireless backlog represents an incremental.
$12 million of annualized revenues.
At Uniti fiber, we reported revenues of $75 million and adjusted EBITDA of $32 million during the fourth quarter, achieving margins of 42% revenues were slightly lower than expected due to the timing of nonrecurring equipment sales and installs, while adjusted EBITDA was above expectations due to lower than expected costs relating to the early termination.
Of legacy sprint sites.
Uniti fiber net success based Capex was $41 million in the fourth quarter and was higher than originally anticipated due to the timing of equipment purchases ratings of several projects.
Given the continued challenges affecting the industry supply chain and lengthy delivery times, we expedited the purchase of certain equipment during the quarter to ensure that we would meet the delivery timeframes of our customers.
We also incurred $3 million of maintenance capex during the quarter.
Please turn to slide 12, and I'll now cover our 2023 guidance. Our 2023 outlook includes the estimated impact from our recent convertible unsecured notes offerings and related redemptions, our outlook excludes future acquisitions capital market transactions and future transaction related and other costs not specifically mentioned here in <unk>.
Actual results could differ materially from these forward looking statements.
Our full year outlook for 2023 includes the following for each segment.
Beginning with Uniti leasing, we expect revenues and adjusted EBITDA to be $850 million $825 million, respectively at the midpoint, representing adjusted EBITDA margins of approximately 97%.
Yes.
Revenue and adjusted EBITDA each include $33 million of cash rent associated with the GCI investment and $21 million relating to the straight line rent associated with the Windstream master leases and GCI investments, we expect to deploy $260 million of success based capex at the midpoint of our guidance of which $237 million relates to <unk>.
<unk> Windstream GCI investments.
Turning to slide 13, we expect uniti fiber to contribute $314 million of revenue at the midpoint with core recurring revenue is expected to grow 6% from the prior year.
Slide 14 further emphasize at this point as we expect our run rate monthly recurring revenue at Uniti fiber to grow between 6% and 8% in 2023.
This strong growth demonstrates our continued success in executing on our lease up strategy that leverages, our existing dense southeast fiber footprint.
As it relates to dish, we saw strong levels of bookings throughout 2022, and as previously stated the revenue impact will begin to be realized during 2023, although we do expect continued healthy bookings from dish in 2023, we expect they will come at a slower pace than in 2022.
Core nonrecurring revenue is expected to be slightly down from the prior year due to lower <unk> in 2023, when compared to 2022.
Partially offset by higher equipment and install revenue.
As you May recall 2022, with a peak year for <unk> due to sprint related churn, we expect <unk> in 2023 to be approximately $15 million compared to $24 million last year.
For full year 2023, we expect adjusted EBITDA at Uniti fiber to be a $125 million at the midpoint adjusted EBITDA based on core recurring revenue is expected to be up 5% from the prior year, while nonrecurring adjusted EBITDA is expected to be lower due to higher equipment and install cost.
Overall, we expect adjusted EBITDA margins at Uniti fiber to be approximately 40% for the full year 2023.
Net success based Capex for Uniti fiber. This year is expected to be $120 million at the midpoint of our guidance a 10% decrease from levels in 2022.
Turning to slide 15 for 2023, we expect full year <unk> to range between $1 36, and $1 43 per diluted common share with a midpoint of $1 39 per diluted share.
<unk> in 2023 will be impacted by incremental interest in diluted shares relating to our recent convertible and secured note refinancings, excluding the impact of those transactions 2023, <unk> <unk> would have been $1 78 per diluted share on a consolidated basis, we expect revenues to be $1 2 billion in <unk>.
The EBITDA that would be $925 million at the midpoint.
Our guidance contemplates consolidated interest expense for the full year of approximately $550 million, which includes a $21 million write off of deferred financing costs and $44 million of earlier repayment premium in the first quarter of this year related to the redemption of our 778 senior notes due 2025.
Corporate SG&A, excluding amounts allocated to our business segments is expected to be approximately $32 million, including $7 million of stock based compensation expense.
We expect our weighted average diluted common shares outstanding for the full year 2023 to be around 291 million shares compared to 268 million shares in 2022, reflecting the full year impact of the incremental diluted shares relating to the accounting of the new convertible notes using the if converted method.
