Uniti Group Inc.

Welcome to Unity Group's second quarter 2022 conference call. My name is Daniel and I will be your operator for today. A webcast of this call will be available on the company's website, www.unity.com, beginning today and will remain available for 14 days. At this time, all participants are in a listen-only mode. Participants on the call will have the opportunity to ask questions following the company's prepared comments. The company would like to remind you, that today's remarks include forward-looking statements, and actual results could differ materially from those projected in these statements. The factors that could cause actual results to differ are discussed in the company's filings with the SEC. The company's remarks this morning will reference slides posted on its website, and you're encouraged to refer to those materials during this call. Discussions during the call will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the company's current report on Form 8K, dated today. I would now like to turn the call over to Unity Group's Chief Executive Officer, Kenny Gunderman. Please go ahead, Mr. Gunderman.

Thank you. Good morning, everyone, and thank you for joining. Starting on slide three, the demand for our mission-critical fiber infrastructure continues to accelerate across virtually all of our customer segments. Our results for the second quarter exceeded our expectations, and we continue to be enthusiastic about our prospects for the second half of the year. As a result, we announced today that we're once again raising our full year outlook. We achieved our fifth consecutive quarter of elevated consolidated new sales bookings, while also realizing our highest level of gross install activity since 2017. As the second largest independent fiber operator in the country with 133,000 route mile network, Unity is successfully enabling broadband connectivity for our customers, from local businesses to large national carriers. We remain uniquely positioned to benefit from the favorable trends within our industry, and our strategy also further demonstrates that the shared infrastructure benefits of fiber result in healthy adjusted EBITDA and AFFO growth. Turning to slide four, Unity continues to track well in the shared infrastructure economics. As a result, we believe that a healthy mix of anchor and lease-up bookings and installs represents the most effective way to drive profitable growth. Unity acquires or builds new fiber, largely for our wireless customers, with attractive long-term anchor cash flow yields in the mid to high single digits. We're then successfully adding additional tenants with very high margins and minimal capex, resulting in a cumulative cash flow yield today of 21%, a three-fold increase from the anchor yield of these projects. Slide 5 illustrates an important part of our healthy business mix. We continue to show that the majority of new bookings are lease-up in nature, and the business mix results in predictable cash flow with industry-leading monthly churn of 0.3% and an average remaining contract churn of over eight years. Our continued intentional focus on balancing wholesale, non-wholesale, and anchor lease-up opportunities has resulted in outsized margin enhancement and AFFO growth. and a business that is relatively immune to swings in the economy, which I will elaborate more later in the call. Turning to slide six, as I've previously stated, although we report Unity Fiber and Unity Leasing separately, both businesses are marketed to our customers as one consolidated fiber business. An increasing number of customers and network solutions are a mix of Unity Leasing and Unity Fiber networks, and we fully expect and encourage that trend to continue. High-capacity long-haul routes are needed by all of our customers, including carriers, hyperscalers, international carriers, MSOs, and large enterprises to connect their disparate markets, data centers, and POPs. Today, dark fiber in North America is an approximately $1.5 billion annual market opportunity and is expected to grow about 10% annually over the next several years, reaching approximately $4 billion by 2030, with long-haul fiber contributing to the majority of these revenues. The continued broadband explosion fueled by 5G, metro fiber, small cells, fiber to the tower, fiber to the home, and even fixed wireless and satellite broadband all provide on-ramps of demand into the long-haul market. A critical ingredient to being a successful provider for these customers is having a robust national network that, as most large customers, require multi-route solutions. Having an own national network is a meaningful barrier to entry for competitors to Unity, especially given that it would take billions of dollars and many years to build a new national network. We estimate there are only five truly owned national networks and two independent fiber providers with national networks in the U.S. today, with Unity being one of them. Thus, we have a unique opportunity to capitalize on this growing demand in the fiber market. We've created a 133,000 route mile network through proprietary acquisitions at Attractive Economics, with approximately 3 million strand miles of fiber available to lease to third parties. We continue to grow that network and have built over 16,000 route miles of new fiber in the past four years. And our networks are intentionally constructed with high strand fiber in order to capitalize on highly accretive lease up opportunities. As a reminder, the economics of long haul fiber are very attractive with high margin passively managed revenue, little to no churn, long-term contracts that routinely have escalators built into them, and minimal capex requirements. Since most of our network is dark today, we also have a great opportunity to grow our business by lighting more of our network in a disciplined manner. Our national wholesale network has the added benefit of providing terrific growth potential for UnityFiber. As we expand our national lit network into new regions, the economics of adding lit metro services, enterprise lease-up in particular, become more achievable. Turning to slide seven, although enterprise sales represent less than 5% of our total revenue today and will likely always represent a minority percentage, it remains a critical element of our leasehold strategy. Enterprise new sales bookings and install activity during the second quarter were both the highest levels we have ever achieved in company history. And we expect these strong trends to continue as we further capture market share and deploy fiber-based lit services to our customers in our existing and new markets. As a result of our consistent, strong bookings activity, enterprise recurring revenue was up 11% in the second quarter from the prior year. As I've mentioned before, we're only offering lit services in approximately 25 metro markets today, with an average market share of only approximately 5%, providing us with a long runway to increase our market share substantially over the next several years. Even more exciting, As you can see from the map, we own Metro Fiber in nearly 300 markets nationwide, which represents terrific capital and margin-efficient growth potential for enterprise, wireless backhaul, and even small sales. We only recently acquired access to these markets in our 2020 settlement with Windstream, so we're just beginning to capitalize on the opportunity. Given the proven success of our anchor lease-up strategy and the attractive economics of these enterprise opportunities, With payback periods of about half the initial contract term and cash yields of 50% plus, we continue to actively prioritize these metro markets for expansion in both 2023 and beyond. In looking at our national wholesale network and our 300 metro markets combined, we estimate that less than 5% of our total 7.8 million strand miles of fiber are actually lit. This virtual blank canvas provides us with a terrific runway for disciplined growth without the burden of legacy declining products. With that, I'll now turn the call over to Paul.

