Uniti Group Inc. - Quarter Report: 2023 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________________________________________________

FORM 10-Q

_______________________________________________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number: 001-36708

_______________________________________________________________

Uniti Group Inc.

(Exact name of registrant as specified in its charter)

_______________________________________________________________


Maryland			46-5230630
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

2101 Riverfront Drive, Suite A Little Rock, Arkansas			72202
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (501) 850-0820

_______________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	UNIT	The NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

As of October 26, 2023, the registrant had 238,672,102 shares of common stock, $0.0001 par value per share, outstanding.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements as defined under U.S. federal securities law. Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements regarding: our expectations regarding the settlement we have entered into with Windstream Holdings, Inc. (together with Windstream Holdings II, LLC, its successor in interest, and its subsidiaries, “Windstream”); the future prospects and financial health of Windstream; our expectations about our ability to maintain our status as a real estate investment trust (a “REIT”); our expectations regarding the future growth and demand of the telecommunication industry, future financing plans, business strategies, growth prospects, operating and financial performance, and our future liquidity needs and access to capital; expectations regarding future deployment of fiber strand miles and small cell networks and recognition of revenue related thereto; expectations regarding levels of capital expenditures; expectations regarding the deductibility of goodwill for tax purposes; expectations regarding reclassification of accumulated other comprehensive income (loss) related to derivatives to interest expense; expectations regarding the amortization of intangible assets; and expectations regarding the payment of dividends.

Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “believe(s),” “may,” “will,” “would,” “could,” “should,” “seek(s)” and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors which could have a material adverse effect on our operations and future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to:

•the future prospects of our largest customer, Windstream, following its emergence from bankruptcy;

•adverse impacts of inflation and higher interest rates on our employees, our business, the business of our customers and other business partners and the global financial markets;

•the ability and willingness of our customers to meet and/or perform their obligations under any contractual arrangements entered into with us, including master lease arrangements;

•the ability and willingness of our customers to renew their leases with us upon their expiration, our ability to reach agreement on the price of such renewal or ability to obtain a satisfactory renewal rent from an independent appraisal, and the ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant;

•the availability of and our ability to identify suitable acquisition opportunities and our ability to acquire and lease the respective properties on favorable terms or operate and integrate the acquired businesses;

•our ability to generate sufficient cash flows to service our outstanding indebtedness and fund our capital funding commitments;

•our ability to access debt and equity capital markets;

•the impact on our business or the business of our customers as a result of credit rating downgrades and fluctuating interest rates;

•our ability to retain our key management personnel;

•our ability to maintain our status as a REIT;

•changes in the U.S. tax law and other federal, state or local laws, whether or not specific to REITs;

•covenants in our debt agreements that may limit our operational flexibility;

•the possibility that we may experience equipment failures, natural disasters, cyber-attacks or terrorist attacks for which our insurance may not provide adequate coverage;

•the risk that we fail to fully realize the potential benefits of or have difficulty in integrating the companies we acquire;

•other risks inherent in the communications industry and in the ownership of communications distribution systems, including potential liability relating to environmental matters and illiquidity of real estate investments; and

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•additional factors discussed in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q and in Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K, as well as those described from time to time in our future reports filed with the U.S. Securities and Exchange Commission (the “SEC”).

Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except in the normal course of our public disclosure obligations, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based.

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Uniti Group Inc.

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		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	5
	Uniti Group Inc.
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Loss	6
	Condensed Consolidated Statements of Comprehensive Loss	7
	Condensed Consolidated Statements of Shareholders’ Deficit	8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to Condensed Consolidated Financial Statements	11
	1.Organization and Description of Business	11
	2.Basis of Presentation and Summary of Significant Accounting Policies	11
	3.Revenues	13
	4.Leases	14
	5.Investments in Unconsolidated Entities	16
	6.Fair Value of Financial Instruments	16
	7.Property, Plant and Equipment	18
	8.Derivative Instruments and Hedging Activities	18
	9.Goodwill and Intangible Assets and Liabilities	19
	10.Notes and Other Debt	20
	11.Earnings Per Share	24
	12.Segment Information	26
	13.Commitments and Contingencies	29
	14.Accumulated Other Comprehensive Loss	31

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
	1.Overview	31
	2.Results of Operations	32
	3.Non-GAAP Financial Measures	39
	4.Liquidity and Capital Resources	42
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	48

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Mine Safety Disclosures	49
Item 5.	Other Information	49
Item 6.	Exhibits	50

Signatures		51

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Uniti Group Inc.

Condensed Consolidated Balance Sheets


	(Unaudited)
(Thousands, except par value)	September 30, 2023		December 31, 2022
Assets:
Property, plant and equipment, net	$	3,962,436	$	3,754,547
Cash and cash equivalents	34,119		43,803
Accounts receivable, net	46,824		42,631
Goodwill	208,378		361,378
Intangible assets, net	312,541		334,846
Straight-line revenue receivable	87,733		68,595
Operating lease right-of-use assets, net	121,816		88,545
Other assets	79,000		77,597
Investment in unconsolidated entities	37,686		38,656
Deferred income tax assets, net	90,792		40,631
Total Assets	$	4,981,325	$	4,851,229
Liabilities and Shareholders' Deficit:
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	133,958	$	122,195
Settlement payable (Note 13)	185,855		251,098
Intangible liabilities, net	159,071		167,092
Accrued interest payable	50,778		121,316
Deferred revenue	1,214,287		1,190,041
Dividends payable	69		2
Operating lease liabilities	81,302		66,356
Finance lease obligations	18,388		15,520
Notes and other debt, net	5,582,057		5,188,815
Total liabilities	7,425,765		7,122,435

Commitments and contingencies (Note 13)

Shareholders' Deficit:
Preferred stock, $0.0001 par value, 50,000 shares authorized; no shares issued and outstanding	—		—
Common stock, $0.0001 par value, 500,000 shares authorized; issued and outstanding: 236,540 shares at September 30, 2023 and 235,829 at December 31, 2022	24		24
Additional paid-in capital	1,218,815		1,210,033
Distributions in excess of accumulated earnings	(3,665,569)		(3,483,634)
Total Uniti shareholders' deficit	(2,446,730)		(2,273,577)
Noncontrolling interests:
Operating partnership units	2,040		2,121
Cumulative non-voting convertible preferred stock, $0.01 par value, 6 shares authorized, 3 issued and outstanding	250		250
Total shareholders' deficit	(2,444,440)		(2,271,206)
Total Liabilities and Shareholders' Deficit	$	4,981,325	$	4,851,229

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Uniti Group Inc.

Condensed Consolidated Statements of Loss

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands, except per share data)	2023		2022		2023		2022
Revenues:
Uniti Leasing	$	214,588	$	208,623	$	637,849	$	618,878
Uniti Fiber	76,067		74,480		226,326		226,234
Total revenues	290,655		283,103		864,175		845,112
Costs and Expenses:
Interest expense, net	120,691		97,731		389,243		290,280
Depreciation and amortization	77,337		73,516		231,379		217,276
General and administrative expense	25,481		26,863		77,331		75,818
Operating expense (exclusive of depreciation and amortization)	37,392		36,291		109,878		108,184
Goodwill impairment (Note 2)	153,000		216,000		153,000		216,000
Transaction related and other costs	1,441		2,375		9,805		7,324
Gain on sale of real estate	(1,424)		(94)		(1,424)		(344)
Gain on sale of operations	—		(176)		—		(176)
Other expense (income), net	1,435		74		21,323		(8,254)
Total costs and expenses	415,353		452,580		990,535		906,108

Loss before income taxes and equity in earnings from unconsolidated entities	(124,698)		(169,477)		(126,360)		(60,996)
Income tax benefit	(43,095)		(13,056)		(49,864)		(10,183)
Equity in earnings from unconsolidated entities	(670)		(672)		(1,990)		(1,696)
Net loss	(80,933)		(155,749)		(74,506)		(49,117)
Net (loss) income attributable to noncontrolling interests	(36)		(70)		(33)		135
Net loss attributable to shareholders	(80,897)		(155,679)		(74,473)		(49,252)
Participating securities' share in earnings	(321)		(226)		(890)		(897)
Dividends declared on convertible preferred stock	(5)		(5)		(15)		(15)
Net loss attributable to common shareholders	$	(81,223)	$	(155,910)	$	(75,378)	$	(50,164)

Loss per common share:
Basic	$	(0.34)	$	(0.66)	$	(0.32)	$	(0.21)
Diluted	$	(0.34)	$	(0.66)	$	(0.32)	$	(0.21)

Weighted-average number of common shares outstanding:
Basic	236,533		235,739		236,352		235,483
Diluted	236,533		235,739		236,352		235,483

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Uniti Group Inc.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands)	2023		2022		2023		2022
Net loss	$	(80,933)	$	(155,749)	$	(74,506)	$	(49,117)
Other comprehensive income:
Interest rate swap termination	—		2,829		—		8,488
Other comprehensive income	—		2,829		—		8,488
Comprehensive loss	(80,933)		(152,920)		(74,506)		(40,629)
Comprehensive (loss) income attributable to noncontrolling interest	(36)		(69)		(33)		147
Comprehensive loss attributable to shareholders	$	(80,897)	$	(152,851)	$	(74,473)	$	(40,776)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Uniti Group Inc.

Condensed Consolidated Statements of Shareholders’ Deficit

(unaudited)


	For the three months ended September 30,
(Thousands, except share data)	Preferred Stock		Common Stock		Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Distributions in Excess of Accumulated Earnings	Noncontrolling Interest - OP Units	Noncontrolling Interest - Non- voting Preferred Shares	Total Shareholders' Deficit
	Shares	Amount	Shares	Amount
Balance at June 30, 2022	—	—	235,699,513	24	1,224,427	(3,516)	(3,298,455)	2,072	250	(2,075,198)
Net loss	—	—	—	—	—	—	(155,679)	(70)	—	(155,749)
Other comprehensive income	—	—	—	—	—	2,828	—	1	—	2,829
Common stock dividends declared ($0.15 per share)	—	—	—	—	—	—	(35,584)	—	—	(35,584)
Distributions to noncontrolling interest declared	—	—	—	—	—	—	—	49	—	49
Payments related to tax withholding for stock-based compensation	—	—	—	—	2	—	—	—	—	2
Stock-based compensation	—	—	1,201	—	3,151	—	—	—	—	3,151
Issuance of common stock - employee stock purchase plan	—	—	40,530	—	325	—	—	—	—	325
Balance at September 30, 2022	—	—	235,741,244	24	1,227,905	(688)	(3,489,718)	2,052	250	(2,260,175)

Balance at June 30, 2023	—	—	236,430,752	24	1,215,260	—	(3,548,870)	2,092	250	(2,331,244)
Net loss	—	—	—	—	—	—	(80,897)	(36)	—	(80,933)
Common stock dividends declared ($0.15 per share)	—	—	—	—	—	—	(35,802)	—	—	(35,802)
Distributions to noncontrolling interest declared	—	—	—	—	—	—	—	(16)	—	(16)
Payments related to tax withholding for stock-based compensation	—	—	—	—	(9)	—	—	—	—	(9)
Stock-based compensation	—	—	3,227	—	3,148	—	—	—	—	3,148
Issuance of common stock - employee stock purchase plan	—	—	105,737	—	416	—	—	—	—	416
Balance at September 30, 2023	—	—	236,539,716	24	1,218,815	—	(3,665,569)	2,040	250	(2,444,440)

	For the nine months ended September 30,
(Thousands, except share data)	Preferred Stock		Common Stock		Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Distributions in Excess of Accumulated Earnings	Noncontrolling Interest - OP Units	Noncontrolling Interest - Non- voting Preferred Shares	Total Shareholders' Deficit
	Shares	Amount	Shares	Amount
Balance at December 31, 2021	—	—	234,779,247	23	1,214,830	(9,164)	(3,333,481)	13,893	125	(2,113,774)
Net loss	—	—	—	—	—	—	(49,252)	135	—	(49,117)
Other comprehensive income	—	—	—	—	—	8,476	—	12	—	8,488
Common stock dividends declared ($0.45 per share)	—	—	—	—	—	—	(106,860)	—	—	(106,860)
Distributions to noncontrolling interest declared	—	—	—	—	—	—	—	(111)	—	(111)
Cumulative non-voting convertible preferred stock	—	—	—	—	—	—	(125)	—	125	—
Exchange of noncontrolling interest	—	—	244,682	—	7,257	—	—	(11,877)	—	(4,620)
Payments related to tax withholding for stock-based compensation	—	—	—	—	(4,434)	—	—	—	—	(4,434)
Stock-based compensation	—	—	647,461	1	9,663	—	—	—	—	9,664
Issuance of common stock - employee stock purchase plan	—	—	69,854	—	589	—	—	—	—	589
Balance at September 30, 2022	—	—	235,741,244	24	1,227,905	(688)	(3,489,718)	2,052	250	(2,260,175)

Balance at December 31, 2022	—	—	235,829,485	24	1,210,033	—	(3,483,634)	2,121	250	(2,271,206)
Net loss	—	—	—	—	—	—	(74,473)	(33)	—	(74,506)
Common stock dividends declared ($0.45 per share)	—	—	—	—	—	—	(107,462)	—	—	(107,462)
Distributions to noncontrolling interest declared	—	—	—	—	—	—	—	(48)	—	(48)
Payment for settlement of common stock warrant	—	—	—	—	(56)	—	—	—	—	(56)
Termination of bond hedge option	—	—	—	—	59	—	—	—	—	59
Payments related to tax withholding for stock-based compensation	—	—	—	—	(1,359)	—	—	—	—	(1,359)
Stock-based compensation	—	—	537,590	—	9,408	—	—	—	—	9,408
Issuance of common stock - employee stock purchase plan	—	—	172,641	—	730	—	—	—		730
Balance at September 30, 2023	—	—	236,539,716	24	1,218,815	—	(3,665,569)	2,040	250	(2,444,440)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Uniti Group Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)


	Nine Months Ended September 30,
(Thousands)	2023		2022
Cash flow from operating activities
Net loss	$	(74,506)	$	(49,117)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	231,379		217,276
Amortization of deferred financing costs and debt discount	13,975		13,510
Loss on extinguishment of debt, net	31,187		—
Interest rate swap termination	—		8,488
Deferred income taxes	(50,161)		(21,723)
Equity in earnings of unconsolidated entities	(1,990)		(1,696)
Distributions of cumulative earnings from unconsolidated entities	2,959		2,959
Cash paid for interest rate swap settlement	—		(9,591)
Straight-line revenues and amortization of below-market lease intangibles	(28,795)		(31,066)
Stock-based compensation	9,408		9,664
Goodwill impairment (see Note 2)	153,000		216,000
Gain on sale of unconsolidated entity (see Note 5)	—		(7,923)
Gain on sale of real estate	(1,424)		(344)
(Gain) loss on asset disposals	(242)		902
Gain on sale of operations	—		(176)
Accretion of settlement obligation	8,273		8,733
Other	2		(126)
Changes in assets and liabilities:
Accounts receivable	(4,194)		(2,863)
Other assets	10,530		7,756
Accounts payable, accrued expenses and other liabilities	(108,826)		(75,556)
Net cash provided by operating activities	190,575		285,107
Cash flow from investing activities
Capital expenditures	(368,264)		(292,666)
Proceeds from sale of unconsolidated entity (see Note 5)	—		32,527
Proceeds from sale of real estate, net cash	1,530		575
Proceeds from sale of operations	—		541
Proceeds from sale of other equipment	1,581		338
Net cash used in investing activities	(365,153)		(258,685)
Cash flow from financing activities
Repayment of debt	(2,263,662)		—
Proceeds from issuance of notes	2,600,000		—
Dividends paid	(107,395)		(107,362)
Payments of settlement payable	(73,516)		—
Distributions paid to noncontrolling interest	(48)		(217)
Payment for exchange of noncontrolling interest	—		(4,620)
Borrowings under revolving credit facility	450,000		180,000
Payments under revolving credit facility	(367,000)		(105,000)
Finance lease payments	(1,601)		(887)
Payments for financing costs	(26,955)		—
Payment for settlement of common stock warrant	(56)		—

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Termination of bond hedge option	59		—
Costs related to the early repayment of debt	(44,303)		—

Employee stock purchase program	730		589
Payments related to tax withholding for stock-based compensation	(1,359)		(4,434)
Net cash provided by (used in) financing activities	164,894		(41,931)
Net decrease in cash and cash equivalents	(9,684)		(15,509)
Cash and cash equivalents at beginning of period	43,803		58,903
Cash and cash equivalents at end of period	$	34,119	$	43,394

Non-cash investing and financing activities:
Property and equipment acquired but not yet paid	$	12,134	$	12,751
Tenant capital improvements	94,322		120,239

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Uniti Group Inc.