As a reminder guidance ranges for key components of our outlook are included in the appendix to our presentation on.
On slide 16, we have provided a tabular reconciliation of our full year 2022 results to our 2023 outlook, which summarizes the organic contribution from our core operations and the impact from recent financing activities.
Turning now to our capital structure during the fourth quarter, we issued $306 $5 million of seven 5% convertible senior notes due December 2000, 27 million to repurchase approximately $207 million of our 4% exchangeable notes due 2024 at a discount the.
The initial conversion price of the convertible notes is approximately $7 29 per share representing a premium of 20% to the closing price of the common stock of the company on the data pricing in connection with the convertible notes offering unit entered into privately negotiated capped call transactions with certain financial institutions that effectively increased the conversion.
Our eyes to approximately $10 63 per share.
On February 14th we closed on the issuance of $2 $6 billion of 10, 5% senior secured notes due February 2028, the proceeds from the offering will be used to redeem all of the outstanding 77 708.
Secured notes due 2025 and repay outstanding borrowings under the company's revolving credit facility at.
At year end, we had approximately $356 million of combined unrestricted cash and cash equivalents and undrawn revolver capacity as of today, we have essentially repaid all of our borrowings under our revolver and have almost $500 million of undrawn capacity under our facility our leverage ratio at year end stood at 572 times.
On net debt to last quarter annualized adjusted EBITDA on February 20, <unk>, Our board declared a dividend of <unk> 15 per share to stockholders of record on March 31 payable April 14th.
With that I'll now turn the call back over to Kenny.
Thanks, Paul.
Despite the current macroeconomic backdrop, we continue to prioritize investment in our core business. We currently have approximately $7 billion of revenue under contract with an average term remaining of eight years.
Given the wholesale heavy nature of our business. The majority of this revenue is passively managed in the form of triple net or dark fiber mla's.
As a result, the operating costs associated with this revenue is de Minimis, which results in a very cash flow rich business over the mid to long term.
As slide 17 illustrates the investment from this cash flow will lead to a more sizeable and valuable fiber business over the next several years.
We also expect to be free cash flow positive about 2026, and generate cumulative free cash flow of over $1 billion within five years.
Within the five year period, ending in 2030.
We maintain our current dividend and approximate level of annual capital investment.
The trajectory leads to substantial deleveraging, resulting in net leverage between four to five times roughly roughly doubling the size of our fiber business by 2030.
Our fully funded business plan, no significant near term debt maturities and long runway for profitable growth afford unity the ability to create value for our shareholders each day.
Operator, we're now ready to take questions.
Certainly ladies and gentlemen, if you have a question at this time. Please press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue simply press star one again, one moment for our first question.
Okay.
And our first question comes from the line of Lee from RBC. Your question. Please.
Thank you for taking the.
Question so.
Given the current macro environment are you seeing any changes in wholesale demand with some players. Thank you Chuck.
Capex to Opex.
Hey, Bob.
Not not really I think.
So we're selling wholesale to the large wireless carriers, the hyperscale or is a lot of big international and domestic carriers and so the the spending patterns are all going up.
And the different differential between whether they are prioritizing.
Spending capital.
Versus opex is very customer specific and frankly in some cases, it's more routes specific or market specific.
So, but I wouldn't characterize any of that.
Any of those.
Observations as it has been.
Related to the macro environment.
And I would also add to that as well bore that we.
We're flexible in our terms with our customers so not.
In addition to <unk> that come with large upfront capital expenditures for customers. We also do.
Monthly leasing and we also offer lit services.
Fit right in to somebody who prefers adding.
Adding opex overriding.
Capital expenses in the near term. So I think we also have the ability to be flexible with our wholesale customers and provide services in <unk>.
The contracts the way that fit their their capital demands.
Alright.
And then a follow up we've heard some others in the communications infrastructure space talked about customers taking longer to make goodbye. This session.
Are there some more cross analysis required approvals.
Additional parties internally.
What have you been seeing in terms of how long it takes.
Customers asked for our next session.
Yes, we have.
We've heard of that anecdotally.
Bore.
I think we we certainly.
Here here of that around the enterprise business, a little bit I think.
But when it comes to.
Our big wholesale customers, we havent really seen that I think that the.
There's a there's a big push among our wireless carriers to upgrade to 10 gig.
