May 7, 2015
HIGHLIGHTS
- Year-over-year consolidated revenue growth of 4 percent
- Revenue from strategic products totaled $125 million, up 22 percent compared to prior year
- Fioptics revenue totaled $42 million, up 36 percent from a year ago
- Strong first quarter Adjusted EBITDA1 of $79 million
- Net income of $49 million resulted in diluted earnings per share of $0.22
- Announced the agreement to sell 14 million CyrusOne partnership units
CINCINNATI, Ohio – Cincinnati Bell Inc. (NYSE:CBB) today announced financial results for the first quarter of 2015, highlighted by consolidated year-over-year revenue growth as demand for strategic products remains strong. Fioptics revenue for the quarter totaled $42 million, up $11 million compared to the prior year as Fioptics internet and video subscribers increased 34 percent and 24 percent, respectively. The company also announced the sale of 14 million CyrusOne partnership units which closed in the second quarter for proceeds totaling $426 million.
"We are off to another great start in 2015. Our impressive Fioptics subscriber growth and strong financial results demonstrate continued demand for faster data speeds and supports our decision to accelerate our fiber investments," said Ted Torbeck, president and chief executive officer. Torbeck also added, "The team continues to execute our long-term strategy. As evidence, we recently sold another tranche of our CyrusOne investment and successfully closed our wireless operations. These were both key steps towards improving the overall health of Cincinnati Bell and our ability to generate significant sustainable cash flows."
"The completion of the Wireless spectrum sale and the initial monetization of our CyrusOne investment has created an opportunity to accelerate our fiber investments and capitalize on the growing demand for our strategic products," said Ted Torbeck, president and chief executive officer. "Our fiber investments have significantly changed the perception of Cincinnati Bell and are essential to creating a fiber based entertainment, communications, and IT solutions company with growing revenue, growing profits, and significant cash flows," added Torbeck.
CONSOLIDATED RESULTS2
Consolidated revenue for the first quarter of 2015 was $293 million, up $11 million from the prior year. Operating income for the quarter totaled $37 million and Adjusted EBITDA equaled $79 million. Net income was $49 million, including income from discontinued operations. In the first quarter of 2015 we discontinued providing wireless service and recognized the $113 million gain on the sale of our wireless spectrum that closed in third quarter of 2014.
The 2014 third quarter net loss of $27 million included the following special items directly related to Wireless: restructuring charges of $9 million, asset impairments of $8 million and transaction costs of $3 million. During the quarter we also recorded a $19 million loss on extinguishment of debt related to the redemption of $325 million 8 ¾ percent Senior Subordinated Notes due 2018.
Year-to-date consolidated revenue totaled $970 million, up $21 million from a year ago. Operating income totaled $109 million and Adjusted EBITDA was $301 million. Net income for the first nine months of 2014 totaled $94 million due primarily to the gain resulting from the initial monetization of our CyrusOne investment, partially offset by initiating the wind-down of wireless operations and the loss on extinguishment of debt.
Entertainment and Communications Segment3
- Entertainment and Communications revenue for the quarter totaled $188 million, up $4 million compared to the prior year.
- Fioptics revenue for the quarter was $42 million, up 36 percent from the prior year.
- Strategic revenue for business customers totaled $43 million (including $2 million of Fioptics revenue) for the quarter, up 10 percent compared to the prior year.
- Operating income and Adjusted EBITDA for the quarter totaled $41 million and $75 million, respectively.
- Adjusted EBITDA margin4 for the quarter was 40 percent.
- Decrease from prior year due to $3 million of costs absorbed from shutting down wireless operations and increased costs associated with accelerating Fioptics expansion.
- Fioptics internet subscribers totaled 123,100, adding a record 9,400 new Fioptics high-speed internet subscribers in the quarter.
- Video subscribers totaled 95,800 at the end of the first quarter, an increase of 18,300 subscribers compared to a year ago.
- Fioptics is now available to 357,600 addresses, or approximately 44 percent of Greater Cincinnati, passing 22,600 new addresses during the first quarter of 2015.
IT Services and Hardware Segment
- Revenue of $108 million for the quarter was up $6 million compared to prior year.
- Strategic managed and professional services revenue was $41 million in the quarter, up 24 percent compared to the prior year.
