Form 8-K
0001304421 False 0001304421 2020-10-29 2020-10-29 iso4217:USD xbrli:shares iso4217:USD xbrli:shares
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 8-K

_________________

CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  October 29, 2020

_______________________________

CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

_______________________________

Delaware000-5144602-0636095
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification No.)

121 South 17th Street

Mattoon, Illinois 61938-3987

(Address of Principal Executive Offices) (Zip Code)

(217) 235-3311

(Registrant's telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

_______________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock – $0.01 par valueCNSLThe Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 
 
Item 2.02. Results of Operations and Financial Condition.

On October 29, 2020, Consolidated Communications Holdings, Inc. issued a press release to report its results of operations and financial condition as of and for the quarter ended September 30, 2020. A copy of this press release is included as Exhibit 99.1 to this Form 8-K and incorporated into this Item 2.02 by reference.

The information in this Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such filing.

Item 7.01. Regulation FD Disclosure.

On October 29, 2020, the Company posted an investor presentation to the "Investor Relations" section of the Company's website at http://ir.consolidated.com. A copy of the investor presentation is attached as Exhibit 99.2 to this Current Report on Form 8-K.

The information in this Form 8-K, including Exhibit 99.2, is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

No. Description
   
99.1 Press release dated October 29, 2020  
99.2 Investor presentation dated October 29, 2020
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
 
 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.
   
  
Date: October 29, 2020By: /s/ Steven L. Childers        
  Steven L. Childers
  Chief Financial Officer
  

 

EdgarFiling

EXHIBIT 99.1

Consolidated Communications Reports Third Quarter 2020 Results

Stable and improved Adjusted EBITDA and revenue trends reflecting resiliency of the business 

Global refinancing strengthened balance sheet resulting in lowered leverage and increased liquidity

Strategic investment accelerates fiber expansion plans enabling a transformation and return to growth

Third Quarter 2020 Highlights (compared to third quarter 2019)

MATTOON, Ill., Oct. 29, 2020 (GLOBE NEWSWIRE) -- Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) (the “Company” or “Consolidated”) reported results for the third quarter 2020.

“Consolidated’s very solid third quarter results demonstrate both the resiliency of our business and strong execution on improving revenue trends, growing adjusted EBITDA and strengthening the balance sheet,” said Bob Udell, president and chief executive officer of Consolidated Communications. “Revenue growth trends in both broadband and data-transport services sequentially and year-over-year combined with lower operating expenses contributed to our strong third quarter results.”

“We’ve made great progress with our capital allocation plan having successfully completed a global debt refinance which extends maturities, significantly increases liquidity and strengthens our balance sheet, enabling us to immediately pivot and implement our growth plans.”

“Our new capitalization coupled with the strategic investment from Searchlight Capital Partners enables us to accelerate our fiber expansion plans and upgrade more than 1 million passings bringing significant benefits to customers. This multi-year, build plan will put us on a path to return to overall revenue growth,” concluded Udell.

Financial Results for the Third Quarter

Conference Call

Consolidated’s third-quarter earnings conference call will be webcast today at 10 a.m. ET. The live webcast and materials will be available on the Investor Relations section of the Company’s website at http://ir.consolidated.com. The live conference call dial-in number for investors and analysts is 1-877-374-3981, conference ID 7219487. A telephonic replay of the conference call will be available through Nov. 5 and can be accessed by calling 855-859-2056.

About Consolidated Communications        

Consolidated Communications Holdings, Inc. (NASDAQ: CNSL) is a leading broadband and business communications provider serving consumers, businesses, and wireless and wireline carriers across rural and metro communities and a 23-state service area. Leveraging an advanced fiber network spanning 46,300 fiber route miles, Consolidated Communications offers a wide range of communications solutions, including: high-speed Internet, data, phone, security, managed services, cloud services and wholesale, carrier solutions. From our first connection 125 years ago, Consolidated is dedicated to turning technology into solutions, connecting people and enriching how they work and live. Visit www.consolidated.com for more information.

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 twelve month adjusted EBITDA ratio,” “free cash flow” 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 twelve month adjusted EBITDA ratio” principally to put other non-GAAP measures in context and facilitate comparisons by investors, security analysts and others; this ratio differs in certain respects from the similar ratio used in our credit agreement. 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. Because adjusted EBITDA is a component of the ratio of total net debt to last twelve month adjusted EBITDA, these measures are also subject to the material limitations discussed above. In addition, the ratio of total net debt to last twelve 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.

