Uniti Group - Q4 2022

Transcript

Speaker 0

Welcome to Uniti Group's 4th Quarter 2022 Conference Call. My name is Jonathan, and I will be your operator for today. A webcast of this call will be available on the company's website, www.uniti.com, beginning today and will remain available 14 days. At this time, all participants are in a listen only mode. Participants on the call will have the opportunity to ask Questions following the company's prepared comments.

The company would like to remind you that today's remarks include forward looking statements, and actual results could differ materially from those projected in these statements. The factors that could cause actual results to differ are Gust is 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 this call will also include certain financial measures that were not prepared in accordance with general accepted accounting principles. Reconciliation of these non GAAP financial measures to the most directly 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, I wanted to briefly cover our key accomplishments in 2022 and our priorities for 2023. I'm very pleased with how we executed on our disciplined growth plan throughout 2022. The growth of broadband continues to accelerate and is being fueled by fiber.

Uniti's core IP backbone peaked at around 30 gigs in 2017 and grew to approximately 100 gigs just before the pandemic. As of last week, our IP backbone peaked at 300 gigs, a 10 times increase from just 6 years ago. We expect this acceleration to continue across both our IP and transport networks, especially given that 3 out of our 4 wireless carriers, Some of our largest customers consumers of capacity are just beginning to upgrade towers from 1 gig to 10 gig. As we said many times before, we do not have a lack of demand in our industry. However, profitable demand is key.

In 2022, we had record levels of consolidated new bookings and gross installs. But as importantly, the bookings and installs were between anchor and lease up and wholesale and non wholesale. Along with sub-one hundred day mean time to deliver on our installs and our industry leading monthly Uniti is demonstrating the outstanding economics of shared fiber infrastructure. Wholesale and Enterprise recurring revenue were up 10% 13% respectively in 2022 from the prior year, while dark fiber lease up at Uniti Leasing was up over 50 On an overall basis, we continue to target and deliver mid single digit top line growth, 2020 2 was also an important year with respect to positioning Uniti to control its own destiny. We recently completed 2 successful financings that pushed out our most meaningful debt maturities, while also providing additional liquidity As we turn to our priorities for 2023, many remain the same as they were in 2022.

We're still focused on driving high margin recurring revenue through lease up on both our metro, fiber and on our long haul routes to span the country. We'll selectively light more and more fiber with anchor economics with a clear path to lease up. We'll closely monitor and adapt to macro economic conditions and potential supply chain and labor challenges. And we remain confident we're in a good position to withstand any disruptions that may occur. As it relates to M and A, we will continue to take a disciplined approach and do not expect any transactions in the immediate future, given the current interest rate and macroeconomic environment.

In the meantime, we're focused on delivering strong organic growth and operating results while creating value for our stakeholders. Turning to Slide 4, our strategy continues to focus on buying and building mission critical fiber infrastructure and in turn leasing that infrastructure to anchor customers as well as to additional lease up customers while driving cumulative cash yields well above anchor yields. This Strategy has resulted in Uniti becoming the 2nd largest independent fiber operator in the country. We're often asked what distinguishes Uniti from other facilities based fiber Operator, so I'd like to highlight a few. Many other sizable fiber companies were built through dozens of company acquisitions that come with integration challenges And some percentage of legacy revenue, this often leads to years of challenges on growth, elevated churn and profitability.

Conversely, Uniti has only acquired 3 meaningful operating companies in its history, which are now fully integrated and brought over no legacy services. However, through additional sale leaseback and other asset acquisitions, we've acquired over 100,000 fiber route miles that come with 1 or 2 anchor customers. Said differently, 75% of our network was acquired with no legacy services, no integration challenges and substantial amounts of unused fiber for lease up. As Slide 5 demonstrates, this substantially underutilized fiber network is helping drive our shared infrastructure economics. We're driving cumulative cash flow yields today of 23%, a more than 3 fold increase from the anchor yields on these projects.

Slide 6 demonstrates a second distinguishing characteristic. The majority of our revenue is wholesale in nature, which comes with longer term contracts, lower churn and less required overhead. As a result, our business and underlying performance are less susceptible to macroeconomic conditions. The vast majority of these wholesale customers are the large wireless providers, hyperscalers and international and domestic carriers. These carriers are purchasing large pipes from Unity to Connect towers, small cells, data centers, fiber to the home and intercity pops, which further highlights Our business is diversified across numerous fiber use cases.

