Attached files
| file | filename |
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| 8-K - CINCINNATI BELL INC. 8-K - CINCINNATI BELL INC | a8-kearningsreleaseshellq1.htm |
| EX-99.1 - Q1 2017 EARNINGS RELEASE - CINCINNATI BELL INC | earningsreleaseq12017.htm |
Cincinnati Bell
First Quarter 2017 Results
May 9, 2017
Today's Agenda
Highlights, Segment Results and Financial Overview
Leigh Fox, President & Chief Operating 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
Leigh Fox
President & Chief Operating Officer
5
Highlights and Financial Overview
$190
$72
$103
$10
$(5)$(4)
$195
$70
$86
$6
$(5)$(3)
6
Entertainment & Communications IT Services & Hardware Eliminations Corporate
Revenue RevenueAdjusted
EBITDA
(Non-GAAP)
Adjusted
EBITDA
(Non-GAAP)
$289
$77
Q1 2016 Q1 2017
▪ Decline in consolidated revenue due primarily to
lower margin Telecom and IT hardware sales
offsetting strategic revenue growth
▪ Revenue from strategic products totaled $165 million,
up $13 million compared to the prior year
▪ Adjusted EBITDA in line with expectations
▪ Net Income totaled $60 million for the quarter,
resulting in diluted EPS of $1.37
▪ Sold our remaining 2.8 million shares of CyrusOne for
proceeds of $141 million, resulting in a $118 million
gain
First Quarter 2017 Highlights
($ in millions)
$278
$71
Revenue Adj. EBITDA (Non-GAAP) Adj. EBITDA Margin (Non-GAAP)
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
$190 $192 $193 $193 $195
$72 $72 $69 $70 $70
38% 38%
36% 36% 36%
Entertainment & Communications Revenue and Adjusted EBITDA
7
▪ Strategic revenues for the quarter totaled $123
million, up 16% year-over-year
▪ Cost-out initiatives resulted in restructuring and
employee severance charges of $26 million, creating
a $2 million operating loss for the quarter
▪ Adjusted EBITDA for the quarter is consistent with
the prior year after excluding the non-cash post-
retirement amortization adjustment ending in 2016
▪ Total internet subscribers of 307,400 at the end of the first
quarter, up 15,000 subs compared to a year ago
▪ Voice lines totaled 516,900, decreasing 2% from the prior
year
Business lines increased 1%
Residential line decreased 8%
__
__
($ in millions)
Legacy IntegrationStrategic
[1]
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Entertainment & Communications Consumer Market
Entertainment & Communications Consumer Integration revenue totaled $1 million in Q1 2016[1]
Consumer Market Revenue
Q1 2016 Q1 2017
$58 $72
$33
$28
$92
▪ Fioptics revenue growth continues to more than offset legacy declines
($ in millions)
Y/Y
(15)%
23%
Fioptics Revenue
Q1 2016 Q1 2017
$29 $36
$22
$30$7
$8
Video Internet Voice
$58
Y/Y
24%
36%
14%
$100 $74
Q1 2016 Q1 2017
120
141
165
207
83
100
▪ Fioptics is available to 545,200 addresses -
approximately 68% of Greater Cincinnati
▪ Fioptics Penetration:
Video – 26%, Internet – 38%, Voice – 18%
▪ Fioptics monthly ARPU for the quarter was up
approximately 3% from Q1 2016. Q1 2017 ARPUs are
as follows:
Video – $86, Internet – $49, Voice – $27
▪ Video churn was 2.4% for the quarter - consistent
with the prior year
Single-family churn was 2.0%
Apartment churn was 3.8%
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Fioptics Update
Video Internet Voice
(in thousands)
Total Fioptics Subscribers
__
__
__
__
▪ Business revenue decreased slightly compared
to a year ago
Transitioning customers from copper network to strategic
fiber-based products continues
LegacyStrategic
10
Q1 2016 Q1 2017
$37 $41
$35 $30
Entertainment & Communications Business and Carrier Market
$72
Business Market Revenue Carrier Market Revenue
Q1 2016 Q1 2017
$11 $10
$15 $14
$26
▪ Carrier revenue decreased year-over-year due to:
On-going FCC switched access rate reductions
National carriers increased focus on reducing costs
($ in millions)
Y/Y
(13)%
11%
Y/Y
(11)%
(3)%
$71
$24
__
__
__
Strategic Revenue Integration Revenue Adj. EBITDA (Non-GAAP) Adj. EBITDA Margin (Non-GAAP)
Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017
$48 $49 $51 $49 $44
$55 $61
$72
$46
$42
$10 $10 $12 $8 $6
10% 9% 9% 9%
7%
IT Services & Hardware Revenue and Adjusted EBITDA
11
▪ Revenue of $86 million for Q1 2017, down $16 million from
Q1 2016
Telecom & IT hardware revenue decreased year-over-year due to
the cyclical nature of these transactions and customers shifting to
the cloud
Strategic revenues were down compared to the prior year as in-
