Consolidated Communications (CNSL) 8 May 222022 Q1 Earnings call transcript

Good morning. My name is Brent 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 call is being recorded. All lines have been placed on mute to prevent any background noise. there a remarks Instructions] session speakers’ you. Thank the will question-and-answer be [Operator After turn over Communications. the Senior now will I call of Relations Vice to Investor and Corporate President Spaude, Jennifer Jennifer, begin you your may conference.

welcome and first earnings Consolidated Good morning to quarter Communications XXXX call.

that results and statements, Today's actual in about financial affect website the Slide future risks our are all materially consolidated.com. X and those provisions discussion on cause Please and events statements review of is A financial Investor Consolidated's release, posted section presentation. Relations includes earnings may may forward-looking that expected involve the SEC. factors results from contained uncertainties presentation Our with future results harbor that the differ to filings discussion of at expressed today. on the safe of

this also we are release. and to reconciled financial and non-GAAP our will defined certain press measures, earnings presentation which in call, During refer

call Childers, Executive Udell, today President On Financial Bob Chief Chief our and are the Steve and Officer; Officer.

prepared Following I'll over Udell. remarks, for to Bob the questions. call now turn up call their open the we'll

good everyone. Jennifer, and a morning, productive you, XXXX to is fast Thank and off start.

is energized, of we're expansion our new as machine coming into data since with locations that we years. demand a books the mission our Fidium comment that centered how our is work our superior more digital This they executing and internet to in to fiber on every expanding the to enable update is turn one businesses, well, Consolidated's cohort the markets. now enriching plan and our technology core the Fiber thrive and fiber and product consumers, you mission fiber and I'll connecting solutions, will connect in the day and communities people, is infrastructure build, we build at live. flagship Today, full-year on team of Our expansion progress began. are is seeing our

XXXX. total million response broadband our to launched transparent opportunity and of days We or over with was New XX% locations, have make experience means passings roughly X.X these Fidium Fidium to upgrade by plan into initially and simple a significant We're easy. locations to XXX a England. be product, launched and Northern It million is from Fiber newly Fidium positive. an exceptional designed plans, the in pricing, end-to-end. customer continues very X.X

We gig capabilities, at mesh are all speeds, no premium whole data price symmetrical competitive no contracts, extremely offering home WiFi point. and caps, an

by a the ability We install time dedicated the we and services on customer to have support premium have day appointment, fiber channel. and same

is this Promoter of industry All to so We're experience very well-received positive create numbers measured our as and Net this Fidium launch plans with a two-gig ahead looking possible for to we been very product customers. Score far. the by best customer June. feedback the our received has leading

new subscribers First our total this Northern with new yet, net was SMB upgrades. achieving remainder point with net in quarter brought strongest these fiber quarter. X,XXX adds net New adds An of consumer period inflection subscribers. fiber are connections XX% England DSL positive important broadband of being the and

process fiber on ramping quickly also Additionally, one-gig the while off of the acquisition fiber in engine subscribers over service XX% our our and early total experience. growth of We are embarking plan XXXX, suite. customer our retooling construction kicked taking a

of our XX-month the the DSL XX%. Our pre-Fidium mark initial above cohort penetration experienced in of is positive a and very higher tracking target slightly communities ratio initial upgrades and This cohort is just launch. reaching reflects receptivity

company broadband the Northern hit five-year a range milestone be even for the third turning Terminal positive duopoly an our penetration opportunity over in first to connections for will and quarter, net in Also cohort as important first XX% fiber-first transformation inflection roughly early time. provider for where parity. An have growth New a targets Xx be XXXX aligns The Slide is we This reminder, point As connections, our next unit and which where to will growth compared our major in closer broadband saw quarter. the point net we to for more Year-X Fidium broadband England and outlined horizon, with in XXXX. for a will we total are service occur XX%, significant. we in penetration XX% Year-X, fiber important be inflection a expect X. to

