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Kenneth Gunderman

Thanks, Bill. Good morning, everyone, and thank you for joining. I'm excited to talk about another solid quarter of performance at Uniti in our pending combination with Windstream. But before doing that, I want to first acknowledge the terrible impact of hurricanes Helene and Milton. Our thoughts are with the many people who have suffered loss and damage in the affected areas. I also want to thank emphatically the loyal Uniti first responders and support employees who yet again provided terrific, virtually immediate support to our customers and communities. While our response to such national disasters is a core competency and regularly complemented by our customers, Uniti leadership never takes your service for granted.
Now, turning to the quarter and starting on slide 4. Uniti once again delivered a solid quarter of performance led by the continued strong demand for our mission critical fiber infrastructure by various customers, including hyperscalers. Paul will provide more details on our updated guidance later on, but we're slightly increasing our full-year 2024 revenue outlook as a result of this strong demand.
Our core recurring strategic fiber business grew 3% in the third quarter, fueled by exceptional growth in enterprise, wholesale, and dark fiber revenue of 10%, 14%, and 18%, respectively. When paired with our industry-leading 0.2% churn, we remain on track to deliver 4% to 6% MRR growth for the full year.
Turning to slide 5, we had another strong quarter of new bookings. While wireless bookings have remained muted so far, we are encouraged that we'll see a pickup in activity towards the end of this year and into 2025. This downturn is more than offset by demand from other customers including fiber-to-the-home carriers, which are driving substantial demand procuring middle mile and inner city backhaul to connect their neighborhoods. The amount of bookings Uniti saw relating to fiber-to-the-home carriers increased threefold in 2023 versus 2022, and we expect a similar level this year.
As we mentioned previously, the demand from hyperscalers continues to represent a meaningful part of our consolidated bookings, with 20% of our year-to-date bookings coming from hyperscalers. We're confident that this demand will be sustained going forward as a meaningful amount of our entire sales funnel is from hyperscalers.
Moving to slide 6, I wanted to talk a bit more granularly about the hyperscaler deals we're seeing. There should be no debate in the industry about the size of the demand for digital infrastructure -- the hyperscaler opportunity for digital infrastructure providers, including data centers and fiber. Hyperscalers are spending over $200 billion annually, and a meaningful percentage of that is being spent on digital infrastructure for cloud-based products, now generative AI, and other future use cases. We believe this spend is going to persist and likely grow.
The types of transactions we're pursuing with hyperscalers thus far are attractive financial deals and highly strategic. As you can see from the map, we're either selling existing infrastructure with little to no capital required or building new infrastructure in highly strategic parts of our network providing future lease-up potential. In some cases, we're building new long-haul routes that we previously coveted, but could not justify from a cost perspective. Further, the economics of these transactions are entirely in line with our previously stated anchor plus lease-up model, and we're very excited to pursue future transactions during this investment phase.
As you can see, the types of deals vary from strategic sales to IRUs to dark fiber leases, and in some cases, selling waves. As a result, the impact of our financials, including bookings, will vary quarter to quarter. For example, in the fourth quarter, we're likely to see a spike in revenue from strategic sales that were made to hyperscalers earlier in the year and are being delivered during the quarter. We're even more excited for the inference phase of generative AI and the many other ultra-high broadband use cases that are coming.
The edge of our network will become even more valuable as data centers, wireless towers, small cells, and connected buildings will need to be built or upgraded, providing a lift to MRR. Importantly, fiber-to-the-home will also become even more valuable. In short, Uniti is executing well on our core strategy of providing mission critical fiber, and we're well positioned for the future.
With that, I will turn the call over to Paul.

