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Uniti Group Inc. (NASDAQ:UNIT)
Q2 2019 Earnings Call
Aug 8, 2019, 4:15 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the Uniti Group's Second Quarter 2019 Conference Call. My name is Alexander and I will be your operator for today. A webcast of this call will be available on the company's website www.uniti.com beginning August 8, 2019 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 afternoon 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 the 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 8-K dated today.

I would now like to turn the call over to Uniti Group's, Chief Executive Officer, Kenny Gunderman. Please go ahead Mr. Gunderman.

Kenny Gunderman -- Chief Executive Officer

Thank you. Good afternoon, everyone and thank you for joining. Despite the expected volatility of the Windstream bankruptcy proceedings all of our business segments continue to execute well on our operating priorities for the year, which is reflected in our solid results for the second quarter. We also continue to invest in our premier infrastructure assets, primarily through the build-out of fiber networks from macro backhaul towers and small cells as well as new tower builds as our wireless carriers are moving toward a broader rollout of 5G wireless services. With this expected closing of the Bluebird transaction later this year Uniti will have nearly six million strand miles of valuable owned fiber. A significant portion of that fiber uniquely positions both Uniti Fiber and Uniti Leasing to capture the increasing demand for wireless and non-wireless services.

At Uniti Fiber, we continue to execute on our strategy of replacing shorter-term lit wireless backhaul with longer-term contractual dark fiber and small cell revenue as well as leasing up our anchor wireless builds, primarily through non-wireless services such as enterprise E-Rate and government. This is reflected in our strong levels of bookings and installs in the second quarter, which I'll detail shortly. As a reminder, these lease-up opportunities drive attractive incremental cash flow yields at substantially less capex than our anchor wireless builds. We're also announcing today the sale of our US ground lease business, which I will cover in more detail later in the call. Similar to the recent sale of our Latin American tower portfolio, the sale of our US ground lease business recycles capital at attractive returns while also allowing Uniti to primarily focus on a strategy of building towers within US.

We currently have consolidated revenue remaining under contract of nearly $10 billion and excluding revenue relating to the Windstream lease, our total revenue under contract grew 15% from the prior year's second quarter, which included the TPx, CenturyLink and CableSouth transactions. Nearly 95% of our remaining revenue under contract relates to leasing, towers, dark fiber and small cells which have little to no churn associated with them and provide highly visible steady cash flows over the next 10 to 20 years. As a result, our company's monthly churn for the quarter remains less than 0.5% on par with some of the best operators within the communications infrastructure industry.

Let me now provide an update on our operational results. Uniti Fiber sales bookings in the second quarter were approximately $0.7 million of MRR, a $0.3 million sequential increase from the prior quarter. 85% of our sales bookings in the second quarter came from local enterprises, government, K-12 schools and wholesale and 15% from the four national wireless carriers. As I mentioned, on our last earnings call, we expect non-wireless bookings will continue to comprise a majority of our bookings going forward as we ramp-up the lease-up of our dark fiber and small cell networks that are nearing completion. A significant part of our non-wireless bookings in the second quarter came from E-Rate, representing over $0.2 million of MRR. As you recall, we had a successful E-Rate season this year retaining almost all of our existing E-Rate customers while adding several new customers including a large metropolitan school district in Florida.

On wireless bookings, we continue to see robust RFP activity for both small cells and backhaul from our wireless carriers as they continue to ramp-up the eventual broader rollout of 5G. Uniti Fiber installed $0.8 million of MRR during the second quarter of 2019, its highest level of install activity over the past six quarters. 48% of gross installs related to non-wireless opportunities, 36% related to wireless, with 23% of total gross installs coming from dark fiber backhaul and small cell projects, and 16% related to balance upgrades.

Total churn for the quarter was $0.5 million resulting in a monthly churn rate of 0.9% for Uniti Fiber, a sequential improvement of 10 basis points from the prior quarter. This connect churn was 0.8% for the quarter, primarily driven by lit backhaul and enterprise disconnects. We expect churn to be somewhat elevated in the third quarter due to increased rerate churn related to the renewal of several contracts, as well as churn related to numerous lit backhaul sites, that are expected to convert to dark fiber. Although, the dark fiber sites that are replacing the lit backhaul sites are installed at a lower MRR, the contract length of those dark fiber sites is approximately 20 years versus average remaining churn of approximately four years for the lit backhaul sites, resulting in a net increase of total remaining contract value. In the fourth quarter, we expect churn to return to more normalized levels.

