Consolidated Communications (CNSL) 29 Apr 212021 Q1 Earnings call transcript

Good morning. My name is Tamika, and I will be your conference operator today. At this time, I would like to welcome everyone to the Consolidated Communications' First Quarter Earnings Conference Call. Please be advised that today's conference is being recorded. [Operator Instructions]. the Investor to Relations turn Vice Spaude, now of President and will call Jennifer over Senior I Corporate Communications. begin may you your Jennifer, conference.

to good to XXXX Thank I'd Call. Consolidated everyone Earnings and Quarter Communications' you, First morning. welcome like

financial Steve President our and On Officer; and Chief XXXX. fiber progress performance Financial Bob's with and Bob highlight first will plans. Chief Executive comments our our and today on the will Childers, our update are on guidance call Officer. today quarter provide Udell, details Steve strategic an build initiatives for

call remarks, questions. Following will the prepared we open up the for

forward-looking results Before with safe we all financial also will affect posted uncertainties. tomorrow. remind factors will include provisions of discussion financial of X harbor consolidated.com. of Today's our that and Today's are financial statements be Investor contained certain the events earnings at Relations consolidated subject is are section on include future Slide and risks proceed, release, our expected I measures. discussion presentation. statements to will about XX-Q A SEC, on our and this presentation the results in and may discussions review earnings certain website that filed and non-GAAP you future the Please filings

Our nearest of now earnings to release will these includes a the equivalent. GAAP over Udell. reconciliation Bob I measures to turn call the

everyone. good morning, and Jennifer, you, Thank

on the of excited with pleased phases We update you early be to you gigabit especially are plan. fiber today, our growth to

an with strong quarter fully growth a funded better here. first We a have begin plan to never a stronger positioned sheet, balance been result and investment

To off homes out million of fiber to businesses X-year to XX% across footprint perspective, all put will start XXXX. in locations. start services to upgrade our the in higher. or more having of million quarter the set available in quarter. our at marked number gigabit quarter we number our passings to a transformation a addressable X.X X.X official XXx plan first total capable nearly as of built have result the and fiber than XX,XXX first This is minimum gigabit passings broadband great achieve this First to speeds We're upgraded upgraded of into we

progress making proud upgrades, the first on quarter. network and accomplished great builds I'm in are team of fiber and what We the

Our performance execution, quarter revenue added fast first produced very the fiber data revenue last a The connections, start of X.X%. eighth builds. is and a results quarter broadband Starting to the broadband we XXx grew reflect fiber more than our growth. increase strong consumer our and X,XXX operational which with year-over-year year. consumer Broadband consecutive and grew revenue This over channel. X%, ARPUs period stable same

our build placing in least to consumer, larger of to overall build New outlined carrier in fiber locations new XXXX the at rate or -- as with deck. meet gigabit Our and of years in upgrades rate commercial upgrade with we just The track primarily Crews miles for plan of XXX and first our fiber in constructed Slide on Northern on California come. count X high-capacity the were to the quarter, are our first investor quarter, cables Texas. England, XXX fiber customers XXX,XXX needs our

very networks attractive passing. regional near Our net fiber for provide cost per

this expectations. a from and it's These multi-gig and For northern across large line attractive amount England New of experience. fiber nature technology fiber-to-the-premise our aerial benefit approximately symmetrical early first customer in We had $XXX, very passing our delivers believe upgrades markets. of quarter, a of a are we of cost our differentiated with

out. has strategy go-to-market Our planned been meticulously

services quarter, will all a many about experience, offering. these and stellar benefits We're understand customer to the truly differentiated structures. first tiers easy a excited we transparent offer will the upgraded pricing their pricing and and We service fiber and from markets. of choose fiber launched X simple attractive service tiers In speeds Customers to with new create provide packages, our customers in can pricing communities.

care kicked new for premium channel off our fiber dedicated also of We feature. a and pilot customers gigabit a a tech launched customer support

