Uniti Group Inc. Q3 FY2022 Earnings Call

Welcome to Uniti Group's Third Quarter 2022 Conference Call. My name is Gigi 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. Forward-looking statements disclaimer. 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 the 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-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. Good morning everyone. Starting on slide three. Our results for the third quarter were once again strong as the demand for our mission-critical fiber infrastructure continues to grow. We achieved our sixth consecutive quarter of elevated new sales bookings, which we now consider the new norm. As importantly, we also had another strong quarter of gross install activity with a mean time to deliver of less than 100 days. Consistent bookings balanced between anchor and lease-up along with installs that can be turned up quickly and our industry-leading monthly churn of 0.2% demonstrate that our strategy is sound and that we're executing on it well. To reiterate, our strategy continues to focus on buying and building mission-critical fiber infrastructure and then leasing infrastructure to anchor customers in the 5% to 10% cash yield range and additional lease-up customers, driving cumulative cash yields above 10%. This strategy has resulted in Uniti becoming the second largest independent fiber operator in the country with 134,000 route miles and a long runway for profitable growth. As slide four demonstrates, Uniti continues to track well on these shared infrastructure economics. We're building new fiber largely for our wireless customers and then successfully adding additional tenants with very high margins and minimal CapEx, resulting in a cumulative cash flow yield today of 22%, a more than threefold increase from the anchor yield on these projects. Slide five illustrates that the majority of new bookings continue to be lease-up in nature and along with our intentional focus of balancing wholesale, non-wholesale and anchor lease-up opportunities has resulted in outsized margin enhancement, AFFO growth and a business that remains relatively immune to swings in the economy. Turning to slide six. High capacity long-haul routes are needed by all of our customers, including wireless carriers, hyperscalers, international carriers, MSOs and large enterprises to connect their disparate markets, data centers and pops. Today, dark fiber in North America is an approximately $1.5 billion annual market opportunity and is expected to grow about 10% annually over the next several years. A growing component of our wholesale strategy is wavelength services, which represent a $2 billion annual revenue opportunity today in North America and is expected to grow approximately 7% over the next several years. We're selectively lighting more long-haul routes to provide wave services and capitalize on growing demand while maintaining the same discipline on anchor and lease-up economics. For example, we recently announced two new long-haul routes that will offer wavelength services and multiple terabit spectrum services to key markets in our Southeast footprint. This is in addition to our previously announced Miami to Tampa route. The anchor cash yields are approximately 10%, and we have a clear line of sight to a combined cash yield of low to mid-teens once leased up over the next few years. Having our own national network is a meaningful competitive advantage for Uniti, especially given that it would take billions of dollars and many years to build a new national network. We estimate there are only five truly owned 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 presents Uniti with a unique growth opportunity with minimal competition. The resulting economics of our national wholesale business are very attractive with high-margins, passively managed revenue, virtually no churn, long-term contracts that routinely have escalators built into them and minimal CapEx requirements. Before turning to our enterprise business, I'd like to comment briefly on lit wireless backhaul. Lit backhaul is a terrific way to lease-up existing network or build new network with attractive yields for wireless carriers. However, the contract lengths are typically shorter than that of dark fiber, and there's some pricing pressure on returns. As such, Uniti has always considered managing return risk as a strategic imperative, and we manage that risk by offsetting re-term discounts with lease-up on the networks, additional business from the wireless carriers and upselling bandwidth. As an example of this focus, today, we're announcing that we recently re-termed approximately 1,100 lit backhaul sites with one of our major wireless customers, resulting in a net price increase of approximately 20% as we upgrade these sites to 10-gig, and we're extending the contract term from a blended 2.5 years remaining to eight years remaining. We're actively working with another of our major wireless carriers to re-term an additional 1,200 lit backhaul sites. Together, these two agreements represent over 60% of our existing lit backhaul portfolio and provide stability and increased visibility for our earnings going forward. Now turning to slide seven. Although, enterprise sales represent less than 5% of our total revenue today and will likely always represent a minority percentage, it remains a critical element of our lease-up strategy. Enterprise new sales bookings and installed activity during the third quarter were again both very strong. And we expect these trends to continue as we further capture market share in our existing and new metro markets. As a result of our consistently strong bookings activity, enterprise recurring revenue was up 16% during the quarter. Slide eight is an example of how we're executing to increase market share in markets with existing fiber and where we're currently offering lit services. Birmingham is the largest metro area in Alabama and the 50th largest metropolitan statistical area in the U.S. It's a very attractive Tier 2 market, which we originally entered in 2017 with a large greenfield build. Today, we have an extensive fiber network there with almost 27,000 strand miles of dense fiber. And despite our growth over the years, our enterprise market share is still only approximately 5%. Homewood is an affluent neighborhood of Birmingham. And for less than $1 million of capital, we can expand our already robust network to reach an additional 600 attractive enterprise customers. These investments not only expand our market share but will result in very attractive economics for Uniti, resulting in cumulative cash yields of approximately 50% and IRRs of 30%. These types of investments are only available to providers like Uniti with an extensive network already in place. Equally exciting, and as we've mentioned before, we own metro fiber in nearly 300 markets nationwide, which represents terrific capital and margin-efficient growth potential for enterprise, wireless backhaul and even small cells. We only recently acquired most of these markets through our 2020 settlement with Windstream. So, we're just beginning to capitalize on the opportunity. Given the proven success of our anchor and lease-up strategies and the attractive economics of these enterprise opportunities, with payback periods of almost half the initial contract term and cash yields of 50% plus, we continue to actively prioritize these metro markets for expansion in both 2023 and beyond. In looking at our national wholesale network and our 300 metro markets combined, we estimate that less than 5% of our total 8 million strand miles of fiber are actually lit. This virtual blank canvas provides us with a terrific runway for disciplined growth without the burden of legacy declining products. With that, I'll now turn the call over to Paul.

