Welcome to the Uni Group's Third Quarter 2021 Conference Call. My name is Stephanie, and I will be your operator for today. A webcast of this call will be available on the Company's website, www.uni.com beginning November 4, 2021, and will remain available for 14 days. At this time, all participants are in a listen-only mode. Participants on the call will have the opportunity to ask questions following the Company's prepared comments. The Company would like to remind you that today's remarks include forward-looking statements and actual results could differ materially from those projected in these statements. The factors that could cause actual results to differ are discussed in the Company's filings with the SEC. The Company's remarks this morning or reference slides posted on the website, and you are encouraged to refer to those materials during this call. Discussions during the call will also include certain financial measures that were not prepared in accordance with the generally accepted accounting principles. Reconciliation of those non-GAAP financial measures to most directly comparable GAAP financial measures can be found in the Company's current report on Form 8-K dated today. I would now like to turn the call over to Uni Group's Chief Executive Officer, Kenny Gunderman. Please go ahead, Mr. Gunderman.

Thank you. Good morning, everyone. Both our Uniti Leasing and Uniti Fiber businesses continue to perform exceptionally well, fueled by continued tailwinds within the communications infrastructure industry and strong demand for our fiber infrastructure. This demand was evidenced by the second consecutive quarter of consolidated new sales bookings of approximately $1 million in MRR, representing again one of the highest quarters ever for consolidated bookings. Turning to Slide 4, Uniti has the eighth largest fiber network in the country, and we're the third largest independent operator. Our portfolio of small cells, connected buildings, macro towers and homes passed continues to grow each quarter driven by the need for more investment in 5G networks, 10-gig upgrades and C-RAN small cell development deployments. These investments provide Unity with the unique opportunity to expand our networks with anchor economics, setting the foundation for attractive future lease-up and further validating the share infrastructure benefits of fiber. As evidenced on Slide 5, Uniti is demonstrating the economics of an attractive shared infrastructure model that continues to drive meaningful returns. We believe that a healthy mix of anchor and lease-up bookings and installs represents the most effective way to drive optimal economics. Unity acquires or builds new fiber largely for our wireless customers with attractive long-term anchor cash flow yields in the mid- to high single digits. We're then successfully adding additional tenants with very high margins and minimal CapEx. And resulting in a cumulative cash flow yield today of approximately 19%, an almost threefold increase from the anchor yield and all within the past five years. Slide 6 is further proof of this healthy business mix. As I mentioned earlier, we had our second consecutive quarter of consolidated sales bookings of approximately $1 million in MRR, a 90% increase from the third quarter of 2020.…

Thank you, Kenny. Good morning, everyone. We continue to execute well at both Uniti Fiber and Uniti Leasing as evidenced by our robust bookings activity and our progress in driving higher-margin recurring revenue and lower-than-anticipated operational costs. As a result, we are increasing the midpoint of our full year 2021 outlook from our prior outlook for adjusted EBITDA and AFFO per diluted common share, which I will cover in more detail shortly. We are maintaining the previous midpoint of our 2021 outlook for revenue as there remains the possibility that some core non-recurring contractual revenue could slip into the first quarter of 2022. Please turn to Slide 8, and I'll start with comments on our third quarter. We reported consolidated revenues of $267 million, consolidated adjusted EBITDA of $217 million, AFFO attributed to common shares of $110 million and AFFO per diluted common share of $0.43. Net income attributable to common shares for the quarter was $43 million or $0.17 per diluted share. At Uniti Leasing, we reported segment revenues of $199 million and adjusted EBITDA of $194 million, up 9% and 7%, respectively, from the prior year. Accordingly, Uniti Leasing achieved an adjusted EBITDA margin of 97% for the quarter. The year-over-year growth reflects the dark fiber IRU contracts we acquired from Windstream, the straight-line rent recognition under the Windstream MLAs and GCI investments subsequent to our settlement agreement, the impact of the Everstream transaction as well as annual lease escalators. Turning to Slide 9. Our growth capital investment program continues to yield positive results. As a reminder, our tenant has invested approximately $1 billion of tenant capital improvements in our network over the past six years, and that investment is expected to continue. Unity has now begun investing its own capital and long-term value-accretive fiber largely focused on…

Thanks, Paul. Please turn to Slide 14. I'd like to take a moment and discuss our non-Windstream business and our continuing effort to highlight the value disconnect we believe still exists. The first two columns of the table represent the last two years of performance of Uniti Fiber plus our non-Windstream Uniti leasing business with the third problem also including the CLEC fiber lease payment we received from Windstream. Our fiber platform, including Uniti Fiber and Uniti Leasing operate as one holistic business. It represents the eighth largest fiber network in the country and one of the largest independent fiber operators. Our strategy is unique in that we are targeting Tier 2 and 3 markets offer full-service fiber where we have a competitive advantage, a well-developed brand and boots on the ground. At a national level, however, we're a light-touch passive wholesale provider. We're executing very well on this collective strategy as evidenced by 4% top line growth and 6% adjusted EBITDA growth, continued strong bookings, industry-leading churn and service delivery intervals. 9% of our business is wholesale with an average term remaining of nine years, making our cash flows stable and relatively immune to swings in the economy, which has been evidenced by our relatively uninterrupted progress during the height of the COVID pandemic. Our lease-up business, including enterprise sales and other additional tenants, is growing at 10% plus a year with attractive incremental cash flow yields. We're very selective about which markets to offer enterprise services, and today, we're operating in only about 20 markets. We estimate our market share at less than 5% in most of our existing metro markets, implying material growth potential without adding any new markets. Having said that, we also own dense fiber and approximately 275 additional metro markets around the country. This…

[Operator Instructions] Your first question comes from the line of Greg Williams with Cowen.

