Consolidated Communications Reports Transformational Second Quarter 2022 Results

Rhea-AI Summary

Consolidated Communications (CNSL) reported a strong second quarter 2022, achieving net-positive total consumer broadband connections for the first time in seven years. The company added a record 9,600 fiber subscribers, reflecting a threefold increase year-over-year. Consolidated has built fiber to 142,300 new locations, now passing over 800,000. Additionally, a $490 million agreement to sell wireless investments to Verizon will fund fiber expansion, while the company has made over $600 million in non-core asset divestitures. However, 2022 EBITDA guidance has been revised down to $400-$410 million.

Positive

• Added a record 9,600 fiber subscribers, 3x growth year-over-year.
• Achieved net-positive consumer broadband connections for the first time in 7 years.
• Built fiber to a record 142,300 new locations, tripling fiber passings in six quarters.
• $490 million sale of wireless investments to Verizon for funding fiber expansion.
• $600 million in divestitures of non-core assets over the past year.

Negative

• Adjusted EBITDA outlook decreased from $410-$425 million to $400-$410 million.
• Revenue decline of $22 million compared to the prior year.
• GAAP net loss reduced to ($1.5 million) from ($55.1 million) but still a loss.
• Adjusted EBITDA decreased from $126.7 million to $107.5 million year-over-year.

• Achieved net-positive, total consumer broadband connections for first time in seven years. Added a record 9,600 fiber subscribers and achieved 3x fiber subscriber growth year over year.
• Built fiber to record 142,300 new locations, tripled the Company’s fiber passings in six quarters. Consolidated now passes over 800,000 locations with fiber becoming one of the largest fiber-to-the-home providers in the U.S. based on locations.
• Subsequent to the end of the quarter, announced $490 million agreement to sell wireless investments to Verizon to support the Company’s fiber expansion plan and pivot to a pure-play fiber company.
• Announced over $600 million in aggregate divestitures of non-core assets over the last year.
  
  

Note: Cosolidated’s second quarter earnings conference call will be webcast on Aug. 2 at 8:30 am ET. The webcast and materials will be available on Consolidated’s Investor Relations website at http://ir.consolidated.com. The live conference call dial-in number for analysts and investors is 888-440-5977, conference ID 8956400.

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 second quarter 2022.

“In the second quarter, we added a record 9,600 net fiber subscribers, a three-fold increase from a year ago, and achieved total consumer net positive broadband connections for the first time in over seven years,” said Bob Udell, president and chief executive officer at Consolidated Communications. “These important milestones demonstrate strong execution on our strategic priorities. Our Gig+ fiber network and Fidium product now reaches 30% of passings, an improvement from 10% at the start of 2021.”

“Additionally, we reached an agreement with Verizon Wireless to sell our interests in five limited partnerships for $490 million in the aggregate, which will provide additional liquidity to fund our fiber expansion plan and bring FttP to 70% of our addressable market by 2025.”

Second Quarter 2022 Highlights and Results (compared to Second Quarter 2021)

• Revenue totaled $298.4 million, generating Adjusted EBITDA of $107.5 million.
• Consumer fiber revenue grew 28.0%, driven by more than 3x consumer fiber net adds.
• Commercial data services revenue was $57.1 million, up 0.4%.
• Carrier data-transport revenue grew $2.3 million or 6.8% aided by a $3.1 million one-time fiber build project.
• Commercial other revenue increased $2.2 million driven primarily by higher equipment sales.
• Subsidy revenue was $6.5 million, a decline of $10.9 million, primarily reflecting the transition to the Rural Digital Opportunity Fund (RDOF).
• Total committed capital expenditures were $179.1 million driven by a record 142,300 fiber upgrades in the second quarter, which included acceleration of 40,000 fiber upgrades and preconstruction for future quarter fiber builds mitigating inflationary pressures.
• Operating expenses were $211.4 million, down $2.9 million from a year ago. The primary drivers were a $4.8 million decline in video programming expense, a $3.0 million reduction in Universal Services Fees offset by $2.1 increase in fuel and travel expenses combined with one-time cost of $2.2 million related to the fiber build project sale previously noted.

