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Q3 2021 Earnings Release

11/03/2021 | 06:15am EST

Frontier Communications Delivers Record New Fiber Locations and Fiber Broadband

Customer Growth

Reports Third-Quarter 2021 Financial Results

  • Built fiber to a record 185,000 locations in the third quarter, bringing total fiber passings to 3.8 million by the end of the third quarter
  • Added a record 29,000 new fiber broadband customers during the quarter
  • Delivered third-quarter revenue of $1.58 billion, net income of $126 million, and Adjusted EBITDA of $587 million
  • Raised $1 billion of debt in October, contributing to liquidity of approximately $2.7 billion
  • Continued to enhance leadership team with Melissa Pint, Chief Digital Information Officer, and Charlon McIntosh, Chief Customer Operations Officer

NORWALK, Conn. -- Frontier Communications Parent, Inc. (NASDAQ: FYBR) ("Frontier" or the "Company") reported third quarter 2021 results today, delivering record new fiber locations and fiber broadband customer growth.

"We gained strong momentum in the quarter and delivered record results on two of the most important drivers of our transformation - building and selling fiber. The team's diligent operational execution and relentless focus on improving the customer experience are beginning to show in our results", said Nick Jeffery, President and Chief Executive Officer of Frontier. "We continued to attract world-classtalent to our organization, and the new billion-dollardebt raise in October will help

us continue to accelerate our fiber build. It's still early days, but I'm encouraged by the numbers and the progress we're making in our plans to Build Gigabit America."

Consolidated Financial Results1

Frontier reported consolidated revenue for the third quarter ended September 30, 2021 of $1.58 billion, a 6.1% decline from consolidated revenue reported in the third quarter of 2020, as growth in consumer fiber broadband was more than offset by declines in video, voice, and wholesale services. Consumer fiber broadband revenue increased 14.6% over the third quarter of 2020 to $243 million in the third quarter, driven by strong growth in fiber broadband customers and average revenue per customer (ARPU). Consumer fiber broadband net adds were approximately 29,000 in the third quarter, the ninth consecutive quarter of positive consumer fiber net adds, resulting in fiber broadband customer growth of 5.1%.

Third quarter 2021 operating income was $284 million and net income was $126 million.

1 Prior year comparisons are adjusted for Disposal of Northwest Operations. See Schedule C and Schedule E for a reconciliation of reported results to the results adjusted for the Disposal of Northwest Operations. Upon emergence from bankruptcy, Frontier adopted fresh start accounting in accordance with ASC 852. As a result, Frontier's consolidated financial statements after April 30,

2021 are not comparable to prior periods.- All figures and growth rates in this release have been normalized to reflect the impact of fresh start accounting. See Frontier's Form 8-K filed with the SEC on July 30, 2021, for further details on the impact of fresh start accounting. See Frontier's supplemental trending schedules, available at www.frontier.com/ir, for information regarding adjustments to revenue, expense and certain non-GAAP measures reflecting the impact of fresh start accounting for periods presented.

Adjusted EBITDA was $587 million and Adjusted EBITDA margin was 37.2%, compared to Adjusted EBITDA of $670 million and Adjusted EBITDA margin of 39.9% in the third quarter of 2020.22 The year- over-year decline in Adjusted EBITDA and Adjusted EBITDA margin was driven by revenue declines, partially offset by cost savings initiatives, including the emphasis on reducing video content costs.

Capital expenditures were $377 million in the quarter, an increase from $314 million in the third quarter of 2020, as fiber expansion initiatives accelerated.

Consumer Results

  • Consumer revenue was $800 million, a 4.2% decline from the third quarter of 2020, as strong fiber broadband revenue growth was offset by legacy video and voice declines
  • Consumer fiber revenue was $409 million, a 0.7% increase over the third quarter of 2020 as strong consumer broadband revenue growth offset declines in voice, video, and wholesale
  • Consumer fiber broadband revenue was $243 million, a 14.6% increase over the third quarter of 2020
  • Consumer fiber customer net adds were 29,000, an increase of over 6,000, or 5.1%, from the third quarter of 2020
  • Consumer fiber broadband customer churn was 1.56%, a decline from 1.80% in the third quarter of 2020
  • Consumer fiber broadband ARPU was $63.35, a 10.0% increase over the third quarter of 2020, as customers continue to upgrade to faster speeds

Business and Wholesale Results

  • Business and wholesale revenue was $693 million, a 6.5% decline from the third quarter of 2020, primarily due to proactive strategic repositioning with key business partners to reset pricing in exchange for higher win shares in the future and higher overall expected cash flow stability.
  • Business and wholesale fiber broadband revenue was $275 million, a 1.4% decline from the third quarter of 2020.
  • Business fiber broadband customer churn was 1.26%, a decline from 1.62% in the third quarter of 2020.
  • Business fiber broadband ARPU was $104.76, a 3.9% increase over the third quarter of 2020.

