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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 1, 2024
Uniti Group Inc.
(Exact name of registrant as specified
in its charter)
| Maryland |
|
001-36708 |
|
46-5230630 |
|
(State or other jurisdiction
of incorporation) |
|
(Commission
File Number) |
|
(IRS Employer
Identification No.) |
2101 Riverfront Drive,
Suite A
Little Rock, AR, 72202
(Address of Principal Executive Offices)
Registrant’s telephone number,
including area code: (501) 850-0820
Not Applicable
(Former name or former address, if changed
since last report.)
Check the appropriate box below if the
Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| x |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section
12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which
registered |
| Common Stock |
UNIT |
The NASDAQ Global Select Market |
Indicate by check mark whether the registrant
is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the
Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company,
indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial
Condition
On August 1, 2024, Uniti Group Inc. (the “Company”)
issued a press release announcing the Company’s results for its fiscal quarter ended June 30, 2024. A copy of the Company’s
press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein solely for purposes
of this Item 2.02 disclosure.
Item 7.01 Regulation FD Disclosure
The Company is furnishing certain financial and
other information of Windstream Holdings II, LLC, successor in interest to Windstream Holdings, Inc., and its consolidated subsidiaries
(collectively, “Windstream”) regarding the period ended June 30, 2024 as Exhibit 99.2 and Exhibit 99.3. The
information furnished herein was provided to the Company by Windstream; the Company did not assist in the preparation or review of this
information and makes no representation as to its accuracy.
***
The
information contained in Items 2.02 and 7.01, including the exhibits attached hereto, are being “furnished” and shall not
be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of Section 18
of the Exchange Act. The information in Items 2.02 and 7.01, including the exhibits attached hereto, shall not be incorporated by reference
into any registration statement or other document pursuant to the Securities Act of 1933, as amended (the “Securities Act”),
or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in any such filing.
No Offer or Solicitation
This communication and the information
contained in it are provided for information purposes only and are not intended to be and shall not constitute a solicitation of any
vote or approval, or an offer to sell or solicitation of an offer to buy, or an invitation or recommendation to subscribe for,
acquire or buy securities of the Company, Windstream or Windstream Parent, Inc., the proposed combined company following the
closing of the Merger (as defined below) (“New Uniti”) or any other financial products or securities, in any place or
jurisdiction, nor shall there be any offer, solicitation or sale of securities in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of
securities shall be made in the United States absent registration under the Securities Act or pursuant to an exemption from, or in a
transaction not subject to, such registration requirements.
Additional Information and Where to Find It
In connection with the contemplated merger (the
“Merger”), New Uniti has filed a registration statement on Form S-4 with the SEC that contains a proxy statement/prospectus
and other documents, which has not yet become effective. Once effective, the Company will mail the proxy statement/prospectus contained
in the Form S-4 to its stockholders. This communication is not a substitute for any registration statement, proxy statement/prospectus
or other documents that may be filed with the SEC in connection with the Merger.
THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS
FILED WITH THE SEC IN CONNECTION WITH THE MERGER CONTAINS IMPORTANT INFORMATION ABOUT THE COMPANY, WINDSTREAM, NEW UNITI, THE MERGER AND
RELATED MATTERS. INVESTORS SHOULD READ THE PROXY STATEMENT/PROSPECTUS AND SUCH OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR
ENTIRETY, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THE PROXY STATEMENT/PROSPECTUS AND SUCH DOCUMENTS, BEFORE THEY MAKE ANY DECISION
WITH RESPECT TO THE MERGER. The proxy statement/prospectus, any amendments or supplements thereto and all other documents filed with the
SEC in connection with the Merger will be available free of charge on the SEC’s website (at www.sec.gov). Copies of documents filed
with the SEC by the Company will be made available free of charge on the Company's investor relations website (at https://investor.uniti.com/financial-information/sec-filings).
Participants in the Solicitation
The Company, Windstream and their respective directors
and certain of their executive officers and other employees may be deemed to be participants in the solicitation of proxies from the Company’s
stockholders in connection with the Merger. Information about the Company’s directors and executive officers is set forth in the
sections titled “Proposal No. 1 Election of Directors” and “Security Ownership of Certain Beneficial
Owners and Management” included in the Company’s proxy statement for its 2024 annual meeting of stockholders, which was
filed with the SEC on April 11, 2024 (and which is available at https://www.sec.gov/Archives/edgar/data/1620280/000110465924046100/0001104659-24-046100-index.htm),
the section titled “Directors, Executive Officers and Corporate Governance” included in its Annual Report on Form 10-K
for the fiscal year ended December 31, 2023, which was filed with the SEC on February 29, 2024 (and which is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1620280/000162828024008054/unit-20231231.htm),
and subsequent statements of beneficial ownership on file with the SEC and other filings made from time to time with the SEC. Additional
information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the Company
stockholders in connection with the Merger, including a description of their direct or indirect interests, by security holdings or otherwise,
is set forth in the proxy statement/prospectus and other relevant materials filed by New Uniti with the SEC. These documents can be obtained
free of charge from the sources indicated above.
Forward-Looking Statements
This communication contains forward-looking statements,
including within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can often be identified
by terms such as “may,” “will,” “appears,” “should,” “expects,” “plans,”
“anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,”
“believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative
of these words or other similar terms or expressions that concern expectations, strategy, plans, or intentions. However, the absence of
these words or similar terms does not mean that a statement is not forward-looking. All forward-looking statements are based on information
and estimates available to the Company and Windstream at the time of this communication and are not guarantees of future performance.
Examples of forward-looking statements in this
communication (made at the date of this communication unless otherwise indicated) include, among others, statements regarding the Merger
and the future performance of the Company, Windstream and New Uniti (the “Merged Group”),
the perceived and potential synergies and other benefits of the Merger, and expectations around the financial impact of the Merger on
the Merged Group’s financials. In addition, this communication contains statements concerning the intentions, beliefs and expectations,
plans, strategies and objectives of the directors and management of the Company and Windstream for the Company and Windstream, respectively,
and the Merged Group, the anticipated timing for and outcome and effects of the Merger (including expected benefits to shareholders of
the Company), expectations for the ongoing development and growth potential of the Merged Group and the future operation of the Company
Windstream and the Merged Group.
These statements involve known and unknown risks,
uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance
or achievements expressed or implied by any forward-looking statement and may include statements regarding the expected timing and structure
of the Merger; the ability of the parties to complete the Merger considering the various closing conditions; the expected benefits of
the Merger, such as improved operations, enhanced revenues and cash flow, synergies, growth potential, market profile, business plans,
expanded portfolio and financial strength; the competitive ability and position of New Uniti following completion of the Merger; and anticipated
growth strategies and anticipated trends in the Company’s, Windstream’s and, following the expected completion of the Merger,
New Uniti’s business.
In addition, other factors related to the Merger
that contribute to the uncertain nature of the forward-looking statements and that could cause actual results and financial condition
to differ materially from those expressed or implied include, but are not limited to: the satisfaction of the conditions precedent to
the consummation of the Merger, including, without limitation, the receipt of shareholder and regulatory approvals on the terms desired
or anticipated; unanticipated difficulties or expenditures relating to the Merger, including, without limitation, difficulties that result
in the failure to realize expected synergies, efficiencies and cost savings from the Merger within the expected time period (if at all);
potential difficulties in the Company’s and Windstream’s ability to retain employees as a result of the announcement and pendency
of the Merger; risks relating to the value of New Uniti’s securities to be issued in the Merger; disruptions of the Company’s
and Windstream’s current plans, operations and relationships with customers caused by the announcement and pendency of the Merger;
legal proceedings that may be instituted against the Company or Windstream following announcement of the Merger; funding requirements;
regulatory restrictions (including changes in regulatory restrictions or regulatory policy) and risks associated with general economic
conditions.
Additional factors that could cause actual results,
level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed
or implied by the forward-looking statements are detailed in the filings with the SEC, including the Company’s annual report on
Form 10-K, periodic quarterly reports on Form 10-Q, periodic current reports on Form 8-K and other documents filed with
the SEC.
There can be no assurance that the Merger will
be implemented or that plans of the respective directors and management of the Company and Windstream for the Merged Group will proceed
as currently expected or will ultimately be successful. Investors are strongly cautioned not to place undue reliance on forward-looking
statements, including in respect of the financial or operating outlook for Uniti, Windstream or the Merged Group (including the realization
of any expected synergies).
Except as required by
applicable law, the Company does not assume any obligation to, and expressly disclaims any duty to, provide any additional or updated
information or to update any forward-looking statements, whether as a result of new information, future events or results, or otherwise.
Nothing in this communication will, under any circumstances (including by reason of this communication remaining available and not being
superseded or replaced by any other presentation or publication with respect to the Company, Windstream or the Merged Group, or the subject
matter of this communication), create an implication that there has been no change in the affairs of the Company or Windstream since the
date of this communication.
Item 9.01 Financial Statements and Exhibits
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| Date: August 1, 2024 |
UNITI GROUP INC. |
| |
|
| |
By: |
/s/ Daniel L. Heard |
| |
|
Name: |
Daniel L. Heard |
| |
|
Title: |
Executive Vice President – General Counsel and Secretary |
Exhibit 99.1
 |
Press
Release
Release date: August 1, 2024 |
Uniti Group Inc.
Reports Second Quarter 2024 Results
Second Quarter
Consolidated Bookings Monthly Recurring Revenue of $1.1 Million Increased Approximately 50% From Prior Year
Updates 2024
Outlook
| · | Net
Income of $18.3 Million for the Second Quarter |
| · | Net
Income of $0.07 Per Diluted Common Share for the Second Quarter |
| · | AFFO
of $0.34 Per Diluted Common Share for the Second Quarter |
LITTLE ROCK, Ark.,
August 1, 2024 (GLOBE NEWSWIRE) – Uniti Group Inc. (“Uniti” or the “Company”) (Nasdaq: UNIT) today
announced its results for the second quarter 2024.
