Uniti Group Inc Stock

Before we begin, disclosures are available at the registration desk. And for those of you I haven't met, I'm Mike Rollins and I cover communication services and infrastructure for Citi. Very pleased to welcome back Kenny Gunderman, CEO of Uniti. Kenny, thank you so much for joining us this morning.

It's a pleasure to be here, Michael. Thank you for having us, as always.

Well, it's great to see you. And as I think back, it's been what, like a year now since you closed the Windstream deal. Back then, you set out a very detailed set of objectives for Uniti. And I'm curious if you could give us an update on how you're progressing against your key milestones that you have established for the company.

Absolutely. We are about 1 month past our 1-year anniversary. So good memory, Michael, and I appreciate you holding us accountable to what we promised then versus what we've delivered on. We said at the time the merger would make us the premier insurgent fiber provider, which really to us meant that we were a large fiber provider where scale matters in the fiber business. And we have 250,000 route miles of fiber across the country and over 2 million fiber-to-the-home customers. And both of those are growing at a rapid clip. And so we think we've achieved the goal of achieving scale in the fiber business. But insurgent is important because we want to be small enough that we're nimble enough to continue to outmaneuver our larger competitors. That's very important to us in a highly competitive environment like fiber is.

We also promised to clean up the complicated capital structure and MLA relationship that existed between Uniti and Windstream and was a real deterrent on our cost of capital. So we promised to clean that up, collapse the debt silos. And as a result, our cost of capital has improved dramatically. Our cost of debt alone has improved 600 basis points. And so we think we've delivered on that.

We talked about removing the operational complexity of that MLA relationship and really untethering our teams towards growth. And we've not only done that, we've unlocked over $100 million of true operational synergies. So we've hit that goal. But we also talked about at the time, and this seemed a little bit fanciful at the time, but we talked about the real benefit of bringing together the Windstream wholesale business with the Uniti wholesale business and how that would position us really well to capture the hyperscaler and AI investment opportunity. And boy, we're really proven right on that one, and I can't wait to talk more about that today. So that's been a terrific success for us.

We talked about really ramping the build at Kinetic. So prior to the merger, Windstream had really slowed the fiber-to-the-home build, but we felt it was a strategic imperative to ramp that materially to get ahead of any overbuilders and just get ahead of the build cycle that we saw coming, and we're certainly in the middle of. So we've ramped that build materially. This last quarter, we built over 140,000 homes and we're now building 50,000 homes a month. So that run rate is exactly where we want to be.

And we talked about how the merger would put us on our front foot from an M&A perspective and how in the past, the 2 companies separately had been sort of reactive to M&A and it was challenging. But with the merger, we knew that it would put us on our front foot. And despite the -- our inability to talk about that publicly and the reality is we're making great progress there, too. So all that to say, I think we've delivered on what we promised, and we're continuing to execute every day. And I think over the next 12, 18, 24 months, you're going to continue to see terrific execution on our part.

Great. That gives us a lot to unpack this morning. So maybe just to start off, you mentioned we're going to see more over the next 18 to 24 months. So what are the key milestones that investors should be looking out for as you look out over that period?

Well, we -- first of all, it's very important to us to set goals that we either hit or exceed. So we give our guidance -- I talk about the vanity metrics of revenue and EBITDA. But we also talk about the less exciting metrics of homes passed and penetration and churn, bookings. And I think critically important will be that you continue to see us building 50 -- roughly 50,000 homes a month at Kinetic and we've been executing on that. And when you extrapolate that number, that gets you to 600,000 homes on an annual basis, which is well in excess of what we've guided towards. As you know, we've guided to 475,000 to 525,000 for the rest of the year. That's exactly where we want to be, a place where we can ramp the build engine higher if we want to. And so it becomes more of a capital allocation question than it is a build engine question.

Secondly, you continue to look for progression and improvement in penetration levels at Kinetic. We've stated 40% of our -- as our goal, terminal penetration goal, and we're currently at around 29%. So we're progressively tracking towards that, including when you look at our most recent cohorts, 1 year anniversary of those cohorts around 35%. So we're really doing extremely well there. We've talked about bringing down fiber churn to what we think could be, should be industry-leading levels. I've said many times, you can't sell your way out of a bad churn number and continue to believe that. So we're going to continue to focus on bringing churn down and continue to look at strong bookings from fiber infrastructure. So we just posted a record quarter of bookings, $2.2 million of MRR, which is, I think, 30% better than any previous quarter.

That number will ebb and flow as it does in a wholesale fiber business. But over a multi-quarter period of time, you should continue to see that number tick up as well as we continue to take our share of a growing -- substantially growing fiber infrastructure opportunity set.

And maybe just dig deeper on 2 of those quick things and then we'll come back to a higher level, starting backwards. So the $2.2 million of MRR, does that include or exclude some of these large fiber wholesale deals that you're winning and going after.

So it largely excludes those. So when we show a onetime revenue or EBITDA effect in a quarter, that is not picked up in bookings. So only MRR is what's shown in our bookings. That, however, we do show dark fiber in our bookings. So you do have some element of MAR in our bookings, but it's not the onetime revenue or EBITDA that we sometimes report. With that said, the hyperscalers only represented 10% of our bookings for that quarter -- for second quarter. So the $2.2 million, the hyperscalers actually represented a pretty small percentage of that number, which is part of what excites me about the quarter.

We had such a diversified mix of customers in the quarter, which we may get into later. But I know everyone likes to talk about the hyperscalers and we do too, but it was really only 10% of the total for the quarter.

Great. And then the other thing, you said 35% penetration. Is that in a single year, you're getting 35% penetration? Or is that over a few years, you're getting that in some of your markets already?

That's within 1 year of a cohort built less than a year ago. So that's -- that is very -- that's terrific penetration in a very short period of time in our most recent cohorts -- and even before that, Michael, as you know, our early cohorts were showing mid-20% penetration, which is also very good. But as part of the merger, we brought in a new leadership team at Kinetic with a true insurgent mentality, a share taker mentality, and we've really started to see the effects of that team as they've ramped in the past 6 months or so.

So maybe actually, we'll go a little out of the order that I was going to focus on. Just given the progress that you're making in both of these businesses, maybe we'll just spend a little bit more time on each of these and maybe just sticking with Kinetic for another couple of minutes.

So with Kinetic, you're doing really well. It sounds like with the penetration with the builds one of the things that we're seeing in the broadband market right now is that ARPUs for the category just seem to be softening a little bit. And the question is, for you guys as you look at what your performance is and what you're seeing in the industry, is this a function that like the consumers just having a tougher time to keep pushing price and mix of tiers of speed, is it just competition you guys wanted to get to your end destination more quickly. So there's a little more discounting along the way. What are you seeing? And what does this mean for pricing power in broadband over time.

Yes, great question and hugely important topic. And look, we came into the year expecting a competitive environment. And we thought really for 2 reasons. One, the wireless carriers especially AT&T and Verizon have been talking a lot about convergence. And really, what does that mean? Convergence means a lot of really great exciting things from a strategic point of view, but as an operator -- which I'm happy to talk about that, too. But as an operator, what it means is they're discounting their fiber-to-the-home product to pull in wireless, right? They've been very vocal about how that drives greater penetration for wireless and it drives lower churn, but it means lower fiber pricing, right? And I think you've also seen the big cable providers looking for a defensible line of retreat, right? They've been losing a lot of broadband subs over the past 12, 18 months.

And they're using creative promos, they're using creative giveaways and that also effectively results in lower broadband pricing. So we anticipated that. We didn't know exactly what the moves would be, but we anticipated that environment. And as a result, we've seen lower ARPU. So to your question, lower ARPU largely driven by competitive pressures and we've historically had a higher ARPU than most in the industry, as you know, Michael, and we sacrificed some of that ARPU in the first half of the year to retain customers. So we gave away some retention credits. We gave away some other things to save our base thinking that this competitive turmoil right now is temporary, and we really do think it is. So as we look at the second half of the year, I think we've already started to see some stabilization across some of the competitors. So we've seen some price ups from some of the folks I just mentioned, and we think that's going to continue to stabilize in the second half of the year.

For us, we've got an increasing amount of value-added services to sell. So we've just rolled out YouTube TV -- we've got always on Wi-Fi. We've got some more added features coming on the security side in particular. We also have less than 50% of our base that's taking 1 gig. So we've got a terrific upsell opportunity. And ultimately, very importantly, our team is now fully in place and functioning. So in the first half of the year, it really wasn't. We were still putting pieces in place, putting our systems in place. But in the second half of the year, we now have AI monitoring all of our calls incoming and out. So we've got the ability to refine our scripts. We've got the ability to refine our offerings. So back to the insurgent mentality, we have the ability to be a lot more nimble than our competitors.

So I do think it's going to continue to be competitive, and I think it's going to be competitive on price, but I think there's going to be an increasing stabilization in the industry, and we're going to have the ability to continue to be nimble and I hope out maneuver our competitors. I think very, very importantly, though, we also have a superior product. I mean we do have the superior broadband product, whether you're competing against cable or fixed wireless or LEO, and that gives us an advantage. And in our markets, as you know, Michael, they're less competitive. They're smaller. They're Tier 2, they're Tier 3. So we compete against big cable in less than 50% of our markets, and that's substantially less than most. And we don't compete against AT&T and Verizon at all on the wireline side. So we've got a really good competitive environment. We've got the right team in place. Now we have the right systems in place. So I feel really good about our ability to compete.

I mean that's one of the things that I remember just about historic Windstream, right? It's just that they're competing in these less populated areas, less competition. What about Starlink? What about -- what are you seeing from them as they're boosting broadband capacity? And do you think they'll move to more of a price-based approach? Are you seeing any evidence of that? And how do you compete against them?

So Starlink is a great customer of ours. So again, we're a wholesale fiber provider in addition to being a broadband -- residential broadband provider. So they're a terrific customer of ours. And so -- and I think they're going to continue to be a great customer and a growing customer over time. So we're a little bit hedged against that competitive threat, I'd say probably substantially hedged. We have definitely seen a leaning in from their perspective, leading up to and around their IPO. So from a promo perspective and from a pricing perspective, I'm sure that was designed, and we saw a little bit of that in the first half of the year, and we were public about that.

We also have a build plan, as you know, that's aggressive, and we're ramping it quickly. And that build plan is intentionally designed to build into markets where we have a competitive threat -- potential competitive threat from overbuilders, fiber overbuilders or from cable. So we're not -- our build today is not tooled towards competing against LEO. We're not viewing LEO or fixed wireless as a long-term competitive threat. So as a result, we're leaving our flank a little bit exposed, if you will, to those 2 products. So we're losing a little bit more to both of those than we are to fix than we are to cable or to fiber overbuilders. And I would take that trade-off all day long because as we move forward, when we do build fiber into these markets, we have the ability to take back share from LEO and take back share from fixed wireless because I do think as we've now gotten further and further from the IPO, you're starting to see more stabilization in how Starlink is approaching the market.

And it's an expensive product, right? It is more expensive than fiber. You do have to buy the equipment. So I think over time, we've got an ability to compete very effectively against LEO.

And then pivoting over to the fiber infrastructure business. So we were just talking earlier, so you have kind of these 2 components, this recurring MRR business, and in some of these larger hyperscale opportunities, can you frame the growth opportunities from each? And I know you have in your guidance, right, some expectations for significant bookings and flow through. I think on the earnings call, you may have mentioned some of that could actually maybe be early '27. So maybe give us an update on fiber growth, the wholesale opportunity and the timing.

Yes, I love this topic for, I'd say, maybe 2 years, maybe a little more than 2 years. We've been getting the question about what's the opportunity set for AI and the hyperscalers. What does it look like for you as a fiber company? And we've been struggling to estimate that. And so we've stopped trying. Our last stated estimate of the opportunity set for fiber companies from hyperscalers in the AI build is $20 billion for network providers, fiber network providers today. And we think -- and we stated that we got...

Is that national?

Yes, national across the U.S. And we stated that we thought that number could grow to $75 billion in 5 years. So pretty dramatic growth.

And I would say that number -- those estimates are probably well over a year old. And I would say they're conservative. And when you look at what we have stated publicly about our opportunity set, we said in '26 through '28, there would be a build cycle of building to large language model data centers. And we thought we could capture about $1.5 billion of that opportunity. And these are onetime revenue and EBITDA opportunities and we -- and that -- those are what we consider anchor customers, building new opportunities, new greenfield fiber in strategic locations around our network. So connecting markets where we have an existing presence, building off of those markets. And we think that's a terrific opportunity for us because the hyperscalers are looking to be in markets like Mobile, Alabama or Shreveport, Louisiana or Jackson, Mississippi or Little Rock, Arkansas, not New York City, right? So where we are, where our network is.

And so we felt very confident about achieving that. And then off of that $1.5 billion anchor build, we said we could get to $500 million of recurring revenue over a period of time. So that would be on top of that. So that's the MRR. Those are those mega waves packages that we started to talk about publicly. And we said that we're starting to see that sooner than we expected. So that's kind of the pull-in that you're referencing, Michael, that we now seeing 15-terabit wave packages and 20-terabit wave packages and on and on and on. And those waves packages are on top of those builds that we're executing on and that we expect to do over the next couple of years.

So when you put all that together, that math suggests a terrific upside opportunity for us, and it represents about 10% of the TAM that I described. And to me, there's no reason why that 10% shouldn't be 20%, right? Because we're competing against 2 or 3 other large wholesale fiber providers in the country and we do believe the hyperscalers like to go back to proven providers. And so when I consider that the TAM that I expressed appears to be conservative and seems to be growing each day that we appear to be executing on the pull-in, the lease-up sooner than expected and that our stated market share is roughly 10% when I think it could be higher. I just -- I feel like there's a lot of terrific opportunity there for us.

And just thinking about this out loud for a minute with you. So the $1.5 billion, if I remember correctly, that's contract value.

Correct.

That's over like 20 years. So it's really like if you broke that into like an MAR or just like an economic value, it'd be like $75 million a year. But the $500 million is a recurring opportunity. So the multiple opportunity on the incremental business seems much more significant than the initial. Curious if you could share some of the opportunities that are driving that multiple of difference between a hyperscaler, but then all of the businesses that you serve in these regions?

Yes. I think -- first of all, I think your math is directionally right. I think that $1.5 billion is -- it's close to contract value. It's really just the onetime revenue that associated with a dark fiber build, but then there is additional O&M associated with that over time that's not captured in that $1.5 billion. But as you know, the O&M is a smaller part. So it's...

It's margin.

It's terrific margin, and we love it, but it's -- it doesn't move the needle too much, but I just want to clarify that.

Your question directionally though is spot on, which is that $500 million of lease-up is substantially -- that's what we're working towards. The $1.5 billion build is good business, and we're building strategic network that 70%, 80% of that is funded through NRCs from the hyperscalers. We've stated that publicly too. So a large percentage of the build is funded by our customers. But what we -- and so we're -- that's a terrific business. We want to do more of it. But that $500 million of recurring revenue is the real play. And that $500 million, to be clear, is really just the AI-driven lease-up. So that's coming from the neo-clouds, the superscalers, the hyperscalers. That doesn't include the true inference opportunity that we see, which is all of us using AI on our iPhones and therefore, driving demand on small cells or towers or hopefully 3.5 million homes passed with fiber, not only needing 1 gig service, but now needing 2 gig service to provide AI to the home, which, by the way, blows LEO and fixed wireless out of the water, right, because they can't get anywhere near those speeds of those latencies.

So that opportunity is not captured in any of the numbers we've talked about. And I think that's one of the reasons that we're really excited about the next number of years of opportunity in our fiber business. And it's also why I love to see a diversified mix of customers in our bookings at fiber because 10% hyperscalers, 20% neo-cloud, 20% superscalers, the other 50% is wireless carriers, and it's fiber-to-the-home providers and it's international ISPs that are driving demand that they see coming across their fiber-to-the-home footprint or their wireless footprint. And I think all of that is just going to ramp in the coming years.

So 1 more question on this, and then we're going to get into the asset conversation. So your returns. So you've been describing very healthy returns or marginal returns on these fiber deals that you're getting -- some of your competitors, especially for the initial business have had significantly lower returns. It's not unusual mid- to upper single-digit returns on the initial deal, just to get the anchor and then everything else could be much better incrementally. What's driving your success with marginal returns? And is it sustainable to -- as you're going after that $1.5 billion initial set from the hyperscalers?

Yes. I think -- I can't comment on our competitors too much. I could, but I won't. Look, for us, our playbook in the past has always been the target 5% to 10% anchor yields, cash flow yields and then grow those with lease-up beyond that. And so prior to the AI build cycle, we -- and we've stated each quarter what those -- what our metrics are and our actuals. And prior to the AI build, we were at 6% anchor yields, so right in that range, and our blended lease-up yields, inclusive of anchor, were at 37%. So 37% cash flow yields on our pre-AI build model. We applied that same discipline to the AI build cycle.

And as a result, we knew there were going to be deals that we wouldn't pursue or we wouldn't take on because they didn't fit within the parameters. But what we have accepted are deals that are actually contiguous to our existing network. And we've actually stated that 80% of our hyperscaler builds have actually been either connected to or on existing infrastructure. So that means only 20% of the builds have been like true greenfields. And I think that, in and of itself, is the answer to your question. But if you start to unpack that, we also estimated initially that roughly 70% of those builds would be funded through NRCs. That number has been tracking higher, and I think it's going to continue to track higher, which means those anchor yields are well in excess of that 5% to 10% range. They're -- to the point where we don't even report the yields on those deals because they're not measurable, we're reporting the IRRs on those deals, which our anchor IRRs are at over 20% on the anchor deals.

And inclusive of lease-up on top of those anchor deals, we're now showing close to 35% IRRs on a blended basis. But I think ultimately, the real answer to your question, Michael, is we're not pursuing builds that are not contiguous to our network. We're pursuing builds that are in or around our network. And as I mentioned earlier, we just happen to have network in the right places. We have network over the years that we've built in Tier 2 and Tier 3 markets in the Southeast. So Texas, Louisiana, Mississippi, Arkansas, these are markets where the hyperscalers want to be, and we're building off of pre-existing network which really gives us a cost advantage and speed to build advantage.

Great. In terms of the assets, so you've got 3 businesses that arguably could go their separate ways over time. And you have some noncore assets. What's happening in terms of the explorations of trying to find the best homes and the best value for all of your assets?

Yes, we were very candid when we announced the merger and since then about our willingness and ability to pursue M&A with -- on our front foot, struggling with that metaphor. And we've done that. We set up our businesses to be modular. So fiber infrastructure, Uniti Solutions and Kinetic really through that lens to be able to pursue M&A strategically. And I would say that was the right decision. And I won't update any further than that on the broader strategic conversation. But I would just say that was the right decision. I feel very -- I'm very pleased with the progress we've made there.

We've also talked about noncore asset sales of $500 million to $1 billion. And these are just assets that are generating very little EBITDA, or if any, EBITDA that are within the portfolio. This is like spectrum assets that are not being used. This is -- these are fiber assets that are not contiguous to the core network, for example, that may be in regions of the country that are never going to be core to our business. These may be assets that are corporate real estate, for example, Kinetic is an old ILEC at its core. And so there's just thousands of square feet of real estate around the country or acres of real estate around the country that's monetizable. And there's operational real estate that's monetizable.

So when you start to -- and then there's also probably markets at Kinetic and other places where we have assets, but we're not going to build fiber anytime soon. So when you think about those assets, there's $0.5 billion to $1 billion of opportunity for us to monetize those to help us fund our build with little to no impact on EBITDA. And we're making terrific progress on that. We told folks that to expect a 12- to 36-month period of time to see some monetizations. As I've been reminding people recently, we're not yet at that 12-month period. So we said that at the beginning of the year that the 12-month period would start in March of '27, and I'm confident that by then and certainly after, you'll start to see some announcements there.

So these are things for '27, '28...

Correct.

Not for '26.

I don't want to be too definitive about time lines, but just think about it over that 12- to 36-month period of time.

So maybe just a speed round on this for just a moment because we only have a couple of minutes left. So with your Kinetic assets, is there any concern from private equity and possible buyers of those types of assets -- is there any pause or paralysis of people figuring out fixed wireless, Starlink that all these developments in the last couple of years is just freezing a little bit of that market relative to the converged strategics who, I think, clearly have a different perspective of how they're leveraging, as you mentioned earlier, fiber for their mobile business.

Yes. It's a great question, and I can't put myself into the head of everyone or others. But to speculate a little bit, I think certainly no paralysis but I think pause is a fair word. I don't think that the industry -- and when I talk to other operators in the space and when I hear them speak publicly about Starlink, the reality is Starlink is a good product, but it's always been a good product. And just because they went public doesn't mean they're more of a competitive threat. It just means all of you are more focused on it, and you should be. But when I look at our original model versus today, our competitive threat to LEO is about what we thought it would be.

And our competitive threat to fixed wireless is probably higher. But our number of overbuilders coming into our market is also less. And so I would take that trade-off all day long. I think LEO is going to continue to be something that we have to respond to each quarter because you now have them speaking publicly each quarter. But I don't think the overarching competitive threat is any different. And if anything, I think it actually puts more value on fiber-to-the-home because that's one product that is indisputably better than LEO. Fixed wireless, maybe not, cable, maybe not, mobile wireless, maybe not. But fiber is an indisputably better product. And ultimately, I think the conclusion from a strategic point of view is you need more of that, not less.

And then on fiber infrastructure, the public markets have had a tougher time valuing fiber infrastructure business models for the last several years. Are you seeing that as a contagion into the private markets?

I think that when investors look at our business, whether public or private, they want to see a TAM or an opportunity that's believable and understandable. And I think that is true of the hyperscaler and the AI opportunity. I think it's largely accepted as a terrific opportunity.

I think secondly, people want to see execution. And in the past, many fiber businesses have not executed. And they haven't executed because they haven't embraced the shared infrastructure model, so the lease-up model. There's been too much anchor build only and no follow-through. And I think we've demonstrated the ability to follow through on the shared infrastructure as we talked about earlier.

And thirdly, the quality of our assets and where they are is super important. And when I make the point about we have network where the hyperscalers want to be, that's a believable point. And so I think, yes, there's always skepticism towards any business. The fiber industry has been through some cycles, as you know well, Michael. But ultimately, when you approach the issues with facts like we have, I think we've got a terrific story.

Kenny, thank you very much.

Great. Thank you, Michael.

Good to see you.

Good to see you.

Thank you. Good morning and welcome to today's conference call to discuss Unity's second quarter 2026 earnings results. My name is Jonathan and I will be your operator for today. Today's call is be recorded and a webcast will be available on the company's investor relations website. Investor.Unity.com, beginning today and will remain available for 365 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. It is now my pleasure to introduce Bill DiTullio.

Unity's Senior Vice President of Investor Relations and Treasury. Please begin.

Thanks, Jonathan. Good morning, everyone, and thank you for joining today's conference call to discuss Unity's second quarter of 2026 results. on the call today will be Kenny Gunderman, our CEO, and Paul Bowlington, Unity's CFO. John Harabin, President of Kinetic, will also be joining us this morning during Q&A. Before we get started, I would like to quickly cover our Safe Harbor Statement. Please note that today's remarks may contain forward-looking statements. These statements include, but are not limited to, statements regarding Unity's fiber build strategy, the business's growth potential, our 2026 outlook, and other statements that are not historical facts. Numerous factors could cause actual results to differ materially from those described in the forward-looking statement. For more information on those factors, please see the section titled Safe Harbor Statement in the accompanying presentation in the Risk Factors section in our filings with the United States Securities and Exchange Commission.

With that, I would now like to turn the call over to Kenny. Thank you, Bill. Good morning, everyone, and thank you for joining. Unity posted another terrific quarter of results as we continue to execute well on our strategy as the premier insurgent fiber provider. We're consistently growing wholesale, enterprise, and consumer fiber revenue at 10 to 20% with an insurgent share-taker mentality. Our strategy of being first with fiber to metro and wholesale markets, along with a mission-critical and future-proof technology, positions us for many years of predictable execution and value creation for our shareholders. Demand for fiber is continuing to accelerate, and hyperscalers and neoclouds are leading the way. We posted a record quarter of new bookings at Fiber Infrastructure, exceeding our previous record by almost 30%.

Demand was strong across virtually all categories, reinforcing the benefit of our robust, diversified customer base, especially at Unity Wholesale. The use of agentic AI is now upon us and growing. As has proven typical with AI adoption, both the timeline and TAM appear ahead of our prior expectations. Near term agentic AI use cases with measurable ROI such as customer service agents, cybersecurity threat hunting and mitigation, and automation of corporate functions are only a precursor to more bandwidth intensive functions like physical robotics, autonomous driving, personal AI agents, scientific research, and many others. Unity is building the infrastructure to enable this growth and benefit our shareholders. This growth started and continues with dark fiber networks in Tier 2 and 3 markets with fiber strand counts of 50 to 100 times previous levels and is now evolving to lit wave packages at the same 50 to 100 times prior levels. These wholesale investments by our hyperscaler NeoCloud customers are a precursor to enabling greater agentic AI usage by our enterprise and residential customers.

And we've seen estimates of dramatic multiplier effects on broadband usage as a result. Distribution of inference to the edge requires low latency and high bandwidth connectivity, highlighting the significant benefit of our 5 million future-proofed connected endpoints at Unity, including fiber to the home, on-net buildings, and data centers, towers, and small cells. Fixed wireless, LEO, and even cable remain somewhat competitive today at the edge, but over time, as usage, reliability, and latency become more mission critical, customers large and small will demand fiber at the edge, presenting us an opportunity to win back share from these other technologies. In short, Unity is well positioned strategically. We have the right assets, plan, and team in place going forward. Now we have to execute. Our results indicate we're doing just that. Total fiber revenue grew 10% year over year, and fiber revenue at fiber infrastructure grew 6%, right in line with our expectations and demonstrating the robust demand we're seeing.

In addition to the record bookings of fiber infrastructure, we had the strongest quarter ever of net ads at Kinetic and just as importantly, the number of new fiber homes constructed. As we've been foreshadowing for some time, we really hit our stride for the fiber build in the second quarter, and we fully expect that momentum to continue. Our footprint at Kinetic has substantial opportunities to build first and there are increasingly fewer skilled footprints like ours in the country. We're moving in haste to take advantage of this benefit. To that end, as highlighted on slide five, our priorities have not changed for the full year. Building off the momentum in the kinetic build engine, we're now raising our expectations on new fiber homes constructed this year to 475,000 to 525,000. We also continue to lean into this generational opportunity of fiber infrastructure, which I'll comment further on in a moment.

At Unity Solutions, we're seeing growing success in cross-selling products into our on-net fiber base at Unity Fiber and Kinetic. Today, we estimate our managed services attachment rate to be only around 6% excluding voice, but we're growing that materially as during the quarter about 16% of new bookings came with a managed services product. We believe selling more products to on-net customers will not only lead to greater sales, but enhanced margins and more loyal customers. 2026 is an important inflection year for Unity and the terrific industry tailwinds we just discussed are fueling that pivot. We previously committed to some key milestones as highlighted on slide 6 and we're demonstrating progress towards our goals. Convergence offerings and new initiatives from Big Cable are having an expected impact on ARPU across the industry and we've seen some near-term pressure. However, we expect ARPU to stabilize industry-wide and at Kinetic, especially given the favorable competitive dynamics in our markets and the upsell opportunities that exist in our base. The current industry dynamics suggest it has never been more important to build fiber first or early and that's exactly what we're doing now at an accelerated pace.

Slide 7 shows that we're well on our way to 3.5 million homes passed with fiber and 1.25 million fiber subs and we're closer to 90% of our revenue coming from our core business. We remain focused on operational excellence, customer obsession, and together with executing on our strategy of building fiber into unique locations, progress on our key KPIs will remain up and to the right. Driving lower churn is critically important to driving higher customer lifetime value, and we are very pleased with our plan and progress there as highlighted on slide 8. Our fiber churn at Kinetic this quarter is the best second quarter churn we've ever seen. We believe that with the various actions we've taken to date, plus future planned actions, will bring kinetic fiber churn down to industry-leading levels. Managing churn effectively is a team effort and we've actually made it a company-wide metric for our incentive compensation plan as a result. Turning to fiber infrastructure on slide 9, having a previously built robust fiber network in Tier 2 and 3 markets is presenting us an opportunity to capture meaningful share of the generational demand as evidenced by a record quarter of new bookings.

