Uniti(US:UNIT)2023-11-02 20:36markdown [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Uniti Group Inc.'s unaudited condensed consolidated financial statements and detailed notes for the period ended September 30, 2023 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (Thousands, except par value) | | September 30, 2023 | December 31, 2022 | | :---------------------------- | :----------------- | :------------------ | | **Assets:** | | | | Property, plant and equipment, net | $3,962,436 | $3,754,547 | | Cash and cash equivalents | $34,119 | $43,803 | | Goodwill | $208,378 | $361,378 | | Total Assets | $4,981,325 | $4,851,229 | | **Liabilities:** | | | | Notes and other debt, net | $5,582,057 | $5,188,815 | | Total liabilities | $7,425,765 | $7,122,435 | | **Shareholders' Deficit:** | | | | Total shareholders' deficit | $(2,444,440) | $(2,271,206) | | Total Liabilities and Shareholders' Deficit | $4,981,325 | $4,851,229 | [Condensed Consolidated Statements of Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Loss) Condensed Consolidated Statements of Loss (Thousands, except per share data) | Metric | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | | :--------------------------------- | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Total revenues | $290,655 | $283,103 | $864,175 | $845,112 | | Total costs and expenses | $415,353 | $452,580 | $990,535 | $906,108 | | Net loss | $(80,933) | $(155,749) | $(74,506) | $(49,117) | | Net loss attributable to common shareholders | $(81,223) | $(155,910) | $(75,378) | $(50,164) | | Basic loss per common share | $(0.34) | $(0.66) | $(0.32) | $(0.21) | | Diluted loss per common share | $(0.34) | $(0.66) | $(0.32) | $(0.21) | [Condensed Consolidated Statements of Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Condensed Consolidated Statements of Comprehensive Loss (Thousands) | | Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | | :---------- | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Net loss | $(80,933) | $(155,749) | $(74,506) | $(49,117) | | Other comprehensive income | — | $2,829 | — | $8,488 | | Comprehensive loss | $(80,933) | $(152,920) | $(74,506) | $(40,629) | | Comprehensive loss attributable to shareholders | $(80,897) | $(152,851) | $(74,473) | $(40,776) | [Condensed Consolidated Statements of Shareholders' Deficit](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Deficit) - **Total shareholders' deficit increased** from **$(2.27 billion)** at December 31, 2022, to **$(2.44 billion)** at September 30, 2023, primarily due to net loss and common stock dividends declared[15](index=15&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (Thousands) | | Nine Months Ended September 30, 2023 | Nine Months Ended September 30, 2022 | | :---------- | :----------------------------------- | :----------------------------------- | | Net cash provided by operating activities | $190,575 | $285,107 | | Net cash used in investing activities | $(365,153) | $(258,685) | | Net cash provided by (used in) financing activities | $164,894 | $(41,931) | | Net decrease in cash and cash equivalents | $(9,684) | $(15,509) | | Cash and cash equivalents at end of period | $34,119 | $43,394 | [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Financial%20Statements) [Note 1. Organization and Description of Business](index=13&type=section&id=Note%201.%20Organization%20and%20Description%20of%20Business) - **Uniti Group Inc. is an independent, internally managed REIT** focused on acquiring, constructing, and leasing mission-critical communications infrastructure, primarily **fiber optic, copper, and coaxial broadband networks and data centers**. The company operates through two main business lines: **Uniti Fiber** and **Uniti Leasing**[30](index=30&type=chunk) - Uniti operates an **'up-REIT' structure**, holding substantially all assets through Uniti Group LP, a Delaware limited partnership, which it controls as the sole general partner (owning approximately **99.96% of partnership interests** as of September 30, 2023). This structure facilitates **tax-efficient acquisitions** using common units of the Operating Partnership[31](index=31&type=chunk) [Note 2. Basis of Presentation and Summary of Significant Accounting Policies](index=13&type=section&id=Note%202.