These use cases are all on ramps that are driving traffic into our core network. Turning to Slide 7, scale matters in fiber, especially with a wholesale heavy business like ours. Having an owned national network is a meaningful competitive advantage for Uniti, especially given that it would take 1,000,000,000 of dollars in 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 Uniti with the unique growth opportunity with minimal competition. Today, dark fiber in North America is an approximately $1,500,000,000 annual market opportunity and is expected to grow about 10% annually over the next several years. A growing component of our wholesale strategy are Wavelinq Services, which represent a $2,000,000,000 annual revenue opportunity today and are expected to grow 7% over the next several years. We're selectively lighting more and more long haul routes to provide wave services and capitalize on growing demand, while maintaining the same discipline on anchor and lease up economics.

For example, we recently signed a long term contract with a large global Internet provider, offering long haul dark fiber connectivity over 3,100 route miles The premier data center is located in 12 cities within the Central and Southeastern U. S. The total contract value of this deal was approximately $65,000,000 making it one of the largest customer contracts in Uniti's history. We expect these routes to be delivered throughout this year and next. As I mentioned earlier, a wholesale heavy model produces economics that are very attractive with high margin, passively managed revenue, Virtually no churn, long term contracts that routinely have escalators and minimal CapEx requirements.

Slide 8 demonstrates a third distinguishing characteristic of Uniti's, which is our balanced approach to bookings. Although the wholesale business will always be our focus, a disciplined and controlled enterprise strategy can drive enhanced profitability with minimal CapEx and low churn, especially if there are no legacy services. While greenfield bookings drive growth with anchor customers and expand the network in a cost effective manner for new lease up opportunities, The majority of new bookings continue to be lease up in nature and are substantially less capital intensive. Turning to Slide 9. Our 4th distinguishing characteristic is that 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 no legacy services such as legacy voice or TDM. The majority of our operational expenses within fiber businesses are employees and off net fiber purchases. Because we are selling largely on net products and services and the majority of our employees, including sales, field techs, site acquisition, construction, Maintenance and others are concentrated in a certain geographic area.

We're able to maximize efficiency and therefore drive 50% plus cash yields on our enterprise Lease up sales. In addition, our local brand is substantially enhanced in this region, and our enterprise monthly churn is industry leading at around 0.7%. As a result of our consistent strong bookings activity, enterprise recurring revenue was up 15% during the quarter, While gross install MRR was up 30% from the prior year, equally exciting and as we mentioned before, we own darkmetrofiber in about 300 markets nationwide, which represents terrific capital and margin efficient growth potential for enterprise, wireless backhaul With that, I'll now turn the call over to Paul.

Speaker 2

Thank you, Kenny. Good morning, everyone. I'd like to begin by reviewing our Q4 and full year 2022 performance, followed by an overview of our 2023 outlook. As Kenny highlighted, 2022 was an outstanding year for Uniti from a performance perspective. Our bookings and gross installs have never been higher, And we expect these high levels to continue throughout 2023 as the demand for our product and service offerings remain strong.

We Also recently completed 2 refinancing transactions that effectively pushed out our significant near term debt maturities by 5 years and added additional liquidity, fortifying our balance sheet and enhancing our ability to weather any financial market uncertainty. As I will cover in more detail in just a bit, Our 2023 outlook reflects these trends and the continued strength we are seeing in our fiber business today. Finally, I will end with additional commentary on our current balance sheet and capital structure. Please turn to Slide 10, and I'll start with comments on our Q4. We reported consolidated revenues of $284,000,000 Consolidated adjusted EBITDA of $229,000,000 AFFO attributed to common shareholders of $115,000,000 And AFFO per diluted common share of $0.44 Net income attributable to common shareholders for the quarter was approximately $41,000,000

Speaker 3

Or $0.13 per diluted

Speaker 2

share, which includes a $24,500,000 goodwill impairment charge related to our Uniti Fiber segment that was driven by an increase in the At Uniti Leasing, we reported segment revenues of $209,000,000 and adjusted EBITDA of $203,000,000 Excluding an $8,000,000 onetime non cash adjustment in the Q4 of 2021 that related to the straight line revenue associated with Dark Fiber IRU contracts and other assets we acquired from Windstream as part of the settlement agreement. Revenue and adjusted EBITDA grew 3%, respectively, in the Q4 of 2022 compared to the prior year period. Accordingly, Uniti Leasing achieved an adjusted EBITDA margin of 97% for the quarter. Turning to Slide 11. Our growth capital investment program continues to provide positive results for Uniti.

