Earnings Call Transcript - UNIT Q4 2022

Operator, Operator

Welcome to Uniti Group's Fourth 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, 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-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.

Kenny Gunderman, CEO

Thank you. Good morning, everyone, and thank you for joining. Starting on slide three, I wanted to briefly cover our key accomplishments in 2022 and our priorities for 2023. I'm very pleased with how we executed on our disciplined growth plan throughout 2022. The growth of broadband continues to accelerate and is being fueled by fiber. Uniti's core IP backbone peaked at around 30 gigs in 2017 and grew to approximately 100 gigs just before the pandemic. As of last week, our IP backbone peaked at 300 gigs, a 10 times increase from just six years ago. We expect this acceleration to continue across both our IP and transport networks, especially given that three out of our four wireless carriers, where some of our largest consumers of capacity are just beginning to upgrade towers from 1-gig to 10-gig. As we said many times before, we do not have a lack of demand in our industry. However, profitable demand is key. In 2022, we had record levels of consolidated new bookings and gross installs, but as importantly, the bookings and installs were balanced between anchor and lease-up and wholesale and non-wholesale. Along with sub-100 day mean time to deliver on our installs and our industry-leading monthly churn of 0.2%, Uniti is demonstrating the outstanding economics of shared fiber infrastructure. Wholesale and enterprise recurring revenue were up 10% and 13%, respectively, in 2022 from the prior year, while dark fiber lease-up at Uniti Leasing was up over 50% 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. 2022 was also an important year with respect to positioning Uniti to control its own destiny. We recently completed two successful financings that pushed out our most meaningful debt maturities, while also providing additional liquidity to an increasingly positive free cash flow trajectory. Combined with our organic growth runway and our steady performance, we now have a growth plan that is virtually fully funded aside from potential future refinancings. As we turn to our priorities for 2023, many remain the same as they were in 2022. We're still focused on driving high margin recurring revenue through lease-up on both our metro fiber and on our long-haul routes to span the country. We'll selectively light more and more fiber with anchor economics with a clear path to lease up. We'll closely monitor and adapt to macroeconomic conditions and potential supply chain and labor challenges, and we remain confident we're in a good position to withstand any disruptions that may occur. As it relates to M&A, we'll continue to take a disciplined approach and do not expect any transactions in the immediate future given the current interest rate and macroeconomic environment. In the meantime, we're focused on delivering strong organic growth and operating results, while creating value for our stakeholders. Turning to Slide 4. Our strategy continues to focus on buying and building mission-critical fiber infrastructure and in turn, leasing that infrastructure to anchor customers as well as to additional lease-up customers, while driving cumulative cash yields well above anchor yields. This strategy has resulted in Uniti becoming the second largest independent fiber operator in the country. We're often asked what distinguishes Uniti from other facilities-based fiber operators, so I'd like to highlight a few. Many other sizable fiber companies were built through dozens of company acquisitions that come with integration challenges and some percentage of legacy revenue. This often leads to years of challenges on growth, elevated churn, and profitability. Conversely, Uniti has only acquired three meaningful operating companies in its history, which are now fully integrated and brought over no legacy services. However, through additional sale leaseback and other asset acquisitions, we've acquired over 100,000 fiber route miles that come with one or two anchor customers. Said differently, 75% of our network was acquired with no legacy services, no integration challenges, and substantial amounts of unused fiber for lease-up. As Slide 5 demonstrates, this substantially underutilized fiber network is helping drive our shared infrastructure economics. We're driving cumulative cash flow yields today of 23%, a more than threefold increase from the anchor yields on these projects. Slide 6 demonstrates the second distinguishing characteristic. The majority of our revenue is wholesale in nature, which comes with longer-term contracts, lower churn, and less required overhead. As a result, our business and underlying performance are less susceptible to macroeconomic conditions. The vast majority of these wholesale customers are large wireless providers, hyperscalers, and international and domestic carriers. These carriers are purchasing large pipes from Uniti to connect towers, small cells, data centers, fiber-to-the-home, and intercity pops, which further highlight that our business is diversified across numerous fiber use cases. These use cases are all on-ramps that are driving traffic into our core network. Turning to Slide 7, scale matters in fiber, especially with a wholesale-heavy business like ours. Having an owned national network is a meaningful competitive advantage for Uniti, especially given that it takes 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 US 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. 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 are wavelength services, which represent a $2 billion annual revenue opportunity today and are expected to grow 7% over the next several years. We're selectively lighting more and 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 signed a long-term contract with a large global Internet provider, offering long-haul dark fiber connectivity over 3,100 route miles to premier data centers located in 12 cities within the Central and Southeastern US. The total contract value of this deal was approximately $65 million, making it one of the largest customer contracts in Uniti's history. We expect these routes to be delivered throughout this year and next. As I mentioned earlier, our wholesale heavy model produces economics that are very attractive with high margin, passively managed revenue, virtually no churn, long-term contracts that routinely have escalators, and minimal CapEx requirements. Slide 8 demonstrates the third distinguishing characteristic of Uniti, which is 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 lease-up in nature and are substantially less capital intensive. Turning to Slide 9, our fourth distinguishing characteristic is that 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 owned and controlled dense metro fiber network, and we have no legacy services such as legacy voice or TDM. The majority of operational expenses within fiber businesses are employees and off-net fiber purchases because we are selling largely on-net products and services, and the majority of our employees, including sales, field techs, site acquisition, construction, maintenance, and others 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%. As a result of our consistent strong bookings activity, enterprise recurring revenue was up 15% during the quarter, while gross install MRR was up 30% from the prior year. Equally exciting, 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, CFO

