Otelco (OTEL) 5 Mar 192018 Q4 Earnings call transcript

Good day, and welcome to the Otelco's Fourth Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Ms. Drew Anderson. Please go ahead, Ma'am.

Shelby. you, Thank this results to XX, call review to And the Otelco fourth company's for December quarter the welcome conference and XXXX. year-ended and Garner, call Rob Officer. Richard the will Chief Operating President Executive Conducting Clark, Chief Officer; Financial Chief today Curtis Officer; and Souza, be

during historical forward-looking that start, factors we the forward-looking unknown or unknown expressed other have constitute materially statements. caused from of Such made and uncertainties current involve offer that by known results are risks, note statements. results that the fact, Before call cautionary not statements results and actual me statements could any company different such the or let implied future this statements be to or of forward-looking the historical from

In generally terms Commission. risks expects, which time-to-time Exchange in over Souza. ahead. and be urged are also the addition readers filings are labeled the such similar consider from are I now belief, and forward-looking. terms forward-looking believe, contained company's Securities turn explicitly or Please to uncertainties, to describe to plans herein and that uncertainties statements subject Rob will with statements the uncertain The call anticipates, with statements, intends, that the described stated, With to and risks go to other

in the like Chief and Otelco's first headquartered Albany Good business. Vice President performance And quarter's our Clark, Officer, of previously Drew. Financial Albany, Chief Executive new as doing quarter issues New to business fourth Officer TVC Richard welcome key morning. call. Operating discuss you, joining XXXX was Thank to our and York and Incorporated, investor fiber. fourth Richard affecting is other today

financial very with Initially, in and industry experience as and Otelco. billing questions. in our influence to Curtis business expanding network operations sales, Richard include and the of I as Richard provide brings he we'll results Richard his We after and an attention to focused supplier is role a as well take marketing, regulatory of years that, and wealth operations review worked knowledge have functions. now and competitor, plans update, our and his After on will both recent his your

continue Our more in access traditional X.X% to to residential for and stable. data decline, revenue as the trends fourth our industry with quarter quarter customers in million, residential the results same down reflect Total revenues customers customers XXXX. data poised was $XX.X $XX.X business continue been have for RLEC in million the fourth while and compared quarter and

representing total decline was year, X.X% XXXX. the $XX.X revenue over also million, For

trend products, further coupled in this as expect will maybe of continue We and influenced such alternative availability properties the services. IP telecommunication and competition our cellular by with RLEC

our speeds the Operating voice However, to quarter down and for customer XX.X% of base was the increase income fiber-fed in loss services. residential the million. $X offsets partially data fourth

the income. Cash additional Curtis will compared end CoBank For of of in Act XXXX provide $X.X of of fourth the balance Act quarter year-end of $XX.X $X.X a XXXX of future million last the at our the $X.X as new when income net comparability well as fourth significantly the year. million cash was Jobs the quarter, impact our an he Cuts tax for year, gets XXXX, agreement for an with $X.X was X.X% The raising XXXX XXXX, tax benefit, million and million. his information sheet at the in in decline. to position quarter The Tax affected operating $X.X of and reflected fourth compared to and quarter increase in comments. years XXXX with income fourth taxes XXXX. was net and limits was $XX.X income income credit positive Tax in million the million million fourth compared Net quarter with

funding over discussed the XXXX. used will for ACAM provide of The program speeds to past began applicable is and broadband out Richard payments states receive funding five to plans the XXXX. provide and in where accessibility continue the our Otelco to in now receiving year, through the SEC's program As a customers. enhance summary broadband our increased fiber will XXXX. XXXX and being network and to for build build-out our is

vehicle and for with being options you delighted miles call with fiber. this during million the to sparsely its and support fourth the in to join node XXX XXXX, distribution XXXX improve now $X discrete Fiber million populated I'm of added Otelco, of we the be the an Rob. great Thanks including premise have will systems, fiber $X.X Otelco's increase Otelco and approximately primary to fiber service on invested X,XXX customers to our XX% data it's XXXX. In employed today. be to more wireless network grow to territory, locations in invested of quarter fiber from increase we passed And to XXXX. its capacity with fixed areas.

we the network. of XXXX, by broadband to our in During XX% reach is our increase expand $X to to plan which expected the investment business million,

In year in includes revised funding $XXX,XXX funding. XXXX, we extends approximately are evaluating additional of two per and years addition, through the ACAM which additional representing the program, program

additional products. a both fiber. existing based believe end-user light we XX%, in offer and focus. new broadband And and fiber our continues ACAM room Reducing program. which services stabilizing fiber-based every already new growth for reviewing of offering XX-X are to approach of This location we to on Of mile to revenues centers light services valuation our capital X,XXX requiring we wave be rate locations customers. of with to with leaves the the X,XXX services of passed to in in fiber, Our locations the our pass penetration we our approximately have represents churn customers new subscribing impact each weight customers targeted

