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Consolidated Communications Announces Third Quarter Financial Results

Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) (the “Company” or “Consolidated”), a top 10 fiber provider in the U.S., today reported results for the third quarter of 2023.

Third Quarter 2023 Results

  • Revenue totaled $283.7 million
  • Overall consumer revenue was $115.2 million
  • Consumer fiber revenue was $34.0 million
  • Total consumer broadband net adds were 9,392
  • Consumer broadband revenue was $75.1 million
  • Commercial data services revenue was $53.9 million
  • Carrier data-transport revenue was $31.4 million
  • Other products and services revenue was $10.0 million
  • Net loss was ($69.2 million). Adjusted EBITDA was $80.2 million
  • Total committed capital expenditures were $111.3 million

Operating expenses increased $15.2 million versus the prior year largely due to increased severance costs in relation to the previously announced business simplification and costs savings initiatives, in addition to higher costs related to professional fees for customer service and process improvement initiatives. Partly offsetting the higher operating expenses was the impact of the divestiture of the Kansas City operations on Nov. 30, 2022, lower video programming costs and a decrease in required contributions to the federal and state Universal Service Funds.

Net interest expense was $39.6 million, an increase of $7.5 million versus the prior year, primarily as a result of higher interest on the term loan. The Company has 77% of its total debt at a fixed rate through September 2026. As of Sept. 30, 2023, the weighted average cost of debt was 7.03%.

Net loss in the third quarter of 2023 was ($69.2 million) compared to net income of $282.3 million in the third quarter of 2022, which included $299.9 million of income from discontinued operations. Net loss per share was ($0.61) in the third quarter of 2023 as compared to net income per share of $2.45 in the third quarter of 2022. Adjusted diluted net income (loss) per share excludes certain items as outlined in the table provided in this release. Adjusted diluted net loss per share from continuing operations was ($0.31) compared to ($0.13) in the third quarter of 2022.

Capital Expenditures

Total committed capital expenditures were $111.3 million, driven by 67,120 new fiber passings and third quarter fiber adds. Capital expenditures were lower than the first two quarters of 2023 due to the usage of existing inventory for install and build activity.

Capital Structure

As of Sept. 30, 2023, the Company maintained liquidity with cash and short-term investments of approximately $90 million and $215 million of available borrowing capacity on the revolving credit facility, subject to certain covenants. The net debt leverage ratio for the trailing 12 months ended Sept. 30, 2023, was 6.15x.

In connection with execution of the definitive agreement to be acquired by Searchlight Capital Partners, L.P. (“Searchlight”) and British Columbia Investment Management Corporation (“BCI”), on Oct. 15, 2023 Consolidated entered into an amendment (the “Amendment”) to its credit agreement. The Amendment provides for interim financial covenant relief by increasing the maximum consolidated first lien leverage ratio permitted under the credit agreement, subject to certain conditions. The covenant relief provided for in the Amendment will provide the Company with near-term financial and operational flexibility. The Amendment is expected to remain in effect following closing of the proposed transaction. In the event the proposed transaction does not close by Aug. 1, 2025, it is expected that the maximum consolidated first lien leverage ratio under the financial covenant will revert to the levels that currently apply.

Pending Transaction

As previously announced on Oct. 16, 2023, Consolidated entered into an agreement to be acquired by Searchlight and BCI in an all-cash transaction with an enterprise value of approximately $3.1 billion, including the assumption of debt. The proposed transaction will result in Consolidated becoming a private company and is expected to close by the first quarter of 2025, subject to customary closing conditions, including receipt of regulatory approvals and approval of the holders of a majority of the voting power represented by the outstanding shares that are entitled to vote thereon and held by shareholders other than Searchlight and BCI, their investment fund affiliates and the directors and officers of the Company.

In light of the announced transaction, Consolidated will not host an earnings conference call and has withdrawn its 2023 outlook.

About Consolidated Communications

Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) is dedicated to moving people, businesses and communities forward by delivering the most reliable fiber communications solutions. Consumers, businesses and wireless and wireline carriers depend on Consolidated for a wide range of high-speed internet, data, phone, security, cloud and wholesale carrier solutions. With a network spanning nearly 60,000 fiber route miles, Consolidated is a top 10 U.S. fiber provider, turning technology into solutions that are backed by exceptional customer support. Learn more at consolidated.com.