Thank you, Kenny, and good morning, everyone. We are once again pleased with how our businesses performed during the quarter with robust booking and install levels driving in-line consolidated revenue and better-than-expected adjusted EBITDA. While non-recurring revenue at Uniti Fiber was lower than expected during the quarter, recurring revenue, both at Uniti Fiber and Uniti Leasing, was strong. Uniti remains well-positioned to weather current macroeconomic conditions, given our robust level of long-term revenues under contract, our declining capital intensity and the work we have done to strengthen our balance sheet and push out our debt maturities. As a result of the strength of the quarter and our expectations for the fourth quarter, we are increasing the midpoint of our 2022 outlook for consolidated revenue and adjusted EBITDA. Please turn to slide nine, and I'll start with comments on our third quarter. We reported consolidated revenues of $283 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 loss attributable to common shares for the quarter was approximately $156 million or $0.66 per diluted share, which includes a $216 million goodwill impairment charge related to our Uniti Fiber segment that was driven by an increase in the macro interest rate environment. At Uniti Leasing, we reported segment revenues of $209 million and adjusted EBITDA of $203 million, both of which were up 5% from the prior year. Accordingly, Uniti Leasing achieved an 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 six years, our tenants have invested approximately $1 billion of tenant capital improvements in our network. Uniti continues to invest its own capital in long-term value-accretive fiber, largely focused on highly valuable last-mile fiber, including fiber in commercial parks and fiber-to-the-home. Collectively, these investments have resulted in 18,800 route miles of newly constructed fiber and 23% of the legacy copper network being overbuilt 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 third quarter, Uniti Leasing deployed approximately $72 million towards growth capital investment initiatives, with the majority of the investments relating to the Windstream GCI program. These GCI investments added 2,250 route miles of fiber to Uniti's own network across several different markets. As of September 30th, Uniti has invested approximately $460 million of capital to date under the GCI program with Windstream, adding around 13,500 route miles and 731,000 strand miles of fiber to our network. These investments will be added to the master leases at an 8% initial yield at the one-year anniversary of Uniti making such investment. They are subject to a 0.5% annual escalator and result in nearly 100% margin. The investments we have made to date will ultimately generate approximately $38 million of annualized cash rent and increase the overall value of our network. At Uniti Fiber, we turned over almost 300 lit backhaul, dark fiber and small cell sites for our wireless carriers across our Southeast footprint during the third quarter. These installs add annualized revenues of approximately $3 million. We currently have around 1,200 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 $11.5 million of annualized revenues. At Uniti Fiber, we reported revenues of $74 million and adjusted EBITDA of $29 million during the third quarter. Revenues were lower than expected due to lower non-recurring equipment sales and installs resulting from several factors, including the timing of those sales, a modest impact from delivery delays and key employee turnover within our E-Rate Group. However, adjusted EBITDA was slightly higher than expected given the low margin nature of the equipment sales combined with lower than expected costs. Uniti Fiber net success-based CapEx was $26 million in the third quarter. We also incurred $2 million of maintenance CapEx or about 3% of revenues. Please turn to slide 11, and I will now cover our updated 2022 guidance. We are revising our guidance primarily for business unit level revisions 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 2022 includes the following for each segment. Beginning with Uniti Leasing, based on our continued strong lease-up success, we now expect revenues and adjusted EBITDA to be $827 million and $805 million, respectively, at the midpoint, representing adjusted EBITDA margins of approximately 97%. Revenue and adjusted EBITDA each include $14 million of cash rent associated with the GCI investments and $25 million related to the straight-line rent associated with the Windstream master leases and GCI investments. We still expect to deploy $275 million of success-based CapEx at the midpoint of our guidance, of which $250 million relates to estimated Windstream GCI investments. Turning to slide 12. We now expect Uniti Fiber to contribute $305 million of revenue at the midpoint, given the factors I mentioned earlier that are impacting our non-recurring revenue. However, we are increasing the midpoint of our full-year recurring revenue outlook on the strong bookings and install activity we continue to see. Our full-year outlook for adjusted EBITDA remains $121 million with lower non-recurring revenue offset by higher recurring revenue and lower costs. When adjusting for the Everstream transaction that occurred in May of 2021, the year-over-year revenue and adjusted EBITDA growth is 5% and 8%, respectively. This strong growth demonstrates our continued success in managing our cost structure and improving margins while executing on lease-up that leverages our existing dense Southeast fiber footprint. As I mentioned last quarter, we expect 2022 to be the peak year for Sprint-related churn. As a reminder, as we turn to 2023, we still expect to realize some ETL fees, but most likely $12 million to $13 million less than what we recognized in 2022. We also still expect that our core recurring revenue at Uniti Fiber will increase by a mid-single digit percentage rate for full year 2023 when compared to 2022. Net success-based CapEx for Uniti Fiber this year is expected to be $120 million at the midpoint of our guidance, a 12% decrease from levels in 2021. Turning to slide 13. For 2022, we still expect full-year AFFO to range between $1.70 and $1.77 per diluted common share with a midpoint of $1.74 per diluted share, a 4% increase from 2021. On a consolidated basis, we expect revenues to be $1.1 billion and adjusted EBITDA to be $900 million at the midpoint. Our guidance contemplates consolidated interest expense for the full year of approximately $390 million. Corporate SG&A, excluding amounts allocated to our business segments, is expected to be approximately $34 million, including $8 million of stock-based compensation expense. We still expect our weighted average diluted common shares outstanding for full year 2022 to be around 267 million shares. 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. Given the current macroeconomic and interest rate environment, we will continue to be opportunistic in our approach to managing our capital structure over the near term. At quarter-end, we had approximately $270 million of combined unrestricted cash and cash equivalents and undrawn revolver capacity. Our leverage ratio stood at 5.80 times based on net debt to last quarter annualized adjusted EBITDA. On November 1, our Board declared a dividend of $0.15 per share to stockholders of record on December 16, payable December 30. With that, I'll now turn the call back over to Kenny.

