Lumos Networks (LMOS) 8-K Lumos Networks Corp. Reports Second Quarter 2015 Results

Company Presentation

August 2015

Company Presentation

August 2015

Exhibit 99.2

Use

of

Non-GAAP

Financial

Measures

Included

in

this

presentation

are

certain

non-GAAP

financial

measures

that

are

not

determined

in

accordance

with

US

generally

accepted

accounting

principles.

These

financial

performance

measures

are

not

indicative

of

cash

provided

or

used

by

operating

activities

and

exclude

the

effects

of

certain

operating,

capital

and

financing

costs

and

may

differ

from

comparable

information

provided

by

other

companies,

and

they

should

not

be

considered

in

isolation,

as

an

alternative

to,

or

more

meaningful

than

measures

of

financial

performance

determined

in

accordance

with

US

generally

accepted

accounting

principles.

These

financial

performance

measures

are

commonly

used

in

the

industry

and

are

presented

because

Lumos

Networks

Corp.

believes

they

provide

relevant

and

useful

information

to

investors.

The

Company

utilizes

these

financial

performance

measures

to

assess

its

ability

to

meet

future

capital

expenditure

and

working

capital

requirements,

to

incur

indebtedness

if

necessary,

and

to

fund

continued

growth.

Lumos

Networks

Corp.

also

uses

these

financial

performance

measures

to

evaluate

the

performance

of

its

business,

for

budget

planning

purposes

and

as

factors

in

its

employee

compensation

programs.

Special

Note

Regarding

Forward-Looking

Statements

Any

statements

contained

in

this

presentation

that

are

not

statements

of

historical

fact,

including

statements

about

our

beliefs

and

expectations,

are

forward-looking

statements

and

should

be

evaluated

as

such.

The

words

“anticipates,”

“believes,”

“expects,”

“intends,”

“plans,”

“estimates,”

“targets,”

“projects,”

“should,”

“may,”

“will”

and

similar

words

and

expressions

are

intended

to

identify

forward-looking

statements.

Such

forward-

looking

statements

reflect,

among

other

things,

our

current

expectations,

plans

and

strategies,

and

anticipated

financial

results,

all

of

which

are

subject

to

known

and

unknown

risks,

uncertainties

and

factors

that

may

cause

our

actual

results

to

differ

materially

from

those

expressed

or

implied

by

these

forward-looking

statements.

Many

of

these

risks

are

beyond

our

ability

to

control

or

predict.

Because

of

these

risks,

uncertainties

and

assumptions,

you

should

not

place

undue

reliance

on

these

forward-looking

statements.

Furthermore,

forward-looking

statements

speak

only

as

of

the

date

they

are

made.

We

do

not

undertake

any

obligation

to

update

or

review

any

forward-looking

information,

whether

as

a

result

of

new

information,

future

events

or

otherwise.

Important

factors

with

respect

to

any

such

forward-looking

statements,

including

certain

risks

and

uncertainties

that

could

cause

actual

results

to

differ

from

those

contained

in

the

forward-looking

statements,

include,

but

are

not

limited

to:

rapid

development

and

intense

competition

in

the

telecommunications

and

high

speed

data

transport

industry;

our

ability

to

offset

expected

revenue

declines

in

legacy

voice

and

access

products

related

to

the

recent

regulatory

actions,

wireless

substitution,

technology

changes

and

other

factors;

our

ability

to

effectively

allocate

capital

and

implement

our

“edge-out”

expansion

plans

in

a

timely

manner;

our

ability

to

complete

customer

installations

in

a

timely

manner;

adverse

economic

conditions;

operating

and

financial

restrictions

imposed

by

our

senior

credit

facility;

our

cash

and

capital

requirements;

declining

prices

for

our

services;

our

ability

to

maintain

and

enhance

our

network;

the

potential

to

experience

a

high

rate

of

customer

turnover;

federal

and

state

regulatory

fees,

requirements

and

developments;

our

reliance

on

certain

suppliers

and

vendors;

and

other

unforeseen

difficulties

that

may

occur.

These

risks

and

uncertainties

are

not

intended

to

represent

a

complete

list

of

all

risks

and

uncertainties

inherent

in

our

business,

and

should

be

read

in

conjunction

with

the

more

detailed

cautionary

statements

and

risk

factors

included

in

our

SEC

filings,

including

our

Annual

Report

filed

on

Form

10-K.