Free cash flow represents net cash provided by operating activities adjusted for capital expenditures, cash dividends and proceeds received from the sale of assets. Free cash flow is a measure of operating cash flows available for corporate purposes after providing sufficient fixed asset additions. The tables that follow include a calculation of free cash flow for each of the periods presented with a reconciliation to net cash provided by operating activities. Free cash flow provides useful information to investors in the evaluation of our operating performance and liquidity.

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.
                
Safe Harbor

Certain statements in this press release are forward-looking statements and are made pursuant to the safe harbor provisions of the 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 or our refinancing of outstanding debt, including our senior secured credit facilities, will not be realized; the outcome of any legal proceedings that may be instituted against the Company or its directors; the ability to obtain regulatory approvals and meet other closing conditions to the investment on a timely basis or at all, including the risk that regulatory approvals required for the investment are not obtained on a timely basis or at all, or are obtained subject to conditions that are not anticipated or that could adversely affect the Company or the expected benefits of the investment; the anticipated use of proceeds of the strategic investment; 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 acquisitions; 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; and liability and compliance costs regarding environmental regulations; and risks associated with discontinuing paying dividends on our common stock. 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 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 press release.  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.

Investor and Media Contact                                                   

Jennifer Spaude, Consolidated Communications
Phone: 507-386-3765
jennifer.spaude@consolidated.com



Consolidated Communications Holdings, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
(Unaudited)
 Sept. 30, Dec. 31,
  2020   2019 
    
ASSETS   
Current assets:   
Cash and cash equivalents$99,719  $12,395 
Accounts receivable, net 119,076   120,016 
Income tax receivable 5,175   2,669 
Prepaid expenses and other current assets 42,473   41,787 
Total current assets 266,443   176,867 
    
Property, plant and equipment, net 1,782,183   1,835,878 
Investments 111,555   112,717 
Goodwill 1,035,274   1,035,274 
Customer relationships, net 126,081   164,069 
Other intangible assets 10,557   10,557 
Other assets 51,735   54,915 
Total assets$3,383,828  $3,390,277 
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
Current liabilities:   
Accounts payable$22,385  $30,936 
Advance billings and customer deposits 50,045   45,710 
Accrued compensation 61,804   57,069 
Accrued interest 15,195   7,874 
Accrued expense 89,871   75,406 
Current portion of long-term debt and finance lease obligations 23,827   27,301 
Total current liabilities 263,127   244,296 
    
Long-term debt and finance lease obligations 2,193,828   2,250,677 
Deferred income taxes 185,017   173,027 
Pension and other post-retirement obligations 272,023   302,296 
Other long-term liabilities 78,257   72,730 
Total liabilities 2,992,252   3,043,026 
    
Shareholders' equity:   
Common stock, par value $0.01 per share; 100,000,000 shares authorized, 73,057,683 and 71,961,045, shares outstanding as of September 30, 2020 and December 31, 2019, respectively 731   720 
Additional paid-in capital 497,722   492,246 
Accumulated deficit (27,594)  (71,217)
Accumulated other comprehensive loss, net (85,896)  (80,868)
Noncontrolling interest 6,613   6,370 
Total shareholders' equity 391,576   347,251 
Total liabilities and shareholders' equity$3,383,828  $3,390,277 
    



Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
        
 Three Months Ended Nine Months Ended
 September 30, September 30,
  2020   2019   2020   2019 
        
Net revenues$327,066  $333,326  $977,904  $1,005,507 
Operating expenses:       
Cost of services and products 144,428   146,636   421,717   438,735 
Selling, general and administrative expenses 65,066   70,100   197,679   222,615 
Depreciation and amortization 80,220   93,048   244,024   289,595 
Income from operations 37,352   23,542   114,484   54,562 
Other income (expense):       
Interest expense, net of interest income (31,661)  (34,250)  (95,215)  (103,270)
Gain on extinguishment of debt -   1,121   234   1,370 
Other income, net 13,467   11,180   38,529   27,510 
Income (loss) before income taxes 19,158   1,593   58,032   (19,828)
Income tax expense (benefit) 4,576   1,204   13,892   (5,719)
Net income (loss) 14,582   389   44,140   (14,109)
Less: net income attributable to noncontrolling interest 72   132   243   286 
        
