Uniti Group Inc. 10-K Analysis & Summary – 2/21/2025

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Uniti Group Inc.

10-K

Annual report

Filing date:

02/21/2025

TLDR:

Uniti Group’s 2024 results show improved profitability due to the absence of prior-year impairment charges. However, the company faces risks related to its dependence on Windstream and the proposed merger.

ELI5:

Uniti Group made more money this year, but they rely heavily on one customer and are planning a big merger, which could be risky.

Accession #:

0001628280-25-007109

Published on

March 16, 2025

Analyst Summary

Total revenue increased slightly from $1,149.8 million in 2023 to $1,166.9 million in 2024.
Net income attributable to common shareholders improved significantly from a loss of $82.9 million in 2023 to a profit of $91.3 million in 2024.
68.3% of revenue is derived from Windstream, highlighting a significant concentration risk.
Operating Profit Margin = 6.5%
Net Profit Margin = 8.0%
Return on Assets (ROA) = 1.8%
Return on Equity (ROE) = -3.8%
Basic EPS = $0.38, Diluted EPS = $0.38
Current Ratio = 2.6
Quick Ratio = 2.6
Cash Ratio = 2.0
Debt-to-Equity Ratio = -2.4
Debt-to-Assets Ratio = 1.1
Interest Coverage Ratio = 1.8
Asset Turnover = 0.2
Price-to-Earnings Ratio (P/E) = 14.8
Price-to-Book Ratio (P/B) = -0.5
Price-to-Sales Ratio (P/S) = 1.1
Enterprise Value to EBITDA (EV/EBITDA) = 7.7
Revenue Growth = 1.5%
Net Income Growth = -214.3%
EPS Growth = -208.6%
Adjusted EBITDA increased from $923.5 million in 2023 to $940.1 million in 2024.
FFO attributable to common shareholders increased from $136.8 million in 2023 to $294.5 million in 2024.
AFFO attributable to common shareholders decreased from $385.3 million in 2023 to $358.9 million in 2024.
Uniti Leasing revenues increased from $852.8 million in 2023 to $880.5 million in 2024.
Uniti Fiber revenues decreased from $297.1 million in 2023 to $286.4 million in 2024.

Opportunities and Risks

Dependence on Windstream: A significant portion of Uniti’s revenue is derived from Windstream, making the company vulnerable to Windstream’s financial performance.
Merger Risks: The proposed merger with Windstream is subject to regulatory approvals and integration challenges.
Debt Levels: Uniti has a substantial amount of debt, which could limit its financial flexibility.
REIT Status: The merger may cause Uniti to lose its REIT status, which could have tax implications.
Merger Synergies: The proposed merger with Windstream could create synergies and growth opportunities.
Fiber Demand: Increasing demand for bandwidth infrastructure services could drive growth in the Fiber segment.

Potential Implications

Uniti Group Inc. (UNIT) 2024 10-K Filing Report

Executive Summary

This report analyzes Uniti Group Inc.’s 2024 10-K filing. Uniti Group, an independent REIT focused on communications infrastructure, faces significant dependence on Windstream, a proposed merger with Windstream, and substantial debt. While revenue increased slightly, profitability improved significantly due to the absence of goodwill impairment charges present in the prior year. The proposed merger with Windstream introduces both opportunities and risks. Overall, a cautious approach is warranted, given the dependence on Windstream and the complexities of the proposed merger.

Company Overview

Uniti Group Inc. (UNIT) is a REIT focused on acquiring, constructing, and leasing communications infrastructure, primarily fiber optic, copper, and coaxial broadband networks. The company operates through two segments: Uniti Leasing and Uniti Fiber. A key development is the proposed merger with Windstream, expected to close in the second half of 2025.

Detailed Analysis

Financial Statement Analysis

Revenue: Total revenue increased slightly from $1,149.8 million in 2023 to $1,166.9 million in 2024.

Net Income: Net income attributable to common shareholders improved significantly from a loss of $82.9 million in 2023 to a profit of $91.3 million in 2024. This is largely due to the absence of goodwill impairment charges in 2024, which were significant in 2023.

