Uniti Group Inc. Q4 FY2025 earnings call

2025 was a landmark year with the successful merger with Windstream. Kinetic had strong consumer fiber results with highest ever fourth - quarter gross adds and net adds, and consumer fiber revenue growth. The business is driven by twin engines: Fiber to the Home build at Kinetic and hyperscaler AI build at Fiber Infrastructure. 2026 priorities include ramping up Fiber to the Home build at Kinetic, continuing growth at Fiber Infrastructure, and continuing to optimize the balance sheet

Kinetic: Fourth quarter consumer fiber gross adds 38,000, net adds 28,000, consumer fiber revenue up 24% year over year. Fiber Infrastructure: Q4 consolidated bookings MRR was approximately $1.7 million, tying the highest level on record. Unity Solutions: Generates significant and predictable cash flow

Kinetic targets 450,000 to 500,000 new homes for Fiber to the Home build and around 700,000 consumer fiber subs by end 2026. Fiber Infrastructure expects revenues and contribution margin of $975 million and $560 million respectively at midpoint for full year 2026. Consolidated revenue and adjusted EBITDA are expected to be approximately $3.63 billion and $1.45 billion respectively at midpoint of 2026 outlook

Potential competition due to attractive returns on fiber builds. Exposure to DISH is immaterial, with revenue exposure less than 1%

Q: Kenny, you noted the IRRs here for anchor returns at 22%, obviously a great return. Can you help us with the mechanics? I mean, it's not to get the network scale. And obviously, a lot of it is the upfront cash you'll receive that helps the NPV there. Is this sustainable? The way I think about it is with 22% returns, you'd invite more competition, or do you just have that breadth and scale to keep the competition out? And the second question is just on housekeeping. The billion dollars of non - recurring 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?

A: Good morning, Greg. I'll take the first one, and then, Paul, you can take the second. On your first one, Greg, yeah, 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 lease - 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 the NRC you have, but then when you blend that with mixing in, selling some existing infrastructure, you obviously drive those yields higher. And selling existing infrastructure, either to 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 half a 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 Dan Mansoor - fiber industry is focused on this opportunity and looking for ways to to to play in this space, but I do think and we've said this publicly, but I do think that the hyper scalers prefer to work with large scale. Dan Mansoor - fiber providers who have breath, who have expanded footprints across multi regions 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, you want to take the second question? Yeah, I'll take the second. 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 simple return profile. So keep that in mind as well. In terms of the billion dollars 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. We've already booked $670 million in total contract value. Not all that is up front, of course, but we're well on our way towards numbers that are approaching that billion - dollar mark as well with what we're 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 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 two to three years to to deploy if there's significant construction involved and so since we're not going you know 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, it build over the next two to three 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 two to three years.

Q: Richard Chui from JP Morgan asked about the $1.5 billion hyperscale 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 much bigger is that kind of funnel or pipeline as you're seeing right now?

A: Good morning, Richard. So I think 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 NRCs. So I think if you tie those two 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 three 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 gonna win. And then certainly beyond 2028, there's an estimate of what we think we're gonna win from a funnel perspective. including, by the way, lease up. And I've said this many times, including in 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 dark 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 terrific business. So that's part of what's in that funnel. So when you see these numbers and you see the the one time revenue, don't forget about the half a billion dollars 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, 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. I think based on the funnel and our success on winning the deals that we really want to win, we feel really great about the opportunity ahead of us.