Uniti Group Inc. (NASDAQ:UNIT) Q1 2023 Earnings Call Transcript

Uniti Group Inc. (NASDAQ:UNIT) Q1 2023 Earnings Call Transcript May 4, 2023

Operator: Welcome to Uniti Group’s First Quarter 2023 Conference Call. My name is Jiji, 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 for 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 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 this call will also include certain financial measures that were not prepared in accordance with Generally Accepted Accounting Principles. Reconciliation of those non-I financial measures to the most directly comparable I financial measures can be found in the company’s current report on Form 8-K 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.

Kenny Gunderman: 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 second largest independent fiber operator in the country with 137,000 route mile network. We remain focused on disciplined growth and look to strike the right balance on our bookings and installs between anchor and lease up and wholesale and non-wholesale. This balance along with sub-100 day meantime to deliver in our industry leading monthly churn at 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% and 15%, respectively in the first quarter, and our fiber lease up at Uniti leasing was up 15% from the prior year. 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. Side 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% and more than three from a threefold increase from the anchor yield of these projects. Slide 5 shows that the majority of our revenue is wholesale 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 pies from Uniti to connect towers, small sales datacenters, fiber-to-the-home and intercity 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 including our sale leaseback tenants. Overall trends of the fiber-to-the-home business remain highly attractive, giving substantial — 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 of 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 own national network is a meaningful competitive advantage for Uniti, especially given it would take billions of dollars and many years to build a new national network.

We estimate there are only five truly own national networks and two independent fiber providers with national networks in the U.S. today, with Uniti being one of them. Thus, our ability to deploy dark fiber and wave services present Uniti with the 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 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 leased up in nature which are substantially less capital intensive.

Wholesale bookings in the first quarter were impacted by shift in timing. 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 own and control dense metro fiber network.

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 the majority of our employees, including sales, field ops, maintenance, construction, et cetera, 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 potential for enterprise, wireless backhaul, and even small cells. With that, I’ll now turn the call over to Paul.

Paul Bullington : Thank you, Kenny. And good morning, everyone. I’d like to begin by reviewing our first quarter performance, followed by an overview of our updated 2023 outlook. We continue to execute well on our strategy at 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 an amendment 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. That we’ll 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 first quarter. We reported consolidated revenues of $290 million consolidated adjusted EBITDA of $231 million, AFFO attributed to common shareholders of $107 million and AFFO per diluted common share of $0.39. Net loss attributable to common shareholders for the quarter was approximately $19 million or $0,08 per diluted share, which includes the write off of $10 million of deferred financing costs and $52 million of costs related to the early repayment of our 7.875% secured notes due 2025.

At Uniti Leasing, we reported segment revenues of $211 million and adjusted EBITDA $205 million, representing growth of 3% for each in the first quarter of 2023 compared to the prior year period. Accordingly, Uniti Leasing achieved and 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 eight years, our tenant has invested over $1 billion of tenant capital improvements in our network. Uniti continues to invest its own capital and long-term value accretive fiber, largely focused on highly valuable last mile fiber. Collectively, these investments have resulted in 22,200 route miles of newly constructed fiber, and 24% of the legacy copper network being over built 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 2030. During the first quarter Uniti Leasing deployed approximately $72 million toward growth capital investment initiatives, with a majority of the investments relating to the Windstream GCI program. These GCI investments added 1,200 route miles of fiber to Uniti network across several different markets. As of March 31, Uniti has invested approximately $612 million of capital today 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 an 8% initial yield at the one year anniversary of unity making such investment.

They are subject to a 0.5% annual escalator and resulted in nearly 100% margin. The investments we’ve made to date will ultimately generate approximately $49 million 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 first quarter. These installed add annualized revenues of approximately $2.2 million. We currently have around 1100 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 million of annualized revenues. At Unity Fiber we reported revenues of $79 million and adjusted EBITDA of $34 million during the first quarter, 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 legacy Sprint sites. Uniti Fiber net success-based CapEx was $36 million in the first quarter 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 million of maintenance CapEx during the quarter. Please turn to Slide 11, and I’ll now cover our updated 2023 guidance. We were revising our guidance for business unit level revisions, the finalized accounting impact from our recent convertible unsecured 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 million and $825 million respectively at the midpoint representing adjusted EBITDA margins of approximately 97%. Revenue and adjusted EBITDA each includes $33 million of cash rent associated with the GCI investments and $21 million relating to the straight line rent associated with the Windstream master leases and GCI investments. We now expect to deploy $270 million of success-based CapEx at the midpoint of our guidance, of which $237 million relates to estimated Windstream GCI investments.

