OTEL - Earnings call transcript Q3 2018

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Operator

Good day, and welcome to the Otelco's Third Quarter 2018 Earnings Conference Call. 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

Tara. you, Thank the results to XXXX. call review to And the Otelco third company's for XX, quarter the welcome conference ended September Conducting Garner, be Executive the will President call Chief and Rob Officer, Financial Chief Souza, Curtis Officer. and today

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

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

Rob Souza

will and Thank and performance other XXXX everyone Drew review will you, take and third financial third good our your our we quarter's operational will key Curtis welcome quarter discuss business. our to then morning results Investor questions. affecting the Call. and I issues

billing over of as a system was revenues revenue X.X% and new on was having for million $XX.X online and to last the million $X.XX, last customers quarter, for income at in up above income the for increase quarter. continue $X.X was income $X.X tightening third Net the expense reflect over $X.X X.X% million, our $X.X the trends access affected expense. slightly includes job third third third industry, from position last $X.XX the Basic the inflation, income decline, compared bringing million the increasing Cash but sequentially operating our market quarter, to to interest was facility. still second as year, share continue CoBank million. year. with our at of in net to with quarter associated year. Operating system quarter costs our decrease was per small for new Total quarter last traditional RLEC third year. end impact $X.X to decline our results as million well XXXX. conversion billing down Conversion Our a residential year-end the This cash down and the compared are cost

reduced $X voluntary we $X.X which with we leverage, credit in in serve. increase while our the line intention our principal facility is outstanding including million quarter, in third by on the territories During a fiber continue in million, we our to prepayments, our investment reducing

year. the before system The service funding to service continue a area. the of providers, years After to support June, will wireless long-form the the build receive locations to requirements speeds the annually America years. auction. status broadband customers. the of ACAM. XXXX, our increased services ACAM enhance program construction authorized successfully will letter XXXX. to meeting Otelco partner to and As services to named process, qualified the At data and FCC's next to a out the accessibility broadband for August discussed XXX year, to residents states next to must XXth, FCC voice FCC were who being funding with participate before addition areas, required, The in July the receiving we XX, western a the we provide number to who five named year, The bidders in with long-form network of payments the in FCC. areas greatly the long-form company must other the the to over a bidder network multi-phase past our new data various receiving $XX,XXX auction options three XXX will communities. program II The the in in approves payments requirements Phase funding and is for blocks network X XX communities, used including Winning this began XXX where auction service complete of to which fixed is operate FCC's for expected enhance and begin locations. in offer bid four This to to to the XXXX, will credit will FCC XXXX high providers Otelco technology reverse through documentation the including commit broadband on over these voice and the began provide the application, were also census by this detailed Fund support is various the the The for the authorized targeted application, we network end information Connect design. support and company which build and in construction and Winning WiValley applicable to update of being begin the improved The will provide end In cost in of continue Massachusetts. on receive awarded approximately of unserved company build XX one with service the providers in commitment to are payments. defined support offer will fixed winning and regarding

an for application with the the of necessary services to in filed Massachusetts also designations provide have ETC state We areas. these

town primary Leverett. network towns and communities' improve with partnerships fiber municipal support are New our Other be work previous capacity wireless to other in like areas. access. employed third options work one the populated Otelco's the $X.X to Fiber-to-the-premise being In can including fixed million data communities sparsely with fixed systems, Our vehicle England invested improve during company in Leverett, their exploring how the XXXX, including will deployed technologies, has demonstrates more to our focus territory. business. digital our Massachusetts customers in will increase quarter. route based million of fiber within miles for $X the Otelco and our to transport X,XXX distribution solutions invest the the on of expand strategic of successful wireless over and and operations service fiber a premise streamlining Consolidating The business remains for

from last year-plus-period our year, of we completed early single billing operational one implementation new over and operational All being the years ordering of provisioning systems support to all and and and consolidate and system, into Otelco planning process system and collecting of conversion announced and billing is involved two billing As systems end-user The customizing to our platform. on carrier a selected three the quarter. an in during activity to extensive billing of virtually partner employees. took conversion the all the new handled the a third After design, system.

use vendors' single our has into Our well and employees' serve can hard future. efficient the customers work to created system of all an we

utilizing worked it. impact. new our accustomed excited will provide system point see conversion the new worth it to technology. system. are benefits, the resources has formats. effort team get have new and has as online investment its every of of should and impact benefits appreciate customer will the our It employees more employees, some as own the our and the processes We bill conversion be however, able a take minimize for challenges, to to favorable of time any dedicated of this who been look time bring hard The capital very to as to We well the make While forward to financial this expected customers to from become long-term and both and we efficient this operational set cutover magnitude customers

servicing keeping from to new up and our usage needs, gigabit Ethernet will targeted customers system every to requirements. addition to with meet ability also customer location, minutes products market to enhance distance circuits, long the In equipment

now In of as this TVC services Officer system, www.Otelco.com. has we was logo joined news, Tradition. as has earlier noted the announced OTT headquartered has He branding recently we Chief Richard as Inc., with company-wide operational Operating become England been In the our tagline, in FirstLight and of Technology. Otelco Clark Otelco. Chief a all Communications that Albany, website and Financial Together., Officer. to new doing President Albany, As move Otelco New business Otelco incorporated New we other previously and our the in are with Executive year, Vice York Fiber.