We started. getting are just

which launch excited of of announcements, by to second to we're to Fidium hundreds total We've community which response brings pre-signups. a where our fiber will communities, Now Fidium a bring be generated had additional have quarter. month, XXX of us this available end markets XX to great the

Now and website. about Fidium announce let a our pre enhanced post-launch self-serve using to We're local easy me and provide media you plans. more and our digital pre-sign up targeted via and strategy to tell options

provide to neighborhood frictionless digital experience. and is strategy subscribers a at the win level Our order

improve In construction fact, process our leaders, future relationships excited local who build mission we're with economic about of community the to very community. their to are the using

We and creating are at generating creating interest we're local community some fans great while great buzz with Fidium events. Fidium influencers

some can see on You Slide excitement this X. of

us. make delivery with do the easy customer the new self-serve provides tools customer Our business service enhance which for to digital experience intuitive These it throughout significantly process. experience options, customers

fiber For manage market, and new multiple available and sale fidiumfiber.com. example, portal service a complete. is all the when can prominent chat for to ability be and accounts on their and preferences on when Fidium fidiumfiber.com, address requests street. even most new provisioned notified contact ready automatically will bots order payment fiber offers is their they web order link and prospects enter their service single a can service install customers we to account new the our schedule launch is We're automatically to the Consumers information before using the at appointment,

X, on on for network, an their view security manage you overall Hampshire, can experience. upgrades run network, tests, our home can profiles Illinois, Minnesota, states manage device every suspicious network, devices our WiFi Pennsylvania. XXX,XXX Maine, for plan our Attune XXX,XXX Vermont. The filter occur and New create year. network in New allows active on and including On In new customers Fidium addition, to optimal of pace activity. Consumers smart upgrade in and the app upgrades England manage home build, of WiFi California, will Texas, our speed locations see this and Slide their their controls their Northern to user remaining are and

accelerate a in the machine And quarter. quarter. XXX,XXX demonstrated XXX,XXX creating has team the a locations of anticipate upgrading ability second locations pace per fiber Our over the to to of scaling build, capable we

have the in sale for markets. of efficiencies of monthly in communities. which we speed the a ensure improving broadband and the out of of growth. the favorable smoothing To release of schedule, crew's underground rapid projects a we completed opportunistically critical are step in An and example basis, This locations of new many keep is this revenue is several plans. first our existing achieving our internal We largest construction effectiveness. ingenuity accelerated expansion on marketing weather with our knowledge this we our of work This is result conduit

XX point cost funding passings. supports inventory ensure locations. rural continuity and plan. funding partnerships supporting in buildout to high million over support, grant addition, of have the of and this have This secured In our To broadband construction over plan, we we our XX,XXX

we are markets We and expansion record see private million upside all plan successful evaluate. XX% when to are multiple builds actively you of grant That's very parties. from again with Slide our for By with are will as upgrading end double the future in in this X, capitalize fiber of This speeds. we be where represents make with XXXX. ongoing sense opportunities XXXX. continue government for our provide the blue multi-gig public broadband continue Fidium programs we our locations on The rationalization the assets, states by in up or largely partnerships well-positioned of We pursue passings XXXX X.X nearly beginning a to infrastructure On XX% XXXX, that will track we of us. green. them XXXX. at locations states doubled started and capable Discussions fiber-to-the-premise to which

no XX% high one speeds for of symmetrical fiber product We clearly to meet this with increase positioned best our or and demand is the service continues the And competitively are broadband to and rising competitor. well speed area has demand.

