Q3 2024 Uniti Group Inc Earnings Call
Speaker Change: Good morning and welcome to today's conference call to discuss Unity's third quarter 2024 earnings results.
Gigi: My name is Gigi and I'll be your operator for today. Today's call is being recorded and a webcast will be available on the company's investor relations website and vester.unity.com. Beginning today and will remain available for 365 days.
Gigi: At this time, O'Portis have been thrown a listen only mode. Participants on the call will have the opportunity to ask questions following the company's prepared comments.
Speaker Change: It is now my pleasure to introduce Bill DiTullio, Unity's Vice President of Investor Relations and Treasury. Please begin.
Bill DiTullio: Thank you, GG. Good morning, everyone. And thank you for joining today's conference call to discuss unit 3rd quarter, 2024 results. Speaking on the call today, we'll be Kenny Gunderman, our CEO, and Paul Bullington Unity CSO. Before we get started, I would like to quickly cover our partners statement.
Bill DiTullio: Please note that today's remarks may contain forward-looking statements.
Bill DiTullio: These statements include, but are not limited to, statements about our 2024 outlook, expectations regarding Lisa Povernetwork.
Bill DiTullio: Demand Trends, Business Strategies, Growth Prospects.
Bill DiTullio: The benefits of the proposed transaction between unity and wind stream, including future financial and operating results of either company or the combined company. State mature related to the expected timing of the completion of the transaction in combined company plans and other statements that are not historical facts.
Bill DiTullio: Any forward-looking statements contained in today's discussion in materials speak only as of the particular date or date indicated in the materials.
Bill DiTullio: We also note that unity and win stream through the entity that will be the combined parent company, following the merger. Has filed a form S4 registration statement with the SEC that includes a proxy statement and prospectus regarding the transaction that has not yet become effective.
Bill DiTullio: and Vesteres are urged to read that proxy statement and perspectives as it contains important information about the transaction. In addition, Unity and Winstrum and their directors and officers may be deemed to be participating in the solicitation of Proxy's and Favour of the Transaction.
Bill DiTullio: We may find information about unity directors and executive officers in the company's most recent proxy statement. We may also obtain a copy of the proxy statement and prospectus through the SEC website, Unity and Winstream's websites. Or by requesting a copy from either companies and investor relations website.
Bill DiTullio: More information about how to request these documents is available in the presentation that it completes this call.
Bill DiTullio: Unit is 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.
Bill DiTullio: New Morris Factor's could cause actual results to differ materially from those described in the Ford-looking statements. And for more information on those factors, please see the Section Title Ford-looking statements in the presentation in the risk factors section of the filed form S4.
Speaker Change: with that I would now like to turn the call over to Kenny.
Kenny Gunderman: Thanks Bill, good morning everyone and thank you for joining. I'm excited to talk about another solid quarter of performance at Unity in our pending combination with Winstrain. But before doing that I want to first acknowledge the terrible impact of Hurricane
Kenny Gunderman: [inaudible]
Kenny Gunderman: Well, I'll respond to such national disasters as a core competency and regularly compliment at our customers. Unity leadership never takes your service for granted.
Kenny Gunderman: Now, turning to the quarter and starting on slide four.
Kenny Gunderman: Unit once again delivered a solid quarter of performance led by the continued strong demand for our mission critical fiber infrastructure by various customers including hyperscalers. Paul will provide more details on our updated guidance later on, but we're slightly increasing our full year 2024 revenue outlook as a result of this strong demand.
Kenny Gunderman: Our core recurring strategic fiber business grew 3% in the third quarter field by exceptional growth in enterprise wholesale and dark fiber revenue of 10% 14% and 18% respectively.
Kenny Gunderman: When paired with our industry leading 0.2% churn, we remain on track to deliver 4-6% MRR growth for the full year.
Speaker Change: Terrence Leid-Five, we had another strong quarter of new bookies.
Speaker Change: While wireless bookings have remained muted so far, we're encouraged that we'll see a pickup and activity towards the end of this year and end of 2025.
Speaker Change: The town's turn is the more it's been offset by demand from other customers, including fiber to home carriers, which are driving substantial demand for curing middle-mile and intercity backpalt to connect their neighborhoods.
Speaker Change: The amount of bookings, Unity saw a relating to fire-around carriers increased threefold in 2023 vs. 2022, and we expect a similar level this year.