Income from operations totaled $14.4 million, down from $30.0 million a year ago. The year-over-year decrease was primarily the result of a revenue decline of $22.0 million offset by lower operating expenses of $2.9 million and a decline in depreciation and amortization expense of $3.5 million.

Net interest expense was $30.2 million, a decrease of $15.3 million compared to a year ago, primarily as a result of non-cash interest of $10.9 million on the Searchlight note, which was converted to perpetual preferred stock in conjunction with the second stage closing of the Searchlight investment in December 2021. The remaining reduction in interest expense was primarily the result of the maturity of an interest swap agreement in July 2021.

Cash distributions from the Company’s wireless partnerships totaled $11.3 million, compared to $12.7 million a year ago.

GAAP net loss was ($1.5 million) compared to a net loss of ($55.1 million) for the same period a year ago. GAAP net loss per share was ($0.10) compared to a net loss of ($0.71) in the prior year. Adjusted diluted net income per share excludes certain items as outlined in the table provided in this release. Adjusted diluted net income per share was $0.01 compared to $0.09 a year ago.

Adjusted EBITDA was $107.5 million, compared to $126.7 million in the prior year.

Sale of Investments in Wireless Partnerships

The Company announced the sale of its limited partnership interests in five wireless partnerships to Cellco Partnership, d/b/a Verizon Wireless, for an aggregate price of $490 million. The sale transactions are expected to close by the end of 2022, subject to certain closing conditions and third-party purchase rights available to other partners in the partnership. The Company expects to use the net proceeds from the sale to support its fiber expansion plan.

2022 Outlook

“We are updating our 2022 outlook for adjusted EBITDA as a result of accelerated legacy revenue declines, inflationary pressures on utilities and fuel, and the timing of cash distributions from the sale of our wireless investments,” said Steve Childers, chief financial officer at Consolidated Communications. “Our updated capex outlook reflects primarily the pre-work associated with fiber expansion for 2023 and some inflationary cost pressures.”

Consolidated Communications provides updated guidance for the full-year 2022.

• Adjusted EBITDA is expected to be in a range of $400 million to $410 million.
  Previous outlook was $410 million to $425 million.
• Capital expenditures are expected to be in a range of $565 million to $585 million.
  Previous outlook was $475 million to $495 million.
• Cash interest expense is expected to be in a range of $125 million to $129 million.
  Previous outlook was $123 million to $127 million.
• Cash income taxes are expected to be in a range of $12 million to $17 million, an increase from previous outlook of $2 million to $4 million as a result of the estimated incremental state income taxes associated with the sale of the wireless investments.

About Consolidated Communications

Consolidated Communications Holdings, Inc. (NASDAQ: CNSL) is dedicated to moving people, businesses and communities forward by delivering the latest reliable 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 50,000 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, as well as the conference call, includes disclosures regarding “EBITDA,” “adjusted EBITDA,” “total net debt to last 12 month adjusted EBITDA ratio” or “Net debt leverage ratio,” and “adjusted diluted net income (loss) per share,” all of which are non-GAAP financial measures and described in this section as not being in compliance with Regulation S-X. Accordingly, they should not be construed as alternatives to net cash from operating or investing activities, cash and cash equivalents, cash flows from operations, net income or net income per share as defined by GAAP and are not, on their own, necessarily indicative of cash available to fund cash needs as determined in accordance with GAAP. In addition, not all companies use identical calculations, and the non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable financial measures presented in accordance with GAAP is included in the tables that follow.

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

We present adjusted EBITDA for several reasons. Management believes adjusted EBITDA is useful as a means to evaluate our ability to fund our estimated uses of cash (including interest on our debt). In addition, we have presented adjusted EBITDA to investors in the past because it is frequently used by investors, securities analysts and other interested parties in the evaluation of companies in our industry, and management believes presenting it here provides a measure of consistency in our financial reporting. Adjusted EBITDA, referred to as Available Cash in our credit agreement, is also a component of the restrictive covenants and financial ratios contained in our credit agreement that requires us to maintain compliance with these covenants and limit certain activities, such as our ability to incur debt. The definitions in these covenants and ratios are based on adjusted EBITDA after giving effect to specified charges. In addition, adjusted EBITDA provides our board of directors with meaningful information, with other data, assumptions and considerations, to measure our ability to service and repay debt. We present the related “total net debt to last 12 month adjusted EBITDA ratio” or “Net debt leverage ratio” principally to help investors understand how we measure leverage and facilitate comparisons by investors, security analysts and others. This ratio differs in certain respects from the similar ratio used in our credit agreement 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 ratio of total net debt to last 12-month adjusted EBITDA is subject to the risk that we may not be able to use the cash on the balance sheet to reduce our debt on a dollar-for-dollar basis. Management believes this ratio is useful as a means to evaluate our ability to incur additional indebtedness in the future.