Importantly, over 50% of the new bookings this quarter were WAVES or LIT capacity as opposed to DAR Fiber, reinforcing the pivot from the build cycle to more lease up and inference. As we've previously pointed out, we expect approximately $1.5 billion of revenue in the next few years as we build profitably to enable AI learning. However, the truly exciting opportunity for Unity is the approximately $500 million of recurring revenue that will sit on top of those new builds, and we're starting to realize that recurring revenue now. We've also said that we expect that broadband usage to come from a diversified base of customers, and during the quarter, we demonstrated a healthy mix of demand across our key customer segments, including about 20% from neoclouds, 18% from superscalers, 10% from hyperscalers, and 6% from fiber optic. the home providers. A special thank you to Mike Freeloo, Greg Ortel, and the terrific sales leaders at Unity Wholesale and our world-class network and service delivery teams under the leadership of Eric Daniels and Kathy De La Garza following through for our customers. With that said, our funnel of opportunities is even more exciting, so we expect continued positive momentum. As a reminder, while quarterly bookings in wholesale will always be lumpy given the nature of the customer base, the general trend over the next few years should be up and to the right.

Slide 10 illustrates we're building our fiber network profitably and strategically. Although we're building some attractive new greenfield routes for hyperscalers, close to 80% of our hyperscaler business actually includes selling all or at least partial existing infrastructure, leveraging heavily the previously built network. Make no mistake, this is a big advantage for Unity from a cost and time to deploy perspective, as evidenced by our blended anchor lease up cash yields of 37%, the highest we've ever seen. Turning to slide 11, during the quarter we sold more waves than ever and as a result, waves were the single biggest product contributing to our record bookings. As a reminder, we're not enabling WAVES capability all across the country. We're focusing on routes that are unique to Unity that give us a competitive advantage. Our pre-existing routes are enhanced by the unique build cycle that we're currently undertaking for the hyperscalers as we strategically expand our connectivity among unique markets.

Highlights in the quarter were a 20 terabit wave package connecting a NeoCloud from a data center in a Tier 2 market back to a large metro. and an 18 terabit wave packet sold to a superscaler out of another major data center in a Tier 2 market. To put this in perspective, that's 96 400 gig waves sold as lease up in one quarter to just two customers over fiber recently built into new data centers. There's more to come, as our current waste funnel represents approximately 1.3 petabytes of traffic, and the vast majority of this funnel consists of relatively new customers. As we see it today, the demand appears staggering. With that, I'll turn the call to Paul.

Thank you, Kenny. Starting on slide 13, I'd like to review the key second quarter highlights for both Kinetic and our fiber infrastructure segment. Results for the quarter were once again strong, and we continue to make significant progress across several fronts. Starting with Kinetic, we expanded our fiber network to pass an additional 141,000 homes with fiber, our highest level of new passings on record, ending the quarter with approximately 2.1 million homes passed with fiber. Kinetic also added 38,000 net new fiber subscribers during the second quarter, ending the quarter with 603,000 total fiber subscribers. As Kenny mentioned earlier, FiberNet ads for the quarter were the highest on record, and total kinetic fiber subscribers grew 25% from the prior year period. Kinetic consumer fiber revenue grew 19% year-over-year during the quarter. This growth is being driven by strong adoption of our fiber-to-the-home product, bolstered by the performance of the various marketing initiatives at Kinetic that target both our newer and more seasoned cohorts.

At Fiber Infrastructure, we recorded consolidated bookings MRR of approximately $2.2 million, our highest level on record and an almost 30% increase from the previous record level. These record levels continue to be driven by the robust demand we are seeing for both dark and lit fiber solutions from hyperscaler and neocloud superscaler customers. Slide 14 highlights the sustained momentum we are seeing within kinetic fiber. We achieved fiber penetration of 29% during the quarter, which is up 90 basis points year over year. We also now pass 46% of our kinetic consumer footprint with fiber. Consumer fiber ARPU during the quarter was impacted by a number of factors, including new customer volume, the timing of rate plan adjustments, and customer retention initiatives. For the remainder of the year, we expect consumer fiber ARPU to decrease low single digits year-over-year in the third quarter, but should stabilize in the fourth quarter with an expected increase of low single digits year-over-year.

Turning to slide 15, the continued strong improvement in our cohort fiber penetration is being driven by highly targeted marketing, customer experience, and customer retention initiatives being deployed by the Kinetic team. Penetration levels in our year one 2025 cohort are now exceeding year two penetration rates in the prior year cohort, and year three penetration rates in our older cohorts. We expect to maintain or improve this trajectory going forward, and given our current trajectory, we remain confident that our 40% terminal penetration target is very achievable and perhaps conservative. Slide 16 lays out our key targets for Kinetic in 2026. Given the accelerated pace of our fiber build, we are increasing our incremental homes passed with fiber target by 25,000 and now expect to reach 2.33 to 2.38 million homes passed with fiber by the end of this year. This would bring fiber coverage within the kinetic footprint to over 50%, a significant milestone and our goal to reach 3.5 million homes by the end of 2029. We also expect to end the year with between 675,000 and 700,000 fiber subs and realize $635 million to $655 million of consumer fiber revenue in 2026, an increase of roughly 25% to 30% from the prior year.

Slide 17 provides a pro forma view of Unity's consolidated results for the second quarter. Consolidated pro forma revenue and adjusted EBITDA were down 5% and 10% year over year respectively during the quarter, primarily driven by the continued declines at Unity Solutions and in legacy copper and TDM services. However, we continue to see strong growth in the strategic parts of our business. Kinetic fiber-based revenue inclusive of consumer, business, and wholesale services grew 12% year-over-year. As we continue to execute on and accelerate our fiber over-build plan, fiber services at Kinetic will deliver consistent, strong growth quarter-over-quarter. Our infrastructure revenue and adjustability of DOG grew 10% and 20% respectively year over year. In addition to the information provided in our earnings materials, we have also included supplemental pro forma financial information on our investor website.

Slide 18 demonstrates that the growth in each of our core fiber lines of business has been very strong and we expect that growth to continue given the superior nature of fiber as a service. With this pace of growth, we continue to expect fiber to overtake legacy services as the majority of our revenue by the end of 2026. Please turn to slide 19 and I'll now cover our updated full year 2026 outlook for the combined company. Beginning with Kinetic, we continue to expect revenues and contribution margin to be $2.145 billion and $905 million, respectively, at the midpoint. Given the high number of fiber premises now expected to be constructed in 2026 and the incremental capital expected to be spent later this year to support our accelerated build plan for 2027, we now expect to deploy approximately $1.27 billion of net capex at the midpoint of our guidance, a $100 million increase from our previous range. At Fiber Infrastructure, we expect revenues and contribution margin to be $1 billion and $575 million, respectively, at the midpoint for full year 2026. The increase from our prior guidance range reflects the strong hyperscale and AI activity we saw in the second quarter.

As a reminder, we expect the revenue from large sales type lease dark fiber deals to be lumpy and to come in unevenly during 2026. As such, we have further adjusted our third quarter and fourth quarter guidance to account for the timing of these deals in the second half of the year. While we still expect to see a significant portion of those deals hit later this year, in the fourth quarter, as we previously communicated, there is a possibility that some of those deals could slip into early 2027. Our outlook for net capex at fiber infrastructure this year remains $140 million at the midpoint of our guidance and represents a capital intensity of approximately 14%. Please also note that, as has always been our practice, our net CapEx reporting offsets our gross CapEx by upfront payments received in an IRU arrangement as the cash received will offset a significant portion of the CapEx related to those deals. Turning to Unity Solutions, we expect revenues and contribution margin of $700 million and $320 million at the midpoint. The increase in our contribution margin guidance is due to higher margin strategic services sold during the quarter.

As we have mentioned several times before, while Unity Solutions is not core to our go-forward fiber infrastructure strategy, it does generate meaningful, predictable cash flow. While we expect revenue and EBITDA to continue to decline at a mid-teens pace year over year over the next few years, a crucial part of our strategy is to retain the most profitable portion of this business while winding down low-value legacy and TDM services. Altogether, we expect consolidated revenue and adjusted EBITDA of approximately $3.655 billion and $1.475 billion at the midpoint of our 2026 outlook, with consolidated net capex of about $1.525 billion. Finally, I'd like to provide some brief comments on our capital structure. Since announcing our agreement to merge with Windstream, we have successfully executed on a series of planned actions that were systematically implemented to extend our debt maturities, lower our overall cost of debt, establish access to new debt markets, optimize our mix of secured and unsecured debt, and drive meaningful interest expense savings. As slide 20 highlights, partially as a result of these actions, the blended yields on our debt have improved significantly, falling an impressive 600 basis points over the past three years, from around 12.5% in February of 2023 to around 6.5% today on a blended basis. In recent quarters, we have discussed the attractive of the ABS debt market and the likelihood that ABS would play a significant and growing role in our capital structure going forward.

To do that in, we recently completed our second ABS transaction at Kinetic that will not only substantially help fund our fiber build for the next year, but also allows us to potentially pay down up to $500 million of secured debt through the asset sale offers that are currently ongoing. As I've said many times previously, we intend to be balanced in our approach to raising ABS funds. financing, and these associated offers to pay down secure debt with ABS proceeds is in keeping with that balanced approach. While ABS will be an important part of our strategy to fund the strategic investments we are making in our business, it's not the only source of capital we have at our disposal. For example, as has been our practice at Unity, we are constantly evaluating our portfolio of assets for optimization. Optimization opportunities could include assets that are underutilized or fallow, assets that are outside of our priority footprint or assets for which we can receive premium valuation multiples. As we mentioned last quarter, we believe there are $500 million to a billion of non-core assets that we could monetize. It's important to also note that the monetization of these assets would have a negligible effect on our adjusted EBITDA as many of them are underutilized today and currently produce minimal to no cash flow for the business.

As slide 21 shows, between excess fiber, non-core and non-clustered assets and operations, such as select non-clustered kinetic and non-Southeast fiber infrastructure markets, as well as spectrum and other real estate assets, we believe the opportunity exists to generate material proceeds over the next 12 to 36 months, and we are making progress on several potential transactions. With that, we'd be happy to take your questions. Operator?.

Certainly. And ladies and gentlemen, if you do have a question at this time, please press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. Our first question comes from the line of Gregory Williams from TD Cowan. Your question, please.

Great. Thanks for taking my questions. Sounds like business is booming on the fiber-infra side, so my questions are more on the kinetic side, actually. One is just on the consideration Consumer Fiber ARPU, as you guys noted, it was down 2.6%. And you gave us some guidance for the third quarter and fourth quarter saying that you had new customers, timing of rate plan adjustments and retention. Can you just help provide more color to the ARPU trajectory? We're seeing ARPU pressures everywhere, whether it's cable repricing, wireless and now Starlink in the mix. How do you think about the ARPU curve sort of longer term? As you think about maybe two or 3% growth from previous messaging. Second question is on Kinetic CapEx.

You did raise it by a hundred million and you did raise the fiber home deployment by 25,000. So it implies cost per home pass might be going up or is this just because you're front end loading some of the costs or warehousing equipment or is it actually indeed cost for home pass going up from rising equipment costs thanks.

Yes, Greg, this is John. I'll take that and I'll start with the second one. And on the equipment costs, You know, we've seen all those stories that you've seen. We believe that there's going to be a slight increase in our cost of fiber in the outer years, 27 and beyond. And as a result, I think when you look at the range that we've guided to in terms of cost per passing, we're going to come in at the upper end of that range. So I would plan for that, and that's what we are planning for as well. We're not going to be impacted by the CPE memory charge issues for a variety of reasons, including our long term contracts and volume and the fact that we can balance different skews in order to hit the targeted CPE cost number that we are that we plan for. So I think we're good on the CPE side and an uptick a little bit in the fiber material side, beginning in, I'd say mid 2027 and beyond. relative to the ARPU trends.

As Paul said, we expect a slight decrease year over year next quarter and then return to positive in the fourth quarter. And on an annual basis, our forecasts still show to and beyond. And all the reasons Paul mentioned are, entirely accurate when he talks about cost of retention. That is in response to the competitive promotions that Cable started with and the Telcos matched on. And we've seen that, you know, we're fortunate in a sense that we only compete with cable and less than big cable and less than 60% of our fiber territory. So it means that and that compares to like mid 80s to low 90s versus other areas. peers in our category. So we're not as impacted, but make no mistake, 60% is still a number and we are in a growth business.

And like Kenny said, we're not going to chase unprofitable growth, but we're not going to see the market either. So we're being really smart about it. We've got, We call them regional, but they're not geographic. They're more like tiers of pricing and cohorts. that we adjust based on our performance, the strength of that market, and the competitors pricing. We track it and monitor it, and we adjust that to be rational yet maintain our growth. As you can see, we haven't necessarily been slowed down by growth on the top line or churn improvements either. So I think we'll see it play out.

We said churn would come in where it did at an improved guidance last quarter, and we expect that to improve. And like Paul said, we're going to return back to that 2 to 3 percent growth beginning in fourth quarter.

Greg, let me just add a couple of things to what John said to reemphasize on the CAPEX, make sure we're clear there. You can't really take the increase in capital that we're guiding to and apply it directly to just those 25,000 additional homes we're guiding to. As mentioned in my comments, a lot of that CapEx is a pull forward of CapEx to accelerate 2027 growth. So those households that we're investing in at the end of 2026 will be households that are passings, I think, in 2027. So as we've talked about before, these bills tend to be more front loaded from a CapEx standpoint. and with design and permitting and then construction starts on homes to be passed in future periods. We're confident in our ability to hit the cost to pass range that we've put out prior, even though, as John said, there might be forces that are driving us a little bit more towards the higher end of that range, but that range still holds.

That's helpful. Thank you. Thank you. And our next question comes from the line of Richard Choi from JP Morgan. Your question, please.

Hi, sorry about that. I wanted to ask about the demand funnel or pipeline you see from the three different categories you called out, neocloud, superscalers, and hyperscalers. Is there any differentiation? and what type of projects they're looking at or you're potentially doing for them.

Good morning, Richard. This is Kenny. I think you trailed off a little bit at the end there, but I think I got the gist of your question, which is the distribution of our funnel across the key customer segments and the types of products. I'm paraphrasing a little bit. Look, fundamentally, the funnel is very, very strong across all of those customer segments. And I think our distribution of bookings in the quarter is actually a pretty good representation of the funnel. And, of course, it ebbs and flows because any time you've got a funnel, funnel that just grows and grows, that means you're not selling enough. So we need the funnel to grow, but then retract and grow again. But fundamentally, each of those segments are strong.

As we've been saying now for really two years, and we're really just parroting what the hyperscalers and neoclouds have been saying, there is a constraint on compute supply in the industry and therefore the infrastructure to enable that compute. That is a constraint. It has been a consistent message. It's been a consistent message among that customer segment that they need to invest to stay ahead of the demand, and they're consistently surprised by the amount of demand that's chewing up the capacity. And so they're having – they're struggling to stay ahead of it. And of course, we're at the tip of the spear of that, and we see the same amount of demand across all of those segments. I think the hyperscalers are much more in the vein of building new fiber, whether it's greenfield or interconnecting routes or over-pulling routes and more in the vein of dark fiber as a product. think about them as more of enabling building the learning models. And really that's a large percentage of the billion and a half of revenue that we've talked about over the next several years as being the build cycle.

So they're generally the anchor customers in that build cycle. And we've talked about the the emergence of the neoclouds and the superscalers and other names of customer categories that we haven't come up with yet that will enable, that will then use those learning models and that fiber and use that for inference and obviously selling and reselling compute capacity And frankly, we're starting to see that demand sooner than we expected. And we're now using words like petabytes that that are needed to capture the amount of demand. And I'd say the majority of the funnel that we talked about there is really coming from the neocloud group and these multi-terabit wave packages are more of the norm than the exception. And we talked about two of them this quarter. right down the fairway of lease up on greenfield builds that we've had over the past couple of years, driving really terrific margins in a capital efficient way. got a lot more of those coming so I would say the long shorter version of the answer your question is demand continues to accelerate and and we're starting to see the neoclouds and the super scalars as the higher growth component of that and they're and they're taking more late waves and lit capacity versus dark fiber than the hyper scalars.

Yes, sorry for fading out there. In terms of the hyperscale or lease up IRR, the 15% for state, is that just timing or is that a mixture of timing, volume, and maybe pricing?.

Yes, I think so it's a combination of all the above. As you know, Richard, many of these hyperscaler deals come with very large NRCs. And so we used to measure our anchor deals on a cash flow yield basis, but we can't do that with the hyperscalers because it's not measurable. in many cases because the cash up front offsets the initial capital, or largely offsets the initial capital. So when you think about both the anchor and the lease up, in many cases it's the same hyperscaler, taking the original anchor plus the lease up, And so it's definitely a function of timing and the amount of fiber that they're taking. But in all cases, the returns are very attractive and we think they're only going to get more attractive because as I said earlier, The build cycle is the precursor to where the real demand and the real upside for us is, and that's on the recurring revenue.

Great, thank you. Thank you. And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 1 1 on your telephone. Our next question comes from the line of Frank Lothian from Raymond James. Your question, please.

Great, thank you. On the lease-ups going forward, how did those work? Are there any restrictions on what you can charge new tenants or any most favored nation clauses for the anchor tenants? And then on the wavelinks, do you offer a wage to any point that a customer or any endpoint a customer wants or or are your waves just between certain POPs or data centers? Thanks. Hey, Frank, good morning.

We have very few limitations, restrictions, and sort of unique terms with respect to what we can or can't do with the fiber that we're building. And that's by conscious design. And many of our customers know that we're building... Fiber is a shared infrastructure asset, which means in order to get acceptable returns for ourselves, we've got to be able to lease that fiber up to other customers. And that's an understanding from the very beginning. I could list on one hand a number of kind of unique deal terms that we might have. So it's absolutely more of the exception than the rule. And so as we look forward, and we're currently building fiber, we've built fiber, there's very, very few limitations on what we're going to be able to do with that fiber going forward.

There's probably more limitations on what our customers can do with what we sell to them than the other way around, and that's something we've covered in the past and has always been a part of our business model and will be on a go-forward basis. With respect to WAVES, I just, we couldn't be more happy with our WAVES strategy and the progress that we're making. And we have talked for several quarters, Frank, as you know, that about how the WAVES market is growing at roughly 10% a year, which I think is conservative. We've talked about how we We have probably less than 5% market share in that market, so we don't have a big embedded base of waves that are susceptible to competition. We've also talked about how we're selectively lighting routes around the country where we've got a right to win on network quality and network uniqueness and customer service capabilities as opposed to on price. There are many tier one routes around the country, as you know, where you've got multiple competitors and they're competing largely on price. And we don't want to be in that game.

We want to be in the Waves business where we've got unique routes and we're able to compete. based upon that and network quality. And this hyperscaler build has helped us accelerate that strategy because we're building a lot of new fiber in tier two and three markets, in some cases, connecting back to tier one markets. And so you have an embedded waves opportunity that we're now taking advantage of and the two big waves These packages that we highlighted this quarter are exactly that. This is dark fiber that was recently built and connecting data centers. These are clearly not just single-use data centers. They're multi-use as evidenced by the fact that we had an anchor customer and now we're leasing up to Waves customers. So that's the strategy. It always has been, but I think this AI-fueled hyperscaler build is actually accelerating the Waves product for us, and we're very excited about it.

All right, great. Thank you. Thank you. And our next question comes from the line of Matthew Griffiths from B of A. Your question, please. Matthew, you might have your phone on mute.

Yes, sorry about that. Ricky mistake me. Thanks for taking the question. So you mentioned in your prepared remarks, I believe, that some fiber infrastructure revenue could slip maybe from 4Q into 2027. Is the driver of that just kind of data center construction completion timing? Or is it, or what other factors could be behind that? And then just, I'm curious on the terms of the kind of waves and dark fiber fields. Can you comment on the terms, the number of years that you're signing this up for, and if that's moving in a certain direction or not? That would be helpful.

Hey Matthew, it's Kenny. I'll start with that. Yes, on the large deals, hyperscaler deals for the year, we've tried to be really transparent, not only just coming into this year, but foreshadowing next year and beyond that these big deals, are ones that will move the needle from a quarter to quarter basis and even from a year to year basis because they're big deals. And in the first half of the year, we've had, we've actually either been able to pull in deals sooner than expected or on schedule, a pleasant surprise to the market. And so that's part of what's helped us outperform expectations for the first couple of quarters. We're foreshadowing that the third quarter will be down because we don't actually think there's going to be a material amount of larger deals in the third quarter. And therefore, most of them in the fourth quarter, And that's just the math and the expectation on time, current expectation on timing. And we flag it because we don't want people to be surprised if something does happen to slip from 26 into 27 and move the numbers in a big way based on paper, but we're really talking about a matter of weeks or maybe a month or so as opposed to quarters or years. it's not a reflection of the quality of the book of business.

It's just a reality that when you're building hundreds of miles of new fiber and you're building, you know, 864 strand count fiber with multiple conduits or even 1728 fiber with multiple conduits, and you're building that through multiple permitting authorities and using multiple contractors or subcontractors in addition to our internal crews, there's always a risk of slippage, even when you're largely in control of your destiny. I wouldn't flag any particular issue around the builds or the deployments that we're concerned about. We're really flagging it because of the materiality of the numbers and just the reality of building large amounts of fiber. With respect to your second question, we've talked a lot about the greenfield builds and the overpulls for the hyperscalers as being largely 10 to 20 year deals. That has continued to be the case. We love those deals. We love dark fiber. has always been a core part of our business. And of course, locking in that long-term revenue and long-term anchor customers is terrific.

But when you start to get into the lease-up phase, you're generally going to be into shorter-term contracts as almost by definition. And taking that one step further, with respect to this new class of customers, the neocloud, superscalers, we're very, very focused on credit quality of the customer. and making sure that when we paper these opportunities or when we're doing our analysis to assess customers that we're focused on the credit quality of the customer. We're trying to put ourselves in their shoes about what they're using the fiber for. And so we're pushing for longer term deals. They're pushing for shorter term deals. and we're landing, I'd say, at a place where we're very comfortable from a credit quality perspective. So generally, lit deals, waived deals are in the three to five year range, and I'd say, you know, we're closer to the three year range, in some cases a little shorter, in some cases a little little higher but but we're very comfortable with the terms that we're inking and we're very comfortable thus far with the credit quality of the customers that were that we're signing up deals with.

Thank you so much. Thank you. This does include the question and answer session of today's program as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.

This live transcript is auto-generated without human intervention or review.

[Call has ended.]

My name is Richard Choe. I cover Communications Infrastructure for JPMorgan. I would like to introduce Kenny Gunderman, President and CEO of Uniti Group. Thank you for joining us today.

Richard, it's a pleasure to be here as always. Thanks for having us.

We were here about a year ago, and you had a lot going on at the time, but I think even more has happened. So can you give us a quick update on what's changed over the past year and kind of where are things today?

Yes. We definitely had a lot going on then. We had announced our merger with Windstream, but it had not yet closed. And so we were still talking about all the benefits of the merger and trying to convince folks of the strategic rationale. And that included our ability to accelerate the fiber build at Kinetic. That included our ability to go after the wholesale fiber opportunity by combining the Windstream Wholesale business with our Uniti Fiber Wholesale business.

That included synergies, obviously, corporate and cost savings synergies on-net, off-net synergies, but also very importantly, removing the complexity of the MLA relationship that existed, which we also foreshadowed thought that could also mean cost of capital improvements. And then we also thought the merger would put us in a better position to be leaning into strategic options. So that was the promise. And now that we're a year later and we've closed the merger, and we're 9 months in, I would say that we're delivering on all of those promises.

I think the build at Kinetic has been ramped materially. The wholesale opportunity that we talked about, and I even said at the time, I thought that was more exciting to me than the fiber-to-the-home build. That opportunity has blossomed into something that's really terrific. And obviously, a big part of that is the hyperscaler AI theme that's so important right now, but we're really leaning into that. So very excited about that.

The synergies achievement, we've really achieved all of our corporate savings, if not a little bit more, and the off-net to on-net savings have been terrific. And our cost of capital has improved. We talk about 600 basis point improvement from where our bonds were yielding previously to where they are now. And so that has absolutely improved. And I think from a strategic point of view, our business is more and more strategic every day. And so I think we've delivered on that.

And so all that to say, Richard, I feel great about the progress, a lot more going on. And the key for us right now is just to execute. We've got all the -- we've got the strategy, the plan, the team and the assets, now we just have to execute. And I think we put up a good fourth quarter and finished 2025 strongly, and we've gotten off to a great start this year with a good first quarter, and I feel really good about how the second quarter is building. So...

Yes. And we'll go into each of those topics more. But I will say like when you hear about the plans for merger and the actual delivery, there's a lot of plans, but delivery isn't always as fast or as efficient as possible. But it seems like you've been able to deliver really quickly. Has the integration and the execution gone better than you expected? And kind of what enabled you to be able to kind of deliver on a lot of this? It seems like really quickly.

Yes, I do think -- thank you, and I'm going to take that as a compliment whether it was meant as one or not. But we are definitely delivering on our plan, on our 180-day plan, and we're following through on the execution that we promised at the time of the merger. And the market has moved in our direction as well. And so sometimes, it's just as good to be lucky as good. So we've executed, but also, I think industry themes have been benefiting us. And I think from an integration point of view, we talked about cost savings and a big part of that was bringing off-net traffic onto an owned fiber network and transitioning away from legacy networks onto an owned fiber network. That's probably the most exciting part of the merger so far for me because we're executing on that.

We're getting cost savings and the build has gone better than expected. And when we see the throughput of that investment, the early return on that is terrific. That's what's enabling us to pursue the hyperscaler opportunity in the way that we are. And everything we're seeing from a returns perspective in the Kinetic fiber-to-the-home build is better than we expected.

So I think that part of the merger and the integration has been terrific. And an important part of pursuing all of that is just a mind shift mentality away from being the old incumbent ILEC to being actually an insurgent share taker. And probably another part of the merger that where we've outperformed is that we were able to recruit and onboard a leadership team, especially at Kinetic that we had drawn up in anticipation, but I think we've really executed well on that as well. And I'll give John Harrobin, a lot of credit for that.

No, it makes sense. And it's funny in the past, I would say the Kinetic and the fiber build to residential would be the more, I guess, opportunistic and kind of leading theme, but it's actually the infrastructure, but we'll get to that part. So we'll start with the [ boring ] business, which is actually a good opportunity. Something you can't control is the weather and -- but yet you're still able to deliver pretty well on the homes build. Can you kind of talk us through how the fiber progression is going for your residential build? And where should it kind of head to as we go through the year?

First of all, I agree with your characterization. I think when we announced the merger, everybody thought it was all about fiber-to-the-home, but we, at the time, said, hey, don't sleep on this wholesale fiber opportunity. And I think that's proven to be very true. But we're also extremely excited about the fiber-to-the-home investment. And I think -- and I'd hate blaming winter storms for a little bit of the slowdown in the first quarter because as I tell the team, hey, you have storms in the winter time, and so we should plan around that. But with that said, when the build at Kinetic prior to the merger was very focused on building subsidized builds. So RDOF and other builds that were maybe capital efficient, but you're building to a lot fewer homes with the same amount of capital and the same amount of time. That build was also focused on more of a patchwork build around the footprint. And part of that was driven by the fact that we did have that unique MLA relationship where there were fully owned states and not fully owned states.

So it kind of led to some build decisions that were suboptimized. And then it was a build that was really done 100% internal. So it was -- Windstream had built a large internal build engine. And I say all that, not to criticize prior decisions, but to say that we changed all 3 of those things. And that really puts a spotlight on how quickly of a ramp we made despite making all 3 of those changes, including really deemphasizing subsidized builds.

So we're now focusing on building where we have strategic markets and the return is driven by strategic builds and not subsidized by government builds. And that's important for a lot of reasons because those are the markets where we have the greatest risk of overbuilders. So we're really putting a deeper defensive moat around the footprint by focusing on those markets first. And that's also important because we believe in clustering fiber builds.

We don't want to have a patchwork of builds around the country. We want to have them clustered in areas where you get go-to-market synergies, you get construction synergies, you get operational synergies. All of those things are more acute when you've got more adjacent markets versus markets that are more dispersed.

Secondly, we -- or thirdly, I should say, we absolutely thought it was the right thing to do to onboard third-party contractors to help subsidize the builds. So as opposed to it all being internal, we wanted to have third-party contractors. And we said at the time, and it's proven to be true that the cost of using third-party contractors is a little bit higher. But in a world where we've got a lot of white space, and it's a very strategic footprint, we want to be able to move as quickly as we possibly can to build that. And so our view is that having those third-party contractors is maybe a little bit more expensive, but it's well worth it in terms of our ability to build quicker and to put more of a defensive moat around that space.