Thank you, Kenny. Good morning, everyone. I'd like to begin by reviewing our fourth quarter and full year 2022 performance, followed by an overview of our 2023 outlook. As Kenny highlighted, 2022 was an outstanding year for Uniti from a performance perspective. Our bookings and growth installs have never been higher, and we expect these high levels to continue throughout 2023 as the demand for our product and service offerings remain strong. We also recently completed two refinancing transactions that effectively pushed out our significant near-term debt maturities by five years and added additional liquidity, fortifying our balance sheet and enhancing our ability to weather any financial market uncertainty that we'll cover in more detail in just a bit. Our 2023 outlook reflects these trends and the continued strength we're seeing in our fiber business today. Finally, I will end with additional commentary on our current balance sheet and capital structure. Please turn to slide 10, and I'll start with comments on our fourth quarter. We reported consolidated revenues of $284 million, consolidated adjusted EBITDA of $229 million, AFFO attributed to the common shareholders of $150 million, and AFFO per diluted common share of $0.44. Net income attributable to common shareholders for the quarter was approximately $41 million or $0.13 per diluted share, which includes a $24.5 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. Excluding an $8 million one-time non-cash adjustment in the fourth quarter of 2021 that related to the straight-line revenue associated with dark fiber IRU contracts and other assets we acquired from Windstream as part of the settlement agreement, revenue and adjusted EBITDA grew 3%, respectively, in the fourth quarter of 2022 compared to the prior year period. Accordingly, Uniti Leasing achieved an adjusted EBITDA margin of 97% for the quarter. Turning to slide 11, our growth capital investment program continues to provide positive results for Uniti. Over the past six years, our tenant has invested over $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 2,800 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 fourth quarter, Uniti Leasing deployed approximately $85 million towards growth capital investment initiatives, with the majority of the investments relating to the Windstream GCI program. These GCI investments added 1,950 route miles of fiber to Uniti's own network across several different markets. As of December 31, Uniti has invested approximately $544 million of capital to date under the GCI program with Windstream, adding around 15,450 route miles and 755,000 strand miles of fiber to our network. These investments will be added to the master lease at an 8% initial yield at the one-year anniversary of Uniti making such investments. 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 $44 million of annualized cash rent and increase the overall value of our network. At Uniti Fiber, we turned over 236 limp backhaul dark fiber and small cell sites for our wireless carriers across our Southeast footprint during the fourth quarter. These installs add annualized revenues of approximately $2.6 million. For the full year 2022, we installed over 1,100 lit backhaul, dark fiber, and small cell sites, adding approximately $12 million of annualized revenue. We currently have around 1,300 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 $12 million of annualized revenues. At Uniti Fiber, we reported revenues of $75 million and adjusted EBITDA of $32 million during the fourth quarter, achieving margins of 42%. Revenues were slightly lower than expected due to the timing of non-recurring equipment sales and installs, while adjusted EBITDA was above expectations due to lower-than-expected costs relating to the early termination of legacy spread sites. Uniti Fiber net success-based CapEx was $41 million in the fourth quarter and was higher than originally anticipated due to the timing of equipment purchases relating to double projects. Given the continued challenges affecting the industry supply chain and lengthy delivery times, we expedited the purchase of certain equipment during the quarter to ensure that we would meet the delivery timeframes of our customers. We also incurred $3 million of maintenance CapEx during the quarter. Please turn to slide 12, and I'll now cover our 2023 guidance. Our 2023 outlook includes the estimated impact from our recent convertible unsecured notes offerings and related redemptions. Our outlook excludes future acquisitions, capital market transactions, and any costs not specifically mentioned here. Actual results could differ materially from these forward-looking statements. Our full year outlook for 2023 includes the following for each segment; beginning with Uniti Leasing, we 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 