Earnings call transcript: Uniti Group’s Q2 2025 results miss forecasts

Published 05/08/2025, 17:04
 Earnings call transcript: Uniti Group’s Q2 2025 results miss forecasts

Uniti Group Inc. reported its second-quarter 2025 earnings, revealing a notable miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of -$0.04, falling short of the anticipated $0.116, marking a surprise of -134.48%. Revenue came in at $300.73 million, slightly below the forecasted $304.19 million. According to InvestingPro data, the company maintains a healthy current ratio of 1.95, indicating strong ability to meet short-term obligations despite the earnings miss. In response, Uniti Group’s stock saw a significant pre-market decline of 12.79%, with shares trading at $8.14 after the announcement, down from $9.34 the previous day. Despite this decline, InvestingPro analysis indicates the stock is trading near its Fair Value, with technical indicators suggesting overbought conditions. InvestingPro subscribers have access to 16 additional exclusive insights about Uniti Group’s valuation and growth prospects.

Key Takeaways

  • Uniti Group’s EPS and revenue both missed analysts’ expectations significantly.
  • Stock price dropped by 12.79% in pre-market trading following the earnings release.
  • Fiber infrastructure revenue grew by 7% year-over-year, despite overall revenue decline.
  • The company is accelerating its fiber build strategy, aiming for significant market expansion by 2029.
  • Merged with Windstream and simplified its capital structure for future growth.

Company Performance

Uniti Group’s performance in Q2 2025 was marked by a 6% year-over-year decline in pro forma consolidated revenue. Despite this, the company reported a 7% increase in fiber infrastructure revenue and a 19% rise in kinetic fiber-based revenue, highlighting growth in its core business areas. The company maintains strong profitability with an impressive gross profit margin of 84.86% and trades at an EV/EBITDA multiple of 8.73, suggesting reasonable valuation relative to its earnings potential. The company has been focusing on expanding its fiber network, aiming to pass 3.5 million homes by 2029.

Financial Highlights

  • Revenue: $311 million, down 6% YoY
  • Consolidated Adjusted EBITDA: $243 million
  • AFFO per diluted common share: $0.36
  • Fiber infrastructure revenue: Up 7% YoY
  • Kinetic fiber-based revenue: Up 19% YoY

Earnings vs. Forecast

Uniti Group’s Q2 2025 results fell short of expectations, with an EPS of -$0.04 against a forecast of $0.116, resulting in a negative surprise of 134.48%. Revenue was also below the forecast of $304.19 million, coming in at $300.73 million, a surprise of -1.14%. This marks a significant deviation from the company’s previous performance trends.

Market Reaction

Following the earnings release, Uniti Group’s stock price experienced a sharp decline of 12.79% in pre-market trading. The stock closed at $8.09, down 8.1% from the previous day, and further dropped to $7.88 in pre-market trading on August 5, 2025. This movement is a stark contrast to its 52-week high of $10.47 and reflects investor concerns over the earnings miss.

Outlook & Guidance

Uniti Group has set a consolidated revenue guidance of $2.2 billion for 2025, with an adjusted EBITDA target of $1.1 billion. InvestingPro data shows the company has achieved revenue growth of 1.95% over the last twelve months, with analysts expecting continued growth this year. For detailed analysis and comprehensive valuation metrics, investors can access the exclusive Pro Research Report, available for over 1,400 US stocks including Uniti Group. The company plans to invest $875 million in net capital expenditures and aims to add 530,000 fiber subscribers by the end of 2025. Despite the current challenges, Uniti remains committed to its long-term strategy of expanding its fiber network and increasing its fiber-based revenue.

Executive Commentary

CEO Kenny Gunderman emphasized the critical role of fiber in broadband delivery, stating, "Fiber is the mission critical connective tissue for all current and future broadband delivery." CFO Paul Bullington highlighted the company’s strategic focus, noting, "We are on a multi-year journey to overbuild the majority of the Kinetic copper network with fiber."

Risks and Challenges

  • Market competition in the fiber industry could impact growth.
  • Potential delays in fiber build-out projects may affect future revenue.
  • Economic uncertainties could influence consumer spending and investment.
  • Integration challenges post-merger with Windstream.
  • Regulatory changes in telecommunications could pose risks.

Q&A

During the earnings call, analysts inquired about Uniti’s high win rate for hyperscaler deals and the strategic focus on high-margin infrastructure leasing. The company is also exploring fixed wireless solutions to cover remaining footprint areas, with expectations of mid-single-digit growth in fiber infrastructure. Analysts expressed interest in the potential for average revenue per user (ARPU) growth through speed upgrades.

