UNIT - NASDAQ

Good morning, and welcome to today's conference call to discuss Uniti Group Inc.'s fourth quarter and full year 2025 earnings results. My name is Gigi, and I will be your operator for today. Today's call is being recorded, and a webcast will be available on the company's Investor Relations website at investor.uniti.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, Uniti Group Inc.'s Senior Vice President of Investor Relations and Treasurer. Please begin. Thank you, Gigi.

Good morning, everyone, and thank you for joining today's conference call to discuss Uniti Group Inc.'s fourth quarter and full year 2025 results. Speaking on the call today will be Kenneth A. Gunderman, our CEO, and Paul Bullington, Uniti Group Inc.'s CFO. John Harrobin, President of Kinetic, will also be joining us this morning during Q&A. 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 Uniti Group Inc.'s fiber build strategy, the business's growth potential, our 2026 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 Factors section in our filings with the United States Securities and Exchange Commission. With that, I would now like to turn the call over to Kenneth.

Thanks, Bill. Good morning, everyone, and thank you for joining. 2025 was a landmark year for Uniti Group Inc. We successfully closed our transformative merger with Windstream, establishing us as the premier insurgent fiber provider. We have a scaled national wholesale fiber footprint that puts us in a rare company to win large-scale fiber infrastructure deals, and we are first or early with fiber to hundreds of tier two and tier three markets around the country. Within a few months of closing the merger, we have established a new insurgent leadership team with recent successful experience in fiber-to-the-home businesses. We reignited the fiber builds at both Kinetic and Fiber Infrastructure and have significantly lowered our cost of capital through several landmark ABS transactions. We are well positioned strategically. We have the right assets and plan and team in place to future proof our business. Slide five highlights the early success of our execution. In the fourth quarter of last year, we had terrific year-over-year revenue growth in our core fiber business of 13%. At Kinetic, where our transformational efforts are most acute, consumer fiber gross adds of 38,000 in the fourth quarter were the highest ever, and net adds of 28,000 were the highest in almost three years, bringing Kinetic churn down to our industry-leading levels at Uniti Group Inc. is a big focus of ours, and we have already started to see success, posting the best consumer fiber churn since the pandemic. Importantly, we also hit an inflection point in December and have heavily ramped up the build. Our business is being fueled by twin engines right now, including the fiber-to-the-home build at Kinetic and the hyperscaler AI build at Fiber Infrastructure. As we previously foreshadowed, the fourth quarter was a record quarter for us in terms of new bookings, bringing the largest customer contracts ever signed in our company's history. Our priorities will not change this year. We are going to ramp our fiber-to-the-home build at Kinetic targeting 450 to 500 new homes, almost doubling last year's activity, and approximately 700,000 consumer fiber subs by 2026. At Fiber Infrastructure, we are continuing to benefit from all the tailwinds driving wholesale fiber, including fiber-to-the-home, mobile wireless, satellite, and, of course, hyperscaler and generative AI demand, among others. For the hyperscalers, we expect to see even more activity in 2026 than last year. Importantly, we are now starting to show solid lease-up on these builds, demonstrating our discipline in making investments in this space. At Uniti Solutions, we are beginning to cross-sell products into our on-net fiber base at Uniti Fiber and Kinetic. Today, we estimate our managed services attachment rate to be below 0.1x at Uniti Fiber, and we think it could rise to be materially higher over time. Lastly, we are going to continue our track record of optimizing the balance sheet through disciplined access to the capital markets as well as through monetizing non-core assets, as Paul will discuss later. 2026 is an important inflection year for Uniti Group Inc., and in particular is a big investment year at Kinetic. As such, showing progress towards key goals is critical, and we previously committed to some milestones as highlighted on slide seven. We achieved our first milestone during the fourth quarter of greater than 50% of Kinetic subs now on fiber, and we are on track to achieve the other critical milestones throughout the course of this year and next. As such, we still expect to realize consolidated revenue and EBITDA growth in 2027. We are laser-focused on operational excellence, customer obsession, and intensely growing our fiber business and executing on our strategy of building fiber in unique locations, including overbuilding legacy networks and moving customers onto our own fiber. All of this combined with aggressively managing out-of-services will lead to growth. As slide eight illustrates, we expect to show progress on key metrics every quarter, and as you can see, we continued to grow in the fourth quarter of last year. We are well on our way to 3.5 million homes passed with fiber and 1.25 million fiber subs by 2029, and we are also closer to 90% of our revenue coming from our core business. Our progress on these metrics reinforces our conviction that we are creating substantial value for our shareholders every step of the way. As outlined on slide nine, in order to fully maximize the opportunity in front of us, we have to quickly transform Kinetic into an insurgent fiber provider as opposed to a traditional telecom operator. Within just months of closing our merger, we now have an insurgent leadership team in place. Led by John and Robin, we have hired over a dozen new leaders in construction, sales, operations, customer loyalty, and analytics that have relevant recent fiber-to-the-home transformation experience. We have also revamped our go-to-market strategy by focusing on the customer and eliminating obvious pain points, investing in high-impact value-added products and services, and expanding our direct sales channel partnerships. As I mentioned earlier, we have also successfully reignited the build by de-emphasizing subsidized builds and bringing in third-party crews to help us build more quickly. The metrics I went through earlier indicate that our transformation is showing early signs of success, and I am highly confident that will continue. With that said, we are in the early days. 2026 will not only be an investment year, but a major inflection year on several fronts. While we fully expect to hit some bumps along the road towards achieving these goals, in the end, we will be successful in accomplishing our long-term objectives. Turning to Fiber Infrastructure, the opportunity in wholesale fiber right now is generational in nature, and we are extremely well positioned with the right strategy and assets to capture our share in both dark fiber and wave. There has never been a better time to be a wholesale fiber provider. Broadband trends are accelerating across virtually all categories, especially AI-driven use cases, as evidenced by our record quarter of new bookings. Although we are building substantial amounts of new fiber, especially for the hyperscalers, we are doing it profitably, and our scaled national footprint gives us terrific lease-up potential, driving our blended anchor lease-up cash yields to 34%, the highest we have ever seen. We are in the early innings of an unprecedented fiber build within our industry. This opportunity continues to grow for us, so today, we are providing a multiyear view of what we believe the opportunity for Uniti Group Inc. is at this moment in time. First, I want to reiterate that our focus is on disciplined strategic fiber builds and related economics, the same disciplined growth we have applied in prior build cycles. The top table on the right side of slide 11 shows the early returns we are seeing on the build today. We have chosen to use IRRs versus cash yields due to how these deals are structured with large upfront payments from the customers. With that said, you can see that we are not only getting strong economics on the anchor, but the lease-up as well. We are highly confident that the lease-up will continue to grow substantially, especially since we are building dense fiber networks that pass key strategic locations within our footprint. When we build fiber for the hyperscalers, we plan to build inside our existing footprint, or we will look for ways to strategically expand our connected footprint. We are not building one-off networks. We are building networks where we have the ability to lease them up for many years into the future, and we see a long runway, especially when we start to hit the inference phase. We are also seeing benefits from some of these builds by using the back for our own business, including and especially at Kinetic. Slide 12 illustrates over the next three years, we expect to build approximately 6,000 new route miles of fiber, and we expect to get close to $1 billion of cumulative non-recurring cash revenue and up to $25 million of recurring cash revenue by 2028. Over the next three years, a meaningful portion of our economics is supported by executed contracts, including 100% of the economics included in our 2026 guidance. Beyond this three-year build cycle, we not only expect more fiber builds to come, but importantly, we expect to really ramp the lease-up. This will lead to additional non-recurring cash revenue of approximately $500 million after 2030. As a result, we expect to achieve a total return on our capital of 2x to 4x. With that, I will turn the call to Paul.

