Welcome to Uniti Group's First 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 at www.uniti.com beginning May 5th, 2022, and will remain available for 14 days. At this time, all participants are in listen-only mode. Participants on this call will have the opportunity to ask questions following the company 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 the website, and you are encouraged to refer to those materials during the call. Discussions during the call will also include certain financial measures that were not prepared in accordance with the Generally Accepted Accounting Principles. Reconciliation of these non-GAAP financial measures to the most directly comparable GAAP 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.

Thank you and good morning. Starting on slide three, we continue to see robust demand for our portfolio of mission-critical communications infrastructure. Our strong first quarter results exceeded our expectations and we're enthusiastic about the prospects for the balance of the year. In fact, we announced today we're raising our full year outlook which Paul will cover shortly. Consolidated new sales bookings during the quarter were again a highlight, representing a 58% increase over the first quarter of 2021 and our fourth consecutive quarter of elevated bookings. These results also further demonstrate that the shared infrastructure benefits of fiber resulted in healthy adjusted EBITDA and AFFO growth. Fiber has never been more valuable and the insatiable demand that we're seeing for these assets shows no signs of slowing. As the second largest independent fiber operator in the country, Uniti is uniquely positioned to benefit from these trends. Turning to slide four, Uniti continues to track well in the shared infrastructure economics. As a reminder, we believe that a healthy mix of anchor and lease-up bookings and installs represents the most effective way to drive profitable growth. Uniti acquires or builds new fiber largely for our wireless customers with attractive long-term anchor cash flow yields in the mid to high single-digits. We're then successfully adding additional tenants with very high margins and minimal CapEx, resulting in a cumulative cash flow yield today of approximately 20% and almost three-fold increase from the anchor yields. Slide five illustrates an important part of our healthy mix. We continue to show that the majority of new bookings are at lease-up in nature and the business mix results in predictable cash flow with 0.2% monthly churn and average remaining contract term of almost nine years. Our continued intentional focus of balancing wholesale, non-wholesale, and anchor lease-up…

Thank you, Kenny. Good morning everyone. The communications infrastructure sector continues to undergo a robust growth cycle, primarily driven by the trends Kenny mentioned earlier. Our operational performance in the first quarter was strong and we continue to successfully execute on our strategy of leasing up our existing fiber network with high margin recurring revenue opportunities, while at the same time, pursuing attractive new Greenfield builds. As a result, we are increasing the midpoint of our 2022 outlook for revenue, adjusted EBITDA, and AFFO. Please turn to slide seven and I'll start with comments on our first quarter. We reported consolidated revenues of $278 million, consolidated adjusted EBITDA of $225 million, AFFO attributed to common shares of $112 million, and AFFO per diluted common share of $0.43. Net income attributable to common shares for the quarter was approximately $52 million or $0.21 per diluted share. At Uniti Leasing, we reported segment revenues of $205 million and adjusted EBITDA of $199 million, up 5% and 4% respectively from the prior year. Accordingly, Uniti Leasing achieved an adjusted EBITDA margin of 97% for the quarter. Turning to slide eight, our growth capital investment program continues to perform well and provide positive results for Uniti. Over the past six years, our tenant has invested approximately $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, including fiber in commercial parts and fiber-to-the-home. Collectively, these investments have resulted in 14,400 route miles of newly constructed fiber and 21% of the legacy copper network being overbuilt with fiber. Both of these numbers continue to gradually increase each quarter and we expect they will increase materially over the coming years. During the first quarter, Uniti Leasing deployed approximately…

Thanks Paul. Let me finish with a few comments about M&A. For several quarters now, we've been messaging our belief that a conglomerate discount is being applied to Uniti share price. We've demonstrated a framework for valuing our non-Windstream fiber business in a range of 15 to 20 times cash flow and our Windstream business and approximately 10 times cash flow as a starting point. The range of values for our Fiber business is supported by numerous years of private market valuations applied to other Fiber businesses and we believe Uniti is executing as a best-in-class operator commanding a premium value. The range of values for our Windstream business are supported by recent third-party appraisals, in addition to market based comps. We've also been very transparent about our efforts to unlock business count by creating options to separate our assets in a value and tax efficient manner. Last quarter, for instance, we confirmed our high confidence and the executability of this separation. Lastly, we've highlighted our prioritization of transformative transactions at this time, in lieu of our typical sale leaseback and bolt on M&A strategy. These combined efforts have resulted in continued productive conversations with various strategic and financial parties. To be clear, our priorities in these conversations are to maximize value for our shareholders, through customer diversification and growth of our fiber business, with a focus on wholesale. Consistent with past comments, we have a very strategic set of assets. And through patience, we're confident that the true value of those assets will be realized. In the meantime, we remain focused on executing our strategy with continued strong performance and favorable industry tailwinds as well as a strong balance sheet and liquidity. With that operator, we're now ready to take questions.