Full transcript - Uniti Group Inc (UNIT) Q2 2025:

Operator: Good morning, and welcome to today’s conference call to discuss Uniti’s Second Quarter twenty twenty five 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.unity.com, beginning today and will remain available for three sixty five 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 DeTullio, Uniti’s Senior Vice President of Investor Relations and Treasury. Please begin.

Bill DeTullio, Senior Vice President of Investor Relations and Treasury, Uniti: Good morning, everyone, and thank you for joining today’s conference call to discuss Unity’s second quarter twenty twenty five results. Speaking on the call today will be Kenny Gunderman, our CEO, and Paul Bullington, Unity’s CFO. 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, efficiencies from the debt silos combination, Unity’s 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 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.

Kenny Gunderman, CEO, Uniti: Thanks, Bill. Good morning, everyone, and thank you for joining. We’re very pleased to have closed our merger with Windstream. When we announced this combination in May 2024, we talked about how fiber is the mission critical connective tissue for all current and future broadband delivery. Since then, we’ve not only seen a validation of that thesis, but an acceleration of positive themes that reinforce our views.

Since our announcement, for example, four of the largest wireless carriers in North America have begun investing heavily in fiber to the home, and we believe that investment will continue. With Kinetic, we own one of the most strategic independent fiber to the home platforms remaining. With a focus on Tier two and three markets, our footprint has substantial first mover advantages with fiber. We’ve also seen the dramatic emergence of the hyperscalers as massive bandwidth hogs. And Uniti is one of the few truly national wholesale providers able to support their growth and scale.

Importantly, with our close to 5,000,000 connected fiber endpoints by 2029, we will be substantial beneficiaries of the AI inference phase, which is fast approaching. Lastly, since our deal announcement, we’ve seen a material improvement in the regulatory backdrop for fiber providers, including copper to fiber conversions. The FCC has taken a much more commercially favorable position towards copper retirement and a more business friendly view of communications regulations in general. Many of our state PUCs are following their lead. So with that, we cannot be more pleased with our transaction and how well positioned we are as a premier insurgent fiber provider.

Before jumping into the quarter, we want to spend a little more time on prepared remarks than normal in order to give a refresher of new unity. Starting on slide four, first we are going to accelerate our investment in fiber and expect to pass 3,500,000 homes with fiber within the Kinetic footprint by the 2029, and we have no plans of stopping there. We also expect that about 75% of our total revenue will be fiber based by 2029. That conversion to fiber will further fuel the strong core fiber revenue and EBITDA growth we saw during the second quarter. The proven success of fiber based products, especially when you build first or early in a market like we’re doing at Connecticut and Uniti Fiber, allows for predictable, steady growth with increasingly improving churn.

Our aggressive management of legacy products and services will allow us to eventually achieve stable consolidated revenue and adjusted EBITDA growth. Our mentality and go to market strategy will be that of an insurgent share taker with industry leading NPS scores and a focus on network quality and customer obsession. We believe long term blended penetration of 40% is not only achievable, but looks increasingly conservative. Slide five shows key metrics we plan on presenting each quarter. We currently pass 1,700,000 homes with fiber within our Kinetic footprint and we expect to be at 2,000,000 homes by the end of this year, and 3,500,000 homes by the ’9.

Even before taking into account our enhanced build plan, our percentage of total revenue on fiber is already around 40%, and we expect that to increase to roughly 75%. Also, the percentage of total revenue that comes from our core business, kinetic and fiber infrastructure, is 80% today and growing to 90%, providing a substantially future proofed business. As demonstrated on slide six, the growth in each of our core fiber lines of business has been very strong, and we expect that to continue given the indisputably superior nature of fiber. Given this pace of growth, fiber will soon overtake legacy services as the majority of our revenue and EBITDA. It’s important to highlight on this page that we will face headwinds from legacy services that will weigh on consolidated revenue and EBITDA.

With that said, I’d like to highlight three points. First, these services in no way diminish the value of our core fiber business. Secondly, within a relatively short period of time, the mix shift to higher fiber revenue will make the legacy services increasingly immaterial. And thirdly, in the meantime, these services are generating predictable free cash flow. In order to grow, we have to take market share and our insurgent mentality is reinforced by very strong NPS scores as shown on slide seven.

