RELEASE

Announces Strategic OpCo-PropCo Transaction with Everstream

       Settlement of Litigation with Windstream Effective

• Revenues of $258.8 Million for the Third Quarter
• Net Income of $0.04 Per Diluted Common Share for the Third Quarter
• AFFO Per Diluted Common Share of $0.42 for the Third Quarter
• Updates 2020 Outlook

LITTLE ROCK, Ark., Nov. 09, 2020 (GLOBE NEWSWIRE) -- Uniti Group Inc. (“Uniti” or the “Company”) (Nasdaq: UNIT) today announced its results for the third quarter 2020.

“Our fiber and leasing businesses continue to perform exceedingly well.  Install activity during the quarter at Uniti Fiber remained robust reflecting the strong demand we continue to see for our wireless and non-wireless service offerings.  At Uniti Leasing, we continue to drive additional lease up on our national fiber network.  This was reflected in the Everstream transaction we are announcing today, reinforcing the substantial value of our national network, including the fiber Uniti acquired the rights to in its settlement with Windstream,” commented Kenny Gunderman, President and Chief Executive Officer.

Mr. Gunderman continued, “The demand for our fiber networks has never been higher as we continue to drive high margin, low churn, recurring revenue to provide mission critical services.”

QUARTERLY RESULTS

Consolidated revenues for the third quarter of 2020 were $258.8 million.  Net income and Adjusted EBITDA were $7.5 million and $198.6 million, respectively, for the same period.  Net income attributable to common shares was $7.0 million for the period and included a $22.9 million pre-tax gain on the sale to Macquarie Infrastructure Partners (“MIP”) of a controlling ownership interest in the entity that holds a portion of Uniti’s former Midwest fiber network, and $20.8 million of transaction related and other costs.  Adjusted Funds From Operations (“AFFO”) attributable to common shareholders was $92.5 million, or $0.42 per diluted common share.

Uniti Fiber contributed $76.4 million of revenues and $25.4 million of Adjusted EBITDA for the third quarter of 2020, achieving Adjusted EBITDA margins of approximately 33%.  Uniti Fiber’s net success-based capital expenditures during the quarter were $34.6 million, and maintenance capital expenditures were $1.6 million.

Uniti Leasing contributed revenues of $182.4 million and Adjusted EBITDA of $181.1 million for the third quarter.  During the quarter, Uniti Leasing deployed $30.5 million towards growth capital investment initiatives, including $29.1 million as part of our settlement agreement with Windstream.

WINDSTREAM EMERGES FROM BANKRUPTCY; SETTLEMENT OF LITIGATION EFFECTIVE

On September 21, 2020, Uniti announced the effectiveness of the previously announced settlement with Windstream Holdings Inc. and certain of its subsidiaries (collectively, “Windstream”).  The settlement occurred in connection with Windstream’s emergence from bankruptcy.  The effectiveness of the settlement resolves any and all claims and causes of action that have been or may be asserted in the future by Uniti and Windstream regarding the 2015 spinoff of Uniti and related sale leaseback transaction, including all litigation brought against Uniti by Windstream and certain of its creditors during Windstream’s bankruptcy proceedings.  The release from claims applies to any Windstream successor and is binding going forward, including in any future Windstream bankruptcy.

INVESTMENT TRANSACTIONS

Uniti announced today a strategic OpCo-PropCo transaction with Everstream Solutions LLC (“Everstream”), which is majority owned by AMP Capital, a global investment manager headquartered in Sydney, Australia.  As part of the transaction, Uniti will enter into two 20 year IRU lease agreements with Everstream on Uniti owned fiber that spans 8 states and covers over 10,000 route miles and 220,000 fiber strand miles.  Concurrently, Uniti has agreed to sell to Everstream a portion of Uniti Fiber’s Northeast operations and certain dark fiber IRU contracts acquired as part of the Windstream settlement, that on a combined basis, currently generate approximately $24 million of annual revenue.  Total cash consideration to Uniti, including upfront IRU payments, is approximately $135 million.  In addition to the upfront proceeds, Uniti will receive fees of approximately $3 million annually from Everstream over the initial 20 year term of the IRU lease agreements, subject to an annual escalator of 2%. The transaction is subject to regulatory and other customary closing conditions and is expected to close in the second quarter of 2021.

On July 1, 2020, Uniti completed the sale of a controlling ownership stake in the entity that holds certain former Uniti Midwest fiber network assets to MIP for total cash consideration of approximately $168 million.  Uniti retained an investment interest in the entity, and the fiber network will continue to be leased to MIP at a fixed cash yield of 8.5%.

