Uniti Group Inc. (UNIT) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining us, and thanks for coming to our last session here on Day 2 of Deutsche Bank's 29th Annual Leverage Finance Conference. Again we very much appreciate all the participation we've had today both on behalf of the companies that are joining us for these sessions as well as all the investors that have joined in for these sessions and a lot of the panel presentations. My name again is Anthony Klarman. I've been with you a few other times today. I won't take up any more time. This is the slot for Uniti. Obviously, a name that's well known here in the market in both the equity and fixed income markets. We're very pleased to have with us here from the company today, the newly appointed Chief Financial Officer, Paul Bullington, who will be on the screen in a second. And then, of course, Bill DiTullio, who many of us all know as the Vice President of Finance and Investor Relations. And Paul and Bill, I want to thank you both for coming and being part of the conference.

Thank you, Anthony. We're delighted to be here. Thank you for having us.

Yes, Paul, I thought I would turn it to you first, just to give a little bit of your background and kind of what you're bringing to the table as you take the CFO role here at Uniti. Obviously, the market has spent a lot of time with Mark, and it would be great to just get some perspective as to your background and what you bring here to the seat as you take the CFO role at Uniti?

Sure. Thanks, Anthony. I'll be glad to introduce myself a bit. So again, my name is Paul Bullington. I was just appointed permanent Chief Financial Officer for Uniti Group in early September. Before that, I was appointed Interim Chief Financial Officer, going back to May. So I've been in the seat now for a few months. My background is after a stint in strategy consulting, I started a fiber business with a couple of other partners of mine in Alabama and the Southeast. That company was called Southern Light. And I was the Chief Financial Officer for Southern Light for its existence for about 17 years, until we were acquired in 2017 by Uniti. So I've been in the business for over 20 years now in the fiber business, a huge believer in fiber infrastructure and the value of those assets to generate and deliver long-term cash flows and return to the business. Since we were acquired by Uniti in 2017, I've had a couple of roles, but mostly in a financial role of the Uniti Fiber division, where I've overseen the financial operations of the Uniti Fiber group and also integration of all of the various acquisitions we've made over the years into 1 operating platform company that we have and referred to as Uniti Fiber, which primarily operates networks in the Southeastern United States. So I was in that role for a while, been at Uniti now since 2017 and in the business for over 20 years. And I take the seat at I think a really good time for Uniti. We've come through some turbulent days the last couple of years with the Windstream bankruptcy, bankruptcy of our largest single customer. That certainly put a little bit of an overhang over the business for a bit as they work through that process. But just a little over a year ago now, Windstream emerged from -- reemerged from their bankruptcy much stronger and healthier company, and we're the benefactor of that as well. So I take the role here, I think at an inflection point, a really good time for Uniti at a time where we can -- we've got a lot of those things sort of in the rearview mirror and are focused on the future and executing on our business plan.

Great. And again, welcome aboard into the role, and I'm sure I speak for the rest of the market when I say we look forward to spending time with you both here and in the future calls and conferences that you guys all attend. So why don't we get started? I would love maybe for you guys to take a shot of just kind of level setting sort of what you're seeing on the ground today, maybe as it relates to bookings and how the third quarter has shaped up relative to expectations, obviously, steering clear of guidance. And in particular, maybe to remind the crowd listening sort of the resiliency that you saw kick in as COVID hit and there were impacts to various businesses. What you saw in your business? And how we should take that from an extrapolation or think about what the run rate of the business looks like on the back end of COVID here?