We’re obsessed with customer satisfaction, and as a result, our industry leading churn is our superpower. On a go forward basis, as we transition the majority of Kinetic’s footprint to fiber, we’ll also start to see material improvements in churn. Finally, we believe we have the right leadership team in place to capitalize on the opportunity ahead, as highlighted on slide eight. Our collective experience spans successful copper to fiber conversion stories like Frontier and Zipline, as well as wholesale and enterprise fiber. And of course, we have substantial strategic and M and A experience for the exciting road ahead.

Going forward, we will report our results in three segments. The first is Kinetic, which is our fiber to the home platform. Second is fiber infrastructure, which includes Uniti Fiber, Uniti Leasing, plus Windstream wholesale. And our third segment is Uniti Solutions, which is the business formerly known as Windstream Enterprise. Starting with fiber infrastructure on slide 10, you can see we had a solid quarter of pro form a Uniti and Windstream consolidated bookings of $1,200,000 of MRR.

As we foreshadowed, wireless bookings have been a highlight, up 30% in the 2025 compared to the first half of last year. Our anchor lease up strategy within the fiber infrastructure segment will not change going forward, and in fact, the economics when combined with Windstream wholesale track right in line with our expectations. Importantly, the hyperscaler deals we are pursuing on a consolidated basis are not only in line with these economics, but are tracking ahead of our expectations. As demonstrated on slides eleven and twelve, we have terrific potential in this segment. The chart on the right side of slide 11 is frankly dated as it shows the industry growth expectations before the hyperscalers theme emerged in earnest.

Our new combined wholesale fiber platform not only has an expansive high strand count network to sell with unique metro markets and intercity routes, we also now have capabilities to sell a more robust product set of lit and dark fiber. As you can see on slide 12, we have an immediate and materially enhanced set of customer MSAs to now sell that larger product set into. In fact, on August signed a twenty year IRU with a major hyperscaler that spans approximately 500 miles on existing intercity network. The total contract value is approximately $100,000,000 This is a deal that we’ve been working on together for some time and would not have been possible without Uniti’s network and Windstream’s relationship with the customer. This cross selling opportunity is exactly the type of deal we’ve been foreshadowing and expect to see more in the near future.

That’s a great segue to our wholesale sales funnel on slide 13. On a combined basis, our hyperscaler funnel represents about $1,500,000,000 of total contract value. At Unity alone, hyperscalers have increased as a percentage of the total funnel from less than 15% a year ago to now 40%, and that’s on a total funnel that’s increased 80 since 2Q24. The activity of both companies alone has been very strong, but the closing of this deal is an accelerant, and we expect a nice ramp in the ’5 and certainly into ’twenty six. Turning to Kinetic.

This segment will now include all consumer, wholesale and enterprise customers that are located within the ILEC footprint. As slide 15 illustrates, consumer represents about 60% of total revenue and is expected to grow to about 75%. And although fiber based revenue within Kinetic today represents a minority share of total revenue, by 2029, we expect that to be about 85%. As I said earlier, this shift to fiber will result in growth, lower churn, and therefore predictable revenue and EBITDA. Slide 16 shows the cadence of our accelerated fiber build.

As a reminder, Kinetic has built a substantial amount of fiber to the node over the past ten years, and building that last mile can be done both cost efficiently and in a timely fashion relative to many of our peers. Also, it’s important to point out that the 3,500,000 homes that we’re passing does not include B nor any out of territory builds. We think there’s a terrific opportunity to build fiber to the home utilizing our existing metro rich Uniti Fiber footprint. And taken together, we see a clear path to up to 4,000,000 fiber homes over time. More to come on that in the future.

Turning to slide 17, as we’ve now demonstrated at Uniti over the years, if you build fiber first or early to Tier two or three markets, you have the right to win for many years into the future. And that same strategy is being implemented at Kinetic. 80% of Kinetic’s footprint is either one competitor or less, highlighting the competitive dynamics of Tier two and three markets. I mentioned it earlier, but Kinetic’s footprint represents one of the last remaining scale platform opportunities to be first with fiber. Also, as you can see, only 60% of the footprint has a national cable provider that’s offering a fixed mobile bundle.

We believe that’s one of the real highlights of our footprint. Speaking of the bundle, turning to slide 18. As we’ve talked about in the past, we think a wireless bundle at Kinetic today is a nice to have but not a must have. As this slide demonstrates, we’re seeing terrific success thus far with our existing wireless bundle partnership with AT and T with 18 times quarter over quarter fiber subscriber growth and approximately 50% improvement in churn for those subscribers that bundle. So while we do not think a bundle is critical, it does demonstrate the benefits of the convergence theme we’re seeing in the industry.