Notes to the Condensed Consolidated Financial Statements

(unaudited)

Note 1. Organization and Description of Business

Uniti Group Inc. (the “Company,” “Uniti,” “we,” “us,” or “our”) was incorporated in the state of Maryland on September 4, 2014. We are an independent internally managed real estate investment trust (“REIT”) engaged in the acquisition, construction and leasing of mission critical infrastructure in the communications industry. We are principally focused on acquiring and constructing fiber optic, copper and coaxial broadband networks and data centers. We manage our operations focused on our two primary lines of business: Uniti Fiber and Uniti Leasing.

The Company operates through a customary “up-REIT” structure, pursuant to which we hold substantially all of our assets through a partnership, Uniti Group LP, a Delaware limited partnership (the “Operating Partnership”) that we control as general partner. The up-REIT structure is intended to facilitate future acquisition opportunities by providing the Company with the ability to use common units of the Operating Partnership as a tax-efficient acquisition currency. As of September 30, 2023, we are the sole general partner of the Operating Partnership and own approximately 99.96% of the partnership interests in the Operating Partnership.

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying Condensed Consolidated Financial Statements include all accounts of the Company and its wholly-owned and/or controlled subsidiaries, including the Operating Partnership. Under the Accounting Standards Codification 810, Consolidation (“ASC 810”), the Operating Partnership is considered a variable interest entity and is consolidated in the Condensed Consolidated Financial Statements of Uniti Group Inc. because the Company is the primary beneficiary. All material intercompany balances and transactions have been eliminated.

ASC 810 provides guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities” or “VIEs”) and the determination of which business enterprise, if any, should consolidate the VIEs. Generally, the consideration of whether an entity is a VIE applies when either: (1) the equity investors (if any) lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; (2) the equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support; or (3) the equity investors have voting rights that are not proportionate to their economic interests and substantially all of the activities of the entity involve or are conducted on behalf of an investor with a disproportionately small voting interest. The Company consolidates VIEs in which it is considered to be the primary beneficiary. The primary beneficiary is defined as the entity having both of the following characteristics: (1) the power to direct the activities that, when taken together, most significantly impact the VIE’s performance; and (2) the obligation to absorb losses and right to receive the returns from the VIE that would be significant to the VIE.

The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information set forth in the Accounting Standards Codification (“ASC”), as published by the Financial Accounting Standards Board (the “FASB”), and with the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim period have been included. Operating results from any interim period are not necessarily indicative of the results that may be expected for the full fiscal year. The accompanying Condensed Consolidated Financial Statements and related notes should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K filed with the SEC on February 28, 2023, as amended by Amendment No. 1 thereto filed on Form 10-K/A with the SEC on March 29, 2023 (the “Annual Report”). Accordingly, significant accounting policies and other disclosures normally provided have been omitted from the accompanying Condensed Consolidated Financial Statements and related notes since such items are disclosed in our Annual Report.

Concentration of Credit Risks—Prior to September 2020, we were party to a long-term exclusive triple-net lease (the “Master Lease”) with Windstream Holdings, Inc. (together with Windstream Holdings II, LLC, its successor in interest, and its subsidiaries, “Windstream”) pursuant to which a substantial portion of our real property was leased to Windstream and from which a substantial portion of our leasing revenues were derived. On September 18, 2020, Uniti and Windstream

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bifurcated the Master Lease and entered into two structurally similar master leases (collectively, the “Windstream Leases”), which amended and restated the Master Lease in its entirety. The Windstream Leases consist of (a) a master lease (the "ILEC MLA") that governs Uniti owned assets used for Windstream's incumbent local exchange carrier ("ILEC") operations and (b) a master lease (the "CLEC MLA") that governs Uniti owned assets used for Windstream's consumer competitive local exchange carrier ("CLEC") operations. Revenue under the Windstream Leases provided 66.9% and 66.4% of our revenue for the nine months ended September 30, 2023 and 2022, respectively. Because a substantial portion of our revenue and cash flows are derived from lease payments by Windstream pursuant to the Windstream Leases, there could be a material adverse impact on our consolidated results of operations, liquidity, financial condition and/or ability to pay dividends and service debt if Windstream were to default under the Windstream Leases or otherwise experiences operating or liquidity difficulties and becomes unable to generate sufficient cash to make payments to us.

We monitor the credit quality of Windstream through numerous methods, including by (i) reviewing credit ratings of Windstream by nationally recognized credit agencies, (ii) reviewing the financial statements of Windstream that are required to be delivered to us pursuant to the Windstream Leases, (iii) monitoring news reports regarding Windstream and its business, (iv) conducting research to ascertain industry trends potentially affecting Windstream, (v) monitoring Windstream’s compliance with the terms of the Windstream Leases and (vi) monitoring the timeliness of its payments under the Windstream Leases.

As of the date of this Quarterly Report on Form 10-Q, Windstream is current on all lease payments. We note that in August 2020, Moody’s Investor Service assigned a B3 corporate family rating with a stable outlook to Windstream in connection with its post-emergence exit financing. At the same time, S&P Global Ratings assigned Windstream a B- issuer rating with a stable outlook. Both ratings remain current as of the date of this filing. In order to assist us in our continuing assessment of Windstream’s creditworthiness, we periodically receive certain confidential financial information and metrics from Windstream.

Goodwill—As of September 30, 2023 and December 31, 2022, all of our goodwill is included in our Uniti Fiber segment. Goodwill is recognized for the excess of purchase price over the fair value of net assets of businesses acquired. Goodwill is reviewed for impairment on an annual basis during the fourth quarter. Application of the goodwill impairment test requires significant judgment, including: the identification of reporting units; assignment of assets and liabilities to reporting units; and assignment of goodwill to reporting units. In accordance with ASC 350-20, Intangibles-Goodwill and Other, we evaluate goodwill for impairment between annual impairment tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount (a “Triggering Event”). On the occurrence of a Triggering Event, an entity has the option to first assess qualitative factors to determine whether a quantitative impairment test is necessary. If it is more likely than not that goodwill is impaired, the fair value of the reporting unit must be estimated and compared with its carrying value.

In performing the quantitative assessment of goodwill, we estimate the fair value of our fiber reporting unit using a combination of an income approach based on the present value of estimated future cash flows and a market approach based on market data of comparable businesses, and acquisition multiples paid in recent transactions. Inherent in our preparation of cash flow projections are significant assumptions and estimates derived from a review of our operating results and business plans, which include expected revenue and expense growth rates, capital expenditure plans and discount rate. In determining these assumptions, we consider our ability to execute on our plans, future economic conditions, interest rates and other market data. Many of the factors used in assessing fair value are outside the control of management, and these assumptions and estimates may change in future periods. Small changes in these assumptions or estimates could materially affect our cash flow projections, and therefore could affect the likelihood and amount of potential impairment in future periods. Potential events that could negatively impact these assumptions or estimates may include customer losses or poor execution of our business plans, which impact revenue growth, cost escalation impacting margin, the level of capital expenditures required to sustain our growth and market factors, including stock price fluctuations and increased interest rates, impacting our discount rate. For example, if we were to experience a significant delay in our permitting process in the construction of our fiber networks, the timing of effected cash flows could impact long term growth rates and negatively impact the income approach, leading to potential impairment. As a result, should our expectations of average projected revenue growth percentage, average projected EBITDA margin percentage and/or average projected capital expenditures as a percentage of revenue change, we may experience future impairment to goodwill (while other assumptions remain constant). Furthermore, a deterioration in market factors such as stock prices or increased interest rates and/or declines in acquisition multiples utilized in the market approach could affect the likelihood and amount of potential impairment. We evaluate the appropriateness of each valuation methodology in determining the weighting applied to each methodology in the determination of the concluded fair value. If the carrying amount of a reporting unit's net assets is less than its fair value, no impairment exists. If the carrying amount of the reporting unit is greater than the fair value of the reporting unit, an impairment loss must be recognized for the excess and recorded in the Consolidated Statements of Loss not to exceed the carrying amount of goodwill.

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In connection with the preparation of the Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2023, the Company identified a Triggering Event and, therefore, performed a qualitative and quantitative goodwill impairment test. The Triggering Event was a result of macroeconomic and financial market factors, specifically the continuing rise in interest rates, impacting our discount rate. As a result of the interim assessment of goodwill, we concluded that the fair value of the Uniti Fiber segment, estimated using a combination of the income approach and market approach, is less than its carrying amount. Accordingly, we recorded a $153.0 million ($113.9 million net of tax) goodwill impairment charge in the Uniti Fiber segment during the three months ended September 30, 2023.

In connection with the preparation of the Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2022, the Company identified a Triggering Event and, therefore, performed a qualitative and quantitative goodwill impairment test. The Triggering Event was a result of macroeconomic and financial market factors, specifically increased interest rates, impacting our discount rate. As a result of this interim assessment of goodwill, we concluded that the fair value of the Uniti Fiber segment, estimated using a combination of the income approach and market approach, is less than its carrying amount. Accordingly, we recorded a $216.0 million ($205.7 million net of tax) goodwill impairment charge in the Uniti Fiber segment during the three months ended September 30, 2022.

Recently Adopted Accounting Pronouncements

In March 2022, the FASB issued Accounting Standards Update ("ASU") 2022-02, Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"), which eliminates the accounting guidance for troubled debt restructurings and requires the disclosure of current-period gross write-offs of financing receivables and net investment in leases by year of origination. The Company adopted ASU 2022-02 on January 1, 2023, and the adoption had no impact on the Company's consolidated financial statements.

In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848 ("ASU 2022-06"), which provides additional relief for contract modifications completed after the December 31, 2022 LIBOR sunset date. The amendment allows for a deferral until December 31, 2024. The Company adopted ASU 2022-06 at issuance, and the adoption had no impact on the Company's consolidated financial statements.

Note 3. Revenues

Disaggregation of Revenues

The following table presents our revenues disaggregated by revenue stream.


	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands)	2023		2022		2023		2022
Revenue disaggregated by revenue stream
Revenue from contracts with customers
Uniti Fiber
Lit backhaul	$	18,246	$	19,969	$	57,221	$	59,344
Enterprise and wholesale	24,211		21,423		70,144		63,359
E-Rate and government	15,911		15,245		43,947		48,026
Other	786		703		2,264		2,076
Uniti Fiber	$	59,154	$	57,340	$	173,576	$	172,805
Uniti Leasing	1,868		1,201		5,142		3,553
Total revenue from contracts with customers	61,022		58,541		178,718		176,358
Revenue accounted for under leasing guidance
Uniti Leasing	212,720		207,422		632,707		615,325
Uniti Fiber	16,913		17,140		52,750		53,429
Total revenue accounted for under leasing guidance	229,633		224,562		685,457		668,754
Total revenue	$	290,655	$	283,103	$	864,175	$	845,112

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At September 30, 2023 and December 31, 2022, lease receivables were $20.9 million and $26.2 million, respectively, and receivables from contracts with customers were $16.4 million and $16.1 million, respectively.

Contract Assets (Unbilled Revenue) and Liabilities (Deferred Revenue)

Contract assets primarily consist of unbilled construction revenue where we are utilizing our costs incurred as the measure of progress of satisfying our performance obligations. Contract assets are reported within accounts receivable, net on our Condensed Consolidated Balance Sheets. When the contract price is invoiced, the related unbilled receivable is reclassified to trade accounts receivable, where the balance will be settled upon the collection of the invoiced amount. Contract liabilities are generally comprised of upfront fees charged to the customer for the cost of establishing the necessary components of the Company’s network prior to the commencement of use by the customer. Fees charged to customers for the recurring use of the Company’s network are recognized during the related periods of service. Upfront fees that are billed in advance of providing services are deferred until such time the customer accepts the Company’s network and then are recognized as service revenues ratably over a period in which substantive services required under the revenue arrangement are expected to be performed, which is the initial term of the arrangement. During the three and nine months ended September 30, 2023, we recognized revenues of $0.9 million and $3.5 million which was included in the December 31, 2022 contract liabilities balance.

The following table provides information about contract assets and contract liabilities accounted for under ASC 606.


(Thousands)	Contract Assets		Contract Liabilities
Balance at December 31, 2022	$	173	$	8,699
Balance at September 30, 2023	$	44	$	11,129

Transaction Price Allocated to Remaining Performance Obligations

Performance obligations within contracts to stand ready to provide services are typically satisfied over time or as those services are provided. Contract liabilities primarily relate to deferred revenue from upfront customer payments. The deferred revenue is recognized, and the liability reduced, over the contract term as the Company completes the performance obligation. As of September 30, 2023, our future revenues (i.e., transaction price related to remaining performance obligations) under contracts accounted for under ASC 606 totaled $646.1 million, of which $584.9 million is related to contracts that are currently being invoiced and have an average remaining contract term of 3.4 years, while $61.2 million represents our backlog for sales bookings which have yet to be installed and have an average contract term of 5.0 years. We do not disclose the value of unsatisfied performance obligations for contracts that have an original expected duration of one year or less.

Note 4. Leases

Lessor Accounting

We lease communications towers, ground space, colocation space and dark fiber to tenants under operating leases. Our leases have initial lease terms ranging from less than one year to 35 years, most of which include options to extend or renew the leases for less than one year to 20 years (based on the satisfaction of certain conditions as defined in the lease agreements), and some of which may include options to terminate the leases within one to six months. Certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts include fixed payments plus, for some of our leases, variable payments.

The components of lease income for the three and nine months ended September 30, 2023 and 2022, respectively, are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands)	2023		2022		2023		2022
Lease income - operating leases	$	229,633	$	224,562	$	685,457	$	668,754

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Lease payments to be received under non-cancellable operating leases where we are the lessor for the remainder of the lease terms as of September 30, 2023 are as follows:


(Thousands)	September 30, 2023⁽¹⁾
2023	$	196,452
2024	804,866
2025	813,967
2026	815,516
2027	816,453
Thereafter	2,351,694
Total lease receivables	$	5,798,948
(1) Total future minimum lease payments to be received include $4.9 billion relating to the Windstream Leases.

The underlying assets under operating leases where we are the lessor are summarized as follows:


(Thousands)	September 30, 2023		December 31, 2022
Land	$	26,533	$	26,549
Building and improvements	347,002		346,093
Poles	309,901		296,941
Fiber	3,802,120		3,529,835
Equipment	437		437
Copper	3,978,336		3,964,439
Conduit	89,963		89,963
Tower assets	1,165		1,397
Finance lease assets	2,615		28,126
Other assets	10,434		10,434
	8,568,506		8,294,214
Less: accumulated depreciation	(5,660,717)		(5,542,726)
Underlying assets under operating leases, net	$	2,907,789	$	2,751,488

Depreciation expense for the underlying assets under operating leases where we are the lessor for the three and nine months ended September 30, 2023 and 2022, respectively, is summarized as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands)	2023		2022		2023		2022
Depreciation expense for underlying assets under operating leases	$	45,795	$	44,127	$	136,640	$	130,858

Lessee Accounting

We have commitments under operating leases for communications towers, ground space, colocation space, dark fiber and buildings. We also have finance leases for dark fiber and automobiles. Our leases have initial lease terms ranging from less than one year to 30 years, most of which include options to extend or renew the leases for less than one year to 20 years, and some of which may include options to terminate the leases within one to six months. Certain lease agreements contain provisions for future rent increases. Payments due under the lease contracts include fixed payments plus, for some of our leases, variable payments.

As of September 30, 2023, we have short term lease commitments amounting to approximately $3.40 million.

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Future lease payments under non-cancellable leases as of September 30, 2023 are as follows:


(Thousands)	Operating Leases		Finance Leases
2023	$	4,169	$	928
2024	17,941		3,521
2025	15,090		3,468
2026	11,701		3,335
2027	9,060		2,960
Thereafter	101,405		12,934
Total undiscounted lease payments	$	159,366	$	27,146
Less: imputed interest	(78,064)		(8,758)
Total lease liabilities	$	81,302	$	18,388

Note 5. Investments in Unconsolidated Entities

Fiber Holdings

BB Fiber Holdings LLC (“Fiber Holdings”) was primarily established to develop fiber networks as real estate property for long-term investment. On July 1, 2020, the Company completed the sale of an ownership stake in the entity that controls the Company’s Midwest fiber network assets (the “Propco”). Fiber Holdings has a 47.5% ownership in the Propco that is under a long-term, triple net lease with our joint venture partner. Our ownership interest in Fiber Holdings represents approximately a 20% economic interest in the Propco. The Company’s current investment and maximum exposure to loss as a result of its involvement with Fiber Holdings, an equity method unconsolidated entity, was approximately $37.7 million as of September 30, 2023. The Company has not provided financial support to Fiber Holdings.