Yes. Sure. So obviously, Anthony, I can't really speak directly to Q3 results prior to our earnings call here in a few weeks. But I can tell you that the positive trends that we've seen earlier this year are generally continuing. So you mentioned bookings. The second quarter, we released in our earnings call, extremely strong bookings for the second quarter of the year. And that trend has continued. Those bookings were in the second quarter were really broad-based. They're coming from all aspects of our customer spectrum. So from the wireless side, from the non-wireless side, from the wholesale side, from the large hyperscalers and large content providers as well as the small to medium enterprise that we also work with as well, just strong bookings and demand from across the board, and we've seen those trends generally continue. I think that's attribute -- some of it a bit kind of coming out of the initial phases of COVID, we've seen some resilience there. But I think as you kind of alluded to, we haven't really had material impacts on our business from COVID. We've been resilient, I think, throughout. And I think a lot of that is the nature of the business we're in and the customers that we work with. A lot of long-term contracts, stable revenues, very little of our recurring revenues are usage based, so it's stable revenues. They're mission-critical services for our customers. So one of the last things that they would cut in the event that they were making cuts to the business. So I think those -- that stability of our cash flow that serves us well, generally has also served us very well during COVID times. COVID is even in some instances, certainly work to accelerate some of the trends that were already having, some of the virtualization of society, streaming our remote meetings and conferences like what we're doing now, telemedicine. Some of those things, I think it's only accelerated. So -- while I wouldn't say we were totally immune from COVID and the impacts, we've definitely seen longer sales cycles, delayed decision-making from some of our customers. There were certainly times where we couldn't meet with potential customers at their offices or maybe even couldn't get into offices to install and deliver services. So certainly not immune to the effects of COVID, but I think our business has proven to be particularly resilient. We're also probably a little less -- we're a little underexposed to some of the industries that were most affected, most harmed by COVID, some of the service industries, restaurants. And some of those things that while we do some business with and through our enterprise businesses, it's -- those are not huge sectors in terms of driving demand for a lot of the services that we bring to the marketplace. So I think all those things combined work to sort of overshadow some of the negative pieces of COVID and help to keep us resilient throughout.

So on COVID impact that does keep coming up at this conference, and I think it was coming up at conferences that people have prevented -- presented recently have really been around supply chain management and logistics and a notion of companies constantly trying to get ahead of issues in the supply chain now there was a company in the high-yield market, last week, who essentially was raising some debt to start making forward purchases of fiber because of the fears about running short of fiber, almost like you were running short of paper rolls 18 months ago. Have you seen much disruption on the supply chain side as you think about your CapEx spending program and your ability to sort of meet the demand on the CapEx on the install side relative to your ability to source inventory?

Yes. We haven't seen anything -- we haven't seen a really large impact from some of the supply chain issues that have come about in our industry and across the world. So I'll talk about that a little bit why we may not have seen much of an impact to date. So a lot of our procurement group, which has reported up to me for a number of years, particularly Uniti Fiber, where we're doing most of our fiber construction. They've worked really hard to have a diverse group of suppliers to have guaranteed supplies, a lot of our critical materials and inputs into fiber construction and guaranteed pricing, plus a lot of our larger fiber construction or multiyear deployments where we're building fiber over a couple, 1, 2, maybe even 3 years for some of these larger deployments. And so we've worked to make sure we've got the supply for a lot of those larger builds already in advance of COVID just as normal practices for the business. And so we've been insulated a bit from some of those supply chain issues. But as we move further into it, I think we're starting to see some of those sorts of things creep in a little bit, particularly on the inputs to the materials associated with construction. So HDPE conduit, which is a petroleum-derived product. We've seen those prices increase a lot. And so maybe we had a lot of inventory and access to supply for a while at the old pricing. As we move further, we're going to have to start to bear some of those higher prices for that kind of thing. You mentioned fiber cable. We are seeing higher prices in fiber cable now as we look to find new supply going forward. One of the things that our -- that we did was diversify our suppliers of fiber kind of early on in the pandemic to like you were talking about with the other company to try to make sure that we've got access to supply as we go forward. We haven't seen an issue to date with regard to making sure we've got any of those materials, fiber cable included on hand to meet our install time lines and to continue to deliver for customers. But it's something we've got to continue to manage very closely and carefully as we go forward. And maybe as we get further away from the Delta spike and some of the things that maybe contributed to some of the supply chain issues, maybe some of that will lessen a bit, some of those prices may come down, some of the supply shortages may loosen a little bit, but that's not something we can necessarily count on, so we're at something we're managing very actively.

Great. Thank you. I want to move on to margins and the potential margin accretion as it relates to leasing up existing capacity to new tenants and the opportunity there. What are the drivers in your control in terms of being able to stimulate the lease-up of the existing facilities versus organic greenfield build-out in extensions to the territory?

Bill, do you want to take one?