And we think this provides tremendous upside by combining Kinetic with a more robust bundle in the future. I mentioned the favorable regulatory roadmap earlier at the FCC, but that’s also true of our state PUCs. Of the 18 states comprising Kinetic’s footprint, nine have eliminated COLA obligations with deregulation and expanded access to advanced technology. In the remaining nine states with COLA obligations, we have the flexibility to provide voice services using the technology of our choosing, such as fixed wireless or fiber based VoIP solutions. So as slide 19 highlights, by 2029, we believe that over 95% of our customers will be on fiber to the home directly or through alternative technologies like fixed wireless that leverage our substantial fiber to the node investment.

We think this is one of our key competitive and strategic advantages and we’ll elaborate more on that in the future. Turning to slide 21, before I turn the call over to Paul, I want to talk about Unity Solutions, which is a robust nationwide managed services provider to Fortune 100 enterprise customers across the country. As I mentioned earlier, this business is not part of our go forward fiber infrastructure strategy, but it is still a very good business that generates substantial amount of predictable cash flow. While both revenue and EBITDA are declining, weighing on our top line as I mentioned earlier, a critical part of our strategy is to retain the most profitable part of this business while maximizing cash flow. We will largely exit TDM by the end of this year.

And we believe many of the customers we plan to retain will be huge bandwidth users from AI generated products when the infra space begins, giving us a potential opportunity to move these customers to fiber. Also, we believe some of the managed services products within this segment can be cross sold into our Uniti Fiber enterprise base as well as into the Kinetic enterprise base. Taken together, we believe all these things will flatten the decline of this business by 2028, resulting in an NPV of over $1,000,000,000 of enterprise value. With that, I’ll now turn the call over to Paul.

Paul Bullington, CFO, Uniti: Thank you, Kenny. Starting on Slide 23. Fifteen months ago when we announced the planned merger with Windstream, we laid out our key pre close priorities. Through the dedication and collaboration of our combined teams, we have completed nearly all of those objectives, including our go forward operating plan, the collapsing of the debt silos and the full redesign of the Kinetic Fiber to the Home build plan. And we are now set to hit the ground running at full speed as one company.

Please turn to Slide 24 and I’ll touch on some of the key second 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 current Uniti Fiber and Uniti Leasing segments, along with the Windstream Wholesale segment, all of which are highly complementary and will combine to create a premier fiber infrastructure company with both national and deep regional capabilities. We are also now referring to the Windstream Managed Solutions segment as Uniti Solutions. Both Uniti and Windstream made good progress this quarter on several different fronts.

Starting with Kinetic, we expanded our fiber network to pass an additional 52,000 homes with fiber, ending the quarter with 1,700,000 homes passed. Kinetic also added 19,000 fiber subscribers during the second quarter, ending the quarter with 483,000 total fiber subscribers, a 15% increase from the prior year period. As Kenny mentioned earlier, total fiber revenue for Uniti and Windstream increased 10% year over year during the second quarter, with Kinetic consumer fiber revenue alone growing 27%, which is consistent with the growth rate we’ve seen for multiple quarters now. This growth is being driven by strong adoption of our Fiber to Home product, bolstered by the performance of our Fiber Fast Start and Fiber Forward initiatives at Kinetic that target our newer and more seasoned cohorts respectively. At fiber infrastructure, Uniti and Windstream combined to record consolidated bookings MRR of approximately 1,200,000 with Uniti contributing $800,000 of MRR to that total.

This level of bookings at Unity is consistent with the past several quarters. Slide 25 highlights the sustained momentum we are seeing within Kinetic Fiber. Fiber penetration was up 20 basis points sequentially and 120 basis points year over year, while fiber ARPU increased 6% sequentially and 11% year over year. Turning to slide 26, I’d now like to cover Uniti’s standalone results for the second quarter. Uniti reported consolidated revenues of $3.00 $1,000,000 consolidated adjusted EBITDA of $243,000,000 AFFO attributed to common shareholders of $96,000,000 and AFFO per diluted common share of $0.36 all of which were ahead of our expectations.

As we mentioned previously, analysts’ consensus estimates for standalone Uniti were too high for the second quarter and too low for the 2025. At Uniti Leasing, we reported segment revenues of $226,000,000 and adjusted EBITDA of $220,000,000 representing an adjusted EBITDA margin of 97% for the quarter. During the second quarter, Uniti Leasing net success based CapEx was approximately $2,000,000 as GCI funding for the calendar year 2025 was fully satisfied during the first quarter. At Uniti Fiber, we reported revenues of $74,000,000 and adjusted EBITDA of $29,000,000 during the second quarter, resulting in an adjusted EBITDA margin of 39%. Uniti Fiber net success based CapEx was $21,000,000 in the second quarter, which represents a net capital intensity of approximately 28%.