Turning to towers, in the US, we now expect to complete the construction of approximately 240 towers in 2019. We continue to focus on leasing out more towers, with additional tenants. And we expect our lease-up activity on our US tower portfolio, to ramp throughout the remainder of 2019 and into 2020. Also we recently signed a long-term master lease agreement with another major national wireless carrier, to co-locate their equipment on our macro towers and small cell locations within the US. The initial term of this agreement will be 25 years. We now have MLAs in place with three of the four major wireless carriers, which reinforces our belief that wireless carriers continue to look to diversify their vendor relationships in the tower industry. And it further highlights the value of our multi-product infrastructure offering, including fiber small cells and macro towers.

In Uniti Leasing, we continue to pursue additional lease-up opportunities, that we utilize our existing fiber assets. While also pursuing additional value creative cell leaseback opportunities in OpCo-PropCo structures, similar to the previously announced Bluebird transaction. I'd like to reiterate that the economics of additional lease-up community leasing are very attractive, with near 100% margins. And little-to-no additional capex required. Given this attractive economic profile, we may deploy more capital into Uniti Leasing over time, than any of our other business segments.

Before I turn the call over to Mark, I'd to take a minute to comment on, the T-Mobile Sprint merger. Consistent with our previous comments, although, there is some overlap in our backlog between T-Mobile and Sprint. And there is also the potential for near-term cannibalization of some of our bookings and revenue. Overall, we view the potential merger as a long-term positive for Uniti, as the network investments of the combined company appear to be an increase over each company's investments as a stand-alone entity. The commitment by T-Mobile and Sprint to invest substantially, in rural broadband and in the rollout of 5G services, would be a great fit for our overall strategy and network. We also view the possibility of DISH, becoming a major facilities-based provider as a positive. And believe that Uniti is uniquely positioned to become a full-service infrastructure provider for DISH in the coming years.

With that, I will turn the call over to Mark.

Mark Wallace -- Executive Vice President, Chief Financial Officer and Treasurer

Thanks Kenny. Good afternoon, everyone. It was a busy second quarter for Uniti and I expect the pace of activity to accelerate for the balance of the year. During the quarter, we accomplished a number of key objectives.

First, we strengthened our balance sheet with the exchangeable note offering, and improved our debt maturity profile with a two-year extension of our revolver. Second, we closed in the sale of our Latin America tower business. And our US ground lease portfolio, adding $130 million to over liquidity. Third, we settled our Hurricane Michael insurance claim to Uniti Fiber, for over $12 million. And last, we continue to work through the Windstream bankruptcy process, with our stakeholder interest being our top priority. As importantly, our business units continue to perform well. And industry dynamics continued to be favorable. With that backdrop, I'll start with a review of our second quarter. And then discuss our updated guidance.

Turning to slide five, we reported consolidated revenues of $264 million which was up 7% from the same quarter in 2018. We achieved consolidated adjusted EBITDA, of $207 million, up 5% from the same period in the prior year. AFFO attributable to the common shares was $105 million. And AFFO per diluted common share was $0.55. Net income attributable to common shares for the quarter was $38 million or $0.20 per diluted share. Net income was impacted by a handful of items that did not affect AFFO, including one, $28.8 million of pre-tax gains on the sale of our Latin America tower portfolio and US ground lease business. Two, a $22.3 million gain on changes in fair value of contingent consideration and three transaction and integration-related costs of $7 million that partially offset these gains. Our diluted share calculations were also impacted this quarter by, a couple of items.