Capital Structure

Frontier successfully raised $1.0 billion of 6.000% second lien secured debt on October 13, 2021. Including the $1.0 billion debt raise, Frontier currently has total liquidity of approximately $2.7 billion, including a cash balance of approximately $2.2 billion and $535 million of available capacity in its revolving credit facility. Frontier's net leverage ratio for the four quarters ended September 30, 2021 was approximately 2.2x.3 Frontier has no long-term debt maturities prior to 2027.

2021 Outlook

  1. Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures of performance, See "Non-GAAP Measures" for a description of these measures and its calculation. See Schedule A for a reconciliation of Adjusted EBITDA to net income/(loss).
  2. Net leverage ratio is a non-GAAP measure. See "Non-GAAP Measures" and the condensed consolidated balance sheet data contained herein for a description and calculation of net leverage ratio.

Frontier today reaffirmed its operational and financial guidance expectations for 2021.

Frontier's guidance for the full year 2021 is:

  • Adjusted EBITDA of $2.40 - $2.50 billion
  • Cash capital expenditures of approximately $1.8 billion
  • Fiber build to at least 600,000 new locations in 2021
  • Cash taxes of approximately $50 million
  • Cash interest payments of approximately $365 million
  • Cash pension and OPEB of approximately $70 million (net of capitalization)

Conference Call Information

Frontier Communications will host a conference call with the financial community to discuss third quarter 2021 results today, November 3, 2021, at 8:30 a.m. Eastern Time (ET).

The conference call webcast and presentation materials will be accessible through Frontier's Investor Relations website at https://investor.frontier.comand will remain archived at this location.

Investor Contact

Spencer Kurn

SVP, Investor Relations +1 401 225 0475 spencer.kurn@ftr.com

About Frontier Communications

Frontier Communications offers a variety of services to residential and business customers over its fiber-optic and copper networks in 25 states, including high-speed Internet, advanced voice, video, and Frontier Secure® digital protection solutions. Frontier Business™ offers communications solutions to small, medium, and enterprise businesses. More information about Frontier is available at www.frontier.com.

Non-GAAP Financial Measures

Frontier uses certain non-GAAP financial measures in evaluating its performance, including EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, operating free cash flow, adjusted operating expenses, and leverage ratio, each of which is described below. Management uses these non-GAAP financial measures internally to (i) assist in analyzing Frontier's underlying financial performance from period to period, (ii) analyze and evaluate strategic and operational decisions, (iii) establish criteria for compensation decisions, and (iv) assist in the understanding of Frontier's ability to generate cash flow and, as a result, to plan for future capital and operational decisions. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors regarding Frontier's financial condition and results of operations because these measures, when used in conjunction with related GAAP financial measures (i) provide a more comprehensive view of Frontier's core operations and ability to generate cash flow, (ii) provide investors with the financial analytical framework upon which management bases financial, operational, compensation, and

planning decisions and (iii) present measurements that investors and rating agencies have indicated to management are useful to them in assessing Frontier and its results of operations.

A reconciliation of these measures to the most comparable financial measures calculated and presented in accordance with GAAP is included in the accompanying tables. These non-GAAP financial measures are not measures of financial performance or liquidity under GAAP, nor are they alternatives to GAAP measures and they may not be comparable to similarly titled measures of other companies.

EBITDA is defined as net income (loss) less income tax expense (benefit), interest expense, investment and other income (loss), pension settlement costs, gains/losses on extinguishment of debt, reorganization items, and depreciation and amortization. EBITDA margin is calculated by dividing EBITDA by total revenue.

Adjusted EBITDA is defined as EBITDA, as described above, adjusted to exclude, certain pension/OPEB expenses, restructuring costs and other charges, stock-based compensation, and certain other non-recurring items. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by total revenue.

Management uses EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin to assist it in comparing performance from period to period and as measures of operational performance. Management believes that these non-GAAP measures provide useful information for investors in evaluating Frontier's operational performance from period to period because they exclude depreciation and amortization expenses related to investments made in prior periods and are determined without regard to capital structure or investment activities. By excluding capital expenditures, debt repayments and dividends, among other factors, these non-GAAP financial measures have certain shortcomings. Management compensates for these shortcomings by utilizing these non-GAAP financial measures in conjunction with the comparable GAAP financial measures.

Adjusted net income (loss) attributable to Frontier common shareholders is defined as net income (loss) attributable to Frontier common shareholders and excludes restructuring costs and other charges, pension settlement costs, reorganization items, certain income tax items and the income tax effect of these items, and certain other non-recurring items. Adjusting for these items allows investors to better understand and analyze Frontier's financial performance over the periods presented.