Over the past 6 years, our tenant has invested over $1,000,000,000 of tenant capital improvements in our network. Uniti continues to invest its own capital in long Term value accretive fiber, largely focused on highly valuable last mile fiber, including fiber in commercial parks and fiber to the home. Collectively, these investments have resulted in 20,800 route miles of newly constructed fiber and 23% of the legacy copper network being overbuilt with fiber. Based on the investments made today 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 Q4, Uniti Leasing deployed approximately $85,000,000 towards growth capital investment initiatives with the majority of the investments relating to the Windstream GCI program.

These GCI investments added 1950 route miles of fiber to Uniti's own network across several different markets. As of December 31, Uniti has invested approximately $544,000,000 of capital to date under the GCI program with Windstream, adding around 15,450 route miles and 755,000 strand miles of fiber to our network. These investments will be added to the master lease at an 8% initial yield as a 1 year anniversary of Uniti making such investments. They are subject to a 0.5% annual escalator and result in nearly 100% margin. The investments we have made to date will ultimately generate approximately 40 $4,000,000 of annualized cash rent and increase the overall value of our network.

At Uniti Fiber, we We turned over 236 lift backhaul dark fiber and small cell sites for our wireless carriers across our Southeast footprint during the Q4. These installs add annualized revenues of approximately $2,600,000 For the full year 2022, we installed over 1100 lit backhaul dark fiber and small cell sites, adding approximately $12,000,000 of annualized revenue. We currently have around 1300 lit backhaul dark fiber and small cell sites remaining in our backlog that we expect to deploy over the next few years. This wireless backlog represents an incremental $12,000,000 of annualized revenues. At Uniti Fiber, we reported revenues of $75,000,000 And adjusted EBITDA of $32,000,000 during the 4th quarter, achieving margins of 42%.

Revenues were slightly lower than expected due to the timing of non recurring equipment sales and installs, while adjusted EBITDA was above expectations due to lower than expected costs relating to the early termination of legacy Sprint sites. Uniti Fiber net success based CapEx was $41,000,000 in the 4th quarter and was higher than originally anticipated due to the timing of equipment purchases relating to several projects. Given the continued challenges affecting the industry supply chain and lengthy delivery times, we expedited the purchase of certain equipment during the quarter to ensure that we would meet We also incurred $3,000,000 of maintenance CapEx during the quarter. Please turn to Slide 12, and I'll now cover our 2023 guidance. Our 2023 outlook includes the estimated impact from our recent convertible and 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 full year outlook for 2023 includes the following for each segment. Beginning with Uniti Leasing, we expect revenues and adjusted EBITDA to be 8 $50,000,000 $825,000,000 respectively at the midpoint, representing adjusted EBITDA margins of approximately 97%. Revenue and adjusted EBITDA each include $33,000,000 of cash rent associated with the GCI investments and $21,000,000 relating to the straight line rent We expect to deploy $260,000,000 of success based CapEx at the midpoint of our guidance, of which $237,000,000 relates to estimated Windstream GCI investments. Turning to Slide 13.

We expect Uniti Fiber to contribute $314,000,000 of revenue at the midpoint with core recurring revenues expected to grow 6% from the prior year. Slide 14 further emphasizes this point as we expect our run rate monthly recurring revenue at Uniti Fiber to grow between 6% 8% in 2023. This strong growth demonstrates our continued success in executing on our lease up strategy that leverages our existing dense southeast fiber footprint. As it relates to DISH, we saw strong levels of bookings throughout 2022. And as previously stated, the revenue impact will begin to be realized during 2023.

Although we do expect continued healthy bookings from DISH in 2023, we expect they will come at a slower pace than in 2022. Core non recurring revenue is expected to be slightly down from the prior year due to lower ETL fees in 2023 when compared to 2022, partially offset by higher equipment and install revenue. As you may recall, 2022 was a peak year for ETL fees due to Sprint related churn. We expect ETL fees in 2023 to be approximately $15,000,000 compared to $24,000,000 last year. For full year 2023, we expect adjusted EBITDA at Uniti Fiber to be $125,000,000 at the midpoint.