Great. Kenny, if we're to believe the reports in the last few weeks, there's a deal that maybe has an impact. And the impact is really around bid-ask and you articulated the valuation case here on Slide 15. Some of the pushback on the valuation is perhaps the 2030 renewal as you think about the Windstream MLA stream. Does that -- whether it remains at $700 million plus the escalators? Or does it get cut? And in the MLA Exhibit E discusses the renewal, and it seems more formulaic. So can you just give us your latest thoughts on the 2030 renewal? And what's your calculus in yourself valuation?

Yes. Thanks, Greg. Yes, first of all, the -- going back to the original lease, it was set at around 8% cap rate, a little over an 8% cap rate, and then we just renegotiated the lease holistically last year, as you know, and the rent was essentially reaffirmed with third-party valuation reports and so forth. So -- And that was five years into the deal and really with not a lot of new fiber investment made in the network in that five- or six-year period. So we feel good about the asset holding its value during that period. And when you look out 10 years from now, there's going to be based on current plans, at least a substantial amount of new investment in the network, not just investment to maintain its value but investment to enhance the value through our GCI program and otherwise. So -- and look, if you believe in the fiber-to-the-home trend, which we certainly do, and I think the industry certainly is revealing that as we see earnings and we see progress from around the industry, including with our tenant, we feel really good about the trajectory. And so we don't see the value of our network declining and dropping off precipitously by any means. In fact, we believe it's going to enhance value and certainly hold its value. But look, it's -- there's no formula calculation, the fair market value, the rent reset in 10 years will be fair market value. So, I think -- but I think the trends are looking positive for Unity.

Your next question comes from Frank Louthan with Raymond James.

Can you walk us through a couple of the lease protections you had in the MLA? In particular, do you still have the rights to buy certain elements of Windstream's network to allow you to operate the ILEC in the event that there wasn't a lease renewal in 2030? And then I've got a follow-up.

Yes. Frank, are you referring to what happens in 2030 if there's not -- if Windstream chooses not to renew the lease?

Yes. I think you had some pauses in the master lease that allows you to purchase some elements in case of non-renewal. Are those still in place with the new agreement? Or has that changed?

It hasn't changed, Frank. It's -- and sorry, I'm a little foggy on it. 15 years is a long way away, but we do think about it. And that didn't change from the original lease, and it does -- there are protections. And I think generally, I'm looking at my General Counsel, but I think generally, if Windstream chose not to renew the lease, we would have the right to acquire the operations and then operate it ourselves or have someone else step in and operate it. So there's not a risk that those operations go away from the lease. Frank?

I'm sorry, I'm here. So you mentioned you're investing some fiber. You mentioned the commercial parts and some fiber-to-the-home. Is that fiber to the home outside of the Windstream territory? Are you building for some other providers or building some of your own residential broadband business?

No, that's all within the GCI program and for Windstream, the fiber-to-the-home builds are.

[Operator Instructions] Your next question comes from Simon Flannery with Morgan Stanley.

I wonder if you could focus on the fiber business just a little bit. I haven't seen the Q yet, but I think you mentioned that the revenues, which were a little bit below our estimate was primarily due to lower non-recurring. But maybe you could just comment on what we're seeing in the backhaul, enterprise and wholesale and E-Rate and government. Where is the pressure there and the outlook? And then as we think about '22 and some of the new signings, the bookings you've had, is capital intensity going to be similar to '21 levels? Any early thoughts on that? Thank you.

Simon, I'll start and Paul can jump in if you'd like to add. But yes, the core recurring business is doing great at fiber. If you look at our disclosure, we've always bifurcated revenue at Uniti Fiber between core recurring and core non-recurring. And I think we said we have something like $50 million of core non-recurring this year. That's the part that is below plan for this quarter. So that's equipment sales and ETL revenue, which are just harder to predict from a timing perspective. But we've reiterated revenue guidance from the year and so -- or for the year, and so I think you can infer that we think we're going to make that up in the fourth quarter just from a timing perspective. But the core business itself is doing terrific and strong bookings, strong installs, minimal churn and very, very good service delivery metrics all implied a really good growth on the core recurring business. With respect to capital intensity, yes, I think we're not ready to give any guidance for 2022, but I don't expect any changes -- any material changes. I think the general trajectory of margin enhancement and capital intensity kind of simmering at existing levels, if not a little below is kind of what we're still thinking.

Great. And I guess the OpEx was a good surprise there. Can you give us any color on what was going on there? Because I think elsewhere, people are just worried about inflationary pressures on costs, but is that something that's also sustainable?

Yes. I think so. We -- it's a combination of really three things, Simon. One, we've just been particularly cost conscious in the past couple of years. I think that's just a general good thing to do. But two, we've been pretty vocal about exiting low-margin non-recurring businesses that are not core to our business. So just like one-off construction projects, for example So those businesses have pretty much wound down and they're no longer in the numbers. And so you're seeing some benefit from that. But then thirdly, we've really focused on lease-up and bringing on these -- the higher margin, higher cash flow business. We're showing you the component parts of that, right, that slide where we show you the economics and then the lease up. But that stuff starts to really impact margin when you do it at scale and you're really seeing that. So ultimately, going forward, yes, that's exactly what we expect to continue focusing on.

At this time, there are no additional questions. I would like to turn it back over to Mr. Gunderman for your closing remarks.

Thank you. Thank you all for your interest in Uniti, and we look forward to having our next conversation in a few months.

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