Use of Non-GAAP Financial Measures

This press release includes disclosures regarding “EBITDA,” “adjusted EBITDA,” “Net debt leverage ratio,” “adjusted diluted net income (loss) per share,” and “Normalized revenue,” all of which are non-GAAP financial measures. 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 these non-GAAP financial measures to 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 (loss) from continuing operations. EBITDA is defined as income (loss) from continuing operations 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 “Net debt leverage ratio” principally to help investors understand how we measure leverage and facilitate comparisons by investors, security analysts and others. Total net debt is defined as the current and long-term portions of debt and finance lease obligations less cash, cash equivalents and short-term investments, deferred debt issuance costs and discounts on debt. Our Net debt leverage ratio differs in certain respects from the similar ratio used in our credit agreement or against comparable measures of certain other companies in our industry. 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. In addition, the Net debt leverage ratio 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.

Forward-Looking Statements

Certain statements in this press release, including those relating to the current expectations, plans, strategies, and the timeline for consummating the take private transaction with Searchlight and BCI by the first quarter of 2025, are forward-looking statements and are made pursuant to the safe harbor provisions of the Private 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, including: significant competition in all parts of our business and among our customer channels; our ability to adapt to rapid technological changes; shifts in our product mix that may result in a decline in operating profitability; public health threats, including the COVID-19 pandemic; continued receipt of support from various funds established under federal and state laws; disruptions in our networks and infrastructure and any related service delays or disruptions could cause us to lose customers and incur additional expenses; cyber-attacks may lead to unauthorized access to confidential customer, personnel and business information that could adversely affect our business; our operations require substantial capital expenditures and our business, financial condition, results of operations and liquidity may be impacted if funds for capital expenditures are not available when needed; our ability to obtain and maintain necessary rights-of-way for our networks; our ability to obtain necessary hardware, software and operational support from third-party vendors; substantial video content costs continue to rise; our ability to enter into new collective bargaining agreements or renew existing agreements; our ability to attract and/or retain certain key management and other personnel in the future; risks associated with acquisitions and the realization of anticipated benefits from such acquisitions; increasing attention to, and evolving expectations for, environmental, social and governance initiatives; unfavorable changes in financial markets could affect pension plan investments; weak economic conditions; the risk that the proposed transaction may not be completed in a timely manner or at all; the failure to receive, on a timely basis or otherwise, the required approvals of the proposed transaction by the Company’s stockholders; the possibility that any or all of the various conditions to the consummation of the proposed transaction may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); the possibility that competing offers or acquisition proposals for the Company will be made; the occurrence of any event, change or other circumstance that could give rise to the termination of the definitive transaction agreement relating to the proposed transaction, including in circumstances which would require the Company to pay a termination fee; the effect of the announcement or pendency of the proposed transaction on the Company’s ability to attract, motivate or retain key executives and employees, its ability to maintain relationships with its customers, suppliers and other business counterparties, or its operating results and business generally; risks related to the proposed transaction diverting management’s attention from the Company’s ongoing business operations; the amount of costs, fees and expenses related to the proposed transaction; the risk that the Company’s stock price may decline significantly if the proposed transaction is not consummated; the risk of shareholder litigation in connection with the proposed transaction, including resulting expense or delay; and the other risk factors described in Part I, Item 1A of Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022 and the other risk factors identified from time to time in the Company’s other filings with the SEC. Filings with the SEC are available on the SEC’s website at http://www.sec.gov. 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. 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 press release. Furthermore, undue reliance should not be placed on forward-looking statements, which are based on the information currently available to us and speak only as of the date they are made. Except as required under federal securities laws or the rules and regulations of the Securities and Exchange Commission, we disclaim any intention or obligation to update or revise publicly any forward-looking statements.

