OTEL - Earnings call transcript Q1 2018

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Operator

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

Drew Anderson

welcome results Otelco ended for XXXX. and review call March Tiffany company’s the the you, to conference the to XX, Thank first quarter the President Rob and Conducting Garner, will Executive Curtis Officer. Chief Officer, Souza, Financial Chief today call and be

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

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

Rob Souza

and issues will take and our operational the performance up to will I change the move your request at results tomorrow’s and to Drew our of call. last-minute affecting a investors most the key rescheduled current release quarter’s discuss good to meeting will provide we welcome questions. you, performance morning the and annual in stockholders conference other Curtis investor financial of Thank made first quarter first then We business. XXXX our earnings York. before information our call several review financial and New

of seeing access million, the of income market. as continue Our last Total revenue period results decline inflation is $XX.X our trends service our job while to impact operating $X decline, year. in cost was a quarter residential same traditional the continue first was customers over reflect XX% X.X% and delivery last revenues industry, and to the in down million, for a tightening year for RLEC

on bonus employees paid first with call, operating we several of noted to and we one-time expenses almost our our this, special quarter the in accounted in a half out As other decline the and project income. for last along

We have changes and increases implemented price margins. help fee support operating to our

however, Cut of time for continue expense expand interest in rates Tax million million. to $X our rates interest for and and to expense cost we quarter same new during in and customer quarter XXXX CoBank ways for first the by experience federal reflecting the at Additionally, our lower the in reach Jobs corporate Cash given agreement. included million by decreased $X.X $X.X Act. the Cash the taxes $X.X increased reduced reductions identify efficiencies network. million income look provision and fiber quarter XXXX, Net $X lower credit improve driven the the by other to million to income, in first first from the increased

the of debt. long-term We during reduce further this some will second to our make use payment to voluntary cash a quarter

enhance states XX Otelco increased to past funding network broadband and began where the As broadband payments FCC’s our years. customers accessibility to the build is company. next to receiving the in program program year, being and the The provide A-CAM discussed over over five the applicable to out is the speeds used

some of receiving is legacy Otelco’s FCC, by apportioned the funding that finalized with retroactively the in on for A-CAM America additional the funding companies expected XXXX. be The support. program, would increase and Fund. another $XXX Connect the April update being already As will FCC included in an funding the be million announced the overall additional paid to support Once

We also is targeted as covered broadband for its speeds small a build-out believe locations. of and additional include the support requirements revenue will this broadband it additional amount offer for original program. Otelco program A-CAM in additional a locations will for adjust our recognize increase the in business. focus operations the the included speed received marginal already streamlining business strategic of build-out Consolidating and remains and

prepared As of our customers. operational all our XX of on to one systems minimal selected operational and planning, announced we have we After billing to earlier development designed nearly quarter. onto been has systems partner a consolidate The on process impact last and to months second the platform a platform. of year, all and training, billing are our single during convert serving

there planned the while to new have over we systems old orders, delay new where to delay periods will data customer the have system. a rolled However, are the is from –

provide favorable have the the updating to benefits worked technology. we to should efficient our well employees as get to are see hard more be Our new point look conversion and financial will excited from very this forward as to customers, operational to the a impact it system. We

have for FCC’s if our CAF-II in applied met operations to be did we year. this operational As England, now this requirements. a move that the In to upcoming the and system, Otelco now this Communications Auction approximately has of we Technology. more new OTT we to the become logo company-wide last branding In system, as support quarter, all results. Including throughout New website are March, in into existing operation. billing locations our $X.X would noted held been are bid Otelco. eligibility its block hear and implementation invest million Otelco of XXXX operational with we the auction into waiting summer, to the Tradition. we summarize Curtis updated tagline: we Otelco. with easily the amount, in process, Together. company could quarter’s census first same has The new will integrated incorporated our financial services be as on expect accepted are the and the we the If Otelco.com.