sourcing of IT professionals within our market continues
▪ Operating income and Adjusted EBITDA decreased
year-over-year due to:
Declines in revenue
Increased costs to expand national footprint
▪ Acquired SunTel Services - expanding CBTS' presence
into the Michigan market
__
__
($ in millions)
$103
$110
$123
$95
$86
__
__
Q1 2017 Free Cash Flow
Q1 2017
Adjusted EBITDA (Non-GAAP) $ 71
Interest Payments (18)
Pension and OPEB Payments (3)
Stocked-based Compensation 3
Restructuring & Severance related payments (13)
Transaction Costs (1)
Working Capital 15
Cash Provided by Operating Activities (GAAP) $ 54
Selected 2017 Free Cash Flow Items
▪ Capital expenditures: $180 - $210 million
▪ Interest payments ~ $70 million
▪ Pension and OPEB payments ~ $14 million
Q1 2017
Cash Provided by Operating Activities (GAAP) $ 54
Capital Expenditures (55)
Restructuring & Severance related payments 13
Preferred stock dividends (3)
Transaction Cost 1
Free cash flow (Non-GAAP) $ 10
12
($ in millions)
Q1 2017 Capital Expenditures
Q1 2017 2017
Low High
Construction $ 16 $ 40 $ 50
Installation 15 40 50
Value Added 5 10 10
Total Fioptics $ 36 $ 90 $ 110
Other Strategic 12 50 60
Discretionary Investments 48 140 170
Legacy Maintenance 7 40 40
$ 55 $ 180 $ 210
13
($ in millions)
▪ Invested $36 million in Fioptics in Q1 2017
Passed an additional 11,800 customer locations
▪ Plan to pass 35,000 addresses with Fioptics in
2017:
New addresses will be passed with a fiber-to-the-
home product
Extends coverage to more than 70% of Greater
Cincinnati
▪ Other strategic represents success-based capital
for fiber builds for business and new IT services
projects
__
__
__
2017 Guidance
2017 Guidance
Revenue $ 1.2 billion
Adjusted EBITDA $295 million*
* Plus or minus 2 percent
14
Appendix
15
Consolidated Results
($ in millions, except per share amounts)
Three Months Ended
March 31,
2017 2016
Revenue $ 278.2 $ 288.9
Costs and expenses
Cost of services and products 154.8 162.7
Selling, general and administrative 56.7 53.2
Depreciation and amortization 45.8 43.4
Restructuring and severance related charges 25.6 —
Other 0.6 —
Operating (loss) income (5.3) 29.6
Interest expense 18.0 20.3
Gain on extinguishment of debt — (2.4)
Gain on sale of Investment in CyrusOne (117.7) —
Other income, net (0.4) —
Income before income taxes 94.8 11.7
Income tax expense 34.4 4.7
Net income 60.4 7.0
Preferred stock dividends 2.6 2.6
Net income applicable to common shareholders $ 57.8 $ 4.4
Basic and diluted net earnings per common share $ 1.37 $ 0.10
Weighted average common shares outstanding (in millions)
– Basic 42.1 42.0
– Diluted 42.3 42.1
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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
17
(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
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Revenue – Strategic, Legacy and Integration
($ in millions) Q1 2017
Entertainment and
Communications
IT Services and
Hardware Total Eliminations Total
Strategic
Data $ 65.4 $ —
Voice 20.5 —
Video 36.0 —
Services and other 0.9 —
Professional services — 18.3
Management and monitoring — 5.0
Unified communications — 7.1
Cloud services — 13.7
Total Strategic 122.8 44.1 166.9 (2.3) 164.6
Legacy
Data $ 22.2 $ —
Voice 47.2 —
Services and other 2.7 —
Total Legacy 72.1 — 72.1 (0.2) 71.9
Integration
Services and other $ 0.4 $ —
Professional services — 3.4
Unified communications — 2.8
Telecom and IT hardware — 35.9
Total Integration 0.4 42.1 42.5 (0.8) 41.7
$ 195.3 $ 86.2 $ 281.5 $ (3.3) $ 278.2
Eliminations 0.4 2.9 3.3
Total Revenue $ 194.9 $ 83.3 $ 278.2
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Revenue – Strategic, Legacy and Integration
($ in millions) Q1 2016
Entertainment and
Communications
IT Services and
Hardware Total Eliminations Total
Strategic
Data $ 58.1 $ —
Voice 17.2 —
Video 29.0 —
Services and other 1.3 —
Professional services — 22.3
Management and monitoring — 8.1
Unified communications — 7.5
Cloud services — 10.2
Total Strategic 105.6 48.1 153.7 (2.2) 151.5
Legacy
Data $ 27.1 $ —
Voice 53.0 —
Services and other 3.1 —
Total Legacy 83.2 — 83.2 (0.3) 82.9
Integration
Services and other $ 1.5 $ —
Professional services — 3.9
Unified communications — 2.6
Telecom and IT hardware — 47.9
Total Integration 1.5 54.4 55.9 (1.4) 54.5
$ 190.3 $ 102.5 $ 292.8 $ (3.9) $ 288.9
Eliminations 0.4 3.5 3.9
Total Revenue $ 189.9 $ 99.0 $ 288.9
20