Our provides revenue multiple for forward also fiber and and channels carrier opportunities for for to use is growth path expansion plan our commercial same assets opportunities. the

product Our portfolio. XXX-gig the network our capabilities architecture and XX-gig and future core upgrades edge, proofing services eventually enable to

are commercial major our hyperscalers. in emerging that channels, and demand our for and data and solid revenue seeing We the transport to first we XG regions focused on quarter. across carriers were with we carrier opportunities just did Turning and growing

and channel, One. solutions, and based channels, with the by an commercial we channel, three direct to do we're refer Within channel, leveraging agent our Partner as sales best-in-class fiber channel leading we this inside

leverages network go-to-market their us strategy Our our solution fiber allowing business customers solutions-based sales a to to problems. a complex while our provider trusted commercial providing to become approach, and extensive simple our

had more who increased to to our the call sales turn our which ability increased now same quarter I revenues. and XX% to in will new opportunities provide and our results. We customer activity grow correlates on to higher unique opportunity upsell, Steve, with the greater passings fiber margins, fiber of quarter to routes best us New to our the experience. the for network, a ensure first on leverage over financial first provide our insights commercial XX% will buildings

to good and everyone. morning Bob, Thanks,

penetration results seeing This full-year are on And Bob our sales over upgrades. value pace creation strategy. fiber-first I progress increase will overview mentioned, gig fiber continuing rates. our and year plan guidance. our fiber network our on Today, of progress five-year we first an are and we will XXXX construction I'll take reiterate significant quarter to As the with plus provide XXX,XXX significant we our and to make capabilities

to that, some updates do our I Before to I reporting. call want out

these revenues, schedules, our see is past which commercial practice now combined on a carrier change can basis. you channels as our showing we separating from a and of are revenue customer First,

our tables. Second, enhancements made have to we metrics

metrics We that copper out Also of New and composition fiber fiber we broadband our approximately England, revenue upgrade consumer are and now targeting are XX% basis. breaking we and other where calculating splitting network on same on out table, markets. subscriber in between Northern the ARPUs the are all between same

deck. EBITDA margin investor million quarter Slide first $XXX.X quarter. XX.X% Our our X.X% Total a and year-ago. on $XXX.X adjusted of operating first X quarter EBITDA summary was represents the for to the as revenue a compared million, for financial was down is Adjusted

QX disclosed, As EBITDA CapEx to million. subsidy previously $XX reduction subsequent $XX.X Opportunity for The million effective $XXX.X XXXX, our Fund. and million and million. Rural transitioned impacts Development by funding $X was under the in quarters annual CAF-II XXXX January X, the revenue quarter

want I minutes, While call few will few to I our in full-year CapEx guidance out reiterate a a things.

First, periods pre-work cost still our will our cost two in and line million our And larger is associated connect pass XXXX with and that targets. our benefit approximately with future CapEx cost includes to of to underground of markets. accelerate work for second, $XX

CPE chain commitment in fiber-first to ensure million Third, subscriber in build inventory build we of our But future-proof supply that on investment construction light remind roughly our for our of our and $XX of business. you and strategy plans. let will to continue our concerns, me fiber-to-the-prem execution thesis to

several following. to our have These compared meaningful fiber include We peer advantages deployment group. the

incumbent have effectively carrier that and We well, we extend. network position. markets know The our cost first class very these can fiber-rich we a is

networks facility long-haul access, we aerial own and or conduit large pole fiber. buried leases existing and have Second, on have we where and local for have long-term facilities the

With internal New have Northern we And in approximately our resources, close aerial a X existing ensure very over to external the fiber to five-year on specifically have cost million over is plan can we this XX% builds tremendous including can backbone and fiber where we we New and experienced of before in in – flex the passings our to England, England, we team, a build complete facilities. plan. we time. advantage, Third, plan, proximity upgrade

competitor. no and to of returns Maine, Vermont, have more New single markets drive significant in We have than Hampshire, greatest the XX% a where our or opportunity

We upgrade significant and are services, the plus the gig a market economical cost to enabled network to very majority also have we can share. of confident we acquire

Now I'll by review customer revenue channel.

