Uniti Group Inc (UNIT) Q1 2025 Earnings Call Highlights: Strong Growth and Strategic Advancements

GuruFocus News

Wed, May 7, 2025, 1:08 AM 4 min read

Consolidated Revenue: $294 million for Q1 2025.
Consolidated Adjusted EBITDA: $238 million for Q1 2025.
AFFO Attributed to Common Shareholders: $92 million for Q1 2025.
AFFO Per Diluted Common Share: $0.35 for Q1 2025.
Uniti Leasing Revenue: $222 million for Q1 2025.
Uniti Leasing Adjusted EBITDA: $215 million, with a margin of 97% for Q1 2025.
Uniti Fiber Revenue: $72 million for Q1 2025.
Uniti Fiber Adjusted EBITDA: $29 million, with a margin of 40% for Q1 2025.
Net Success-Based CapEx for Uniti Leasing: $170 million for Q1 2025.
Net Success-Based CapEx for Uniti Fiber: $18 million for Q1 2025.
2025 Revenue Guidance for Uniti Leasing: $902 million at the midpoint.
2025 Adjusted EBITDA Guidance for Uniti Leasing: $872 million at the midpoint.
2025 Revenue Guidance for Uniti Fiber: $304 million at the midpoint.
2025 Adjusted EBITDA Guidance for Uniti Fiber: $125 million at the midpoint, with a margin of approximately 41%.
Full-Year AFFO Guidance: $1.40 to $1.47 per diluted common share, with a midpoint of $1.43.
Leverage Ratio: 6.09 times based on net debt to annualized adjusted EBITDA for Q1 2025.

Warning! GuruFocus has detected 6 Warning Signs with UNIT.

Release Date: May 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Uniti Group Inc (NASDAQ:UNIT) reported strong first-quarter performance with mid-single-digit top-line growth and high-single-digit adjusted EBITDA growth.
The company reiterated its full-year revenue, adjusted EBITDA, and AFFO guidance, indicating confidence in its financial outlook.
Uniti Group Inc (NASDAQ:UNIT) is making significant progress in expanding its fiber network, with plans to double the number of homes passed with fiber by the end of 2025.
The merger with Windstream received overwhelming shareholder approval, with 97% of voting shareholders in favor, and is on track to close in the second half of the year.
The company is experiencing strong demand from wireless carriers and hyperscalers, with bookings almost doubling compared to the same quarter last year.

Negative Points

The company faces potential risks from proposed tariff changes, although it currently anticipates little to no effect on its business.
There is increased volatility in capital markets and a risk of recession, which could impact the company's financial performance.
Non-recurring revenue at Uniti Fiber was lower than expected due to a delay in a $4 million one-time sale of fiber to a government customer.
The cost of capital has been volatile, although it remains better compared to levels prior to the merger announcement with Windstream.
The company is still in a large investment period for learning models, which may not be fully reflected in current bookings.

Q & A Highlights

Q: Kenny, are we seeing any slowdown in M&A activity due to the current market environment? Also, can you provide insights on the high mix of lease-ups and any shift away from new builds? A: Kenneth Gunderman, CEO: No, we don't see any slowdown in M&A activity. In fact, there's a lot of interest in the fiber space, driven by industry convergence and hyperscaler activity. Regarding lease-ups, while quarterly figures can vary, we are not seeing a slowdown in investment for large-language models. We anticipate large greenfield opportunities and are excited about the inference phase, which will drive recurring revenue for fiber businesses.

Q: Can you unpack the nature of the bookings this quarter, particularly those related to AI, and how do the returns on AI-driven builds compare to others? A: Kenneth Gunderman, CEO: Approximately 15-20% of bookings are related to hyperscalers, consistent with past quarters. While AI is a significant theme, other use cases like fiber-to-the-home and wireless are also growing. AI-related deals often involve high NRCs and are treated as strategic sales. Our hyperscaler deals are tracking ahead of our traditional anchor lease-up model, nearing 20% yields.

Q: How is Uniti positioned in terms of capital markets and financing, especially with the ABS market? A: Paul Bullington, CFO: Our cost of capital has improved significantly, with debt yielding around 7.5% compared to over 12% two years ago. The ABS market remains an attractive financing source, and we see a $1 billion-plus near-term opportunity for incremental ABS capacity on our fiber assets.

Q: What are the expected impacts of the merger with Windstream on Uniti's business strategy and financial outlook? A: Kenneth Gunderman, CEO: The merger extends our fiber network and will bring large parts of Windstream's business on net. We expect mid-single-digit revenue growth and declining capital intensity. By 2025, we aim to convert about 2 million of Kinetic's homes to fiber, with plans to reach 3.5 million by 2029.

Q: Can you elaborate on the regulatory environment and its impact on Uniti's operations? A: Kenneth Gunderman, CEO: We're encouraged by regulatory changes, such as leniency towards retiring copper networks and the use of government subsidies for fiber deployment. These trends provide a favorable backdrop for our business model and growth strategy.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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