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

Well, good afternoon, and welcome back to Citi's AppsEconomy Conference. For those of you I haven't met, I'm Mike Rollins, and I cover the communications services and infrastructure stocks for Citi. And before we get started, just a few items. One, I just want to mention, we do have disclosures available on the site. They could be to the right of the video player or under the Citi Disclosures tab, if you're viewing this via [ velocity ]. Also, if you'd like to ask a question during our time together, please put your question into that question box on your screen. It should come directly to me, and we'll do our best to integrate it into the discussion. With those details out of the way, it's a pleasure to welcome Uniti's CFO and Treasurer, Paul Bullington, as well as Vice President of IR and Finance; Bill DiTullio. Paul, Bill, thank you both for joining today.

Thank you, Mike. It's great to be here. We really appreciate you having us.

Well, it's great to see you. And after another busy year for you, as we're starting this new year, it'd be great to get your perspective on the strategic and operating priorities for Uniti.

Yes, sure. 2021 was a great year, and we hope to keep and continue things, as we move into 2022. And I think, our strategic priorities are going to look largely very similar to what we had in 2021, for the business. So at Uniti Fiber, we want to continue to focus on lease-up, driving the growth of core recurring revenue at Uniti Fiber, across our spectrum of products that we deliver to customers across those networks. And there were years past, where we were very focused on a large number of greenfield builds that were heavily capital-intensive. And we're still going to continue to do greenfield builds and look for those opportunities. But we want to focus more on lease-up, and that's going to be the focus for 2022 and the lease-up side. And one of the things that does for us, it drives down capital intensity, which is the goal of the business, going forward and also drives up margin. Lease-up business is lower in the capital requirements and it's higher in margin, typically, than some of the greenfield stuff. And so those goals certainly play into 2022 as well for Uniti Fiber. At Uniti Leasing, we're about a year -- a little over a year into having access to this national network that we got out of the Windstream settlement, a little over a year ago, to 2 million-plus strand miles of fiber that really gave us a national footprint, overnight, that we have to lease to third parties. We've built an organization around driving lease-up of that network, along with our other leasing networks. And we've had really nice success so far, over double the size of the pipeline. And so really, what we want to do into 2022 is, on the leasing side, is really continue to drive that, accelerate that, continue to capitalize on that opportunity to turn those -- that pipeline into real orders and turn those orders into deliveries, so that we can start billing. And we've had a good run of it, lately, with a couple of quarters, where our bookings exceeded expectations, and we want to continue to do that. Also, another point of emphasis for us, going into 2022, is the customer experience. we want to continue to really work -- strive to improve the customer experience. And that comes along with faster deliveries, making sure we can deliver on time and ahead of time, on our orders, that our networks are the most reliable of any of the networks out there and deliver a great experience for our customers. And then we bring the full breadth of our product suite across all of our networks, which is something we've really worked to do, especially in the enterprise space [indiscernible] to bring all those products to bear, so that we can deliver a full suite of products to all our customers, wherever they are on our networks. And then finally, I'll mention M&A. M&A continues to be a linchpin of our strategic emphasis, going forward. We want to find additional opco/propco deals. We did one, last year, with Everstream that we think was highly successful for the business, a great deal. We want to continue to do deals like that. We want to also continue to find bolt-ons or other sale leasebacks or even the transformative deal, maybe, that really help us move the needle, in terms of diversification of our revenue stream. So I think, those are the main things I would point you to the audience to, in terms of 2022 for Uniti.

And as we're on the -- talk about the fiber strategy and the progress that you made with the assets, what's been the organic growth you've been achieving, the apples-to-apples organic growth, when you normalize for some of the different deals that the company has done? And is that a sustainable rate in the future? Or can that actually get better in the future?

Yes. So the Uniti Fiber -- we report our financials in 2 businesses, Uniti Fiber and Uniti Leasing. And I will make the point, as I'm talking about the two separately, that our go-to-market strategy for our customer, is largely one seamless network. So we bring solutions to our customers. A lot of times it involves both our Southeastern Uniti Fiber network and our national leasing network that we bring to bear for our customers. So it's all one seamless network in the way we go to market, but we do report them separately. And on the Uniti Fiber side, organic growth has been in the, sort of, the mid-single digits year-over-year growth. And on the leasing side, on what I'll call the non-Windstream side, still a large portion of our revenue is made up of Windstream. So that's a pretty large base of revenue to build off of. But if you look at the non-Windstream portion of our Leasing business, year-over-year, our last quarterly earnings report, we reported 27% year-over-year growth. And I don't -- I'm not going to suggest that we're going to hit 27% or better, every year, going forward. But I do expect good solid double-digit growth out of that business, a lot of opportunity in the Leasing business that we're excited about.

