Uniti Group - Q1 2023

Transcript

Speaker 0

Welcome to Uniti Group's First Quarter 2023 Conference Call. My name is Gigi, and I'll be your operator for today. A webcast of this call will be available on the company's website, www.uniti.com, beginning today will remain available for 14 days. At this time, all participants are in a listen only mode. Participants on the call will have the opportunity to ask The company would like to remind you that today's remarks include forward looking statements, And actual results could differ materially from those projected in these statements.

The factors that could cause actual results To differ are discussed in the company's filings with the SEC. The company's remarks this morning will reference slides posted on its website, and you are encouraged to refer to those materials during this call. Discussions during the call will also include certain financial measures that were not prepared accordance with generally accepted accounting principles. Reconciliation of those non GAAP financial measures to the most directly comparable GAAP financial measures Can be found in the company's current report on Form 8 ks dated today. I would now like to turn the call over to Uniti Group's Chief Executive Officer, Kenny Gunderman.

Please go ahead, Mr. Gunderman.

Speaker 1

Thank you. Good morning, everyone, and thank you for joining. Starting on Slide 3, we remain highly focused on our strategy of buying and building mission critical fiber infrastructure. And this strategy has resulted in Uniti becoming the 2nd largest Independent fiber operator in the country with 137,000 route mile network. We remain focused on disciplined growth and look strike the right balance on our bookings and installs between anchor and lease up and wholesale and non wholesale.

This balance along with sub-one hundred day mean time to deliver And our industry leading monthly churn of 0.2% demonstrates the outstanding economics of shared fiber infrastructure. This discipline has led to yet another quarter of solid performance and reiterating our consolidated full year revenue and adjusted EBITDA outlook. Wholesale and enterprise recurring revenue were up 10% 15%, respectively, in the Q1, and dark fiber lease up at Unity Leasing was up 15% On an overall basis, we continue to target and deliver mid single digit top line growth, increasing adjusted EBITDA and declining capital intensity. In addition to the recent refinancings we mentioned last quarter, we also extended the maturity on our revolver to 2027, ensuring Uniti is positioned to patiently execute during these uncertain economic and credit market conditions. Combined with our organic growth runway and our steady performance, We now have a growth plan that is virtually fully funded.

As Slide 4 demonstrates, our substantially underutilized fiber network acquired largely through sale leasebacks versus complicated company acquisitions is helping drive our shared infrastructure economics. The anchor plus lease up model is working, Driving cumulative cash flow yields today of 23%, a more than threefold increase from the anchor yield of these projects. Slide 5 shows that the majority of our revenue is wholesale in nature, which comes with longer term contracts, lower churn and less required overhead for execution. As a result, our business and underlying performance are less susceptible to macroeconomic conditions. The vast majority of these wholesale customers are the large wireless providers, Hyperscalers and international and domestic carriers.

These carriers are purchasing large pipes from Uniti to connect towers, Small sales, data centers, fiber to the home and inner city pops, which further highlights that our business is diversified across numerous use cases. These use cases are all on ramps that are driving traffic onto our core network. A growing number of our wholesale customers are fiber to the home providers, Overall trends of the Fiber to the Home business remain highly attractive Given substantial investment from private capital sources, increasing valuations and successful asset backed securitizations, Uniti is uniquely positioned as one of the largest wholesale providers to the fiber to the home space and we believe our underlying network assets Continue to appreciate and value as a result. Turning to Slide 6, scale matters in fiber, Especially with a wholesale heavy business model like ours. Having an owned national network is a meaningful competitive advantage for Uniti, especially given it would take 1,000,000,000 of dollars and many years To build a new national network.

We estimate there are only 5 truly owned national networks and 2 independent fiber providers with national networks in the U. S. Today, With Unity being one of them. Thus, our ability to deploy dark fiber and wave services present Unity with unique low growth opportunity with minimal competition. Slide 7 illustrates our balanced approach to bookings.

Although the wholesale business will always be our focus, a disciplined and Trolled Enterprise strategy can drive enhanced profitability with minimal CapEx and low churn, especially if there are no legacy services. While greenfield bookings drive growth with anchor customers and expand the network in a cost effective manner for new lease up opportunities, The majority of new bookings continue to be leased up in nature, which are substantially less capital intensive. Wholesale bookings in the Q1 were impacted by a shift To be clear, our sales funnel remains strong and we're not seeing customers cancel orders. In fact, our wholesale bookings forecast for this year remains largely unchanged. It's also important to remember that wholesale bookings in the prior quarter included one of the largest customer contracts in Uniti's history, resulting in the best quarter we've ever had for bookings.