The accounting treatment for the exchangeable notes that we issued on June 28, and the conversion of the Series A preferred stock that occurred on July 2, increased our diluted common shares by approximately 10 million shares during the quarter, increasing our second quarter weighted average diluted shares outstanding to $193 million. While our diluted common share information reflects the required if-converted method of accounting for exchangeable notes and Series A, preferred stock I would emphasize that the exchangeable notes contain significant settlement optionality for Uniti. In fact, structuring flexibility was an important consideration in our decision to access the capital markets. And I'll touch more on this topic later in my remarks.

Starting with Uniti Leasing. For the second quarter, our leasing segment revenues were $177 million with adjusted EBITDA of $176 million. Non-Windstream revenues and adjusted EBITDA were $5.3 million and $4.6 million, respectively and should continue to represent a growing share of Uniti Leasing's revenues over the next several years. Our sales funnel at Uniti Leasing remains well diversified with opportunities from international, domestic and regional carriers as well as cable and content providers. Our current Uniti Leasing sales funnel represents approximately $18 million of annual revenue and $350 million of total contract value. During the second quarter, Windstream made approximately $50 million of improvements to our network with our capital bringing the cumulative amount since our spin-off to just under $690 million of tenant capital improvements.

Moving now to our Fiber business. During the quarter, we turned over approximately 340 dark fiber and small cell sites across multiple markets for wireless carriers adding annualized revenues of over $2.2 million during the quarter. Uniti Fiber Net success-based capex was $50 million in the second quarter. We also incurred $4 million of integration capex related principally to our off-net savings initiatives. Integration capex was higher in the second quarter than we expected as a portion of the integration capex that we anticipated to be incurred later in the year was pulled forward. Maintenance capex for the quarter was approximately $2 million or about 2% of revenues. Uniti Fiber reported revenues of $81 million and adjusted EBITDA of $37 million achieving adjusted EBITDA margins of 46% for the quarter. Excluding $5.8 million of income related to Hurricane Michael insurance recoveries, adjusted EBITDA margins were approximately 38% consistent with our prior expectations.

Uniti Towers reported revenues of $3.1 million and near break-even adjusted EBITDA for the second quarter. These results reflect the impact of the sale of our Latin American operations, which were sold on April 2 and the sale of our ground lease business, which was sold in late May. Towers CapEx was approximately $31 million during the second quarter. We completed the construction of 69 towers during the quarter about 11 more than previously expected due to increased development activity with our anchor tenant. Over the first six months of 2019 we've completed 143 towers in the US bringing our completed and in-service tower count at quarter end to 573 towers. We currently have approximately 225 additional towers in various stages of development.

Turning now to corporate items. During the second quarter, we issued $345 million principal amount of 4% exchangeable senior notes which will be matured on June 15 2024. The initial exchange process of the exchangeable notes is approximately $12.43 per share representing a premium of 32.5% to the closing price of our common stock on the sale of pricing. The exchangeable notes are exchangeable into cash, shares of common stock or a combination of both at our election. In connection with the offering, Uniti also entered into a series of previously announced hedging transaction that effectively increased the conversion price to approximately $60.42.

With regard to the accounting treatment for the exchangeable notes, we will require to reflect the fully diluted impact of the exchangeable notes in the presentation of earnings, FFO and AFFO per diluted shares as if the exchangeable notes had been converted into common shares on the date of issuance. Currently, certain restrictions under the fourth amendment to our credit agreement preclude us from cash settling the exchangeable notes. Once certain conditions are satisfied these restrictions will no longer be applicable and Uniti may at its option irrevocably elect to settle the paramount of the exchangeable notes in cash. In that circumstance, we may no longer be required to account for the diluted impact of the common shares outstanding in the presentation of our per diluted share metrics in future periods. As previously announced, we also entered into an amendment to our credit agreement that extended the maturity date of $575.9 million of commitment by two years to April 24 2022. As part of that transaction our LIBOR borrowing cost under our revolving credit agreement increased 200 basis points. A portion of the net proceeds from the exchangeable notes were used to repay outstanding borrowers under our revolver and to pay the cost of the hedge transactions.

