2025 leverage finance conference. We're thrilled to have Uniti Group with us today, and Paul Bullington, the company's CFO. We also have Bill DiTullio, the company's Head of Investor Relations, with us. Without further ado, Paul, welcome. Thanks for joining us again this year. Thank you Ana. you Ana. Yeah, glad to be here. This is certainly a favorite conference of ours. Okay, good to hear. You're one of our favorite issuers of pending things. Yeah, awesome. Glad to hear that. Yeah. Before I jump into Q&A, are there any opening comments or are you ready to? No, no. I mean, other than we're certainly very excited to have the merger with Windstream closed and behind us now. I think we're still early days, still 100 or 120 or whatever it is, days into the merger. Still a little bit early days, but I think we're off to, to me, a great start. I think the leadership team has really come together well. The new leadership that we've infused, particularly in Kinetic with John Harrobin and some of the folks that he's brought in with the experience on the consumer side, I think has been very well received all the way through the organization. He's really hit the ground running. We are excited to be well into this new chapter now. Great. Okay. I think I'll start pretty much there, with an update on the Windstream integration. The company has got three discrete segments. There's Kinetic, which is really the heritage phone company. I don't mean that to be pejorative because it's really a broadband company now, but it is the. 100 years of history. Heritage, yeah, the heritage phone company. Two, fiber infrastructure, which is really a combination of both the Uniti Fiber assets as well as, what was it, Windstream. Three, Uniti Solutions, which is effectively managed services. It's a.k.a. the managed services business, which you've recently rebranded to Uniti Solutions. There is some hypothetical potential to monetize these three pieces separately. I think we'll talk about it later in our discussion. People do, investors and analysts do some of the parts of the company based on these three segments. Given that, how much are you actually integrating these three segments? Or conversely, are you making an effort to keep them relatively siloed to kind of keep your strategic flexibility open? Yeah. We're definitely thinking of these businesses as somewhat modular. That's both for strategic flexibility, but it's also just a little bit of the natural order of things. I mean, if you think about the Kinetic business, there wasn't a consumer business at Uniti that we need to integrate with Kinetic. I mean, obviously, there's a broader network reach when you combine these businesses together, and that's beneficial and accretive to the company. You've got a broader network that can support all three of these segments. Kinetic is really an independent business and will remain so. Fiber infrastructure, we are integrating those two pieces that you talked about. We're doing a lot of work to integrate the Windstream wholesale business with those legacy Uniti businesses, Uniti Fiber, Uniti Leasing, into a broader national and regional fiber infrastructure business. There's integration certainly going on there. Uniti Solutions is fairly modular as well. I think you'll see those three segments maintain some independence and some of that strategic flexibility. We're certainly integrating where it makes sense. That is mostly at the corporate level. Finance and HR and IT, certainly a lot of efforts to integrate those and gain efficiencies. Gaining efficiencies where it makes sense, but maintaining some modularity and some flexibility between the segments. Okay. On the topic of the cost synergies, can you kind of help us put some numbers on what you've realized to date and what's still expected? Yeah. I mean, again, it's early days. Most of the work is in front of us. We still have a target of $100 million of run rate annual synergies to be realized over the first three years of the deal. A lot of that is in, there's some corporate synergies that include some headcount and those sorts of things that can be realized pretty quickly. A lot of it is longer term. IT systems, converging systems, that takes a little time. A lot of our synergies are from bringing off-net services that we're paying other third parties to carry traffic, bringing that onto our own network. That takes a little time as well. There's typically some network grooming and maybe a little capital to spend to make that happen as well. It takes some time. We're early days, but we still expect to get to that $100 million in synergy savings over that three-year period. Yeah. Now diving into the segment. In Kinetic, you are going from, at least Uniti is going from being a passive owner of the assets of the network elements to now an active operator. As part of that, you're really looking to accelerate the fiber-to-the-home build. Just to kind of provide context, I think the goal is 3.5 million homes passed by 2029, or the end of 2029, you've got about 1.8 million currently. If you just do the simple math on that, I think your current pace of builds has been about 200,000 a year, and you really kind of need to get that to ramp up to an average of 400,000 a year. When does that ramp up? How are you going to accomplish that? Kind of what's going to be your peak passing? Yeah. So yeah, all those stats are exactly right. We've got a target of 3.5 million homes by 2029, 1.9 million today. We've got some work to do to get there. We are ramping that build as we speak. The ramp is taking a little bit longer than maybe what we hoped when we started the year. It is just some things to