include $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 expect to deploy $216 million of success-based CapEx at the midpoint of our guidance, of which $237 million relates to estimated Windstream GCI investments. Turning to slide 13, we expect Uniti Fiber to contribute $314 million of revenue at the midpoint with core recurring revenue expected to grow 6% from the prior year. Slide 14 further emphasizes this point as we expect our run rate monthly recurring revenue and Uniti Fiber to grow between 6% and 8% in 2023. This strong growth demonstrates our continued success in executing on our lease-up strategy that leverages our existing dense Southeast fiber footprint. As it relates to DISH, we saw strong levels of bookings throughout 2022, and as previously stated, the revenue impact will begin to be realized during 2023. Although we do expect continued healthy bookings from DISH in 2023, we expect they will come at a slower pace than in 2022. Core non-recurring revenue is expected to be slightly down from the prior year due to lower ETL fees in 2023 when compared to 2022, partially offset by higher equipment and install revenue. As you may recall, 2022 was a peak year for ETL fees due to Sprint-related churn. We expect ETL fees in 2023 to be approximately $15 million compared to $24 million last year. For full year 2023, we expect adjusted EBITDA at Uniti Fiber to be $125 million at the midpoint. Adjusted EBITDA based on core recurring revenue is expected to be up 5% from the prior year, while non-recurring adjusted EBITDA is expected to be lower due to higher equipment and install costs. Overall, we expect adjusted EBITDA margins at Uniti Fiber to be approximately 40% for the full year 2023. Net success-based CapEx for Uniti Fiber this year is expected to be $120 million at the midpoint of our guidance, a 10% decrease from levels in 2022. Turning to slide 15, for 2023, we expect full year AFFO to range between $1.36 and $1.43 per diluted common share with a midpoint of $1.39 per diluted share. AFFO in 2023 will be impacted by incremental interest and diluted shares relating to our recent convertible and secured note refinancing. Excluding the impact of those transactions, 2023 AFFO would have been $1.78 per diluted share. On a consolidated basis, we 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 $550 million, which includes a $21 million write-off of deferred financing costs and a $44 million early repayment premium in the first quarter of this year related to the redemption of our 7.875% senior unsecured notes due 2025. Corporate SG&A, excluding amounts allocated to our business segments, is expected to be approximately $32 million, including $7 million of stock-based compensation expense. We expect our weighted average diluted common shares outstanding for the full year 2023 to be around 291 million shares compared to 268 million shares in 2022, reflecting the full year impact of the incremental diluted shares relating to the accounting of the new 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. On slide 16, we have provided a tabular reconciliation of our full year 2022 results to our 2023 outlook, which summarizes the organic contribution from our core operations and the impact from recent financing activities. Turning now to our capital structure. During the fourth quarter, we issued $306.5 million of 7.5% convertible senior notes due December 2027, to repurchase approximately $207 million of our 4% exchangeable notes due 2024 at a discount. The initial conversion price of the convertible notes is approximately $7.29 per share, representing a premium of 20% to the closing price of the common stock of the company on the date of pricing. In connection with the convertible notes offering, Uniti entered into privately negotiated capped call transactions with certain financial institutions that effectively increased the conversion price to approximately $10.63 per share. On February 14, we closed on the issuance of $2.6 billion of 10.5% senior secured notes due February 2028. The proceeds from the offering will be used to redeem all of the outstanding 7.875% senior secured notes due 2025 and repay outstanding borrowings under the company's revolving credit facility. At year-end, we had approximately $356 million of combined unrestricted cash and cash equivalents and undrawn revolver capacity. As of today, we have essentially repaid all of our borrowings under our revolver and have almost $500 million of undrawn capacity under our facility. Our leverage ratio at year-end stood at 5.72 times based on net debt to last quarter annualized adjusted EBITDA. On February 23, our Board declared a dividend of $0.15 per share to stockholders of record on March 31, payable April 14. With that, I'll now turn the call back over to Kenny.