Speaker Change: As we mentioned previously, the demand from hyperscalers continues to represent a meaningful part of our consolidated bookings with 20% of our year-to-date bookings coming from hyperscalers.
Speaker Change: We're confident that this demand will be sustained going forward as a meaningful amount of our entire sales model is from HyperSkillers.
Speaker Change: Moving to slide 6, I wanted to talk a bit more granular about the hyperscaler deals we're seeing. There should be no debate in the industry about the size of the demand for digital infrastructure. The hyperscaler opportunity for digital infrastructure providers, including data centers and fiber.
Speaker Change: Hyperskiller is spending over $200 billion annually and a meaningful percentage of that is being spent on digital infrastructure for cloud-based products, now generative AI and other future use cases.
Speaker Change: We believe this band is going to persist and likely grow.
Speaker Change: The types of transactions we're pursuing with hyper-scalors thus far are attractive financial deals and highly strategic.
Speaker Change: As you can see from the map, we're either selling existing infrastructure with little and no capital required or building new infrastructure and highly strategic parts of our network providing future lease up potential.
Speaker Change: In some cases, we're building new long-haul routes that we previously coveted, but could not justify from a cost perspective.
Speaker Change: Further, the economics of these transactions are entirely in line with our previously stated anchor plus lease up model and we're very excited to pursue future transactions during this investment phase.
Speaker Change: As you can see the types and deals vary from strategic sales to IRUs to dark fiber leases and in some cases selling waves.
Speaker Change: As a result, the impact of our financials including bookings will vary according to quarter. For example, in the fourth quarter, we're likely to see a spike in revenue from strategic sales that were made to hyper-scalers earlier in the year and are being delivered during quarter.
Speaker Change: We're even more excited for the inference phase of gender-to-day eye and the many other ultra-high-brought band use cases that are coming.
Speaker Change: The Edge of our network will become even more valuable as data centers, wireless towers, small cells, and connected buildings will need to be built or upgraded, providing a lift in our art. Importantly, fiber of the home will also become even more valuable.
Speaker Change: and your unit is executing well in our core strategy of providing mission critical fiber and we're well positioned for the future.
Speaker Change: with that, and we'll turn the call over to Paul.
Paul Bullington: Thanks, Kenny. I'd like to begin by reviewing our third quarter performance, followed by an overview of our current 2024 outlook.
Paul Bullington: The solid results we saw on the third quarter for unity were once again anchored by a healthy level of consolidated booking MRR of nearly $1 million. 3% year over year growth in our core recurring strategic fiber revenue.
Paul Bullington: and declining consolidated net success-based capital intensity, ending the quarter at around 20%.
Paul Bullington: As I'll cover in more detail in just a bit, we are slightly increasing our 2024 outlook for consolidated revenue while a Justice Eba dial remains unchanged as we expect to end the year within the previous guidance range is provided.
Paul Bullington: We have also provided Winstream's third quarter financial information in an 8K filed with the SEC earlier this morning.
Paul Bullington: Please turn this slide seven and I'll start with comments on our third quarter.
Paul Bullington: We reported consolidated revenues of $292 million, consolidated adjusted to be a dot of $235 million. AFFO attributed to common shareholders of $87 million, and AFFO per diluted common share of 33 cents.
Paul Bullington: As I mentioned last quarter, given the timing of one time sales, including strategic dark fiber sales to hyperscalers, we continue to expect second half revenue and a just to even doble be more heavily weighted in the fourth quarter versus the third quarter.
Paul Bullington: On a consolidated basis, our Net Capital Intensity during the quarter was 21% down from 41% in the same period, same prior period prior year, as we wrapped up our 2024 GCI funding commitments in July.
Paul Bullington: The continued to be a number of encouraging trends in bookings that are driving this capital efficiency, including our continued focus on lease up and a higher mix of hyper-scaler deals that generally come with higher in our seas.
Paul Bullington: and Unity Leasing, we reported segment revenues of $223 million and adjusted to the end of $215 million, representing an adjusted-debut-dao margin of 97% for the quarter.
Paul Bullington: A Unity Fiverr, we reported revenues of $69 million and a just to leave a dog of $26 million during the third quarter. Both revenue and a just to leave a dog during the quarter were in line with our expectations.
