UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
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Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01 Regulation FD Disclosure
Uniti Group Inc. (the “Company” or “Uniti”) is furnishing this Current Report on Form 8-K to provide certain financial and other information of Windstream Holdings II, LLC, successor in interest to Windstream Holdings, Inc., and its consolidated subsidiaries (collectively, “Windstream”) regarding the period ended March 31, 2024. The information furnished herein was provided to the Company by Windstream; the Company did not assist in the preparation or review of this information and makes no representation as to its accuracy.
The information contained in this Item 7.01, including the exhibit attached hereto, is being “furnished” and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of Section 18 of the Exchange Act. The information in this Item 7.01 shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or into any filing or other document pursuant to the Exchange Act, except as otherwise expressly stated in any such filing.
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No Offer or Solicitation
This communication and the information contained in it are provided for information purposes only and are not intended to be and shall not constitute a solicitation of any vote or approval, or an offer to sell or solicitation of an offer to buy, or an invitation or recommendation to subscribe for, acquire or buy securities of Uniti, Windstream or the combined company (“New Uniti”) or any other financial products or securities, in any place or jurisdiction, nor shall there be any offer, solicitation or sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made in the United States absent registration under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or pursuant to an exemption from, or in a transaction not subject to, such registration requirements.
Additional Information and Where to Find It
Uniti and Windstream plan to file relevant materials with the SEC in connection with the contemplated transaction (the “Transaction”), including a registration statement on Form S-4 with the SEC that contains a proxy statement/prospectus and other documents. Uniti will mail the proxy statement/prospectus contained in the Form S-4 to its stockholders. This communication is not a substitute for any registration statement, proxy statement/prospectus or other documents that may be filed with the SEC in connection with the Transaction.
THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION WILL CONTAIN IMPORTANT INFORMATION ABOUT UNITI, WINDSTREAM, NEW UNITI, THE TRANSACTION AND RELATED MATTERS. INVESTORS SHOULD READ THE PROXY STATEMENT/PROSPECTUS AND SUCH OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THE PROXY STATEMENT/PROSPECTUS AND SUCH DOCUMENTS, BEFORE THEY MAKE ANY DECISION WITH RESPECT TO THE TRANSACTION. The proxy statement/prospectus, any amendments or supplements thereto and all other documents filed with the SEC in connection with the Transaction will be available when filed free of charge on the SEC’s website (at www.sec.gov). Copies of documents filed with the SEC by Uniti will be made available free of charge on Uniti's investor relations website (at https://investor.uniti.com/financial-information/sec-filings).
Participants in the Solicitation
Uniti, Windstream and their respective directors and certain of their executive officers and other employees may be deemed to be participants in the solicitation of proxies from Uniti’s stockholders in connection with the Transaction. Information about Uniti’s directors and executive officers is set forth in the sections titled “Proposal No. 1 Election of Directors” and “Security Ownership of Certain Beneficial Owners and Management” included in Uniti’s proxy statement for its 2024 annual meeting of stockholders, which was filed with the SEC on April 11, 2024 (and which is available at https://www.sec.gov/Archives/edgar/data/1620280/000110465924046100/0001104659-24-046100-index.htm), the section titled “Directors, Executive Officers and Corporate Governance” included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the SEC on February 29, 2024 (and which is available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1620280/000162828024008054/unit-20231231.htm), and subsequent statements of beneficial ownership on file with the SEC and other filings made from time to time with the SEC. Additional information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of Uniti stockholders in connection with the Transaction, including a description of their direct or indirect interests, by security holdings or otherwise, will be set forth in the proxy statement/prospectus and other relevant materials when they are filed with the SEC. These documents can be obtained free of charge from the sources indicated above.
Forward-Looking Statements
This communication contains forward-looking statements, including within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can often be identified by terms such as “may,” “will,” “appears,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these words or other similar terms or expressions that concern expectations, strategy, plans, or intentions. However, the absence of these words or similar terms does not mean that a statement is not forward-looking. All forward-looking statements are based on information and estimates available to Uniti and Windstream at the time of this communication and are not guarantees of future performance.