Segment Performance:

Uniti Leasing: Revenue increased from $852.8 million to $880.5 million.
Uniti Fiber: Revenue decreased from $297.1 million to $286.4 million.

Key Ratios:

Customer Concentration: 68.3% of revenue is derived from Windstream, highlighting a significant concentration risk.

Management’s Discussion and Analysis (MD&A) Insights

Management highlights the proposed merger with Windstream as a key strategic initiative. The MD&A emphasizes the potential benefits of the merger, including synergies and growth opportunities. However, it also acknowledges the risks associated with the merger, such as regulatory approvals and integration challenges.

Risks and Opportunities

Risks:

Dependence on Windstream: A significant portion of Uniti’s revenue is derived from Windstream, making the company vulnerable to Windstream’s financial performance.
Merger Risks: The proposed merger with Windstream is subject to regulatory approvals and integration challenges.
Debt Levels: Uniti has a substantial amount of debt, which could limit its financial flexibility.
REIT Status: The merger may cause Uniti to lose its REIT status, which could have tax implications.

Opportunities:

Merger Synergies: The proposed merger with Windstream could create synergies and growth opportunities.
Fiber Demand: Increasing demand for bandwidth infrastructure services could drive growth in the Fiber segment.

Red Flags and Uncommon Metrics

Goodwill Impairment: While no impairment was recorded in 2024, the significant impairment in 2023 indicates potential valuation concerns.
Related Party Transactions: The close relationship with Windstream requires careful scrutiny of related party transactions.

Conclusion and Actionable Insights

Uniti Group’s 2024 results show improved profitability, largely due to the absence of prior-year impairment charges. However, the company faces significant risks related to its dependence on Windstream and the complexities of the proposed merger. The merger presents both opportunities and risks, and its success will depend on regulatory approvals and successful integration. Given these factors, a cautious approach is warranted.

Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin:

Ratio/Metric: Since the report doesn’t provide a cost of revenue, we can’t calculate the gross profit margin.

Operating Profit Margin:

Ratio/Metric: Operating Income / Total Revenues = $75,877 / $1,166,927 = 6.5%
Trend: Previous Operating Profit Margin = $(152,885) / $1,149,831 = -13.3%. Percentage Change = (6.5% – (-13.3%)) / (-13.3%) = -148.87%
Industry: The operating profit margin for REITs can vary widely. A reasonable range might be 15-30%. Uniti Group’s operating margin is below this range.

Net Profit Margin:

Ratio/Metric: Net Income / Total Revenues = $93,432 / $1,166,927 = 8.0%
Trend: Previous Net Profit Margin = $(81,749) / $1,149,831 = -7.1%. Percentage Change = (8.0% – (-7.1%)) / (-7.1%) = -214.08%
Industry: REITs typically have net profit margins in the 10-20% range. Uniti Group’s net profit margin is below this range.

Return on Assets (ROA):

Ratio/Metric: Net Income / Total Assets = $93,432 / $5,282,145 = 1.8%
Trend: Previous ROA = $(81,749) / $5,025,129 = -1.6%. Percentage Change = (1.8% – (-1.6%)) / (-1.6%) = -212.5%
Industry: Average ROA for REITs is typically in the 2-4% range. Uniti Group’s ROA is below this range.

Return on Equity (ROE):

Ratio/Metric: Net Income Attributable to Shareholders / Total Shareholders’ Equity = $93,406 / (-$2,451,840) = -3.8%
Trend: Previous ROE = $(81,713) / (-$2,484,121) = 3.3%. Percentage Change = (-3.8% – 3.3%) / (3.3%) = -215.15%
Industry: ROE for REITs can be highly variable due to leverage. A typical range might be 5-15%. Uniti Group’s ROE is below this range.

Earnings Per Share (EPS) – Basic and Diluted:

Ratio/Metric: Basic EPS = $0.38, Diluted EPS = $0.38
Trend: Previous Basic EPS = $(0.35), Diluted EPS = $(0.35). Percentage Change = (0.38 – (-0.35)) / (-0.35) = -208.57%
Industry: EPS varies widely.