Richard. Thanks,

over we the census three Massachusetts. America to over payments several service support next in in involvement blocks Fund our just Over phase million FCC's improve were years Western about have the We processes. of XX last in talked awarded the two quarters, $X.X Connect

Our the some will begin required this partner sign town the X,XXX serving services which locations. communities to with expects the will the Thursday, final build-out, in and four to documents serve offer

We initiating with are receipt with the the II from CAF final on of funds staff FCC details the working program. associated

Our bringing we with New options on business focus how Massachusetts areas. and demonstrates to can can access. of participate municipal our wireless Leverett the based solutions partnerships in the Consolidating strategic and to in like those a Leverett, improve are to services exploring of another town public-private These focus previous communities England towns work are and successful has work community’s in Otelco fixed been digital for activities. one their business. Other engaged the continued partnerships be continue broadband rural of the operations streamlining way in fiber

calls, and All previous multiyear customizing system, handled collecting new end-user from operational extensive improved our enhance planning teams Otelco being step As into is our service update all system. existing after an system. and the the billing a and customers. the of system the activity of next we of single for period the new integrates delivery to support to conversion services completed new the into installation and provisioning and is systems shared intervals of carrier billing billing and of on to capabilities service ordering, three new to The in to area and provisioning, mass

initiatives hard execute to in both employees have and with on pleased of our progress worked as shareholders. our our XXXX for number are a We customers

and employees Looking continue performance believe adding experience, in and family the revenue focus improving to on the management our improvement value to will on customers of our our and both data deliver We XXXX, our and customers we shareholders. to focus cost will an enhancing speeds benefit to customer new companies. continued

We’re now steps summarize build foundation to continue the will Curtis will in provide we've and a fourth XXXX quarter confident solid on. taken in to take results.

Richard. the important from investor and presentation joining the several and appreciate a results, and your today. quarter, recent us and added it's We standpoint. the several Rob site. stock which then history are that our for the summarizes pursuing. last quarter site, Web an updated investors information Last questions. we to add strategic can of use periods will Richard Web and Rob few parameters and our Thanks year more several our I we we in the our company, to that and discussed Last performance take of directions results factoids section everybody we mentioned combines we financial fourth night, over of

last brief share a overview things key financial of do fourth Unless owners. quarter-over-quarter all period either year-over-year. results the Let's or to note, year, and the for relevant same quarter are the otherwise most comparisons are I that

As Rob mentioned, revenues from X.X% fourth last million, year's $XX.X down quarter for quarter. the fourth were total

over directory and order, decline local look the and at long or the a access decreased million, reduced revenue residential prior-year eliminated X% FCC's voice lower distance which CAF payments, which special due $X.X our to offset fees to due accounted broadband access for in transition an revenue lower to each decreased last support by customers. decrease. $X.X speed million, customers XXXX services you were the $X.X only accountable was the and components, decrease impact the and requirements decline million. to Network over the X.X% X.X% customers partially of and competition, The decrease. ACAM year revenue primarily end-user local decline was intrastate RLEC in related period. in If year, primarily of a increase revenue, which cellular Internet from for small revenue

offset Transport increases, security by we services the customers. in fourth by reflecting Video and benefit increased should Area hosting And X.X%, cloud revenue X.X% last fourth delivery and last increases services. primarily revenue. over Network basic Internet fiber penetration over As in Wide finally, quarter revenue our a revenue year, and XX.X% our cable of in required decreased year, reflecting digital managed in revenue. services quarter pay-per-view cable professional IPTV lower grows the see small increase reflecting and revenue, services declines and the decreased

expenses Jobs of million and Last increased which those Cuts had to retiring expenses transition $X.X In up As lower Acts in X.X%, agreement, expense, principal XX% fourth new XX% of EBITDA our prior and $X.X for the the and Cost the was X.X% maximum basically about There of offset was over and expense The was as decreased operating network at for Interest other $X higher customer. written on cost and $X.X of for rates CoBank ago reduced offset bonus recognition fourth to ago. onto by tax slightly, also XXXX we $X.X from to a our of which the from included with to increase $X.X reductions from fourth Income Lower was of year decreased due of number to benefit partially Depreciation were million the XX%. compared loan services both the same was partially was LIBOR credit operations for quarter These Richard depreciation the in to accounted to last were was million our mentioned for year taxes million million Officer. federal We compared million. expenses former million implemented related year decrease, the year. SVP categories. of year a XXX%, Chief primarily balance from unchanged balance bank end the a tax total earlier, down operating coming primarily over increases million. move from reflecting at CLEC quarter, $X.X was Tax provision be a expenses. Consolidated by the Operating $X.X the a as XX% agreement. levels level was amortization year. cost the SG&A ago. and quarter, fourth XX% quarter operating margin The period off G&A board uncollectable changes. the from expense rates. to high

