Uniti Group today announced its Q1 2021 earnings and provided updates on its fiber and small cell infrastructure portfolio, growth capital improvements (GCI) program with Windstream, and leasing sales pipeline.

Uniti Group – Financial Performance in Q1 2021

In Q1 2021, Uniti Group reported total revenue of $273m and adjusted EBITDA of $214m (79% margin). Both revenue and EBITDA declined ~1% as compared to the prior quarter, Q4 2020. Decomposing the results further:

  • Uniti Leasing, which is primarily Windstream, contributed revenue of $195m and adjusted EBITDA of $192m (98% margin) for Q1 2021
  • Uniti Fiber added revenue of $77.7m and adjusted EBITDA of $29.7m (38% margin) for Q1 2021

The company called-out robust dark fiber and small cell revenue growth of 30% year-over-year, while enterprise revenue grew 17% year-over-year.

Uniti Group – Fiber and Small Cells – Q1 2021

As of Q1 2021, Uniti Group owns 125k fiber route miles and 7.0 million fiber strand miles. Indeed, this represents an average strand count of 56 strands per route mile. Notably, Uniti has constructed 7.6k fiber route miles since the beginning of 2018, equating to a build pace of 2.3k fiber route miles annually.

Uniti Group Fiber Network Q1 2021

Overall, Uniti Group has built the eighth largest fiber network in the United States. With its dense metro fiber, the company’s network passes 185k on-net and near-net buildings. Additionally, Uniti is building this fiber network deeper into office parks and neighborhoods through fiber-to-the-home and fixed wireless initiatives.

Beyond fiber, Uniti also has 2.3k small cells in service or in backlog. The company currently has 1.1k lit backhaul, dark fiber, and small cell sites remaining in its backlog which will be deployed over the next two years.

Growth Capital Improvements (GCI)

As of Q1 2021, Uniti Group has invested, since inception, $127m through its growth capital improvements (GCI) program with Windstream. In turn, this investment has added 3.4k fiber route miles and 122k fiber strand miles to the company’s network. Additionally, Uniti expects to invest $158m into the GCI program for the remainder of 2021, adding 4.8k fiber route miles.

Uniti Group’s GCI investments add to the cash rent payments it receives under existing Master Lease Agreements (MLAs) with Windstream. Specifically, the company generates an 8% initial yield, payable one-year following the corresponding investment made. Additionally, a 0.5% annual rental escalator, is applied to the yield, from the prior year.

As of Q1 2021, Uniti generates ~$10m of annualized cash rent on the investments it has made through the GCI program. Furthermore, the remaining investments that the company expects to make in 2021 will produce ~$13m of annualized cash rent.

Leasing Sales Pipeline

Uniti Group is actively marketing over 3 million strand miles of fiber, which is available for lease-up. As a result, Uniti’s leasing sales pipeline currently stands at $1.0bn of total contract value, representing $60m of annual revenue. Additionally, revenues under contract for Q1 2021 are $765m with an average contract term remaining of 14.5 years.

The customer mix of Uniti Group’s pipeline is split between carriers (54%), government (35%), and other (11%). Indeed, the company notes that it is seeing robust demand driven by network densification from wireless carriers. Particularly, these wireless carriers require additional fiber and small cell infrastructure to support their 5G services.

One example of this trend was DISH Network’s agreement, in November 2020, to use Uniti’s fiber network for fronthaul and backhaul support of its 5G network. Moreover, Uniti expects its dark fiber and small cell revenue to continue growing as DISH Network becomes a more active customer.

Additionally, Facebook, Amazon, Apple, Netflix, and Google (FAANG) and the national multiple-system operators (MSOs), such as Comcast and Charter Communications are also active customers, as they expand their cloud-based services. In particular, these customers have strong demand for high-capacity, long-haul fiber routes.

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