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) - The financial statements are prepared in accordance with **U.S. GAAP** for interim financial information and **SEC rules**. The company consolidates its Operating Partnership as a **variable interest entity** where it is the primary beneficiary[32](index=32&type=chunk)[34](index=34&type=chunk) - A significant portion of revenue (**66.9%** for the nine months ended September 30, 2023) is derived from **Windstream Leases**, posing a **concentration of credit risk**. Windstream's credit quality is monitored through ratings (**B3 by Moody's, B- by S&P**, both stable outlook) and financial statements[36](index=36&type=chunk)[38](index=38&type=chunk) - **Goodwill**, entirely within the **Uniti Fiber** segment, was impaired by **$153.0 million** (**$113.9 million net of tax**) during **Q3 2023** due to **rising interest rates** impacting the discount rate, following a **$216.0 million impairment** in Q3 2022 for similar reasons[39](index=39&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) [Note 3. Revenues](index=15&type=section&id=Note%203.%20Revenues) Revenue Disaggregated by Stream (Thousands) | Revenue Stream | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Uniti Fiber (contracts with customers) | $59,154 | $57,340 | $173,576 | $172,805 | | Uniti Leasing (contracts with customers) | $1,868 | $1,201 | $5,142 | $3,553 | | Uniti Leasing (leasing guidance) | $212,720 | $207,422 | $632,707 | $615,325 | | Uniti Fiber (leasing guidance) | $16,913 | $17,140 | $52,750 | $53,429 | | **Total revenue** | **$290,655** | **$283,103** | **$864,175** | **$845,112** | - As of September 30, 2023, future revenues from remaining performance obligations under **ASC 606** totaled **$646.1 million**, with **$584.9 million** from currently invoiced contracts (average **3.4 years** remaining) and **$61.2 million** from backlog sales bookings (average **5.0 years** remaining)[51](index=51&type=chunk) [Note 4. Leases](index=16&type=section&id=Note%204.%20Leases) Lease Income - Operating Leases (Thousands) | Period | 2023 | 2022 | | :----- | :--- | :--- | | Three Months Ended September 30 | $229,633 | $224,562 | | Nine Months Ended September 30 | $685,457 | $668,754 | - **Total future minimum lease payments** to be received under non-cancellable operating leases as of September 30, 2023, amount to **$5.8 billion**, with **$4.9 billion** relating to the **Windstream Leases**[54](index=54&type=chunk) Future Lease Payments (Thousands) | Year | Operating Leases | Finance Leases | | :--- | :--------------- | :------------- | | 2023 | $4,169 | $928 | | 2024 | $17,941 | $3,521 | | 2025 | $15,090 | $3,468 | | 2026 | $11,701 | $3,335 | | 2027 | $9,060 | $2,960 | | Thereafter | $101,405 | $12,934 | | **Total undiscounted lease payments** | **$159,366** | **$27,146** | | Less: imputed interest | $(78,064) | $(8,758) | | **Total lease liabilities** | **$81,302** | **$18,388** | [Note 5. Investments in Unconsolidated Entities](index=18&type=section&id=Note%205.%20Investments%20in%20Unconsolidated%20Entities) - Uniti's investment in Fiber Holdings, an **equity method unconsolidated entity**, was approximately **$37.7 million** as of September 30, 2023, representing about a **20% economic interest** in the Propco that controls the Midwest fiber network assets[58](index=58&type=chunk) - **The company completed the sale of its investment** in Harmoni Towers LP on **June 21, 2022**, for **$32.5 million cash**, resulting in a pre-tax gain of **$7.9 million**[59](index=59&type=chunk) [Note 6. Fair Value of Financial Instruments](index=18&type=section&id=Note%206.