Adjusted EBITDA based on core recurring revenue is expected to be up 5% from the prior year, while non recurring adjusted EBITDA is expected to be lower due to higher equipment and install costs. Overall, we expect adjusted EBITDA margins at Uniti Fiber to be approximately 40% for the full year 2023. Net success based CapEx for Uniti Fiber this year is expected to be $120,000,000 at the midpoint of our guidance, A 10% decrease from levels in 2022. Turning to Slide 15. For 2023, we expect full year AFFO to range AFFO in 2023 will be impacted by incremental interest and diluted shares relating to our recent convertible and secured note refinancings.

Excluding the impact of those transactions, 2023 AFFO would have been $1.78 per diluted share. On a consolidated basis, we 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 $550,000,000 which includes a $21,000,000 write off of deferred financing And $44,000,000 of earlier repayment premium in the Q1 of this year related to the redemption of our 7.7.8 senior notes due 2025. Corporate SG and A, excluding amounts allocated to our business segments, is expected to be approximately $32,000,000 including $7,000,000 of stock based compensation We expect our weighted average diluted common shares outstanding for the full year 2023 to be around 291,000,000 shares compared to 268,000,000 shares in 2022, reflecting the full year impact of the incremental diluted shares relating to the accounting of the new convertible notes using the if converted method. As a reminder, guidance ranges for key components Our outlook are included in the appendix to our presentation.

On Slide 16, we have provided a tabular reconciliation of our full year 20 22 results to our 2023 outlook, which summarizes the organic contribution from our core operations and the impact from recent financing activities. Turning now to our capital structure. During the Q4, we issued $306,500,000 of 7.5 percent convertible senior notes Due December 2027 to repurchase approximately $207,000,000 of our 4% exchangeable notes due to 2024 at a discount. The initial conversion price of the convertible notes is approximately $7.29 per share, representing a premium of 20% The closing price of the common stock of the company on the date of pricing. In connection with the convertible notes offering, Uniti entered into privately negotiated cap call transactions with certain financial institutions that effectively increased the conversion price to approximately $10.63 per share.

On February 14, we closed on the issuance of $2,600,000,000 of 10.5 percent senior secured notes due February 2028. The proceeds from the offering will be used to redeem all of the outstanding 7.875% senior secured notes due 2025 And we'll now take our next question from the line of Jonathan. Thank you, Jonathan. Thank you, Jonathan. Thank you, Jonathan.

Thank you, Jonathan. Thank you, Jonathan. Thank you, Jonathan. Thank you, Jonathan. Thank you, Jonathan.

Thank you, Jonathan. Thank you, Jonathan. Thank you, Jonathan. Thank you, cash equivalent and undrawn revolver capacity. As of today, we have essentially repaid all of our borrowings under our revolver And have almost $500,000,000 of undrawn capacity under our facility.

Our leverage ratio at year end stood at 5 With that, I'll now turn the call back over to Kenny. Thanks, Walt.

Speaker 1

Despite the current macroeconomic backdrop, we continue to prioritize investment in our core business. We currently have approximately $7,000,000,000 of revenue under contract with an average term remaining of 8 years. Given the wholesale heavy nature of our business, majority of this revenue is passively managed in the form of triple net or dark fiber MLAs. As a result, the operating costs associated with this revenue is de minimis, which results in a very cash flow rich business over the mid to long term. As Slide 17 illustrates, the investment from this cash flow will lead to a more sizable and valuable fiber business over the next several years.

We also expect to be free cash flow positive by 2026 and generate cumulative free cash flow of over $1,000,000,000 Within the 5 years period ending in 2,030, if we maintain our current dividend and approximate level of annual capital investment, This trajectory leads to substantial deleveraging, resulting in net leverage between 4x to 5x and roughly doubling the size of our fiber business by 2,030. Our fully funded business plan, no significant near term debt maturities and long runway for profitable growth afford Uniti the ability to create value for our shareholders today. With that, operator, we're now ready to take questions.

Speaker 0

One moment for our first question. And our first question comes from the line of Pura Lee from RBC. Your question please.

Speaker 4

Thank you for taking the questions. So given the current macro environment, are you seeing any changes in wholesale demand with some Players opting to shift from CapEx to OpEx?

Speaker 1

Hey, Bora. Not really. I think so we're selling wholesale to The large wireless carriers, the hyperscalers, a lot of big international and domestic carriers. And so The spending patterns are all going up, and the differential between whether they're prioritizing Spending capital versus OpEx is very customer specific. And frankly, in some cases, it's more route So but I wouldn't characterize any of that any of those Observations as being related to the macro environment.