Examples of forward-looking statements in this communication (made at the date of this communication unless otherwise indicated) include, among others, statements regarding our merger with Windstream and the future performance of New Uniti (together with Windstream and Uniti, the “Merged Group”), the perceived and potential synergies and other benefits of the Transaction, and expectations around the financial impact of the Transaction on the Merged Group’s financials. In addition, this communication contains statements concerning the intentions, beliefs and expectations, plans, strategies and objectives of the directors and management of Uniti and Windstream for Uniti and Windstream, respectively, and the Merged Group, the anticipated timing for and outcome and effects of the Transaction (including expected benefits to shareholders of Uniti), expectations for the ongoing development and growth potential of the Merged Group and the future operation of Uniti, Windstream and the Merged Group.
These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement and may include statements regarding the expected timing and structure of the Transaction; the ability of the parties to complete the Transaction considering the various closing conditions; the expected benefits of the Transaction, such as improved operations, enhanced revenues and cash flow, synergies, growth potential, market profile, business plans, expanded portfolio and financial strength; the competitive ability and position of New Uniti following completion of the Transaction; and anticipated growth strategies and anticipated trends in Uniti’s, Windstream’s and, following the expected completion of the Transaction, New Uniti’s business.
In addition, other factors related to the Transaction that contribute to the uncertain nature of the forward-looking statements and that could cause actual results and financial condition to differ materially from those expressed or implied include, but are not limited to: the satisfaction of the conditions precedent to the consummation of the Transaction, including, without limitation, the receipt of shareholder and regulatory approvals on the terms desired or anticipated; unanticipated difficulties or expenditures relating to the Transaction, including, without limitation, difficulties that result in the failure to realize expected synergies, efficiencies and cost savings from the Transaction within the expected time period (if at all); potential difficulties in Uniti’s and Windstream’s ability to retain employees
as a result of the announcement and pendency of the Transaction; risks relating to the value of New Uniti’s securities to be issued in the Transaction; disruptions of Uniti’s and Windstream’s current plans, operations and relationships with customers caused by the announcement and pendency of the Transaction; legal proceedings that may be instituted against Uniti or Windstream following announcement of the Transaction; funding requirements; regulatory restrictions (including changes in regulatory restrictions or regulatory policy) and risks associated with general economic conditions.
Additional factors that could cause actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements are detailed in the filings with the SEC, including Uniti’s annual report on Form 10-K, periodic quarterly reports on Form 10-Q, periodic current reports on Form 8-K and other documents filed with the SEC.
There can be no assurance that the Transaction will be implemented or that plans of the respective directors and management of Uniti and Windstream for the Merged Group will proceed as currently expected or will ultimately be successful. Investors are strongly cautioned not to place undue reliance on forward-looking statements, including in respect of the financial or operating outlook for Uniti, Windstream or the Merged Group (including the realization of any expected synergies).
