CBB - Earnings call transcript Q3 2017

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and welcome to the CBB Third Quarter Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Josh Duckworth. Please go ahead sir.

Josh Duckworth

morning. good and you Thank I’d like XXXX Bell’s quarter to welcome call. everyone earnings Cincinnati third to

Before me are start, being to presentation Investor we it let website. recorded slides release our Relations future like for and if press at you today’s to call a call Today’s posted would our remind on is you listen that time.

differ suggested discussing also of and GAAP to draw Annual X. non-GAAP report, reports. forward-looking Quarterly on statements. Form-XK certain financial is Safe contains the and also call are measures Harbor most Reconciliations measures. website. we the on uncertainties today available on This With Slide reports In forward-looking those SEC Now, risks President recent our me remarks materially actual our measures risks non-GAAP will Due directly presentation in our these comparable highlights provide and segment and Form quarter. financial and Officer, More Leigh our Financial for guidance. I statement results XX-K Chief available Andy the from may Bell's performance performance Company's the information. indicated Leigh's to additional be would by any Cincinnati then detail Executive XXXX to comments various on will Andy or and your XX-Q recap attention like morning, our is will our Kaiser. to the today Chief Officer, Fox potential and our this Form uncertainties, presented filings or information on with such including outcomes

Cincinnati a question-and-answer am that, prepared Leigh Chief Operating our Andy will Following pleased Bell's conduct Chief Executive and I remarks, Officer, Tom Simpson, With President Fox. Leigh, the to introduce and session. Officer

Leigh Fox

good joining everyone. morning us Thanks today. for and Josh, Thanks

investment Bell's high-speed, performance continued strong ability ongoing fiber in itself to highlights the high-bandwidth networks. marketplace through Cincinnati differentiate and quarter Our this

X% offset with quarter consolidated compared X% margin Similar grew our year-over-year. driven As products EBITDA previous quarters declines a revenue Adjusted of increase the year-over-year consistent decrease revenue. in Fioptics Slide in third and resulting to in our by in illustrated million X, strategic million strategic year. in last was quarter lower revenues for XX% in expectations, $XX strength ongoing by to $XX primarily hardware sales on by was

number into moving significant to serve. of North development early the the the strategic quarterly represents America IT I’m we segment, Before milestone OnX October. the immediate doubling announce and scale a excited services acquisition markets update addition by financial across OnX of more of of operational closing and and The brings business our in than

towards will XXXX the combined on presented Slide serving XX IT posses necessary accelerate market X, progress As A customers. to with and more. CBTS million combination an to with or capitalize creates megatrends business plus tap plus billion cloud employees more the platform goal plus XX data into creating EBITDA than the and OnX adjusted access services of $XXX on the market XXXX our enhance $XXX offices scale totaling

$XX products million Slide our business of double starting of $XXX drove respectively offerings this turning adjusted an quarter year-over-year. our support to again communications ongoing a The quarter Now million up X. Fioptics than legacy the demand declines. revenues networks. focus X% and generated increase in revenue for on The suite fiber segment on legacy the this an to quarterly in our digit results fiber-based EBITDA entertainment revenue to increase of more migration expanding In primary to advanced of strategic our offset business, remains network products

This XX%, competitor. miles X. up X% despite demand The the approaching totaled was on route we fiber Internet consistent Greater Bell faster as Fioptics our strong penetration is by for in from to yet fiber fiber increasing to scale to million traditional year the expected increasing route a more for the addition $XX differentiates close throughout of is our operational superior Fioptics churn fiber we value which win metrics. demand positions rates Telcom in by the quarter is shareholders Video X% further rate our data to expanding advertising with subscribers total strategy remaining second us penetration XX% compared the X% lock evident miles and density the class of increased Hawaiian both year-over-year. schedules. we at with prior during half combination quality and improved With and and ARPU in early our extension XXXX than capitalize of on year. network quarter intensity quarter XX%. a merger year-over-year XXXX ago to adding carriers. an while In the and ARPU Internet fiber added compared for and usage subscribers Fioptics pending added Our quarter increased fiber a our video from growing illustrated impacted with centric in is for Slide Cincinnati Proof that third XX,XXX primary fiber We speeds university were Hawaii, of footprint. seasonally broadband accelerate. XXXX with third continues and subscribers relatively revenue Cincinnati

the quarter further new In incremental As we XXXX, fiber success the nine our subscribers the numbers XX,XXX of again impressive of highlights mentioned, added Fioptics first months an of addresses. passed investments. this