“Uniti reported
another quarter of solid results fueled by strong demand for its mission critical fiber infrastructure. Approximately 40% of our consolidated
bookings during the quarter, the highest level since 2022, was driven by Hyperscalers and Generative AI demand, and we expect that growth
to continue. Our core recurring strategic fiber business grew 3% in the second quarter of 2024 when compared to the second quarter of
2023, while net success-based capital intensity at Uniti Fiber during the quarter declined to 27% from 44% in the second quarter of 2023,”
commented President and Chief Executive Officer, Kenny Gunderman.
Mr. Gunderman
continued, “We continue to make significant progress on our recently announced transformational merger with Windstream, and remain
on track to close the transaction by the second half of 2025. As a combined company, we will continue our disciplined growth trajectory
while expanding our fiber network into Tier II and III markets, and significantly improving our overall financial profile. The demand
for both commercial and residential fiber has never been greater and Uniti is well positioned to capture this growth potential going
forward.”
QUARTERLY RESULTS
Consolidated revenues
for the second quarter of 2024 were $294.9 million. Net income and Adjusted EBITDA were $18.3 million and $236.7 million, respectively,
for the same period, achieving Adjusted EBITDA margins of approximately 80%. Net income attributable to common shares was $17.6 million
for the period. AFFO attributable to common shareholders was $92.3 million, or $0.34 per diluted common share.
Uniti Fiber contributed
$76.7 million of revenues and $31.1 million of Adjusted EBITDA for the second quarter of 2024, achieving Adjusted EBITDA margins of approximately
40%. Uniti Fiber’s net success-based capital expenditures during the quarter were $20.8 million.
Uniti Leasing contributed
revenues of $218.3 million and Adjusted EBITDA of $210.9 million for the second quarter. During the quarter, Uniti Leasing deployed capital
expenditures of $69.6 million, including $65.3 million of GCI capex.
FINANCING TRANSACTIONS
On May 17,
2024, Uniti closed on the issuance of $300 million of additional senior secured notes due February 2028 (the “Additional 2028
Notes”). The Additional 2028 Notes bear interest of 10.50% and were issued at 103.00% of their principal amount. The proceeds from
the offering are expected to be used for general corporate purposes, including funding a portion of the cash consideration payable in
connection with the previously announced merger with Windstream.
LIQUIDITY
At quarter-end,
the Company had approximately $618.8 million of unrestricted cash and cash equivalents, and undrawn borrowing availability under its
revolving credit agreement. The Company’s leverage ratio at quarter-end was 5.97x based on net debt to second quarter 2024 annualized
Adjusted EBITDA, excluding the debt and Adjusted EBITDA impact from the ABS loan facility.
UPDATED FULL YEAR 2024 OUTLOOK
The Company is
updating its 2024 outlook primarily for business unit level revisions, recent financing transactions, and transaction related and other
costs incurred to date. Our outlook excludes any impact from the expected merger with Windstream, future acquisitions, capital market
transactions, and future transaction-related and other costs not mentioned herein.
The Company’s consolidated outlook
for 2024 is as follows (in millions):
| | |
Full Year 2024 | |
| Revenue | |
$ | 1,154 | | |
to | |
$ | 1,174 | |
| Net income attributable to common shareholders | |
| 98 | | |
to | |
| 118 | |
| Adjusted EBITDA (1) | |
| 930 | | |
to | |
| 950 | |
| Interest expense, net (2) | |
| 514 | | |
to | |
| 514 | |
| | |
| | | |
| |
| | |
| Attributable to common shareholders: | |
| | | |
| |
| | |
| FFO (1) | |
| 301 | | |
to | |
| 321 | |
| AFFO
(1) | |
| 353 | | |
to | |
| 373 | |
| | |
| | | |
| |
| | |
| Weighted-average common shares outstanding – diluted | |
| 285 | | |
to | |
| 285 | |
|
(1) See
“Non-GAAP Financial Measures” below.
(2) See
“Components of Interest Expense” below. |
CONFERENCE CALL
Uniti will hold
a conference call today to discuss the announced merger with Windstream and this earnings release at 8:30 AM Eastern Time (7:30 AM Central
Time). The conference call will be webcast live on Uniti’s Investor Relations website at investor.uniti.com. Those parties
interested in participating via telephone may register on the Company’s Investor Relations website or by clicking here.
A replay of the call will also be made available on the Investor Relations website.
ABOUT UNITI
Uniti, an internally
managed real estate investment trust, is engaged in the acquisition and construction of mission critical communications infrastructure,
and is a leading provider of fiber and other wireless solutions for the communications industry. As of June 30, 2024, Uniti owns
approximately 142,000 fiber route miles, 8.6 million fiber strand miles, and other communications real estate throughout the United States.
Additional information about Uniti can be found on its website at www.uniti.com.
NO OFFER OR
SOLICITATION
This communication
and the information contained in it are provided for information purposes only and are not intended to be and shall not constitute a
solicitation of any vote or approval, or an offer to sell or solicitation of an offer to buy, or an invitation or recommendation to subscribe
for, acquire or buy securities of Uniti, Windstream Holdings II (Windstream”) or Windstream Parent, Inc., the proposed combined
company following the closing of the Merger (as defined below) (“New Uniti”) or any other financial products or securities,
in any place or jurisdiction, nor shall there be any offer, solicitation or sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No
offer of securities shall be made in the United States absent registration under the U.S. Securities Act of 1933, as amended (the “Securities
Act”), or pursuant to an exemption from, or in a transaction not subject to, such registration requirements.
ADDITIONAL INFORMATION
AND WHERE TO FIND IT
In connection with
the contemplated merger (the “Merger”), New Uniti has filed a registration statement on Form S-4 with the SEC that contains
a proxy statement/prospectus and other documents, which has not yet become effective. Once effective, Uniti will mail the proxy statement/prospectus
contained in the Form S-4 to its stockholders. This communication is not a substitute for any registration statement, proxy statement/prospectus
or other documents that may be filed with the SEC in connection with the Merger.
THE PROXY STATEMENT/PROSPECTUS
AND OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE MERGER CONTAINS IMPORTANT INFORMATION ABOUT UNITI, WINDSTREAM, NEW UNITI,
THE MERGER AND RELATED MATTERS. INVESTORS SHOULD READ THE PROXY STATEMENT/PROSPECTUS AND SUCH OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY
AND IN THEIR ENTIRETY, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THE PROXY STATEMENT/PROSPECTUS AND SUCH DOCUMENTS, BEFORE THEY MAKE
ANY DECISION WITH RESPECT TO THE MERGER. The proxy statement/prospectus, any amendments or supplements thereto and all other documents
filed with the SEC in connection with the Merger will be available free of charge on the SEC’s website (at www.sec.gov). Copies
of documents filed with the SEC by Uniti will be made available free of charge on Uniti's investor relations website (at https://investor.uniti.com/financial-information/sec-filings).
PARTICIPANTS
IN THE SOLICITATION
Uniti, Windstream
and their respective directors and certain of their executive officers and other employees may be deemed to be participants in the solicitation
of proxies from Uniti’s stockholders in connection with the Merger. Information about Uniti’s directors and executive officers
is set forth in the sections titled “Proposal No. 1 Election of Directors” and “Security Ownership of Certain
Beneficial Owners and Management” included in Uniti’s proxy statement for its 2024 annual meeting of stockholders, which
was filed with the SEC on April 11, 2024 (and which is available at https://www.sec.gov/Archives/edgar/data/1620280/000110465924046100/0001104659-24-046100-index.htm),
the section titled “Directors, Executive Officers and Corporate Governance” included in its Annual Report on Form 10-K
for the fiscal year ended December 31, 2023, which was filed with the SEC on February 29, 2024 (and which is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1620280/000162828024008054/unit-20231231.htm),
and subsequent statements of beneficial ownership on file with the SEC and other filings made from time to time with the SEC. Additional
information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of Uniti stockholders
in connection with the Merger, including a description of their direct or indirect interests, by security holdings or otherwise, is set
forth in the proxy statement/prospectus and other relevant materials filed by New Uniti with the SEC. These documents can be obtained
free of charge from the sources indicated above.
FORWARD-LOOKING
STATEMENTS
This communication
contains forward-looking statements, including within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements can often be identified by terms such as “may,” “will,” “appears,” “should,”
“expects,” “plans,” “anticipates,” “could,” “intends,” “target,”
“projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,”
or “continue,” or the negative of these words or other similar terms or expressions that concern expectations, strategy,
plans, or intentions. However, the absence of these words or similar terms does not mean that a statement is not forward-looking. All
forward-looking statements are based on information and estimates available to Uniti and Windstream at the time of this communication
and are not guarantees of future performance.
Examples of
forward-looking statements in this communication (made at the date of this communication unless otherwise indicated) include, among others,
statements regarding the Merger and the future performance of Uniti, Windstream and New Uniti (the “Merged Group”), the perceived
and potential synergies and other benefits of the Merger, and expectations around the financial impact of the Merger on the Merged Group’s
financials. In addition, this communication contains statements concerning the intentions, beliefs and expectations, plans, strategies
and objectives of the directors and management of Uniti and Windstream for Uniti and Windstream, respectively, and the Merged Group,
the anticipated timing for and outcome and effects of the Merger (including expected benefits to shareholders of Uniti), expectations
for the ongoing development and growth potential of the Merged Group and the future operation of Uniti, Windstream and the Merged Group.
These statements
involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results,
levels of activity, performance or achievements expressed or implied by any forward-looking statement and may include statements regarding
the expected timing and structure of the Merger; the ability of the parties to complete the Merger considering the various closing conditions;
the expected benefits of the Merger, such as improved operations, enhanced revenues and cash flow, synergies, growth potential, market
profile, business plans, expanded portfolio and financial strength; the competitive ability and position of New Uniti following completion
of the Merger; and anticipated growth strategies and anticipated trends in Uniti’s, Windstream’s and, following the expected
completion of the Merger, New Uniti’s business.