So when you put all that together, last year, when the merger was -- it just closed in August, but -- so almost 3/4 of the year was under Windstream leadership. The build -- we built around 220,000 homes. This year, we're going to ramp that to more than double it. And so in the first quarter, as you pointed out, we're a little bit behind the plan, but we pointed out that in March and April, we spent -- we built around 45,000 homes each of those months. And so when you annualize those numbers, you start to get to more than 500,000 homes. And so that's really more directionally where we want to be. So we feel great about that ramp.

It seems like there's been more of an alignment with your build and your strategy, and it seems like it's paying off in terms of not only are you building the moat, but you're attacking the right opportunities and that seem to have come through with your kind of net adds and one is increasing the opportunity of customers, but also kind of preventing churn in your existing base. So how is this kind of being attacked with the new management you brought in and at the strategy level of growing that customer base, not just the TAM of the build?

Yes. No, that's exactly the right question. And so the limiting factor on the build for us has not been the build engine itself. I mean I'm confident that we could build more than what I just talked about. In fact, when John and -- John Harrobin and Manny Sampedro were first onboarded. We said, "hey, go tell us how much you can build in 2026, just max out the build just based on that short ramp period of time." And the number they came back with was close to 600,000 homes. And the reason we're not building that many homes this year is partly because of capital.

We want to be responsible about our balance sheet and funding in a responsible manner. And we've got other priorities like hyperscaler opportunities. But importantly, and to your question, we didn't want to build to get so far ahead of the rest of the organization that we didn't follow through on selling and servicing the customer. And I think that's a really important point because if you don't have a good sales organization, if you don't have good distribution, if you don't have a good marketing strategy, if you don't have good and nimble pricing and the ability to be nimble with pricing in the go-to-market, and then you don't have a good customer care organization, then you wind up building, but you're not selling and you have customers that are unhappy and you wind up having elevated churn as a result. And so for us, and one of the things I've been most excited about so far is that we're not only really ramping that build, but things like penetration are outperforming.

Fiber churn is better than expected. And we called that out at the time of the merger as being too high. And so it's been a huge focus area. It's a team sport. We've made it a bonus metric and that gets everybody focused on it really quickly. And so I've been really excited about all of that. And it's one of the things that when you look at build cost, the build execution, penetration, churn, follow-through on ARPU, all of those metrics are trending favorable or better than expected. And that's one of the things that we -- that start to give us confidence that our 40% terminal penetration is perhaps conservative because we're starting to see, I'd say, green shoots of opportunity in other areas.

And I think one of the things that people do worry about if you're not building fast enough is that maybe there are some customers you are losing to alternative technologies like fixed wireless and satellite. But in terms of your experience there, it seems like you're not in a super hurry to get there just to get there. And it seems like you have confidence that you can win back customers. What have you seen both in a competitive response from cable providers, but also kind of alternative providers?

Yes. So to be clear, we absolutely have a sense of urgency to get there quickly. We just want to get there in a responsible and economical manner where the rest of the organization is shoulder to shoulder with the build so that we can follow through. And I think that's what we're doing. But yes, the faster, the better because I do think that our footprint is -- it is very strategic because it's white space. It's one of the fewer parts of the country that don't have fiber. And as you all know, there's a rush to get fiber to those -- to that white space. And we want to be the ones that do it and not the overbuilders.

And thus far, thankfully, overbuilders have generally stayed away from our footprint. It is harder to build in the more rural areas because there's a smaller pie, and so you have to assume that there's going to be a second fiber provider if you're an overbuilder, you have to figure out how to get backhaul into those markets and there aren't very many backhaul solutions. In fact, we're usually the only one, and we aren't selling to an overbuilder. So it's harder to get in there as an overbuilder and we make it as hard as possible by building as fast as we can.

With the competition that we do have, we overlap with big cable in about 50% of our footprint, which is a lot less than most. And so when you think about some of the things that big cable are doing today with the price locks and the MVNOs and the subsidies, we don't feel much of an impact from that thus far. And I I'm cautiously optimistic that we'll continue to be somewhat immune to that. Only about 40% of our base today is taking full speeds available to them. So we have an opportunity to upsell customers, and that gives us some pricing and flexibility with our customers to offset some of the things that cable is doing.

And I think we have the ability to be nimble in market and actually adjust on a market-by-market basis. And that gives us a big advantage relative to big cable who are much more of a peanut butter approach in terms of marketing. Probably the most acute competition today is coming from fixed wireless and a little bit on LEO. And that's really happening in the markets that we haven't built fiber yet. And so we -- DSL churn has been elevated as a result. And I think that that's going to probably continue to be true until we build fiber into those markets. And to your point, Richard, when we go back and build fiber in markets where we've lost share, we are winning back share.

And so while I don't want to take that as false hope or give us the ability to slow down and take our time because we do want to have that sense of urgency, I do feel like that even though we're losing that share, I do think over the next 2 or 3 years, we're going to have a great opportunity to win a lot of that back. Because in these markets, even the more rural markets, the average consumer values fiber and understands that fiber is faster, it is more reliable. And even when you compare it to a lower cost alternative like a LEO or maybe a fixed wireless, people still put value on that better product.

Got it. And it seems like people generally talk about -- and when you kind of, I guess, went through the positives of the merger, about a 40% long-term penetration in the markets that you've been in, but do you see upside to that? And as you maybe get to upside, if there is like 50% penetration, how does that impact your margins and kind of the overall success of the company?

I'd love to change our long-term guidance here today, Richard. And -- but I'm not going to. But I'm going to continue to say that we feel like the 40% is increasingly conservative and when you think about that, what goes into that assumption? There's a lot of different things that go into it, including how fast can we build? Can we build on schedule? Can we build on budget? What do the competitors do? Do you invite overbuilders or not? And so you have to make assumptions like that. What are the demographics of the market? What are the demographics of the consumer that we're selling to and on and on and on. And when you look at those factors and compare those to what we thought originally, what was in the original model, I would say that virtually all of our assumptions are proving conservative.

Again, whether it's overbuilders, the pace of our build, the cost of our build, et cetera, and so I feel great about that. And obviously, things could change, a competitive dynamic could change, cable could do something else that we don't anticipate or something else. But right now, based on everything we're seeing, those numbers feel conservative. And look, once you've built the network in a market, and we've seen this at Uniti for years, once you make the decision to go into a market, you choose a good market that has very little competition or none, that has good demographics, has good growth potential and you make the decision to go in and spend $10 million, $15 million, $20 million or $100 million to build that market, that's the most risky moment there when you're first building. But once you start to execute on it, every additional customer or what we call lease-up after that initial build is just terrific margin.

And I wouldn't call it gravy because it's part of our model, but that's when you really start to drive terrific economics. So to your question about margin enhancement, yes, anything above 40% is additive and additive in a material way to the model.

Yes. And I think something I didn't appreciate as much is that we just looked at it as a build opportunity, but there is a customer service side, there is the marketing side, and it seems like you've brought in the right people to kind of maximize that value? And operationally, is that going better than you had expected? And how -- what are your comments there?

Yes. No, it is, and I appreciate you asking that question. I mean when -- again, when we were contemplating the merger, we said one of the things we have to do, one of the strategic imperatives is new leadership at Kinetic to really shake up that business and bring that insurgent share taker mentality to that business. And it just so happened that Frontier was being acquired by Verizon and it created an opportunity to bring on a lot of those people from Frontier into the business. And they had run the play that we're running, right? They emerged from bankruptcy. They were accelerating their build and they had a really aggressive go-to-market to take share back from cable.

So we -- John Harrobin was the leader that we chose to run that business. And part of the rationale there was that he could help us bring on -- get the old band back together, not all of them, but a lot of them from Frontier. So we've onboarded some terrific leaders from Frontier. We've onboarded leaders from Brightspeed and leaders from Ziply and others that have terrific experience actually building fiber-to-the-home and then following through on the go-to-market.

So I'd say, first and foremost, we've outperformed on executing on onboarding that team. And I would say the first quarter of this year -- actually, the second quarter of this year will be the first quarter where we have the new leadership team fully in place. So most of them came in December, January and February. So this is the second quarter. It will be the first quarter where they're all fully onboarded. And therefore, we're expecting big things from the team on a go-forward basis.

Got it. Now moving to, I guess, the opportunity that we knew would be big, but it seems to be getting bigger every day, if not every week. In terms of a lot of these data center builds, and I said it to Bill a week ago, it's like if you look at your fiber footprint map and you see where all the new data centers are being built, it's like a great overlay. What do you -- you've talked about the $1.5 billion opportunity, but what are you seeing today? And how are the conversations going in terms of what you see down the pipeline just because it seems like a very long-term big opportunity?

Yes, I agree. As you know, Richard, our strategy at Uniti for years has been to build fiber first or early into markets where there is no fiber. And that was well before the Kinetic fiber-to-the-home build. This was going back 15, 20 years, and we used to call ourselves the Zayo of the smaller markets. And the thesis was that you would have a smaller TAM because you're in smaller markets, but you should get a greater percentage of the opportunity because there's fewer people there. And we've executed on that strategy at Uniti and we're now executing on it at Kinetic. But one of the advantages that it gave us was we built network into more remote locations, including a backbone that has given us unique long-haul routes in Tier 2 and Tier 3 long-haul connections.

And as I've been saying more and more over the past number of weeks, it's sometimes better to be lucky than good because that happens to be where the hyperscalers want to be because land and power are more accessible than it is in the Tier 1 NFL cities. So we're there. And unlike in the enterprise or consumer space, where the TAM is smaller because you're in these smaller markets, I would say the TAM for us is bigger among the hyperscalers because we are in those corridors where they want to be, and we've got existing infrastructure there that we're building off of, which gives us an advantage from a deployment perspective because we can deploy faster and it gives us an advantage from a cost perspective because you're building off of existing infrastructure.

So when you put all those things together, I do think the opportunity for us is it's certainly bigger than what we expected, and it appears to be growing. And we sometimes struggle to put numbers around the TAM as a result because it's a moving target in a good way. But what we have said is that over the next several years, we expect to build about $1.5 billion of revenue through some of these anchor builds that we're building off of our network. And then that would lead to roughly $0.5 billion of recurring revenue and really give us a meaningful share of what we've estimated to be a $75 billion TAM for fiber companies. And so -- but honestly, Richard, if you ask me this question next year, I wouldn't be surprised if those numbers are all bigger for us.

Hopefully, I'll be able to ask that next year. In terms of like the lease-up opportunity, it's one of those things that I think people see the hyperscale opportunity, but lease-up has always been a little bit harder for people to really believe in. But it seems like with the development of AI inference and how much companies are using it, that the lease-up opportunity from enterprises that use the hyperscalers might come faster. Are you having more conversations with enterprises that are willing to not sign deals necessarily now, but are in conversation of, oh, if you build that and that hyperscaler is there, we'd like to build capacity or have capacity there.

We certainly are. In fact, the -- and we recognize that lease-up on fiber networks is a sensitive topic, right? People want to see follow through on that. And that's why every single quarter for the past, I don't know, several years, we've tracked our lease-up -- our anchor economics plus lease-up economics and now we're doing that on hyperscaler deals. And we're showing a blended IRR of 30% on anchor plus lease-up economics for hyperscalers.

We also recently made the point that 80% of what we're doing with the hyperscalers is either selling existing infrastructure or selling infrastructure that's attached to existing infrastructure, and that's important because we're not building remote locations that are not strategic to our network. We're building where we are expanding our network in a strategic way. And so we're -- and we're starting to see tangible lease-up results. In fact, this first quarter, we talked about a $70 million hyperscaler deal that got turned up and showed up in revenue and EBITDA, and that was a lease-up deal. That was selling -- overpulling strands on an existing network route that we built about 2 years ago. So this was -- it was an overpull that had CapEx, but it was a lease-up on an existing route. And we also talked about a 20-terabit wave package, which by the way, is crazy. I mean 2 years ago, 3 years ago, our entire backbone was only 1.9 terabits, and now we're selling 20-terabit wave packages. That was also an existing route and it was a Tier 3 market connecting back to a Tier 1 market that was a Kinetic backbone route that was connecting a Kinetic market back to the core. And we sold a wave route to a [ NeoCloud ] that is connecting private data centers to public data centers.

And we specifically called those out because they're terrific deals, but also those are good leading indicators of what I think we should expect to see going forward. And that's what we're playing for here. We like these builds, the $1.5 billion of builds over the next number of years. But what's going to really drive value in our business is that recurring revenue that comes from the lease-up. And the 2 deals that I just described, when you add up the recurring revenue, not just the onetime revenue, but the recurring revenue, that's about $5 million of recurring revenue just on those 2 deals in 1 quarter. So I feel like we're well down the path to making great progress there.

It's funny because like I know the nonrecurring revenue people don't kind of give it the same multiple or view, but you're making good money on that also, it's just the accounting involved. In terms of -- the one thing we do hear is that before you would get a deal, you'd build a route. And now it seems like there are multiple routes being built or the hyperscalers don't want just one route that there's redundant routes. And then also the level of build, the capacity you're building is different. How has this changed over the past few years? And where do you see it kind of going as more of these orders kind of come in?

Yes. It's definitely changed. And we we're constantly challenging ourselves to be innovative and think creatively about doing things differently, better and actually working with our customers to do things differently and innovate. When you're going from a customer that 3 years ago was buying 6 strands or 12 strands or maybe 24, and that was a gusher when you sold 24 strands, and they're now buying 832 -- or sorry, 864, 1,728 and then additional conduits on top of that, that's a very different network to engineer and follow through on and then service after the fact than the smaller networks we were talking about before.

So you have to really work well with your customers and design routes that work for us and for them. So that's a big part of it. But the redundancy point is also really important because a lot of these data centers, in the past, customers might want a redundant circuit into a data center, maybe not. But the hyperscalers are actually looking for 4 different redundant circuits into these data centers. And that in and of itself is mind boggling. But when you're in a remote data center and you're the only fiber provider, there's 4 different opportunities. Now we don't always get all 4 of those opportunities. But when you're one of the few fiber providers near there with a backbone, you're almost always in the conversation for all of those. So it's -- in other words, it's not vendor diversity, it's really route diversity that they're looking for. And we're in a unique location -- unique position to service that.

And something that we start -- or we've been hearing more of, but I'm not sure how you're able to manage it is that people are worried about having enough fiber and having enough of the supply chain, whether it's construction or materials. Do you have any concerns that the supply chain is going to be constraining for you over the next few years?

I think it's -- I do have concerns and because we -- that's the kind of thing we're supposed to think about and be focused on. But I don't see us having any issues or at least in the near term. And by the way, that's a high-class problem when there's so much activity going on that fiber is a constraint. But I think that we're one of the few large remaining fiber providers that are building at scale. And when you consider that we're building at Kinetic and we're building at Fiber Infra and you compare that to others. I mean, there's a handful that are building more than we are, but not many. And so that does get us a seat at the adult table as we like to say.

And so when it comes to our ability to procure fiber on time and at reasonable cost, we have, I think, the right relationships and the right amount of leverage in order to make that happen. And also, our customers are procuring fiber for themselves, and we benefit from that at times. And we've had customers who have channeled fiber our way, if we've needed it to help them -- to help us build on time for them. So I think at this moment in time, I feel good about our ability to manage through that.

One of the last things I want to hit on is something that you talked about a little bit with the 20-terabit deal. But how does FastWaves going to really kind of accelerate your business over the next few years because you seem really into...

Yes. We spent millions of dollars on that FastWaves marketing brand. I'm kidding. Look, I think the ability to turn up waves in a short period of time is a nice to have, but not a must-have. So what I mean by that -- and FastWaves, just for those of you who don't know, that is our product where we commit to a customer to turn up a wave within 21 days that's our committed SLA. We've been executing on that at around 14 days or maybe a little bit less. And it is important to have that because occasionally, customers do come to you and say, hey, I need this wave, and I need it quickly. And so for us to have that product is important, and it does give us an advantage relative to a lot of companies that don't have that product.

With that said, when it comes to these mega wave projects or even 400 gig and certainly 800 gig waves, those are not overnight decisions that customers make. These are usually months in the making, and we have a heads-up weeks, months in advance. And so those are not deals that we win because we have the FastWaves product. We win FastWaves because of the exception, not necessarily the rule on the big wave packages. And ultimately, for us, we don't want to compete on Tier 1 to Tier 1 routes. We want to compete on Tier 2 and Tier 3 routes where we have route diversity and we have route uniqueness that give us the ability to compete on those things as opposed to on price. So that's our wave strategy, and I'm confident that we're going to capture some share.

It feels like it's a differentiation that you're able to deliver for both types. But we're out of time. Thank you.

Thank you, Richard. Thank you all.

Good morning and welcome to today's conference call to discuss the First Quarter 2026 Uniti Group's Earnings Conference Call. My name is Michelle and I'll be your operator for today. Today's call is being recorded and a webcast will be available on the company's Investor Relations website, investor.uniti.com beginning today and will remain available for 365 days. [Operator Instructions]

It is now my pleasure to introduce Bill DiTullio, Uniti's Senior Vice President of Investor Relations and Treasury. Please begin.

Thanks, Michelle. Good morning, everyone, and thank you for joining today's conference call to discuss Uniti's first quarter 2026 results. Speaking on the call today will be Kenny Gunderman, our CEO; and Paul Bullington, Uniti's CFO. John Harrobin, President of Kinetic, will also be joining us this morning during Q&A. Before we get started, I would like to quickly cover our safe harbor statement. Please note that today's remarks may contain forward-looking statements.

These statements include, but are not limited to, statements regarding Uniti's fiber build strategy, the business' growth potential, our 2026 outlook and other statements that are not historical facts. Numerous factors could cause actual results to differ materially from those described in the forward-looking statements. For more information on those factors, please see the section titled safe harbor statement in the accompanying presentation and the Risk Factors sections in our filings with the United States Securities and Exchange Commission.

With that, I would now like to turn the call over to Kenny.

Thanks, Bill. Good morning, everyone, and thank you for joining. Uniti is off to a great start in 2026 and we're executing well on our strategy as the premier insurgent fiber provider. We have a terrific embedded fiber base and are aggressively building more fiber to future-proof our network. We're continuously elevating our game from an operational excellence perspective and we're putting the customer first by being customer obsessed. For many years and continuing through today, we've been building fiber first or early into Tier 2 and 3 markets and that strategy has proven successful.

We are consistently growing traditional wholesale and enterprise fiber revenue at 10% to 15% and now consumer fiber revenue at over 20% with an insurgent share taker mentality. Having fiber in unique locations is also advantageous from a long-haul wholesale perspective as we've been selling less competitive, but increasingly desired routes. Sometimes it's better to be fortunate than smart and our footprint happens to be located in or near markets that have power and land availability, which is giving us an outsized opportunity to build for the AI revolution.

Fiber is clearly viewed as a mission-critical asset in a way that it has never been before. Plus in an increasingly converged world where there is less and less white space to build fiber first, our footprint and network grow in strategic significance every day. Our business is being fueled by twin engines, including the fiber-to-the-home build at Kinetic and the hyperscaler AI build at Fiber Infrastructure. We are well positioned strategically and we have the right assets, plan and team in place going forward.

We demonstrated strong results in the first quarter by executing on that strategy. Total fiber revenue grew 15% year-over-year. Fiber revenue at Fiber Infrastructure grew 13% and we had the third highest quarter of bookings ever at Fiber Infrastructure. At Kinetic, we had the strongest quarter ever of gross adds and the highest number of homes constructed in nearly 4 years. Importantly, and back to my comments about being customer obsessed, we had the best quarter of consumer fiber churn ever at Kinetic.

As highlighted on Slide 5, our priorities have not changed for the year. Despite some unprecedented winter storm activity during the first quarter, we're well on our way to ramping our fiber-to-the-home build at Kinetic targeting 450,000 to 500,000 new homes with fiber in 2026. In fact we built 45,000 new homes in March and another 45,000 new homes in April. In Fiber Infrastructure, we're continuing to benefit from all of the tailwinds driving wholesale fiber, including fiber-to-the-home, mobile wireless, satellite and of course hyperscaler and generative AI demand.

For the hyperscalers, we foreshadowed even more activity in 2026 than last year and thus far, our expectations have been exceeded. Importantly, we are continuing to show solid lease-up on our new hyperscaler builds demonstrating our discipline in making investments in this space. At Uniti Solutions, we're seeing growing success in cross-selling products into our on-net fiber base at Uniti Fiber and Kinetic. Today, we estimate our managed services attachment rate to be below 0.1x at Uniti Fiber and we think it could be materially higher over time.

Lastly, as Paul will comment on later, the ABS opportunity to fund our business cost efficiently also continues to grow. 2026 is an important inflection year for Uniti and in particular is a critical investment year at Kinetic. As such, showing progress towards key goals is critical and we previously committed to some milestones as highlighted on Slide 6 to demonstrate that progress. We achieved our first milestone during the fourth quarter of greater than 50% of Kinetic subs now on fiber. And in April, we achieved our second milestone of greater than 50% of Kinetic's consumer revenues on fiber.

We remain very confident in the remainder of our milestones, including achieving consolidated revenue and EBITDA growth in 2027. Slide 7 shows we're well on our way to 3.5 million homes passed with fiber and 1.25 million fiber subs by the end of 2029 and we're also closer to 90% of our revenue coming from our core business. We are laser-focused on operational excellence, customer obsession, intensely growing our fiber business and executing on our strategy of building fiber into unique locations, including overbuilding legacy networks and moving customers on to our own fiber. All of this combined with aggressively managing out of legacy services will lead to growth.

As I mentioned earlier, Kinetic consumer fiber churn was a bright spot for the quarter as highlighted on Slide 8. We were very candid when our merger closed that consumer fiber churn was too high and it was going to be a big focus area. We followed through on that promise and expect there's room for further improvement. We believe with the various actions we've taken to date plus future planned actions, we will bring Kinetic fiber churn down to industry-leading levels just like those we've had at Uniti for years. We're also using best practices brought over from Frontier, Ziply and others led by John Harrobin's team.

Managing churn effectively is a team effort and we've actually made it a company-wide metric for our incentive bonus plan as a result. Turning to Fiber Infrastructure on Slide 9. The opportunity in wholesale fiber right now is generational in nature and we're extremely well positioned with the right strategy, leadership, assets to capture our share in both dark fiber and waves. There has never been a better time to be a wholesale fiber provider. Although we are building substantial amounts of new fiber, especially for the hyperscalers, we're doing it profitably and our scaled national footprint gives us terrific lease-up potential driving our blended anchor lease-up yields to 35%.

Importantly, although we're building some attractive new greenfield routes for hyperscalers, close to 80% of our hyperscaler business actually includes selling all or at least partial existing infrastructure. As such, the combined IRRs on the hyperscaler deals sold to date is approximately 30%. As I mentioned last quarter, we expect to build approximately 6,000 new route miles of fiber and we expect to get close to $1 billion of cumulative nonrecurring cash revenue by 2028. Over the next 3 years, a meaningful portion of our economics is supported by executed contracts, including 100% of the economics included in our 2026 guidance.

On the other side of this 3-year time horizon, we not only expect more fiber builds to come, but importantly, we expect to really ramp the lease-up of these builds. This will lead to additional nonrecurring cash revenue and up to $500 million of recurring annual cash revenue. As a result, we expect to achieve a total return on our capital of 2x to 4x. We've often stated that the current build phase for hyperscalers is exciting, but we have also said that the inference phase is the most exciting.

When the inference phase fully ramps, a more expansive group of customers will be using AI and will need highly reliable, low latency, ultra-high bandwidth connectivity and the mission-critical advantages of fiber will really rise above all other technologies. Fixed wireless, LEO and even cable remain somewhat competitive today at the edge. But over time, that will dissipate. Customers large and small will demand fiber at the edge, which brings into focus our 5 million connected endpoints and provides us an opportunity to win back share from these other technologies.

All of this edge demand will drive substantially more traffic on to our wholesale network. As such, we are not only working hard to prepare for the inference phase by building fiber to more homes and businesses as well as upgrading our towers and small cells, but importantly, we're preparing to become more of a share taker in the waves market. As illustrated on Slide 11, the waves market is projected to grow at close to 10% a year and we believe that could be conservative. Uniti has less than 5% waves market share today, which is similar to our other fiber products where we are an insurgent share taker.

We recently launched FastWaves, a product which has substantially faster turn-up intervals than we've had in the past. We're not enabling waves capability all across the country. We're being selective about where we like waves and we're focusing on routes that are unique to Uniti that give us a competitive advantage. These routes are particularly enhanced by the unique build cycle that we're currently undertaking for the hyperscalers.

As we complete long-haul builds that connect Tier 2 and 3 markets, we expect the hyperscalers to be increasingly large wave customers eventually pivoting away from the current dark fiber-intensive build cycle and becoming more regular wave customers. As an example and we think a leading indicator, in May we sold a 20-terabit wave package for a hyperscaler, the single largest lit bandwidth order in Uniti's history. And there are an increasing number of deals like this in our sales funnel.

With that, I'll turn the call over to Paul.

Thank you, Kenny. Starting on Slide 13, I'd like to review key first quarter highlights for both Kinetic and our Fiber Infrastructure segment. We saw another strong quarter with significant progress made across several fronts. Starting with Kinetic, we expanded our fiber network to pass an additional 88,000 homes with fiber, our highest level of new passings in almost 4 years ending the quarter with approximately 1.94 million homes passed with fiber. Kinetic also added 30,000 net new fiber subscribers during the first quarter ending the quarter with 564,000 total fiber subscribers.

As Kenny mentioned earlier, we had the highest quarter on record for fiber gross adds and total Kinetic fiber subscribers grew 22% from the prior year period. Kinetic Consumer Fiber revenue grew 26% year-over-year during the quarter. This growth is being driven by strong adoption of our fiber-to-the-home product bolstered by the performance of the various marketing initiatives at Kinetic that target both our newer and more seasoned cohorts. At Fiber Infrastructure, we recorded consolidated bookings MRR of approximately $1.6 million, the third highest level on record.

Slide 14 highlights the sustained momentum we are seeing within Kinetic Fiber. We achieved fiber penetration of 29.1% during the quarter, which was up 20 basis points sequentially and 120 basis points year-over-year. Fiber ARPU also continued its positive trend increasing 5% year-over-year. These trends support higher lifetime value per passing and improving returns on our incremental capital spend for fiber. Turning to Slide 15. The strong improvement in our cohort fiber penetration is being driven by highly targeted marketing, customer experience and customer retention initiatives being deployed by the Kinetic team.

Penetration levels in our year 1 2025 cohort are now exceeding year 2 penetration rates in the prior year cohort and year 3 penetration rates in our older cohorts. We expect to maintain or improve this trajectory going forward and the team is now focusing on executing a deeper, more sophisticated playbook to increase penetration in our older cohorts. Given our current trajectory, we remain confident that our 40% terminal penetration target is very achievable and perhaps conservative given Kenny's comments earlier about winning back share from alternative technologies.

Slide 16 lays out our key targets for Kinetic in 2026. We remain on target to reach 2.3 million to 2.35 million homes passed with fiber by the end of this year, which would bring fiber coverage within the Kinetic footprint to over 50%, a significant milestone in our goal to reach 3.5 million homes by the end of 2029. We also expect to end the year with between 675,000 and 700,000 fiber subs and realize $635 million to $655 million of consumer fiber revenue in 2026, an increase of roughly 25% to 30% from the prior year.

Slide 17 provides a pro forma view of Uniti's consolidated results for the first quarter. Consolidated pro forma revenue and adjusted EBITDA were up 1% and 10% year-over-year, respectively, during the quarter primarily driven by the hyperscaler AI deals that were recognized during the quarter and partially offset by the continued declines at Uniti Solutions and in legacy copper and TDM services. This was the first quarter as a combined company that we achieved both top line and EBITDA growth, a significant first step in our goal to achieve full year growth by 2027. Kinetic fiber-based revenue, inclusive of consumer, business and wholesale services grew 16% year-over-year.

As we continue to execute on and accelerate our fiber overbuild plan, fiber services at Kinetic will deliver consistent strong growth quarter-over-quarter. In addition to the information provided in our earnings materials, we have also included supplemental pro forma financial information on our Investor Relations website. Slide 18 demonstrates that the growth in each of our core fiber lines of business has been very strong and we expect that growth to continue given the superior nature of fiber as a service. With this pace of growth, we expect fiber to overtake legacy services as the majority of our revenue by the end of 2026.