Certainly. [Operator Instructions] Our first question comes in the line of Greg Williams from Cowen. Your question please.

Great, thanks for taking my questions. First one is just on the M&A environment. You mentioned you're having productive conversations with various parties. Can you just talk about where multiples are public and private, given the rising rates we've seen? Second question is just on bookings. Again, you've got another strong quarter $800,000 of MRR, it just seems like is this the new normal and help us frame the mix of wholesale and enterprise? That slide is really helpful with the bar charts, is that the right mix to see like you know, in $500,000, wholesale, $300,000 enterprise and how should we think about the enterprise environment coming out of COVID, but then, of course facing this challenging macro environment? Thanks

Greg, all good questions. I'm writing them down and make sure we hit them. Yes, on multiples, we haven't seen any multiple contraction. I think that the environment is such that we think buyers are being more discerning about asset quality. So, good assets with owned networks and performing -- high performing businesses are still commanding premium multiples and we haven't seen any issues there. But I think more and more of the of the funds -- two or three years ago, were new funds to the space, they're now more knowledgeable of the space. And so they're smarter on their diligence. And so I think they're being smarter about placing premium multiples on premium assets. So, as that relates to Uniti, I think with the assets we own, we feel very confident about the premium multiples that should be applied to those. But as a buyer, it places a greater importance upon the proprietary nature of our M&A funnel. We've always talked about our ability to execute on buying assets at really below intrinsic value prices. And we I think we've repeatedly executed on that historically, through environments where multiples have been elevated. So, it continues to be similar to the past net add. With respect to bookings, I'll make a few comments then ask Paul to comment too, but yes, I do think this is probably the new norm. We've now seen four quarters of this type of activity, and frankly, don't see that changing just based upon the funnel, and based upon the level of activity. I think it's not an accident -- or that elevated level of bookings happened about six to nine months after the settlement with Windstream because we really then got access to substantially more fiber, especially the national network. And that's been a real boost to our wholesale business in particular, in terms of new bookings. And so -- and as we always said, the sales cycle on those types of deals is kind of six to nine months, 12 months. So, I think we're sort of in a new norm. That mix of bookings is about right, we really like to keep a good healthy mix of anchor and lease-up. Anchor deals tend to drive more revenue, but the lease-up tends to drive the profitability. And so we think that mix is right. And I -- we know it's a challenging enterprise environment, broadly speaking, especially given the work-from-home trends are continuing. And we expect those to continue. But we haven't seen an impact to our business. I think it's largely because we're still a share taker in the enterprise space. That business is growing at 10%, 15% a year, and we're taking share in new markets with an owned fiber network with substantial lease-up potential. So, I think the runway for growth for us there continues to be very, to be very strong. And Paul?

Yes, I would just echo those, those comments, Kenny. I think this new normal of the level of bookings that that you see -- that we've been producing is a very intentional effort on both the enterprise side and the leasing wholesale side where we've built the teams around the fiber network that we have, particularly around the Windstream settlement fibers that we now have access to, to take advantage of that opportunity. And we've been very intentional about the enterprise part of our business as well, building those teams, building the leadership up to take advantage of that opportunity, and to have a consistent set of enterprise products across all of our networks -- our enterprise networks. And so I think this is the new normal that you'll continue to see going forward. And the mix on enterprise I think is probably steadier, it's made up of a lot of smaller orders, the mix on the wholesale can be up and down a little bit because those tend to be larger orders that can be a little lumpier, but I think the mix that you're seeing now is about what I would continue to expect going forward as well.

Great. That's super helpful. Thank you.

Thank you. Our next question comes from the line of Frank Louthan from Raymond James. Your question please.

Great. Thank you. So, walk us through where you're getting some of the traction -- some of the types of customers and verticals in Uniti fiber and are you seeing any opportunity there on the wholesale side or helping with Greenfield builds with some of the private over builders that are that are running fiber today? Thanks.