Net income (loss) attributable to common shareholders$14,510  $257  $43,897  $(14,395)
        
Net income (loss) per basic and diluted common shares attributable to common shareholders$0.20  $-  $0.60  $(0.21)
        



Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
  (Dollars in thousands)
(Unaudited)
          
   Three Months Ended Nine Months Ended
   September 30, September 30,
    2020   2019   2020   2019 
OPERATING ACTIVITIES        
 Net income (loss) $14,582  $389  $44,140  $(14,109)
 Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
 Depreciation and amortization  80,220   93,048   244,024   289,595 
 Deferred income taxes  -   639   -   639 
 Cash distributions from wireless partnerships in excess of (less than) earnings  857   (349)  1,001   (1,561)
 Pension and post-retirement contributions in excess of expense  (13,681)  (11,649)  (29,666)  (24,261)
 Non-cash, stock-based compensation  2,263   1,928   5,487   5,240 
 Amortization of deferred financing  1,222   1,240   3,628   3,679 
 Gain on extinguishment of debt  -   (1,121)  (234)  (1,370)
 Other adjustments, net  (255)  (4)  (4,485)  791 
 Changes in operating assets and liabilities, net  30,421   1,254   33,455   (10,006)
 Net cash provided by operating activities  115,629   85,375   297,350   248,637 
INVESTING ACTIVITIES        
 Purchase of property, plant and equipment, net  (55,978)  (64,575)  (152,215)  (184,343)
 Proceeds from sale of assets  904   140   6,977   14,343 
 Proceeds from sale of investments  -   -   426   329 
 Other  -   -   -   (450)
 Net cash used in investing activities  (55,074)  (64,435)  (144,812)  (170,121)
FINANCING ACTIVITIES        
 Proceeds from issuance of long-term debt  -   45,000   40,000   152,000 
 Payment of finance lease obligations  (2,124)  (2,932)  (7,243)  (9,743)
 Payment on long-term debt  (4,588)  (45,588)  (93,763)  (142,763)
 Repurchase of senior notes  -   (21,692)  (4,208)  (25,986)
 Dividends on common stock  -   -   -   (55,445)
 Net cash used in financing activities  (6,712)  (25,212)  (65,214)  (81,937)
Net change in cash and cash equivalents  53,843   (4,272)  87,324   (3,421)
Cash and cash equivalents at beginning of period  45,876   10,450   12,395   9,599 
Cash and cash equivalents at end of period $99,719  $6,178  $99,719  $6,178 
          



Consolidated Communications Holdings, Inc. 
Consolidated Revenue by Category 
(Dollars in thousands) 
(Unaudited) 
            
  Three Months Ended   Nine Months Ended 
  September 30,   September 30, 
   2020  2019    2020  2019 
Commercial and carrier:           
Data and transport services (includes VoIP) $90,153 $88,756   $269,297 $265,420 
Voice services  45,343  46,606    136,838  141,812 
Other  10,909  11,828    33,027  40,394 
   146,405  147,190    439,162  447,626 
Consumer:           
Broadband (VoIP and Data)  67,163  65,456    196,806  192,609 
Video services  18,452  20,463    56,796  61,540 
Voice services  42,775  45,487    129,072  136,601 
   128,390  131,406    382,674  390,750 
            
Subsidies  18,064  18,025    54,587  54,318 
Network access  32,009  34,211    93,947  105,000 
Other products and services  2,198  2,494    7,534  7,813 
Total operating revenue $327,066 $333,326   $977,904 $1,005,507 
            



Consolidated Communications Holdings, Inc.
Consolidated Revenue Trend by Category
(Dollars in thousands)
(Unaudited)
            
           
  Three Months Ended 
  Q3 2020 Q2 2020 Q1 2020 Q4 2019 Q3 2019 
Commercial and carrier:           
Data and transport services (includes VoIP) $90,153 $89,572 $89,572 $89,905 $88,756 
Voice services  45,343  45,775  45,720  46,510  46,606 
Other  10,909  10,406  11,712  12,500  11,828 
   146,405  145,753  147,004  148,915  147,190 
Consumer:           
Broadband (VoIP and Data)  67,163  65,567  64,076  64,474  65,456 
Video services  18,452  19,213  19,131  19,838  20,463 
Voice services  42,775  43,121  43,176  44,238  45,487 
   128,390  127,901  126,383  128,550  131,406 
            