Paul Bullington

Thanks Kenny. I'd like to begin by reviewing our third quarter performance followed by an overview of our current 2024 outlook. The solid results we saw on the third quarter for Uniti were once again anchored by a healthy level of consolidated bookings MRR of nearly $1 million, 3% year-over-year growth in our core recurring strategic fiber revenue, and declining consolidated net success-based capital intensity, ending the quarter at around 20%.
As I'll cover in more detail in just a bit, we are slightly increasing our 2024 outlook for consolidated revenue, while adjusted EBITDA remains unchanged as we expect to end the year within the previous guidance ranges provided. We have also provided Windstream's third quarter financial information in an 8-K filed with the SEC earlier this morning.
Please turn to slide 7 and I'll start with comments on our third quarter. We reported consolidated revenues of $292 million, consolidated adjusted EBITDA of $235 million, AFFO attributed to common shareholders of $87 million, and AFFO per diluted common share of $0.33. As I mentioned last quarter, given the timing of one-time sales, including strategic dark fiber sales to hyperscalers, we continue to expect second half revenue and adjusted EBITDA will be more heavily weighted in the fourth quarter versus the third quarter.
On a consolidated basis, our net capital intensity during the quarter was 21%, down from 41% in the same period -- same prior period prior year as we wrapped up our 2024 GCI funding commitments in July. There continue to be a number of encouraging trends in bookings that are driving this capital efficiency, including our continued focus on lease-up and a higher mix of hyperscaler deals that generally come with higher NRCs.
At Uniti Leasing, we reported segment revenues of $223 million and adjusted EBITDA of $215 million, representing an adjusted EBITDA margin of 97% for the quarter. At Uniti Fiber, we reported revenues of $69 million and adjusted EBITDA of $26 million during the third quarter. Both revenue and adjusted EBITDA during the quarter were in line with our expectations.
Turning to slide 8, our growth capital investment program continues to provide positive results for Uniti and given our pending merger with Windstream, I wanted to highlight a key point that I believe the market is underappreciating. Since 2015, Kinetic and Uniti have invested almost $2.5 billion of capital in its network. These historical investments have helped enable Kinetic's approximate $650 fiber-to-the-home per passing cost, as we estimate that deploying backhaul fiber networks equates to roughly 20% of the total cost of building fiber-to-the-home for others in the industry.
On slide 9, we've updated the consolidated year-to-date view of revenue and adjusted EBITDA for New Uniti by each segment on which we expect to report post close. Both Kinetic and fiber infrastructure consists of a highly predictable core recurring revenue base that continues to grow and yield attractive margins.
As a reminder, our fiber-to-the-home platform will continue to be branded as Kinetic. Fiber infrastructure will include our current Uniti Fiber and Uniti Leasing segments along with the Windstream wholesale segment, all of which are highly complementary and will combine to create a premier fiber infrastructure company with both national and deep regional capabilities and a fiber network that is predominantly owned and operated. As you can see, the core fiber business demonstrated solid top line growth for the quarter, and just as importantly, the combined business is demonstrating continued solid EBITDA growth.
Please turn to slide 10 and I'll now cover our updated 2024 guidance. We are revising our guidance for business unit level revisions and the impact of transaction related and other costs incurred to date. Our outlook excludes the impact from the expected merger with Windstream, future acquisitions, capital market transactions, and future transaction related and other costs not specifically mentioned herein. Actual results could differ materially from these forward-looking statements.
As I mentioned earlier, we are increasing our 2024 outlook for consolidated revenue by $3 million to account for higher than expected onetime lease up that was realized during the quarter at Uniti Leasing. While our full-year outlook for adjusted EBITDA remains unchanged, we are increasing the midpoint of our outlook for Uniti Leasing by $2 million to reflect the additional one-time lease-up I just mentioned, which is offset by an increase of $2 million in our full-year corporate expense outlook due to higher than expected corporate SG&A expense.
At Uniti Leasing, we continue to expect $250 million of net success-based CapEx at the midpoint of our guidance, of which, approximately $230 million relates to Windstream GCI investments. Net success-based CapEx for Uniti Fiber this year is still expected to be $100 million at the midpoint of our guidance, representing a capital intensity of 34%, down from 40% in 2023 and 45% in 2022, further demonstrating the success we are having in transitioning to less capital-intensive, higher return lease-up deals. We expect full-year AFFO to range between $1.32 and $1.39 per diluted common share with a midpoint of $1.35 per diluted share.
As a reminder, guidance ranges for key components of our outlook are included in the appendix to our earnings presentation. At quarter end, we had approximately $529 million of combined unrestricted cash and cash equivalents and undrawn revolver capacity. Our leverage ratio at quarter end was 6.05 times based on net debt to third quarter 2024 annualized adjusted EDITDA excluding the debt and net contributions from the ABS loan facility.
Finally, a couple of comments on our capital structure. During the quarter, Windstream successfully executed on a collaborative plan to strengthen and simplify the post-merger capital structure, these moves accomplished three primary goals. First, all of Windstream's debt is now portable into the Uniti debt structure at or shortly after close, allowing for a collapse of the dual debt silos into one, simplifying the combined capital structure for both the company and investors with something that was important for us to accomplish quickly and efficiently.
Second, it addresses the majority of our 2027 maturity stack by pushing out significant debt maturities to 2031. And third, raises the additional capital that can be used for general corporate purposes, including expanding the Kinetic fiber-to-the-home build plan. As it relates to the ABS market, we continue to view it as an attractive source of financing that complements our existing capital structure well. To that end, we continue to make good progress on replacing our current ABS bridge financing with a permanent ABS solution, which we expect will be in place by later this year or early next year.
With that, I'll now turn the call back over to Kenny.