1

Advanced Fiber Network Driving Value for Our Customers

2

Lumos

at a Glance

Attractive Fundamentals

Attractive Fundamentals

2015 Data Revenue target of ~$115m, up 8% YoY

Total data contract value: ~$362m with avg.

length: 4+ years.  Target of $500mm by YE15

Targeted 15-20%+ ROI on fiber deals

FTTC/Enterprise revenue is 90%+ non-TDM

4G LTE wireless deployments (FTTC)

On-net focus: 60% Data EBITDA margin target

Network Expansion to increase Addressable

market by $135m or 60%

Enterprise growth of 8-9% expected in 2015

Favorable interest rate and tax environment

1

As of 6/30/2015

2

Based

on

Lumos

Networks’

internal

research

and

analysis

of

data

from

research,

surveys

and

studies

conducted

by

third

parties,

such

as

Tower

Source

(for

FTTC

sites),

Equifax

Telecom

and

Stratsoft

(for

On-Net

buildings)

and

public

records

databases

(for

data

centers).

Market

Opportunity

denotes

wireless

cell

sites

within

3

miles

and

buildings

within

½

mile

of

the

Lumos

Networks

fiber

footprint

and

includes

recently

announced

planned

market

expansion

in

Richmond

and

Norfolk

Current

1

Market

Opportunity

2

FTTC Unique

Sites

976

~7,400

On-Net Buildings

1,574

104,000

Total Connected

Data Centers

32

100+

8,100 Fiber Route Miles; 369,238 Total Fiber Strand Miles

45+ Avg

Strand Count; 64% of Strand Miles are Lumos-owned

3

Revenue Opportunities

Revenue Opportunities

Pamplona Capital Announced as Strategic Financial Partner

On

August

5,

2015,

Lumos

announced

a

$150

Million

cash

investment

from

Pamplona

Capital,

a

Private

Equity

Fund

with

over $8 billion

in

total

capital

commitments

Creates

Strategic

Partnership

to

Accelerate

the

Transformation

of

Lumos

Networks

to

a

Pure-Play

Fiber

Bandwidth

Infrastructure

Company

Use of Proceeds

Up

to

$50m

to

pay

down

existing

senior

bank

debt

and

related

deal

costs

Approximately

$100m

for

general

corporate

purposes.

Provides

the

company

with

additional

capital

to

pursue

organic

and

inorganic

growth

opportunities

in

the

fiber

and

data

center

space.

Interest

payable

on the notes to be issued in connection with Pamplona’s

investment

will

accrue

at

an

annual

rate

of 8%,

paid

quarterly

either

in

cash

or

in

kind.

The warrants to be issued

entitle Pamplona

to

purchase

up

to

5.5

million

shares

of

common

stock

at

an exercise

price

equal

to

the

closing

price

immediately

prior

to

the

announcement

of

the

transaction on

August

5,

2015.

Pamplona

will

receive

two

seats

on

the

Lumos

Board

of

Directors

William

Pruellage,

Partner

at

Pamplona

Capital

(based

in

New

York)

Peter

Aquino,

former

Executive

Chairman

of

Primus

Telecommunications

Group

and

former

President

and

CEO

of

RCN

Corporation

4

0.0 EB

1.0 EB

2.0 EB

3.0 EB

4.0 EB

5.0 EB

2014

2015

2016

2017

2018

0.0 EB

0.5 EB

1.0 EB

1.5 EB

2.0 EB

2014

2015

2016

2017

2018

Exponential Growth in Bandwidth Demand

Bandwidth Demand Drivers

Bandwidth Demand Drivers

U.S. Mobile IP Traffic

U.S. Mobile IP Traffic

Web & Data

Video

Source: Cisco Visual Networking Index 2015

U.S. Business IP Traffic

U.S. Business IP Traffic

Web & Data

Video

5

Cisco VNI estimates US mobile data traffic growth of

47% from 2014-2019

LTE traffic grew 2x YoY

in 2Q15 for large US operator

Proliferation of network-connected devices and

locations

2014 to 2019 tablets, smartphones, and M2M

traffic growth rates of 83%, 60%, and 103%,

respectively

Rapid growth in rich media applications

Of the 24.3 exabytes

per month crossing the

mobile network by 2019, 17.4 exabytes

will be

due to video

Spectrum constraints require increased efficiency to

manage mobile data traffic

Cloud adoption, increased outsourcing of IT

infrastructure

Data Products

1

Goals highlighted herein are long-term in nature and are subject to various risks and uncertainties, one or more of which could cause goals to be unattainable. You should not regard the inclusion of a goal in this presentation as

a representation by any person that the results will be achieved

6

Enterprise

2Q15 Rev: $11.3m

8% YoY

Growth 

40% of Data Revs

Non-TDM products account for ~90%+ of total revenue

Enterprise 2015 growth target raised from 6% to 8-9%

Renewed Enterprise contracts totaling $18.5 million in

1H15, up 60% vs 1H14

Network expansion into Richmond/Norfolk increases

Enterprise Addressable Market by $135 million

Transport

2Q15 Rev: $10m

(-11%) YoY

Growth 

36% of Data Revs

IP-based Ethernet Transport and wavelength potential

Significant reduction in DS1/DS3 exposure in last 2-3

years

TDM Carrier grooming trends universal across industry

FTTC

2Q15 Rev: $6.8m

34% YoY

Growth 

24% of Data Revs

Carrier

Ethernet:

