Cincinnati Bell Reports Third Quarter 2019 Results

HIGHLIGHTS

• Revenue of $383 million and operating income of $23 million— Adjusted EBITDA¹ totaled $102 million
• Entertainment and Communications revenue totaled $249 million, generating Adjusted EBITDA of $93 million, up 2% year-over-year
• Fiber-to-the-premise (“FTTP”) HSI net activations totaled 3,800 in Cincinnati and 900 in Hawaii during the quarter
• Hawaiian Telcom generated Adjusted EBITDA of $25 million, an increase of 13% from a year ago
• IT Services and Hardware revenue totaled $141 million, generating Adjusted EBITDA of $12 million
• Cash provided by operating activities totaled $189 million year-to-date, and free cash flow² of $34 million year-to-date

CINCINNATI–(BUSINESS WIRE)–Cincinnati Bell Inc. (NYSE:CBB), today announced financial results for the third quarter of 2019.

Commenting on the company’s performance, President and Chief Executive Officer Leigh Fox stated, “Our solid third quarter results demonstrate the superior quality of our fiber assets and ability to capitalize on the expanded scale of our IT services business. Looking ahead, we remain committed to our full year 2019 financial guidance.”

Consolidated Results

• Consolidated revenue totaled $383 million in the third quarter of 2019 and $1,146 million year-to-date
• Operating income was $23 million in the third quarter of 2019 and $58 million year-to-date
• Adjusted EBITDA of $102 million in the third quarter of 2019 and $303 million year-to-date

Entertainment and Communications Segment

• Entertainment and Communications revenue totaled $249 million for the third quarter of 2019
  • Cincinnati revenue totaled $171 million in the third quarter
    • Fioptics revenue totaled $88 million, up $2 million from a year ago
    • Fioptics internet subscribers totaled 247,100, up 10,500 year-over-year
    • Fioptics is available to approximately 75% of Greater Cincinnati, which includes a combination of fiber-to-the-premise (“FTTP”) and fiber-to-the-node (“FTTN”) addresses
    • During the first nine months of 2019, 9,700 additional homes and businesses were passed with FTTP, which is available to 482,000 addresses or approximately 60% of Cincinnati’s total addressable market
  • Hawaii revenue totaled $78 million in the third quarter of 2019
    • Consumer / SMB Fiber revenue totaled $22 million, up 4% from a year ago
    • Consumer / SMB Fiber internet subscribers totaled 67,800, adding 3,800 customers year-over-year
    • Consumer / SMB Fiber is available to approximately 50% of Hawaii, which includes a combination of FTTP and FTTN addresses
    • During the first nine months of 2019, 3,600 additional homes and businesses were passed with FTTP, which is available to 170,600 addresses, approximately 35% of Hawaii’s total addressable market
• Adjusted EBITDA was $93 million in the third quarter of 2019, up 2% from a year ago

IT Services and Hardware Segment

• IT Services and Hardware revenue totaled $141 million for the third quarter of 2019
  • Communications revenue was $51 million, up $4 million year-over-year
  • Consulting revenue totaled $38 million for the third quarter, up $2 million year-over-year
  • Cloud revenue of $23 million, up $3 million from the prior year excluding insourcing initiatives from General Electric Company (“GE”)
  • Infrastructure Solutions revenue totaled $29 million, down $3 million year-over-year
• Adjusted EBITDA was $12 million for the third quarter of 2019, consistent year-over-year excluding the impact of GE’s insourcing initiatives

Cash Flow and Financial Position

• Operating cash flows totaled $189 million year-to-date with free cash flow totaling $34 million year-to-date
• Liquidity of $162 million as of September 30, 2019, with no significant maturities until 2024
• Capital expenditures were $167 million year-to-date
• Gross NOL carryforward of approximately $800 million as of September 30, 2019

2019 Outlook

• Cincinnati Bell is reaffirming the following guidance for 2019 as initially provided on February 14, 2019:

Conference Call/Webcast

Cincinnati Bell will host a conference call on Thursday, November 7, 2019 at 9:00 a.m. (ET) to discuss its financial results for the third quarter of 2019. A live webcast of the call will be available via the Investor Relations section of www.cincinnatibell.com. Callers can dial toll-free (888) 254-3590 or toll (929) 477-0448. A taped replay of the conference call will be available starting at 12:00 p.m. (ET) on Thursday, November 7, 2019 until 12:00 p.m. (ET) on Thursday, November 21, 2019. To access the telephone replay, please dial toll-free (888) 203-1112 or toll (719) 457-0820, and then enter the conference ID number 5338917. An archived webcast will be available for replay following the conclusion of the live event in the Investor Relations section of www.cincinnatibell.com.

INVESTOR RELATIONS CONTACT:

Kei Lawson, 513-565-0510

E-mail: [email protected]

or

MEDIA CONTACT:

Josh Pichler, 513-565-0310

E-mail: [email protected]

Safe Harbor Note

This release may contain “forward-looking” statements, as defined in federal securities laws including the Private Securities Litigation Reform Act of 1995, which are based on our current expectations, estimates, forecasts and projections. Statements that are not historical facts, including statements about the beliefs, expectations and future plans and strategies of the Company, are forward-looking statements. Actual results may differ materially from those expressed in any forward-looking statements. The following important factors, among other things, could cause or contribute to actual results being materially and adversely different from those described or implied by such forward-looking statements including, but not limited to: those discussed in this release; we operate in highly competitive industries, and customers may not continue to purchase products or services, which would result in reduced revenue and loss of market share; we may be unable to grow our revenues and cash flows despite the initiatives we have implemented; failure to anticipate the need for and introduce new products and services or to compete with new technologies may compromise our success in the telecommunications industry; our access lines, which generate a significant portion of our cash flows and profits, are decreasing in number and if we continue to experience access line losses similar to the past several years, our revenues, earnings and cash flows from operations may be adversely impacted; our failure to meet performance standards under our agreements could result in customers terminating their relationships with us or customers being entitled to receive financial compensation, which would lead to reduced revenues and/or increased costs; we generate a substantial portion of our revenue by serving a limited geographic area; a large customer accounts for a significant portion of our revenues and accounts receivable and the loss or significant reduction in business from this customer would cause operating revenues to decline and could negatively impact profitability and cash flows; maintaining our telecommunications networks requires significant capital expenditures, and our inability or failure to maintain our telecommunications networks could have a material impact on our market share and ability to generate revenue; increases in broadband usage may cause network capacity limitations, resulting in service disruptions or reduced capacity for customers; we may be liable for material that content providers distribute on our networks; cyber attacks or other breaches of network or other information technology security could have an adverse effect on our business; natural disasters, terrorists acts or acts of war could cause damage to our infrastructure and result in significant disruptions to our operations; the regulation of our businesses by federal and state authorities may, among other things, place us at a competitive disadvantage, restrict our ability to price our products and services and threaten our operating licenses; we depend on a number of third party providers, and the loss of, or problems with, one or more of these providers may impede our growth or cause us to lose customers; a failure of back-office information technology systems could adversely affect our results of operations and financial condition; if we fail to extend or renegotiate our collective bargaining agreements with our labor union when they expire or if our unionized employees were to engage in a strike or other work stoppage, our business and operating results could be materially harmed; the loss of any of the senior management team or attrition among key sales associates could adversely affect our business, financial condition, results of operations and cash flows; our debt could limit our ability to fund operations, raise additional capital, and fulfill our obligations, which, in turn, would have a material adverse effect on our businesses and prospects generally; our indebtedness imposes significant restrictions on us; we depend on our loans and credit facilities to provide for our short-term financing requirements in excess of amounts generated by operations, and the availability of those funds may be reduced or limited; the servicing of our indebtedness is dependent on our ability to generate cash, which could be impacted by many factors beyond our control; we depend on the receipt of dividends or other intercompany transfers from our subsidiaries and investments; the trading price of our common shares may be volatile, and the value of an investment in our common shares may decline; the uncertain economic environment, including uncertainty in the U.S. and world securities markets, could impact our business and financial condition; our future cash flows could be adversely affected if we are unable to fully realize our deferred tax assets; adverse changes in the value of assets or obligations associated with our employee benefit plans could negatively impact shareowners’ deficit and liquidity; third parties may claim that we are infringing upon their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling products; third parties may infringe upon our intellectual property, and we may expend significant resources enforcing our rights or suffer competitive injury; we could be subject to a significant amount of litigation, which could require us to pay significant damages or settlements; we could incur significant costs resulting from complying with, or potential violations of, environmental, health and human safety laws; the possibility that the expected synergies and value creation from our acquisition of Hawaiian Telcom will not be realized or will not be realized within the expected time period; the risk that the businesses of the Company and Hawaiian Telcom will not be integrated successfully; the risk that unexpected costs will be incurred; and the other risks and uncertainties detailed in our filings with the SEC, including our Form 10-K report, Form 10-Q reports and Form 8-K reports.

