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Uniti Group Inc. (UNIT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered steady results: revenue $293.3M, Adjusted EBITDA $239.5M (~82% margin), EPS $0.09, and AFFO per diluted share $0.35, with strong capital efficiency from net success-based capex of $0.7M .
  • Management introduced initial FY2025 outlook: revenue $1.196–$1.216B, Adjusted EBITDA $966–$986M, AFFO $369–$389M, and net interest expense $532M; CFO also guided AFFO per diluted share to $1.40–$1.47 (midpoint +6% YoY) .
  • Strategic positives included a landmark $589M fiber ABS financing (weighted avg yield ~6.5%) and partial redemption of 10.50% 2028 notes, lowering cost of capital and pushing maturities beyond 2028 .
  • Catalysts ahead: merger progress (S-4 effective; 16 PUC approvals), accelerated Kinetic fiber build to ~2.0M homes by YE 2025 (two years ahead of initial plan), and expanding hyperscaler demand with attractive blended yields .

What Went Well and What Went Wrong

What Went Well

  • Strong non-GAAP performance and capital efficiency: Q4 Adjusted EBITDA $239.5M (~82% margin) and AFFO per diluted share $0.35; net success-based capex just $0.7M due to upfront customer payments .
  • Balance sheet actions reduced funding costs: $589M ABS financing at ~6.5% WAC and redemption of $125M of 10.50% secured notes due 2028; year-end liquidity ~$655.6M and leverage 5.80x (net debt/annualized Adjusted EBITDA) .
  • Management emphasis on AI/hyperscaler demand: “Strategically, Uniti is uniquely well positioned to benefit from the emerging themes related to Generative AI and convergence” — CEO Kenny Gunderman . CFO highlighted cost of capital improvement from ~12% to ~7.5% in two years and expects positive free cash flow in 2025 .

What Went Wrong

  • Windstream operating headwinds (shared in furnished exhibits): ACP funding elimination pressured Kinetic consumer revenue and margins; legacy TDM declines weighed on Enterprise; net broadband units fell as DSL losses offset fiber adds .
  • Natural disasters disrupted operations in H2 2024 for Windstream (tornados, wildfires, hurricanes), requiring resource redirection and impacting Q4 trends .
  • FY2024 AFFO per share ended lower than initial guidance due to incremental interest expense from the $300M add-on secured notes in May (not contemplated in original outlook), per CFO .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$294.9 $292.2 $293.3
Adjusted EBITDA ($USD Millions)$236.7 $235.3 $239.5
Adjusted EBITDA Margin %~80% ~81% ~82%
Diluted EPS ($USD)$0.07 $0.05 $0.09
AFFO per Diluted Share ($USD)$0.34 $0.33 $0.35

Actual vs. estimates (Q4 2024):

  • Consensus estimates were unavailable via S&P Global at the time of this analysis; therefore, beat/miss vs. estimates cannot be assessed.*

Segment breakdown (Q4 2024):

SegmentRevenue ($USD Millions)Adjusted EBITDA ($USD Millions)EBITDA Margin %
Uniti Leasing$221.7 $214.5 ~97%
Uniti Fiber$71.7 $31.1 ~43%

KPIs and balance sheet:

KPIQ2 2024Q3 2024Q4 2024
Net Success-Based Capex ($USD Millions)$20.8 (Fiber); $65.3 GCI (Leasing) $26.2 (Fiber); $34.2 GCI (Leasing) $0.7 combined (offset by $23.6 upfront payments)
Liquidity (Unrestricted Cash + Revolver)~$618.8M ~$529.1M ~$655.6M
Leverage (Net Debt/Annualized Adj. EBITDA)5.97x 6.05x 5.80x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated Revenue ($USD Millions)FY 2025N/A$1,196–$1,216 New
Net Income Attributable to Common ($USD Millions)FY 2025N/A$95–$115 New
Adjusted EBITDA ($USD Millions)FY 2025N/A$966–$986 New
Interest Expense, net ($USD Millions)FY 2025N/A$532 New
FFO ($USD Millions)FY 2025N/A$322–$342 New
AFFO ($USD Millions)FY 2025N/A$369–$389 New
Weighted Avg Diluted Shares (Millions)FY 2025N/A280 New
AFFO per Diluted Share ($USD)FY 2025N/A$1.40–$1.47 New
Uniti Leasing Revenue/Adj. EBITDA ($USD Millions)FY 2025N/A$902 / $872 (midpoints) New
Uniti Fiber Revenue/Adj. EBITDA ($USD Millions)FY 2025N/A$304 / $125 (midpoints) New
Capex – Leasing (GCI) ($USD Millions)FY 2025N/A~$175 (all in Q1) New
Capex – Fiber Net Success-Based ($USD Millions)FY 2025N/A~$85 (capital intensity ~28%) New
DividendsFY 2025Not discussedNot discussedN/A