We also incurred about $2,000,000 of maintenance CapEx during the quarter. In addition to these standalone Uniti results, we also wanted to provide a pro form a view of new Uniti consolidated performance for the quarter. Slide 27 provides this pro form a view of new Uniti consolidated second quarter results. Consolidated pro form a revenue was down approximately 6% year over year during the quarter, primarily driven by the continued decline in legacy TDM services and in Uniti Solutions. However, top line growth in other parts of the business was strong, with fiber infrastructure growing 7% year over year and Kinetic fiber based revenue inclusive of consumer, business and wholesale services growing 19% year over year.

As we continue to execute on and accelerate our fiber overbuild plan, we expect fiber services at Kinetic will continue to deliver consistent strong growth quarter over quarter. Please turn to Slide 28, and I’ll now cover our 2025 outlook for the combined company. We have provided two views of estimates for 2025 on this slide. 2025 as reported outlook includes seven months of standalone Unity results, plus five months of combined Unity 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 form a view for 2025, similar to what we have provided in prior quarters. Both the as reported and pro form a views for 2025 reflect the completion of the resegmentation work at Windstream that has been in progress over the past couple of quarters, and also reflects how we plan to present the different segments going forward. The following comments on our 2025 guidance will be based on the as reported outlook view. Beginning with Kinetic, we expect revenues and adjusted EBITDA to be $945,000,000 and $385,000,000 respectively at the midpoint. We expect to deploy $510,000,000 of net CapEx at the midpoint of our guidance, primarily related to the continued build out of fiber within the Kinetic footprint.

At Fiber Infrastructure, we expect revenues and adjusted EBITDA to be $1,100,000,000 and $735,000,000 respectively at the midpoint for full year 2025. 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 $310,000,000 at the midpoint of our guidance and represents a capital intensity of approximately 30%. As a reminder, both Kinetic and fiber infrastructure consist of a highly predictable core recurring revenue base that continues to grow and yield attractive margins. Turning to Unity Solutions, which we referred to in the past as Managed Solutions or Windstream Enterprise, We expect revenues and adjusted EBITDA of $320,000,000 and $155,000,000 at the midpoint.

Altogether, we expect consolidated revenue and adjusted EBITDA of $2,200,000,000 and $1,100,000,000 at the midpoint of our 2025 outlook, with consolidated net CapEx of $875,000,000 Using the legacy Uniti shares outstanding that is on the cover of our most recent 10 Q filing and excluding the impact of the warrants that were issued to Windstream shareholders as a part of the merger, total shares outstanding for the combined company is approximately 238,600,000.0. As we’ve mentioned multiple times already this morning, we are on a multi year journey to overbuild the majority of the Kinetic copper network with fiber, and we are greatly accelerating and expanding that fiber build plan. Accordingly, slide 29 lays out our key targets for Kinetic this year. We expect to reach 2,000,000 homes passed with fiber by the end of the year, reaching 45% fiber coverage within the Kinetic footprint. We also expect to add approximately 530,000 fiber subs and realize approximately $500,000,000 of consumer fiber revenue in 2025, an increase of roughly 25% from the prior year.

In terms of cost for passing, Kinetic has historically achieved a cost for passing on strategic non subsidized bills of approximately $650 As we push fiber deeper into the Kinetic footprint and shift our construction mix to using more external crews, we expect the strategic cost per passing to increase, but to still compare very favorably to industry benchmarks. We estimate cost per passing going forward will likely be in the $850 to $950 range, giving us a blended cost of $750 to $850 per passing over the life of the fiber build program. Finally, I’d like to provide some brief comments on our capital structure. Slide 30 illustrates how Uniti’s cost of capital has improved significantly over the past two years. If you go back to this time two years ago 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 7 percent on basis, a five fifty basis point improvement in two point five years. Slide 31 provides an overview of our outstanding debt maturities. Over the past year, we have done meaningful work to extend our debt maturities, reducing our combined near term maturities in 2027 and 2028 from over $6,000,000,000 a year ago to just over $3,000,000,000 today. Most recently in June, we issued new unsecured notes using majority of the proceeds to redeem a portion of our 10.5% secured notes due in 2028. Going forward, we will continue to be opportunistic in our approach to continue to push out near term maturities and drive significant interest expense out of the business.

