CNSL - Consolidated Communications Reports Third Quarter 2019 Results

MATTOON, Ill., Oct. 31, 2019 (GLOBE NEWSWIRE) -- Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) (the “Company”) reported results for the third quarter 2019 and will hold a conference call and simultaneous webcast to discuss its results and developments today at 10 a.m. ET.

Third Quarter 2019 Financial Summary:

• Revenue totaled $333.3 million
• Net cash from operating activities was $85.4 million
• Adjusted EBITDA was $131.0 million

Third Quarter 2019 Operational Summary:

• Fiber connections for wireless carriers under contract increased 4 percent year over year
• Ethernet revenues increased 4 percent year over year
• Consumer broadband revenue grew more than 2 percent year over year

“We are executing on our capital allocation plan and have reduced our total debt during the quarter by $26 million,” said Bob Udell, president and chief executive officer of Consolidated Communications. “We are intensely focused on achieving our deleveraging goal of less than 4.0x net debt to adjusted EBITDA in advance of refinancing our unsecured debt by mid-2021.”

“We’re pleased to achieve another quarter of stable and consistent adjusted EBITDA and revenue,” added Udell. “And, we are particularly pleased with the performance of our carrier and consumer channels, both of which demonstrated growth in strategic areas. Our fiber connections to wireless carriers increased 4 percent year over year and consumer broadband revenue grew more than 2 percent compared to a year ago.”

Financial Results for the Third Quarter   

• Revenues totaled $333.3 million, compared to $348.1 million for the third quarter of 2018, a decline of $14.8 million. After normalizing for the sale of the Virginia properties in July 2018, revenue declined $14.3 million or 4.1 percent for the quarter.
  
  
  • Commercial and carrier data and transport service revenue increased 1.3 percent or $1.1 million on a comparable basis from a year ago.
  • Consumer broadband revenue increased 2.5 percent or $1.6 million compared to a year ago.
  • Voice services revenue across all customer channels declined $8.8 million compared to a year ago.
  • Subsidies decreased $1.2 million during the quarter, due to the final CAF step down in transitional revenues. Network access revenues declined $3.9 million compared to a year ago.
     
• Income from operations increased to $23.5 million compared to $748,000 in the third quarter of 2018. The change was primarily due to operating expense reductions of $21.5 million offsetting revenue declines. The operating expense decline was largely due to reductions in salaries, benefits and restructuring and integration costs. Depreciation and amortization expense declined by $16.1 million primarily due to acquired assets with a short remaining useful life becoming fully depreciated.
  
  
• Interest expense, net was $34.3 million, compared to $33.5 million for the same period last year. After giving effect to interest rate swap agreements, as of Sept. 30, our weighted average cost of debt was approximately 5.7 percent.
  
  
• Cash distributions from the Company’s wireless partnerships totaled $10.9 million for the third quarter compared to $8.1 million for the prior year period.   
  
  
• Other income, net was $11.2 million, compared to $9.0 million in the third quarter of 2018, due to higher income from the Company’s minority interest in wireless partnerships.
  
  
• On a GAAP basis, net income was $389,000, compared to a net loss of $14.8 million for the same period last year. GAAP net income per share was $0.0. Adjusted diluted net income (loss) per share excludes certain items as outlined in the table provided in this release. Adjusted diluted net income per share was $0.06 in the third quarter of 2019, compared to a net loss per share of ($0.09) in the third quarter of 2018. 
  
  
• Adjusted EBITDA was $131.0 million compared to $133.7 million in the third quarter last year.
  
  
• The total net debt to last 12-month adjusted EBITDA ratio was 4.39x, an improvement over the prior quarter primarily due to the retirement of over $23 million senior unsecured notes at par value, in addition to the scheduled principal payment on the term loan.
  
  
• Capital expenditures remained elevated for the quarter totaling $64.6 million, due to seasonal construction, expenditures associated with hurricane restoration and increased consumer and broadband network investments.

Financial Guidance

The Company is affirming its previous 2019 full-year guidance for:

• Cash interest expense in the range of $130 million to $135 million
• Cash income taxes⁽¹⁾ in a range of $1 million to $3 million
• Adjusted EBITDA in a range of $520 million to $525 million 

The Company is increasing its Capital expenditure guidance for 2019 from $210 million to $220 million to a range of $220 million to $225 million. This change reflects the estimates of final hurricane restoration costs and updated success-based capital. With insurance recoveries for storm damage, the modest increase in capital expenditures will not impact the Company’s ability to achieve its stated leverage targets.

Conference Call Information

Consolidated Communications will host a conference call and webcast today at 10 a.m. ET / 9 a.m. CT to discuss third quarter earnings and developments. The live webcast and replay can be accessed from the Investor Relations section of the Company’s website at http://ir.consolidated.com. The live conference call dial-in number is 1-877-374-3981, conference ID 5824024. A telephonic replay of the conference call will be available through Nov. 7 and can be accessed by calling 1-855-859-2056, conference ID 5824024.  
 
About Consolidated Communications 

Consolidated Communications Holdings, Inc. (NASDAQ: CNSL) is a leading broadband and business communications provider serving consumers, businesses, and wireless and wireline carriers across rural and metro communities and a 23-state service area. Leveraging an advanced fiber network spanning 37,000 fiber route miles, Consolidated Communications offers a wide range of communications solutions, including: high-speed Internet, data, phone, security, managed services, cloud services and wholesale, carrier solutions. From our first connection 125 years ago, Consolidated is dedicated to turning technology into solutions, connecting people and enriching how they work and live. Visit www.consolidated.com for more information.

