UNIT

Strategic Positioning for AI-Driven Fiber Demand

• Unity positions itself as a premier insurgent fiber provider focused on Tier 2/3 markets, with 5 million future-proofed connected endpoints to meet growing low-latency, high-bandwidth demand for agentic AI.
• Agentic AI adoption is progressing faster than prior expectations, with dramatic projected increases in broadband usage that will drive long-term fiber demand at the edge; management expects fiber to gain share from fixed wireless, LEO, and cable as usage becomes more mission-critical.
• ~80% of hyperscaler business leverages existing Unity infrastructure, delivering a blended anchor lease up cash yield of 37% (the highest in company history), a major cost and deployment speed advantage.

Build and Operational Milestones

• Q2 2026 delivered the highest ever net new Kinetic fiber ads and the strongest quarter of new fiber home construction on record, hitting the accelerated build stride that management had previously foreshadowed.
• Kinetic achieved its best Q2 fiber churn ever; churn reduction is a company-wide performance metric for incentive compensation, with a target of reaching industry-leading churn levels.
• Penetration rates for 2025 new build cohorts are already exceeding penetration levels of older year-two cohorts, putting the 40% terminal penetration target on track to be potentially exceeded.
• Managed services attachment rate to on-net customers is ~6% (excluding voice), with 16% of Q2 new bookings including a managed services product; cross-selling is expected to drive higher margins and customer loyalty.

Capital Structure Updates

• Unity has extended debt maturities, lowered blended average debt yields to 6.5% from 12.5% in February 2023 (a 600 bps improvement), and reduced overall interest expense.
• Completed a second asset-backed securities (ABS) transaction at Kinetic that will fund 2027 fiber builds and enable up to $500 million in secured debt paydown.
• Management has identified $500 million to $1 billion of underutilized non-core assets (including excess fiber, non-clustered operations, spectrum, and real estate) for potential monetization over the next 12-36 months, with negligible impact to adjusted EBITDA.

• **Full-year 2026 new fiber home construction target raised to 475,000 to 525,000, up from the prior range. Total incremental homes passed target increased by 25,000, with a full-year 2026 end range of 2.33 million to 2.38 million, pushing fiber coverage of the Kinetic footprint over 50% by year-end.
• Full-year 2026 Kinetic fiber subscriber guidance is 675,000 to 700,000, with consumer fiber revenue expected to reach $635 million to $655 million (25% to 30% YoY growth).
• Kinetic consumer fiber ARPU is expected to see a low single-digit YoY decrease in Q3 2026, stabilize to a low single-digit YoY increase in Q4 2026, and return to 2% to 3% annual accretion starting in 2027.
• Full-year 2026 Kinetic net CapEx guidance midpoint increased by $100 million to $1.27 billion, driven by a pull forward of 2027 build-related spending; cost per home pass is expected to land at the upper end of the prior guided range, with only a slight uptick projected for 2027 and beyond.
• Full-year 2026 Fiber Infrastructure revenue midpoint guidance increased to $1 billion, with contribution margin midpoint guidance raised to $575 million, reflecting stronger than expected AI/hyperscaler demand in Q2; Fiber Infrastructure net CapEx guidance midpoint remains $140 billion (14% capital intensity). Most large deals are still expected to close in Q4 2026, but management flagged that some may slip into early 2027 due to construction timing.
• Unity Solutions full-year 2026 revenue midpoint guidance is $700 million, with contribution margin midpoint guidance increased to $320 million, reflecting higher-margin strategic sales in Q2.
• Consolidated 2026 guidance midpoint is $3.655 billion in total revenue, $1.475 billion in adjusted EBITDA, and $1.525 billion in total net CapEx.
• Management expects fiber revenue to represent over 50% of total consolidated revenue by the end of 2026, hitting its 2026 inflection milestone.