Yes. Thanks, Paul. So yes, Anthony, regardless if it's anchor projects we're going after a lease up, the goal is we're trying to drive high-margin recurring revenue, right? And so when you look at the greenfield builds, over the last few years, we had several of these builds ongoing. At one time, we had over 15, 16 builds at one time. Now we completed the majority of those builds at the end of 2020. But the margins on those initial anchor builds, again, they were for small cell, dark fiber to the tower mostly. They were all 80% on average types of margins associated with that. And we targeted initial cash yields of 5% to 7%. Now we are in the early stages of leveraging those builds to drive incremental lease-up, and that lease-up could come from adding on an additional wireless tenant, but most of its come from adding on nonwireless customers. So enterprise, health care, government, financial institutions, schools to the federally-funded e-rate program, those are the types of customers that we're adding on there. And again, all that lease-up comes on with margins that are anywhere from 70% to 90%. So again, 80% on average. And we're going from initial yields of say, 5% to 7%. And then when you layer on the lease up, you go into cumulative yields that are in the double digits, low to mid-teens. And in fact, if you look at the lease-up that we've derived over the last several years, we basically have doubled our initial yield from 7% to 14%, 15% today. And then you start to add on -- that's just at Uniti Fiber. And then you add on the lease up that we're doing at Uniti Leasing, where, again, we're just primarily leasing the fiber that we have the rights to other parties. And so really, absent the initial CapEx required to acquire that fiber, there really is no incremental CapEx required to lease that fiber up to other parties. And then you're also talking about margins that are generally 90%, 95% plus. And so when you layer on that lease-up, again, early stages there as well, then you start getting into the high teens where we said we've almost tripled our initial yield over the last 5 years through these lease-up initiatives. So we continue to drive lease-up in our Southeast footprint, primarily Uniti Fiber, right, adding on, again, additional tenants, nonwireless customers as well as driving incremental lease-up at Uniti Leasing as well.

And maybe sticking with the wireless being here for a second. Could you just maybe remind us all of what some of the headwinds are around Sprint coming off of some of the sites, some of it -- as T-Mobile integrates the Sprint network and the T-Mobile networks together and does some cell site deconstruction. And then I want to also venture into the potential opportunities around DISH. I think on the prior earnings call, you mentioned that you guys were extremely active with DISH. I think DISH has already announced some of its first markets, but the belief is that it is spending money probably across the U.S. Could you give us some color as to what we're starting to see from DISH as potentially making up for some of those initial headwinds out of wireless consolidation?

Yes, sure. I can talk to that, Anthony. So yes, I mean the consolidation of Sprint and T-Mobile is an evolving thing for us for sure. They're certainly one of our large wireless customers that we work with. And that -- there will be some consolidation there and some erosion of some of that business as they consolidate. I think that's something that everybody in our industry is going through. But I would say that we are seeing very active demand from all of the wireless industry. It's been something that's been prevalent here for the last few quarters. A lot of it driving densification to backhaul towers, addition of new towers, deployment of the C-band. A lot of that and some small cell activity, a lot of that has been very active. And there's good growth in that market to help us fill some of that gap that might be left from anything that has eroded due to the consolidation between T-Mobile and Sprint, which we all know is coming. So -- and we've seen some of that already in terms of the last year and their plans, but it continues to evolve on their side. And then DISH provides a really bright spot for us in terms of as we're kind of losing one provider in the marketplace and seeing consolidation. We've got a new one coming on, which makes it exciting as well. So -- and we think there's a pretty large opportunity going forward with DISH as the new fourth provider and DISH announced a while back, that Uniti is one of its preferred fiber providers, which we were extremely excited about. And we tend to not talk a lot specifically about particular customers, but because DISH did include us in that press release, we have been talking a bit about our relationship with those guys. We have very active conversations. We've had orders -- initial orders from DISH coming in over the last couple of quarters. We expect more as we continue talks and work with DISH going forward. From a revenue standpoint, it's mostly going to be a 2022 event this year as order -- initial orders are starting to come in, and then we'll work to execute on those and deliver services, which will mostly start being delivered in 2022. And most of that is backhaul type -- tower backhaul type services. There's been some market-to-market type backhaul services as well. Most of it is tower backhaul. And if you're a wireless player and you want to turn up services really quickly, then Uniti is a natural place to turn because we've got a large installed base on net towers. We've got broad market coverage, especially in the Southeast, where we've got a lot of our thick Uniti Fiber metro markets. And so with that installed base of towers, it can enable a wireless provider to very quickly cover a market without waiting months or years for greenfield fiber to be put in the ground. They can turn things up much more quickly. So I think that makes us attractive not only to DISH, but to any wireless player looking to quickly cover an area and if it's one of the areas that we serve. So certainly some headwinds there with the T-Mobile Sprint consolidation, but some new blood and some new opportunity as well. So we're excited about the demand in the wireless space and our ability to continue to drive revenues there.