97%+

revenue

and

~98%

total

bookings

FTTC backhaul supports 4G LTE growth

Long-term

target

of

~$85

million

in

FTTC

revenue

1

Achieved target of 1,300 FTTC installations by 2Q15

Targeted

FTTC

incremental

gross

margin

of

85%+

1

FY2014A

FY2015E

$20m/19%

~$29m/25%

$42.3m/40%

~$46m/40%

$44.3m/41%

~$40m/35%

Revenue/(% of Data Rev)

Accelerating the Transformation

7

FTTC + Enterprise as % of Data Revenue

FTTC + Enterprise as % of Data Revenue

55.4%

55.7%

58.3%

58.0%

57.5%

59.9%

62.3%

64.3%

65.2%

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

2015E

In 2Q15,  90%+ of Total FTTC (~97%)/Enterprise(~90%) Revenue was non-TDM based

8

Planned 665 Mile Fiber Network Expansion in Richmond and Norfolk

Underpinned by 257 unique FTTC site contract (269 total FTTC connections) with major wireless carrier

Vast majority of network expected to be completed by YE15 vs original target of 3Q16

Three signed Enterprise contracts: total MRC of ~$13,000 (two new logos, one new site with existing core market customer)

Significant expansion of Richmond, VA network with the addition of Norfolk, Petersburg and Hampton Roads markets

Increases total Enterprise addressable market by ~$135 million, up ~60% vs. existing markets

Increases tower addressable market to 7,400 within 3 miles of footprint

Richmond/Petersburg Metro Fiber Network

Green: Existing market launched 2H13 (144 miles);

Yellow: Expansion Footprint (Additional 314 miles)

9

Norfolk/Hampton Roads/Tidewater Metro Market Expansion

All

New

Footprint:

~270

Fiber

Route

Miles.

Portions

of

Network

“Lit”

in

August

‘15

as

24

th

Metro

Market

10

Dark Fiber Product Officially Launched May 2015

Targeting a Growing Number of RFPs in our Footprint:

Macro Fiber to the Cell Backhaul

Small Cell Fronthaul

Large Enterprises: Healthcare, Education/Gov’t, Financial

Data Centers

Relatively limited dark fiber deployments in our footprint (by any fiber

provider), but industry dark fiber network activity should increase in

2015 and beyond

Lumos Dark Fiber Product has standardized Monthly Recurring Charge

(MRC)

and Non-Recurring Charge (NRC) pricing

Lumos provides dark fiber cable and customer supplies equipment and

resources to manage their bandwidth service

Lumos has $1m+ in annual Dark Fiber revenue, mostly derived from

Allegheny Energy assets purchased in 2009

11

Dark Fiber Solutions for FTTC Small Cell Deployments

C-RAN Architecture

12

Architecture is designed for FTTC Customers who are:

1)

Using Small Cell Strategy to supplement macro sites for cell coverage and capacity

2)

Leveraging a centralized Base Band Unit (“BBU”) design

Note: One large wireless operator leading the way

Key FTTC Statistics

2Q15 Revenue: $6.8m up 34% YoY

2015 Revenue Target: $29m, up 45% YoY

Unique FTTC Towers: 976 up 45% YoY

1,307 FTTC Connections: up 49% YoY

FTTC Tenants (connections) per tower: 1.3-1.4x

Avg

Monthly Revenue/Connection: $1,735

Average contracted bandwidth/connection: ~100Mbs

~97-98% of total booked revenue (3-4% current revenue) is Carrier Ethernet

0% microwave sites

Total FTTC Revenue under contract: $215-$220m

Average Contract length: 6-7 years

Gross Margin: ~85%

# of Active Mobile Operator Customers: 5

13

FTTC Opportunities Accelerate

Dramatic Growth in Mobile Data Traffic Driving Increased Backhaul Bandwidth Requirements

Dramatic Growth in Mobile Data Traffic Driving Increased Backhaul Bandwidth Requirements

Compelling  Tower-Like Economics

Compelling  Tower-Like Economics

Scalable bandwidth capability drives margin expansion

Increased tenants per unique site combined with higher bandwidth per site magnifies

leverage.  FTTC bandwidth upgrade activity accelerating in 2015.

Long-term contracts (ranging from 5 to 13 years).  Avg

of 6-7 years.