Harmoni

On June 21, 2022, the Company completed the sale of its investment in Harmoni Towers LP to Palistar Communications Infrastructure GP LLC, our partner in the investment, for total cash consideration of $32.5 million. As a result of the transaction, during the second quarter of 2022 we recorded a pre-tax gain of $7.9 million within other expense (income), net and $6.7 million of income tax expense within our Consolidated Statements of Income.

Note 6. Fair Value of Financial Instruments

FASB ASC 820, Fair Value Measurements, establishes a hierarchy of valuation techniques based on the observability of inputs utilized in measuring assets and liabilities at fair values. This hierarchy establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are as follows:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity can access at the assessment date;

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3 – Unobservable inputs for the asset or liability.

Our financial instruments consist of cash and cash equivalents, accounts and other receivables, our outstanding notes and other debt, settlement payable, interest and dividends payable.

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The following table summarizes the fair value of our financial instruments at September 30, 2023 and December 31, 2022:


(Thousands)	Total		Quoted Prices in Active Markets (Level 1)		Prices with Other Observable Inputs (Level 2)		Prices with Unobservable Inputs (Level 3)
At September 30, 2023
Liabilities
Senior secured notes - 10.50%, due February 15, 2028	$	2,530,476	$	—	$	2,530,476	$	—
Senior secured notes - 4.75%, due April 15, 2028	460,130		—		460,130		—
Senior unsecured notes - 6.00%, due January 15, 2030	441,809		—		441,809		—
Senior unsecured notes - 6.50%, due February 15, 2029	723,720		—		723,720		—
Exchangeable senior notes - 4.00%, due June 15, 2024	118,016		—		118,016		—
Convertible senior notes - 7.50% due December 1, 2027	263,535		—		263,535		—
Senior secured revolving credit facility, variable rate, due September 24, 2027	270,973		—		270,973		—
Settlement payable	174,075		—		174,075		—
Total	$	4,982,734	$	—	$	4,982,734	$	—


(Thousands)	Total		Quoted Prices in Active Markets (Level 1)		Prices with Other Observable Inputs (Level 2)		Prices with Unobservable Inputs (Level 3)
At December 31, 2022
Liabilities
Senior secured notes - 7.875%, due February 15, 2025	$	2,208,319	$	—	$	2,208,319	$	—
Senior secured notes - 4.75%, due April 15, 2028	469,740		—		469,740		—
Senior unsecured notes - 6.00%, due January 15, 2030	467,401		—		467,401		—
Senior unsecured notes - 6.50% , due February 15, 2029	759,917		—		759,917		—
Exchangeable senior notes - 4.00%, due June 15, 2024	127,024		—		127,024		—
Convertible senior notes - 7.50%, due December 1, 2027	297,765				297,765
Senior secured revolving credit facility, variable rate, due December 10, 2024	187,981		—		187,981		—
Settlement payable	232,350		—		232,350		—
Total	$	4,750,497	$	—	$	4,750,497	$	—

The carrying value of cash and cash equivalents, accounts and other receivables, and accounts, interest and dividends payable approximate fair values due to the short-term nature of these financial instruments.

The total principal balance of our outstanding notes and other debt was $5.68 billion at September 30, 2023, with a fair value of $4.98 billion. The estimated fair value of our outstanding notes and other debt was based on available external pricing data and current market rates for similar debt instruments, among other factors, which are classified as Level 2 inputs within the fair value hierarchy.

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Uniti is required to make $490.1 million of cash payments to Windstream in equal installments over 20 consecutive quarters beginning October 2020 (the “Settlement Payable”). See Note 13. The Settlement Payable was initially recorded at fair value, using the present value of future cash flows. The future cash flows are discounted using discount rate inputs based on observable market data. Accordingly, we classify inputs used as Level 2 in the fair value hierarchy. As of September 30, 2023, the remaining Settlement Payable is $185.9 million. There have been no changes in the valuation methodologies used since the initial recording.

Note 7. Property, Plant and Equipment

The carrying value of property, plant and equipment is as follows:


(Thousands)	Depreciable Lives	September 30, 2023		December 31, 2022
Land	Indefinite	$	30,035	$	28,845
Building and improvements	3 - 40 years	364,714		363,077
Poles	30 years	309,901		296,941
Fiber	30 years	4,763,091		4,434,506
Equipment	5 - 7 years	451,758		399,473
Copper	20 years	3,978,336		3,964,439
Conduit	30 years	89,963		89,963
Tower assets	20 years	4,031		5,619
Finance lease assets	(1)	52,403		73,487
Other assets	15 - 20 years	10,436		10,436
Corporate assets	3 - 7 years	15,641		14,883
Construction in progress	(1)	57,597		46,508
		10,127,906		9,728,177
Less accumulated depreciation		(6,165,470)		(5,973,630)
Net property, plant and equipment		$	3,962,436	$	3,754,547

(1) See our Annual Report for property, plant and equipment accounting policies.

Depreciation expense for the three and nine months ended September 30, 2023 was $69.9 million and $209.1 million, respectively. Depreciation expense for the three and nine months ended September 30, 2022 was $66.1 million and $194.9 million, respectively.

Note 8. Derivative Instruments and Hedging Activities

Exchangeable Notes Hedge Transactions

On June 25, 2019, concurrently with the pricing of the 4.00% Exchangeable Notes due June 15, 2024 (the "Exchangeable Notes"), and on June 27, 2019, concurrently with the exercise by the initial purchasers involved in the offering of the Exchangeable Notes (the “Initial Purchasers”) of their option to purchase additional Exchangeable Notes, Uniti Fiber Holdings Inc., the issuer of the Exchangeable Notes, entered into exchangeable note hedge transactions with respect to the Company’s common stock (the “Note Hedge Transactions”) with certain of the Initial Purchasers or their respective affiliates (collectively, the “Counterparties”). The Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those applicable to the Exchangeable Notes, the same number of shares of the Company’s common stock that initially underlie the Exchangeable Notes in the aggregate and are exercisable upon exchange of the Exchangeable Notes. The Note Hedge Transactions have an initial strike price that corresponds to the initial exchange price of the Exchangeable Notes, subject to anti-dilution adjustments substantially similar to those applicable to the Exchangeable Notes. The Note Hedge Transactions will expire upon the maturity of the Exchangeable Notes, if not earlier exercised. The Note Hedge Transactions are intended to reduce potential dilution to the Company’s common stock upon any exchange of the Exchangeable Notes and/or offset any cash payments Uniti Fiber Holdings Inc.is required to make in excess of the principal amount of exchanged Exchangeable Notes, as the case may be, in the event that the market value per share of the Company’s common stock, as measured under the Note Hedge Transactions, at the time of exercise is greater than the strike price of the Note Hedge Transactions.

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The Note Hedge Transactions are separate transactions, entered into by Uniti Fiber Holdings Inc. with the Counterparties, and are not part of the terms of the Exchangeable Notes. Holders of the Exchangeable Notes will not have any rights with respect to the Note Hedge Transactions. The Note Hedge Transactions meet certain accounting criteria under GAAP, are recorded in additional paid-in capital on our Condensed Consolidated Balance Sheets and are not accounted for as derivatives that are remeasured each reporting period.

Warrant Transactions

On June 25, 2019, concurrently with the pricing of the Exchangeable Notes, and on June 27, 2019 concurrently with the exercise by the Initial Purchasers of their option to purchase additional Exchangeable Notes, the Company entered into warrant transactions to sell to the Counterparties warrants (the “Warrants”) to acquire, subject to anti-dilution adjustments, up to approximately 27.8 million shares of the Company’s common stock in the aggregate at an exercise price of approximately $16.42 per share. The initial maximum number of shares of the Company’s common stock that could be issued pursuant to the Warrants was approximately 55.5 million. The maximum number of shares of the Company's common stock that could be issued pursuant to the Warrants has subsequently decreased due to the partial unwind agreements that the Company entered into with the Counterparties in connection with each repurchase of Exchangeable Notes. The Company offered and sold the Warrants in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. If the market value per share of the Company’s common stock, as measured under the Warrants, at the time of exercise exceeds the strike price of the Warrants, the Warrants will have a dilutive effect on the Company’s common stock unless, subject to the terms of the Warrants, the Company elects to cash settle the Warrants. The Warrants will expire over a period beginning in September 2024.

The Warrants are separate transactions, entered into by the Company with the Counterparties, and are not part of the terms of the Exchangeable Notes. Holders of the Exchangeable Notes will not have any rights with respect to the Warrants. The Warrants meet certain accounting criteria under GAAP, are recorded in additional paid-in capital on our Condensed Consolidated Balance Sheets and are not accounted for as derivatives that are remeasured each reporting period.

Note 9. Goodwill and Intangible Assets and Liabilities

Changes in the carrying value of goodwill occurring during the nine months ended September 30, 2023 are as follows:


(Thousands)	Uniti Fiber		Total
Goodwill at December 31, 2022	$	672,878	$	672,878
Accumulated impairment charges as of December 31, 2022	(311,500)		(311,500)
Balance at December 31, 2022	$	361,378	$	361,378

Goodwill Impairment (Note 2)	$	(153,000)	$	(153,000)
Balance at September 30, 2023	$	208,378	$	208,378

Goodwill at September 30, 2023	$	672,878	$	672,878
Accumulated impairment charges as of September 30, 2023	(464,500)		(464,500)
Balance at September 30, 2023	$	208,378	$	208,378

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Carrying value of intangible assets and liabilities at September 30, 2023 and December 31, 2022 are as follows:


(Thousands)	September 30, 2023				December 31, 2022
	Original Cost		Accumulated Amortization		Original Cost		Accumulated Amortization
Finite life intangible assets:
Customer lists	$	416,104	$	(145,845)	$	416,104	$	(128,728)
Contracts	52,536		(19,701)		52,536		(14,776)
Underlying Rights	10,497		(1,050)		10,497		(787)

Total intangible assets	$	479,137			$	479,137
Less: accumulated amortization	(166,596)				(144,291)
Total intangible assets, net	$	312,541			$	334,846

Finite life intangible liabilities:
Below-market leases	$	191,154	(32,083)		$	191,154	(24,062)

Finite life intangible liabilities:
Below-market leases	$	191,154			$	191,154
Less: accumulated amortization	(32,083)				(24,062)
Total intangible liabilities, net	$	159,071			$	167,092

As of September 30, 2023, the remaining weighted average amortization period of the Company’s intangible assets was 13.6 years.

Amortization expense for the three and nine months ended September 30, 2023 was $7.4 million and $22.3 million, respectively. Amortization expense for the three and nine months ended September 30, 2022 was $7.5 million and $22.3 million, respectively. Amortization expense is estimated to be $29.8 million for the full year of 2023, $29.7 million in 2024, $29.7 million in 2025, $29.7 million in 2026, and $29.7 million for 2027.

We recognize the amortization of below-market leases in revenue. Revenue related to the amortization of the below-market leases for the three and nine months ended September 30, 2023 was $2.7 million and $8.0 million. Revenue related to the amortization of the below-market leases for the three and nine months ended September 30, 2022, was $2.7 million and $8.0 million. As of September 30, 2023, the remaining weighted average amortization period of the Company’s intangible liabilities was 16.3 years. Revenue due to the amortization of the below-market leases is estimated to be $10.7 million for the full year of 2023, $10.7 million in 2024, $10.7 million in 2025, $10.7 million in 2026, and $10.7 million in 2027.

Note 10. Notes and Other Debt

All debt, including the senior secured credit facility and notes described below, are obligations of the Operating Partnership and/or certain of its subsidiaries as discussed below. The Company is, however, a guarantor of such debt.

Notes and other debt are as follows:


(Thousands)	September 30, 2023		December 31, 2022
Principal amount	$	5,680,442	$	5,262,373
Less unamortized discount, premium and debt issuance costs	(98,385)		(73,558)
Notes and other debt less unamortized discount, premium and debt issuance costs	$	5,582,057	$	5,188,815

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Notes and other debt at September 30, 2023 and December 31, 2022 consisted of the following:


	September 30, 2023				December 31, 2022
(Thousands)	Principal		Unamortized Discount, Premium and Debt Issuance Costs		Principal		Unamortized Discount, Premium and Debt Issuance Costs
Senior secured notes - 7.875% due February 15, 2025 (discount is based on imputed interest rate of 8.38%)	$	—	$	—	$	2,250,000	$	(22,239)
Senior secured notes - 10.50% due February 15, 2028 (discount is based on imputed interest rate of 11.06%)	2,600,000		(50,570)		—		—
Senior secured notes - 4.75%, due April 15, 2028 (discount is based on imputed interest rate of 5.04%)	570,000		(6,689)		570,000		(7,654)
Senior unsecured notes - 6.00% due January 15, 2030 (discount is based on imputed interest rate of 6.27%)	700,000		(9,622)		700,000		(10,535)
Senior unsecured notes - 6.50%, due February 15, 2029 (discount is based on imputed interest rate of 6.83%)	1,110,000		(16,398)		1,110,000		(18,245)
Exchangeable senior notes - 4.00%, due June 15, 2024 (discount is based on imputed interest rate of 4.77%)	122,942		(657)		137,873		(1,501)
Convertible senior notes - 7.50%, due December 1, 2027 (discount is based on imputed interest rate of 8.29%)	306,500		(8,524)		306,500		(9,768)
Senior secured revolving credit facility, variable rate, due September 24, 2027	271,000		(5,925)		188,000		(3,616)
Total	$	5,680,442	$	(98,385)	$	5,262,373	$	(73,558)

At September 30, 2023, notes and other debt included the following: (i) $271.0 million under the Revolving Credit Facility (as defined below) pursuant to that certain credit agreement, dated as of April 24, 2015, by and among the Operating Partnership, Uniti Group Finance 2019 Inc. and CSL Capital, LLC (hereinafter, the “Borrowers”), the guarantors party thereto, Bank of America, N.A., as administrative agent, collateral agent, swing line lender and an L/C issuer and certain other lenders named therein (the “Credit Agreement”); (ii) $2.6 billion aggregate principal amount of 10.50% Senior Secured Notes due February 15, 2028 (the “February 2028 Secured Notes”); (iii) $570 million aggregate principal amount of 4.75% Senior Secured Notes due April 15, 2028 (the “April 2028 Secured Notes”); (iv) $1.1 billion aggregate principal amount of 6.50% Senior Unsecured Notes due February 15, 2029 (the “2029 Notes”); (v) $122.9 million aggregate principal amount of the Exchangeable Notes; (vi) $700 million aggregate principal amount of 6.00% Senior Unsecured Notes due January 15, 2030 (the “2030 Notes”); and (vii) $306.5 million aggregate principal amount of 7.50% Convertible Senior Notes due December 1, 2027 (the "Convertible 2027 Notes" and, together with the February 2028 Secured Notes, April 2028 Secured Notes, 2029 Notes, 2030 Notes and the Exchangeable Notes, the "Notes"). The terms of the Notes are as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Credit Agreement

On March 24, 2023, the Borrowers, each a subsidiary of Uniti Group Inc., entered into Amendment No. 8 (the “Amendment”) to the Credit Agreement.

Following the receipt of certain routine regulatory approvals on July 25, 2023, the Amendment extended the maturity of the $500 million revolving credit facility to September 24, 2027 (the “Revolving Credit Facility”). The Amendment also transitioned the Revolving Credit Facility from LIBOR to Term SOFR, and in connection with that change, set the credit spread adjustment to ten basis points for all interest periods. All obligations under the Credit Agreement are guaranteed by (i) the Company and (ii) certain of the Operating Partnership’s subsidiaries (the “Subsidiary Guarantors”) and are secured by substantially all of the assets of the Borrowers and the Subsidiary Guarantors.

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The Borrowers are subject to customary covenants under the Credit Agreement, including an obligation to maintain a consolidated secured leverage ratio, as defined in the Credit Agreement, not to exceed 5.00 to 1.00. We are permitted, subject to customary conditions, to incur other indebtedness, so long as, on a pro forma basis after giving effect to any such indebtedness, our consolidated total leverage ratio, as defined in the Credit Agreement, does not exceed 6.50 to 1.00 and, if such debt is secured, our consolidated secured leverage ratio, as defined in the Credit Agreement, does not exceed 4.00 to 1.00. In addition, the Credit Agreement contains customary events of default, including a cross default provision whereby the failure of the Borrowers or certain of their subsidiaries to make payments under other debt obligations, or the occurrence of certain events affecting those other borrowing arrangements, could trigger an obligation to repay any amounts outstanding under the Credit Agreement. In particular, a repayment obligation could be triggered if (i) the Borrowers or certain of their subsidiaries fail to make a payment when due of any principal or interest on any other indebtedness aggregating $75.0 million or more, or (ii) an event occurs that causes, or would permit the holders of any other indebtedness aggregating $75.0 million or more to cause, such indebtedness to become due prior to its stated maturity. As of September 30, 2023, the Borrowers were in compliance with all of the covenants under the Credit Agreement.