XX% Our approximately in now addresses year-over-year fiber Fioptics in is of our footprint. the one network an available country. of represents and mix Cincinnati's competitively to Greater XX% the homes increase most of advantaged products and This the businesses suite

market markets by the business performance in last Moving X% on consumer, of quarter, and our Fioptics. we year-over-year driven Slide X, revenue continued growth Similar to overview and provide increased consumer to in an carrier communications. for entertainment our the

transition copper in revenue market solutions. remained business fiber Our strategic with to based offerings prior business customers' as line product quarters from legacy

wireless nearly once partially fully to pressure in these tower challenges to price we and is we macro our our revenue grooming in share that and carrier XXXX. declines persist increase market, to by operational While are expect win mitigate network the from ongoing market encouraged recent expected XXX%

Now and $X million adjusted revenues turning services quarter Slide IT of segment the to on we third of XX. EBITDA and $XX hardware the In generated million.

performance is as of customers. quarter largest impacted to major by one be cost-cutting consistent our last Our we initiatives with by continue

offering combining We in sales of communications enterprise made To The have pattern our American base footprint this the back will experiencing being and the progress geographic with solutions. combined part to in OnX We're ongoing complete networking, also diversification and the integration a top cloud-based by priority. remain as hardware the and products. are get Cincinnati. margin IT excited due of customers customer the lower By Greater declines strategy. of spending of for expansion dramatically ourselves a including our cloud next-generation our portfolio positioning our unified our new within expansion CBTS trend, company in we're North platform provider IT service with leading about strength OnX

that experienced in new progress, competitive XXX at to As as start XX,XXX to for year retail switching them over soon cloud and signed advantage major a than network more a security locations. national be evidence deal with Service we this service The gives a UCAS SD-WAN NaaS plus and as will look as history or us three-year our of our for recently period. project digital-based services. scheduled We customers to and XXXX handsets Network provider voice solution providers including phased is migrate believe

of outlook based will turn our to who due sales call time, same walk beneficiary UCAS the digital you we let and updated upside continue and of such SD-WAN over the us to as historically for limited at the as will our that, to a geography Andy and these cash me market expand provide services make trends While our net the geographic capital year. structure, presence. performance With through flow NaaS,

Andy Kaiser

Thanks Leigh.

and million strategic senior for a senior loan facility a as our activity This new closed as I with quick OnX In initiatives, well $XXX to finance summary would syndicated us secured start seven-year a million Hawaiian early execute of new Turning October, Slide and recent ample $XXX to we the flexibility credit facility. to to agreement our future XX, five-year agreement credit revolving financial we Telcom. a like provides liquidity merger comprising secured needs. term

In addition, expect to both transactions in combined of the we our cash Hawaiian remain levels senior Telcom. with in with we the of consideration raised portion $XXX merger leverage and line escrow are including synergy. run finalized, to current Once fund closed company's unsecured notes million the rate

we last attributable cash changes flow working million free Moving $XX capital first cash of compared performance, flow XXXX significant decrease generated in capital. in to the in negative flow and for same increase the on nine $XX million primarily to to free year. The is our expenditures cash months of a for period

$XX invested year-to-date. debt. Our in remains XX, without to continue our capital taking $XXX expenditures Slide we on million reflects leverage consistent to and year-over-year build third network the fiber our additional and commitment on Expanding on net quarter million

Fioptics fiber services for based During $XX $XX the builds expenditures third $X million. maintenance and projects totaled was was million million, quarter, success and IT capital new business