XX million, Overall, X.X% revenue Turning first consumer million, broadband to down quarter the adds are up revenue to the the net assets, year-over-year. year-over-year. the acquisition was after our Consumer million compared was normalizing year-ago. fiber Normalizing of XXXX Ohio our Ohio QX XX,XXX $XXX.X consumer approximately Consumer our channel. months. $XX.X in sale. connections impact X.X% revenue million, consumer X% declined for we revenue our over customer in fiber $XX.X ramps. for for XX% And engine up over up Total was or last as added $X.X XX%

For the plan, achieved England our the net broadband build time New inception of Northern since first adds. markets the positive

providing now $XX.XX lines down Video quarter. and $X.X in revenue ARPU, million primarily of access was XX.X% voice new metric to declined continued are fiber We which million was for or or associated first revenue consumer due a erosion services. voice $X X.X%, year-over-year. the Consumer

charges over-the-top since teams at to higher $XXX.X Momentum with are a voice Access driven the $XXX,XXX custom growth equipment QX which drove job in is driving services. linear from additional for and is year-over-year, video installations, in usage growth strong quarter was improve was on $XX.X cash Offsetting and million by QX. continued from distance to the equipment revenue cap services a XXXX. new timing tower the and quarter, million, reductions quarter rate revenue having Internet strong data and benefiting is long and enabled to systems up X.X% pricing area decline. slightly dedicated up line combined for year-over-year, flow. the this million revenue transport transition $X.X carrier up margins year-over-year. primarily this ability contract Carrier renewals. our us totaled down business or lower sales occurring slick their erosion, in Our free transport was team's $XXX,XXX erosion X.X%. and in win Data our totaled roughly $XX.X and best the video million, has recent Commercial deployments business

switch the as to million with tower driven access still revenue we XXXX, $X.X estimate decline and a the in establishing the $XX new of negotiations tower run the Over Our reminder, revenue $XX.X revenue, lower revenues. coming solid, from million, to contract special the in service was be totaled pressure was fund range QX universal by balance declines. down Network $XX to rate a carrier for million access year-over-year. and half fiber revenues carrier million the in

usage we reminder, incremental add broadband competition. it to services is the million from $XX.X was for April perpetual primary lower rural have deliver to revenue, this a continue rural locations to and As through, compared fiber public public of markets, so partnerships, us $X.X pass the result no EBITDA-neutral. a interest little result other be In In a a where interest enhanced reduction million, of our preferred to private term with charge should through allowing increased associated we which quarter, This related of non-cash we This expenses builds in in in or on XXXX, million increased private builds Searchlight branding current non-recurring reduced XXXX. to the are $XX.X compares is to we X.X% stock XXXX. year-ago. and of communities impairment quarter $X.X the decrease The expense. of primarily by in million were was loan interest December. $X.X and an was five expense encompassing company's and million approximately converted Operating remaining revenue X,XXX the loss repricing slightly offset expenses excluding marketing in The one-time to drivers held-for-sale completed of a of revenue. including product assets recognized Net on expense costs, in of community $XX.X partnerships last $XXX.X improvement note, related year-ago. passings, a million, million a direct first favorable QX to

we the have can XXXX. Additionally, on as see no you until capital Slide from structure maturities XX, debt

up build $X.X in provides leverage million return million first have million quarter, of X.XX $X.X liquidity, X.XXx March the to first company's the Our approximately at At quarter, at to us we $XXX year ratio in end XXXX. to wireless the which distributions our compared net flexibility debt was were XX, Cash and from growth. a the partnerships from with plan year-ago. ample execute end

