Attached files
| file | filename |
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| EX-99.1 - Q3 2016 EARNINGS RELEASE - CINCINNATI BELL INC | earningsreleaseq32016.htm |
| 8-K - CINCINNATI BELL INC. 8-K - CINCINNATI BELL INC | a8-kearningsreleaseshellq3.htm |
Cincinnati Bell
Third Quarter 2016 Results
November 2, 2016
Today's Agenda
Highlights, Segment Results and Financial Overview
Ted Torbeck, Chief Executive Officer
Question & Answer
2
Safe Harbor
This presentation and the documents incorporated by reference herein contain forward-looking statements regarding
future events and our future results that are subject to the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995. All statements, other than statements of historical facts, are statements that could be
deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and
projections about the industries in which we operate and the beliefs and assumptions of our management. Words
such as “expects,” “anticipates,” “predicts,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,”
“continues,” “endeavors,” “strives,” “may,” variations of such words and similar expressions are intended to identify
such forward-looking statements. In addition, any statements that refer to projections of our future financial
performance, our anticipated growth and trends in our businesses, and other characterizations of future events or
circumstances are forward-looking statements. Readers are cautioned these forward-looking statements are based
on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual
results to differ materially and adversely from those reflected in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to, those discussed in this release and those
discussed in other documents we file with the Securities and Exchange Commission (SEC). More information on
potential risks and uncertainties is available in our recent filings with the SEC, including Cincinnati Bell’s Form 10-K
report, Form 10-Q reports and Form 8-K reports. Actual results may differ materially and adversely from those
expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking
statements for any reason.
3
Non-GAAP Financial Measures
This presentation contains information about adjusted earnings before interest, taxes, depreciation and amortization
(Adjusted EBITDA), Adjusted EBITDA margin, net debt and free cash flow. These are non-GAAP financial measures
used by Cincinnati Bell management when evaluating results of operations and cash flow. Management believes
these measures also provide users of the financial statements with additional and useful comparisons of current
results of operations and cash flows with past and future periods. Non-GAAP financial measures should not be
construed as being more important than comparable GAAP measures. Detailed reconciliations of Adjusted EBITDA,
net debt and free cash flow (including the Company’s definition of these terms) to comparable GAAP financial
measures can be found in the earnings release on our website at www.cincinnatibell.com within the Investor
Relations section.
4
Ted Torbeck
Chief Executive Officer
5
Highlights and Financial Overview
$185
$68
$117
$10
$(1)$(2)
$193
$69
$123
$12
$(3)$(4)
6
Entertainment & Communications IT Services & Hardware Eliminations Corporate
Revenue RevenueAdjusted
EBITDA
(Non-GAAP)
Adjusted
EBITDA
(Non-GAAP)
$300
$312
$77 $78
Q3 2015 Q3 2016
▪ Consolidated Revenue for the quarter totaled $312
million, increasing $12 million compared to prior year
Revenue from strategic products totaled $163
million, up 18% compared to the prior year
▪ Strong third quarter Adjusted EBITDA of $78 million,
up slightly over the prior year
▪ Net income totaled $19 million during the third
quarter, resulting in diluted EPS of $0.38
▪ Issued $425 million of 7% Senior Notes due 2024
Proceeds used to redeem 8 3/8% Senior Notes
due 2020
Third Quarter 2016 Highlights
($ in millions)
__
__
Revenue Adj. EBITDA (Non-GAAP) Adj. EBITDA Margin (Non-GAAP)
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