And presumably your agreement with DISH is more regional in nature where you have facilities in place. I guess DISH has publicly talked about escalating CapEx in the back half of '21. But in reality, they have a build-out requirement to get to a certain coverage by June of 2023. Would your expectation be that you just see a pretty consistent pace for DISH over the course of these next couple of years, and we don't see these kind of peak and trough spending cycles that it's given that they have to -- they have committed to a build-out with the FCC and the DOJ as part of the Sprint T-Mobile divestiture agreement that you're likely to see a more linear path of spend from them over the course of the next couple of years?

Yes, I think that's a good assumption. I think they obviously have to cover a lot of ground really quickly and get up to speed. And so I would -- I think that your speculation there, I would have a similar speculation as to their plans. I mean, I don't have -- obviously don't have perfect visibility into how they plan to roll things out, but in terms of how we're working with them to roll out some of the markets that we're working with them on, I think that pretty much holds true. And you're right, we are working with them primarily in the Southeast. That's where our Uniti Fiber assets are where we have the thick metro fiber and interconnecting metros and the highest -- certainly the highest concentration of towers on net, on fiber. So yes, most of what we'll be doing with them we expect to be in the Southeast, although we're still interested in greenfield builds for markets, something we're interested in wireless customers make great anchor tenants. And so we're -- while we're more focused on lease-up today, as Bill mentioned earlier, than maybe we have been in the past with some of a larger number of anchor greenfield builds that we completed mostly last year, we still have some of those that are active, and we're interested in doing more if the numbers and the returns are there. So -- but I do expect most of that activity to be in the Southeast, yes.

Yes. Great. I want to pivot back to Windstream. You mentioned Windstream a little bit, obviously, still by far your largest customer. And I think the company has spoken previously about wanting to continue to diversify away from Windstream for no other reason other than obviously, you want to continue to grow and sell services into other customers. And your share of revenue from Windstream should come down with that over time. I think some in the market would argue that's been a little slower to develop. Part of it has been presumably the cost of capital. But how should we think about your push in thinking about the inorganic opportunities or maybe even additional greenfield opportunities that would help accelerate some of the diversification away from Windstream? And then how much does that get frustrated by the fact that in meeting with Windstream this week, it certainly seems like they have an ambitious plan around wanting to upgrade a lot of their network in full fiber in places where the ROIs make sense. And so potentially some additional work from Windstream as well.

Yes. So no, you're absolutely right. I mean diversification of our revenues away from Windstream is a critical piece of our strategy going forward. And I think you said it well. I mean it would be for any business who is highly concentrated. Certainly, we feel great about where Windstream is post emergence, bankruptcy, they're much stronger company, much stronger balance sheet levered at only 2 times. We think they've got the right growth strategy in terms of their fiber-to-the-home investments that they're driving. And we think all of that makes sense, and we're certainly very secure in terms of our -- in terms of those cash flows going forward. But like any business would, we have an imperative to continue to diversify and continue to grow. And so there's obviously a few ways we can do that. We're -- Bill talked a lot about demand and lease-up and we're going to continue to drive growth organically. And I think we could -- we can -- we talk about the 50% threshold in terms of our revenue diversification as being a really important threshold for us. And currently today, we're -- Windstream makes up around 65% of our revenue. So that 50% threshold is something that we've put a stake in the ground that we really want to continue to drive for. And we can get there organically, but it's going to take a while to do that organically. And so the inorganic piece of it, the M&A piece is another critical piece of our strategy that we've talked about for a while. That kind of got put on hold a bit for a while with the Windstream bankruptcy and some of the things that came out of all of that. But that's about a year now in the rearview mirror, and we've been active again in pursuing the right acquisitions we want to pursue. Acquisitions, we're focused around the fiber space. So we're looking to make more investments in fiber and focused on fiber as opposed to other potential assets that we could look for. And we're looking at several different types. We talk about our pipeline of acquisitions, bolt-on, opco/propco acquisitions, which we really like a lot, the opco/propco deals are, we think, really nice deals for the business. And we want to continue to look and do those sorts of things, but also the transformative acquisitions as well. And when we talk about transformative acquisitions, we're typically talking about larger acquisitions that can really move the needle from a diversification standpoint and get us beyond that 50% mark and in a sort of rapid fashion. And I think we have shown in the past that we can move the needle really quickly with acquisitions. We've done several acquisitions over a short period of time that really help to move that needle. And we think that we can do that again. It is a tough market. Multiples are high. There's a lot of money chasing fiber deals, a lot of interest in investing in fiber. But a lot of that really frankly isn't new. I think multiples were high in 2016 and 2017 when we were doing deals and showing that we can bring a pipeline of deals to the table that we can execute at maybe lower than average market multiples. And so we think we can do that again, there's no reason why we can't. But we're not going to set an artificial deadline, we're not going to set an artificial time line. We're going to remain disciplined about how we do that. We're going to make sure that we're doing deals that make sense. They are accretive to the business, and we're not going to do a deal for the sake of doing a deal. So rest assured, we're very, very active in that. Conversations are ongoing. We have a robust pipeline of potential deals, and we're going to continue to work at it, and I think we'll eventually be successful.