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

Forward-Looking Statements

Certain statements in this communication 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. These risks and uncertainties include a number of factors related to our business, including the uncertainties relating to the impact of the novel coronavirus (COVID-19) pandemic on the Company’s business, results of operations, cash flows, stock price and employees; the possibility that any of the anticipated benefits of the strategic investment from Searchlight Capital Partners, L.P. or our refinancing of outstanding debt, including our senior secured credit facilities, or of the proposed sales of the limited partnership interests will not be realized; the ability to meet closing conditions to the proposed sales of the limited partnership interests on a timely basis or at all; the anticipated use of proceeds of the strategic investment or the proposed sales of the limited partnership interests; the outcome of any legal proceedings that may be instituted against the Company or its directors; economic and financial market conditions generally and economic conditions in our service areas; various risks to the price and volatility of our common stock; changes in the valuation of pension plan assets; the substantial amount of debt and our ability to repay or refinance it or incur additional debt in the future; our need for a significant amount of cash to service and repay the debt restrictions contained in our debt agreements that limit the discretion of management in operating the business; regulatory changes, including changes to subsidies, rapid development and introduction of new technologies and intense competition in the telecommunications industry; risks associated with our possible pursuit of or failure to consummate acquisitions or dispositions; system failures; cyber-attacks, information or security breaches or technology failure of ours or of a third party; losses of large customers or government contracts; risks associated with the rights-of-way for the network; disruptions in the relationship with third party vendors; losses of key management personnel and the inability to attract and retain highly qualified management and personnel in the future; changes in the extensive governmental legislation and regulations governing telecommunications providers and the provision of telecommunications services; new or changing tax laws or regulations; telecommunications carriers disputing and/or avoiding their obligations to pay network access charges for use of our network; high costs of regulatory compliance; the competitive impact of legislation and regulatory changes in the telecommunications industry; liability and compliance costs regarding environmental regulations; risks associated with discontinuing paying dividends on our common stock; and the potential for the rights of our series A preferred stock to negatively impact our cash flow. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements are discussed in more detail in our filings with the Securities and Exchange Commission (“SEC”), including our reports on Form 10-K and Form 10-Q. Many of these circumstances are beyond our ability to control or predict. Moreover, forward-looking statements necessarily involve assumptions on our part. These forward-looking statements generally are identified by the words “believe,” “expect,” “anticipate,” “estimate,” “project,” “intend,” “plan,” “should,” “may,” “will,” “would,” “will be,” “will continue” or similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company and its subsidiaries to be different from those expressed or implied in the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements that appear throughout this communication. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, we disclaim any intention or obligation to update or revise publicly any forward-looking statements. You should not place undue reliance on forward-looking statements.