Hey, Frank, I'll start on that and Paul, you can jump in. But we are seeing some traction Frank with the over builders and some of the upstarts who are getting the broadband stimulus money. And we sort of foreshadow this, but we've kind of been conservative about it and I still don't want to put numbers around it. But our network tends to reach out into the Netherlands, in terms of Tier 2, 3-ish-type markets. And so that's where a lot of this broadband stimulus has been deployed, right, underserved markets. And so that last-mile build is new fiber, but in order to connect those markets back to the core, you need metro and broadband, long haul, transport, and support and that's where the opportunity is for us. And so we're getting what we call new logos, we're getting new calls from an increasing number of those parties, which is exciting for us. And it's sort of indicative of just the overall environment. I mean, we're seeing demand from pockets of providers that we haven't seen for some time. I'm including some of the regional RLACs [ph] with better balance sheets and better liquidity. We're building out their networks. We've seen the hyperscalers really demanding substantial amounts of fiber, connecting data centers, and connecting markets, and the wireless carriers, very actively looking at 10-Gig upgrades. So, we're very, very focused on that. And anchor build, Greenfield build opportunities are absolutely out there. And we continue to take on some of those opportunities, but we're very disciplined about it. As I've said many times, there's there is no shortage of demand in our industry. It's really a question of taking on profitable demand and that's our focus. So, thus the focus on the right mix of bookings between wholesale and enterprise and anchor and lease-up, but no shortage of demand from really any of those pockets.

All right, great. And speaking of shortages, can you address kind of what you've done to stay ahead of supply chain challenges and getting network equipment so forth for the builds?

Yes, sure Frank. Our team has been really successful over the last year and managing a pretty difficult supply chain environment that continues to think to get increasingly difficult. And we've done that through just the standard blocking and tackling and staying ahead of that demand, deep supplier relationships, diversified supplier relationships, staying ahead of the curve, making sure we've got orders in place to get materials and equipment on time to deliver on time for our customers. So, I think our teams have done a really good job of managing that. But it continues to be a difficult environment and we continue to have to very actively manage that going forward. So, we've been doing things, pulling forward orders for materials for equipment, given the elongating lead-times for that sort of thing, in order to manage that well. So, we think we've got a good handle on that. We think we're well-positioned to continue to deliver for our customers and have the supplies on hand that we need to do that. But it's a challenging environment and we've got to continue to manage it well and stay ahead of the curve.

All right, great. Thank you.

Thank you. Our next question comes from the line of Simon Flannery from Morgan Stanley. Your question, please.

Hi, this is Alexis [ph] on for. Simon, can you hear me okay?

Yes, we can.

Okay. Could you talk a little bit about the trends in the fiber business one impacted? 1Q for like a year-over-year and a quarter-over-quarter perspective? And when do you think the impact kind of, those mid-single-digit growth rates we talked about for the business? And then dividend, are there any updates around that look for that I saw leverage fall a little bit in the quarter.

Yes, Alexis, I'll take a stab at the trends, sort of, year-over-year. When you look at our numbers, year-over-year, I mean, we're experiencing really solid growth 5%to 6% for the leasing business, and we talked about 6% to 8% growth in revenue and EBITDA respectively, year-over-year, as well in our comments and remarks. To get there, though, you've got to remember, they got to adjust for the Everstream transaction that we had in May of 2021, where we sold a portion of our Northeast network. So you need to adjust the numbers to reflect for that transaction in order to kind of really see the real trend underlying it. And I think those trends are just what we've already sort of alluded to solid bookings leading to solid revenue growth and that revenue growth is coming from all sectors really -- pretty evenly spread across our wholesale and non-wholesale business. And then from a cost standpoint, we've done I think, a really solid job of continuing to get more efficient from a cost standpoint. And part of that is our intentional strategy of doing more and more lease-up business and that lease-up business is higher margin business for us going forward. So, I think we expect to continue to see that level of growth and improving margins as we go forward into the future.

Thank you. Was there anything on the dividend outlook for that?