%20Fair%20Value%20of%20Financial%20Instruments) Fair Value of Financial Instruments (Thousands) | | September 30, 2023 Total | December 31, 2022 Total | | :---------- | :----------------------- | :---------------------- | | **Liabilities** | | | | Senior secured notes - 10.50%, due February 15, 2028 | $2,530,476 | — | | Senior secured notes - 4.75%, due April 15, 2028 | $460,130 | $469,740 | | Senior unsecured notes - 6.00%, due January 15, 2030 | $441,809 | $467,401 | | Senior unsecured notes - 6.50%, due February 15, 2029 | $723,720 | $759,917 | | Exchangeable senior notes - 4.00%, due June 15, 2024 | $118,016 | $127,024 | | Convertible senior notes - 7.50% due December 1, 2027 | $263,535 | $297,765 | | Senior secured revolving credit facility, variable rate | $270,973 | $187,981 | | Settlement payable | $174,075 | $232,350 | | **Total** | **$4,982,734** | **$4,750,497** | - **The total principal balance of outstanding notes and other debt was $5.68 billion** at September 30, 2023, with a fair value of **$4.98 billion**. **The Settlement Payable to Windstream was $185.9 million** as of September 30, 2023[63](index=63&type=chunk)[64](index=64&type=chunk) [Note 7. Property, Plant and Equipment](index=20&type=section&id=Note%207.%20Property,%20Plant%20and%20Equipment) Carrying Value of Property, Plant and Equipment (Thousands) | | September 30, 2023 | December 31, 2022 | | :---------- | :----------------- | :------------------ | | Land | $30,035 | $28,845 | | Fiber | $4,763,091 | $4,434,506 | | Copper | $3,978,336 | $3,964,439 | | Construction in progress | $57,597 | $46,508 | | Total | $10,127,906 | $9,728,177 | | Less accumulated depreciation | $(6,165,470) | $(5,973,630) | | **Net property, plant and equipment** | **$3,962,436** | **$3,754,547** | - **Depreciation expense** for the three and nine months ended September 30, 2023, was **$69.9 million** and **$209.1 million**, respectively, showing an increase from **$66.1 million** and **$194.9 million** in the prior year periods[65](index=65&type=chunk) [Note 8. Derivative Instruments and Hedging Activities](index=20&type=section&id=Note%208.%20Derivative%20Instruments%20and%20Hedging%20Activities) - **Uniti Fiber Holdings Inc. entered into Note Hedge Transactions** to reduce potential dilution from **Exchangeable Notes**, which are recorded in **additional paid-in capital** and not remeasured as derivatives[66](index=66&type=chunk)[67](index=67&type=chunk) - The company also entered into **Warrant transactions** to sell warrants to acquire common stock, which are also recorded in **additional paid-in capital** and not remeasured as derivatives. The maximum number of shares issuable under warrants has **decreased** due to partial unwind agreements[68](index=68&type=chunk)[69](index=69&type=chunk) [Note 9. Goodwill and Intangible Assets and Liabilities](index=21&type=section&id=Note%209.%20Goodwill%20and%20Intangible%20Assets%20and%20Liabilities) Changes in Goodwill Carrying Value (Thousands) | | Uniti Fiber | Total | | :---------- | :---------- | :---- | | Balance at December 31, 2022 | $361,378 | $361,378 | | Goodwill Impairment (Note 2) | $(153,000) | $(153,000) | | **Balance at September 30, 2023** | **$208,378** | **$208,378** | Intangible Assets and Liabilities, Net (Thousands) | | September 30, 2023 | December 31, 2022 | | :---------- | :----------------- | :------------------ | | Total intangible assets, net | $312,541 | $334,846 | | Total intangible liabilities, net | $159,071 | $167,092 | - **Amortization expense for intangible assets was $7.4 million** for Q3 2023 and **$22.3 million** for the nine months ended September 30, 2023. Estimated annual amortization expense is **$29.8 million** for 2023 and **$29.7 million** for 2024-2027[72](index=72&type=chunk) - **Revenue from amortization of below-market leases was $2.7 million** for Q3 2023 and **$8.0 million** for the nine months ended September 30, 2023. Estimated annual revenue from this source is **$10.7 million** for 2023-2027[73](index=73&type=chunk) [Note 10. Notes and Other Debt](index=22&type=section&id=Note%2010.