$185 $188 $190 $192 $193
$68 $69 $72 $72 $69
37% 37%
38% 38%
36%
Entertainment & Communications Revenue and Adjusted EBITDA
7
▪ Strategic revenues for the quarter totaled $114
million, up 22% year-over-year
▪ Operating income totaled $21 million in the
quarter, compared to $30 million in the prior year
▪ Adjusted EBITDA totaled $69 million in the third
quarter, resulting in Adjusted EBITDA margins of
36%
▪ Total internet subscribers of 299,800 at the end of the third
quarter, up 18,500 subs compared to a year ago
▪ Voice line loss was 1% – improved from 4% in the prior year
Business lines increased 4%
Residential line decreased 7%
__
__
($ in millions)
Legacy IntegrationStrategic
[1]
8
Q3 2015 Q3 2016
$44 $50
$56 $48
Entertainment & Communications Business & Consumer Markets
$101 $98
Business & Carrier Market Revenue
Entertainment & Communications Business Integration revenue totaled $1 million in Q3 2015
Entertainment & Communications Consumer Integration revenue totaled $1 million in Q3 2015 and Q3 2016
[1]
Consumer Market Revenue
Q3 2015 Q3 2016
$49 $64
$34
$30
$84
$95
▪ Fioptics revenue growth continues to more than offset legacy
declines
▪ Business revenue totaled $72 million, consistent with the prior
year
▪ Carrier revenue was $26 million, down $3 million from 2015
FCC switched access rate reductions
Network efficiency initiatives by national wireless
carriers
($ in millions)
Y/Y
(14)%
14%
Y/Y
(12)%
31%
__
__
▪ Fioptics is available to 510 thousand addresses, or 64% of
Greater Cincinnati
Passed 31 thousand new addresses in Q3 2016
Expect to pass 95 thousand new address in 2016
▪ Fioptics Penetration:
Video – 26%, Internet – 36%, Voice – 18%
▪ Total video churn was 2.9% for the quarter
Single-family churn was 2.1%
Apartment churn was 5.4%
▪ Fioptics monthly ARPU for the quarter was up approximately
5% from 2015. Q3 2016 ARPUs are as follows:
Video – $83, Internet – $47, Voice – $28
9
Q3 2015 Q3 2016
$25
$32
$18
$26$6
$7
$49
$65
Fioptics Update
Fioptics Revenue
Total Fioptics Subscribers
Video Internet Voice
__
__
__
($ in millions) Y/Y
17%
44%
28%
Q3 2015 Q3 2016
109
133144
186
73 91
(in thousands)
__
Strategic Revenue Integration Revenue Adj. EBITDA (Non-GAAP) Adj. EBITDA Margin (Non-GAAP)
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016
$46 $48 $48 $49 $51
$71 $56 $55 $61
$72
$10 $9 $10 $10 $12
9% 9% 10% 9% 9%
IT Services & Hardware Revenue and Adjusted EBITDA
10
▪ Revenue of $123 million for Q3 2016, up 5% from Q3 2015
Strategic Revenues totaled $51 million in Q3 2016, up 10%
compared to the prior year
Telecom & IT hardware revenue of $66 million for Q3 2016 was
up from $65 million in the prior year
▪ Operating income and Adjusted EBITDA for the
quarter totaled $8 million and $12 million,
respectively
▪ Adjusted EBITDA margin was 9%, consistent with a
year ago
$117
$104 $103
$110
$123
__
__
($ in millions)
Q3 2016 Cash Flow and Capital Expenditures
Free Cash Flow (Non-GAAP)
Capital Expenditures
Q3 2016 YTD 2016
Adjusted EBITDA (Non-GAAP) $ 78 $ 231
Interest Payments (17) (59)
Capital Expenditures (67) (189)
Pension and OPEB Payments (3) (8)
Dividends from CyrusOne 1 6
Working Capital and Other (13) (20)
Free Cash Flow (Non-GAAP) $ (21) $ (39)
Selected 2016 Free Cash Flow Items
▪ CyrusOne dividends ~ $7 million
▪ Capital expenditures: $280 - $290 million
▪ Interest payments ~ $75 million
▪ Pension and OPEB payments ~ $12 million
Q3 2016 YTD 2016
Construction $ 22 $ 59
Installation 19 40
Value Added 2 13
Total Fioptics $ 43 $ 112
Other Strategic 12 44
Discretionary Investments 55 156
Maintenance 12 33
$ 67 $ 189
11
($ in millions)
Cash Flow
Q3 2016 YTD 2016
Operating Activities $ 44 $ 142
Investing Activities (118) (93)
Financing Activities 73 (48)
Change in Cash (1) 1
[1]
[1]
Increased due to passing addresses more efficiently than originally estimated and to capitalize on continued strong
demand for Fioptics. Revised plan to pass 95 thousand addresses in 2016, up from original estimate of 70 thousand.