Kenneth Gunderman

Thanks, Paul. We continue to make great progress on our timeline to close our pending merger, and in fact, we've already received PUC approvals from 13 of the 18 jurisdictions requiring them.
Slide 14 showcases the reach of new Uniti's insurgent fiber network, extending our successful strategy of targeting Tier 2 and Tier 3 markets for wholesale and enterprise now into residential fiber-to-the-home. Our true north is building fiber first in less competitive markets, giving us the right to win for many years into the future. Including connected buildings, fiber to the tower, and small cell connections, connected POPs and data centers, and the 4.3 million total homes within Kinetic's current footprint, Uniti will have the potential to reach over 5 million connected on-ramps in largely unique locations, each driving increasing amounts of bandwidth onto our owned wholesale network.
Slide 15 highlights how Kinetic compares favorably to other providers in the industry. Only 15% of the footprint today has a true overbuilder, and that's held relatively constant for the last five years. Next, Kinetic is also building fiber passings of what we believe to be an industry-leading cost of $650 per passing. As Paul highlighted earlier, the historical GCI, TCI investments have given Kinetic a head start from a cost and network quality perspective, and Kinetic has a fully internally owned build engine that lowers costs further.
Importantly, our current plan currently targets approximately 60% coverage with fiber, and we're actively evaluating expanding that plan further. In fact, Winstream announced on its earnings call yesterday that we expect to accelerate its fiber build program beginning in 2025. We plan to provide more specific guidance on that plan when we provide our 2025 outlook early next year.
Moving to slide 16, you can see Kinetic has been demonstrating strong success the past few years. Initial penetration levels on early cohorts have consistently averaged between 15% to 18% in the first year, increasing to above 25% on average by the second year. Recent cohorts have been demonstrating initial penetration rates of up to 30%, as Kinetic has really ramped a more customer-focused, digitally enhanced local go-to-market strategy.
Slide 17 highlights another exciting element of our combination, which is the bringing together of Uniti's robust, asset-rich national wholesale business with Windstream's national lit network. On a combined basis, this business will have over 200,000 route miles, many in unique Tier 2 and Tier 3 routes, almost 800,000 connected buildings, and over 1,600 connected POPs and data centers. We'll be uniquely positioned to continue being a share taker in the growing dark fiber and waves markets.
Turning to slide 18, we committed to making progress on numerous key initiatives between signing and closing of our transaction. First, both companies continue to execute well operationally and we continue to provide a unified investor relations outreach to help investors understand the New Uniti. Next, as Paul mentioned earlier, we're very excited to have completed the simplification of our new pro forma balance sheet at closing. As part of that, we're working on an accelerated and expanded fiber-to-the-home built plan with extra capital. We're also actively working with Kinetic on an integration plan to achieve our synergy goals. And lastly, we're never idle when it comes to M&A.
Let me close on slide 19 by restating how excited we are for our pending merger with Windstream. When we announced the transaction in May, we talked about the strategic rationale, and since then, market developments have absolutely validated our views. The new Uniti is at the epicenter of the growing convergence trend, highlighting the substantial strategic value of Kinetic and its scaled fiber-to-the-home platform. Our fiber infrastructure business is also uniquely positioned to benefit from the explosion and broadband demand in general, including the demand being fueled by hyperscalers. We cannot be more excited about our positioning.
And with that, we'd be happy to take your questions.