Thanks, Paul. We continue to believe that our core business will likely see little to no noticeable impact from any economic downturn given the mission-critical nature of broadband. Further, the vast majority of our revenue is wholesale in nature with long-term contracts. Lastly, 95% of our debt is fixed rate, and we have no significant near-term maturities. So as it relates to potential debt refinancing and M&A, we have the ability to be patient. Our strategy since 2015 has been to acquire and build mission-critical communications infrastructure and then lease that infrastructure to quality anchor customers with a clear path to lease-up, resulting in combined cash yields of 10% plus. While in our early years, our priority was more focused on acquiring rather than building as we established our national fiber platform, we're now much more focused on building given the attractive returns we're seeing in the challenging economic and capital markets backdrop. We believe our strategy is working, and the initial investments both in M&A and greenfield builds are paying off. We currently have over $7 billion of revenue under contract with an average remaining term of approximately eight years. The majority of this revenue is passively managed in the form of triple net or dark fiber MLAs. As a result, the operating costs associated with this revenue is very predictable, which results in a cash flow-rich business over the mid to long term. By 2030, we expect to have generated approximately $1.5 billion of cumulative free cash flow if we maintain our current dividend and approximate level of annual capital investment. This trajectory leads to substantial deleveraging, resulting in 2.5 to 3.5 times net leverage and more than doubling the size of our fiber business. Our network is highly underutilized, presenting profitable growth potential for some time. We expect net capital intensity to decline from our current level of approximately 35% to 5% to 10% by 2030 and is indicative of accelerating operating leverage in the business and many years of high margin and high yielding lease-up, including dark fiber, lighting unique long-haul routes and expanding deeper into our existing 300 metro markets. With that said, our cash-rich MLAs provide great optionality to pay an increasing dividend and invest even more in our core business in lieu of paying down debt. Regardless of our capital allocation policy, our runway for organic growth appears long and fruitful, especially given strong industry tailwinds. With that, operator, we're now ready to take questions.