Participants in the Solicitation

The Company and its directors, executive officers and certain other members of management and employees, under SEC rules, may be deemed to be “participants” in the solicitation of proxies from stockholders of the Company in connection with the proposed transaction. Information about who may, under SEC rules, be considered to be participants in the solicitation of the Company’s stockholders in connection with the proposed transaction will be set forth in the definitive proxy statement when it is filed with the SEC in connection with the proposed transaction. Information relating to the foregoing can also be found in the Company’s Proxy Statement on Schedule 14A for its 2023 Annual Meeting of Shareholders, which was filed with the SEC on March 21, 2023. To the extent holdings of the Company’s securities have changed since the amounts set forth in such 2023 proxy statement, such changes have been or will be reflected on Initial Statements of Beneficial Ownership on Form 3 or Statements of Change in Ownership on Form 4 filed with the SEC. Additional information concerning the interests of the Company’s participants in the solicitation, which may, in some cases, be different than those of the Company’s stockholders generally, will be set forth in the Company’s proxy statement relating to the proposed transaction when it becomes available.

Additional Information and Where to Find It

This communication may be deemed to be solicitation material in respect of the proposed acquisition of the Company by Condor Holdings LLC. In connection with the proposed transaction, the Company intends to file relevant materials with the SEC, including the Company’s proxy statement in preliminary and definitive form. In addition, the Company and certain affiliates of the Company intend to jointly file a transaction statement on Schedule 13e-3 (the “Schedule 13e-3”). INVESTORS AND STOCKHOLDERS OF THE COMPANY ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE COMPANY’S PROXY STATEMENT AND THE SCHEDULE 13E-3 (WHEN THEY ARE AVAILABLE), BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE COMPANY, SEARCHLIGHT AND BCI AND THE PROPOSED TRANSACTION. Investors and stockholders of the Company are or will be able to obtain these documents (when they are available) free of charge from the SEC’s website at www.sec.gov, or free of charge from the Company by directing a request to the Company at 2116 South 17th Street, Mattoon, IL 61938, Attention: Investor Relations or at tel: +1 (844) 909-2675.

No Offer or Solicitation

This communication is not intended to and shall not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities, or a solicitation of any vote or approval, nor shall there be any offer, solicitation or sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Tag: [Consolidated-Communications-Earnings]

Consolidated Communications Holdings, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
(Unaudited)
 

September 30,

 

December 31,

2023

 

2022

ASSETS
Current assets:
Cash and cash equivalents $

89,617

 

$

325,852

 

Short-term investments

 

87,951

 

Accounts receivable, net

107,361

 

119,675

 

Income tax receivable

3,594

 

1,670

 

Prepaid expenses and other current assets

51,921

 

62,996

 

Assets held for sale

69,816

 

 

Total current assets

322,309

 

598,144

 

 
Property, plant and equipment, net

2,429,213

 

2,234,122

 

Investments

8,980

 

10,297

 

Goodwill

814,624

 

929,570

 

Customer relationships, net

24,035

 

43,089

 

Other intangible assets

10,557

 

10,557

 

Other assets

76,245

 

61,315

 

Total assets $

3,685,963

 

$

3,887,094

 

 
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $

44,380

 

$

33,096

 

Advance billings and customer deposits

44,939

 

46,664

 

Accrued compensation

53,896

 

60,903

 

Accrued interest

35,623

 

18,201

 

Accrued expense

121,016

 

95,206

 

Current portion of long-term debt and finance lease obligations

15,540

 

12,834

 

Liabilities held for sale

2,727

 

 

Total current liabilities

318,121

 

266,904

 

 
Long-term debt and finance lease obligations

2,129,087

 

2,129,462

 

Deferred income taxes

229,005

 

274,309

 

Pension and other post-retirement obligations

118,394

 

123,644

 

Other long-term liabilities

46,004

 

47,326

 

Total liabilities

2,840,611

 

2,841,645

 

 
Series A Preferred Stock, par value $0.01 per share; 10,000,000 shares authorized, 434,266 and 456,343 shares outstanding as of September 30, 2023 and December 31, 2022, respectively; liquidation preference of $509,646 and $477,047 as of September 30, 2023 and December 31, 2022, respectively

361,276

 

328,680

 

 
Shareholders' equity:
Common stock, par value $0.01 per share; 150,000,000 shares authorized, 116,487,985 and 115,167,193 shares outstanding as of September 30, 2023 and December 31, 2022, respectively

1,165

 

1,152

 

Additional paid-in capital

692,197

 

720,442

 

Accumulated deficit

(215,080

)

