Frontier Communications(FYBR) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Frontier achieved record fiber sales and ARPU growth in Q2 2025, marking its highest quarterly revenue and Adjusted EBITDA since emerging from bankruptcy Q2 2025 Performance Overview Frontier achieved a "breakthrough quarter" in Q2 2025 with record fiber sales, ARPU growth, and its highest quarterly revenue and Adjusted EBITDA since emerging from bankruptcy, driven by strong fiber customer growth - Q2 was a breakthrough quarter for Gigabyte America builders, achieving record fiber sales, ARPU growth, and the highest quarterly revenue and EBITDA since emerging from bankruptcy four years ago[2] - The strategy is based on the belief that the business strengthens with each new fiber customer, achieving outperforming market share relative to coverage this quarter, simply put, fiber won[3] Key Financial & Operational Highlights In Q2 2025, Frontier added 126,000 fiber broadband customers, saw ARPU grow by 5%, and Adjusted EBITDA increase by 8%, with total revenue reaching $1.54 billion, up 4.0% year-over-year, despite a net loss of $123 million Q2 2025 Key Financial and Operational Highlights | Metric | Q2 2025 Value | YoY Change | | :-------------------------------- | :------------ | :--------- | | Fiber Broadband Customers Added (thousands) | 126 | +20.0% | | Consumer Fiber Broadband ARPU ($) | 68.54 | +4.9% | | Total Fiber Passings (millions) | 8.5 | N/A | | Revenue ($ billion) | 1.54 | +4.0% | | Operating Income ($ million) | 44 | N/A | | Net Loss ($ million) | 123 | N/A | | Adjusted EBITDA ($ million) | 607 | +8.4% | | Cash Capital Expenditures ($ million) | 845 | N/A | | Net Cash from Operations ($ million) | 477 | N/A | Segment Performance Frontier's Q2 2025 performance saw consumer revenue grow by 4.6% driven by fiber broadband, while business and wholesale revenue increased by 3.0% with fiber growth Consumer Segment Results Consumer segment revenue grew 4.6% year-over-year to $825 million, with fiber broadband revenue up 26.2% to $496 million, adding 120,000 new fiber broadband customers, and improving churn to 1.29% Q2 2025 Consumer Segment Key Metrics | Metric | Q2 2025 Value | YoY Change | | :-------------------------------- | :------------ | :--------- | | Consumer Revenue ($ million) | 825 | +4.6% | | Consumer Fiber Revenue ($ million) | 609 | +16.4% | | Consumer Fiber Broadband Revenue ($ million) | 496 | +26.2% | | Consumer Fiber Broadband Net Adds (thousands) | 120 | N/A | | Consumer Fiber Broadband Customer Growth | N/A | +20.4% | | Consumer Fiber Broadband Churn | 1.29% | -0.11 pp | Business and Wholesale Segment Results Business and wholesale revenue increased 3.0% year-over-year to $697 million, with fiber revenue growing 4.1% to $330 million, adding 6,000 fiber broadband customers, and ARPU rising 0.9% to $98.72 Q2 2025 Business and Wholesale Segment Key Metrics | Metric | Q2 2025 Value | YoY Change | | :-------------------------------- | :------------ | :--------- | | Business and Wholesale Revenue ($ million) | 697 | +3.0% | | Business and Wholesale Fiber Revenue ($ million) | 330 | +4.1% | | Business and Wholesale Fiber Broadband Net Adds (thousands) | 6 | N/A | | Business and Wholesale Fiber Broadband Customer Growth | N/A | +14.2% | | Business and Wholesale Fiber Broadband ARPU ($) | 98.72 | +0.9% | | Business and Wholesale Fiber Broadband Churn | 1.37% | +0.06 pp | Corporate Information Frontier's corporate information covers its capital structure, pending acquisition by Verizon, company overview, non-GAAP financial measures, and forward-looking statements Capital Structure & Liquidity As of June 30, 2025, Frontier's total liquidity was approximately $2.3 billion, comprising $400 million in cash, $1.2 billion in delayed draw term loan capacity, and $700 million in revolving credit facility capacity, with a net leverage ratio of 4.9x and no long-term debt maturing before 2027 Capital Structure and Liquidity as of June 30, 2025 | Metric | Value (as of June 30, 2025) | | :-------------------------------- | :-------------------------- | | Total