- Hardware revenue was $65 million for the quarter, compared to $68 million in the first quarter of 2014.
- Operating income totaled $1 million for the quarter and Adjusted EBITDA was $8 million.
Investment in CyrusOne
- Sold 14 million partnership units in April for cash proceeds totaling $426 million - remaining 22 percent ownership of CyrusOne valued at approximately $450 million.
Investment in CyrusOne
- Cincinnati Bell now effectively owns 44 percent of CyrusOne as an equity method investment, valued at $685 million as of September 30, 2014.
- CyrusOne reported strong third quarter 2014 revenue of $85 million and Adjusted EBITDA of $42 million.
2015 Outlook
Cincinnati Bell reaffirms its financial guidance for 2015:
| Category | 2015 Guidance |
| Revenue | $1.1 billion |
| Adjusted EBITDA | $297 million* |
*Plus or minus 2 percent
Conference Call/Webcast
Cincinnati Bell will host a conference call on May 7 at 1:00 p.m. (ET) to discuss its results for the first quarter of 2015. A live webcast of the call will be available via the Investor Relations section of www.cincinnatibell.com. The conference call dial-in number is (888) 256-9022. Callers located outside of the U.S. and Canada may dial (913) 312-1469. A taped replay of the conference call will be available one hour after the conclusion of the call until 1:00 p.m. on Thursday, May 21, 2015. For U.S. callers, the replay will be available at (888) 203-1112. For callers outside of the U.S. and Canada, the replay will be available at (719) 457-0820. The replay reference number is 5877185. An archived version of the webcast will also be available in the Investor Relations section of www.cincinnatibell.com.
Safe Harbor Note
This release and the documents incorporated by reference herein contain forward-looking statements regarding future events and our future results that are subject to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “expects,” “anticipates,” “predicts,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “may,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances are forward-looking statements. Readers are cautioned these forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially and adversely from those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this release and those discussed in other documents we file with the Securities and Exchange Commission (SEC). More information on potential risks and uncertainties is available in our recent filings with the SEC, including Cincinnati Bell's Form 10-K report, Form 10-Q reports and Form 8-K reports. Actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
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 excluding special items, 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, restructuring charges, (gain) loss on sale or disposal of assets, transaction costs, curtailment gain (loss), asset impairments, components of pension and other retirement plan costs (including interest costs, asset returns, and amortization of actuarial gains and losses), 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.
2Consolidated Results for the three months ended March 31, 2015 and 2014 report our former wireless segment results as discontinued operations. Effective March 31, 2015, the Company no longer provides wireless services.
3Entertainment and Communications Segment represents our former Wireline segment.
4Adjusted 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.
Free 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, financing and investing activities, adjusted for the issuance and repayment of debt, debt issuance costs, the repurchase of common stock, and the proceeds from the sale or the use of funds from the purchase of business operations, including transaction costs. 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 feels that there is no comparable GAAP measure for free cash flow, the attached financial information reconciles free cash flow to the net increase (decrease) in cash and cash equivalents.
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 and unamortized premium and/or discount, offset by cash and cash equivalents.
Net income excluding special items in total and per share provides a useful measure of operating performance. Net income excluding special items should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with net income excluding special items as defined by other companies.
About Cincinnati Bell Inc.
With headquarters in Cincinnati, Ohio, Cincinnati Bell (NYSE: CBB) provides integrated communications solutions – including local and long distance voice, data, high-speed Internet and video – that keep residential and business customers in Greater Cincinnati and Dayton connected with each other and with the world. In addition, enterprise customers across the United States rely on CBTS, a wholly-owned subsidiary, for efficient, scalable office communications systems and end-to-end IT solutions. Cincinnati Bell owns approximately 22 percent of CyrusOne (NASDAQ: CONE), which is held in the form of CyrusOne common stock and CyrusOne LP partnership units. CyrusOne specializes in highly reliable enterprise-class, carrier-neutral data center properties and provides mission-critical data center facilities that protect and ensure the continued operation of IT infrastructure for more than 675 customers, including nine of the Fortune 20 and 146 of the Fortune 1000 companies or private or foreign enterprises of equivalent size. For more information, please visit www.cincinnatibell.com.