Kenny Gunderman, CEO

Thanks, Paul. Despite the current macroeconomic backdrop, we continue to prioritize investment in our core business. We currently have approximately $7 billion of revenue under contract with an average term remaining of eight years. Given the wholesale-heavy nature of our business, 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 are minimal, which results in a very cash flow-rich business over the mid- to long-term. As slide 17 illustrates, the investment from this cash flow will lead to a more sizable and valuable fiber business over the next several years. We also expect to be free cash flow positive by 2026 and generate cumulative free cash flow of over $1 billion within the five-year period ending in 2030, if we maintain our current dividend and approximate level of annual capital investment. This trajectory leads to substantial deleveraging, resulting in net leverage between 4 to 5 times and roughly doubling the size of our fiber business by 2030. Our fully-funded business plan, no significant near-term debt maturities, and long runway for profitable growth afford Uniti the ability to create value for our shareholders each day. With that, operator, we're now ready to take questions.

Operator, Operator

Certainly. One moment for our first question. Our first question comes from the line of Bora Lee from RBC. Your question, please.

Bora Lee, Analyst

Thank you for taking the call and the question. So given the current macro environment, are you seeing any changes in wholesale demand with some players stopping to shift from CapEx to OpEx?

Paul Bullington, CFO

Hey, Bora, not really. We're selling wholesale to the large wireless carriers, hyperscalers, and many significant international and domestic carriers. The spending patterns are all increasing, and the difference between whether they prioritize spending on capital versus operational expenses is very specific to each customer. In some instances, it also varies by route or market. However, I wouldn't say any of those observations are linked to the macro environment.

Kenny Gunderman, CEO

I'll also add that we are flexible in our terms with our customers. In addition to IRUs that require large upfront capital expenditures, we also offer monthly leasing and lit services that are suitable for those who prefer to add operating expenses rather than capital expenses in the short term. We have the capability to be flexible with our wholesale customers and provide services and contracts that align with their capital needs.

Bora Lee, Analyst

Right. As a follow-up, we've heard that companies in the communications infrastructure sector are experiencing longer decision-making times from customers, who are conducting more cost analyses or seeking additional internal approvals. What have you observed regarding the duration of customer decision-making?

Kenny Gunderman, CEO

Yes, we’ve heard some anecdotal evidence of that, particularly in the enterprise business. However, with our major wholesale customers, we haven’t observed any significant delays. There’s a strong initiative among our wireless carriers to upgrade to 10-gig, which is a capital-intensive endeavor. Notably, one carrier is pushing to expedite this process. Hyperscalers are acquiring substantial intercity capacity, and their demand for capacity, especially intercity, seems limitless. Therefore, we believe any purchasing decisions are not influenced by macroeconomic factors; they are more related to network planning and our usual decision-making processes.

Bora Lee, Analyst

Okay. And if I could just squeeze in one last one. Thank you for that long-term target slide, going into that a little bit. Can you provide some additional color on the revenue side, how you see the top, maybe top two or three drivers and how you see that revenue mix shifting over time? Thank you.