Please turn to slide six and I'll now cover our current 2019 outlook. Our updated outlook for 2019 revises our prior guidance primarily for the following items; the sale of the US ground lease business, incremental interest expense relating to the exchangeable notes offering and amendment of our revolving credit facility; the dilutive impact from the accounting treatment of our exchangeable notes; and Series A preferred stock transaction costs and other income reported during the first half of the year and other business unit level revisions. Our outlook includes the effect of Bluebird transaction, which is expected to close near the end of the third quarter. As a reminder, this transaction includes a 20-year initial term master lease with an initial cash yield of 9.6% and over $20 million in annual cash rent. Our outlook excludes any future acquisitions, capital market transactions and future transactions and integration costs, except for those specifically mentioned. Our current outlook anticipates that Windstream continues to make timely payments of all rent under our master lease. Our outlook is subject to adjustment based on events arising at Windstream reorganization proceedings, the timing and closing of acquisitions, any future capital market transactions, market conditions, finalization of purchase price allocations related to acquisitions and other factors. Actual results could differ materially from these forward-looking statements. A reconciliation of our current outlook to our prior guidance is included in the presentation materials posted on our website today. Our current full-year outlook includes the following items for each segment. Starting with Uniti Leasing, we now expect Uniti Leasing 2019 revenues and adjusted EBITDA to be $714 million and $708 million respectively at the midpoint. This is approximately $1 million increase from our prior guidance due to incremental TCI revenue.

Moving to slide seven, we expect Uniti Fiber to contribute $334 million of revenue, $133 million of adjusted EBITDA and achieve adjusted EBITDA margins of about 40% for the full year at the midpoint of our outlook. Revenue at Uniti Fiber is approximately $3 million lower than our prior guidance, primarily due to the lower than expected services sales at ITS, as well as the timing of lower margin construction and equipment sale revenue. Adjusted EBITDA is approximately $5 million higher than our prior guidance due to the Hurricane Michael insurance recoveries, partially offset by the margin effect of lower revenues. Excluding insurance recoveries, adjusted EBITDA margins are expected to be approximately 38% for the full-year consistent with our prior outlook.

As previously mentioned, our guidance reflects the sale of our Uniti Fiber Midwest operations as part of the Bluebird transactions. We now expect our net success-based capex for Uniti Fiber for 2019 to be about $140 million at the midpoint, of which about 30% will be directed toward the dark fiber and small cell projects. Of the seven dark fiber projects and seven small cell projects currently under construction, we still expect all of these to be completed by year-end, except for two dark fiber projects and one small cell project that should finish in 2020. Upon completion, these 14 projects are projected to consume $38 million in net capital in 2019 and $29 million in 2020. In aggregate upon completion, we expect these projects to have an initial anchor cash yield of approximately 6%. We expect Uniti Fiber's net success-based capital to be about 42% for 2019, and then trend toward the mid-30% range by the end of next year. We also expect integration and maintenance capex for 2019 of $13 million and $8 million respectively.

Turning to slide eight. As I mentioned earlier, we closed on the sale of substantially all of our US ground leases on May 23 and the results reflected in our 2019 guidance up to that date. The impact of our revenue guidance for the remainder of the year from the sale of the ground lease portfolio was approximately $1 million, which is offset by higher revenue with increased tower development activity in the second half of the year. For 2019, we expect tower revenues to be about $15 million with reported adjusted EBITDA of $1 million in 2019. We now expect Uniti Towers to complete the construction of 240 towers this year, with capital expenditures forecast to range from $95 million to $105 million that will result in Uniti Towers having approximately 670 completed towers at year-end. Our outlook range for capital expenditures increased $35 million from our prior guidance, due to the expected increase in tower development activity.

Turning to slide nine. For 2019, we now expect full year AFFO to range between $2.08 and $2.13 per diluted common share with a midpoint of $2.10 per diluted share. On a consolidated basis, we expect revenues to be nearly $1.1 billion and adjusted EBITDA to be $819 million at the midpoint. We expect weighted average diluted common shares outstanding for the full year 2019 to be approximately 201 million shares, up about 10% from our prior guidance. Of the approximately 18 million share increase over our prior outlook, 4 million shares relates to the weighted average impact of issuing 9 million shares of common stock on July 2 for conversion of the Series A preferred stock and 40 million shares relates to the accounting for the exchangeable notes, which were issued on June 28 using the if-converted method of accounting. As a reminder, our guidance ranges for key components of our current outlook are included in the Appendix to our presentation today.

