Consolidated Communications Announces Third Quarter Financial Results

Rhea-AI Summary

Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) reported Q3 2023 results, including $283.7M revenue and a net loss of $69.2M. The company also announced an agreement to be acquired by Searchlight Capital Partners, L.P. and British Columbia Investment Management Corporation in a $3.1B all-cash transaction.

MATTOON, Ill.--(BUSINESS WIRE)-- 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.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231106553659/en/

Philip Kranz, Investor Relations

+1 217-238-8480

Philip.kranz@consolidated.com

Jennifer Spaude, Media Relations

+1 507-386-3765

Jennifer.spaude@consolidated.com

Source: Consolidated Communications

FAQ

What were Consolidated Communications Holdings, Inc.'s Q3 2023 revenue and net loss?

Consolidated Communications Holdings, Inc. reported revenue of $283.7 million and a net loss of $69.2 million in Q3 2023.

What was the reason for the net loss in Q3 2023?

The net loss in Q3 2023 was largely due to increased operating expenses, higher net interest expense, and a decrease in net income from discontinued operations compared to the same period in 2022.

What is the impact of the proposed acquisition by Searchlight Capital Partners, L.P. and British Columbia Investment Management Corporation on Consolidated Communications Holdings, Inc.?

The proposed acquisition will result in Consolidated Communications Holdings, Inc. becoming a private company and is expected to close by the first quarter of 2025, subject to regulatory approvals and approval of the majority of voting power represented by outstanding shares.