NASDAQ:UNIT Uniti Group Q4 2024 Earnings Report $4.76 -0.04 (-0.83%) Closing price 04/25/2025 04:00 PM EasternExtended Trading$4.78 +0.02 (+0.32%) As of 04/25/2025 07:57 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Uniti Group EPS ResultsActual EPS$0.35Consensus EPS $0.33Beat/MissBeat by +$0.02One Year Ago EPSN/AUniti Group Revenue ResultsActual Revenue$293.32 millionExpected Revenue$294.59 millionBeat/MissMissed by -$1.27 millionYoY Revenue GrowthN/AUniti Group Announcement DetailsQuarterQ4 2024Date2/21/2025TimeBefore Market OpensConference Call DateFriday, February 21, 2025Conference Call Time8:30AM ETUpcoming EarningsUniti Group's Q1 2025 earnings is scheduled for Tuesday, May 6, 2025, with a conference call scheduled at 8:30 AM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Annual Report (10-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Uniti Group Q4 2024 Earnings Call TranscriptProvided by QuartrFebruary 21, 2025 ShareLink copied to clipboard.PresentationSkip to Participants Operator00:00:00Good morning, and welcome to today's conference call to discuss Uniti's Fourth Quarter and Full Year twenty twenty four Earnings Results. My name is Gigi, and I'll be your operator for today. Today's call is being recorded, and a webcast will be available on the company's Investor Relations website, investor.unity.com, beginning today and will remain available for three sixty five days. At this time, all participants are in a listen only mode. Operator00:00:29Participants on the call will have the opportunity to ask questions following the company's prepared comments. It is now my pleasure to introduce Bill D'Tullio, Uniti's Senior Vice President of Investor Relations and Treasurer. Please begin. Bill DiTullioVice President of Finance & Investor Relations at Uniti Group00:00:47Good morning, everyone, and thank you for joining today's conference call to discuss Uniti's fourth quarter and full year twenty twenty four results. Speaking on the call today will be Kenny Gunderman, our CEO and Paul Bullington, Uniti's CFO. Before we get started, I would like to quickly cover our Safe Harbor statement. Please note that today's remarks may contain forward looking statements. These statements include, but are not limited to, statements about our 2025 outlook expectations regarding lease above our network demand trends business strategies growth prospects the benefits of the proposed transaction between Uniti and Windstream including future financial and operating results of either company or the combined company statements related to the expected timing of the completion of the transaction and combined company plans and other statements that are not historical facts. Bill DiTullioVice President of Finance & Investor Relations at Uniti Group00:01:37Please also note that Uniti and Windstream, through the entity that will be the combined parent company following the merger, have filed a Form S-four registration statement with the SEC, which was declared effective by the SEC on 02/12/2025, and includes a definitive proxy statement and prospectus that was mailed to Uniti stockholders on or about 02/18/2025, seeking their approval of the transaction related proposals. Investors are urged to read the definitive proxy statement and perspectives as it contains important information about the transaction. You may find information on how to request these documents in the presentation that accompanies this call. Numerous factors could cause actual results to differ materially from those described in the forward looking statements. For more information on those factors, please see the section titled Forward Looking Statements in the accompanying presentation and the Risk Factors section of the filed Form S-four. Bill DiTullioVice President of Finance & Investor Relations at Uniti Group00:02:34With that, I would now like to turn the call over to Kenny. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:02:37Thanks, Bill. Good morning, everyone, and thank you for joining. 2024 was the most consequential year in Uniti's history. We delivered on our promises and executed exceptionally well. The strategic and balance sheet moves we made during the year have future proofed our business and positioned us to create real shareholder value. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:02:56Our strategic recurring revenue, adjusted EBITDA and consolidated bookings growth of approximately 5%, eight % and twenty seven % respectively, not only underscore our strong execution, but the continued strength and the demand for mission critical communications fiber. Our balance sheet and liquidity remains strong and we're proud to be the first commercial fiber provider to access the ABS market with resounding success. We believe the ABS market will be a terrific value accretive financing tool for us going forward. In addition, our current business plan is fully funded and in 2025 we expect Uniti will generate positive free cash flow. And of course, we achieved our goal of positioning ourselves strategically to control our own destiny with our announced merger with Windstream. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:03:42Our often misunderstood MLA relationship will be simplified and with nine months of hindsight, the approximately five times EBITDA valuation paid looks increasingly attractive for our shareholders. The new Unity will be extremely well positioned to benefit from the increasing demand from generative AI and of course the convergence team driving strategic value for Fiber to the Home. Our priorities for 2025 will not change materially. We will continue to focus on best in class execution and disciplined top line growth of mid single digits and high single digit adjusted EBITDA growth. As Paul will discuss later, we also expect to fully fund the business plan of new Unity using ABS and other tools. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:04:22Lastly, we'll have a substantial focus on building new fiber, especially in the kinetic footprint. For example, Windstream announced yesterday that they expect to roughly double the number of targeted homes passed with fiber for 2025 over 2024. As you might recall, when we announced our merger with Windstream, we guided to an initial target of approximately 2,900,000 homes. By the end of twenty twenty five, we expect to reach 2,000,000 homes, which is two years earlier than originally expected. As it relates to the pending merger with Windstream, we've received PUC approvals from 16 of the 18 jurisdictions requiring them, including Washington, D. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:05:00C. And the shareholder vote to approve the merger has been set for April 2. I encourage all shareholders to vote at the upcoming special meeting. Based on where things stand today, we remain on track to close the transaction in the second half of this year and are optimistic we could close as early as July. Moving to Slide six, I could not be more pleased with our growth trajectory and strategy of being a pure play fiber provider in Tier two and three markets. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:05:27In the past several years, we've demonstrated predictable solid mid single digit revenue growth and accelerated EBITDA growth as we hit real leverage in the business with a heavy focus on lease up of our existing infrastructure. All the while we're achieving this growth, our capital intensity continues to come down. As slides seven and eight highlight, in order for capital intensity to come down, we need to continue showing steady predictable new sales. While we strive to grow bookings in correlation with our ever expanding TAM, even with flat bookings and our industry leading monthly churn of 0.2%, we're still able to achieve mid single digit top line growth. In addition to steady bookings, capital intensity has continued to decline for other reasons. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:06:11First, in 2018 and 2019, we undertook a heavy build cycle of new fiber largely in metro markets throughout the Southeast. Our capital intensity peaked at over 50%, but we assured investors that once past that build phase, we began leasing up those assets with attractive incremental cash flow yields and capital intensity would drop. We've delivered on that promise. Average paybacks on capital deployed have declined and that theme should continue, especially as we remain disciplined in the approach of targeting 5% to 10% anchor cash flow yields with a lease up strategy that is currently targeting 27% on a blended basis. As an aside, we expect to have a similar robust three to four year build cycle at Kinetic, but we'll likewise see capital intensity decline materially after the build is complete. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:07:01Finally, as we foreshadowed, NRCs continue to creep higher offsetting capital intensity and we expect this trend to continue for the foreseeable future. As I mentioned earlier, we had another strong quarter of new bookings. We previously stated that 2024 was expected to be a down year for wireless, but we actually ended the year flattish to 2023 and are encouraged by the activity we have seen so far in early twenty twenty five. Flat wireless bookings were more than offset, however, by demand from other customers, including fiber to the home carriers. The number of bookings Unity saw relating to fiber to the home carriers increased threefold in 2023 versus 2022, and we saw further growth in 2024. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:07:45As we previously mentioned, the demand from hyperscalers continues to represent a meaningful part of bookings. While hyperscaler bookings were very small in 2023, in just a year's time, they now represent about 20% of our full year bookings. And we're confident this demand will continue. In fact, in addition to new deals, we're now seeing hyperscalers come back and lease more fiber from us on the same routes they lease from us originally. Despite the year in big activity, only two of our top 20 customers in 2024 were hyperscalers. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:08:18This demonstrates that we have a well diversified customer base and that our business plan is not reliant upon targeting hyperscalers or any one particular type of customers for that matter. Moving to Slide nine, hyperscalers are spending approximately $300,000,000,000 annually and a meaningful percentage of that is being spent on digital infrastructure. We estimate the digital infrastructure TAM today to be around $40,000,000,000 with roughly $15,000,000,000 being spent on fiber and network investments. In five years, we see the TAM for both of these areas growing by three to five times creating an attractive opportunity for Unity. We also estimate that about 80% of the generative AI spend today is related to building large learning models for AI training purposes. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:09:05We're pursuing and have won fiber infrastructure bills relating to training, but only where the transactions strategically expand our network at attractive economics. Said differently, we're approaching hyperscaler deals during the learning phase as anchor deals with the expectation for material lease up in the future. In fact, although it is still early, we're very pleased with the progress we've made to date as the combined yields of our hyperscaler deals, inclusive of lease up, are already close to 20%. As I've said numerous times before, we're most excited about the inference phase of AI, which today represents a minority of the spin, but in a few years is expected to be approximately 80% of the TAM. During the inference phase, users of AI will need distributed low latency, high bandwidth connectivity and our network is well positioned to benefit from those trends. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:09:56During this phase, we expect to see increasing MRR associated from all high bandwidth users and lease up continued lease up on the builds we're undertaking during the learning phase. As mentioned earlier, we're already starting to see hyperscalers come back to us for additional fiber on initial builds. In short, Uniti is executing well on our core strategy of providing mission critical fiber and we're well positioned for the future. With that, I'll turn the call over to Paul. Paul BullingtonCFO & Treasurer at Uniti Group00:10:24Thanks, Kenny. I'd like to begin by reviewing our fourth quarter performance followed by an overview of our 2025 outlook. Uniti had another year of strong performance in 2024 with our core recurring strategic fiber business growing approximately 5%, while consolidated net success based capital intensity continues to decline ending the year at 27. This all resulted in our full year 2024 consolidated revenue, adjusted EBITDA and AFFO being in line with our prior outlook. As I'll cover in more detail in just a bit, our 2025 outlook reflects the strong tailwinds we continue to see in our recurring business as well as the estimated impact from our recent ABS financing and partial redemption of the 10.5% secured notes. Paul BullingtonCFO & Treasurer at Uniti Group00:11:11Finally, I'll end with additional commentary on our current balance sheet and capital structure. We've also provided Windstream's fourth quarter financial information in an eight K filed with the SEC earlier this morning. Please turn to Slide 10, and I'll start with comments on our fourth quarter. We reported consolidated revenues of $293,000,000 consolidated adjusted EBITDA of $239,000,000 AFFO attributed to common shareholders of $92,000,000 and AFFO per diluted common share of $0.35 Combined gross capital expenditures for both Uniti Fiber and Uniti Leasing were $24,300,000 during the fourth quarter, which was offset by upfront customer payments totaling $23,600,000 resulting in net success based CapEx of only $700,000 for the quarter. As I mentioned last quarter, there continue to be a number of encouraging trends and bookings that are driving this capital efficiency, including our continued focus on lease up and a higher mix of hyperscaler deals that generally come with higher NRCs. Paul BullingtonCFO & Treasurer at Uniti Group00:12:17At Uniti Leasing, we reported segment revenues of $222,000,000 and adjusted EBITDA of $214,000,000 representing an adjusted EBITDA margin of 97% for the quarter. At Uniti Fiber, we reported revenues of $72,000,000 and adjusted EBITDA of $31,000,000 during the fourth quarter, resulting in an adjusted EBITDA margin of 43%. As I alluded to earlier, Slide 11 shows that our 2024 results were in line with our original 2024 guidance range provided early last year. Reported AFFO per share was lower than our original guidance due to the incremental interest from the $300,000,000 add on to our secured notes that was completed back in May and was not contemplated in our original outlook for 2024. Turning to slide 12. Paul BullingtonCFO & Treasurer at Uniti Group00:13:08Our growth capital investment program continues to provide positive results for Uniti. And given our pending merger with Windstream, I wanted to highlight a key point which I believe the market is under appreciating. Kinetic and Uniti have invested a substantial amount of capital in the network with almost 2,500,000,000 invested since 2015. These historical investments play a critical role in enabling Kinetic's industry leading Fiber to the Home per passing cost. While we estimate that backhaul equates to roughly 20% of the total cost of building fiber to the home for others, Kinetic has previously absorbed much of this cost having already built fiber to roughly 95% of its DSlam nodes. Paul BullingtonCFO & Treasurer at Uniti Group00:13:48Please turn to Slide 13 and I'll now cover our 2025 guidance. Our 2025 outlook includes the estimated impact from the recent ABS financing and partial redemption of the 10.5% senior secured notes. Our outlook excludes any impact from the expected merger with Windstream, future acquisitions, capital market transactions and future transaction related and other costs not mentioned herein. Actual results could differ materially from these forward looking statements. Beginning with Uniti Leasing, we expect revenues and adjusted EBITDA to be $9.00 $2,000,000 and $872,000,000 respectively at the midpoint. Paul BullingtonCFO & Treasurer at Uniti Group00:14:26We expect to deploy $185,000,000 of success based CapEx at the midpoint of our guidance, of which $175,000,000 relates to Windstream GCI investments. We also expect the full $175,000,000 of GCI investments for 2025 will be made in the first quarter. At Uniti Fiber, we expect revenues and adjusted EBITDA to be $3.00 $4,000,000 and $125,000,000 respectively at the midpoint for full year 2025, representing an EBITDA margin of approximately 41%. Net success based CapEx for Uniti Fiber this year is expected to be $85,000,000 at the midpoint of our guidance and represents a capital intensity of 28%. As a result of the strong financial performance and declining capital intensity, stand alone Uniti is expected to be free cash flow positive on a consolidated basis in 2025. Paul BullingtonCFO & Treasurer at Uniti Group00:15:17We expect full year AFFO to range between 1.4 and $1.47 per diluted common share with a midpoint of $1.43 per diluted share, representing a 6% increase from the prior year. Slide 14 provides a comparison of our 2025 outlook ranges to 2024 actuals. As a reminder, guidance ranges for key components of our outlook are included in the appendix to our earnings presentation. At year end, we had approximately $656,000,000 of combined unrestricted cash and cash equivalents and undrawn revolver capacity. Our leverage ratio was 5.8 times based on net debt to fourth quarter twenty twenty four annualized adjusted EBITDA, excluding the debt and net contributions from the ABS loan facility. Paul BullingtonCFO & Treasurer at Uniti Group00:16:03Slide 15 illustrates how Uniti's cost of capital has improved significantly over the past two years. If you go back to this time two years ago when we launched our 10.5% secured notes offering, our secured and unsecured debt was yielding over 12%. Fast forward to today and our debt is currently yielding around 7.5%, a 500 basis point improvement in just two years. As a result, we've taken an opportunistic approach to strengthening our combined balance sheet and we'll continue to look for opportunities across all of the debt markets to which we have access. Most recently, as Kenny mentioned, we successfully completed our inaugural ABS transaction at a blended coupon of less than 6.5. Paul BullingtonCFO & Treasurer at Uniti Group00:16:44This transaction provided additional capital that we used to redeem a portion of those 10.5% notes at an attractive premium. This redemption, along with financing activities conducted by Windstream last year, successfully retires or extends a meaningful portion of our combined debt that was set to mature in 2028. Regarding ABS, we continue to view that market as an attractive source of financing that complements our existing capital structure well, And we will continue to evaluate further opportunities to expand our current program. To that end, we believe that the potential incremental ABS capacity on our fiber assets at Uniti and the potential for ABS on the Kinetic assets represents a $1,000,000,000 plus near term opportunity for the combined company with considerable incremental capacity potential above that over time. On slide 16, we provided a 2025 pro form a view of revenue and adjusted EBITDA for new Uniti by each segment we expect to report on post close. Paul BullingtonCFO & Treasurer at Uniti Group00:17:43Both Kinetic and fiber infrastructure consist of a highly predictable core recurring revenue base that continues to grow and yield attractive margins. As a reminder, our Fiber to the Home platform will continue to be branded as Kinetic. Fiber infrastructure will include our current Unity Fiber and Unity Leasing segments, along with the Windstream Wholesale segment, all of which are highly complementary and will combine to create a premier fiber infrastructure company with both national and deep regional capabilities as well as a fiber network that is predominantly owned and operated. Going forward, as we continue to transition away from legacy services such as Windstream TDM services, we continue to expect the Kinetic and Fiber Infrastructure segments to realize low to mid single digit top line growth with an improving margin profile. With that, I'll now turn the call back over to Kenny. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:18:35Thanks, Paul. Slide 18 showcases the reach of new Unity's insurgent fiber network, extending our successful strategy of targeting Tier two and three markets for wholesale and enterprise now into residential fiber to the home. Archer North is building fiber first in less competitive markets giving us the right to win for many years into the future. Including connected buildings, fiber to the tower and small cell connections, connected pops and data centers and the 4,400,000 total homes within Kinetic's current footprint, Uniti will have the potential to reach over 5,000,000 connected on ramps in largely unique locations, each driving increasing amounts of bandwidth onto our owned wholesale network. Slide 19 highlights some of the benefits of bringing Uniti and Windstream together. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:19:22At Uniti, we've been able to drive attractive financial results in large part because of our fully owned fiber network and associated owners' economics. Our combination with Windstream not only extends our fiber network materially, but will bring large parts of Windstream's business on net immediately with a four year plan to achieve virtually 100% on net. As such, with owners' economics and our same disciplined growth strategy, we will eventually see similar economic trends in Windstream's business, including mid single digit revenue growth, growing EBITDA and declining capital intensity. A big part of moving Windstream on net is transitioning Kinetic off of legacy based copper systems and onto fiber. As mentioned earlier, by the end of twenty twenty five, we expect to have converted about 2,000,000 of Kinetics four point four million homes to fiber. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:20:09And And by 2029, we expect to have built fiber to between 3,000,000 to 3,500,000 homes. Lastly, we've aggressively managed out of legacy services at Unity and plan to continue that strategy at the combined new Unity. Our ability to address the burgeoning hyperscaler opportunities is going to be enhanced as well. Windstream's wholesale network is highly complementary to ours on key routes and Windstream's largely lit waves product capabilities are additive to our strong dark fiber portfolio. On a combined basis, we'll be able to sell a full product suite and immediately begin selling into an expanded customer base, given that Windstream has an incremental 40 different MLAs with hyperscalers to complement Unity's current count of only four. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:20:55Finally, as we mentioned previously, we believe the real opportunity with generative AI is when the inference phase begins in earnest. Earnest. With a dramatic increase in distributed endpoints coming with our Windstream combination, our ability to provide enhanced broadband connectivity with low latency increases materially. We remain committed to making progress on numerous key initiatives between signing and closing of our transaction. First, both companies continue to execute well and we continue to provide a unified investor relations outreach to help investors understand the new unity. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:21:28Next, we're excited to have completed the simplification of our new pro form a balance sheet at closing, thus paving the way to roll out our accelerated and expanded Fiber to the Home plan. We're also actively working with Kinetic on an integration plan to achieve our synergy goals. We expect to receive shareholder approval in April and after that we anticipate providing greater clarity on our ongoing plan focusing primarily on the holistic kinetic build plan, but also other key strategic initiatives. Let me close by restating how excited we are for our pending merger with Windstream. The new unit is at the epicenter of the growing conversions theme highlighting substantial strategic value of Kinetic and its scaled fiber to the home platform. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:22:12Our fiber infrastructure business is uniquely positioned to benefit from the explosion in broadband demand in general, including the demand being fueled by hyperscalers. With that, we'd be happy to take your questions. Operator00:22:26Thank you. Our first question comes from the line of Greg Williams from TD Cowen. Greg WilliamsDirector - Equity Research at TD Cowen00:22:52Great. Thanks for taking my questions. Kenny, I was just wondering on Slide nine, I was super helpful about your excitement for the inference phase. Just kind of curious about the timing of that and the opportunity of inference in Tier two and Tier three markets because there's a thought that inference is really going to be in the availability zones in major metro markets. Just trying to gauge how you're going to win in the smaller tier two, two, three markets for inference. Greg WilliamsDirector - Equity Research at TD Cowen00:23:17You did mention if Windstream is in four d markets and maybe the opportunities there. Second question is on just the AI bidding environment. How rational is the bidding environment with your competitors at the RFP table? I mean, you have disciplined healthy yields, but on the deals you don't win, do you suspect competitors are taking lower yields? Thanks. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:23:40Good morning, Greg. All good questions. Let me make sure I hit them all. On the Empress phase, yes, I think it's already started. Honestly, as we said, roughly 20% to 25% of the spend today is related to that. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:23:53And we think that's going to grow. We're saying in our slide that by 02/1930, that will flip to 80% inference and we think that will just gradually increase to that number over time. I think things like and there's a tremendous amount of dollars being spent on innovation, whether it's from the big tech companies in The U. S. Or frankly around the world. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:24:15There's just billions of dollars being invested by nation states and by various technology companies, obviously, DeepSeq being an example of that, all of which we think just accelerates the proliferation of AI. So I don't think it's going to take five years for us to get to that 80% spend on inference, but that's what we're putting on the paper. To your question about Tier two and three markets versus Tier one, it's a recurring theme that our markets tend to be fast followers on some of the themes, whether it's going back to the wireless days of getting good cellular coverage and then eventually four gs and five gs, they started in the major metros and then hit our markets. And I don't think that's going to be any different for inference, because I do think there's got to be more investment made to push AI out to those regions. But the flip side of that has always been true of us also, which is that's okay. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:25:19We're getting there first to those markets and first to those regions with our fiber. So that when the demand does come, we're there and we've been able to build generally build moats around those markets and will capture our fair share or a disproportionate amount of that demand when the time comes. So we're excited about that. And to your comment about the 40 wind stream markets from our prepared remarks, what I was actually referring to is 40 different customer relationships supported by existing MLAs with hyperscalers, which is really important. And at Unity, we only have four and we're developing more and more of those. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:26:01But even with that those four MLAs, we're driving the substantial demand that we talked about in our prepared remarks. But and so when you on a combined basis, when you take that four and expand it to 44, having those existing relationships and those existing agreements in place cuts off a lot of negotiating time. Those MLAs take six, nine, in some cases twelve months to get in place. And so really helps accelerate our sales cycle. So that's a little bit independent of your inference point, but I just wanted to get that out there because maybe my prepared remarks weren't clear enough on that point. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:26:38But we're very excited about that, about the combination with Lindstrom wholesale. And look, on your question about the rational spending, it's a great question because we've definitely seen periods of time in the fiber business where irrational capital had pushed yields down. And so we have always stayed true to our 5% to 10% anchor yields with a really clear plan to lease up on top of that. And as I said in my prepared remarks, we're already seeing the early returns of that strategy in our hyperscaler deals. So over the past twelve, eighteen months of building these new hyperscaler deals, we've never given an exact yield for the anchor deals, but we've said they tend to be at the high end of that anchor range, if not above. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:27:30But regardless, on a blended basis with those initial economics plus lease up that we're already seeing, we're close to 20% yields on those deals. And so very excited about the future there and very excited about building more of these large infrastructure deals for hyperscalers to get the infrastructure further into our markets to set up for that inference phase. The competitive environment so far to the heart of your question, Greg, we think has been rational. I can probably count on less than one hand the number of deals that we have lost at Unity that we actually bid for. And I suspect that's because we were undercut on price perhaps. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:28:17We don't know that definitively. But in reality, where we're really going for new business, we've got good enough customer relationships and we've got network in the right places and we've got a track record with for executing with the various hyperscalers that we tend to win what we go after. And we're winning at economics that are good for us and for our hyperscaler customers. So all that to say, so far so good on the rational rationality of the market approaching these spends or at least in our patch of the sandbox. Greg WilliamsDirector - Equity Research at TD Cowen00:28:52Great. Thank you. Operator00:28:55Thank you. One moment for our next question. Our next question comes from the line of Frank Louthan from Raymond James and Associates. Frank LouthanManaging Director at Raymond James Financial00:29:09All right, great. Thank you. So a couple of quick things. So you said you're going to rely on ABS funding largely going forward. Can you give us what's an optimal mix that we can expect for the combined business for ABS versus other debt instruments? Frank LouthanManaging Director at Raymond James Financial00:29:24And then you mentioned I think you mentioned the GCI bill is compressed and you're going to this into Q1, you're going to reach 2,000,000 homes. Can you frame that in terms of the number of homes you expect to build? And then where will that end up with as far as the subscriber adds? Are you focusing more on the construction and a little less on the marketing this year? Or will that go in lockstep? Frank LouthanManaging Director at Raymond James Financial00:29:44And should we see an equivalent lift in the subs for the year? Thanks. Paul BullingtonCFO & Treasurer at Uniti Group00:29:51Hey, Frank, this is Paul. I'll take your first question on ABS and maybe Kenny will take your second question on the kinetic strategy for the year. But Frank, I think it's hard to box us into what I think is the optimal mix of ABS versus other more traditional debt that is at least in terms of Uniti's capital structure historically. We do think that we do have an appetite for more ABS. We think that the cost of that capital, the leverage profile of that in terms of the assets that we move into an ABS type facility, we think is complementary to that and really enhances our cost of capital and the overall healthiness of our balance sheet. Paul BullingtonCFO & Treasurer at Uniti Group00:30:48I think over time, so I do expect it to grow. I think over time, the optimal mix is we're going to stay open to adjusting with how the market moves on that. I think if ABS proves to be a lower cost of capital, more attractive source and that market continues to have a large appetite for debt. I think you'll see us do more, but there are certainly times where the high yield markets and other markets have been highly attractive as well, particularly the unsecured side of the market, which hasn't been open for a lot of high yield providers for a few years, but is opening back up now in terms of the unsecured market, which we'd like to make sure we have a healthy mix of that in our capital structure as well. So not really answering your question in terms of an exact percentage, but I think we'd like to add more and we're going to continue to kind of move where the market says our best opportunity is for managing our capital structure to the lowest cost of capital on a go forward basis. Frank LouthanManaging Director at Raymond James Financial00:31:58Okay. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:32:01Frank, good morning. On your second question, so in 2024, Windstream built about 170,000 new homes. That seems like a low number, but in reality, it was building to a lot of the subsidized homes with RDOF and PPP. And so those are longer builds, and so the number just is lower for that reason. But it set us up for a substantially higher number in 2025 as we focus on more strategic builds, which are the non subsidized builds. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:32:36So in anticipation of our transaction closing, We're excited and Windstream announced yesterday and we have it in our materials today, but the Kinetics is going to build around 325,000 homes this year. So almost doubling what was built last year. And we think that number can grow over time. And as we said in the prepared remarks, we think ultimately we can get to 3,000,000 to 3,500,000 homes economically in the footprint. And by the end of twenty twenty five, as you said, we should be at around 2,000,000 homes, which if you remember was actually just exceeds the original build target that Windstream had put out there previous to our combination. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:33:23So we're excited that that original plan is going to be built by the end of twenty twenty five, '2 years ahead of the original plan. And so we look, I think the footprint has a tremendous amount of opportunity in it. Again, it's a relatively less urban footprint Tier two and Tier three markets. And so overbuilders have continued to stay at bay in the footprint. With that said, we don't want to let any grass grow and we want to get the strategic markets built ASAP. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:33:56And then of course there's the beat opportunity out there to reach areas of the footprint that wouldn't be economical without some sort of subsidy. So we're excited about the strategic opportunity plus the subsidized opportunity around the edges that's really going to get us to substantial fiber coverage in the footprint. And look, fiber subs will come. Fiber subs are highly correlated to obviously building fiber to the homes. And to your point, we're definitely going to stay focused on building and the go to market and marketing at the same time. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:34:33There's not going to be those are neck and neck from a priority point of view. And as Windstream has said publicly and we've reiterated, in the past twelve months, past eighteen months, there's been a substantial improvement in the initial penetration levels in the ladder built cohorts. In the 25% to 30% range for initial penetration, which is terrific. And we expect to continue that focus going forward. We've got some nice enhancements to the plan that we're preparing to roll out. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:35:08But we're excited about the progress thus far. And there's the opportunity to go back to those original cohorts where the penetration levels were a little bit lower initially. And we're now starting to see with some of the more enhanced local market presence and digital marketing that those penetration levels are also coming up. So a lot of growth potential. It's exciting to see Kinetic being a share taker. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:35:35And we don't see that changing anytime in the next number of years. Paul BullingtonCFO & Treasurer at Uniti Group00:35:41And Frank, I'll just add just in terms of the timing of GCI. The timing of that kind of all being compressed into the first quarter of this year is was more a function of just the mechanics of GCI than necessarily correlated to sort of the Windstream '20 '20 '5 accelerated build plan. So if you recall back to last year, we maxed out GCI about midyear, about July of last year. And so it hasn't been Windstream hasn't had the ability to submit for GCI reimbursements since last July. So they've got a backlog that then becomes eligible in the first quarter. Paul BullingtonCFO & Treasurer at Uniti Group00:36:23So it's really a little bit more function of the declining GCI investment coming down from $250,000,000 plus to now $175,000,000 in 2025. Frank LouthanManaging Director at Raymond James Financial00:36:39Great. That's really helpful. Thank you. Operator00:36:42Thank you. Our next question comes from the line of Bora Lee from RBC Capital Markets. Bora LeeVice President at RBC Capital Markets00:37:19Good morning. Thanks for taking the questions. So I guess first of all, I was wondering how have the more recent needs of the hyperscalers kind of changed the way you think about how and where you build fiber in terms of the amount of fiber you deploy, geography, number of IOAs required and so on. Just curious high level your thoughts there. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:37:45Good morning, Bora. Yes, in short, it certainly has changed the way we've approached new builds. And in a nutshell, the amount of capacity needed from a strand count perspective, empty conduits, excess conduits has all increased dramatically. I think I mentioned in a previous which is terrific, and I think I mentioned previously that we were selling six to 12 strands to hyperscalers as recently as a couple of years ago. And now we're selling four sixty four strand counts or well north of that. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:38:28And as I mentioned in our prepared remarks, we're already seeing hyperscalers come back to us for additional fiber on top of those already large initial purchases. And again, not every transaction is the same, so I'm generalizing a little bit. But ultimately, substantial increases in strand count, substantial increases in excess conduit capacity. That also and we're absolutely looking at ILAs and implications for ILAs because as a result of the tremendous increase in strand count, you've got to think about providing for space and power and cooling in ILA facilities. And so we've got an active work stream going on now to upgrade our standard ILA facility to allow for that enhanced those enhanced needs as a result. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:39:24And we're excited to be doing that because that means incremental bandwidth, it means incremental usage and obviously incremental revenue for us and ultimately can drive greater yields on the dollars that we're putting into the ground. Geographically, we've stayed disciplined with respect to the deals that we're pursuing. We're really building new fiber in areas that really enhance the strategic value of our network. We're not going off into remote locations where there's not going to be a second or third use of that fiber and therefore lease up potential. We're really staying focused on routes and areas of our footprint that we've wanted to build for some time, but couldn't make the economic case work or where we're expanding into areas we hadn't anticipated, but we do see incremental lease up demand. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:40:16But again, in our footprint, or expanding our footprint around the edges to give us greater opportunity going forward. We're also looking at the incremental maintenance requirements required of substantially higher strand count. So for example, if you need to splice a six strand count or 12 strand count opportunity, that is substantially more complicated when you talk about an eight sixty four strand count opportunity, right? I mean, that's just a dramatic increase in fiber. And so the maintenance requirements go up and the repair requirements go up. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:40:54I mean, if eight sixty four strand count cable is cut, imagine going in and having to unwind that and clear it out and re splice it. There's just a lot of implications there that exist today that didn't exist twelve or eighteen or twenty four months ago. Again, all good opportunities for us because the hyperscalers don't want to have to deal with those things, right. And companies like us with boots on the ground around our network are able to provide that service, which give us a stickier customer relationship, especially if we execute as we always have. So a lot of implications, but I think all good for our business, Bora. Bora LeeVice President at RBC Capital Markets00:41:40Great. And for my second question, in terms of wireless bookings, there were a bit, I guess, a bit soft last year just because of industry activity. Just wondering how that closed out, if there was that pickup towards the end of the year that you thought might happen and your outlook for the vertical in 2025? Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:42:06Yes. Good question, Bora, and good recall on our comments at the beginning of 2024. We said we thought wireless bookings would be down for the year in 2024 versus 2023, but we thought that towards the end of 2024, there would be a we would start to see a pickup in wireless activity. We were right in one regard and wrong in another. Ultimately, the wireless bookings for 2024 were not down. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:42:36They were roughly flat compared to 2023. So still muted, but flattish instead of down. And secondly, rather than seeing the pickup in the second half of twenty twenty four, we really are starting to see it at the beginning of this year. And so we're excited about the prospects for 2025. I would I will tell you that when we we don't guide to bookings categories, but since you asked the question, I'll tell you that we are expecting wireless bookings to be up this year compared to 2024. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:43:13And so far, the activity that we're seeing at the beginning of this year helps give us confidence that that should turn out to be the case. Bora LeeVice President at RBC Capital Markets00:43:23Great. Thanks, Kenny. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:43:24Thank Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:43:25you. Operator00:43:26Thank you. At this time, I will now turn the conference back over to Kenny Gunderman for closing remarks. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:43:35Thank you. We appreciate your interest in Uniti Group and look forward to updating you further on future calls. Thank you for joining us today. Operator00:43:42This concludes today's conference call. Thank you for participating. You may now disconnect.Read moreParticipantsExecutivesBill DiTullioVice President of Finance & Investor RelationsKenny GundermanPresident and Chief Executive OfficerPaul BullingtonCFO & TreasurerAnalystsGreg WilliamsDirector - Equity Research at TD CowenFrank LouthanManaging Director at Raymond James FinancialBora LeeVice President at RBC Capital MarketsPowered by Conference Call Audio Live Call not available Earnings Conference CallUniti Group Q4 202400:00 / 00:00Speed:1x1.25x1.5x2xTranscript SectionsPresentationParticipants Earnings DocumentsSlide DeckPress Release(8-K)Annual report(10-K) Uniti Group Earnings HeadlinesUniti Appoints John Harrobin President of KineticApril 23 at 4:15 PM | globenewswire.comUniti Nominates Harold Zeitz for Election to its Board of DirectorsApril 17, 2025 | globenewswire.comElon Set to Shock the World by May 1st ?Tech legend Jeff Brown recently traveled to the industrial zone of South Memphis to investigate what he believes will be Elon’s greatest invention ever… Yes, even bigger than Tesla or SpaceX.April 26, 2025 | Brownstone Research (Ad)Uniti Group Inc. To Report First Quarter 2025 Financial Results and Host Conference CallApril 8, 2025 | globenewswire.comUniti Group Inc. Stockholders Approve Proposed Merger with Windstream Holdings II, LLCApril 2, 2025 | globenewswire.com3 Stocks Trading Under $10 That Deliver Massive Ultra-High-Yield DividendsMarch 27, 2025 | 247wallst.comSee More Uniti Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Uniti Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Uniti Group and other key companies, straight to your email. Email Address About Uniti GroupUniti Group (NASDAQ:UNIT), Inc. is a real estate investment trust company, which engages in the acquisition, construction, and leasing of properties. It operates through the following business segments: Uniti Leasing, Uniti Fiber, and Corporate. The Uniti Leasing segment involves mission-critical communications assets on exclusive or shared-tenant basis, and dark fiber network. The Uniti Fiber segment includes the operation of infrastructure solutions, cell site backhauls, and dark fiber. The Corporate segment consists of office and shared service functions. 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PresentationSkip to Participants Operator00:00:00Good morning, and welcome to today's conference call to discuss Uniti's Fourth Quarter and Full Year twenty twenty four Earnings Results. My name is Gigi, and I'll be your operator for today. Today's call is being recorded, and a webcast will be available on the company's Investor Relations website, investor.unity.com, beginning today and will remain available for three sixty five days. At this time, all participants are in a listen only mode. Operator00:00:29Participants on the call will have the opportunity to ask questions following the company's prepared comments. It is now my pleasure to introduce Bill D'Tullio, Uniti's Senior Vice President of Investor Relations and Treasurer. Please begin. Bill DiTullioVice President of Finance & Investor Relations at Uniti Group00:00:47Good morning, everyone, and thank you for joining today's conference call to discuss Uniti's fourth quarter and full year twenty twenty four results. Speaking on the call today will be Kenny Gunderman, our CEO and Paul Bullington, Uniti's CFO. Before we get started, I would like to quickly cover our Safe Harbor statement. Please note that today's remarks may contain forward looking statements. These statements include, but are not limited to, statements about our 2025 outlook expectations regarding lease above our network demand trends business strategies growth prospects the benefits of the proposed transaction between Uniti and Windstream including future financial and operating results of either company or the combined company statements related to the expected timing of the completion of the transaction and combined company plans and other statements that are not historical facts. Bill DiTullioVice President of Finance & Investor Relations at Uniti Group00:01:37Please also note that Uniti and Windstream, through the entity that will be the combined parent company following the merger, have filed a Form S-four registration statement with the SEC, which was declared effective by the SEC on 02/12/2025, and includes a definitive proxy statement and prospectus that was mailed to Uniti stockholders on or about 02/18/2025, seeking their approval of the transaction related proposals. Investors are urged to read the definitive proxy statement and perspectives as it contains important information about the transaction. You may find information on how to request these documents in the presentation that accompanies this call. Numerous factors could cause actual results to differ materially from those described in the forward looking statements. For more information on those factors, please see the section titled Forward Looking Statements in the accompanying presentation and the Risk Factors section of the filed Form S-four. Bill DiTullioVice President of Finance & Investor Relations at Uniti Group00:02:34With that, I would now like to turn the call over to Kenny. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:02:37Thanks, Bill. Good morning, everyone, and thank you for joining. 2024 was the most consequential year in Uniti's history. We delivered on our promises and executed exceptionally well. The strategic and balance sheet moves we made during the year have future proofed our business and positioned us to create real shareholder value. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:02:56Our strategic recurring revenue, adjusted EBITDA and consolidated bookings growth of approximately 5%, eight % and twenty seven % respectively, not only underscore our strong execution, but the continued strength and the demand for mission critical communications fiber. Our balance sheet and liquidity remains strong and we're proud to be the first commercial fiber provider to access the ABS market with resounding success. We believe the ABS market will be a terrific value accretive financing tool for us going forward. In addition, our current business plan is fully funded and in 2025 we expect Uniti will generate positive free cash flow. And of course, we achieved our goal of positioning ourselves strategically to control our own destiny with our announced merger with Windstream. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:03:42Our often misunderstood MLA relationship will be simplified and with nine months of hindsight, the approximately five times EBITDA valuation paid looks increasingly attractive for our shareholders. The new Unity will be extremely well positioned to benefit from the increasing demand from generative AI and of course the convergence team driving strategic value for Fiber to the Home. Our priorities for 2025 will not change materially. We will continue to focus on best in class execution and disciplined top line growth of mid single digits and high single digit adjusted EBITDA growth. As Paul will discuss later, we also expect to fully fund the business plan of new Unity using ABS and other tools. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:04:22Lastly, we'll have a substantial focus on building new fiber, especially in the kinetic footprint. For example, Windstream announced yesterday that they expect to roughly double the number of targeted homes passed with fiber for 2025 over 2024. As you might recall, when we announced our merger with Windstream, we guided to an initial target of approximately 2,900,000 homes. By the end of twenty twenty five, we expect to reach 2,000,000 homes, which is two years earlier than originally expected. As it relates to the pending merger with Windstream, we've received PUC approvals from 16 of the 18 jurisdictions requiring them, including Washington, D. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:05:00C. And the shareholder vote to approve the merger has been set for April 2. I encourage all shareholders to vote at the upcoming special meeting. Based on where things stand today, we remain on track to close the transaction in the second half of this year and are optimistic we could close as early as July. Moving to Slide six, I could not be more pleased with our growth trajectory and strategy of being a pure play fiber provider in Tier two and three markets. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:05:27In the past several years, we've demonstrated predictable solid mid single digit revenue growth and accelerated EBITDA growth as we hit real leverage in the business with a heavy focus on lease up of our existing infrastructure. All the while we're achieving this growth, our capital intensity continues to come down. As slides seven and eight highlight, in order for capital intensity to come down, we need to continue showing steady predictable new sales. While we strive to grow bookings in correlation with our ever expanding TAM, even with flat bookings and our industry leading monthly churn of 0.2%, we're still able to achieve mid single digit top line growth. In addition to steady bookings, capital intensity has continued to decline for other reasons. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:06:11First, in 2018 and 2019, we undertook a heavy build cycle of new fiber largely in metro markets throughout the Southeast. Our capital intensity peaked at over 50%, but we assured investors that once past that build phase, we began leasing up those assets with attractive incremental cash flow yields and capital intensity would drop. We've delivered on that promise. Average paybacks on capital deployed have declined and that theme should continue, especially as we remain disciplined in the approach of targeting 5% to 10% anchor cash flow yields with a lease up strategy that is currently targeting 27% on a blended basis. As an aside, we expect to have a similar robust three to four year build cycle at Kinetic, but we'll likewise see capital intensity decline materially after the build is complete. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:07:01Finally, as we foreshadowed, NRCs continue to creep higher offsetting capital intensity and we expect this trend to continue for the foreseeable future. As I mentioned earlier, we had another strong quarter of new bookings. We previously stated that 2024 was expected to be a down year for wireless, but we actually ended the year flattish to 2023 and are encouraged by the activity we have seen so far in early twenty twenty five. Flat wireless bookings were more than offset, however, by demand from other customers, including fiber to the home carriers. The number of bookings Unity saw relating to fiber to the home carriers increased threefold in 2023 versus 2022, and we saw further growth in 2024. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:07:45As we previously mentioned, the demand from hyperscalers continues to represent a meaningful part of bookings. While hyperscaler bookings were very small in 2023, in just a year's time, they now represent about 20% of our full year bookings. And we're confident this demand will continue. In fact, in addition to new deals, we're now seeing hyperscalers come back and lease more fiber from us on the same routes they lease from us originally. Despite the year in big activity, only two of our top 20 customers in 2024 were hyperscalers. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:08:18This demonstrates that we have a well diversified customer base and that our business plan is not reliant upon targeting hyperscalers or any one particular type of customers for that matter. Moving to Slide nine, hyperscalers are spending approximately $300,000,000,000 annually and a meaningful percentage of that is being spent on digital infrastructure. We estimate the digital infrastructure TAM today to be around $40,000,000,000 with roughly $15,000,000,000 being spent on fiber and network investments. In five years, we see the TAM for both of these areas growing by three to five times creating an attractive opportunity for Unity. We also estimate that about 80% of the generative AI spend today is related to building large learning models for AI training purposes. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:09:05We're pursuing and have won fiber infrastructure bills relating to training, but only where the transactions strategically expand our network at attractive economics. Said differently, we're approaching hyperscaler deals during the learning phase as anchor deals with the expectation for material lease up in the future. In fact, although it is still early, we're very pleased with the progress we've made to date as the combined yields of our hyperscaler deals, inclusive of lease up, are already close to 20%. As I've said numerous times before, we're most excited about the inference phase of AI, which today represents a minority of the spin, but in a few years is expected to be approximately 80% of the TAM. During the inference phase, users of AI will need distributed low latency, high bandwidth connectivity and our network is well positioned to benefit from those trends. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:09:56During this phase, we expect to see increasing MRR associated from all high bandwidth users and lease up continued lease up on the builds we're undertaking during the learning phase. As mentioned earlier, we're already starting to see hyperscalers come back to us for additional fiber on initial builds. In short, Uniti is executing well on our core strategy of providing mission critical fiber and we're well positioned for the future. With that, I'll turn the call over to Paul. Paul BullingtonCFO & Treasurer at Uniti Group00:10:24Thanks, Kenny. I'd like to begin by reviewing our fourth quarter performance followed by an overview of our 2025 outlook. Uniti had another year of strong performance in 2024 with our core recurring strategic fiber business growing approximately 5%, while consolidated net success based capital intensity continues to decline ending the year at 27. This all resulted in our full year 2024 consolidated revenue, adjusted EBITDA and AFFO being in line with our prior outlook. As I'll cover in more detail in just a bit, our 2025 outlook reflects the strong tailwinds we continue to see in our recurring business as well as the estimated impact from our recent ABS financing and partial redemption of the 10.5% secured notes. Paul BullingtonCFO & Treasurer at Uniti Group00:11:11Finally, I'll end with additional commentary on our current balance sheet and capital structure. We've also provided Windstream's fourth quarter financial information in an eight K filed with the SEC earlier this morning. Please turn to Slide 10, and I'll start with comments on our fourth quarter. We reported consolidated revenues of $293,000,000 consolidated adjusted EBITDA of $239,000,000 AFFO attributed to common shareholders of $92,000,000 and AFFO per diluted common share of $0.35 Combined gross capital expenditures for both Uniti Fiber and Uniti Leasing were $24,300,000 during the fourth quarter, which was offset by upfront customer payments totaling $23,600,000 resulting in net success based CapEx of only $700,000 for the quarter. As I mentioned last quarter, there continue to be a number of encouraging trends and bookings that are driving this capital efficiency, including our continued focus on lease up and a higher mix of hyperscaler deals that generally come with higher NRCs. Paul BullingtonCFO & Treasurer at Uniti Group00:12:17At Uniti Leasing, we reported segment revenues of $222,000,000 and adjusted EBITDA of $214,000,000 representing an adjusted EBITDA margin of 97% for the quarter. At Uniti Fiber, we reported revenues of $72,000,000 and adjusted EBITDA of $31,000,000 during the fourth quarter, resulting in an adjusted EBITDA margin of 43%. As I alluded to earlier, Slide 11 shows that our 2024 results were in line with our original 2024 guidance range provided early last year. Reported AFFO per share was lower than our original guidance due to the incremental interest from the $300,000,000 add on to our secured notes that was completed back in May and was not contemplated in our original outlook for 2024. Turning to slide 12. Paul BullingtonCFO & Treasurer at Uniti Group00:13:08Our growth capital investment program continues to provide positive results for Uniti. And given our pending merger with Windstream, I wanted to highlight a key point which I believe the market is under appreciating. Kinetic and Uniti have invested a substantial amount of capital in the network with almost 2,500,000,000 invested since 2015. These historical investments play a critical role in enabling Kinetic's industry leading Fiber to the Home per passing cost. While we estimate that backhaul equates to roughly 20% of the total cost of building fiber to the home for others, Kinetic has previously absorbed much of this cost having already built fiber to roughly 95% of its DSlam nodes. Paul BullingtonCFO & Treasurer at Uniti Group00:13:48Please turn to Slide 13 and I'll now cover our 2025 guidance. Our 2025 outlook includes the estimated impact from the recent ABS financing and partial redemption of the 10.5% senior secured notes. Our outlook excludes any impact from the expected merger with Windstream, future acquisitions, capital market transactions and future transaction related and other costs not mentioned herein. Actual results could differ materially from these forward looking statements. Beginning with Uniti Leasing, we expect revenues and adjusted EBITDA to be $9.00 $2,000,000 and $872,000,000 respectively at the midpoint. Paul BullingtonCFO & Treasurer at Uniti Group00:14:26We expect to deploy $185,000,000 of success based CapEx at the midpoint of our guidance, of which $175,000,000 relates to Windstream GCI investments. We also expect the full $175,000,000 of GCI investments for 2025 will be made in the first quarter. At Uniti Fiber, we expect revenues and adjusted EBITDA to be $3.00 $4,000,000 and $125,000,000 respectively at the midpoint for full year 2025, representing an EBITDA margin of approximately 41%. Net success based CapEx for Uniti Fiber this year is expected to be $85,000,000 at the midpoint of our guidance and represents a capital intensity of 28%. As a result of the strong financial performance and declining capital intensity, stand alone Uniti is expected to be free cash flow positive on a consolidated basis in 2025. Paul BullingtonCFO & Treasurer at Uniti Group00:15:17We expect full year AFFO to range between 1.4 and $1.47 per diluted common share with a midpoint of $1.43 per diluted share, representing a 6% increase from the prior year. Slide 14 provides a comparison of our 2025 outlook ranges to 2024 actuals. As a reminder, guidance ranges for key components of our outlook are included in the appendix to our earnings presentation. At year end, we had approximately $656,000,000 of combined unrestricted cash and cash equivalents and undrawn revolver capacity. Our leverage ratio was 5.8 times based on net debt to fourth quarter twenty twenty four annualized adjusted EBITDA, excluding the debt and net contributions from the ABS loan facility. Paul BullingtonCFO & Treasurer at Uniti Group00:16:03Slide 15 illustrates how Uniti's cost of capital has improved significantly over the past two years. If you go back to this time two years ago when we launched our 10.5% secured notes offering, our secured and unsecured debt was yielding over 12%. Fast forward to today and our debt is currently yielding around 7.5%, a 500 basis point improvement in just two years. As a result, we've taken an opportunistic approach to strengthening our combined balance sheet and we'll continue to look for opportunities across all of the debt markets to which we have access. Most recently, as Kenny mentioned, we successfully completed our inaugural ABS transaction at a blended coupon of less than 6.5. Paul BullingtonCFO & Treasurer at Uniti Group00:16:44This transaction provided additional capital that we used to redeem a portion of those 10.5% notes at an attractive premium. This redemption, along with financing activities conducted by Windstream last year, successfully retires or extends a meaningful portion of our combined debt that was set to mature in 2028. Regarding ABS, we continue to view that market as an attractive source of financing that complements our existing capital structure well, And we will continue to evaluate further opportunities to expand our current program. To that end, we believe that the potential incremental ABS capacity on our fiber assets at Uniti and the potential for ABS on the Kinetic assets represents a $1,000,000,000 plus near term opportunity for the combined company with considerable incremental capacity potential above that over time. On slide 16, we provided a 2025 pro form a view of revenue and adjusted EBITDA for new Uniti by each segment we expect to report on post close. Paul BullingtonCFO & Treasurer at Uniti Group00:17:43Both Kinetic and fiber infrastructure consist of a highly predictable core recurring revenue base that continues to grow and yield attractive margins. As a reminder, our Fiber to the Home platform will continue to be branded as Kinetic. Fiber infrastructure will include our current Unity Fiber and Unity Leasing segments, along with the Windstream Wholesale segment, all of which are highly complementary and will combine to create a premier fiber infrastructure company with both national and deep regional capabilities as well as a fiber network that is predominantly owned and operated. Going forward, as we continue to transition away from legacy services such as Windstream TDM services, we continue to expect the Kinetic and Fiber Infrastructure segments to realize low to mid single digit top line growth with an improving margin profile. With that, I'll now turn the call back over to Kenny. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:18:35Thanks, Paul. Slide 18 showcases the reach of new Unity's insurgent fiber network, extending our successful strategy of targeting Tier two and three markets for wholesale and enterprise now into residential fiber to the home. Archer North is building fiber first in less competitive markets giving us the right to win for many years into the future. Including connected buildings, fiber to the tower and small cell connections, connected pops and data centers and the 4,400,000 total homes within Kinetic's current footprint, Uniti will have the potential to reach over 5,000,000 connected on ramps in largely unique locations, each driving increasing amounts of bandwidth onto our owned wholesale network. Slide 19 highlights some of the benefits of bringing Uniti and Windstream together. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:19:22At Uniti, we've been able to drive attractive financial results in large part because of our fully owned fiber network and associated owners' economics. Our combination with Windstream not only extends our fiber network materially, but will bring large parts of Windstream's business on net immediately with a four year plan to achieve virtually 100% on net. As such, with owners' economics and our same disciplined growth strategy, we will eventually see similar economic trends in Windstream's business, including mid single digit revenue growth, growing EBITDA and declining capital intensity. A big part of moving Windstream on net is transitioning Kinetic off of legacy based copper systems and onto fiber. As mentioned earlier, by the end of twenty twenty five, we expect to have converted about 2,000,000 of Kinetics four point four million homes to fiber. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:20:09And And by 2029, we expect to have built fiber to between 3,000,000 to 3,500,000 homes. Lastly, we've aggressively managed out of legacy services at Unity and plan to continue that strategy at the combined new Unity. Our ability to address the burgeoning hyperscaler opportunities is going to be enhanced as well. Windstream's wholesale network is highly complementary to ours on key routes and Windstream's largely lit waves product capabilities are additive to our strong dark fiber portfolio. On a combined basis, we'll be able to sell a full product suite and immediately begin selling into an expanded customer base, given that Windstream has an incremental 40 different MLAs with hyperscalers to complement Unity's current count of only four. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:20:55Finally, as we mentioned previously, we believe the real opportunity with generative AI is when the inference phase begins in earnest. Earnest. With a dramatic increase in distributed endpoints coming with our Windstream combination, our ability to provide enhanced broadband connectivity with low latency increases materially. We remain committed to making progress on numerous key initiatives between signing and closing of our transaction. First, both companies continue to execute well and we continue to provide a unified investor relations outreach to help investors understand the new unity. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:21:28Next, we're excited to have completed the simplification of our new pro form a balance sheet at closing, thus paving the way to roll out our accelerated and expanded Fiber to the Home plan. We're also actively working with Kinetic on an integration plan to achieve our synergy goals. We expect to receive shareholder approval in April and after that we anticipate providing greater clarity on our ongoing plan focusing primarily on the holistic kinetic build plan, but also other key strategic initiatives. Let me close by restating how excited we are for our pending merger with Windstream. The new unit is at the epicenter of the growing conversions theme highlighting substantial strategic value of Kinetic and its scaled fiber to the home platform. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:22:12Our fiber infrastructure business is uniquely positioned to benefit from the explosion in broadband demand in general, including the demand being fueled by hyperscalers. With that, we'd be happy to take your questions. Operator00:22:26Thank you. Our first question comes from the line of Greg Williams from TD Cowen. Greg WilliamsDirector - Equity Research at TD Cowen00:22:52Great. Thanks for taking my questions. Kenny, I was just wondering on Slide nine, I was super helpful about your excitement for the inference phase. Just kind of curious about the timing of that and the opportunity of inference in Tier two and Tier three markets because there's a thought that inference is really going to be in the availability zones in major metro markets. Just trying to gauge how you're going to win in the smaller tier two, two, three markets for inference. Greg WilliamsDirector - Equity Research at TD Cowen00:23:17You did mention if Windstream is in four d markets and maybe the opportunities there. Second question is on just the AI bidding environment. How rational is the bidding environment with your competitors at the RFP table? I mean, you have disciplined healthy yields, but on the deals you don't win, do you suspect competitors are taking lower yields? Thanks. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:23:40Good morning, Greg. All good questions. Let me make sure I hit them all. On the Empress phase, yes, I think it's already started. Honestly, as we said, roughly 20% to 25% of the spend today is related to that. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:23:53And we think that's going to grow. We're saying in our slide that by 02/1930, that will flip to 80% inference and we think that will just gradually increase to that number over time. I think things like and there's a tremendous amount of dollars being spent on innovation, whether it's from the big tech companies in The U. S. Or frankly around the world. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:24:15There's just billions of dollars being invested by nation states and by various technology companies, obviously, DeepSeq being an example of that, all of which we think just accelerates the proliferation of AI. So I don't think it's going to take five years for us to get to that 80% spend on inference, but that's what we're putting on the paper. To your question about Tier two and three markets versus Tier one, it's a recurring theme that our markets tend to be fast followers on some of the themes, whether it's going back to the wireless days of getting good cellular coverage and then eventually four gs and five gs, they started in the major metros and then hit our markets. And I don't think that's going to be any different for inference, because I do think there's got to be more investment made to push AI out to those regions. But the flip side of that has always been true of us also, which is that's okay. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:25:19We're getting there first to those markets and first to those regions with our fiber. So that when the demand does come, we're there and we've been able to build generally build moats around those markets and will capture our fair share or a disproportionate amount of that demand when the time comes. So we're excited about that. And to your comment about the 40 wind stream markets from our prepared remarks, what I was actually referring to is 40 different customer relationships supported by existing MLAs with hyperscalers, which is really important. And at Unity, we only have four and we're developing more and more of those. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:26:01But even with that those four MLAs, we're driving the substantial demand that we talked about in our prepared remarks. But and so when you on a combined basis, when you take that four and expand it to 44, having those existing relationships and those existing agreements in place cuts off a lot of negotiating time. Those MLAs take six, nine, in some cases twelve months to get in place. And so really helps accelerate our sales cycle. So that's a little bit independent of your inference point, but I just wanted to get that out there because maybe my prepared remarks weren't clear enough on that point. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:26:38But we're very excited about that, about the combination with Lindstrom wholesale. And look, on your question about the rational spending, it's a great question because we've definitely seen periods of time in the fiber business where irrational capital had pushed yields down. And so we have always stayed true to our 5% to 10% anchor yields with a really clear plan to lease up on top of that. And as I said in my prepared remarks, we're already seeing the early returns of that strategy in our hyperscaler deals. So over the past twelve, eighteen months of building these new hyperscaler deals, we've never given an exact yield for the anchor deals, but we've said they tend to be at the high end of that anchor range, if not above. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:27:30But regardless, on a blended basis with those initial economics plus lease up that we're already seeing, we're close to 20% yields on those deals. And so very excited about the future there and very excited about building more of these large infrastructure deals for hyperscalers to get the infrastructure further into our markets to set up for that inference phase. The competitive environment so far to the heart of your question, Greg, we think has been rational. I can probably count on less than one hand the number of deals that we have lost at Unity that we actually bid for. And I suspect that's because we were undercut on price perhaps. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:28:17We don't know that definitively. But in reality, where we're really going for new business, we've got good enough customer relationships and we've got network in the right places and we've got a track record with for executing with the various hyperscalers that we tend to win what we go after. And we're winning at economics that are good for us and for our hyperscaler customers. So all that to say, so far so good on the rational rationality of the market approaching these spends or at least in our patch of the sandbox. Greg WilliamsDirector - Equity Research at TD Cowen00:28:52Great. Thank you. Operator00:28:55Thank you. One moment for our next question. Our next question comes from the line of Frank Louthan from Raymond James and Associates. Frank LouthanManaging Director at Raymond James Financial00:29:09All right, great. Thank you. So a couple of quick things. So you said you're going to rely on ABS funding largely going forward. Can you give us what's an optimal mix that we can expect for the combined business for ABS versus other debt instruments? Frank LouthanManaging Director at Raymond James Financial00:29:24And then you mentioned I think you mentioned the GCI bill is compressed and you're going to this into Q1, you're going to reach 2,000,000 homes. Can you frame that in terms of the number of homes you expect to build? And then where will that end up with as far as the subscriber adds? Are you focusing more on the construction and a little less on the marketing this year? Or will that go in lockstep? Frank LouthanManaging Director at Raymond James Financial00:29:44And should we see an equivalent lift in the subs for the year? Thanks. Paul BullingtonCFO & Treasurer at Uniti Group00:29:51Hey, Frank, this is Paul. I'll take your first question on ABS and maybe Kenny will take your second question on the kinetic strategy for the year. But Frank, I think it's hard to box us into what I think is the optimal mix of ABS versus other more traditional debt that is at least in terms of Uniti's capital structure historically. We do think that we do have an appetite for more ABS. We think that the cost of that capital, the leverage profile of that in terms of the assets that we move into an ABS type facility, we think is complementary to that and really enhances our cost of capital and the overall healthiness of our balance sheet. Paul BullingtonCFO & Treasurer at Uniti Group00:30:48I think over time, so I do expect it to grow. I think over time, the optimal mix is we're going to stay open to adjusting with how the market moves on that. I think if ABS proves to be a lower cost of capital, more attractive source and that market continues to have a large appetite for debt. I think you'll see us do more, but there are certainly times where the high yield markets and other markets have been highly attractive as well, particularly the unsecured side of the market, which hasn't been open for a lot of high yield providers for a few years, but is opening back up now in terms of the unsecured market, which we'd like to make sure we have a healthy mix of that in our capital structure as well. So not really answering your question in terms of an exact percentage, but I think we'd like to add more and we're going to continue to kind of move where the market says our best opportunity is for managing our capital structure to the lowest cost of capital on a go forward basis. Frank LouthanManaging Director at Raymond James Financial00:31:58Okay. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:32:01Frank, good morning. On your second question, so in 2024, Windstream built about 170,000 new homes. That seems like a low number, but in reality, it was building to a lot of the subsidized homes with RDOF and PPP. And so those are longer builds, and so the number just is lower for that reason. But it set us up for a substantially higher number in 2025 as we focus on more strategic builds, which are the non subsidized builds. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:32:36So in anticipation of our transaction closing, We're excited and Windstream announced yesterday and we have it in our materials today, but the Kinetics is going to build around 325,000 homes this year. So almost doubling what was built last year. And we think that number can grow over time. And as we said in the prepared remarks, we think ultimately we can get to 3,000,000 to 3,500,000 homes economically in the footprint. And by the end of twenty twenty five, as you said, we should be at around 2,000,000 homes, which if you remember was actually just exceeds the original build target that Windstream had put out there previous to our combination. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:33:23So we're excited that that original plan is going to be built by the end of twenty twenty five, '2 years ahead of the original plan. And so we look, I think the footprint has a tremendous amount of opportunity in it. Again, it's a relatively less urban footprint Tier two and Tier three markets. And so overbuilders have continued to stay at bay in the footprint. With that said, we don't want to let any grass grow and we want to get the strategic markets built ASAP. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:33:56And then of course there's the beat opportunity out there to reach areas of the footprint that wouldn't be economical without some sort of subsidy. So we're excited about the strategic opportunity plus the subsidized opportunity around the edges that's really going to get us to substantial fiber coverage in the footprint. And look, fiber subs will come. Fiber subs are highly correlated to obviously building fiber to the homes. And to your point, we're definitely going to stay focused on building and the go to market and marketing at the same time. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:34:33There's not going to be those are neck and neck from a priority point of view. And as Windstream has said publicly and we've reiterated, in the past twelve months, past eighteen months, there's been a substantial improvement in the initial penetration levels in the ladder built cohorts. In the 25% to 30% range for initial penetration, which is terrific. And we expect to continue that focus going forward. We've got some nice enhancements to the plan that we're preparing to roll out. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:35:08But we're excited about the progress thus far. And there's the opportunity to go back to those original cohorts where the penetration levels were a little bit lower initially. And we're now starting to see with some of the more enhanced local market presence and digital marketing that those penetration levels are also coming up. So a lot of growth potential. It's exciting to see Kinetic being a share taker. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:35:35And we don't see that changing anytime in the next number of years. Paul BullingtonCFO & Treasurer at Uniti Group00:35:41And Frank, I'll just add just in terms of the timing of GCI. The timing of that kind of all being compressed into the first quarter of this year is was more a function of just the mechanics of GCI than necessarily correlated to sort of the Windstream '20 '20 '5 accelerated build plan. So if you recall back to last year, we maxed out GCI about midyear, about July of last year. And so it hasn't been Windstream hasn't had the ability to submit for GCI reimbursements since last July. So they've got a backlog that then becomes eligible in the first quarter. Paul BullingtonCFO & Treasurer at Uniti Group00:36:23So it's really a little bit more function of the declining GCI investment coming down from $250,000,000 plus to now $175,000,000 in 2025. Frank LouthanManaging Director at Raymond James Financial00:36:39Great. That's really helpful. Thank you. Operator00:36:42Thank you. Our next question comes from the line of Bora Lee from RBC Capital Markets. Bora LeeVice President at RBC Capital Markets00:37:19Good morning. Thanks for taking the questions. So I guess first of all, I was wondering how have the more recent needs of the hyperscalers kind of changed the way you think about how and where you build fiber in terms of the amount of fiber you deploy, geography, number of IOAs required and so on. Just curious high level your thoughts there. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:37:45Good morning, Bora. Yes, in short, it certainly has changed the way we've approached new builds. And in a nutshell, the amount of capacity needed from a strand count perspective, empty conduits, excess conduits has all increased dramatically. I think I mentioned in a previous which is terrific, and I think I mentioned previously that we were selling six to 12 strands to hyperscalers as recently as a couple of years ago. And now we're selling four sixty four strand counts or well north of that. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:38:28And as I mentioned in our prepared remarks, we're already seeing hyperscalers come back to us for additional fiber on top of those already large initial purchases. And again, not every transaction is the same, so I'm generalizing a little bit. But ultimately, substantial increases in strand count, substantial increases in excess conduit capacity. That also and we're absolutely looking at ILAs and implications for ILAs because as a result of the tremendous increase in strand count, you've got to think about providing for space and power and cooling in ILA facilities. And so we've got an active work stream going on now to upgrade our standard ILA facility to allow for that enhanced those enhanced needs as a result. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:39:24And we're excited to be doing that because that means incremental bandwidth, it means incremental usage and obviously incremental revenue for us and ultimately can drive greater yields on the dollars that we're putting into the ground. Geographically, we've stayed disciplined with respect to the deals that we're pursuing. We're really building new fiber in areas that really enhance the strategic value of our network. We're not going off into remote locations where there's not going to be a second or third use of that fiber and therefore lease up potential. We're really staying focused on routes and areas of our footprint that we've wanted to build for some time, but couldn't make the economic case work or where we're expanding into areas we hadn't anticipated, but we do see incremental lease up demand. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:40:16But again, in our footprint, or expanding our footprint around the edges to give us greater opportunity going forward. We're also looking at the incremental maintenance requirements required of substantially higher strand count. So for example, if you need to splice a six strand count or 12 strand count opportunity, that is substantially more complicated when you talk about an eight sixty four strand count opportunity, right? I mean, that's just a dramatic increase in fiber. And so the maintenance requirements go up and the repair requirements go up. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:40:54I mean, if eight sixty four strand count cable is cut, imagine going in and having to unwind that and clear it out and re splice it. There's just a lot of implications there that exist today that didn't exist twelve or eighteen or twenty four months ago. Again, all good opportunities for us because the hyperscalers don't want to have to deal with those things, right. And companies like us with boots on the ground around our network are able to provide that service, which give us a stickier customer relationship, especially if we execute as we always have. So a lot of implications, but I think all good for our business, Bora. Bora LeeVice President at RBC Capital Markets00:41:40Great. And for my second question, in terms of wireless bookings, there were a bit, I guess, a bit soft last year just because of industry activity. Just wondering how that closed out, if there was that pickup towards the end of the year that you thought might happen and your outlook for the vertical in 2025? Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:42:06Yes. Good question, Bora, and good recall on our comments at the beginning of 2024. We said we thought wireless bookings would be down for the year in 2024 versus 2023, but we thought that towards the end of 2024, there would be a we would start to see a pickup in wireless activity. We were right in one regard and wrong in another. Ultimately, the wireless bookings for 2024 were not down. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:42:36They were roughly flat compared to 2023. So still muted, but flattish instead of down. And secondly, rather than seeing the pickup in the second half of twenty twenty four, we really are starting to see it at the beginning of this year. And so we're excited about the prospects for 2025. I would I will tell you that when we we don't guide to bookings categories, but since you asked the question, I'll tell you that we are expecting wireless bookings to be up this year compared to 2024. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:43:13And so far, the activity that we're seeing at the beginning of this year helps give us confidence that that should turn out to be the case. Bora LeeVice President at RBC Capital Markets00:43:23Great. Thanks, Kenny. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:43:24Thank Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:43:25you. Operator00:43:26Thank you. At this time, I will now turn the conference back over to Kenny Gunderman for closing remarks. Kenny GundermanPresident and Chief Executive Officer at Uniti Group00:43:35Thank you. We appreciate your interest in Uniti Group and look forward to updating you further on future calls. Thank you for joining us today. Operator00:43:42This concludes today's conference call. Thank you for participating. You may now disconnect.Read moreParticipantsExecutivesBill DiTullioVice President of Finance & Investor RelationsKenny GundermanPresident and Chief Executive OfficerPaul BullingtonCFO & TreasurerAnalystsGreg WilliamsDirector - Equity Research at TD CowenFrank LouthanManaging Director at Raymond James FinancialBora LeeVice President at RBC Capital MarketsPowered by