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Consolidated Communications Holdings, Inc. (CNSL)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 revenue was $275.2M with Adjusted EBITDA of $86.7M; net loss attributable to common shareholders was ($58.6M) and GAAP EPS was ($0.52) . Versus Q3 2023, revenue declined slightly from $283.7M and Adjusted EBITDA rose from $80.2M; vs Q4 2022, revenue fell from $296.0M and Adjusted EBITDA fell from $101.7M .
  • Consumer broadband remained the growth driver: quarterly consumer broadband net adds were 6,998; consumer fiber broadband revenue reached $37.9M and total consumer broadband revenue was $76.5M .
  • Cost actions helped: cost of services/products and SG&A collectively decreased $12.6M YoY; weighted average cost of debt was 7.04% with 77% fixed through Sep-2026; net debt/LTM Adjusted EBITDA was 6.73x .
  • No earnings call due to the pending take-private by Searchlight/BCI; the transaction was approved by disinterested shareholders and is expected to close by 1Q25, subject to approvals .
  • Street estimates (S&P Global) were unavailable for CNSL this quarter; therefore, no vs-consensus comparison could be made (S&P Global data unavailable).

What Went Well and What Went Wrong

  • What Went Well
    • Fiber growth and mix: consumer fiber broadband revenue reached $37.9M; total consumer broadband net adds were 6,998, underscoring demand for Fidium .
    • Cost discipline: combined cost of services/products and SG&A fell $12.6M YoY on divestitures, lower video programming, lower advertising and access costs, and lower salaries from cost savings initiatives .
    • Liquidity and rate protection: 77% of debt is fixed through Sep-2026; weighted average cost of debt was 7.04%, providing some insulation from rate volatility .
  • What Went Wrong
    • Top-line pressure: revenue declined to $275.2M from $283.7M in Q3 and $296.0M in Q4’22 as legacy voice/video/network access continue to contract .
    • Profitability headwinds: net loss widened YoY to ($58.6M) from ($45.5M) in Q4’22 as net interest expense rose $8.4M YoY; Adjusted EBITDA of $86.7M was down from $101.7M in Q4’22 .
    • No earnings call and withdrawn outlook: with the pending transaction, the company did not hold calls and had previously withdrawn its 2023 outlook, reducing transparency for investors .

Financial Results

MetricQ4 2022Q3 2023Q4 2023
Revenue ($M)$296.0 $283.7 $275.2
Net Income (Loss) Attrib. to Common ($M)($45.5) ($69.2) ($58.6)
GAAP EPS ($)($0.41) ($0.61) ($0.52)
Adjusted EBITDA ($M)$101.7 $80.2 $86.7
Adjusted Diluted EPS ($)($0.16) ($0.31) ($0.26)
EBIT (Loss from Operations) ($M)($20.7) ($31.9) ($13.2)
Net Income Margin % (calc)(15.4%) (24.4%) (21.3%)
EBIT Margin % (calc)(7.0%) (11.2%) (4.8%)
Adjusted EBITDA Margin % (calc)34.4% 28.3% 31.5%

Notes: Margin % are calculated from cited revenue and profit metrics.

Segment and category revenue

Revenue Category ($M)Q4 2022Q3 2023Q4 2023
Consumer Broadband (Data & VoIP)$69.0 $75.1 $76.5
Consumer Voice$34.3 $31.6 $29.9
Consumer Video$11.9 $8.5 $7.5
Commercial Data (incl. VoIP)$56.7 $53.9 $54.5
Commercial Voice$34.7 $31.8 $31.2
Commercial Other$10.3 $9.2 $10.5
Carrier Data & Transport$33.8 $31.4 $31.7
Carrier Voice$3.7 $4.1 $2.9
Carrier Other$0.3 $0.3 $0.2
Subsidies$13.1 $6.9 $6.9
Network Access$26.3 $20.8 $22.2
Other Products & Services$2.0 $10.0 $1.2
Total Operating Revenue$296.0 $283.7 $275.2

Key KPIs

KPIQ2 2023Q3 2023Q4 2023
Total Fiber Gig+ Capable Passings1,119,956 1,187,076 1,236,208
Consumer Broadband Net Adds (Total)6,967 9,392 6,998
Fiber Broadband Revenue ($M)$34.0 $37.9 $37.9
Fiber ARPU ($)$68.29 $68.78 $68.14
Fiber Consumer Broadband Churn (%)1.3% 1.3% 1.2%

Actuals vs Street (S&P Global) – Q4 2023

MetricActualS&P Global ConsensusSurprise
Revenue$275.2M N/AN/A
Primary EPS($0.52) N/AN/A