%20Notes%20and%20Other%20Debt) Notes and Other Debt (Thousands) | | September 30, 2023 Principal | December 31, 2022 Principal | | :---------- | :--------------------------- | :-------------------------- | | Senior secured notes - 10.50% due Feb 15, 2028 | $2,600,000 | — | | Senior secured notes - 4.75% due Apr 15, 2028 | $570,000 | $570,000 | | Senior unsecured notes - 6.00% due Jan 15, 2030 | $700,000 | $700,000 | | Senior unsecured notes - 6.50% due Feb 15, 2029 | $1,110,000 | $1,110,000 | | Exchangeable senior notes - 4.00% due Jun 15, 2024 | $122,942 | $137,873 | | Convertible senior notes - 7.50% due Dec 1, 2027 | $306,500 | $306,500 | | Senior secured revolving credit facility | $271,000 | $188,000 | | **Total Principal Amount** | **$5,680,442** | **$5,262,373** | | Less unamortized discount, premium and debt issuance costs | $(98,385) | $(73,558) | | **Notes and other debt, net** | **$5,582,057** | **$5,188,815** | - On **February 14, 2023**, the company issued **$2.6 billion of 10.50% Senior Secured Notes** due February 15, 2028, using proceeds to redeem **$2.25 billion of 7.875% senior secured notes** due 2025 and repay revolving credit facility borrowings. This resulted in a **$32.3 million loss on extinguishment of debt**[82](index=82&type=chunk) - **The Revolving Credit Facility's maturity was extended** to **September 24, 2027**, and transitioned from **LIBOR to Term SOFR** with a **10 basis point credit spread adjustment**. The company was in **compliance with all debt covenants** as of September 30, 2023[78](index=78&type=chunk)[79](index=79&type=chunk) [Note 11. Earnings Per Share](index=24&type=section&id=Note%2011.%20Earnings%20Per%20Share) Loss Per Common Share (Thousands, except per share data) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss attributable to common shareholders | $(81,223) | $(155,910) | $(75,378) | $(50,164) | | Basic weighted-average common shares outstanding | 236,533 | 235,739 | 236,352 | 235,483 | | Basic loss per common share | $(0.34) | $(0.66) | $(0.32) | $(0.21) | | Diluted loss per common share | $(0.34) | $(0.66) | $(0.32) | $(0.21) | - For the three and nine months ended September 30, 2023, **1,053,189 non-participating securities** and **53,427,833** and **53,836,845 potential common shares** related to Exchangeable Notes and Convertible Notes, respectively, were excluded from EPS computation as their effect would have been **anti-dilutive**[96](index=96&type=chunk) [Note 12. Segment Information](index=28&type=section&id=Note%2012.%20Segment%20Information) - **Uniti Group Inc. manages its operations through two reportable segments**: **Uniti Leasing** (**REIT operations**, leasing mission-critical communications assets) and **Uniti Fiber** (infrastructure solutions, including **cell site backhaul and dark fiber**). Corporate operations include shared service functions[98](index=98&type=chunk)[99](index=99&type=chunk) - **Segment performance is evaluated using Adjusted EBITDA**. For the three months ended September 30, 2023, Uniti Leasing reported **$208.6 million** in **Adjusted EBITDA** and Uniti Fiber reported **$29.9 million**. For the nine months ended September 30, 2023, Uniti Leasing reported **$620.1 million** and Uniti Fiber reported **$88.7 million**[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) [Note 13. Commitments and Contingencies](index=31&type=section&id=Note%2013.%20Commitments%20and%20Contingencies) - **Uniti is obligated to make $490.1 million** in cash payments to Windstream in **20 quarterly installments**, having paid **$288.9 million** as of September 30, 2023[104](index=104&type=chunk) - **The company is committed to reimbursing Windstream up to $1.75 billion** for **Growth Capital Improvements (GCIs)** through 2029, with annual limits. During the nine months ended September 30, 2023, Uniti reimbursed **$233.5 million** for GCIs, bringing the total to **$794.2 million**[105](index=105&type=chunk) - **Rent payable by Windstream increases by 8.0%** of each GCI reimbursement installment, escalating by **100.5%** of the prior rate annually[106](index=106&type=chunk) - **A class action lawsuit was settled for $38.9 million**, fully funded by insurance carriers. Derivative actions were settled for **non-monetary damages** and **$0.8 million** in attorney's fees[109](index=109&type=chunk)[110](index=110&type=chunk) [Note 14. Accumulated Other Comprehensive Loss](index=33&type=section&id=Note%2014.