Subsidies  18,064  18,069  18,454  18,122  18,025 
Network access  32,009  30,473  31,465  33,056  34,211 
Other products and services  2,198  2,980  2,356  2,392  2,494 
Total operating revenue $327,066 $325,176 $325,662 $331,035 $333,326 
            



Consolidated Communications Holdings, Inc.
Schedule of Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)
        
        
 Three Months Ended Nine Months Ended
 September 30, September 30,
  2020   2019   2020   2019 
Net income (loss)$14,582  $389  $44,140  $(14,109)
Add (subtract):       
Income tax expense (benefit) 4,576   1,204   13,892   (5,719)
Interest expense, net 31,661   34,250   95,215   103,270 
Depreciation and amortization 80,220   93,048   244,024   289,595 
EBITDA 131,039   128,891   397,271   373,037 
        
Adjustments to EBITDA (1):       
Other, net (2) 35   1,141   (3,280)  13,840 
Investment income (accrual basis) (11,510)  (11,254)  (31,269)  (30,605)
Investment distributions (cash basis) 12,350   10,905   32,046   28,823 
Pension/OPEB expense (1,937)  483   (3,107)  3,690 
Gain on extinguishment of debt -   (1,121)  (234)  (1,370)
Non-cash compensation (3) 2,263   1,928   5,487   5,240 
Adjusted EBITDA$132,240  $130,973  $396,914  $392,655 
        
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.
Schedule of Free Cash Flow Calculation
(Dollars in thousands)
(Unaudited)
        
        
 Three Months Ended Nine Months Ended
 September 30, September 30,
  2020   2019   2020   2019 
Net cash provided by operating activities$115,629  $85,375  $297,350  $248,637 
Add (subtract):       
Capital expenditures (55,978)  (64,575)  (152,215)  (184,343)
Dividends paid -   -   -   (55,445)
Proceeds from the sale of assets 904   140   6,977   14,343 
Free cash flow$60,555  $20,940  $152,112  $23,192 
        



Consolidated Communications Holdings, Inc.
Total Net Debt to LTM Adjusted EBITDA Ratio
(Dollars in thousands)
(Unaudited)
  
 Sept. 30,
Summary of Outstanding Debt: 2020 
Term loans, net of discount $4,533$1,766,416 
Senior unsecured notes due 2022, net of discount $1,486 439,023 
Finance leases 18,273 
Total debt as of September 30, 2020 2,223,712 
Less deferred debt issuance costs (6,057)
Less cash on hand (99,719)
Total net debt as of September 30, 2020$2,117,936 
  
Adjusted EBITDA for the twelve months ended September 30, 2020$527,799 
  
Total Net Debt to last twelve months 
Adjusted EBITDA4.01x 
   



Consolidated Communications Holdings, Inc.
Total Net Debt to LTM Adjusted EBITDA Ratio - Pro Forma
(Dollars in thousands)
(Unaudited)
  
 Pro Forma
 Sept. 30,
Summary of Outstanding Debt: 2020 
Term loans, net of discount of $18,750$1,231,250 
Senior secured notes due 2028 750,000 
Finance leases 18,273 
Total debt 1,999,523 
Less deferred debt issuance costs (25,000)
Less cash on hand (142,043)
Total net debt$1,832,480 
  
  
Adjusted EBITDA for the twelve months ended September 30, 2020$527,799 
  
Total Net Debt to last twelve months 
Adjusted EBITDA - Pro Forma3.47x 
  
Notes: 
Pro Forma net debt leverage ratio represents the effects of the refinancing and Searchlight Stage 1 investment of $350 million as if it was completed on September 30, 2020.   
  