(11,866

)

Accumulated other comprehensive loss, net

(2,298

)

(610

)

Noncontrolling interest

8,092

 

7,651

 

Total shareholders' equity

484,076

 

716,769

 

Total liabilities, mezzanine equity and shareholders' equity $

3,685,963

 

$

3,887,094

 

 
Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
 

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

2023

 

2022

 

2023

 

2022

 
Net revenues $

283,654

 

$

296,619

 

$

834,942

 

$

895,287

 

Operating expenses:
Cost of services and products

132,422

 

141,226

 

391,327

 

413,009

 

Selling, general and administrative expenses

96,814

 

72,837

 

261,663

 

221,632

 

Loss on impairment of assets held for sale

 

5,208

 

77,755

 

131,698

 

Loss (gain) on disposal of assets

6,692

 

(19,163

)

12,380

 

(19,163

)

Depreciation and amortization

79,604

 

75,659

 

236,841

 

220,552

 

Income (loss) from operations

(31,878

)

20,852

 

(145,024

)

(72,441

)

Other income (expense):
Interest expense, net of interest income

(39,571

)

(32,071

)

(110,334

)

(91,742

)

Other income, net

3,509

 

2,984

 

11,677

 

9,425

 

Loss from continuing operations before income taxes

(67,940

)

(8,235

)

(243,681

)

(154,758

)

Income tax benefit

(10,220

)

(978

)

(40,908

)

(17,814

)

Loss from continuing operations

(57,720

)

(7,257

)

(202,773

)

(136,944

)

 
Discontinued operations:
Income from discontinued operations

 

4,744

 

 

22,628

 

Gain on sale of discontinued operations

 

389,905

 

 

389,905

 

Income tax expense

 

94,715

 

 

99,973

 

Income from discontinued operations

 

299,934

 

 

312,560

 

 
Net income (loss)

(57,720

)

292,677

 

(202,773

)

175,616

 

Less: dividends on Series A preferred stock

11,305

 

10,352

 

32,596

 

29,752

 

Less: net income attributable to noncontrolling interest

137

 

75

 

441

 

393

 

Net income (loss) attributable to common shareholders $

(69,162

)

$

282,250

 

$

(235,810

)

$

145,471

 

 
Net income (loss) per common share - basic and diluted:
Loss from continuing operations $

(0.61

)

$

(0.15

)

$

(2.09

)

$

(1.45

)

Income from discontinued operations

 

2.60

 

 

2.72

 

Net income (loss) per basic and diluted common shares attributable to common shareholders $

(0.61

)

$

2.45

 

$

(2.09

)

$

1.27

 

 
Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
 

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

2023

 

2022

 

2023

 

2022

OPERATING ACTIVITIES
Net income (loss) $

(57,720

)

$

292,677

 

$

(202,773

)

$

175,616

 

Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization

79,604

 

75,659

 

236,841

 

220,552

 

Deferred income taxes

(13,438

)

81,775

 

(44,697

)

69,949

 

Cash distributions from wireless partnerships in excess of earnings

 

3,957

 

 

5,618

 

Pension and post-retirement contributions in excess of expense

(3,704

)

(4,830

)

(9,241

)

(23,991

)

Non-cash, stock-based compensation

2,261

 

2,939

 

5,448

 

7,971

 

Amortization of deferred financing costs and discounts

1,901

 

1,849

 

5,622

 

5,475

 

Loss on impairment of assets held for sale

 

5,208

 

77,755

 

131,698

 

Gain on sale of partnership interests

 

(389,905

)

 

(389,905

)

Loss (gain) on disposal of assets

6,692

 

(19,163

)

12,380

 

(19,163

)

Other adjustments, net

614

 

(162

)

(2,247

)

(558

)

Changes in operating assets and liabilities, net

19,064

 

26,622

 

23,505

 

34,869

 

Net cash provided by operating activities

35,274

 

76,626

 

102,593

 

218,131

 

INVESTING ACTIVITIES
Purchase of property, plant and equipment, net

(143,337

)

(164,045

)

(424,197

)

(496,959

)

Purchase of investments

 

 

 

(39,959

)

Proceeds (disbursements) from sale of assets

(712

)

19,463

 

6,089

 