These forward-looking statements are based on information, plans and estimates as of the date hereof and there may be other factors that may cause our actual results to differ materially from these forward-looking statements. We assume no obligation to update the information contained in this release except as required by applicable law.

Use of Non-GAAP Financial Measures

This press release contains information about adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA), Adjusted EBITDA margin, net debt, net income (loss) applicable to common shareholders excluding special items and free cash flow. These are non-GAAP financial measures used by Cincinnati Bell management when evaluating results of operations and cash flow. Management believes these measures also provide users of the financial statements with additional and useful comparisons of current results of operations and cash flows with past and future periods. Non-GAAP financial measures should not be construed as being more important than comparable GAAP measures. Detailed reconciliations of these non-GAAP financial measures to comparable GAAP financial measures have been included in the tables distributed with this release and are available in the Investor Relations section of www.cincinnatibell.com.

¹Adjusted EBITDA provides a useful measure of operational performance. The company defines Adjusted EBITDA as GAAP operating income plus depreciation, amortization, stock based compensation, restructuring and severance related charges, (gain) loss on sale or disposal of assets, transaction and integration costs, asset impairments, and other special items. Adjusted EBITDA should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with the measure as defined by other companies.

Adjusted EBITDA margin provides a useful measure of operational performance. The company defines Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. Adjusted EBITDA margin should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with the measure as defined by other companies.

²Free cash flow provides a useful measure of operational performance, liquidity and financial health. The company defines free cash flow as cash provided by (used in) operating activities, adjusted for restructuring and severance related payments, transaction and integration payments, less capital expenditures and preferred stock dividends. Free cash flow should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities, or the change in cash on the balance sheet and may not be comparable with free cash flow as defined by other companies. Although the company believes there is no comparable GAAP measure for free cash flow, the attached financial information reconciles cash provided by operating activities to free cash flow.

Net debt provides a useful measure of liquidity and financial health. The company defines net debt as the sum of the face amount of short-term and long-term debt, unamortized premium and/or discount and unamortized note issuance costs, offset by cash and cash equivalents.

Net income (loss) applicable to common shareholders excluding special items in total and per share provides a useful measure of operating performance. Net income (loss) applicable to common shareholders excluding special items should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with net income (loss) excluding special items as defined by other companies.

About Cincinnati Bell Inc.

With headquarters in Cincinnati, Ohio, Cincinnati Bell Inc. (NYSE: CBB) delivers integrated communications solutions to residential and business customers over its fiber-optic and copper networks including high-speed internet, video, voice and data. Cincinnati Bell provides service in areas of Ohio, Kentucky, Indiana and Hawaii. In addition, enterprise customers across the United States and Canada rely on CBTS and OnX, wholly-owned subsidiaries, for efficient, scalable office communications systems and end-to-end IT solutions. For more information, please visit www.cincinnatibell.com. The information on the Company’s website is not incorporated by reference in this press release.

Contacts

Cincinnati Bell Inc.
Investor contact:
Kei Lawson, 513-565-0510

[email protected]

Media contact:
Josh Pichler, 513-565-0310

[email protected]

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