Consolidated Communications Holdings, Inc.
Adjusted Net Income (Loss) and Net Income (Loss) Per Share
(Dollars in thousands, except per share amounts)
(Unaudited)
        
        
 Three Months Ended Nine Months Ended
 September 30, September 30,
  2020   2019   2020   2019 
Net income (loss)$14,582  $389  $44,140  $(14,109)
Integration and severance related costs, net of tax -   2,761   31   10,931 
Storm costs (recoveries), net of tax 6   -   (104)  (257)
Gain on extinguishment of debt, net of tax -   (724)  178   (930)
Non-cash interest expense for swaps, net of tax (187)  (152)  (568)  78 
Other, tax -   639   -   639 
Non-cash stock compensation, net of tax 1,722   1,245   4,176   3,558 
Adjusted net income (loss)$16,123  $4,158  $47,853  $(90)
        
Weighted average number of shares outstanding 71,153   70,813   71,153   70,813 
Adjusted diluted net income (loss) per share$0.23  $0.06  $0.67  $- 
        
Notes:       
Calculations above assume a 23.9% and 35.4% effective tax rate for the three months ended and 23.9% and 32.1% for the nine months ended September 30, 2020 and 2019, respectively.
 



Consolidated Communications Holdings, Inc.
Key Operating Statistics
(Unaudited)
           
  Sept. 30,
 June 30, % Change  Sept. 30, % Change
   2020  2020 in Qtr  2019 YOY
           
Voice Connections 794,333 809,457 (1.9%) 854,430 (7.0%)
           
Data and Internet Connections 792,211 791,203 0.1% 784,151 1.0%
           
Video Connections 77,854 80,053 (2.7%) 86,446 (9.9%)
           
Business and Broadband as % of total revenue (1) 75.9% 76.1% (0.3%) 75.6% 0.4%
           
Fiber route network miles (long-haul, metro and FTTH) (2) 46,326 45,847 1.0% 37,359 24.0%
           
On-net buildings 13,202 12,882 2.5% 11,732 12.5%
           
Consumer Customers 562,587 569,148 (1.2%) 602,482 (6.6%)
           
Consumer ARPU $76.07 $74.91 1.5% $72.70 4.6%
           
           
Notes:          
(1) Business and Broadband revenue % includes: commercial/carrier, equipment sales and service, directory, consumer broadband and special access.
(2) FTTH miles added to fiber route network miles beginning in Q2 2020, which were previously not included. Prior period amounts have not been restated to the current period presentation.

EdgarFiling

Exhibit 99.2

 

Q3 2020 Earnings Oct. 29, 2020

 

 

Safe Harbor The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward - looking information so that investors ca n better understand a company’s future prospects and make informed investment decisions. Certain statements in this communication are forward - looki ng statements and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These forward - looking statemen ts reflect, among other things, our current expectations, plans, strategies, and anticipated financial results. There are a number of risks, uncertaint ies, 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; economic and financial market conditions ge ner ally and economic conditions in our service areas; various risks to the price and volatility of our common stock; changes in the valuation of pen sion 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 si gni ficant amount of cash to service and repay the debt restrictions contained in our debt agreements that limit the discretion of management in operating the busin ess; regulatory changes, including changes to subsidies, rapid development and introduction of new technologies and intense competition in the telecom mun ications industry; risks associated with our possible pursuit of acquisitions; system failures; cyber - attacks, information or security breaches or techno logy 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; disrupt ions in the relationship with third party vendors; losses of key management personnel and the inability to attract and retain highly qualified management a nd personnel in the future; changes in the extensive governmental legislation and regulations governing telecommunications providers and the provision of te lecommunications services; new or changing tax laws or regulations; telecommunications carriers disputing and/or avoiding their obligations to pa y 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; and liability and compliance costs regarding environmental regulations; and risks associated with discontinuing pay ing dividends on our common stock. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ mat erially from such forward - looking statements are discussed in more detail in our filings with the 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 assumption s on our part. These forward - looking statements generally are identified by the words “believe,” “expect,” “anticipate,” “estimate,” “project,” “inte nd,” “plan,” “should,” “may,” “will,” “would,” “will be,” “will continue” or similar expressions. Such forward - looking statements involve known and unknown r isks, uncertainties and other factors that may cause actual results, performance or achievements of Consolidated Communications Holdings, Inc. and its subs idi aries 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, forw ard - 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 t he SEC, we disclaim any intention or obligation to update or revise publicly any forward - looking statements. You should not place undue reliance on for ward - looking statements. 2

 

 