I also want to highlight that yesterday, we successfully completed the steps to collapse legacy Unity and Windstream debt silos into one unified structure. Completing this debt collapse was a critical part of our strategy as it greatly simplifies our capital structure, unlocks significant opportunity for ABS on the Windstream assets and sets the stage for optimizing our combined capital structure going forward. Combined net leverage at the time of our merger closing is around 5.5 times and we expect to end the year with a combined net leverage of between 5.5 times and six point zero times, consistent with the target we set for standalone Unity. With that, we’d be happy to take your questions. Operator?

Operator: Thank you. Our first question comes from the line of Gregory Williams from TD Cowen.

Gregory Williams, Analyst, TD Cowen: Great. Thanks for taking my questions. The first one is just on, Kenny, you move to the inference phase, how did the deal constructs change? I imagine it’s a lot more lease up, better margin, maybe lower upfront costs for you guys, but maybe there’d be more competition as well. And, you know, what would the yields be compared to the, you know, training data center yields?

Second question just on the funnel you mentioned. I think you said the wholesale funnel represents a billion and a half dollars of total contract value. What’s your typical win rate on a funnel? Thanks.

Kenny Gunderman, CEO, Uniti: Morning, Greg. Good questions. I’ll start with your second one. When when when it and you specifically asked about the billion and a half of hyperscaler deals. And I would say, as we’ve said consistently over the past probably eighteen months, our win rate when we go after a large hyperscaler deal is very, very high.

We are being very disciplined about which deals we pursue. We’re not looking to go after every single hyperscaler deal we hear about. We’re not going after deals that are built out in the middle of nowhere that are not either contiguous to or strategic to in some other way our network. We’re very focused on deals that are either in an existing metro or near an existing metro or deals that connect our metro markets to others or that are relatively close to our network and give us the ability to expand it strategically. And so we’re being selective on the deals that we pursue and despite that, we still have a very sizable funnel, the billion and a half.

I’m pretty sure that’s the first time we’ve shared that number publicly. And when we go after those deals, we tend to win. And as I’ve said before, hyperscalers don’t always pick the winner. In fact, I’d say don’t frequently pick the winner based upon price. They pick their winner based upon reliability, ability to build on time and on budget and on spec.

And I think as I mentioned in our prepared remarks, being a scaled provider matters with them because I think they want a robust group of network providers to serve them, but not so long of a list that it’s unmanageable. I think they like to have partners that they can go back to on a regular basis. So long winded way of saying our win rate is pretty high, we haven’t set a percentage, but I’d say it’s very high. With respect to your first question, inference is exciting to us. It’s more exciting than this phase that we’re in now, frankly, with the

We’re doing lots of great deals. We’re building lots of new network that we haven’t been able to build in years. We’re connecting metros that we’ve needed to connect over the years, and we’re now using hyperscalers anchor customers in order to do that, which is terrific. But where we’re really going to start to see a pickup in recurring revenue and EBITDA is when the inference phase starts in earnest. And previously we said that would probably be three or four years out, but I think that’s increasingly looking conservative.

It looks like it’s going to be earlier and earlier. I also think it’s going be harder to predict what’s inference versus not. I think AI work streams are getting more and more in infused in all other work streams and it’s hard to distinguish between the two, which is fine. But I think for us, what we really need is to have more distributed fiber endpoints that serve as on ramps to serve that inference phase. So we talk about our 3,500,000 fiber homes, for example, and our million plus buildings, data centers and fiber and small cells that are on are connected.

And all of those things are going to, we think, see an improvement in demand as it relates to inference. And that’s all coming from non hyperscaler customers by the way. So we’re really looking forward to that. And to your question, Greg, about the types of hyperscaler deals that we expect to see going forward as it relates to inference, I think you hit it, you’re right. It’ll be more lease up as opposed to Anchorgreenfield builds.

And in fact, the deal that we highlighted and Windstream signed last week at the end of right before the deal our merger closed, that’s a lease up deal. Very attractive transaction, twenty year IRU on existing infrastructure using existing strands with minimal capital and OpEx required. So very, very high margin and low capital intensity. And that deal came with, I think it was two ninety six strands and there’s a ROFR on incremental strands on top of that, which by the way is also exciting, right? Because as we’ve said before, we’ve got hyperscalers taking these very large strand count deals from us, and then they’re coming back for the second deal.