A termination of either Windstream Lease would result in an “event of default” under the Credit Agreement if a replacement lease is not entered into within ninety (90) calendar days and we do not maintain pro forma compliance with a consolidated secured leverage ratio, as defined in the Credit Agreement, of 5.00 to 1.00.

Borrowings under the Revolving Credit Facility bear interest at a rate equal to either a base rate plus an applicable margin ranging from 2.75% to 3.50% or a Term SOFR rate plus an applicable margin ranging from 3.75% to 4.50% in each case, calculated in a customary manner and determined based on our consolidated secured leverage ratio. We are required to pay a quarterly commitment fee under the Revolving Credit Facility equal to 0.50% of the average amount of unused commitments during the applicable quarter (subject to a step-down to 0.40% per annum of the average amount of unused commitments during the applicable quarter upon achievement of a consolidated secured leverage ratio not to exceed a certain level), as well as quarterly letter of credit fees equal to the product of (A) the applicable margin with respect to Term SOFR borrowings and (B) the average amount available to be drawn under outstanding letters of credit during such quarter.

Secured Notes

On February 14, 2023, the Operating Partnership, CSL Capital, LLC, Uniti Group Finance 2019 Inc. and Uniti Fiber Holdings Inc. (collectively, the “Issuers”) issued $2.6 billion aggregate principal amount of the February 2028 Secured Notes. The Issuers used the net proceeds from the offering to fund the redemption in full of the Issuers’ outstanding 7.875% senior secured notes due 2025 (the "2025 Secured Notes"), to repay outstanding borrowings under the Revolving Credit Facility and to pay any related premiums, fees and expenses in connection with the foregoing. On February 14, 2023, the Issuers deposited the full redemption price for the 2025 Secured Notes with the trustee and satisfied and discharged their respective obligations with respect to the indenture governing the 2025 Secured Notes at such time. During the first quarter of 2023, we recorded $32.3 million of loss on the extinguishment of the 2025 Secured Notes within interest expense, net on the Condensed Consolidated Statements of Income, which included $10.3 million of non-cash interest expense for the write off of the unamortized discount and deferred financing costs and $22.0 million of cash interest expense for the redemption premium.

The February 2028 Secured Notes were issued at an issue price of 100% of their principal amount pursuant to an indenture, dated as of February 14, 2023 (the “February 2028 Secured Notes Indenture”), among the Issuers, the guarantors named therein (collectively, the “Guarantors”) and Deutsche Bank Trust Company Americas, as trustee and as collateral agent. The February 2028 Secured Notes mature on February 15, 2028 and bear interest at a rate of 10.50% per year. Interest on the February 2028 Secured Notes is payable on March 15 and September 15 of each year, beginning on September 15, 2023.

The Issuers may redeem the February 2028 Secured Notes, in whole or in part, at any time prior to September 15, 2025 at a redemption price equal to 100% of the principal amount of the February 2028 Secured Notes redeemed plus accrued and unpaid interest thereon, if any, to, but not including, the redemption date, plus an applicable “make whole” premium described in the February 2028 Secured Notes Indenture.

Thereafter, the Issuers may redeem the February 2028 Secured Notes in whole or in part, at the redemption prices set forth in the February 2028 Secured Notes Indenture. In addition, prior to February 15, 2025, the Issuers may, on one or more occasions, redeem up to 10% of the aggregate principal amount of the February 2028 Secured Notes in any twelve month

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period at a redemption price equal to 103% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to, but not including, the applicable redemption date. Notwithstanding the foregoing, the Issuers may not use the proceeds of any offering of Additional Notes (as defined in the February 2028 Secured Notes Indenture) with a price to investors equal to or in excess of 103% to finance any such optional redemption. Further, at any time on or prior to September 15, 2025, up to 40% of the aggregate principal amount of the February 2028 Secured Notes may be redeemed with the net cash proceeds of certain equity offerings at a redemption price of 110.50% of the principal amount plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date; provided that at least 60% of aggregate principal amount of the originally issued February 2028 Secured Notes remains outstanding. If certain changes of control of the Operating Partnership occur, holders of the February 2028 Secured Notes will have the right to require the Issuers to offer to repurchase their Notes at 101% of their principal amount plus accrued and unpaid interest, if any, to, but not including, the repurchase date.

The February 2028 Secured Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the Company and on a senior secured basis by each of the Operating Partnership’s existing and future domestic restricted subsidiaries (other than the Issuers) that guarantees indebtedness under the Company’s senior secured credit facilities and existing secured notes (the “Subsidiary Guarantors”). In addition, the Issuers will use commercially reasonable efforts to obtain necessary regulatory approval to allow certain non-guarantor subsidiaries of the Company to guarantee the February 2028 Secured Notes, including by making filings to obtain such approval within 60 days of the issuance of the February 2028 Secured Notes. The guarantees are subject to release under specified circumstances, including certain circumstances in which such guarantees may be automatically released without the consent of the holders of the February 2028 Secured Notes.

The February 2028 Secured Notes and the related guarantees are the Issuers’ and the Subsidiary Guarantors’ senior secured obligations and rank equal in right of payment with all of the Issuers’ and the Subsidiary Guarantors’ existing and future unsubordinated obligations; effectively senior to all unsecured indebtedness of the Issuers and the Subsidiary Guarantors, including the Company’s existing senior unsecured notes, to the extent of the value of the collateral securing the February 2028 Secured Notes; effectively equal with all of the Issuers’ and the Subsidiary Guarantors’ existing and future indebtedness that is secured by first-priority liens on the collateral (including indebtedness under the Company’s senior secured credit facilities and existing secured notes); senior in right of payment to any of the Issuers’ and Subsidiary Guarantors’ subordinated indebtedness; and structurally subordinated to all existing and future liabilities (including trade payables) of the Company’s subsidiaries (other than the Issuers) that do not guarantee the February 2028 Secured Notes.

The February 2028 Secured Notes Indenture contains customary high yield covenants limiting the ability of the Operating Partnership and its restricted subsidiaries to: incur or guarantee additional indebtedness; incur or guarantee secured indebtedness; pay dividends or distributions on, or redeem or repurchase, capital stock; make certain investments or other restricted payments; sell assets; transfer material intellectual property to unrestricted subsidiaries; enter into transactions with affiliates; merge or consolidate or sell all or substantially all of their assets; and create restrictions on the ability of the Issuers and their restricted subsidiaries to pay dividends or other amounts to the Issuers. These covenants are subject to a number of important and significant limitations, qualifications and exceptions. The February 2028 Secured Notes Indenture also contains customary events of default.

Exchangeable Notes

On March 21, 2023, the Company repurchased approximately $15.0 million of the Exchangeable Notes for total cash consideration of $13.7 million. During the first quarter of 2023, we recorded $1.1 million of gain on extinguishment of debt, net within interest expense on our Condensed Consolidated Statements of Income, which included $0.1 million of non-cash interest expense for the write off of the unamortized discount and deferred financing costs. In connection with these repurchases, the Company entered into partial unwind agreements with the Counterparties to unwind a portion of the Note Hedge Transactions and the Warrants described above (see Note 8).

Deferred Financing Cost

Deferred financing costs were incurred in connection with the issuance of the Notes and the Revolving Credit Facility. These costs are amortized using the effective interest method over the term of the related indebtedness and are included in interest expense in our Condensed Consolidated Statements of Income. For the three and nine months ended September 30, 2023, we recognized $4.4 million and $13.6 million, respectively, of non-cash interest expense related to the amortization of deferred financing costs. For the three and nine months ended September 30, 2022, we recognized $4.4 million and $13.0 million, respectively, of non-cash interest expense related to the amortization of deferred financing costs.

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Note 11. Earnings Per Share

Our time-based restricted stock awards are considered participating securities as they receive non-forfeitable rights to dividends at the same rate as common stock. As participating securities, we included these instruments in the computation of earnings per share under the two-class method described in FASB ASC 260, Earnings per Share (“ASC 260”).

We also have outstanding performance-based restricted stock units that contain forfeitable rights to receive dividends. Therefore, the awards are considered non-participating restrictive shares and are not dilutive under the two-class method until performance conditions are met.

The dilutive effect of the Exchangeable Notes and the Convertible 2027 Notes is calculated by using the “if-converted” method. This assumes an add-back of interest, net of income taxes, to net income attributable to shareholders as if the securities were converted at the beginning of the reporting period (or at time of issuance, if later) and the resulting common shares included in number of weighted average shares. The dilutive effect of the Warrants (see Note 8) is calculated using the treasury-stock method. During the three and nine months ended September 30, 2023 and 2022, the Warrants were excluded from diluted shares outstanding because the exercise price exceeded the average market price of our common stock for the reporting period.

The following sets forth the computation of basic and diluted earnings per share under the two-class method:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands, except per share data)	2023		2022		2023		2022
Basic loss per share:
Numerator:
Net loss attributable to shareholders	$	(80,897)	$	(155,679)	$	(74,473)	$	(49,252)
Less: Income allocated to participating securities	(321)		(226)		(890)		(897)
Dividends declared on convertible preferred stock	(5)		(5)		(15)		(15)
Net loss attributable to common shares	$	(81,223)	$	(155,910)	$	(75,378)	$	(50,164)
Denominator:
Basic weighted-average common shares outstanding	236,533		235,739		236,352		235,483
Basic loss per common share	(0.34)		(0.66)		(0.32)		(0.21)


	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands, except per share data)	2023		2022		2023		2022
Diluted loss per share:
Numerator:
Net loss attributable to shareholders	$	(80,897)	$	(155,679)	$	(74,473)	$	(49,252)
Less: Income allocated to participating securities	(321)		(226)		(890)		(897)
Dividends declared on convertible preferred stock	(5)		(5)		(15)		(15)
Impact on if-converted dilutive securities	—		—		—		—
Net loss attributable to common shares	$	(81,223)	$	(155,910)	$	(75,378)	$	(50,164)
Denominator:
Basic weighted-average common shares outstanding	236,533		235,739		236,352		235,483
Effect of dilutive non-participating securities	—		—		—		—
Impact on if-converted dilutive securities	—		—		—		—
Weighted-average shares for dilutive loss per common share	236,533		235,739		236,352		235,483
Dilutive loss per common share	$	(0.34)	$	(0.66)	$	(0.32)	$	(0.21)

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For the three and nine months ended September 30, 2023, 1,053,189 non-participating securities were excluded from the computation of earnings per share, as their effect would have been anti-dilutive. For the three and nine months ended September 30, 2023, we excluded 53,427,833 and 53,836,845 potential common shares related to the Exchangeable Notes and the Convertible Notes, respectively, from the computation of earnings per share, as their effect would have been anti-dilutive.

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Note 12. Segment Information

Our management, including our chief executive officer, who is our chief operating decision maker, manages our operations as two reportable segments, in addition to our corporate operations, which include:

Uniti Leasing: Represents the operations of our leasing business, Uniti Leasing, which is engaged in the acquisition and construction of mission-critical communications assets and leasing them to anchor customers on either an exclusive or shared-tenant basis, in addition to the leasing of dark fiber on our existing dark fiber network assets that we either constructed or acquired. While the Leasing segment represents our REIT operations, certain aspects of the Leasing segment are also operated through taxable REIT subsidiaries.

Uniti Fiber: Represents the operations of our fiber business, Uniti Fiber, which is a leading provider of infrastructure solutions, including cell site backhaul and dark fiber, to the telecommunications industry.

Corporate: Represents our corporate office and shared service functions. Certain costs and expenses, primarily related to headcount, insurance, professional fees and similar charges, that are directly attributable to operations of our business segments are allocated to the respective segments.

Management evaluates the performance of each segment using Adjusted EBITDA, which is a segment performance measure we define as net income determined in accordance with GAAP, before interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense and the impact, which may be recurring in nature, of transaction and integration related costs, costs associated with Windstream’s bankruptcy, costs associated with litigation claims made against us, costs associated with the implementation of our enterprise resource planning system, executive severance costs, costs related to the settlement with Windstream, amortization of non-cash rights-of-use assets, the write off of unamortized deferred financing costs, costs incurred as a result of the early repayment of debt, including early tender and redemption premiums and costs associated with the termination of related hedging activities, gains or losses on dispositions, changes in the fair value of contingent consideration and financial instruments, and other similar or infrequent items (although we may not have had such charges in the periods presented). Adjusted EBITDA includes adjustments to reflect the Company’s share of Adjusted EBITDA from unconsolidated entities. The Company believes that net income, as defined by GAAP, is the most appropriate earnings metric; however, we believe that Adjusted EBITDA serves as a useful supplement to net income because it allows investors, analysts and management to evaluate the performance of our segments in a manner that is comparable period over period. Adjusted EBITDA should not be considered as an alternative to net income as determined in accordance with GAAP.

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Selected financial data related to our segments is presented below for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30, 2023
(Thousands)	Uniti Leasing		Uniti Fiber		Corporate		Subtotal of Reportable Segments
Revenues	$	214,588	$	76,067	$	—	$	290,655

Adjusted EBITDA	$	208,561	$	29,857	$	(5,408)	$	233,010
Less:
Interest expense							120,691
Depreciation and amortization	44,754		32,570		13		77,337
Transaction related and other costs							1,441
Gain on sale of real estate							(1,424)
Goodwill impairment							153,000
Other, net							2,091
Stock-based compensation							3,148
Income tax benefit							(43,095)
Adjustments for equity in earnings from unconsolidated entities							754
Net loss							$	(80,933)


	Three Months Ended September 30, 2022
(Thousands)	Uniti Leasing		Uniti Fiber		Corporate		Subtotal of Reportable Segments
Revenues	$	208,623	$	74,480	$	—	$	283,103

Adjusted EBITDA	$	203,209	$	28,586	$	(6,742)	$	225,053
Less:
Interest expense							97,731
Depreciation and amortization	43,121		30,370		25		73,516
Transaction related and other costs							2,375
Gain on sale of real estate							(94)
Gain on sale of operations							(176)
Goodwill impairment							216,000
Other, net							600
Stock-based compensation							3,151
Income tax benefit							(13,056)
Adjustments for equity in earnings from unconsolidated entities							755
Net loss							$	(155,749)

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	Nine Months Ended September 30, 2023
(Thousands)	Uniti Leasing		Uniti Fiber	Corporate		Subtotal of Reportable Segments
Revenues	$	637,849	226,326	$	—	$	864,175

Adjusted EBITDA	$	620,079	88,712	(16,413)		$	692,378
Less:
Interest expense						389,243
Depreciation and amortization	133,617		97,719	43		231,379
Transaction related and other costs						9,805
Gain on sale of real estate						(1,424)
Goodwill impairment						153,000
Other, net						23,073
Stock-based compensation						9,408
Income tax benefit						(49,864)
Adjustments for equity in earnings from unconsolidated entities						2,264
Net loss						$	(74,506)


	Nine Months Ended September 30, 2022
(Thousands)	Uniti Leasing		Uniti Fiber		Corporate		Subtotal of Reportable Segments
Revenues	$	618,878	$	226,234	$	—	$	845,112

Adjusted EBITDA	$	602,531	$	93,628	$	(19,153)	$	677,006
Less:
Interest expense							290,280
Depreciation and amortization	127,738		89,440		98		217,276
Transaction related and other costs							7,324
Gain on sale of real estate							(344)
Gain on sale of operations							(176)
Goodwill impairment							216,000
Other, net							(6,534)
Stock-based compensation							9,664
Income tax benefit							(10,183)
Adjustments for equity in earnings from unconsolidated entities							2,816
Net loss							$	(49,117)

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Note 13. Commitments and Contingencies

In the ordinary course of our business, we are subject to claims and administrative proceedings, none of which we believe are material or would be expected to have, individually or in the aggregate, a material adverse effect on our business, financial condition, cash flows or results of operations.

Windstream Commitments

Following the consummation of our settlement agreement with Windstream, including entry into the Windstream Leases, we are obligated to make $490.1 million of cash payments to Windstream in equal installments over 20 consecutive quarters beginning in October 2020, and Uniti may prepay any installments due on or after the first anniversary of the settlement agreement (discounted at a 9% rate). As of September 30, 2023, the Company has made payments totaling $288.9 million.

