CNSL - Earnings call transcript Q2 2018 | Consolidated Communications Holdings, Inc.

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Operator

Good day, ladies and gentlemen, and welcome to the Consolidated Communications Holdings Second Quarter 2018 Results Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Lisa Hood, Treasurer and Vice President of Investor Relations.

begin. may You

Lisa Hood

good today and We you appreciate Thank Consolidated morning, Communications’ us for call. second joining you, everyone. quarter earnings

are call events that prepared in are future filings release SEC subject questions. and results expected remarks, Please forward-looking about are discussion that A our today factors and SEC, will open available Executive press risks results of is Childers, statements with Today's the measures. up website. may President Today's we will Financial filings. the uncertainties. and which for call include Chief our our Chief with Steve Officer; the our Consolidated's to safe Bob After certain financial include financial and future on contained Officer. discussion review in the in affect non-GAAP and discussions and On Udell, me harbor provisions

measures at equivalent. turn our over Our includes reconciliations earnings section Relations Bob the release of these our has Investor been consolidated.com. I Udell. will It the to with that, on to nearest website call posted of And GAAP

Bob Udell

good FairPoint Lisa, the strategic you reached call. network fiber transaction one Thank meaningfully scale. have for following July, and Communications was second you, and quarter everyone joining In milestone year our expanded the acquisition. we morning This our Consolidated thank and key and overall

plan. benefits acquisition and the capital are of recognizing with are structure operational track our financial, We synergy and the on

the service expanding but as the not groups. for three unifying in around tremendous organizations accomplished and our have broadband vision year. plans and possible am together our our of amount a across first one, integration only two customer We I proud have best come our providing how aligning

legacy connections, additional our Consolidated and have increased five expanded successfully have carrier teams. our the scale, data expanded sales washed FairPoint new new brand combined XXX lift cloud our fiber we wireless Communications a in we introduced products. have As combined by our implemented miles, commercial and markets, and buildings sold we route X,XXX XXX network in company our with Since strategy

faster to customer will addresses by recognized to businesses average least of all speed than revenue available. video what is for We increased residence investments Higher of the will small just speeds availability of network to the there higher and currently X.X opportunities Either broadband and more speeds a available get complete have small unit. three increased times are and businesses over in and at in million drive our allow upgrades year-end. will XXX,XXX These few and we consumer two per accomplishments adoption services over-the-top markets.

quarter now turn So second let’s to the highlights.

in data and First realized carrier channels, transport legacy commercial being grown have almost sequential year-over-year. and data X% basis, up FairPoint with within On and growth and markets. transport X% we a are revenue our revenues consolidated quarter both

transport revenues. As I Northern playbook the execute legacy the our quarter data markets we the and England we on within by growth continued of call, and in excited in our and we mentioned see first success as opportunity investment proven are are region New demonstrating

These In center the to data they England to exceeded services contributing team so, recurring number new Northern growth, goals. winning revenues fiber closed New sales beginning provider. Our second contracts against commercial we sales quarter strategic regional sales a their or of monthly realize. a represents two including sizable doing are

multiple for more England Northern cost based effectiveness network recently connectivity SD-WAN, and we consultative sites growth. sales commercial ongoing with businesses our approach of added while launched validating our markets, the performance. MPLS value excited effectively our sales are New overall momentum In the robust have we are Our offering results sales enhancing in and providing options about

solution to strategy, fiber the communication our of a connectivity increases project launch XX% Kansas a product us City. in area to completed the businesses with of recently to providers. deliver year-over-year Missouri voice customers. access XXX contributed prequalified X% have cloud our commercial our carrier, Connect, us our in expand business City, growth yet we fiber example that gigabit our This to cloud markets, expands in than to that In is direct network fiber provides we bring customers and transport revenues project Across another of more Ethernet our Kansas allows data to secured our expansion organically and in service alignment offerings. announced This continue and We Cloud commercial speeds our advanced to a expanding network. We North of revenues. to all commercial private Peer and and major solutions network

year-over-year Our carrier by new also to this transport their selling focus and existing to fiber data upgrading continuing our quarter connections carriers. and growth contributed revenue team wireless on

were consumer compared a our the to our second Turning to – as flat largely channel, ago. second quarter broadband legacy revenues quarter year a

declined markets over this FairPoint our same period. in revenues million broadband $X.X However,

speed are in for New upgraded previously England, the We on who customers pricing. non-competitive with bundles have Northern

experienced new While agreement to renewing securing are we term a and we a ARPU down, customers longer-term a write slight revenue stream.

