Thaddeus Weed: It’s not in CapEx, it’s in principle payments, because it is a lease payment. It is not a CapEx payment.
Walter Piecyk: Got it. Now I understand. So whenever I do this for the telcos, telcos always like to try and exclude that from CapEx, I consider that CapEx. So that’s fine. But bottom line as you moved it, you helped EBITDA and you moved it onto the cash flow statement, fine. Is that a recurring $12.5 million? Is that like how do we look at that number, because obviously free cash flow is ultimately everything that matters?
Thaddeus Weed: Right. Yeah, that’s the change in the accounting. So it will continue until the lease expires.
Dave Schaeffer: And as we indicated, in the appraisal for the acquired assets, there was approximately $150 million of uneconomic lease obligations that reduced the appraised value to get to the $1 billion value for the network. And the majority of that was associated with this lease. And this lease, in fact, met all of the criteria to be treated as a financing or a capital lease as opposed to an operating lease. This was just a correction, but it will continue until that lease expires.
Walter Piecyk: But the capital lease principal payment, I guess, is how you’re calling it, was $41 million. So of that $41 million, only $12 million was moved out of OpEx helping your EBITDA. Is that, do I have that right?
Thaddeus Weed: Yeah, that about right.
Dave Schaeffer: That’s correct.
Walter Piecyk: Okay. So what was the other, because last quarter was $8 million. So what are the other $30 million or $25 million payments that are capital leased? And is that an ongoing payment that’s going to pinch your free cash flow?
Dave Schaeffer: So we have a total of 315 different suppliers and over 3,000 unique IRUs. Those IRUs fluctuate, some are paid annually, some are paid quarterly, some are paid monthly, some are paid upfront. And you can go back and look at the principal payment on capital lease run rate that we’ve had and see a fair amount of sequential volatility based on the existing [ph] quarter or annual, but you can take the annualized rate and extrapolate that and add this additional $12 million a quarter and that would get you to a…
Walter Piecyk: So what is the annual rate? Because legacy obviously didn’t include Sprint. So if I’m adding $12 million, what is the legacy? Because I look at 2022 and you had $45 million. So you’re saying that it’s basically going to be $50 million.
Thaddeus Weed: This is the only finance lease with the acquired business.
Dave Schaeffer: This is the only incremental lease.
Walter Piecyk: Got it.
Thaddeus Weed: Only finance.
Walter Piecyk: So we’re talking like $60 million on a go forward basis for what you call principal payments, what I call CapEx, but whatever you want to call, it impacts the free cash flow.
Dave Schaeffer: That’s correct.
Walter Piecyk: Got it. Awesome. Thank you, Dave.
Dave Schaeffer: Yeah.
Operator: Our next question comes from Tim Horan from Oppenheimer. Your line is now open.
Timothy Horan: Thanks a lot, guys. Dave, can you just level set where you think EBITDA margins will be 4 or 5 years from now? Also maybe where you think the wavelength revenue run rate will be at that time? And then just a clarification on your $20 million of sales of wavelength in the second quarter next year. Is that bookings or is that recognized revenue? I mean, will it take another quarter or two to recognize that revenue? Are you talking about actually sales bookings or you actually, when you use the word sales, [that revenue will cost?] [ph] Thanks.
Dave Schaeffer: We’re actually talking about revenue run rate recognized installed revenue. And, again, to be clear, we anticipate this backlog that we have as well as additional sales to begin to install with shorter and shorter provisioning windows. But we expect to be doing about $20 million of reported, not bookings, but reported. And, the idea of presenting a backlog number is something, and a bookings number is something that we historically don’t do and probably will do for the next couple of quarters until investors see a consistent cadence in our growth and wavelength revenue. And at that point, we will only be reporting actual revenue, not pipeline and funnels and provisioning cues. But I think in the short-term, that’s necessary.
And then to go to answer your question around a 5-year target, and I’m going to use 5 years from closing, so May of 2023 to May of 2028. We anticipate being on a run rate for wavelength sales of approximately $500 million, and a total run rate for the combined business in excess of $1.5 billion, up from the [$1.1 billion of $1.1 billion, $51.2 million] [ph] that we’re running at right now, and EBITDA margins in the mid-30s. And that will be, well, actually, it’ll probably be a little bit above that, because we will still be getting a payment stream from T-Mobile, which will be counted, but will be going away probably by year 6.
Timothy Horan: Very helpful. And just the way to big market, can you give us just a little bit more color, what’s going on, do you think with the overall growth in that market and volumes and pricing and the competitive dynamics, now that you’ve had more time to be in that market?