noted, at balance cash ended quarter Rob at sheet, $X.X we the the with end XXXX. million to the Looking million $X.X of as in fourth compared

save cash end million, which X.XX%, loan interest interest rate debt applying origination outstanding end brought payments credit turns the end The computed of leverage of million current the to X.XX. margin million a its we $XX.X the in down interest facility rates, cost, $X.X from At the on in with XXXX than the in to excluding year in on $XX $X at leverage voluntary reflects more expense below The on made The just remaining down by margin voluntary quarter will lower quarter, XXXX. expense loan annual company a for the ratio million million. was on payments create in balance full our prepayment. its an X.X% during on which loan $X.X on loan fourth our million interest $X.X leverage scheduled the During the the XXXX fourth credit was making Otelco the will debt basis. was third since to the held the line quarter, November company principle interest on rate quarter, business by X million. our of the million, occurred origination The and made reduction under facility reduced at ratio $XX.X Capital at the million were of X, by XX.X% the including annual approximately CoBank. ratio when fourth in expenditures investment lower quarter. third the in investment the ratio X.X the sheet as our net $X balance bringing $X.X

XXXX increase we this in noted, million. investment to Richard expect $X As to

filed full noted be year presentation quarter directions, on time. shift in The with site we our has from I additional press our investor details as if and which at the details release Friday. XX-K, think questions quarter highlights that for also will for you Web and the to covers the provide can our updated this earlier Shelby, fourth on investors taking results. the

Private Instructions] [Operator Riley], a Investor. and [Gene he's

I just ACAM obligations your are many XXXX? to How between pass for two questions. now you have and required locations

Riley. locations, XX,XXX Approximately Mr.

metric the then be three access to that quick call, equivalent conference mentioned going you quarter question. one no And In reported. longer line more was

mention that release? to was of else, there no replace in going press with the You're and something it

year. I Yes, the planning reporting units. of generating what begin reporting doing we revenue at of we're will first on quarter is And this end those believe

then? there anything in So, the XX-K won't be

no. will be XX-K, the in nothing There

do you the have going show and in been that, have the us before? to history what last quarter. those start they when first behind reporting you then Are would year And some year

going We're do to attempt to that.

system it more the give billing a Of for course comparison. to going best do to to we’re get that little new bit it comparison the investors. conversion, But makes a with our year-over-year difficult

new or like order be equivalents of If access they to magnitude generating are between just line an a and going difference like difference it's percentage units?

would right generating believe I of account then the relate we're now, level. product line units revenue And we looking things are Certainly, a anticipate additional working customer maybe the to to Mr. access opposed an more on Those doing reporting probably as at to some count. Riley.

from comes [Wally Investor. Private Our next question Walker],

What expect in the rate do is to add take network have there? how you for the new customers estimated you Massachusetts, that wireless many

incumbent underserved those areas carrier. serving Wally, Generally are we're speaking, that defiantly by the

not take CAF even those know, you was locations, the to As money serve the that’s incumbent that carrier why did II reason the the offered CAF option existed.

be of services So based especially we would anticipate on level, our take rate service speed data high areas. in rather high to those the

mean So the What you I see X,XXX total customers, about is what did or was potential number whatever. number? it of

probably possibly we we we the that you approaching could potentially higher. I was Historically, of X,XXX would be see give take other little in It bit customers. rates would think some somewhere areas. XX%, in neighborhood a

I by any third and you the $X.X to $X.X compared the decreased the we’re down do And closer million. know EBITDA what that? was stabilization? but think primary revenue of quarter revenue like quarter, And would getting to cause was million, fourth EBITDA just to

of items certainly first the we question, impacted the fourth To had number in quarter, one-time that EBITDA. a

OSS the I think expense that costs that. retirement Vice was between We additional our Curtis on Richard to senior There items Operations had and of our board. hit the some conversion. with some billing expense and President. of relative referenced were There the SVP associated coming overlap line

the some on So Curtis there I one including are a the was timing to item number and items operational a other of billing conversion. bit uncollectibles think little of based mentioned varied support it and due that that

The funding. question, offer new it's if of company the says ATM evaluating I And additional FCC's may. one final