Further, beginning in October 2020, we became obligated to reimburse Windstream for up to an aggregate of $1.75 billion for certain growth capital improvements in long-term fiber and related assets made by Windstream (“Growth Capital Improvements”) through 2029. Uniti’s reimbursement commitment for Growth Capital Improvements does not require Uniti to reimburse Windstream for maintenance or repair expenditures (except for costs incurred for fiber replacements to the property leased under the competitive local exchange carrier master lease agreement, up to $70 million during the term), and each such reimbursement is subject to underwriting standards. Uniti’s total annual reimbursement commitments for the Growth Capital Improvements under both Windstream Leases (and under separate equipment loan facilities) were limited to $225 million in 2022, and are limited to $225 million per year in 2023 and 2024; $175 million per year in 2025 and 2026; and $125 million per year in 2027 through 2029. If the cost incurred by Windstream (or the successor tenant under a Windstream Lease) for Growth Capital Improvements in any calendar year exceeds the annual limit for such calendar year, Windstream (or such tenant, as the case may be) may submit such excess costs for reimbursement in any subsequent year and such excess costs shall be funded from the annual commitment amounts in such subsequent period. In addition, to the extent that reimbursements for Growth Capital Improvements funded in any calendar year during the term is less than the annual limit for such calendar year, the unfunded amount in any calendar year will carry-over and may be added to the annual limits for subsequent calendar years, subject to an annual limit of $250 million in any calendar year. During the nine months ended September 30, 2023, Uniti reimbursed $233.5 million of Growth Capital Improvements, of which $35.1 million, as allowed for under the Settlement, represented the reimbursement of capital improvements completed in 2022 that were previously classified as tenant funded capital improvements. As of the date of this Quarterly Report on Form 10-Q, we have reimbursed a total of $794.2 million of Growth Capital Improvements. Upon reimbursement, the Company reduced the unamortized portion of deferred revenue related to these capital improvements and capitalized the difference between the cash provided to Windstream and the unamortized deferred revenue as a lease incentive. This lease incentive, which is $0.7 million and reported within other assets on our Condensed Consolidated Balance Sheets as of September 30, 2023, will be amortized as a reduction to revenue over the initial term of the Windstream Leases.

Starting on the first anniversary of each installment of reimbursement for a Growth Capital Improvement, the rent payable by Windstream under the applicable Windstream Lease will increase by an amount equal to 8.0% (the “Rent Rate”) of such installment of reimbursement. The Rent Rate will thereafter increase to 100.5% of the prior Rent Rate on each anniversary of each reimbursement. In the event that the tenant’s interest in either Windstream Lease is transferred by Windstream under the terms thereof (unless transferred to the same transferee), or if Uniti transfers its interests as landlord under either Windstream Lease (unless to the same transferee), the reimbursement rights and obligations will be allocated between the ILEC MLA and the CLEC MLA by Windstream, provided that the maximum that may be allocated to the CLEC MLA following such transfer is $20 million per year. If Uniti fails to reimburse any Growth Capital Improvement reimbursement payment or equipment loan funding request as and when it is required to do so under the terms of the Windstream Leases, and such failure continues for thirty (30) days, then such unreimbursed amounts may be applied as an offset against the rent owed by Windstream under the Windstream Leases (and such amounts will thereafter be treated as if Uniti had reimbursed them).

Uniti and Windstream have entered into separate ILEC and CLEC Equipment Loan and Security Agreements (collectively “Equipment Loan Agreement”) in which Uniti will provide up to $125 million (limited to $25 million in any calendar year) of the $1.75 billion of Growth Capital Improvements commitments discussed above in the form of loans for Windstream to purchase equipment related to network upgrades or to be used in connection with the Windstream Leases. Interest on these loans will accrue at 8% from the date of the borrowing. All equipment financed through the Equipment Loan Agreement is

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the sole property of Windstream; however, Uniti will receive a first-lien security interest in the equipment purchased with the loans. No loans have been made under the Equipment Loan Agreement.

Other Litigation

Beginning on October 25, 2019, shareholders filed class action lawsuits that were consolidated into one case under the caption In re Uniti Group Inc. Securities Litigation (the "Class Action") in the U.S. District Court for the Eastern District of Arkansas against the Company and certain of our officers, alleging violations of the federal securities laws based on claims that the defendants improperly failed to disclose the risk that our spin-off from Windstream (the "Spin-Off") and entry into the Master Lease violated certain debt covenants of Windstream. The Class Action sought class certification, unspecified monetary damages, costs and attorneys’ fees and other relief. On March 25, 2022, the parties reached an agreement to settle the Class Action for $38.9 million, to be funded entirely by the Company’s insurance carriers, which was approved by the court on November 7, 2022. In accordance with ASC 450, we recorded $38.9 million of settlement expense within general and administrative expense within our Condensed Consolidated Statements of Income during the first quarter of 2022 and accounts payable, accrued expenses and other liabilities, net within our Condensed Consolidated Balance Sheets as of June 30, 2022. Additionally, we recorded the probable insurance recovery of $38.9 million as a reduction to general and administrative expense during the three months ended June 30, 2022 within our Condensed Consolidated Statements of Income, and other assets within the Condensed Consolidated Balance Sheets as of June 30, 2022. The probable insurance recovery remains in other assets within the Condensed Consolidated Balance Sheets as of September 30, 2023.

On August 17, 2021, shareholders filed a derivative action on behalf of the Company in the Circuit Court for Baltimore City, Maryland, under the caption Mayer et al. v. Gunderman et al. (the “Mayer Derivative Action”). On February 11, 2022, a shareholder filed a derivative action on behalf of the Company in the federal District Court for the District of Maryland, under the caption Guzzo et al. v. Gunderman et al. (the “Guzzo Derivative Action” and together, with the Mayer Derivative Action, the "Derivative Actions"). Various members of the Company's board of directors and management team were named as defendants in the Derivative Actions. The allegations in the Derivative Actions are similar to those in the Class Action, and both sought unspecified damages, equity relief and related costs and fees. On March 3, 2023, the parties to the Derivative Actions signed a stipulation of settlement agreeing to settle the actions in exchange for non-monetary damages, and also agreeing to an award of attorney’s fees and expenses to plaintiffs’ counsel in both actions in the amount of $0.8 million. The court in the Mayer Derivative Action granted final approval to the settlement on May 9, 2023 and dismissed the action. On May 11, 2023, the parties to the Guzzo Derivative Action filed a stipulation and order of dismissal in the action based on the final approval of the settlement in the Mayer Derivative Action, which was entered on May 25, 2023.

We maintain insurance policies that would provide coverage to various degrees for potential liabilities arising from the legal proceedings described above.

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Note 14. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component is as follows for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands)	2023		2022		2023		2022
Cash flow hedge changes in fair value:
Balance at beginning of period attributable to shareholders	$	(30,353)	$	(30,353)	$	(30,353)	$	(30,353)
Balance at end of period attributable to shareholders	(30,353)		(30,353)		(30,353)		(30,353)
Interest rate swap termination:
Balance at beginning of period attributable to shareholders	30,353		26,837		30,353		21,189
Amounts reclassified from accumulated other comprehensive income	—		2,829		—		8,488
Balance at end of period	30,353		29,666		30,353		29,677
Less: Other comprehensive income attributable to noncontrolling interest	—		1		—		12
Balance at end of period attributable to shareholders	30,353		29,665		30,353		29,665
Accumulated other comprehensive loss at end of period	$	—	$	(688)	$	—	$	(688)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following management’s discussion and analysis of financial condition and results of operations describes the principal factors affecting the results of our operations, financial condition, and changes in financial condition for the three and nine months ended September 30, 2023. This discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements, and the notes thereto set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on February 28, 2023, as amended by Amendment No. 1 thereto filed on Form 10-K/A with the SEC on March 29, 2023 (the “Annual Report”).

Overview

Company Description

Uniti Group Inc. (the “Company”, “Uniti”, “we”, “us” or “our”) is an independent, internally managed real estate investment trust (“REIT”) engaged in the acquisition and construction of mission critical infrastructure in the communications industry. We are principally focused on acquiring and constructing fiber optic, copper and coaxial broadband networks and data centers.

On April 24, 2015, we were separated and spun-off (the “Spin-Off”) from Windstream Holdings, Inc. (“Windstream Holdings” and together with Windstream Holdings II, LLC, its successor in interest, and its subsidiaries, “Windstream”) pursuant to which Windstream contributed certain telecommunications network assets, including fiber and copper networks and other real estate (the “Distribution Systems”) and a small consumer competitive local exchange carrier (“CLEC”) business (the “Consumer CLEC Business”) to Uniti and Uniti issued common stock and indebtedness and paid cash obtained from borrowings under Uniti’s senior credit facilities to Windstream. In connection with the Spin-Off, we entered into a long-term exclusive triple-net lease (the “Master Lease”) with Windstream, pursuant to which a substantial portion of our real property is leased to Windstream and from which a substantial portion of our leasing revenues are currently derived. In connection with Windstream’s emergence from bankruptcy, Uniti and Windstream bifurcated the Master Lease and entered into two structurally similar master leases (collectively, the “Windstream Leases”), which amended and restated the Master Lease in its entirety. The Windstream Leases consist of (a) a master lease (the “ILEC MLA”) that governs Uniti owned assets used for Windstream’s incumbent local exchange carrier (“ILEC”) operations and (b) a master lease (the “CLEC MLA”) that governs Uniti owned assets used for Windstream’s CLEC operations.

Uniti operates as a REIT for U.S. federal income tax purposes. As a REIT, the Company is generally not subject to U.S. federal income taxes on income generated by its REIT operations, which includes income derived from the Windstream Leases. We have elected to treat the subsidiaries through which we operate our fiber business, Uniti Fiber, certain aspects of our leasing business, Uniti Leasing, certain aspects of our former towers business, and Talk America Services, LLC, which operated our former Consumer CLEC Business, as taxable REIT subsidiaries (“TRSs”). TRSs enable us to engage in activities that result in income that does not constitute qualifying income for a REIT. Our TRSs are subject to U.S. federal, state and local corporate income taxes.

The Company operates through a customary up-REIT structure, pursuant to which we hold substantially all of our assets through a partnership, Uniti Group LP, a Delaware limited partnership (the “Operating Partnership”), that we control as general partner. This structure is intended to facilitate future acquisition opportunities by providing the Company with the ability to use common units of the Operating Partnership as a tax-efficient acquisition currency. As of September 30, 2023, we are the sole general partner of the Operating Partnership and own approximately 99.96% of the partnership interests in the Operating Partnership. In addition, we have undertaken a series of transactions to permit us to hold certain assets through subsidiaries that are taxed as REITs, which may also facilitate future acquisition opportunities.

We aim to grow and diversify our portfolio and tenant base by pursuing a range of transaction structures with communication service providers, including (i) sale-leaseback transactions, whereby we acquire existing infrastructure assets from third parties, including communication service providers, and lease them back on a long-term triple-net basis; (ii) leasing of dark fiber and selling of lit services on our existing fiber network assets that we either constructed or acquired; (iii) whole company acquisitions, which may include the use of one or more TRSs that are permitted under the tax laws to acquire and operate non-REIT businesses and assets subject to certain limitations; (iv) capital investment financing, whereby we offer communication service providers a cost efficient method of raising funds for discrete capital investments to upgrade or expand their network; and (v) mergers and acquisitions financing, whereby we facilitate mergers and acquisition transactions as a capital partner, including through operating company-property company (“OpCo-PropCo”) structures.

Segments

We manage our operations as two reportable business segments, in addition to our corporate operations, which include:

Uniti Leasing: Represents the operations of our leasing business, Uniti Leasing, which is engaged in the acquisition and construction of mission-critical communications assets and leasing them to anchor customers on either an exclusive or shared-tenant basis, in addition to the leasing of dark fiber on our existing fiber network assets that we either constructed or acquired. While the Leasing segment represents our REIT operations, certain aspects of the Leasing segment are also operated through TRSs.

Corporate: Represents our corporate office and shared service functions. Certain costs and expenses, primarily related to headcount, information technology systems, insurance, professional fees and similar charges, that are directly attributable to operations of our business segments are allocated to the respective segments.

We evaluate the performance of each segment based on Adjusted EBITDA, which is a segment performance measure we define as net income determined in accordance with GAAP, before interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense and the impact, which may be recurring in nature, of transaction and integration related costs, costs associated with Windstream’s bankruptcy, costs associated with litigation claims made against us, costs associated with the implementation of our enterprise resource planning system, executive severance costs, costs related to the settlement with Windstream, amortization of non-cash rights-of-use assets, the write off of unamortized deferred financing costs, costs incurred as a result of the early repayment of debt, including early tender and redemption premiums and costs associated with the termination of related hedging activities, gains or losses on dispositions, changes in the fair value of contingent consideration and financial instruments, and other similar or infrequent items (although we may not have had such charges in the periods presented). Adjusted EBITDA includes adjustments to reflect the Company’s share of Adjusted EBITDA from unconsolidated entities. For more information on Adjusted EBITDA, see “Non-GAAP Financial Measures.” Detailed information about our segments can be found in Note 12 to our accompanying Condensed Consolidated Financial Statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Table of Contents

Results of Operations

Comparison of the three months ended September 30, 2023 and 2022

The following table sets forth our results of operations expressed as dollars and as a percentage of total revenues for the periods indicated:


	Three Months Ended September 30,
	2023			2022
(Thousands)	Amount		% of Revenues	Amount		% of Revenues
Revenues:
Uniti Leasing	$	214,588	73.8%	$	208,623	73.7%
Uniti Fiber	76,067		26.2%	74,480		26.3%
Total revenues	290,655		100.0%	283,103		100.0%
Costs and Expenses:
Interest expense, net	120,691		41.5%	97,731		34.5%
Depreciation and amortization	77,337		26.6%	73,516		26.1%
General and administrative expense	25,481		8.8%	26,863		9.5%
Operating expense (exclusive of depreciation and amortization)	37,392		12.9%	36,291		12.8%
Goodwill impairment	153,000		52.6%	216,000		76.3%
Transaction related and other costs	1,441		0.5%	2,375		0.8%
Gain on sale of real estate	(1,424)		(0.5)%	(94)		0.0%
Gain on sale of operations	—		—%	(176)		(0.1)%
Other expense (income), net	1,435		0.5%	74		0.0%
Total costs and expenses	415,353		142.9%	452,580		159.9%
Loss before income taxes and equity in earnings from unconsolidated entities	(124,698)		(42.9)%	(169,477)		(59.8)%
Income tax benefit	(43,095)		(14.9%)	(13,056)		(4.6%)
Equity in earnings from unconsolidated entities	(670)		(0.2%)	(672)		(0.2%)
Net loss	(80,933)		(27.8%)	(155,749)		(55.0%)
Net loss attributable to noncontrolling interests	(36)		(0.0)%	(70)		0.0%
Net loss attributable to shareholders	(80,897)		(27.8)%	(155,679)		(55.0%)
Participating securities' share in earnings	(321)		(0.1%)	(226)		(0.1%)
Dividends declared on convertible preferred stock	(5)		(0.0%)	(5)		(0.0%)
Net loss attributable to common shareholders	$	(81,223)	(27.9)%	$	(155,910)	(55.1)%

The following tables set forth revenues, Adjusted EBITDA and net income of our reportable segments for the three months ended September 30, 2023 and 2022:


	Three Months Ended September 30, 2023
(Thousands)	Uniti Leasing		Uniti Fiber		Corporate		Subtotal of Reportable Segments
Revenues	$	214,588	$	76,067	$	—	$	290,655

Adjusted EBITDA	$	208,561	$	29,857	$	(5,408)	$	233,010
Less:
Interest expense							120,691
Depreciation and amortization	44,754		32,570		13		77,337
Transaction related and other costs							1,441
Goodwill impairment							153,000
Gain on sale of real estate							(1,424)
Other, net							2,091
Stock-based compensation							3,148
Income tax benefit							(43,095)
Adjustments for equity in earnings from unconsolidated entities							754
Net loss							$	(80,933)


	Three Months Ended September 30, 2022
(Thousands)	Uniti Leasing		Uniti Fiber		Corporate		Subtotal of Reportable Segments
Revenues	$	208,623	$	74,480	$	—	$	283,103

Adjusted EBITDA	$	203,209	$	28,586	$	(6,742)	$	225,053
Less:
Interest expense							97,731
Depreciation and amortization	43,121		30,370		25		73,516
Transaction related and other costs							2,375
Goodwill impairment							216,000
Gain on sale of real estate							(94)
Gain on sale of operations							(176)
Other, net							600
Stock-based compensation							3,151
Income tax benefit							(13,056)
Adjustments for equity in earnings from unconsolidated entities							755
Net loss							$	(155,749)

Summary of Operating Metrics


	Operating Metrics
	September 30,
	2023	2022	% Increase / (Decrease)
Operating metrics:
Uniti Leasing:
Fiber strand miles	5,460,000	5,140,000	6.2%
Copper strand miles	230,000	230,000	0.0%
Uniti Fiber:
Fiber strand miles	2,940,000	2,840,000	3.5%
Customer connections	28,257	27,615	2.3%

Revenues


	Three Months Ended September 30,
	2023			2022
(Thousands)	Amount		% of Consolidated Revenues	Amount		% of Consolidated Revenues
Revenues:
Uniti Leasing	$	214,588	73.8%	$	208,623	73.7%
Uniti Fiber	76,067		26.2%	74,480		26.3%
Total revenues	$	290,655	100.0%	$	283,103	100.0%

Uniti Leasing – Uniti Leasing revenues are primarily attributable to rental revenue from leasing our Distribution Systems to Windstream pursuant to the Windstream Leases (and historically, the Master Lease). Under the Windstream Leases, Windstream is responsible for the costs related to operating the Distribution Systems, including property taxes, insurance, and maintenance and repair costs. As a result, we do not record an obligation related to the payment of property taxes, as Windstream makes direct payments to the taxing authorities. The initial term of the Windstream Leases expires on April 30, 2030. Annual rent under the Windstream Leases for the full year 2023 is $672.2 million and is subject to annual escalation at a rate of 0.5%. For a description of the Windstream Leases, see “Liquidity and Capital Resources— Windstream Leases” below.