In addition,
other factors related to the Merger that contribute to the uncertain nature of the forward-looking statements and that could cause actual
results and financial condition to differ materially from those expressed or implied include, but are not limited to: the satisfaction
of the conditions precedent to the consummation of the Merger, including, without limitation, the receipt of shareholder and regulatory
approvals on the terms desired or anticipated; unanticipated difficulties or expenditures relating to the Merger, including, without
limitation, difficulties that result in the failure to realize expected synergies, efficiencies and cost savings from the Merger within
the expected time period (if at all); potential difficulties in Uniti’s and Windstream’s ability to retain employees as a
result of the announcement and pendency of the Merger; risks relating to the value of New Uniti’s securities to be issued in the
Merger; disruptions of Uniti’s and Windstream’s current plans, operations and relationships with customers caused by the
announcement and pendency of the Merger; legal proceedings that may be instituted against Uniti or Windstream following announcement
of the Merger; funding requirements; regulatory restrictions (including changes in regulatory restrictions or regulatory policy) and
risks associated with general economic conditions.
Additional factors
that could cause actual results, level of activity, performance or achievements to differ materially from the results, level of activity,
performance or achievements expressed or implied by the forward-looking statements are detailed in the filings with the SEC, including
Uniti’s annual report on Form 10-K, periodic quarterly reports on Form 10-Q, periodic current reports on Form 8-K
and other documents filed with the SEC.
There can be
no assurance that the Merger will be implemented or that plans of the respective directors and management of Uniti and Windstream for
the Merged Group will proceed as currently expected or will ultimately be successful. Investors are strongly cautioned not to place undue
reliance on forward-looking statements, including in respect of the financial or operating outlook for Uniti, Windstream or the Merged
Group (including the realization of any expected synergies).
Except as required
by applicable law, Uniti does not assume any obligation to, and expressly disclaims any duty to, provide any additional or updated information
or to update any forward-looking statements, whether as a result of new information, future events or results, or otherwise. Nothing
in this communication will, under any circumstances (including by reason of this communication remaining available and not being superseded
or replaced by any other presentation or publication with respect to Uniti, Windstream or the Merged Group, or the subject matter of
this communication), create an implication that there has been no change in the affairs of Uniti or Windstream since the date of this
communication.
NON-GAAP PRESENTATION
This release
and today’s conference call contain certain supplemental measures of performance that are not required by, or presented in accordance
with, accounting principles generally accepted in the United States (“GAAP”). Such measures should not be considered as alternatives
to GAAP. Further information with respect to and reconciliations of such measures to the nearest GAAP measure can be found herein.
Uniti Group Inc.
Consolidated
Balance Sheets
(In thousands,
except per share data)
| | |
June 30,
2024 | | |
December 31,
2023 | |
| Assets: | |
| | | |
| | |
| Property, plant and equipment, net | |
$ | 4,092,799 | | |
$ | 3,982,069 | |
| Cash and cash equivalents | |
| 118,763 | | |
| 62,264 | |
| Restricted cash and cash equivalents | |
| 12,728 | | |
| - | |
| Accounts receivable, net | |
| 56,654 | | |
| 46,358 | |
| Goodwill | |
| 157,380 | | |
| 157,380 | |
| Intangible assets, net | |
| 290,264 | | |
| 305,115 | |
| Straight-line revenue receivable | |
| 101,710 | | |
| 90,988 | |
| Operating lease right-of-use assets, net | |
| 128,837 | | |
| 125,105 | |
| Other assets | |
| 40,699 | | |
| 118,117 | |
| Deferred income tax assets, net | |
| 117,780 | | |
| 109,128 | |
| Assets held for sale | |
| - | | |
| 28,605 | |
| Derivative asset | |
| 1,616 | | |
| - | |
| Total Assets | |
$ | 5,119,230 | | |
$ | 5,025,129 | |
| | |
| | | |
| | |
| Liabilities and Shareholders’ Deficit | |
| | | |
| | |
| Liabilities: | |
| | | |
| | |
| Accounts payable, accrued expenses and other liabilities | |
$ | 87,105 | | |
$ | 119,340 | |
| Settlement payable | |
| 118,232 | | |
| 163,583 | |
| Intangible liabilities, net | |
| 151,050 | | |
| 156,397 | |
| Accrued interest payable | |
| 142,227 | | |
| 133,683 | |
| Deferred revenue | |
| 1,242,165 | | |
| 1,273,661 | |
| Dividends payable | |
| 1,134 | | |
| 36,162 | |
| Operating lease liabilities | |
| 79,812 | | |
| 84,404 | |
| Finance lease obligations | |
| 18,110 | | |
| 18,110 | |
| Notes and other debt, net | |
| 5,771,809 | | |
| 5,523,579 | |
| Liabilities held for sale | |
| - | | |
| 331 | |
| Total Liabilities | |
| 7,611,644 | | |
| 7,509,250 | |
| | |
| | | |
| | |
| Commitments and contingencies | |
| | | |
| | |
| | |
| | | |
| | |
| Shareholders’ Deficit: | |
| | | |
| | |
| Preferred stock, $ 0.0001 par value, 50,000 shares authorized, no shares issued and outstanding | |
| - | | |
| - | |
| Common stock, $ 0.0001 par value, 500,000 shares
authorized, issued and outstanding: 237,353 shares at June 30, 2024 and 236,559 shares at December 31, 2023 | |
| 24 | | |
| 24 | |
| Additional paid-in capital | |
| 1,228,527 | | |
| 1,221,824 | |
| Accumulated other comprehensive income | |
| 136 | | |
| - | |
| Distributions in excess of accumulated earnings | |
| (3,722,066 | ) | |
| (3,708,240 | ) |
| Total Uniti shareholders’ deficit | |
| (2,493,379 | ) | |
| (2,486,392 | ) |
| Noncontrolling interests – operating partnership units and non-voting convertible preferred stock | |
| 965 | | |
| 2,271 | |
| Total shareholders’ deficit | |
| (2,492,414 | ) | |
| (2,484,121 | ) |
| Total Liabilities and Shareholders’ Deficit | |
$ | 5,119,230 | | |
$ | 5,025,129 | |
Uniti Group Inc.
Consolidated
Statements of Operations
(In thousands,
except per share data)
| | |
Three Months Ended
June 30, | | |
Six Months Ended
June 30, | |
| | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| Revenues: | |
| | |
| | |
| | |
| |
| Uniti Leasing | |
$ | 218,286 | | |
$ | 212,453 | | |
$ | 435,907 | | |
$ | 423,261 | |
| Uniti Fiber | |
| 76,661 | | |
| 71,245 | | |
| 145,458 | | |
| 150,259 | |
| Total revenues | |
| 294,947 | | |
| 283,698 | | |
| 581,365 | | |
| 573,520 | |
| | |
| | | |
| | | |
| | | |
| | |
| Costs and expenses: | |
| | | |
| | | |
| | | |
| | |
| Interest expense, net | |
| 127,475 | | |
| 119,689 | | |
| 250,686 | | |
| 268,552 | |
| Depreciation and amortization | |
| 78,052 | | |
| 77,267 | | |
| 155,537 | | |
| 154,042 | |
| General and administrative expense | |
| 25,716 | | |
| 23,417 | | |
| 53,849 | | |
| 51,850 | |
| Operating expense (exclusive of depreciation and amortization) | |
| 37,036 | | |
| 37,418 | | |
| 72,234 | | |
| 72,486 | |
| Transaction related and other costs | |
| 10,977 | | |
| 5,576 | | |
| 16,664 | | |
| 8,364 | |
| Gain on sale of real estate | |
| - | | |
| - | | |
| (18,999 | ) | |
| - | |
| Other (income) expense, net | |
| (19 | ) | |
| (291 | ) | |
| (301 | ) | |
| 19,888 | |
| Total costs and expenses | |
| 279,237 | | |
| 263,076 | | |
| 529,670 | | |
| 575,182 | |
| | |
| | | |
| | | |
| | | |
| | |
| Income (loss) before income taxes and equity in earnings from
unconsolidated entities | |
| 15,710 | | |
| 20,622 | | |
| 51,695 | | |
| (1,662 | ) |
| Income tax benefit | |
| (2,571 | ) | |
| (4,357 | ) | |
| (7,934 | ) | |
| (6,769 | ) |
| Equity in earnings from unconsolidated entities | |
| - | | |
| (659 | ) | |
| - | | |
| (1,320 | ) |
| Net income | |
| 18,281 | | |
| 25,638 | | |
| 59,629 | | |
| 6,427 | |
| Net income attributable to noncontrolling interests | |
| 3 | | |
| 12 | | |
| 22 | | |
| 3 | |
| Net income attributable to shareholders | |
| 18,278 | | |
| 25,626 | | |
| 59,607 | | |
| 6,424 | |
| Participating securities’ share in earnings | |
| (723 | ) | |
| (322 | ) | |
| (1,159 | ) | |
| (569 | ) |
| Dividends declared on convertible preferred stock | |
| (5 | ) | |
| (5 | ) | |
| (10 | ) | |
| (10 | ) |
| Net income attributable to common shareholders | |
$ | 17,550 | | |
$ | 25,299 | | |
$ | 58,438 | | |
$ | 5,845 | |
| | |
| | | |
| | | |
| | | |
| | |
| Net income attributable to common shareholders – Basic | |
$ | 17,550 | | |
$ | 25,299 | | |
$ | 58,438 | | |
$ | 5,845 | |
| Impact of if-converted securities | |
| - | | |
| - | | |
| - | | |
| - | |
| Net income attributable to common shareholders – Diluted | |
$ | 17,550 | | |
$ | 25,299 | | |
$ | 58,438 | | |
$ | 5,845 | |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average number of common shares outstanding: | |
| | | |
| | | |
| | | |
| | |
| Basic | |
| 237,347 | | |
| 236,429 | | |
| 237,121 | | |
| 236,260 | |
| Diluted | |
| 237,347 | | |
| 236,429 | | |
| 237,121 | | |
| 236,260 | |
| | |
| | | |
| | | |
| | | |
| | |
| Earnings per common share: | |
| | | |
| | | |
| | | |
| | |
| Basic | |
$ | 0.07 | | |
$ | 0.11 | | |
$ | 0.25 | | |
$ | 0.02 | |
| Diluted | |
$ | 0.07 | | |
$ | 0.11 | | |
$ | 0.25 | | |
$ | 0.02 | |
Uniti Group Inc.