Turning to Slide 8. Our enterprise strategy is highly disciplined and regional in nature. As you can see from the map, we're only offering enterprise services in approximately 30 metros concentrated in the Southeast. Our product set is simple. All sales are on our owned and controlled dense metro fiber network, and we have virtually no legacy services.

The majority of operational expenses within fiber businesses are employees and off net fiber purchases. Because we're selling largely on net products and services and Majority of our employees, including sales, field ops, maintenance, construction, etcetera, are concentrated in a certain geographic area. We're able to maximize efficiency and therefore drive 50% plus cash yields on our enterprise lease up sales. In addition, our local brand is substantially enhanced in this region, and our enterprise monthly churn is industry leading at around 0.7%. Although enterprise sales represent about 5% of our total revenue today and will likely always represent a minority percentage, It remains a critical element of our lease up strategy.

As a result of our consistently strong bookings activity, enterprise recurring revenue was up 15% during the quarter. Equally exciting and as we mentioned before, we own Dark Metro Fiber in about 300 markets nationwide, which represents terrific capital and margin efficient growth With that, I'll now turn the call over to Paul.

Speaker 2

Thank you, Kenny, and good morning, everyone. I'd like to begin by reviewing our Q1 performance, followed by an overview of our updated 2023 outlook. We continue to execute well on our strategy of leasing up our existing fiber network of 137,000 route miles with high margin recurring revenue. This lease up activity was reflected in the strong growth during the quarter. Also of note, we recently entered into on our revolving credit facility that extends the maturity of the facility to September 2027.

Combined with our other recent refinancing activities, Over 97% of our outstanding debt now matures in 2027 or later. As I will cover in more detail in just a bit, Our 2023 outlook for consolidated revenue and adjusted EBITDA remains unchanged. However, we are slightly lowering our Uniti Fiber adjusted EBITDA estimate. We are also increasing our AFFO per share for full year 2023 as a result of finalizing the accounting impact relating to our recent refinancings. Finally, I'll conclude with additional commentary on our current balance sheet and capital structure.

Please turn to Slide 9, and I'll start with comments on our Q1. We reported consolidated revenues of $290,000,000 Consolidated adjusted EBITDA of $231,000,000 AFFO attributed to common shareholders of $107,000,000 And AFFO per diluted common share of $0.39 Net loss attributable to common shareholders for the quarter was approximately $19,000,000 Or $0.08 per diluted share, which includes the write off of $10,000,000 of deferred financing costs and $52,000,000 of costs related to the early repayment of our 7.7 percent 8 percent secured notes due 2025. At Uniti Leasing, we reported segment revenues of $11,000,000 and adjusted EBITDA of $205,000,000 representing growth of 3% for each In the Q1 of 2023 compared to the prior year period. Accordingly, Uniti Leasing achieved an adjusted EBITDA margin of 97% for the quarter. Turning to Slide 10.

Our growth capital investment program continues to provide positive results for Uniti. Over the past 8 years, our tenant has invested over $1,000,000,000 of tenant capital improvements in our network. Uniti continues to invest its own capital Long term value accretive fiber, largely focused on highly valuable last mile fiber. Collectively, these investments have resulted in 22,200 miles of newly constructed fiber and 24% of the legacy copper network being overbuilt with fiber. Based on the investments made to date And our expectation that Windstream will utilize most, if not all of the GCI program, we expect that nearly half of the legacy copper network will be overbuilt with fiber by 2,030.

During the Q1, Uniti Leasing deployed approximately $72,000,000 toward growth capital investment initiatives, With the majority of the investments relating to the Windstream GCI program, these GCI investments added 1200 round miles of fiber to Uniti's own network across several different markets. As of March 31, Uniti has invested approximately $612,000,000 of capital to date under the GCI program with Windstream, Adding around 16,600 route miles and 930,000 strand miles of fiber to our network. These investments will be added to the master leases at an 8% initial yield at the 1 year anniversary of Uniti making such investment. They are subject to a 0.5% annual escalator and results in nearly 100% margin. The investments we've made to date We'll ultimately generate approximately $49,000,000 of annualized cash rent and increase the overall value of our network.