The rent for the first year of each renewal term will be an amount agreed to by us and Windstream. While the agreement requires that the renewal rent be “Fair Market Rent,” if we are unable to agree, the renewal Fair Market Rent will be determined by an independent appraisal process. Commencing with the second year of each renewal term, the renewal rent will increase at an escalation rate of 0.5%.

Pursuant to the Windstream Leases, Windstream (or any successor tenant under a Windstream Lease) has the right to cause Uniti to reimburse up to an aggregate $1.75 billion for certain growth capital improvements in long-term value accretive fiber and related assets made by Windstream (or the applicable tenant under the Windstream Lease) to certain ILEC and CLEC properties (the “Growth Capital Improvements” or “GCIs”). Uniti’s total annual reimbursement commitments to Windstream for the Growth Capital Improvements is discussed below in “Liquidity and Capital Resources—Windstream Leases.”

payment or equipment loan funding request as and when it is required to do so under the terms of the Windstream Leases, and such failure continues for thirty (30) days, then such unreimbursed amounts may be applied as an offset against the rent owed by Windstream under the Windstream Leases (and such amounts will thereafter be treated as if Uniti had reimbursed them).

The Windstream Leases provide that tenant funded capital improvements (“TCIs”), defined as maintenance, repair, overbuild, upgrade or replacement to the Distribution Systems, including without limitation, the replacement of copper distribution systems with fiber distribution systems, automatically become property of Uniti upon their construction by Windstream. We receive non-monetary consideration related to TCIs as they automatically become our property, and we recognize the cost basis of TCIs that are capital in nature as property, plant, and equipment and deferred revenue. We depreciate the property, plant, and equipment over their estimated useful lives and amortize the deferred revenue as additional leasing revenues over the same depreciable life of the TCI assets. TCIs exclude Growth Capital Improvements as and when reimbursed by Uniti.


	Three Months Ended September 30,
	2023			2022
(Thousands)	Amount		% of Segment Revenues	Amount		% of Segment Revenues
Uniti Leasing revenues:
Windstream Leases:
Cash revenue
Cash rent	$	168,338	78.5%	$	167,500	80.3%
GCI revenue	8,450		3.9%	3,914		1.9%
Total cash revenue	176,788		82.4%	171,414		82.2%
Non-cash revenue
TCI revenue	11,707		5.4%	10,939		5.2%
GCI revenue	4,436		2.1%	3,624		1.7%
Other straight-line revenue	1,401		0.7%	2,241		1.1%
Total non-cash revenue	17,544		8.2%	16,804		8.0%
Total Windstream revenue	194,332		90.6%	188,218		90.2%
Other services	20,256		9.4%	20,405		9.8%
Total Uniti Leasing revenues	$	214,588	100.0%	$	208,623	100.0%

The increase in TCI revenue is attributable to continued investment by Windstream. As of September 30, 2023 and 2022, the total amount invested in TCIs by Windstream since the inception of the Windstream Leases and Master Lease was $1.1 billion and $1.1 billion, respectively.

The increase in GCI revenue is attributable to Uniti’s continued reimbursement of Growth Capital Improvements. During the three months ended September 30, 2023, Uniti reimbursed $74.7 million of Growth Capital Improvements. Subsequent to September 30, 2023, Windstream requested, and we reimbursed $16.5 million of qualifying Growth Capital Improvements. As of the date of this Quarterly Report on Form 10-Q, we have reimbursed a total of $794.2 million of Growth Capital Improvements.

We recognized $20.3 million and $20.4 million of revenues from other services including non-Windstream triple-net leasing and dark fiber indefeasible rights of use (“IRU”) arrangements for the three months ended September 30, 2023 and 2022, respectively.

Because a substantial portion of our revenue and cash flows are derived from lease payments by Windstream pursuant to the Windstream Leases, there could be a material adverse impact on our consolidated results of operations, liquidity, financial condition and/or ability to maintain our status as a REIT and service debt if Windstream were to become unable to generate sufficient cash to make payments to us.

its business, (iv) conducting research to ascertain industry trends potentially affecting Windstream, (v) monitoring Windstream’s compliance with the terms of the Windstream Leases and (vi) monitoring the timeliness of its payments under the Windstream Leases.

As of the date of this Quarterly Report on Form 10-Q, Windstream is current on all lease payments. Moody's Investor Service's current corporate family rating for Windstream is B3 with a stable outlook. S&P Global Ratings' current issuer rating for Windstream is B- with a stable outlook. In addition, in order to assist us in our continuing assessment of Windstream’s creditworthiness, we periodically receive certain confidential financial information and metrics from Windstream.

Uniti Fiber – Uniti Fiber revenues for the three months ended September 30, 2023 and 2022 consisted of the following:


	Three Months Ended September 30,
	2023			2022
(Thousands)	Amount		% of Segment Revenues	Amount		% of Segment Revenues
Uniti Fiber revenues:
Lit backhaul services	$	18,246	24.0%	$	19,969	26.8%
Enterprise and wholesale	24,211		31.9%	21,423		28.8%
E-Rate and government	15,911		20.9%	15,245		20.5%
Dark fiber and small cells	16,913		22.2%	17,140		23.0%
Other services	786		1.0%	703		0.9%
Total Uniti Fiber revenues	$	76,067	100.0%	$	74,480	100.0%

For the three months ended September 30, 2023, Uniti Fiber revenues totaled $76.1 million as compared to $74.5 million for the three months ended September 30, 2022. The increase in Uniti Fiber revenues of $1.6 million is primarily due to an increase in Enterprise and wholesale revenues of $2.8 million, driven primarily by increased internet services, and an increase in E-Rate and government revenues of $0.7 million, driven primarily by increased equipment and installation sales, partially offset by a decrease in Lit backhaul services revenues of $1.7 million, driven primarily by decreased one-time unsplicing and cancellation fees.

Interest Expense, net


	Three Months Ended September 30,
(Thousands)	2023		2022		Increase / (Decrease)
Interest expense, net:
Cash:
Senior secured notes	75,019		$	51,066	23,953
Senior unsecured notes	35,514		31,988		3,526
Senior secured revolving credit facility - variable rate	3,510		3,539		(29)
Interest rate swap termination	—		2,829		(2,829)
Other	49		985		(936)
Total cash interest	114,092		90,407		23,685
Non-cash:
Amortization of deferred financing costs and debt discount	4,520		4,495		25
Accretion of settlement payable	2,497		2,946		(449)
Capitalized interest	(418)		(117)		(301)
Total non-cash interest	6,599		7,324		(725)
Total interest expense, net	$	120,691	$	97,731	$	22,960

Interest expense for the three months ended September 30, 2023 increased by $23.0 million compared to the three months ended September 30, 2022. The increase is primarily due to higher cash interest on our secured and unsecured notes of $27.5 million, partially offset by a $2.8 million decrease in interest rate swap termination interest which ceased October 2022.

Depreciation and Amortization Expense


	Three Months Ended September 30,
(Thousands)	2023		2022		Increase / (Decrease)
Depreciation and amortization expense by segment:
Depreciation expense
Uniti Leasing	$	43,026	$	41,392	$	1,634
Uniti Fiber	26,872		24,653		2,219
Corporate	13		25		(12)
Total depreciation expense	69,911		66,070		3,841
Amortization expense
Uniti Leasing	1,728		1,729		(1)
Uniti Fiber	5,698		5,717		(19)
Total amortization expense	7,426		7,446		(20)
Total depreciation and amortization expense	$	77,337	$	73,516	$	3,821

Uniti Leasing – Uniti Leasing depreciation expense increased $1.6 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The increase is primarily due to asset additions since September 30, 2022.

Uniti Fiber – Uniti Fiber depreciation expense increased $2.2 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022. The increase is primarily due to asset additions since September 30, 2022.

General and Administrative Expense

General and administrative expense includes compensation costs, including stock-based compensation awards, professional and legal services, corporate office costs and other costs associated with administrative activities of our segments.


	Three Months Ended September 30,
	2023			2022
(Thousands)	Amount		% of Consolidated Revenues	Amount		% of Consolidated Revenues
General and administrative expense by segment:
Uniti Leasing	$	2,668	1.0%	$	3,368	1.2%
Uniti Fiber	15,590		5.4%	14,820		5.2%
Corporate	7,223		2.4%	8,675		3.1%
Total general and administrative expenses	$	25,481	8.8%	$	26,863	9.5%

Uniti Leasing – Uniti Leasing general and administrative expense decreased $0.7 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, which is primarily due to a decrease in personnel expense of $0.5 million.

Uniti Fiber – Uniti Fiber general and administrative expense increased $0.8 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, which is primarily due to an increase in personnel expense of $0.7 million and insurance expense of $0.3 million.

Corporate – Corporate general and administrative expense decreased $1.5 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, which is primarily due to decreases in legal fees, professional fees, and insurance expense of $1.3 million.

Operating Expense

Operating expense consists of network related costs, such as dark fiber and tower rents, lit service and maintenance expense and costs associated with our construction activities.


	Three Months Ended September 30,
	2023			2022
(Thousands)	Amount		% of Consolidated Revenues	Amount		% of Consolidated Revenues
Operating expense by segment:
Uniti Leasing	$	6,070	2.1%	$	4,679	1.7%
Uniti Fiber	31,322		10.8%	31,612		11.1%
Total operating expenses	$	37,392	12.9%	$	36,291	12.8%

Uniti Leasing – Uniti Leasing operating expense increased $1.4 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, which is primarily due to increased leased asset costs of $1.1 million.

Uniti Fiber – Uniti Fiber operating expenses decreased $0.3 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, which is primarily due to decreased personnel expense of $1.4 million, partially offset by increased maintenance and repairs of $1.3 million.

Goodwill Impairment

($113.9 million net of tax) goodwill impairment in Uniti Fiber segment during the three months ended September 30, 2023 as compared to a $216.0 million ($205.7 million net of tax) goodwill impairment in the Uniti Fiber segment during the three months ended September 30, 2022. See Note 2 of Notes to Condensed Consolidated Financial Statements in Part I Item 1 of this Quarterly Report on Form 10-Q.

Transaction Related and Other Costs

Transaction related and other costs during the three months ended September 30, 2023 and 2022 included acquisition, pursuit, transaction, and integration costs (including unsuccessful acquisition pursuit costs). For the three months ended September 30, 2023, we incurred $1.4 million of transaction related and other costs, compared to $2.4 million of such costs during the three months ended September 30, 2022.

Income Tax Benefit

The income tax benefit recorded for the three months ended September 30, 2023 and 2022, respectively, is related to the tax impact of the following:


	Three Months Ended September 30,
(Thousands)	2023		2022
Income tax benefit
Pre-tax loss (Uniti Fiber)	$	(43,487)	$	(14,555)

Other undistributed REIT taxable income	—		963
REIT state and local taxes	392		516
Other	—		20
Total income tax benefit	$	(43,095)	$	(13,056)

Comparison of the nine months ended September 30, 2023 and 2022

The following table sets forth our results of operations expressed as dollars and as a percentage of total revenues for the periods indicated:

Table of Contents


	Nine Months Ended September 30,
	2023				2022
(Thousands)	Amount		% of Revenues		Amount		% of Revenues
Revenues:
Uniti Leasing	$	637,849	73.8	%	$	618,878	73.2	%
Uniti Fiber	226,326		26.2	%	226,234		26.8	%
Total revenues	864,175		100.0	%	845,112		100.0	%
Costs and Expenses:
Interest expense, net	389,243		45.0	%	290,280		34.3	%
Depreciation and amortization	231,379		26.8	%	217,276		25.7	%
General and administrative expense	77,331		9.0	%	75,818		8.9	%
Operating expense (exclusive of depreciation and amortization)	109,878		12.7	%	108,184		12.8	%
Goodwill impairment	153,000		17.7	%	216,000		25.6	%
Transaction related and other costs	9,805		1.1	%	7,324		0.9	%
Gain on sale of real estate	(1,424)		(0.2)	%	(344)		0.0	%
Gain on sale of operations	—		—	%	(176)		0.0	%
Other expense (income), net	21,323		2.5	%	(8,254)		(1.0)	%
Total costs and expenses	990,535		114.6	%	906,108		107.2	%
Loss before income taxes and equity in earnings from unconsolidated entities	(126,360)		(14.6)	%	(60,996)		(7.2)	%
Income tax benefit	(49,864)		(5.8)	%	(10,183)		(1.2)	%
Equity in earnings from unconsolidated entities	(1,990)		(0.2)	%	(1,696)		(0.2)	%
Net loss	(74,506)		(8.6)	%	(49,117)		(5.8)	%
Net loss attributable to noncontrolling interests	(33)		0.0	%	135		0.0	%
Net loss attributable to shareholders	(74,473)		(8.6)	%	(49,252)		(5.8)	%
Participating securities' share in earnings	(890)		(0.1)	%	(897)		(0.1)	%
Dividends declared on convertible preferred stock	(15)		(0.0)	%	(15)		(0.0)	%
Net loss attributable to common shareholders	$	(75,378)	(8.7)	%	$	(50,164)	(5.9)	%

The following tables set forth revenues, Adjusted EBITDA and net income of our reportable segments for the nine months ended September 30, 2023 and 2022:

Table of Contents


	Nine Months Ended September 30, 2023
(Thousands)	Uniti Leasing		Uniti Fiber		Corporate		Subtotal of Reportable Segments
Revenues	$	637,849	$	226,326	$	—	$	864,175

Adjusted EBITDA	$	620,079	$	88,712	$	(16,413)	$	692,378
Less:
Interest expense							389,243
Depreciation and amortization	133,617		97,719		43		231,379
Goodwill impairment							153,000
Gain on sale of real estate							(1,424)
Transaction related and other costs							9,805
Other, net							23,073
Stock-based compensation							9,408
Income tax benefit							(49,864)
Adjustments for equity in earnings from unconsolidated entities							2,264
Net loss							(74,506)


	Nine Months Ended September 30, 2022
(Thousands)	Uniti Leasing		Uniti Fiber		Corporate		Subtotal of Reportable Segments
Revenues	$	618,878	$	226,234	$	—	$	845,112

Adjusted EBITDA	$	602,531	$	93,628	$	(19,153)	$	677,006
Less:
Interest expense							290,280
Depreciation and amortization	127,738		89,440		98		217,276
Goodwill impairment							216,000
Gain on sale of real estate							(344)
Gain on sale of operations							(176)
Transaction related and other costs							7,324
Other, net							(6,534)
Stock-based compensation							9,664
Income tax benefit							(10,183)
Adjustments for equity in earnings from unconsolidated entities							2,816
Net loss							(49,117)

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Revenues


	Nine Months Ended September 30,
	2023			2022
(Thousands)	Amount		% of Consolidated Revenues	Amount		% of Consolidated Revenues
Revenues:
Uniti Leasing	$	637,849	73.8%	$	618,878	73.2%
Uniti Fiber	226,326		26.2%	226,234		26.8%
Total revenues	$	864,175	100.0%	$	845,112	100.0%

Uniti Leasing – Uniti Leasing revenues for the nine months ended September 30, 2023 and 2022 consisted of the following:


	Nine Months Ended September 30,
	2023			2022
(Thousands)	Amount		% of Segment Revenues	Amount		% of Segment Revenues
Uniti Leasing revenues:
Windstream Leases:
Cash revenue
Cash rent	$	503,897	79.0%	$	501,390	81.0%
GCI revenue	22,128		3.5%	8,734		1.4%
Total cash revenue	526,025		82.5%	510,124		82.4%
Non-cash revenue
TCI revenue	34,628		5.4%	32,010		5.2%
GCI revenue	12,245		1.9%	11,073		1.7%
Other straight-line revenue	5,323		0.9%	7,850		1.3%
Total non-cash revenue	52,196		8.2%	50,933		8.2%
Total Windstream revenue	578,221		90.7%	561,057		90.7%
Other services	59,628		9.3%	57,821		9.3%
Total Uniti Leasing revenues	$	637,849	100.0%	$	618,878	100.0%

The increase in GCI revenue is attributable to Uniti’s continued reimbursement of Growth Capital Improvements. During the nine months ended September 30, 2023, Uniti reimbursed $233.5 million of Growth Capital Improvements. Subsequent to September 30, 2023, Windstream requested, and we reimbursed $16.5 million of qualifying Growth Capital Improvements. As of the date of this Quarterly Report on Form 10-Q, we have reimbursed a total of $794.2 million of Growth Capital Improvements.