Curtis Garner

the provide same noted a I’ll quarter. comparison first press against schedule. Thank you, of changed is brief last and Rob. first quarter our year, announcement period the us every overview contained as highlights quarter We the otherwise, financial today appreciate everybody to first release. accommodating joining in Unless

quarter payments the The over and million, expect lines decrease $X.X end million, switched in and of which decrease year portion a million million, was in in million. was revenue quarter and that was last offset by supporting increased speeds to revenue our year, the RLEC wide will last an a reduced primarily accounts in and file RLEC the in XX-Q revenue residential revenue revenue order, year, X.X% reflecting period. decline. network or revenue unchanged for first transport look a in which quarter municipality details to revenue user small local by X.X% reduction a due data $X.X FCC’s revenue from in was increased this no decline a million, down $XX.X we of the Friday, revenue. compensation have affected were decrease intrastate increases the the special residential access, which the the X% revenue cellular customers. components, is the and based decline offset $X.X and X.X% If in increase over decrease additional at XXXX. of million, first results. for residential a $X.X million. as accounted there was additional funding first comparable order decrease access Transport which pay-per-view $X.X wholesale of decrease and Massachusetts our customers recovered X.X% and RLEC over access Massachusetts for decreases basic local RLEC reflected decline, line in first revenue at services million decreased decreased impact of which $X.X We was services CAF, one-time which Wholesale Internet the FCC’s Video in last $X.X included is cable in traditional decrease both prior XX.X% the a from through to security and in on of categorized municipality which and in interstate Form access fees The Total $X.X equivalents. provided last A quarter. revenue, Network increases area services. $X.X reform over was IPTV, decrease access provided in Managed to a transition services services million revenue. access intercarrier eliminated some CAF year’s by

in $X to The for Moving operation up were which million the total pole increase operating on training $X.X are last details and the million. billing expense and $X.X access to circuit, was rental, and cable was will central quarter, $X.X to $X.X following: associated expenses be network attributable support the internet year. million, million from by and implemented increased system, SG&A million; operating our toll first services million quarter. with second prior while The in each X.X% and operating expenses year. $X.X new up expenses expenses over increased down X.X% the Cost of office to decreased broken X.X%

million. offset also and a million expense decrease year was $X.X expense. in a option We amortization partially stock legal $X.X by and had a were senior expenses. unchanged million increases $X.X at These in increase ago management from Depreciation

for XX.X% of Rob our million under the Lower the same XX% quarter last and expense XX% accounted Interest the decrease rates Cuts depreciation of federal with was year. a XXXX $X.X loan XX.X% amortization million. and and was from year. quarter Tax million, maximum the associated $X Act million a the tax the Income noted, over implemented for credit down Jobs end reduced to of about income for accounted XX%. rate just tax cost facility from decrease for bonus increased last operating $X.X lower to XXX% expense, to $X.X at first first new As period compared interest

year’s first the financial $X increased as all both these $X.X state months full million the XX, income year. the the While CoBank which due for lower the the the receive months In the Rob $X.X was income of lower year. law inherent three will $X.X compared interest net rate of to last effective dividends XXXX two to million first lower interest March for credit provision to last Other related $X.X was reductions and the versus million primarily a federal net value in XXXX period $X.X mentioned, changes raise was and million expense XXXX when for XXXX the taxes, to was quarter to increased the EBITDA provision the compared income at and new Factoring to implementation effect the primarily quarter, million we statements. annual of income new facility. dividend. unchanged and the in for million a reduction same income, to tax Consolidated produced ended of of taxes due for net