Attractive return on investments

Devices

Use Case

Backhaul Technology

Voice / Text / Email /

Rich Media / Streaming Video

Moving to Carrier Ethernet

2015+

Voice / Text / Email

T1 / SONET

2004 -

2007

Voice / Text

T1

1999 -

2003

14

15

Project Ark: 100G Core -

Premier FTTC Network in Footprint

New MEF-certified Carrier Ethernet MPLS/IP fiber network

Fully Redundant/Fast Re-route

A key selling point for a series of contract wins (total of 500+ FTTC

sites) with a major US wireless carrier

100G: Entire Ark Core and  and 1/3 of distribution rings

Core network completed in Sept ’14 using Cisco routers

FTTC traffic already routed onto Ark

Expect 100% of FTTC traffic routed onto Ark by YE15, to  coincide

with completion of Richmond/Norfolk market expansion

Cisco provides new testing tools, thousands of hours of training,

and 2 R&D centers

Ark planned to provide total bandwidth throughput up to ~1

Terabit (equivalent to 2,500 circuits at 400 Mbps each)

Allows for cost effective scalability for upgraded FTTC connection

target of 3,100

16

1

Goals

highlighted

herein

are

long-term

in

nature

and

are

subject

to

various

risks

and

uncertainties,

one

or

more

of

which

could

cause

goals

to

be

unattainable.

You

should

not

regard

the

inclusion

of

a

goal

in

this

presentation

as

a

representation

by

any

person

that

the

results

will

be

achieved

2

Represents

management’s

long-term

estimates

prepared

using

data

from

industry

publications

and

its

market

knowledge

and

experience.

Management’s

estimates

have

not

been

verified

by

any

independent

source

and

are

subject

to

various

risks

and

uncertainties,

which

could

cause

actual

results

to

materially

deviate

from

estimates.

You

should

not

regard

the

inclusion

of

an

estimate

in

this

presentation

as

a

representation

by

any

person

of

future

results

Long-Term Fiber to the Cell Targets

FTTC Targets (as updated in Nov 2014)

FTTC Targets (as updated in Nov 2014)

Key Drivers of FTTC Upgrade

Key Drivers of FTTC Upgrade

Expansion of 4G/LTE coverage and capacity in

Lumos’ footprint by multiple wireless carriers

Continued migration of copper, microwave and

SONET FTTC sites to Carrier Ethernet

Planned 665 route-mile market expansion,

underpinned by 257 FTTC unique tower contract

Pro forma tower addressable market increase to

7,400 (within 3 miles) from 5,400

Added 686 fiber route miles since YE13, including

key routes from Richmond-Charlottesville and

Richmond-Ashburn, VA

Increased RFP activity for small cell and dark fiber

FTTC contracts in our footprint

Expectation for increased tenants per site and

higher bandwidth per site over time

Revised

Prior

Annual Revenue

1

~$85 million

~$70 million

Gross Margin

1

~$72 million

~$60 million

Total Unique Towers

1

1,875

1,500

Total FTTC Connections

2

3,100

2,250

Tenants (Connections/Tower)

2

1.65

1.50

Monthly Revenue/Connection

2

~$2,300

~$2,600

Addressable Market

2

7,400

5,400

2Q15

Long-Term

Estimate

1

FTTC Unique

Towers

976

1,875

Tenants/Unique

Tower

~1.3-1.4

1.65x

Monthly Revenue/Connection

~$1,750

~$2,300

Monthly Revenue/Unique

Tower

Contracted Bandwidth Per Site

~$2,300

~100MBs

~$3,800

400MBs+

~7,400 towers within 3 miles of

Lumos Network fiber footprint

Early stages of 4G LTE rollout

Conversion from T-1,

microwave and SONET to

Carrier Ethernet

Significant new LTE site

builds/network densification

Continued FTTC share gains

expected

Carrier Ethernet more scalable

than SONET of other providers

FTTC operating leverage drives

margin expansion opportunity

Strong FTTC Growth Opportunity in Our Footprint

Anticipated FTTC Trends

Anticipated FTTC Trends

+287

+208

+303

1

Represents

management’s

long-term

estimates

prepared

using

data

from

industry

publications

and

its

market

knowledge

and

experience.

Management’s

estimates

have

not

been

verified

by

any

independent

source

and

are

subject

to

various

risks

and

uncertainties,

which

could

cause

actual

results

to

materially

deviate

from

estimates.

You

should

not

regard

the

inclusion

of

an

estimate

in

this

presentation

as

a

representation

by

any

person

of

future

results

2

Goals

highlighted

herein

are

long-term

in

nature

and

are

subject

to

various

risks

and

uncertainties,

one

or

more

of

which

could

cause

goals

to

be

unattainable.