Liquidity ($ billion) | ~2.3 | | Cash Balance ($ billion) | 0.4 | | Delayed Draw Term Loan Capacity ($ billion) | 1.2 | | Revolving Credit Facility Capacity ($ billion) | 0.7 | | Net Leverage Ratio | 4.9x | - Frontier has no long-term debt maturities before 2027[8] Pending Acquisition by Verizon Frontier and Verizon signed a definitive agreement on September 4, 2024, for Verizon to acquire Frontier, with the transaction expected to close in Q1 2026, pending regulatory approvals, and consequently, Frontier will not host a conference call or provide financial outlook - On September 4, 2024, Verizon Communications Inc. ("Verizon") entered into a definitive agreement to acquire Frontier[9] - The transaction is expected to close in Q1 2026, subject to necessary regulatory approvals[10] - Due to the pending transaction, Frontier will not host a conference call or provide a financial outlook[9] About Frontier Frontier Communications Parent, Inc. (NASDAQ: FYBR) is the largest pure-play fiber provider in the U.S., dedicated to delivering ultra-fast broadband connectivity to millions of consumers and businesses through its "Building Gigabit America®" mission - Frontier (NASDAQ: FYBR) is the largest pure-play fiber provider in the U.S.[13] - The company's mission is "Building Gigabit America®," providing ultra-fast broadband connectivity to unlock the potential of millions of consumers and businesses[13] Non-GAAP Financial Measures Frontier utilizes non-GAAP financial measures such as EBITDA, Adjusted EBITDA, operating free cash flow, adjusted operating expenses, and net leverage ratio to assess performance, analyze decisions, determine compensation, and evaluate cash flow generation, aiming to provide investors a more comprehensive view of core operations and financial condition when used with GAAP metrics - Frontier uses non-GAAP financial measures including EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, operating free cash flow, adjusted operating expenses, and net leverage ratio to evaluate performance[14] - Management internally uses these non-GAAP financial measures to analyze company performance, evaluate strategic and operational decisions, determine compensation, and understand cash flow generation[14] - These non-GAAP financial measures are not GAAP measures of financial performance or liquidity, are not substitutes for GAAP metrics, and may not be comparable to similarly titled measures used by other companies[15] Forward-Looking Statements This report contains forward-looking statements regarding future events, including the proposed merger with Verizon, future operational and financial performance, and capital expenditures, which are subject to uncertainties and risks such as merger completion, significant debt, economic fluctuations, market competition, and regulatory changes that could materially impact future developments - This press release contains "forward-looking statements" related to future events, including the 2025 outlook, expectations or beliefs about future events such as the proposed merger with Verizon, future operational and financial performance, growth strategy implementation, and capital expenditures[24] - A wide range of factors could materially impact future developments and performance, including risks that the merger may not be completed timely or at all, or that conditions for completion may not be satisfied or waived, including failure to obtain necessary regulatory approvals[24] - Other factors include significant debt, economic uncertainty, financial market volatility, ability to implement strategic initiatives, and competition from various providers including cable, wireless, satellite, and fiber overbuilders[24] Unaudited Financial Data This section presents Frontier's unaudited financial data, including statements of operations, selected revenue data, operating data, balance sheet data, cash flow data, and non-GAAP reconciliations Statements of Operations This section provides Frontier's unaudited quarterly and six-month statements of operations, detailing revenue, expenses, operating income, and