%20Accumulated%20Other%20Comprehensive%20Loss) Changes in Accumulated Other Comprehensive Loss (Thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Balance at beginning of period attributable to shareholders (Cash flow hedge) | $(30,353) | $(30,353) | $(30,353) | $(30,353) | | Balance at end of period attributable to shareholders (Cash flow hedge) | $(30,353) | $(30,353) | $(30,353) | $(30,353) | | Balance at beginning of period attributable to shareholders (Interest rate swap termination) | $30,353 | $26,837 | $30,353 | $21,189 | | Amounts reclassified from accumulated other comprehensive income | — | $2,829 | — | $8,488 | | Balance at end of period attributable to shareholders (Interest rate swap termination) | $30,353 | $29,665 | $30,353 | $29,665 | | **Accumulated other comprehensive loss at end of period** | **$—** | **$(688)** | **$—** | **$(688)** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Uniti Group Inc.'s financial condition and operations for Q3 2023, covering segment performance, non-GAAP measures, liquidity, and accounting estimates [1. Overview](index=33&type=section&id=1.%20Overview) - **Uniti Group Inc. is an independent, internally managed REIT** focused on acquiring and constructing mission-critical communications infrastructure, including **fiber optic, copper, and coaxial broadband networks and data centers**[115](index=115&type=chunk) - The company operates as a **REIT** for U.S. federal income tax purposes, with its fiber and certain leasing businesses operating through **Taxable REIT Subsidiaries (TRSs)** which are subject to corporate income taxes[117](index=117&type=chunk) - Uniti aims to grow and diversify its portfolio through various transaction structures, including **sale-leasebacks, dark fiber leasing, whole company acquisitions, capital investment financing, and M&A financing**[119](index=119&type=chunk) - **The company manages operations through two reportable segments**: **Uniti Leasing** (**REIT operations**, leasing communications assets) and **Uniti Fiber** (infrastructure solutions like **cell site backhaul and dark fiber**)[120](index=120&type=chunk)[121](index=121&type=chunk) [2. Results of Operations](index=35&type=section&id=2.%20Results%20of%20Operations) Consolidated Results of Operations (Thousands, % of Revenues) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :----- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total revenues | $290,655 (100.0%) | $283,103 (100.0%) | $864,175 (100.0%) | $845,112 (100.0%) | | Interest expense, net | $120,691 (41.5%) | $97,731 (34.5%) | $389,243 (45.0%) | $290,280 (34.3%) | | Depreciation and amortization | $77,337 (26.6%) | $73,516 (26.1%) | $231,379 (26.8%) | $217,276 (25.7%) | | Goodwill impairment | $153,000 (52.6%) | $216,000 (76.3%) | $153,000 (17.7%) | $216,000 (25.6%) | | Net loss attributable to common shareholders | $(81,223) (27.9%) | $(155,910) (55.1%) | $(75,378) (8.7%) | $(50,164) (5.9%) | Operating Metrics | Operating Metrics | September 30, 2023 | September 30, 2022 | % Increase (Decrease) | | :---------------- | :----------------- | :----------------- | :-------------------- | | Uniti Leasing: Fiber strand miles | 5,460,000 | 5,140,000 | 6.2% | | Uniti Leasing: Copper strand miles | 230,000 | 230,000 | 0.0% | | Uniti Fiber: Fiber strand miles | 2,940,000 | 2,840,000 | 3.5% | | Uniti Fiber: Customer connections | 28,257 | 27,615 | 2.3% | - **Uniti Leasing revenues increased by $5.9 million (2.8%)** for the three months ended September 30, 2023, and by **$18.9 million (3.1%)** for the nine months ended September 30, 2023, primarily driven by **Growth Capital Improvement (GCI) revenue** and continued investment by Windstream in **Tenant Funded Capital Improvements (TCIs)**[127](index=127&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - **Uniti Fiber revenues increased by $1.6 million (2.1%)** for the three months ended September 