Thank you, Kenny. Good morning, everyone. Both our Unity Leasing and Unity Fiber businesses continue to perform well, and this performance is reflected in our better than expected second quarter results. Despite increased economic uncertainty and volatility within the capital markets, Unity remains well positioned given our robust level of long-term revenues under contract, our declining capital intensity, along with the work we have done to strengthen our balance sheet and push out our debt maturities. As a result of the strength of the quarter and our continued confidence in our ability to execute in the second half of the year, we are once again increasing the midpoint of our 2022 outlook for revenue and adjusted EBITDA. Please turn to slide eight and I'll start with comments on our second quarter. We reported consolidated revenues of $284 million, consolidated adjusted EBITDA of $227 million, AFFO attributed to common shares of $115 million, and AFFO per diluted common share of 44 cents. Net income attributable to common shares for the quarter was approximately $53 million, or 21 cents per diluted share. At Unity Leasing, we reported segment revenues of $206 million and adjusted EBITDA of $200 million, up 5% and 4% respectively from the prior year. Accordingly, Unity Leasing achieved an adjusted EBITDA margin of 97% for the quarter. Turning to slide 9, our Growth Capital Investment Program continues to make progress and provide positive results for Unity. Over the past six years, our tenant has invested approximately $1 billion of tenant capital improvements in our network. Unity continues to invest its own capital in long-term value-accreted fiber, largely focused on highly valuable last mile fiber, including fiber in commercial parks and fiber to the home. Collectively, these investments have resulted in 16,400 route miles of newly constructed fiber and 22% of the legacy copper network being overbuilt with fiber. Both of these numbers continue to gradually increase each quarter, and we expect they will increase materially over the coming years. During the second quarter, Unity Leasing deployed approximately $53 million towards growth capital investment initiatives, with the majority of the investments relating to the Windstream GCI program. These GCI investments added around 1,700 route miles of fiber to Unity's own network across several different markets. As of June 30th, Unity has invested approximately $400 million of capital to date under the GCI program with Windstream, adding around 11,200 route miles and 594,000 strand miles of fiber to our network. These investments will be added to the master leases at an 8% initial yield at the one-year anniversary of Unity making such investment. They are subject to a 0.5% annual escalator and result in nearly 100% margin. The investments we have made to date will ultimately generate approximately $32 million of annualized cash rent. During the quarter, we sold our remaining investment interest in Harmony Towers to Palastar Capital, formerly known as Melody Investment Advisors, for total cash consideration of $32.5 million, or approximately 35 times our ownership interest in annualized run rate cash flows. This transaction generated a gain on sale of approximately $8 million, excluding related tax expense of $7 million. We had previously sold 90% of our U.S. tower business to Palastar in June of 2020. The net effects of this transaction are included within our leasing segment. At Unity Fiber, we turned over 459 lit backhaul, dark fiber, and small cell sites for our wireless carriers across our southeast footprint during the second quarter. These installs add annualized revenues of approximately $4.9 million and represent the highest level of wireless gross installs ever for Unity. We currently have around 1,400 lit backhaul, dark fiber, and small cell sites remaining in our backlog that we expect to deploy within the next few years. This wireless backlog represents an incremental $12 million of annualized revenues. At Unity Fiber, we reported revenues of $78 million and adjusted EBITDA of $34 million during the second quarter. Both revenues and adjusted EBITDA were higher than expected, largely due to the timing of equipment sales and early termination fees and lower costs. We achieved an adjusted EBITDA margin of 43% for the quarter, a 200 basis point improvement from the prior year period. Unity Fiber net success-based CapEx was $30 million in the second