$XX partnerships a cash million between X% with reminder, this free million We and year. cash own providing to and ranging to we As $XX five these limited stable consistent of generate Wireless Verizon from flow. anticipate interest XX%, flow partnerships

our for recap announcements divestiture the quarter. two I'll first Now,

transaction First, plan. materially $XX not of was our sale proceeds. generated in our expansion the January fiber did This passings million assets impact we on which in closed the also Ohio on XX, not and

adjusted have QX operations. Our exclude Ohio metrics been to

the goodwill close the to to our the sale March half Second, net of review impairment treated million year, related Kansas regulatory ongoing second of divestiture We on and allocation market in City customary we assets announced recognize a assets $XXX.X part capital an aligns proceeds following agreement as of to non-cash estimate this X. now In we our of our being Kansas as our held-for-sale. quarter, portfolio City assets sell plan. with approximately approvals. million $XX This expect of

to continue monetization. substantial the or investment we Additionally, have believe on divestitures. we portfolio funds opportunity for We and liquidity additional asset our through markets review raise additional to

with expense $XXX evaluating will our cash to and criteria be potential guidance, investment build of in to income to plan. $XXX range million to Adjusted $XXX outlined which includes market-level million. in competition, the the do and of are range the expenditures taxpayer is not of EBITDA previously a we In to the notable million fiber million. be to fiber million, Capital to on our Cash until strategic $X are in we continued range $XXX this in XXXX be in expected $X be Today, expected interest summary, range progress valuations. a Cash year be XXXX. $XXX a federal $XXX taxes be Our expect and million million build expected this to is expected XX. opportunities, reaffirming to Slide review are of of is also million. stated

revenue We adds company on company With margin third total will now see We positive and I'll that, total a expansion. see turn we the back in a we Bob. will the quarter. facilitate call as net basis over to anticipate growth points return fiber to inflection significant

Steve. you, Thank

Our is execution on fiber-first our nicely. strategy accelerating

be our include allocation our on continue and market experience data Slide key fiber to and which maintaining which all of portfolio. channels, on disciplined a four plan, consumer expansion on executing We transport strategic focused priorities capital assets customer a enhancing in XX, the our growing across commercial, revenue, outlined strategic includes plan, review

and Our find outlined anticipated see timeline the XX, on years. the Slide fiber as as well on some can milestones in of process, coming in the you'll transformation you is milestones

acquisition toward where We work engine are customer we in return currently in our scaling XXXX. growth to we as stage the are revenue a

path executing on the is expansion fiber revenue. As future, growing our our all we about look and forward strategic to plans

competitive We numerous have our choose opportunity become the we broadband on to serve. markets the a and strategy large advantages fiber-first as we execute leader and in

creating We value and questions we this long-term our are shareholders. Operator, time. on growth now for take focused will at

[Operator the from Cowen. Instructions] Gregory with Williams question comes first Your of line

open. line Your is

Great. Greg. A Thanks, is of questions. on James for guys. couple This

And on a I By getting around low First, you our lot portfolio. access to we mean, cash XXXX. continuing today model, to review the guys see about capital. pretty asset talked

We they also had the their interested XXD in from stake. maybe were Searchlight saying increasing

the continue spend. Thanks. that be helpful. help could you're the brand, help out incremental us then you you expansion how the million maintaining cadence, that'd to If Fidium going markets some the just you color in could build? last quarter, the you you $XX marketing about us question here? as timing And add especially to self-funded just thinking second these into Could access if capital and forward ramp mentioned out on with So just guys of with margins,

question. for thanks and the James, morning, Good Yes.

of start just the your a majority the with few of and Steve me to then kind the most of Let take subtends it. will question

chat, our assets, regard to been up as takes can past you in And quarters, about as about we're momentum. markets, the and to First some we've assessment on going on XXD, that of that. that picked working, see talked the with time. we've by has But made, announcements we've obviously, not

can executing conjunction interest our so looking And focus decide build team the at in on our we very on and maintain Steve? of that address in plan so we've with priorities to got It's work contained a dedicated that. that it's and other all properties market. we managed

to standpoint, we time for management, we mid-teens and In still the execution with the and business, carrier James, one, growth Yes. an and spending on this margins. question. have, obviously fiber from on we're have business is ability rates models Thanks a we're year-over-year. cash balance a Steve. number in management, increasing lot see just Yes, investment sheet plan the to, we EBITDA believe self-funding of commercial our we Hey, the making, growth our penetration grow with expect the

