NORWALK, Conn.–(BUSINESS WIRE)–Frontier Communications Corporation today reported financial results for the first quarter ended March 31, 2021.
Nick Jeffery, President and Chief Executive Officer of Frontier, said, “Frontier is now positioned with operational momentum and industry-leading leverage ratios to capitalize on the major growth forecast in the US fiber market. At this pivotal moment in the company’s evolution, we look forward to rapidly expanding our fiber footprint, delivering enhanced customer service offerings and value, and accelerating our efforts to build Gigabit America. Building on our first quarter performance, I am thrilled to announce our plan to expand our fiber footprint to 495,000 new locations in 2021.”
First Quarter 2021 Financial Results1
Frontier reported consolidated revenue for the first quarter of 2021 of $1.68 billion, a 6.3% decline from consolidated revenue reported in the first quarter of 2020.
While overall Data and Internet Services revenue decreased $13 million in the first quarter of 2021, or 1.5%, against the prior year, Frontier’s fiber broadband revenues grew by $19 million in the first quarter of 2021 compared to the prior year. Consumer fiber net adds were 11,000 in the quarter, the seventh consecutive quarter of positive consumer fiber net adds.
First quarter 2021 net income was $60 million. Adjusted EBITDA was $670 million and Adjusted EBITDA margin2 was 40.0%. This compares with Adjusted EBITDA of $686 million and Adjusted EBITDA margin of 38.4% in the first quarter of 2020. The $16 million year-over-year decline in Adjusted EBITDA was driven by revenue declines, partially offset by cost savings initiatives including the emphasis on reducing video content costs. Capital expenditures increased to $384 million in the quarter from $356 million in Q4 2020, as fiber expansion initiatives accelerate. During the quarter, Frontier built fiber to approximately 100,000 new locations, more than the total number of locations it built in all of 2020.
Consumer Results
- Consumer revenue was $844 million, down $50 million, or 5.6%, against prior year as fiber broadband growth was offset by video and voice subscriber losses.
- Consumer customer churn was 1.45%, a strong improvement from 1.84% in the prior year.
- Video revenue was impacted by subscriber losses, as video subscribers (excluding DISH) decreased by 141,000, or approximately 24% as the video bundle was deemphasized.
- Fiber broadband ARPU increased $4 year-over-year from a higher speed mix, as well as price increases on new and existing accounts.
Commercial Results
- Commercial revenue was $749 million, a $61 million decline, or approximately 7.5%, against prior year, driven by voice declines in our retail portion.
- The wholesale portion of Commercial also declined reflecting proactive strategic repositioning with key business partners to reset pricing in exchange for higher win shares in the future and higher overall expected cash flow stability.
Sheldon Bruha, Chief Financial Officer, said, “Our early progress in implementing operational initiatives that enhance customer retention, simplify our internal processes, and reduce costs reflect a solid start to the year. Looking ahead, our expected emergence later today provides the opportunity to aggressively reinvest in expanding our fiber business and strengthening the customer experience.”
John Stratton, incoming Executive Chairman of the Board, said, “As Frontier transitions from its financial restructuring to its new course as a revitalized public company we are encouraged by what has been accomplished and enthusiastic about the future. Frontier is in a very strong position to accelerate the implementation of our fiber expansion plan and continually enhance the customer experience. The incoming Board of Directors is excited to work with the team to capture the significant opportunities that lie ahead.”
Capital Structure
In addition to the significant debt reduction accomplished in the Chapter 11 process, Frontier continues to take advantage of favorable market conditions to reduce interest expense and enhance liquidity. Some capital structure changes year-to-date include:
- Issuing $750 million of takeback second lien debt to existing noteholders concurrent with today’s expected emergence as contemplated by the Plan of Reorganization, with a coupon of 5.875%;
- Repricing the $1.25 billion Term Loan facility and reducing the interest rate by 125bps, resulting in approximately $16 million in annual interest savings;
- Raising an incremental $225 million of First Lien Term Loan expected to close concurrent with emergence; and
- At emergence, the company is expected to have total liquidity3 of approximately $1.3B and an expected net debt to Adjusted EBITDA ratio of approximately of 2.2x.
Stock Trading Update
- Concurrent with emergence, Frontier will issue approximately 244 million shares of new common stock to its senior unsecured noteholders. Together with the 6% of shares reserved under the Management Incentive Plan (MIP), there will be approximately 260 million shares outstanding.
- Frontier expects the new common stock to begin trading on the NASDAQ on May 4, 2021 under the ticker FYBR.
- The pre-emergence common stock (trading under OTC: FTRCQ) will be extinguished and will not receive any new equity or other considerations, as provided in the Plan of Reorganization.
For more information on the new and previously issued common stock, please visit www.frontier.com/ir.
2021 Outlook and Investor Day
Frontier has established operational and financial guidance expectations for 2021. Upon emergence from Chapter 11, Frontier expects to adopt fresh start accounting in accordance with ASC 852. The impact of the application of fresh start accounting and any associated accounting policy changes will be determined by management upon and following emergence and, as such, the guidance below does not reflect any such impact.
Frontier’s guidance for the full year 2021 is as follows:
- Adjusted EBITDA of $2.4-$2.5 billion4
- Decrease from $2.8 billion in 2020 (adjusted for the sale of the Northwest operations), driven by strategic repositioning within Wholesale, secular declines of voice and copper broadband, and higher fiber broadband customer acquisition costs, partially offset by growth in fiber broadband revenue
- Cash taxes of approximately $50 million
- Cash interest payments of approximately $365 million
- Cash pension and OPEB of approximately $120 million (net of capitalization)
- Cash capital expenditures of approximately $1.5 billion
- Increase versus $1.2 billion in 2020 (not adjusted for Disposal of Northwest Operations) primarily driven by fiber expansion efforts accelerating during the year
- Fiber build to 495,000 locations in 2021
- Incremental cash cost to build estimated at approximately $550 per location
- Level of the 2021 fiber build continues to be evaluated by new executive management
Frontier will hold an investor day in August 2021 following the completion of a strategic business review by the new Board of Directors and management.
About Frontier Communications
Frontier Communications offers a variety of services to residential and business customers over its fiber-optic and copper networks in 25 states, including video, high-speed Internet, advanced voice, and Frontier Secure® digital protection solutions. Frontier Business™ offers communications solutions to small, medium, and enterprise businesses. More information about Frontier is available at www.frontier.com.