At Uniti Fiber, we turned over 197 lit backhaul, dark fiber and small cell sites for our wireless carriers across our Southeast footprint during the Q1. These installs add annualized revenues of approximately $2,200,000 We currently have around 11 25 lit backhaul, dark fiber and small cell sites remaining in our backlog that we expect to deploy over the next few years. This wireless backlog represents an incremental $10,000,000 of annualized revenues. At Uniti Fiber, we reported revenues of $79,000,000 Adjusted EBITDA of $34,000,000 during the Q1, achieving margins of 43%. Revenue and adjusted EBITDA growth during the quarter of 8% And 7% respectively from the prior year period was higher than expected primarily due to the timing of non recurring ETL fees relating to the early termination of Unity Fiber net success based CapEx was $36,000,000 in the Q1 and was higher than originally anticipated Due to the early receipt of equipment purchases as networking equipment delivery lead times continue to improve, we also incurred $2,000,000 of maintenance CapEx during the quarter.

Please turn to Slide 11, and I'll now cover our updated 2023 guidance. We are revising our guidance for business unit level revisions, The finalized accounting impact from our recent convertible and secured note offerings and related redemptions and the impact of transaction related and other costs incurred to date. Our outlook excludes future acquisitions, capital market transactions and future transaction related and other costs not specifically mentioned herein. Actual results could differ materially from these forward looking statements. Our current full year outlook for 2023 includes the following for each segment.

Beginning with Uniti Leasing, we continue to expect revenues and adjusted EBITDA to be $850,000,000 $825,000,000 respectively, at the midpoint, representing adjusted EBITDA margins of approximately 97%. Revenue and adjusted EBITDA each includes $33,000,000 Cash rent associated with the GCI Investments and $21,000,000 relating to the straight line rent associated with the Windstream master leases and GCI Investments. We now expect to deploy $270,000,000 of success based CapEx at the midpoint of our guidance, of which $1,000,000 relates to estimated Windstream GCI investments. The $10,000,000 increase from our prior guidance is due to capital requirements associated with the lease up in our dark fiber leasing business. Turning to Slide 12, we still expect Uniti Fiber to contribute $314,000,000 of revenues at the midpoint.

We now expect adjusted EBITDA of $123,000,000 for full year 2023. The slight decrease in adjusted EBITDA from our prior outlook Due to lower than expected core recurring revenues as a result of the timing of bookings as Kenny highlighted earlier, partially offset by higher than expected non recurring equipment sales, Which come with lower relative margins. Despite this, we still expect healthy core recurring revenue growth of 5% from the prior year. Slide 13 further emphasizes this point as we now expect our run rate monthly recurring revenue at Uniti Fiber to grow between 5% to 7% in 2023. This solid growth demonstrates our continued success in executing on our lease up strategy that leverages our existing dense Southeast fiber footprint.

We still expect ETL fees in 2023 to be approximately $15,000,000 compared to $24,000,000 in 2022. Net success based CapEx for Uniti Fiber this year is now expected to be $115,000,000 at the midpoint of our guidance, a 14% decrease from levels in 2022 And $5,000,000 lower than our prior guidance, primarily due to lower equipment purchases as a result of the bookings delays mentioned earlier. Turning to Slide 14. For 2023, we expect full year AFFO to range between $1.38 and $1.45 per Diluted common share with a midpoint of $1.41 per diluted share. As a reminder, AFFO in 2023 will be impacted by incremental interest and diluted shares relating to our recent convertible and secured note refinancings.

On a consolidated basis, we still expect revenues to be $1,200,000,000 and adjusted EBITDA to be $925,000,000 at the midpoint. Our guidance contemplates consolidated interest expense for the full year of approximately $517,000,000 which includes a $10,000,000 write off of deferred Financing costs and $32,000,000 of early repayment premium in the Q1 of this year related to the redemption of our 7.8 percent senior secured notes due 2025. Corporate SG and A, excluding amounts allocated to our business segments, It is expected to be approximately $30,000,000 including $7,000,000 of stock based compensation expense. We are revising our weighted average diluted common shares outstanding Full year 2023 to be around 290,000,000 shares, reflecting the full year impact of the incremental diluted shares relating to the accounting of the recently issued convertible notes using the if converted method. As a reminder, guidance ranges for key components of our outlook are included in the appendix to our presentation.

