Uniti Group Inc.

Good morning and welcome to today's conference call to discuss Unity's fourth quarter and full year 2024 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 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 Treasurer. Please begin.

Good morning, everyone, and thank you for joining today's conference call to discuss Unity's fourth quarter and full year of 2024 results. Speaking on the call today will be Kenny Gunderman, our CEO, and Paul Bullington, Unity 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 about our 2025 outlook, expectations regarding lease-up of our network, demand trends, business strategies, growth prospects, the benefits of the proposed transaction between Unity and Windstream, including future financial and operating results of either company or the combined company, statements related to the expected timing of the completion of the transaction and combined company plans, and other statements that are not historical facts. Please also note that Unity and Windstream, through the entity that will be the combined parent company following the merger, have filed a Form S-4 registration statement with the SEC, which was declared effective by the SEC on February 12, 2025, and includes a definitive proxy statement and prospectus that was mailed to Unity stockholders on or about February 18, 2025, seeking their approval of the transaction-related proposals. Investors are urged to read the definitive proxy statement and prospectus as it contains important information about the transaction. You may find information of how to request these documents in the presentation that accompanies this call. Numerous factors could cause actual results that differ materially from those described in the forward-looking statement. For more information on those factors, please see the section titled forward-looking statements in the accompanying presentation and the risk factors section of the filed form S4. With that, I would now like to turn the call over to Kenny.

Thanks, Bill. Good morning, everyone, and thank you for joining. 2024 was the most consequential year in Unity's history. We delivered on our promises and executed exceptionally well. The strategic and balance sheet moves we made during the year of future-proofed our business and positioned us to create real shareholder value. Our strategic recurring revenue, adjusted EBITDA, and consolidated bookings growth of approximately 5%, 8%, and 27%, respectively, not only underscore our strong execution, but the continued strength and the demand for mission-critical communications fiber. Our balance sheet and liquidity remain strong, and we're proud to be the first commercial fiber provider to access the ABS market with resounding success. We believe the ABS market will be a terrific value-accreted financing tool for us going forward. In addition, our current business plan is fully funded, and in 2025, we expect Unity will generate positive free cash flow. And of course, we achieved our goal of positioning ourselves strategically to control our own destiny with our announced merger with Windstream. Our often misunderstood MLA relationship will be simplified, and with nine months of hindsight, the approximately five times EBITDA valuation paid looks increasingly attractive for our shareholders. The new Unity will be extremely well positioned to benefit from the increasing demand from generative AI and, of course, the convergence theme driving strategic value for fiber to the whole. Our priorities for 2025 will not change materially. We will continue to focus on best-in-class execution and disciplined top-line growth of mid-single digits and high single-digit adjusted EBITDA growth. As Paul will discuss later, we also expect to fully fund the business plan of new Unity using ABS and other tools. Lastly, we'll have a substantial focus on building new fiber, especially in the kinetic footprint. For example, Windstream announced yesterday that they expect to roughly double the number of targeted homes passed with fiber for 2025 over 2024. As you might recall, when we announced our merger with Windstream, we guided to an initial target of approximately 2.9 million homes. By the end of 2025, we expect to reach 2 million homes, which is two years earlier than originally expected. As it relates to the pending merger with Windstream, we've received PUC approvals from 16 of the 18 jurisdictions requiring them, including Washington, DC, and the shareholder vote to approve the merger has been set for April 2nd. I encourage all shareholders to vote at the upcoming special meeting. Based on where things stand today, we remain on track to close the transaction in the second half of this year and are optimistic we could close as early as July. Moving to slide six, I could not be more pleased with our growth trajectory and strategy of being a pure-play fiber provider in Tier 2 and 3 markets. In the past several years, we've demonstrated predictable, solid, mid-single-digit revenue growth and accelerated EBITDA growth as we hit real leverage in the business with a heavy focus on lease-up of our existing infrastructure. All the while we're achieving this growth, our capital intensity continues to come down. As slides 7 and 8 highlight, in order for capital intensity to come down, we need to continue showing steady, predictable new sales. While we strive to grow bookings in correlation with our ever-expanding TAM, even with flat bookings and our industry-leading monthly churn of 0.2%, we're still able to achieve mid-single-digit top-line growth. In addition to steady bookings, capital intensity has continued to decline for other reasons. First, in 2018 and 19, we undertook a heavy build cycle of new fiber, largely in metro markets throughout the Southeast. Our capital intensity peaked at over 50%, but we assured investors that once past that build phase, we began leasing up those assets with attractive incremental cash flow yields and capital intensity would drop. We've delivered on that promise. Average paybacks on capital deployed have declined, and that theme should continue, especially as we remain disciplined in the approach of targeting 5-10% anchor cash flow yields with a lease-up strategy that is currently targeting 27% on a blended basis. As an aside, we expect to have a similar robust 3-4 year build cycle at Kinetic, but will likewise see capital intensity decline materially after the build is complete. Finally, as we foreshadowed, NRCs continue to creep higher, offsetting capital intensity, and we expect this trend to continue for the foreseeable future. As I mentioned earlier, we had another strong quarter of new bookings. We previously stated that 2024 was expected to be a down year for wireless, but we actually ended the year flattish to 2023 and are encouraged by the activity we have seen so far in early 2025. Flat wireless bookings were more than offset, however, by demand from other customers, including fiber to the home carriers. The number of bookings Unity saw relating to fiber to the home carriers increased threefold in 2023 versus 2022, and we saw further growth in 2024. As we previously mentioned, the demand from hyperscalers continues to represent a meaningful part of bookings. While hyperscaler bookings were very small in 2023, in just a year's time, they now represent about 20% of our full-year bookings, and we're confident this demand will continue. In fact, in addition to new deals, we're now seeing hyperscalers come back and lease more fiber from us on the same routes they leased from us originally. Despite the year in big activity, only two of our top 20 customers in 2024 were hyperscalers. This demonstrates that we have a well-diversified customer base and that our business plan is not reliant upon targeting hyperscalers or any one particular type of customers for that matter. Moving to slide nine, hyperscalers are spending approximately $300 billion annually and a meaningful percentage of that is being spent on digital infrastructure. We estimate the digital infrastructure TAM today to be around $40 billion with roughly $15 billion being spent on fiber and network investments. In five years, we see the TAM for both of these areas growing by three to five times, creating an attractive opportunity for Unity. We also estimate that about 80% of the generative AI spend today is related to building large learning models for AI training purposes. We're pursuing and have one fiber infrastructure build relating to training, but only where the transactions strategically expand our network at Attractive Economics. Said differently, we're approaching hyperscaler deals during the learning phase as anchor deals with the expectation for material lease up in the future. In fact, although it is still early, we're very pleased with the progress we've made to date as the combined yields of our hyperscaler deals, inclusive of lease up, are already close to 20%. As I've said numerous times before, we're most excited about the inference phase of AI, which today represents a minority of the spend, but in a few years is expected to be approximately 80% of the TAM. During the inference phase, users of AI will need distributed, low latency, high bandwidth connectivity, and our network is well positioned to benefit from those trends. During this phase, we expect to see increasing MRR associated from all high bandwidth users and continued lease up on the builds we're undertaking during the learning phase. As mentioned earlier, we're already starting to see hyperscalers come back to us for additional fiber on initial builds. In short, Unity is executing well on our core strategy of providing mission-critical fiber, and we're well positioned for the future. With that, I'll turn the call over to Paul.