You

should

not

regard

the

inclusion

of

a

goal

in

this

presentation

as

a

representation

by

any

person

that

the

results

will

be

achieved

2

17

FTTC Opportunity

FTTC Opportunity

178

465

673

976

1,875

2Q12

2Q13

2Q14

2Q15

Long-Term Goal

FTTC as a percentage of total Lumos Data revenue

2012: ~8%

2013: ~14%

2014: ~19% 

2015:

~25%

Annual FTTC Revenue

Annual FTTC Revenue

18

1

Goals highlighted herein are long-term in nature and are subject to various risks and uncertainties, one or more of which could cause goals to be unattainable. You should not regard the inclusion of a goal in this presentation as

a representation by any person that the results will be achieved

FTTC Revenue Growth

($

in Millions)

Long-term goal of

$85 million

1

$6.8

$14.3

$19.9

$29.0

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

$30.0

$35.0

2012

2013

2014

2015E

Total FTTC Connections Exceed 1,300

0%

10%

20%

30%

40%

50%

60%

600

700

800

900

1000

1100

1200

1300

1400

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

Installs

YoY Growth

19

Total FTTC Connections

Total FTTC Connections

Key Enterprise Accounts

20

Key Enterprise Statistics

2Q15 Revenue: $11.3m, up 8% YoY

2015 Revenue Target: $46m, up 8-9% YoY

Enterprise Churn Trends improved in 2015

Estimated Enterprise market share in core markets: 17%

Renewal

Program

Gaining

Momentum:

Estimated

MRC

of

renewed

accounts

to

be

up

17%

YoY

in

2015

Network Expansion into Richmond/Norfolk/Hampton Roads Metro Markets Increases Addressable Market for

Enterprise

data

spend

by

an

estimated

$135m

or

~60%...

Target

share

in

these

expansion

markets:

17%

Target: 80% of revenue on-net

Focus: “Large Locals” with multiple sites in footprint: Healthcare, Gov’t/Education, Banks, Professional Services

Target: 80% Enterprise MRC under contract by YE15

Target: Carrier End User Partnership Program to reach 50% of long-term total Enterprise sales

Key Metro Markets (‘14 stats)

Market Status

Population

MSA Rank(out of 381)

Norfolk/Hampton Roads, VA

Expansion Market

1

1.7m

37

Richmond, VA

Expansion Market

2

1.26m

44

Huntington, WVA

Core Market

363k

144

Roanoke, VA

Core Market

315k

159

Hagerstown, MD

Core Market

260k

181

Lynchburg, VA

Core Market

257k

184

Charlottesville, VA

Core Market

296k

196

Charleston, WVA

Core Market

223k

198

Total Core Market

~3m

Total Expansion Markets

~3m

21

1

Launched August 2015

2

Launched 2H13, 2015 expansion 3x miles, see slide 9

100% fiber fed portfolio of lit buildings (ALL success-based)

Added 44 buildings in 2Q15.  Average of 16 buildings/month in 1H15 vs 12 historically

Increases on-net revenue and opens up opportunity for additional FTTC builds

Connected to 32 total data centers (including 7 company owned co-lo facilities)

2Q15 On-Net Building Growth Accelerated

On-Net Buildings

On-Net Buildings

22

1,091

1,273

1,420

1,574

2Q12

2Q13

2Q14

2Q15

Enterprise Revenue Hits Inflection Point

23

-1.1%

-1.7%

1.7%

4.2%

8.2%

8-9%

2Q14

3Q14

4Q14

1Q15

2Q15

2015E

Enterprise Revenue YoY Growth

Enterprise Revenue YoY Growth

Enterprise Renewal Program Results Accelerating

New Enterprise Contract Amounts (MRC)

New Enterprise Contract Amounts (MRC)

Total Enterprise Contract Value Renewed

Total Enterprise Contract Value Renewed

24

($ in Thousands)

Renewal program locks-in revenue on increasingly longer term deals,  reducing churn

Target 1H15 total contract value renewed of $18.5 million up over 60% from 1H14

27% of current Enterprise revenue has been renewed in last 6 quarters at average contract

length of ~39 months

Expecting total MRC of $725,000 to be renewed in 2015, up 17% YoY

$619

$725

2014A

2015E

($ in Thousands)

$11,500

$18,450

1H 2014

1H 2015

25

Carrier End User Pipeline Building with Growing MSA Partner

Strong Growth in 2014 and a Solid Pipeline in Place for 2015

Leverage Lumos Networks’ 8,100 mile fiber footprint to target incremental Enterprise

customers with thousands of sales people from leading national service providers

33 MSAs signed and 39 pending/in pipeline with major U.S. operators, MSOs and fiber

companies operating in our footprint

Pro forma “near-net” list buildings within ½ mile of our footprint of 104,000 (67,000 pre-

expansion), including planned 665 fiber route-mile expansion in the Norfolk, Richmond,