Turning now to our capital structure. On March 21, Uniti repurchased approximately $15,000,000 in principal of its 4% exchangeable notes Due 2024 for total cash consideration of $13,700,000 The outstanding balance of these notes at quarter end is approximately $123,000,000 On March 24, Uniti entered into an amendment to its credit agreement that upon repeat of routine regulatory approval, Extends the maturity date of each lender's commitment under the company's senior secured revolving credit facility to September 24, 2027. The amendment also transitions the $500,000,000 revolving credit facility from LIBOR to SOFR. At quarter end, we had approximately $495,000,000 of combined unrestricted cash and cash equivalents and undrawn revolver capacity. Our leverage ratio at quarter end stood at 5.87 times based on net debt to last quarter annualized adjusted EBITDA.

On May 2, our Board declared a dividend of $0.15 Thank you. Thank you. Thank you.

Speaker 1

Thanks, Paul. Slide 15 illustrates the investments we're making in our fiber network will lead to a more sizable and valuable fiber business over the next several years. We also expect the end of 2025 to be the inflection point where we become free cash flow positive after dividends And expect to generate cumulative free cash flow of over $1,000,000,000 during the 5 year period ending in 2,030, if we maintained our current dividend and approximate level of Capital Investment. This trajectory would lead to substantial deleveraging resulting in net leverage between 4 to 5 times And roughly double the size of our non Windstream fiber business by 2,030. Turning to Slide 16.

Over the past few months, we've filled in many questions about the merits of remaining a REIT and paying a required dividend. So we thought it would be helpful if we explained our current views. The arguments that we've been presented with for de reading are that we could use the free cash flow allocated to our current dividend payout to invest more in our business, Pay down our outstanding debt at a discount and strengthen near term liquidity. I'd like to briefly address each of these arguments and share a few other observations. First, we've never underinvested in our business just to service the dividend.

In fact, our capital intensity historically was over 50% We built out our dense fiber networks in the Southeast and is now more normalized in the 30% range on a consolidated basis. As we said many times, we believe this is the appropriate range for fiber business in order to optimize growth and profitability. Said differently, we could certainly invest more in our business through organic capital or M and A if we didn't pay a dividend, But not materially more. And as we sit here today, we believe our forecasted ongoing capital intensity is appropriate given the returns on capital that we're currently seeing. With respect to the argument of de reading and paying down more debt, we have always said that 5.5 to 6 times is a comfortable leverage level for us, And we've consistently maintained that range.

Given these volatile capital markets, however, we certainly understand the desire for lower leverage, And we suspect the recent trading pressure on our stock is partly related to our leverage being perceived as high. Thus deleveraging over time to 4 to 5 times Seems appropriate. By deleveraging, our forecasted leverage would only decline marginally to around 3.8 times to 4.8 times As the dividend savings would be largely offset by higher taxes, thus de reading would not achieve materially lower leverage. In fact, we estimate the NPV of cash savings to be approximately $1,500,000,000 in the future if we remain a REIT. Dereading and eliminating the dividend would certainly bolster near term liquidity, which could be helpful in these volatile times.

With that said, we sized our recent financings to service our current dividend until we become free cash flow positive in about 24 months. It is not uncommon for REITs to borrow to service their obligations during temporarily elevated times of spending, and that's essentially what we're doing. We have a robust, prosperous, predictable business with contractual step downs in spending, and therefore, a very clear path to Our dividend payout ratio as a percentage of 2023 AFFO per share is approximately 42%, Which is lower than the average for other infrastructure REITs and suggests there is room to increase our payout over time as free cash flow grows. Finally, our REIT structure has significant strategic value. As a reminder, we were created as a REIT in 2015 before certain IRS rules changed making it harder to elect REIT status.

In many of the strategic opportunities we've considered in the past And in our real time conversations, our REIT status has proven to be very valuable. Over the past 8 years, including during other periods of Stream volatility, we've had we've steadily maintained our targeted 5.5 to 6 times leverage, built a best in class U. S. Fiber business, Built and sold at a premium Latin American and U. S.