Maybe if we could stick with that for a second because this question speaks to one that has come in from the audience in the chat box here. But you mentioned valuations have been a challenge, and I think we in the market have seen the publicly observable public market valuations reach new heights almost seemingly every quarter. Private equity has come into the space and applied a lot of capital that has driven up valuations. You have not yet been rewarded from a valuation perspective by the public markets the way perhaps some private assets have been or ways in some total sale assets have traded for. How do you bridge that valuation gap as you think about potentially doing deals that could accelerate that transformation away from the 65% exposure down to more of the 50%. We have been seeing that from a valuation perspective, you have a disadvantage in trying to bridge the valuation gap where Uniti share is currently trade and where public and private market multiples are today.

Yes. I appreciate you asking that question a lot, Anthony. I mean that's something that is -- if you listened to our last earnings call, yes, you know it's certainly on our mind. I mean, we do believe we're undervalued in the marketplace. And the value gap between public and private fiber companies is not a new topic. I think that's been something that's been discussed and observed in the past in the market. So it's not something that's totally unique to Uniti, but we do think we have a particularly interesting situation, and we tried to highlight that in our last earnings call. The way -- the framework we provided to try to help the market kind of take a look at Uniti and Uniti's valuation, I think is informative. And you can argue with some of our assumptions in that framework we put out. But we think regardless of the assumptions that you make and sort of that some of the parts look at Uniti, the fiber business and the appropriate multiple on the fiber business and then what that implies in terms of the valuation the market is putting on the Windstream cash flows. We think there's a disconnect there between that valuation and the real value of those cash flows, and we think that framework sort of highlights that. And so how do we break through that, how do we achieve those higher valuations that we think are more appropriate for us in the marketplace? Well, I think, first of all, we're going to try to highlight that a little bit and we got to do a better job of communicating our value to the marketplace and our strategy and what we're doing. We're a bit unique in terms of -- there's really not another animal like us in the marketplace in terms of communications, REIT and some of the things that we're doing. And so -- our fiber REIT and some of the things that we were doing. So we've got to continue to do a better job of communicating to the marketplace who we are and what our strategy is. And then we've got to continue to execute. We've got to continue to show that we can execute on lease-up, the fiber that we received access to market on the national network from Windstream in this last settlement provides us a great opportunity. 123,000 route miles of national fiber made us an overnight player in the national fiber network in a way that we weren't before. We've got to show that we can monetize that, that we can drive value to that, and we can execute on our plan. And then I think the market is looking for us to diversify more. I think we need to continue to find deals and market is looking for us to do more deals. I think that will help us break through some of that as well. And Windstream has got to continue to execute. I think there's still some hangover there as the market trying to figure out how Windstream is going to execute in the marketplace. And I think they've got to show that they can execute on their plan. And again, I think we believe strongly in their plan, we're investing through the GCI program in their plan to build fiber-to-the-home and overbuild copper. We think that's the right strategy, but they've got to continue to show that they can execute. And if we do all that and we can't break through some of that, Kenny talked about, Kenny Gunderman, our CEO, talked on our last earnings call about, there may be other ways through other private investment or third-party investment into what we're doing that we can monetize, maybe some of that Windstream fiber or Windstream relationship or those cash flows in a way that highlights and breaks through some of the valuation mismatch in the marketplace. And so I think some of those things are on the table and there are real options for us. So there's a lot of interest in fiber and a lot of interest in the stable cash flows that the fiber business can bring. And so I think those are options for us as well.