Liquidity

Current Ratio:

Ratio/Metric: Current Assets / Current Liabilities. We need to calculate current assets and current liabilities first.
Current Assets = Cash and cash equivalents + Restricted cash and cash equivalents + Accounts receivable, net = $155,593 + $28,254 + $51,418 = $235,265
Current Liabilities = Accounts payable, accrued expenses and other liabilities, net + Dividends payable = $89,688 + $665 = $90,353
Current Ratio = $235,265 / $90,353 = 2.6
Trend: Previous Current Assets = $62,264 + $0 + $46,358 = $108,622
Previous Current Liabilities = $119,340 + $36,162 = $155,502
Previous Current Ratio = $108,622 / $155,502 = 0.7
Percentage Change = (2.6 – 0.7) / 0.7 = 271.43%
Industry: A current ratio of 1.5 to 2.0 is generally considered healthy. Uniti Group’s current ratio is above this range.

Quick Ratio (Acid-Test Ratio):

Ratio/Metric: (Current Assets – Inventory) / Current Liabilities. Since there is no inventory, Quick Ratio = Current Ratio = 2.6
Trend: Previous Quick Ratio = Previous Current Ratio = 0.7
Percentage Change = (2.6 – 0.7) / 0.7 = 271.43%
Industry: A quick ratio of 1.0 or greater is generally considered healthy. Uniti Group’s quick ratio is above this range.

Cash Ratio:

Ratio/Metric: (Cash and Cash Equivalents + Restricted Cash and Cash Equivalents) / Current Liabilities = ($155,593 + $28,254) / $90,353 = 2.0
Trend: Previous Cash Ratio = ($62,264 + $0) / $155,502 = 0.4
Percentage Change = (2.0 – 0.4) / 0.4 = 400%
Industry: A cash ratio of 0.5 to 1.0 is often considered acceptable. Uniti Group’s cash ratio is above this range.

Solvency/Leverage

Debt-to-Equity Ratio:

Ratio/Metric: Total Debt / Total Shareholders’ Equity = $5,783,597 / (-$2,451,840) = -2.4
Trend: Previous Debt-to-Equity Ratio = $5,523,579 / (-$2,484,121) = -2.2
Percentage Change = (-2.4 – (-2.2)) / (-2.2) = 9.09%
Industry: Debt-to-equity ratios for REITs are typically higher than other industries. A range of 1.0 to 2.0 might be considered normal, but it depends on the specific REIT and its strategy. Uniti Group’s negative ratio is due to negative equity.

Debt-to-Assets Ratio:

Ratio/Metric: Total Debt / Total Assets = $5,783,597 / $5,282,145 = 1.1
Trend: Previous Debt-to-Assets Ratio = $5,523,579 / $5,025,129 = 1.1
Percentage Change = (1.1 – 1.1) / 1.1 = 0%
Industry: A debt-to-assets ratio above 0.5 may indicate higher risk. Uniti Group’s ratio is above this level.

Interest Coverage Ratio (Times Interest Earned):

Ratio/Metric: EBITDA / Interest Expense = $902,051 / $511,364 = 1.8
Trend: Previous Interest Coverage Ratio = $672,654 / $512,349 = 1.3
Percentage Change = (1.8 – 1.3) / 1.3 = 38.46%
Industry: A ratio of 1.5 or greater is generally considered acceptable. Uniti Group’s ratio is above this level.

Activity/Efficiency

Asset Turnover:

Ratio/Metric: Total Revenues / Total Assets = $1,166,927 / $5,282,145 = 0.2
Trend: Previous Asset Turnover = $1,149,831 / $5,025,129 = 0.2
Percentage Change = (0.2 – 0.2) / 0.2 = 0%
Industry: Asset turnover for REITs is typically low, often below 0.5. Uniti Group’s asset turnover is within this range.

Valuation

Price-to-Earnings Ratio (P/E):

Ratio/Metric: Stock Price / EPS = $5.62 / $0.38 = 14.8
Industry: P/E ratios for REITs can be variable.