On slide 10, we have provided a tabular reconciliation of our prior guidance to our current updated 2019 outlook, which summarizes some of my comments this afternoon.

Turning now to our balance sheet. At quarter end, we had approximately $300 million of combined unrestricted cash and cash equivalents. Our leverage ratio under our debt agreements at the end of the second quarter stood at six times based on net debt to annualized adjusted EBITDA. On August 6, our Board had cleared dividend of $0.05 per share to stockholders of record on September 30 payable October 15. The level of dividends continues to be substantially less than the amount permitted under our credit agreement. For 2019, our estimated allowable dividends attributable to our capital stock is just over $180 million including the dividends paid in January, April and July of this year. Over the next two quarters, such allowable dividends are estimated to be approximately $53 million or about $0.27 per common share under our credit agreement. We continue to expect our Board will reconsider our dividend policies as key development in Windstream's reorganization process occur and in context of our longer-term business strategy and financial profile.

With that, I'll now turn the call back to Kenny.

Kenny Gunderman -- Chief Executive Officer

Thanks, Mark. Turning to slide 12. We sold our ground lease business to wireless infrastructure fund for approximately $34 million or 18 times annualized run rate cash flow. The portfolio consists of 64 ground leases located across the US. Not only did this transaction realize value for our stockholders, it also allows Uniti to focus solely on the development of our US tower portfolio, which continues to be a significant part of our overall strategy to provide a full suite of solutions to our wireless and non-wireless customers. I'm also pleased that this is the third example of Uniti recycling capital and locking in attractive returns for our stockholders including the sale of our Latin American tower portfolio and the sale of Uniti Fiber's Midwest operations as part of the Bluebird OpCo-PropCo transaction.

Before turning the call over to Q&A, I'd like to provide a brief update on Windstream. We are encouraged by the continued efforts by both parties to reach a mutually beneficial outcome regarding the master lease. In fact, we've agreed to mediation with Windstream and in order to further facilitate productive discussions among all parties, we've also agreed to an extension of the assumption deadline for the master lease through December 6, 2019. Windstream has in exchange provided certain assurances regarding the continued payment of rent pursuant to the master lease during the extension period and beyond. To be clear, we did not agree to mediation nor the extension because our view of Windstream's and its creditor's claims has changed. In fact, we continue to believe those claims are not meritorious and encourage interested parties to review our filings with the bankruptcy code to understand the strength of our position. If we're unable to reach a mutually beneficial outcome in mediation, we are prepared to vigorously defend our network and our rights. With that said, during the extension period both Uniti and Windstream have agreed not to make any further public comments regarding the mediation process or on any motions that have been brought forth in the bankruptcy proceeding so far except were required by law. Therefore, we will be limited in answering any questions on the call today relating to Windstream.

Operator, we are now ready to take questions.

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Frank Louthan from Raymond James. Your line is now open.

Frank Louthan -- Raymond James Financial Inc. -- Analyst

Great. Thank you. Can you give us a little more bit color on the ground leases? What was sort of the nature of those leases? And are any of them under -- your towers are still connected with any other assets that you own?

Kenny Gunderman -- Chief Executive Officer

Hey, Frank, it's Kenny. So in reverse order, no. None of these ground leases were under our existing towers which is actually part of the rationale for signing to sell them. But secondly, it's really -- it's just leases that we have accumulated back in 2016 and 2017 all over the country. We had a program to go out and accumulate these believing they were good long-term investments. But ultimately, as we got deeper into the tower business and have numerous opportunities to deploy capital there, we just decided to allocate capital more toward towers versus the ground leases, because we believe that's a better long-term investment for the company. So that's why we decided to sell them.

Frank Louthan -- Raymond James Financial Inc. -- Analyst

Okay. And any other assets like that that you might consider consolidated solds and telephone poles for a nice price? Do you have any of those assets that you bid is something like that you might be able to monetize as well?

