Uniti Group Inc.

Good morning and welcome to today's conference call to discuss Unity's second quarter 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, .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 D'Attulio, Unity'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 Unity's second quarter 2025 results. Speaking on the call today will be Kenny Gunderman, our CEO, and Paul Bollington, 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 Unity's fiber build strategy, the business's 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 factor 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.

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 of 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 and 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 Unity is one of the few truly national wholesale providers able to support their growth and scale. Importantly with our close to five million 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 three and a half million homes with fiber within the Kinetic footprint by the end of 2029. And we have no plans of stopping there. We also expect that about 75 percent 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 Kinetic and Unity 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 percent is not only achievable but looks increasingly conservative. Slide five shows key metrics we plan on presenting each quarter. We currently pass 1.7 million homes with fiber within our Kinetic footprint and we expect to be at 2 million homes by the end of this year and three and a half million homes by the end of 2029. Even before taking into account our enhanced build plan, our percentage of total revenue on fiber is already around 40 percent and we expect that to increase to roughly 75 percent. Also the percentage of total revenue that comes from our core business, Kinetic and fiber infrastructure, is 80 percent today and growing to 90 percent providing a substantially future approved 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 in EBITDA. It's important to highlight on this page that we will face headwinds from legacy services that will weigh on consolidated revenue in 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 mixed 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 super superpower. On a go forward basis, as we transition the majority of kinetic 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 Zipley, as well as wholesale and enterprise fiber. And of course, we have substantial strategic and M&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 unity fiber, unity leasing, plus Windstream wholesale. And our third segment is unity 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 forma unity and Windstream solid bookings of 1.2 million of MRR. As we foreshadowed, wireless bookings have been a highlight, up 30% in the first half of 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 11 and 12, we have terrific potential in this segment. The chart on the right side of page 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 inner city 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 1st, Windstream signed a 20 year IRU with a major hyperscaler that spans approximately 500 miles on existing inner city network. The total contract value is approximately $100 million. This is a deal that we've been working on together for some time and would not have been possible without Unity's network and Windstream's relationship with the customer. This cross selling opportunity is exactly the type of deal we've been foreshadowing and we 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 1.5 billion 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 second half of 25 and certainly into 26. 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 of 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 note over the past 10 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 3.5 million 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 unity fiber footprint and taken together we see a clear path to up to 4 million fiber homes over time. More to come on that in the future. Turning slide 17, as we've now demonstrated at Unity 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&T with 18 times quarter over quarter fiber subscriber growth and approximately 50% improvement in term 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 voice 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 infraspace 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 Unity 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 about 2028 resulting in an NPV of over a billion dollars in enterprise value. With that, I'll now turn the