The outlook for the dividend? Currently, we're still restricting dividend to the 90% of REIT taxable income, the statutory minimum for a REIT and we're restricted to that by our -- [technical difficulty] Hey, Frank, I think you may want to go back on mute. Sorry about that. So, from a dividend standpoint, our hands are a bit tied by that reversion covenant that we got from our debt -- our debt covenants. But as you can see from the leverage that we reported -- leverage ratio that we reported, we're edging closer and closer to that 5.75 times on a trailing 12-month basis, leverage ratio that would allow us to have that covenant -- that restrictive covenant removed from us going forward. So, once we get there and get through that, that covenant reversion level in the future, then we'll have a little bit more flexibility with regard to our dividend going forward. But that remains a Board decision, something our Board is going to have to look at with regard to our other capital allocation priorities and we'll make that decision going forward when they've got that ability to do so.

Okay, great. Thank you.

Thank you. Our next question comes from the line of David Barden from Bank of America. Your question please.

Hey, guys, thanks for taking the question. I guess the first question, Kenny, would be in the current rate environment, where the Fed, we're expecting somewhere, depending on who you are three to five incremental hikes this year, your weighted average cost of capital is going to get mark-to-market every day. And I'm wondering how that affects your thinking about that 7% initial build yield? Because I imagine the customers that you're asking to pay that 7%, if that 7% becomes an 8%, or 9%, are going to maybe balk at that, at least, in the short run. And how that -- is that risk lagging some of these conversations? And how do you think about matching that yield ask for day one versus the mark-to-market of your weighted average cost of capital? Second, Paul, I think I heard you say, in passing that that the fiber business this quarter was impacted by some better than expected termination fees and things and some lower than expected costs, if you could kind of review that for us? And then I guess -- I'm sorry, my last question, I guess, going back to you, Kenny, obviously, we've been talking about this for months. I mean in December, there was a bit out there reportedly at $15 a share, you and other parties went back and forth about maybe whether that was right or wrong. And I guess my question right now is that been still out there? Or did that just come and go now? And we're back to being patient? Thanks.

David, great question on the rate environment, and that that the impact of that on our pricing models and our dialogue with customers, we have not -- and there's multiple elements to that, there's not just the rate environment, but there's also the supply chain implications to higher -- potentially higher costs that get reflected through CapEx or OpEx for us and I think that's definitely factored into our modeling. We have not had any need to change our focus on those starting yields with -- in customer conversations. As you can imagine, we're not sharing our models and talking about specific yields with customers, it's really just more of a pricing conversation on a per site basis. And so it all kind of factors into an overall model for us that we're looking at that includes our cost of capital, and includes our threshold expected returns. I think where the real focus for us is, is not on those initial yields, because we haven't seen that any sort of softening in that and we don't think we will, just based on the demand we're seeing. But it puts a real focus on the lease-up opportunity after that, because we're not content to get a 6% or 7% or 8% yield, what we really want is 10% plus, getting up to 20%, which we show you in our slideshows. And so in order to get to that level, you've got to be confident that the lease-up potential is there. Because as I said earlier, the revenue tends to come from the anchor awards, but the return and the profitability comes from lease-up. And so with that, and the strength that we're seeing in our enterprise business and just lease-up in general, we feel confident that we're going to continue to be able to hit those returns, including through this rate environment. Paul, you want to take that second one.

Yes, I can take that question, David on ETLs and costs. So, the ETL revenue that we've been talking about for several quarters is -- that's the early termination liability revenues associated with contracts that disconnect early. The large majority of that activity is connected to the Sprint T-Mobile consolidation in that activity to consolidate that network. And we've talked about that before in terms of its impact on our business going forward. So, as that that happens, we'll see those ETL revenues come in. And the timing of those revenues is a little hard to predict because it's dependent on the actual disconnect of those circuits. But we've got those ETLs as a part of our plan going forward and so you see that activity was strong in the first quarter. In terms of overall costs, I think it's not attributable to really any one area. Specifically, I think it's coming from a broad number of the expense categories across the business, both direct expense categories and operating expense categories as we continue to just become more efficient and drive more towards lease-up types of revenue. So, we're seeing costs efficiency and things like third-party off-net cost as we as we drive more towards revenue on net and near net, lease-up activity, things like that, but it's pretty broad base in terms of expense containment across the business.

And David on M&A I'm going to let our scripted remarks stand for our answer there and just generally say we continue to make very good progress on our priorities. So, feel very good about that.

All right. I'll let that stand Kenny. Thanks man.

Thank you.

Thank you. 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.

Thank you. We appreciate your interest in Uniti Group and look forward to updating you further on future calls. Thank you for joining us today.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.