Kenny Gunderman -- Chief Executive Officer

So Frank, we have a tremendous portfolio of assets that I think would garner premium multiples, if we decided to monetize them including poles for example. But at this time we don't have anything to comment on publicly with respect to that.

Frank Louthan -- Raymond James Financial Inc. -- Analyst

Okay. And I appreciate you probably can't comment but has a date set for the mediation and what are sort of the steps that need to happen before you get to there?

Kenny Gunderman -- Chief Executive Officer

Frank, I'd love to comment on that but I'll just refer back to our prepared remarks on Windstream-related questions.

Frank Louthan -- Raymond James Financial Inc. -- Analyst

You can't blame me for asking. All right. Thanks.

Operator

Your next question comes from the line of Philip Cusick from JPMorgan. Your line is now open.

Philip Cusick -- JPMorgan -- Analyst

Hey guys, thank you. Kenny, your MLA on the tower side does that contain a minimum number of towers or is there standard agreement for pricing across your sites?

Kenny Gunderman -- Chief Executive Officer

Hi, Phil, it's Kenny. It's more of the latter. There are no commitments from the customers' perspective, nor from ours in terms of volume. So it's really more pricing related and other important terms.

Philip Cusick -- JPMorgan -- Analyst

And do you have any data you can share with us on lease-up at this point?

Kenny Gunderman -- Chief Executive Officer

Not yet on towers. Obviously, we track it very, very closely. It's obviously a critically important part of the returns for that portfolio. But what I can tell you is that, it's tracking in line with what we expected when we underwrote that business. So we're pleased with it. And I think in the near-term we'll be providing more color on lease-up.

Philip Cusick -- JPMorgan -- Analyst

Last thing, can you just give us the sort of same-store sales growth averaging only a year ago? What might revenue have grown year-over-year? Thanks again.

Mark Wallace -- Executive Vice President, Chief Financial Officer and Treasurer

So we've added probably about $0.5 million of revenue to those towers but as Kenny said we'll try to give you some more metrics on lease-up because we really need to split it out to make a meaningful kind of value vintage here. And so we'll try to do that in future. We're actually working on some of those metrics now.

Philip Cusick -- JPMorgan -- Analyst

Thanks, again.

Mark Wallace -- Executive Vice President, Chief Financial Officer and Treasurer

You bet.

Operator

Your next question comes from the line of David Barden from Bank of America. Your line is now open.

David Barden -- Bank of America Merrill Lynch -- Analyst

Hey, guys. Thanks for taking the question. I guess I have kind of three questions. In terms of the mediation like how does that look different than the kind of arm's length negotiation that you have engaged in arguably presumably talking about meeting the Windstream for a year or talking about mutually beneficial outcomes in? Is there any color you can give us at all about why mediation looks different than anything that you've done to this point in time?

I guess the second question would be could you elaborate a little bit on any relationship that you've already established with DISH to this point in time and what that could look like? And I guess, the third question would be we saw Crown downgrade their growth expectations because of the municipal approvals process being an impediment to their growth rate. Could you talk about kind of what your experience is or has been or if there is a difference between kind of the second and third tier markets that you're involved in versus the kind of major metros that they been involved in? Thanks.

Kenny Gunderman -- Chief Executive Officer

Sure. David, it's Kenny. I'll try to take each of those and Mark will keep me honest. But first on mediation, yes, unfortunately I can't comment beyond what we've said in our prepared remarks other than to say we're not surprised by this outcome. So it was not something that we hadn't expected with respect to mediation.

With respect to DISH, yeah, not a lot to say other than we've been working on that relationship. We don't currently do a lot of business with DISH just given the nature of their business. But we have been engaged in conversations for some time and we really believe given what they're trying to do what they talked about publicly and what we know otherwise about what they would like to do. There's a great opportunity for us to really help them with respect to not only backhaul but macro towers and potentially small cells and including potentially some of the potential decommission sites as part of the Sprint and T-Mobile merger. So more to come on that, we prefer not to get deeply into that.