Tower businesses, all while returning over $11 per share of value to our shareholders in the form of a dividend. In conclusion, under our current circumstances, we continue to believe maintaining our REIT status is the appropriate corporate structure As it provides a meaningful return of capital to our investors, which has always been important part of our investment thesis while preserving its strategic value. With that, operator, we're now ready to take questions.

Speaker 0

Thank you. Please stand by while we compile the Q and A roster. Our first question comes from the line of Gregory Williams from TD Cowen.

Speaker 3

Thanks for taking my questions. The first one, Kenny, you just made the case and To remain a REIT, can you just remind us of your $0.15 dividend, How much of that is above and beyond the minimum requirements? And then just the second question is on the softer bookings, especially in the wholesale Bookings. Can you just maybe expound on what's causing delays, I mean, the complicated RFP process or customers dragging their feet? So Then you reiterated guidance on bookings, so we should expect what a meaningful pickup in the second quarter then?

Speaker 1

Hey, Greg. Yes, I'll start with your bookings question. Yes, I don't think that we obviously Follow the bookings very closely, but even more closely follow our funnel development because that's what leads to the bookings. And our funnel is very, very strong. I think we continue to maintain a funnel that's as large as it's ever been.

And given that we have a wholesale heavy business, which by definition means you have fewer customers with larger deals, When a handful of customers, 2 or 3 or 4 make different decisions about timing, It can impact bookings in any one quarter. And for example, in the Q4 of last year, we had one Deal for 200,000 of MRR that caused us to have a record quarter of bookings. When that deal was originally in our funnel earmarked for the Q1 of this year, so if you just normalize the Q4 and the Q1, you basically Have pretty level bookings that are consistent with historical levels. All that to say, 1 or 2 or 3 deals Slipping from 1 quarter or being pulled into a prior quarter can might reveal soft bookings, but we really don't view it that way. In fact, when you look at April bookings that are now in the rearview mirror, we're back to more normal levels, and And we think the Q2 is going to be in general.

So all that to say, I don't know precisely how you're forecasting the timing of your bookings. But for us, Well, I don't think we're going to have any herculean months or quarters. I think we're just going to our expectation is that we make up The roughly 200,000 over the course of the year. And I wouldn't attribute the timing to any particular Certainly not we don't think macro environment issues. I think it's just customer specific buying patterns.

So I don't have anything really to attribute those to. With respect to the dividend, Your dividend question about how much we're distributing over 90%, we've not disclosed that number. But what I would tell you is if you look at 2024 2025 and really the remainder of this year, we're probably distributing Somewhere between $100,000,000 $150,000,000 additional over the 90% based on our forecast. And so I don't know what that Equates to on a per share basis, but in aggregate, that's roughly the number.

Speaker 3

Got it. Thanks for the color. Appreciate it. Sure.

Speaker 0

Thank you. One moment for our next question. Our next question comes from the line of David Barden from Bank of America.

Speaker 4

Hi, this is Shipra Pandey on for David. Could you just elaborate on your comfort level with your relationship with DISH? There are some concerns on their liquidity Status and commitment to their 5 gs network build. As one of the primary customers for Unity, are there any ramifications for Unity if Dish is unable to Thank you.

Speaker 1

Hi, Chipra. Yes, this is actually still a small customer for us, But a growing customer, and so and last year was a very, very active year With DISH on turning up sites, and we've been fairly active in the first quarter, and we think the first half of this year As we strive to reach milestones that they have, so An active customer, but not a large customer, but we do expect them to be over time, and we haven't seen any change in their behavior. And we obviously follow the macro environment and follow each of our customers in terms of their Progress, performance, balance sheet liquidity, etcetera, that's just part of our normal activity. But based on everything we're seeing, we see continued active investment and don't expect that to change anytime soon. Okay,

Speaker 4

sounds good. Thank you.

Speaker 0

Thank you. One moment for our next question. Our next question comes from the line of Rob Paul Missondo from Raymond James.

Speaker 5

Hey, sorry. This is Frank. I think I must have logged in under Rob's login number there. So a couple of quick questions. Can you walk us through the cash obligations, The walk downs as the agreements with Windstream start to roll off over the next couple of years, remind us kind of when those begin to impact the business and the total magnitude?