Paul Bullington: Turning this slide eight, our growth capital investment program continues to provide positive results for unity and given our pending merger with Winstream I wanted to highlight a key point that I believe the market is under-appreciating.
Paul Bullington: Since 2015, Connecticut and Unity have invested almost $2.5 billion of capital in its network.
Paul Bullington: The Youth Historical Investments have helped enable kinetics approximately $650 fiber to the home per passing cost. As we estimate, the deploying back-all fiber networks equates to roughly 20% of the total cost of building fiber to the home for others in the industry.
Paul Bullington: On slide 9, we've updated the consolidated year-to-date view of revenue and adjustivity of a DAF or a new unity by each segment on which we expect to report post-close. Both kinetic and fiber infrastructure consists of a highly predictable, core recurring revenue base that continues to grow and yield attractive margins.
Paul Bullington: As a reminder, our fiber to the home platform will continue to be branded as kinetic.
Paul Bullington: 5.5 or infrastructure will include our current unity, fiber and unity-leasing segments.
Paul Bullington: along with the Winsream wholesale segment.
Paul Bullington: 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 has predominantly owned and operated.
Paul Bullington: As you can see, the core fiber business demonstrated solid top line growth for the quarter, and just as importantly, the combined business is demonstrating continued solid EBITDAG growth.
Speaker Change: Police turned to slide 10 and I'll now cover our updated 2024 guidance.
Speaker Change: We were revising our guidance for business unit level revisions and the impact of transaction related to another cost in today.
Speaker Change: are outlook excludes the impact from the expected merger with Winstream, future acquisitions, capital market transactions, and future transaction related in other costs not specifically mentioned here in.
Speaker Change: Actual results could differ materially from these forward-looking statements. As I mentioned earlier, we are increasing our 2024 outlook for consolidated revenue by $3 million to account for higher than expected one time lease up that was realized during the quarter at Unity Leasing.
Speaker Change: While our full year outlook for adjusted EBITDA remains unchanged.
Speaker Change: We were increasing the midpoint of our outlook for unity leasing by $2 million to reflect the additional one-time lease-up I just mentioned, which is offset by an increase of $2 million in our full-year corporate expense outlook due to higher than expected corporate SGA expense.
Speaker Change: University leasing we continue to expect $250 million of net success-based catbacks at the midpoint of our guidance of which approximately $230 million relates to whenstream GCI investments.
Speaker Change: Net success-based catbacks for Unity fiber this year is still expected to be $100 million at the midpoint of our guidance, representing a capital intensity of 34% down from 40% in 2023 and 45% in 2022.
Speaker Change: Further demonstrating the success we are having in transitioning to less capital and sensitive, higher return lease up deals.
Speaker Change: We expect full-year AFFO to range between $1.32 and $1.39 for deluded common share with a midpoint of $1.35 for deluded share. As a reminder, guidance ranges for key components of our outlook are included in the appendix to our earnings presentation.
Speaker Change: At quarter-in, we had approximately $529 million of combined unrestricted cash and cash equivalent and undrawn revolver capacity.
Speaker Change: Our leverage ratio at quarter in was 6.05 times based on net deaths of 3rd quarter, 24, annualized adjusted, ebidoc, excluding the debt and net contributions from the ABS loan facility.
Speaker Change: Finally, a couple of comments on our careful structure.
Speaker Change: 3. During the quarter, Winstream successfully executed on a collaborative plan to strengthen and simplify the post-murder capital structure. These moves accomplished 3 primary goals.
Speaker Change: First, all of Winstream's debt is now portable into the Unity Death Structure at or shortly after closed, allowing for a collapse of the dual debt silos into one. Simplifying the combined capital structure for both the company and investors was something that was important for us to accomplish quickly and efficiently.
Speaker Change: 2nd, it addresses the majority of our 2027 maturity stack by pushing out significant debt maturity to 2031.
Speaker Change: and third raises the cap, additional capital that can be used for general corporate purposes, including expanding the kinetic fiber to the home build plan.
Speaker Change: As a relates to the ABS market, we continue to view it as an attractive source of financing that compliments our existing capital structure well.
Speaker Change: To that end, we continue to make good progress on replacing our current ABS bridge financing with a permanent ABS solution, which we expect will be in place by later this year or early next year. With that, I'll turn the call back over to Kenny.