quarter. We also incurred $2 million of maintenance CapEx, or about 3% of revenues. Please turn to slide 10 and I'll now cover our updated 2022 guidance. We're revising our guidance primarily for business unit level revisions and the impact of transaction related and other costs incurred to date. Our outlook excludes future acquisitions, capital market transactions, and future transaction related and other costs not specifically mentioned herein. Actual results could differ materially from these forward looking statements. Our current full year outlook for 2022 includes the following for each segment. Beginning with Unity Leasing, based on better than expected lease-up success, we now expect revenues and adjusted EBITDA to be $822 million and $800 million, respectively, at the midpoint, representing adjusted EBITDA margins of approximately 97%. Revenue and adjusted EBITDA each include $14 million of cash rent associated with the GCI investments. and $26 million relating to the straight line rent associated with the Windstream master leases and GCI investments. We expect to deploy $275 million of success-based CapEx at the midpoint of our guidance, of which $250 million relates to estimated Windstream GCI investments. Turning to slide 11, we continue to expect UnityFiber to contribute $309 million of revenues at the midpoint and adjusted EBITDA of $121 million for full year 2022. When adjusting for the EverStream transaction that occurred in May of 2021, the year-over-year revenue and adjusted EBITDA growth is 6% and 8%, respectively. This strong growth demonstrates our continued success in managing our cost structure and improving margins while executing on lease-up that leverages our existing dense southeast fiber footprint. As I previously mentioned, we still expect 2022 to be the peak year for Sprint-related churns. which means higher than normal one-time ETL fees related to legacy Sprint sites being disconnected as part of the T-Mobile merger. As we turn to 2023, we still expect to realize some ETL fees, but most likely $12 to $13 million less than in 2022. We do still expect that our core recurring revenue at UnityFiber will increase by a mid-single digits percentage rate for full year 2023 when compared to 2022. Net success-based CapEx for Unity Fiber this year is still expected to be $120 million at the midpoint of our guidance, a 12% decrease from levels in 2021. Turning to slide 12, for 2022, we expect full-year AFSO to range between $1.70 and $1.77 per diluted common share, with a midpoint of $1.74 per diluted share, a 4% increase from 2021. On a consolidated basis, we expect revenues to be $1.1 billion and adjusted EBITDA to be $896 million at the midpoint. Our guidance contemplates consolidated interest expense for the full year of approximately $390 million. Corporate SG&A, excluding amounts allocated to our business segments, is expected to be approximately $33 million, including $8 million of stock-based compensation expense. We still expect our weighted average diluted common shares outstanding for full year 2022 to be around 267 million shares. As a reminder, guidance ranges for key components of our outlook are included in the appendix to our presentation. Turning now to our capital structure. With the work we have done over the past couple of years to push out our debt maturities and strengthen our balance sheet and liquidity position, we do not have a need to access external capital through the end of 2023. As such, we continue to be opportunistic in our approach to managing our capital structure over the near term. At quarter end, we had approximately $360 million of combined unrestricted cash and cash equivalents in undrawn revolver capacity. Our leverage ratios stood at 5.64 times based on net debt to last quarter annualized adjusted EBITDA. Our consolidated net leverage ratio at quarter end as defined in the indenture governing our seven and seven eighths senior secured notes stood at 5.71 times, which is below the 5.75 times threshold imposed by the indenture that had restricted our ability to distribute dividends in excess of 90% of taxable REIT income. In light of this milestone, our board will continue to evaluate our dividend policy and the optimal capital allocation strategy going forward. On July 29th, our board declared a dividend of 15 cents per share to stockholders of record on September 9th, payable September 23rd. With that, I'll now turn the call back over to Kenny.