Consolidated
Statements of Cash Flows
(In thousands)
| | |
Six Months Ended
June 30, | |
| | |
2024 | | |
2023 | |
| Cash flow from operating activities: | |
| | | |
| | |
| Net income | |
$ | 59,629 | | |
$ | 6,427 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 155,537 | | |
| 154,042 | |
| Amortization of deferred financing costs and debt discount | |
| 10,950 | | |
| 9,454 | |
| Loss on debt extinguishment, net | |
| - | | |
| 31,187 | |
| Interest rate cap amortization | |
| 720 | | |
| - | |
| Deferred income taxes | |
| (8,652 | ) | |
| (8,046 | ) |
| Equity in earnings of unconsolidated entities | |
| - | | |
| (1,320 | ) |
| Distributions of cumulative earnings from unconsolidated entities | |
| - | | |
| 1,969 | |
| Cash paid for interest rate cap | |
| (2,200 | ) | |
| - | |
| Straight-line revenues and amortization of below-market lease intangibles | |
| (17,038 | ) | |
| (19,216 | ) |
| Stock-based compensation | |
| 6,745 | | |
| 6,260 | |
| Loss (gain) on asset disposals | |
| 294 | | |
| (172 | ) |
| Gain on sale of real estate | |
| (18,999 | ) | |
| - | |
| Accretion of settlement obligation | |
| 3,660 | | |
| 5,776 | |
| Other | |
| (48 | ) | |
| - | |
| Changes in assets and liabilities: | |
| | | |
| | |
| Accounts receivable | |
| (10,296 | ) | |
| (391 | ) |
| Other assets | |
| 7,264 | | |
| 967 | |
| Accounts payable, accrued expenses and other liabilities | |
| (13,228 | ) | |
| 12,894 | |
| Net cash provided by operating activities | |
| 174,338 | | |
| 199,831 | |
| | |
| | | |
| | |
| Cash flows from investing activities: | |
| | | |
| | |
| Capital expenditures | |
| (262,758 | ) | |
| (247,269 | ) |
| Proceeds from sale of other equipment | |
| 435 | | |
| 1,169 | |
| Proceeds from sale of real estate | |
| 40,039 | | |
| - | |
| Proceeds from sale of unconsolidated entity | |
| 40,000 | | |
| - | |
| Net cash used in investing activities | |
| (182,284 | ) | |
| (246,100 | ) |
| | |
| | | |
| | |
| Cash flows from financing activities: | |
| | | |
| | |
| Repayment of debt | |
| (122,942 | ) | |
| (2,263,662 | ) |
| Proceeds from issuance of notes | |
| 309,000 | | |
| 2,600,000 | |
| Dividends paid | |
| (108,445 | ) | |
| (71,594 | ) |
| Payments of settlement payable | |
| (49,011 | ) | |
| (49,011 | ) |
| Borrowings under revolving credit facility | |
| 125,000 | | |
| 245,000 | |
| Payments under revolving credit facility | |
| (333,000 | ) | |
| (347,000 | ) |
| Proceeds from ABS Loan Facility | |
| 275,000 | | |
| - | |
| Finance lease payments | |
| (1,265 | ) | |
| (799 | ) |
| Payments for financing costs | |
| (15,778 | ) | |
| (26,955 | ) |
| Payment of settlement of common stock warrant | |
| - | | |
| (56 | ) |
| Termination of bond hedge option | |
| - | | |
| 59 | |
| Costs related to the early repayment of debt | |
| - | | |
| (44,303 | ) |
| Distributions paid to noncontrolling interests | |
| (37 | ) | |
| (32 | ) |
| Payment for exchange of noncontrolling interest | |
| (92 | ) | |
| - | |
| Employee stock purchase program | |
| 326 | | |
| 314 | |
| Payments related to tax withholding for stock-based compensation | |
| (1,583 | ) | |
| (1,350 | ) |
| Net cash provided by financing activities | |
| 77,173 | | |
| 40,611 | |
| Net increase (decrease) in cash and cash equivalents | |
| 69,227 | | |
| (5,658 | ) |
| Cash, restricted cash and cash equivalents at beginning of period | |
| 62,264 | | |
| 43,803 | |
| Cash, restricted cash and cash equivalents at end of period | |
$ | 131,491 | | |
$ | 38,145 | |
| | |
| | | |
| | |
| Non-cash investing and financing activities: | |
| | | |
| | |
| Property and equipment acquired but not yet paid | |
$ | 7,074 | | |
$ | 14,708 | |
| Tenant capital improvements | |
| 94,049 | | |
| 78,473 | |
Uniti Group Inc.
Reconciliation
of Net Income to FFO and AFFO
(In
thousands, except per share data)
| | |
Three Months Ended
June 30, | | |
Six Months Ended
June 30, | |
| | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| Net income attributable to common shareholders | |
$ | 17,550 | | |
$ | 25,299 | | |
$ | 58,438 | | |
$ | 5,845 | |
| Real estate depreciation and amortization | |
| 55,615 | | |
| 55,062 | | |
| 111,545 | | |
| 109,578 | |
| Gain on sale of real estate, assets, net of tax | |
| - | | |
| - | | |
| (18,951 | ) | |
| - | |
| Participating securities share in earnings | |
| 723 | | |
| 322 | | |
| 1,159 | | |
| 569 | |
| Participating securities share in FFO | |
| (1,470 | ) | |
| (730 | ) | |
| (2,295 | ) | |
| (977 | ) |
| Real estate depreciation and amortization from unconsolidated entities | |
| - | | |
| 435 | | |
| - | | |
| 870 | |
| Adjustments for noncontrolling interests | |
| (9 | ) | |
| (25 | ) | |
| (25 | ) | |
| (50 | ) |
| FFO attributable to common shareholders | |
| 72,409 | | |
| 80,363 | | |
| 149,871 | | |
| 115,835 | |
| Transaction related and other costs | |
| 10,977 | | |
| 5,576 | | |
| 16,664 | | |
| 8,364 | |
| Amortization of deferred financing costs and debt discount | |
| 5,915 | | |
| 4,491 | | |
| 10,950 | | |
| 9,454 | |
| Write off of deferred financing costs and debt discount | |
| - | | |
| - | | |
| - | | |
| 10,412 | |
| Costs related to the early repayment of debt | |
| - | | |
| - | | |
| - | | |
| 51,997 | |
| Stock based compensation | |
| 3,397 | | |
| 3,130 | | |
| 6,745 | | |
| 6,260 | |
| Non-real estate depreciation and amortization | |
| 22,437 | | |
| 22,205 | | |
| 43,992 | | |
| 44,464 | |
| Straight-line revenues and amortization of below-market lease intangibles | |
| (8,216 | ) | |
| (9,789 | ) | |
| (17,038 | ) | |
| (19,216 | ) |
| Maintenance capital expenditures | |
| (1,909 | ) | |
| (1,916 | ) | |
| (3,998 | ) | |
| (3,744 | ) |
| Other, net | |
| (12,753 | ) | |
| (13,417 | ) | |
| (27,298 | ) | |
| (26,078 | ) |
| Adjustments for equity in earnings from unconsolidated entities | |
| - | | |
| 320 | | |
| - | | |
| 640 | |
| Adjustments for noncontrolling interests | |
| (3 | ) | |
| (5 | ) | |
| (8 | ) | |
| (37 | ) |
| AFFO attributable to common shareholders | |
$ | 92,254 | | |
$ | 90,958 | | |
$ | 179,880 | | |
$ | 198,351 | |
| | |
| | | |
| | | |
| | | |
| | |
| Reconciliation of Diluted FFO and AFFO: | |
| | | |
| | | |
| | | |
| | |
| FFO Attributable to common shareholders – Basic | |
$ | 72,409 | | |
$ | 80,363 | | |
$ | 149,871 | | |
$ | 115,835 | |
| Impact of if-converted dilutive securities | |
| 6,878 | | |
| 6,991 | | |
| 13,900 | | |
| 13,258 | |
| FFO Attributable to common shareholders – Diluted | |
$ | 79,287 | | |
$ | 87,354 | | |
$ | 163,771 | | |
$ | 129,093 | |
| | |
| | | |
| | | |
| | | |
| | |
| AFFO Attributable to common shareholders – Basic | |
$ | 92,254 | | |
$ | 90,958 | | |
$ | 179,880 | | |
$ | 198,351 | |
| Impact of if-converted dilutive securities | |
| 6,807 | | |
| 6,976 | | |
| 13,783 | | |
| 14,085 | |
| AFFO Attributable to common shareholders – Diluted | |
$ | 99,061 | | |
$ | 97,934 | | |
$ | 193,663 | | |
$ | 212,436 | |
| | |
| | | |
| | | |
| | | |
| | |
| Weighted average common shares used to calculate basic earnings per common share (1) | |
| 237,347 | | |
| 236,429 | | |
| 237,121 | | |
| 236,260 | |
| Impact of dilutive non-participating securities | |
| - | | |
| - | | |
| - | | |
| - | |
| Impact of if-converted dilutive securities | |
| 52,911 | | |
| 53,455 | | |
| 54,070 | | |
| 54,082 | |
| Weighted average common shares used to calculate diluted FFO and AFFO per common share (1) | |
| 290,258 | | |
| 289,884 | | |
| 291,191 | | |
| 290,342 | |
| | |
| | | |
| | | |
| | | |
| | |
| Per diluted common share: | |
| | | |
| | | |
| | | |
| | |
| EPS | |
$ | 0.07 | | |
$ | 0.11 | | |
$ | 0.25 | | |
$ | 0.02 | |
| FFO | |
$ | 0.27 | | |
$ | 0.30 | | |
$ | 0.56 | | |
$ | 0.44 | |
| AFFO | |
$ | 0.34 | | |
$ | 0.34 | | |
$ | 0.67 | | |
$ | 0.73 | |
| (1) |
For periods in which FFO to common shareholders is a loss,
the weighted average common shares used to calculate diluted FFO per common share is equal to the weighted average common shares used
to calculate basic earnings per share. |
Uniti Group Inc.