do with the infrastructure at Kinetic to get us ready to have that build engine running at full speed. The steps that we've been taking, we're making a pivot from almost exclusively internal crews to a heavier mix toward external crews. We're keeping the internal crews, but we're just augmenting that with a significant amount of external crews. We've signed agreements with multiple very large providers of those construction services. We wanted to bring in providers that were not really on board prior, that have the scale to really be able to build at a level and make the volume commitments and the price commitments over the next three to four years that we needed to ensure that we can execute on the build. We have been onboarding those contractors. There is kind of the permitting design and permitting engine that we have to get ramped up. We also need to basically—we are also putting in place sort of a control center really to manage a larger build, a larger crew of external contractors to make sure we stay on top of that. All of that is taking a little time to put in place, but it is not rocket science. I think we've got a lot of people in the company that have built fiber at scale, know how to build fiber at scale. We are very confident that early next year, we'll be able to get to that build pace. First quarter, maybe second quarter of next year, we'll be at that build pace that we need to be at in order to hit that goal in 2029 of 3.5 million homes. Yeah. Other providers are building at a larger scale than that. Nothing we're looking to do is unprecedented or outside of the norm. We just got to put in place the infrastructure to get it up to speed. Okay. Next question is really on the cost to pass and the cost to do this build. Windstream historically has cited what I think, what I believe is an industry low cost to pass for fiber-to-the-home. That has been about $650. A lot of that has been attributed to the fact that they had investments in fiber backhaul, even like fiber-to-the-node, which really made that last connection kind of lower cost than a lot of other operators were experiencing. This has gone up because you have just plain old inflation. You also talked about bringing in these external crews, which is key to getting to your goal. The other question is, are you now expanding into areas where you may not have the same degree of the pre-investment in terms of the fiber? If you put that all together, how should we think about the cost to pass going forward? Yeah. So again, all your facts there are accurate. Windstream's historical strategic cost to pass, so cost to pass for strategic passings, strategic meaning non-subsidized passings, has been in that $600-$650 range, which is, I would call, industry leading. That has been facilitated by a couple of things. One is the effective use of internal crews. They've been able to keep costs down because of that. Then because of this prior investment that you referred to that Kinetic made in bringing fiber to the node across its footprint. Back five or six, seven years ago, they made that investment to bring fiber to the node, fiber to the DSLAM, basically. That covers really 95% of the households in their footprint, fiber to the node. It's pretty ubiquitous throughout. We're going to be able to continue to leverage that all the way really through the life of the build out through 3.5 million homes in 2029. That cost advantage from those prior investments in fiber to the node, we're going to be able to continue to leverage. That's what's going to help, that's part of what's going to help us continue to keep what we think is a very favorable cost to pass from an industry benchmark standpoint as well going forward of more in the $850-$950 range is what we're projecting in kind of 2026 and beyond. Still a really super strong cost to pass that's enabling us to get what we think are a very strong return on investment for those passings. We typically are looking at return on investment and what I would characterize as high teens on average when you look at the full blend. Some are higher, 20%+, some maybe a little lower, but 15% is kind of where we've drawn the line on return on investment. Blended together, an average return on investment I would call in the high teens. The reason the costs are going up from what they have been historically at Kinetic is, one, Kinetic did the low hanging fruit first. There was really a very much a Swiss cheese approach to going and finding the lowest hanging fruit, the lowest cost to pass. A lot of that had to do with aerial passings versus underground passings. As we build deeper into the territory, we're going to encounter a much heavier mix of underground. That's going to drive the cost up. Like we talked about, and like you alluded to, we're also bringing in a lot of external contractors. Now, we've been able to bring on these external contractors at a rate that we think is very attractive for us for external contractors, but it's a little higher than what our historical cost has been maintaining internal crews. Those two factors are really driving up the cost to pass. Still, what we think is well below industry benchmarks in terms of cost to pass at the $850-$950 range going forward. Okay. So local wireline wireless convergence is a thing now? Yeah. Yeah. You have or Kinetic has a collaboration with AT&T Wireless. How does this relationship work and what kind of take rates have there been on the part of Kinetic customers and then this kind of bundling or kind of co-marketing with AT&T Wireless? Yeah. Okay. So yeah, we do have a partnership with AT&T. It's kind of a joint marketing agreement. Kinetic decided