Thank you, Kenneth. Starting on slide 14, I would like to review key fourth quarter highlights for both Kinetic and our Fiber Infrastructure segment. We saw another strong quarter with significant progress made across several fronts. Starting with Kinetic, we expanded our fiber network to pass an additional 80,000 homes with fiber, our highest level of new passings in over three years, ending the year with approximately 1,900,000 homes passed with fiber. Kinetic also added 28,000 net new fiber subscribers during the fourth quarter, ending the quarter with 535,000 total fiber subscribers. As Kenneth mentioned earlier, this was the highest level of net adds in almost three years, and total 20% from the prior-year period. Kinetic consumer fiber revenue grew 24% year over year during the quarter. This growth is being driven by strong adoption of our fiber-to-the-home product bolstered by the performance of the various marketing initiatives at Kinetic that target both our newer and more seasoned cohorts. At Fiber Infrastructure, we recorded consolidated bookings MRR of $1,700,000, tying the highest level on record. Slide 15 highlights the sustained momentum we are seeing within Kinetic Fiber. We achieved fiber penetration of 29% during the quarter, which was up 30 basis points sequentially and 150 basis points year over year. 5% year over year, these trends support higher lifetime value per passing and improving returns on our incremental capital spend for fiber. Turning to slide 16. The strong improvement in our cohort fiber penetration is being driven by highly targeted marketing initiatives being deployed by the Kinetic team. Penetration levels in our 2024 year-one cohort now exceed year-two penetration rates in our older cohorts. We expect to maintain or improve this trajectory going forward, and the team is now focused on executing the playbook to increase penetration in our older cohorts. Given our current trajectory, we remain confident that achieving our 40% terminal penetration target is very realistic. Slide 17 lays out our key targets for Kinetic in 2026. As Kenneth alluded to earlier, we are targeting to reach 2.3 to 2.35 million homes passed with fiber by the end of this year, which would bring fiber coverage within the Kinetic book over 50%, a significant milestone in our goal to reach 3.5 million homes by 2029. We also expect to end the year with between 675,000 to 700,000 fiber subs and realize $635,000,000 to $655,000,000 of consumer fiber revenue in 2026, an increase of roughly 25% to 30% from the prior year. In terms of cost per passing, we expect the cost going forward will likely be in the $900 to $1,000 range, resulting in a blended cost of $800 to $900 per passing over the life of the fiber build program. Slide 18 provides a pro forma view of Uniti Group Inc.'s consolidated results for the fourth quarter. Consolidated pro forma revenue was down approximately 5% year over year during the quarter, primarily driven by the continued decline in legacy copper and TDM services, and at Uniti Solutions. However, top-line growth in other parts of the business continued to be strong, with Fiber Infrastructure growing 6% year over year and Kinetic fiber-based revenue inclusive of consumer, business, and wholesale services growing 16% year over year. As we continue to execute on and accelerate our fiber overbuild plan, fiber services at Kinetic will deliver consistent, strong growth quarter over quarter. In addition to the information provided in our earnings materials, we have also included additional supplemental pro forma financial information on our Investor Relations website. Slide 19 further demonstrates that the growth in each of our core fiber lines of businesses has been very strong, and we expect that growth to continue given the superior nature of fiber as a service. With this pace of growth, we expect fiber to overtake legacy services as the majority of our revenue by 2026. As a reminder, we will continue to face headwinds from legacy services over the next couple of years that will weigh on consolidated revenue and EBITDA. With that said, there are three important points I would like to make. First, legacy services in no way diminish the value of our core fiber business. Secondly, within a relatively short period of time, the shift to higher fiber revenue will make legacy services revenue increasingly less material. And thirdly, in the meantime, Uniti Solutions is generating significant and predictable cash flow. Please turn to slide 20, and I will now cover our full-year 2026 outlook for the combined company. Beginning with Kinetic, we expect revenues and contribution margin to be $2,150,000,000 and $905,000,000, respectively, at the midpoint. We expect to deploy approximately $1,200,000,000 of net CapEx at the midpoint of our guidance as we accelerate our fiber build. At Fiber Infrastructure, we expect revenues and contribution margin to be $975,000,000 and $560,000,000, respectively, at the midpoint for full year 2026. Our outlook for net CapEx at Fiber Infrastructure this year is $140,000,000 at the midpoint of our guidance and represents capital intensity of approximately 14%. It is important to note