As addresses new year. well we addresses for Fioptics XX,XXX the to to we XX,XXX our passed discussed earlier, are with on have and the year-to-date achieve new plan way

supporting growth of our Our capital compete investment the we fiber as network remains XXXX to need for focused on effectively. strategic fiber

and we and As $XXX to to high-end opportunities continue invest million year capitalize of targeting share. the volume near market of we end. to on with gain win we for full will our earlier, see million discounts we We're we purchase maintain CapEx what to or $XXX range fiber for mentioned the as look year opportunities

acquisition $XXX to adjusted Slide year Leigh anticipate $XXX to $X.XX October approximately in quarter XXXX. X% increasing our XX, $XXX of I'll update for the million adjusted billion now billion the $XX back for call to early million With to to our in some that, of full previously between walk the projected updated range contributions expect EBITDA compared through $XXX financial let guidance and This turn million XXXX. the million plus be OnX in minus million. generate previous fourth Turning or versus in guidance in and We quarter to remarks. the me $X.X revenue of fourth from billion $X.X over reflects you which revenue closing EBITDA to is completed and

Leigh Fox

for very opportunities businesses. We're ahead of us about IT our both fiber Andy. services Thanks excited and the

and and Over positions and services our operational The to shareholders greater bring demand establish service of product market-leading appreciate the Hawaiian our capitalize ability and our business, confident ever-increasing customers offerings. financial of migration. cloud we've support with geographies to months our of spoken the integrate are the abilities successfully two combinations Bell couple last for in open Cincinnati new enhanced to a and we and we scale and the and feedback dialogue. data number acquisition to OnX capacity OnX strategy Telecom with greatly In IT on provide

with companies necessary two special complete approvals positive having shareholders future the diligently transaction the and promise subject made we've acquisition these to merger regulators network capacity confident employees for of know for integration held together. be a pending week tireless vote transaction I as approve our scaling the fiber Telcom of XG. Hawaiian that all securing by meet A you in important will majority and solid growing working will local the remain fiber thank be Since In the Hawaiian a in high quality shareholders. outcome. are towards base efforts we to next to to with meeting the announcement, And of towards approval of to progress demand is Telecom our We the transaction. and assets business, delivering ecosystems an IoT on want step their of bringing

internal our appropriate Lastly, to to units completed committed brand scale, with we leading distinct the forward. have and the respective leadership driving structure reorganization business two

top a also growth fuel we to generate remain IT our priority sheet. sustainable and flows fiber to While strong and remains our of expansion and balance network flexible services committed the cash

maintain the its call to and executing the the and to line will on operator in it We are also for to shareholders. open opportunistic of Q&A. to and continue while now discipline in to creating shareholder best we continue the We’ve additional our the turn allocation look capital for interest over strategy the value approach up of ways I company future.

Operator

from question Simon [Operator with Morgan Instructions] Stanley. We'll Flannery first our take

Simon Flannery

customer. just ago that's this to quarters. you And But out a you in over successful, and few starting longer-term the large a about how over services obviously a the see return can this do hardware obviously deals standalone to CyrusOne the two terms to years very when we of segments of in you how segment bit thinking and next there doing the Leigh, is should to start the carved underlying combined number think growth. one-time IT trends medium few versus here long-term? we been some about talk business items are little about the But you’re like

Leigh Fox

that's help we’re us good based We're I but four company offerings hardware in So new cloud-based know to we have the the I I trend practices. such an service sales, SD-WAN it’s and ongoing we that's the pressure news ongoing think UCAS - going think see NaaS a cyclical, actually don't way thinking bit will you going as The grow is away. in future. and have about

professional expertise the very stronger within services a bench developing cloud strong have a integration also We company. we're

"cloud". I So move assets going storage from the new means world the where right as into compute traditional with combination are do who networking looking you of the of of think forward you the of the deal are kind to into assets of companies put kind

of do but year. we customers our trend from I standpoint, because with next growing a a compressed year expect what's of year one begin be to hopefully large this So happening

with is the point. hopefully view And make I parts some give those of have both going that as look we're both financial we to the have of the operational that folks just value and simple we businesses. to greater next the way separation standalone clarity understand it units year things two financial in from a possible ultimately statements to companies, structurally Beyond greater and creates metrics and want as We've of reorganize standpoint. two and for what from I options reorganized, creates greater distinct the to

have nature evidenced been as is that confusing win I as I a UCAS as necessarily don't robust issues we the we understand people our think understand business that had the example to the what of one that had. a of an bit little we it’s know that company by recently

business if companies revenue oriented UCAS at a We recurring have high lot service a very in they have front trading, reason growth for they’re they trading how robust those look a very standpoint them. and multiples you from a of and are at are of

further of parts and been valuation the we separating you've then I've by value simplify equal and future. our views the options as think cleanup the if the the stock intent, that of clear I So for got the doesn't of company pretty in total the company sub

most out history spinning assets we company to of out asset a a that As any trying have of have. the and we get