higher upgrade to marketing impact and will broadband quarters. future availability, order coupled we speed experiencing are a steady strong revenues We with broadband the demand expanded increase associated our volumes ARPU in continue we anticipate speeds products. efforts with for As

on quarter continue As new we two offerings. our networks, PlayStation to focus Sony signed Philo. upgrade with and content over-the-top Vue We the premier we during agreements our second

customers, entertainment only to first a content streaming options entertainment broadband These new partner delivery. the the platform are streaming their retention with choose delivering content Philo, are be all about television for We the focused services content. broadband excited who of

home, stickiness to to and on We content strategy competitive speeds introduce the and increase focused over-the-top ARPU. data the secure provide our services be consumer connection other that continue into will and

Turning to synergies.

efficiencies, XX our improving achieving years of within We we target as are operational customer two focused of the gaining remain synergy experience, million on closing.

run rate million which synergies, ahead original cumulative the end of the in have of over we of recognized our As second quarter, is $XX plan.

to approach disciplined with and continue We our integration. proven

our secure agreements. Since have New good England. negotiations union labor in Northern in about we labor Some of asked been new have April, representatives negotiating faith with you to

clear. be me Let

goal employees in We that needs costs sustainable these flexibility effectively great in a effectively our more order and to secure and and to customers’ create our provide also business. have meet agreements manage and efficiently negotiations it’s

We are agreements. obtain fair will optimistic we

As week. I close XXrd and turn the our we call Steve, over to to announce this proud quarterly declared dividend I'm consecutive

upgrades construction during our new builds Our the year-to-date on wireless payout focus fiber for Steve? activities tower and right on commercial given turning ratio of second connections. plan XX% is the broadband quarter increased up

Steve Childers

down results the to Operating an review from year. Thanks, were will the Today, the Bob, million everyone. results pro quarter quarter second X% also last for on same revenues for our I forma our $XXX.X last XXXX $XXX.X good update financial I’ll morning quarter compared and year. to second million, guidance.

the revenues. expected of voice the the on vast year-over-year pressure come from and As decline access majority XX% almost continues to

customer where look of acquired coming of our being In quarter, and let’s service voice one down at second each The Now commercial primary X.X% decreased the or revenue driver channels. FairPoint the from carrier with the thirds revenues markets. client million X%. $X.X two

or $X.X less showing data these data and growth and transport grew $X.X our X%. reporting decreased are X% net million increased strong which revenues strategic as year-over-year markets, or Legacy while FairPoint million momentum, We than in X.X%. transport service are

$X.X Consumer were for FairPoint carrier recognition invest down client our stabilize $X we products, price $X.X revenue new quarter. revenue and introduce in markets. fiber million business down do network for As centric the and the equipment sales continues due to grow. million Consumer decreased special increased Other compression continue we the Voice broadband commercial continue projects. revenue majority to the or and million expect commercial from $XXX,XXX and during to data revenues quarter. abate and to of X.X% the revenue to was with coming

the competitive some declined faster Bob as XXXX. bundles. moved declines trigged explained, as for customers we previously the consumer and expected $X.X as As same we Video speeds quarter revenues to at have we customers million in ARPU quarter compared – more