that a meaningful driver in the year-over-year growth at Fiber Infrastructure is coming from dark fiber, high-hyperscaler IRU deals that are expected to be accounted for as sales-type leases. Under GAAP, the present value of the lease payments from these deals is recognized as a one-time amount of revenue and EBITDA in the period that the fiber route is delivered to the customer. This differs from our typical IRU arrangements classified as operating leases under which revenue is recognized ratably over the lease term. Accordingly, we expect the revenue from these large sales-type lease dark fiber deals to be lumpy and to come in unevenly during 2026. More specifically, we expect a significant portion of this revenue will be recognized in the first quarter, with the bulk of the remaining amount to be recognized later in the year, most likely the fourth quarter. Please also note that, as has always been our practice, our net CapEx reporting offsets our gross CapEx by upfront payments received in an IRU arrangement, as the cash received will offset a significant portion of the CapEx relating to these sales-type lease arrangements. Turning to Uniti Solutions, we expect revenues and contribution margin of $700,000,000 and $310,000,000 at the midpoint. As we have mentioned several times before, Uniti Solutions is not core to our go-forward Fiber Infrastructure strategy. However, this business does generate meaningful, predictable cash flow. While we expect revenue and EBITDA to continue to decline at a mid-teens pace year over year over the next few years, a crucial part of our strategy is to retain the most profitable portion of this business while winding down low-value legacy and TDM services. Altogether, we expect consolidated revenue and adjusted EBITDA of approximately $3,630,000,000 and $1,450,000,000 at the midpoint of our 2026 outlook, with consolidated net CapEx of about $1,400,000,000. On slide 21, we have provided a tabular reconciliation of our pro forma full year 2025 results to our 2026 outlook that summarizes the contribution from our core fiber businesses as well as the impact from legacy and TDM services. Finally, I would like to provide some brief comments on our capital structure. Since announcing our agreement to merge with Windstream, we have successfully executed on a series of planned actions that were systematically implemented to extend our debt maturities, lower our overall cost of debt, establish access to new debt markets, optimize our mix of secured and unsecured debt, and drive meaningful interest expense savings. As slide 22 highlights, partially as a result of these actions, the blended yields on our debt have improved significantly, falling an impressive 560 basis points over the past three years from around 12.5% in February 2023 to around 6.9% today on a blended basis. Recently, we closed on our inaugural ABS financing at Kinetic, which was unlocked as a result of the recombination of our businesses, with resounding success. Our Kinetic ABS transaction saw the tightest spreads and highest demand for a deal of its kind, further validating the strength of the Kinetic Fiber business and the attractiveness of the markets in which we operate. Further, in January, we successfully completed a $1,000,000,000 add-on to our 8.625% unsecured notes, allowing us to take out our $500,000,000 term loan with similarly priced unsecured debt. We intend to use the majority of the remainder of the proceeds from this transaction to opportunistically reduce other debt in the near term. Going forward, we believe that ABS will play a growing role in our capital structure, given its comparative cost advantage. However, as I have said many times previously, we intend to be balanced in our approach and to maintain a healthy mix of both ABS and non-ABS debt in our capital structure. ABS will be an important part of our strategy to fund the strategic investments we are making in our business, it is not the only source of capital we have at our disposal. For example, as has been our practice at Uniti Group Inc., we are constantly evaluating our portfolio of assets for optimization. Optimization opportunities could include assets that are underutilized or fallow, assets that are outside of our prioritized footprint, or assets for which we can receive premium valuation multiples. Based on our analysis over the past six months, we believe there are $500,000,000 to $1,000,000,000 of non-core assets that we could monetize. As slide 23 shows, between excess fiber, non-core and non-clustered assets and operations, such as select non-clustered Kinetic, and non-Southeast Fiber Infrastructure markets, as well as spectrum and other real estate assets, we believe the opportunity exists to generate material proceeds over the next twelve to thirty-six months. It is important to note that the monetization of these assets would have a negligible effect on our adjusted EBITDA, as many of them are underutilized today and currently produce minimal to no cash flow for the business. To be clear, any divestiture would be entirely opportunistic. We are not currently running a formal sales process. With that, we will now open for questions. Operator?

Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Gregory Williams from TD Cowen.

Great. Thanks for taking my questions. Kenneth, you noted the IRRs here for anchor returns at 22%, obviously a great return. Can you help us with the mechanics? I mean, not to get the network scale, and a lot of it is the upfront cash flow you receive that helps the NPV there. Is this sustainable? The way I think about it is with 22% returns, you did not invite more competition. Or do you just have that breadth and scale to keep the competition out? Then second question is just on housekeeping. The $1 billion of non-recurring revenue you are 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?

Good morning, Greg. I will take the first one, and then Paul, you can take the second. On your first one, Greg, yes, we are very pleased with those returns. And, as you know, historically, we have typically shown cash yields versus IRRs when it comes to our anchor and lease-up builds. But in this case, those numbers will 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 are 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 are doing with the hyperscalers. It has been for some time, and that is a big part of what we did in the fourth quarter of last year in 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 is very analogous to the words when we describe lease-up. Right? Because that is really what you are doing. You are selling the second, third, fourth customer off of a build or off of existing infrastructure, and that is really the core business that we are gearing towards. This build cycle is terrific. We are using it to fill in parts of the network that we have strategically wanted to build in the past. We are using it to strategically expand our footprint. And so the build cycle itself is great. But what we are really playing for is that half a billion of recurring cash revenue that is building and, frankly, we feel great about that. I think your question about, you know, these returns are attractive, does that invite competition, I think the reality is, yes. It does. That is why the entire fiber industry is focused on this opportunity and looking for ways to play in this space. But I do think, and we have said this publicly, but I do think that the hyperscalers prefer to work with large-scale fiber providers who have breadth, 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 are leveraging that existing footprint. So we feel like we are really well positioned competitively, certainly relative to upstarts and even relative to other fiber providers, large-scale fiber providers, because we are targeting our backyard. We are building in areas where we have a right to win. So I think we are going to continue to see these great returns going forward. Paul, you want to take the second question?

Yes. I will take the second. I will just, and I will add on to that last point you made, Kenneth, and just say that the returns are not necessarily equal. In most of these deals, we are 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 $1,000,000,000 you referenced and the cadence, we, you know, 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. And then, you know, we have already booked $6,670,000,000 of total contract value—not all of that is upfront, of course, but we are well on our way towards, you know, numbers that are approaching that $1 billion mark as well with what we are booking today and certainly with what we are seeing and have visibility to within the funnel. It is a little hard to predict because these deals are not 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 deploy if there is significant strip construction involved. And so since we are not going, you know, we do not 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 are 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 are going to see kind of a steady ramp over the next two to three years.