Petersburg and Hampton Roads, VA metro markets

Carrier End User Sales Grew Over 100% in 2014

Carrier End User Sales Grew Over 100% in 2014

2013: $77,000

2014: $294,000

2015 (target): ~$400,000

New Distribution Channel for Enterprise Data

New Distribution Channel for Enterprise Data

26

Data Center Fiber Connection Strategy

32 Total Data Center Connections

32 Total Data Center Connections

32 total data center connections as of 2Q15

Includes

19

commercial,

6

private

and

7

Lumos

operated

data

centers

Lumos Co-los: Washington PA, Waynesboro VA, Charlottesville VA, Covington VA,

Harrisonburg VA, Lynchburg VA, Charleston WV

Key data center relationships:  Peak 10, Iron Mountain, QTS, DC Corp, Alpha Technologies

Increasingly, Enterprise traffic moving to data centers with customers requesting secure, fiber

bandwidth access to those locations

~100+ data center market opportunity within existing footprint

Lumos

is under-penetrated in data center connections relative to fiber peers.  Data center

connections

represent

promising

fiber

bandwidth

revenue

upside

Key Residential/Small Business (“RSB”) Highlights

RSB EBITDA Margins improved to 32% in 1H15 from 29% in 1H14

Total 2Q15 RSB Revenue ex-CLEC Voice/Access essentially flat YoY

High Speed Internet Connections up 15% YoY

Total Premises Passed by Fiber of nearly 19k, up 14% YoY

Completed RUS build in 2Q15 (~5,300 sites passed with fiber)

CLEC Rate Increases instituted in 2Q15

1G Broadband Service launched 2Q15 for residential and SMB customers

-14%

-13%

-12%

-11%

-10%

-9%

-8%

-7%

-6%

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

27

Improving YoY

Revenue Growth Trends in RSB

Improving YoY

Revenue Growth Trends in RSB

Selected Financial Highlights

Data Revenue

Data Revenue

Data as a % of Total Revenue

Data as a % of Total Revenue

Data Gross Margin

1

Data Gross Margin

1

Overall Adjusted EBITDA Margin

2

Overall Adjusted EBITDA Margin

2

($ in Millions)

1

Defined as operating revenues less network access costs divided by operating revenues for Data segment

2

Defined as Adjusted EBITDA divided by operating revenues on a consolidated basis, excluding the impact of one-time curtailment gain on benefit plans in Q314 and Q414

28

$26.7

$26.5

$27.3

$27.8

$28.1

2Q14

3Q14

4Q14

1Q15

2Q15

53.2%

52.4%

53.9%

55.0%

55.1%

2Q14

3Q14

4Q14

1Q15

2Q15

85.3%

85.1%

85.5%

86.9%

85.5%

2Q14

3Q14

4Q14

1Q15

2Q15

45.3%

44.9%

43.2%

44.6%

44.5%

2Q14

3Q14

4Q14

1Q15

2Q15

Liquidity and Debt Maturities

Debt refinancing completed in April 2013; closed

new Term Loan C in January 2015 for $28 million

Liquidity to support growth capital requirements

~$29 million in cash

$50 million undrawn revolver capacity

Cash investment from Pamplona Capital on

August 5, 2015 for gross proceeds of $150 million

Debt Maturity Profile

Debt Maturity Profile

Capitalization

Capitalization

Note: Excludes capital leases

1

Pro forma to include Pamplona Capital investment transaction

2

Does not account for any value assigned to detachable warrants issued in conjunction with the debt offering.

29

( in Millions)

($ in Millions)

As of

6/30/2015

1

Cash and Marketable Securities

29.2

$   

Revolving Credit Facility ($50MM)

-

Pamplona Note

2

150.0

Term Loan A

85.3

Term Loan B

242.0

Term Loan C

25.1

Capital Leases

2.8

Total Debt

505.2

$ 

2015

2016

2017

2018

2019

2020

2021

2022

$4

$7

$12

$72

$258

$0

$0

$162

2Q15 Snapshot

2Q15 Balance Sheet & Valuation

2Q15 Balance Sheet & Valuation

2Q15 Metrics

2Q15 Metrics

Data

revenue

up

5%+

YoY

and

comprises

55% of total revenue

FTTC and Enterprise revenue grew 34%

and 8% YoY, respectively

Completed

installation

of

69

FTTC

sites

and

71 total FTTC Connections

Exceeded 75% target ratio for success-

based/growth capital projects.  Target of 

~90% for 2015

Connected 44

on-net buildings

Added 145

miles of fiber route miles

Key 2Q15 Accomplishments

Key 2Q15 Accomplishments

1

Based on closing share price of $13.96 as of 7/31/2015 and 22,881,853 shares outstanding as of 6/30/2015

2

Pro forma to include Pamplona Capital investment transaction

30

($ in Millions)