And let's see, if we can go to our first survey question, see what our audience thinks. And for our audience, that's on the line, the responses are confidential. So we're not tracking them. And if you don't see the survey question pop up, just scroll down below the disclosures, and they should be right there for you. And so the first question, which is a topic that we can get to in a few minutes, once we get the responses in, is how should Uniti manage capital allocation? And the choices that we're providing, is aggressively pursue revenue and cash flow diversification through M&A, split the assets between the Leasing business and Fiber infrastructure, focus on organic growth from the existing infrastructure assets, reduce net debt leverage or increase dividends to a normalized payout of 80% or more of the REIT income. So just kind of curious, like how our clients think about your capital allocation? And we'll get those responses coming in over the next few minutes. And while we wait for some of those responses, Paul, you made a really interesting comment about focusing on lease-up as opposed to greenfield. And so as an organization, how do you accomplish that? Because customers might come in and say, "Oh, I want X." And the customer doesn't know, whether it's a greenfield for Uniti or if it's an organic upsell or colocation. So how do you gear the organization to get more lease-up, as opposed to greenfield?

Yes. Well, that's a good question, Mike. And it is, to some degree, it's demand driven. And so when I say, "We're going to focus on lease-up versus greenfield", it really is a matter of focus. I think we want to continue to look at greenfield opportunities, they provide a great ability for us to -- with an anchor tenant, to go out and expand our network footprint and set the table for more lease up in the future. So it's not to say that we won't consider greenfield. We absolutely will. And we're executing on some greenfield deals right now. But a couple of years ago, we had like 14 massive greenfield deals in the pipeline, a lot of which we inherited through some of the acquisitions that we had, that we needed to execute on. And we wouldn't be really fulfilling the strategy we had, if we didn't then turn the table, once we had those greenfield networks installed and really start trying to lease up, because that's where the real gravy comes on top, right? You start to really improve margins and improve yield and lower capital intensity, going forward. And so the way we're focusing on that is not by turning a deaf ear to customers that might want us to look at greenfield. But making sure that we've got a significant focus in the way we've deployed our field sales team and the way we've organized ourselves to go after the lease-up opportunity. And so -- and that's what we've done. We've built a salesforce, whereas a year ago, we had one salesperson, really focused on the national wholesale lease-up strategic accounts. Well, we've got about a dozen now that are going after that space. Those are not all new heads, but a refocus of some of the attention of some of our salesforce. And then we've expanded our enterprise salesforce to really be able to make sure we're taking full advantage. We've got enough feet on the street to really focus on and put the leadership in place to really focus on lease-up of those markets that may have been greenfield newbuilds, a couple of years ago, but now are ready for the lease-up that comes on top of it. And then also, we can -- we set our return criteria, right? And so we're going to skew our attention towards RFPs or deals that are more within our footprint, as opposed to outside of our footprint. So again, it's just really a matter of focus, as opposed to a binary decision of one versus the other. We just want to make sure we've got a really robust strategy to attack the lease-up opportunity that really gives us the growth and the return profile over the long term that we think our investors really like.

Can you give us an update on the pipeline for new business. I think, from time to time, you provided some updates on how the pipeline is looking for the Fiber business and the Leasing segment. And for the opportunities that you're pursuing, to the point earlier about greenfield versus lease-up, is there a significant amount of capital that's needed to go after these incremental opportunities?

I don't want to get you into the mix here. So you can join in. Why don't you take that one for us?