I'm value anything the open as as possible. my is much So shareholder future very focus to in to create

Simon Flannery

need do you’ll got you’ve or do the you on at think - point? this more Is scenario deals where executing what you

Leigh Fox

then a I portfolio standpoint. fragmented your very and fragmented, help about find space like companies I assets of What ways area say it’s in find why that product from you you all sizes different a that and

I think initially standpoint. to momentum a We with for OnX from needed was American very the platform. scale us important North gain

we have, the the is know further we there see that to smaller tuck-ins this products that ability think enhance on I services IT some of help nothing but immediate. side you point at have

to past the I with now and Hawaiian We that OnX complete constantly right integrating in working looking, on then mentioned focused we’re are as but merger.

the XX months. focus So within that's our next

Operator

take Bank question Barden America. next from of our We'll with David

David Barden

declined of result one bit the noting I a 'XX on and as the market entities of on you think cannot elevated guess longer-term basis? touched mitigation if it be, revenue big footprint, the something little of on first side, decline of you we that for on its elaborate the a you offset or blunt elaborate model you in would can I decline Thanks. And Charter a kind levels in carrier there does kind little would what some a that be that carrier are also macro out carrier the does if said had the that wondered guess your been a from there competition Leigh bit I the that. then I

Leigh Fox

would do comment. migration transitions, in we've increase soon, operator. operator. a that’s but of carriers continues Yes, I with very worst stop deal pricing decline that But but so seen last a networks. think see groom I we dip carrier 'XX would and mitigate mute say I On will consumer be obviously obviously that I'll start sort the complex good you make they this just kind pressure the declines. as to to to optimize There’s they’re continue a start the this their the pressure trajectory and as good they’re said past in We that expect of year. anytime trend think side, spectrum in competitive, the will don't declines help I macro to continue

you’re off I going think to of being in race effectively Cincinnati, standpoint trading horse the from sales. an Internet see two

is standpoint that important a with and are greater, but so out There's asset are better product we superior a provide product a achieve speed out been they that customers out change, great consistent. they from our big I been shouting you they but that no your we’re believe product. competitor do what's that's can having can think an focused mean company, have can our you I competitor us. I and consistently Ultimately shout and sell we are having they think customers on are the against they’ve I us been shouting

So we of ongoing think nature Warner bit I nature when they aggressive to standpoint of mode deal effectively consumer to aggressive a were charter. of went from the the transition from a Time a

able compete any being the I different see been moving So all and don't forward. and well that cycles through we've to

Andy Kaiser

they've thing entire the one have fiber footprint. that increasing would been advertising I where really our to David media campaign Leigh of metrics we add have sort we on strongest while their touched this, across a

see board. our we fiber-to-the-home product across incredibly we So the to them with are continue where competing metrics against strong

Leigh Fox

stay look investments you give product and the compete look included and that service need think trends and good we you line still one. the focused which product I to have need should that think in our we don't offer compete to us us to do that’s compete. in to good a bottom very a And I but on good macro product, the but I at to to a product you David have need include you we in industry have think be we

Operator

our UBS Batya Financial. We’ll question with Levi take from next

Batya Levi

follow-up Maybe on talk just for product. your longer-term a the and data about you for video from can Charter, competition expectations the penetration both

expected And and with data get still business. of XX% be video that Fioptics balance goals. XX% that north the is on the you maybe think of to XX% you I how profitability do had around to

on you year? provide on of mentioned the it’s for Another what presence you take volume you geographic can to business you high-end fiber I the think region? referring And were question optic I this as you. that? your to do you why expand on would had was would own more color need attract at And you range of CapEx, think the discounts, some you the segment, of data to Thank that advantage