Got it. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Frank Louthan from Raymond James & Associates.

Great. Thank you. Can you give us the confidence you have in the resources for the expanded fiber build and then the hyperscale AI build? Any concerns on labor or material availability to reach those goals? And then a follow-up question, EchoStar has been canceling some of their leases with some of the towers. I just wanted to see what sort of exposure you guys might have there on the fiber side, and is there any of that factored into your guidance?

Great. Good morning, Frank. I will take part of the first one, and then I will ask John to comment on the Kinetic element of the build, and then I will come back and talk about DISH and EchoStar. We feel great about where we are from a resource perspective. We have been planning for reigniting the Kinetic build for eighteen months, really, since we announced the merger. So a lot of time and effort went into that. John joined Uniti Group Inc. well before the merger closed, so I am going to let him take it from there on Kinetic. But on the Fiber Infrastructure side of the equation, we have been in build mode for years, and I think we have got terrific third-party contract relationships around the industry, including supply chain relationships on procuring fiber and labor. And, as you know, there was a time when, at Uniti Group Inc., we built a large portion of our fiber internally, but we pivoted away from that over the years. We are now outsourcing probably 90% of the fiber builds, and we have got a few internal strategic crews at Uniti Fiber to help us where we really need it. But for the most part, we are relying upon really trusted, third-party relationships where we have got a track record of performing in both directions. And so I feel great about it and think that when, you know, Paul is mentioning the deployment cycle for the next three years in this build cycle, like I said, 100% of what is in the funnel is contracted at this point for 2026, and roughly 50% of 2027 is contracted. So we are already working on deploying these deals and are well on track for deploying them on time. So feel great about it. John, you want to comment on Kinetic?

Yes. I am really pleased with the progress at Kinetic. I mean, you know, 80,000 is significantly up since our prior quarter and among the highest quarters the company has ever delivered, and we expect that number to grow every single quarter throughout 2026. So we are clearly confident that we are on track for the 2,300,000 at 2026, which puts us at a little over 50% fiberized in our entire network, and well on track for the 3,500,000 at 2029. The new team that came in December 1 has years of experience building and managing fiber networks. I have had the privilege of working with Mandy San Pedro, our Chief Network Officer, at Verizon, and he and Bobby Walters, our Head of Construction now at Kinetic, came over from Brightspeed, where they built 1 million homes a year for the past two years. And so they came in and made a fairly quick impact, you know, putting in new procedures so that we now have a single pane of glass of every single project in our funnel, and we are able to make sure that we are not surprised if things go wrong left or right. They have got enough engineered prems, enough permitted prems to deliver the number of homes that we need. So I feel really confident about it and expect that you will see improvement quarter over quarter. And, you know, mathematically, you will see the clear pace to 2.3 by the end of the year.

Great. And, Frank, on your EchoStar question, we are very aware of the force majeure position they have taken publicly. We are obviously in dialogue with them ourselves and agree with the rest of the infrastructure industry that that is an inappropriate position on their part, and I will leave it at that. With respect to the exposure that we have to DISH, I would say that our revenue exposure to DISH is less than 1%, so it is immaterial in our view. And with respect to the impact of that in our guidance for this year, we are really assuming no recurring revenue from DISH throughout the course of this year. So immaterial impact and certainly less material when you include how we are treating it in the guidance, and we think their position is tenuous at best.

Great. I would tend to agree with you. That is great. Thanks for the insight.

Thank you. One moment for our next question. Our next question comes from the line of Richard Choe from JPMorgan.

Hi. I wanted to ask about the $1,500,000,000 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? Just wanted to get a better sense of, as we kind of move forward, you talked about it a little bit, but how much bigger is that kind of funnel or pipeline as you are seeing right now?

Good morning, Richard. So I think the $1,500,000,000 you are 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 is really how we see it impacting our financials. So we are winning a good percentage of that funnel. As I have mentioned, a large percentage of the business that we anticipate over the next three years is contracted at this point, and so we are in the process of deploying it. But some of that is based upon our view of the funnel that we are going to win. And then certainly beyond 2028, there is an estimate of what we think we are going to win from a funnel perspective, including, by the way, lease-up. And I have said this many times, including in answering Greg's question earlier, but a big part of what we are winning with the hyperscalers is not just greenfield deals. It is lease-up. It is waves. It is traditional dark fiber. In fact, over the weekend, I heard about a transaction where we won a $200,000 MRR waves deal where we are providing capacity by derivative to a hyperscaler, and that is terrific business. So that is part of what is in that funnel. So when you see these numbers and you see the one-time revenue, do not forget about the $500,000,000 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 would say, and this is a good thing, but we have continuously struggled to try to forecast what the opportunity is for us. You know, we have been very measured in our comments about the hyperscaler business, the AI build, over the past, I would say, eighteen months. We progressively gave more and more guidance. We have 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, I 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 will continue to update those as we go forward. But 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.