Kenny Gunderman: Thanks, Paul. We continue to make great progress on our timeline to close our pending merger. In fact, we've already received PUC approvals from 13 of the 18 jurisdictions requiring them.
Kenny Gunderman: Slide 14 showcases the reach of new Unities in Surgeon Fiber Network, extending our successful strategy of targeting Tier II and three markets for wholesale and enterprise now into residential fiber to the home.
Kenny Gunderman: Art true north is building fiber first in less competitive markets, giving us the right to win for many years into the future.
Kenny Gunderman: Including connected buildings, fiber to the tower and small self connections, connected pops and data centers and the 4.3 million total homes within Kenneth's current footprint.
Kenny Gunderman: Unit will have the potential to reach over 5 million connected on ramps and largely unique locations, each driving increasing amounts of bandwidth onto our own wholesale network.
Kenny Gunderman: So I had 15 highlights how kinetic compares favorably to other providers in the industry.
Kenny Gunderman: The only 15% of the footprint today has a true overbuilder and that's held relatively constant for the last five years.
Kenny Gunderman: Next, Connecticut is also building fiber passings of what we believe to be an industry leading cost of $650 per passing.
Speaker Change: Hi, I'm Larry earlier, the Historical GCI TCI Investments of Given Kinetic Head Start from a cost and network quality perspective. Kinetic has a fully and turn-ly owned billed engine that lowers cost further.
Speaker Change: And importantly our current plan currently targets approximately 60% coverage with fiber and we're actively evaluating, expanding that plant further.
Speaker Change: In fact, when streaming now, it's on its earnings call yesterday that we expect to accelerate its fiber-filled program beginning in 2025.
Speaker Change: We plan to provide more specific guidance on that plan when we provide our 2025 outlook early next year.
Speaker Change: Moving to slide 16, you can see Connecticut has been demonstrating strong success the past few years. Initial penetration levels on early cohorts have consistently averaged between 15 to 18 percent in the first year, increasing to above 25 percent on average by the second year.
Speaker Change: RECING COWR to demonstrate initial penetration rates of up to 30% as Connecticut has really ramped a more customer-focused, visually enhanced, local GoToMarket strategy.
Speaker Change: So I'd say 17, how I'd say another exciting element of our combination, which is the bringing together of Unity's robust asset rich national wholesale business with windstreams national lit network.
Speaker Change: On a combined basis, this business will have over 200,000 route miles, many in unique tier 2 and 3 routes, almost 800,000 connected buildings and over 1,600 connected pops and data centers.
Speaker Change: will be act uniquely positioned to continue being a share taker in the growing dark fiber and waves markets.
Speaker Change: Turing this flight at 18, we committed to making progress on numerous key initiatives between signing and closing of our transaction.
Speaker Change: First, both companies continue to execute well operationally, and we continue to provide a unified investor relations outreach to help investors understand the new unity.
Speaker Change: Next, as Paul mentioned earlier, we're very excited to have completed the simplification of our new growth form a balance sheet at closing.
Speaker Change: and as part of that, we're working on an accelerated, expanded fiber-to-home build plan with extra capital.
Speaker Change: We're also actively working with kinetic on an integration plan to achieve our synergy goals.
Speaker Change: and lastly, we're never idle when it comes to Ebene.
Speaker Change: Let me close on slide 19 by restating how excited we are for our Pending Marjorer with Wenskrain.
Speaker Change: and we announce the transaction in May. We talked about this strategic rationale and since then, market developments have absolutely validated our views.
Speaker Change: The new unity is at the epicenter of the growing convergence trend, highlighting the substantial strategic value of kinetic and its scaled fiber-thomoe platform.
Speaker Change: Our five-ranked infrastructure business is also uniquely positioned to benefit from the explosion and broadband demand and general, including the demand being fueled by hyperscanners.
Speaker Change: We cannot be more excited about our positioning, and with that we'd be happy to take your questions.
Speaker Change: Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced.
Speaker Change: 2. With a draw your question, please press star 1-1 again.
Speaker Change: Police, standby, where we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Greg Williams from TD Cowin.
Greg Williams: Great, thanks for taking my questions. The first one is just hoping you could provide more color on the recent win with the Montgomery Metro rings.
Greg Williams: in terms of, you know, MRR and bookings.
Greg Williams: and Enders.
Greg Williams: is a concern out there in general that you're seeing high upfront NRCs as Paul you noted, but not much recurring MRR cash and low yields on some of these deals. Maybe you can talk too.