Leigh Fox

is to I will lot I accurate. questions, hit think as I some to Tom you there what as over I can Andy pass color. your it On even then really So try relates rates, quoted will penetration of and the it question to first for here is maybe and many as

the look we is at how video. I only think that's changing thing

we've profitability but various and see also I trends being and more And because honestly transitioned that think viewing absorbed growing You content of an consumers that’s our the think increase video content. over from I there in cost the how I being priority. time. definitely affects over might and shift do are video know Internet I subs of last content how it And revenues first affect a think then is year video our to of absorbed. time should the

shifting advantage to the how at trends. looking are best We these of take

exactly going But challenging will that just seeing. don’t a be But will et partnerships know anything, I assumptions the you and to it et correct. Video comment bit on with is that say of Do little I would be we because change the Internet you're gradual, to you providers top I cetera think overnight. want think that? it weird So are over cetera. of are be

Tom Simpson

talking we trend a would Leigh's point, about to seeing add hockey not not, gradual. a you is, know are trend we I are and What it’s stick it's

only. moving portion anticipate, folks continue more of And your And margin as increased a you of seeing migrate, a we see from question video an you you margin, know to bundle see Internet. corresponding cost, from our you video content trend obviously there’s would folks would by shift ARPU from definitive video but to including are a know decline folks the to We as huge to answer expense. the Internet way

Leigh Fox

we question, capital to I would line I very your why? capital On think different next still we be But got right super for haven't maintain a think that to that first be in determined important will this the I consistent. going we've and we don't future. the will I be that And platform wildly, in talk call. line is, quarter year. want more don't consistent the think we’ll it's think we stay happening expect about build bottom that. but are now year We lot to a we and

increase what you that’s the see coming. in wild out expect capital. I I thing expenditures to that don't only a statement again, capital So should a know in don’t take

fiber the know territory think need these fiber the of to we've you see the and out products business moving that really I don't got the in On own with we most to to script, businesses, of that mentioned of defined the of you a I our for nice platforms managing are benefits business historic capabilities know opportunity one some products out territory. I a software I a and think grow front, now products have,

a historically going such our having footprint, where small I that's advantage. to its work think

more it’s upside I Is helpful? of think the buckets new folks and us that cannibalized it’s defined where for revenue to are see for products being going of a a lot by downside us. not software much these traditional exposure as on lot big

Batya Levi

you. thank Yes,

Tom Simpson

to to our we the think guiding I are higher is, started CapEx to you I The And add thing think specific range. of would end towards asked you that this. only say why I

volume discounts find We the are absolutely and year, term looking can every to do for those. extent we we as opportunities

Again likely CapEx. in the the that of cannot are mid-range. we high-end to probably the We towards guiding extent

Operator

take next Company. from with question & will Sergey Gabelli We Dluzhevskiy our

Sergey Dluzhevskiy

could. I if questions, Two

Leigh you that your one the past may broadband of interest be smaller about as be as First scale, subpart but could would areas you And of businesses a question that on and growth markets next you. your possibly products that question is exist drivers the as growth business of at for Hawaiian IT most And show IT over Telecom. could proximity broad my are second sounds could promise there UCAS as kind Telecom, sounds of Cincinnati. pro at in philosophy. what mentioned M&A your your of on, move consumer five talk of portfolio, pro drivers years? M&A of there question and some interest a look their do that on even you you fiber, they for Hawaiian other if needle looking services and this are you bit as forma be see what services and any one you consumer forma services close as look look to meaningful is, to you Do of around little fiber a

Leigh Fox

On they right for. be price. are look but us, closer front, lot assets that's is is variables. my the right M&A of pricing process a the that right M&A to got complicated be you and the and right and have we for around a looking the assets There very keep what to fiber and assets philosophy are us And assets there the combines they've

what's price. complex the a and from available I fairly and looking side have the But looking look aggressive and look around complete on. you being given I open keep us, focus right the us probability folks low maybe that's at in and asset the opportunities it’s asset for at me put it really just to challenging, of on is but be to happening to look have looking you from there find opportunities. than I a for much to that so assets up what isn’t near gets more opens keep were brings little that that's at are it stuff up why standpoint that’s see those everything level And right What know again the to price the speculation. and more are more big right I standpoint the do different and There a we at you macro network got future efforts maybe right maybe, are but to don't right my

big For obviously for product IT services, a us. UCAS is

product think that migration more that. quite get a to business will national America we and growing I companies that us from services professional into professional is solve something problems. offering standpoint help for be think cloud smart do services a services at our now we with people we're I look if you a extremely of and smart OnX, a and very good people job with that’s robust have a standpoint lot we from North got impressed we’ve and expanded and across