Kenny Gunderman, CEO

I will comment on it and then ask Paul for his input as well. We believed that the slide would be helpful to provide some data for people to reference. We are confident sharing this information because we see the business's growth trajectory continuing, as we've mentioned multiple times. We have a significant potential for profitable organic growth. Our goal of doubling the fiber business size or even better is certainly within reach. As I've indicated in our prepared remarks, we don't have any legacy services that hinder our growth or increase churn, unlike many carriers and infrastructure providers. When we consider our various segments, including dark fiber, lit fiber-to-the-tower, small cells, enterprise, e-rate, and government, all are experiencing growth. It's just a matter of the extent of that growth. Some segments are growing at mid-single digits; others are increasing at 10% to 20%. Looking a bit further ahead, we anticipate mid-single-digit blended top-line growth long-term, with variations among segments. The mix of our business will heavily focus on wholesale, which we believe offers the best economics. Our strategy is to drive good returns from wireless carriers, hyperscalers, and both international and domestic carriers. This approach allows us to remain agnostic and diversified across various fiber use cases. Trends such as 5G, mobile broadband, fixed wireless, fiber-to-the-home, intercity capacity, and data center connectivity all contribute to our growth, especially as we maintain our focus on wholesale. We plan to integrate a solid enterprise component to support optimal economics and leasing. We expect approximately 75% to 80% emphasis on wholesale, with the remainder on enterprise and government.

Paul Bullington, CFO

Yeah, I would agree with those comments, Kenny. I don't have a lot to add. I think you said those well. I think we expect the macro environment and the demand for bandwidth to continue to drive growth. We see that continuing going forward. And we're also a share taker in a lot of our markets, particularly our metro markets. So in addition to just overall demand growth, we expect to be a share taker in that to help drive our growth as well. So in the mix, we expect it to continue to come from, as Kenny just added, from all of our customer segments and tilted towards wholesale, but with a good contribution from enterprise and metro services.

Bora Lee, Analyst

Thank you both.

Operator, Operator

Thank you. Our next question comes from Shipra Pandey from Bank of America. Please go ahead with your question.

David Barden, Analyst

Hey, guys. Sorry, I dialed in as Shipra. It's David Barden, how are you? So I guess two questions, if I could, Kenny, one for you, one for Paul. I guess, Kenny, when I think about your comments about the immediate future and kind of M&A and where rates are for the time being and kind of the return profile that you've got in your organic harbor business as you describe it. Can you elaborate why being a REIT is still a good idea because it seems like when you look at that slide 17, by the mid-year 2030, after dividends, you've managed to skim about $1 billion of free cash flow out of the business. But that will be net of current course and speed more than $1 billion of dividends over that time. Arguably, if the returns are what we're seeing here on this page, it seems like being not a REIT and not paying a dividend and investing those dollars or delevering with those dollars, any of those uses would be better than the dividend use that you're kind of confined to today. So if you could kind of elaborate a little bit on why this is a good idea to keep doing it.

Kenny Gunderman, CEO

Hey, David. In response to your question about our status as a REIT, given the cash flow-heavy nature of our business, as highlighted in that slide, particularly when we become free cash flow positive, if we are not a REIT, we would face significant tax liabilities. One of the primary benefits of being a REIT is the tax shield it provides, which has always applied to us and will continue to do so as our cash flow increases in the coming years. Now, regarding the use of cash and how to best utilize that extra $1 billion, whether it’s through increasing dividends, reducing our leverage, or investing back into the business, I appreciate those questions. We're excited about having the flexibility to make those decisions. Moving forward, our capital allocation decisions will depend on the business's growth trajectory and our shareholders' preferences. It’s our goal to provide our board with options in these areas. Currently, being leveraged around 5.5 to 6 times is optimal for us. We’ve consistently been in this range while paying dividends and providing our shareholders with stable returns despite stock volatility. This current macro environment certainly highlights that pressure on yield stocks. However, we continue to deliver a steady return to our shareholders and aim to reach a point where we can increase our dividend and shift towards more of a dividend growth focus. At the same time, I value the opportunity to invest in our business. The returns we achieve, particularly with mid-single-digit yields from anchor customers helping finance our network expansion, are impressive. We see clear potential to grow leases above 10%, regularly hitting 20%. That’s compelling, yet we must balance chasing profitable growth with not overextending our organization. For instance, if we decided to invest an additional $100 million in CapEx next year, we could, because the growth opportunity exists. As Paul mentioned, we are gaining market share across nearly all our segments, with less than 1% in dark fiber and waves, and under 5% in most enterprise markets. The growth potential is substantial, but pursuing it too aggressively could risk our performance with customers, so disciplined growth remains a core focus of ours, ensuring we pursue good business at a measured pace. All these considerations present good challenges for us. Fundamentally, being a REIT continues to be advantageous because of the tax benefits, which I expect will persist. However, we remain open to exploring different capital allocation strategies and organizational structures, ensuring we consider various approaches.