Price-to-Book Ratio (P/B):

Ratio/Metric: Market Cap / Book Value of Equity. Market Cap = Shares Outstanding * Stock Price. Shares outstanding is approximately 237,513,495. Market Cap = 237,513,495 * $5.62 = $1,334,825,539. Book Value of Equity = -$2,451,840. P/B = $1,334,825,539 / (-$2,451,840) = -0.5
Industry: P/B ratios for REITs can be variable.

Price-to-Sales Ratio (P/S):

Ratio/Metric: Market Cap / Total Revenue. Market Cap = Shares Outstanding * Stock Price. Shares outstanding is approximately 237,513,495. Market Cap = 237,513,495 * $5.62 = $1,334,825,539. Total Revenue = $1,166,927. P/S = $1,334,825,539 / $1,166,927 = 1.1
Industry: P/S ratios for REITs can be variable.

Enterprise Value to EBITDA (EV/EBITDA):

Ratio/Metric: EV = Market Cap + Total Debt – Cash and Cash Equivalents. Market Cap = 237,513,495 * $5.62 = $1,334,825,539. Total Debt = $5,783,597. Cash and Cash Equivalents = $183,847. EV = $1,334,825,539 + $5,783,597 – $183,847 = $6,934,575,539. EBITDA = $902,051. EV/EBITDA = $6,934,575,539 / $902,051 = 7.7
Industry: EV/EBITDA ratios for REITs can be variable.

Growth Rates

Revenue Growth:

Ratio/Metric: (Current Revenue – Previous Revenue) / Previous Revenue = ($1,166,927 – $1,149,831) / $1,149,831 = 1.5%

Net Income Growth:

Ratio/Metric: (Current Net Income – Previous Net Income) / Previous Net Income = ($93,432 – (-$81,749)) / (-$81,749) = -214.3%

EPS Growth:

Ratio/Metric: (Current EPS – Previous EPS) / Previous EPS = ($0.38 – (-$0.35)) / (-$0.35) = -208.6%

Other Relevant Metrics

Adjusted EBITDA:

Metric: Adjusted EBITDA increased from $923.5 million in 2023 to $940.1 million in 2024.
Trend: Percentage Change = ($940.1 – $923.5) / $923.5 = 1.8%
Significance: Adjusted EBITDA is a non-GAAP measure used by the company to assess its operating performance. The increase suggests improved operational efficiency.

Funds From Operations (FFO) and Adjusted Funds From Operations (AFFO):

Metric: FFO attributable to common shareholders increased from $136.8 million in 2023 to $294.5 million in 2024. AFFO attributable to common shareholders decreased from $385.3 million in 2023 to $358.9 million in 2024.
Trend: FFO Percentage Change = ($294.5 – $136.8) / $136.8 = 115.3%. AFFO Percentage Change = ($358.9 – $385.3) / $385.3 = -6.8%
Significance: FFO and AFFO are common metrics used to evaluate REIT performance. FFO adds back depreciation and amortization to net income, while AFFO makes further adjustments.

Uniti Leasing and Uniti Fiber Segments:

Metric: Uniti Leasing revenues increased from $852.8 million in 2023 to $880.5 million in 2024. Uniti Fiber revenues decreased from $297.1 million in 2023 to $286.4 million in 2024.
Trend: Uniti Leasing Percentage Change = ($880.5 – $852.8) / $852.8 = 3.2%. Uniti Fiber Percentage Change = ($286.4 – $297.1) / $297.1 = -3.6%
Significance: Uniti Leasing is the larger segment and experienced revenue growth, while Uniti Fiber experienced a revenue decline.

Commentary

Uniti Group’s financial performance in 2024 shows a mixed picture. The company achieved net income profitability, a significant turnaround from the loss in the previous year. Revenue growth was modest, driven primarily by the Uniti Leasing segment, while Uniti Fiber experienced a revenue decline. Liquidity metrics improved substantially, but the company remains highly leveraged. While FFO increased significantly, AFFO decreased, indicating potential challenges in underlying cash flow generation.