LIQUIDITY AND FINANCING TRANSACTIONS

At quarter-end, the Company had approximately $484 million of unrestricted cash and cash equivalents, and undrawn borrowing availability under its revolving credit agreement.  The Company’s leverage ratio at quarter end was 6.1x based on Net Debt to Annualized Adjusted EBITDA.

On November 5, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.15 per common share, payable on January 4, 2021 to stockholders of record on December 15, 2020.

UPDATED FULL YEAR 2020 OUTLOOK

The Company is updating its 2020 outlook for (i) the revised impact from the effectiveness of our settlement agreement with Windstream, (ii) transaction related costs and other items reported in the third quarter of this year, and (iii) other business unit level revisions.  Our current outlook excludes 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.

The Company’s consolidated outlook for 2020 is as follows (in millions):

CONFERENCE CALL

Uniti will hold a conference call today to discuss this earnings release at 4:15 PM Eastern Time (3:15 PM Central Time).  The dial-in number for the conference call is (844) 513-7153 (or (508) 637-5603 for international callers) and the conference ID is 3536128.  The conference call will be webcast live and can be accessed on the Company’s website at www.uniti.com.  A replay of the call will be available on the Company’s website or by telephone beginning today at approximately 8:00 PM Eastern Time. To access the telephone replay, which will be available for 14 days, please dial (855) 859-2056 and enter the conference ID number 3536128.

ABOUT UNITI

Uniti, an internally managed real estate investment trust, is engaged in the acquisition and construction of mission critical communications infrastructure, and is a leading provider of wireless infrastructure solutions for the communications industry.  As of September 30, 2020, Uniti owns 6.7 million fiber strand miles and other communications real estate throughout the United States. Additional information about Uniti can be found on its website at www.uniti.com.

FORWARD-LOOKING STATEMENTS

Certain statements in this press release and today’s conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended from time to time. Those forward-looking statements include all statements that are not historical statements of fact, including, without limitation, our 2020 financial outlook, our business strategies, growth prospects, industry trends, sales opportunities, impacts of the settlement with Windstream, and operating and financial performance.

Words such as "anticipate(s)," "expect(s)," "intend(s)," “estimate(s),” “foresee(s),” "plan(s)," "believe(s)," "may," "will," "would," "could," "should," "seek(s)" and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors which could materially alter our expectations include, but are not limited to, the future prospects of Windstream; changes in the accounting treatment of our settlement with Windstream; our ability to delever and achieve the ‘covenant reversion date’ under our secured notes due 2025, which would permit us to pay additional dividends to shareholders; the ability and willingness of our customers to meet and/or perform their obligations under any contractual arrangements entered into with us, including master lease arrangements; the ability of our customers to comply with laws, rules and regulations in the operation of the assets we lease to them; the ability and willingness of our customers to renew their leases with us upon their expiration, and the ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant; the adverse impact of litigation affecting us or our customers; our ability to renew, extend or obtain contracts with significant customers (including customers of the businesses we acquire); the availability of and our ability to identify suitable acquisition opportunities and our ability to acquire and lease the respective properties on favorable terms; the risk that we fail to fully realize the potential benefits of acquisitions or have difficulty integrating acquired companies; our ability to generate sufficient cash flows to service our outstanding indebtedness; our ability to access debt and equity capital markets (including to fund required payments pursuant to our settlement with Windstream); the impact on our business or the business of our customers as a result of credit rating downgrades and fluctuating interest rates; our ability to retain our key management personnel; our ability to qualify or maintain our status as a real estate investment trust (“REIT”); changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs; covenants in our debt agreements that may limit our operational flexibility; our expectations regarding the effect of the COVID-19 pandemic on our results of operations and financial condition; other risks inherent in the communications industry and in the ownership of communications distribution systems, including potential liability relating to environmental matters and illiquidity of real estate investments; and additional factors described in our reports filed with the SEC.

Uniti expressly disclaims any obligation to release publicly any updates or revisions to any of the forward-looking statements set forth in this press release and today’s conference call to reflect any change in its expectations or any change in events, conditions or circumstances on which any statement is based.

NON-GAAP PRESENTATION

This release and today’s conference call contain certain supplemental measures of performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”).  Such measures should not be considered as alternatives to GAAP.  Further information with respect to and reconciliations of such measures to the nearest GAAP measure can be found herein.

