Uniti Group Inc. on Monday reported a second-quarter loss of $588.2 million as one of its largest customers emerges from bankruptcy.
The loss included a $650 million charge related to its settlement with Windstream, the telecommunications company that relies on Uniti's fiber network for operations.
Revenue was relatively flat during the three months that ended June 30. Results missed Wall Street's expectations.
Uniti had strong operations across its businesses, and effects from the coronavirus pandemic were minimal, said Kenny Gunderman, Uniti's president and chief executive officer.
"We remain focused on driving high-margin, low churn recurring revenue in both our Uniti Fiber and Uniti Leasing businesses, while de-emphasizing non-core businesses that do not fit our overall strategy," he said in a statement.
The company announced it was expanding a partnership with Macquarie Infrastructure Partners and had sold an ownership stake in the entity that controls Uniti's Midwest fiber network assets, known as "Propco," for $168 million.
Total revenue for the quarter was $266.8 million, with Uniti's fiber and leasing businesses contributing the most. Gunderman said Uniti continues to see good momentum in its leasing business and plans to lease up to 90% more fiber to third parties as part of the Windstream settlement.
The Uniti Leasing division posted revenue of $185.3 million, up from a year ago. Adjusted earnings increased to $182.8 million.
Uniti Fiber had revenue of $79.1 million, down from last year. Adjusted earnings declined to $28.5 million.
Uniti Towers reported revenue of $2.4 million, down from a year ago. Adjusted earnings increased to $85,000.
Analysts expected adjusted earnings of 50 cents per share, according to a Zacks consensus estimate. Instead, Uniti posted an adjusted profit of 44 cents per share, or $94 million. This excluded Windstream's settlement charge and other costs for the quarter.
Windstream spun off its fiber network in 2015, forming Uniti, and signed a lease to rent out the network. It sued Uniti over a $650 million annual rent agreement last summer, calling it too costly, after Windstream lost a legal battle with a New York hedge fund and sought bankruptcy protection.
After months of back-and-forth, Judge Robert Drain, of the U.S. Bankruptcy Court for the Southern District of New York, in June approved Windstream's settlement deal with Uniti over the lease dispute.
Uniti revised its 2020 outlook to $1.1 billion in revenue and a net loss of $599 million, considering recent transactions, business levels and court decisions. It had roughly $378 million in cash, equivalents and revolving credit at the quarter's end.
Uniti shares fell 38 cents, or 3.7%, to close Monday at $10.04. Share prices have been as high as $11.09 in the past year and as low as $4.86.