Please turn to Slide 19 and I'll now cover our full year 2026 outlook for the combined company. Beginning with Kinetic, we continue to expect revenues and contribution margin to be $2.15 billion and $905 million, respectively, at the midpoint. We expect to deploy approximately $1.2 billion of net CapEx at the midpoint of our guidance as we accelerate our fiber build. At Fiber Infrastructure, we still expect revenues and contribution margin to be $975 million and $560 million, respectively, at the midpoint for full year 2026. Our outlook for net CapEx at Fiber Infrastructure this year remains $140 million at the midpoint of our guidance and represents a capital intensity of approximately 14%.

As a reminder, we expect the revenue from large sales-type lease dark fiber deals to be lumpy and come in unevenly during 2026. More specifically, a significant portion of this revenue was recognized in the first quarter and the bulk of the remaining amount is still expected to be recognized later in the year, most likely the fourth quarter. Given the inherent variability of the hyperscaler sales-type lease revenue and in an effort to provide better guidance, we have included quarterly ranges for our 2026 outlook for total revenue and adjusted EBITDA.

Please also note that as has always been our practice, our net CapEx reporting offsets our gross CapEx by upfront payments received in an IRU arrangement as the cash received will offset a significant portion of the CapEx relating to these sales-type lease arrangements. Turning to Uniti Solutions. We expect revenues and contribution margin of $700 million and $310 million at the midpoint. As we've mentioned several times before, Uniti Solutions is not core to our go-forward Fiber Infrastructure strategy. However, this business does generate meaningful predictable cash flow.

While we expect revenue and EBITDA to continue to decline at a midteens pace year-over-year over the next few years, a crucial part of our strategy is to retain the most profitable portion of this business while winding down low-value legacy and TDM services. Altogether, we continue to expect consolidated revenue and adjusted EBITDA of approximately $3.63 billion and $1.45 billion at the midpoint of our 2026 outlook with consolidated net CapEx of about $1.4 billion. Finally, I'd like to provide some brief comments on our capital structure.

Since announcing our agreement to merge with Windstream, we have successfully executed on a series of planned actions that were systematically implemented to extend our debt maturities, lower our overall cost of debt, establish access to new debt markets and optimize our mix of secured and unsecured debt and drive meaningful interest expense savings. Slide 20 highlights partially as a result of these actions the blended yields on our debt have improved significantly, falling an impressive 600 basis points over the past 3 years from around 12.5% in February of 2023 to around 6.5% today on a blended basis.

We continue to believe that Uniti has significant and growing access to ABS capacity and that ABS will play an increasing role in our capital structure given its competitive cost advantage. As a result, I expect us to continue to be active in the ABS market this year. However, as I've said many times previously, we intend to be balanced in our approach and maintain a healthy mix of both ABS and non-ABS debt in our capital structure. While ABS will be an important part of our strategy to fund the strategic investments we are making in our business, it is not the only source of capital we have at our disposal.

For example, as has been our practice at Uniti, we are constantly evaluating our portfolio of assets for optimization. Optimization opportunities could include assets that are underutilized or fallow, assets that are outside of our prioritized footprint or assets for which we can receive premium valuation multiples. As we mentioned last quarter, we believe there are $500 million to $1 billion of noncore assets that we could monetize.

As Slide 21 shows between excess fiber, noncore and nonclustered assets in operations such as select nonclustered kinetic and non-Southeast fiber infrastructure markets as well as spectrum and other real estate assets, we believe the opportunity exists to generate material proceeds over the next 12 to 36 months. It is important to note that the monetization of these assets would have a negligible effect on our adjusted EBITDA as many of them are underutilized today and currently produce minimal to no cash flow for the business. To be clear, any divestiture would be entirely opportunistic. And while we haven't announced any transactions yet, we have made significant progress on multiple deals. So hopefully, more to come on that in the coming months.

With that, we'd be happy to take your questions. Operator?

[Operator Instructions] And the first question is going to come from Frank Louthan with Raymond James.

Couple of quick questions, if I can. What are you seeing from a competitive standpoint either from FWA or satellite? And then can you just clarify, it seems that you had quite a beat in the quarter, but did not really raise the guidance. Just walk us through what's playing into that variability, what kind of was pulled forward in the quarter? And I appreciate the quarterly layout for the guidance, but why the pace of that, just to be clear, on what you're seeing there? I assume that the Q1 upside you probably had some idea of going into the quarter when you gave the initial guide, but walk us through what's impacting that?

Frank, it's Kenny. I'll take your second question and then I'll ask John to chime in on the first one. Yes, look, we're very excited about the results of this quarter. It's in line with our plan. It's very much expected and hopefully foreshadowed with respect to our guidance that there'd be some lumpy quarters from a revenue and EBITDA perspective because of the large hyperscaler deals that were in our funnel and frankly, fully contracted. And so coming into the year, we have a schedule laid out of which deals should hit in which quarter and thus the quarterly guidance to help give you some idea of what that cadence should look like.

So the quarter is not a surprise for us although I'd say probably a little bit better than planned not really because of the hyperscaler deals, but because of some of the other areas of the business where we're outperforming. And when you look out for the rest of the year, to be candid, yes, our business is tracking ahead of the midpoint. And so we're feeling optimistic about where the business is heading from a trajectory point of view and we debated raising guidance. But we ultimately decided to stick with where we are because some of these larger deals can kind of move around a month here or a month there, which can sway performance or sway quarterly results, if you will.

But with that said, with respect to the optimism in the business and actually what's in the funnel and what's contracted and we're in the process of turning up, I would say we're more optimistic about the business than we were before and we're more optimistic about the upside in the plan relative to the midpoint. So I think you're hitting on a good theme, Frank, and you're directionally thinking about it the right way. And ultimately, a lot more good things to come in the coming months and quarters.

And Frank, you asked about FWA and LEO. In our fiber markets, we had record top line growth and record churn so we're not seeing an impact of their efforts in our fiber markets. In our copper markets, we do see it a little bit. Nothing changed this past quarter with respect to FWA. But for the first time this past quarter, we did see a pop in LEO activity and we see that in our churn figures in our copper markets this past quarter. I think it's a combination of their aggressive promotion on rates and also free equipment and the timing of our price increases.

So it's kind of a double whammy there in our copper markets. We know that we're building fiber as fast as we can everywhere and this is why. So we view that LEO churn as temporary churn in some respects because we know when we build fiber in those markets, we'll get that back. As Kenny alluded to before, when we come with fiber, we see the benefits of that. And we even see it in some of our early RDOF markets that we've built out that didn't have a provider before. We do win customers from Starlink there. So I hope that answers your question.

Great. And was the price increase just on copper or was it across the board for Internet?

So we did a price increase in copper in late 4Q and we'll do another one in the coming months. And we did a January and February 1 fiber increase in our fiber business.

And the next question will come from Gregory Williams with TD Cowen.

Great. Two questions, if I may. First one, I'm not asking on any specific conversations of deals, but I'm curious to hear your thoughts if you'd sell Kinetic assets sooner rather than later. In the past you mentioned waiting until you approach 3.5 million homes to extract more value. Just wondering if that calculus has changed at all. And just second question, are you seeing any delays in your customers accepting orders or are you seeing any rising cost of equipment because some of your peers were saying so last week.

So Greg, I'll take a couple of those and I may ask Paul to jump in as well. But we're not really seeing any delays on orders I think and I assume you mean on customers turning up circuits and not really any delays there. I think we always get a deployment schedule with our customers and occasionally the schedule might slip a little bit here and there, but nothing material. I think on equipment costs, we are seeing some higher costs in customer CPE a little bit and we're also seeing some higher costs in conduit pricing a little bit from the higher cost from resin, if you will. But the reality is we're not -- we bake a lot of that into our guidance for the year.

So those expectations are fully baked into what our expectations were coming into the year. And we, frankly, have plenty of inventory that we don't really see any impact from it beyond that. And I think although we're not the biggest in the industry, we're of scale. So when it comes to getting in line with our vendors and having leverage with our vendors when it comes to pricing on equipment costs and timelines on getting equipment, we may not be at the front of the line, but we're pretty high up in the line to get whatever it is we need.

With respect to Kinetic, look, there's no hard and fast timeline for us. And Greg, you know from our history, we're always active in the M&A market and we've bought and sold assets over the years, including at times when assets were strategic to our business. So going back over the years, we've sold our tower business. We've sold fiber operations in the Northeast and the Midwest. And so there's no timeline on execution there. We're very focused on achieving shareholder value as soon as we possibly can and if M&A is a tool for us to do that, then we're absolutely open-minded to that in the near term.

And the next question is going to come from Richard Choe with JPMorgan.

I wanted to follow up a little bit on the hyperscale opportunity in your kind of pipeline or backlog. Kind of how should we think about how much revenue we will be hitting this year versus the next few years given what you have signed? But I guess more importantly, each of the trends that we've seen from the hyperscaler AI build has been a lot bigger than anyone expected and it looks like it's ramping up in fiber, but the real kind of deals to be signed are coming down the pipeline. Can you give us a little color on what you're seeing there and what you think will come down the pipeline for the next few years?

Richard, I'll start on that one and then ask Paul to chime in. But yes, look, I think we've said this probably 3 or 4 quarters in a row that we continue to be surprised to the upside on activity among the hyperscalers and in AI in general. And I constantly remind myself not to conflate hyperscalers with AI because they're obviously highly correlated, but they're different. Hyperscalers are building today to enable AI, which is really going to come in full force when the inference phase hits. And I say that because with respect to demand, we're seeing it growing every month, every quarter.

We continue to have a lot of conviction with respect to what we gave as the multiyear guidance last quarter and, as I mentioned in my response to Frank earlier today, continue to have very strong conviction about what we expect to see this year. And I'll let Paul comment a little bit on those numbers in a second. But ultimately, we've talked about how hyperscalers used to buy 12 to 24 strands and now they're buying 864 to 1,728 and extra conduits. That 50x to 100x to 200x multiplier on what they're buying is terrific and that's not a fiber package for 10 years.

That's a fiber package for a period of time and we're seeing them come back and buying more on top of that in the near term. And we've actually had hyperscalers tell us that their 10-year plan, if there is one, it starts to reach 7,500 to 10,000 strand miles of fiber over a 10-year period. And I'm not sure that's the limit, frankly, and that's just 1 customer. So that's before you ever even get into lease-up. And as we've said, this build cycle is exciting for us because we're building strategic network. And as I said in my prepared remarks, 80% of what we're doing with the hyperscalers is either connected to our existing network or it's selling existing infrastructure.

And if you think about that, what that basically means is we're building contiguous network. So even when we're building greenfield, we're building contiguous network that's attached to the rest of our network and that's all to set us up for the lease-up phase and the inference phase and as we foreshadowed, that's what we think will be the most exciting phase of opportunity for us. And we specifically called out this quarter a 20-terabit wave package that we signed in the quarter. That's 50 400-gig waves. So back to that 50x to 100x multiplier that we're seeing in dark fiber, we're now starting to see that in lit fiber.

And that's when you get beyond the lumpy onetime revenue items and start getting into the recurring revenue, which is extremely exciting and value accretive to us. So all of that back to your question, I think you're right that the opportunity is continuing to grow. We continue to see it. And as I mentioned with respect to our outlook for the rest of the year, we're more optimistic about the plan for the rest of the year than we were coming into the year. It's just the timing related to some of these deals is a little bit hard to predict especially this early in the year. So with that, Paul, I'll turn it over to you.

Yes, I'll just add a little bit to that, Richard. So as you said, Kenny, we continue to be more and more optimistic and more and more excited as we see the demand really continue to grow in the space. With regard to your question, Richard, specifically about this year and sort of over the coming years, we have laid out in a pretty detailed slide sort of our overall view of how this revenue can grow over the next several years from a 2026 standpoint -- and I would refer you to that slide. But from a 2026 standpoint, we haven't given specific guidance on the hyperscaler onetime sales-type lease dark fiber revenue.

But we have given guidance of that Fiber Infrastructure business year-over-year and we've said that most of that growth year-over-year is really being driven by this hyperscaler dark fiber opportunity. I will say in the first quarter of this year, we expected -- as we've said, we expected to have an outsized amount of that onetime dark fiber sales-type lease revenue show up. We had about $70 million of that revenue in our first quarter numbers. And then we've laid out kind of quarterly for the rest of the year that guidance so you can see that lumpiness and better know how to expect that revenue to show up over the rest of the year.

But we would expect it to be sort of front-end loaded in the first quarter with that result I just mentioned and then more back-end loaded in the back half of the year. And as we move forward, going forward we expect for the next 3 years really to have similar type of revenue and we think optimistically growing revenue for the sales-type lease revenue kind of year-over-year as we go through the next 3 years before we get to more of the inference phase that Kenny was talking about where we think the revenue is going to really start showing up in terms of recurring revenue as well as hopefully additional sales-type lease onetime revenue going forward.

It's nice to see it hitting the lit services too.

And the next question will come from Brendan Lynch with Barclays.

Kenny, maybe to follow up on some of your comments on Kinetic churn. One question would just be how much lower do you think you can bring those to think you referenced industry-leading levels. So what would that mean in terms of a percentage, maybe what your percentage target is and what some of the initiatives are to bring this down lower?

Brendan, I'll really quickly comment and then I'll turn it over to John because he's obviously leading this effort. But John was at Frontier when they had industry-leading levels and so that's part of what's leading us towards concluding that. And look, I think at the end of the day, fiber is becoming more and more mission-critical. As we've said, John mentioned that we're winning back share from some of the other technologies where we've lost in the past. And so I think in addition to the various efforts that we have ongoing and that John has proven successful at Frontier, the fact that the industry is moving in our direction is helping tremendously. But with that, I'll ask John to comment on the specifics.

Yes. We're encouraged by the first quarter results. I mean down 14% year-over-year at record levels and we talked last quarter about the actions we were taking to achieve that. And when you look at that juxtaposed with our early life customer churn, these are the customers that first sign up with us, we see even a larger improvement in those customers down 20% year-over-year. And that's a good sign for the health of the long-term customer relationship because we get it right at the beginning, we know that will carry forward for the customer's life.

We put in place a bunch of mechanisms to identify and resolve customer pain points and this is not only driving our loyalty, but also our overall efficiency. When you think about it, when -- like last quarter we actually beat just slightly our record from last quarter. So we don't list it as a record because it's kind of a tie. But a record for trouble tickets and truck rolls, right? Not only is that great for the customer, but it means we're more efficient. We're rolling less trucks. We have the highest installed completion rates that we've ever had meaning we don't have to invest in the cost of going out to the customer's location again.

We have the lowest repeat rates that we've ever had in terms of our service and repair function. That means we save on those secondary truck rolls. And our transfer rates are at their lowest in all-time history. So that is not only durable in terms of solving customer problems by the way we went about that, but also it makes us more efficient. So I think we'll see the improvement continue and what I mean by improvement, churn is a seasonal game, right? One quarter and fourth quarter are a little bit lower than other quarters and this past quarter we improved churn by 24 basis points, 25 basis points. Our objective and our expectation is to widen that improvement year-over-year for the next couple of quarters, but it will follow seasonal patterns.

Okay. Great. Maybe 1 for Paul. Considering where you have been able to issue ABS debt, your optimal mix between secured and unsecured debt, how much lower do you think you can bring your weighted average cost down?

That's a great question. ABS, we printed that last deal at a blended coupon of about 5.7%. So with an all-in sort of blended yield of 6.5%, we're really driving down towards that level. But I think as we add some additional ABS into the mix, which I mentioned in my prepared remarks we'd like to do, I think we can certainly continue to drive that down. The ABS market continues to I think really hang in there well. I think we're off of the March tights in the market a little bit, but not a whole lot. So I think as we continue to add ABS, the benefit to our cost of capital, comparative advantage there is super strong.

But I wouldn't -- while we're excited about ABS, I think we're very excited about how our debt in the other markets have performed. And I think as we get opportunities to refinance our other high yield debt, our loan debt, we think we're going to continue to be able to push that cost of debt down as well at least at current market rates. And so I think that is as just an important piece of how we continue to drive net interest savings and our cost of capital is being able to continue to access the other markets in addition to ABS successfully.

So not a specific answer to your question. I mean some of that's going to be certainly market dependent. But in the current market today, I think we can -- I've been really pleased. Every deal that we've done over the last couple of years, we've hit a new low mark and the trend keeps going down. And I expect that trend to continue as long as markets can hold, which obviously we can't control that. But from our perspective and what we're doing in the market, I really like the trend.

[Operator Instructions] At this time, I am showing no further questions. This will conclude today's conference call and thank you for participating. You may now disconnect.

Good morning, and welcome to today's conference call to discuss Uniti's Fourth Quarter and Full Year 2025 Earnings Results. My name is Gigi, and I'll be your operator for today. Today's call is being recorded, and a webcast will be available on the company's Investor Relations website, investor.uniti.com, beginning today and will remain available for 365 days. [Operator Instructions]

It is now my pleasure to introduce Bill DiTullio, Uniti's Senior Vice President of Investor Relations and Treasurer. Please begin.

Thank you, Gigi. Good morning, everyone, and thank you for joining today's conference call to discuss Uniti's fourth quarter and full year 2025 results. Speaking on the call today will be Kenny Gunderman, our CEO; and Paul Bullington, Uniti's CFO. John Harrobin, President of Kinetic, will also be joining us this morning during Q&A.

Before we get started, I would like to quickly cover our safe harbor statement. Please note that today's remarks may contain forward-looking statements. These statements include, but are not limited to, statements regarding Uniti's fiber build strategy, the business's growth potential, our 2026 outlook and other statements that are not historical facts. Numerous factors could cause actual results to differ materially from those described in the forward-looking statements. For more information on those factors, please see the section titled Safe Harbor Statement and the accompanying presentation in the Risk Factors sections in our filings with the United States Securities and Exchange Commission.

With that, I would now like to turn the call over to Kenny.

Thanks, Bill. Good morning, everyone, and thank you for joining. 2025 was a landmark year for Uniti. We successfully closed our transformative merger with Windstream, establishing us as the premier insurgent fiber provider. We have a scaled national wholesale fiber footprint that puts us in a rare company to win large-scale Fiber Infrastructure deals, and we are first or early with fiber to hundreds of Tier 2 and Tier 3 markets around the country.

Within a few months of closing the merger, we have established a new insurgent leadership team with recent successful experience transforming fiber-to-the-home businesses. We reignited the fiber builds at both Kinetic and fiber infrastructure and have significantly lowered our cost of capital through several landmark ABS transactions. We are well positioned strategically. We have the right assets and plan and team in place to future-proof our business.

Slide 5 highlights the early success of our execution. In the fourth quarter of last year, we had a terrific year-over-year revenue growth in our core fiber business of 13%. At Kinetic, where our transformational efforts are most acute, consumer fiber gross adds of 38,000 in the fourth quarter were the highest ever, and that adds a 28,000 were the highest in almost 3 years. Bringing Kinetic churn down to our industry-leading levels at Uniti is a big focus of ours, and we've already started to see success, posting the best consumer fiber churn since the pandemic. Importantly, we also hit an inflection point in December and have heavily ramped up the build.

Our business is being fueled by twin engines right now, including the fiber-to-the-home build at Kinetic and the hyperscaler AI build at Fiber Infrastructure. As we previously foreshadowed, the fourth quarter was a record quarter for us in terms of new bookings, bringing the largest customer contracts ever signed in our company's history.

Our priorities won't change this year. We're going to ramp our fiber-to-the-home build at Kinetic, targeting 450,000 to 500,000 new homes, almost doubling last year's activity, and approximately 700,000 consume fiber subs by the end of 2026. At Fiber Infrastructure, we're continuing to benefit from all the tailwinds driving wholesale fiber, including fiber-to-the-home, mobile wireless, satellite and, of course, hyperscaler and generative AI demand, among others. For the hyperscalers, we expect to see even more activity in 2026 than last year. Importantly, we're now starting to show solid lease-up on these builds, demonstrating our discipline in making investments in this space.

At Uniti Solutions, we're beginning to cross-sell products into our on-net fiber base at Uniti Fiber and Kinetic. Today, we estimate our managed services attachment rate to be below 0.1x at Uniti Fiber, and we think it could rather be materially higher over time. Lastly, we're continuing to -- we're going to continue our track record of optimizing the balance sheet through disciplined access to the capital markets as well as through monetizing noncore assets, as Paul will discuss later.

2026 is an important inflection year for Uniti and in particular, is a big investment year at Kinetic. As such, showing progress towards key goals is critical, and we previously committed to some milestones as highlighted on Slide 7. We achieved our first milestone during the fourth quarter of greater than 50% of Kinetic subs now on fiber, and we are on track to achieve the other critical milestones throughout the course of this year and next. As such, we still expect to realize consolidated revenue and EBITDA growth in 2027. We are laser-focused on operational excellence, customer obsession, intensely growing our fiber business and executing on our strategy of building fiber into unique locations, including overbuilding legacy networks and moving customers onto our owned fiber. All of this, combined with aggressively managing out of legacy services, will lead to growth.

As Slide 8 illustrates, we expect to show progress on key metrics every quarter. And as you can see, we continued to grow in the fourth quarter of last year. We're well on our way to 3.5 million homes passed with fiber and 1.25 million fiber subs by the end of 2029, and we're also closer to 90% of our revenue coming from our core business. Our price on these metrics reinforces our conviction that we're getting substantial value for our shareholders every step of the way.

As outlined on Slide 9, in order to fully maximize the opportunity in front of us, we have to quickly transform Kinetic into insurgent fiber provider as opposed to a traditional telecom operator. Within just months of closing our merger, we now have an insurgent leadership team in place. Led by John Harrobin, we've hired over a dozen new leaders in construction, sales, operations, customer loyalty and analytics that have relevant recent fiber-to-the-home transformation experience. We've also revamped our go-to-market strategy by focusing on the customer and eliminating obvious pain points, investing in high-impact value-added products and services and expanding our direct sales and channel partnerships.

As I mentioned earlier, we've also successfully reignited the build by deemphasizing subsidized bills and bringing in third-party crews to help us build more quickly. The metrics I went through earlier indicate that our transformation is showing early signs of success, and I'm highly confident that will continue. With that said, we're in the early days. So 2026 will not only be an investment year, but a major inflection year on several fronts. While fully expected to hit some bumps along the road towards achieving these goals, in the end, we will be successful in accomplishing our long-term objectives.

Turning to Fiber Infrastructure. The opportunity in wholesale fiber right now is generational in nature, and we're extremely well positioned with our strategy, leadership and assets to capture our share in both dark fiber and waves. There has never been a better time to be a wholesale fiber provider. Broadband trends are accelerating across virtually all categories, especially AI-driven use cases, as evidenced by our record quarter of new bookings. Although we're building substantial amounts of new fiber, especially for the hyperscalers, we're doing it profitably, and our scaled national footprint gives us terrific lease-up potential, driving our blended anchor lease up cash yields to 34%, the highest we've ever seen.

We're in the early innings of an unprecedented fiber build within our industry. This opportunity continues to grow for us. So today, we're providing a multiyear view of what we believe the opportunity for Uniti is at this moment in time. First, I want to reiterate that our focus is on disciplined strategic fiber builds and related economics. The same disciplined growth we provide in prior build cycles.

The table on the right side of Slide 11 shows the early returns we're seeing on the builds to date. We've chosen to use IRRs versus cash yields due to how deals are structured with large upfront payments from the customers. With that said, you can see that we're not only getting strong economics on the anchor, but the lease-up as well. We're highly confident that the lease-up will continue to grow substantially, especially since we're building dense fiber networks that has key strategic locations within our footprint.

When we build fiber for the hyperscalers, we plan to build inside our existing footprint or we'll look for ways to strategically expand our connected footprint. We're not building one-off networks. We're building networks where we have the ability to lease them up for many years into the future, and we see a long runway, especially when we start to hit the inference phase. We're also seeing benefits from some of these bills by using the backhaul for our own business, including and especially at Kinetic.

Slide 12 illustrates over the next 3 years, we expect to build approximately 6,000 new route miles of fiber and we expect to get close to $1 billion of cumulative nonrecurring cash revenue and up to $25 million of recurring cash revenue by 2028. Over the next 3 years, a meaningful portion of our economics is supported by executed contract, including 100% of the economics included in our 2026 guidance. Beyond this 3-year build cycle, we not only expect more fiber builds to come, but importantly, we expect to really ramp the lease-up. This will lead to additional nonrecurring cash revenue of approximately $500 million after 2030. As a result, we expect to achieve a total return on our capital of 2 to 4x.

With that, I'll turn the call to Paul.

Thanks, Kenny. Starting on Slide 14, I'd like to review key fourth quarter highlights for both Kinetic and our Fiber Infrastructure segment. We saw another strong quarter with significant progress made across several fronts. Starting with Kinetic. We expanded our fiber network to pass an additional 80,000 homes with fiber, our highest level of new passings in over 3 years, ending the year with approximately 1.9 million homes passed with fiber.

Kinetic also added 28,000 net new fiber subscribers during the fourth quarter, ending the quarter with 535,000 total fiber subscribers. As Kenny mentioned earlier, this was the highest level of net adds in almost 3 years, and total Kinetic fiber subscribers grew 20% from the prior year period. Kinetic consumer fiber revenue grew 24% year-over-year during the quarter. This growth is being driven by strong adoption of our fiber-to-the-home product, bolstered by the performance of the various marketing initiatives at Kinetic that target both our newer and more seasoned cohorts.

At Fiber Infrastructure, we recorded consolidated bookings MRR of approximately $1.7 million, tying the highest level on record.

Slide 15 highlights the sustained momentum we are seeing within Kinetic fiber. We achieved fiber penetration of 29% during the quarter, which was up 30 basis points sequentially and 150 basis points year-over-year. Fiber ARPU also continued its positive trend, increasing 5% year-over-year. These trends support higher lifetime value per passing and improving returns on our incremental capital spend for fiber.

Turning to Slide 16. The strong improvement in our cohort fiber penetration is being driven by highly targeted marketing initiatives being deployed by the Kinetic team. Penetration levels in our year one 2024 cohort now exceed year two penetration rates in our older cohorts. We expect to maintain or improve this trajectory going forward, and the team is now focusing on executing the playbook to increase penetration in our older cohorts. Given our current trajectory, we remain confident that achieving our 40% [ terminal ] penetration target is very realistic.

Slide 17 lays out our key targets for Kinetic in 2026. As Kenny alluded to earlier, we are targeting to reach 2.3 million to 2.35 million homes passed with fiber by the end of this year, which would bring fiber coverage within the Kinetic footprint to over 50%, a significant milestone in our goal to reach 3.5 million homes by the end of 2029. We also expect to end the year with between 675,000 to 700,000 fiber subs, and realized $635 million to $655 million of consumer fiber revenue in 2026, an increase of roughly 25% to 30% from the prior year. In terms of cost per passing, we expect the cost going forward will likely be in the $900 to $1,000 range, resulting in a blended cost of $800 to $900 per passing over the life of the fiber build program.

Slide 18 provides a pro forma view of Uniti's consolidated results for the fourth quarter. Consolidated pro forma revenue was down approximately 5% year-over-year during the quarter, primarily driven by the continued decline in legacy copper and TDM services and Uniti Solutions. However, top line growth in other parts of the business continue to be strong, with Fiber Infrastructure growing 6% year-over-year and Kinetic fiber-based revenue, inclusive of consumer and wholesale services, growing 16% year-over-year. As we continue to execute on and accelerate our fiber overbuild plan, fiber services at Kinetic will deliver consistent strong growth quarter-over-quarter. In addition to the information provided in our earnings materials, we have also included additional supplemental pro forma financial information on our Investor Relations website.

Slide 19 further demonstrates that the growth in each of our core fiber lines of businesses has been very strong, and we expect that growth to continue given the superior nature of fiber as a service. With this pace of growth, we expect fiber to overtake legacy services as the majority of our revenue by the end of 2026.

As a reminder, we will continue to face headwinds from legacy services over the next couple of years that will weigh on consolidated revenue and EBITDA. With that said, there are 3 important points I'd like to make. First, legacy service is in no way diminish the value of our core fiber business. Secondly, within a relatively short period of time, the shift to higher fiber revenue will make legacy services revenue increasingly less material. And thirdly, in the meantime, Uniti Solutions is generating significant and predictable cash flow.

Please turn to Slide 20, and I'll now cover our full year 2026 outlook for the combined company. Beginning with Kinetic. We expect revenues and contribution margin to be $2.15 billion and $905 million, respectively, at the midpoint. We expect to deploy approximately $1.2 billion of net CapEx at the [ midpoint ] of our guidance as we accelerate our fiber build.

At Fiber Infrastructure, we expect revenues and contribution margin to be $975 million and $560 million, respectively, at the midpoint, for full year 2026. Our outlook for net CapEx at Fiber Infrastructure this year is $140 million at the midpoint of our guidance, and represents a capital intensity of approximately 14%.

