Frontier Communications(FYBR) - 2025 Q1 - Quarterly Results

Executive Summary & Highlights Frontier achieved record Q1 2025 revenue and Adjusted EBITDA, driven by significant fiber business growth and surpassing 8 million fiber passings, despite a net loss of $64 million - CEO Nick Jeffery highlighted the strongest start to a year yet, attributing success to continued strength in the fiber business and increasing reliance on fiber networks[3] - The company reached a significant milestone, expanding its fiber network to over 8 million passings, progressing towards its goal of 10 million[3][6] Q1 2025 Key Financial and Operational Highlights (YoY) | Metric | Q1 2025 Value | YoY Change | | :--- | :--- | :--- | | Total Revenue | $1.51 billion | +3.4% | | Fiber Broadband Revenue | - | +24% | | Fiber Broadband Customers | - | +19.3% | | Adjusted EBITDA | $583 million | +6.6% | | Net Loss | $64 million | N/A (vs $1M income) | | Fiber Passings Added | 321,000 | - | | Total Fiber Passings | 8.1 million | - | | Consumer Fiber Broadband ARPU | $68.21 | +4.7% | Segment Performance Both Consumer and Business/Wholesale segments grew revenue year-over-year, driven by fiber expansion, partially offset by legacy copper declines Consumer Results Consumer revenue increased 3.3% to $813 million, fueled by a 25.6% surge in fiber broadband revenue from customer growth and higher ARPU, with improved churn Q1 2025 Consumer Segment Performance (YoY) | Metric | Q1 2025 Value | YoY Change | | :--- | :--- | :--- | | Total Consumer Revenue | $813 million | +3.3% | | Consumer Fiber Revenue | $589 million | +16.6% | | Consumer Fiber Broadband Revenue | $471 million | +25.6% | | Fiber Broadband Net Additions | 103,000 | - | | Fiber Broadband Customer Growth | - | +19.8% | | Fiber Broadband Customer Churn | 1.20% | -0.04 p.p. | Business and Wholesale Results Business and Wholesale revenue grew 3.5% to $682 million, led by fiber revenue growth and 4,000 fiber broadband customer additions, despite increased churn Q1 2025 Business & Wholesale Segment Performance (YoY) | Metric | Q1 2025 Value | YoY Change | | :--- | :--- | :--- | | Total B&W Revenue | $682 million | +3.5% | | B&W Fiber Revenue | $324 million | +8.0% | | Fiber Broadband Net Additions | 4,000 | - | | Fiber Broadband Customer Growth | - | +11.4% | | Fiber Broadband ARPU | $99.98 | +1.6% | | Fiber Broadband Customer Churn | 1.53% | +0.21 p.p. | Financial Position and Outlook Frontier maintained strong liquidity of ~$2.6 billion and a 4.9x net leverage ratio as of March 31, 2025, with no significant debt maturities before 2027, as its Verizon acquisition progresses Capital Structure Frontier reported total liquidity of ~$2.6 billion and a 4.9x net leverage ratio as of March 31, 2025, with no long-term debt maturities prior to 2027 - Total liquidity of ~$2.6 billion consists of $0.5 billion in cash, $1.3 billion in a delayed draw term loan facility, and $0.8 billion in a revolving credit facility[10] - The net leverage ratio was approximately 4.9x as of March 31, 2025[10] Pending Acquisition by Verizon Frontier's definitive merger agreement with Verizon, signed September 4, 2024, is expected to close by Q1 2026 pending approvals, resulting in no financial outlook or earnings call - A definitive merger agreement was signed with Verizon on September 4, 2024[13] - The transaction is expected to close by the first quarter of 2026, subject to regulatory approvals[14] Financial Statements Unaudited Q1 2025 financials show 3.4% revenue growth to $1.51 billion, but higher expenses led to a $64 million net loss, with operating cash flow offset by capital expenditures Statements of Operations Frontier's Q1 2025 revenue increased to $1.511 billion, but operating income declined to $76 million, resulting in a $64 million net loss compared to prior year Q1 Statement of Operations Data (YoY Comparison) | Metric ($ in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $1,511 | $1,462 | | Total operating expenses | $1,435 | $1,372 | | Operating income | $76 | $90 | | Net income (loss) | $(64) | $1 | | Diluted EPS | $(0.26) | $0.00 | Revenue Breakdown Revenue analysis shows a clear strategic shift to fiber, with fiber revenue growing to $913 million in Q1 2025, offsetting copper declines, and Data and Internet services revenue increasing Revenue by Technology (YoY Comparison) | ($ in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Fiber | $913 | $805 | | Copper | $582 | $641 | Revenue by Service (YoY Comparison) | ($ in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Data and Internet services | $1,049 | $947 | | Voice services | $290 | $321 | | Video services | $74 | $94 | Balance Sheet As of March 