With respect to permitting in some of the issues there, what I'd say with respect to our tier two and three markets we continue to be very, very pleased with the competitive dynamics in those markets with the growth potential there I think you continue to see the growth in bookings. We're very pleased with the continued growth in the non-wireless bookings in particular, which is indicative of the lease-up of our networks. So that's very good. Our churn rates continue to be low if not below market churn. So we're very pleased by that. And all of that to say, the real governor on growth for us is in fact installs and so we're very focused on growing installs and there are portions of installs -- or certain elements of installs like permitting and weather the labor market and other things that are outside of our control that are impacting us. And so long way to answering your question directly David. We do see permitting issues and it's really a market-by-market analysis in markets where we're going in for the first time where small cells may not have been to fully previously, for example, we tend to see longer delays. But if it's in existing market one that we've been in for many years or one that we've been in for even two or three years, we don't see delays at all. So it's hard to generalize other than to say, we do see permitting issues as one of the issues that factor in to our installs going forward.

David Barden -- Bank of America Merrill Lynch -- Analyst

Thank you for that. And if I can ask one follow-up would be, obviously, the cap two exploration coming up has become a topic all of a sudden in this space. As you look at the NPR and the SEC put out just the other day, do you see opportunities for UNIT in that space or is that separately distinct from your goals?

Kenny Gunderman -- Chief Executive Officer

Yeah. David we're actually looking at that closely not only because it impacts our customers, but we're also looking at it. We've had a number of our customers approach us about potentially finding ways to do joint bills using some of their funding. So there are some opportunities. It's too early for me to elaborate on it, because I'm not sure if they'll materialize or not. We're looking at it from both angles.

David Barden -- Bank of America Merrill Lynch -- Analyst

Okay. Great. Thanks guys.

Operator

Your next question comes from the line of Michael Rollins from Citi. Your line is now open.

Michael Rollins -- Citigroup -- Analyst

Thanks for taking the question. Curious if you could help frame within the Fiber business, the revenue growth that you're getting relative to the capital required? In other words, you didn't spend a success-based capex on slide eight. What would revenue growth look like in the absence of that? And how do we think about the relationships over the next couple of years between the capital and the revenue growth? Thanks.

Kenny Gunderman -- Chief Executive Officer

Yeah. So Michael let me try to answer your question this way. I probably don't have the exact math that you're asking for here with me. But what we said is that we expect the business to grow in the 8% to 12% range long-term. We've been a little bit below that in the first half of this year, but as Kenny mentioned in his prepared remarks, the install rates which are a big focus of what we're currently -- are big focus right now we had the best install rate in the last six quarters. So we expect that to improve over the balance of the year. We've always said that churn replacement capex, there is a component of that that we don't break out, but that's probably somewhat equal to maintenance capex so on top of the maintenance capex numbers that we report.

And then in terms of the cap potentially what we have consistently said is that as you know the dark fiber projects, as I said in my remarks will come on at an anchor yield of about 6%. We expect to working out to lease-up and had been working to lease-up those builds as they come on and we'll have more to report on that as we go into next year. But generally those anchor builds, we'll underwrite those to somewhere in the double-digit range in terms of what we expect the yields to be as we add on multiple tenants. So I'm sure that as I said I think you're asking a little bit more quantitative, but qualitatively I think directionally that's the answer to your question.

Michael Rollins -- Citigroup -- Analyst

That's helpful. And you mentioned a 6% upfront yield. How does yield has been trending? And do you see them at some point turning up where whether because you have fiber that certain companies need or certain routes that are really in demand that you could try to improve the upfront yields on the capital over-time?

Mark Wallace -- Executive Vice President, Chief Financial Officer and Treasurer

So in terms of the yields on new projects, I would say that the yields or new projects are really very specific depending on the carrier and the particular project that we're working on. Obviously, the yields are dependent on a lot on both pricing as well as the NRCs that we're able to negotiate as well, and so I'd say that -- but I would say from the ranges that we gave in our presentations, no real change from those yields on new projects. And I think I don't really have anything to add in terms of the lease-up on the existing projects that we're completing or any new projects. I think, again, we always underwrite those to about the double-digit return range that I expressed previously.

Michael Rollins -- Citigroup -- Analyst

Thanks.