Consolidated Communications Holdings, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
(Unaudited)
		June 30,				December 31,
		2022				2021
ASSETS
Current assets:
Cash and cash equivalents		$	18,019			$	99,635
Short-term investments			25,005				110,801
Accounts receivable, net			117,479				133,362
Income tax receivable			2,733				1,134
Prepaid expenses and other current assets			56,928				56,831
Assets held for sale			95,922				26,052
Total current assets			316,086				427,815
Property, plant and equipment, net			2,101,127				2,019,444
Investments			107,514				109,578
Goodwill			929,570				1,013,243
Customer relationships, net			58,514				73,939
Other intangible assets			10,557				10,557
Other assets			62,349				58,116
Total assets		$	3,585,717			$	3,712,692
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	58,761			$	40,953
Advance billings and customer deposits			48,097				53,028
Accrued compensation			64,949				68,272
Accrued interest			17,902				17,819
Accrued expense			92,397				97,417
Current portion of long-term debt and finance lease obligations			9,539				7,959
Liabilities held for sale			4,856				97
Total current liabilities			296,501				285,545
Long-term debt and finance lease obligations			2,124,001				2,118,853
Deferred income taxes			186,183				194,458
Pension and other post-retirement obligations			195,587				214,671
Other long-term liabilities			49,132				62,789
Total liabilities			2,851,404				2,876,316
Series A Preferred Stock, par value $0.01 per share; 10,000,000 shares authorized, 436,943 and 434,266 shares outstanding as of June 30, 2022 and December 31, 2021, respectively; liquidation preference of $456,343 and $436,943 as of June 30, 2022 and December 31, 2021, respectively			307,976				288,576
Shareholders' equity:
Common stock, par value $0.01 per share; 150,000,000 shares authorized, 115,395,668 and 113,647,364 shares outstanding as of June 30, 2022 and December 31, 2021, respectively			1,154				1,137
Additional paid-in capital			726,247				740,746
Accumulated deficit			(258,978	)			(141,599	)
Accumulated other comprehensive loss, net			(49,491	)			(59,571	)
Noncontrolling interest			7,405				7,087
Total shareholders' equity			426,337				547,800
Total liabilities, mezzanine equity and shareholders' equity		$	3,585,717			$	3,712,692

Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2022				2021				2022				2021
Net revenues		$	298,390			$	320,403			$	598,668			$	645,169
Operating expenses:
Cost of services and products			135,888				145,311				271,783				289,290
Selling, general and administrative expenses			75,510				68,998				148,795				135,848
Loss on impairment of assets held for sale			—				—				126,490				—
Depreciation and amortization			72,543				76,079				144,893				151,690
Income (loss) from operations			14,449				30,015				(93,293	)			68,341
Other income (expense):
Interest expense, net of interest income			(30,156	)			(45,431	)			(59,671	)			(93,846	)
Loss on extinguishment of debt			—				(5,121	)			—				(17,101	)
Change in fair value of contingent payment rights			—				(39,826	)			—				(97,414	)
Other income, net			12,920				10,687				24,325				22,961
Loss before income taxes			(2,787	)			(49,676	)			(128,639	)			(117,059	)
Income tax expense (benefit)			(1,275	)			5,413				(11,578	)			113
Net loss			(1,512	)			(55,089	)			(117,061	)			(117,172	)
Less: dividends on Series A preferred stock			9,802				—				19,400				—
Less: net income attributable to noncontrolling interest			203				267				318				283
Net loss attributable to common shareholders		$	(11,517	)		$	(55,356	)		$	(136,779	)		$	(117,455	)
Net loss per basic and diluted common shares attributable to common shareholders		$	(0.10	)		$	(0.71	)		$	(1.22	)		$	(1.51	)

Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2022				2021				2022				2021
OPERATING ACTIVITIES
Net loss		$	(1,512	)		$	(55,089	)		$	(117,061	)		$	(117,172	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			72,543				76,079				144,893				151,690
Cash distributions from wireless partnerships in excess of earnings			1,508				1,227				1,661				1,238
Pension and post-retirement contributions in excess of expense			(9,819	)			(9,443	)			(19,161	)			(18,213	)
Non-cash, stock-based compensation			2,833				2,493				5,032				3,943
Amortization of deferred financing costs and discounts			1,824				4,366				3,626				8,649
Non-cash interest expense on convertible security interest			—				8,229				—				16,104
Loss on extinguishment of debt			—				5,121				—				17,101
Loss on change in fair value of contingent payment rights			—				39,826				—				97,414
Loss on impairment of assets held for sale			—				—				126,490				—
Other adjustments, net			(207	)			4,099				(396	)			3,731
Changes in operating assets and liabilities, net			(7,225	)			10,433				(3,579	)			21,346
Net cash provided by operating activities			59,945				87,341				141,505				185,831
INVESTING ACTIVITIES
Purchase of property, plant and equipment, net			(176,434	)			(119,236	)			(332,914	)			(195,196	)
Purchase of investments			—				(89,967	)			(39,959	)			(89,967	)
Proceeds from sale of assets			1,720				65				1,794				89
Proceeds from business dispositions			—				—				26,042				—
Proceeds from sale and maturity of investments			60,800				—				126,554				1,198
Net cash used in investing activities			(113,914	)			(209,138	)			(218,483	)			(283,876	)
FINANCING ACTIVITIES
Proceeds from bond offering			—				—				—				400,000
Proceeds from issuance of long-term debt			—				—				—				150,000
Payment of finance lease obligations			(2,183	)			(1,338	)			(4,524	)			(2,936	)
Payment on long-term debt			—				—				—				(397,000	)
Payment of financing costs			—				(2,693	)			—				(8,266	)
Share repurchases for minimum tax withholding			—				—				(114	)			—
Net cash provided by (used in) financing activities			(2,183	)			(4,031	)			(4,638	)			141,798
Net change in cash and cash equivalents			(56,152	)			(125,828	)			(81,616	)			43,753
Cash and cash equivalents at beginning of period			74,171				325,142				99,635				155,561
Cash and cash equivalents at end of period		$	18,019			$	199,314			$	18,019			$	199,314

