Frontier Communications Parent (FYBR) 15 Dec 202020 Q3 Earnings call transcript

Good morning, everyone. I'm Sheldon Bruha, Chief Financial Officer of the company.

Joining me today is Robert Schriesheim, Chairman of the Finance Committee of the Board; and Bernie Han, our President and CEO. At the outset, I would like to inform you that the quarterly business update is available on our Webcasts & Events section of our Investor Relations website, which can be found at frontier.com/ir.

During this call, we will be making certain forward-looking statements.

Forward-looking statements, by their nature address matters that are uncertain and involve risks, which could cause actual results to be materially different from those expressed in such forward-looking statements. language presentation. On statements discuss this financial cautionary X on certain the measures. the of call, review regarding found forward-looking Page non-GAAP Please we will and how to defines presentation refer associated for Please these these the measures certain measures. shortcomings with management non-GAAP will these closest the presentation business the lead in off to be it over update. GAAP now quarterly presentation. I the will measures hand can to found of Reconciliations measures the Rob, who of

joining Thanks, Sheldon. morning, Good for us. thanks and

of of our with sheet. to progress details investor generally we update, minutes has like the Before successful made, Slide outcome. team dive our in beyond the last just quarterly take to has I'd a one-dimensional into starting and have moving come we view discuss our significant few X. The a of a year the the strides state reorganization full-scale transformation, we to Instead, pursued the define which focus made balance a on recapitalizing

Let predominant many me reducing such provide a but is activity sheet effectuate full-scale being on not leverage transformation. the focus often and with a necessary, In balance there restructurings, to addressing sufficient bit of background. a

multiple seamless supporting emergence been foundation while has a noteholders, improve perform Chapter strategic turnaround an Frontier's balance a case, were sheet lens. the At believed realized was company able this with the approach. Bernie preemptively as to at on to not done to pleased to strategically might stakeholders reposition talent for driven advance named provider would plan, engaging a strategic a with of more process, which leadership turnaround addressing through turnaround of we committee's of long the the in our skills repositioning need that strategically and the operations developing was a of of take plan much team the for in attention which, operational focus term. implement us engaged only our in was was reposition led We balance operating and the as Frontier's provider. The had intent creating the being productive committee investment us also company's plan significantly to Frontier address much scenario approach determined performance structure virtual how address the all the holistic that capital in plan with for would This by need was of They and opportunities time company in Frontier's constructively case, that concurrently needed present. value we focus to business stabilize clear that served in restructuring we focus December the around to from with to but fiber-based noteholder strategically proactively in wider to XXXX the points driving services have various adding value while noteholders using plan a initiated. We're Han while leads performance copper-based recapitalize we to were what opportunity crowds a strongly we the the leader. the CEO execute that to a across that a an proactively the but approach early have creation. framework and its plan the dramatically in while performance, there However, on our sheet, sheet our and Frontier's the separation recapitalizing balance legacy from improvement. The turnaround and accountability. scenarios supported framework metrics various of appropriate This capital business relentless with the on XX. transform for operational and the often, Too a and laying advisers noteholders this Bernie structure, level to understood creation. dialogue a the to on our out on the under which to the with engagement foundation our finance Bernie proactively developed we

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ratio a our billion. have and start our the X. a balance in through Let's substantial Slide about lead emergence, Upon in $X of $XX able debt of financial of constructive noteholders. We're increased sheet X.Xx. on with expense various annual reduction in with recapitalization This we reduction of flexibility billion the to to will our with large engagement part debt-to-EBITDA interest under this pro forma achieve a

maturity of recently second-lien $XX we by by to debt capacity increased addition, and a reduced In to billion. debt, interest and $X.X first the $XXX completed extended an additional billion $X.XX XXXX million refinancing annual first-lien million, which

The stabilization XX. covered second Slide that of holistic pillar transformation the on our some performance operating is highlights we've with Frontier's of

this Bernie discussed, hired turnaround. was in As Han operational XXXX to spearhead

fiber wholesale annual significantly fifth targeted quarter leading on and to Over number the reduced $XXX EBITDA has straight adds million XXXX. enterprise net performance track implemented company's to and a the he higher a benefit consumer positive his of of suite, we've have product and on operations. of creating which team churn broadband put or achieving past initiatives Notably, year, by focused Frontier so year-over-year, the improved

the is pillar Slide shown repositioning third The the company on of XX.