March, at million of a balance facility end with $X.X our of the $X.X the quarter principal at in mentioned Looking the second reducing at plan the million. a payment sheet, in We loan compared quarter first million balance we to voluntary cash debt $XX.X payment ended $X.X make the on the credit we balance. further outstanding of our to reduce that XXXX. to end million with Rob made

compared to annual level for run the higher for debt, investment Our quarter to XXXX, XX when net was to just down ratio historical expenditures XXXX. XXXX. similar our slightly X.XX period $X.X network XXXX. We in be March of in the at million end Capital investments million at rate, to of than X.XX consolidated first but of were XXXX compared $X.X the in of our cash anticipate will EBITDA for same

specific on the think that directions, press limitations Our provide in highlights can at the you’ll any and new flexibility time. upcoming with Rob, the for calls if Tiffany, I business. we allowing quarter investor the credit the release doesn’t facility details in shift covers CapEx, us in XX-Q. on taking this investing additional put more

Operator

go first to Instructions] Walker. [Operator We’ll Wally

Wally Walker

good Hey, Curtis. Rob, morning

Rob Souza

Wally. Good morning

Curtis Garner

Hey Wally.

Wally Walker

to Did Connect the Otelco hear the America auction? reverse Phase elect I got that II on I correctly call in did late. participate

Rob Souza

to applied Wally. believe application has are don’t it, eligible. had to there waiting but FCC The for from in March. to have our I still with end We was have not we are as problems we’re any the if eligibility the accepted. hear FCC whether We given of that indication an

Wally Walker

legacy it’s Otelco hear. for FCC’s seems per it that to was that lower Otelco’s has budget that appears last the you another and to estimate, much Since Connect than the just that Also operation could total to here million in A-CAM due rough stuff looking about Otelco year some the support, now. encouraging added how nice A-CAM revenue revised a $XXX the receives the America lost at I’m to give offer FCC original that’s Fund Yes, FCC year me both shortfall? offer, its ballpark? $XXX,XXX is Missouri

Rob Souza

I don’t was that for fund million all receiving the XXX% the the $XXX We amount Wally. is obviously of that that to will amongst being used and starting at haircut actual A-CAM given believe being last anticipate that last reduction amount The of support or it’s reduction spread was projected was year. year. year actually this the June recipients, XX reduce and legacy culminate in July

to their offers companies, expect to don’t A-CAM decision funding. of FCC believe with was we recover So certainly the the that going out to be because coming providing I we and XXX% review to exactly the have we point, that what Otelco. amount and to information sure having that But at will I offer anticipate that then soon. accept for and am this not

Wally Walker

you the This and we’ll lot. tomorrow has been helpful see meeting. a Thanks at annual

Rob Souza

in person Thank you. to Wally. look We you forward meeting

Wally Walker

a day! Have good

Rob Souza

You too.

Operator

go to Riley. next We’ll Jean

Unidentified Analyst

Hi there.

quarter new system Is expenses the level same for training in in were going about it mentioned two? be to You $XXX,XXX the press in one. the the about release billing quarter

Curtis Garner

there I would not quite I’m $XXX,XXX training expenses in will will be in would time. this thinking I sure high, range reasonable additional but be at would point QX. in that they think, anticipate that be

Unidentified Analyst

then much know an on expect do And how expenses, annual forward, you Okay. basis? that save would going you

Curtis Garner

We on and are those that looking numbers. at working certainly

anticipate system. from keep those will have do efficiencies We point. the system a we public savings there numbers this at we we to certainly new the that quantified a convert the the and with as as perspective updated of We result would throughout not see investors will company be certainly

Unidentified Analyst

expenses would press were that $XXX,XXX year. be, thing? in Is that year the also release Okay, mentioned this higher legal and last the about a one-time than question last you

Curtis Garner

it. of third Most little the a of although may it be Part is, over rolls also. that there into bit quarter

Unidentified Analyst

that mentioned? expenses Okay. Are one-time there other weren’t any

Curtis Garner

the I think of the key largest items. are those

Unidentified Analyst

Okay, thank you.

Curtis Garner

You’re welcome. you. Thank

Operator

Instructions] Socket. [Operator go We’ll next to Ira

Ira Socket

morning. Good

Rob Souza

morning Good Ira.

