Consolidated Communications Holdings, Inc.

Second-quarter total operating revenue was $275.2 million and adjusted EBITDA was $76.9 million. Revenue declined $8.5 million, or 3%, versus the prior year on a normalized basis; adjusted EBITDA declined by $31 million, with $16 million tied to nonstrategic asset divestitures, $10 million to voice/video/access declines, and $5 million to higher marketing and advertising costs. In the consumer segment, revenue was $112.1 million, consumer broadband revenue was $71.3 million, consumer fiber revenue grew 58%, and fiber net adds were 18,651; fiber ARPU was $68.29, up 5.1% year over year and 1.2% sequentially. Full-year 2023 adjusted EBITDA, cash interest expense, and cash taxes guidance were unchanged, while full-year capex was raised to about $495 million from higher expected year-end inventory; carrier revenue is now expected to decline by $5 million to $10 million for the year. Management said it still expects to upgrade roughly 225,000 locations in 2023, with average cost per passing for the full year around $780.

Bob Udell framed the quarter as evidence that the transformation to a fiber-first broadband company is working, citing record fiber adds, strong penetration in newer cohorts, and a 43% fiber coverage level. He said the company is focused on increasing fiber penetration, improving customer experience, and removing costs, and he highlighted more than $30 million of annualized cost savings from simplification efforts. His tone was confident and upbeat, with emphasis on long-term operating leverage and a return to revenue growth in 2024.

Fred Graffam focused on the financial effects of the portfolio reset and the growing fiber business. He said adjusted EBITDA fell because of divestitures, legacy revenue declines, and higher marketing costs, while the Washington assets are being sold for $73 million gross proceeds and generated about $21 million of revenue in 2022. He noted cash and short-term investments of about $203 million, $215 million of revolver capacity, net debt leverage of 5.55 turns, and an average cost of debt of 6.72%. He also said the company entered a new 3-year swap for $500 million of term loan debt, bringing 77% of total debt to fixed rate through September 2026.

Analysts pressed on whether the Searchlight/BCI take-private review could affect operating or strategic decisions, but Bob Udell declined to discuss the process and said he is focused on long-term business execution. The other main question was about cost savings and future operating leverage; Fred Graffam said much of the cost takeout is right-sizing the business after prior divestitures and ending transition-service burdens, and that fiber is a high-margin incremental product so a large portion of future fiber revenue should fall to EBITDA. Management also reiterated that they expect the business to move to full revenue growth in 2024.