Paul Bullington, CFO

Yes. Dave, I'll take your second question. I mean the short answer to your question is yes, you're exactly right. You're interpreting that slide correctly. So, we do have a clear path to free cash flow positive by the end of 2025. Part of that is continuing to grow the business organically and driving towards lower capital intensity at Uniti Fiber and more low CapEx large deals on the national network at Uniti Leasing. The other piece of that is not depending on operational execution at all. It's really kind of baked into the cake as part of the Windstream settlement. So, those Windstream settlement payments fall off in 2025 and then GCI continues – our GCI funding commitment continues to step down over time, while the GCI revenue from the previous GCI investments continues to step up. So, those two pieces are more just a factor of time. So, part of it is operational execution and part of it is just sort of baked into the cake of those future commitments.

David Barden, Analyst

Perfect. And just one last thing, if I could, Paul, just on kind of your experience through the refinancing process, you guys in Windstream and Windstream's owners have had back and forth over the last year or so for various sundry reasons. And yet, irrespective of that, it seems like the refinancing went pretty smoothly. I was wondering if you could kind of talk a little bit about how relevant, if at all relevant, the backward-looking wrestling with Windstream owners and/or the future kind of lease renewal period came up in the process of nailing down this runway that you now have over the next five years?

Paul Bullington, CFO

Yes, I’m happy to discuss that. The refinancing was essential for our business, and we were very pleased with how it was executed, especially given the tough conditions in the capital market. It was significantly oversubscribed and marked the largest book order for a bond deal in Uniti's history. This was very encouraging for our management team and the board, showing strong confidence in our future plans. We saw a high level of interest from a diverse group of investors, and we've participated in similar bond issuances before, which we found gratifying. Due to this demand, we were able to price at the tight end of the range and increase the issuance to a full $2.6 billion, which we believe is beneficial for the business. Regarding the renewal rent discussion, it did not play a role in this process. In fact, during our marketing of the deal, we did not receive any questions about renewal rent from investors. While it’s clearly a known issue, it did not significantly impact the deal's completion. I think the strong demand and oversubscription reflect the confidence investors have in our upcoming plans.

Rob Palmisano, Analyst

Hey, guys. This is Rob on for Frank. So you kind of touched on this first part earlier, but what do you think of the outlook for network expansion? And do you guys think that Cogent's acquisition of the Sprint network could potentially impact you guys if Cogent decides to drop pricing on wavelengths and dark fiber? Thank you.

Kenny Gunderman, CEO

Good morning, Rob. We have a lot of respect for Cogent and Dave Schaeffer. He's a great operator, and they're a good customer. We're very familiar with the asset they're acquiring and are definitely paying attention to that. Frankly, it's a bit of an affirmation of our strategy because it's moving more towards facilities-based solutions and long-haul transport dark fiber and wavelengths. We appreciate this validation from an operator we respect. The risk of competition is always present since telecom is a competitive industry. We're continually competing with customers in some markets, while in others, they're just customers. In the long-haul transport space, there are really only a few competitors: Zayo, Lumen, us, and now Cogent. As Paul mentioned, we're taking market share in all our businesses and are not concerned about Cogent or anyone else taking our business in dark fiber wavelengths, as that segment is currently growing for us. We maintain a sub-1% market share, so there’s more potential for us than risk. Having another competitor reinforces our strategy, and there's ample opportunity for both Cogent and Uniti to grow and share the market. Lastly, our national network is broader than the one being acquired, which enhances our ability to create network solutions, particularly for hyperscalers and wireless carriers. Our national network consists of around 135,000 route miles, built from our acquisitions, including about 30 routes from Lumen a few years ago. This extensive network allows us to offer more comprehensive solutions, and while we're aware of the added competition, we remain focused on growing our business effectively and profitably.

Rob Palmisano, Analyst

Great. Thank you, guys.

Operator, Operator

Thank you. And 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.

Kenny Gunderman, CEO

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

Operator, Operator

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