So that's that's a capital intensive.
Our approach.
Approach.
We've seen at least particularly among one carrier in particular, a real push to get to get that done sooner rather than later.
There's a lot of inner city.
<unk> being acquired by the Hyperscale is.
And just.
Appears to be no no ceiling on their need for capacity, particularly inner city capacity. So I don't think that the.
Any sort of decisions being made around.
Purchasing we don't we wouldn't attribute them to macro environment.
Issues, it's more just network planning and typical decision making.
From our vantage point.
Okay.
I could just squeeze in one last one thank you for that long term.
Bob.
Our debt slide.
And to that a lot of that can you provide some additional color for on the revenue side.
How you see that.
Maybe top two or three drivers and how you see that next.
At that revenue mix shifting over time. Thank you.
Yes, I'll comment on it and then ask Paul to comment on it too but.
We thought that it would be helpful. Just to give people some some some some data to anchor around.
And we were confident putting it out there because we just see the growth trajectory of the business continuing and we've said it. Many many times, we just have a long runway for profitable organic growth.
And ultimately doubling the size of the fiber business or better is absolutely within our within our within our sites and really and I mentioned it a number of times in our prepared remarks to highlight it but we just we don't have any legacy services and a lot of carriers a lot of operators lot of infrastructure providers have.
Legacy services that way down their growth or.
Heightened churn and we don't have that and so when we look at our different businesses, whether it's dark fiber or lit.
Fiber to the tower small cells enterprise E rate government those businesses are all growing and it's just a question of.
To what extent some are growing at mid single digits summer growing it as we said in our prepared remarks at 10, 2% to 20%.
But when we start to look a little bit longer term several years out and.
And the business starts to level out we think again, we think the mid single digit blended topline growth is what we expect and again some businesses will be more so it will be less but generally in that in that Zip code.
And the mix of business will continue to be heavily.
Dependent reliant.
Weighted towards wholesale that's going to continue to be our focus.
That's where we think that the optimal economics are that's where we that's where we're driving good returns from the wireless carriers, the hyperscale or is that.
The international and the domestic carriers it gives us the ability to stay.
Agnostic and diversified across all the different fiber use cases, so whether it's the.
<unk> or some.
Some other version of mobile broadband or fixed wireless or fiber to the home.
Or inner city capacity datacenter connectivity it doesn't matter to us we all of those are trends that are driving growth in our business, especially if we stay together to wholesale.
We plan to do and there'll be a nice mix of enterprise in there to help drive optimal economics in lease up in the business, but I think that kind of roughly 75% 80%.
Not more focus on wholesale and the rest on enterprise and government is what we're looking at.
Yes, I would agree with those comments can I don't have a lot to add to those I think you said those so those well I think we expect the macro environment.
Demand for bandwidth to continue to drive to drive growth, we see that continuing going forward and we're also a share taker and a lot of our markets, particularly our metro market. So.
In addition to just overall demand growth, we expect to be a share taker in that to help drive our growth as well so.
The mix, we expect it to continue to be.
Come from as Kenny just add from from all of our customer segments.
Towards wholesale, but with a good contribution from enterprise and <unk> services.
Thank you Doug.
Thank you and then as a reminder, ladies and gentlemen, if you have any.
Question at this time, please press Star 111 moment for our next question.
And our next question comes from the line of <unk> from Bank of America. Your question. Please.
Oh, Hey, guys, sorry, I dialed in a reshaped its day part and how are you.
So I guess two questions if I could.
Kenny one for you and one for Paul.
I guess.
When I.
Think about your.
Your comments about.
The immediate future and kind of M&A.
Where rates are for the time being and kind of the return profile that you have got in.
In the organic Harvard business as you describe it can you elaborate why being a REIT.
It's still a good idea because.
Because it seems like even when you look at that slide 17 by mid year 2030, after dividends, you've managed to skim about $1 billion.
Free cash flow out of the business, but that will be net of current course and speed.
<unk> than a $1 billion of dividends over that time arguably if the returns are what we're seeing here on this page it seems like.
Being not a REIT and not paying a dividend and investing those dollars.
We're delevering with those dollars any of those uses would be better than the dividend use.