net loss Quarterly Statements of Operations In Q2 2025, Frontier reported total revenue of $1.539 billion, operating income of $44 million, a net loss of $123 million, and basic net loss per common share of $0.49, showing revenue growth from Q2 2024 but a deterioration in operating income and net loss compared to Q1 2025 Quarterly Statements of Operations (in millions, except per share amounts) | Metric | Q2 2025 ($M) | Q1 2025 ($M) | Q2 2024 ($M) | | :-------------------------------- | :----------- | :----------- | :----------- | | Revenue | 1,539 | 1,511 | 1,480 | | Cost of service | 532 | 521 | 516 | | Selling, general, and administrative expenses | 490 | 433 | 449 | | Depreciation and amortization | 457 | 445 | 398 | | Restructuring costs and other charges | 16 | 36 | 26 | | Total operating expenses | 1,495 | 1,435 | 1,389 | | Operating income | 44 | 76 | 91 | | Net loss | (123) | (64) | (123) | | Basic net loss per common share | (0.49) | (0.26) | (0.49) | | Capital expenditures | 845 | 757 | 626 | Six Months Statements of Operations For the six months ended June 30, 2025, total revenue was $3.050 billion, an increase from $2.942 billion in the prior year period, but operating income decreased from $181 million to $120 million, and net loss expanded from $122 million to $187 million, resulting in a basic net loss per common share of $0.75 Six Months Statements of Operations (in millions, except per share amounts) | Metric | H1 2025 ($M) | H1 2024 ($M) | | :-------------------------------- | :----------- | :----------- | | Revenue | 3,050 | 2,942 | | Cost of service | 1,053 | 1,038 | | Selling, general, and administrative expenses | 923 | 877 | | Depreciation and amortization | 902 | 786 | | Restructuring costs and other charges | 52 | 60 | | Total operating expenses | 2,930 | 2,761 | | Operating income | 120 | 181 | | Net loss | (187) | (122) | | Basic net loss per common share | (0.75) | (0.49) | | Capital expenditures | 1,602 | 1,292 | Selected Revenue Data This section provides Frontier's selected revenue data, categorized by service, segment, and technology for both quarterly and six-month periods Quarterly Revenue by Service, Segment, and Technology Total revenue for Q2 2025 was $1.539 billion, with data and internet services revenue increasing to $1.085 billion (from $983 million in Q2 2024) while voice and video services continued to decline; consumer revenue was $825 million and business and wholesale revenue was $697 million, with fiber revenue significantly growing to $939 million (from $840 million in Q2 2024), offsetting copper revenue decline Quarterly Revenue by Service, Segment, and Technology (in millions) | Revenue Category | Q2 2025 ($M) | Q1 2025 ($M) | Q2 2024 ($M) | | :-------------------------------- | :----------- | :----------- | :----------- | | By Service: | | | | | Data and Internet services | 1,085 | 1,049 | 983 | | Voice services | 282 | 290 | 312 | | Video services | 68 | 74 | 88 | | Other | 87 | 82 | 83 | | By Segment: | | | | | Consumer | 825 | 813 | 789 | | Business and wholesale | 697 | 682 | 677 | | By Technology: | | | | | Fiber | 939 | 913 | 840 | | Copper | 583 | 582 | 626 | | Total Revenue | 1,539 | 1,511 | 1,480 | Six Months Revenue by Service, Segment, and Technology Total revenue for H1 2025 was $3.050 billion, with data and internet services revenue increasing to $2.134 billion (from $1.930 billion in H1 2024) while voice and video services revenue declined; consumer revenue was $1.638 billion and business and wholesale revenue was $1.379 billion, with fiber revenue growing to $1.852 billion (from $1.645 billion in H1 2024), partially offsetting copper revenue decline Six Months Revenue by Service, Segment, and Technology (in millions) | Revenue Category | H1 2025 ($M) | H1 2024 ($M) | | :-------------------------------- | :----------- | :----------- | | By Service: | | | | Data and Internet services | 2,134 | 1,930 | | Voice services | 572 | 633 | | Video services | 142 | 182 | | Other | 169 | 167 | | By Segment: | | | | Consumer | 1,638 | 1,576 | | Business and wholesale | 1,379 | 1,336 | | By Technology: | | | | Fiber | 1,852 | 1,645 | | Copper | 1,165 | 1,267 | | Total Revenue | 3,050 | 2,942 | Unaudited Operating Data As of June 30, 2025, total broadband customers reached 3.227 million, with 74,000 net customer additions in Q2 2025; consumer customers totaled 3.283 million, with average monthly revenue per customer of $84.43 and a churn rate of 1.61%, and total employees were 12,765 Unaudited Operating Data | Metric | As of June 30, 2025 | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------------------- | :------------------ | :------ | :------ | :------ | | Broadband customers (thousands) | 3,227 | N/A | N/A | 3,010 | | Net customer additions (thousands) | N/A | 74 | 59 | 36 | | Consumer customers (thousands) | 3,283 | N/A | N/A | 3,154 | | Average monthly consumer revenue per customer ($) | 84.43 | N/A | 84.40 | 83.57 | | Customer monthly churn | 1.61% | N/A | 1.51% | 1.65% | | Employees | 12,765 | N/A | 12,738 | 12,960 | Condensed Consolidated Balance Sheet Data As of June 30, 2025, total assets were $21.265 billion, up from $20.614 billion at year-end 2024; cash and cash equivalents decreased from $750 million to $412 million; total liabilities increased to $16.514 billion, including $11.860 billion in long-term debt; equity was $4.761 billion, and the net leverage ratio was 4.9x Condensed Consolidated Balance Sheet Data (in millions) | Metric | June 30, 2025 ($M) | December 31, 2024 ($M) | | :-------------------------------- | :------------------- | :--------------------- | | Cash and cash equivalents | 412 | 750 | | Total current assets | 1,025 | 1,260 | | Property, plant and equipment, net | 16,785 | 15,678 | | Total assets | 21,265 | 20,614 | | Total current liabilities | 2,870 | 2,289 | | Long-term debt | 11,860 | 11,551 | | Equity | 4,761 | 4,941 | | Total liabilities and equity | 21,265 | 20,614 | | Net debt | 11,458 | N/A | | Adjusted EBITDA - last 4 quarters | 2,334 | N/A | | Net Leverage Ratio | 4.9x | N/A | Unaudited Consolidated Cash Flow Data This section presents Frontier's unaudited consolidated cash flow data for both quarterly and six-month periods, detailing operating, investing, and financing activities Quarterly Cash Flow Data In Q2 2025, net cash provided from operating activities was $477 million, up from $374 million in Q2 2024; net cash used by investing activities significantly increased to $841 million (from $393 million in Q2 2024), primarily due to capital expenditures rising to $845 million; net cash provided from financing activities was $209 million, reversing a net use of $72 million in Q2 2024, mainly due to long-term debt borrowings Quarterly Cash Flow Data (in millions) | Metric | Q2 2025 ($M) | Q2 2024 ($M) | | :-------------------------------- | :----------- | :----------- | | Net cash provided from operating activities | 477 | 374 | | Capital expenditures | (845) | (626) | | Net cash used by investing activities | (841) | (393) | | Net cash provided from (used by) financing activities | 209 | (72) | | Decrease in cash, cash equivalents, and restricted cash | (155) | (91) | | Cash, cash equivalents, and restricted cash at end of period | 564 | 1,246 | Six Months Cash Flow Data In H1 2025, net cash provided from operating activities was $996 million, up from $709 million in H1 2024; net cash used by investing activities significantly increased to $1.597 billion (from $207 million in H1 2024), primarily due to capital expenditures rising to $1.602 billion; net cash provided from financing activities was $254 million, a significant improvement from a net use of $495 million in H1 2024, mainly due to debt borrowings Six Months Cash Flow Data (in millions) | Metric | H1 2025 ($M) | H1 2024 ($M) | | :-------------------------------- | :----------- | :----------- | | Net cash provided from operating activities | 996 | 709 | | Capital expenditures | (1,602) | (1,292) | | Net cash used by investing activities | (1,597) | (207) | | Net cash provided from (used by) financing activities | 254 | (495) | | Decrease in cash, cash equivalents, and restricted cash | (347) | 7 | | Cash, cash