Yes. It almost seems a little bit chicken and egg, I think, is the term that an investor used where the market perhaps values you at a discount because of the over-indexed exposure to Windstream, which creates a valuation gap that makes it harder to do deals to diversify away. And I guess if you're able to find some creative solution that plugs a valuation gap or there's a capital pool other than public debt -- public equity that might be available to you, that could be an interesting way to maybe accelerate that.

Yes. No, agreed. Agreed.

One more on Windstream, and then I do want to get into capital allocation and some balance sheet questions. On a recent call that you had an investor call, a bondholder call, you had walked through some potential options around prepaying the Windstream cash settlement liability, talking about roughly the 9% discount rate that you have and the mechanics around that. Could you just review the economics of that and how management thinks about the net present value or the benefit of prepaying the cash settlement liability, certainly as your cost of debt is well below the discount rates that I think that you would be required to use as part of that prepayment?

Yes, sure. Yes. That is something that we have talked about recently. We just raised some debt in the marketplace through a bond issuance last week. And part of the -- uses of that fundraise, approximately $78 million we announced that we anticipated using that money to prepay some of the Windstream obligation. So just a little bit about the Windstream obligation that I'm talking about. As part of the settlement, we agreed to pay Windstream $490 million over 20 quarters. So that payment is broken down into 20 equal payments of $24.5 million a quarter. And one of the terms of the settlement agreement is that Uniti has the option after 1 year, and we've just passed through that 1-year mark, we have the option to prepay that settlement obligation in full or in part at any time at a 9% discount rate. So really what we're doing is just taking advantage of an economic trade that we've got in the marketplace to borrow money at a lower cost of capital and then prepay some of those obligations with Windstream that come with a 9% discount rate. So it's just kind of a pure economic trade that we see there. So -- and a little bit further about the way it works, we can basically pick and choose payments out in the future that we repay that are discounted back to present value at that 9% rate and satisfy that obligation today at a discount versus waiting until that another quarter to make that payment. So we decided to do that with some of the capital we raised from the bond issuance last week. But we've got the continued option to do that in the future as we see as well. So if we have the inclination and the future capital raises or from other sources of cash, we can also take advantage of that in the future at any point in time to prepay some of those obligations.

And just to make sure I heard you correctly, you can sort of pick and choose the payments to prepay, so you could potentially choose all of the back-end payments and discount them back to today's dollars at a 9% discount rate capturing the differential between your cost of debt and the 9% discount rate. And so a discount to today dollars to settle a future liability that would be sort of par dollars in the future.

That's correct. That's correct. That's an option. Yes.

Got it. And what is the pro forma balance of that liability, I guess? And where the prepayments that you made on the front end? Or did you put them towards the back end?

We have not made any payments yet. And I don't want to get specific about our strategy and what we're going to prepay in terms of that since we haven't declared that yet. So -- but we have all those options ahead of us. And can -- like you said, we can prepay the back end or the front end or anything in between, and we can do that going forward. So we haven't made an announcement as to exactly how we're going to execute on that in the short term, but we do have that capability.

All right. Let's pivot to the balance sheet with the remaining time and capital allocation. You've talked about leverage goals and obviously, you have a threshold for leverage that also governs your dividend and your dividend payout. Can you remind us of just what the priorities are around the balance sheet as it relates to leverage? And then how has you organically delever to inside that range, how we should be thinking about the dividend and the dividend payout, which you previously had to right size as part of the Windstream restructuring until they sort of exited and you're able to delever back down into that target leverage range?