No. That makes sense, and that does answer the question. I was just trying to get a sense of what you are currently seeing and knowing that the hyperscalers can move very quickly for a lot more capacity with a lot of capital behind it. So that helps. Thank you.

One moment for our next question. Our next question comes from the line of Brendan Lynch from Barclays.

Great. Thanks for taking my question. It looks like the ARPU in Kinetic was up about 5%. What do you think is sustainable? And maybe give us some color on what your overall ARPU strategy is going forward?

Yes. This is John. Thank you for that. Yes, 5% I think is a little bit higher than the averages, and, you know, we have a track record of delivering higher-than-industry-average ARPU at Kinetic. As we said last quarter, I do not think the double-digit growth that we experienced last quarter is sustainable. I think we are sacrificing customers and volume at that level for incoming customers. And so going forward, I think on a sustainable level, it will be inflationary increases and inflation ARPU accretion, 2% to 3%. This next year, as we reset, I think it is probably toward 2%, but certainly growth. And, you know, I think there is a lot of headroom in ARPU, and we are just getting started. So there are kind of three big levers for ARPU growth, and this is our strategy. One, inflationary price-ups, and we do that surgically. We do that on a more segmented basis now. We are in the process of executing a price-up to our fiber base this first quarter, and we are doing it this time more surgically based on the customer's attributes and profile relative to their speed and trying to get customers to upgrade their speed along with the increase. So, yes, there is an increase, but we can also offer you increased speed. I mean, that is a very standard industry practice, and we are trying to perfect it here. So one is, you know, price-ups, inflationary price-ups. Two is our ability to move our base up the speed ladder, and we, last year, late last year, we introduced 2-gig into our portfolio. And in the fourth quarter, we set a record in terms of percent of new customers taking gig speeds. We have also set a record for upgrading our base in the fourth quarter of existing customers to gig-plus speed. So right now, as we sit here today, we have about 40% of our base on gig-plus speeds, our fiber base. We know that we could upgrade 60% of them, and that is not counting the 1-gig customers that we can upgrade to 2-gig. So it is utilizing that speed ladder strategically and upgrading the customers to more advanced capabilities. And the third aspect of our strategy is to sell additional value-added services to those customers. We call those VAS services. VAS, and we recently reset our VAS portfolio in the fourth quarter, introduced some new services. We also partnered with Eero. We are going to be introducing at least two new value-added services in the second quarter. And so with the combination of inflationary price-ups, upgrading customers along the speed ladder, and selling value-added services, we are confident that we will deliver the guidance of 2% this year and 2% to 3% on a durable basis in terms of fiber ARPU.

Great. Thanks. That is all very helpful color. Maybe on a similar trend thought there, you could talk a little bit about customer churn and what your strategy is there to address that. And when customers do churn, what is typically their next best option?

Yes. So, like, this past quarter we set a record not only in top-line sales growth and fiber sales and also quality in terms of gig attach rate and VAS attach rate. We also had our second-best churn quarter in the company's history. First best was in first quarter 2021 in the middle of the pandemic. That said, we still have more room to go. And last quarter, we talked about the five fundamental actions that we took to lower churn. We executed those actions, and I think the changes that we made are durable and will help our overall churn trajectory. Not only did we make the fundamental value prop and non-pay churn, which is showing up really well in new customer early-life churn, but also fundamentally, we eliminated a bunch of pain points. This past quarter, we set a record in first-call resolution, a record in terms of trouble tickets for our customers, a record for repeat visits from our techs, a record for save rates in our retention queue, and a record low in terms of transfer rates, you know, the unnecessary transfers where we are bouncing customers around. Those are real customer pain points, and we set a record in the fourth quarter in all those areas, and that is a direct correlation to churn. So I think we are going to see the momentum continue there. And, you know, at Frontier, we were among the worst in the category in terms of churn when we started that transformation in 2021, and by the end of this past year, they were among the best or the best outside of AT&T and Verizon. And I am really pleased that Stacy Vongbinet from Frontier started with us on February 9 as our Chief Customer Officer. Stacy and Jonathan Wu from Frontier led the loyalty and data science and customer operations efforts to drive durable loyalty, and they are both here now. And all our results and all the fundamentals that we put in place are not even the beneficiaries of their more advanced practices of using AI to change workflow and to get ahead of what customers' opportunities are so we could be more predictive about it. So I am super excited and bullish about our ability to further improve churn.