1. Kinetic: Added 141,000 new fiber homes passed (highest on record), ending Q2 with 2.1 million total homes passed. Added 38,000 net new fiber subscribers, reaching 603,000 total (25% YoY growth). Kinetic consumer fiber revenue grew 19% YoY. Fiber penetration reached 29% (up 90 bps YoY), with 46% of the total Kinetic consumer footprint now passed by fiber. Kinetic fiber-based revenue (including consumer, business, and wholesale) grew 12% YoY.
2. Fiber Infrastructure: Record quarterly new bookings, up ~30% from the prior all-time high, with consolidated bookings MRR of $2.2 million. Over 50% of new bookings were waves/lit capacity (vs. dark fiber). Revenue grew 10% YoY and adjusted EBITDA grew 20% YoY. Demand is diversified: 20% from neoclouds, 18% from superscalers, 10% from hyperscalers, 6% from fiber-to-the-home providers.
3. Unity Solutions: Revenue and adjusted EBITDA continue to decline mid-teens YoY, as the business winds down low-value legacy services while retaining profitable strategic offerings. The segment generated predictable cash flow with higher than expected contribution margin in Q2 from growth in high-margin managed services. Consolidated pro forma revenue and adjusted EBITDA declined 5% and 10% YoY respectively, driven by legacy copper/TDM declines, with core fiber segments posting strong growth.

• Large hyperscaler and fiber infrastructure deals are material to quarterly and annual results, permitting and construction timelines for large builds carry inherent delay risk that can push revenue recognition across reporting periods.
• Industry-wide consumer ARPU pressure from competitive promotions by cable and fixed wireless providers is impacting near-term Kinetic ARPU, even though Unity is less exposed than peers.
• Slight upward pressure on fiber material costs is expected starting in mid-2027, which will push build costs to the upper end of prior guided ranges.
• Quarterly Fiber Infrastructure bookings are inherently lumpy due to the size and nature of customer contracts, so quarterly results may not reflect the long-term underlying demand trend.

Q: What is the long-term ARPU trajectory for Kinetic consumer fiber, and does the $100 million Kinetic CapEx increase reflect rising per-home build costs? / A: Management expects ARPU to decline low single digits YoY in Q3 2026, then return to low single-digit growth in Q4, and hit 2-3% annual growth from 2027 onward. Competitive promotions have pressured pricing, but only 60% of Kinetic's territory faces competition from large cable (lower exposure than peers), and Unity adjusts pricing tiered by market and competitor dynamics to maintain rational, profitable growth. Most of the CapEx increase is a pull-forward of 2027 build costs, not higher costs for 2026's additional 25,000 homes. A slight uptick in fiber material costs is expected from 2027 onward, but CPE costs remain stable thanks to long-term contracts, and the original per-home cost range still holds, with Unity now expecting to land at the upper end of the range.

Q: How does demand differ across hyperscaler, neocloud, and superscaler customer segments? / A: All three segments have very strong demand, with Q2 booking mix reflecting the overall funnel composition. Hyperscalers are primarily focused on dark fiber for new greenfield builds to enable AI model training, and act as anchor tenants for new network construction, comprising the majority of the $1.5 billion build revenue projected over the next several years. Neoclouds and superscalers focused on AI inference are the fastest growing segment, driving most of the 1.3 petabyte wave demand in the current funnel, and primarily purchase lit wave capacity. This inference demand is emerging faster than Unity originally expected.

Q: Are there restrictions on leasing fiber to additional customers after anchoring a deal, and what is Unity's wave deployment strategy? / A: Very few anchor deals include restrictions on additional lease-ups, by conscious design, as Unity builds fiber as a shared infrastructure asset, and this is disclosed to customers upfront; restrictions are extremely rare exceptions. For waves, Unity only selectively deploys on unique Tier 2/3 routes where it has a competitive advantage in network quality and uniqueness, avoiding competitive price pressure on Tier 1 routes. The current hyperscaler build cycle has accelerated this strategy by adding new connective fiber that creates embedded wave opportunities, which are now driving record wave bookings.

Q: What is driving potential revenue slippage from Q4 2026 to 2027, and what are the typical contract lengths for dark fiber vs. wave deals? / A: Any potential slippage is just due to normal construction timing variability for large multi-mile fiber builds that require permitting across multiple jurisdictions, not a reflection of weak demand or deal quality. Any shift would only be a matter of weeks to a month, not quarters. Hyperscaler dark fiber deals are typically 10-20 year long-term contracts, which Unity favors for stable long-term revenue. Lit wave deals for neocloud/superscaler inference customers generally run 3-5 years, with most landing closer to 3 years, a middle ground that Unity is comfortable with after assessing customer credit quality.