Our first question comes from David Barden from Bank of America.

Thank you for taking my question. Kenny, with your banking background, could you discuss the current status of the sale-leaseback business, where every additional dollar invested generates an 8% return immediately, while your bonds yield between 9% and 13%? It seems this is the most affordable segment of your capital structure, with equity being more expensive, which raises your overall cost of capital above the yield produced in this area. How should we consider this in terms of investment potential? Additionally, regarding the fiber business, there's an ongoing question about a significant transaction that could unlock its value. Is it feasible to pursue this in the present market conditions, given rising rates and an impending recession? How can you reassure stakeholders that this is still a viable opportunity?

Good morning, David. On your first question, I agree with your assessment. Our anchor yields, whether from sale-leasebacks, greenfield builds, or other agreements, generally fall in the 5% to 10% range, with 8% being on the high end. This has been our guiding principle for many years. Importantly, during the lease-up phase, we are achieving yields well above 10%. As shown in our materials, we're currently tracking at 22% cash yields. There are various projects at different maturity stages, but overall, our core business is delivering 22% yields, and I anticipate those will continue to rise. The yields generated from our CapEx are very appealing, exceeding 50%. Regarding the current high-interest rate environment, I agree that many yields are in the high single digits to low double digits, but our core business comfortably exceeds those figures, and I don’t see that changing. On your second question, we are trying to move away from a quarter-to-quarter analysis of M&A, as it’s not constructive. In this environment, different types of counterparties emerge. Some adopt a defensive approach and do nothing, while others may seek to capitalize on forced sellers, which we refer to as bottom feeders, and we do not engage with them. However, there are also savvy parties with substantial capital who see market conditions as opportunities for more creative or customized transactions. We've observed some of these deals recently, where a large fund independently secured debt financing instead of relying on public markets. Opportunities do exist. Our history in M&A demonstrates our capability to complete straightforward cash acquisitions as well as more innovative transactions, which will always be part of our strategy. Additionally, our Board believes strongly in being patient regarding M&A, as acting as a forced buyer or seller usually leads to suboptimal results. Every day, we are successfully running a business that yields impressive returns and is highly valued, particularly in the private market. This ability to execute and develop our platform creates ongoing value and enables us to patiently await opportunities for potentially value-enhancing M&A, whether in the near or distant future.

Thanks Kenny. It makes sense.

Thank you. One moment for our next question. Our next question comes from the line of Gregory Williams from Cowen.