Cash and Marketable Securities

$29.2

Total Long-Term Debt

2

$505.2

Net Long-Term Debt

$476.0

Market Capitalization¹

$319.4

Enterprise Value

$795.4

($ in Millions)

4Q14

1Q15

2Q15

Revenue

$50.7

$50.5

$51.0

Adjusted EBITDA

$22.4

$22.5

$22.7

% Margin

44.3%

44.6%

44.5%

Capital Expenditures

$19.9

$29.2

$26.1

% of Revenue

39.4%

57.9%

51.3%

Historical Financial Metrics by Segment

1

Defined as operating revenues less network access costs

2

Defined as net income attributable to Lumos Networks before interest, income taxes, depreciation and amortization, accretion of asset retirement obligations, net income or loss attributable to noncontrolling interests, other

income or expenses, equity-based compensation charges, acquisition-related charges, amortization of actuarial losses on retirement plans, employee separation charges, restructuring-related charges, gain or loss on settlements

and gain or loss on interest rate swap derivatives. See note from the Company on “Use of Non-GAAP Measures” on Slide 1

3

The Company recorded a $10.8 million curtailment gain in the second half of 2014 related to the elimination of certain medical benefits under the postretirement plan, which was not allocated to the operating segments

31

($ in Thousands)

FYE 2013

FYE 2014

FYE 2015

% of 2Q15

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

Total

Revenue

Data

$25,369

$25,706

$26,094

$26,943

$26,137

$26,707

$26,488

$27,310

$27,767

$28,089

55.1%

Residential and Small Business

21,057

20,453

20,055

19,094

18,647

18,290

17,668

17,423

17,265

17,010

33.4%

RLEC Access

6,108

6,152

5,478

4,966

5,306

5,168

6,360

5,952

5,463

5,854

11.5%

Total Revenue

$52,534

$52,311

$51,627

$51,003

$50,090

$50,165

$50,516

$50,685

$50,495

$50,953

100.0%

% Sequential Growth

(0.3%)

(0.4%)

(1.3%)

(1.2%)

(1.8%)

0.1%

0.7%

1.0%

(0.4%)

0.9%

% YoY Growth by Segment

Data

19.0%

17.5%

15.1%

10.3%

3.0%

3.9%

1.5%

1.4%

6.2%

5.2%

Residential and Small Business

(12.3%)

(12.5%)

(13.5%)

(12.8%)

(11.4%)

(10.6%)

(11.9%)

(8.8%)

(7.4%)

(7.0%)

RLEC Access

0.4%

11.0%

(10.8%)

(21.8%)

(13.1%)

(16.0%)

16.1%

19.9%

3.0%

13.3%

Gross Profit

1

Data

$21,338

$21,827

$22,206

$22,940

$21,963

$22,788

$22,551

$23,350

$24,122

$24,025

58.5%

Residential and Small Business

13,934

13,831

13,601

12,677

12,107

12,019

11,355

11,670

11,198

11,162

27.2%

RLEC Access

6,108

6,152

5,478

4,966

5,306

5,168

6,360

5,952

5,463

5,854

14.3%

Total Gross Profit

1

$41,380

$41,810

$41,285

$40,583

$39,376

$39,975

$40,266

$40,972

$40,783

$41,041

100.0%

Adjusted EBITDA

2

Data

$13,124

$13,355

$13,012

$14,011

$12,717

$13,395

$12,984

$12,629

$12,367

$12,492

55.1%

Residential and Small Business

6,697

6,356

5,691

5,917

5,544

5,230

4,503

4,623

5,627

5,327

23.5%

RLEC Access

4,874

4,840

4,343

4,104

4,306

4,098

5,214

4,621

4,517

4,848

21.4%

Adjusted EBITDA, Before Curtailment Gain

$24,695

$24,551

$23,046

$24,032

$22,567

$22,723

$22,701

$21,873

$22,511

$22,667

100.0%

Curtailment Gain

3

0

0

0

0

0

0

10,207

567

0

0

Total Adjusted EBITDA

$24,695

$24,551

$23,046

$24,032

$22,567

$22,723

$32,908

$22,440

$22,511

$22,667

% Sequential Growth, Normalized

6.4%

(0.6%)

(6.1%)

4.3%

(6.1%)

0.7%

(0.1%)

(3.6%)

2.9%

0.7%

% Margin, Normalized

47.0%

46.9%

44.6%

47.1%

45.1%

45.3%

44.9%

43.2%

44.6%

44.5%

Financial Guidance

1

Guidance as of date of 2Q15 earnings release dated August 5, 2015

2

Normalized Adjusted EBITDA excludes the impact of a $10.8 million curtailment gain for the elimination of other postretirement plan medical benefits recognized in the second half of 2014

2014

2Q15

FY 2015

($ in Millions)