And then can you give us an update on your overlap with the Sprint network that Cogent just closed and your thoughts on how that might impact dark fiber pricing

Speaker 1

Hey, Frank, I'll start with your second question and let Paul take the first one. But We're very familiar with the Sprint GMG network, and there's not a lot of overlap. I don't have a percentage of overlap that I could share with you, but I can just tell you there's not a lot of overlap. Historically, They and frankly, Cogent have been good customers of ours, and we expect that to continue going forward. And so by definition, we don't expect a big change in the impact on our dark Fiber sales and certainly not the pricing of dark fiber.

Frank, you know, I mean, pricing of dark fiber has held pretty steady in the industry for, gosh, 10 years, 20 years maybe. So we don't expect a big change there. I think that the impact on the industry is going to be more On the waves product, so lit transport. And as you know, Frank, we don't do a lot of lit transport today. It's predominantly dark by design.

We're starting to light some routes where we have a very clear line of sight to both an anchor Lease up and so very clear economics, predominantly in our southeastern footprint where we also have The supporting field operations to maintain it, and we're going to continue to grow our lit Transport over time where we can do it in a very disciplined and tactical manner. But all that to say, we're a share taker in that Market 2, just like we expect Cogent to be. And so, it may it's not going to impact an embedded base for us Like it will others, it may impact the amount of upside in that space for us, but you're already growing from a very, very small base. And so As it relates to our foundational business, I'm not concerned about it. And I think ultimately, given there's not a lot of overlap between our transport networks, I think Cogent drives a lot of incremental waves traffic.

Just by definition, networking solutions May create more demand for us in terms of dark fiber or even additional wave solutions. So net net, I think it will be a positive for Uniti. And Frank, I'll jump in and

Speaker 2

talk about the Windstream settlement Payments going forward. And you're right, there is a step down in those obligations that we made to Windstream as part of that settlement in 2020. And that's a big piece of the story in terms of our trajectory towards free cash flow in the next couple of years, as Kenny kind of alluded to. So there's 2 pieces to it. The first piece is the settlement payments, which are basically just shy of 100 $1,000,000 on an annual basis paid in quarterly payments.

Those are completed in the Q3 of 2025, so we've got a couple of years left of those obligations. We have the ability to prepay those at a 9% discount rate. And we exercised that option And prepaid all of 'twenty two's payments in late 2021. But in 2023, we're back on the regular schedule now of paying on a quarterly basis. So we've got a couple of years left of that obligation.

And then the second piece is the GCI program, and we committed to making $1,750,000,000 available to Windstream to the Growth Capital Improvement Program Through 2,030, and as I mentioned in my comments, or I think we've actually just got it in the materials, We're at about $600,000,000 to date invested in that program. So a little over $1,000,000,000 left in that program over the next 7 years through 2,030. Those obligations those are capped every year. This year, the cap is $250,000,000 and we expect them To spend, utilize the majority of that, and then those step down over time, and you can see that step down in Our filings as well, but steps down to 225 and then 175 and then below that in the out years of The lease through 2,030. But the other piece of that as well is there's GCI rent that is paid On those investments, so over time, not only does the GCI Capital program that we're investing step down, But the cash rent from those previous investments start to step up.

So by the end of the lease term, the delta between The investments and the rent on previous GCI investments starts to get to be a pretty small number out in the out years of the program. So That step down for both of those obligations are definitely a part of our free cash flow projections and trajectory going forward.

Speaker 5

All right, great. That's very helpful. Thank you.

Speaker 0

Thank you. One moment for our next question. Our next question comes from the line of Simon Flannery from Morgan Stanley.

Speaker 6

Great. Good morning. Thanks a lot. Kenny, I wonder if you could just update us on M and A, just what you're seeing in the M and A market generally in terms of Valuations, etcetera. And just how are you thinking in terms of being a buyer, being a seller?

People have talked about the potential for Stressed assets coming to market, is that something that might be of interest? And then Paul, just a clarification on the early termination fees. I think you reiterated $15,000,000 for the year. I guess if you could just update us on what we saw in the quarter and how we should think of the balance over the rest of the year. Thanks.

Speaker 1

Yes. Simon, yes, on M and A, Very focused on it. We continue to believe that there's a substantial conglomerate discount embedded in our stock. If you look at just putting a modest private company valuation on our fiber business, the implied Yield on our fiber in the home MLAs is over 20%, 20%, 25% when the secured debt of the Fiber to the home providers are trading at 10% or 12%, and we should be our MLAs should be valued inside of those And if you just make that one adjustment, there's $10,000,000 $11,000,000 $12 a share of value that is Not being reflected in our stock. So as a result, our Board continues to be very focused on M and A as a catalyst to unlock that Discount and more.