Question and Answer Session

Operator

(Operator Instructions)
Greg Williams, TD Cowen.

Greg Williams

Great. Thanks for taking my questions. The first one is just hoping you could provide more color on the recent win with the Montgomery Metro rings in terms of MRR and bookings. And there's a concern out there in general that you're seeing high upfront NRCs, as Paul you noted, but not much recurring MRR cash and low yields on some of these deals. So maybe you can talk to the flavor and then the characterization of the deals and the mechanics and if the yields are acceptable. And part and parcel to that, just can you talk to the competitive dynamics in the RFP process? Press releases out there and funnels that are in the billions of dollars, and if it's a lucrative GenAI fiber opportunity, is there more competition at the RFP table, and can you speak to, you need these advantages. Thanks.

Kenneth Gunderman

Good morning, Greg. Thanks. Yeah, we wanted to provide more color on the types of transactions we're pursuing with this new slide that we hit in the prepared remarks. And really, when you look at Montgomery, the one you mentioned, it's really part and parcel with the ones on this page. And it’s -- what we're doing at Uniti with respect to the hyperscalers is we're building very strategic fiber when we're working with them. We're not building fiber off in remote locations that we can't use for a second, third, or fourth tenant. We're building fiber that's in the core of our network in markets like Montgomery or connecting markets like Montgomery to Huntsville or Huntsville to Mobile, which give us tremendous lease-up potential on top of the initial build.
And so that dovetails, I think, nicely into your second question, which is the economics of these deals, how do they work for us and how do they fit within our previously stated strategy of our anchor plus lease-up model. And we believe they fit squarely in that model. And we've always talked about building anchor fiber in the 5% to 10% initial cash flow range, but then having a lease up strategy on top of that that gets you well above that 10%.
And as we talk about every quarter, we're tracking well above those performance metrics when we look at all the anchor bills we've done over the past number of years. And with respect to these hyperscaler deals, I would say -- and when you do an anchor deal, if you take a lower NRC, that puts more stress or more focus on the need for lease up in order to get to those returns. And conversely, if you have a higher NRC, there's less stress on the need for lease up or less stress on, I'd say, the sense of urgency on lease up.
And in these hyperscaler deals, generally what we're seeing, like Paul said, the NRCs are higher. And so when we think about that 5% to 10% initial yield range, I would say most of the deals we're seeing are in excess of that range. And so from an economic perspective, we feel very good about the deals, including our view of the lease-up potential on the deals that we've done after the anchor deal. Again, given where these bills are, they're right in the core of our network. So we feel great about the economics of the deals and we're excited to build more of these going forward and we'll continue reporting on the economics as we do.
With respect to the competitive dynamic, it's really -- these are a different type of opportunity than just a broad wireless RFP, for example. I mean, we're engaging not quite in bespoke manner with the hyperscalers, but closer to that than an RFP, if you will. We're engaging on a regular basis. And look, similar to other large, sophisticated companies who want to procure fiber network, they're looking for parties who have a robust scaled network that has plenty of capacity.
Two, they're looking for providers that are able to build on time and on budget. It's critically important to them. There's a sense of urgency on their part to get this infrastructure built, and so they're putting a priority on parties who can deliver for them. And Uniti does have a scaled, robust network. We are in unique locations, including Tier 2 and Tier 3 markets where they're tending to focus right now. And we certainly have a proven ability to build on time and on budget.
And so we don't necessarily feel the same competitive pressure that you would in an RFP process. And I think that's a terrific place to be and we continue to focus on execution for these good customers on a go-forward basis and I think that sort of competitive dynamic will persist.