Thanks, Paul. Before turning to Q&A, I'd like to address the current economic backdrop and the implications for unity. We're prepared for the likelihood of a recession, or at least a sustained economic downturn, as well as an elevated interest rate environment for some time. With respect to a potential recession, we believe our core business will likely see little to no noticeable impact given the mission-critical nature of broadband. Further, the vast majority of our revenue is wholesale in nature with long-term contracts, some of which have escalators pegged to CPI. This customer base has proven more resilient than enterprise during downturns. With respect to costs, we're beginning to forecast higher labor and material costs in some areas. With that said, however, we don't expect any meaningful changes to current or forecasted margins or capital intensity. Given that our business performed exceptionally well during the depths of the pandemic, we would expect to execute at a similar level during any potential recession or economic downturn. The elevated interest rate environment has created capital market challenges for high yield issuers seeking to finance M&A or to refinance near-term debt. Fortunately for Unity, we have no significant near-term maturities. As it relates to potential debt refinancing in M&A, we have the ability to be patient. To be clear, we remain confident in our intrinsic value and our ability to execute on our strategic options, but we believe better execution could be achieved in more normalized markets. Despite this macroeconomic backdrop, we continue to prioritize investment in our core business. We currently have over $7 billion of revenue under contract with the average remaining term of eight and a half years. The majority of this revenue is passively managed in the form of triple net or dark fiber MLAs. As a result, the operating costs associated with this revenue is de minimis, which results in a cash flow rich business over the mid to long term. We think this is an underappreciated part of our story, especially since by 2030, we expect to have generated approximately $1.5 billion of cumulative free cash flow after dividends, if we maintain our current dividend and approximate level of annual capital investment. This trajectory leads to substantial deleveraging, resulting in 2.5 to 3.5 times net leverage and more than doubling the size of our non-windstream fiber business by 2030. Our network is highly underutilized, presenting profitable growth potential for some time. We expect net capital intensity to decline from our current level of approximately 35% to approximately 10% by 2030. This decline is indicative of accelerating operating leverage in the business and many years of high margin, high yielding lease up, including dark fiber, lighting unique long haul routes, and expanding deeper into our existing 300 metro markets. With that said, our cash rich MLAs provide great optionality to pay an increasing dividend. and invest even more in our core business in lieu of paying down debt. As I mentioned in my earlier remarks, regardless of our capital allocation policy, our runway for organic growth appears long and fruitful, especially given strong industry tailwinds. In summary, we believe Unity is well positioned with a recession-resistant business and a terrific opportunity for material value creation with no reliance upon M&A. With that, Operator, we're now ready to take questions.