XX transformation RDOF from footprint as services. an framework We've to go-forward X.X to expand being to implements of the a about a years fiber long-term in XX% past will on services capital the provider that or flow operating business the a plan detailed today plan is the subs returns in provider legacy modernization be over is the investment of pass long in with the defined company's footprint plan will through through for program the XX individual base fiber from revenue strategically million mix the copper of some target to how today. expected fiber-rich determine return the cash of Over and capital. The completely to Frontier for term communication company a as initiated allowing the transformation including XX% been builds operating from XX% The fiber to homes on increase the to self state over strict The done modernization business products has percent managed funding horizon establishing attractive from employing this the by company's developed expected plan fiber separation of planned or shift optimize modernization of to drive months, expected coming and incremental result and performance, virtual organically invested a business so. generated hurdles, transform our the reevaluate plan builds, a and to next has X/X strategy very returns. the of compared the subscriber and

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from X assistance right both of leading and of Jeffery growth. a through around and the search that executive committee March effective the internal on at the lead and and review candidates phase noteholder to X, baton additional choice arrived investment representatives, comprehensive Bernie the profitable President Following XXXX, of external assume CEO Frontier or Nick and conclusion search and firm its a next is the Han with

the U.K., the Nick its XX start. has a industry. as Board Nick businesses in and will to which telecommunications transformation. to company CEO the expertise initiate at a CEO next of allow of seamless transition wireline wireless and and in voted recently, put nearly intent operator, leadership leading place overseeing appoint felt the baton that our customer-centric who from years X-year one President Bernie, a served foundation, and unanimously Vodafone a Board as CEO. The pass operational he Vodafone juncture turnaround Most is successful to natural Nick of running brings through largest a Group's and Our

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well transition. On CEO Slide that we will a we've these milestones to that time transformation work remain previously. than fortunate comment of key There's to Bernie Nick are part transformation plan this out our provided mosaic guiding of a need no XXXX. that were will a as XX, actions review fit X-pillar and back of Frontier's We early emergence during through process, of with the line have many member thought within which dating discussed other in to Board each

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of operational financial then our our Now on to conclude, initiatives success detail. plan. results Sheldon in and various a greater some let more discuss off commentary our will to to to on to me provide our And hand QX Bernie? reinvestment Bernie review provide detail with date, it on progress along

and Rob, good Thanks, morning, everyone.

results will at I you shows later. when the to not more cable the this to generated disadvantage which XX, from If market fiber review to quarter are a peers. Slide quarter, move to few detail adds in for period, third fifth net a want network we our positive ability highlight In grow our we that share Sheldon broadband consecutive

total initial a churn consumer the Our our in the year-over-year COVID-XX XXXX, as as the generally some months of a of as activity in the initiatives, little revenue generated operational avoided to impact came swapping sequentially consumer $X.X consumers QX seasonal pandemic. We quarter. due resulting but well X.XX%, improvement higher churn from billion during increase in to providers on

modest aforementioned to broadband performance. broadband growth consumer fiber seeing stable by We improving in revenues, the driven are

from was adjusted expense performance. $XXX Our strong EBITDA million, continued operating resulting

Finally, during income quarter, Slide of fiber-to-the-home our XX, posted progress positive want net we pilot. the you million. On $XX update to of the on I

end discussed the our new aiming by As to in are from locations the year. fiber of copper XX,XXX to reports, previous converted have to investor up we