Non - GAAP Measures This presentation includes certain non - GAAP historical and forward - looking financial measures, including but not limited to “ EBITDA,” “adjusted EBITDA,” “total net debt to last twelve month adjusted EBITDA ratio ,” and “ free cash flow.” In addition to providing key metrics for management to evaluate the Company’s performance, we believes these measurements assist investors in their understanding of operating performance and in identifying historical and prospective trends. A reconciliation of the differences between these non - GAAP financial measures and the most directly comparable financial measures presented in accordance with GAAP are available on the Company’s website at https:// ir.consolidated.com . Non - GAAP measures are not presented to be replacements or alternatives to the GAAP measures, and investors are urged to consider these non - GAAP measures i n addition to, and not in substitution for, measures prepared in accordance with GAAP. Consolidated may present or calculate i ts non - GAAP measures differently from other companies. Consolidated has filed a Form 8 - K reporting the quarterly results for the third quarter of 2020. The 8 - K must be read in conjun ction with this presentation and contains additional important details on the quarterly results. . 3

 

 

Third Quarter 2020 Highlights New Capitalization Plan Positions Company for Return to Growth • Announced strategic partnership with Searchlight Capital Partners, closed on $350M capital infusion and completed global refinancing on 10/2/20 • Lowered net debt ratio from 4.39x to 4.01x, as of Sept. 30, 2020 • Total liquidity: $ 191.6M, as of Sept. 30, 2020 Delivered Stable Revenue and Adjusted EBITDA Growth • Revenue: $327.1M, down 1.9% • Adjusted EBITDA: $132.2M, up 1.0% • Free Cash Flow: increased $39.6M in Q3 - 20 and $128.9M YTD • Capital expenditures: $ 56M in Q3 - 20 and $ 152.2M YTD Leveraging Fiber Assets Across Three Customer Groups • Data & Transport revenue: up 1.6% • Broadband revenue: up 2.6% (6th consecutive quarter) • Fiber lit buildings +12.5%; 1,100 fiber - route miles added Q3 - 2020 as compared to Q3 - 2019 Stable and improved Adjusted EBITDA and revenue trends reflecting resiliency of business Global refinancing strengthened balance sheet; lowered leverage and increased liquidity Strategic investment accelerates fiber expansion plans enabling return to growth 4

 

 

The New Consolidated Communications Strategic transformation underway for return to growth Dividend Cut + New Capital Allocation Plan Aggressive Debt Paydown from Free Cash Flow Conservative Financial Policy Accelerate Investment in Business: $ 425M Committed Capital I nfusion Future - proof the Fiber Network Deliver Best - in - Class Services and Customer Experience Across Three Customer Groups Return to Revenue Growth Lowered Leverage, Extended Maturities, Enhanced Liquidity Profile $350M Searchlight investment 5

 

 

Third Quarter 2020 Results • Improved revenue trends driven by broadband and data/transport growth; higher voice retention • Adjusted EBITDA margins improved as a result of improved cost structure, technology and process improvements $ in millions • Cost management resulted in a 3.3% or $7.2M reduction in operating expenses • Wireless cash distributions totaled $12.3M in Q3 Q3 - 20 Y/Y YTD 2020 Y/Y Total Revenue $327.1 (1.9%) $977.9 (2.7%) Adjusted EBITDA $132.2 1.0% $396.9 1.1% Adjusted EBITDA margin 40.4% 1.1% 40.6% 1.5% Third Quarter Highlights 6

 

 

Commercial and Carrier Revenue Data and Transport Revenue $ in millions, Q3 - 2020 as compared to Q3 - 2019 • Data and Transport Revenue: +1.6% • On - net buildings: 13,202, +12.5% • Tower wireless connections: 3,890, +1.9% • Ethernet revenue +2.8% • VoIP revenue +12% • Introduced Exterprise@Home • Enhanced Cloud Services with Pax8 Partnership • Expanded launch of Microsoft Productivity Suite Q3 - 20 Results Commercial and Carrier Highlights Commercial and Carrier Revenue Q3 - 20 Y/Y YTD 2020 Y/Y $146.4 (0.5%) $439.2 (1.9%) Q3 - 20 Y/Y YTD 2020 Y/Y $90.2 1.6% $269.3 1.5% 7

 

 