to go that route because a full MVNO route would have taken a lot more time and cost a lot more capital to put in place. This is a much quicker and simpler way to, we think, take advantage of some of the positives of convergence. Basically, the way that the deal works is there's a $20 subsidy that appears on the Kinetic bill to consumers that are both a Kinetic customer and an AT&T customer. AT&T subsidizes half of that credit. Half of it's borne by Kinetic, by Uniti, and half of it's borne by AT&T. We've seen it's early days. We're a year or so into that program. It's still a newer program, but we've seen strong adoption. We're getting attachment rates in the kind of the low teens, I would say, which we think is positive. That book of business is building very consistently. About 35,000-40,000 customers today are part of that mix. What we've seen is what we expected to see. We've seen a significant improvement in churn on customers that are taking that bundle, about a 50% on average improvement in churn numbers associated with that bundle. It has also been an advantage, and I think marketing against some of the big cable that we have in our footprint with a full MVNO offering. I think the biggest impact has really been on the churn side. It's also not something that would be difficult to unwind since it's really just sort of a billing bundle. There's no real integration other than that. It could be unwound if we needed to, but we're very pleased with the relationship, and it's paying dividends. Okay. Just the consumer broadband competitive intensity is sort of the next topic here. Your penetration for fiber right now, where you have it deployed, I think it's close to 29%. Where do you think you can take that? If you could just comment on what you think the broadband competitive intensity is right now. Yeah. The competitive landscape in the Kinetic footprint is something that we viewed very positively coming into this merger. I think it compares very favorably to other industry peers, and it's one of the key advantages I think that Kinetic has going forward. For instance, 60% of the Kinetic footprint has a big cable competitor. We define big cable as a cable player with an MVNO offering. That 60% compares really favorably to peers who are typically in the 80%-90% range, big versus big cable. We think we have a competitive advantage there. 25% of the Kinetic footprint has no other 1 Gb competitor at all. I think that compares favorably for the industry. Overall, the competitive dynamics are, I think, one of the strengths of that Kinetic business segment for Uniti. In terms of the competitive pressures that we're seeing, I think we're seeing it a bit on the DSL side. I think there's been some more aggressive competitive movement both by fixed wireless and cable. I think our DSL plan is susceptible to that. I think we're seeing that much less so on the fiber side. Yeah. Okay. I want to be cognizant of time, so I might skip over a couple of our pre-planned questions here. Maybe last question for now on the Kinetic side. There are two fiber-to-the-home M&A deals on the consumer side in the market right now. That is Verizon buying all of Frontier, and then there is AT&T buying Lumen's overbuilt fiber. Both of these are still pending close. They are really very different because Lumen is retaining the regulated ILEC assets and network for which they have said there is a long tail of cash flow. Is Uniti open to either one of these deal structures? Would either one work for you as you might consider potential monetization opportunities for the Kinetic? Yeah. Short answer is yes. I think we're open to really all value-creating opportunities. I think one of the things that we're excited about is that there seems to be multiple models and structures that make value creation or value realization possible. I think we're open to any structure that would create value for shareholders. Yeah. Okay. Shifting to the fiber infrastructure business. I think we've got to say AI in every session. Just said it. That's good. You have talked about hyperscale cash upfront deals as anchors for market expansion. Can you talk about the funnel, the kinds of market these are? For the most part, are you proactively seeking out these kinds of deals, or do you have a lot of incomings on them? Yeah. The AI opportunity is real. It's materializing in a very real way, a very exciting way. I think it's a generational opportunity is what it appears to be. I think we're early inning, so a lot of it is, I think, to come, but it appears to be a generational opportunity. I don't know that I've been as excited about opportunity in fiber. I've been in the business for a while and seen a lot of the ups and downs. I don't think I've seen anything quite like this since maybe the iPhone kind of came in and really drove so much usage and demand for fiber, particularly fiber to the tower several years ago. That AI demand is showing up in a big way for us. We talked on our last earnings call about the size of the funnel for the kind of the hyperscaler demand set. We pegged it at, I think, $1.7 billion in total contract value. We expect that to continue to grow. It's a dynamic funnel, so deals fall off, deals come on, but we expect that funnel to continue to grow. That funnel is largely made up of dark fiber deals that we would expect to be structured in an IRU format. An IRU format is not new. It's not new to hyperscalers. It's not new to the industry. It's the typical large dark fiber deal structure. It's basically a prepaid lease, and that cash comes in upfront and can offset a lot of the CapEx that you would potentially need to put in place in