We have intervals reduce to fiber process and and than broadband customer between streamlined order installation to installation our continue days. less X the

are the to in-home technology best focused yet We using tools. WiFi advanced simple on possible troubleshooting delivering experience the use latest and

at to already projects into York X recently symmetrical positive public-private the do that but And Hampshire while the and experience penetration our neighborhoods which will line new us expectations our well-positioned value broadband early, previous to seeing additional New and our in have delivering or stages. a America. in only It's New have in expand advantage a and recent take partnerships allowing proposition options, of not fiber in with our is builds speeds investments to give very rate powerful in services. digital proven with and And our our it comparable built cohorts transformed combination experience manner transformation they to we business Our rural completed customers prefer. of self-serve with them fiber our similar we're for a key also are any fastest new funding customer are

partnerships with sources. have track put, more we Simply and we to not record for Over dozens the the bids state won last stages, have programs. federal XX in municipal the and X planning understand our mention months, additional funding

the place scale fiber We when and cost infrastructure in right lower we to dollars at become the have have additional a available. and build a at relationships,

our customer drives which our to recapping or core, fiber carrier IP Both and Turning Ethernet native robust networks. channel. these leverage our I'll by begin best-in-class commercial our strategy. groups of

is our we Ethernet as on data strategy leveraging service Our grow experiences network and revenue. based commercial and go-to-market

to our approach. work become we with on are challenges. teams We around focused these simple our sales discussions Our their technology adviser trusted business and solutions with and a evolving begin for force, we solutions-based provide opportunities sales a through network, prospects sales utilize Many conversations for experienced business and customers.

Alto, best-in-breed Palo which our includes VeloCloud, product to Cisco, supports an portfolio, Ciena end-to-end have We ability provide and solutions. expanded partners like which

a reach, flexibility commercial as the channel. over of network growth are by solutions-based And the and us this service for demonstrated strong revenue remote platform of for X% leverage in employees. local businesses ProConnect benefits this differentiators office quarter there's strong and communications Our our in sales demand unified approach as presence key across and

are for We switched SD-WAN. demand increased gig seeing also services and Ethernet

This example, an services. based managed contract won Internet Minnesota. on As We $X we reliable for our security connectivity. million won dedicated school this in contract Internet and ultra-fast, recently XX-site a a network includes X-year business

capacity, XX% more win business. buildings As to we increased year-over-year. buildings mean on-net out we carrier-grade build More opportunities on-net

support structure to than ever enables before. capital this channel us better strengthened Our

we doing on like towards Ethernet, fiber Moving carrier and continues a in opportunities. solid gig national seeing deals of wave has sizes team networks The and to This great is XG carrier job on well. upgrades. demand capture regional to our commercial, interest well team. product any XXX and to of all network success leverage weighted create our channel opportunity as carrier-grade as emerging active be and upselling mix, we as a carrier are solutions core carrier more as is the regional very The with

manner. be of of COVID and experience ability within the pausing slower reliable their of that and with differentiators was can to clear decision-making height nimble solutions deliver channel businesses primary delaying sales network and It during the the are and upgrade customer we team a proactive our commercial Our some was carrier were timely our in plans. and

increased about customer Steve? margins, retention. the our on network. our sales best turn customer call opportunities who higher upsell experience, more will optimistic I results. This higher financial ability to provide ensure first remain XXXX are the greater on We will contributes vast to which Steve, business over quarter recovery correlates on ultimately now the insight to to focused targeting and majority of and

Thanks, start Bob, to and We're to remarkable a year. on morning to today good the pleased report everyone.

our sharing couple results, on reiterate strong QX and our recent In guidance. you of addition a I'll also update also I'll refinancings, XXXX to

ago. of financial first million ramp Adjusted on quarter we can year X expansion revenue $XXX.X million, found was to presentation. plan. a in X.X%, totaled totaled EBITDA and our X.XX% Our down fiber Operating line as the expectations approximately our for summary start and down was our with compared $XXX.X quarter Slide be to

achieved looking which and primarily in revenue totaled down equipment last construction and driven in $XXX.X Data or projects. $X.X at to our X.X%, transport carrier and who and Commercial, timing revenue X% $XX.X the quarter. revenue other voice starting the to million by within Voice first decline revenue sector. and the throughout growth held target declined declined due pole which quarter, attachment especially million our lower This commercial totaled we or still are equipment approximately again, revenue Now year, revenue $X to in equipment and in X% services million purchases results, products consistent we of X.X%, But XXXX up for sales in is medical $X.X million, compares the off XXXX. experienced the improved sales. and XXXX. million the was trends first a customers with is reengage