Greg Williams: the flavor and the characterization of the deals and the mechanics and if the yields are acceptable. And part and parcel to that just...
Greg Williams: can you talk to the competitive dynamics in the RFP process? You know, it's press releases out there.
Greg Williams: and funnels that are in the billions of dollars. If it's a lucrative GNI, Fiber Opportunity, is there more competition at the RFP table and can you speak to the Unibi's advantages? Thanks.
Greg Williams: Good morning, Greg. Thanks.
Speaker Change: Yeah, we wanted to provide more color on the types of transactions we're pursuing with this new slide that we hit in the prepared remarks. And really, when you look at Montgomery, the one you mentioned, it really part and parcel with the ones on this page.
Speaker Change: and it's...
Speaker Change: What we're doing at Unity with respect to the hyperscalers is we're building various strategic fiber when we're working with them. We're not building fiber.
Speaker Change: Often in remote locations that we can't use for a second, third or fourth tenant. We're building fiber that's in the core of our network in markets like Montgomery or connecting markets like Montgomery to Huntsville or Huntsville to Mobile.
Speaker Change: which give us tremendous lease up potential on top of the initial build.
Speaker Change: and so that Doug tells, I think, nicely into your second question, which is the economics of these deals, how do they work for us and how do they fit within our previously stated strategy of our anchor plus lease up model? And we believe they fit.
Speaker Change: Squarely in that model, and we've always talked about...
Speaker Change: Building Anchor Fiber in the 5-10% initial cash flow range, but then having a lease up strategy on top of that that gets you well above that 10%.
Speaker Change: and as we talk about every quarter, we're tracking well above those performance metrics when we look at all the anchor bills we've done over the past number of years. And with respect to these high-press killer deals, I would say, and when you do an anchor deal,
Speaker Change: If you take a lower in our sea, that puts more stress or more focus on the need for lease up in order to get to those returns.
Speaker Change: and Conversely, if you have an higher in RC, there's less stress on the need for less stress on, on, on, on, on, on, at, say that the, the, the sense of urgency on Lisa.
Speaker Change: and then these hyper-scale ideals generally what we're seeing like Paul said the NRC's are higher and so when we think about that 5 to 10% initial yield range I would say
Speaker Change: Most of the deals we're seeing are in excess of that range. And so, from an economic perspective,
Speaker Change: We feel very good about the deals including our view of the lease up potential on the deals that we've done after the anchor deal. Again, given where these bills are, they're right in the core of our network.
Speaker Change: So we feel great about the economics of the deals and we're excited to build more of these going forward and we'll continue reporting on the economics as we do.
Speaker Change: with respect to the competitive dynamic.
Speaker Change: It's really...
Speaker Change: and the other thing is that these are a different type of opportunity than just a broad, wireless RFP, for example. I mean, we're engaging.
Speaker Change: Not quite in the soap manner with the hybrasculars but closer to that than an RFP. If you will, we're engaging on a regular basis.
Speaker Change: and look similar to other large sophisticated companies who want to procure fiber network, they're looking for parties who have a robust scaled network that has plenty of capacity.
Speaker Change: 2, they're looking for providers that are able to build.
Speaker Change: On time and on budget. It's critically important to them. You know, there's a sense of urgency on their part to get this infrastructure built and so they're putting a priority on parties who can deliver for them.
Speaker Change: and Unity does have a scaled robust network. We are in unique locations, including Tier 2 and 3 markets where they're tending to focus right now. And we certainly have a proven ability to build on time and on budget. And so...
Speaker Change: We don't necessarily feel...
Speaker Change: The same competitive pressure that you would in our P process and I think that's a terrific place to be and we continue to focus on execution for these good customers on a go-for basis and I think that's that sort of competitive dynamical process. That's helpful, caller. Thank you.
Speaker Change: Thank you. One moment for our next question.
Speaker Change: Our next question comes from the line of Frank Louten from Braim and James.
Frank Louten: Thank you. With these anchor deals, can you give us some color of how much fiber you're building for yourself?
Frank Louten: with that. How much is this all new Greenfield construction? I assume you're getting some of these some fiber for yourself for inventory. And then on slide 14, but some of these potential market expansions, can we give us more color on that? Are these wind-stream markets as well as the unity fiber markets or a combination? And how should we think about the revenue opportunity there, thanks.