We recognized $59.6 million and $57.8 million of revenues from non-Windstream triple-net leasing, dark fiber IRU arrangements, and other services for the nine months ended September 30, 2023 and 2022, respectively. The increase is primarily due to revenues from new customer arrangements.

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Uniti Fiber – Uniti Fiber revenues for the nine months ended September 30, 2023 and 2022 consisted of the following:


	Nine Months Ended September 30,
	2023			2022
(Thousands)	Amount		% of Segment Revenues	Amount		% of Segment Revenues
Uniti Fiber revenues:
Lit backhaul services	$	57,221	25.3%	$	59,344	26.3%
Enterprise and wholesale	70,144		31.0%	63,359		28.0%
E-Rate and government	43,947		19.4%	48,026		21.2%
Dark fiber and small cells	52,750		23.3%	53,429		23.6%
Other services	2,264		1.0%	2,076		0.9%
Total Uniti Fiber revenues	$	226,326	100.0%	$	226,234	100.0%

For the nine months ended September 30, 2023, Uniti Fiber revenues totaled $226.3 million as compared to $226.2 million for the nine months ended September 30, 2022. The increase in revenues of $0.1 million is primarily due to an increase in Enterprise and wholesale revenues of $6.8 million, driven primarily by increased internet services, partially offset by a decrease in E-Rate and government revenues of $4.1 million, driven primarily by decreased equipment and installation sales, and a decrease in Lit backhaul services revenues of $2.1 million, driven primarily by decreased one-time unsplicing and cancellation fees.

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Interest Expense, net


	Nine Months Ended September 30,
(Thousands)	2023		2022		Increase / (Decrease)
Interest expense, net:
Cash:
Senior secured notes	$	243,226	$	153,198	90,028
Senior unsecured notes	106,674		95,963		10,711
Senior secured revolving credit facility - variable rate	8,143		9,018		(875)
Interest rate swap termination	—		8,488		(8,488)
Other	758		1,664		(906)
Total cash interest	358,801		268,331		90,470
Non-cash:
Amortization of deferred financing costs and debt discount	13,974		13,510		464
Write off of deferred financing costs and debt discount	10,412		—		10,412
Accretion of settlement payable	8,273		8,733		(460)
Gain on extinguishment of debt	(1,269)		—		(1,269)
Capitalized interest	(948)		(294)		(654)
Total non-cash interest	$	30,442	$	21,949	$	8,493
Total interest expense, net	$	389,243	$	290,280	$	98,963

Interest expense for the nine months ended September 30, 2023 increased $99.0 million compared to the nine months ended September 30, 2022. The increase is primarily due to a loss on extinguishment of debt of $32.3 million on the 7.875% senior secured notes due 2025 (the "2025 Secured Notes"), which included $10.3 million of non-cash interest expense for the write off of unamortized discount and deferred financing costs and $22.0 million of cash interest expense for the redemption premium, and an increase in cash interest on secured and unsecured notes of $78.7 million, partially offset by a decrease in interest rate swap termination interest of $8.5 million that ceased October 2022.

Depreciation and Amortization Expense


	Nine Months Ended September 30,
(Thousands)	2023		2022		Increase / (Decrease)
Depreciation and amortization expense by segment:
Depreciation expense
Uniti Leasing	$	128,430	$	122,550	$	5,880
Uniti Fiber	80,601		72,290		8,311
Corporate	43		98		(55)
Total depreciation expense	209,074		194,938		14,136
Amortization expense
Uniti Leasing	5,187		5,188		(1)
Uniti Fiber	17,118		17,150		(32)
Total amortization expense	22,305		22,338		(33)
Total depreciation and amortization expense	$	231,379	$	217,276	$	14,103

Uniti Leasing – Uniti Leasing depreciation expense increased $5.9 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase is primarily due to asset additions since September 30, 2022.

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Uniti Fiber – Uniti Fiber depreciation expense increased $8.3 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase is primarily due to asset additions since September 30, 2022.

General and Administrative Expense

General and administrative expenses include compensation costs, including stock-based compensation awards, professional and legal services, corporate office costs and other costs associated with administrative activities of our segments.


	Nine Months Ended September 30,
	2023				2022
(Thousands)	Amount		% of Consolidated Revenues		Amount		% of Consolidated Revenues
General and administrative expense by segment:
Uniti Leasing	$	8,713	1.0	%	$	9,907	1.1	%
Uniti Fiber	46,692		5.4	%	40,603		4.9	%
Corporate	21,926		2.5	%	25,308		3.0	%
Total general and administrative expenses	$	77,331	8.9	%	$	75,818	9.0	%

Uniti Leasing – Uniti Leasing general and administrative expense decreased $1.2 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, which is primarily due to decreased personnel costs of $0.8 million.

Uniti Fiber – Uniti Fiber general and administrative expense increased $6.1 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, which is primarily due to increases in personnel expense of $3.3 million, insurance expense of $1.0 million, and regulatory expense, driven predominantly by universal service fees, of $0.8 million.

Corporate – Corporate general and administrative expense decreased $3.4 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, which is primarily due to decreases in legal fees, professional fees, and insurance expense of $4.7 million, partially offset by an increase in personnel costs of $1.3 million.

Operating Expense

Operating expense consists of network related costs, such as dark fiber and tower rents, lit service and maintenance expense and costs associated with our construction activities.


	Nine Months Ended September 30,
	2023			2022
(Thousands)	Amount		% of Consolidated Revenues	Amount		% of Consolidated Revenues
Operating expense by segment:
Uniti Leasing	$	17,113	2.0%	$	14,385	1.7%
Uniti Fiber	92,765		10.7%	93,799		11.1%
Total operating expenses	$	109,878	12.7%	$	108,184	12.8%

Uniti Leasing – Uniti Leasing operating expense increased $2.7 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The increase is primarily due to increased leased asset cost of $2.6 million and other network related charges of $0.6 million, partially offset by decreased personnel expense of $0.4 million.

Uniti Fiber – Uniti Fiber operating expenses decreased $1.0 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022. The decrease is primarily due to decreased dark fiber early

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termination fees of $2.6 million and non-recurring equipment and installation costs of $2.2 million, partially offset by increased maintenance and repairs of $4.0 million.

Goodwill Impairment

As a result of macroeconomic and financial market factors, specifically increased interest rates impacting our discount rate, we concluded that it was more likely than not that the fair value of the Unit Fiber segment, estimated using a combination of the income approach and market approach, is less that its carrying amount. Accordingly, we recorded a $153.0 million ($113.9 million net of tax) goodwill impairment in the Uniti Fiber segment during the nine months ended September 30, 2023 as compared to a $216.0 million ($205.7 million net of tax) goodwill impairment in the Uniti Fiber segment during the nine months ended September 30, 2022. See Note 2 of Notes to Condensed Consolidated Financial Statements in Part I Item 1 of this Quarterly Report on Form 10-Q.

Transaction Related and Other Costs

Transaction related and other costs during the nine months ended September 30, 2023 and 2022 included acquisition, pursuit, transaction and integration costs (including unsuccessful acquisition pursuit costs). For the nine months ended September 30, 2023, we incurred $9.8 million of transaction related and other costs, compared to $7.3 million of such costs during the nine months ended September 30, 2022.

Other Expense (Income), net

Other expense for the nine months ended September 30, 2023 totaled $21.3 million, which included $20.6 million of costs related to the issuance of the February 2028 Secured Notes.

Income Tax Benefit

The income tax benefit recorded for the nine months ended September 30, 2023 and 2022, respectively, is related to the tax impact of the following:


	Nine Months Ended September 30,
(Thousands)	2023		2022
Income tax benefit
Pre-tax loss (Uniti Fiber)	$	(51,042)	$	(21,798)
Gain on sale of unconsolidated entity	—		6,711
Other undistributed REIT taxable income	—		3,229
REIT state and local taxes	1,151		1,594
Other	27		81
Total income tax benefit	$	(49,864)	$	(10,183)

Non-GAAP Financial Measures

We refer to EBITDA, Adjusted EBITDA, Funds From Operations (“FFO”) (as defined by the National Association of Real Estate Investment Trusts (“NAREIT”)) and Adjusted Funds From Operations (“AFFO”) in our analysis of our results of operations, which are not required by, or presented in accordance with, accounting principles generally accepted in the United States (“GAAP”). While we believe that net income, as defined by GAAP, is the most appropriate earnings measure, we also believe that EBITDA, Adjusted EBITDA, FFO and AFFO are important non-GAAP supplemental measures of operating performance for a REIT.

We define “EBITDA” as net income, as defined by GAAP, before interest expense, provision for income taxes and depreciation and amortization. We define “Adjusted EBITDA” as EBITDA before stock-based compensation expense and the impact, which may be recurring in nature, of incremental acquisition, pursuit, transaction and integration costs (including unsuccessful acquisition pursuit costs), costs associated with Windstream’s bankruptcy, costs associated with litigation claims made against us, and costs associated with the implementation of our enterprise resource planning system, (collectively, “Transaction Related and Other Costs”), costs related to the settlement with Windstream, goodwill impairment charges, executive severance costs, amortization of non-cash rights-of-use assets, the write off of unamortized

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deferred financing costs, costs incurred as a result of the early repayment of debt, including early tender and redemption premiums and costs associated with the termination of related hedging activities, gains or losses on dispositions, changes in the fair value of contingent consideration and financial instruments, and other similar or infrequent items (although we may not have had such charges in the periods presented). Adjusted EBITDA includes adjustments to reflect the Company’s share of Adjusted EBITDA from unconsolidated entities. We believe EBITDA and Adjusted EBITDA are important supplemental measures to net income because they provide additional information to evaluate our operating performance on an unleveraged basis. In addition, Adjusted EBITDA is calculated similar to defined terms in our material debt agreements used to determine compliance with specific financial covenants. Since EBITDA and Adjusted EBITDA are not measures calculated in accordance with GAAP, they should not be considered as alternatives to net income determined in accordance with GAAP.

Because the historical cost accounting convention used for real estate assets requires the recognition of depreciation expense except on land, such accounting presentation implies that the value of real estate assets diminishes predictably over time. However, since real estate values have historically risen or fallen with market and other conditions, presentations of operating results for a REIT that uses historical cost accounting for depreciation could be less informative. Thus, NAREIT created FFO as a supplemental measure of operating performance for REITs that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP. FFO is defined by NAREIT as net income attributable to common shareholders computed in accordance with GAAP, excluding gains or losses from real estate dispositions, plus real estate depreciation and amortization and impairment charges, and includes adjustments to reflect the Company’s share of FFO from unconsolidated entities. We compute FFO in accordance with NAREIT’s definition.

The Company defines AFFO, as FFO excluding (i) Transaction Related and Other Costs; (ii) costs related to the litigation settlement with Windstream, accretion on our settlement obligation, and gains on prepayment of our settlement obligation as these items are not reflective of ongoing operating performance; (iii) goodwill impairment charges; (iv) certain non-cash revenues and expenses such as stock-based compensation expense, amortization of debt and equity discounts, amortization of deferred financing costs, depreciation and amortization of non-real estate assets, amortization of non-cash rights-of-use assets, straight line revenues, non-cash income taxes, and the amortization of other non-cash revenues to the extent that cash has not been received, such as revenue associated with the amortization of TCIs; and (v) the impact, which may be recurring in nature, of the write-off of unamortized deferred financing fees, additional costs incurred as a result of the early repayment of debt, including early tender and redemption premiums and costs associated with the termination of related hedging activities, executive severance costs, taxes associated with tax basis cancellation of debt, gains or losses on dispositions, changes in the fair value of contingent consideration and financial instruments and similar or infrequent items less maintenance capital expenditures. AFFO includes adjustments to reflect the Company’s share of AFFO from unconsolidated entities. We believe that the use of FFO and AFFO, and their respective per share amounts, combined with the required GAAP presentations, improves the understanding of operating results of REITs among investors and analysts, and makes comparisons of operating results among such companies more meaningful. We consider FFO and AFFO to be useful measures for reviewing comparative operating performance. In particular, we believe AFFO, by excluding certain revenue and expense items, can help investors compare our operating performance between periods and to other REITs on a consistent basis without having to account for differences caused by unanticipated items and events, such as transaction and integration related costs. The Company uses FFO and AFFO, and their respective per share amounts, only as performance measures, and FFO and AFFO do not purport to be indicative of cash available to fund our future cash requirements. While FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent cash flows from operations or net income as defined by GAAP and should not be considered an alternative to those measures in evaluating our liquidity or operating performance.

Further, our computations of EBITDA, Adjusted EBITDA, FFO and AFFO may not be comparable to that reported by other REITs or companies that do not define FFO in accordance with the current NAREIT definition or that interpret the current NAREIT definition or define EBITDA, Adjusted EBITDA and AFFO differently than we do.

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The reconciliation of our net loss to EBITDA and Adjusted EBITDA and of our net loss attributable to common shareholders to FFO and AFFO attributable to common shareholders for the three and nine months ended September 30, 2023 and 2022 is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands)	2023		2022		2023		2022
Net loss	$	(80,933)	$	(155,749)	$	(74,506)	$	(49,117)
Depreciation and amortization	77,337		73,516		231,379		217,276
Interest expense, net	120,691		97,731		389,243		290,280
Income tax benefit	(43,095)		(13,056)		(49,864)		(10,183)
EBITDA	$	74,000	$	2,442	$	496,252	$	448,256
Stock-based compensation	3,148		3,151		9,408		9,664
Transaction related and other costs	1,441		2,375		9,805		7,324
Gain on sale of operations	—		(176)		—		(176)
Gain on sale of real estate	(1,424)		(94)		(1,424)		(344)
Goodwill impairment	153,000		216,000		153,000		216,000
Other, net	2,091		600		23,073		(6,534)
Adjustments for equity in earnings from unconsolidated entities	754		755		2,264		2,816
Adjusted EBITDA	$	233,010	$	225,053	$	692,378	$	677,006

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	Three Months Ended September 30,				Nine Months Ended September 30,
(Thousands)	2023		2022		2023		2022
Net loss attributable to common shareholders	$	(81,223)	$	(155,910)	$	(75,378)	$	(50,164)
Real estate depreciation and amortization	55,405		53,118		164,983		157,436
Gain on sale of real estate assets	(1,424)		(94)		(1,424)		(344)
Participating securities share in earnings	321		226		890		897
Participating securities share in FFO	(321)		(226)		(1,298)		(1,788)
Real estate depreciation and amortization from unconsolidated entities	435		436		1,305		1,931
Adjustments for noncontrolling interests	(24)		(24)		(74)		(235)
FFO attributable to common shareholders	$	(26,831)	$	(102,474)	$	89,004	$	107,733
Transaction related and other costs	1,441		2,375		9,805		7,324
Amortization of deferred financing costs and debt discount	4,521		4,495		13,975		13,510
Write off of deferred financing costs and debt discount	—		—		10,412		—
Costs related to the early repayment of debt	—		—		51,997		—
Stock-based compensation	3,148		3,151		9,408		9,664
Gain on sale of unconsolidated entity, net of tax	—		—		—		(1,212)
Gain on sale of operations	—		(176)		—		(176)
Non-real estate depreciation and amortization	21,932		20,398		66,396		59,840
Goodwill impairment	153,000		216,000		153,000		216,000
Straight-line revenues and amortization of below-market lease intangibles	(9,579)		(9,918)		(28,795)		(31,066)
Maintenance capital expenditures	(1,594)		(2,314)		(5,338)		(7,136)
Other, net	(50,963)		(19,182)		(77,041)		(35,412)
Adjustments for equity in earnings from unconsolidated entities	320		319		960		887
Adjustments for noncontrolling interests	(55)		(96)		(92)		(137)
AFFO attributable to common shareholders	$	95,340	$	112,578	$	293,691	$	339,819

Liquidity and Capital Resources

Our principal liquidity needs are to fund operating expenses, meet debt service obligations, fund investment activities, including capital expenditures, and make dividend distributions. Furthermore, following consummation of our settlement agreement with Windstream, including entry into the Windstream Leases, we are obligated (i) to make $490.1 million of cash payments to Windstream in equal installments over 20 consecutive quarters beginning in October 2020 and (ii) to reimburse Windstream for up to an aggregate of $1.75 billion for Growth Capital Improvements in long-term value accretive fiber and related assets made by Windstream through 2029. To date, we have paid $288.9 million of the $490.1 million due to Windstream under the settlement agreement. Uniti’s reimbursement commitment for Growth Capital Improvements does not require Uniti to reimburse Windstream for maintenance or repair expenditures (except for costs incurred for fiber replacements to the CLEC MLA leased property, up to $70 million during the term), and each such reimbursement is subject to underwriting standards. Uniti’s total annual reimbursement commitments for the Growth Capital Improvements under both Windstream Leases (and under separate equipment loan facilities) were limited to $225 million in 2022, and are limited to $225 million per year in 2023 and 2024; $175 million per year in 2025 and 2026; and $125 million per year in 2027 through 2029.