The $10 million 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 Unity Fiber to contribute $314 million of revenues at the midpoint. We now expect adjusted EBITDA of $123 million for full year 2023. The slight decrease in adjusted EBITDA from our prior outlook is 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 of Uniti Fiber to grow between 5% to 7% in 2023.

This solid rows demonstrates our continued success and 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 million, compared to $24 million in 2022. Net success-based CapEx for Uniti Fiber this year is now expected to be $115 million at the midpoint of our guidance, a 14% decrease from levels in 2022 and $5 million lower than our prior guidance, primarily due to lower equipment purchases as a result of the bookings delays as 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 unsecured note refinancings.

On a consolidated basis, we still expect revenues to be $1.2 billion and adjusted EBITDA to be $925 million at the midpoint. Our guidance contemplates consolidated interest expense for the full year of approximately $517 million, which includes a $10 million write-off of deferred financing costs and $32 million of early repayment premium in the first quarter of this year related to the redemption of our 7.875% senior secured notes due 2025. Corporate SG&A excluding amounts allocated to our business segments is expected to be approximately $30 million, including $7 million of stock-based compensation expense. We are revising our weighted average diluted common shares outstanding for full year 2023 to be around 290 million 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 $50 million in principle of its 4% exchangeable notes due 2024 for total cash consideration of $13.7 million. The outstanding balance of these notes at quarter end is approximately $123 million. On March 24, Uniti entered into an amendment to its credit agreement that upon receipt of routine regulatory approval, extends the maturity date of each lenders commitment under the company’s senior secured revolving credit facility to September 24, 2027. The amendment also transitions the $500 million revolving credit facility from LIBOR to SOFR. At quarter-end we had approximately $495 million of combined unrestricted cash and cash equivalents and undrawn revolver capacity.

Our leverage ratio a 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 per share to stockholders of record on June 16, payable June 30. With that, I’ll now turn the call back over to Kenny.

Kenny Gunderman: Thanks. Thanks, Paul. Slide 15 illustrates the investments we’re making in our fiber network will lead to a more sizeable 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 cashflow positive after dividends and expect to generate cumulative free cash flow of over $1 billion during the five-year period ending in 2030, if we maintained our current dividend and approximate level of annual capital investment. This trajectory would lead to substantial deleveraging resulting in net leverage between four to five times and roughly double the size of our non-Windstream fiber business by 2030. Turning to Slide 16. Over the past few months, we’ve filled in many questions about the merits of remaining REIT and paying a required dividend, so we thought it’d be helpful if we explained our current views.

The arguments that we’ve been presented with for de-REITing 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 under invested in our business just to service the dividend. In fact, our capital intensity historically was over 50% as we build out our dense fiber networks in the Southeast, and is now more normalized in the 30% range on a consolidated basis. As we’ve said many times, we believe this is the appropriate range for fiber business in order to optimize growth and profitability. So definitely, we could certainly invest more in our business through organic capital, or M&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 deREITing, and paying down more debt, we have always said that 5.5 to six 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 reason trading pressure on our stock is partly related to our leverage being perceived as high. Thus, deleveraging over time to four to five times seems appropriate. By de leveraging our forecasted leverage would only decline marginally to around 3.8 to 4.8 times, as the dividends savings would be largely offset by higher taxes.

Thus, deREITing would not achieve materially lower leverage. In fact, we estimate the NPV of cash savings to be approximately $1.5 billion in the future if we remain a REIT. DeREITing and eliminating the dividend would certainly bolster near term liquidity which could be helpful in these volatile times. With that said, we size 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 time to 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 substantial free cash flow generation.

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 overtime 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. And 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 eight years, including during other periods of extreme volatility we’ve had, we’ve steadily maintained our targeted 5.5 to six 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 is 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.

Q&A Session

Operator: Thank you. Our first question comes from the line of Gregory Williams from TD Cowen.

Gregory Williams: Hey. Thanks for taking my questions. The first of all, Kenny, you just made the case and I think 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 you know what’s causing delays and makes it complicated RFP process or customers dragging their feet? And so then you reiterated guidance on bookings so we should expect what a meaningful pick up in in second quarter then.

Kenny Gunderman: Hey, Greg. Yeah, I’ll start with your bookings question. Yeah, 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 two or three or four make different decisions about timing, it can impact bookings in any one quarter. And, for example, in the fourth quarter of last year, we had one deal for $200,000 of MRR that causes us to have a record quarter of bookings.

When that deal was originally in our funnel earmarked for the first quarter of this year. So if you just normalize the fourth floor in the first quarter, you basically have pretty level bookings that are consistent with historical levels. All that to say, one or two or three deals slipping from one quarter or being pulled into a prior quarter can 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 we think the second quarter 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 too. 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 and 2025, and really the remainder of this year, we’re probably distributing somewhere between $100 million and $150 million 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.