Uniti Group Inc.
Consolidated Balance Sheets
(In thousands, except per share data)

Uniti Group Inc.
Consolidated Statements of Operations
(In thousands, except per share data)

Uniti Group Inc.
Consolidated Statements of Cash Flows
(In thousands)

Uniti Group Inc.
Reconciliation of Net Income to FFO and AFFO
 (In thousands, except per share data)

Uniti Group Inc.
Reconciliation of EBITDA and Adjusted EBITDA
(In thousands)

Uniti Group Inc.
Projected Future Results ⁽¹⁾
(In millions)

Uniti Group Inc.
Projected Future Results ⁽¹⁾
(Per Diluted Share)

Components of Interest Expense ⁽¹⁾
(In millions)

NON-GAAP FINANCIAL MEASURES

We refer to EBITDA, Adjusted EBITDA, Funds From Operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and Adjusted Funds From Operations (“AFFO”) in our analysis of our results of operations, which are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). While we believe that net income, as defined by GAAP, is the most appropriate earnings measure, we also believe that EBITDA, Adjusted EBITDA, FFO and AFFO are important non-GAAP supplemental measures of operating performance for a REIT.

We define “EBITDA” as net income, as defined by GAAP, before interest expense, provision for income taxes and depreciation and amortization. We define “Adjusted EBITDA” as EBITDA before stock-based compensation expense and the impact, which may be recurring in nature, of transaction and integration related costs, costs associated with Windstream’s bankruptcy (including the costs of our settlement with Windstream), costs associated with litigation claims made against us, and costs associated with the implementation of our new enterprise resource planning system, collectively “Transaction Related and Other Costs”, the write off of unamortized deferred financing costs, costs incurred as a result of the early repayment of debt, including costs associated with the termination of related hedging activities, gains or losses on dispositions, changes in the fair value of contingent consideration and financial instruments, and other similar or infrequent items. Adjusted EBITDA includes adjustments to reflect the Company’s share of Adjusted EBITDA from unconsolidated entities.  We believe EBITDA and Adjusted EBITDA are important supplemental measures to net income because they provide additional information to evaluate our operating performance on an unleveraged basis. In addition, Adjusted EBITDA is calculated similar to defined terms in our material debt agreements used to determine compliance with specific financial covenants.  Since EBITDA and Adjusted EBITDA are not measures calculated in accordance with GAAP, they should not be considered as alternatives to net income determined in accordance with GAAP.

Because the historical cost accounting convention used for real estate assets requires the recognition of depreciation expense except on land, such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a REIT that use historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP. FFO is defined by NAREIT as net income attributable to common shareholders computed in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization and impairment charges, and includes adjustments to reflect the Company’s share of FFO from unconsolidated entities. We compute FFO in accordance with NAREIT’s definition.

The Company defines AFFO, as FFO excluding (i) transaction related and other costs; (ii) Windstream bankruptcy and litigation related expenses, including litigation settlement expenses and accretion on our settlement obligation as these items are not reflective of ongoing operating performance; (iii) certain non-cash revenues and expenses such as stock-based compensation expense, amortization of debt and equity discounts, amortization of deferred financing costs, depreciation and amortization of non-real estate assets, straight line revenues, non-cash income taxes, and the amortization of other non-cash revenues to the extent that cash has not been received, such as revenue associated with the amortization of tenant capital improvements; and (iv) the impact, which may be recurring in nature, of the write-off of unamortized deferred financing fees, additional costs incurred as a result of early repayment of debt, including costs associated with the termination of related hedging activities, taxes associated with tax basis cancellation of debt, gains or losses on dispositions, changes in the fair value of contingent consideration and financial instruments and similar or infrequent items less maintenance capital expenditures. AFFO includes adjustments to reflect the Company’s share of AFFO from unconsolidated entities. We believe that the use of FFO and AFFO, and their respective per share amounts, combined with the required GAAP presentations, improves the understanding of operating results of REITs among investors and analysts, and makes comparisons of operating results among such companies more meaningful. We consider FFO and AFFO to be useful measures for reviewing comparative operating performance. In particular, we believe AFFO, by excluding certain revenue and expense items, can help investors compare our operating performance between periods and to other REITs on a consistent basis without having to account for differences caused by unanticipated items and events, such as transaction and integration related costs. The Company uses FFO and AFFO, and their respective per share amounts, only as performance measures, and FFO and AFFO do not purport to be indicative of cash available to fund our future cash requirements. While FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating performance.

Further, our computations of EBITDA, Adjusted EBITDA, FFO and AFFO may not be comparable to that reported by other REITs or companies that do not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition or define EBITDA, Adjusted EBITDA and AFFO differently than we do. 

INVESTOR AND MEDIA CONTACTS:

Mark A. Wallace, 501-850-0866
Executive Vice President, Chief Financial Officer & Treasurer
mark.wallace@uniti.com

Bill DiTullio, 501-850-0872
Vice President, Finance and Investor Relations
bill.ditullio@uniti.com

Source: Uniti Group Inc.