It's important to note that a meaningful driver in the year-over-year growth at Fiber Infrastructure is coming from dark fiber hyperscaler IRU deals that are expected to be accounted for as sales-type leases. Under GAAP, the present value of the lease payments from these deals are recognized as a onetime amount of revenue and EBITDA in the period that the fiber route is delivered to the customer. This differs from our typical IRU arrangements classified as operating leases, under which revenue is recognized ratably over the lease term.

Accordingly, we expect the revenue from these large sales-type lease dark fiber deals to be lumpy and to come in unevenly during 2026. More specifically, we expect a significant portion of this revenue will be recognized in the first quarter, with the bulk of the remaining amount to be recognized later in the year, most likely the fourth quarter. Please also note that as has always been our practice, our net CapEx reporting offsets our gross CapEx by upfront payments received in an IRU arrangement as the cash received will offset a significant portion of the CapEx relating to these [ sales ] type lease arrangements.

Turning to Uniti Solutions. We expect revenues and contribution margin of $700 million and $310 million at the midpoint. As we've mentioned several times before, Uniti Solutions is not core to our go-forward Fiber Infrastructure strategy. However, this business does generate meaningful predictable cash flow. While we expect revenue and EBITDA to continue to decline at a mid-teens pace over the year-over-year over the next few years, a crucial part of our strategy is to retain the most profitable portion of this business while winding down low-value legacy and TDM services. Altogether, we expect consolidated revenue and adjusted EBITDA of approximately $3.63 billion and $1.45 billion at the midpoint of our 2026 outlook, with consolidated net CapEx of about $1.4 billion.

On Slide 21, we have provided a tabular reconciliation of our pro forma full year 2025 results to our 2026 outlook that summarizes the contribution from our core fiber businesses as well as the impact from legacy and TDM services.

Finally, I'd like to provide some brief comments on our capital structure. Since announcing our agreement to merge with Windstream, we have successfully executed on a series of planned actions that were systematically implemented to extend our debt maturities, lower our overall cost of debt, establish access to new debt markets, optimize our mix of secured and unsecured debt and drive meaningful interest expense savings. As Slide 22 highlights, partially as a result of these actions, the blended yields on our debt have improved significantly, following an impressive 560 basis points over the past 3 years from around 2.5% in February of 2023 to around 6.9% today on a blended basis.

Recently, we closed on our inaugural ABS financing at Kinetic, which was unlocked as a result of the recombination of our businesses with resounding success. Our Kinetic ABS transaction saw the tightest spreads and highest demand for a deal of its kind, further validating the strength of the Kinetic fiber business and the attractiveness of the markets in which we operate. Further, in January of this year, we successfully completed a $1 billion add-on to our [ 8 and 5/8 ] unsecured notes, allowing us to take out our $500 million term loan with similarly priced unsecured debt. We intend to use the majority of the remainder of the proceeds from this transaction to opportunistically reduce other debt in the near term.

Going forward, we believe that ABS will play a growing role in our capital structure given its comparative cost advantage. However, as I've said many times previously, we intend to be balanced in our approach and to maintain a healthy mix of both ABS and non-ABS debt in our capital structure.

While ABS will be an important part of our strategy to fund the strategic investments we are making in our business, it is not the only source of capital we have at our disposal. For example, as has been our practice at Uniti, we are constantly evaluating our portfolio of assets for optimization. Optimization opportunities could include assets that are underutilized or [ follow ], assets that are outside of our prioritized footprint or assets for which we can receive premium valuation multiples. Based on our analysis over the past 6 months, we believe there are $500 million to $1 billion of noncore assets that we could monetize.

As Slide 23 shows, between excess fiber, noncore and non-cluster assets and operations, such as select nonclustered Kinetic and non-Southeast Fiber Infrastructure markets as well as spectrum and other real estate assets, we believe the opportunity exists to generate material proceeds over the next 12 to 36 months. It is important to note that the monetization of these assets would have a negligible effect on our adjusted EBITDA as many of them are underutilized today and currently produce minimal to no cash flow for the business. To be clear, any divestiture would be entirely opportunistic, and we are not currently running a formal sales process.

With that, we'd be happy to take your questions. Operator?

[Operator Instructions] Our first question comes from the line of Gregory Williams from TD Cowen.

Kenny, you noted the IRRs here for anchor [ reached ] up 22%, obviously, a great return. Can you help us with the mechanics? I mean it sounds like you have the network scale. And obviously, a lot of the upfront cash flow received that helps the NPV there. Is this sustainable? The way I think about it is with 22% returns, you [ did invite ] more competition? Or do you just have that breadth and scale to keep the competition out?

And then second question is just on housekeeping. The $1 billion of nonrecurring revenue you're seeing from now to 2028, can you help us with the cadence of that? Is that going to be sort of linear or ramp up in the later years?

Greg, I'll take the first one and then Paul, you can take the second. On your first one, Greg, yes, we're very pleased with those returns. And as you know, historically, we've typically shown cash yields versus IRRs when it comes to our anchor and lease-up builds. But in this case, those numbers well exceed our traditional anchor yields and place up yields. And so we felt that IRRs were probably a better number to show to give a true view of these deals.

And I think one of the reasons that you're seeing high numbers is because we are, in addition to some greenfield builds, we are selling some existing infrastructure. So that is a part of what we're doing with the hyperscalers. It has been for some time, and that's a big part of what we did in the fourth quarter of last year and some of the record deals that we talked about. So when you think about a greenfield build, the IRRs might be a little bit lower depending upon how much of an RC you have. But then when you blend that with mixing and selling some existing infrastructure, you obviously drive those yields higher.

And selling existing infrastructure either do the anchor or in lease-up, it's very analogous to the words when we describe lease-up, right? Because that's really what you're doing. You're selling the second, third, fourth customer off of a build or off of existing infrastructure. And that's really the core business that we're gearing towards. This build cycle is terrific. We're using it to fill in parts of the network that we have strategically wanted to build in the past. We're using it to strategically expand our footprint. And so the build cycle itself is great. But what we're really playing for is that $0.5 billion of recurring cash revenue that's building. And frankly, we feel great about that.

I think your question about these returns are attractive. Does that invite competition? I think the reality is yes, it does. That's why the entire fiber industry is focused on this opportunity and looking for ways to play in this space. But I do think -- and we've said this publicly, but I do think that the hyperscalers prefer to work with large-scale fiber providers who have breadth, who have expanded footprints across multiregions and importantly, have a track record of building both on time and on budget. And I think for us to drive these returns -- as I said, we're leveraging that existing footprint.

So I feel like we're really well positioned competitively, certainly relative to upstarts and even relative to other fiber providers -- large-scale fiber providers because we're targeting our backyard. We're building in areas where we've got a right to win. So I think we're going to continue to see these great returns going forward.

So Paul, do you want to take the second question?

Yes, I'll take the second. I'll just add -- and I'll add on to that last point you made, Kenny, and just say that the returns aren't necessarily equal. In most of these deals, we're leveraging existing assets to a great degree. So someone coming in to try to compete against those existing assets might not have a similar return profile. So keep that in mind as well.

In terms of the $1 billion you referenced and the cadence, we show in our materials today, the growth at Fiber Infrastructure year-over-year. That growth is being largely driven by these types of deals that are coming in immediately. So you can kind of see directionally a little bit of the impact in 2026 from these types of deals. And then we've already booked $670 million of total contract value. Not all of that is upfront, of course, but we're well on our way towards numbers that are approaching that $1 billion mark as well with what we are booking today and certainly with what we're seeing and have visibility to within the funnel.

It's a little hard to predict because these deals aren't all equal. Like I said a few minutes ago, some of these deals leverage existing assets and can be turned over to the customer fairly quickly. Some of them can take 2 to 3 years to deploy if there's significant construction involved. And so since we're not going -- we don't recognize the revenue from these upfront sales type leases until we deliver the fiber. It can take a little time between the signing of these deals and the delivery of the fiber and the recognition of the revenue.

So I think you're going to see, Greg, a build over the next 2 to 3 years as we continue to sell deals out of the funnel and work to execute on those and deliver the fiber. So I think you're going to see kind of a steady ramp over the next 2 to 3 years.

Our next question comes from the line of Frank Louthan from Raymond James and Associates.

Great. Can you give us the confidence you have in the resources for the expanded fiber build and then the hyperscale AI builds? Any concerns on labor or material availability to reach those goals?

And then a follow-up question. [ EchoStar ] has been canceling some of their leases with some of the towers. I just wanted to see what sort of exposure you guys might have there on the fiber side? And is any of that factored into your guidance?

Great. Frank, I'll take part of the first one, and then I'll ask John to comment on the Kinetic element of the build, and then I'll come back and talk about [ DISH and EchoStar ].

We feel great about where we are from a resource perspective. We've been planning for igniting -- reigniting the Kinetic build for 18 months, really since we announced merger. So a lot of time and effort went into that. And John joined Uniti well before the merger closed. I'm going to let him take it from there on Kinetic.

But on the Fiber Infrastructure side of the equation, we've been in build mode for years, and I think we've got terrific third-party contract relationships around the industry, including supply chain, relationships on procuring fiber and labor. And as -- Frank, as you know, there was a time when Uniti, we built a large portion of our fiber internally, but we pivoted away from that over the years. We're now outsourcing probably 90% of the fiber builds, and we've got a few internal strategic crews in Fiber Infrastructure to help us where we really need it.

But for the most part, we're relying upon really trusted third-party relationships where we've got a track record of performing in both directions. And so I feel great about it and think that when Paul is mentioning the deployment cycle for the next 3 years in this build cycle, like I said, 100% of what's in the funnel is contracted at this point for 2026 and roughly 50% of 2027 is contracted. So we're already working on deploying these deals and are well on track for deploying them on time. So feel great about it.

And John, you want to comment on Kinetic?

Yes. I'm really pleased with the progress at Kinetic. I mean 80,000 is significantly up since our prior quarter and among the highest quarters the company has ever delivered. And we expect that number to grow every single quarter throughout 2026. So we're -- I'm clearly confident that we're on track for the 2.3 million at the end of 2026, which puts us at a little over [ 5% ] fiberized in our entire network and well on track for the 3.5 million at the end of 2029.

The new team that came in December 1 has years of experience building and managing fiber networks. I've had the privilege of working with [ Manny San Pedro ], our Chief Network Officer at Verizon, and he and [ Bobby Walters ], our Head of Construction now at Kinetic, came over from Brightspeed, where they built 1 million homes a year for the past 2 years. And so they came in and made a fairly quick impact, putting in new procedures so that we now have a single pane of glass of every single project in our funnel. And we're able to make sure that we're not surprised if things go wrong, left or right. They've got enough engineered prems, enough permitted prems to deliver the number of homes that we need. So I feel really confident about it and expect that you'll see improvement quarter-over-quarter. And mathematically, you'll see the clear phase to 2.3 by the end of the year.

Great, and Frank, on your EchoStar question, we're very aware of the force majeure position they've taken publicly. We're obviously in dialogue with them ourselves and agree with the rest of the infrastructure industry that, that's an inappropriate position on their part, and I'll leave it at that.

With respect to the exposure that we have to DISH, I would say that our revenue exposure to DISH is less than 1%. So it's immaterial in our view. And with respect to the impact of that in our guidance for this year, we're really assuming no -- we're really assuming no recurring revenue from DISH throughout the course of this year. So immaterial impact and certainly less material when you include how we're treating it in the guidance, and we think their position is continuous at best.

Great. I tend to agree with you. That's great.

Our next question comes from the line of Richard Choe from JPMorgan.

I wanted to ask about the $1.5 billion hyperscaler opportunity. How much of that do you expect to win? And can you talk a little bit more about how you expect that opportunity to grow as we kind of move forward? You talked about it a little bit, but just wanted to get a better sense of how bigger is that kind of funnel or pipeline as you're seeing right now?

Richard, so I think your -- the $1.5 billion you're referring to is the funnel that we mentioned earlier in the presentation, and then we talk about -- on Page 12, we talk about how we see the hyperscaler opportunity actually factoring into our various financial metrics, including revenue route miles built and CapEx and RCs. So I think if you tie those 2 together, that's really how we see it impacting our financials.

So we're winning a good percentage of that funnel. As I've mentioned, a large percentage of the business that we anticipate over the next 3 years is contracted at this point, and so we're in the process of deploying it. But some of that is based upon our view of the funnel that we're going to win. And then certainly beyond 2028, there's an estimate of what we think we're going to win from a funnel perspective, including, by the way, lease-up.

And I've said this many times, including and answering Greg's question earlier, but a big part of what we're winning with the hyperscalers is not just greenfield deals. It's lease-up, it's waves, it's traditional or fiber. In fact, over the weekend, I heard about a transaction where we won a 200,000 MRR waves deal, where we're providing capacity by derivative to a hyperscaler, and that's a terrific business. So that's part of what's in that funnel. So when you see these numbers and you see the onetime revenue, don't forget about the $0.5 billion of recurring cash revenue that we expect over time, and some of that is coming from hyperscalers.

The only other thing, and hopefully, this is answering your question, Richard. And if not, just jump in with a follow-up. But the other thing I'd say -- and this is a good thing, but we've continuously struggled to try to forecast what the opportunity is for us. We've been very measured in our comments about the hyperscaler business, the AI build over the past, I'd say, 18 months. We progressively gave more and more guidance. We've given our view of what the TAM is for us. We updated our view of the TAM. And frankly, every time we put numbers on a page, I go back and look at them later and think those were conservative.

And so we continue to be emboldened by the opportunity that we see, but we also know that you and certainly investors want to have our best view of what the opportunity is. And as I said in my prepared remarks, what you see in the deck today is our best view at this moment in time, and we'll continue to update those as we go forward. But I think based on the funnel and our success on winning the deals that we really want to -- really want to win, we feel really great about the opportunity ahead of us.

No, that makes sense, and that does answer the question. I was just trying to get a sense of what you're currently seeing and know that the hyperscalers can move very quickly for a lot more capacity with a lot of capital behind it. So that helps.

Our next question comes from the line of Brendan Lynch from Barclays.

It looks like the ARPU in Kinetic was up about 5%. What do you think is sustainable? And maybe just give us some color on what your overall ARPU strategy is going forward.

Yes. This is John. Thanks for that. Yes, 5%, I think, is a little bit higher than industry averages, and we have a track record of delivering higher than industry average ARPU at Kinetic.

As we said last quarter, I don't think the double-digit growth that we experienced last quarter is sustainable. I think we're sacrificing customers and volume at that level for incoming customers. And so going forward, I think on a sustainable level, we'll be -- inflationary increases and inflationary ARPU accretion 2% to 3%. This next year, as we reset, I think it's probably towards 2%, but certainly growth.

And I think there's a lot of headroom in ARPU, and we're just getting started. So there's kind of 3 big levers for ARPU growth and this is our strategy. One, inflationary price ups, and we do that surgically. We do that on a more segmented basis now. We're in the process of executing a price up to our fiber base this first quarter. And we're doing it this time more surgically based on the customers' attributes and profile relative to their speed and trying to get customers to upgrade their speed along with the increase. So yes, there's an increase, but we can also offer you increased speed. I mean that's a very standard industry practice, and we're trying to perfect it here. So one is price-ups, inflationary price ups.

Two is our ability to move our base up the speed ladder. And we, last year -- late last year, we introduced 2 gig into our portfolio. And in the fourth quarter, we've had -- we set a record in terms of percent of new customers taking big speeds. We've also set a record for upgrading our base in the fourth quarter of existing customers, 2 gig plus speed. So right now, as we sit here today, we have about 40% of our base on gig-plus speeds, our fiber base. We know that we could upgrade [ 60% ] of them. And that's not counting the 1 gig customers that we can upgrade to 2 gig. So it's utilizing that speed ladder strategically and upgrading the customers to more advanced capabilities.

And the third aspect of our strategy is to sell additional value-added services to those customers. We call those VAS service, VAS, and we recently reset our VAS portfolio in the fourth quarter, introduced some new services. We also partnered with eero. We're going to be introducing at least 2 new value-added services in the second quarter. And so with the combination of inflationary price ups, upgrading customers along the speed ladder and selling value-added services, I'm confident that we'll deliver the guidance of 2% this year and 2% to 3% on a durable basis in terms of fiber ARPU.

Great. That's all very helpful color. Maybe on a similar trend thought there, you could talk a little bit about customer churn and what your strategy is there to address that? And when customers do churn, what is typically their next best option?

Yes. So like this past quarter, we set a record, not only in top line sales growth in fiber sales and also quality in terms of gig attach rate and VAS attach rate, but we also had our second best churn in the quarter in the company's history. First best was in first quarter '21 in the middle of the pandemic. That said, we still have more room to go.

And last quarter, we talked about the 5 fundamental actions that we took to lower churn. We executed those actions. And I think the changes that we made and are durable and will help our overall churn trajectory. Not only do we make the fundamental value prop and nonpaid churn, which is showing up really well in new customer early life churn. But also, fundamentally, we eliminated a bunch of pain points. We -- this past quarter, we set a record in first call resolution, a record in terms of trouble tickets for our customers, a record for repeat visits from our tax, a record for stay rates in our retention queue and a record low in terms of transfer rates. The unnecessary transfers were bouncing customers around. Those are real customer pain points. And we set a record in the fourth quarter in all those areas. And that's a direct correlation to churn. So I think we're going to see the momentum continue there.

And at Frontier, we were among the worst in the category in terms of churn when we started that transformation in 2021. And by the end of this past year, they were among the best or the best outside of AT&T and Verizon. And I was really pleased that Stacie Vongvanith from Frontier started with us on February 9 as our Chief Customer Officer. Her -- Stacie and [ Jonathan Wu ] from Frontier led that loyalty and data science and customer operations efforts to drive durable loyalty. And they're both here now. And all our results and all fundamentals that we put in place are not even the beneficiaries of their more advanced practices of using AI to change workflow and to get ahead of what customers' opportunities are so we could be more predictive and proactive about it. So I'm super excited and bullish about our opportunity to further improve churn.

Our next question comes from the line of David Barden from New Street Research.

It's been a great conversation so far. I wanted to maybe ask kind of maybe 2 interrelated questions. So I guess the first question is maybe for you, Paul. But if you annualize the fourth quarter EBITDA, you're going to get to the very high end of the guidance range that you've given this year, and you're guiding for year-over-year EBITDA growth in the fourth quarter of 2026. So I guess I've got some questions which are, number one, is there some of this onetime hyperscale IRU type revenue that was in the fourth quarter of 2025 that we should not be kind of annualizing as a run rate?

And then second is, within the guide, could you be more specific about what is contributing to the revenue and EBITDA from these kind of onetime items that we maybe shouldn't be using as a jumping off point for 2027 necessarily?

Yes, David, thank you. Good to have you on the call, and I appreciate the question. There was a little bit of onetime hyperscaler revenue in the fourth quarter of 2025. So again, David, this is going to be a little bit -- it's going to be a little bit lumpy as we go forward. So those kind of onetime revenues are going to make comparison periods a little bit more difficult. So I appreciate the question.

But there was a little bit in the fourth quarter of this year, so it increased the jumping off point a little bit, but we're not talking about a whole lot there. So fourth quarter is pretty close. There were some other onetime revenue non-hyperscaler related in the fourth quarter as well that Bill and I can take you through sort of offline, happy to do that as well just to make sure you level set.

And then in terms of hyperscaler revenue, this kind of sales-type lease, onetime revenue that we've talked about in 2026. I mentioned that within '26, it's going to be lumpy. A good portion of it coming in, in the first quarter and then the bulk of the rest of it, probably later in the year, maybe most heavily tilted towards the fourth quarter. So we're going to have a little bit of up and down, I think, as we go through the year.

We provided, David, again, in the materials of kind of a reconciliation of that fiber revenue, fiber infrastructure from '25 to '26. So you can see the year-over-year growth there and a lot of that is being driven by the hyperscalers. So you can kind of get directionally close to the growth over the course of this year, that's kind of a onetime hyperscaler type growth.

But like I said earlier in the call, we're -- we -- we've sold some large deals. Some of these deals are going to take a while to implement. We've got visibility, as Kenny has talked about into future deals that are going to come in. And so we expect this onetime hyperscaler type revenue to be recurring, in a sense over the next -- and to build over the next 3 years and kind of -- so as we go through the next 3 years, I would expect it to actually build year-over-year. But from any quarter to its comparative quarter, you might see some lumpiness and some jumping around.

And I apologize, I have maybe a follow-up or 2. So just as a quick follow-up. So the rating agencies, when you talk to them, look at this kind of one recurring nonrecurring revenue EBITDA as recurring? Or do they look at it as kind of nonrecurring and ignored?

Yes. I don't know that, that's a conversation that the rating agencies have developed, I don't know, a definitive point of view. I guess it's kind of new in our numbers and in some of our peers' numbers. So we're going to have to -- have an ongoing dialogue with the rating agencies to talk through that, David, as we go forward. But I don't want to necessarily speak for how they're going to view it.

Our next question comes from the line of Ana Goshko from Bank of America.

So just a kind of a follow-up on the prior question from David. So on these -- on the sales type lease accounting for these hyperscaler deals that are the cash upfront, is there something about the nature of those contracts that require you to look at this way? And I know we've all spent a lot of time kind of understanding the [ Lumen ] deals, their PCF deals so that they have like $13 billion of these. And they're accounting for it in a different way. So they're receiving the cash upfront. But obviously, amortizing it over the life of the contract. So I understand that you don't know all the ins and outs necessarily of their contract, but wondering if you're aware that if there's a difference in the contracts that you have with these hyperscalers versus what they've been selling?

Ana, thanks for the question. I appreciate it. Obviously, I don't have a lot of insight into Lumen and their deals and their accounting. So I'll kind of stay away from comparisons of our deals to theirs and our accounting to theirs. But what I can tell you on -- our accounting policies have not changed with regard to how we account for and recognize revenue from these IRU lease deals. We follow GAAP, we follow lease accounting. And each of these deals really has to stand on its own. We'll take a look at each deal, we look at the specifics of the contract, and the specifics of the deal determine whether or not it's accounted for on an operating basis or on a sales-type lease basis. So you're going to see both of those accounting methods going forward, and it's going to depend on the characteristics of the deal.

I will say sort of directionally that the hyperscaler deals, just given the massive size of those deals, are more likely going to be more likely to trip into a sales-type lease accounting than sort of the traditional lease-up, lower-volume dark fiber deals. So happy to -- again, we can kind of get into some lease accounting we do a little bit on operating versus debt off-line. But I would just leave it at that for the call today.

Okay. And then if I can just follow up. What is the average length of these IRUs? Secondly, do you have the traditional O&M operating and maintenance contract that is over the life of the contract? And that was my other question. So one of the things that Lumen has made clear is that they've made clear in the contract with the hyperscalers that the capacity is only for the internal consumption of the customer. Do you have that same arrangement?

Yes. I'll start on all good questions. I'll start and then I'll turn it over to Kenny for the last piece. These are IRU deals that are structured very similarly, I would say, 2 classic IRU deals. What's creating different accounting is just the specifics of the deals, like I said, the size of the deals. And as you kind of go through the analysis of just applying GAAP accounting.

But these are generally -- if you looked at it just from a business standpoint, you'd see very traditional IRU structure. So they tend to be 20 years in length. They have O&M associated with them that provides a recurring revenue that is MRR, recurring -- classic recurring revenue that we will be receiving throughout the course of the deal typically with escalators.

And a lot of these deals also have colo involved as well. So ILA, regeneration or other forms of colo, which we think is likely to be sort of a bit of a growing revenue stream from these deals, just given the massive amount of fiber that's being taken down by a lot of these deals. If you light all that fiber, there's a lot of colo that you need, a lot of equipment that you need along these routes to power that fiber. So we think colo could be a much more meaningful part of the recurring revenue stream from these hyperscaler dark fiber deals over time than the traditional deals.

And then I'll turn it over to you, Kenny, for that last piece.

Well, I'll hit that last question, Ana, but I just want to add a couple of things to the series of questions about the structure of these deals, and Paul hit on all of this, really, but just to double down on it.

Number one, we recognize this is different than what we've shown in the past, but I think the nature of this opportunity, the nature of these deals calls for it. So this is not necessarily a conscious decision on our part to change accounting methodology or presentation style. This is just what the accounting is driving towards.

But frankly, I think it's actually better visibility into the underlying economics for investors than the traditional way of showing these deals. So for example, we've always had onetime fiber sales like this in our portfolio in the past. But at Uniti, it's usually been something around $20 million to maybe $25 million a year of this, right? So on others, you'll know that we've had onetime revenue in our business in the past, and it's either been equipment sales or deals structured like this from these onetime fiber deals where we're building a big greenfield for someone like the government, for example, or some of our other customers that -- where the economics just calls for it. It's just now these deals are much bigger and it's a much bigger part of the revenue. But -- so we've done this in the past, number one.

Number two, we're showing all the revenue upfront as opposed to showing amortize revenue over time. That's the critical difference. And so for example, if we talk about the record quarter of bookings in the fourth quarter of 1.7 million, but if you actually treated the hyperscaler deals that we're turning up in the fourth -- I'm sorry, in 2026 as traditional IRU revenue, that bookings number would have been over 4 million of MRR. So that is a record quarter by a factor of 2 or 2.5. But that 4 million of MRR would be a little bit misleading because a lot of that would be amortized revenue. And rather than showing an inflated bookings number of 4 million, we're actually just showing higher cash revenue and EBITDA in the time period when this business gets turned up.

So I think the real point of all of that is don't think about the economics of these deals any differently than IRU deals. It's the same. It's just a question of how we report it. And that really gets into your last question on -- and really why we talk so much about the lease-up because when we sell a greenfield deal, it's not about the anchor for us. It's really about the lease-up. And so we're getting all this onetime revenue and funded and largely funded bills, and we're [ paying ] for the $0.5 billion of recurring revenue that comes through the lease-up over time.

And I think the way we structure these deals -- I don't want to get into specific customer agreements, but we absolutely structure these deals in a way where we have the maximum opportunity for lease-up with the minimal amount of competition from our anchor customer. So I'll leave it at that, and you can draw your own conclusions about our point of view on that.

I would also say, and this is very important. When we put this fiber in the ground, we're not building for just the anchor and the anchors lease-up potential. We're building for lease-up potential for traditional wholesale, traditional enterprise, which we think is going to be a huge opportunity once inference comes. And so as a result, the CapEx that we're putting in the ground is a little bit higher on the front end because we're adding that extra conduit, we're adding that extra -- second conduit, and we're even blowing fiber potentially through it to provide the ease of lease-up after the fact. So very focused on the lease-up and I think about these deals as -- the economics of these deals as being very much a tradition -- like traditional IRUs.

At this time, I'm showing no further questions. This concludes today's conference call. Thank you for participating. You may now disconnect.

[Audio Gap] 2025 Leveraged Finance Conference. We're thrilled to have Uniti Group with us today, and Paul Bullington, the company's CFO. And we also have Bill DiTullio, company's Head of Investor Relations with us. So without further ado, Paul, welcome.

Thank you, Ana.

Thanks for joining us again this year.

Yes, I'm glad to be here. This is certainly a favorite conference of ours.

Okay. Good to hear, and you're one of our favorite issuers.

Yes. Awesome. Glad for that.

So before I jump into Q&A, are there any opening comments or you're ready to...

No, no. I mean other than we're certainly very excited to have the merger with Windstream closed and behind us now. I think we're still early days, still 100 or 120 or whatever it is days into the merger. So it's still a little bit early days, but I think we're off to -- to me, a great start. I think the leadership team has really come together well, the new leadership that we have infused, particularly in Kinetic with John Horobin and some of the folks that he's brought in with the experience on the consumer side, I think, has been very well received all the way through the organization, and he's really hit the ground running. So we're excited to be well into this new chapter now. Yes.

Great. Okay. So I think I'll start pretty much there. So with an update on the Windstream integration. So the company has got 3 discrete segments. So there's Kinetic, which is really the heritage phone company, I don't mean that to be pejorative because it's really broadband company, but it is the...

100 years of history.

Heritage -- yes, the heritage phone company. Two, fiber infrastructure, which is really a combination of both the Uniti Fiber assets as well as what was it, Windstream. And then three, Uniti Solutions, which has effectively managed services. It's, aka, the managed services business, which recently rebranded to Uniti Solutions.

So there is some hypothetical potential to monetize these 3 pieces separately. And I think as -- we'll talk about it later in our discussion, but people do -- investors and analysts do a sum of the parts of the company based on these 3 segments. So given that, how much are you actually integrating these 3 segments? Or conversely, are you making an effort to keep them relatively siloed to kind of keep your strategic flexibility open?