We through the end of last year and part of the Q1, we're very focused on Getting all of our near term financing work done. And so we intentionally and publicly pressed Pause on M and A as a way to give us the ability to focus on financings and not have intermittent blackouts When financing markets were already opening and closing virtually on a daily basis, and so we intentionally paused on that. But now that we have that behind us and we've basically afforded ourselves a multiyear runway to execute on the business, We also now have a multiyear runway to focus on M and A, and we're back to being focused on it. The good thing In addition to that and getting to your point, the interest in digital infrastructure assets has not waned. There's a Substantial amount of capital on the sidelines looking for quality opportunities.

And I think in our world, quality opportunities Our in commercial fiber at least, it's scaled fiber platforms without legacy services that are largely Facilities based that are performing on shared infrastructure economics, and we're doing that. And we also own a scaled embedded ILEC incumbent fiber to the home network That's generating substantial cash flow. So those two assets are, we think, highly coveted among infrastructure digital infrastructure investors. We've always had a active dialogue with counterparties in that space and believe that In our future, near future, midterm, we're going to have the opportunity to begin engaging materially, Frankly, as a buyer and or as a seller. So I think we're excited about that and look forward to digging in.

We always get the question about multiples, are multiples higher or lower? And I continue to say that for Quality assets, the multiples remain elevated. And I think that, again, For quality assets, digital infrastructure investors are getting smarter and smarter about what's quality versus what's not. And I think For quality assets like ours, multiples remain attractive. So to your point about some of the distressed Assets out there, we're not afraid of engaging in situations that have a little hair on them.

In fact, when we bought The divested long haul routes from CenturyLink several years ago when they were required to divest those The assets as part of their acquisition of Level 3, you could consider that a distressed sale because they were required to do it. And so we But we got engaged and we were able to acquire those assets at a very attractive price. But we were willing to get engaged and do that because we thought there was an opportunity Buy some assets at an attractive price that were very clean, no legacy services. It was a network that fit really, really well within our existing network. And in hindsight, that was a terrific deal for us.

So we're not afraid of getting involved in situations that may be considered distressed, But only if the actual asset underneath the distress is a quality asset with quality operations. We're not interested in buying assets that are of sub quality. So with all that said, we think we're going to be pretty active in the coming months

Speaker 2

Hey, Simon. This is Paul. I'll take your question on the Sprint ETLs. So The early termination liabilities that are connected with the consolidation of the Sprint and T Mobile networks are Definitely a piece of our revenue over a 2 or 3 year period as they go through that process. Last year, we did about $24,000,000 in Sprint ETL fees.

And in 2023, We're projecting about $15,000,000 in Sprint ETL fees. Their program for the towers that they're looking to decommission is well known. So we know the total size of What they're planning to do, we know their overall plan. What's a little uncertain is the timing of when those are going to come in. So it's a little hard to predict exactly when Those tower decommissionings and disconnects occur.

But when they do occur, basically Sprint is paying us for the remainder of their obligation For monthly recurring revenue on that tower, so it's really a pull forward of future monthly recurring revenue obligations into the current period. So very high margin revenue that comes in with that pull forward. That was a big factor in Our performance last year in terms of our margins at Uniti Fiber kind of increased those margins a bit with that high margin revenue Coming in early at pull forward. And then this year that amount We said expected decline after last year was the peak year. This year, as I said, we're expecting about $15,000,000 But the activity was higher than expected in the Q1, a little less than half of that $15,000,000 came in, in the Q1 alone.

But we still think the total number for the year should be around that $15,000,000 range. That program is starting to get towards the end of its life. There'll be a little bit in 2024 that continues to happen, but most of what they've got left to do will be done in 2023. So over the course of the year, we still think that number 15 is the right number for the full year. It's just coming in a little faster than we expected the 1st part of the year.

And I think some of the other carriers have reported similar activity on their network as well.

Speaker 6

Great. Thanks for the color.

Speaker 0

Thank you. At this time, I would now like to turn the conference back to Kenny Gunderman for closing remarks.

Speaker 1

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

Speaker 0

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