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
AI/Hyperscalers40% of Q2 bookings driven by Hyperscalers/Gen AI ; Q3 bookings ~$0.9M MRR (+20% YoY) and long-term hyperscaler award Hyperscaler blended yields nearing ~20%; growing strand counts (e.g., 464/864); inference phase expected to dominate over time Strengthening demand; expanding scope and economics
Capital Structure / ABSPlanning funding for merger and growth; add’l 2028 notes in Q2 $589M ABS at ~6.5% and partial redemption of 10.50% notes; cost of capital improved ~500 bps in two years Lower cost of capital; enhanced flexibility
Merger ProgressSignificant progress; path to collapse dual debt silos S-4 effective; 16 PUC approvals; shareholder vote set for April 2; targeting 2H 2025 close, possibly July Advancing; regulatory milestones achieved
Kinetic Fiber BuildOngoing expansion ~325k homes planned in 2025; ~2.0M homes by YE 2025 (two years early) Accelerating build; earlier scale
Wireless BookingsExpected down in 2024 Ended 2024 roughly flat vs 2023; expecting up in 2025 Stabilizing → improving
Macro/RegulatoryN/AACP elimination pressured Kinetic consumer trends; BEAD program opportunity; natural disaster impacts in H2 Mixed: headwinds offset by funding opportunities

Management Commentary

  • “2024 was a transformational year for Uniti… Strategically, Uniti is uniquely well positioned to benefit from the emerging themes related to Generative AI and convergence” — CEO Kenny Gunderman .
  • “Our current business plan is fully funded, and in 2025, we expect Uniti will generate positive free cash flow” — CEO .
  • “By the end of 2025, we expect to reach 2 million homes, which is 2 years earlier than originally expected” — CEO on Kinetic build .
  • “Fast forward to today and our debt is currently yielding around 7.5%, a 500 basis-point improvement in just 2 years” — CFO Paul Bullington .
  • “We expect full-year AFFO to range between $1.40 and $1.47 per diluted common share… representing a 6% increase from the prior year” — CFO .
  • “Potential incremental ABS capacity… represents a $1 billion-plus near-term opportunity for the combined company” — CFO .

Q&A Highlights

  • AI inference and Tier 2/3 markets: Management expects inference spend to grow faster than the baseline path to ~80% by 2030, with UNIT positioned as first mover in these markets to capture demand; existing MLAs (4 for UNIT, ~40 for Windstream) accelerate sales cycles .
  • Hyperscaler bidding environment: UNIT maintains disciplined anchor yields (5–10%), achieving ~20% blended yields with lease-up; competitive environment remains rational with strong win rates .
  • Funding mix: ABS viewed as complementary to traditional debt; optimal mix will flex with market conditions, with intent to maintain healthy unsecured exposure as that market reopens .
  • Kinetic build and subs: ~325k homes targeted in 2025, with parallel focus on construction and marketing; newer cohorts show 25–30% initial penetration with programs to lift older cohorts .
  • GCI timing: ~$175M 2025 GCI investment concentrated in Q1 due to submission backlog and program mechanics .
  • Engineering demands: Hyperscalers now require very high strand counts (e.g., 464/864), added conduit and enhanced ILA facilities; UNIT is upgrading standards to support higher capacity and stickier customer relationships .
  • Wireless: 2024 bookings ended roughly flat vs 2023; expecting growth in 2025 .

Estimates Context

  • Q4 2024 Wall Street consensus (S&P Global) was unavailable at the time of this analysis; beat/miss cannot be determined. Estimates should be refreshed when access is restored to S&P Global to update the comparison.*

Key Takeaways for Investors

  • Capital structure improvement is a meaningful near-term driver: ABS financing lowered funding costs and partially redeemed high-coupon notes; leverage moved to 5.80x with ample liquidity, setting up stronger FCF conversion in 2025 .
  • Hyperscaler demand is expanding in scope and economics: larger strand counts, enhanced infrastructure requirements, and blended yields near ~20% point to favorable project returns and potential incremental lease-up .
  • FY2025 guidance implies mid-single-digit top-line and high-single-digit EBITDA trajectory, with AFFO per diluted share +6% YoY; monitoring execution vs. segment-level targets will be critical .
  • Kinetic fiber build acceleration is a structural catalyst: ~325k homes in 2025 and ~2.0M homes by YE 2025 should underpin future penetration gains and revenue mix improvement .
  • Watch ACP/legacy headwinds and disaster recovery impacts in Windstream’s markets near term; offset by expense reductions, TDM exit, and funding programs (BEAD/RDOF) .
  • Merger timeline looks de-risked (S-4 effective, 16 PUC approvals) with potential close as early as July; synergy clarity and integrated plan (including expanded ABS capacity) are potential upside catalysts .
  • Action: Reassess position sizing around merger milestones and ABS scaling announcements; refresh S&P Global estimates to quantify beat/miss dynamics once available.*

*Consensus unavailable via S&P Global at time of analysis.