Uniti(UNIT) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Uniti reported a consolidated pro forma revenue decline of approximately 6% year over year, primarily due to the continued decline in legacy TDM services and Uniti Solutions [20] - Fiber infrastructure revenue grew 3% year over year, while Kinetic fiber-based revenue, including consumer, business, and wholesale services, grew 17% year over year [20][21] - The company expects consolidated revenue and adjusted EBITDA of $2.2 billion and $1.1 billion, respectively, at the midpoint of their 2025 outlook [25] Business Line Data and Key Metrics Changes - Kinetic expanded its fiber network to pass an additional 56,000 homes, ending the quarter with 1.8 million homes passed, and added 24,000 net new fiber subscribers, marking a 17% year-over-year growth [16] - Kinetic consumer fiber revenue grew 26% year over year, driven by strong adoption of the fiber-to-the-home product [16] - Fiber penetration at Kinetic reached almost 29%, up 50 basis points sequentially and 130 basis points year over year [18] Market Data and Key Metrics Changes - The company reported strong fiber revenue growth of 13%, with the highest number of fiber gross adds ever and the highest net adds in two years at Kinetic [9] - The hyperscaler funnel grew approximately 13% since the second quarter, with hyperscaler activity now representing around 30% of the total monthly recurring revenue (MRR) funnel [13] - The total addressable market for AI and hyperscalers for fiber providers is now estimated to be approximately 50% higher than originally estimated at the beginning of the year [14] Company Strategy and Development Direction - Uniti's strategy focuses on building fiber into unique locations, providing operational excellence, and maintaining a customer-centric approach, which has led to industry-leading churn and net promoter scores [6] - The company aims to transition from legacy services to fiber revenue, expecting fiber to overtake legacy services as the majority of revenue by 2026 [22] - Uniti is also focused on cross-selling Unity Solutions products into its enterprise base and capturing a larger share of the wavelength market [28][55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth trajectory of the fiber business, emphasizing the importance of transitioning out of legacy networks and services [70] - The company anticipates that the next few quarters will bring the largest deals seen to date, with clear visibility into at least three years of strong value-accretive deal flow [14] - Management acknowledged the challenges posed by legacy services but emphasized the strong cash flow generated from the core fiber business [73] Other Important Information - The company has improved its cost of capital significantly over the past two years, with debt yielding around 8% on a blended basis [26] - Uniti is working to establish a separate ABS program with fiber assets at Kinetic, which is expected to play a growing role in its capital structure [27] - The integration of Uniti and Windstream is progressing smoothly, with no significant disruptions reported [28] Q&A Session Summary Question: What is the outlook for the hyperscale opportunity and deal mechanics? - Management noted that the total addressable market for fiber is booming, with demand outpacing supply, and they expect to see larger deals in the coming quarters [32][36] Question: What is the plan for Kinetic's ABS and funding for fiber builds? - Management indicated that they expect to raise additional capital for Kinetic's fiber build plan and that ABS will play a role in financing due to its cost advantages [43][46] Question: How does the company plan to take more share in the wavelength market? - Management highlighted the importance of unique routes and reliability over price competition, and they believe they can capture more share in less trafficked markets [50][55] Question: What is the strategy to reduce churn in Kinetic's fiber business? - Management outlined a multi-faceted approach to reduce churn, including targeted pricing strategies, improved customer service, and fixing broken customer experiences [87][95]