Except as required by applicable law, Uniti does not assume any obligation to, and expressly disclaims any duty to, provide any additional or updated information or to update any forward-looking statements, whether as a result of new information, future events or results, or otherwise. Nothing in this communication will, under any circumstances (including by reason of this communication remaining available and not being superseded or replaced by any other presentation or publication with respect to Uniti, Windstream or the Merged Group, or the subject matter of this communication), create an implication that there has been no change in the affairs of Uniti or Windstream since the date of this communication.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
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Exhibit Number |
Description | |
| 99.1 | Windstream presentation regarding the period ended March 31, 2024 | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| UNITI GROUP INC. | ||
| By: | /s/ Daniel L. Heard | |
| Name: | Daniel L. Heard | |
| Title: | Executive Vice President - General Counsel and Secretary | |
Date: May 3, 2024
Exhibit 99.1
1Q24 Financial Earnings May 2, 2024
2 This presentation includes forward - looking statements that are subject to risks and uncertainties that could cause actual future events and results to differ materially from those expressed in the forward - looking statements. Forward - looking statements are typically identified by words or phrases such as “wi ll,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “forecast” and other words and terms of similar meaning. Forward - looking statements include, but are not limited to, guidance regarding 2024 financial and operational results and our ab ility to successfully execute our 2024 company strategic goals supporting the guidance, including our quality initiatives designed to improve our customer’s experiences; an tic ipated Kinetic broadband subscribers and market penetration growth, including broadband additions; availability and timing of delivery of fiber broadband to customers, inclu din g fiber broadband penetration; number of households or locations that may be served generally and related to funding from various state and federal broadband programs, including fu ture programs, public - private partnerships with government entities, the Rural Digital Opportunity Fund and the Broadband Equity and Access Deployment Program (BEAD); opport uni ties related to strategic sales, products, and strategic revenue growth across all of our business units; statements concerning the CLEC and ILEC Master Leases with Uniti Group, Inc.; expectations regarding expense management activities, including continuation of reduction in interconnection and access expense, and the timing and benefit of such act ivi ties; and any other statements regarding plans, objectives, expectations and intentions and other statements that are not historical facts. These statements, along with othe r f orward - looking statements regarding Windstream’s overall business outlook, are based on estimates, projections, beliefs, and assumptions that Windstream believes are reasonab le but are not guarantees of future events, performance, or results. Actual future events and results may differ materially from those expressed in these forward - looking st atements as the result of a number of important factors. Important factors that could cause actual results to differ materially from those indicated by such forward - looking statements i nclude risks and uncertainties relating to increased competitive pressures as state and federal broadband funding programs provide opportunities for new entrants in our markets and possible overbuilding of our network; our ability to, and the extent to which, we participate in BEAD and are able to successfully secure funding via competitive bidding processes ov er our competitors; loss of funding provided by the Affordable Connectivity Program that may lead to customer disconnects or other state or federal subsidy programs that are not ye t permanent programs; the effect of any changes in federal or state governmental regulations or statutes, including any new regulations regarding alleged digital discrimination an d net neutrality in the marketplace, oversight or enforcement activities by state or federal agencies; adverse changes in economic conditions, including the impact of foreign war s or political upheaval; risks and uncertainties from cost pressures and inflation on our customers’ communications and payment decisions; adverse economic, political or market co ndi tions related to epidemics, pandemics, or disease outbreaks, and the impact of these conditions on our business operations and financial position and on our customers; impact of any supply chain delays or shortages on our business operations and on our customers’ ability to operate their business; that the expected benefits of cost reduction and expense man agement activities are not realized or adversely affect our sales and operations or are otherwise disruptive to our business and personnel; the impact of new, emerging, or competing te chnologies and our ability to utilize these technologies to provide services to our customers; and general U.S. and worldwide economic conditions and related uncertainti es. Windstream does not undertake any obligation to publicly update any forward - looking statement, whether as a result of new information, future events or otherwise.
3 Paul Sunu Chief Executive Officer Drew Smith Chief Financial Officer & Treasurer Genesis White VP, Investor Relations & Assistant Treasurer
4 Be the PREMIER broadband provider Be the TRUSTED communications and security advisor Be the INNOVATIVE wholesale leader OPERATIONS & SUPPORT Be the unwavering foundation that aligns, nurtures and enables us to be our best Focus o diversity and inclusion Prioritize quality and trust. Do it right the first time, every time. Give our best in everything we do.