To ask a question, you will need to press star 1 1 on your telephone. Please stand by while we compile the Q&A roster.

Our first question comes from Gregory Williams with Cowan. Your line is now open.

Great. Thanks for taking my questions. First one is just on the solid gross installs. obviously impressive here and you're finally chipping away at this backlog. Is this sort of a function of, you know, the better weather so you can get out there and install and, you know, we're coming out of the pandemic and how does that translate to your ability to hire contractors in the workforce? I think as I think about the sustainability of the solid gross installs. And then the second question is just on the M&A environment. I think you noted, you know, you're waiting for better execution for a more normalized environment. How would you characterize, you know, your M&A and your appetite and I didn't see any deals today. Does that mean something more transformative is still on the table? Thanks.

Greg, on installs, I'd say it's a result of three things. One, we've just had elevated bookings now for several quarters. Obviously, bookings precede installs, so you're starting to see installs catch up, if you will. Secondly, very active first half of the year with DISH, which I think was probably more active than we expected. So that was an important contributor. To your question about labor, it continues to be a challenge to get, whether it be contract labor or full-time labor, frankly. It's one of the reasons we called it out in our prepared remarks but fortunately we've been able to to staff the positions we need and we we actively manage that so I think we're we're confident that that's not going to be a bottleneck for us although like we said there could be some elevated costs associated with it going forward but at this level of bookings and this level of installs for us that's a that's a cost well worth bearing With respect to M&A, not much more to say than what we had in our prepared remarks. We're just going to continue to be patient and opportunistic like we always have. We continue to think the trends, both in the industry and in the conversations that we're having, are very favorable and we believe will be very fruitful for Unity in the future.

Got it. Thank you. Thank you.

And our next question comes from Michael Rollins with Citi. Your line is now open.

Thanks, and good morning. Two questions. First, on the guidance, the revenue in EBITDA midpoints picked up a little bit, but AFFO looks unchanged. If you could just unpack a little bit more of the pluses and minuses in that transition from income statement to the AFFO guide. Secondly, you talked about the opportunity to delever over time with the cash that the business can produce. Should that be the base case for investors that in the absence of any larger transformative transactions that Unity is aspiring to delever to a certain financial net debt target range? Thank you.

Hey, Michael. This is Paul. Thanks so much for your question. Yeah, just some differences, particularly in terms of cash, cash revenue and translating from EBITDA to from revenue and adjusted EBITDA to AFFO between the between the quarters. So I think that's the primary difference that you're seeing there. There's a couple other minor things, and we can get you some more detail on that, Michael, if you'd like. But I think that just the differences between cash, cash revenue, and non-cash revenue is the major contributor to the difference there.

So just to quickly follow up on that, so is the benefit in the short-term straight line or deferred revenue? and over time that converts into cash revenue so therefore you're getting the benefit in the income statement but not AFFL. I was curious if it was more that or if there's just other offsetting items to a change in the cash income statement contributors versus like interest or some other items like that.

Without getting into too much detail there, I think that a lot of those cash differences do come in when you're looking at straight line revenue. I think you're exactly right there in those differences coming in as you have that roll on and off with new contracts or old contracts. I think that's the largest contributor, so I think you're right on target there.

Michael, it's Kenny. With respect to your question about some of the longer term outlook we provided, I doubt we will ever get down to two and a half to three and a half times leverage simply because that's probably under leveraged relative to an optimal capital structure for our business. What we're really trying to demonstrate is the ability to do that if we chose to. I think more likely we would use that cash to either pay a higher dividend or invest more in the business, especially given the trends that we're seeing in the business and the trends that we're seeing in the industry, or some combination of those things. And I think that's a great place for us to be, to have the optionality to either invest, pay a higher dividend, or deleverage, or some combination. And by the way, that also sets you up for doing more opportunistic both on M&A with a better balance sheet and more liquidity. So that obviously would factor in. And with respect to this being the base case, I think this is the base case. I mean, M&A for us has always been opportunistic, especially transformative M&A. And I think in doing M&A, it's always important to to have the ability to be patient and in order to be patient, you have to have a good business that's performing well and you have to have a good balance sheet and a good runway for liquidity and we certainly have all those things.

Thanks. Thank you.

And our next question comes from Frank Welton with Raymond James. Your line is now open.

Great. Thank you. In your slides, you talked about the 275 buildings that you passed. What percentage of those are realistic targets to get business from, and what's your current penetration, and then what are you doing to try and increase that penetration going forward?

Hey, Frank. I would say all of them are... accessible and that's really the point. We do a lot of work both with our own data and outside sources where it's useful to pinpoint our network and opportunities near that network. So anything on that list, and by the way, that's a list we share with our customers. It's out there for the industry to see. So we want customers and potential customers to see that and therefore call us when there's opportunities in those buildings. So that's a real number that we're executing on. And I would say with respect to market share, we look at it by market. And we've got some markets where we're approaching maybe 10% market share. But the vast majority, in the vast majority of our metro markets, we're you know, well below 5%. So we're really an insurgent, a share taker, and just feel really excited about the opportunity that we have going forward to continue taking share in the near term.

All right, great. And talking with some other infrastructure players, they're seeing some of their escalators go up as inflation's gone up. Are you having any similar conversations with new customers or when you're renewing leases about raising some of the escalators to compensate for that?