30, 2023, mainly due to increased **Enterprise and wholesale revenues**, partially offset by a decrease in **Lit backhaul services**. For the nine months, Uniti Fiber revenues were relatively flat, with growth in Enterprise and wholesale offset by declines in **E-Rate and government** and Lit backhaul[137](index=137&type=chunk)[138](index=138&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk) - **Interest expense, net, increased significantly by $23.0 million** for the three months and **$99.0 million** for the nine months ended September 30, 2023, primarily due to **higher cash interest** on secured and unsecured notes and a **$32.3 million loss on extinguishment of debt** related to the 2025 Secured Notes redemption[139](index=139&type=chunk)[162](index=162&type=chunk) - **Depreciation expense increased** for both Uniti Leasing and Uniti Fiber segments due to **asset additions** since September 30, 2022[140](index=140&type=chunk)[141](index=141&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - **Goodwill impairment charges of $153.0 million** were recorded in the **Uniti Fiber** segment for both the three and nine months ended September 30, 2023, driven by **macroeconomic factors** and **increased interest rates** impacting the discount rate[149](index=149&type=chunk)[173](index=173&type=chunk) [3. Non-GAAP Financial Measures](index=48&type=section&id=3.%20Non-GAAP%20Financial%20Measures) - The company uses **non-GAAP financial measures** like **EBITDA, Adjusted EBITDA, FFO (NAREIT defined), and AFFO** to supplement GAAP net income, believing they provide additional information for evaluating operating performance and comparability among REITs[177](index=177&type=chunk)[179](index=179&type=chunk)[181](index=181&type=chunk) Reconciliation of Net Loss to EBITDA and Adjusted EBITDA (Thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss | $(80,933) | $(155,749) | $(74,506) | $(49,117) | | EBITDA | $74,000 | $2,442 | $496,252 | $448,256 | | Adjusted EBITDA | $233,010 | $225,053 | $692,378 | $677,006 | Reconciliation of Net Loss to FFO and AFFO (Thousands) | | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net loss attributable to common shareholders | $(81,223) | $(155,910) | $(75,378) | $(50,164) | | FFO attributable to common shareholders | $(26,831) | $(102,474) | $89,004 | $107,733 | | AFFO attributable to common shareholders | $95,340 | $112,578 | $293,691 | $339,819 | [4. Liquidity and Capital Resources](index=51&type=section&id=4.%20Liquidity%20and%20Capital%20Resources) - **Principal liquidity needs include** funding operating expenses, debt service, investment activities (including capital expenditures), and dividend distributions. The company is obligated to make **$490.1 million** in cash payments to Windstream and reimburse up to **$1.75 billion** for Growth Capital Improvements through 2029[186](index=186&type=chunk) - **As of September 30, 2023, Uniti had $34.1 million** in cash and cash equivalents and **$229.0 million** in borrowing availability under its Revolving Credit Facility[188](index=188&type=chunk) - **Net cash provided by operating activities decreased to $190.6 million** for the nine months ended September 30, 2023, from **$285.1 million** in the prior year, primarily due to **increased cash interest expense** and changes in working capital[188](index=188&type=chunk) - **Net cash used in investing activities increased by $106.5 million to $365.2 million** for the nine months ended September 30, 2023, mainly driven by a **$75.4 million increase in Growth Capital Improvements**[189](index=189&type=chunk) - **Net cash provided by financing activities was $164.9 million** for the nine months ended September 30, 2023, a significant change from net cash used of **$41.9 million** in the prior year, primarily due to **proceeds from new secured notes** offset by debt repayments and related costs[190](index=190&type=chunk) Capital Expenditures (Thousands) | | Success Based | Maintenance | Non-Network | Total | | :---------- | :------------ | :---------- | :---------- | :---- | | Uniti