5 Adjusted EBITDAR of $406M (1) , up 7% y - o - y; Completed sale of IPv4 assets for over $100M Strong Strategic Revenue Trends ▪ Strategic & Advanced IP services revenue grew slightly y - o - y; ~85% of total Enterprise Market service revenue (2)(3) now comes from Strategic & Advanced IP ▪ Wholesale Market service revenue increased 1% y - o - y Strong Consumer Metrics ▪ 1% Kinetic consumer service revenue growth year - over - year ▪ Strong fiber additions of 18K in quarter ▪ Consumer Broadband ARPU of $89.93 up 5% y - o - y Interconnection Expense Reduction (2) ▪ Total interconnection expense fell by 19% y - o - y; legacy - TDM related expenses (4) fell by 27% y - o - y ▪ Of the $634 million in annualized interconnection expense remaining, $303 million relates to TDM services (4) & (1) Adjusted EBITDAR excluding gain on sale of IPv4 assets (2) Excludes End user surcharges; (3) Based on 1Q24 results on an an nualized basis (4) Includes TDM expenses as shown on Slide 11, plus Network Facilities (excluding Fiber Expense) & Fiber Build Momentum Continues ▪ 53K new premises added in quarter ▪ Approximately 1.7 million total premises now have access to FTTH services ▪ 35% coverage of consumer households was achieved by quarter end
162 169 170 170 173 174 178 180 184 1,012 1,111 1,174 1,237 1,294 1,336 1,406 1,459 1,508 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 1 Gbps Premises Passed (in 000’s) SMB Consumer 1,174 1,280 1,344 1,407 1,510 1,692 53K 1 Gbps Premises Constructed in 1Q24 1,639 1,584 1,467 6
72% 76% 79% 81% 81% 44% 50% 53% 57% 58% 10% 22% 29% 34% 35% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2020 2021 2022 2023 1Q24 25 Mbps+ 100 Mbps+ 1Gbps % of Homes in Kinetic Footprint with Access to Available Speeds 7
29 24 23 20 18 24.4% 25.5% 25.8% 26.3% 26.6% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 250 275 300 325 350 375 400 425 450 1Q23 2Q23 3Q23 4Q23 1Q24 383 316 363 340 401 Ended 1Q with Consumers on 1G capable facilities, up 18K from 4Q23 Penetration Consumer Fiber Subscription Growth Shows Strong Adoption of New 1 Gbps Facilities ▪ Ending Fiber Subscribers ▪ Penetration Rate Note: Consumer Subscriber counts in 000’s 8
< 1 Year Cohorts 18% 16% 22% 15% 15% 20% 22% 25% 26% 27% 24% 29% 23% 23% 29% 22% 21% 26% 27% 29% 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 27% 23% 20% 2Q23 3Q23 4Q23 Newest Fiber Cohorts Are Showing Strong Penetration Early Note: Cohort penetration reflects consumers on 1G capable facilities, within the respective cohort, at the 12 - month (Year 1 Penetratio n) and 24 - month (Year 2 Penetration) anniversary of the cohort being launched. Less than 1 Year cohort penetration is shown as of March 31, 2024, reflecting penetration at the 9 - , 6 - and 3 - month mark for coh orts completed in the second, third and fourth quarter of 2023, respectively. 40% Target Penetration Over a 4 Year Period 6 - Month Penetration 3 - Month Penetration Year 1 & Year 2 Cohort Penetration Year 1 Penetration Year 2 Penetration 9 9 - Month Penetration
Financial Overview 2023 2023 2023 2023 2023 2024 Q1 Q2 Q3 Q4 YE Q1 Revenue and Sales Kinetic Market 536$ 537$ 530$ 540$ 2,143$ 547$ Enterprise Market 371 338 346 314 1,369 316 Wholesale Market 113 106 115 103 437 114 Service Revenue 1,019$ 980$ 991$ 958$ 3,948$ 977$ Product & Fiber Sales 8 11 11 9 39 24 Total Revenue and Sales 1,027$ 991$ 1,002$ 967$ 3,987$ 1,001$ Expenses Direct Segment Expenses 363$ 358$ 363$ 337$ 1,421$ 343$ Network Access & Facilities 122 119 117 108 467 101 Shared Network & Operations 89 85 84 82 340 79 Information Techology/Shared Corporate 73 69 68 60 271 71 Total Expenses 648$ 631$ 632$ 588$ 2,499$ 595$ Adjusted EBITDAR 380$ 360$ 370$ 379$ 1,488$ 406$ Adjusted EBITDAR Margin % 37.0% 36.3% 36.9% 39.2% 37.3% 40.6% (Dollars in Millions) 10 (1) 1Q24 Adjusted EBITDAR excluding gain on sale of IPv4 assets (1)