I would also add

Speaker 2

to that as well, Bora, that We're flexible in our terms with our customers. So not, in addition to IRUs that come with large upfront capital expenditures For customers, we also do monthly leasing, and we also offer lit services that fit right into somebody who prefers adding OpEx over adding capital expense in the near term. So I think we also have the ability to be flexible with our wholesale customers and Provide services and contracts the way that fit their capital demands.

Speaker 4

Great. And then a follow-up. We've heard some others in the communications infrastructure space talk about customers taking longer to make a buy decision As they either do some more cost analysis or require more approvals from additional parties internally, What have you been seeing in terms of how long it takes customers to actually make decisions?

Speaker 1

Yes. We've heard of that anecdotally, Bora. And I think we certainly Hear that around the enterprise business a little bit, I think. But when it comes Our big wholesale customers, we haven't really seen that. I think that the that There's a big push among our wireless carriers to upgrade to 10 gig.

So that's a capital intensive Approach and we've seen at least particularly among one carrier in particular a real push to get that done sooner rather than later. There's a lot of inner city capacity being acquired by the hyperscalers and Just there appears to be no ceiling on their need for capacity, particularly inner city capacity. So I don't think that Any sort of decisions being made around purchasing, we don't we wouldn't attribute them to Macro environment issues is more just network planning and typical decision making from our vantage point.

Speaker 4

Okay. And if I could just squeeze in one last one. Thank you for that long term Target slide, going into that a little bit, can you provide some additional color for on the revenue side, How you see the top maybe top 2 or 3 drivers and how you see that mix That revenue mix shifting over time? Thank you.

Speaker 1

Yes, I'll comment on it and then ask Paul to comment on it too. But we thought that slide would be helpful just to give people Some data to anchor around and we were confident putting it out there because we just See the growth trajectory of the business continuing and we've said it many, many times, we just have a long runway for profitable organic growth. And ultimately, doubling the size of the fiber business or better is absolutely within our sites. And really, and I mentioned it a number of times in our prepared remarks to highlight it, but we just we don't have any legacy services, And a lot of carriers, a lot of operators, a lot of infrastructure providers have legacy services that weigh down their growth or heighten the churn and we don't have that. And so when we look at our different businesses, whether it's Dark fiber or lid, fiber to the tower, small cells, enterprise, E Rate, government, those businesses are all growing.

And it's just a question of to what extent. Some are growing at mid single digits, some are growing at, as we said in our prepared remarks, at 10% to 20%. But when we start to look a little bit longer term, several years out and the business starts to level out, we think Again, we think the mid single digit blended top line growth is what we expect. And Again, some businesses will be more, some will be less, but generally in that zip code. And the mix of business will continue to be heavily Dependent, Reliant, Weighted Towards Wholesale.

That's going to continue to be our focus. That's where we think that the optimal economics are. That's where we're driving good returns from the wireless carriers, the hyperscalers, The international and domestic carriers, it gives us the ability to stay agnostic and diversified across all the different fiber So whether it's 5 gs or some other version of mobile broadband or fixed wireless or fiber to the home Our inner city capacity, data center connectivity, it doesn't matter to us. We all of those are trends that are driving Growth in our business, especially if we stay tethered to wholesale, which we plan to do, and there'll be a nice mix of enterprise In there to help drive optimal economics and lease up in the business. But I think that kind of roughly 75% to 80%, If not more focus on wholesale and the rest on enterprise and government is what we're looking at.

Yes. I would agree with

Speaker 2

those comments, Katy. I don't have a lot to add to those. I think you said those well. I think we expect The macro environment, the demand for bandwidth to continue to drive growth, we see that continuing going forward. And we're also A share taker in a lot of our markets, particularly our metro markets.

So in addition to just overall demand growth, we expect to be a share taker and that to help drive Our growth as well. So in the mix, we expect it to continue to be come from, as Kenny just said, from all of our customer segments Tilted towards wholesale, but with a good contribution from Enterprise and Metro Services.

Speaker 4

Thank you, both.

Speaker 0

Thank you. One moment for our next question. And our next question comes from the line of Shipra Pandey from Bank of America, your question please.

Speaker 3

Hey guys, sorry, I dialed in under Shiprock. It's Dave Barton. How are you? So I guess two questions if I could. Kenny, one for you, one for Paul.