And in this case, this particular hyperscaler has asked for a ROFR on another four thirty two strands on top of the two ninety six, again, all lease up. So I do think, again, sorry for the long winded answer, but I do think once inference really kicks into high gear, you’re going to see higher margin, lower capital intensity deals coming from the hyperscalers and a lot of, we think, an improvement in MRR just across the basin in general.

Gregory Williams, Analyst, TD Cowen: Great. Thanks.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Frank Louthan from Raymond James and Associates.

Frank Louthan, Analyst, Raymond James and Associates: Great. Thank you very much. What is the timeframe for the $1,500,000,000 funnel? What are those deals over? And then as far as the Kinetic build out going forward, how much of that 20 percent of your footprint that doesn’t have any cable competition is economical to build?

And how much of your 40% penetration goal is reliant on being able to construct in that part of the footprint? Thanks.

Kenny Gunderman, CEO, Uniti: Hey, Frank, I’ll start on both of those and Paul, you might want to join in on the second one. But on the funnel, first of all, I’m always a little bit reluctant to show funnel information because funnels ebb and flow by their nature. And in fact, if all you’re doing is showing a funnel growing over time, pessimist point of view would mean that you’re not selling enough on the other side, if it just grows and grows. So we don’t like to show it on a regular basis, but we thought showing the funnel in this case made sense because we really want to show the theme of the funnel itself growing, but it’s growing predominantly because the hyperscaler slice of the pie has gotten is getting very sizable. And in fact, at 40%, this is the first time that the first quarter where the hyperscalers have been the largest customer segment for us in the funnel.

And so we really just wanted to show those themes. To your question, usually when something’s in the funnel, it usually takes something like twelve to eighteen months for it to come out. I mean, sales cycle and it certainly could be a lot less, right? It could be anywhere from a month up to, I’d say twelve months, maybe a little longer. And so, but with this, what’s in the funnel today, the billion and a half, I expect that over the next six, twelve, eighteen months, most of that will have worked its way through, but it hopefully will be regenerated by additional demand coming behind that.

And we do see that. Think that what’s in the funnel are actual deals that have been qualified by us and our customers, but we hear about much more in just private conversations and we certainly think based upon public comments being made by the hyperscalers just a commitment to investing in this space for years into the future. So very excited about that. With respect to the 40% of the footprint that doesn’t have the so called cable bundle, And really just to your question in general about how much of the footprint is economical to get to. Look, think as we said, 3,500,000 homes is roughly 75% of the footprint.

And beyond that, we think we can get to a large percentage of what’s left with fixed wireless or alternative technologies that are building off of that fiber to the node investment over the years. And so I do think it’s one of the real highlights of the Kinetic footprint that gets lost that while it is a rural footprint and the average market is less dense than a large metro, for example. There’s a lot of fiber that’s been pushed out into this network. So that $6.50 to 700 cost per passing that we’ve talked about historically is real. And as Paul mentioned in his prepared remarks, going up to a blend of seven fifty to eight fifty on the build over the next number of years, we’re getting to the less dense markets with that still very economical build based upon the historical fiber investment that’s been made.

And by the way, that also includes a blend that we’re starting to work more and more with third party contractors. Historically, we’ve done the vast majority of it in house, but we’re starting to bring in more and more third party contractors to give us the ability to have a more predictable cadence and definitely an uptick in the build itself. So with all that said, Frank, we feel very confident about getting to 75%, 80% of the footprint with direct fiber to the home and then the rest really serving it off of that fiber to the node investment that’s been made. So Paul, you want to add anything?

Paul Bullington, CFO, Uniti: Yeah, hey Frank, it’s Paul. Would just add that, to specifically your question about how much of our build is focused on that portion of the kinetic network without a cable competitor, That portion of our footprint tends to be very rural. And so it’s certainly an area of our footprint where we’re building fiber. That fiber tends to be more subsidized builds in nature, so it tends to be more RDOF or PPP or maybe even bead going forward. But it’s definitely a part of the plan.

And through those subsidized builds in those more rural areas of the footprint, we are able to build fiber, but it tends to be more of the subsidized projects that are in that category overall.

Frank Louthan, Analyst, Raymond James and Associates: Great, thank you very much.

Operator: Thank you. Our next question comes from the line of Michael Rollins from Citi.

Michael Rollins, Analyst, Citi: Thanks and good morning. And thanks for all the details in some of these slides. Curious if we could turn back to Slide 28. And when you look at the pro form a for each of the new segmentations, Kinetic, Fiber Infrastructure, Unity Solutions, Curious if you could give us perspective of aggregate growth for each of these pieces or in the case of solutions potential declines. And then how do you think about the multiyear progression of margin for each of those pieces?