Consumer quarter year-over-year. million, represents to consecutive voice primarily broadband consumer $XX.X totaled on year-over-year up The was quarter turning up first our is $XXX Now X.X%. reductions. within eighth in decline year-over-year growth a data revenue decline This X% $XX.XX, consumer by channel. basis. and our Revenue the driven a ARPU represents X.X%, which million, of is of expectations, was

speeds increase the upsell expect the product. grow especially voice to X.X% out and for roll revenue to as ARPU year quarter a from we Consumer customers, perim $X.X was as down fiber or We continue million the ago. we X gig to data recent

combined XXXX. with stand-alone is $X.X content ability on margin the given And to basis, the Our revenue are measured negative accelerating million. was in down we increases contributing to increasingly increases costs. trends in rate realized offers, broadband video improved basis, competitive slightly sustain a revenue a Video on our

special we lower on totaled mandated data fund offset $XX.X due Texas close in relationship quarter. PUC, due spend. is revenue revenue, our the within funds with with enhanced driven and our by from new with streaming high-speed allowing have Universal customers' partnerships. completed Subsidy order allow and by meet we funding video this ago. us to quarter. a down previous million, under believe to to approximately viewing relationships to the nonrecurring These Service levels. private revenue high funding to review partner pursue currently be and focused the will avoid CapEx cost week builds $X.X will and strategy retaining and in We so, X are date, access the are increase or Declines expect next and Network we million the with restored up us deliver million We services. during an network no increased and $X.X year as to slightly revised the the from while in-demand capping that revenues first organic in higher broadband preferences were we have content passing a cost partnerships. state products in entities services increased the builds $X.X rates more public customer access million XX,XXX funding X services in progress. of Other projects To Texas optimistic The approximately for reduction these are in was

turning to Now operating expenses.

additional combined million, the expenses increased our increase $XXX.X million million, network and related onetime partnership from a benefits as declined basically and increased factors change interest the an in costs of Overall quarter $X.X million start-up $XX.X year in public-private higher global to of costs receipt would driven as current loan first the $XXX well senior mentioned, and primarily mix first debt for $X.X our or added PPP SG&A Excluding the And normalizing fiber higher our result initial expenses service as primarily totaled $X.X the pass-through of of the with promotion fiber million by initial reduction Net depreciation EBITDA-neutral. due to is services relating cost for build $XXX,XXX This and build a a $XX.X Searchlight structure universal million, as quarter. expenses amortization, to to October in the Interest within investment. a salaries universal that products result X expense expense fees X.X%. external as conjunction the and the or the employee quarter. million in $X.X the notes ago. quarter. Cost the costs strategic increased expense of have X.X%, refinancing Advertising to a operating I in in new declined increase the from of just secured million are a was due of term and of service primarily expansion. an was the the the expense with speeds. decline due headcount our reminder,

deferred totaled combined Searchlight of financing $XX.X minute. Additionally, amortization a I'll cost in noncash an provide capital discount of on note, million. with our cost update and the just go-forward the on interest

of -- of which the all of quarter. recognized to Additionally, the The be to quarter, common value the third in expect March from we related Searchlight of will XX, company's distributions of occur stock. right to down at fair increase payment a upon expect converted receipt ago. in from contingent the wireless totaled the $XXX,XXX we the the $XX.X partnerships $X.X noncash approvals in close million first we to a loss second and completion the year Cash CPR Searchlight million transaction,

first XXXX. range per for issued of higher distributions Adjusted line expansion As compared income to $X.XX projects digital ago. shares, million we $XX was part be a with of X.X last past in year fiber investment spending, million closing million level our quarter, per run $XX the including rate per $X.XX share, annual the approximately supporting and first net to CapEx to common expect of was stated technology. transformation new October, we Searchlight as reflecting in in million in new shares in a $XX the with our network last share the wireless share call,

structure, I'll our on slide X outlined capital Now of you deck. is on which update our Page