As homes, over engineered goal. of surpassing XXXX November our we have XX,XXX XX,

construction quickly goals. reach completed locations XX% to about year-end target our remain target and ramp to on of of have We continue our and

offer is process, is the still our early appealing customers. in it to Although very very

at early most customers. successfully above winning existing are are we from customers While are of converting penetration targets. new to coming in copper ARPUs fiber, performing our Early net gains or

more for and open sale to homes acquisition matures. program trends are continue We the pilot as monitor will customer

pilot design, is marketing infrastructure larger more customer analysis, aim We and scale Our learnings our ultimate to through and better we convert XXXX continually program build to to goal this use implement as fiber. acquisition from the our construction, improve in beginning beyond. to begin

provide will fiber to Moving color I around Slide XX, additional broadband recent on some performance.

the remained to churn Fiber continues XXXX, in we partially broadband In be QX Fox since approach net content successful. first positive quarter. broadband-first Sports QX, the Our saw consecutive adds for drops. strongly fifth by driven increase

it customers roll increases gross slightly, trend reopenings promotion activity life after the around off. adds. still which industry-wide of levels, Although trend is that to cycle pre-COVID ongoing of increased consumers lockdowns, the also and our centered in to caused This also initiatives is churn at an COVID following early below largely time churn are partially due related of in increasing uptick

success in operational fiber I acquisition monitor We are and and want our to continue encouraged to broadband by improve space, our other of some sustained retention effectiveness the the we'll customer and updates. XX, strategies. On provide Slide

Networks, in with continue We long-term roughly negotiate align million FX rate not Nat our Regional with and providers drops, Sports Wild QX drops including to implement Geo content and achieve expected further content are savings. $XX do contracts strategy. MSG, to quarterly Movies Fox run they content that

These this and we our XXXX pilot modernization builds builds. XXXX XXXX On and our the from program engineering, our our execution planning are we'll and year, leverage fiber-to-the-home the knowledge plan. gained engineering fiber planning, our construction company's our have marketing plan, modernization goals successful pilot, we continue and in against overall begun extensive expansion on for building will

we our begun a pricing multiphase offerings simplify experience. to Additionally, customer structures the product streamline have overall improve operations plan management implementing and to to and

Northwest provided services we their transition Finally, the have as we operations. of transitioned of X, from acquisition have to Northwest support and sale, essentially to related XXXX, ended fully November Ziply the

footprint the our will our long-term network through plan copper footprint. over I reinvest strategic plan, of Next, in discuss modernization to the XX. of our passings nearly existing Slide to double the on plans our modernization we Under fiber

organically with a competitive geographic program generated on broadband develop Across will IRR months of we, have over XX, most broadband, the copper environment. diligently with returns passed attractive this market flow opportunities higher homes plan In of by the along lower plan. through Phase Slide we customer wireline business the churn. On on over focus reinvestment As working cash fiber XX and ARPU, and attractive superior provide of high-return highest are is is additional transformative The an pursue network to plan key including our been This business. there in no for plan, overbuild impact supported comprehensive and markets. multiyear are our in our forecasted the deploy to by operating our potential. modernization completely performance last self-funding from reinvestment the detail states target where Rob interior the earlier, we a capital advisers, footprint, mentioned of a the penetration X XX% plans modernization project competitors and higher

where expect plan flow to proportion nearly the we long-term cash homes is broadband XX% increasing our and to business, deployed our modernization base we these X total plan passed. are available XX% given today subscriber from XX% speed subs. Today, the already of our aims able to broadband double fiber today have using of very competitors. areas. achievable XX% Solely capable penetration this over broadband to think to in fiber we subscribers gigabit areas build new broadband have deployed, We from the of passed our assumes of also penetration XX% that XX% are fiber the no ramp The Phase homes in that fiber our is

are new has conservative appear against us, up our assumptions from some through homes of by rate initial penetration financial general in growth to alternative taking as areas. our signs the of to feedback on to reflected in cable an cable build but in Customers preemptive to evidenced been XX,XXX XXXX. welcome this There steps projections