Use of Non-GAAP Financial Measures                         

This press release, as well as the conference call, includes disclosures regarding “EBITDA,” “adjusted EBITDA” and “total net debt to last twelve month adjusted EBITDA ratio” and “adjusted diluted net income (loss) per share,” all of which are non-GAAP financial measures and described in this section as not being in compliance with Regulation S-X.  Accordingly, they should not be construed as alternatives to net cash from operating or investing activities, cash and cash equivalents, cash flows from operations, net income or net income per share as defined by GAAP and are not, on their own, necessarily indicative of cash available to fund cash needs as determined in accordance with GAAP. In addition, not all companies use identical calculations, and the non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.  A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable financial measures presented in accordance with GAAP is included in the tables that follow.

Adjusted EBITDA is comprised of EBITDA, adjusted for certain items as permitted or required by the lenders under our credit agreement in place at the end of each quarter in the periods presented.  The tables that follow include an explanation of how adjusted EBITDA is calculated for each of the periods presented with the reconciliation to net income.  EBITDA is defined as net earnings before interest expense, income taxes, depreciation and amortization on a historical basis.                                              

We present adjusted EBITDA for several reasons.  Management believes adjusted EBITDA is useful as a means to evaluate our ability to fund our estimated uses of cash (including interest on our debt). In addition, we have presented adjusted EBITDA to investors in the past because it is frequently used by investors, securities analysts and other interested parties in the evaluation of companies in our industry, and management believes presenting it here provides a measure of consistency in our financial reporting. Adjusted EBITDA, referred to as Available Cash in our credit agreement, is also a component of the restrictive covenants and financial ratios contained in our credit agreement that requires us to maintain compliance with these covenants and limit certain activities, such as our ability to incur debt.  The definitions in these covenants and ratios are based on adjusted EBITDA after giving effect to specified charges.  In addition, adjusted EBITDA provides our board of directors with meaningful information, with other data, assumptions and considerations, to measure our ability to service and repay debt.  We present the related “total net debt to last twelve month adjusted EBITDA ratio” principally to put other non-GAAP measures in context and facilitate comparisons by investors, security analysts and others; this ratio differs in certain respects from the similar ratio used in our credit agreement.  These measures differ in certain respects from the ratios used in our senior notes indenture. 

These non-GAAP financial measures have certain shortcomings.  In particular, adjusted EBITDA does not represent the residual cash flows available for discretionary expenditures, since items such as debt repayment and interest payments are not deducted from such measure.  Because adjusted EBITDA is a component of the ratio of total net debt to last twelve month adjusted EBITDA, these measures are also subject to the material limitations discussed above.  In addition, the ratio of total net debt to last twelve month adjusted EBITDA is subject to the risk that we may not be able to use the cash on the balance sheet to reduce our debt on a dollar-for-dollar basis. Management believes this ratio is useful as a means to evaluate our ability to incur additional indebtedness in the future. 

We present the non-GAAP measure “adjusted diluted net income (loss) per share” because our net income (loss) and net income (loss) per share are regularly affected by items that occur at irregular intervals or are non-cash items.  We believe that disclosing these measures assists investors, securities analysts and other interested parties in evaluating both our company over time and the relative performance of the companies in our industry.

Safe Harbor

The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions.  Certain statements in this communication are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995.  These forward-looking statements reflect, among other things, our current expectations, plans, strategies, and anticipated financial results.  There are a number of risks, uncertainties, and conditions that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements.  These risks and uncertainties include a number of factors related to our business, including economic and financial market conditions generally and economic conditions in our service areas;  various risks to the price and volatility of our common stock; changes in the valuation of pension plan assets; the substantial amount of debt and our ability to repay or refinance it or incur additional debt in the future; our need for a significant amount of cash to service and repay the debt  restrictions contained in our debt agreements that limit the discretion of management in operating the business; regulatory changes, including changes to subsidies, rapid development and introduction of new technologies and intense competition in the telecommunications industry; risks associated with our possible pursuit of acquisitions; system failures; cyber-attacks, information or security breaches or technology failure of ours or of a third party; losses of large customers or government contracts; risks associated with the rights-of-way for the network; disruptions in the relationship with third party vendors; losses of key management personnel and the inability to attract and retain highly qualified management and personnel in the future; changes in the extensive governmental legislation and regulations governing telecommunications providers and the provision of telecommunications services; new or changing tax laws or regulations; telecommunications carriers disputing and/or avoiding their obligations to pay network access charges for use of our network; high costs of regulatory compliance; the competitive impact of legislation and regulatory changes in the telecommunications industry; and liability and compliance costs regarding environmental regulations; and risks associated with discontinuing paying dividends on our common stock. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements are discussed in more detail in our filings with the SEC, including our reports on Form 10-K and Form 10-Q.  Many of these circumstances are beyond our ability to control or predict.  Moreover, forward-looking statements necessarily involve assumptions on our part.  These forward-looking statements generally are identified by the words “believe,” “expect,” “anticipate,” “estimate,” “project,” “intend,” “plan,” “should,” “may,” “will,” “would,” “will be,” “will continue” or similar expressions.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Consolidated Communications Holdings, Inc. and its subsidiaries to be different from those expressed or implied in the forward-looking statements.  All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements that appear throughout this communication.  Furthermore, forward-looking statements speak only as of the date they are made.  Except as required under the federal securities laws or the rules and regulations of the SEC, we disclaim any intention or obligation to update or revise publicly any forward-looking statements.  You should not place undue reliance on forward-looking statements.

Company Contact                                                                      

Jennifer Spaude, Consolidated Communications
Phone:  (844)-909-CNSL (2675)
Jennifer.Spaude@consolidated.com