Mark Wallace -- Executive Vice President, Chief Financial Officer and Treasurer

Sure.

Kenny Gunderman -- Chief Executive Officer

Your next question comes from the line of Simon Flannery from Morgan Stanley. Your line is now open.

Simon Flannery -- Morgan Stanley -- Analyst

Thanks a lot. Good evening. I've just a couple of housekeeping. If you could just clarify on Hurricane, Michael, I thought one point you said $12 million and then $5.8 million in the number. So is it just the $5.8 million? And does that hit revenues at all or just an EBITDA? And then Kenny I think you said at one point that you would be more focused perhaps on sale and leaseback type transactions more on the leasing area. Is that to say that you probably won't be doing many more fiber deals that you're really going to be growing that business organically and that the kind of acquisition M&As really pivoting? And if that's right, just what's the driving force behind that? Thanks.

Mark Wallace -- Executive Vice President, Chief Financial Officer and Treasurer

Yes. Simon, this is Mark. Thanks for calling in. I'll take your first question on Hurricane Michael I did say both numbers. So the $12 million was the cash settlement that we received from insurance carriers and then the $5.8 million was the gain associated with receiving those proceeds. So it's a gain related to what we have previously booked on the recovery -- has estimated for recovery. And so on the $5.8 million gain that is included in Uniti Fiber adjusted EBITDA and I give you those numbers in the adjusted margins Uniti Fiber both with and without but it is included in adjusted EBITDA the gain is not included in any revenue numbers.

Simon Flannery -- Morgan Stanley -- Analyst

Great. Thanks. That's helpful.

Kenny Gunderman -- Chief Executive Officer

Hey Simon, it's Kenny. So respect to your second question you're right, we are very focused on new sale leasebacks and business in Uniti Leasing. And so that has been the focus will be the focus. So that's really new sale leasebacks that's new OpCo-PropCo opportunities are on assets that we currently don't own or just buying assets outright. So there's a lot of opportunities there in addition to of course leasing up our existing portfolio of assets. But within Uniti Fiber we do continue to plan to do acquisitions there. I think it's probably going to be more bolt-on in nature. The first four acquisitions that we have done were all generally larger transactions that were purposely done to build up our portfolio company. So I think in future deals there will probably be smaller bolt-on types but also we might look at OpCo-PropCo opportunities using some of the Uniti Fiber assets like we did with the Bluebird transaction. So one of the real advantages of Uniti Fiber is that it brings optionality to us in strategic ways and the Bluebird transaction to [Indecipherable] included the operations of our Midwestern assets from Uniti Fiber and I think that made that transaction a much more attractive transaction for both us and our financial partners. So there's a lot of optionality and benefits that Uniti Fiber brings in addition to just acquisitions.

Simon Flannery -- Morgan Stanley -- Analyst

Okay. And do you think that you can do these transactions while the settlement or the resolution with Windstream is pending or is this more kind of happiest conversation but the counter-parties probably want to see clarity on that?

Kenny Gunderman -- Chief Executive Officer

Yes. It's hard to say. I mean we've done one this year during the filing I think a smaller one earlier this year. We've got others in the funnel that we might execute on. So it's probably a question of liquidity and how sizable the transaction we want to do just given the volatility in the cost of capital. So that's top of mind. With respect to counterparties and their willingness to transact, we haven't seen any of our opportunities fall out of the funnel. But having said all that Simon with the volatility and some of the -- just rhetoric and uncertainty around the process, I think you'll see a pickup in activity once the bankruptcy is behind us.

Simon Flannery -- Morgan Stanley -- Analyst

Great. Thanks a lot.

Operator

I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Gunderman. Please continue.

Kenny Gunderman -- Chief Executive Officer

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

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

Kenny Gunderman -- Chief Executive Officer

Mark Wallace -- Executive Vice President, Chief Financial Officer and Treasurer

Frank Louthan -- Raymond James Financial Inc. -- Analyst

Philip Cusick -- JPMorgan -- Analyst

David Barden -- Bank of America Merrill Lynch -- Analyst

Michael Rollins -- Citigroup -- Analyst

Simon Flannery -- Morgan Stanley -- Analyst

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