Yes. So Our target leverage range, we're actually right square in the middle of our target leverage range today. Our target range is 5.5 to 6x. And we are right in the middle of that, slightly -- as of the end of the second quarter slightly below the midpoint of that range. And so on our last quarter annualized basis. So we're right where we are comfortable being from a leverage standpoint, and we want to continue to be in that range and operate in that range. And we think that's an appropriate range for our business given the secured nature of the cash flows for our business. And so we're where we want to be from a leverage standpoint. The covenant that you're talking about, we do have a covenant with our debt that restricts our ability to pay more than the minimum dividend required to maintain our REIT status until we hit a 5.75x leverage ratio on a trailing 12-month basis. And so we have not tripped that reversion covenant yet. And so we're still bound by that covenant that restricts our ability to raise the dividend meaningfully. But we're trending close to that. We're very close to hitting that covenant. And so we think while we really haven't had a really anything but an academic conversation. Recently, our Board hasn't really had anything but an academic conversation around the dividend because of that covenant. As we we're getting closer to the point where we can hit that covenant and then we can actually have a real conversation about that as a leadership team and as a Board. Of course, the dividend is a Board decision. And so I certainly don't want to tip their hand in terms of how they're -- any future dividend decisions, but I think that's something -- raising the dividend is something that we know is important to some investors and something that I'm sure the Board will consider as we're able to consider it going forward. I mean, from a capital allocation standpoint, I think -- I mean our first priority is investing in the business. I think we like investing in fiber assets. We think they're a long lived asset that can generate substantial returns over time. And we think that investing in high return, Bill talked about high-margin, high-return lease-up business, we think that makes sense all day long to continue to invest in the business and invest in those assets. So I think that's our first priority, but we also -- the dividend is also important to us and something that we're going to continue to discuss internally and the Board will make decisions on that as we go forward. But it's definitely something under consideration in terms of how we might raise that dividend going forward once we're out from under those covenants.

And do share buybacks figure into that at all? I guess, from a capital allocation perspective, obviously, buybacks can be a bit less episodic than dividends, which once you sort of get on the dividend train, it's hard to get off.

Yes, yes.

Are those part of the capital allocation decision? Or are you actually committed to the dividend policy and then you'll use cash flow to reinvest in the business and maybe inorganic growth?

Yes. No, I think -- I mean, we do think our stock is undervalued. I would love to buy back some of our stock at some of the prices that we've seen over the last several months. And so -- I mean, I think that would be great. But from a capital allocation standpoint, I think we've got other priorities in terms of continuing to invest in the business. It's a capital-intensive business. We've been driving capital intensity down over time towards that 30% capital intensity ratio that we have today. We plan to continue to drive that capital intensity down. But it's a capital-intensive business. We want to continue to invest in the business. As we talked about M&A and possibilities there and then the GCI program with Windstream, we've made substantial commitments to that. And so -- when you put -- add all those things together, it doesn't leave much room for things like buybacks, but it's certainly something that at these equity prices, it does provide an attractive alternative if we have the capital to do so.

Yes. To some extent, the market might reward buybacks more than it has historically rewarded the dividend. But I guess that there are also plenty of cases where that's been proven not to necessarily be the case. So final question for me as we come towards the end of the session. I guess, Paul, as the new CFO, what would you like the Street to sort of judge Uniti on as we go forward? What are the things that we should be thinking about in terms of how to judge your success in hitting a lot of the guideposts or the mile markers that we've talked about in the conversation here today?

Yes. No, I think that's a good question. We -- first of all, I think we're a fiber company plain and simple. There's a lot of pieces of our story that are a little different or a little complex in terms of our REIT status and the Windstream lease, the opco/propco deals and some of the things that we do. But at the end of the day, we're a fiber company. And I think fiber assets are assets that I think the market values and that are great long-term investments and the future of a lot of the things that drive our economy. So I think cutting through some of the -- a lot of this is communication on our part, but cutting through some of the noise around our business plan and the history there and getting to the nuts and bolts of the fact that we're a fiber company with substantial fiber assets all over the country and national footprint. We're one of the top 4 or 5 providers in terms of our fiber footprint and the breadth of our fiber reach in the United States. And I think those are all things that are important for investors to see and to judge us on. And as we go through time and look to -- continue to lease those fiber assets up as we look to monetize the Windstream national network that we now have the ability to monetize, I think those are the things that investors should focus on and the breadth of those assets and the ability of those assets to deliver return to investors over time is I think -- where I think investors should be focused in terms of our business plan going forward.

Well, Paul, that's a great place to leave it. I want to welcome you again to the conference. And Bill, thank you very much for joining us as well. We appreciate Uniti's attendance, and we look forward to hearing more from you guys over the course of the next few weeks as we enter earnings season. So again, thank you all for joining us, and we're signing off from Day 2 of Deutsche Bank's 29th Annual Leverage Finance Conference. Thank you very much.

Thank you, Anthony. Appreciate it.

Yes. Thanks, Anthony.