Moving on to XX. Page

homes New Florida we York fiber passed them modernization in which Texas, pursue plans long-term roughly Illinois, California, page, roughly And is a the investment, on homes West to capital grouping. million targeting passed over deploy have of are the potential. Ohio. With to million overbuilds are is there to a is per in where of states this Connecticut. X.X high-return and key and fiber available new which Frontier the plan, and in Virginia, As mentioned X.X XX% prior Of our WINO, CTFC, state the

We on analysis change operational outcome the evolution auction. That such states are I the over states our opportunities, may the as concludes of competitive target and and real-time groupings specific update. turn events of and it environment, constantly investment depending for going RDOF results of our now Sheldon. forward ongoing will the evaluating to our

performance our and you reorganization refinancing of you, review as Thank financial that as court structure, update we will quarter the our third confirmation bankruptcy given October November. on plan of executed well Bernie. I our transactions and the in capital

please could reminder, you If of divestiture closed the on May turn Slide we as a to XX, X. Northwest the operations

the our reported results states results the consolidated XX such presents such, thereafter. Northwest with view. the only through X This include then performance hybrid and slide the April, remaining of As states reported

slide, of historic periods the can the the performance Northwest exclude we the performance operations the the properties. you On subsequent to see adjust remaining underlying so for

As where discuss the can the such, on slide appropriate made. I operating will comparisons following company's apples-to-apples performance be

this Our consolidated several nonoperational income was items. for $XX net was quarter, by impacted income but the million

of which filing activities, category bankruptcy First, we reorganization now sits and sheet bankruptcy a new our filing to called refinancing million expense balance related restructuring, in had items. $XX costs our below post operating

settlement obtain our to had items. Please turn XX. reorganization Second, Slide activities. reached $XX items for in their reorganization million facilitate the to secured and our refinancing help This creditors for plan we other support also sits to the with

by the XX% remaining including $X.XXX customers, properties, broadband a revenue quarter X.X% and a X% X% year-over-year, in video the was users. customer decline at for down third in decline customers total performance driven consumer decline declines, looking in a our Now billion,

losses, X% offset was gains. services the and $XX prior broadband by our of which declined Internet about primarily driven million year, partially at copper by year-over-year, broadband data components the fiber versus Looking customer revenue, revenue down

broadband growing the efforts. recently speed revenue introduction broadband Our and begun fiber customers and with of higher offerings have reduction churn

circuit QX disputes. represented fact, positive was backhaul lower quarter of net fifth In by partially consecutive our wireless adds. Wholesale legacy and fiber broadband offset decline revenue

revenue similar services additional related reserves revenue the versus prior revenues rates declined in receivable declines to As the QX and at video billing Voice declined prior year, took sales accounts improve Video our XX.X%, declined percentage but landlines. disputes. Voice video dropping we not value. and to in year. only the industry double-digit wholesale also on to broadband strategy shift the reflecting attachments the customers and customer top, by XX%, driven of to QX, impact over deemphasize

on where segment we just over XX view came the by by mostly year-over-year, revenue customer business $XX Looking quarter Commercial months. our our was the offset from declined that declines voice the expense million down at revenue I was broadband, and copper for in management. consumer faced segment revenue of type, video reflecting Most mentioned. the this pressures in trends to of decline last COVID. The related the small revenue Retail X%

$XXX and XX down million were field content costs primarily lower related months, expenses last to in over costs, the Our our compensation operations.

basis, a headcount XX,XXX from Bernie on Excluding as the is months down not employees efforts Northwest last well, the video employees. Content XX X,XXX than to that like-for-like down lower but mentioned just costs earlier. more over or costs sale and our to the subs, the reduce XX% premium content almost also are from

CapEx was our EBITDA the million turn to last quarter margin prepetitioned in of bankruptcy impacted invoices adjusted payments for XX%. Please quarter about CapEx This Cash million EBITDA by an CapEx third nonpayment XX. quarter were was the to Slide due is cash as $XX million. $XXX filings. quarter of than second more Third adjusted $XXX