Yes. Thanks, Paul. Yes. So Mike, our pipeline, both at Uniti Fiber and Uniti Leasing, continue to be very robust. So as Paul mentioned before, Uniti Leasing -- Uniti Fiber, we're mostly focused on lease-up of our greenfield build. So as Paul mentioned, over the last couple of years, where we had 14 so-so projects that were underbuilt [indiscernible] small-cell, [ dark-fiber ] projects, mostly. And we completed the majority and we completed those projects at the end of 2020. So we spent 2021, really leasing up in [indiscernible] and you saw that in our bookings results, right? We saw robust, strong booking results, and the bookings kind of stayed [ high consistently ] throughout the year. And when you look at that mix of bookings, right, most of those bookings have come from, what I'll call, [ non-wireless ] opportunities. So enterprise, local enterprise, healthcare, government schools through the federally-funded E-Rate program, financial institutions, healthcare, all those types of things. And so majority of the bookings have been there. But there's also been a good amount of bookings that have been wireless, right? So it's been anywhere from 60% to 70% of our bookings in any given quarter, have been non-wireless, but the remainder being wireless. And those wireless have been either small cell, dark fiber-to-the-tower. We still continue to see lit solutions from certain customers as that their preference [indiscernible]. We didn't really talk about this before, but we have seen -- and we may get to this question a little bit later, too, but we have seen some shift, going from small cell to more macro, especially as wireless providers are deploying more C-band, right? But all that is good. It's all high-margin recurring revenue, and that's really what we've been driving. And you saw us in 2020, deemphasize the noncore, the nonrecurring part -- the low-margin part of our business in our core construction and other things. And so really, now we're focused on high-margin recurring revenue. I think that's -- and you're seeing that play out in the margins, Uniti Fiber improve throughout this year, and we expect them to continue to improve as we continue to add on. And then again, the leasing, that sales pipeline remains robust as well. You saw that pipeline -- that sales pipeline double, once we announced the settlement agreement with Windstream, right? And even before [indiscernible] we saw in the pipeline, increase thematically as people in the market realize that we're going to be getting more of that fiber. And we've been successful, so far, in executing on leasing that up. So the sales pipeline today sits about $1.2 billion, represents about $65 million of annual revenue, all contracted in. But again, this is we're working forward to on. It can take many years. There's a long sales cycle associated with that. And not everything in that funnel will get executed on. But some things will come out and some things will get added. But what we have seen, is the continued trend of interest from existing customers, and that's one -- Paul touched on this as well, why we reevaluated and readjusted our sales team because we were seeing certain customers call on for both solution that would fit in the Uniti Fiber side of the [ bucket ] and Uniti Leasing. It's all becoming one, right? And so we want one point of contact there. But yes, Uniti Leasing, again, really driving strong lease-up of those [ fiber ] strands, and we got it as part of the Windstream settlement and also the fiber we acquired few years back from CenturyLink acquisition -- we acquired from CenturyLink as well. And so really, get really strong results there, continue to really execute there, see strong bookings. In terms of capital intensity, I'll start with leasing. There really is no incremental CapEx required to lease up that asset. Once you've acquired that asset, you're really just leasing the fiber out to the customer. There may be some small CapEx that's required to provide cabinets and things like that. But usually, those are passed on to the customer through a nonrecurring charge as well. So low capital intensity, very high margin, 90% margin. And then we look at Uniti Fiber, we've been talking about expecting the capital intensity in that business to come down because had -- when we were doing all those 14 greenfield builds, right, our capital intensity was 50% plus, and a capital intensity I'm defining as net success-based CapEx at Uniti Fiber as a percentage of Uniti Fiber's revenues. And so that number has come down to -- in the '21, should be around the 40% range. And then we expect that to come down even further into the 30%, 35% range, going forward, and that's a function of -- primarily focusing on the lease-up, which, again, is on [indiscernible] opportunities that don't require a substantial amount of CapEx. But it's also a mix of, as Paul mentioned, pursuing a handful of greenfield builds. We have pursued greenfield builds, we will continue to pursue. We're just probably not going to do 14, 15 projects at a time. And all these greenfield build projects that we have pursued, we want to make sure that they are done, where they only now have attractive anchor economics but also have substantial lease-up opportunity as well. If we were just focused on just lease up, our capital intensity will be even lower. But having that mix of greenfield plus lease up, is why we feel comfortable with our capital intensity being in that 30% to 35% range.

That's really helpful. And that $1.2 billion that you're pursuing a pipeline in Uniti Leasing, how much of that is competitive versus unique to Uniti Group?