Reconciliation
of EBITDA and Adjusted EBITDA
(In thousands)
| | |
Three Months Ended June 30, | | |
Six Months Ended June 30, | |
| | |
2024 | | |
2023 | | |
2024 | | |
2023 | |
| Net income | |
$ | 18,281 | | |
$ | 25,638 | | |
$ | 59,629 | | |
$ | 6,427 | |
| Depreciation and amortization | |
| 78,052 | | |
| 77,267 | | |
| 155,537 | | |
| 154,042 | |
| Interest expense, net | |
| 127,475 | | |
| 119,689 | | |
| 250,686 | | |
| 268,552 | |
| Income tax benefit | |
| (2,571 | ) | |
| (4,357 | ) | |
| (7,934 | ) | |
| (6,769 | ) |
| EBITDA | |
$ | 221,237 | | |
$ | 218,237 | | |
$ | 457,918 | | |
$ | 422,252 | |
| Stock-based compensation | |
| 3,397 | | |
| 3,130 | | |
| 6,745 | | |
| 6,260 | |
| Transaction related and other costs | |
| 10,977 | | |
| 5,576 | | |
| 16,664 | | |
| 8,364 | |
| Gain on sale of real estate | |
| - | | |
| - | | |
| (18,999 | ) | |
| - | |
| Other, net | |
| 1,048 | | |
| 469 | | |
| 2,959 | | |
| 20,982 | |
| Adjustments for equity in earnings from unconsolidated entities | |
| - | | |
| 755 | | |
| - | | |
| 1,510 | |
| Adjusted EBITDA | |
$ | 236,659 | | |
$ | 228,167 | | |
$ | 465,287 | | |
$ | 459,368 | |
| | |
| | | |
| | | |
| | | |
| | |
| Adjusted EBITDA: | |
| | | |
| | | |
| | | |
| | |
| Uniti Leasing | |
$ | 210,853 | | |
$ | 206,552 | | |
$ | 421,530 | | |
$ | 411,518 | |
| Uniti Fiber | |
| 31,091 | | |
| 25,181 | | |
| 54,929 | | |
| 58,855 | |
| Corporate | |
| (5,285 | ) | |
| (3,566 | ) | |
| (11,172 | ) | |
| (11,005 | ) |
| | |
$ | 236,659 | | |
$ | 228,167 | | |
$ | 465,287 | | |
$ | 459,368 | |
| | |
| | | |
| | | |
| | | |
| | |
| Annualized
Adjusted EBITDA (1) | |
$ | 918,630 | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| As of June 30, 2024: | |
| | | |
| | | |
| | | |
| | |
| Total Debt (2) | |
$ | 5,604,610 | | |
| | | |
| | | |
| | |
| Unrestricted cash and cash equivalents | |
| 118,763 | | |
| | | |
| | | |
| | |
| Net Debt | |
$ | 5,485,847 | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | |
| Net Debt/Annualized Adjusted EBITDA | |
| 5.97 | x | |
| | | |
| | | |
| | |
| (1) | Calculated as Adjusted EBITDA for
the most recently reported three-month period, excluding the Adjusted EBITDA of $7.0 million
contributed from the ABS Loan Facility subsidiaries, multiplied by four. Annualized Adjusted
EBITDA has not been prepared on a pro forma basis in accordance with Article 11 of Regulation
S-X. |
| (2) | Includes $18.1 million of finance
leases, but excludes $89.7 million of unamortized discounts and deferred financing costs
and excludes the principal balance from the $275.0 million ABS loan facility. |
Uniti Group Inc.
Projected Future
Results (1)
(In millions)
| | |
Year Ended
December 31, 2024 |
| Net income attributable to common shareholders – Basic | |
$ 98 to $ 118 |
| Participating securities’ share in earnings | |
2 |
| Net income (2) | |
100 to 120 |
| Interest expense, net (3) | |
514 |
| Depreciation and amortization | |
313 |
| Income tax benefit | |
(11) |
| EBITDA (2) | |
916 to 936 |
| Stock-based compensation | |
13 |
| Gain on sale of real estate | |
(19) |
| Transaction related and other costs (4) | |
20 |
| Adjusted EBITDA (2) | |
$ 930 to $ 950 |
| (1) | These ranges represent management’s
best estimates based on the underlying assumptions as of the date of this press release.
Future acquisitions, capital market transactions, changes in market conditions, and other
factors are excluded from our projections. There can be no assurance that our actual results
will not differ materially from the estimates set forth above. |
| (2) | The components of projected future
results may not add due to rounding. |
| (3) | See “Components of Projected
Interest Expense” below. |
| (4) | Future transaction related costs not
mentioned herein are not included in our current outlook. |
Uniti Group Inc.
Projected Future
Results (1)
(Per Diluted
Share)
| | |
Year Ended
December 31, 2024 |
| Net income attributable to common shareholders – Basic | |
$ 0.41 to $ 0.50 |
| Real estate depreciation and amortization | |
0.94 |
| Gain on sale of real estate, net of tax | |
(0.08) |
| FFO attributable to common shareholders – Basic (2) | |
$ 1.27 to $ 1.35 |
| Impact of if-converted securities | |
(0.14) |
| FFO attributable to common shareholders – Diluted (2) | |
$ 1.14 to $ 1.21 |
| | |
|
| FFO attributable to common shareholders – Basic (2) | |
$ 1.27 to $ 1.35 |
| Transaction related and other costs (3) | |
0.07 |
| Amortization of deferred financing costs and debt discount | |
0.10 |
| Accretion of settlement payable (4) | |
0.03 |
| Stock-based compensation | |
0.06 |
| Non-real estate depreciation and amortization | |
0.38 |
| Straight-line revenues | |
(0.13) |
| Maintenance capital expenditures | |
(0.03) |
| Other, net | |
(0.26) |
| AFFO attributable to common shareholders – Basic (2) | |
$ 1.49 to $ 1.57 |
| Impact of if-converted securities | |
(0.17) |
| AFFO attributable to common shareholders – Diluted (2) | |
$ 1.33 to $ 1.40 |
| (1) | These ranges represent management’s
best estimates based on the underlying assumptions as of the date of this press release.
Future acquisitions, capital market transactions, changes in market conditions, and other
factors are excluded from our projections. There can be no assurance that our actual results
will not differ materially from the estimates set forth above. |
| (2) | The components of projected future
results may not add to FFO and AFFO attributable to common shareholders due to rounding. |
| (3) | Future transaction related and other
costs are not included in our current outlook. |
| (4) | Represents the accretion of the Windstream
settlement payable to its stated value. At the effective date of the settlement, we recorded
the payable on the balance sheet at its initial fair value, which will be accreted based
on an effective interest rate of 4.2% and reduced by the scheduled quarterly payments. |
Uniti Group Inc.
Components of
Projected Interest Expense (1)
(In millions)
| | |
Year Ended
December 31, 2024 | |
| Interest expense on debt obligations | |
$ | 484 | |
| Accretion of Windstream settlement payable | |
| 6 | |
| Amortization of deferred financing cost and debt discounts | |
| 24 | |
| Interest expense, net (2) | |
$ | 514 | |
| (1) | These ranges represent management’s
best estimates based on the underlying assumptions as of the date of this press release.
Future acquisitions, capital market transactions, changes in market conditions, and other
factors are excluded from our projections. There can be no assurance that our actual results
will not differ materially from the estimates set forth above. |
| (2) | The components of interest expense
may not add to the total due to rounding. |
NON-GAAP FINANCIAL MEASURES
We
refer to EBITDA, Adjusted EBITDA, Funds From Operations (“FFO”) (as defined by the National Association of Real Estate Investment
Trusts (“NAREIT”)) and Adjusted Funds From Operations (“AFFO”) in our analysis of our results of operations,
which are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”).
While we believe that net income, as defined by GAAP, is the most appropriate earnings measure, we also believe that EBITDA, Adjusted
EBITDA, FFO and AFFO are important non-GAAP supplemental measures of operating performance for a REIT.
We
define “EBITDA” as net income, as defined by GAAP, before interest expense, provision for income taxes and depreciation and
amortization. We define “Adjusted EBITDA” as EBITDA before stock-based compensation expense and the impact, which may be
recurring in nature, of transaction and integration related costs, costs associated with Windstream’s bankruptcy, costs associated
with litigation claims made against us, and costs associated with the implementation of our enterprise resource planning system, (collectively,
“Transaction Related and Other Costs”), costs related to the settlement with Windstream, goodwill impairment charges, severance
costs, amortization of non-cash rights-of-use assets, the write off of unamortized deferred financing costs, costs incurred as a result
of the early repayment of debt, including early tender and redemption premiums and costs associated with the termination of related hedging
activities, gains or losses on dispositions, changes in the fair value of contingent consideration and financial instruments, and other
similar or infrequent items (although we may not have had such charges in the periods presented). Adjusted EBITDA includes adjustments
to reflect the Company’s share of Adjusted EBITDA from unconsolidated entities. We believe EBITDA and Adjusted EBITDA are important
supplemental measures to net income because they provide additional information to evaluate our operating performance on an unleveraged
basis. In addition, Adjusted EBITDA is calculated similar to defined terms in our material debt agreements used to determine compliance
with specific financial covenants. Since EBITDA and Adjusted EBITDA are not measures calculated in accordance with GAAP, they should
not be considered as alternatives to net income determined in accordance with GAAP.