Great. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of David Barden from New Research.

Hey, guys. Thanks for taking the questions. It has been a great conversation so far. I wanted to maybe ask kind of two interrelated questions. So I guess the first question is maybe for you, Paul. If you annualize the fourth quarter EBITDA, you are going to get to the very high end of the guidance range that you have given this year. And you are guiding for year-over-year EBITDA growth in the fourth quarter 2026. I guess I have got some questions, which are number one, is there some of this one-time hyperscale IRU-type revenue that was in the fourth quarter 2025 that we should not be kind of annualizing as a run rate? And then second is, within the guide, could you be more specific about what is contributing to the revenue and EBITDA from these kind of one-time items that, you know, we maybe should not be using as a jumping-off point for 2027 necessarily? Thank you.

Yes, David, thank you. Good to have you on the call. Appreciate the question. Yes, there was a little bit of one-time hyperscaler revenue in 2025. So, you know, again, David, this is going to be a little bit lumpy as we go forward. So, you know, those kind of one-time revenues are going to make comparison periods a little bit more difficult. So I appreciate the question. But there was a little bit in the fourth quarter of this year, so it increased the jumping-off point a little bit. But, you know, we are not talking about a whole lot there. So fourth quarter is pretty close. There was some other one-time revenue non-hyperscaler related in the fourth quarter as well that Bill and I can take you through sort of offline, I am happy to do that as well just to make sure you level set. And then in terms of hyperscaler revenue, this kind of sales-type lease one-time revenue that we have talked about in 2026, I mentioned that within 2026, it is going to be lumpy. A good portion of it coming in in the first quarter, and then the bulk of the rest of it probably later in the year, maybe most heavily tilted towards the fourth quarter. So we are going to have a little bit of up and down, I think, as we go through the year. We provided, David, in the materials kind of a reconciliation of that fiber revenue at Fiber Infrastructure from 2025 to 2026. So you can see the year-over-year growth there, and a lot of that is being driven by the hyperscaler. So you can kind of get directionally close to the growth over the course of this year that is kind of one-time hyperscaler-type growth. But, like I said earlier in the call, you know, we have sold some large deals. Some of these deals are going to take a while to implement. We have got visibility, as Kenneth has talked about, into future deals that are going to come in. And so we expect this one-time hyperscaler-type revenue to be recurring in a sense over the next and to build over the next three years. And kind of, you know, as we go through the next three years, I would expect it to actually build year over year. But from any quarter to its comparative quarter, you might see some lumpiness and some jumping around.

And I apologize. I have maybe a follow-up too. So just as a quick follow-up, so do the rating agencies, when you talk to them, look at this kind of recurring, non-recurring revenue EBITDA as recurring, or do they look at it as kind of non-recurring and ignore it?

Yes. I know that that is a conversation that the rating agencies have developed. I do not know a definitive point of view on it. I guess it is kind of new in our numbers and in some of our peers' numbers. So we will kind of have to have an ongoing dialogue with the rating agencies to talk through that, David, as we go forward. But I do not want to necessarily speak for how they are going to view it.

Thank you. One moment for our next question. Our next question comes from the line of Anna Goshko from Bank of America.

Hi, thanks very much. So just a kind of follow-up on the prior question from David. So on the sales-type lease accounting for these hyper deals that are the cash upfront, is there something about the nature of those contracts that required you to book it this way? And, you know, I know we all spend a lot of time kind of, you know, understanding the Lumen deals, their PCF deals, so that they have, like, $13,000,000,000 of these. And they are accounting for it in a different way. So they are receiving the cash upfront but, obviously, amortizing it over the life of the contract. So I understand that you would, you know, I do not know all the ins and outs necessarily of their contract, but wondering if you are aware that if there is a difference in the contracts that you have on these hyper with these hyperscalers versus what they have been selling?

Anna, thanks for the question. Appreciate it. Obviously, I do not have a lot of insight into Lumen and their deals and their accounting. So I will kind of stay away from comparisons of our deals to theirs and our accounting to theirs. But what I can tell you, Anna, is our accounting policies have not changed with regard to how we account for and recognize revenue from these IRU lease deals. We follow GAAP. We follow lease accounting. And each of these deals really has to stand on its own. We will take a look at each deal. We will look at the specifics of the contract and the specifics of the deal to determine whether or not it is accounted for on an operating basis or on a sales-type lease basis. So you are going to see both of those accounting methods going forward, and it is going to depend on the characteristics of the deal. I will say, sort of directionally, that the hyperscaler deals, just given the massive size of those deals, are more likely going to be, are more likely to trip into a sales-type lease accounting than sort of the traditional lease-up lower-volume dark fiber deals. So, you know, happy to, again, we can kind of get into some lease accounting with you a little bit on operating versus sales-type lease, you know, offline. But yes, I would just leave it at that for the call today.