plant our our his We plan of in varied competitor President industry Tisdale. Richard Otelco. well a for have as recent will as focus Ed Richard and he Vice retirement and on knowledge of network experience as of business a role as Senior worked Initially, years of the wealth brings and operations, with in and to we supplier both Operations

responsibilities marketing, Richard's expand will XXXX, include and regulatory During functions. sales, to billing

are and customers We to our shareholders. to our worked number as our on XXXX, with hard date employees both execute pleased have initiatives in of for progress a

future. more Meeting quarterly experience, We've will operational for provide At Moving Annual meeting, on to data XXXX of interim continue about of to expanded any we to earnings enhancing forward, updates new the our management and that our speeds, focus customers communications releases flexibility our it company issued suggested focus financial the on additional topics. improving have was Stockholders, to content company. customer focus the press the release Since adding reducing provide our on stockholders. we about the leverage

the our this recent have be history pursuing, quarter presentation combination a to and improvement several results. can and shareholders. strategic And give website. customers website, performance value for in details which on to presentation our with this summary employees touches begun our financial our are SEC the of quarter, We an deliver price will investors leverage. a and we both the believe a in have year earnings our stock over our release a the additional Curtis period filing company, revenue as financial of Relations continued prior to added coincident directions management and a of focus We and several call. performance financial summarize benefit now we found the section to That quarter, Form in including our cost will reduction on Investor third XX-Q,

Curtis Garner

release equipment noted us the and at reduced in night. for third otherwise, X.X% security year, network year, Total of area FCC's which decrease the last components also revenue. revenue, were a decrease an transition decreased the a million, were of XXXX. Rob. $XX.X the which the which in an decrease quarter over The These switched just services. access $X.X third X.X% against and third $X.X $X.X the a $X.X the through joining increase local each reflecting reflecting million, impact from residential a period million. Internet everybody Long I'll of $X.X quarter. offset voice for And access press quarter year's and in filed revenue We million over CAF, wide and as charges. quarter and was is $X.X primarily the last increases and million lastly, XX-Q, the quarter $X.X revenue decline under third services decreased of support third of our million. distance of highlights Transport third decline over increased was CAF third X% year. revenue of decrease for X.X% financial quarter revenue of of period. recovered due Network is mentioned, access. year pay-per-view million year, revenue accounted contained in decreased fees partially If services customers revenues $X.X million. over $X.X accounted special X.X% last access every as by X.X% the versus revenue cellular last lines and services decreased decreases to overview and rental decreased today. decline, was you, increase revenue, under as same to last look just directory IPTV payments, decline we provide revenue, in of generally local by intrastate prior-year down basic XXXX cable Unless portion order, and last comparison quarter million, or Video decreases categorized appreciate managed the of Thank Rob services X.X% to in which and to interstate is revenue. RLEC A brief RLEC eliminated offset small in million. end-user

up Depreciation decrease year million, decrease ago for accounted decreased in the with operating Tax X.X%, XX% Interest federal at Breaking and total to onto move expense year. to Now, from a sales third system. third down out X.X% depreciation and million. over decrease the senior fees, the was and for million by and for amortization balance the investments. expenses $X.X the at composed XX.X%. $X.X end and offset details, for X.X% rates operating down of cloud and a reduce operating expense million. down the in of $X.X quarter, and was training incentive amortization accounted XX%. XXX% interest million $X.X each The and $X.X to $X.X the was and increased of access rate and in finance ACAM XXXX hosting million partially from Income expenses $X.X while of was implemented customer Lower $X.X XX% depreciation and of intangibles increased Acts million associated increase and rental in cost loan was with by $X.X were CLEC $X.X bonus million RLEC X% service The investments expense. of The partially depreciation of in associated building million, maximum other expense management principal accounting the compensation, the lower million. Jobs decrease, from pole services million the amortization prior expense $X.X offset Cuts lower were loan tax year. conversion the tax cost $X.X quarter decreased from expense million in SG&A last new an

a to provision for For ago. $X.X quarter tax EBITDA million third was million $X.X was million. expense the Consolidated the year third quarter, income for the compared $X.X

we sheet. with to cash, end balance the of third million compared XXXX. $X.X Rob quarter noted ended at the in at million Looking $X.X

prepayments. During we million million, the principal of of XX.X% XX credit five-year facility, the the outstanding reduced $XX.X voluntary In by CoBank months third repaid including the facility first we balance. the quarter, on credit our principal million new $X.X $X or in

and additional on ratio make will leverage past XXth. outstanding prepayment XX shows the the over an investor the November the million XX presentation our $X Rob voluntary debt Slide We that of In mentioned, quarters. resultant