Yes. So we're definitely thinking of these businesses as somewhat modular. And that's both for strategic flexibility. It was also just a little bit of the natural -- the natural order of things. I mean if you think about the Kinetic business, there wasn't a consumer business at Uniti that we need to integrate with Kinetic. I mean, obviously, there's a broader network reach when you combine these businesses together, and that's beneficial and accretive to the company as you've got a broader network that can support all 3 of these segments. But Kinetic is really an independent business and will remain so.

Fiber Infrastructure, we are integrating those 2 pieces that you talked about. So we're doing a lot of work to integrate the Windstream wholesale business with those legacy Uniti businesses, Uniti Fiber, Uniti Leasing into a broader national and regional fiber infrastructure business. So there's integration certainly going on there. And then Uniti Solutions is fairly modular as well.

So I think you'll see those 3 segments maintain some independence and some of that strategic flexibility. But we're certainly integrating where it makes sense, and that is mostly at the corporate level. So in finance, in HR, in IT, certainly a lot of efforts to integrate those and gain efficiencies. So gaining efficiencies where it makes sense, but maintaining some modularity and some flexibility between the segments.

So then on the topic of the cost synergies, can you kind of help us put some numbers on what you've realized to date and what's still expected?

Yes. I mean, again, it's early days. So most of the work is in front of us. But we still have a target of $100 million of run rate annual synergies to be realized over 3 -- the first 3 years of the deal. So a lot of that is in -- there's some corporate synergies that include some head count and those sorts of things that can be realized pretty quickly, but then a lot of it is longer term.

So IT systems, converging systems, that takes a little time. A lot of our synergies are from bringing off-net services that we're paying other third parties to carry traffic, bringing that onto our own network. That takes a little time as well. There's typically some network grooming and maybe a little capital to spend to make that happen as well. So it takes some time. So we're early days, but we still expect to get to that $100 million in synergy savings over that 3-year period. Yes.

So now diving into the segment. So in Kinetic, you are going from -- at least Uniti is going from being a passive owner of the assets -- of the network elements to now an active operator. And as part of that, you're really looking to accelerate the Fiber to the Home build. So just to kind of provide context, so I think the goal is 3.5 million homes passed by 2029 -- or the end of '29 and you've got about 1.8 million currently. So if you just do the simple math on that, I think your current pace of builds has been about 200,000 a year, and you really kind of need to get that to ramp up to an average of 400,000 a year. So when does that ramp up? How are you going to accomplish that? And what -- kind of what's going to be like your peak passing?

Yes. So yes, all those stats are exactly right. So we've got a target of 3.5 million homes by 2029, 1.9 million today. So we've got some work to do to get there. And we are ramping that build as we speak. The ramp has taken a little bit longer than maybe what we hoped when we started the year, but it's just some things to do with the infrastructure at Kinetic to get us ready to have that build engine running at full speed.

And so the steps that we've been taking, we're making a pivot from almost exclusively internal crews to a heavier mix towards external crews. We're keeping the internal crews, but we're just augmenting that with a significant amount of external crews. So we've signed agreements with multiple very large providers of those construction services. We wanted to bring in providers that weren't really on board prior that have the scale to really be able to build at a level and make the volume commitments and the price commitments over the next 3 to 4 years that we needed to ensure that we can execute on the build. So we've been onboarding those contractors.

And then there's this -- the kind of the permitting -- design and permitting engine that we've got to get ramped up. We also need to basically -- we're also putting in place sort of a control center really to manage a larger build, a larger crew of external contractors to make sure we stay on top of that. So all of that is taking a little time to put in place, but it's not rocket science. I think we've got a lot of people in the company that have built fiber at scale, know how to build fiber at scale. So we're very confident that early next year, we'll be able to get to that build pace. So first quarter, maybe second quarter of next year, we'll be at that build pace that we need to be at in order to hit that goal in 2029 of 3.5 million homes, yes.

And other providers are building at a larger scale than that. So nothing we're looking to do is unprecedented or outside of the norm. We just got to put in place the infrastructure to get it up to speed.

Okay. So next question is really on the cost to pass and the cost to do this build. So Windstream historically has cited what I think -- what I believe is an industry low cost to pass for Fiber to the Home. They spend about $650. And a lot of that has been attributed to the fact that they had investments in fiber backhaul, even like Fiber to the Node, which really made that less connection kind of lower cost than a lot of other operators were experiencing.

But this has gone up because you've got just plain old inflation. And you also talked about bringing in these external crews, which is key to getting to your goal. But the other question is, are you now expanding into areas where you may not have the same degree of the pre-investment in terms of the fiber. So if you put that all together, how should we think about the cost to pass going forward?

Yes. So again, all your facts there are accurate. So Windstream's historical strategic cost to pass -- so cost to pass for strategic passing, strategic meaning nonsubsidized passings has been in that $600 to $650 range, which is I would call industry-leading. And that has been facilitated by a couple of things. One is the effective use of internal crews. They've been able to keep cost down because of that. And then because of this prior investment that you referred to that Kinetic made in bringing Fiber to the Node across its footprint.

And back 5 or 6, 7 years ago, they made that investment to bring Fiber to the Node, Fiber to the DSLAM basically. And that covers really 95% of the households in their footprint Fiber to the Node. So it's pretty ubiquitous throughout. So we're going to be able to continue to leverage that all the way really through the life of the build out through 3.5 million homes in 2029. So that cost advantage from those prior investments in Fiber to the Node, we're going to be able to continue to leverage.

And that's what's going to help -- that's part of what's going to help us continue to keep what we think is a very favorable cost to pass from an industry benchmark standpoint as well going forward of more in the $850 to $950 range is what we're projecting in kind of 2026 and beyond.

So still a really super strong cost to pass that's enabling us to get what we think are very strong return on investment for those passings. We typically are looking at return on investment in what I would characterize as high teens on average when you look at the full blend. So some are higher 20s plus, so maybe a little lower, but 15% is kind of where we've drawn the line on return on investment. So blended together an average return on investment, I would call, in the high teens.

But the reason the costs are going up from what they have been historically at Kinetic is, one, Kinetic did the low-hanging fruit first. And so there is really a very -- very much a Swiss cheese approach to going in and finding the lowest hanging fruit, the lowest cost to pass and a lot of it had to do with aerial -- aerial passings versus underground passings. As we build deeper into the territory, we're going to we're going to encounter a much heavier mix of underground. So that's going to drive the cost up. And then like we talked about and like you alluded to, we're also bringing a lot of external contractors.

Now we've been able to bring on these external contractors at a rate that we think is very attractive for us for external contractors, but it's a little higher than what our historical cost has been maintaining internal crews. So those 2 factors are really driving up the cost to pass. But still, what we think is well below industry benchmarks in terms of cost to pass at $850 to $950 range kind of going forward.

Okay. So local wireline wireless convergence is a thing now?

Yes.

And you have or Kinetic has a collaboration with AT&T Wireless. So how does this relationship work? And what kind of like take rates had there been on the part of Kinetic customers and then this kind of bundling or kind of co-marketing with AT&T wireless?

Yes. Okay. So -- yes, we do have a partnership with AT&T. It's kind of a joint marketing agreement. Kinetic decided to go that route because a full MVNO route would have taken a lot more time and cost a lot more capital to put in place. So this is a much quicker and simpler way to, we think, take advantage of some of the positives of convergence.

And so basically, the way the deal works is there's a $20 subsidy that appears on the Kinetic bill to consumers that are both a Kinetic customer and an AT&T customer. And AT&T subsidizes half of that credit. So half of it's borne by Kinetic, by Uniti and half of it is borne by AT&T. And we've seen -- it's early days. We're a year or so into that program. So this is still a newer program, but we've seen strong adoption. We're getting attachment rates in the kind of the low teens, I would say, which we think is positive. And so that book of business is building very consistently. About 35,000, 40,000 customers today are part of that mix.

And what we've seen is what we expected to see. We've seen a significant improvement in churn on customers that are taking that bundle, about 50% on average improvement in churn numbers associated with that bundle. So it's been also an advantage in I think marketing against some of the big cable that we have in our footprint with a full MVNO offering. But I think the biggest impact has really been on the churn side. It's also not something that would be difficult to unwind since it's really just sort of a billing bundle as no real integration other than that. So it could be unwound if we needed to, but we're very pleased with the relationship, and it's paying dividends.

Okay. So just consumer broadband competitive intensity is sort of the next topic here. So your penetration for fiber right now where you have it deployed, I think it's close to 29%. So one, where do you think you can take that? And then if you could just comment on what you think the broadband competitive intensity is right now?

Yes. So the competitive landscape in the Kinetic footprint is something that we viewed very positively coming into this merger. I think it compares very favorably to other industry peers, and it's one of the key advantages, I think, that Kinetic has going forward. So for instance, 60% of the Kinetic footprint has a big cable competitor. So we define big cable as a cable player with an MVNO offering. So that 60% compares really favorably to peers who are typically in the 80% to 90% range versus big cable. So we think we have a competitive advantage there.

Then 25% of the Kinetic footprint has no other 1-gig competitor at all. So I think that compares favorably for the industry. So overall, the competitive dynamics are, I think, one of the strengths of that Kinetic business segment for Uniti.

In terms of the competitive pressures that we're seeing, I think we're seeing it a bit on the DSL side. I think there's been some more aggressive competitive movement, both by fixed wireless and cable. And so I think our DSL plan is susceptible to that. I think we're seeing that much less so on the fiber side.

Okay. Let me be cognizant of time, so I might skip over a couple of our preplanned questions here. But -- so -- maybe last question for now on the Kinetic side. So there's 2 Fiber to the Home M&A deals on the consumer side in the market right now. So it's Verizon buying all of Frontier and then there's AT&T buying Lumen's overbuilt fiber, both of these are still pending close. So they're really very different because Lumen is retaining the regulated ILEC assets and network for which they have said there's a long tail of cash flow. Is Uniti open to either one of these deal structures? Would either one work for you as you might consider potential monetization opportunities for the Kinetics?

Short answer is yes. I think we're open to really all value-creating opportunities. And I think one of the things that we're excited about is that there seems to be multiple models and structures that make value creation or value realization possible. And so I think we're open to any structure that would create value for shareholders.

Okay. Shifting to the Fiber Infrastructure business. So I think we've got to say AI in every session, so just at it. But -- so you have talked about hyperscale cash upfront deals as anchors for market expansion. Can you talk about the funnel, the kinds of market these are? And for the most part, are you proactively seeking out these kinds of deals? Or do you have a lot of incomings on them?

Yes. Well, the AI opportunity is real. It's materializing in a very real way, a very exciting way. I think it's a generational opportunity, is what it appears to be. I think we're early innings. So a lot of it is, I think, to come, but it appears to be a generational opportunity. I don't know that I've been as excited about opportunity in fiber. I've been in the business for a while and seen a lot of the ups and downs, but I don't think I've seen anything quite like this since maybe the iPhone kind of came in and really drove so much usage in demand for fiber, particularly Fiber to the Tower several years ago.

But that AI demand is showing up in a big way for us. And so we talked on our last earnings call about the size of the funnel for the kind of the hyperscaler demand set. We pegged it at, I think, $1.7 billion in total contract value. We expect that to continue to grow. It's the dynamic funnel. So deals follow off, deals come on, but we expect that funnel to continue to grow. That funnel is largely made up of dark fiber deals that we would expect to be structured in an IRU format.

So an IRU format is not new, it's not new to hyperscalers, it's not new to the industry, it's the typical large dark fiber deal structure. But that -- it's basically a prepaid lease and that cash comes in upfront and can offset a lot of the CapEx that you would potentially need to put in place in order to deliver the fiber. We announced a $100 million deal with our second quarter earnings that was signed early in the third quarter that uses almost entirely existing assets. So that kind of a deal is very cash accretive for Uniti since we're able to leverage existing assets.

In terms of like how that demand materializes and whether we're chasing it or it's coming to us, I mean it's a bit of both. Clearly, we see this as a huge opportunity. So our sales team is very focused on building deep relationships with these providers and building the kind of relationships where we know their demand set, not just now, but into the future and can work with them to help them meet that demand set in a partnership sort of way. So certainly pursuing those relationships and developing those relationships.

But these buyers are very smart. They know the fiber landscape. They know who the players are, particularly the players of scale that they're working with. They know who has assets where generally. And so when they have a project that is coming up or maybe as potential in an area where we have assets, they're typically coming to us or if there's a need for maybe a network that doesn't exist today, particularly in areas that are close to our existing markets, they're coming to us as well.

Okay. So then switching to Uniti Solutions, which has been described as noncore. Could you talk about the free cash flow profile of that business? And then what kind of company would be a better owner of it?

Yes. So yes, the Uniti Solutions business, we've characterized it as noncore, not because we don't like the business or it's not a good business, but because it is not consistent with our primary thesis, which is we want to be owners and operators of fiber. Uniti solution uses almost exclusively other people's networks to deliver services. And the services they're delivering are those managed services or sort of Software as a Service, Security as a Service type solutions.

It is throwing off significant cash flow for the business. And so we expect it to be a generator of free cash flow for well into the future for the business. So that's certainly a very positive thing for us because we can take that cash and put it to work in other parts of the business where we're investing more heavily.

In terms of the capital intensity of that Uniti Solutions business, it's at 10% to 15%. I mean you do have to make some investments. They're mostly investments around the platform, the solutions that you're providing. You're not investing in network, you're investing in the platform. And so I expect that capital intensity to be pretty consistent over the next several years.

And then in terms of who might see a better strategic fit for that business within theirs, I think -- that could be either maybe a pure-play provider of these types of managed services solutions or I think you could also an owner of a large broadband network that has these sorts of solutions in their portfolio, have some interest in this business. You could take -- for a player like that, you could take a lot of what is off-net for Uniti and roll it on to your own network -- broadband network in large part, I think, pick up significant synergies there.

So I think one of those 2 types of players, I think -- and you've seen some of those transactions over the years with Masergy or Nitel, similar type businesses -- not exactly similar, but similar type businesses in terms of managed services kind of other off-net businesses get acquired by players like that over the years.

Okay. And then I know Kenny Gunderman, the CEO, is typically not shy about kind of directing investors to think about how to kind of value the company. So now that we've covered all the segments on a sum of the parts basis, are there like certain comps that you would look at for Kinetic, like is that like Frontier and for the Fiber Infrastructure business? And what kind of multiple do you think the market would put on Uniti Solutions?

Yes. So we have put out multiples. Historically, we haven't put out anything recently on that. So I think you could kind of look back to some of those multiples we talked about prior. But I think -- the Kinetic business, I think Frontier is obviously a benchmark deal and valuation. The Ziply deal, I think, is another one, I would point investors to kind of look at as well on the Kinetic consumer side of the business.

On the Fiber Infrastructure side, it's been a little bit more challenging from a valuation standpoint because we've seen some deals recently, but the deals we've seen more recently that are larger deals were, I would say, more forced sales or distressed sales in nature. So I don't know that they're great comps. I think we still very much believe that the quality fiber assets, so dense, owned fiber networks with large recurring revenue bases on them can command a superior value. And I think we're starting to see that interest come back into that Fiber Infrastructure space, particularly around that the AI hyperscaler demand. I think that's creating more interest in that space. So we're thinking there's some tailwinds in Fiber Infrastructure from a valuation standpoint.

Uniti Solutions as more of an off-net managed services business. We've kind of talked about a 3 to 5x benchmark range, 3 to 5x EBITDA for that business is something we put out historically, and I would kind of stick to that range for that business.

Okay. And then just kind of switching now to the capital structure -- the debt capital structure and funding for the Fiber Build plan. So you've done ABS. I think it was $840 million of Fiber Infrastructure ABS, but you've talked about a $3 billion to $4 billion kind of total envelope in the ABS market. So like what's next? I think the next step would be looking at some of the local market -- the consumer makes for ABS. So what's timing on being able to tap incremental ABS? And what other moves that -- might that have to entail in the capital structure as well?

Okay. Yes. So we are very bullish on ABS. Certainly, if you've been listening to us, you've heard us talk about that in the past. So we're bullish on ABS just given the comparative cost of capital there and some of the other kind of features of ABS financing. The fact that a large part of it is investment grade, we think, helps to make it stable and may be available in times when maybe high yield can kind of have some turbulence.

So we like adding ABS to the portfolio. We expand -- we intend to expand ABS. Probably most likely next step would be establishing an ABS on the Kinetic footprint with the consumer assets, in particular. And we've said this publicly a few times before, but we've been doing significant work in that and are well on our way to, I think, bringing that to fruition. So I would expect first half of 2026, we would likely be ready and have the ability to bring a Kinetic ABS issuance to the market if we want to.

There is a lot of work that goes into that. It's not something you can kind of do overnight. There's a lot of regulatory pieces of it. A lot of the underlying rights need to be transferred or recreated into an SPV, where you're going to do the ABS. Certainly got to work with the rating agencies to get them comfortable and knowledgeable and able to rate the assets and the cash flow. So there's a lot of work that goes in, but we've been -- we've been doing a lot of that work and preparing for it.

I should definitely make clear that we don't think ABS is a full solution for our capital structure. We see it as an additive and enhancing piece to the capital structure given some of those qualities that I talked about, but we intend to maintain a healthy access to multiple debt markets and a healthy mix of assets, both in ABS where we're doing that, but also in the corporate high-yield box as well. We want to make sure we've got healthy access to all those debt markets. And we think that's a great solution for our capital structure long term to have the access to multiple markets.

In terms of sizing, I can walk through that quickly. But what we've said publicly is $1 billion plus in the near term. We just did a $250 million deal that was tightest spreads on a fiber ABS deal in about 4 years. So we were very pleased with that transaction. So if you take that from the $1 billion, that leaves $750 million plus. That's kind of the way I'd characterize that. So somewhere in that $750 million to maybe $1 billion range is probably I would see on the horizon for us in the near term from an ABS standpoint, largely probably coming from the Kinetic side.

And then longer term, we talked about $3 billion to $4 billion of capacity there, not necessarily saying that we would take down all of that capacity, but just trying to size the capacity we see there. It could be more over time if we are able to complete the build and really drive penetration well and generate significant cash flows off of particularly that Kinetic business. But definitely $3 billion to $4 billion of capacity we see over the longer term. And then how we access that, I think, will be determined over time. But we want to do it in a measured way and in a thoughtful way as a part of the overall capital structure.

Okay. And then sneak one more in. So leverage, I think you've been clear that leverage will probably go up before it starts coming down, and that's just driven by the Fiber Build and having to kind of prefund that build. So when do you expect leverage -- do you have an idea when you expect leverage to peak and at what level?

Yes. So we are planning to go through an investment cycle. And so similar to what we did in the Fiber Infrastructure space in -- 5 or 6 years ago, 2017 to 2020, where we were kind of running at a capital intensity above 50% through an investment cycle, we're going to go through an investment cycle at Kinetic. And that's going to -- that's going to cause it -- leverage to increase for a period of time. But what we've got is a long-term line of sight to -- on the other side of that build to free cash flows and ability to delever on the other side of that.

It's going to take some time. And we've talked about 2029 being our target to get to 3.5 million homes. So that's sort of the lifespan of this build cycle we're going to go through. I think it's going to be a little bit more capital intensive on the front end. So by the time you get towards the back end of that, I would expect that we're starting to generate free cash flow and be able to start to look at delevering.

But it's going to take us some time. So I don't want to indicate that it is going to be a quick process. But I think it's the right strategic trajectory for the business. I think fiberization of the Kinetic footprint is a strategic imperative for us, and I think it's going to pay dividends in the long term.

Okay. Great. So any closing comments, what you're most excited about as you go into 2026?

Well, I definitely think we're excited about having the merger closed and having all of the things that -- the baggage that went on with that relationship behind us, certainly excited about that. I mentioned before that how exciting the AI hyperscaler opportunity be in sort of the middle of that transformational piece of the economy and the technological revolution is certainly exciting.

And then just the -- I think the opportunity for Kinetic, the fiberization of that network and the competitive advantage that we think that's going to bring, but also the interest that we think is out there.in Fiber to the Home assets generally, I think, is exciting for us as well.

Okay. Great. Paul and Bill, thanks so much for being with us.

Thank you so much. Appreciate it. Yes.

Good morning, and welcome to today's conference call to discuss Uniti's Third Quarter 2025 Earnings Results. My name is Michelle, and I'll be your operator for today. Today's call is being recorded, and a webcast will be available on the company's Investor Relations website, investor.uniti.com, beginning today and will remain available for 365 days. [Operator Instructions]

It is now my pleasure to introduce Bill DiTullio, Uniti's Senior Vice President of Investor Relations and Treasury. Please begin.

Good morning, everyone, and thank you for joining today's conference call to discuss Uniti's third quarter 2025 results. Speaking on the call today will be Kenny Gunderman, our CEO; and Paul Bullington, Uniti's CFO. John Harrobin, President of Kinetic, will also be joining us this morning during Q&A.

Before we get started, I would like to quickly cover our safe harbor statement. Please note that today's remarks may contain forward-looking statements. These statements include, but are not limited to, statements regarding Uniti's fiber build strategy, the business' growth potential, our 2025 outlook and other statements that are not historical facts.

Numerous factors could cause actual results to differ materially from those described in the forward-looking statements. For more information on those factors, please see the section titled Safe Harbor Statement in the accompanying presentation and the Risk Factors sections in our filings with the United States Securities and Exchange Commission.

With that, I would now like to turn the call over to Kenny.

Thanks, Bill. Good morning, everyone, and thank you for joining. Starting on Slide 3, we're very pleased to have closed our merger with Windstream during the third quarter, and we're now well positioned as the premier insurgent fiber provider. We have a scaled national wholesale fiber footprint that puts us in rare company to win large-scale Fiber Infrastructure deals, and we are first or early with fiber to hundreds of Tier 2 and 3 markets around the country, giving us the right to win for many years into the future.

Our strategy is very clear and is the same simple winning formula we've had at Uniti for years. First, continue to build fiber into unique locations, including by overbuilding legacy networks and moving customers onto our owned fiber while aggressively managing out of legacy products and services; second, providing operational excellence; and third, having an insurgent obsessive focus on the customer.

This formula has led to industry-leading churn and NPS scores and predictable mid-single-digit growth at Uniti. Fiber is indisputably a superior product and coupled with execution prowess, we're now firmly on the same path post our merger with Windstream.

Even though we've not yet had full quarter of performance to report, we're starting to see strong improving trends. We continue to add industry veterans to our leadership team, including with experience at Frontier and Ziply, among others, and we've now fully onboarded and are ramping up key third-party partners to accelerate our fiber build and go-to-market strategy.

We now have 115 active third-party crews, which is about 2.5x increase from before the merger, and we should have close to 400 by the second quarter of next year. Thus, even though we were behind our plan at the merger close, we fully expect to get caught up and beyond in the first quarter of next year.

From an operational point of view, we're very pleased and focused on improving our customer experience and are seeing early progress. For example, in October, we had the highest first call resolution ever at Kinetic, the lowest transfer rate in over 2 years and a record low dispatch rate and a record low for fiber repeat trouble tickets, among other improvements.

New leadership with experience building and executing on a scaled fiber-to-the-home strategy is focusing our field resources and go-to-market teams on what matters most to our customers in this new competitive environment. We are now an insurgent share taker and have the right strategy, leadership and assets to accelerate trends towards positive revenue and EBITDA growth.

Turning to Slide 4. During the quarter, we saw strong fiber revenue growth of 13%, the highest number of fiber gross adds ever, and the highest net adds in 2 years at Kinetic. Because of our historical fiber-to-the-node investment, we were also able to quickly and cost efficiently upgrade 85% of our fiber footprint to be multi-gig capable, greatly enhancing our upsell opportunities in the coming quarters.

In Fiber Infrastructure, we had an outstanding quarter of new bookings fueled by hyperscalers, and we were named "The Best North American Connectivity Provider" by Capacity Media. The opportunity in wholesale fiber right now is generational in nature, and we are extremely well-positioned with the right strategy, leadership and assets to capture share in dark fiber and waves.

As you can see on Slide 5, we're making steady progress towards all of our key goals. Almost 80% of total revenue today is from core fiber businesses, while nearly 40% of our total revenue for the entire company and at Kinetic is from fiber. We also grew homes passed and fiber subs by 11% and 17% year-over-year and are well on our path to 3.5 million homes and 1.25 million fiber subs by 2029.

Slide 6 illustrates that our path forward is not only clear but it's also reasonably predictable as the critical fiber inflections are already beginning. By the end of this year, more of our consumer customers at Kinetic will be on fiber than legacy networks. And by the second quarter of next year, Kinetic's consumer fiber revenue will exceed DSL revenue. By the end of next year, consolidated fiber revenue will exceed 50% for the entire company.

Once these important inflections happen, the flywheel starts to accelerate, leading to total revenue and adjusted EBITDA growth year-over-year in 2026 for our core Fiber businesses, setting us up for year-over-year revenue and adjusted EBITDA growth for the entire company beginning in 2027.

Turning to Slide 7. A vitally important part of our growth will come from our Fiber Infrastructure business. There has never been a better time to be a wholesale fiber provider. Broadband trends are accelerating across virtually all categories, especially AI-driven use cases, as evidenced by another strong quarter of new bookings. Although we're building substantial amounts of new fiber especially for the hyperscalers, our scaled national footprint gives us terrific lease-up potential, driving our blended cash yields to 34%, the highest we've ever seen, and we believe there's more to come.

On Slide 8, our hyperscaler funnel has grown approximately 13% since the second quarter with numerous large deals getting booked but being replenished with many more. Hyperscaler activity as a percentage of our total funnel at stand-alone Uniti has improved materially year-over-year to around 30% of MRR. Importantly, when measured on a total contract value basis, hyperscalers are an even higher percentage of the total combined sales funnel, highlighting that the benefit of these deals are not always apparent in traditional bookings metrics.

Before turning the call to Paul, I want to briefly provide an update on our outlook with hyperscalers. We now believe the total addressable market for AI and hyperscalers for fiber providers is approximately 50% higher than what we originally estimated at the beginning of this year. We now believe the total addressable market for AI and hyperscalers for fiber providers is approximately 50% higher than what we originally estimated at the beginning of this year.

Our conviction resonates from the strong new bookings we're seeing, our steadily growing qualified funnel and the bespoke conversations we're having with our customers. Our customers continue to say to us both privately and publicly that investing in AI infrastructure is mission-critical to their businesses. Demand constantly outpaces supply and quarter after quarter, CapEx assumptions go up.

For Uniti, the next few quarters will likely bring the largest deals we have seen to date, and we have clear visibility into at least 3 years of strong value-accretive deal flow.

With that, I'll turn the call to Paul.

Thank you, Kenny. Starting on Slide 11. I'd like to touch on some of the key third quarter highlights for both Kinetic and our Fiber Infrastructure segment. As a reminder, our fiber-to-the-home platform will continue to be branded as Kinetic. Fiber Infrastructure will include our previous Uniti Fiber and Uniti Leasing segments, along with the Windstream Wholesale segment, and we are now also referring to the Windstream Managed Solutions segment as Uniti Solutions.

During the quarter, we continued to make solid progress on several fronts. Starting with Kinetic, we expanded our fiber network to pass an additional 56,000 homes with fiber, ending the quarter with 1.8 million homes passed. Kinetic also added 24,000 net new fiber subscribers during the third quarter, ending the quarter with 507,000 total fiber subscribers. As Kenny mentioned earlier, this was the second highest level of net adds in the past 2 years, and total Kinetic fiber subscribers grew 17% from the prior year period.

Kinetic Consumer fiber revenue grew 26% year-over-year during the quarter, and this growth is being driven by strong adoption of our fiber-to-the-home product, bolstered by the performance of the various marketing initiatives at Kinetic that target both our newer and more seasoned cohorts. At Fiber Infrastructure, Uniti and Windstream combined to record consolidated pro forma bookings MRR of approximately $1.6 million, the second highest level in over 2 years.

Slide 12 highlights the sustained momentum we are seeing within Kinetic Fiber. Fiber penetration of almost 29% during the quarter was up 50 basis points sequentially, the second-best sequential improvement over the past 3 years and 130 basis points year-over-year. while fiber ARPU increased 10% year-over-year. The slight sequential decrease in ARPU during the quarter was primarily driven by onetime price adjustments and the acceleration of new fiber subscriber net adds.

Turning to Slide 13. The strong improvement in our cohort fiber penetration is being driven by various marketing initiatives, including our Fiber Forward efforts that we launched last year. We've seen a 200-basis point improvement in our 2023 cohort penetration levels from year 1 to year 2 and penetration levels in our year 1, 2024 cohort that are on par with year 2 penetration in older cohorts.