Gregory Williams: Got it. Thanks for the color, appreciate it.

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

Unidentified Analyst: Hi, this is 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 5G network build. As one of the primary customers for Uniti, are there any ramifications for Uniti if DISH is unable to fulfill their network commitments? Thank you.

Kenny Gunderman: Hi, Shipra , yeah, DISH 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 — we’ve been fairly active in the first quarter, and we think the first half of this year as they 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, et cetera, 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.

Unidentified Analyst: Okay, sounds good. Thank you.

Operator: Thank you one moment for our next question. Our next question comes from the line of Rob Palmisano from Raymond James.

Unidentified Analyst: Hey, sorry. This is Frank. 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 going to impact the business and the total magnitude? And then can you give us an update on your overlap with Sprint Network that could you just close your thoughts on how that might impact dark fiber pricing in your market? Thanks.

Kenny Gunderman: Hey, Frank, I’ll start with your second question. 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 that 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 has 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. If Frank, I mean, pricing of dark fiber is held pretty steady in the industry for 10 years, 20 years maybe. So we don’t expect the big change there. I think the impact on the industry is going to be more on the waves product, so let transport.

And as you know, Frank, we don’t do a lot of lit transport today. It’s predominantly dark, but by design, we’re starting to light some routes, where we have a very clear line of sight to both an anchor and 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 overtime 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 too, 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 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 unity.

Paul Bullington : And Frank, I’ll jump in and 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 two pieces to it. The first piece is the settlement payments, which are basically just shy of $100 million on an annual basis, paid in quarterly payments. Those are completed in the third quarter 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 or discount rate. And we exercise that option and prepaid all of ’22s 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 $1.75 billion available to Windstream to the growth capital improvement program through 2030. And as I mentioned in my comments I think we’ve actually just got it in the materials, we’re at about $600 million to date invested in that program. So we’re little over $1 billion left in that program over the next seven years through 2030. Those obligations, those are capped every year. This year, the cap is $250 million, and we expect them to spend to utilize majority of that. And then those stepped down over time. And you can see that step down in our filings as well.

But step down to 225 and then 175 and then below that in the out years of the lease through 2030. But the other piece of that as well as there’s GCI rent that is paid on those investments. So over time, not only does the GCI capital program that we’re investing stepped 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 the pre — 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 trajectories going forward.

Unidentified Analyst: All right. Great. That’s very helpful. Thank you.

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

Simon Flannery: Great, good morning, and thanks a lot. Kenny. I wonder if you could just update us on M&A just what you’re seeing in the M&A market generally in terms of valuations, et cetera. And just how are you thinking, in terms of being a buyer being a seller, people have talked about the potential for distressed 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 million for the year, perhaps if you could just update us on what we saw in the quarter, and how we should think of their balance over the rest of the year. Thanks.

Kenny Gunderman: You take the —

Paul Bullington : Yep. Simon, yeah, on M&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-to-the-home M&As, there’s 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 M&A should be valued inside of those yields. And if you just make that one adjustment, there’s $10-$11-$12 a share of a value that is not being reflected in our stock. So as a result, our board continues to be very focused on M&A as a catalyst to unlock that discount, and more. We, through the end of last year and part of the first quarter, we’re very focused on getting all of our near term financing work done.

And so we intentionally and publicly pressed pause on M&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&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 are — 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 fibre-to-the-home network, thus 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 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 domestic long-haul routes from CenturyLink, several years ago, when they were required to divest those assets as part of their acquisition of level three, 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 to 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 and quarters.

Paul Bullington : Hey, Simon. This is Paul. I’ll take your question on the Sprint ETL. 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 the over two or three year period as they go through that that process. Last year, we did about $24 million in Sprint ETL fees and in 2023, we’re projecting about $15 million in Sprint ETL fees. The program for the towers that they’re looking to decommission is well known. So we know that 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. And so it’s a little hard to predict, exactly when those power decommissioning and disconnects occur.

But when they do occur, basically the Sprint is paying us for the remainder 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 that comes in with that pull forwards. That was a big factor in our performance last year in terms of our margins at Uniti Fiber kind of increase those margins a bit with that high margin revenue coming in early pull forward. And then, this year that amount is we said expected to decline after last year was the peak year. This year as I said, we’re expecting about $15 million. But the activity was higher than expected in the first quarter, a little less than half of that $15 million came in the first quarter alone.

But we still think the total number for the year should be around that $15 million 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 of 15 is the right number for the full year is just coming in a little faster than we expected the first part of the year. And I think some of the other carriers, we reported similar activity and they’re on their network as well.

Simon Flannery: Great. Thanks for the color.

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

Kenny Gunderman: 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.

Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.