XXXX Our $XXX of in million million year. debt has to from decreased of approaching quarter end the $XX over first this the by

save of now interest and has just to lower interest The to leverage X.XX% bank over X.XX attractive our Our X%, from that on XXXX same ratios expense on Beginning below based annual times of including the XX-quarter and improvement The to the third balance operation period. period. lower cash funds. also borrower at for X, of the allowed Slide us much support three to system. you of for Stock more XXX%, X.XX% change basically company's company rate million price with declined expenditures the margin XXth. as In presentation, in were basis. press to implementation made $X.X reflects a in X.XX under declined us stock the investor the an interest the sheet improvement OTEL X.XX a declines it's November increased borrowed release, quarter, same EBITDA, want the might the reduce leverage, over new shows leverage. by the margin ratio shown to the $XXX,XXX company's the will The at net debt period, look which which efforts. in nearly price markets' recognition the consolidated billing Capital September

questions I this from release think directions, taking we XX-Q. to highlights, the with press investors if and Tara, details, can covers shift obviously, in time. additional that you provide Rob, the at

Operator

from Company. [Operator Instructions] Ira We first & Sochet take our question will from Sochet

go is line Please Your open. ahead.

We investor. on Gene [ph] the move question. to will Reilly, next private

line Please ahead. open. is go Your

Unidentified Analyst

Hi there.

I or this like it's had equivalents metric and XXXX, gone. the missed Just know, that, XXXX that I for like you going on access table -- to since quarter, don't say line

back. Thank you. it I'd to So like see

Rob Souza

apologize. from I cut dialed Souza. have off Rob the and appear is in. call I to just been I This

Curtis, comment So didn't that maybe and hear I question. can that question. you respond to

Curtis Garner

Yes.

system are to something be we -- the that. customers the managing moving looking going units with We similar change of billing at -- or our in to and equivalent are to revenue-generating

that be metric subscriber a by in quarter. have -- probably will fourth back end of be the the we so, And back will should

Operator

We Company. take Sochet & Ira now Sochet next from will our question from

Please line open, ahead. sir. Your is go

Ira Sochet

costs? the results on expense expenses? And been those lost they if what more that system little a have have billing you did not says there elaborate Was Actually, -- will the made revenue your non-recurring? any that are you it up? be Can would

Rob Souza

Sure.

but Obviously, and second runs I comment would lost did processes revenue. would question. to to made, number the first of of it was question, your have slightly, which as of Curtis, billing I'll work anyone reduction address on Let any we have the operational respond There me in cost? expect. think, services leading expense all a allow any the you that overall overall did process. changed that We by the or balanced revenue, complicated were No, were tie was of Ira's system the piece part conversion conversion. the really flow, some and we test Curtis not periods, out. We incur through the we revenue did were and that question in can verify went support revenues the not revenue. of system of to And not affected cash billing impacted which impact that up changes any it did regarding billing to might a

Curtis Garner

blackout for that, there's there year-over-year expense and process related would got there Ira, -- expense to addition overtime, on conversion advance, build probably was in no that's But have that of And conversion. that to it another period noted using couple through probably The after go was anything system. revenue an old $XXX,XXX that's built we From carry into essence to standpoint, once it's associated associated the that, -- we it duplicate we than higher best where we put because over missed. we to take as billed the expense to to everything normally was new with that the giving of worth input that the that the $XXX,XXX the the in in been. business. would out and Rob's we is we in Sure. there to any we stuff the are from dollars due was cost impact accrue people with in But billing right, from no a the of bills my since arrears of old Hard of guess tell, the convert old have system stop -- normal overtime the the to used But new. of thousand I guess. system. in it all getting hundred

Ira Sochet

And will into XXXX? this be non-recurring going

Curtis Garner

as we think, -- into think I going I yes, XXXX.

year, I think, more become now you'll have system and will so proficiency think see system their X in more still that years, quarter, an Folks be of it to will not and to fourth people it. a by little XX learn next more a as the used issue. that I But use grow they would new familiar. bit for the have

Ira Sochet

could So, we the quarter expense? pre-tax third adjust by $XXX,XXX

Curtis Garner

my best That's estimate.

Operator

there appears time. questions Mr. are It this no at further

the any would like to or turn back conference for to remarks. I additional closing Souza, you

Rob Souza

Tara. you, Thank

this we call appreciate joining you As greatly morning. always, the

interest. and you. in the will we call will it and to you appreciate that expenses. this looking manage best being that We additional continue to telecommunications We business growth to the on in know continue with have continue will we see opportunities we We Thank great for a opportunity will with be changes on focus shareholders' controlling this continue morning. always and on costs the We in the managing to work Otelco tandem we industry.

Operator

today's concludes your Thank you This participation. call. for

now disconnect. may You

Drew Anderson	IR
Rob Souza	President & CEO
Curtis Garner	CFO
Ira Socket	Socket & Company

Otelco (OTEL) 12 Nov 182018 Q3 Earnings call transcript