Uniti Group today announced its Q3 2021 earnings and provided updates on its fiber and small cell infrastructure portfolio, growth capital improvements (GCI) program with Windstream, and leasing success with hyperscale customers.

Financial Performance in Q3 2021 – Uniti Group

In Q3 2021, Uniti Group reported total revenue of $267m, a 0.5% decrease quarter-over-quarter, and adjusted EBITDA of $217m, a 0.7% increase quarter-over-quarter. Therefore, the company’s EBITDA margin was 81.4% in Q3 2021, a ~100 bps improvement quarter-over-quarter. Decomposing the results further:

  • Uniti Leasing: primarily Windstream, contributed revenue of $199m (75% of total) and adjusted EBITDA of $194m (97% margin)
  • Uniti Fiber: revenue of $67.3m (25% of total) and adjusted EBITDA of $27.6m (41% margin)

Additionally, the company secured consolidated new sales bookings during Q3 2021 of $0.9m in monthly recurring revenue (MRR). Of this total, wholesale bookings comprised $0.5m, while non-wholesale bookings formed the remaining $0.4m.

Leasing Win – New Hyperscale Customer

In October 2021, Uniti Group executed a 20-year long-haul dark fiber contract with a large, international hyperscale company – which is a new customer for Uniti. Specifically, Uniti is providing high-strand count fiber along a route connecting key data centers in Pittsburgh, Pennsylvania and Ashburn, Virginia.

Reports of Zayo Group’s Interest in Uniti and Windstream

Subsequent to quarter-end, press reports indicated that Zayo Group has recently been in talks with Uniti Group to acquire the company at a price of ~$15 per share. For more detail on these developments, check-out Dgtl Infra’s prior coverage.

Fiber and Small Cells as of Q3 2021 – Uniti Group

As of Q3 2021, Uniti Group owns 126k fiber route miles and 7.5 million fiber strand miles. Indeed, this represents an average strand count of 59.5 strands per route mile.

Overall, Uniti serves ~300 metro markets with its owned metro fiber or enterprise services. With this metro fiber network, the company passes 250k+ on-net and near-net buildings.

Beyond fiber, Uniti also has 2.45k small cells in service or in backlog. The company currently has 1.4k lit backhaul, dark fiber, and small cell sites remaining in its backlog which will be deployed over the coming years.

Growth Capital Improvements (GCI) – Uniti Leasing

During the quarter, Uniti Leasing deployed capital expenditures of $61.7m primarily towards its growth capital improvements (GCI) program with Windstream. Through these GCI investments, Uniti constructed ~1.3k new fiber route miles and ~45k fiber strand miles (35 strands per mile).

As of Q3 2021, Uniti Group has invested, since inception, $237m through its growth capital improvements (GCI) program with Windstream. In turn, this investment has added 6.2k fiber route miles and 217k fiber strand miles to the company’s network.

GCI Program – Structure

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 Q3 2021, Uniti generates ~$19m of annualized cash rent on the investments it has made through the GCI program.

Leasing Sales Pipeline at Q3 2021 – Uniti Group

Uniti Group is actively marketing 3+ million strand miles of fiber, which is available for lease-up. As a result, Uniti’s leasing sales pipeline currently stands at $1.2bn of total contract value, representing $65m of annual revenue. Additionally, revenues under contract for Q3 2021 are $826m with an average contract term remaining of 14.3 years.

The customer mix of Uniti Group’s pipeline is split between domestic carriers (16%), regional carriers (24%), international carriers (29%), and government (29%).

Jonathan Kim covers Fiber for Dgtl Infra, including Zayo Group, Cogent Communications (NASDAQ: CCOI), Uniti Group (NASDAQ: UNIT), Lumen Technologies (NYSE: LUMN), Frontier Communications (NASDAQ: FYBR), Consolidated Communications (NASDAQ: CNSL), and many more. Within Fiber, Jonathan focuses on the sub-sectors of wholesale / dark fiber, enterprise fiber, fiber-to-the-home (FTTH), fiber-to-the-premises (FTTP), and subsea cables.

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