Because
the historical cost accounting convention used for real estate assets requires the recognition of depreciation expense except on land,
such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate
values have historically risen or fallen with market and other conditions, presentations of operating results for a REIT that uses historical
cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance
for REITs that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP. FFO is
defined by NAREIT as net income attributable to common shareholders computed in accordance with GAAP, excluding gains or losses from
real estate dispositions, plus real estate depreciation and amortization and impairment charges, and includes adjustments to reflect
the Company’s share of FFO from unconsolidated entities. We compute FFO in accordance with NAREIT’s definition.
The
Company defines AFFO, as FFO excluding (i) Transaction Related and Other Costs; (ii) costs related to the litigation settlement
with Windstream, accretion on our settlement obligation, and gains on the prepayment of our settlement obligation as these items are
not reflective of ongoing operating performance; (iii) goodwill impairment charges; (iv) certain non-cash revenues and expenses
such as stock-based compensation expense, amortization of debt and equity discounts, amortization of deferred financing costs, depreciation
and amortization of non-real estate assets, amortization of non-cash rights-of-use assets, straight line revenues, non-cash income taxes,
and the amortization of other non-cash revenues to the extent that cash has not been received, such as revenue associated with the amortization
of tenant capital improvements; and (v) the impact, which may be recurring in nature, of the write-off of unamortized deferred financing
fees, additional costs incurred as a result of the early repayment of debt, including early tender and redemption premiums and costs
associated with the termination of related hedging activities, severance costs, taxes associated with tax basis cancellation of debt,
gains or losses on dispositions, changes in the fair value of contingent consideration and financial instruments and similar or infrequent
items less maintenance capital expenditures. AFFO includes adjustments to reflect the Company’s share of AFFO from unconsolidated
entities. We believe that the use of FFO and AFFO, and their respective per share amounts, combined with the required GAAP presentations,
improves the understanding of operating results of REITs among investors and analysts, and makes comparisons of operating results among
such companies more meaningful. We consider FFO and AFFO to be useful measures for reviewing comparative operating performance. In particular,
we believe AFFO, by excluding certain revenue and expense items, can help investors compare our operating performance between periods
and to other REITs on a consistent basis without having to account for differences caused by unanticipated items and events, such as
transaction and integration related costs. The Company uses FFO and AFFO, and their respective per share amounts, only as performance
measures, and FFO and AFFO do not purport to be indicative of cash available to fund our future cash requirements. While FFO and AFFO
are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income
as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating performance.
Further,
our computations of EBITDA, Adjusted EBITDA, FFO and AFFO may not be comparable to that reported by other REITs or companies that do
not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition or define EBITDA, Adjusted
EBITDA and AFFO differently than we do.
INVESTOR
AND MEDIA CONTACTS:
Paul
Bullington, 251-662-1512
Senior
Vice President, Chief Financial Officer & Treasurer
paul.bullington@uniti.com
Bill
DiTullio, 501-850-0872
Vice
President, Investor Relations & Treasury
bill.ditullio@uniti.com
Exhibit 99.2
2Q24 Financial Earnings July 31, 2024
2 This presentation includes forward - looking statements that are subject to risks and uncertainties that could cause actual future events and results to differ materially from those expressed in the forward - looking statements. Forward - looking statements are typically identified by words or phrases such as “will,” “anticipate, ” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast” and other words and terms of similar meaning. Forward - looking statements include, but are not limited to, guidance regarding 2024 financial and operational results and our ab ility to successfully execute our 2024 company strategic goals supporting the guidance, including our quality initiatives designed to improve our customer’s experiences; anticipated Kineti c b roadband subscribers and market penetration growth, including broadband additions; availability and timing of delivery of fiber broadband to customers, including fiber broadband penetrati on; number of households or locations that may be served generally and related to funding from various state and federal broadband programs, including future programs, public - private partnerships wit h government entities, the Rural Digital Opportunity Fund and the Broadband Equity and Access Deployment Program (BEAD); opportunities related to strategic sales, products, and strategic reve nue growth across all of our business units; expectations regarding expense management activities, including continuation of reduction in interconnection and access expense, and the timing and ben efit of such activities; statements regarding possible benefits of the proposed transaction with Until Group, Inc., that was announced publicly in May 2024; and any other statements regarding plan s, objectives, expectations and intentions and other statements that are not historical facts. These statements, along with other forward - looking statements regarding Windstream’s overall business outlook, are based on estimates, projections, beliefs, and assumptions that Windstream believes are reasonable but are not guarantees of future events, performance, or results. Actual future event s a nd results may differ materially from those expressed in these forward - looking statements as the result of a number of important factors. Important factors that could cause actual results to differ materially from those indicated by such forward - looking statements i nclude risks and uncertainties relating to increased competitive pressures as state and federal broadband funding programs provide opportunities for new entrants in our markets and possible overbuilding of our network; our ability to, and the extent to which, we participate in BEAD and are able to successfully secure funding via competitive bidding processes over our competitors , especially in light of the various bidding requirements and program parameters proposed by the individual states for the award of BEAD funding; loss of funding from the Affordable Connectivity Program tha t m ay lead to customer disconnects or other state or federal subsidy programs that are not yet permanent programs; the effect of any changes in federal or state governmental regulations or statu tes , including any new regulations regarding alleged digital discrimination and net neutrality in the marketplace; uncertainty created in the federal Universal Service Fund program based on pending legal actions; oversight or enforcement ac tiv ities by state or federal agencies; that the proposed transaction with Uniti Group, Inc., could cause distraction by management and an allocation of resources that otherwise would have been attributed t o the business; adverse changes in economic conditions, including the impact of foreign wars or political upheaval; risks and uncer tai nties from cost pressures and inflation on our customers’ communications and payment decisions and on the business of our vendors; adverse economic, political or market conditions related to epidemics, pandemics, or dise ase outbreaks, and the impact of these conditions on our business operations and financial position and on our customers; impact of any supply chain delays or sh ortages on our business operations and on our customers’ ability to operate their business; that the expected benefits of cost reduction and expense management activities are not realized or ad ver sely affect our sales and operations or are otherwise disruptive to our business and personnel; the impact of new, emerging, or competing technologies and our ability to utilize these technologies to provide services to our customers; and general U.S. and worldwide economic conditions and related uncertainties. Windstream does not undertake any obligation to publicly update any forward - looki ng statement, whether as a result of new information, future events or otherwise.
3 Paul Sunu Chief Executive Officer Drew Smith Chief Financial Officer & Treasurer Genesis White VP, Investor Relations & Assistant Treasurer
4 Be the PREMIER broadband provider Be the TRUSTED communications and security advisor Be the INNOVATIVE wholesale leader OPERATIONS & SUPPORT Be the unwavering foundation that aligns, nurtures and enables us to be our best Focus o diversity and inclusion Prioritize quality and trust. Do it right the first time, every time. Give our best in everything we do.