21,257

 

Proceeds from business dispositions, net

 

 

 

26,042

 

Proceeds from sale and maturity of investments

 

25,006

 

91,623

 

151,560

 

Proceeds from sale of partnership interests, net

 

489,567

 

 

489,567

 

Net cash provided by (used in) investing activities

(144,049

)

369,991

 

(326,485

)

151,508

 

FINANCING ACTIVITIES
Payment of finance lease obligations

(4,138

)

(2,587

)

(11,259

)

(7,111

)

Share repurchases for minimum tax withholding

(48

)

 

(1,084

)

(114

)

Net cash used in financing activities

(4,186

)

(2,587

)

(12,343

)

(7,225

)

Net change in cash and cash equivalents

(112,961

)

444,030

 

(236,235

)

362,414

 

Cash and cash equivalents at beginning of period

202,578

 

18,019

 

325,852

 

99,635

 

Cash and cash equivalents at end of period $

89,617

 

$

462,049

 

$

89,617

 

$

462,049

 

 
Consolidated Communications Holdings, Inc.
Consolidated Revenue by Category
(Dollars in thousands)
(Unaudited)
 

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

2023

 

2022

 

2023

 

2022

Consumer:
Broadband (Data and VoIP) $

75,089

$

69,641

$

214,389

$

203,144

Voice services

31,616

36,444

95,231

110,539

Video services

8,541

13,552

27,497

42,277

115,246

119,637

337,117

355,960

Commercial:
Data services (includes VoIP)

53,870

56,796

160,234

171,804

Voice services

31,825

35,484

96,692

107,598

Other

9,228

9,933

29,362

32,780

94,923

102,213

286,288

312,182

Carrier:
Data and transport services

31,388

33,878

95,535

103,626

Voice services

4,090

3,517

12,720

11,087

Other

262

605

925

1,350

35,740

38,000

109,180

116,063

 
Subsidies

6,878

7,187

20,986

20,304

Network access

20,842

27,277

68,033

78,336

Other products and services

10,025

2,305

13,338

12,442

Total operating revenue $

283,654

$

296,619

$

834,942

$

895,287

 
Consolidated Communications Holdings, Inc.
Consolidated Revenue Trend by Category
(Dollars in thousands)
(Unaudited)
 

Three Months Ended

Q3 2023

 

Q2 2023

 

Q1 2023

 

Q4 2022

 

Q3 2022

Consumer:
Broadband (Data and VoIP) $

75,089

$

71,339

$

67,961

$

69,002

$

69,641

Voice services

31,616

31,352

32,263

34,314

36,444

Video services

8,541

9,362

9,594

11,876

13,552

115,246

112,053

109,818

115,192

119,637

Commercial:
Data services (includes VoIP)

53,870

53,230

53,134

56,662

56,796

Voice services

31,825

32,236

32,631

34,676

35,484

Other

9,228

10,378

9,756

10,320

9,933

94,923

95,844

95,521

101,658

102,213

Carrier:
Data and transport services

31,388

31,224

32,923

33,752

33,878

Voice services

4,090

4,263

4,367

3,685

3,517

Other

262

313

350

338

605

35,740

35,800

37,640

37,775

38,000

 
Subsidies

6,878

7,072

7,036

13,078

7,187

Network access

20,842

22,747

24,444

26,308

27,277

Other products and services

10,025

1,646

1,667

1,965

2,305

Total operating revenue $

283,654

$

275,162

$

276,126

$

295,976

$

296,619

 
Consolidated Communications Holdings, Inc.
Reconciliation of Historical Revenue by Category to Normalized Revenue by Category
(Dollars in thousands)
(Unaudited)
 
Three Months Ended Nine Months Ended
September 30, 2022 September 30, 2022
Historical Adjustments (1) Normalized Historical Adjustments (1) Normalized
Consumer:
Broadband (Data and VoIP) $

69,641

$

(1,745

)

$

67,896

$

203,144

$

(5,581

)

$

197,563

Voice services

36,444

(514

)

35,930

110,539

(1,751

)

108,788

Video services

13,552

(2,599

)

10,953

42,277

(8,005

)

34,272

119,637

(4,858

)

114,779

355,960

(15,337

)