Great. Thanks for taking the questions. Just first one, you mentioned, Kenny, about expansion to eventually the 300 markets you're in. Do you have a sort of cadence on how many markets you'd expand per quarter or per year, that would be helpful. Second question is just if you're seeing any labor supply or inflation concerns on the business. Just in the last two days, we heard Lumen talk about slowing down on their fiber enablement to their homes. And the day before that, I think consolidated, so the cost per home pass is coming up a little bit. I'm wondering if you're seeing that broadly or maybe more particularly in the Windstream fabric to the home space. Thanks.

Good morning, Greg. I'll let Paul address part of your question later. Regarding the first part, we are actively reviewing all of our metro markets and prioritizing them. I don’t have anything to announce just yet in terms of rollout timing, but we should have more details around February. The fact is that we chose Birmingham as an example of the investment potential in a strong Tier 2 market with little competition. We’ve been established there since 2017 with an anchor award and have been gradually increasing our enterprise market share over the last four to five years, yet we are still only at 5%. There are clear, low-hanging fruit investment opportunities in these existing markets. For instance, we discussed the potential to expand into the Homewood neighborhood for under $1 million. If we break that down, it's primarily about a couple hundred thousand dollars for expanding the backbone, with the remaining funds aimed at acquiring new customers. The returns on this investment are impressive and yield high returns without incurring significant additional operating expenses since we have existing personnel in place. Consequently, our immediate focus for market expansion is on developing current markets rather than venturing into completely new ones for now. We have a strong fiber network in Little Rock; however, we currently don’t offer enterprise services there, only wholesale services to a few other carriers. While we are centering our enterprise efforts more on Southeastern markets, we will eventually broaden that reach. Meanwhile, we are enjoying solid returns in other metro markets through dark fiber and wholesale services. This situation allows our Uniti Fiber and Uniti Leasing businesses to support each other effectively. Concerning supply-side pressures, we are indeed experiencing some challenges, particularly with labor, as we find it difficult to maintain fully staffed crews. Although we are surpassing our booking targets, our number of enterprise sales representatives is down by about 15% to 20% compared to our plan. The good news is that our current reps are more productive, allowing us to still meet our bookings objectives, but overall, we would perform even better if we were fully staffed. On the topic of pricing pressure or rising costs, Paul may have more to add, but we are perceiving some of that, albeit not significantly.

I agree with your comment, Kenny. The labor supply market is indeed very tight. However, for the construction of our network, we primarily utilize a contractor labor force. So far, we haven't experienced any significant increase in labor costs within our construction operations. This stability can be attributed to several factors. Firstly, we have a strong network of contractors focused mainly in the Southeast, which ensures a steady flow of work. Additionally, we employ a competitive bidding system for all projects. These elements combined have helped maintain stable costs for us. That said, we are not completely shielded from potential increases in labor costs, but as of now, we haven't seen any substantial rise in the labor component of construction costs.

That’s helpful. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Frank Louthan from Raymond James.

Great. Thank you. So, pretty material downtick there in the quota-bearing heads. Where are you losing folks to? And do you think you can get that back up and maybe expand that? And is there any concern for the outlook for next year with the base going down that much?

Yeah, Frank, I'm not worried about next year. The key takeaway here is positive, as we're still meeting our targets because our current representatives are more productive, and there's a lot of potential to monetize our network. That said, we are focused on increasing that number. Historically, we have faced challenges in maintaining the desired number of representatives, primarily because we are very selective in bringing on new reps. Once they join, we actively remove those who are not performing well. I believe our churn rate for unproductive reps is around 20%. Therefore, I don't see the current lower number as a problem or an indication of future issues. However, we are continuously seeking to add quality reps and are looking for ways to adjust our commission or compensation plan to support that. Nonetheless, we won't stray from the discipline and standards we enforce to ensure our reps are accountable and productive. Ultimately, if our goal was simply to increase the number of reps, we could easily do that, but that's not our approach.

Sure. To follow up on a previous question, do you think Windstream is facing any challenges in obtaining trucks or equipment to meet their build plans? Will there be any possibility that they might extend their build timelines due to rising costs?

So, Frank, we have an opinion on that, but we're going to let them address that. I think they've got an earnings call coming up, so we'll let them address that directly.

All right. Fair enough. Thanks very much.