Leasing, excluding growth capital improvements | $20,657 | — | — | $20,657 | | Growth capital improvements | $233,465 | — | — | $233,465 | | Uniti Fiber | $108,173 | $5,338 | $631 | $114,142 | | **Total capital expenditures** | **$362,295** | **$5,338** | **$631** | **$368,264** | - **The company intends to make dividend payments** of all or substantially all of its taxable income to maintain **REIT status**. **Quarterly cash dividends of $0.15 per share** were declared for the periods ended March 31, June 30, and September 30, 2023[203](index=203&type=chunk)[204](index=204&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=57&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to market risk disclosures were reported compared to the Annual Report - **No material changes to market risk disclosures** were reported compared to the Annual Report[213](index=213&type=chunk) [Item 4. Controls and Procedures](index=57&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were effective as of September 30, 2023, with no material changes in internal control over financial reporting - Management, including the principal executive and financial officers, concluded that **disclosure controls and procedures were effective** as of September 30, 2023[215](index=215&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter ended September 30, 2023, that materially affected or are reasonably likely to materially affect internal control over financial reporting[216](index=216&type=chunk) [PART II. OTHER INFORMATION](index=58&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=58&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from Note 13 of the financial statements - **Legal proceedings information is incorporated by reference** from Note 13 to the Condensed Consolidated Financial Statements[219](index=219&type=chunk) [Item 1A. Risk Factors](index=58&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported compared to the Annual Report - **No material changes to risk factors** were reported compared to the Annual Report[220](index=220&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=58&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details shares withheld from employees for tax obligations related to restricted stock vesting Issuer Purchases of Equity Securities (Shares Withheld for Tax) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----- | :----------------------------- | :--------------------------- | | July 1, 2023 to July 31, 2023 | 644 | $5.07 | | August 1, 2023 to August 31, 2023 | 987 | $5.49 | | September 1, 2023 to September 30, 2023 | 67 | $4.58 | | **Total** | **1,698** | **$5.30** | [Item 3. Defaults Upon Senior Securities](index=58&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - **No defaults upon senior securities** were reported[223](index=223&type=chunk) [Item 4. Mine Safety Disclosures](index=58&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company - **Mine safety disclosures are not applicable**[223](index=223&type=chunk) [Item 5. Other Information](index=58&type=section&id=Item%205.%20Other%20Information) The Board amended Bylaws for SEC Rule 14a-19 compliance; no Rule 10b5-1 trading arrangements were adopted or terminated - On **November 1, 2023**, the Board approved an amendment to the Bylaws to address **SEC Rule 14a-19** regarding universal proxy cards, requiring stockholders to comply with the rule for nominations and use a non-white proxy card[223](index=223&type=chunk) - **No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements** during the three months ended September 30, 2023[225](index=225&type=chunk) [Item 6. Exhibits](index=59&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including amended Bylaws, officer certifications, and Inline XBRL documents - **Key exhibits include the Amended and Restated Bylaws** (as amended November 1, 2023), **certifications of the Principal Executive Officer and Principal Financial Officer** (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act), and **Inline XBRL documents**[226](index=226&type=chunk)