340,623

Commercial:
Data services (includes VoIP)

56,796

(4,034

)

52,762

171,804

(12,403

)

159,401

Voice services

35,484

(1,253

)

34,231

107,598

(4,045

)

103,553

Other

9,933

(273

)

9,660

32,780

(860

)

31,920

102,213

(5,560

)

96,653

312,182

(17,308

)

294,874

Carrier:
Data and transport services

33,878

(283

)

33,595

103,626

(3,923

)

99,703

Voice services

3,517

(4

)

3,513

11,087

(13

)

11,074

Other

605

(5

)

600

1,350

(8

)

1,342

38,000

(292

)

37,708

116,063

(3,944

)

112,119

 
Subsidies

7,187

 

7,187

20,304

(49

)

20,255

Network access

27,277

(474

)

26,803

78,336

(1,412

)

76,924

Other products and services

2,305

(181

)

2,124

12,442

(368

)

12,074

Total operating revenue $

296,619

$

(11,365

)

$

285,254

$

895,287

$

(38,418

)

$

856,869

 
Notes:
(1) These adjustments reflect the removal of operating revenues for divestitures. We completed the sale of the Company's Ohio and Kansas assets on January 31, 2022 and November 30, 2022, respectively.
Consolidated Communications Holdings, Inc.
Reconciliation of Loss from Continuing Operations to Adjusted EBITDA
(Dollars in thousands)
(Unaudited)
 

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

2023

 

2022

 

2023

 

2022

Loss from continuing operations $

(57,720

)

$

(7,257

)

$

(202,773

)

$

(136,944

)

Add (subtract):
Income tax benefit

(10,220

)

(978

)

(40,908

)

(17,814

)

Interest expense, net

39,571

 

32,071

 

110,334

 

91,742

 

Depreciation and amortization

79,604

 

75,659

 

236,841

 

220,552

 

EBITDA

51,235

 

99,495

 

103,494

 

157,536

 

 
Adjustments to EBITDA (1):
Other, net (2)

21,366

 

6,186

 

36,837

 

17,754

 

Pension/OPEB benefit

(1,323

)

(2,950

)

(3,395

)

(8,897

)

Loss (gain) on disposal of assets

6,692

 

(19,163

)

12,380

 

(19,163

)

Loss on impairment

 

5,208

 

77,755

 

131,698

 

Non-cash compensation (3)

2,261

 

2,939

 

5,448

 

7,971

 

Adjusted EBITDA from continuing operations

80,231

 

91,715

 

232,519

 

286,899

 

Investment distributions from discontinued operations

 

5,478

 

 

25,023

 

Adjusted EBITDA $

80,231

 

$

97,193

 

$

232,519

 

$

311,922

 

 
Notes:
(1) These adjustments reflect those required or permitted by the lenders under our credit agreement.
(2) Other, net includes income attributable to noncontrolling interests, acquisition and non-recurring related costs, and certain miscellaneous items.
(3) Represents compensation expenses in connection with our Restricted Share Plan, which because of the non-cash nature of the expenses are excluded from adjusted EBITDA.
Consolidated Communications Holdings, Inc.
Reconciliation of Loss Attributable to Common Shareholders from Continuing Operations to Adjusted Loss from Continuing Operations and Calculation of Adjusted Diluted Net Income (Loss) Per Common Share
(Dollars in thousands, except per share amounts)
(Unaudited)
 

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

2023

 

2022

 

2023

 

2022

Loss from continuing operations $

(57,720

)

$

(7,257

)

$

(202,773

)

$

(136,944

)

Less: dividends on Series A preferred stock

11,305

 

10,352

 

32,596

 

29,752

 

Less: net income attributable to noncontrolling interest

137

 

75

 

441

 

393

 

Loss attributable to common shareholders from continuing operations

(69,162

)

(17,684

)

(235,810

)

(167,089

)

 
Adjustments to loss attributable to common shareholders:
Dividends on Series A preferred stock

11,305

 

10,352

 

32,596

 

29,752

 

Integration and severance related costs, net of tax

13,099

 

 

17,062

 

1,604

 

Loss on impairment of assets held for sale

 

5,208

 

77,755

 

131,698

 

Loss on disposition of assets, net of tax

4,943

 