31, 2025, Frontier's balance sheet showed total assets of $20.9 billion, driven by increased property, plant, and equipment, with total debt at $11.64 billion Condensed Balance Sheet Data | ($ in millions) | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $506 | $750 | | Property, plant and equipment, net | $16,221 | $15,678 | | Total assets | $20,898 | $20,614 | | Total debt | $11,643 | $11,561 | | Equity | $4,877 | $4,941 | Cash Flow Statement In Q1 2025, Frontier generated $519 million in net cash from operating activities, but investing activities used $756 million, driven by capital expenditures for the fiber buildout Consolidated Cash Flow Data (YoY Comparison) | ($ in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided from operating activities | $519 | $335 | | Net cash provided from (used by) investing activities | $(756) | $186 | | Net cash provided from (used by) financing activities | $45 | $(423) | Key Operating Metrics Q1 2025 operating metrics reflect a successful fiber-first strategy, with total fiber passings reaching 8.1 million and 107,000 fiber broadband customer additions, contrasting with continued copper declines Customer Metrics Total broadband customers grew to 3.153 million, with 59,000 net additions in Q1 2025, an acceleration from prior year, and consumer ARPU rising to $84.40 Broadband and Consumer Customer Metrics | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Broadband customers (thousands) | 3,153 | 3,094 | 2,974 | | Broadband net additions (thousands) | 59 | 37 | 31 | | Consumer customers (thousands) | 3,232 | 3,193 | 3,140 | | Avg. monthly consumer revenue per customer | $84.40 | $83.58 | $83.65 | Broadband Metrics The company's fiber buildout reached 8.1 million total passings, with strong consumer fiber net additions of 103,000 and healthy ARPU growth, contrasting with copper customer declines - Total fiber passings increased to 8.1 million as of Q1 2025, up from 6.8 million in Q1 2024[43] Broadband Net Additions (in thousands) | Segment | Technology | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | :--- | | Consumer | Fiber | 103 | 85 | | Consumer | Copper | (41) | (51) | | Business + Wholesale | Fiber | 4 | 3 | | Business + Wholesale | Copper | (7) | (6) | Broadband ARPU | Segment | Technology | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | :--- | | Consumer | Fiber | $68.21 | $65.18 | | Consumer | Copper | $62.39 | $56.16 | | Business + Wholesale | Fiber | $99.98 | $98.40 | Non-GAAP Financial Measures & Reconciliations Frontier uses non-GAAP measures like Adjusted EBITDA, operating free cash flow, and net leverage ratio to evaluate performance, with Q1 2025 Adjusted EBITDA at $583 million, and provides detailed reconciliations - Management uses non-GAAP measures like EBITDA, Adjusted EBITDA, operating free cash flow, and net leverage ratio to analyze underlying financial performance, make strategic decisions, and assess cash flow generation ability[17] Reconciliation of Net Income to Adjusted EBITDA The company reconciled its Q1 2025 GAAP net loss of $64 million to a non-GAAP Adjusted EBITDA of $583 million, with key adjustments including depreciation, interest expense, and restructuring costs Adjusted EBITDA Reconciliation (YoY Comparison) | ($ in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net income (loss) | $(64) | $1 | | Depreciation and amortization | 445 | 388 | | Interest expense | 200 | 199 | | Restructuring costs and other charges | 36 | 34 | | Stock-based compensation | 15 | 26 | | Adjusted EBITDA | $583 | $547 | Reconciliation of Operating Free Cash Flow Operating free cash flow for Q1 2025 was a negative $254 million, derived from net cash from operations less capital expenditures and vendor financing, an improvement from prior year Operating Free Cash Flow Reconciliation (YoY Comparison) | ($ in millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided from operating activities | $519 | $335 | | Capital expenditures | $(757) | $(666) | | Payment of vendor financing | $(16) | $(363) | | Operating free cash flow | $(254) | $(694) | Forward-Looking Statements This press release contains forward-looking statements concerning future events, including the pending merger with Verizon, financial performance, and strategic initiatives, subject to numerous risks and uncertainties - The report includes forward-looking statements regarding future performance, strategic plans, and the proposed merger with Verizon[26] - A wide range of factors could affect future results, including risks related to the merger's completion, regulatory approvals, economic conditions, competition, and the company's ability to execute its fiber buildout plan[26]