I FCC fiber what this funding with the a realized But comes trying imagine funding. this wouldn't ACAM of goal is to specific accept out network? guess I requirements. build Otelco is critical Now, where really to Otelco's I'm offer a rich I can’t scenario additional say

asked Wally. reach analyze locations I is that Richard have total XX-X. I What of Sure, your statement, with we number don't would have do though to disagree the think to to

asking And of from I'm reach XX-X do standpoint to see to what will those I expenditure around what that it the is a an have have think capacity. capital it's to increase take locations X,XXX locations. to

just something that take off will the willing to indicates that preliminary funding. with reach those with done Richard would it on And plans of that I we're we we've have work what appears answer had those his be think serve locations announcing except. locations, some until final place. we're that funding opportunity a to it we that in that we the But comes the on back holding the good be already to would accepting

is deadline the March XXth, But that? isn’t

I think what decision of would we'll top the middle on that. the probably able that of And It us. and better a well deadline. week, his next March to much of we'll XXth idea is, And or are to means team anticipate that beginning and have Richard I before the be make

[Operator take Investor. Sochet], from Instructions] Private question our We'll next [Ira

guidance. you do not know give any I

XXXX it and the good However, to you on of billings flat to going it's be it bit a to insight going we fourth with pretty going going March little is the of are are down the new be turn it just as Can system of your be quarter. going out to have quarter, to your revenue. a up? in billing what it give for you idea billings flat be Is would us to or -- be is

around bill, be this January Based of time. XXth. March process really difficult to those being I way will a in at have numbers until answer. processed. February's don’t one on the we Ira, are we in point only that's the completed in think

how this So revenue point. trending tell at it's you pretty is difficult to

[Gene Private Investor. our Riley], take now We'll question again last

before to you need that's you But discrete said the that locations total so just cap have X,XXX mentioned that this far. XX,XXX. you You

you way So be done, really can't right? half

are get we Remember those locations. pass Riley, we were to included fiber, locations, not No. ACAM build Mr. when to not of piece often that a eligible passing we the But offer. ACAM in only locations

X,XXX, those locations. census block we the portion of refer ACAM are would of only what So as to a

what number And would would know? be, you that

I think blocks. in think X,XXX that XX% census ACAM -- that are years, of the passed of included are I we're of neighborhood XX% the after we're approaching locations somewhere in the around neighborhood the in XX,XXX, two

eligible So out marked roughly are as of the are that X,XXX X,XXX locations? ACAM

that with have that requirements Clark things other we funding measurement have which we some additional the new it push analyzing those good And offer, it we locations. extend thing. And years, even is And will of our Richard of of those correct. is two is believe by be reporting deadlines may the that a parameters. one four, year XX% out That is to for

all pieces and this Richard are at time. those analyzing that the So are team moving his

then And question. more one

some again I You to release about the mentioned new periods, press the to? comparing to to billing there are your is And in that by those what service it we it wanted and SG&A, in that also buckets? of of or some compare cost a one system in in all is $XXX,XXX expected year. And some past that -- of is expenses of reduce is

It realized would the I on you think cost the go area, things close new portion already year-over-year have savings $XXX,XXX. buckets. we are system. saw into one declined of some from implementing But basis, of that both a highlighted billing services. Curtis to they is I And that cost A of services. number those if of of There the of probably in think that

service, that out adding So at and cost than going I know less taking items of then onetime it's fall forward, say be to would next from to the SG&A going XXX… I expect just how to I if into much were year? look these

$XXX,XXX anticipated billing $XXX,XXX say Yes, we've system. the and of majority we the that to I to would from expense converting operational support realized savings the

going So a $XXX,XXX. there not of will share, savings, some much additional piece to smaller be it's lion it's but be a the

than minus be is So going quarter four to closer $XXX,XXX? FY'XX

front up broke the saying, of what end catch all it didn't I you're a sorry bit. little I'm

in represented quarter savings most So the of numbers… are four the

Yes.

Okay, thank you.

impacts info… If performance, out Rob take as was the talking, as change company's that's the as correct is the for you're onetime modeling long you

no have Mr. the I back time. more this queue would the at turn questions We like to in over to call now

closing for Souza remarks.

Thanks joining the on again. this We morning. really us call appreciate you

shareholders. this to to current always with us value those in in managing happen continue mentioned always, focus additional for in morning, for Thanks to looking this business delivering we the we've being our significant with in the discussion of continue And we opportunities changes We're greater marketplace. tandem As growth some our again that our as morning. are on dedicated industry. for

Thank concludes you This for participation. today's. your

disconnect. may You now