5 Adjusted EBITDAR of $362M, up 4% year to date (1) Strong Strategic Revenue Trends ▪ Continued focus on Strategic & Advanced IP portfolios, which now represent 89% of total Enterprise Market service revenue (3)(4) ▪ Wholesale had solid performance highlighted by high demand from telecom, cable and content customers Consumer Highlights ▪ Kinetic consumer service revenue down 2% year - over - year largely driven by impact of the ACP step - down (2) ▪ Strong fiber additions of 17K in quarter ▪ Consumer Broadband ARPU of $89.13 up 2% y - o - y Interconnection Expense Reduction (4) ▪ Total interconnection expense fell by 16% y - o - y; legacy - TDM related expenses (5) fell by 26% y - o - y ▪ Of the $645 million in annualized interconnection expense remaining, $279 million relates to TDM services (5) & (1) Adjusted EBITDAR excluding gain on sale of IPv4 assets in 1Q24 (2) Step - down of the Affordable Connectivity Program (ACP) b egan in 2Q24; Windstream’s ACP customer base received ~$3M in monthly subsidy under this program (3) Excludes End user surcha rge s; (4) Based on 2Q24 results on an annualized basis (5) Includes TDM expenses as shown on Slide 11, plus Network Facilities (excluding Fi ber Expense) & Fiber Build Momentum Continues ▪ 94K new consumer premises added year to date ▪ Approximately 1.6 million consumer premises now have access to FTTH services ▪ 36% coverage of consumer households was achieved by quarter end
1,258 1,290 1,352 1,396 1,437 1,466 26 34 40 48 54 64 10 12 14 15 17 23 1,000 1,100 1,200 1,300 1,400 1,500 1,600 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 1 Gbps Consumer Premises Passed by Type (in 000’s) RDOF PPP Strategic 94K 1 Gbps Consumer Premises Constructed Year to Date 6 1,553 1,294 1,336 1,406 1,459 1,508
72% 76% 79% 81% 81% 44% 50% 53% 57% 58% 10% 22% 29% 34% 36% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2020 2021 2022 2023 2Q24 25 Mbps+ 100 Mbps+ 1Gbps % of Homes in Kinetic Footprint with Access to Available Speeds 7
24 23 20 18 17 25.5% 25.8% 26.3% 26.6% 26.9% 20% 21% 22% 23% 24% 25% 26% 27% 28% 275 300 325 350 375 400 425 450 475 2Q23 3Q23 4Q23 1Q24 2Q24 383 363 340 401 418 Ended 2Q with Consumers on 1G capable facilities, up 17K from 1Q24 Penetration Consumer Fiber Subscription Growth Shows Strong Adoption of New 1 Gbps Facilities ▪ Ending Fiber Subscribers ▪ Penetration Rate Note: Consumer Subscriber counts in 000’s 8
< 1 Year Cohorts 18% 16% 22% 15% 15% 20% 22% 25% 26% 27% 24% 29% 28% 23% 23% 29% 22% 21% 26% 27% 29% 30% 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 25% 24% 20% 3Q23 4Q23 1Q24 Newest Fiber Cohorts Are Showing Strong Penetration Early Note: Cohort penetration reflects consumers on 1G capable facilities, within the respective cohort, at the 12 - month (Year 1 Penetratio n) and 24 - month (Year 2 Penetration) anniversary of the cohort being launched. Less than 1 Year cohort penetration is shown as of June 30, 2024, reflecting penetration at the 9 - , 6 - and 3 - month mark for cohorts c ompleted in the third and fourth quarter of 2023, and first quarter of 2024, respectively. 40% Target Penetration Over a 4 Year Period 6 - Month Penetration 3 - Month Penetration Year 1 & Year 2 Cohort Penetration Year 1 Penetration Year 2 Penetration 9 - Month Penetration 9
Financial Overview 2023 2023 2023 2023 2024 2024 Q2 Q3 Q4 YE Q1 Q2 Revenue and Sales Kinetic Market 537$ 530$ 540$ 2,143$ 547$ 529$ Enterprise Market 338 346 314 1,369 316 287 Wholesale Market 106 115 103 437 114 100 Service Revenue 980$ 991$ 958$ 3,948$ 977$ 916$ Product & Fiber Sales 11 11 9 39 24 11 Total Revenue and Sales 991$ 1,002$ 967$ 3,987$ 1,001$ 926$ Expenses Direct Segment Expenses 358$ 363$ 337$ 1,421$ 343$ 326$ Network Access & Facilities 129 127 118 505 111 109 Shared Network & Operations 75 75 72 302 70 64 Information Techology/Shared Corporate 69 68 60 271 71 65 Total Expenses 631$ 632$ 588$ 2,499$ 595$ 565$ Adjusted EBITDAR 360$ 370$ 379$ 1,488$ 406$ 362$ Adjusted EBITDAR Margin % 36.3% 36.9% 39.2% 37.3% 40.6% 39.1% (Dollars in Millions) 10 (1) 1Q24 Adjusted EBITDAR excluding gain on sale of IPv4 assets (1)
TDM Retirement Accelerates Cost Reduction and Improves Customer Experience 11 Interconnection Expenses (in millions) 2Q23 2Q24 YoY Annualized Annualized Change % TDM 79$ 38$ (51%) IP/Ethernet 242$ 216$ (11%) Last Mile Access 321$ 255$ (21%) TDM 46$ 12$ (74%) IP/Ethernet 19$ 15$ (19%) Network Access 65$ 27$ (58%) Network Facilities (excluding Fiber Expense) 61$ 40$ (34%) Fiber Expense & Other 22$ 19$ (14%) Network Facilities Expense 83$ 59$ (29%) Enterprise Interconnect and Network Facilities Expense 469$ 342$ (27%) Network Facilities (excluding Fiber Expense) 189$ 189$ 0% Fiber Expense & Other (2) 113$ 114$ 1% Kinetic & Wholesale Network Facilities Expense 302$ 303$ 1% Total Interconnect and Network Facilities Expense 771$ 645$ (16%) ▪ 2Q24 annualized run - rate of $645 million in interconnection and network facilities expenses; annualized decline of 16% ▪ $279 million of Legacy TDM - related expense (1) including Network Facility expense; annualized decline of 26% ▪ Continued execution of multi - year program to migrate legacy TDM customers to newer technologies, moving from circuit - level to market - level optimization ▪ The focus on market - level TDM removal will enable greater reductions in network real estate and colocation expenses (1) Includes TDM expenses as shown, plus Network Facilities (excluding Fiber Expense) (2) Kinetic Fiber Expense & Other was updated during the current quarter to include Kinetic Pole Attachment expense. Prior perio ds were restated to reflect this change
$250 $0 $0 $0 $0 $708 $1,400 $- $250 $500 $750 $1,000 $1,250 $1,500 2023 2024 2025 2026 2027 2028 $475 Debt Maturity as of November 10, 2022 Revolver Draw Note : Available capacity under credit facility excludes outstanding letters of credit of $134.1 million of which $104.6 million w as issued to Universal Service Administrative Company as a condition for Windstream receiving RDOF funding The amended senior secured revolving credit facility will have $500 million of capacity through September 21, 2024, and $475 mil lion of capacity through January 23, 2027 Net Liquidity 1 Net Debt to Adjusted EBITDA First Out Term Loan 1 Net Liquidity calculation includes $500 million revolver capacity through September 2024 Debt Maturity as of June 30, 2024 12 Term Loan Senior First Lien Notes Undrawn Revolver
Broadband Consumers (1) Fiber Broadband Consumers (1) Fiber Route Miles (1)(4) Fiber Households Today (1) Fiber Households – Build Plan (1) Windstream Owns 100GB POPs (1) Total Consumer Revenues (2) Kinetic Owned Assets (3) E&W Owned Assets (3) Kinetic Fully Owned and Operated Metrics 215K (20.7%) 117K (31.3%) 453K (29.2%) 651K (35.0%) $229M $2.5B E&W Owned & Operated 80K (75.0%) 1,358 (100.0%) $ 1.0B (1) Metric represents number and percentage of Windstream total not associated or encumbered by Uniti Master Lease Agreements as of June 30, 2024 (2) Consumer Revenues for FY 2023 that are not within in - footprint ILEC markets governed by Uniti ILEC Master Lease Agreement (3) Kinetic and E&W Owned Assets represent net PP&E, excluding CWIP, as of December 31, 2023, for Windstream owned assets (4) Beginning in 2Q24, the calculation of Fiber Route Miles was modified to align with Uniti disclosures 13
14 (all $ in millions) 2023 Results 2024 Guidance Adjusted EBITDAR (1) $1,488M Approximately flat y - o - y (adjusted for ACP expiration) (2) Capex, net (3) $798M Approximately $700M Unlevered Free Cash Flow (4) $155M Approximately $140M Fiber Consumer Customer Additions 96K Similar to 2023 Fiber Premises Constructed 232K Approximately 200K (lowered from previous: "Similar to 2023") (1) 2024 Adjusted EBITDAR guidance excludes the impact of non - core operating asset sales during the period (2) Adjusted for expected wind - down of the Affordable Connectivity Program (ACP) in 2Q 2024. Windstream’s ACP customer base currently receives ~ $3M in monthly subsidy under this program (3) Adjusted Capex, less GCI reimbursements (4) Total change in cash, excluding cash interest, cash taxes and debt amortization payments
Quarterly supplemental schedules (Pro Forma) Appendix 15
16
17
18
19
20
21
22
23
Exhibit 99.3
| 2Q24 Earnings Presentation Script
July 31, 2024
Genesis White
Good morning everyone and thank you for joining Windstream’s second quarter 2024
earnings conference call.
Joining me on the call today are:
• Paul Sunu, our CEO, and
• Drew Smith, our CFO and Treasurer
To accompany today’s call, we have posted the presentation slides and supplemental
schedule on our various investor websites. If you do not have access to these websites,
please reach out to me at Genesis dot White at windstream dot com.
Our financial statements, prepared in accordance with U.S. GAAP, will be available by mid-August to our lenders and investors, in compliance with the terms of the Credit Agreement,
Indenture, and Amended and Restated LLC Agreement.
During the second quarter of 2024, we adjusted certain expense assignments between
Kinetic, Enterprise and shared services. Prior period segment information, as previously
reported in the first quarter 2024 investor supplement, has been revised to reflect these
updates. |
| 2Q24 Earnings Call Script
2
Today’s discussion includes statements about expected future events and financial results
that are forward-looking and subject to risks and uncertainties and the disclosure to our
forward-looking statements will be contained in our financial statements. Let me now turn
it over to Paul Sunu. |
| 2Q24 Earnings Call Script
3
Paul Sunu
Good morning and thank you for joining us.
Today, we are pleased to share with you our second quarter results, which showed solid
financial and operational performance across our business and demonstrated progress
towards our 2024 priorities, as shown on Slide 4.
As you know, our focus for 2024 is Quality. As we continue to execute on our 2024 strategic
objectives, we want to underline these efforts by doing our best and doing things right the
first time, every time. And we are seeing improvements in our operations and delivering
better service, including a 10% year-to-date reduction in our overall consumer broadband
disconnects, as well as improving trends on care and repair intervals across the business.
We are focused on providing an outstanding service experience to our customers and the
communities we serve. This is exemplified by our recovery and restoration initiatives
around the unusually high level of tornados this quarter which tore through a number of
servicing areas in Iowa, Nebraska and Oklahoma as well as the extensive wildfire in New
Mexico. Whether helping to clear impacted areas, repairing damaged fiber or providing
meals, our teams demonstrated the very essence of our commitment to service quality and
community. |
| 2Q24 Earnings Call Script
4
Let’s turn to Slide 5, which provides an overview of our second quarter financial and
operational highlights. For the quarter, we delivered adjusted EBITDAR of $362 million,
which was up 4% for the full year.
Within Kinetic, our consumer revenues declined approximately 2% year-over-year.
These results include the impact of the funding step-down from the ACP, or Affordable
Connectivity Program, that began this quarter. We ended the second quarter with over
95,000 customers who were previously enrolled and receiving the ACP benefits. While this
is a public policy decision, the abrupt discontinuation of this program does create a heavy
burden on those that need it the most. We continue to hope that Congress will address the
need to continue this support mechanism. In the meantime, as previously reported, we are
continuing for the time being a $30 monthly credit to this cohort. As a reminder, this
impact is included in our 2024 guidance that was provided in February.
Turning to slide 6, we extended our fiber coverage by constructing over 94,000 consumer
premises so far this year, bringing us to approximately 1.6 million total consumer premises
passed. And this represents 36% coverage of our Kinetic footprint as outlined on slide 7.
