solidated munications (US:CNSL)2021-10-28 20:28Financial Data and Key Metrics Changes - Operating revenue for Q3 2021 totaled $318.6 million, down 2.6% year-over-year, primarily due to declines in legacy products for voice, video, and network access, partially offset by growth in strategic revenues for data and transport and consumer broadband services [23][24] - Adjusted EBITDA was $127.4 million, representing a 40% adjusted EBITDA margin for the quarter [23] - Consumer broadband revenue was $68.6 million, up approximately 1% sequentially and up 2.1% year-over-year, marking the tenth consecutive quarter of year-over-year growth in broadband revenue [24][25] Business Line Data and Key Metrics Changes - Total consumer revenue was $125.4 million, down 2.4% year-over-year, with over 75% of the decline attributed to linear video services [24] - Data and transport revenue in the commercial and carrier segment totaled $91.1 million, up approximately 1.1% year-over-year, indicating continued growth in this area [31] - Commercial voice revenue declined by $2.7 million or 6% due to access declines and migration to VoIP solutions [31] Market Data and Key Metrics Changes - The company upgraded 97,000 passings to fiber Gig capable service in Q3 2021, with a total of 219,000 upgrades year-to-date, on track to exceed the target of 300,000 fiber upgrades for the year [9][10] - Fiber gig subscriber base increased by over 20% year-to-date, with more than 4,000 net one gig subscribers added in Q3 [12][26] - The total fiber gig plus penetration at the end of Q3 was 13%, measured on total inventory, including recently upgraded passings [27] Company Strategy and Development Direction - The company is focused on a multiyear value creation fiber expansion plan, aiming to upgrade 1.6 million passings by the end of 2025, which represents over 70% of total passings [10][44] - A new brand launch is expected to enhance customer experience and offer superior gig symmetrical speeds, with no data caps and competitive pricing [14][18] - The strategy includes leveraging fiber network investments to grow commercial and carrier data transport revenue, with a focus on Ethernet and 5G network opportunities [22][44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about business recovery from the pandemic and the receptiveness of customers to in-person meetings [22] - The company anticipates a step down in revenue and margins in 2022 due to the decline in CAF 2 revenue, but expects to show sequential growth later in the year and full-year growth in 2023 [55][56] - The management highlighted the importance of public/private partnerships to maximize infrastructure funding opportunities [60][62] Other Important Information - Capital expenditures for Q3 totaled $144.3 million, with year-to-date CapEx at $339.5 million, reflecting proactive measures to secure fiber materials amid supply chain challenges [37][39] - The company recorded a non-cash pretax loss of $5.7 million on assets held for sale, related to the sale of non-core Ohio assets for approximately $26 million [34] Q&A Session Summary Question: Customer mix in terms of net ads from existing DSL customers versus new relationships - Management indicated that the mix started at 60% new and 40% upgrades, now shifting to 80% new and 20% upgrades as they exit Q3 [46] Question: Supply chain concerns and CapEx guidance - Management confirmed they are seeing supply constraints and have increased inventory, pulling forward some 2022 CapEx to 2021 due to anticipated supply chain issues [51][54] Question: Tailwinds or headwinds for 2022 EBITDA outlook - Management noted infrastructure funding as a potential tailwind and emphasized the importance of public/private partnerships to maximize opportunities [60][62]