Speaker Change: So Frank Werd.
Speaker Change: in terms of the fiber.
Frank Louten: Your first question, you know, look three or four years ago, we were selling six to 12 strands, generally to high broscalers, now we're delivering on average at say, eight or eight or eight hundred sixty-four strand count deals and some cases more.
Frank Louten: and so there's a substantial pick up in the amount of fiber and just general infrastructure that they're procuring.
Frank Louten: and to your question about how much fiber we're keeping for ourselves or building for ourselves, I would say it's a substantial amount on par with what we're delivering if not more. So anytime we...
Frank Louten: We break ground and put in new network, we're planning future proofing our own network and own capacity needs. We're keeping in mind the amount of capacity we're selling. When you, in the past, when we were selling 6 to 12 strands,
Frank Louten: You know, putting in a 144-count cable seemed like enough, but now when you're not, and you're selling a 164-scran count, you need more. You need more capacity and more conduits.
Frank Louten: We're absolutely using this as an opportunity to not only deliver the fiber that our customers are demanding but we're also future proof, future proofing our network.
Frank Louten: which goes back to Greg's question. I mean, we just feel very excited about the lease up potential that we're building in for ourselves with the fiber that we're delivering.
Frank Louten: In terms of the new market expansion, I think there's multiple new market expansion opportunities for the new unity. Starting with Connecticut.
Frank Louten: Currently today, Connecticut has built fiber to roughly 37-38% of their footprint.
Frank Louten: and we have a plan to get to 60%. So that's a substantial pick-up and the number of markets that where Connecticut has copper today and we have the opportunity to build fiber. And we think there's potentially an opportunity to go even higher and we're working hard on that.
Frank Louten: But we also, in addition to kinetic, we have Metro fiber in 300 markets around the country. And that's a lot of that is in the Unity footprint.
Frank Louten: It's outside of the Connecticut footprint so it's in addition to that kinetic build.
Frank Louten: and today we're offering lit services and probably 30 of those markets. So, you know, a tenth of the opportunity.
Frank Louten: That's not to say that to your revenue question that we think we've got a hundred fold increase in revenue.
Frank Louten: because we're going to target those markets in a very disciplined and measured approach.
Frank Louten: But we do think that having Metro fiber is a very valuable part of our network and that Metro fiber is connected by an owned back haul network in which we also have a lot of unique routes and unique markets.
Frank Louten: and I think that's often under appreciated about the wholesale part of our business because especially with these hyper-scalers, you know, we're connecting data centers in unique metro markets with routes, unique tier 2 and tier 3 routes that, again, have leesapeutential on top of it.
Frank Louten: I'm very excited for a about the market expansion opportunities across all three of our businesses, Connecticut, Unity Fiber, and our wholesale business.
Speaker Change: Great, that's really helpful, Color Banks.
Speaker Change: Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced.
Speaker Change: 2. To withdraw your question, please press star 1-1 again.
Speaker Change: or our next question comes from the line of David Borden from Bank of America.
Speaker Change: and I think we're taking a question.
Speaker Change: I did.
Speaker Change: and a couple of like good um
Speaker Change: and I guess on that slide is the green and yellow kind of the progress of the merger.
David Borden: What's not on there is kind of the regulatory conversation that you're going through on a state-by-state basis. Could you kind of give us a little bit of a color about what is the act or on Bullshodg, you know, from bringing the state regulatory agencies and are there some longer polls in this moment than others?
David Borden: Second Call, you can just step us through there.
David Borden: The one kind revenue benefit that is causing the guide up on revenue but is not.
Speaker Change: and the first question which was...
Speaker Change: the selling process. I mean, it kind of feels like the hyper-feelers know today where they're building.
Speaker Change: So they don't necessarily...
Speaker Change: Need to be stolen, they need to be, they have a route and I'm not guessing they're out there funding for the people that have that route and is that in a little like a reverse sale? I'm just gonna understand how that whole thing's working since it's so new.
Speaker Change: Great day, I'll take the first and turn it to Paul and then come back on the third. So on the regulatory approval process, when we originally signed the deal, we talked about the deal.
Speaker Change: closing. We expected it to close in the second half of 2025 and as part of that guidance, we were sort of baking in the long poles that we thought existed. I would tell you, we thought the long poles were probably the...