We is over-the-top our low cash such this which from linear as to margins the customers streaming in and to product, a And accretive a products flow. strategy. to as margin reminder, mix our video transitioned to expect is this video since revenue content, trend complements broadband change continue free

down step of X to million down CAF support. revenues, Finally revenues XXXX $X.X respect with due to subsidy

the were $XXX.X interest was the amortization is to As a FairPoint put expense expense in X declines $XX.X equipment for to for will sells quarter $XX.X merger. and of the the in increases in expense XXXX. to increased primarily expenses the first CAF the pro occur million place forma network and August support with due these with second interest the of compared operational of $XX.X due equipment quarter costs increased down last hedges quarter for corporate, to LIBOR improvement second higher on quarter Xst. depreciation primarily and interest compared associated the million of million final cost quarter quarter. last Offsetting third step million we reminder, million realization associated the efficiencies of during exclusive Net in from for additional interest $XXX.X were the expenses synergy in Interest year. year. result the in rate Operating

quarter of these the due wireless approximately rata quarter, in $XX.X as of $X received we share million is million year our our net to compared $X.X partnerships ownership second distributions the our income $XX.X pro million of partnerships. of have to fixed the interest rate. increased swap our million Other to cash earnings primarily from ago. from the XX% a effect Given to of rising end In as five portfolio increased debt

cash up EBITDA under year data less In $X than XX% understand change the second that Adjusted true due X% with is second and As We first ups was the by now are distributions. The true primarily quarter. year-over-year also revenue for or $XXX.X prior with in quarter, accounting synergy million was just increases revenue. offsets CapEx includes totaled $XX prior wireless declines million million of the in down roaming. completed. year the the of associated to quarter and quarter, prepaid realization the second Verizon’s

with quarter due wireless million during $XX elevated ended quarter hand that under we've fiber spend on our to the approximately sold the work and broadband connections The up available CapEx standpoint, new cash From was on second we fiber a XXXX. spend million and upgrades liquidity in associated $XX.X revolver. turning with

XXs times. of structure, pleased We basis X.X attractive announce properties until have the on the divestiture to second and leverage XXXX. we low do maturities an am pro on quarter, and debt XXst closed capital no Cash realized a For total ratio for a ago. year the Virginia million cost to I We forma that our the the our dividends mid of ratio a in net $XX.X was million a quarter July payout dividend XX% cash dividend to expect of resulting year. still payout pay expected XX% be in full for available ratio proceeds. compared $XX was in as to the our

making We are guidance. slight modification XXXX our to

interest expected the million. be for to Capital costs confirmed We of unchanged. $XXX remains taxes reduction We million guidance are million $XXX $XXX to expenditures cash in range the $XXX expect be our for are $X $XXX to cash the million. guidance and be tightening interest $X cash range of and million of a still capital expected in range still we of million, expenditures cash taxes prior less in now million than to are the income while to

turn over on reform cash remarks. income now enacted to XXXX. until based a tax and payer tax we the federal a that back don't for our be the closing With reminder Bob recently NOL I'll to As expect call position legislation,

Bob Udell

and of in planning our shareholders. Norma? take network, Thanks, call we the our structure remain are to Steve. to strategy merger today. confident we deliver now Thanks value We’ll join operational for questions. the capital summary, results and our to financial, taking recognizing time the in In return invest and benefits our

Operator

James. first comes Louthan [Operator Raymond you. Frank Thank Instructions] from question of Our

Your line is open.

Frank Louthan

overlap little with bit the would your you over building then the Verizon have margin impacts expect and And of particularly the gives about that in can to How the outlook that? service you Great. Thanks. Philo others? wireless a why us XG may a little some be much financials with bit partnership? partnerships Talk what Houston on to And – us the profile? of give

Bob Udell

of that channels over-the-top. Channel, Good Starting stuff. Discovery, owner has it any really XX more the Country us of MTV, morning, Music Philo. in And available first base history us non-sports expanded content making that type A&E gives Frank. with the aggressive that been gives It some the really

And so just facilitate that to for we're customers. the about stickiness. first that over-the-top folks the And carrier remind is our

and to distribution an We of our stickiness portal add the operation haven't our invested dollars It’s and millions improves to of value build or product. our over-the-top content tool. Internet

boundaries switching they our way the XG R-Box on partnerships tracked then around the evolve to independent history, question those historical wireless and with partnerships, the So telcos. through Houston impact the and in the [ph] of

out, Verizon our So Houston partnership that XG be the of applies investments and proper will more the it the city to works way is downtown suburban making areas.