I guess, Kenny, when I Think about your comments about the immediate future and kind of M and A and where rates are for the time being and kind of the Return profile that you've got in the organic harbor business as you describe it. Can you elaborate why being REIT Is still a good idea? Because it seems like when you look at that Slide 17 by the year 2,030 After dividends, you've managed to skim about $1,000,000,000 of free cash flow out of the business, but that'll be net of current course and speed, More than $1,000,000,000 of dividends over that time arguably if the returns are what we're seeing here on this page, it seems like Being not a REIT and not paying a dividend and investing those dollars, or delevering with those dollars, any of those uses would be better than the dividend use That you're kind of confined to today. So if you could kind of elaborate a little bit on why this is a good idea to keep doing it? And then Paul, I guess, I I just wanted to make sure we understood.

Thank you again for that slide. And I think that you guys had made some comments about With the kind of new financing, net of the dividends, net of the payments to Windstream of about $100,000,000 a year for the settlement, net Of the GCI CapEx that you're making on their behalf, that you might be free cash flow positive by the end of 2025 after the dividend. And so what we're looking at here is really a concentration of cash flows Cumulating between kind of 2026 and 2,030, am I thinking about that correct? Appreciate it. Thank you.

Speaker 1

Hey, David. Yes, on the question about being a REIT, I think If you believe the cash flow heavy nature of our business, obviously, as indicated by that slide, And particularly once we become free cash flow positive, then the upshot of That if we're not a REIT is that we're paying taxes, a lot of taxes. And so there is, as you know, one of the benefits of being a REIT is that You're shielding taxes. And so that has always been true of us and will continue to be going forward, especially as we Start generating more cash flow in the outer year. So there's that benefit.

Secondly, And I think to your point about the use of cash and where do you use that extra $1,000,000,000 Is it better To pay a higher dividend or is it better to deleverage or is it better to invest in the business or some different combination of all the above? I think those are all great questions And we're excited about the ability to have that flexibility. And I think as we go forward, We'll make different capital allocation decisions based upon the trajectory of the business, the growth of the business, preference of our shareholders. And I think that's exactly the place where we want to be to be able to give our Board the optionality on things like that. And I, for one, like being levered around 5.5 times to 6 times.

I think that's an optimal Place for us, it always has been. We've always been in that zip code. I, for one, like paying a dividend and giving our shareholders a nice steady return, Given the volatility in our stock, and that's always been the case, it's up and down. And this current macro environment It demonstrates that, right? I mean, we're under pressure like a lot of yield stocks, but despite that, we're paying a nice steady return to our shareholders.

I'd like to get to a place where we have the flexibility to raise the dividend and be more of a dividend growth story. And I think there's a time when that But I also love the ability to invest more in our business. And like you said, the returns that we're getting Are just terrific. And we say it all the time, but mid single digit yields with anchor customers that basically help Finance, the expansion of the network and then very clear line of sight to lease up that gets well above 10% Trading 20% regularly, that's hard to turn away from. But the discipline side of that is not just Going after profitable business, but it's also doing it in a way that you don't overextend the organization.

So for example, If we wanted to spend an extra $100,000,000 on CapEx next year, we could do that and And the opportunity for growth is there. I mean, as Paul said, we're a share taker in virtually all of our businesses. We have less than 1 share in dark fiber and less than 1% share in waves and less than 5% market share in most of our enterprise markets. So there's Tons of growth potential, but if you overextend the organization and go after growth too aggressively, then you wind up not Performing well for customers, and so there's a cost to it. So disciplined growth is a huge theme of ours, which includes Good business, but also doing it in over a time period that's measured.

So I think it's all these are all good things for us, All good issues for us to deal with and address. And I think fundamentally being a REIT today is a good thing for us because Excluding taxes, expect that to continue in the future. And but at the same time, we're always open minded to different ways to allocate capital and different corporate structures. So we're never going to be close minded to evaluating different approaches.

Speaker 2

Yes. And Dave, I'll take your second question. I mean, the short answer to your question is yes. You're exactly right. You're interpreting that slide So we do have a clear path to free cash flow positive by the end of 2025.

Part of that is continuing to grow the business organically and driving toward lower capital intensity at Uniti Fiber and more low CapEx large deals on the national network at Uniti Leasing. The other piece of that is not dependent on operational execution at all. It's really kind of baked into the cake as part of the Windstream settlement. So Those Windstream settlement payments fall off in 2025, and then GCI continues our GCI funding commitment continues to step down over time, while the GCI revenue from the previous GCI investments continue to step up. So Those two pieces are more just a factor of time.