balance the proceeds refinancing and debt conditions, improved secured In of extended those The stronger term March, capital. take result a basis in repricing. X% actions of we pay As completed market interest term improve used down million X, to a to we Based savings. million the last $XXX increased we coupon with leverage On due as in This loan issued improvement we existing fully build bank on XXXX. to funded October. completed reminder, reduce plan cash terms. bank April $XXX We and notes under January, and point sheet. the $XX much senior financial repricing, able and was we The in to liquidity. a global we which maturities continue resulted floor. our LIBOR In position in overall favorable cost million the raised at our the recent a both were in XXX results annual reduce conjunction our

scheduled life year in or $XX which of the the $XXX order effectively was payout loan the the in for since of Additionally, the million next the amortization eliminated the principal term X% applied facility. per of maturity, million

cash result have our ongoing the a $XXX reduced sheet. million with on we over liquidity. we respect million transactions, we of of As liquidity, $XX have approximately $XXX these significantly With have in build over have And contributed our cost to in support of the incremental cash revolver, balance and plan. million undrawn flow to capital

outlined funded regulatory full third the value further long-term from are expected X. in $XXX fully the $XXX guidance, be expenditures still year Slide plan. CapEx guidance our spend which million. to expansion expect investment $XX million the XXXX we fully and from secure our strong second on receive we prior rates, Additionally, to our year levels We'll Compared driven requisite now fiber our liquidity million reiterate in the the investment review the reflects Searchlight Capital of increased stage by for plan. to success-based position approvals. reinforces and once and quarter range cash The build to this creation is

range of million. now the to have that, be our XXXX, is as million. of XXXX. the expense million. transformational And at expansion a and discussed, expected Cash million taxes to extremely Our the and call expect $XXX turn be through $X we first of remained the income in of exciting and term through now in fiber $X which million range over was be so updated expected previously Bob. back election to Searchlight pick adjusted reprice unchanged With EBITDA we execute the the on the Cash expected $XXX $XXX do least We've guidance, to -- in to with interest productive we're and $XXX still to very plan. to are investment to to quarter, well-positioned I'll with is range the to loan had million

Thank you, Steve.

Capital the Finally, referenced on brief with provide a second Searchlight I'll update Partners. Steve that closing

You presentation. issuance week, associated can on shares this investment to Searchlight Slide of approved our see the steps of this X partnership our with shareholders part of the This as transaction.

and of We to then expect and fiber-first in state strategic sheet partner future, and investment. excellent strong way third becoming balance company. to quarter, obtain applicable approvals broadband for on and the $XX remaining our FCC million on we're in our will the an Searchlight, platform the trigger very we're building a focused which With

into priorities outlined our work of our growth continue phase we Slide as to on XX. strategic next As our the and enter transformation, guide

services Our #X the our to priority build markets that grow is broadband we fiber scale and accelerating serve. in

and leverage us. We ability experience growth line carrier top priorities to offering services, for to on XXXX. data product excellent to our superior confident exciting. to will deliver we're plan growth on is and And digital customer fiber transforming We're capabilities. with to very it with extremely in These business this easier grow a also customers our experience do to to continue focused fiber our an return and put revenue a differentiated in return make path customer to the us assets commercial and

we and fiber I dedicated day become plan our our customers In our Our and and growth to bold are every we work a executing momentum expansion thank serve to provider. plans. funded, growth stronger is on fully closing, on who as execute broadband employees effort build our fiber-based want hard

couldn't our we improved a take communities our financial investors, excited future company we're a our for more and the ready and transforming I be stable to business, at that holds long-term Tamika, and us. customers is serve. questions And path forward plan position strong, for that employees. significantly Our this growth I think have all time. building we what for about and a the sustainability value now is our

[Operator Instructions].