Speaker Change: I want to do the state PUCs and I won't get into which ones but we thought it was one of the toughs.
Speaker Change: Now, after having engaged with the various regulators over a period of the number of months, we're less concerned about those long balls. We haven't heard any.
Speaker Change: Issues are concerns that are troubling or that are surprising. In fact, there's a lot of enthusiasm for the transaction.
Speaker Change: and on the federal front the same, you know, making good progress across the board.
Speaker Change: and so we constantly debate whether to update our guidance on the...
Speaker Change: Closing of the transaction were increasingly confident that our original guidance was conservative, not yet prepared to change that, but I think in the coming weeks and months we certainly will update that. But we feel great about the progress and have not heard any.
Speaker Change: Any issues that are concerning to us at all?
Speaker Change: r
Speaker Change: Yeah, so break on the benefit from the one-time revenue for the quarter.
Speaker Change: So we are taking Unity League of Seeing.
Speaker Change: Guidance of $3 million as a result of this one time.
Speaker Change: or one-time revenues that we reported. But it is flowing through to the bottom line. There's a $2 million increase corresponding increase in our guidance for unity, leasing EBITDA for the year. So it is flowing through. It's just being offset.
Speaker Change: by also a $2 million increase at corporate in terms of expenses. So a decrease in even dog items at corporate as a result of increase.
Speaker Change: SGA and A costs and those costs are primarily being driven by a performance-based of the concept. There's an offset to that one-time revenue profitability that's flowing through.
Speaker Change: Thank you.
Speaker Change: and David on the Hyper-Scaler question. First, just as a reminder, we've said this before, but I think it's worth reiterating that not all of these deals are the same. The Hyper-Scalors are, first of all, they're not all one single customer. They all have different buying patterns, of course, but also,
Speaker Change: In some cases, we're selling traditional waves or we may be selling traditional dark fiber IRU on existing network and it's just there.
Speaker Change: at typical network planning for current and future uses. And so we may be selling, you know, six or 12 strands of dark fiber or we may be selling, you know, hundreds or 400 gig waves in the traditional sense.
Speaker Change: I think you're in that, in by the way, that's terrific business for us and it's a growing part of the funnel and it will continue to grow on a go-for basis.
Speaker Change: and I highlight that because I actually, we think once we start to hit the inference phase,
Speaker Change: where people are using more of the AI at the edges where you can't wear a lot of that data can't be cashed and it has to be used real time. That's when a lot of it's lit fiber.
Speaker Change: On the edge, we'll become even more valuable, and I think that's when you'll start to see a lot of this business flowing through into MRR as opposed to now. You're seeing a lot of these lumpy type deals that we're explaining, and it's either in bookings or it's not, or it's a one time sail or it's not.
Speaker Change: and I think that's the harder your question. What's the sales cycle like for those types of deals where the hyper-scalors are building new data centers for example in a unique location?
Speaker Change: and LaCorao tell you is.
Bill DiTullio: and Bill DiTullio.
Bill DiTullio: The fiber is not the fiber.
Bill DiTullio: Peace of it is not what's driving the decision initially. It's for the Ibrascaleers, it's procuring the land.
Bill DiTullio: and it's procuring the power and the grip capacity.
Bill DiTullio: and obviously building the data center. And then from there, the Ibriscalers, I think are looking for fiber providers that have network near the location or can justify building it off of an existing location. And so it goes back to my earlier question. It's not really a...
Bill DiTullio: We're not really a traditional sales cycle if you will. I think the majority of the capital required to the Iber scaleers to build these data centers.
Bill DiTullio: is not the fiber. It's the data center, the land, and the power, and then fiber comes later. And so in some ways that's a good thing, right? Because there's a little bit less focus on...
Bill DiTullio: and getting the last dollar of economics and it's more about getting that fiber built on time and getting it turned up expeditiously.
Bill DiTullio: and I think in our markets, our core markets, we have an advantage when it comes to providing that.
Speaker Change: Thanks for joining, thanks Paul.
Speaker Change: this.
Speaker Change: Thank you. At this time I would now like to turn the conference back over to Kenny Gunderman for closing remarks.
Kenny Gunderman: Thank you, we appreciate your interest in Unity Group and look forward to updating you further on future calls. Thank you for joining us today.
Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: The New Year's Eve, Bill DiTullio