So part of it is operational execution and part of it's just sort of baked into the cake of those future commitments.

Speaker 1

Perfect.

Speaker 3

And just one last thing, if I could, Paul, just on Kind of your experience through the refinancing process, you guys and Windstream And Windstream's owners have had back and forth over the last year or so, for various and sundry reasons. And yet irrespective of that, it seems like the refinancing went pretty smoothly. I was wondering if you could kind of talk a little bit about How relevant, if at all relevant, the backward looking wrestling with Windstream owners And or the future kind of lease renewal period came up in the process of kind of nailing down this runway that you now have over the next 5 years.

Speaker 2

Yes. Sure, Dave. Happy to comment on that. I mean, You're kind of alluding to that refinancing was critical for our business, and we were very pleased with how it got done, especially against the challenging capital market backdrop. It was significantly oversubscribed.

It was the largest book order for a bond deal in Unity's history, so that was something that was very encouraging for the management team here and the Board to see that kind of confidence And our plan going forward, and we have the largest number of single number of orders. So the interest, The demand for that bond issuance came from a larger number of investors than we ever have participate in the bond issuance before as well. So we also We're very pleased with that. And with that demand, we were able to price The tight end of the range and to upsize it to full $2,600,000,000 which we thought was very A very good thing for the business as well. So in terms of the renewal rent discussion, it Really was not a factor in the process at all.

And as a matter of fact, during our marketing Of that deal, we actually didn't take a single question from investors on the renewal rent. I'm sure it's something that Everybody knows it's out there, and they've heard a lot of the commentary that you alluded to back and forth between the parties. But it just really wasn't It wasn't a big factor in getting that deal done. And I think the demand that we received, the oversubscription, I think it's a good testament to the comfort level that investors had with our plan going forward.

Speaker 3

Okay. Good to hear. Thanks, Paul.

Speaker 0

Thank you. One moment for our next question. And our next question comes from the line of Frank Louthan from Raymond James. Your question please.

Speaker 3

Hey guys, this is Rob on for Frank. So you kind of touched on this first part earlier, but what do you think is the outlook for network And do you guys think that Cogent's acquisition of the Sprint network could potentially impact you guys if Cogent decides to drop pricing on Wavellinks and Dark Fiber. Thank you.

Speaker 1

Good morning, Rob. Yes, we have a lot of respect for Cogent and Dave Schafer. I I think he's a great operator and he's very good customer and we're very familiar with the asset they're acquiring I'm definitely paying a lot of attention to that. We like the frankly, it's a bit of an affirmation of our strategy, right, because It's moving more towards facilities based and moving into long haul Transport, dark fiber and waves, right. So we appreciate that affirmation of our strategy by an operator that we I have a lot of respect for.

I think that the risk of competition Is always there. I mean, telecom is a competitive industry, and so we're all forever competing with customers and on In some markets and in other markets, they're just customers. And in this case, For the transport, long haul transport space, there's really just a few competitors there. I I mean, there's Zayo, there's Lumin, there's us and Cogent now. And so as Paul mentioned, We're a share taker in all of our businesses.

We're not concerned about Cogent or anyone else taking Our book of business on Dark Fiber are always because that book of business is growing right now. We're still a sub-one percent market share participant ourselves, and so there's more upside for us than downside. And I think having Another competitor in the space is affirming of our strategy, and I think it's there's plenty of room for both Cogent and And last thing I'd say, I think our national network It's more expansive than the one that's being acquired. And so our ability to create network solutions For hyperscalers, in particular, the wireless carriers, I think is pretty material because Remember, our national network is it was acquired we acquired about 30 routes From Lumin a few years ago. So it's really the old Level 3 network plus, all the Different networks we've accumulated from our sale leaseback.

So it's an expansive national network, 135,000 route miles. And having that bigger network provides the ability to offer More network solutions. And so it's not always just about price. It's about having to the ability to connect in So we're not concerned about the additional competition. We're obviously focused on it just like we are For competition in general, but we're happy to keep growing our business in a profitable way.

Speaker 3

Great. Thank you, guys.

Speaker 0

Thank you. And this does conclude the question and answer Session of today's program, I'd like to hand the program back to Kenny Gunderman for any further remarks.

Speaker 1

Thank you. We appreciate your interest

Speaker 0

Thank you, ladies and gentlemen, for your participation in today's conference.