 

9,145

 

 

Gain on disposition of tower assets, net of tax

 

(14,167

)

 

(14,167

)

Non-cash interest expense for swaps, net of tax

(101

)

(328

)

(732

)

(932

)

Tax impact of non-deductible goodwill

3,283

 

821

 

(2,618

)

(11,118

)

Change in deferred tax rate

 

(644

)

 

(644

)

Non-cash stock compensation, net of tax

1,670

 

2,173

 

4,024

 

5,893

 

Adjusted net loss from continuing operations $

(34,963

)

$

(14,269

)

$

(98,578

)

$

(25,003

)

 
Weighted average number of common shares outstanding

113,054

 

111,697

 

113,015

 

111,695

 

 
Adjusted diluted net income (loss) per common share:
Adjusted net loss from continuing operations $

(0.31

)

$

(0.13

)

$

(0.87

)

$

(0.22

)

Adjusted income from discontinued operations excluding gain on sale of partnership interests, net of tax

 

0.04

 

 

0.15

 

$

(0.31

)

$

(0.09

)

$

(0.87

)

$

(0.07

)

 
Notes:
Calculations above assume a 26.13% effective tax rate for the three and nine months ended September 30, 2023 and 26.07% effective tax rate for the three and nine months ended September 30, 2022.
Consolidated Communications Holdings, Inc.
Reconciliation of Total Net Debt to LTM Adjusted EBITDA Ratio
(Dollars in thousands)
(Unaudited)
 

September 30,

2023

Long-term debt and finance lease obligations:
Term loans, net of discount $7,445 $

992,430

 

6.50% Senior secured notes due 2028

750,000

 

5.00% Senior secured notes due 2028

400,000

 

Finance leases

32,455

 

Total debt as of September 30, 2023

2,174,885

 

Less: deferred debt issuance costs

(30,258

)

Less: cash, cash equivalents and short-term investments

(89,617

)

Total net debt as of September 30, 2023 $

2,055,010

 

 
Adjusted EBITDA for the 12 months ended September 30, 2023 $

334,177

 

 
Total Net Debt to last 12 months Adjusted EBITDA

6.15x

 
Consolidated Communications Holdings, Inc.
Key Operating Metrics
(Unaudited)
 

2022

 

2023

Q1

 

Q2

 

Q3

 

Q4

 

FY

 

Q1

 

Q2

 

Q3

Passings
Total Fiber Gig+ Capable Passings (1)(5)(6)

689,406

 

831,779

 

947,974

 

1,008,660

 

1,008,660

 

1,062,518

 

1,119,956

 

1,187,076

 

Total DSL/Copper Passings (2)(3)(5)(6)

2,059,025

 

1,920,214

 

1,807,381

 

1,617,077

 

1,617,077

 

1,564,889

 

1,509,875

 

1,447,539

 

Total Passings (1)(2)(3)(5)(6)

2,748,431

 

2,751,993

 

2,755,355

 

2,625,737

 

2,625,737

 

2,627,407

 

2,629,831

 

2,634,615

 

% Fiber Gig+ Coverage/Total Passings

25

%

30

%

34

%

38

%

38

%

40

%

43

%

45

%

 
Consumer Broadband Connections
Fiber Gig+ Capable (3)

93,812

 

103,455

 

115,598

 

122,872

 

122,872

 

135,209

 

153,860

 

175,748

 

DSL/Copper (2)(3)

286,338

 

277,758

 

266,314

 

244,586

 

244,586

 

234,653

 

222,969

 

210,473

 

Total Consumer Broadband Connections (2)(3)

380,150

 

381,213

 

381,912

 

367,458

 

367,458

 

369,862

 

376,829

 

386,221

 

 
Consumer Broadband Net Adds
Total Fiber Gig+ Capable Net Adds (7)

7,690

 

9,643

 

12,143

 

10,599

 

40,075

 

12,337

 

18,651

 

21,888

 

DSL/Copper Net Adds (7)

(8,544

)

(8,580

)

(11,444

)

(10,783

)

(39,351

)

(9,933

)

(11,684

)

(12,496

)

Total Consumer Broadband Net Adds (7)

(854

)

1,063

 

699

 

(184

)

724

 

2,404

 