Yeah, absolutely. Escalators have always been important to include whenever we can, and especially our long-term dark fiber contracts that have such a long life. But in the current market and current times, escalators are even more important. So yeah, we're putting even more focus on making sure our contracts have the escalators that can continue to protect our rivers stream and insulate it from kind of inflationary pressures going forward. And as Kenny mentioned in our comments, we do have some of those escalators are fixed rates, but some of those escalators are tied to CPI, which is particularly valuable in a time like 2022 when we've had such an increase in the the CPI year over year, so that's been a nice thing for us to have those built in whenever we can, and we'll continue to put an increased focus on that in a time like this, for sure.

All right, great. That's really helpful, and if you can make sure the operator turns my mic off this time, that'd be great.

Thank you. And our next question comes from David Barton with Bank of America. Your line is now open.

Hey, guys. Thanks so much. Hey, Frank, make sure your dogs are quieted down there, please. So, guys, I guess I got three questions. So the first one could be, Paul, can you remind us just the 2022 termination income that you're expecting from the T-Mobile company? merger and and what the one-timers contributed to 2q and then what you kind of think is left over for 2023 that we should be thinking about i think you mentioned that in the prepared remarks the second i guess would be kenny um now that you guys have broken through that um you know covenant barrier could you give us a timetable um uh and some criteria either execution or cash flow generation or leverage criteria that you think would help us inform a decision about revisiting the dividend payout policy. And then I guess my last question would be, you know, there was a window, there is a window to refinance your highest coupon debt, 7 and 7 and 8, 2025. that started in kind of the mid first quarter and a quarter ago, it would have been a call it a six ish percent type of coupon to refinance it. Now it's probably north of seven. So you didn't do that presumably for a reason. And one speculation is that the reason why you're not coming back to the markets is is is that this dispute with windstream about the lease renewal term and um the 2027 arbitration is impacting your your decision making around capital markets access so i was wondering if you could kind of revisit that topic too please thank you so much all right thanks david um paul i'll take your your first question so yeah we um you know

We've been mentioning for a while that the Sprint churn is going to peak in 2022, so it's definitely having an impact on the financials this year. So we wanted to provide a little bit more color on that for you guys in our comments this time. Like I said in my remarks, we expect We expect ETLs in 2023 to be less than in 2022, since it's 22, like I said, the peak year, and we're expecting that to be about 12 or $13 million less than what it is this year. So this year, this year, If you look at our page, it breaks down Unity fiber revenue. You can see the $61 million of core non-recurring that we're projecting at UF for 2023. About $25 million of that is expected to be related to ETLs, and the vast majority of that is associated with the Sprint DCOMs. So, you know, it's That amount would really be cut close to in half if you look out towards 2023 for our expectations. I don't know the exact number for the second quarter. If you ask that, we can get you that, David, later, but it's definitely a contributor to the quarter. I've got the number here.

about seven about seven million dollars contribution to the second quarter alone ETLs were from a revenue standpoint and David with respect to your other two questions on the dividend obviously that's a board level decision so I don't want to put any parameters around that to get ahead of them but I certainly had a robust Discussion with the board about it last week and we'll can at the board meeting and we'll continue to have that in the coming Months quarters, I think Right now we're paying 90% of taxable income Most REITs pay 100% there's there's tax savings associated with that there certainly would be for us and so I that's an incremental consideration that I'm sure you're thinking about, aware of. But beyond that, I don't want to put any guardrails around it and get ahead of the board in any way. But it's great to have that covenant cleared so that they have the flexibility to pull that lever on capital allocation if they choose to. With respect to your last question, I don't agree with your conclusion. We certainly did not finance or refinance some of the debt that you mentioned. But there's a lot of factors that go into that. I won't go into all the ones that we considered. But for starters, we've got a really nice runway before we need to refinance those large maturities. And we actively manage that and actively discuss with our advisors, including a whole host of financing opportunities. I can assure you that the renewal issue was not a concern for us. In fact, in some ways, as you know, we didn't choose to have this public spat, but the fact that we are actually caused us to put our disclosure out there, and I think a lot of investors and lenders, creditors, took comfort in seeing that disclosure. So I think it's actually probably the opposite of your speculation with respect to any concerns there. And look, longer term, going back to our prepared remarks at the end about our longer term trajectory in terms of the cash flow generating opportunities in the business, We just feel very confident about the balance sheet and liquidity and how that gives us a terrific runway to continue fueling the growth in the business.