That you're kind of confined to today. So if you could kind of elaborate a little bit of why this is a good idea to keep doing it and then Paul I guess I just wanted to make sure. We understood. Thank you again for that slide.
And.
I think that you guys had made some comments about how with the kind of new financing net of the dividend net of the payments to windstream of about $100 million a year for the settlement net of the GCI capex that youre, making on their behalf.
That you might be free cash flow positive by the end.
Of of 2025 after the dividend.
So what we're looking at here is really a concentration of cash flows accumulating.
Accumulating between kind of 2026 and 2030 am I my thinking about the correct I appreciate it. Thank you.
Hey, David.
On the question about being being a REIT.
Thank you.
If you if you believe the cash flow heavy nature of our business, obviously as indicated by that slide.
And particularly once we become free cash flow positive then.
<unk>.
The upshot of that if we're not a REIT is that we're paying taxes.
A lot of taxes and so there is as you know one of the benefits of being a REIT is that youre shielding taxes.
And so that has always been true of us and we will continue to be going forward, especially as we start generating more cash flow in the outer years, So there's that benefit.
Secondly.
And I think to your point about.
The use of cash and where do you where do you use that extra $1 billion is it better to to pay a higher dividend or is it better to deleverage or is it better to invest in the business.
Or it's some different combination of all of the above I think those are all great questions and we are excited about the ability to have that flexibility and I think as we as we go forward, we'll make different capital allocation decisions based upon the trajectory of the business the growth of the business preference of our shareholders.
Yes.
And I think that's exactly the place where we want to be to be able to give our board the optionality on things like that.
Aye.
For one like being Levered around five five to six times I think that that's an optimal place for us. It always has been we have always been in that Zip code.
For one like paying a dividend and giving our shareholders a nice steady return.
Given the volatility in our stock and that's always been the case, it's up and down in this current macro environment.
<unk> demonstrates that right I mean, we're under pressure like a lot of yield stocks, but.
Despite that we are paying a nice steady return to our shareholders.
I'd like to get to a place where we have the flexibility to raise the dividend.
More of a dividend growth story and I think there is a time when that comes.
But I also love the ability to invest more in our business and like you said that the returns that we're getting are just terrific.
And we say it all the time, but mid single digit yields with anchor customers that basically help finance the expansion of the network and then very clear line of sight to lease up that gets well above 10% demonstrating 20% regularly that's hard to.
Hard to to turn away from but.
But the discipline side of that is not just.
Going after profitable business, but it's also doing it in a way that you don't overextend in the organization. So for example, if we.
If we wanted to to spend an extra $100 million on Capex next year, we could do that and the opportunity for growth is there I mean as Paul said, we're a share taker in virtually all of our businesses, we have less than 1% share in dark fiber and less than 1% share in waves and less than.
5% market share in most of our enterprise market. So there's just tons of growth potential.
But if you over extend the organization and go after growth too aggressively.
You wind up not performing well for customers and so there is a cost to it. So disciplined growth is a huge theme of ours, which includes good business, but also doing it in a over a time period that that's measured so I think its all these are all good things for us.
Good issues for us to deal with and address and I think fundamentally being a REIT today is a good thing for us because it's shielding taxes is expect that to continue in the future.
And but at the same time, we are always open minded to.
Different ways to allocate capital in different corporate structures. So we're never going to be close minded to evaluating different different different approaches.
Yes, Dave I'll take your second question I mean, the short answer to your question is yes.
Youre exactly right, you're interpreting slide correctly so.
We do have a clear path to free cash flow positive by the end of 2025.
Part of that is continuing to grow the business organically and driving towards lower capital intensity at Uniti fiber and more look at cap.
Capex large deals on the National network of your leasing the other piece of that is not dependent on operational execution at all it's really kind of baked into the cake as part of the Windstream settlement. So those windstream settlement payments fall off in 2025.
And then GCI continues our GCI funding commitment continues to step down over time, while the GCI revenue.
The previous GCI investments continue to step up so those two those two pieces are more just a factor of time. So part of it is operational execution and part of it is just sort of baked into the cake.
Those future commitments.
Perfect.
Just one last thing if I could Paul just on kind of your experience through the refinancing process.
You guys have windstream and Windstream as owners have had.
Back and forth over the last year or so.
For various and sundry reasons.