Note: S&P Global consensus for CNSL was unavailable via our data connection this quarter (S&P Global data unavailable).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital ExpendituresFY 2023Approx. $495M (updated on Aug 8, 2023) Outlook withdrawn Nov 7, 2023 Withdrawn
Adjusted EBITDAFY 2023“No changes to previous ranges” (range not provided in docs) Outlook withdrawn Nov 7, 2023 Withdrawn
Earnings Call PracticeQ3 2023 & Q4 2023Historically hostedWill not host due to pending transaction Suspended
Transaction TimelineTake-privateAnnounced Oct 16, 2023 Expected close by 1Q25, subject to approvals Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2023)Q3 2023Current Period (Q4 2023)Trend
Fiber build & penetrationRecord fiber net adds; ARPU up; targeting mid-teens EBITDA CAGR as fiber scales Continued fiber momentum; capex cadence balanced; liquidity protected Consumer broadband net adds 6,998; fiber revenue $37.9M Improving scale, steady momentum
Cost savings & simplification>$30M annualized cost savings targeted; margin upside over time Higher severance costs in quarter offset by cost actions Combined cost buckets down $12.6M YoY Savings taking hold
Government programs/BEADTracking ~$110M in opportunities; strong public-private track record No call commentaryNo call commentaryWatch for future awards
Capital structure & leverage77% fixed-rate through Sep-2026; avg cost of debt 6.72% Net debt leverage 6.15x; covenant relief via amendment Net debt leverage 6.73x; WACD 7.04% Elevated leverage, rates slightly higher
Regulatory/lead-sheathed cable<1% estimated lead-sheathed cable; compliance emphasis No call commentaryNo call commentaryStable
Strategic/Take-privateSpecial committee process noted (no detail) Take-private announced; outlook withdrawn Shareholder approval achieved; closing expected by 1Q25 Transaction progressing

Management Commentary

  • Strategy and growth: “We are executing on a multiyear transformation from a copper-based telecom to a leading fiber broadband provider… We are targeting a mid-teens EBITDA compounded annual growth rate… We also believe that our EBITDA margins have a long-term upside to the mid to high 40% level as we drive highly profitable fiber penetration…” .
  • Cost actions: “We’ve initiated a significant business simplification and cost savings initiative… estimated to result in annualized cost savings of more than $30 million…” .
  • Government funding runway: “Tracking approximately $110 million of additional broadband government partnership opportunities… BEAD partnership opportunities across our footprint are quite significant” .
  • Q4 disclosure: “In light of the transaction, Consolidated will not host an earnings conference call” .

Q&A Highlights

  • Transaction process sensitivity: Management declined to discuss timing/details of the take-private process; focus remains on operations and fiber growth .
  • Cost and operating leverage: Management emphasized fiber’s high incremental margins and the expectation that a large portion of future fiber revenue will drop to EBITDA, supporting margin expansion as scale builds .

Estimates Context

  • We attempted to pull S&P Global consensus for Q4 2023 revenue and EPS but the data was unavailable for CNSL via our connection at this time (S&P Global data unavailable). Actuals are shown above from company filings. This prevents an objective beat/miss assessment against Street for the quarter.

Key Takeaways for Investors

  • Fiber engine remains on track: Consumer broadband net adds and fiber ARPU/churn trends support continued mix shift toward higher-margin fiber revenue .
  • Revenue headwinds persist in legacy categories: Consumer voice, video, and certain carrier/network access lines continue to decline, pressuring the top line despite fiber growth .
  • Cost discipline is evident: Combined cost buckets fell $12.6M YoY; Adjusted EBITDA margin improved sequentially from Q3 to Q4 on slightly lower revenue, reflecting early benefits of simplification .
  • Leverage and rates: Net debt/LTM Adjusted EBITDA at 6.73x with weighted average cost of debt at 7.04% and 77% fixed through Sep-2026—rate-protected but leverage remains elevated .
  • Limited near-term guidance and transparency: With the transaction pending, calls are suspended and outlook was withdrawn; focus turns to execution metrics (net adds, ARPU, capex discipline) and regulatory milestones for the deal .
  • Transaction path is the key catalyst: Disinterested shareholder approval is secured; the take-private is expected to close by 1Q25 subject to regulatory approvals—timelines and conditions are the principal stock narrative near term .
  • Capital allocation: Capex has moderated from earlier 2023 peaks and inventory utilization improved; monitoring capex discipline and success-based returns remains central to the medium-term thesis .