2016 Guidance
2016 Guidance
Revenue $ 1.2 billion
Adjusted EBITDA $303 million*
* Plus or minus 2 percent
12
Appendix
13
Consolidated Results
($ in millions, except per share amounts) Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Revenue $ 312.4 $ 299.8 $ 900.5 $ 878.5
Costs and expenses
Cost of services and products 183.8 175.6 517.3 504.0
Selling, general and administrative 55.5 52.5 164.9 161.7
Depreciation and amortization 46.5 35.8 134.7 102.4
Other 1.1 (0.3) 1.1 7.4
Operating Income 25.5 36.2 82.5 103.0
Interest expense 17.9 21.5 58.1 82.2
Loss on extinguishment of debt, net 11.4 7.8 14.2 21.3
Gain on sale of CyrusOne investment (33.3) (117.7) (151.9) (412.9)
Other (income) expense, net (0.1) 1.2 (1.2) 6.0
Income from continuing operations before income taxes 29.6 123.4 163.3 406.4
Income tax expense 10.8 44.1 59.9 146.1
Income from continuing operations 18.8 79.3 103.4 260.3
Income from discontinued operations, net of tax — 1.0 — 60.8
Net income 18.8 80.3 103.4 321.1
Preferred stock dividends 2.6 2.6 7.8 7.8
Net income applicable to common shareholders $ 16.2 $ 77.7 $ 95.6 $ 313.3
Basic net earnings per common share
Earnings from continuing operations $ 0.39 $ 1.83 $ 2.28 $ 6.03
Earnings from discontinued operations — 0.02 — 1.45
Basic net earnings per common share $ 0.39 $ 1.85 $ 2.28 $ 7.48
.
Diluted net earnings per common share
Earnings from continuing operations $ 0.38 $ 1.83 $ 2.27 $ 6.01
Earnings from discontinued operations — 0.02 — 1.45
Diluted net earnings per common share $ 0.38 $ 1.85 $ 2.27 $ 7.46
14
Revenue Classifications - Entertainment and Communications
Strategic Legacy Integration
Data
Voice
Video
Services and Other
Fioptics Internet
DSL (1) (> 10 meg)
Ethernet
Private Line
MPLS (2)
SONET (3)
Dedicated Internet Access
Wavelength
Audio Conferencing
Fioptics Voice
VoIP (4)
Fioptics Video
Wiring Projects
DSL (< 10 meg)
DS0 (5), DS1, DS3
TDM (6)
Traditional Voice
Long Distance
Switched Access
Digital Trunking
Advertising
Directory Assistance
Maintenance
Information Services
Wireless Handsets and
Accessories
15
(1) Digital Subscriber Line
(2) Multi-Protocol Label Switching
(3) Synchronous Optical Network
(4) Voice of Internet Protocol
(5) Digital Signal
(6) Time Division Multiplexing
Revenue Classifications - IT Services and Hardware
Professional Services
Unified Communications
Cloud Services
Monitoring and Management
Telecom & IT Hardware
Strategic Integration
Consulting
Staff Augmentation
Voice Monitoring
Managed IP Telephony Solutions
Virtual Data Centers
Storage
Backup
Network Monitoring/Management
Security
Installation
Maintenance
Hardware
Software Licenses
16
Revenue – MD&A Strategic, Legacy and Integration
($ in millions) Q3 2016
Entertainment and
Communications
IT Services and
Hardware Total Eliminations Total
Strategic
Data $ 62.1 $ —
Voice 18.7 —
Video 32.2 —
Services and other 1.4 —