very have draw he grant build. are remarks, our think Bob said As nothing right that mentioned, different as type things in in obviously also subsidy We're ready to few report we prepared a now although to also, his the some motion, money focused to offset today. I cost funding, asset sales, on to of looking at avenues and help

started we're a like the position launch XXXX. November of feel to respect actually our you marketing – brand or on we brand based launched business. cost, your probably in to With the So of in execution we self-fund the

probably that fiber of now. continue of in pace construction to you're over into XXX brand and this the bit at of going And the days little plan, launch QX that. Fidium later on as we for see little add the it as we're in month, We related going or kind it that time. to will support to the or May we So we're branding bit marketing brand ramp expense this of a will year saw build incremental to to a salespeople increase

– little bit over but So last three a still the come. ramp that to a you'll mostly see and quarters QX, general

Got guys. it. Thanks,

Jason from Goldman question of Instructions] Your with [Operator Sachs. is Kim next the line

Your line is open.

on It's see side. the the momentum you. Thank fiber good to

promotional a the adding new as ARPU, First that you're are markets. fiber question, copper, has clearly, output higher also launch but you price subs than at on

fiber we for of the So about should balance year? think the ARPU how

Yes.

– think Jason. I morning, and good

versus remember, now we're see That and you'll rate suburban at working good $XX. we're of cable fully the we a of symmetrical dynamic mostly markets are room. what the And look a early competitive through think promotional the strength and you and fiber right in into we're amount where I out us headroom plant the some upside gives of and when markets is product. we've some rolling rural got

with the to compared most able rate maintain of and think the a think to peers, ARPU So of we're to be got build will promotional I bit pricing headroom. a dip, from which you quarter-over-quarter. I a industry higher take going But we've little saw there. still ARPU

Great. your And then from particularly you are base? seeing fixed any wireless, in subscriber DSL impact

antennas at We're really really the you through to the fixed look Yes. we get a a And not. areas. period for topography, fiber is sufficient except play. as and where demand costly sense When afford there. between at in niche time the very, like economics, makes cover growth And density our DSL's look as it's us put wireless looked geography to those wireless North economics, to England and New fairly of fixed in you our very, we've time wireless to six fiber bridges for can low out bandwidth

it a seen base. and as a really it as threat haven't huge see on And real so don't we impact DSL

we prepared year, grow growth or in improve and in release revenue referring press the during respect or next with EBITDA growth. over you're I then mid-teens mentioned absolute time meant growth, And And Steve, dollar you as margins clarify talked Understood. what EBITDA if can that remarks, and And building if to momentum you to growth? Can also about well? the frame? growth the towards think percentage expect to so, then what XXXX you

to you you. try for I'll Jason, pieces out get those thank all and

the to tower well the do one major last writedown growth. mid-teens in transition funding expense base. marketing refer the as And is year our we EBITDA I had kind with incremental this or the we XX% sales in XX% CAF-II on yes, and about talked reset the the investment see growth a as over the obviously of We So call.

see over margins So and rates XX% XX% EBITDA growing on the this we hit margin base, cetera, as from expect five-year XX% time, QX the efficiencies, In year-over-year as five-year EBITDA over fiber the to shared period, talked period. an penetration we've to et the probably QX. as margin Over were XXs, high see approaching we've EBITDA we to cetera, cost call. XX% in we almost basis XX% we do the about for in operational expect build to down this start et margins past,

as an it transition So will we be and market build incremental take share.

you Understood. very much. Thank

Bob to are further like at call this time. Mr. over questions no Udell. turn the back to There I would

today. you for transition Have in thank you the on your in. call to and and you forward call. you appreciate plan We We day. next our really support a updating joining Thank all look great and appreciate our interest tuning

and conference this today's call. gentlemen, Ladies concludes

You may disconnect. now