Yes. That's a good question, Mike. I mean, some of it, definitely, is competitive, but I would say the majority of it is probably unique. And so instance, if you go back and look at the CenturyLink routes, right? We've gotten this question multiple times, even when we acquired the fiber from CenturyLink, one of the questions was, why can you guys be successful with this, when CenturyLink wasn't? And the same thing, question we got with the Windstream fiber. "What makes you guys [indiscernible] successful, when Windstream wasn't really able to?" And I think, there's a couple of things. As a matter of focus, right? We've always been agnostic to leasing up fiber, leasing available strands to others. We don't really have a competitive protection there, a competitive concern that if we lease up fiber, it's going to go away from other parts of our business because Uniti Leasing, our focus there is really just leasing that fiber, and it doesn't really compete with our Uniti Fiber business. The second is, these routes, where the majority of them are -- a lot of them are unique and they're in Tier 2, Tier 3 and 4 markets and Tier 1 markets for that matter. So they cover all types of rural to suburban to metro. And a lot of these -- what our customers are looking for is, they are looking for diverse paths. They're looking for uniqueness and they're looking for protection, right? And so when you look at our network, and you can go out on our website and look at our map and see all the fiber and where it is, it's across the country, you see it across this -- over 30 different metro markets, right? But it also combines those metro markets and passes through rural and suburban areas, too. And so that fiber has a lot of uses. One, it can be used for long-haul routes and offer protection and diversity. It can be used in conjunction with that to also provide metro fiber for customers, so they can use that for macro, cell towers, small cells, enterprises, things like that. So the fiber has a lot of different uses. And so we've been very happy with the success that we saw. I mean, going back to the CenturyLink routes. I think when we got that fiber, we immediately had signed up an anchor tenant, if you'd recall, that took a large portion of that fiber. Very similar with the Windstream fiber, as soon as we got the Windstream fiber, we soon after announced Everstream transaction, which used a significant part of that fiber as well. And so we continue to see new interest from hyperscale carriers. We announced last quarter, a quarter before. We announced a new hyperscale customer. So we continue to see new uses and inbound interest from very different customers. [indiscernible] about the opportunity set there.

I'll add, Bill, as well that, that $1.2 billion in pipeline, is dynamic, right? It changes from month to month. So in any one month, you're going to have deals, where it may have been a competitive situation and we lost to a competitor. In which case, that opportunity would fall out of the pipeline. And so -- but it gets replaced, hopefully, it was something else. So as you see that pipeline grow, it's not just a static, cumulative growth of all the people we've ever talked to, right? It's active deals that we're working on. So as -- as deals fall out, then hopefully, new deals come in.

So I think we'll get to the results of our survey. And I think what's interesting is, the results were split. About 1/3 of responses was aggressively pursue revenue and cash flow and diversification through M&A, then split the assets between leasing and fiber and then focusing just on the organic growth from the existing assets. And so maybe, taking the second one, the question of splitting the assets. What are the opportunities that Uniti considers, in terms of maybe splitting the assets between leasing and fiber?

So it's interesting. Is that the #2 response right now, in terms of the survey? That's interesting to hear that. So -- that comment -- so Kenny Gunderman, our CEO, on our last earnings call, I think, made a comment that we were -- our Board was evaluating, maybe, ways to split the assets. And so maybe some of that commentary comes out of Kenny's comment there. And what Kenny is talking about there, is not necessarily a split between fiber and leasing. As Bill and I have already talked about, we go to customers a lot of times as one network that involves leasing and fiber assets. And so we see leasing and fiber -- Uniti Fiber as being very complementary, in terms of our strategy, going forward. We really -- probably, more accurately, a split between the Windstream assets and the non-Windstream assets. And maybe even more specifically, the Windstream ILEC assets and the other assets. And so there's a range of opportunities, I think, in -- when you talk about splitting, it's not exactly clear. There are different theoretical possibilities, depending on the motivations and maybe why we want to do that. But the reason we would talk about that. And maybe the reason investors are thinking about that, it looks like, maybe with some of the survey results we're getting back here, is that we've been pretty vocal, over the last couple of quarters, about talking about how we feel like our equity is undervalued in the marketplace. And more specifically, that it's undervalued, we think the Windstream cash flows are undervalued. And so -- that's something that we're working to break through, talking about it through forums like this, helping investors understand the Windstream lease and the components of it. But it's something that if it continues to be a source of misvaluation or undervaluation, we think, for our equity, then it's imperative on us to think about, "Well, how can we break through that? How can we cut through that?" And so that's where the concept comes up, of maybe splitting those assets. And the opportunity to do that would be -- to do that, in order to have the option -- or at least to understand the path, Kenny was really only talking about understanding the path to doing that, as opposed to that necessarily being our strategy. He was just talking about that being us understanding a path to do that. And we feel like if we understand the path to doing that, it gives us more flexibility, more optionality, should the right opportunity for some sort of strategic transaction come along that would enable us to sort of monetize that lease or those assets in a different way that cuts through some of that misvaluation and delivers higher value to our customers. So I think, we would look at the possibility of splitting those assets as a precursor to a strategy that will enable us to sort of break through some of that misvaluation, whether it was bringing in an outside investor, who value those cash flows differently than maybe the public market is valuing them or securitizing those, that lease, or maybe even some more transformative transaction that really had the -- had the businesses splitting apart. So I think it's incumbent upon us, given all of that fact set, to make sure that we're thinking through all of those possibilities and the way we might be able to [indiscernible] that, if the right opportunity comes along. So it's all about optionality for us.