And yet irrespective of that it seems like the refinancing went.
Pretty smoothly.
I was wondering if you could kind of talk a little bit about how relevant if at all relevant.
The backward looking.
Wrestling with Windstream owners.
And or the future kind of.
Lease renewal period.
<unk> came up and in the process of kind of nailing down the runway that you now have over the next five years.
Yes, sure happy to comment on that.
As youre kind of alluding to.
That refinancing was critical for our business and we were very pleased with how it got done, especially against the challenging capital market backdrop.
It was.
It was significantly oversubscribed, the largest book order for a bond deal in <unk> history. So that was something that was very.
Very encouraging for.
For the management team here and the board to see that kind of confidence in our.
And our plan going forward.
And we have the largest number of single number of orders. So the interest the demand for that bond issuance came from a larger number of investors and we would ever have participate in the bond issuance before as well. So we also.
We're very pleased with that.
And with that demand, we were able to price that.
Paul.
The tight end of the range and the upside that full $2 6 billion, which.
We thought was very.
A very good thing for the business as well so.
In terms of the.
The renewal rent discussion it really was not a factor in the process at all and as a matter of fact.
During.
Our marketing of of that deal, we actually didn't take a single question from from investors on the renewal rent I'm sure. It's something that everybody knows is out there in <unk>.
I've heard a lot of the commentary that you alluded to back and forth between between the parties, but it just really wasn't.
It wasn't a big factor in getting that deal done and I think the demand that we receive the oversubscription. Thank you.
It's a good testament to that.
The comfort level that investors had with.
With our plan going forward.
Okay. Good to hear thanks, Paul.
Thank you one moment for our next question.
And our next question comes from the line of Frank Lithium from Raymond James Your question. Please.
Hey, guys. This is Rob one for Frank.
You kind of touched on this first part earlier, but what do you think of the outlook for network expansion and.
Do you guys think that cogent acquisition of the sprint network.
Could it could potentially impact you guys, if cogent decides to drop pricing wavelengths dark fiber. Thank you.
Good morning, Rob.
We have a lot of respect for cogent.
Dave Shaffer.
Great operator in.
They are good customer.
We're very familiar with with the asset they are acquiring.
Definitely.
Paying a lot of attention to that we like.
Frankly, it's a bit of an affirmation of our strategy right because it is moving more towards facilities based.
Moving in to long haul.
Transport dark fiber and and waves right. So.
We appreciate that the affirmation of our strategy, but.
And operator that we have a lot of respect for.
I think that.
The.
The the risk of competition is always there.
<unk> is a competitive industry and so we're all forever competing with customers in.
Some markets and in other markets there.
They're just they're just customers and in this case.
For the.
Transport.
Long haul transport.
Space, there's really just a few competitors there.
Oh, there's lumen.
US and Cogent now and so as Paul mentioned, we're a share taker in all of our all of our businesses. We're not we're not concerned about cogent or anyone else, taking our book of business on dark fiber of ways because that book of business is growing right now we're still.
Our sub 1% market share.
Participant ourselves and so there is there is more.
Upside for us than than than downside and I think having.
Other competitor in this space is a firming of our of our strategy and I think it's I think it's there's plenty of room for both cogent and unity to take share.
<unk> continued growing those businesses and last thing I'd say I think our.
Our National network is more expansive.
Then the one that's being acquired and so our ability to create network solutions for.
Four.
Hyper scaler in particular of the wireless carriers I think is pretty material because remember our national network is it was it was acquired.
Hard about 30 routes from from lumen, a few years ago. So it's really the yield level III network plus.
All of the different networks, we've accumulated from our sale leaseback. So it's an expansive national network of 135000 route miles.
And having that bigger network.
<unk> provides the ability to.
To.
Offer more network solutions and so it's not always just about price, it's about having the ability to connect.
And greater greater way so.
So we're we're not we're not concerned about the additional competition obviously.
<unk> focused on it just like we are for competition in general but.
But we're happy to happy.
Happy to keep growing our business in a profitable way.
Great. Thank you guys.
Thank you.
It does conclude the question and answer session of today's program I'd like to hand, the program back to Kenny Gunderman for any further remarks.
Thank you. We appreciate your interest in Uniti group and look forward to updating you further on future calls.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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