order to deliver the fiber. We announced a $100 million deal with our second quarter earnings that was signed early in the third quarter that uses almost entirely existing assets. That kind of a deal is very cash accretive for Uniti since we're able to leverage existing assets. In terms of how that demand materializes and whether we're chasing it or it's coming to us, I mean, it's a bit of both. Clearly, we see this as a huge opportunity. Our sales team is very focused on building deep relationships with these providers and building the kind of relationships where we know their demand set, not just now, but into the future and can work with them to help them meet that demand set in a partnership sort of way. We're certainly pursuing those relationships and developing those relationships. These buyers are very smart. They know the fiber landscape. They know who the players are, particularly the players of scale that they're working with. They know who has assets where generally. When they have a project that is coming up or maybe is potential in an area where we have assets, they're typically coming to us. If there's a need for maybe network that doesn't exist today, particularly in areas that are close to our existing markets, they're coming to us as well. Okay. Switching to Uniti Solutions, which has been described as non-core, could you talk about the free cash flow profile of that business? What kind of company would be a better owner of it? Yeah. So yeah, the Uniti Solutions business, we've characterized it as non-core, not because we don't like the business or it's not a good business, but because it is not consistent with our primary thesis, which is we want to be owners and operators of fiber. Uniti Solutions uses almost exclusively other people's networks to deliver services. The services they're delivering are those managed services, so software as a service, security as a service type solutions. It is throwing off significant cash flow for the business. We expect it to be a generator of free cash flow for well into the future for the business. That's certainly a very positive thing for us because we can take that cash and put it to work in other parts of the business where we're investing more heavily. In terms of the capital intensity of that Uniti Solutions business, it's about 10%-15%. I mean, you do have to make some investments. They're mostly investments around the platform, the solutions that you're providing. You're not investing in network. You're investing in the platform. I expect that capital intensity to be pretty consistent over the next several years. In terms of who might see a better strategic fit for that business within theirs, I think that could be either maybe a pure play provider of these types of managed services solutions, or I think you could also see an owner of a large broadband network that has these sorts of solutions in their portfolio have some interest in this business. For a player like that, you could take a lot of what is off-net for Uniti and roll it onto your own network, broadband network in large part. I think pick up significant synergies there. I think one of those two types of players, I think, and you've seen some of those transactions over the years with Masergy or Nitel, similar type businesses, not exactly similar, but similar type businesses in terms of managed services, kind of other off-net businesses get acquired by players like that over the years. Okay. I know Kenny Gunderman, the CEO, is typically not shy about kind of directing investors to think about how to kind of value the company. Now that we've covered all the segments on some of the parts basis, are there certain comps that you would look at for Kinetic? Is that Frontier and for the fiber infrastructure business? What kind of multiple do you think the market would put on Uniti Solutions? Yeah. We have put out multiples. Historically, we haven't put out anything recently on that. I think you could kind of look back to some of those multiples we talked about prior. I think the Kinetic business, I think Frontier is obviously a benchmark deal and valuation. The Ziply deal, I think, is another one I would point investors to kind of look at as well on the Kinetic consumer side of the business. On the fiber infrastructure side, it's been a little bit more challenging from a valuation standpoint because we've seen some deals recently, but the deals we've seen more recently that are larger deals were, I would say, more for sales or distress sales in nature. I don't know that they're great comps. I think we still very much believe that quality fiber assets, so dense owned fiber networks with large recurring revenue bases on them, can command a superior value. I think we're starting to see that interest come back into that fiber infrastructure space, particularly around the AI hyperscaler demand. I think that's creating more interest in that space. We're thinking there's some tailwinds in fiber infrastructure from a valuation standpoint. Uniti Solutions, as more of an off-net managed services business, we've kind of talked about a three- to five-times benchmark range, three- to five-times EBITDA for that business is something we've put out historically. I would kind of stick to that range for that business. Okay. Just kind of switching now to the capital structure, the capital structure and funding for the fiber build plan. You've done ABS, and it was $840 million of fiber infrastructure ABS, but you've talked about a $3 billion to $4 billion kind of total envelope in the ABS market. What's next? I think the next step would be looking at some of the local market, the consumer markets for