While we are making steady progress on our RDOF and PPP builds, the pace of construction
slowed in the second quarter, driven in large part by the shift in resources toward
restoration initiatives arising from the higher storm- and fire-related activity mentioned
earlier, as well as delays in permitting. We are working through the permitting challenges,
which are being shared by many in the industry, and taking our learnings to help improve
execution on our remaining builds. |
| 2Q24 Earnings Call Script
5
In addition, our internal construction team continues to make productivity gains and
sharpens their execution skills through terrains in rural areas that we anticipate will be
very similar to BEAD builds. The experience and expertise gained, along with our quality-focused approach, gives us assurance that we can reliably meet our build commitments
under these programs as well as those under BEAD. And so, we look forward to the
opportunity to continue our pursuit of connecting the unserved and underserved with our
fiber.
Now let’s look at our fiber broadband subscribers, as seen on Slide 8. We ended the
quarter with 418,000 subscribers on our fiber network, representing a 26.9% penetration
rate, an improvement of 30 basis points sequentially.
Additionally, you can see the performance from our Fiber Fast Start initiative on Slide 9, as
our latest cohorts are showing impressive penetration results. Furthermore, we launched
our Fiber Forward initiative during the second quarter, which leverages the tactics and
learning from Fiber Fast Start to reinvigorate our older cohorts. With the benefit to
customer additions from these two programs, as well as the churn improvements from our
quality initiatives, we see opportunities ahead to further propel our fiber penetration.
Strategic revenues within our Enterprise and Wholesale markets had a solid performance.
Within Enterprise, we continue our focus on Strategic and Advanced IP portfolios, which
now represent 89% of our total Enterprise Market service revenues on an annualized basis,
excluding end-user surcharges. |
| 2Q24 Earnings Call Script
6
Overall, I am very pleased with the progress we made during the quarter and the
operational momentum we are building through our quality initiatives.
And finally, before we get to our financial results, let me address the progress on our
planned merger with Uniti. On Monday, the initial Form S-4 Registration Statement, which
contains pertinent information on the merger, was filed with the SEC and is publicly
available. The Registration Statement has not yet become effective and is subject to SEC
review. In addition, we have received five state approvals and have thirteen state
approvals in process. We continue to defer to Uniti management on specifics of the
transaction and the closing process, but from our perspective, this combination makes a lot
of sense as it will bring the leased network assets back with our operations and creates the
opportunity to unlock additional value from our Kinetic operations while eliminating
certain complexity of the lease arrangement with Uniti. The merger is expected to close in
the second half of 2025, subject to customary closing conditions, including receipt of
regulatory and Uniti shareholder approvals. In the meantime, we remain focused on
executing on our initiatives and running our day-to-day business, while providing support
to Uniti where needed to close the transaction.
With that, let me now turn the call over to Drew to hit some of the highlights on the
financial results. |
| 2Q24 Earnings Call Script
7
Drew Smith
Thank you, Paul, and good morning everyone. Turning to Slide 10, we show our second
quarter financial results.
During the quarter, Windstream generated:
• Total revenues of $926 million, and
• Adjusted EBITDAR of $362 million, up almost 1% year-over-year, which translates
into a consolidated margin of 39.1% during the quarter, an improvement of 280
basis points over last year’s levels. Additionally, the current quarter results include
funding step-downs from the ACP program, as mentioned earlier. Excluding this,
adjusted EBITDAR grew approximately 2% year-over-year.
Moving to our market-level business revenue trends:
Kinetic revenues delivered solid results. For the quarter:
• Service revenue was $529 million, which was down 1.4% year-over-year, with
consumer service revenue down 2.3% year-over-year, driven mostly by the ACP
funding step-downs. In addition, we saw strong growth in our next-generation
subscriber base, however this growth was offset by declines in our legacy-DSL
subscribers
• Kinetic consumer broadband ARPU of $89.13 was up 2% year-over-year, but down
slightly sequentially due to impacts from the ACP wind-down |
| 2Q24 Earnings Call Script
8
• Next-Generation broadband subscribers grew by 17,200 during the quarter. This
was offset by a loss of 27,200 DSL customers, resulting in a net decrease in total
broadband units of 10,000 for the quarter.
Within Enterprise:
• Service revenue was $287 million, down 15.1%, as legacy-TDM revenues continue
to see ongoing declines as expected.
• Notably, approximately 89% of Enterprise Market service revenues, excluding end-user surcharges, came from our Strategic and Advanced IP portfolios. These
combined revenues were down 1% for the year.
• TDM and Other revenue declined approximately 56% year-over-year as we continue
to execute our TDM exit strategy and transition customers to our strategic and
advanced products, which produce a higher margin for the business
Within Wholesale:
• Service revenue was $100 million, down 5% year-over-year, driven by declines in
legacy revenues as well as lower non-recurring revenue. Strategic revenues had a
solid performance during the quarter highlighted by high demand being seen from
telecom, cable and content customers. |
| 2Q24 Earnings Call Script
9
Turning to expenses:
• Total cash expenses during the second quarter fell by $67 million, or approximately
11%, year-over-year, as our quality and unification efforts across the company
continue to deliver solid results.
On slide 11, I wanted to provide our regular update on our interconnection expense
reduction activities. Our total interconnection and network facility expenses fell by 16% on
a year-over-year basis during the second quarter. We reduced these total expenses on a
recurring annualized basis by over $125 million year-over-year. Notably, we still have
$645 million of total interconnection expenses, of which $279 million are legacy TDM-related including network facilities expense. These expenses fell by 26% year-over-year.
In particular, the Enterprise access and service delivery teams have fully exited over 350
collocations associated with our TDM migration plans year-to-date.
Transitioning to slide 12, Windstream has a strong balance sheet with no current debt
maturities until 2027. As of June 30th, we ended with $462 million in total liquidity and a
net debt to adjusted EBITDA ratio of 2.19x.
As seen on slide 13, Windstream fully owns and operates substantial assets. Within our
Kinetic markets, approximately 31% of our current fiber broadband consumers are on a
network that is entirely owned and operated by Kinetic. |
| 2Q24 Earnings Call Script
10
Our financial and operational guidance as seen on slide 14 remains unchanged, with the
exception of Fiber Premises Constructed, which we now expect to be around 200,000 for
the year to account for the delays we’ve seen in permitting for our RDOF and PPP builds
that Paul mentioned earlier. This results in a shift of the remaining households, originally
planned for this year, to early next year.
Now, I will turn the call back over to Paul for some closing comments. |
| 2Q24 Earnings Call Script
11
Paul Sunu
Thank you, Drew.
In closing, Windstream delivered solid financial and operational results across our business
during the second quarter. We continue to extend our fiber footprint within our Kinetic
markets, and the strong penetration that we are seeing in our newest fiber cohorts
demonstrates that our strategic marketing initiatives are on track. We want to be the
premier company for service and quality; the go-to company for the most reliable, resilient,
and responsive network; and through our quality initiative, provide our customers with an
outstanding service experience.
With that, we can now open the call up for questions. |
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dei_ |
| Data Type: |
dei:submissionTypeItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionAddress Line 1 such as Attn, Building Name, Street Name
| Name: |
dei_EntityAddressAddressLine1 |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionAddress Line 2 such as Street or Suite number
| Name: |
dei_EntityAddressAddressLine2 |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- Definition
+ References
+ Details
| Name: |
dei_EntityAddressCityOrTown |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionCode for the postal or zip code
| Name: |
dei_EntityAddressPostalZipCode |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionName of the state or province.
| Name: |
dei_EntityAddressStateOrProvince |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:stateOrProvinceItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionA unique 10-digit SEC-issued value to identify entities that have filed disclosures with the SEC. It is commonly abbreviated as CIK. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityCentralIndexKey |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:centralIndexKeyItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionIndicate if registrant meets the emerging growth company criteria. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityEmergingGrowthCompany |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionCommission file number. The field allows up to 17 characters. The prefix may contain 1-3 digits, the sequence number may contain 1-8 digits, the optional suffix may contain 1-4 characters, and the fields are separated with a hyphen.
| Name: |
dei_EntityFileNumber |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:fileNumberItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionTwo-character EDGAR code representing the state or country of incorporation.
| Name: |
dei_EntityIncorporationStateCountryCode |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:edgarStateCountryItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionThe exact name of the entity filing the report as specified in its charter, which is required by forms filed with the SEC. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityRegistrantName |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionThe Tax Identification Number (TIN), also known as an Employer Identification Number (EIN), is a unique 9-digit value assigned by the IRS. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b-2
| Name: |
dei_EntityTaxIdentificationNumber |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:employerIdItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionLocal phone number for entity.
| Name: |
dei_LocalPhoneNumber |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:normalizedStringItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 13e
-Subsection 4c
| Name: |
dei_PreCommencementIssuerTenderOffer |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 14d
-Subsection 2b
| Name: |
dei_PreCommencementTenderOffer |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionTitle of a 12(b) registered security. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection b
| Name: |
dei_Security12bTitle |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:securityTitleItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionName of the Exchange on which a security is registered. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Number 240
-Section 12
-Subsection d1-1
| Name: |
dei_SecurityExchangeName |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:edgarExchangeCodeItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as soliciting material pursuant to Rule 14a-12 under the Exchange Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Exchange Act
-Section 14a
-Number 240
-Subsection 12
| Name: |
dei_SolicitingMaterial |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionTrading symbol of an instrument as listed on an exchange.
| Name: |
dei_TradingSymbol |
| Namespace Prefix: |
dei_ |
| Data Type: |
dei:tradingSymbolItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
| X |
- DefinitionBoolean flag that is true when the Form 8-K filing is intended to satisfy the filing obligation of the registrant as written communications pursuant to Rule 425 under the Securities Act. Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Securities Act
-Number 230
-Section 425
| Name: |
dei_WrittenCommunications |
| Namespace Prefix: |
dei_ |
| Data Type: |
xbrli:booleanItemType |
| Balance Type: |
na |
| Period Type: |
duration |
|
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