Actual

Actual

Guidance¹

Revenue

Data

$106.6

$28.1

~$115

% of Total

52.9%

55.1%

~57%

Residential

& Small Business

$72.0

$17.0

~67

% of Total

35.8%

33.4%

~33%

Access

$22.8

$5.9

~$20

% of Total

11.3%

11.5%

~10%

Total

$201.5

$51.0

~$202

Adjusted

EBITDA, Normalized

2

$89.9

$22.7

~$92

% Margin

44.6%

44.5%

~46%

Total Capex

$84.1

$26.1

~$112

% Success-Based/Growth Capex

75%

95%

>75%

32

Annual Reconciliation of Net Income Attributable to Lumos

Networks Corp. to Adjusted EBITDA

33

($ in millions)

Year Ended

FY 2010

FY 2011

FY 2012

FY 2013

FY 2014

FY 2015E¹

Net Income (Loss) Attributable to Lumos

Networks Corp

20.8

$     

(43.9)

$    

16.3

$     

17.8

$     

21.5

$     

12.0

$     

Net Income Attributable to Noncontrolling

Interests

0.1

0.1

0.1

0.1

0.1

-

Net Income (Loss)

20.9

(43.8)

16.4

17.9

21.6

12.0

Interest Expense

5.7

11.9

11.9

14.2

15.6

15.0

Loss (Gain) on Interest Rate Swap

Derivatives

-

-

1.9

0.1

(0.5)

0.0

Income Tax Expense (Benefit)

14.5

(4.4)

11.0

12.0

14.4

8.0

Other (Income) Expense, net

-

(0.1)

(0.1)

1.6

(0.7)

0.0

Operating Income (Loss)

41.1

$     

(36.4)

$    

41.1

$     

45.8

$     

50.5

$     

35.0

$     

Depreciation, amortization and accretion of

asset retirement obligations

31.4

43.2

39.0

42.4

45.3

50.0

Equity-based compensation

1.5

2.4

3.9

6.8

4.3

6.0

Asset impairment charge

0.0

86.3

-

-

-

-

Business separation charges

-

1.4

-

-

-

-

Amortization of actuarial losses

-

-

1.8

1.2

0.2

1.0

Acquisition related charges

3.0

0.1

-

-

-

-

Employee separation charges

-

-

2.3

-

0.2

0.0

Restructuring charges

-

-

3.0

0.1

-

-

Gain on settlements, net

-

-

(2.3)

-

-

-

Adjusted EBITDA

77.1

$     

96.9

$     

88.9

$     

96.3

$     

100.6

$   

92.0

$     

1

Guidance as of date of 2Q earnings release dated August 5, 2015

Quarterly Reconciliation of Net Income Attributable to Lumos

Networks Corp. to Adjusted EBITDA

34

($ in millions)

Quarter Ended

6/30/2013

9/30/2013

12/31/2013

3/31/2014

6/30/2014

9/30/2014

12/31/2014

3/31/2015

6/30/2015

Net Income Attributable to Lumos Networks Corp

4.8

$        

2.5

$        

4.1

$          

4.1

$        

3.8

$        

10.2

$      

3.4

$          

2.7

$        

3.3

$        

Net Income Attributable to Noncontrolling

Interests

-

-

-

-

-

-

0.1

-

-

Net Income

4.8

2.5

4.1

4.1

3.8

10.2

3.5

2.7

3.3

Interest expense

3.4

3.8

3.8

4.0

3.8

4.0

3.8

3.5

3.7

(Gain) loss on interest rate swap derivatives

(0.3)

0.6

0.0

(0.1)

0.0

(0.3)

(0.1)

(0.1)

(0.2)

Income Tax Expense

3.2

1.5

3.0

3.0

2.7

6.7

2.0

2.0

2.4

Other expenses (income), net

0.9

(0.1)

0.8

(0.2)

(0.2)

(0.2)

(0.1)

0.2

(0.1)

Operating Income

12.1

$      

8.3

$        

11.7

$        

10.8

$      

10.2

$      

20.4

$      

9.1

$          

8.4

$        

9.3

$        

Depreciation, amortization and accretion of asset

retirement obligations

10.8

11.2

10.8

10.7

11.2

11.3

12.1

11.9

11.5

Equity-based compensation

1.3

3.2

1.2

0.8

1.2

1.1

1.2

1.2

1.6

Amortization of actuarial losses

0.3

0.3

0.3

0.1

0.1

0.1

-

0.3

0.3

Employee separation charges

-

-

-

0.2

-

-

-

-

-

Restructuring charges

-

-

-

-

-

-

-

0.6

-

Adjusted EBITDA

24.6

$      

23.0

$      

24.0

$        

22.6

$      

22.7

$      

32.9

$      

22.4

$        

22.5

$      

22.7

$