Consolidated Communications Holdings, Inc.
Consolidated Revenue by Category
(Dollars in thousands)
(Unaudited)
		Three Months Ended						Six Months Ended
		June 30,						June 30,
		2022			2021			2022			2021
Consumer:
Broadband (Data and VoIP)		$	67,592		$	67,981		$	133,503		$	133,736
Voice services			36,643			40,173			74,095			80,593
Video services			14,359			16,799			28,725			33,580
			118,594			124,953			236,323			247,909
Commercial:
Data services (includes VoIP)			57,113			56,871			115,008			113,942
Voice services			35,775			39,065			72,114			78,818
Other			11,287			9,091			22,847			18,419
			104,175			105,027			209,969			211,179
Carrier:
Data and transport services			36,263			33,942			69,748			67,219
Voice services			3,718			4,396			7,570			8,922
Other			354			395			745			786
			40,335			38,733			78,063			76,927
Subsidies			6,534			17,465			13,117			34,804
Network access			24,846			31,115			51,059			62,718
Other products and services			3,906			3,110			10,137			11,632
Total operating revenue		$	298,390		$	320,403		$	598,668		$	645,169

Consolidated Communications Holdings, Inc.
Consolidated Revenue Trend by Category
(Dollars in thousands)
(Unaudited)
		Three Months Ended
		Q2 2022			Q1 2022			Q4 2021			Q3 2021			Q2 2021
Consumer:
Broadband (Data and VoIP)		$	67,592		$	65,911		$	66,983		$	68,604		$	67,981
Voice services			36,643			37,452			39,518			40,587			40,173
Video services			14,359			14,366			15,371			16,163			16,799
			118,594			117,729			121,872			125,354			124,953
Commercial:
Data services (includes VoIP)			57,113			57,895			57,444			57,545			56,871
Voice services			35,775			36,339			37,303			38,446			39,065
Other			11,287			11,560			11,408			10,205			9,091
			104,175			105,794			106,155			106,196			105,027
Carrier:
Data and transport services			36,263			33,485			32,659			33,556			33,942
Voice services			3,718			3,852			4,088			4,173			4,396
Other			354			391			431			375			395
			40,335			37,728			37,178			38,104			38,733
Subsidies			6,534			6,583			17,671			17,264			17,465
Network access			24,846			26,213			27,846			29,923			31,115
Other products and services			3,906			6,231			7,758			1,743			3,110
Total operating revenue		$	298,390		$	300,278		$	318,480		$	318,584		$	320,403

