Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) (the “Company”) reported results for the fourth quarter 2018.
Fourth quarter 2018 Consolidated Communications financial summary:
— Revenue totaled $344.8 million
— Net cash from operating activities was $93.3 million
— Adjusted EBITDA was $132.4 million
— Dividend payout ratio was 68.3 percent
Financial Results for the Fourth Quarter
— Revenues were $344.8 million, compared to $356.4 million for the fourth quarter of 2017, a decrease of $11.6 million in the recent quarter. Commercial and carrier data and transport service revenue increased 2.3 percent or $2 million on a comparable basis, with Ethernet revenue growth of 6.8 percent being the catalyst. Business system sales and special construction projects contributed an additional $4.7 million to the fourth quarter 2018 revenues. Consumer Broadband revenue was up $500,000 from a year ago in spite of normal seasonality in the Northern New England region. Voice services revenue declined $11.8 million across all customer channels. Subsidies decreased $2.4 million during the quarter primarily due to the final CAF step down in transitional revenues, and network switched and special access revenues declined $2.9 million.
— Income from operations was $3.6 million compared to $7.0 million in the fourth quarter of 2017. The change was primarily due to the declines in revenues described above, offset by reductions in operating expense of $8.2 million.
— Interest expense, net was $35.5 million, compared to $29.9 million for the same period last year. The increase was due to increases in LIBOR and non-cash expense associated with interest rate hedge agreements put in place to maintain our fixed debt target of 75 percent. As of Dec. 31, 2018, our weighted average cost of debt was approximately 5.6 percent.
— Cash distributions from the Company’s wireless partnerships were $10.3 million for the fourth quarter compared to $8.0 million for the prior year period.
— Other income, net was $11.1 million, compared to $7.9 million in the fourth quarter of 2017, mainly due to increased income from the Company’s minority interest in wireless partnerships.
— On a GAAP basis, net loss was $14.0 million and GAAP net loss per share was ($0.20). Adjusted diluted net loss per share excludes certain items as outlined in the table provided in this release. Adjusted diluted net loss per share was ($0.09) in the fourth quarter, compared to ($0.04) in the fourth quarter of 2017.
— Adjusted EBITDA was $132.4 million compared to $133.2 million in the year ago quarter.
— The total net debt to last 12-month adjusted EBITDA ratio was 4.3x.
Full-Year 2018 Results
For the full year 2018, operating revenue totaled $1.4 billion, down 4.2 percent from pro forma fiscal year 2017. The decline was primarily due to continued erosion of legacy voice services and access revenues as well as the step down in CAF II transitional funding support.
— Net cash from operating activities was $357.3 million.
— Adjusted EBITDA was $537.3 million for fiscal year 2018, up $1.1 million from pro forma fiscal year 2017.
Cash Available to Pay Dividends, Capex
For the fourth quarter, cash available to pay dividends was $40.4 million. The dividend payout ratio was 68.3 percent for the quarter and 67.4 percent for the year. At Dec. 31, 2018, cash and cash equivalents were $9.6 million. Capital expenditures were $58.1 million for the fourth quarter and $244.8 million for the year.
Financial Guidance
The Company is providing guidance for fiscal year 2019 as follows:
2018 Results 2019 Guidance
Cash interest expense $128.1M $135M to $140M
Cash income taxes1 $1.0M $1M to $3M
Capital expenditures $244.8M $210M to $220M
(1) Cash income taxes primarily include local and state income taxes as federal income taxes will be shielded by existing net operating losses.
Dividend Payments
The Company’s board of directors declared a quarterly dividend of $0.38738 per common share, which is payable on May 1, 2019 to stockholders of record at the close of business on April 15, 2019. This will represent the 55th consecutive quarterly dividend paid by the Company.