Professional services — 22.9
Management and monitoring — 8.1
Unified communications — 7.3
Cloud services — 12.2
Total Strategic 114.4 50.5 164.9 (2.1) 162.8
Legacy
Data $ 24.3 $ —
Voice 50.0 —
Services and other 3.0 —
Total Legacy 77.3 — 77.3 (0.3) 77.0
Integration
Services and other $ 1.3 $ —
Professional services — 3.6
Unified communications — 2.6
Telecom and IT hardware — 66.2
Total Integration 1.3 72.4 73.7 (1.1) 72.6
$ 193.0 $ 122.9 $ 315.9 $ (3.5) $ 312.4
Eliminations 0.4 3.1 3.5
Total Revenue $ 192.6 $ 119.8 $ 312.4
17
Revenue – MD&A Strategic, Legacy and Integration
($ in millions) Q3 2015
Entertainment and
Communications
IT Services and
Hardware Total Eliminations Total
Strategic
Data $ 50.8 $ —
Voice 15.7 —
Video 25.0 —
Services and other 2.0 —
Professional services — 23.0
Management and monitoring — 8.0
Unified communications — 6.9
Cloud services — 8.1
Total Strategic 93.5 46.0 139.5 (1.9) 137.6
Legacy
Data $ 30.5 $ —
Voice 56.4 —
Services and other 3.2 —
Total Legacy 90.1 — 90.1 (0.2) 89.9
Integration
Services and other $ 1.8 $ —
Professional services — 3.7
Unified communications — 2.6
Telecom and IT hardware — 64.7
Total Integration 1.8 71.0 72.8 (0.5) 72.3
$ 185.4 $ 117.0 $ 302.4 $ (2.6) $ 299.8
Eliminations 0.2 2.4 2.6
Total Revenue $ 185.2 $ 114.6 $ 299.8
18
Revenue – MD&A Strategic, Legacy and Integration
($ in millions) YTD Q3 2016
Entertainment and
Communications
IT Services and
Hardware Total Eliminations Total
Strategic
Data $ 181.0 $ —
Voice 53.8 —
Video 92.1 —
Services and other 4.1 —
Professional services — 68.3
Management and monitoring — 24.1
Unified communications — 22.1
Cloud services — 33.2
Total Strategic 331.0 147.7 478.7 (6.7) 472.0
Legacy
Data $ 77.4 $ —
Voice 154.2 —
Services and other 8.9 —
Total Legacy 240.5 — 240.5 (0.7) 239.8
Integration
Services and other $ 4.3 $ —
Professional services — 11.6
Unified communications — 8.0
Telecom and IT hardware — 167.9
Total Integration 4.3 187.5 191.8 (3.1) 188.7
$ 575.8 $ 335.2 $ 911.0 $ (10.5) $ 900.5
Eliminations 1.0 9.5 10.5
Total Revenue $ 574.8 $ 325.7 $ 900.5
19
Revenue – MD&A Strategic, Legacy and Integration
($ in millions) YTD Q3 2015
Entertainment and
Communications
IT Services and
Hardware Total Eliminations Total
Strategic
Data $ 147.1 $ —
Voice 45.9 —
Video 69.3 —
Services and other 5.2 —
Professional services — 67.1
Management and monitoring — 22.9
Unified communications — 20.1
Cloud services — 21.2
Total Strategic 267.5 131.3 398.8 (6.2) 392.6
Legacy
Data $ 94.2 $ —
Voice 175.4 —
Services and other 10.4 —
Total Legacy 280.0 — 280.0 (0.5) 279.5
Integration
Services and other $ 8.4 $ —
Professional services — 10.7
Unified communications — 8.1
Telecom and IT hardware — 180.8
Total Integration 8.4 199.6 208.0 (1.6) 206.4
$ 555.9 $ 330.9 $ 886.8 $ (8.3) $ 878.5
Eliminations 0.9 7.4 8.3
Total Revenue $ 555.0 $ 323.5 $ 878.5
20