Operator

Frank Louthan, Raymond James.

Frank Louthan

Great. Thank you. With these anchor deals, can you give us some color of how much fiber you're building for yourself with that? How much is this all new greenfield construction? I assume you're getting some fiber for yourself for inventory. And then on slide 14 with some of these potential market expansions, can you give us more color on that? Are these Windstream markets as well as Uniti Fiber markets or a combination? And how should we think about the revenue opportunity there? Thanks.

Kenneth Gunderman

So, Frank, we're -- in terms of the fiber, your first question, look, three or four years ago we were selling six to 12 strands generally to hyperscalers. Now we're delivering on average I'd say 864 strand count deals and in some cases more. And so, there's been a substantial pickup in the amount of fiber and just general infrastructure that they're procuring. And to your question about how much fiber we're keeping for ourselves or building for ourselves, I would say it's a substantial amount on par with what we're delivering, if not more. So anytime we break ground and put in new network, we're planning -- future-proofing our own network and own capacity needs.
And we're keeping in mind the amount of capacity we're selling. In the past, when we were selling six to 12 strands, putting in 144 count cable seemed like enough. But now when you're not and you're selling 864 strand count, you need more. You need more capacity and more conduits. And so, we're absolutely using this as an opportunity to not only deliver the fiber that our customers are demanding, but we're also future proofing our network, which goes back to Greg's question. I mean, we just feel very excited about the lease up potential that we're building in for ourselves with the fiber that we're delivering.
In terms of the new market expansion, I think there's multiple new market expansion opportunities for the new Uniti. Starting with Kinetic, currently today, Kinetic has built fiber to roughly 37%, 38% of their footprint. And we have a plan to get to 60%. So that's a substantial pickup in the number of markets that -- where Kinetic has copper today and we have the opportunity to build fiber. And we think there's potentially an opportunity to go even higher and we're working hard on that.
But we also, in addition to Kinetic, we have metro fiber in 300 markets around the country. And that's -- a lot of that is in the Uniti footprint. It's outside of the Kinetic footprint. So it's in addition to that kinetic build. And today we're offering lit services in probably 30 of those markets. So, a tenth of the opportunity. That's not to say that to your revenue question that we think we've got a hundredfold increase in revenue because we're going to target those markets in a very disciplined and measured approach. But we do think that having metro fiber is a very valuable part of our network, and that metro fiber is connected by an owned backhaul network in which we also have a lot of unique routes and unique markets.
And I think that's often underappreciated about the wholesale part of our business because especially with these hyperscalers, we're connecting data centers in unique metro markets with routes, unique Tier 2 and Tier 3 routes that again have lease up potential on top of it. So I'm very excited Frank about the market expansion opportunities across all three of our businesses, Kinetic, Uniti Fiber, and our wholesale business.

Frank Louthan

Great. That's really helpful color. Thanks.

Operator

(Operator Instructions)
David Barden, Bank of America.

David Barden

Hey, guys. Thanks for taking the questions. I guess, a couple if I could. Kenny, I guess on that slide is the green and the yellow kind of the progress of the merger. What's not on there is kind of the regulatory conversation that you're going through on a state-by-state basis, can you kind of give us a little bit of color about what is the act on both sides, from the state regulatory agencies, and are there some longer polls in this tent than others?
Second, Paul, could you kind of just step us through the one-time revenue benefit that is causing you to guide up on revenue but is not flowing through to the EBITDA line, that'd be helpful.
And then I guess my last question, if I could, Kenny, I just want to drill down a little bit on the hyperscale thing to follow up on the first question, which was, the selling process. I mean, it kind of feels to me like the hyperscalers know (inaudible) today where they're building. So they don't necessarily need to be sold, they need to be -- they have a route. And I guess they're out there hunting for the people that have that route. And is that -- is it more like a reverse sale? I'm just trying to understand how that whole thing is working since it's so new. Thank you.