So that build spot will we sweet in for getting for will that the out. in years of few a marketing the The partnership benefit Bowl investments of still benefit spillover and really the Super like we're the feel made of wireless the that our occur were back. reap

Frank Louthan

Okay, Thank you. great.

Operator

you. Thank

Our next of question Jefferies. comes Goldman from Scott

Your line is open.

Scott Goldman

maybe spend broadband time more bit could in you little Hey, New good England. talking a morning. Northern about Bob, the

far obviously that builds the bit a talk greatest pressuring to which new about on opportunity very the – like some your mentioned helpful. the or could to a waiting it maybe sized process? services have front? comments I there? popularity speed doing further Cloud I’m adjustments you you of sounds for really as wondering And Connect, the some of far along is And side how some products the to bundles, secondly, some just marketing you expand where think are how you you're in I business. you are small medium I’m then if that that in just see equation, ARPU. wondering through that much come as aggressively is Peer targeting then you are longer upgrade of are and the been growing you far along SD-WAN but has and think new go? How the bit on Have quite

you’re the biggest seeing So Where what Thanks. tracking opportunity? there? you of kind do see

Bob Udell

Yeah, let first me two broadband. around combine the the

demands And as long equal. We broadband our have bandwidth of before in a history said customers. all hasn't of I of staying front created

that their our some architecture end some well quality of I effort the but upgrades. overcome competitors. upgrade for pricing different is is what natural remarks. for we're my you in that That's probably XXX,XXX finding XXX,XXX Our architecture markets doing and customers cable broadband going the in to and of in pressure We're the third competes ARPU seeing every in the is Northern demand. England we're having of of very through putting the through working and And situations the with dedicated England. some distribution no – market we're We're New Northern prepared in we've as think heard that's And to sizable, year. another on upgrades a only we're got New which through done the the

about of process optimistic those an through to meg we're and quickly especially the seeing again a just it's working lift, areas So or base and and XX initial taking upgraded to that ARPU the ability for our through quite product. higher get

be progressive to of a going year. effort it’s the through So end the

both that that side, product Metro these all every add in On carrier complementary the within our value products matter. opportunity Foundation commercial Ethernet that are to that commercial lead we for and

Ethernet our our to reach sticky. where other are for we some where those make an team, territories. able and otherwise customers. product play areas So wouldn't things larger us offer SD-WAN we're markets sales to Metro our national extended headquarters our be are that across the adding of secure we the product It service in type or to LAN contracts allows expand than

didn't across productized have filling set, really product we FairPoint been out our so an have so a product priority. And the has MPLS markets similar all product. And that established

the we our little to out legacy And do. now of why out bit in production and there legacy have a England markets. than catch seeing in full there little in great New FairPoint so and we expected better And production Northern markets we're a all that's sales was bit up teams a complement of work

and So continuing a good we're some space. commercial overachievement on position feel in we carrier in

Scott Goldman

thank Great, you.

Operator

you. Thank

Mark Our next question comes Guggenheim from McCormack of Partners.

Your line open.

Mark McCormack

from Hey, its a the coming service the footprint charter Thanks. getting on some threat out about of as speeds is thoughts Maybe hearing the regarding think more company comment space? by across I guys. the And then alongside guess big as in aggressive XG there? of just the more you're talking is Thanks. that far rolling year competition seeing about What cable stuff we're faster into as broadband you the any threat the and end.

Bob Udell

Yeah, thanks.

those buying For and on serve. foundation good acquisitions we’ve us focus are our opportunity based for assets on the building as are of markets an solid both that broadband expansion. And done we fiber

with Let Internet. this. the for time capacity me The to start broadband that overselling what at companies customers architecture. They manage able we're their busiest the means have node a because and period the at cable is cable cable drain of – have level their a to And manage and companies. capacity been to on