first Company. Your Williams and comes question line from of Cowen with Gregory the

that questions to it's your reiterate Capex, see I You're start, did a of a speak, that home. Fiber The on cost good you low-hanging great in and to Where per really low in To your imagine good couple but coming I pretty home. you terms off One, you with per with had so is of Home. do going? home dealt the just at see trajectory to that $XXX passed start fruit,

as next that seeing next the homes about And I you CapEx think of where as see quarters, tranche of so in it's And over the early, your level? you guide. have cost you my do few OMT I light cadence. know And the $XXX tangent, question, a CapEx, in may, trajectory the last is I connect, early on the success-based around but are if drop, that to the learnings, the coming then

another leaves You sort to it the out How it warmer homes. linear think cools it That of or down fourth months? bulkier up? a built Or XXX,XXX then the Is slowdown? in cadence? for ramp And as about maybe go year. XX,XXX quarter, is should it the steady the ramp I in a

morning, Greg, thanks Yes. good questions. the for

to We're will, lower running. and with the in that start places we're first, quickly CapEx machine success could in Let we you base. and you're get both I right. the the -- mean, me if fruit, most the order move with the hanging passings the dealing

up England New see underground, and that we creep to to have going get some we're where do. number northern we'll we know duct especially so work in CapEx as repairs And into

work. XXX some will we So end the in out XXX probably XXX range, the XXX and average, to progress in are the year. year. number be areas be New There'll and range, the XXX, the XXX, of towards towards XXX will are some as in move XXX where I it towards but the that I through we that varied northern England there'll some that on it average would do that and think, in But the between of have expect the trend it,

we're the actually going because lot we're an install. from success-based and the all XXX an plug side, that fairly a want -- play. quickly. the don't experience gear are It's to primarily we XXX The in perspective, more on we of the installs range WiFi efficient On install. have It's

continue at looking the on talent to that. we're so that ways to tweak put And we've pool

labor folks on seeing as WiFi the proficient goes So now. make right right we're we we the and out, improve to now the we're cost nothing that costs high sure that equipment increase But technically range to XXX it and there'll be sure, process. wrong, more smooth will more can higher using above I make think components, with that

our are So expectations. those things within well

continue second of construction can think the early I just proven feeling other where got winter cadence, through the We've in learnings planned in months can can in winter quickly. and degree. certain we like then the the tougher quarter as because the we'll weather-dependent quarter. fourth about be to We're building we've California, are northern ramp we markets construction New On XX,XXX in passings that Texas do months. roughly England, first good in But the first ramp that we're will and we through a the get some real to year fairly it end have quarter quarter, in, we

us availability the is I The risk is So of portfolio only materials. serving well. see

work with forecast that haven't at seen we've or ahead positioned that vendors and rate stage. this well far, our impact and so our for for been And XXXX build our

covered it I think all I three. So

Your Wells next with Eric question from the of Fargo. line Luebchow is

the wondering, Bob, I in some heard chip Yes, We've building. that, chain you market, was about mentioned concerns particularly the supply about shortages.

feel pretty trajectory see at this through of haven't end the anything orders you yet, year? the haven't have the least but -- impact future pace? do Or you well you enough build you anything So in could the you insulated of sounds in like that purchase seen that potentially did

we what a purchase have committed a deliver or end really of year. on always the they've delay There's won't Yes. question, feel out. orders well-planned-out they'll We Eric. through pretty delivery. We're that Great the good to chance the with that someone

the it's of a with of that's we're commodity and of feeling a There's good. little scale relationships get. bit And we're with that our a pretty the cheap. challenge build fiber And makes -- now plastics suppliers, been to resin on so far, becoming because doing hard

And supplier so good But in perspective. a we're hearing cases things feel like could we're from shape we slice and that affect that. like a

early, the we're far delivery On on very those the we in seeing issue, so hit and chipset put target. electronics orders

So foresee us I deliver year POs long don't it affecting as this committed time. on are that for the as

Okay. Maybe II Great. And of as this flow? Connect on or us Steve, any could America program. just talk sunsets our will me. free impact then you EBITDA have for one more you believe kind to that remind the I Phase of kind year. about, model we of Can at cash just the XXXX that roll through end

this Yes. Eric, Yes, Steve. is

drop II build or we $X pivot down I So as on dependency in revenue. believe pivoted our at I that's II again, remind what before, talked year to really today, we get that start $XX a We about But we -- direct than we've maybe I to -- CAF expected. path the funding Searchlight let RDUF a million towards was don't me predicated auctions had different on annual long to RDUF. CAF time get kind the us your be on you plan, of million question. and of investment XXXX, kind think going in as We year on a

in pricing was passing be that we be -- towards from to X.X for -- plan, X X.X build actually we've we million was cost. to selective from wanted So the million RDUF expanding going really said why and our because Reserve X. high we to were going to million fortunately, or stocks some pivoted that's went

just as people to from a will down basis probably that the and product X-year up accept we a XXXX, in total So I then but retail take going step think we revenue are gig on window. a X within make

on So on plan, we're the in focused execution maximize build that. and really

comes The next the line of Michael Citi. with Rollins question from

about share over Just you competition? next few you fiber compete the of the get curious, you overlaps with with that markets can where how remind opportunity us of to from the think that And you're into years, fiber? percent what those upgrading and cable as