Our primary sources of liquidity and capital resources are cash on hand, cash provided by operating activities (primarily from the Windstream Leases), available borrowings under our credit agreement by and among the Operating Partnership, CSL Capital, LLC and Uniti Group Finance 2019 Inc., the guarantors party thereto, Bank of America, N.A., as administrative agent, collateral agent, swing line lender and an L/C issuer and certain other lenders named therein (the "Credit Agreement"), and proceeds from the issuance of debt and equity securities.

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As of September 30, 2023, we had cash and cash equivalents of $34.1 million and approximately $229.0 million of borrowing availability under our Revolving Credit Facility under the Credit Agreement (subject to customary borrowing conditions). Subsequent to September 30, 2023, other than $16.5 million of Growth Capital Improvements (see “Results of Operations—Revenues” above), there have been no material outlays of funds outside of our scheduled interest and dividend payments. Availability under our Revolving Credit Facility is subject to various conditions, including a maximum secured leverage ratio of 5.0:1. In addition, if we incur debt under our Revolving Credit Facility or otherwise such that our total leverage ratio exceeds 6.5:1, our Revolving Credit Facility would impose significant restrictions on our ability to pay dividends. See “—Dividends.”


	Nine Months Ended September 30,
(Thousands)	2023		2022
Cash flow from operating activities:
Net cash provided by operating activities	$	190,575	$	285,107

Cash provided by operating activities is primarily attributable to our leasing activities, which includes the leasing of mission-critical communications assets to anchor customers on either an exclusive or shared-tenant basis, in addition to the leasing of dark fiber network assets to the telecommunications industry. Cash used in operating activities includes compensation and related costs, interest payments, and other changes in working capital. Net cash provided by operating activities was $190.6 million and $285.1 million for the nine months ended September 30, 2023 and 2022, respectively. The decrease in net cash provided by operating activities during the nine months ended September 30, 2023 is primarily attributable to increases in cash interest expense, related to the issuance of the February 2028 Secured Notes, and changes in working capital, including the timing of interest payments associated with debt activities occurring in 2023.


	Nine Months Ended September 30,
(Thousands)	2023		2022
Cash flow from investing activities:
Capital expenditures	$	(368,264)	$	(292,666)
Proceeds from sale of unconsolidated entity (see Note 5 of Notes to Condensed Consolidated Financial Statements in Part I Item 1 of this Quarterly Report on Form 10-Q)	—		32,527
Proceeds from sale of real estate, net of cash	1,530		575
Proceeds from sale of operations	—		541
Proceeds from sale of other equipment	1,581		338
Net cash used in investing activities	$	(365,153)	$	(258,685)

Net cash used in investing activities increased $106.5 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2023, primarily driven by an increase in Growth Capital Improvements of $75.4 million, which we classify as success-based capital expenditures. Additionally, net cash used in investing activities for the nine months ended September 30, 2022 was partially offset by proceeds from the sale of an unconsolidated entity, which was not repeated in the current period. Capital expenditures are primarily related to our Uniti Fiber and Uniti Leasing businesses for deployment of network assets, as described below under “—Capital Expenditures.”

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	Nine Months Ended September 30,
(Thousands)	2023		2022
Cash flow from financing activities:
Repayment of debt	$	(2,263,662)	$	—
Proceeds from issuance of notes	2,600,000		—
Dividends paid	(107,395)		(107,362)
Payments of settlement payable	(73,516)		—
Distributions paid to noncontrolling interest	(48)		(217)
Payment for exchange of noncontrolling interest	—		(4,620)
Borrowings under revolving credit facility	450,000		180,000
Payments under revolving credit facility	(367,000)		(105,000)
Finance lease payments	(1,601)		(887)
Payments for financing costs	(26,955)		—
Payment for settlement of common stock warrant	(56)		—
Termination of bond hedge option	59		—
Costs related to the early repayment of debt	(44,303)		—
Employee stock purchase program	730		589
Payments related to tax withholding for stock-based compensation	(1,359)		(4,434)
Net cash provided by (used in) financing activities	$	164,894	$	(41,931)

Net cash provided by financing activities was $164.9 million for the nine months ended September 30, 2023, while net cash used in financing activities was $41.9 million for the nine months ended September 30, 2022. The change is primarily related to proceeds from the issuance of the February 2028 Secured Notes of $2.6 billion, offset by the repayment of the 2025 Secured Notes of $2.3 billion, repayment of the settlement payable of $73.5 million, costs related to the early repayment of the 2025 Secured Notes of $44.3 million, payments for financing costs related to the February 2028 Secured Notes of $27.0 million, and net borrowings under the Revolving Credit Facility of $83.0 million.

Windstream Leases

The initial term of the Windstream Leases expires on April 30, 2030. The aggregate initial annual rent under the Windstream Leases is $663.0 million. The Windstream Leases contain cross-guarantees and cross-default provisions, which will remain effective as long as Windstream or an affiliate is the tenant under both of the Windstream Leases and unless and until the landlords under the ILEC MLA are different from the landlords under the CLEC MLA. The Windstream Leases permit Uniti to transfer its rights and obligations and otherwise monetize or encumber the Windstream Leases, together or separately, so long as Uniti does not transfer interests in either Windstream Lease to a Windstream competitor.

Beginning in October 2020, pursuant to the Windstream Leases, Windstream (or any successor tenant under a Windstream Lease) has the right to cause Uniti to reimburse up to an aggregate $1.75 billion of Growth Capital Improvements through 2029. Uniti’s reimbursement commitment for Growth Capital Improvements does not require Uniti to reimburse Windstream for maintenance or repair expenditures (except for costs incurred for fiber replacements to the CLEC MLA leased property, up to $70 million during the term), and each such reimbursement is subject to underwriting standards. Uniti’s total annual reimbursement commitments for the Growth Capital Improvements under both Windstream Leases (and under separate equipment loan facilities) were limited to $225 million in 2022, and are limited to $225 million in 2023 and 2024; $175 million per year in 2025 and 2026; and $125 million per year in 2027 through 2029. If the cost incurred by Windstream (or the successor tenant under a Windstream Lease) for Growth Capital Improvements in any calendar year exceeds the annual limit for such calendar year, Windstream (or such tenant, as the case may be) may submit such excess costs for reimbursement in any subsequent year and such excess costs shall be funded from the annual commitment amounts in such subsequent period. In addition, to the extent that reimbursements for Growth Capital Improvements funded in any calendar year during the term is less than the annual limit for such calendar year, the unfunded amount in any calendar year will carry-over and may be added to the annual limits for subsequent calendar years, subject to an annual limit of $250 million in any calendar year.

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UPREIT Operating Partnership Units

Our UPREIT structure enables us to acquire properties by issuing to sellers, as a form of consideration, limited partnership interests in our operating partnership, (commonly called “OP Units”). We believe that this structure will facilitate our ability to acquire individual properties and portfolios of properties by enabling us to structure transactions which will defer taxes payable by a seller while preserving our available cash for other purposes, including the possible payment of dividends.

Outlook

We anticipate continuing to invest in our network infrastructure across our Uniti Leasing and Uniti Fiber portfolios. We anticipate that we will partially finance these needs, as well as operating expenses (including our debt service obligations), from our cash on hand and cash flows provided by operating activities. As of September 30, 2023, we had $229.0 million in borrowing availability under our Revolving Credit Facility (subject to customary borrowing conditions), however, we may need to access the capital markets to generate additional funds in an amount sufficient to fund our business operations, announced investment activities, capital expenditures, including reimbursement commitments for Growth Capital Improvements, debt service and distributions to our shareholders. We are closely monitoring the equity and debt markets and may seek to access them promptly if and when we determine market conditions are appropriate.

The amount, nature and timing of any capital markets transactions will depend on: our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature and timing of our capital requirements; any limitations imposed by our current credit arrangements; and overall market conditions. These expectations are forward-looking and subject to a number of uncertainties and assumptions. If our expectations about our liquidity prove to be incorrect or we are unable to access the capital markets as we anticipate, we would be subject to a shortfall in liquidity in the future which could lead to a reduction in our capital expenditures and/or dividends and, in an extreme case, our ability to pay our debt service obligations. If this shortfall occurs rapidly and with little or no notice, it could limit our ability to address the shortfall on a timely basis.

In addition to exploring potential capital markets transactions, the Company regularly evaluates market conditions, its liquidity profile, and various financing alternatives for opportunities to enhance its capital structure. If opportunities are favorable, the Company may refinance or repurchase existing debt. However, there can be no assurances that any debt refinancing would be on similar or more favorable terms than our existing arrangements. This would include the risk that interest rates could increase and/or there may be changes to our existing covenants.

If circumstances warrant, we may take measures to conserve cash as we anticipate that it will be more difficult for us to access the capital markets at attractive rates until such uncertainty is clarified.

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Capital Expenditures


	Nine Months Ended September 30, 2023
(Thousands)	Success Based		Maintenance		Non-Network		Total
Capital expenditures
Uniti Leasing, excluding growth capital improvements	$	20,657	$	—	$	—	$	20,657
Growth capital improvements	233,465		—		—		233,465
Uniti Fiber	108,173		5,338		631		114,142

Total capital expenditures	$	362,295	$	5,338	$	631	$	368,264

We categorize our capital expenditures as either (i) success-based, (ii) maintenance, or (iii) corporate and non-network. We define success-based capital expenditures as those related to installing existing or anticipated contractual customer service orders. Maintenance capital expenditures are those necessary to keep existing network elements fully operational. We anticipate continuing to invest in our network infrastructure across our Uniti Leasing and Uniti Fiber businesses and expect that cash on hand and cash flows provided by operating activities will be sufficient to support these investments. We have the right, but not the obligation (except for Growth Capital Improvements), to reimburse growth capital expenditures in certain of our lease arrangements where we are the lessor.

Uniti’s total annual reimbursement commitments to Windstream for the Growth Capital Improvements is discussed above in this Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in “Liquidity and Capital Resources—Windstream Leases.” Growth Capital Improvements are treated as success-based capital improvements based on the rents paid with respect to such amounts.

If circumstances warrant, we may need to take measures to conserve cash, which may include a suspension, delay or reduction in success-based capital expenditures.

Dividends

We have elected to be taxed as a REIT for U.S. federal income tax purposes. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its taxable income. In order to maintain our REIT status, we intend to make dividend payments of all or substantially all of our taxable income to holders of our common stock out of assets legally available for this purpose, if and to the extent authorized by our board of directors. Before we make any dividend payments, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service obligations. If our cash available for distribution is less than our taxable income, we could be required to sell assets or borrow funds to make cash dividends or we may make a portion of the required dividend in the form of a taxable distribution of stock or debt securities.

The following table sets out details regarding our cash dividends on our common stock:

Period

Payment Date

Cash Dividend Per Share

Record Date

January 1, 2023 - March 31, 2023

April 14, 2023

0.15

March 31, 2023

April 1, 2023 - June 30, 2023

June 30, 2023

0.15

June 16, 2023

July 1, 2023 - September 30, 2023

September 22, 2023

0.15

September 8, 2023

Any dividends must be declared by the Board, which will take into account various factors including our current and anticipated operating results, our financial position, REIT requirements, conditions prevailing in the market, restrictions in our debt documents and additional factors they deem appropriate. Dividend payments are not guaranteed, and the Board may decide, in its absolute discretion, at any time and for any reason, not to pay dividends or to change the amount paid as dividends.

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Critical Accounting Estimates

We make certain judgments and use certain estimates and assumptions when applying accounting principles in the preparation of our Condensed Consolidated Financial Statements. The nature of the estimates and assumptions are material due to the levels of subjectivity and judgment necessary to account for highly uncertain factors or the susceptibility of such factors to change. We have identified the accounting for income taxes, revenue recognition, the impairment of property, plant and equipment, goodwill impairment and business combinations as critical accounting estimates, as they are the most important to our financial statement presentation and require difficult, subjective and complex judgments.

We believe the current assumptions and other considerations used to estimate amounts reflected in our accompanying Condensed Consolidated Financial Statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our Condensed Consolidated Financial Statements, the resulting changes could have a material adverse effect on our consolidated results of operations and, in certain situations, could have a material adverse effect on our financial condition.

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For further information on our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the notes to our audited financial statements included in our Annual Report. As of September 30, 2023, there has been no material change to these estimates other than discussions above on goodwill.

Recent Accounting Guidance

New accounting rules and disclosures can impact our reported results and comparability of our financial statements. See Note 2 of Notes to Condensed Consolidated Financial Statements in Part I Item 1 of this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no material changes from the information reported under Item 7A of our Annual Report.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

We have established disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023, and based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2023.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act, that occurred during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

A description of legal proceedings can be found in Note 13 - Commitments and Contingencies to our Condensed Consolidated Financial Statements, included in this report at Part I, Item 1- Financial Statements, and is incorporated by reference into this Item 1.

Item 1A. Risk Factors.

There have been no material changes to the risk factors affecting our business that were discussed in Part I, “Item 1A. Risk Factors” in our Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

The table below provides information regarding shares withheld from Uniti employees to satisfy minimum statutory tax withholding obligations arising from the vesting of restricted stock granted under the Uniti Group Inc. 2015 Equity Incentive Plan. The shares of common stock withheld to satisfy tax withholding obligations may be deemed purchases of such shares required to be disclosed pursuant to this Item 2.


Period	Total Number of Shares Purchased	Average Price Paid per Share(1)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2023 to July 31, 2023	644	$	5.07	—	—
August 1, 2023 to August 31, 2023	987	5.49		—	—
September 1, 2023 to September 30, 2023	67	4.58		—	—
Total	1,698	$	5.30	—	—

(1) The average price paid per share is the weighted average of the fair market prices at which we calculated the number of shares withheld to cover tax withholdings for the employees.

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not Applicable

Item 5. Other Information.

(a) On November 1, 2023, the Board approved an amendment (the “Amendment”) to the Company’s Amended and Restated Bylaws (the “Bylaws”) to address Rule 14a-19 promulgated by the SEC under the Exchange Act regarding the use of universal proxy cards. The Amendment, which became effective immediately upon adoption, revised the advance notice provisions in Article II, Section 6 of the Bylaws to, among other things: (i) require that a stockholder delivering a notice for the nomination of individuals for election to the Board must comply with Rule 14a-19; (ii) require stockholders to provide evidence and certification of compliance with Rule 14a-19; (iii) provide that the Company will disregard a stockholder nomination if the nominating stockholder fails to comply with Rule 14a-19 or the nominating stockholder (or its qualified representative) fails to appear and present a nomination at the applicable stockholder meeting; and (iv) specify that any stockholder directly or indirectly soliciting proxies from other stockholders must use a proxy card color other than white.

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The complete text of the Bylaws, as amended, is attached hereto as Exhibit 3.1 and is incorporated herein by reference. The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by Exhibit 3.1.

(b) None

(c) During the three months ended September 30, 2023, none of the Company’s directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).

Item 6. Exhibits.


Exhibit Number						Description
3.1*						Amended and Restated Bylaws of Uniti Group Inc., as amended November 1, 2023.

31.1*						Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*						Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*						Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*						Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH						Inline XBRL Taxonomy Extension Schema Document

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

______________________________

*Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

UNITI GROUP INC.

Date:

November 2, 2023

/s/ Paul E. Bullington

Paul E. Bullington
Senior Vice President – Chief Financial Officer and Treasurer
(Principal Financial Officer)

Date:

November 2, 2023

/s/ Travis T. Black

Travis T. Black
Vice President – Chief Accounting Officer
(Principal Accounting Officer)