ABS. Kind of what's timing and being able to tap incremental ABS? What other moves might that have to entail in the capital structure as well? Okay. Yeah. We are very bullish on ABS. Certainly, if you've been listening to us, you've heard us talk about that in the past. We are bullish on ABS just given the comparative cost of capital there and some of the other kind of features of ABS financing. The fact that a large part of it is investment grade, we think helps to make it stable and maybe available in times when maybe high yield can kind of have some turbulence. We like adding ABS to the portfolio. We intend to expand ABS. Probably most likely next step would be establishing an ABS on the Kinetic footprint with the consumer assets in particular. We've said this publicly a few times before, but we've been doing significant work in that and are well on our way to, I think, bringing that to fruition. I would expect first half of 2026, we would likely be ready and have the ability to bring a Kinetic ABS issuance to the market if we want to. There is a lot of work that goes into that. It's not something you can kind of do overnight. There's a lot of regulatory pieces of it. A lot of the underlying rights need to be transferred or recreated into an SPV where you're going to do the ABS. Certainly got to work with the rating agencies to get them comfortable and knowledgeable and able to rate the assets and the cash flows. There is a lot of work that goes in, but we've been doing a lot of that work and preparing for it. I should definitely make clear that we don't think ABS is a full solution for our capital structure. We see it as an additive and enhancing piece to the capital structure given some of those qualities that I talked about. We intend to maintain a healthy access to multiple debt markets and a healthy mix of assets, both in ABS where we're doing that, but also in the corporate high yield box as well. We want to make sure we've got healthy access to all those debt markets. We think that's a great solution for our capital structure long term to have access to multiple markets. In terms of sizing, I can walk through that quickly, but what we've said publicly is a billion dollars plus in the near term. We just did a $250 million deal that was tightest spreads on a fiber ABS deal in about four years. We were very pleased with that transaction. If you take that from the billion, that leaves $750 million +. That is kind of the way I would characterize that. Somewhere in that $750 million to maybe $1 billion range is probably what I would see on the horizon for us in the near term from an ABS standpoint, largely probably coming from the Kinetic side. Then longer term, we talked about $3 billion to $4 billion of capacity there, not necessarily saying that we would take down all of that capacity, but just trying to size the capacity we see there. It could be more over time if we are able to complete the build and really drive penetration well and generate significant cash flows off of particularly that Kinetic business. Definitely $3 billion to $4 billion of capacity we see over the longer term. How we access that, I think, will be determined over time, but we want to do it in a measured way and in a thoughtful way as a part of the overall capital structure. Okay. And then sneak one more in. Leverage, I think you've been clear that leverage will probably go up before it starts coming down, and that's just driven by the fiber build and having to kind of pre-fund that build. When do you expect leverage? Do you have an idea of when you expect leverage to peak and at what level? Yeah. We are planning to go through an investment cycle. Similar to what we did in the fiber infrastructure space six years ago, 2017 to 2020, where we were kind of running at a capital intensity above 50% through an investment cycle, we are going to go through an investment cycle at Kinetic. That is going to cause leverage to increase for a period of time. What we have is a long-term line of sight on the other side of that build to free cash flows and ability to delever on the other side of that. It is going to take some time. We have talked about 2029 being our target to get to three and a half million homes. That is sort of the lifespan of this build cycle we are going to go through. I think it's going to be a little bit more capital intensive on the front end. By the time you get towards the back end of that, I would expect that we're starting to generate free cash flow and be able to start to look at delevering. It's going to take us some time. I don't want to indicate that it's going to be a quick process, but I think it's the right strategic trajectory for the business. I think fiberization of the Kinetic footprint is a strategic imperative for us, and I think it's going to pay dividends in the long term. Okay. Great. Any closing comments? What you're most excited about as you go into 2026? I definitely think we're excited about having the merger closed and having all of the things that the baggage that went on with that relationship behind us. Certainly excited about that. I mentioned before how exciting the AI hyperscaler opportunity being in sort of the middle of that transformational piece of the economy and that technological revolution is certainly exciting. I think the opportunity for Kinetic, the fiberization of that network and the competitive advantage that we think that's going to bring, but also the interest that we think is out there in fiber to the home assets generally, I think is exciting for us as well. Okay. Great. Paul and Bill, thanks so much for being with us. Thank you so much. Appreciate it. Yeah.