So I want to dig into this, a little bit further. And while we do, we might as well throw the second survey question up. Now this one, I admit, is a little bit complicated, when we wrote this. So we're going to give this a shot, and see if our audience wants to respond to this. I hope they do. And so we can see their feedback. And as similar to last time, your responses are confidential. We're not tracking them. And if you do not see the survey on your screen, just scroll down a little bit through those disclosures in that window box, and you should be able to see the survey question. So this is -- recognizing that the Windstream lease is not set to renew until 2030, what will be the annual rent for the Windstream lease in the first year, post-renewal? So looking, I realize, a long time from now, but we gave a variety of responses. And so right now, and correct me if I'm wrong, Paul and Bill, but I think the lease is somewhere around $660 million of cash a year, roughly speaking. And so the question is, does it renew above the 2030 exit rate, which could be over $800 million, somewhere between the current level of $660-ish million and $800 million? Does it stay flat to the current level at like $660-ish million? Or does it go down? And we thought, what about without the CLEC portion? So if it's just the ILEC portion of about $540-ish million, so between $540 million and $660 million and then below $540 million. So we give a wide range of choices, and it's probably going to take a couple of minutes for people to digest that. So while they do, took a few minutes just to say it. The question is, does Uniti see value in recombining your lease with the Windstream operating assets?

Yes. No, I think that's a great question. And I think fiber-to-the-home is going through this renewed interest in the marketplace, around fiber-to-the-home. So work from home, COVID, just the general digitalization of society. I think there's a lot of interest in fiber-to-the-home, as indicated by some recent market transactions we've had and some other new stories that we've had around fiber-to-the-home. And I think there are investors out there, whether they're strategic investors or institutional investors, that are interested in fiber-to-the-home platforms and a vehicle through which they can play in that market. And so having the asset separated from the operations, I think, is a limiting factor in the ability to have some of those conversations with potential investors. It might want a platform that has both the assets and the operations together. And so I think there could be some industrial logic to recombining both parts of that business. But of course, you've got to find the right opportunity to do that. You have to have the right investor, the right price, the right -- all the things have to work out to make that make sense for Uniti and for our investors. But I think, it's something that we're willing to think about and discuss, should we find the right the right opportunity to make that happen. So it's definitely not something we're opposed to thinking about.

So we'll go to the results of our survey. So for what we have coming in, it's a little bit split. So 25% of the participants in the survey said between $660 million and the exit rate, which is over $800 million; 25% between $540 million and $660 million; and 50% below $540 million, which is just the ILEC rent at the moment. And so what is, in your view, underappreciated about the value of the lease? We'll start there and then I'll have a follow-up.