We acquisition quarter. lower in customer continue to activity due have lower to the acquisition CapEx

net a customers in lower in also We gross little have is to adds, which so play driving adds. of our but no impact across lower seen footprint, churn, level lower

attaining are costs. similar without we levels the incremental acquisition So customer

the terms build-outs Connect In completed of for quarter. XXX,XXX CAF, as builds with to continue we or third of projects, specific Fund, our locations America

fiber over in top footprint. up XXXX. And on across planning targeting previously pass XX,XXX quarter to the areas in the our a of households are almost with the we over as ongoing locations announced, developments greenfield quarters fiber These locations first are element high-return the XXXX, In we we of our addition, X as year, primarily capital our to through built footprint. housing XX,XXX an and XX,XXX spend, in normal built XX,XXX within to of incremental

spend And to this such $XX of we incremental to We the of million expansion. constructed in XX,XXX CapEx approximately have as footprint end of related November, over expect households.

we Finally, completed the won as $XX year to X across Slide auction, states. Please recently per over mentioned government of RDOF turn million earlier, XX. subsidy in

included June look our against on the base Here, performance initially in the XX. disclosure year-to-date courts our at statement with we filed case

churn well are Revenue and revenue statement both X for the driven better our million the adjusted consumer lower in where year disclosure our we are add plan, better, million and with field gross is some lower EBITDA of adjusted EBITDA seeing $XX tracking We efficiency the the activity was levels additional marketplace cost $XX case. quarters and from benefits the versus exceeding by operations. in

Moving refinancing Loan prepetition little recent In Term Slide on first-lien and spend opportunistically we $X notes. refinanced on of B, more time I our want almost to October/November, our notes forward billion a transactions. second-lien XX,

and incremental our DIP-to-exit amend commitments to amended basis extend interest increase covenants points debt by credit rates we XX increase X maturity facility addition, revolving decrease year, In the first-lien to to million, by $XXX capacity.

reduced to debt expense clearing period strategic funded together, and our runway our plan. implementation additional run covenant of of million these our rate Taken flexibility It initiatives. for extended provided per transactions modernization important maturities $XX the interest by the long-term our year XXXX, during

Turning to XX. Slide

the on X as Before more I now to moment we Northwest past months want the a concluding, than spend are closing. divestiture

$XX allocation to states incurred As closing. These I of million total that there the indirect will QX by over that of update, are $XX Northwest costs. Based costs related such or collections; address and the not $XXX costs, are in duration $XXX reduce investor leaving our initial at the at expectation to and were indirect discussed as a and the network of operating allocated costs our level, the we our tech we divestiture and incurred to center, services, by of NOC; the level corporate costs at gradually states and network G&A our of instead corporate million million forecast sales, based billing provisioning These million state backbone costs XXXX. costs time the and then methodology. the TSA a support, over activities, but centralized stranded of the customer on expected include shared as on such of at little

$XX alone, XXXX would million eliminate costs. we in annualized expected, We of

we already of XXXX to the do of plans exceeded where the end expectation, of reductions. before have have now so approximately or $XX We million year that eliminated annualized affirmed

we company's fixed expectation This proportion And now little conducted, the As $XX expect during to recently reduce million an over cost completed. the down as has for we and expenses. based the longer-term million. been opposed on $XX XXXX, work extensive of have a prior outlook, the structure costs this, assessment ultimately of to of stranded to

essentially transitioned As which TSA TSA, by buyer successfully all TSA have of We with the for per for effective we be about revenue the longer associated will the off November of the and support X. November had million no $X month, December.

I on morning, next updating the look concludes you of to to and on projected forward the presentation. As our for Good to of progress the cost result. Outside business. This in such, improvements operational divestiture, business reduce joining the as everyone. than continue you lower to today's on million we focus call. us TSA want We continued revenues XXXX will be structure thank a $XX our quarter. simplifications