We expect to maintain or improve this trajectory going forward, and the team is now focusing on executing the playbook to increase penetration in our older cohorts. Given our current trajectory, we remain confident that achieving our 40% terminal penetration target is very achievable.

Slide 14 lays out our key targets for Kinetic this year. As Kenny alluded to earlier, we now have a target of reaching 1.9 million homes passed with fiber by the end of the year, which would bring fiber coverage within the Kinetic footprint to 42%. With respect to our previous target of 2 million homes, as Kenny mentioned, we expect to fully catch up in 2026.

We also expect to end the year with approximately 536,000 fiber subs and realize approximately $500 million of consumer fiber revenue in 2025, an increase of roughly 25% from the prior year. In terms of cost per passing, we continue to expect the cost going forward will likely be in the $850 to $950 range, resulting in a blended cost of $750 to $850 per passing over the life of the build program.

Slide 15 provides a pro forma view of Uniti's consolidated results for the third quarter. Consolidated pro forma revenue was down approximately 6% year-over-year during the quarter, primarily driven by the continued decline in legacy TDM services and Uniti Solutions. However, top line growth in other parts of the business was strong with Fiber Infrastructure growing 3% year-over-year and Kinetic Fiber-based revenue inclusive of consumer, business and wholesale services growing 17% year-over-year.

As we execute on and accelerate our fiber overbuild plan, we expect fiber services at Kinetic will continue to deliver consistent strong growth quarter-over-quarter. In addition to the information provided in our earnings materials, we have also included additional supplemental pro forma financial information on our Investor Relations website.

Slide 16 further demonstrates that the growth in each of our core fiber lines of business has been very strong, and we expect that growth to continue given the superior nature of fiber as a product. As Kenny mentioned earlier, given this pace of growth, we expect fiber to overtake legacy services as the majority of our revenue by the end of 2026. As a reminder, we will continue to face headwinds from legacy services over the next couple of years that will weigh on consolidated revenue and EBITDA.

With that said, there are 3 important points I'd like to make. First, legacy services in no way diminish the value of our core fiber business. Secondly, within a relatively short period of time, the shift to fiber revenue will make legacy services revenue increasingly less material. And thirdly, in the meantime, Uniti Solutions is generating significant and predictable cash flow.

Please turn to Slide 17, and I'll now cover our updated 2025 outlook for the combined company. We have provided 2 views of estimates for 2025 on this slide. The 2025 as-reported outlook includes 7 months of stand-alone Uniti results plus 5 months of combined Uniti and Windstream. This is our formal guidance for 2025 and matches what was included in our earnings release that was filed earlier this morning. We have also provided a pro forma view for 2025, similar to what we have provided in prior quarters. The following comments on our 2025 guidance will be based on the as-reported outlook view.

Beginning with Kinetic. We continue to expect revenues and contribution margin to be $945 million and $385 million, respectively, at the midpoint. We now expect to deploy $450 million of net CapEx at the midpoint of our guidance, down from $510 million previously, primarily due to the reduction in our homes passed target for 2025.

At Fiber Infrastructure, we expect revenues and contribution margin to be $1.1 billion and $770 million, respectively, at the midpoint for full year 2025. The $35 million increase in contribution margin is related to a shift of expenses from the Fiber Infra segment to corporate expenses as accounting continues to be finalized for the merger.

Although we are no longer providing separate formal guidance for Uniti Fiber and Uniti Leasing, our 2025 outlook for both of those segments is unchanged from our prior guidance. Our outlook for net CapEx at Fiber Infrastructure this year is still $310 million at the midpoint of our guidance and represents a capital intensity of approximately 30%.

Turning to Uniti Solutions. We expect revenues and contribution margin of $320 million and $155 million at the midpoint. Altogether, we expect consolidated revenue and adjusted EBITDA of $2.2 billion and $1.1 billion at the midpoint of our 2025 outlook with consolidated net CapEx of $805 million.

Finally, I'd like to provide some brief comments on our capital structure. Slide 18 illustrates how Uniti's cost of capital has improved significantly over the past 2 years. If you go back to when we launched our 10.5% secured notes offering, our secured and unsecured debt was yielding over 12%. Fast forward to today, and our debt is currently yielding around 8% on a blended basis, a 450-basis point improvement.

Over the past several months, we have continued to execute on a number of planned actions to extend our debt maturities, lower our overall cost of debt and drive meaningful interest expense savings.

With our most recent refinancing of our 10.5% 2028 secured notes, we successfully pushed $2.3 billion of debt out 4 to 5 years and will save close to $60 million in annual interest expense. We also recently closed on our second ABS financing at -- of Uniti Fiber's assets with a blended coupon of 5.67%, which represents the tightest spreads on a fiber ABS deal in almost 40 years.

Going forward, we will continue to take an opportunistic approach to refinancing our outstanding debt with near-term maturities. We also believe that ABS is likely to play a growing role in our capital structure given its comparative cost advantages. To that end, we are working to establish a separate ABS program with fiber assets at Kinetic.

With that said, we are focused on maintaining a healthy mix of both ABS and non-ABS debt, and we will be balanced in our approach. At quarter end, our pro forma combined net leverage was 5.55x, and we still expect to end the year with a combined net leverage of between 5.5x and 6x.

I'll now turn the call back over to Kenny for closing comments.

Thanks, Paul. I'd like to close with a couple of comments on integration and some incremental growth areas we're focused on. First, integration is going very smoothly, and we've had virtually no system nor customer disruptions.

We're also well on our path to full integration and synergy achievement within 36 months, which is in line with our original expectations. We're also excited about a number of budding growth areas, including cross-selling Uniti Solutions products into our enterprise base at both Uniti Fiber and Kinetic. Today, we estimate our managed services attachment rate to be below 3% at Uniti Fiber, for example, and we think it could rise to be materially higher over time.

Also, as discussed numerous times before, with the complementary combination of the Uniti and Heritage Windstream wholesale products and networks, we're increasingly confident we can be a bigger share taker in the growing waves market. Today, we estimate our market share to be less than 5%. And with our scaled national network and unique routes, we believe our growth potential could be material.

Lastly, at Kinetic, we believe there's a sizable and untapped opportunity with multiple dwelling units within our footprint, and there are seemingly attractive edge-out builds off the Kinetic Fiber footprint and the existing Uniti Fiber dense fiber network. We'll have much more to say about these growth areas in the coming quarters. All said, there's never been a better time to be a fiber provider, and our strategy at Uniti is right for the moment.

With that, we'd be happy to take your questions.

[Operator Instructions] Our first question comes from Greg Williams with TD Cowen.

Kenny, just the first question, you noticed in the slide that the total addressable market for fiber is booming, if you will. We're seeing the same thing hearing hyperscalers are even prolonging training phase as they do AGI training now and some of these data centers could be hybrid inference and training data centers.

I'm just curious with this 3 years of strong visibility that you're seeing, if the deal mechanics are now changing or when will they change? When will they go from more upfront NRC revenues to more of a lit services and lower CapEx, high-margin structure?

Second question is on ABS deals. Paul, you mentioned that you're creating a separate vehicle for Kinetic ABS. I think in the past, you said there's over $3 billion of ABS capacity within the Kinetic assets. Just curious what you would be doing with that ABS. Do you have -- is the business fully funded for the fiber-to-the-home build at this point? And then at this case, the ABS deals would be for refining the debt stack and other projects?

Greg, all great questions. Yes, on the hyperscaler incremental TAM, look, when we estimated it back at the beginning of this year, we used all the data we had available. We used internal estimates. We used consultant reports that we saw. We used some internal consultants that we were working with, and we came up with those numbers and thought that they were fairly conservative at the time.

And when you fast forward to today, I think the real takeaway from the page is not necessarily the aggregate numbers. It's really just the increase in bullishness that we see for ourselves, and that 30% to 50% is a good indicator of that because when we look at those aggregate numbers and compare them to the same kind of data points we started with back at the beginning of the year, they look even more conservative.

So, for the industry, both from a digital infrastructure perspective and from a fiber perspective, they just look increasingly conservative every day based on what our customers are saying to both of us privately and publicly. The same comments over and over that demand is outpacing supply. They can't keep up with the demand. And that's really important.

And we've talked about this before, Greg, that we've sold mega strand counts, 432 strand counts, and we've had the same customer come back and ask for another 432-strand count. That's just a very bullish data point on demand outpacing supply. They talk about how the AI infrastructure is mission-critical to their businesses.

And so, we're very excited about what they're saying and what they're doing. And we're really well-positioned for it at Uniti. We're one of the few scaled national fiber providers out there. Many of these builds are in Tier 2 and 3 markets where our network is naturally a good fit. And so we continue to take a sizable share of the business that we see in our footprint, and we're starting to look outside the footprint a little bit to grow the network strategically.

And to that point, when we look out over the next 3 years, the funnel is full of deals that we've either already signed and booked or that are in the funnel with a high degree of confidence that we're in a really strong position to win those deals.

And really to your second part of your question, are the types of deals changing -- and I would say yes and no. I think there's absolutely, in our view, a very gray line between the training phase and the inference phase. We started out talking about that as being sort of 2 distinct phases. But as we've gotten deeper into this, it's very clear that they're not 2 distinct phases.

There's -- training is going to persist for many years, we think, based on conversations with our customers, that these training models are going to need to be updated on a very regular basis, including with Agentic AI and all the other use cases that we're seeing. And so, we're really excited about the builds that we've put in place today to enable these training data centers and feel like there's going to be the second and the third and the fourth comeback for additional fiber to enable those data centers.

So, we think that's going to persist. And we absolutely believe that once AI is adopted on a mass scale among not just the hyperscalers, but the superscalers and the Neoclouds and large enterprises and eventually individual retail consumers like all of us that our roughly 5 million connected fiber endpoints are going to really benefit from that.

And I think the deals that we're seeing from hyperscalers, as we've said, Greg, they've always run the spectrum all the way from greenfield builds with very high NRCs, upfront NRCs. And we love those deals where we're building fiber that's strategic. But also, on the very other end of the spectrum, we're selling existing capacity or existing network, either in waves or dark fiber IRUs or in leases. And we think that's going to continue.

And I think it's probably going to err more towards the latter than the former as we get into more of the inference phase. But just as an example, the big deal that we announced last quarter, the large hyperscaler deal, that was all existing infrastructure, and there was virtually no capital associated with that, and it came in at a very high margin. So -- and when we look in the funnel, there's a very good mix of those in the coming quarters.

And when you look at that free cash flow yield page that we've shown for quarter after quarter for the past 2 years, the jump from 29% to 34% is really largely driven by hyperscaler deals being very high cash flow margin deals. Sorry, I went long on that question. I think ABS is over to you.

Yes. Greg, this is Paul. I'll take your question on ABS. So, we aren't providing specific guidance at this point with regard to 2026 and capital and any financing required in 2026 to fund the Kinetic build plan in particular. However, we do expect to be in a period of investment at Kinetic and Uniti generally, particularly as it relates to the fiber build plan at Kinetic over the next, call it, 4 years.

So, we will raise additional capital. And during this period of investment, we do expect our leverage to remain above our long-term target of 4 to 4.5x. But as Kenny has talked about, this is the right strategic move for the business. And it's very similar to the strategy we have deployed in the Fiber Infrastructure business sort of years ago. Building fiber, we think, gives us the right to win.

And at Kinetic, once we have that superior product ubiquitous across that network or nearly ubiquitous across that network, it gives us the line of sight to that growth and to free cash flow over a period of time and to eventual deleveraging as well. So, it's definitely the right move for the business to make that investment.

And we're excited about ABS. We think ABS will definitely have a role to play with regard to financing the build plan at Kinetic given the relative cost advantages of ABS debt. And like you alluded to, there's significant ABS capacity at Kinetic in particular, the $3 billion to $4 billion capacity number is what we've talked about historically, and we still believe that that is true.

With that said, we're very focused on keeping the right amount and mix of assets in the leveraged finance credit box at Uniti. And we understand the long-term importance of access to the high-yield market for Uniti in addition to ABS. So, ABS, we think, is enhancing a part of the solution, but certainly not the full solution for Uniti's capital structure going forward.

And when we talk about the 4x secured and 6.5x unsecured ratios as governors for our capital structure, that is something -- that's on our non-ABS assets, I guess, is the best way to put it. That's on our non-ABS assets and EBITDA, and we think that's sometimes missed by the market.

And the next question will come from Frank Louthan with Raymond James.

What do you need to do to take more share in the wavelength market? And who do you see your main competitors there? And then you've made some key hires at Kinetic. Any more positions to fill there? Do you think the teams rounded out for what you need to do?

Frank, I'll start, and then I'm going to ask John Harrobin to help follow on the second question. And welcome to John. This is his first Uniti earnings call and first of many more to come, hopefully.

So yes, Frank, on the wave market, as you know, at Uniti, prior to the merger, we were just starting to get into that market in a bigger way. The vast majority of our product set on the wholesale side was focused on dark fiber, and we love that product, lower capital intensity, higher margin, lower touch, just higher and substantially lower churn.

But we're starting to get into the wave market because we definitely began to recognize that there are unique routes on our network, and we felt like lighting those unique routes could give us a -- just similar to how we target Tier 2 and Tier 3 markets, targeting those less trafficked routes could be an opportunity for us to take share, especially as more and more new fiber is being built around the country. So that was kind of the beginnings of the thesis.

And now with the merger, we've not only brought in more network to sell, we've brought in people on the team who have a lot of experience selling waves. We've got engineering talent. We've got product talent, marketing talent that is a terrific complement to what we previously had at Uniti in addition to the fact that now we've got a lot more owned network to sell.

And in the past, I think the waves market has been really characterized by pricing competition, especially on the Tier 1 routes where you've got 3 or 4 different providers. And we don't tend to like to compete in areas on price. We'd rather compete on infrastructure and where we've got unique infrastructure.

And really to the heart of your question, why do we think there's an opportunity for us going forward, it's kind of building upon the original thesis, which is we think there's going to be more and more wave traffic needed in less traffic markets today, so more of the Tier 2 and Tier 3 routes. And we think more and more of the hyperscalers and other Neoclouds, superscalers are going to need waves.

And they don't tend to purchase capacity based on price. They tend to purchase based upon route diversity, unique routes, and reliability, and the ability to provide good customer service, all things that we're seeing on the build side with these customers today. They tend to purchase based upon route diversity, unique routes and reliability and the ability to provide good customer service, all things that we're seeing on the build side with these customers today. So, we think going forward, we've got the ability to capture some share there and not based on price but based on those different characteristics.

And with respect to your question about where that share is going to come from and how big that opportunity is, I'm going to hold on that question for now. We're working on that. We'll give you a more refined answer on that in the future. But all that to say, with 5% of the market today, we've got a long -- we think we've got a nice amount of upside relative to where we are today.

And look, on the leadership question, very excited to have John on the team. He's been a terrific addition, not just to the leadership team, but on what he's already done at Kinetic. And importantly, he's brought in some key additions to his team already, and I think there's more to come, and I'm going to let John comment on that.

Yes. Thanks, Frank. Good to be here. And the Kinetic team as it exists today is highly talented. Their results and their resiliency going through a number of changes and the results that they produced during those changes is really a testament to their capability.

When it comes to team structure, we first look at what's our strategy and what's our operating plan. And that's what we've really been finalizing over the last few months. We finalized our build strategy. Now it's our operating plan strategy. We'll end November with that kind of tucked in, in a way in a good spot. And then it goes into structure.

And we've realized early that we needed a couple of key roles in the business. We've hired a growth leader, David Oliveira, who I've worked with at a couple of other companies, and he is a spectacular leader with a long runway and career ahead of him. Twenty years from now, when we're watching the industry from afar, he'll be running it. And I'm proud to say that he's part of the team and making a large impact already.

We have an active search right now for a construction lead. We've got some good people in that part of the business doing double duty as a few folks have exited that department, and we expect to fill that soon with highly capable leaders as well.

And then as we look at other opportunities in our operating plan, there's probably going to be a few additions we need to make and refinements around capabilities that we're not so strong at today or even new areas that Kenny mentioned before that are untapped in the Kinetic business. So, when you think about the trajectory, we've got what we need now, and the target is 6 months after the close. So, we closed on August 1, 6 months after the close by February 1. We have the go-forward in-person, highly capable team in place.

And the next question will come from Michael Rollins with Citi.

First, I wanted to ask about Slide 15 a little bit more. So, thanks for sharing this pro forma outlook, both for revenue and EBITDA. I’m curious if you could just share with us how to think about these trends going into 2026 in terms of the type of growth for Fiber Infrastructure. You talked about the tailwinds in Kinetic that you're seeing for this year and just trying to understand maybe some of those headwinds.

And then finally, on the EBITDA side of that chart, as revenue moves for each of these big buckets, these segment buckets, how do you think about the operating leverage or the incremental margins that you can extract as the revenues evolve in each of those pieces?

And then just secondly, just curious if you have an update on the strategic front. Last quarter in the slides, I think you referenced starting a review for the acquired assets. And just curious if you have any updates on how you're thinking about optimizing your portfolio of assets.

Michael, I think I wrote down all the questions. We'll try to hit most of them, and I'll start, and Paul, you can jump in on some of the trends, and then I'll come back on [indiscernible] the question.

And really, Michael, on the trends, we don't want to get too much into forward guidance at this point other than what we've laid out in some of the key inflection points for next year and how that sets us up for going into 2027. And so, I'll -- but we'll have obviously more to come on guidance when we come back together in February of next year.

But on the businesses, I'll start with Fiber Infrastructure. I mean that's a business that we know well that we love and bringing the Windstream Wholesale business into that fold along with heritage Uniti, Fiber and Uniti Wholesale is a terrific synergistic fit. And we think the historical mid-single-digit growth there, we're going to get back to that.

And I think there's great both cost savings in that business when we combine them, but also revenue synergies. The waves opportunity, for example, is one of them. Clearly, the hyperscaler opportunity is another that I think is additive and incremental to what we had before because we've now got multiple products to sell to a broader customer set. So very excited about the opportunity in that business.

And I think ultimately, when you think about the legacy services within that business, there is some TDM there, right? We're inheriting some TDM in the Windstream Wholesale -- heritage Windstream Wholesale business. But by 2027, 2028, that will be less than $100 million of TDM revenue. So, we're working through that. That will be a little bit of a headwind in that business, but we're working through that.

And as Paul said in his prepared remarks, that TDM revenue doesn't in any way detract from the real value of the fiber business, the underlying fiber business that's growing and prospering and putting up good predictable results. So, a little bit of headwind but generating cash flow in the meantime and eventually will become an immaterial part of the business.

At Kinetic, very excited about the playbook there. And with John now on the team and adding key -- leaders in key positions, those inflection points for next year are very much in focus, very much predictable. And as we say around here, we're not forecasting anything Herculean with respect to what others have accomplished in the copper to fiber migration story.

I mean this is -- we're not -- we don't shy from the fact that John comes from Frontier, which ran a playbook, and we're following a lot of that and obviously making additions and improvements in certain areas, and we've got a little bit of a unique footprint relative to Frontier. But really, the playbook is very, very clear, and we think the growth trajectory in the fiber business at Kinetic is very predictable. And so very excited about that.

And yes, we're going to work through the copper and DSL book of business, but we're going to do that in a responsible manner, and we're overbuilding and we're replacing that with a superior product, and we're migrating customers in an aggressive manner -- increasingly aggressive manner, I would say. And so eventually, you're going to start to see that predictable growth at Kinetic.

So, when you take those 2 businesses together, we think we're creating a lot of value in those businesses by building fiber, transitioning out of legacy networks and services. And I think the path is very, very clear. And that's 3/4 of our business. And so, then you get into the Uniti Solutions business, which is really where a lot of the heritage headwinds and declining top line exists.

We -- by the end of this year and early next year, we'll largely have exited the TDM part of that business. And then you've got large enterprises that are taking managed services products that are generally off-net. And as we've pivoted that strategy away from targeting new logos and focusing on the long-tenured customers and the profitable products within that business, yes, that's going to continue to result in top line decline. But we feel like the book of business that we're left with in 2 or 3 years is going to be died.

Long-tenured customers, large enterprises, some of which we think we can bring onto our own fiber network, some of which we think are going to be bandwidth hogs when the learning -- or sorry, the training -- the inference phase of AI starts to kick in. And we also think there's cross-selling opportunities with that business into our base at Kinetic and Uniti Fiber.

So, all that to say, those headwinds are going to persist for the next several years and are, in some ways, going to cloud the growth at the core fiber business. But in the meantime, we're generating nice cash flow off that business, and we're transitioning the really large key customers either on-net, and we're certainly using the really high-quality products in those -- in that business to help us in other parts of the business.

So, on your strategic question, Michael, a lot of activity there. We look at M&A the same way as we've looked at it for years. There's 4 buckets, right? There's asset sale opportunities. There's joint venture opportunities. There's opportunities to add bolt-on deals that are strategic. And then, of course, there's the real big bucket of just selling the business or parts of the business.

I'd say in the asset sale category, we're actually looking at a number of opportunities to generate some nice cash flow. I mean we've got a lot of fiber around the footprint that we're not planning to light anytime soon within the Fiber Infrastructure business, for example, we think those could be monetization opportunities. There's also some fallow real estate within the footprint that we're looking at.

On the joint venture side, there's a lot of third-party capital looking to help companies like ours accelerate the build. There's also a lot of capital looking to invest in fiber, AI infrastructure. And so, we're looking at some of those opportunities. And I think there could be some opportunities there. That's really a cost of capital conversation more than anything. But -- and right now, we don't necessarily need the capital, but we're certainly looking at those opportunities to create options for ourselves.

And I'd say on the bolt-on point, we're certainly getting lots of opportunities to look at. But I think on balance, the marginal dollar is probably better spent investing internally than being acquisitive. So, we're not spending a lot of time in that category.

And really, on the last bucket, the big tectonic plates continue to move in the industry. And we -- with our 2 scaled fiber businesses, Fiber Infrastructure and certainly Kinetic, we feel like we have 2 very strategic and very valuable assets. And I would say that our confidence level in that statement grows every day rather than dissipates.

So, Paul, anything you want to add on the trends or outlook?

No, I think that's good.

And the next question comes from Richard Choe with JPMorgan.

I wanted to follow up on the hyperscale opportunity. It seems like that pipeline is just going to continue to grow. But can we get a sense on timing maybe on when you should start signing these deals and coming through and how that should pace over the next few years because it seems like such a big opportunity.

So we've already -- we've signed a lot in the past couple of years. And I'd say the past couple of years, more like the past year, maybe 18 months. And look, this TAM came out of nowhere in a very short period of time. I remember 2 years ago, maybe 30 months ago, we were getting questions about whether or not this was real. Is there really an opportunity there? And we were struggling to answer that question because the numbers and the outlook looked extremely exciting and bullish, but we were trying to be measured in our response.

And now we fast forward 2 years, and we can't keep up with the numbers and we can't put numbers on the page that are -- that seem current or that aren't overly conservative. So, we've definitely been signing deals, and we have more to come. I do think, as I said in my prepared remarks, the next couple, several quarters, you're probably going to see the bigger deals are the biggest deals that we've had to date, and those are probably going to start showing up in revenue and EBITDA.

And I think that's -- we've said for the past 12 months that many of these deals don't show up in the vanity metrics like bookings or revenue and EBITDA because the nature of the deals are -- if you're building something with a very high NRC, it just doesn't show up in a bookings number. It doesn't show up in a revenue or EBITDA number. And so, we've consistently heard from investors that they want more visibility into those deals and how the economics work, and we have a plan to start showing that in the coming quarters as these bigger deals start to come online.

So, all that to say, Richard, we have been signing the deals. They haven't been showing up in the vanity metrics. But on a go-forward basis, I think we're going to be signing more deals, probably bigger deals, and we're going to be able to show you a little bit more visibility into all that.

And then one on the Kinetic side. In terms of the churn for the fiber there, the residential customers, where are you losing customers to? And what's the plan to maybe reduce that churn, if you can?

Yes. So, this is John. Thanks, Richard. On the fiber churn side, we're high on the churn rate versus benchmark. And that's not dissimilar than Frontier in 2021 when it first started its transformation. And we're losing to the logical players in our fiber footprint, it's not FWA or LEO, its cable, right? It's largely cable. And our approach is to apply the same 5 tactics that I know work, and we're starting to execute those right now.

The first tactic really is to clear the decks of any noise, right? And we're making 2 hygiene changes to do that. First, in July, we saw that we were dragging on nonpaid customers for a little bit and incurring bad debt. So now we have a policy to write them off earlier. So that's going to inflate churn a little bit on the fiber side. We'll wash through that by the end of the year.

And the second is to really get out of the ACP credit business when the ACP program went away, we extended credits to those customers. And on September 1, we notified them that that's no longer going to be the case and effective September 1, we are no longer subsidizing the ACP program after it went away. That's going to put about a 16-basis point pressure on fiber churn in the fourth quarter. But again, that's just clearing the decks for the future.

The second is being more surgical about price ups. Over the last 18 months, the legacy company was pretty aggressive about across the board price ups. So, versus across-the-board price ups, we're going to be more surgical and very customized by each customer based on their competitive profile and their speed tier, assign them a price up that's fair and inflationary.

And in many cases, if we can give them more speed for more money, more for more value. That's the strategy that we'll take. Cable has used it, Frontier has used it, we're going to use it. So yes, we might be increasing your rate a few dollars, but we're also going to double your speed in some cases. So, it's that more-for-more strategy and aligning value with price.

The third is really redesigning our value proposition. We just went from national pricing to regional pricing to not leave money on the table and take more share. We've eliminated the concept of rack rate pricing. And we've adopted a pulse strategy. So, we'll go in and out of markets with promotions. So that is -- that's a tactic that works, and we're deploying that.

And we've recently revamped many call center practices. That's the kind of the fourth prong, routing customers to the right queue, simplifying the IBR to get to people quicker, aligning incentives with reps so that it's not only save rate but also net retained revenue for the retention queues and really using GenAI to identify root cause of churn and performance management, identifying those reps that do it well and those that don't and sharing them pushing out those best practices to the entire team.

And finally, and very fundamentally, it's fixing broken customer experiences. Every week, my leadership team gathers around the table to find, proactively find and fix problems, and this is a discipline and muscle that we're building to act fast and to do this.

Everything from transferring customers too many times, and we've made some progress there to simplifying the IVR to small business customers up until a month ago that wanted single location small business customers up until a month ago that wanted to place a fiber order could not schedule an install date.

We fixed that pretty quickly and sales went up fairly significantly. So, these are the things that we're finding and fixing, and this is the way to go after churn and loyalty. I expect we'll make strong progress. This isn't rocket science.

It sounds like a good playbook and nice to clear the decks for next year.

And the next question comes from David Barden with New Street Research.

I guess I got a couple of questions for John. John, there's a philosophical divide in the fiber market right now, which is building in-house versus outsourced building and how that contributes to your cost to pass and your efficiency and your ability to scale. I was wondering if you could kind of elaborate a little bit on kind of where you are landing on that in the kind of the new kinetic.

And then the second is the chart where you guys show the penetration rates for fiber, I mean, 25% to 30% penetration year 1 is pretty incredible. But then it tails off really quickly, only getting us a few more percentage points over the next couple of years. Could you kind of talk a little bit about that arc? How do you get that really high penetration year 1? And then how are we going to scale that further in years 2, 3 plus?

Yes. Excellent. Thanks, David. And on your first question, we've made 3 major fundamental changes to our build plan over the last several months. First is from having no plan to actually having one with a very specific sequencing of where we're going to build in what order, we know every household specifically for the next 3 years in sequence. The second is moving from subsidized builds largely to strategic builds. And 2025 will be the last year that Kinetic builds more subsidized households than strategic households.

And the third is going from predominantly internal construction teams to predominantly external. We took a page out of the Frontier playbook here, put multiyear volume on the table and secured agreements that can scale cost efficiently. And because we have an internal team, we know that we could hire up there, we could deploy. It just takes time and effort. But that gives us a little bit of leverage when negotiating with third parties as well.

And it's not one or the other. It's absolutely both. Our internal teams not only have a cost advantage and combine that with our 95% either fiber now or fiber-to-the node allows us for quick and cost-effective deployment of fiber. But the internal teams have a lot of flexibility to travel, to go to places where we can pivot quickly as appropriate and send teams in to do specific builds.

And so, we have a plan to use both internal and external effectively, so we don't buy into one or the other. I think if we can get the right cost, and we believe we have them on external, that's the fastest way to scale, and that's where we're moving the majority of our work to. But we'll never give up our internal construction team.