equivalents, and restricted cash at end of period | 564 | 1,246 | Reconciliation of Non-GAAP Financial Measures This section provides reconciliations for Frontier's non-GAAP financial measures, including EBITDA, Adjusted EBITDA, operating free cash flow, and adjusted operating expenses EBITDA, Adjusted EBITDA, and Operating Free Cash Flow Reconciliation In Q2 2025, EBITDA was $501 million and Adjusted EBITDA was $607 million, showing growth from Q2 2024, while operating free cash flow was negative $368 million, reflecting significant capital expenditures; for H1 2025, Adjusted EBITDA was $1.190 billion and operating free cash flow was negative $622 million EBITDA, Adjusted EBITDA, and Operating Free Cash Flow Reconciliation (in millions) | Metric | Q2 2025 ($M) | Q1 2025 ($M) | Q2 2024 ($M) | H1 2025 ($M) | H1 2024 ($M) | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Net loss | (123) | (64) | (123) | (187) | (122) | | EBITDA | 501 | 521 | 489 | 1,022 | 967 | | Adjusted EBITDA | 607 | 583 | 560 | 1,190 | 1,107 | | EBITDA margin | 32.6% | 34.5% | 33.0% | 33.5% | 32.9% | | Adjusted EBITDA margin | 39.4% | 38.6% | 37.8% | 39.0% | 37.6% | | Net cash provided from operating activities | 477 | 519 | 374 | 996 | 709 | | Capital expenditures | (845) | (757) | (626) | (1,602) | (1,292) | | Operating free cash flow | (368) | (254) | (304) | (622) | (998) | Adjusted Operating Expenses Reconciliation Total operating expenses for Q2 2025 were $1.495 billion, and after adjustments for depreciation and amortization, pension/OPEB expense, restructuring and other charges, stock-based compensation, storm-related costs, and legal settlements, adjusted operating expenses were $932 million; for H1 2025, adjusted operating expenses were $1.860 billion Adjusted Operating Expenses Reconciliation (in millions) | Metric | Q2 2025 ($M) | Q1 2025 ($M) | Q2 2024 ($M) | H1 2025 ($M) | H1 2024 ($M) | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Total operating expenses | 1,495 | 1,435 | 1,389 | 2,930 | 2,761 | | Depreciation and amortization | (457) | (445) | (398) | (902) | (786) | | Pension/OPEB expense | (8) | (8) | (9) | (16) | (18) | | Restructuring costs and other charges | (16) | (36) | (26) | (52) | (60) | | Stock-based compensation | (13) | (15) | (11) | (28) | (37) | | Storm-related costs | (3) | (3) | - | (6) | - | | Legal settlements | (66) | - | (25) | (66) | (25) | | Adjusted operating expenses | 932 | 928 | 920 | 1,860 | 1,835 | Selected Financial and Operating Data In Q2 2025, total company fiber broadband revenue reached $541 million, a significant increase from $432 million in Q2 2024; total fiber passings grew to 8.5 million, with total fiber penetration at 30.9%; consumer fiber customers increased to 2.472 million, with 120,000 net adds in Q2 2025 and consumer fiber ARPU at $68.54; business + wholesale fiber customers were 153,000, with 6,000 net adds and ARPU at $98.72 Selected Financial and Operating Data | Metric | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------------- | :------ | :------ | :------ | :------ | :------ | | Broadband Revenue ($M): | | | | | | | Total Company Fiber | 541 | 514 | 432 | 1,055 | 846 | | Total Company Copper | 125 | 129 | 151 | 254 | 306 | | Estimated Fiber Passings (millions): | | | | | | | Total Fiber Passings | 8.5 | 8.1 | 7.2 | N/A | N/A | | Estimated Broadband Fiber % Penetration: | | | | | | | Total Fiber Penetration | 30.9% | 30.7% | 30.4% | N/A | N/A | | Broadband Customers, end of period (thousands): | | | | | | | Consumer Fiber | 2,472 | 2,352 | 2,053 | N/A | N/A | | Business + Wholesale Fiber | 153 | 147 | 134 | N/A | N/A | | Broadband Net Adds (thousands): | | | | | | | Consumer Fiber | 120 | 103 | 90 | N/A | N/A | | Business + Wholesale Fiber | 6 | 4 | 2 | N/A | N/A | | Broadband Churn: | | | | | | | Consumer Fiber | 1.29% | 1.20% | 1.40% | 1.25% | 1.32% | | Business + Wholesale Fiber | 1.37% | 1.53% | 1.31% | 1.45% | 1.32% | | Broadband ARPU ($): | | | | | | | Consumer Fiber | 68.54 | 68.21 | 65.32 | 68.40 | 65.39 | | Business + Wholesale Fiber | 98.72 | 99.98 | 97.83 | 99.43 | 98.09 |