6,967

 

9,392

 

 
Consumer Broadband Penetration %
Fiber Gig+ Capable (on fiber passings)

13.6

%

12.4

%

12.2

%

12.2

%

12.2

%

12.7

%

13.7

%

14.8

%

DSL/Copper (on DSL/copper passings)

13.9

%

14.5

%

14.7

%

15.1

%

15.1

%

15.0

%

14.8

%

14.5

%

Total Consumer Broadband Penetration %

13.8

%

13.9

%

13.9

%

14.0

%

14.0

%

14.1

%

14.3

%

14.7

%

 
Consumer Average Revenue Per Unit (ARPU)
Fiber Gig+ Capable $

63.88

 

$

64.95

 

$

65.61

 

$

67.14

 

$

65.42

 

$

67.51

 

$

68.29

 

$

68.78

 

DSL/Copper $

50.78

 

$

52.36

 

$

53.87

 

$

53.55

 

$

53.36

 

$

53.21

 

$

55.88

 

$

57.18

 

 
Churn
Fiber Consumer Broadband Churn (7)

0.9

%

1.1

%

1.2

%

1.1

%

1.1

%

1.0

%

1.3

%

1.3

%

DSL/Copper Consumer Broadband Churn (7)

1.3

%

1.6

%

1.8

%

1.7

%

1.6

%

1.5

%

1.7

%

2.0

%

 
Consumer Broadband Revenue ($ in thousands)
Fiber Broadband Revenue (4) $

17,242

 

$

19,218

 

$

21,558

 

$

24,016

 

$

82,034

 

$

26,136

 

$

29,613

 

$

34,004

 

Copper and Other Broadband Revenue

48,669

 

48,374

 

48,083

 

44,986

 

190,112

 

41,825

 

41,726

 

41,085

 

Total Consumer Broadband Revenue $

65,911

 

$

67,592

 

$

69,641

 

$

69,002

 

$

272,146

 

$

67,961

 

$

71,339

 

$

75,089

 

 
Consumer Voice Connections (3)

316,634

 

306,458

 

294,441

 

276,779

 

276,779

 

267,509

 

258,680

 

249,081

 

 
Video Connections (3)

58,812

 

55,225

 

51,339

 

35,039

 

35,039

 

32,426

 

28,934

 

26,158

 

 
Fiber route network miles (long-haul, metro and FttP)

54,239

 

56,093

 

57,498

 

57,865

 

57,865

 

57,569

 

58,836

 

59,915

 

 
On-net buildings (3)

15,446

 

15,618

 

15,715

 

14,427

 

14,427

 

14,520

 

14,735

 

14,928

 

 
Notes:
(1) In Q1 2021, the Company launched a multi-year fiber build plan to upgrade 1.6 million passings or 70% of our service area to fiber Gig+ capable services. As of September 30, 2023, 178,416 of the targeted 222,000 passings for 2023 were upgraded to FttP and total fiber passings were ~1,187,076 or 45% of the Company's service area.
(2) The sale of the non-core Ohio operations resulted in a reduction of approximately 5,658 DSL/Copper passings and 3,560 DSL/Copper broadband connections in the first quarter of 2022.
(3) The sale of the net assets of our Kansas City operations in the fourth quarter of 2022 resulted in a reduction of approximately 135,144 DSL/Copper passings, 3,325 fiber broadband connections, 10,945 DSL/Copper broadband connections, 6,670 consumer voice connections, 13,425 video connections and 1,415 on-net buildings. Prior period amounts have not been adjusted to reflect the sale.
(4) Fiber broadband revenue includes revenue from our Kansas City operations of approximately $0.3 million for the quarter ended December 31, 2022 and approximately $0.5 million for each of the quarters ended March 31, 2022 through September 30, 2022. Amounts have not been adjusted to reflect the sale.
(5) Passings counts are estimates of single family units, multi-dwelling units, and multi-tenant units within consumer, small business and enterprise. These counts are based upon the information available at this time and are subject to updates as additional information becomes available.
(6) When a passing is both fiber and DSL/Copper capable it is counted as a fiber passing.
(7) Consumer Broadband net adds and churn have been normalized to reflect the divestitures of our Kansas City and Ohio operations.

 

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