There's been a lot of conversation about the renewal of the lease in 2030 and the process for a renewal. And is there something intrinsic in the way that the lease is structured, that is going to dictate some cut to the rent? And I think the right way for investors to think about that, is to understand that the overriding principle of the lease -- and sort of, kind of, written throughout the lease and I don't expect everybody to be an expert on the lease. But the overriding principle of the lease is that the renewal rent in 2030 -- so the initial period was 2015 -- 15 years, 2015 to 2030, the renewal rent in 2030 is going to be set at a fair market rent. And the lease defines the fair market rent as the rate a willing renter and a willing landlord, the rate that they would willingly enter into, together. So we have to get to a fair market rent. And that fair market rent is going to be -- most likely to determine -- I mean, there is the ability -- the first tab is for Windstream and Uniti to agree upon a rent. But should we -- if we're not able to agree, then it goes into a process, where we have professional, outside third-party appraisers come in and work to determine the fair market rent rate. So it's hard to look 8 years into the future and say, "What is fair market? What's the fair market rent for these networks and for what they do?" I do know that -- In 2015, that fair market rent was initially established. And then in 2020, there was an appraisal done by, again, a big [indiscernible] third-party accounting firm type of appraiser that came in and put an appraisal value on the rent as well and the rent stayed unchanged between those two appraisals. So for the first 5 years, the appraisal in '15 and appraisal in 2020 kept that rental rate at the same. And so what is fair market rent going to be in 2030? I think it's -- it's hard for me to say -- Sorry, my dog has entered into the picture here. It's hard for me to say what the fair market rent is going to be in 2030, just like anybody else, it's hard to say, although I'm interested in of your viewers, what the participants here have to say about it. But I think you have to look at the -- at that point, I think you have to look at the trends. So what is happening to the value of fiber? Is it becoming more valuable, more integrated into the economy or less? What is the replacement cost for fiber? How expensive is it is to replace fiber. And I hope, we don't have runaway inflation. But the cost of constructing fiber is definitely going up as opposed to going down, at least currently. What's interest in fiber-to-the-home, what are market multiples doing? What kind of investments is Windstream and Uniti through Windstream, making into the network? And we're making really significant investments into the network through the GCI program. Uniti is committed to investing up to $1.75 billion in replacing old copper with new fiber, as a part of that. So what's the health of the Windstream business? What's interest rates doing? I think all those things you have to look at, in terms of trends that would then go into determining what the fair market rent is in 2030 of those assets and the operations that Windstream has over the top of those assets. And we think, those trends are generally positive and point towards stable valuation. I'm not going to get on here and claim that the rent is going to go way up. But I think, if you look at the trends and you think about what a fair market rent would be, 8 years from now, I like where we are. And I like where the trends are pointing, in terms of where that would lead us and where that would lead appraisers looking at this holistically and determining what that rent would be.

And so as you think about some of the comments that you were describing from Kenny on the last earnings call and some of the comments that you provided today, if Uniti wants to pursue strategic actions for itself, separating the Windstream lease or merging that into Windstream or doing things with other strategics, how much of that depends on Windstream and Uniti getting together and agreeing on what that future value looks like well, well ahead of the renewal date? So how much of the strategic optionality for you, depends on maybe an early meeting of the minds? And in your view, do you think that's a possible or probable outcome over some period?

Yes. Well, obviously, if there's a strategic transaction that involves both sides, and both sides have to come to the table and agree to it, then it's got to be beneficial for both sides. And so you start to think about what's the valuation? And how big is that high? And is there a common ground there. And I think, there is. I think, there is common ground to be had there. And I think, some of the discussion around the renewal rent is interesting. And it's maybe precipitated a little bit, by one side or the other, thinking about some of the strategic alternatives. And there's definitely, some competing incentives, with regard to some of that. But I do think that there is -- it's not -- I will say it's not -- I don't think that it's out of the question that we could get together and find some place, where that could work. Now, just because I think it's possible, doesn't mean that we can all make it -- we can make it happen or that we even -- maybe we don't even -- both sides don't even want to make it happen. But I think, given the interest there is, in those sorts of platforms, I think -- I don't -- I definitely don't think it's out of the realm of possibility that something could happen there.

And just taking a step back to the balance sheet, where is -- on capital allocation? Where is the net debt leverage? And how close are you to unlocking some of that additional freedom to review and revisit the dividend?

Yes. So our -- we're very, very pleased with where our leverage is today and where our liquidity is. Our -- the target range we've been talking about for a while, even when we were above this range, is that 5.5x to 6x net debt leverage or EBITDA leverage on net debt. And we are right in the middle of that range. I think we're somewhere around that 5.8x, depending on if you're looking at the last quarter annualized or the last trailing 12 months or whatever, we're right in the middle of that range. So we're very comfortable with the progress we've made, deleveraging and getting into the [indiscernible] of the range that we think is the appropriate and comfortable range for the business. But you're right, there is a particular debt covenant we have around -- with some of our bonds that require us to hit a 5.75x ratio, in order to free up some flexibility around the dividend. It doesn't impair our ability to refinance our debt or anything like that. But in terms of the dividend, it limits -- until we hit that 5.75x point, we're restricted to paying the minimum statutory dividend, required to maintain our REIT status, which is 90% of REIT taxable income, is the way that works. And so it's not until we hit that covenant that we can really have a meaningful conversation or our Board can have because it's a Board decision. Our Board can have a meaningful conversation around what to do with the dividend, going forward, and the dividend policy. But as you can tell, we're really close to that point. And so I think, the time is coming in the not-too-distant future, where it isn't just an academic discussion of what should we do with the dividend, that our Board will actually have the ability to set that dividend policy without that constraint. So I think that we're close to that. I won't give a timetable as to when I think we're going to hit it because that could be affected by a lot of things, another acquisition or whatever, but we're close to that. And I think the time is coming, when we would have that restriction lifted from us.