Okay. And then if I can just follow up, what is the average length of these IRUs? Secondly, do you have the traditional O&M or operating and maintenance contract that is over the life of the contract? And then what is my other question? Oh, you know, so one of the things that Lumen has made clear is that they have made clear in the contract with the hyperscalers that the capacity is only for the internal consumption of the customer. Do you have that same arrangement?

Yes. I will start. All good questions. I will start, and I will turn it over to Kenneth for the last piece. These are IRU deals that are structured very similarly, I would say, to classic IRU deals. You know, what is creating different accounting is just the specifics of the deals. Like I said, the size of the deal. And as you kind of go through the analysis of, you know, just applying GAAP accounting. But these are generally, you know, if you looked at it just from a business standpoint, you would see very traditional IRU structure. So they tend to be 20 years in length. They have O&M associated with them that provides a recurring revenue that is, you know, MRR, recurring, classic recurring revenue that we will be receiving, you know, throughout the course of the deal, typically with escalators. A lot of these deals also have colo, colo involved as well. So ILA regeneration or other forms of colo, which we think is likely to be sort of a bit of a growing revenue stream from these deals just given the massive amount of fiber that is being taken down by a lot of these deals. If you light all that fiber, there is a lot of colo that you need, a lot of equipment that you need along these routes to power that fiber. So we think colo could be a much more meaningful part of the recurring revenue stream from the hyperscaler dark fiber deals over time than the traditional deal.

Well, I will hit that last question, Anna, but I will want to add a couple things to the series of questions about the structure of these deals. And Paul hit on all of this really, but just to double down on it. Number one, we recognize this is different than what we have shown in the past, but I think the nature of this opportunity, the nature of these deals, calls for it. So this is not necessarily a decision on our part to change accounting methodology or presentation style. This is just what the accounting is driving towards. Frankly, I think it is actually better visibility into the underlying economics for investors than the traditional way of showing these deals. So, for example, we have always had one-time fiber sales like this in our portfolio in the past, but at Uniti Group Inc., it has usually been something around $20 million to maybe $25 million a year of this. Right? So, Anna and others, you will know that we have had one-time revenue in our business in the past, and it has either been equipment sales or deals structured like this from these one-time fiber deals where we are building a big greenfield for someone like the government, for example, or some of our other customers where the economics just calls for it. It is just now these deals are much bigger, and it is a much bigger part of the revenue. But, so we have done this in the past, number one. Number two, we are showing all the revenue upfront as opposed to showing amortized revenue over time. That is the critical difference. And so, for example, if we talk about the record quarter of bookings in the fourth quarter of $1,700,000, but if you actually treated the hyperscaler deals that were turning up in 2026 as traditional IRU revenue, that bookings number would have been over $4,000,000 of MRR. So that is a record quarter by a factor of two or two and a half. But that $4,000,000 of MRR would be a little bit misleading because a lot of that would be amortized revenue. And so, rather than showing an inflated bookings number of $4,000,000, we are actually just showing higher cash revenue and EBITDA in the time period when this business gets turned up. So I think the real point of all of that is, do not think about the economics of these any differently than IRU deals. It is the same. It is just a question of how we report it. And that really gets into your last question, Anna, and really why we talk so much about the lease-up, because when we sell a greenfield deal, it is not about the anchor for us. It is really about the lease-up. And so we are getting all this one-time revenue and funded and largely funded builds, and we are playing for the $500,000,000 of recurring revenue that comes through the lease-up over time. And I think the way we structure these deals, I do not want to get into specific customer agreements, but we absolutely structure these deals in a way where we have the maximum lease-up potential with the minimal amount of competition from our anchor customer. So I will leave it at that, and you can draw your own conclusions about our point of view on that. I would also say, and this is very important, when we put this fiber in the ground, we are not building for just the anchor and the anchor's lease-up potential. We are building for lease-up potential for traditional wholesale, traditional enterprise, which we think is going to be a huge opportunity once inference comes. And so, as a result, the CapEx that we are putting in the ground is a little bit higher on the front end, because we are adding that extra conduit, or we are adding that extra second conduit, and we are even blowing fiber potentially through it to provide the ease of lease-up after the fact. So very focused on the lease-up, and I think about these deals as the economics of these deals as being very much like traditional IRUs.