solidated munications (US:CNSL)2022-08-07 16:01Financial Data and Key Metrics Changes - Total operating revenue for Q2 2022 was $298.4 million, with adjusted EBITDA of $107.5 million, representing a 36% adjusted EBITDA margin [36] - The annual $48 million in CAF II funding transitioned to $6 million under the Rural Digital Opportunity Fund, impacting revenue and EBITDA by approximately $10.5 million on a quarterly basis in 2022 [37] - Net interest expense decreased to $30.2 million, down $15.3 million compared to the previous year [52] Business Line Data and Key Metrics Changes - Consumer channel revenue was $118.6 million, down 5.1% year-over-year, while consumer broadband revenue was $67.6 million, up 0.4% after normalizing for the Ohio asset sale [41][42] - Consumer fiber revenue increased by $4.2 million or 28% year-over-year, with almost 26,000 consumer fiber connections added in the last 12 months [43] - Commercial revenue was $104.2 million, down $852,000 for the quarter, while data services revenue was $57.1 million, up 0.4% year-over-year [46] Market Data and Key Metrics Changes - The company added 9,600 Fiber Fidium subscribers in Q2 2022, a threefold increase from a year ago, with 80% of net adds being new fiber subscribers [11][12] - Fidium is now available in 150 communities, and the company launched 2-gig symmetrical speeds at the end of June [13] - The majority of fiber customers consume 2 to 3 times more data per month than DSL customers, indicating a significant demand for fiber services [14] Company Strategy and Development Direction - The company is focused on transforming into a fiber-first broadband provider, with plans to achieve roughly 1 million total fiber locations by the end of 2022 [8][10] - The sale of wireless partnership investments for $490 million will be reinvested into fiber expansion and growth plans [9][35] - The company aims to leverage its existing infrastructure and market position to enhance fiber deployment and customer experience [25][27] Management's Comments on Operating Environment and Future Outlook - Management noted some slower decision-making from enterprise customers but maintained a solid sales funnel [31] - The company expects to see sequential revenue and EBITDA growth in early 2023, driven by fiber expansion and strategic revenue growth [88] - Inflationary pressures on utility and fuel costs are anticipated to increase operating expenses by $4 million to $5 million in the latter half of the year [59] Other Important Information - The company is on track to upgrade over 400,000 locations this year, with a total of 1 million fiber passings expected by the end of 2022 [22][61] - The company has improved liquidity and flexibility with over $600 million in aggregate divestitures of non-core assets announced in the past year [64] - The net debt leverage was 4.46 times at June 30, with liquidity improving from $293 million to over $850 million post-transaction [55] Q&A Session Summary Question: Impact of Verizon sale on fiber build acceleration - Management confirmed that the Verizon sale will help ensure the build-out plan and remain opportunistic in pursuing public-private partnerships [67][68] Question: Future asset monetizations and impacts on EBITDA - Management is evaluating potential asset sales based on competitive dynamics and cash flow characteristics, with a focus on investing in fiber [71][74] Question: Fiber net adds and housing market impact - Management indicated that the housing market slowdown has not significantly impacted subscriber adds due to the compelling fiber product being offered [77][80] Question: Cost to pass for fiber installations - Management acknowledged a potential 5% to 8% increase in average cost to pass due to inflation, but still expects to remain competitive in costs [84][85] Question: Stabilization of revenue or EBITDA - Management anticipates sequential revenue and EBITDA growth starting in early 2023, driven by fiber expansion and strategic revenue initiatives [88]