Ira Socket

that you? a expenses. your the how was bonus indicated much due breakout Can out, that operating to other Okay, How expenses, break and and what one-time? on you other $XXX,XXX bonus the was are you were

Rob Souza

but quantified we numbers one standpoint that for larger only and from was the the certain had, expense upgrading I minor the not along items with quarter. overall don’t to made Certainly to system, be increases. think of of two new portions of in of the including other a up it operational the have that the the in that the mentioned, not XXX% of training of the other expense. billing the really items employees can be that of addition couple support Curtis the system, total capitalized, system bonus majority to that, for training items we expense Those cost Ira increase system amount first of including a or the

Ira Socket

this into much how under capitalized and next much CapEx on leads expensed depreciation your are new question. of of – year actual opposed that forth, your much how so what be Well or to bonus How percentages? to the of and so capital anticipated going expenditures as or the

Rob Souza

XXXX, XXX% all year. The of This the capitalized have about we’ll been we from depreciation, and a because And spent the in year. last in anything year, again not will capitalizing so after this of was be will XXXX be – which anticipated. of in think change qualified that the probably I that anticipate we won’t last year XXXX. be difference expenses had any bonus bonus capitalized to XXXX – for for originally it same million big it did CapEx we the only was difference, won’t What CapEx qualify process September, XXX% XXth $X.X about CapEx It’ll would the depreciation.

Ira Socket

number? And show a where up that Will that depreciation as will reflect? higher

Rob Souza

will the line. up in It show tax

Ira Socket

lower up tax show rate? as a will It

Rob Souza

been with now downwards bonus XX% XX% end going We’ll what would up XXX%. taxes, because have is to depreciation lower originally cash Right.

taxes. taxes flow the what is cash So on and the cash statement lower on provision provision and for see you’ll lower income taxes income taxes Cash the statement. for

Ira Socket

actual but a and thought first release, tax was in may refund. said quarter the first wrong, I in your but there not it a in million In quarter, read I the have it the $X refund tax number

Rob Souza

no In paid cash taxes was other the there there state the a flow than those cash first was the in but at the statement of statement taxes. tax, income bottom quarter,

Ira Socket

accounting a between and is accounting? book it So tax difference

Rob Souza

sir. Yes

Ira Socket

that Can and to projections tomorrow. answer total is could decline question this see until business this you the even any go positive? Then customer you revenue time plan customers a or and that year not and have in your would – start may break

Rob Souza

that see more we business, point as FCC place don’t certainly the not to for we’re level more but to don’t to this certainly impact as that We that we when believe prepared A-CAM at or that think Ira. other projects detail under I the prepared in guidance I that the But and fiber to related fiber, only to plan, believe turn. that provide numbers the flatten begin we’re continue number completely will we provide company. to place will overall any of

Ira Socket

Okay, have then last you meeting are a question, Q&A session at annual tomorrow? to the going

Rob Souza

Our general yes. is practice

and of go shareholder certainly the after dialog it ask through we shareholders to and then that when questions the shareholders concludes open will normal formalities to meeting, meeting. with the We the we’ll up

Curtis Garner

And all be members meeting. at of our that board attending will

Ira Socket

you. thank Okay,

Rob Souza

you, Thank Ira.

Operator

no have we this questions time. at And further

Rob Souza

appreciate continue marketplace. look the further we everyone Otelco tandem If current remain certainly there in to in We this managing have continue opportunities no focused joining significant and additional growth on occur with are that the changes morning. always us in for occurred to and telecommunications we questions, do industry, the

always, on informed regarding questions for our in dedicated developments shareholders. us thanks business, value and We plan you to and morning. we our again joining the to welcome are greater keeping your As delivering this we

Operator

participation. your for today’s This call. you will conclude Thank

now disconnect. may You

Otelco (OTEL) 11 May 182018 Q1 Earnings call transcript