TDM Retirement Accelerates Cost Reduction and Improves Customer Experience 11 Interconnection Expenses (in millions) 1Q23 1Q24 YoY Annualized Annualized Change % TDM 100$ 52$ (48%) IP/Ethernet 243 221 (9%) Last Mile Access 344$ 273$ (21%) TDM 53$ 20$ (63%) IP/Ethernet 19 16 (15%) Network Access 72$ 36$ (50%) Network Facilities (excluding Fiber Expense) 71$ 46$ (36%) Fiber Expense & Other 24 20 (15%) Network Facilities Expense 95$ 66$ (31%) Enterprise Interconnect and Network Access & Facilities Expense 511$ 374$ (27%) Network Facilities (excluding Fiber Expense) 192$ 185$ (4%) Fiber Expense & Other 77 75 (3%) Kinetic & Wholesale Network Facilities Expense 269$ 260$ (3%) Total Interconnect and Network Facilities Expense 780$ 634$ (19%) ▪ 1Q24 annualized run - rate of $634 million in interconnection and network facilities expenses; annualized decline of 19% ▪ $303 million of Legacy TDM - related expense (1) including Network Facility expense; annualized decline of 27% ▪ Continued execution of multi - year program to migrate legacy TDM customers to newer technologies, moving from circuit - level to market - level optimization ▪ The focus on market - level TDM removal will enable greater reductions in network real estate and colocation expenses (1) Includes TDM expenses as shown, plus Network Facilities (excluding Fiber Expense)
$250 $0 $0 $0 $0 $710 $1,400 $- $250 $500 $750 $1,000 $1,250 $1,500 2023 2024 2025 2026 2027 2028 $475 Debt Maturity as of November 10, 2022 Revolver Draw Note : Available capacity under credit facility excludes outstanding letters of credit of $140.6 million of which $111.0 million w as issued to Universal Service Administrative Company as a condition for Windstream receiving RDOF funding The amended senior secured revolving credit facility will have $500 million of capacity through September 21, 2024, and $475 mil lion of capacity through January 23, 2027 Net Liquidity 1 Net Debt to Adjusted EBITDA First Out Term Loan 1 Net Liquidity calculation includes $500 million revolver capacity through September 2024 Debt Maturity as of March 31, 2024 12 Term Loan Senior First Lien Notes Undrawn Revolver
Fiber Route Miles (1) Fiber Broadband Consumers (1) Broadband Consumers (1) Windstream Owns 100GB POPs (1) Fiber Households – Build Plan (1) Fiber Households Today (1) E&W Owned Assets (3) Kinetic Owned Assets (3) Total Consumer Revenues (2) Kinetic Fully Owned and Operated Metrics 219K (20.5%) 116K (31.2%) 448K (29.5%) 640K (35.8%) $229M $2.5B E&W Owned & Operated 88K (75.0%) 1,338 (100.0%) $ 1.0B (1) Metric represents number and percentage of Windstream total not associated or encumbered by Uniti Master Lease Agreements as of March 31, 2024 (2) Consumer Revenues for FY 2023 that are not within in - footprint ILEC markets governed by Uniti ILEC Master Lease Agreement (3) Kinetic and E&W Owned Assets represent net PP&E, excluding CWIP, as of December 31, 2023, for Windstream owned assets 13
14 2024 Guidance 2023 Results (all $ in millions) Approximately flat y - o - y (adjusted for ACP expiration) (2) $1,488M Adjusted EBITDAR (1) Approximately $700M $798M Capex, net (3) Approximately $140M $155M Unlevered Free Cash Flow (4) Similar to 2023 96K Fiber Consumer Customer Additions Similar to 2023 232K Fiber Premises Constructed (1) 2024 Adjusted EBITDAR guidance excludes the impact of non - core operating assets sales during the period (2) Adjusted for expected wind - down of the Affordable Connectivity Program (ACP) in 1Q 2024. Windstream’s ACP customer base currently receives ~ $3M in monthly subsidy under this program (3) Adjusted Capex, less GCI reimbursements (4) Total change in cash, excluding cash interest, cash taxes and debt amortization payments
Quarterly supplemental schedules (Pro Forma) Appendix 15
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