Consolidated Communications Holdings, Inc.
Schedule of Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2022				2021				2022				2021
Net loss		$	(1,512	)		$	(55,089	)		$	(117,061	)		$	(117,172	)
Add (subtract):
Income tax expense (benefit)			(1,275	)			5,413				(11,578	)			113
Interest expense, net			30,156				45,431				59,671				93,846
Depreciation and amortization			72,543				76,079				144,893				151,690
EBITDA			99,912				71,834				75,925				128,477
Adjustments to EBITDA (1):
Other, net (2)			6,326				8,748				11,836				10,436
Investment income (accrual basis)			(9,903	)			(11,439	)			(18,152	)			(20,995	)
Investment distributions (cash basis)			11,329				12,656				19,545				22,033
Pension/OPEB benefit			(2,964	)			(2,542	)			(5,947	)			(5,083	)
Loss on extinguishment of debt			—				5,121				—				17,101
Loss on impairment			—				—				126,490				—
Change in fair value of contingent payment rights			—				39,826				—				97,414
Non-cash compensation (3)			2,833				2,493				5,032				3,943
Adjusted EBITDA		$	107,533			$	126,697			$	214,729			$	253,326
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 Net Loss to Adjusted EBITDA Guidance
(Dollars in millions)
(Unaudited)
	Year Ended
	December 31, 2022
	Range
	Low				High
Net loss	$	(151	)		$	(138	)
Add:
Income tax benefit		(15	)			(14	)
Interest expense, net		125				122
Depreciation and amortization		293				290
EBITDA		252				260
Adjustments to EBITDA (1):
Other, net (2)		23				25
Loss on impairment		126				126
Pension/OPEB benefit		(11	)			(11	)
Non-cash compensation (3)		10				10
Adjusted EBITDA	$	400			$	410
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, cash distributions less equity earnings from our investments, dividend income, 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.
Total Net Debt to LTM Adjusted EBITDA Ratio
(Dollars in thousands)
(Unaudited)
		June 30,
		2022
Summary of Outstanding Debt:
Term loans, net of discount $9,513		$	990,362
6.50% Senior secured notes due 2028			750,000
5.00% Senior secured notes due 2028			400,000
Finance leases			28,092
Total debt as of June 30, 2022			2,168,454
Less deferred debt issuance costs			(34,914	)
Less cash on hand			(43,024	)
Total net debt as of June 30, 2022		$	2,090,516
Adjusted EBITDA for the 12 months ended June 30, 2022		$	468,265
Total Net Debt to last 12 months Adjusted EBITDA			4.46x

Consolidated Communications Holdings, Inc.
Adjusted Net Income and Net Income Per Share
(Dollars in thousands, except per share amounts)
(Unaudited)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2022				2021				2022				2021
Net loss		$	(1,512	)		$	(55,089	)		$	(117,061	)		$	(117,172	)
Integration and severance related costs, net of tax			802				508				1,604				1,678
Loss on impairment of assets held for sale			—				—				126,490				—
Loss on disposition of wireless spectrum licenses, net of tax			—				2,641				—				2,641
Loss on disposition of fixed wireless, net of tax			—				3,085				—				3,085
Loss on extinguishment of debt, net of tax			—				3,785				—				12,639
Change in fair value of contingent payment rights			—				39,826				—				97,414
Non-cash interest expense for Searchlight note including amortization of discount and fees			—				10,861				—				21,062
Non-cash interest expense for swaps, net of tax			(310	)			(237	)			(605	)			(421	)
Tax impact of non-deductible goodwill			(392	)			—				(11,205	)			—
Non-cash stock compensation, net of tax			2,094				1,843				3,720				2,914
Adjusted net income		$	683			$	7,223			$	2,944			$	23,840
Weighted average number of shares outstanding			111,697				78,029				111,694				78,029
Adjusted diluted net income per share		$	0.01			$	0.09			$	0.03			$	0.31
Notes:
Calculations above assume a 26.07% effective tax rate for the quarter and six months ended June 30, 2022 and 26.10% effective tax rate for the quarter and six months ended June 30, 2021.