Have you enjoyed the freedom of a lower payout and just having more flexibility to think about what to do with the excess cash?

We do have a number of competing opportunities, I guess, like any business, for our capital. And so dividend is one of those things. It's definitely something that's important. We -- our investors enjoy a pretty significant dividend today, even as it stands -- even within the restrictions, it's a pretty good yield, comparative to a lot of our peers, with regard to what we're paying today. So I mean, we do in terms of how we think about capital, and you've asked this question to our audience here. But we do have significant opportunities to invest organically in our business and to continue to drive really high, very attractive business, high-return business. And we think, that is a top priority. We've talked about M&A. We want to continue to do M&A and continue to diversify. And so I think, when our Board does look at the dividend, they will certainly put it in context of all the other priorities for the business, in terms of how we use capital.

Ahead of our rapid-fire questions, anything that we didn't hit that investors should be thinking about, as we kick off this year?

No, I think we've done a good job of covering the basis, just [ 2022 ] is another year of what we want to continue to be good execution, in terms of the core business and diversification of our revenue stream. So I think we're hitting on the main points for the business.

Great. Are you ready for our rapid fire, 3 questions in 3 minutes?

Let's do it. Let's do it.

All right. First question, why should investors buy your equity?

Okay. Well, we are the owners of a mission-critical, highly-valuable asset that is instrumental in the growth of the economy and where the economy is going. If you want a way to play 5G or the fiber-to-the-home or generally the digitalization of the economy, we're a way to do that. We do that through a highly-valuable infrastructure that we own and driving highly-stable recurring revenue to that. So that gives us a very nice cash profile, looking -- stable cash flow, looking out into the future. We pay an attractive dividend, as I just mentioned. And then we believe we're undervalued, relative to our peers and the cash flow profile of the business. So we think, all that adds up to Uniti being an attractive long-term investment for investors.

Is inflation a net opportunity, net neutral or net risk for your business model and financial performance?

I think it's net neutral to negative, if I'm being honest with our audience here. I think -- it's net neutral, I think, because from a capital structure standpoint, we've done a lot of work already in a low interest rate environment, driving our cost of capital down, extending out maturities. Most of our debt structure is fixed in nature. So we're set up well, from a capital structure, going forward, in terms of working in an inflationary environment. It's also net neutral because we do as often as we can, try to build in escalators and protection into our contracts with customers that insulate us from an inflationary environment through having those contracts automatically escalate. But to be honest, it is a negative to the business in some other ways as well. We're sellers of dark fiber, which can grow with inflation, like I just said, but we're also sellers of bandwidth. And bandwidth, traditionally, is a deflationary product and the cost per [ megabit ] keeps going down. And so even if businesses want to buy more, the cost per megabit goes down. And if our cost for deploying infrastructure and for operating the assets, goes up with inflation, that could be -- provide some pressure on margins. So I think it's neutral to slightly negative for us, yes.

And since this is the AppsEconomy Conference, is there an application that you would highlight that's going to significantly increase the demand for connectivity or for data consumption over the next few years?

Well, if I knew exactly what it was, exactly how it was going to happen, I might jump off on another venture. But I do say, generally, whether it will happen exactly in your time frame or not, I know, but I think the thing that comes to my mind, maybe have the biggest impact on the demand for bandwidth, is if there's something that comes along that takes AR and VR from a niche gaming application to something that's more broad-based for consumer and business demand. If that were to happen, I think it's going to drive significant increase in bandwidth and demand for bandwidth across all of our networks.

Well, it's great to see you, Paul and Bill. Thank you for joining us today.

Well, it was great to be here. Thank you for having us, and we appreciate everybody listening in.

Yes. Thanks, Mike.

Thank you.