Consumer Revenue • Consumer revenue: $128.4 M • Consumer broadband revenue: +2.6%; (sixth consecutive quarter of growth) • Consumer ARPU: +4.6% • Voice revenue decline improved from 10.4% in Q3 - 19 to 6.0% in Q3 - 20 • Lead with broadband; upgrade to faster speeds • Increase consumer ARPU; reduce churn • Leverage public - private partnerships to expand broadband services economically • CCiTV expansion to new markets in 2020 ; launched service in Texas in Q2, CA and IL in Q3 Broadband Revenue Q3 - 20 Results Consumer Strategy and Highlights Consumer ARPU $ in millions, Q3 - 2020 as compared to Q3 - 2019 Q3 - 20 Y/Y YTD 2020 Y/Y $67.2 2.6% $196.8 2.2% $70.17 $70.86 $72.70 $73.52 $73.32 74.91 $76.07 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Q3-20 8

 

 

4.3 4.1 4.0 3.5 12/31/19 6/30/20 9/30/20 9/30/20 Capital Allocation and Liquidity Update Debt Maturity ($ in M) Net Debt Leverage • Revolving Credit Facility: $250M (unused) • Secured Term Loan: $1,250M, priced at LIBOR+ coupon rate of 4.75% per annum, with 1.0% floor • Senior Secured Notes: $750M, 6.5% • No Short - Term Maturities $250 $1,250 $750 2020 2021 2022 2023 2024 2025 2026 2027 2028 Senior Notes Term Loan Revolver (1) Pro forma net debt leverage at 9/30/20 includes the net cash proceeds from the refinancing and Searchlight’s Stage 1 investment of $350M completed on 10/2/20 (1) Successful Recapitalization New Capitalization following refinance and Searchlight Investment completed on October 2, 2020 9

 

 

Consolidated’s Fiber - Rich Network 46,300 Fiber - route miles 2M+ Fiber - strand miles 13,200 On - net locations 550 F iber hub s/COs 3,900 F iber connections to wireless providers 13 Data centers 23 Operating states Data Centers Operating States Fiber Networks Leased Fiber 10

 

 

Consolidated Strategic Imperatives New Capital Structure with Extended Maturities and Increased Liquidity, Positions Company for Accelerated Growth • Improved leverage profile of 3.5x 1 • Target substantially all free cash flow to focus on highest return fiber expansion projects and increase market share Three Diverse Customer Groups Benefiting From Significant Fiber Expansion • Top 10 fiber provider in the U.S.; 23 states; 46,300 fiber route miles and growing • Compelling Consumer, Commercial and Carrier growth opportunities • Deliver a superior product offering with best - in - class customer experience Achieve Top Line Growth by Accelerating FTTH, Expanding Commercial and Carrier Opportunities • Improve EBITDA margins through simplified best - in - class fiber broadband services • Leverage low costs to upgrade 1M+ near net fiber passings Strategic Asset Portfolio Review • Continue to evaluate assets for fiber investment or monetization • Ensure all assets have a long - term, strategic fit 1 Pro forma net debt leverage at 9/30/20 includes the net cash proceeds from the refinancing and Searchlight’s Stage 1 investment of $350M completed on 10/2/20 11

 

 

Free Cash Flow (1) Includes acquisition and non - recurring related costs, and certain miscellaneous items. (2) 2019 Free Cash Flow excludes $55.4 million in dividends made prior to the change in capital allocation policy announced in April 2019. Improved Cash Flow; Stronger Balance Sheet $ in millions Q3 - 20 Q3 - 19 YTD 2020 YTD 2019 Adjusted EBITDA $ 132.2 $ 131.0 $ 396.9 $ 392.7 Interest Payments (23.0) (26.5) (84.6) (92.5) Pension and OPEB Payments (11.8) (12.2) (26.6) (28.0) Restructuring, Severance and Other (1) - (1.1) - (14.0) Income Tax Payments, net of refunds (0.8) (0.1) (1.0) (0.6) Working Capital and Other 19.0 (5.7) 12.7 (9.0) Cash provided by Operating Activities $ 115.6 $ 85.4 $ 297.4 $ 248.6 Capital expenditures (56.0) (64.6) (152.2) (184.3) Proceeds from sale of assets 0.9 0.1 7.0 14.3 Free Cash Flow (2) $ 60.5 $ 20.9 $ 152.2 $ 78.6 12

 

 

Q&A Q3 2020 Earnings