got money save and as these in get we’re this about mentioned so for been that's SD-WAN or think them solutions products plus - are for pretty looking in I I excited deal reliable migrate providers our Network-as-a-Service same then so for one and more the product doing services a really these with new lot while defined saving many Solutions, better of a mentioned really momentum than and we're telephone products And service seeing money. looking they're to companies migrations, to customers also what we XXX nice help reliable SD-WAN, the script year-old who legacy is I NaaS years. And our that ones other as really The are software there. new

solutions. excited pretty about So we’re those

Operator

Sine our next from with Barry take Drexel question Hamilton. We'll

Barry Sine

related all like OnX, revenue Could the five sense your looks product First services IT its composition. you what the of like of OnX an legacy OnX much sales categories of same give on I on update us business you breakout think us your a on headcount that result looks that's as transaction? on grown give a and of breakout could force then how what and combined you

Leigh Fox

one I'm to answer. going toss this to over Barry actually to Andy

Andy Kaiser

So percent from of roughly XX% from the revenue a product mix hardware. of comes XX perspective I'd revenue the say plus

customers. they're is was that to the them one call. things with high of been good to and liked acquisition talking bring about services in that not have and And been relationships simply unable they've provide really OnX quality to customers. have are very about But hardware been many offering They've perspective, very able so long actually there some but deep they we the that the got from this services a big that we products the of

solutions it From XX again roughly these U.S. their across and customers. So on effectively hardware. is located solutions very plus and XX SD-WAN, they and Canada brings plus based, a But bring UCAS Network-as-a-Service, are locations. to and excited be XXX increase percent additional the approximately currently employees able to they branch are their employee across to in mix

Barry Sine

I if to side over the telco And of turn the could business.

think Cincinnati. about coverage mentioned Greater Fioptics You I in XX%

that's might decline mitigate economically something The us could How there could covered, guess give other the you you not that of comes the your what thinking improve in can is that and update that that my overall of get most just is? timeframe rate. over to growth you many an so revenue to XX% if do year turn what and in XX%,

Tom Simpson

networks. penetration. pass, of where and the fiber And fiber in certainly win with can core in XX% XX% a you to tell see look neighborhood fiber built is in as standpoint, fiber we at point actually the service that that again got we we that that we the metro we can some I the with area overbuild is we of returns a from the achieve see

Barry Sine

ultimately to would the would copper-based get XX% to that remain network. you So range XX% in somewhere

Tom Simpson

and achieve can very predominantly to areas rural comparable in the to household very areas fiber the would And that network extend have very, some houses per close that where and very mile can low entities speeds. we still we node be those the you

Lastly exploring the to technologies fiber achieve spectrums apartments we complexes, in of is the G.fast but north which MDU areas spectrum's inside a and effectively are the i.e. still building prim copper bandwidth capability. to

Barry Sine

And to XX%? any timeframe getting on that XX%

Tom Simpson

look continuing to We’re it. at

that We’re it's pace to us at. build at planning going build the range current to within the we're there now but get the right

that. You'll see a bit more of

Andy Kaiser

to add I’ll Barry And on that.

leverage. it, we heard will but would Leigh you will out several do happen XX% to to getting without look you say to over build to we say, XX% the years, As the increasing so continue continue next years, invest, we next the likely heard two over me

So fairly efficient well we think give doors it probably year this of number next a that the pass We're we out years build do to would to works a have looking three strategy. of it's looking of couple to methodical and to out way pretty that years, the in XX%. the get XX%

Operator

this Fox closing It like I’d or at are to additional to remarks. further questions the time. for appears conference there back Leigh any turn no

Leigh Fox

forward thank all of of And for peers it's Cincinnati look can in closing the are Bell very the guys you the been I both I about support. network you months In at Have to to for for the next few all and continued your business - IT us just want both you day. and services excited our and that business. Thanks. fiber a again to direction quarter. potential very interest talking your company I tell busy a in guys for great

Operator

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

may disconnect. You now

Cincinnati Bell (BDWGP) 2 Nov 172017 Q3 Earnings call transcript