On the other question on the fast penetration and then the curve for the outer years, yes, this is -- you see this also with overbuilders, et cetera. You hit a wall. And I remember in 2021 at Frontier, people were skeptical of us growing the legacy -- what we call the base markets and the legacy markets, I think it was like 40.5% penetration in 2021.

And we said we wanted to get to, what, 45% in 4 years. We achieved that 1 year ahead of schedule. And I think last quarter, Frontier might have announced 48% penetration in those base markets. So, I think the Kinetic team has done a really strong job penetrating homes in new fiber territories quickly. They have a whole effort called Fiber Fast that's very disciplined, and it's very effective.

Where they haven't paid as much attention to is those legacy markets. And recently, we have. And I can tell you that we're seeing improvements there in the older cohorts. And a lot of it is just how you go after those discretely. Do you pulse in and out of those markets with promo? Do you add distribution in those markets, either door-to-door or do you bolster media, performance-based media in those markets.

So, a combination of promo, distribution and media is how we go after that. And that's how we did it at Frontier, and it seems to work. So, I'm confident that we'll make inroads there. Those are really good markets with good market profiles. We should be winning our fair share in those markets.

David, just to build on John's comments on the build and philosophy there. We've said for several quarters now leading up to this pivot to more external that our build costs would increase. So going from that historically low $600 to $650, all internal that we were going to make the sacrifice to let that cost per passing increase some. But the benefit of that would be that we bring all the things John just said about the benefit and able to build more faster. We think that trade-off is well worth it.

So, to your philosophical point, that's where we land. Let's bring in a good mix as opposed to doing it 100% internal. Yes, you spend a little bit more per passing, but all the benefits that John just mentioned accrue eventually to the bottom line.

And our next question will come from Brendan Lynch with Barclays.

Just on Kinetic home passings, you're a little below the pace that you originally anticipated, but expect to kind of recapture that original trajectory in 2026. Can you just walk us through what you expect to change next year to help you get back on track?

Yes. I mean we're below, as Kenny mentioned, a slight bit, but we expect to catch up in the first quarter. That's simply a timing issue. After the merger close, we realized that not all projects that were designed and ready to go. We secured the crews external to go build them. Not all the projects were permitted, and we ran into delays on permits and locates, particularly in those subsidized markets where we're new to the area and we don't have any existing experience or facilities.

This is not a Kinetic problem. As you know, permitting is an industry-wide problem. There's a lot of support and efforts to streamline the permitting process. We support U.S. telecom and other institutions that are going after that. I know there's potential EOs on the table as well, which we're supportive of and the FCC has been a good advocate for reform here.

That said, relative to permitting and facilities, we have visibility to every project, where we are in that pipeline, how to get ahead of it, the timing now and this is easy to resolve, and we're already knocking down some obstacles. We took our team that really did a good job on our subsidized build planning and winning a lot of great subsidized build and pivoted them to solely focus on managing our permitting and locate motion.

And the velocity there has increased in September and October consecutively. We've set an internal record on number of permits cleared, not that, that means anything in the -- when it comes to build plans, but we know that we're clearing the decks for the teams to roll. So that's why we're really confident that in first quarter, we'll catch up.

Great. That's helpful. And then, Kenny, you kind of teased multiple dwelling units as a growth opportunity. Maybe just help us understand why that wasn't part of the plan in the past and what's changing to make it part of the plan now?

Yes. Great question. I'm going to start and then turn it to John to pile on, Brendan. So, look, I think the short answer is it just wasn't a priority because there were so many other priorities that were being focused on, number one. But number two, I think that we've talked many times about bringing in fresh leadership, a fresh set of eyes, a proven playbook.

This is one of those great examples of how with John coming in and taking a look at where we were focusing, where our resources were targeted and just servicing the concept that, "Hey, this was a big opportunity at prior companies. And here, it's a big opportunity as well, and we don't have the resources next to it that we should. And on a go-forward basis, we're going to." So, it's just really a question of leadership and priorities.

No, I think that's well said. At Verizon, I manage the MDU business and you kind of have to win there in Verizon. I mean, with New York City, Boston and other large cities, you kind of have to nail that. And then at Kinetic, there really wasn't investment there. So, we kind of built it from the ground up.

And to this day, I mean, at Frontier, I think it's delivering double-digit nets every single quarter right now in terms of customer growth. So, once you get it rolling, it's really strong and the IRRs are really even higher than single family business. So, I'm very bullish on it.

It will take a little bit to build, but we'll get it done. You've got to have the right motion, if you will, and leadership. You also have the right product. We have the right product. In fact, our EOR deal that we just announced has certain MDU and community capabilities that we can use to deliver effectively on that segment. So, we're going to get after this. And it might take a few quarters or a year to really show the results. But once we get involved there, I know that we will succeed.

And the next question will come from Matthew Griffiths with Bank of America.

I want to ask on the fiber -- consumer fiber ARPU. You mentioned in the comments explaining the kind of sequential down move was caused by price adjustments and net adds. So, I was wondering to what extent kind of your comments on churn kind of impacted the move in ARPU?

And then on the net add side, are you finding that the kind of incremental net add is coming in at an increasingly lower ARPU? Or was this just something within the quarter that we may not see repeat? An added color there would be great.

Yes, Matthew, astute question, and I'll answer the first part. And then on the second part with new customers, it may sound like I'm circling the airport, but I promise I'll land the plane and answer your question.

Yes, there's a correlation between churn and ARPU. I mean, we have very high churn and among the best -- highest ARPUs in the category. I mean, 10% year-over-year on top of an already high ARPU in the category. I mean that's something that we need to really understand, and I spent a lot of time initially understanding that. The high ARPU that we have is in part due to our market profile, which is, I believe, is very attractive and distinct.

But the 10% year-over-year is really a result of multiple across-the-board price ups over the past 18 months. And just like with copper customers, we're going to get more surgical here. We're going to drive more for more and really use the speed ladder to move customers up the speed ladder to drive ARPU higher. And we have a massive opportunity there. 65% of our fiber base is on plans that are less than 1 gig.

This is, again, similar to the Frontier playbook. Just about a month ago, we launched 2 gigs to 85% of our footprint. And already new customer take rates there are in the double digits. We're going to introduce more value-added services to sell more services to customers, not only to drive more ARPU, but also, we know the more services customers purchase from us, the lower the churn is for those customers.

And also, a contributor to ARPU is using credits more effectively. We put more controls on the use of credits over the last 60 days, and we've now aligned rep or retention rep compensation with net retained revenue. So, you want to qualify the customer, rightsize them and you don't have to drop all the way to the bottom in terms of saving the customer.

You asked about new customers. And I'm always reminded of Moffet's characterization a couple of years ago, we really captured the essence of our category's new customer promo strategy. He think he characterized it, and this is almost exact words, like "It's really value deferred, not forgone." And for years, and this works, the industry brings in new customers at a lower rate because it reflects the natural ability to move customers up the speed ladder, sell more services and deploy inflationary price increases.

We embrace that notion. We've changed our go-to-market recently, like I mentioned before, to take advantage of that. And so, we have specific plans to grow ARPU using the 4 levers that we always use, speed ladder, value-added services, inflationary price increases and use of credits. And while it might not be -- it won't be 10% on a sustainable basis, we do believe there's a path to durable ARPU growth.

I show no further questions in the queue at this time. This does conclude today's conference call. Thank you for participating, and you may now disconnect.

Welcome back to Citi's 2025 Global TMT Conference. For those of you I haven't met yet, I'm Mike Rollins, I cover communication services and infrastructure for Citi.

Disclosures are available at the back of the room. And if you don't have access to those or would like another copy, please e-mail me at [email protected]. So we're pleased to welcome Paul Bullington, Chief Financial Officer of Unity.

Paul, thank you so much for joining us today.

Thank you, Mike. It's always great to be here. This is definitely one of our favorite conferences of the year. It's nice to be with you.

Well, it's great to have you, and it's been a very busy time for Unity. So maybe you can just catch us up with the recent close of the Windstream deal. What are Unity's key strategic and operating priorities as you look out now over the next couple of years?

Yes. So yes, definitely a lot going on. It's been a busy time, but a good time. We're glad to have the merger closed and have that process behind us and be able to really kind of focus on what's next, the future and hit the ground running.

From a priority standpoint, the Kinetic build and go-to-market focus is a huge thing for us. We spent a lot of time even pre-merger, really a very fine level of detail completely going through the full Kinetic territory, rethinking the build plan, re-prioritizing the build plan. And we've got now in place a full build plan out to the 3.5 million homes by 2029. So certainly, a lot of focus on that and now ramping the build engine to be able to meet those targets is a key focus of ours right now.

Also, I think the go-to-market approach at Kinetic is also something that we want to refine. We see a lot of good things that have happened. The penetration curves, particularly more recently at Kinetic have been really strong, but we think there's a lot of work to do and a lot we can build on from that.

So that more investments that we can make in terms of our go-to-market approach, distribution, marketing, all those sorts of things to really continue to drive penetration, getting that all in place is a big focus of our leadership team.

At the fiber infrastructure business, really capitalizing on the enhanced opportunity that we see by bringing those two parts of the businesses together, the Windstream wholesale business along with the Uniti Fiber and Uniti Leasing businesses to create a bigger network, a broader network, deeper customer reach, really capitalizing on that enhanced opportunity, which includes AI and the hyperscaler opportunity, but it's broader than that. It is a big part of our focus.

Integrating the leadership team, integrating the business, achieving the synergies, that's going to be a focus of ours. And then particularly on my plate, I think we have a really good opportunity to drive some interest expense out of the capital structure, helped by the market backdrop, but our capital structure from a debt standpoint, has rallied really strongly over the last year. And so I think we're going to have some opportunity to drive some interest expense out of the business as well.

Great. Now with the merger, you've organized the company into three key segments: Kinetic, Fiber Infrastructure and is it Enterprise Solutions?

Uniti Solutions.

Uniti Solutions?

Uniti Solutions, yes.

Which is the old managed services business?

Correct. Yes.

Do you view those as three distinct and separate businesses that eventually be separated through strategic action? Or are they more complementary?

We definitely view them as separate businesses. We view them as separate businesses with good synergies across those businesses. We think -- the fiber business is a business of scale. And so having the Kinetic business and then the reach of that network attached to the Fiber Infrastructure business and the reach of that network are complementary to each other. But we do think those are strategic business -- separate businesses.

Uniti Solutions, we've kind of labeled that as non-core because, it's not -- it doesn't exactly fit our fiber thesis where that's not a business that runs on its own fiber. It's basically over the top, typically running on other networks. It's a good business, throwing off nice cash flow for the business, but we view that as non-core. But those fiber -- those two fiber segments, we think are complementary, but we want to maintain the optionality to separate those if at some point in time, that's a path to maximizing shareholder value. So separate, but complementary.

And the strategic -- well, the strategic review of the new asset portfolio was referenced in one of your slides in your 2Q earnings presentation. And it mentioned that you're at the beginning of this process. So can you provide the scope, timing and the opportunities that you'll be reviewing?

Yes. Yes. So we definitely wanted to highlight the fact that we're -- now that the merger is behind us, we've -- it's not that we haven't been thinking about the assets from a strategic standpoint. Obviously, we think about that every day as an executive management team. But we have been focused on getting the deal closed and working through the Kinetic build plan and all those sorts of things.

And now that we've closed the deal and the merger, we wanted to highlight the fact that we can really now turn more attention as an executive team and a Board to thinking about the strategic road map for the businesses and the optionality for these businesses.

It's not saying that we have a formal process with a formal timeline that's going to deliver a formal answer, but just the effort to be intentional and very strategic about how we want to think about these assets going forward. So it's really looking at everything, looking at strategic opportunities from an M&A standpoint, both on the sell side and the buy side. But I wouldn't necessarily expect a product or a communication necessarily that we've finished the review, but it would just be folded into our process going forward.

I mean, we do think there's a lot of activity in the market today, particularly from large strategics that have been pretty vocal about raising the bar for the number of homes passed that they want to reach. And so I do think that's a part of it as well. We think given the scale of the Kinetic business and the Uniti business as a whole, there may be conversations to be had there as well, and it seems like that activity is picking up.

And so, with the footprint that you have, we've seen all different sized footprints be a part of this convergence strategy for these national carriers. So for the portfolio you have getting to 3.5 million homes by 2029. Is that something that's kind of in that sweet spot of focus for these big strategics? Or do you think there's a round of consolidation where you might try to expand your fiber presence first and then having more of a larger converged footprint for you guys could be more appealing to these big strategics?

Not to say that we wouldn't entertain opportunities to get more scale through acquisition. But I mean, if you think about players of scale in fiber-to-the-home, we're already one of the -- I would say, the top 3, 4 largest fiber-to-the-home players that are not one of those big strategic. So I don't think more scale is required to get attention on that front.

Very helpful. And so another priority that you've been, I think, focusing on is getting the business to growth. Where are you in the process of returning consolidated revenue and EBITDA as a combined company back to positive growth?

Yes. So we're close. And the investment that we're making in Kinetic accelerating that investment is going to help us to get to that inflection point quickly. I would say -- but we do have some -- there's some legacy services that we're still working through, particularly at Uniti Solutions and some of the Kinetic wholesale business. And my thought around that inflection point is that, we're probably flattish, '25 to '26, as we're working through some of that. But I think you see an inflection at that point, particularly '26 to '27 from both the top and a bottom line standpoint.

And when you think about just the ways that Unity is going to drive value for shareholders over the next few years, how much do you think is going to come from the organic side of the business versus capital allocation or M&A?

I think, organic is where we've got definitely the most wood to chop there and where we're focused. I mean, we've got seasoned people, particularly Kenny Gunderman, our CEO, very seasoned on an M&A standpoint. So I think we've proven to be smart buyers and sellers of assets in the past. So certainly never say never with regard to other acquisitions that might help us there.

But I think the organic opportunity in front of us is really what we're focused on. We've got a lot of fiber to build. We think the best way to deliver value to our shareholders operationally is to build fiber, sell fiber, right? That's what we want to do. So we've got a road map to get to 3.5 million homes by 2029. That's 1.25 million subscribers, 75% of Kinetics revenue coming from fiber.

At that point in time, you'd have 90% of the entire company revenue from fiber. We think that's the best way from an operational standpoint to drive value for shareholders because with the fiberization of that territory, gives us the right to win. Fiber is the winning technology, we think, for the long term. So that drives penetration, that drives profitability, that drives cash flow. All of those things, I think, come from achieving our objectives there.

And maybe diving deeper into the Kinetic opportunity, when you look at making that migration to more fiber passings, how do you look at the margin for EBITDA and unlevered free cash flow that, that business can eventually get to from where it is today?

We haven't put out anything with regard to that. I want to kind of probably keep my comments less specific with regard to specific margin targets there. I think that will come. I think we'll -- we're going to lay out more of the vision for what those benchmarks look like for the business 2028, 2029 as we're kind of coming out of that build.

But I think generally speaking, we're going to go through an investment period over the next 3 to 4 years. There will be some cash flow burn during that period to fiberize the network. But then on the other side of that cash flow burn, you really see an inflection point, right, in terms of free cash flow, delivering significant free cash flow to the business, allowing us to delever the business as well beyond that point.

So no real specific guidance there, but just the general path forward would have that inflection point as we wind down the build 2028, 2029, turning to substantial free cash flow generation.

So you have new leadership at Kinetic. You mentioned there's room to optimize performance. Can you share some of the progress you've had early to date and maybe how that will reflect on performance over the next couple of years?

Yes. So there is new leadership at Kinetic. John Harrobin is in the room, so I'll have to be nice in my comments, be kind. I think -- look, and I think John would tell you this if he was up here, but there's a lot to build on that is really good at Kinetic.

I think the foundation is there. And I think we've got the systems in place. We've got people in place. We've got a progress and a trajectory, and we've made good strides from a penetration standpoint. And so a lot to build off of.

So what are we changing? What are we doing different? I think the build for one, we're pivoting, right? The build previously was focused around subsidized builds and internal crews. We are pivoting. We're going to be much more focused on what we call strategic builds, so the non-subsidized builds and a much heavier mix toward external crews, which gives us the ability to scale and flex and really get the build engine humming. So that's one, I think, big difference that we're going to build on.

Two -- and a long-range plan. So Prior, it was more cherry-picking scatter shot in the fiberization approach, which makes sense in terms of you go where you have the lowest hanging fruit.

Going forward, we're going to have a long-range build plan. We know where we're going to build for the next 3 to 4 years. And so I think that's a different approach. From a go-to-market approach, I think there's a lot more that we can do from an investment in marketing and distribution channels. There have been some improvements made there over the last pretty year with the effort that Kinetic has been undergoing with their fiber Forward program, which is basically rolling their go-to-market marketing, learnings back into older vintage cohorts.

But I think one opportunity we see is the ability to invest much more heavily and intentionally in some of those efforts and to scale those efforts. So I would say that is a big sea change that's probably different now than it was maybe 6 months ago.

And then, one other thing with -- well, one topic, two questions. So I remember the Windstream footprint from years ago. And I think the messaging back then is, it's just a less competitive footprint in the ILEC. Is that still the case relative to ILEC regions that are out there?

Yes. I would definitely characterize the Kinetic footprint as being less competitive on the whole. It's more of the Tier 2, Tier 3 rural markets that where Unity is always focused. So we think it fits really nicely with our strategy. I mean, if you look at the competitive landscape for Kinetic, 60% of the footprint is large cable.

I think that compares pretty favorably to a lot of peers in terms of that. There's another 20% that's kind of cats and dogs. And then, there's another 20% that -- where there's really no cable competitor. I think the stat is maybe 12% of the network has no other wired competitor. And about -- it's 15% to 20%, depending on how you count it, 20% if you kind of look, I think, at co-ops and those sorts of competitors, but 20% with a competitive, call it, over builder or second non-cable option. So from a competitive standpoint, we really like the characteristics of the Kinetic footprint.

And your ARPUs, and you talked about this on the last earnings call, I think that your ARPUs are a bit higher than your peers for broadband and for Kinetic fiber. And what I'm curious about is, does that introduce just a longer-term risk for the business in terms of FWA competition or LEO satellite competition? Just because you have that higher bar on ARPUs where it might let a little bit more of that value segment attrit to these other alternative competitors?

Yes. We definitely don't think that ARPU is a vulnerability of the business. I think -- and ARPU is a little -- I mean, you got to kind of make sure you're comparing apples-to-apples across businesses, which sometimes is hard to do. If you look at our pure broadband ARPU, it's right in the $70 range, which is a little higher, but pretty close to competitors and peers from a broadband standpoint.

And then, we have another $10 or so generally of value-added services, but we only really have two value-added services today, which gives us an opportunity for the future as well. So a security service and then voice. And then there's another $10 maybe for modem, CPE rental, that sort of thing. So that kind of gets you to that $90, which is a pretty high number.

But when you look at the components of it, I don't think we're particularly vulnerable. I think, part of the ARPU equation there is the lower competition that we just talked about being a piece of it. But only about 1/3 of the Kinetic footprint is at a gig speed or higher. So we think there are lots of opportunities from an ARPU standpoint going forward.

Moving customers up the speed ladder is going to be really important for Kinetic. So we get a higher penetration at those higher speeds and higher ARPUs. That's a piece of it. Adding more value-added services, which we think we have an opportunity to do can help with ARPU. Better managing our retention credit strategy, those sorts of things can help with ARPU as well.

So we see plenty of levers that we can pull from an ARPU standpoint and continue to have -- I don't think we're expecting the kind of ARPU growth we've seen in kind of the most recent years at Kinetic. I would call it more of a kind of a 2% type ARPU growth on a go-forward basis, maybe 3% at the high end of the range, but probably closer to 2% from an ARPU growth standpoint through pulling some of those levers.

But one thing we are -- and I talked about kind of the change in philosophy from a go-to-market strategy. I think pricing is one of those -- one of the pieces of that puzzle. And the Kinetic approach historically has been more of a rack rate approach where kind of everybody works off the same rate card. I think -- we think there's an opportunity to be more strategic there to -- for markets where there may be more competition or more susceptible to FWA or other things, maybe there's an opportunity from a price standpoint there, but not necessarily painting the entire Kinetic footprint with that same brush.

So going more local with the marketing and with the pricing?

Absolutely, yes.

Maybe shifting gears to Fiber Infrastructure. So maybe just set the stage for us. As you look at the pro forma business, how much of this is considered strategic relative to what might be like a heritage or legacy revenue that is at risk of a trading away?

Yes. So I think, the vast majority of that Fiber Infrastructure business is what I would call strategic. So really all of the heritage -- I mean, Uniti Fiber Infrastructure business, so the Uniti Fiber business and the Uniti Leasing business. That is all fiber-based. There's no legacy in that. It's all very strategic in terms of revenue.

On the Windstream side, and that's about half of the combined business. On the Windstream wholesale side that we're merging into that fiber infrastructure business, 2/3 of that business, I would call strategic, with another 1/3 that's probably more legacy.

It's not TDM in the copper twisted pair sense of TDM, it's more fiber-based Sonic TDM. So it's a technology that's going away, but it's a very profitable technology. It's a technology that doesn't have a substantial cost base. So we're not as eager to just drive that legacy revenue out of the revenue stream, but it is declining. So that final sort of 20% of that Fiber Infrastructure revenue base is what I would kind of call legacy. Yes.

And you mentioned on the last earnings call, some strength that you're seeing in the sales pipeline and the opportunities to just leverage these assets and push sales. Can you give us an update on how that's progressing?

Yes. So the sales funnel is bigger than it's ever been today. I mean, and that's kind of on an apples-to-apples standpoint. And then, when you combine the Windstream wholesale business with the Uniti businesses there, obviously, there's a much deeper funnel. And we think there's a lot of cross-sell opportunity between those.

So new customer relationships, broader reach of the network, broader scale, we think, only drives more opportunity, more revenue to that business. So that's kind of what I talked about in terms of our priorities is really making sure we are capturing that well.

A big piece of the story is the hyperscaler piece. That part of our funnel has grown 5x from what it was second quarter of '25 over second quarter of 2024. So we're seeing just a ton of activity there. It's super exciting for our business. We think that, that is primarily upside to the business. We talked about a $1.5 billion total contract value from the hyperscalers in the funnel. And so we expect to win our fair share of that, and we expect deals to continue to come into the picture -- new deals to come into the picture as the consumers of AI fiber, hyperscaler fiber continue to invest in their compute infrastructure and their networks.

So the Unity team has talked about the success you're having not just with selling fiber, but leasing up assets that are already in place or largely in place. And this has been a question, I think, for fiber infrastructure companies for a while is the marginal returns on capital. Can you help frame this? When you're spending whatever it is in CapEx in this segment, just a simple math of how that drives EBITDA growth for Unity and the ability to have this accretion to return on capital over time?

I mean, I think that's one really -- and sometimes I feel it's even a little bit of a hidden success story for the Unity, particularly that Uniti Fiber business, that fiber infrastructure business, historically has been a little overshadowed by some of the Windstream lease and all of those things that are now in the rearview mirror. But that's always been a question, I think, and a challenge for fiber infrastructure businesses.

Can you take that anchor wireless build or hyperscaler build or whatever that anchor build is? And then can you successfully layer lease-up over the top of that? And I think we have proven over the years that we can not only do that, but do that really well.

Our enterprise business at Uniti Fiber is growing double digits year-over-year. The wholesale business at Uniti Fiber is growing double digits year-over-year. That's exactly -- when we talk about lease-up, that's exactly the bread and butter of our lease-up, taking those networks that we've built for a wireless company or for a hyperscaler and then layering over that enterprise business at every -- as many buildings as we can that fiber passes or marketing those on-net buildings or those near-net buildings to wholesalers. And so the types of returns that we're getting on that are really strong.

We're averaging yields. So first of all, it's very margin accretive. So our typical benchmark is, we think about it as it differs from project to project, but you can think about it as kind of an 80% margin for those kind of lease-up businesses or opportunities typically. And we're talking about yields on that margin of over 50%. So extremely accretive to the business. So we really like the economics of the fiber infrastructure business and particularly the lease-up part of it.

Maybe just pivoting to Uniti Solutions for a moment. One of the things that struck me, and you can tell me if this is fair, unfair from what I recall. There was an original set of pro formas and segment profit contributions. And it seemed like from the time of the initial guidance being put out to the latest guidance, it feels like the margins went up in Uniti Solutions and the corporate overhead to offset that went up. Is that something that was -- that you learned over time in terms of how that profitability of the business is working? Or were you able to variabilize maybe certain components of that differently than when you first started the merger process?

Yes. So I think that was just a fallout of the work that we did to segmentize the business and really refine the accounting from the perspective of the way we wanted to run the business going forward.

The real difference there is that previously at Windstream, they had a shared cost center across all of the networks. So what they call their CNO organization. There was a lot of shared network costs across that entire business.

Initially, in our evaluation of that, we had an allocation methodology for those costs. But then in preparing to be a combined company, we really went through from an accounting standpoint and really went through all of the detailed work to allocate those costs. And so we have a much more refined view of the allocation of those costs that were shared in the old Windstream model.

And if you think about it, it kind of makes sense. There's -- the majority of the network costs went to where there's network, right? And at Uniti Solutions, where they're using third-party networks, there wasn't as much overhead with regard to that business. So it was just really more of a refinement of the accounting in terms of go-forward segment EBITDA.

And is there any -- you mentioned that, that business eventually could get back to growth. What does it take to turn that business around?

Yes. That's honestly something we're working to figure out. I don't know that we have all of the answers yet. But what we do know is that there is a core book of business at Uniti Solutions that's mission-critical for those customers. And those customers are typically Fortune 100 type customers. And so big customers with big needs across the country.

And so our viewpoint is that, that is a business that's critical for those customers. That's a business that we understand and can work to optimize. And while there's a piece of that business, we -- I think we might change our terminology.

But there's a piece of that business that's sort of, I would call, kind of high calories, sort of, trying to think the best way to describe it. It's more access based. And so not a big value add to these businesses. It's more of a pass-through business. And so that's the business that we think is going to continue to run off. And our job is to really focus on that core product set, that value-added product set and those core customers and stabilize around that. And we think we can definitely do that over time.

As you're managing the investment into Kinetic into the homes passed with fiber, and then managing these other two businesses, Fiber Infrastructure and Uniti Solutions, what's the right leverage for the total portfolio versus where you are today?

Yes. So I mean -- and we've definitely made comments around leverage. We think that leverage today is on the higher side. It's -- the merger itself was deleveraging for Uniti from where we were. But given the nature of the combined business, we think the leverage today in closing around 5.5x is higher than what you would optimally run the business for the long term.

But we also see that we have a strategic imperative to invest in this business. We've got to fiberize this business in order to have the right to win and to have the kind of growth and profitability and defensible territory that we need to have for the business in the long term.

So, our plan is to make that investment. That's going to drive leverage up in the shorter term. We've kind of put a bracket around the 6x to 6.5x kind of high end on the leverage as we go through that investment period. But then on the backside of that, like we talked earlier, call it, 2029 as we're winding down the build, that capital intensity goes way down, free cash flow starts to accrue and then we see the opportunity to delever the business.

Long term, we've put a target leverage range of 4x to 4.5x. But it's going to -- given the investment period through sort of 2029, it's going to take us a while to get there.

And then just maybe real quick, you talked about flattish overall revenue '25 to '26. But when you look into these individual segments, these big three segments that you have, what is the growth or revenue change roughly look like in each of these pieces?

Yes. So Kinetic, I'd like to think about it in terms of the consumer piece of the business and then the enterprise and wholesale segments for Kinetic.

The consumer business at Kinetic, right from '24 to '25 is right at an inflection point. It's flattish, but we are inflecting very quickly to growth from a top line standpoint at Kinetic Consumer.

The wholesale business has got a lot of TDM. And that's the game of we're buying from the big guy, the other ILECs or RBOC and they're buying from us and everybody is trying to look at the balance of power there and raise prices and drive those costs out of their business. So that's a declining piece of the pie.

But then the -- where I think there's a real opportunity is the Kinetic enterprise, the Kinetic business piece. That's only about 20% fiber-based today, and it's declining low single digits, it's declining, but it's declining. We've got an opportunity to turn that into a growth business really quickly.

Fiber Infrastructure -- we'll get through the rest really quickly since we're running out of time. But Fiber Infrastructure, we see that as a mid-single-digit grower, a little TDM to work out there. So maybe not quite at that growth rate year-over-year unless we have some huge hyperscaler AI wins, which I think is very possible. And then Uniti Solutions is going to be continuing to decline at sort of a mid-teens kind of a rate on both the top and the bottom line for the next couple of years.

Yes. Well, thank you so much for joining us today. Thank you.

All right. Yes. Thank you.