We as high hours. of they TV at needs quality work XX doesn't customers and what than are a needs And have that at meets peak of even companies actually based customer's as have the level meg on like the in That a manage well product utilize. utilization customers at cable a have. average very result, architecture majority met a higher bandwidth to level

to validates cable companies and as or video and that the direction to our market on move what's now think to channel just New deemphasize that So linear demand a and way down very our increases that drive we our England moved where we in starting compete XX every And video But above. video and focus meg deemphasize And well excellent broadband products lineup. seeing years to products, our are especially broadcast three we've product. opened has customers is for broadcast our we're strategy been over-the-top linear up for interesting penetrations strategy. on to Northern and prove speed the

opportunity. an see Regarding the XG, as I also that

get for going markets be aren’t out build XG. that the to markets Our first

build more become And at think I cases can With And have secure position we on trials for ways it broadband as continue solution solutions. find fixed product, address we're might in have see CAF going we to for easier of coming wireless carriers constantly obligations. we some look opportunities to a do for it can respect to easier scale, as make our our by the with As so maybe we the to going them, table business that offering help a we're investigating solutions. on, this turnkey we how those better to more how opportunities. at trend a of that activity it wireless up to expedite to for and their some out, compete result with to with

an I So both see it fronts. as opportunity on

Mark McCormack

little Can a you that declines maybe the Is quarter the and impact are getting consumer that the also just saw should expect talk bit better? you a trajectory we about counts continue? seasonal to looking in at

Steve Childers

our this a fourth two but and and – for Hey, can talked so first we Northern New quarter take – particularly, that Bob the England impact about at shot in is yeah Steve. seasonal quarters, I’ll markets. pile on, quarter we

And slight so, for seeing a the improvement are second seasonal first returns. in quarter we

done and will same So if impact not it seeing QX. just that maybe the it and if you quarter want as improve doing some in area. moving to have coming are maybe back going that traditionally – into they prior they're call late feels than They're continue into back to later it doing we years at the rate people hopefully them like snowbirds the

Mark McCormack

Okay. saw here? And sort continue accounts, we the trajectory same consumer just can on the of customer that

Bob Udell

great as speed activity as marketing some, uptick improvement the in in on other adds, through as we rate and I work the New across over-the-top also our our see to I decline new an markets markets turn the in Northern well. we're legacy positioned think markets the eventually the in but do those we’ll portfolio we’ve some packages England, think continuing upgrades continue have and so. net in

Mark McCormack

Great, thanks guys.

Operator

next Thank of and from [Operator question comes Company. Cowen Instructions] Jon you. Our Charbonneau

Your open. line is

Jon Charbonneau

few thinking quarter-over-quarter. us growth update the be a of growth Great, quarters? just thanks on in half for being FairPoint an next the second Thank also give we questions, should how about sequential nice can data you XXXX? How you we the you. taking do acceleration recommend synergies the and about transport realized And over remaining the think in

Steve Childers

FairPoint and the Bob of while we This continue. expect is compliment think with data seeing momentum number Jon. on Hey, that – as in. consistent I pretty We��re very the performance – for said, and legacy markets are out they're transport. nice Yes, Steve. seeing some thanks out consolidated to jumping markets mean pleased of really that and I the

ACB customer – build process. or out So to build our type ready

kind of renegotiating our to but on through are both working an grow little would We conservative on in so we’re the transport carrier some X% to side, or and I that I Bob's We're data line comments for if X% bit the expect hoping contracts but would were the quarter and third commercial model. a continue hopefully what way side. think similar and to uptick, not – of for consumer your fourth obviously be

Jon Charbonneau

then in over terms the synergies couple of FairPoint quarters… next of And

Bob Udell

to you one can going have we're I better investment then to how think see We we'll much update. want you assume I to can yet. – telling you want we that to position fairly a think not we're and much more how quarter exceed, but make marketing and

Jon Charbonneau

you. thank Great,

Operator

Thank you. turn over the closing call remarks. to like Bob for to Dell I'd

Bob Udell

forward you that and to our your year. thank look for shareholders our about we updating confident we join third the to we on this results later we're quarter opportunity you call today and providing time remain Well, taking financial

Operator

conference. for in Ladies gentlemen, and participation you your thank today's

You disconnect. a Have wonderful day. may

Consolidated Communications (CNSL) 4 Aug 182018 Q2 Earnings call transcript