Consolidated Communications Holdings, Inc.
Key Operating Metrics
(Unaudited)
		June 30,				March 31,				December 31,				September 30,				June 30,
		2022				2022				2021				2021				2021
Passings
Fiber Gig+ capable passings
Northern New England			451,414				341,010				291,921				217,660				168,165
All other markets			380,365				348,396				313,789				276,500				228,958
Total Fiber Gig+ capable (1)			831,779				689,406				605,710				494,160				397,123
DSL/Copper passings (2)
Northern New England			1,284,786				1,395,190				1,444,279				1,518,540				1,568,035
All other markets			635,428				663,835				702,098				737,016				779,781
Total DSL/Copper (2)			1,920,214				2,059,025				2,146,377				2,255,556				2,347,816
Total Passings			2,751,993				2,748,431				2,752,087				2,749,716				2,744,939
% Fiber Gig+ Coverage/Total Passings			30	%			25	%			22	%			18	%			14	%
Consumer Broadband Connections
Fiber Gig+ capable
Northern New England			31,050				24,882				20,032				17,288				14,927
All other markets			72,405				68,930				66,090				64,251				62,594
Total Fiber Gig+ capable connections			103,455				93,812				86,122				81,539				77,521
DSL/Copper (2)
Northern New England			126,475				131,763				136,140				140,893				144,057
All other markets			151,283				154,575				162,302				168,229				171,902
Total DSL/Copper connections (2)			277,758				286,338				298,442				309,122				315,959
Total Consumer Broadband Connections			381,213				380,150				384,564				390,661				393,480
Consumer Broadband Net Adds
Northern New England			880				473				(2,009	)			(803	)			(1,887	)
All other markets (2)			183				(1,327	)			(4,088	)			(2,016	)			(2,635	)
Total Consumer Broadband Net Adds			1,063				(854	)			(6,097	)			(2,819	)			(4,522	)
Consumer Broadband Penetration %
Fiber Gig+ capable
Northern New England			7	%			7	%			7	%			8	%			9	%
All other markets			19	%			20	%			21	%			23	%			27	%
Total Fiber Gig+ capable			12	%			14	%			14	%			17	%			20	%
DSL/Copper (2)
Northern New England			10	%			9	%			9	%			9	%			9	%
All other markets			24	%			23	%			23	%			23	%			22	%
Total DSL/Copper (2)			14	%			14	%			14	%			14	%			13	%
Total Consumer Broadband Penetration %			14	%			14	%			14	%			14	%			14	%
Consumer Broadband Revenue by Service Type ($ in thousands)
Fiber Broadband Revenue		$	19,218			$	17,241			$	16,152			$	15,423			$	15,013
Copper and Other Broadband Revenue			48,374				48,670				50,831				53,181				52,968
Total Consumer Broadband Revenue by Service Type		$	67,592			$	65,911			$	66,983			$	68,604			$	67,981
Consumer Average Revenue Per Unit (ARPU)
Fiber Broadband ARPU		$	64.95			$	63.88			$	64.22			$	64.64			$	65.83
Copper Broadband ARPU		$	52.36			$	50.78			$	50.65			$	51.32			$	49.92
Consumer Voice Connections			306,458				316,634				328,849				341,135				352,835
Video Connections			55,225				58,812				63,447				66,971				70,795
Fiber route network miles (long-haul, metro and FttP)			56,093				54,239				52,402				50,405				48,727
On-net buildings			15,618				15,446				14,891				14,625				14,253
Notes:
(1) In Q1 2021, the Company launched a multi-year fiber build plan to upgrade 1.6 million passings by 2025 or 70% of our service area to fiber Gig+ capable services by 2025. As of June 30, 2022, 226,000 of the target 400,000 passings for 2022 were upgraded to FttP and total fiber passings were ~832,000 or 30% 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. Prior period amounts have not been adjusted to reflect the sale.
As of March 31, 2022, the net assets of our Kansas City operations are classified as held for sale. The Kansas City operations, which are included in All other markets above, include approximately 137,000 passings and approximately 10% consumer broadband penetration. Amounts above have not been adjusted to reflect the pending sale.

Tag: [Consolidated-Communications-Earnings]

View source version on businesswire.com: https://www.businesswire.com/news/home/20220802005179/en/

Investor and Media Contact

Jennifer Spaude, Consolidated Communications

Phone: 507-386-3765

jennifer.spaude@consolidated.com

Source: Consolidated Communications

FAQ

What were the key highlights of Consolidated Communications' second quarter 2022 results?

Consolidated reported a record 9,600 net fiber subscribers added and achieved net-positive consumer broadband connections for the first time in seven years.

How much did Consolidated Communications sell its wireless investments for?

Consolidated Communications agreed to sell its wireless investments to Verizon for $490 million.

What is the current market position of Consolidated Communications regarding fiber connections?

Consolidated now passes over 800,000 locations with fiber, making it one of the largest fiber-to-the-home providers in the U.S.

How has the 2022 financial outlook changed for Consolidated Communications?

The adjusted EBITDA outlook for 2022 was revised down to a range of $400 million to $410 million from a previous estimate of $410 million to $425 million.

What was the revenue for Consolidated Communications in the second quarter of 2022?

Consolidated's revenue totaled $298.4 million in the second quarter of 2022.