Kenneth Gunderman

Great, David, I'll take the first and turn it to Paul and then come back on the third. So on the regulatory approval process, when we originally signed the deal, we talked about the deal closing. We expected it to close in the second half of 2025. And as part of that guidance, we were sort of baking in the long polls that we thought existed. I would tell you, we thought the long polls were probably the one or two of the state PUCs, and I won't get into which ones, but we thought it was one or two of those.
Now after having engaged with the various regulators over a period of a number of months, we're less concerned about those long polls. We haven't heard any issues or concerns that are troubling or that are surprising. In fact, we think there's a lot of enthusiasm for the transaction. And on the federal front, the same, making good progress across the board.
And so we constantly debate whether to update our guidance on the closing of the transaction. We're increasingly confident that our original guidance was conservative, not yet prepared to change that, but I think in the coming weeks and months we certainly will update that. But we feel great about the progress and have not heard any issues that are concerning to us at all.

Paul Bullington

Yeah, so Frank, on the benefit from the one-time revenue for the quarter. So we are taking Uniti leasing guidance up $3 million as a result of this one-time deal or one-time revenues that we reported. But it is flowing through to the bottom line. There's a $2 million increase, corresponding increase, in our guidance for Uniti leasing EBITDA for the year. So it is flowing through. It's just being offset by also a $2 million increase at corporate in terms of expenses. So a decrease in EBITDA guidance at corporate as a result of increased SG&A costs. And those costs are primarily being driven by performance-based comps. So it's just -- there's an offset to that one-time revenue profitability that's flowing through.

David Barden

Thank you.

Kenneth Gunderman

And David, on the hyperscaler question, first, just as a reminder, we've said this before, but I think it's worth reiterating that not all of these deals are the same. The hyperscalers are -- first of all, they're not all one single customer. They all have different buying patterns, of course, but also in some cases we're selling traditional waves or we may be selling traditional dark fiber IRU on existing network and it's just their typical network planning for current and future uses. And so we may be selling six or 12 strands of dark fiber, or we may be selling 100 or 400 gig waves in the traditional sense.
I think you're -- and by the way, that's terrific business for us, and it's a growing part of the funnel, and it will continue to grow on a go-forward basis. And I highlight that because I actually -- we think once we start to hit the inference phase where people are using more of the AI at the edges where you can't -- where a lot of that data can't be cached and it has to be used real time, that's when a lot of the lit fiber on the edges will become even more valuable and I think that's when you'll start to see a lot of this business flowing through into MRR as opposed to now. You're seeing a lot of these lumpy type deals that we're explaining and it's either in bookings or it's not or it's a one-time sale or it's not.
And I think that's the heart of your question. What's the sales cycle like for those types of deals where the hyperscalers are building new data centers, for example, in a unique location. And look, what I would tell you is, the fiber is not -- the fiber piece of it is not what's driving the decision initially. For the hyperscalers, it's procuring the land, and it's procuring the power and the grid capacity, and obviously building the data center.
And then from there, the hyperscalers, I think, are looking for fiber providers that have network near the location or can justify building it off of an existing location. And so it goes back to my earlier question. It's not really a traditional sales cycle, if you will. I think the majority of the capital required for the hyperscalers to build these data centers is not the fiber. It's the data center, the land, and the power. And then fiber comes later.
And so in some ways that's a good thing, right? Because there's a little bit less focus on getting the last dollar of economics and it's more about getting that fiber built on time and getting it turned up expeditiously. And I think in our markets, our core markets, we have an advantage when it comes to providing that.

David Barden

Yeah. Thanks, Kenny. Thanks, Paul.

Operator

Thank you. At this time, I would now like to turn the conference back over to Kenny Gunderman for closing remarks.

Kenneth Gunderman

Thank you. We appreciate your interest in Uniti Group and look forward to updating you further on future calls. Thank you for joining us today.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.