Bill DeTullio, Senior Vice President of Investor Relations and Treasury, Uniti: And then

Michael Rollins, Analyst, Citi: I have a follow-up on kinetic after that. Thanks.

Paul Bullington, CFO, Uniti: Yes. So Michael, good question. I mean, I think on the fiber infrastructure, so on those segments from a top line growth standpoint, I think on the fiber infrastructure business, I think we expect that to be very much in line with the fiber infrastructure business Unity has run over the years. So we’re talking about there that kind of mid single digit growth on a go forward basis on the top line and similar growth on the bottom line, on the EBITDA line. So I mean, Windstream wholesale business does have some legacy services, some TDM there that is being run off.

So that does weigh a little bit on the growth there, but I would expect that sort of mid single digit growth with regard to that business on a go forward basis. At Kinetic, that growth year over year, there’s a little, we’ve been doing some re segmentation as you know, Michael, and so as muddied the waters a little bit from a comparison standpoint, that should be much more stable on a go forward basis. But we’re reuniting all of the unity, I’m sorry, the kinetic wholesale and kinetic business into kinetic business segment. It’s not just the consumer segment. So there’s a little bit of TDM coming in there.

You may see that a little bit weighing on that kinetic business more so than it was when it was just sort of isolated to the consumer business for Windstream more recently. But we would look to see that business really start to make the turn in near future into a growth business as well as we drive fiber. So, you know, that kind of flat to low single digit growth is what we’re driving toward over the next near term period. And then on Unity Solutions, I mean, Drew, do you want to jump in? We’ve got Drew Smith with us this morning as well, just on kind of the outlook for Unity Solutions from a top line and EBITDA standpoint.

Drew Smith, Executive, Uniti: Yeah, thank you Paul. Good morning, this is Drew Smith. When you think about Unity Solutions, today there’s still really two things kinda happening within that business. There’s a large portion of the revenue that is our go forward revenue, really based on technology and connectivity when we’re selling our managed services. But there’s also a component of TDM that is being exited.

As we’ve communicated at Windstream and we’ll continue to communicate at Unity, we’ll be fully out of the TDM business as it relates to Unity Solutions, by the end of this year. And so when you look at really kind of the go forward, we’re still seeing some revenue losses, but good margin, conversion as well as free cash flow conversion. I think right now we’re seeing revenue losses of around mid teens. Think that should be similar in the near term. Along term, I think we see stability as we’re really focused on supporting the customers, the larger customers within that base.

Michael Rollins, Analyst, Citi: And then just going back to the Kinetic Fiber business, the Slide 25. So the ARPU trajectory, from what I’m reading, I think that excludes the modem rental charge of $10.99 So when you add that back to the fiber ARPU, it suggests that you’re over $80 of ARPU. Just curious if you could talk about the strength of ARPU. What is driving that all in strength and spend from the customer and how you see the opportunities to continue to grow that customer bill over time?

Kenny Gunderman, CEO, Uniti: Yes, Michael, I’ll start with that one. I think you characterized the slide correctly, think you’re reading it right. And I think you’re right that we’ve got a very solid ARPU and that’s been growing nicely over the past number of years, feel great about that. And obviously, we consistently regularly comp that relative to our competition in the market. And when you do that, when you look across the cable codes and any other small cable companies or if there’s an overbuilder, which there aren’t very many in our markets, but when compare across all those things and fixed wireless, we’re right in line with where the competition is.

So we’re not we don’t have ARPUs or pricing plans that are in excess of our competition. And I think what that really gets to is these are markets where there is a little bit more pricing power for the providers in those markets. We’re, I’d say taking advantage of that, but we also recognize that there is competition and over time, we’ve got to be mindful of that and we will be. And so when we look out and forecast ARPU growth in our various IRR models and we sensitize those models, we’re, I’d say conservative with respect to our expectations there. And so we certainly don’t want to give any forward guidance on ARPU growth at this stage, but I do think we’re mindful that a robust number today and over time we expect that it will continue to be, but I think that we’re also mindful that there could be some pressures over time.

And ultimately, I think that when you think about how do we continue to grow that number, it’s not just pricing power, it’s also upselling customers to higher speeds. Today, I’d say 20%, maybe 25% of our base are actually taking max speeds that are available to them. So we think that’s a terrific upsell opportunity over time, especially as we start to get into the inference phase of AI, for example, and more and more people need higher bandwidth at their home.

Gregory Williams, Analyst, TD Cowen: Thanks.

Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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