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

Thank you very much. Good morning. Regarding the fiber business, Kenny, you mentioned that capital intensity is expected to decrease over time, and there's also a solid backlog. How should we view the near-term capital intensity? Will it remain above the 40% threshold this year? Is it likely to drop to the mid-30s as you indicated over the next couple of years? Additionally, could you provide any updates on DISH? I recall you mentioning that as the Sprint business diminishes, DISH would start to ramp up in 2023. What are their current plans?

Our capital intensity is expected to decrease, but there are no changes to our previous guidance. We're demonstrating where our capital is being allocated and how we are achieving strong returns. In fact, the yields on our capital are outperforming our forecasts, suggesting we could invest less while maintaining similar returns. We are always seeking more efficient capital spending to maximize returns, and that focus will remain unchanged. Regarding capital intensity, its downward trajectory is still on track. DISH has made significant progress. When we discussed the integration of DISH and Sprint, we anticipated some churn from Sprint, estimating a recurring revenue loss of $5 million to $10 million, which we expected DISH to offset and exceed over time. This transition involves some fluctuating ETL fees, which is occurring as expected. The Sprint churn is aligning with our projections, experiencing high ETLs this year before tapering off next year. DISH is accelerating its efforts, and we believe it will more than compensate for the $5 million to $10 million lost from Sprint churn with the existing and future business. Looking ahead, we see a very attractive opportunity for growth.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Michael Rollins from Citi.

Thank you and good morning. I have a strategic question. When considering the fiber portfolio and communications infrastructure more broadly, it seems that in this category, the size of the portfolio may not be as crucial as having the right local assets, which tend to drive sales. In contrast, other areas like data centers seem to benefit from being part of a larger portfolio due to increased cross-selling opportunities. How do you view fiber infrastructure in this context? Does it gain advantages from being part of a larger portfolio, or is success primarily dependent on having the right assets in the right locations? Additionally, how does this perspective shape your strategic goals for Uniti over the coming years?

Good morning, Michael. Scale is important in fiber, particularly on the wholesale side with a national network. Having a national presence puts you in a unique position among providers, enabling more substantial discussions with large carriers, data center providers, and hyperscalers, who require a national network. When we compare our national strategic accounts business today to a year or two ago, the transformation has been significant, allowing us to easily engage with hyperscalers. While I won't mention specific names, it's clear we are in a different category regarding these discussions, which opens up considerable business opportunities. Our leasing business is growing at rates of 10%, 15%, and 20% annually, yielding high margins and excellent returns. Furthermore, having a national network allows for more customized transactions and conversations. For instance, the recent lit backhaul contract we signed includes 1,100 sites, a number few can match with each of the carriers. With that many sites, along with available capital and the capability to deliver 10-gig services, we operate on a different level. Extending a lit backhaul contract from 2.5 years to eight years is significant, which is why we highlighted it. Such opportunities depend on having real scale. However, it's crucial to have high-quality dense metro fiber in select markets with low competition, strong demographics, and growth potential to succeed in fiber. Consequently, we are focusing on the metro aspect of our business. We pride ourselves on being a local partner with national scale. In markets like Birmingham, we have a strong local presence. We understand the permitting authorities, local businesses, terrain, building costs, and expansion opportunities. Success requires careful selection of metro markets for investment, maintaining 5% to 10% anchor yields, and ensuring a clear path for leasing. When you choose the right markets, numerous customer opportunities arise, including enterprises, schools, traditional wholesale, lit backhaul, dark fiber backhaul, and small cells. With the appropriate network and market, you can achieve great prospects for both anchor deals and lease-up while maintaining a healthy balance.

Thanks. And just one quick follow-up. What's the algorithm these days for the minimal capital intensity in fiber as a percent of revenue to replace churn and to keep that fiber revenue flat to organically growing over time?

We haven't disclosed that number, and I'm not sure if we ever have, but our maintenance CapEx is around 3% and our capital intensity on an aggregate basis is low. Our churn is very low, which we consider industry-leading at about 0.2%. We'll need to revisit that number, but I believe it's roughly around 10%, give or take a little bit.

Thank you.

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

Look to updating you further on future calls in Community Group and look forward to updating you further on future calls. Thank you for joining today.

This concludes today's conference call. Thank you for participating. You may now disconnect.