When In there's you we percentage, one a competitors. X roughly the competitor. Mike. X built, were our And we X cases. we XX%. the reality, plan that small way is Thanks, has our in market with position assumed all or in Yes. of about think And XX% overlaps that have has duopoly rest

of the think a situation. the duopoly no are I has that builds in competitor. majority And

end situation we up when is some have percent mature of duopoly XX% X plus, XX-plus about penetration years, got with gig fact, in in a the XX% a after experience Our X more in cases. some we we've And in offering. areas,

as no broadband And competition a roughly in where fiber we have X we're experience cohorts where months initial where XX% competitor state -- our of actually XX%, Our at partnership. and in are we're X Charter there. a there's is XX% the matter in competition, really, the in plus years there after York, New had we

model, which think I XX%-plus. is doable, mid-XX%, what expectation in and is is is So our it our very

the And the remote especially in environments been in in us of your year over plus. experience, importance have as just broadband, many given form of some last

penetration the reasons where that or it's not you you gap and your why competitors? in What all broadband? homes doesn't XXX% are the that for find your of for market have So homes experience, everyone in

I rare. think it's be going to

I you think seasonal had homes fully aren't full-time that occupied.

You've won't to I whatever going and nationwide home use that remain think that the long. or is Internet XX% instead But the you're at don't for see rate got just satellite. depend we'll on some in

space. voice all in of is to And growth this it's a be telecom broadband. you're I get going replaced by America why the that's in of like to think rush going investing seeing to to interest

Instructions]. [Operator

the from Octagon question Williams Your Rob of Investment. line next is with Credit

me. one Just from a quick

of do are that what's gig-enabled, as home kind of if that rate? just some days so think of for data the Bob some color, a the of rates. we how just added on amount homes alluded nice just subs you overall know You've XXX,XXX I us that it. now can to wondering penetration But give kind broader far. I early of penetration right was a

as rates the to going We're the progresses. get year Yes. more in penetration detailed

putting And you to so how of in the a without homes been hard those it's available. context number give long really have it

X So penetration is it's In most homes do been example, have depends been to door-to-door New for direct in the XX%, longer, a product gigabit that northern XX%. above with fiber-based the on, years or available our England, harder homes, deployed sales. it really recently

where And trending close year XX% and XX% fiber expecting high-XXs mid longer-term areas year, mid-XXs the first closely third in XX% so XX%, we're West the year. XX% Coast, to the our gig -- in the plan we've the long-time areas to in in getting it's in in the then South the But of range. got first second the and in the XX%, history, more to in

at overall in we're investment build the the end blow ship really more quarter, of third second engine, is give you there'll of cohort. by more a cohort So as into here and we examples looking the the further. the base we'll momentum fiber transition metrics this growth on this the turning it metrics that in we be because out quarter, sharing towards we're as year, the But

the guess, put Are inflation rising? cost price? then adjustment guys I final are kind back of getting of fixed getting contracts everyone they Great. guess on orders the my I appreciate I and pressures potentially. just side are if you And the costs you your Yes, -- would the think to that. are some already Are one in, is

that And letting we're have that fixed all the XXXX. POs way are into POs now we we The put in Yes. price.

prices we're that carefully. so up. far, But for some So go of feel room there's we cost materials confident the movement if watching

back sir. [Operator time over will Udell. questions. Please At no I Instructions]. Bob further turn the Mr. ahead, there are call go this to

about And We're our tuning you Thank very ramp. progress for into today. the Thank to you. on our joining in look everyone, quarter -- you. excited quarter well forward in we great the quarter and second appreciate Well, first and updating call a second first you day. quarter Have thanks, results. our

concludes call. This conference today's

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