All right. Great. Thanks, Kenny. Appreciate it. Thanks, Paul.

No problem.

Thank you.

And our next question comes from Simon Flannery with Morgan Stanley. Your line is now open.

Great. Thank you very much. Good morning. Paul, coming back to the fiber, perhaps you could just give us a sense of what the recurring revenue trends are. I think your model suggests it's pretty stable for this year, but any sense of how that looked this quarter? And I know that DISH has been a big part of your optimism for 23. What are you seeing from DISH right now? They gave us an update on their call yesterday about continuing to expand to 15,000 towers to hit their June 23 guidance. So is that starting to flow through to some of your markets, or is that more of a 23 factor? And then, Kenny, you talked about being patient with M&A. You've also talked about potentially exploring a separation to highlight the value of the non-windstream revenue and cash flow streams. Could you update us on your thoughts there? Thank you.

Sure, Simon. I'll get us started. In terms of recurring revenue, recurring revenue growth is really as expected and even a little bit better than expected. Recurring revenues came in a little bit above our projections for the second quarter, and part of that, as Kenny mentioned, was contribution from DISH. Not the only contribution to that, but DISH made a meaningful contribution to that. So we're continuing to expect the mid single digit growth and recurring revenue. Some pieces of it are growing even faster. Kenny mentioned our enterprise recurring revenue grew double digits, 11%, I think, year over year. So we're seeing nice growth in our recurring revenue business, which is really what we put on the majority of our focus on building over the long term. And as we look out into next year, like I said in my comments, we expect that same sort of growth to continue. So very pleased with that. You know, installs were the highest, you know, they've ever been in the second quarter. We had a record quarter both in the wireless part of our business and enterprise part of our business as well. So, you know, installs is an MRR, monthly recurring revenue number. So that's all about recurring revenue coming on to the business and churn continues to remain low. So the The outflow of recurring revenue out the back door continues to remain really low for the business industry leading, we think, in terms of our churn performance. We see nice trends there and we see those trends continuing.

Simon, on your last question, the reason we focused on developing a plan to separate our business is because we believe there's a conglomerate discount associated with our stock. It's weighed down by the wind stream part of our business. And so when you look at that and When we look at the trends in the industry, including in the last quarter and this year, they continue to reinforce that view. By that I mean when we look at private market multiples related to fiber-to-the-home businesses, those multiples continue to that view. By that I mean when we look at private market multiples related to fiber-to-the-home businesses, those multiples continue to improve and obviously our wind stream business is an important part of a fiber-to-the-home provider and so we're emboldened by the operating trends in the industry and the multiples associated with those businesses and feel that's another area where it's important for us to be smart and patient about unlocking that value. And with respect to commercial fiber, which is our bread and butter, that's the core part of our business, we've also seen those multiples elevate. There were a couple of private market transactions announced during the quarter where multiples were, EBITDA multiples were well north of 20 times EBITDA. In fact, approaching 30 times EBITDA. So we feel like that the markets, whether it be private or public, but mostly private, are putting the appropriate intrinsic valuations upon our piece parts. And so as a result, we believe it's important to be able to separate those assets and unlock that value for our shareholders in the event there is transformative M&A opportunities. And so I think maybe coming full circle to your question, we wouldn't separate our assets unless it were in the context of a transformative M&A transaction, or at least that's what we're contemplating today.

Great, thank you. And anything more on DISH over the next several quarters when you really expect that to start scaling?

Yeah, sorry we missed that one. Look, I think DISH was more active than we expected in the first half of the year, and a lot of that was to help them hit their first targeted date with the FCC. But candidly, most of the markets they were targeting were not Unity markets. I mean, they were more Tier 1 in nature, as you know, Simon. And we're generally more in the tier two-ish markets. And so now they're moving on to the second targeted date of mid-year next year. And we actually think there's going to be more. We know there are going to be more opportunities for us in our markets. And so as a result, we do think the second half of this year and probably the first half of next year in particular are going to be very busy. Great.

Thanks a lot.

You're welcome.

Thank you. I would now like to turn the conference back to Kenny Gunderman for closing remarks.

Thank you. We appreciate your interest in Unity Group and look forward to updating you further.

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