Management defines operating free cash flow, a non-GAAP measure, as net cash provided from operating activities less capital expenditures. Management uses operating free cash flow to assist it in comparing liquidity from period to period and to obtain a more comprehensive view of Frontier's core operations and ability to generate cash flow. Management believes that this non-GAAP measure is useful to investors in evaluating cash available to service debt and pay dividends. This non-GAAP financial measure has certain shortcomings; it does not represent the residual cash flow available for discretionary expenditures, as items such as debt repayments and preferred stock dividends are not deducted in determining such measure. Management compensates for these shortcomings by utilizing this non-GAAP financial measure in conjunction with the comparable GAAP financial measure.

Adjusted operating expenses is defined as operating expenses adjusted to exclude depreciation and amortization, restructuring and other charges, goodwill impairment charges, certain pension/OPEB expenses, stock-based compensation, and certain other non-recurring items. Investors have indicated that this non-GAAP measure is useful in evaluating Frontier's performance.

Net leverage ratio is calculated as net debt (total debt less cash and cash equivalents) divided by Adjusted EBITDA for the most recent four quarters. Investors have indicated that this non-GAAP measure is useful in evaluating Frontier's debt levels.

The information in this press release should be read in conjunction with the financial statements and footnotes contained in Frontier's documents filed with the U.S. Securities and Exchange Commission.

Forward-Looking Statements

This release contains "forward-looking statements" related to future events. Forward-looking statements address our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, our ability to comply with the covenants in the agreements governing our indebtedness and other matters. These statements are made on the basis of management's views and assumptions, as of the time the statements are made, regarding future events and performance and contain words such as "expect," "anticipate," "intend," "plan," "believe," "seek," "see," "may," "will," "would," or "target." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. A wide range of factors could materially affect future developments and performance, including but not limited to: our significant indebtedness, our ability to incur substantially more debt in the future, and covenants in the agreements governing our current indebtedness that may reduce our operating and financial flexibility; declines in Adjusted EBITDA relative to historical levels that we are unable to offset through potential EBTIDA enhancements; our ability to successfully implement strategic initiatives, including our fiber buildout and other initiatives to enhance revenue and realize productivity improvements; our ability to secure necessary construction resources, materials and permits for our fiber buildout initiative; our ability to effectively manage our operations, operating expenses, capital expenditures, debt service requirement and cash paid for income taxes and liquidity; competition from cable, wireless and wireline carriers, satellite, fiber "overbuilders" and over the top companies, and the risk that we will not respond on a timely or profitable basis; our ability to successfully adjust to changes in the communications industry, including the effects of technological changes and competition on our capital expenditures, products and service offerings; risks related to disruption in our networks, infrastructure and information technology that result in customer loss and/or incurrence of additional expenses; the impact of potential information technology or data security breaches or other cyber-attacks or other disruptions; our ability to retain or attract new customers and to maintain relationships with customers, including wholesale customers; our reliance on a limited number of key supplies and vendors; declines in revenue from our voice services, switched and nonswitched access and video and data services that we cannot stabilize or offset with increases in revenue from other products and services; our ability to secure, continue to use or renew intellectual property and other licenses used in our business; our ability to hire or retain key personnel; our ability to dispose of certain assets or asset groups or to make acquisition of certain assets on terms that are attractive to us, or at all; the effects of changes in the availability of federal and state universal service funding or other subsidies to us and our competitors and our ability to obtain future subsidies, including participation in the proposed RDOF program; our ability to meet our CAF II and RDOF obligations and the risk of penalties or obligations to return certain CAF II and RDOF funds; our ability to defend against litigation and potentially unfavorable results from current pending and future litigation; our ability to comply with applicable federal and state consumer protection requirements; the effects of governmental legislation and regulation on our business, including costs, disruptions, possible limitations on operating flexibility and changes to the competitive landscape resulting from such legislation or regulation; the impact of regulatory, investigative and legal proceedings and legal compliance risks; our ability to effectively manage service quality in the states in which we operate and meet mandated service quality metrics; the effects of changes in income tax rates, tax laws, regulations or rulings, or federal or state

This is an excerpt of the original content. To continue reading it, access the original document here.


Frontier Communications Parent Inc. published this content on 03 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 November 2021 11:14:04 UTC.

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Financials (USD)
Sales 2021 6 429 M - -
Net income 2021 4 896 M - -
Net Debt 2021 5 969 M - -
P/E ratio 2021 2,65x
Yield 2021 -
Capitalization 7 107 M 7 107 M -
EV / Sales 2021 2,03x
EV / Sales 2022 2,39x
Nbr of Employees 15 803
Free-Float -
Duration : Period :
Frontier Communications Parent, Inc. Technical Analysis Chart | FYBR | US35909D1090 | MarketScreener
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus OUTPERFORM
Number of Analysts 6
Last Close Price 29,08 $
Average target price 55,17 $
Spread / Average Target 89,7%
EPS Revisions
Managers and Directors
Nicholas Simon Jeffery President, Chief Executive Officer & Director
Scott C. Beasley Chief Financial Officer & Executive Vice President
John G. Stratton Executive Chairman
Kevin L. Beebe Director
Lisa V. Chang Director
Sector and Competitors