Cincinnati Bell Reports Fourth Quarter and Full Year 2015 Results

Highlights
  • Strategic revenue increased more than 20 percent compared to the prior year - consolidated revenue was up 1 percent year-over-year
  • Entertainment and Communications segment generated annual revenue growth for the second consecutive year - Fioptics revenue increased 34 percent compared to 2014
  • Adjusted EBITDA1 totaled $302 million - high-end of the 2015 guidance range
  • Record-high 40 thousand Fioptics internet and 23 thousand video net activations in 2015
  • Strategic IT Services and Hardware revenue increased 29 percent year-over-year
  • Proceeds from the monetization of our CyrusOne investment totaled $644 million in 2015
CINCINNATI - February 18, 2016 - Cincinnati Bell Inc. (NYSE:CBB) today announced financial results for the full year and fourth quarter of 2015, highlighted by 21 percent year-to-date strategic revenue growth on strong demand for fiber-based products and IT solutions. Fioptics annual revenue totaled $191 million, up $48 million compared to 2014, resulting in Entertainment and Communications annual revenue growth for the second consecutive year. Strategic IT Services and Hardware revenue increased $41 million compared to a year ago, totaling $179 million for the year.

"Our 2015 results demonstrate this team's ability to execute on all phases of our strategy - we successfully closed our wireless operations, opportunistically monetized a significant portion of our CyrusOne investment and continued the impressive growth across all our strategic products," said Ted Torbeck, president and chief executive officer. Torbeck also added, "Looking forward to 2016, we remain focused on efficiently expanding our fiber network and growing our IT Solutions business while we continue to improve profitability and cash flows."

CONSOLIDATED RESULTS 2
Year-to-date consolidated revenue was $1.2 billion, up 1 percent compared to a year ago. Fourth quarter consolidated revenue totaled $289 million, down 2 percent compared to the prior year primarily due to the anticipated decline in lower margin hardware sales. Adjusted EBITDA for the year was $302 million and $71 million in the fourth quarter. Operating income was $128 million and $25 million for the full year and fourth quarter of 2015, respectively. Adjusted EBITDA and operating income were down from a year ago due primarily to additional operating expenses associated with accelerating our fiber investment and absorbing costs associated with discontinuing our wireless operations.

Year-to-date Income from continuing operations totaled $291 million, including a $449 million gain on the sale of CyrusOne investment and $21 million loss on extinguishment of debt. Income from continuing operations for the fourth quarter of 2014 was $31 million, including a $36 million gain on the sale of CyrusOne investment. Income from discontinued operations, net of tax was $63 million for the year and included the $113 million gain recognized in the first quarter on the sale of our wireless spectrum that previously closed in third quarter of 2014. Net income for 2015 was $354 million and $33 million for the fourth quarter, resulting in diluted earnings per share of $1.63 and $0.14 respectively.

Entertainment and Communications Segment
  • Entertainment and Communications revenue totaled $188 million for the quarter and $744 million for the full year, up $3 and $14 million, respectively, from the same periods in 2014 after excluding revenue from services provided to our discontinued wireless business.
    • Fioptics revenue increased 34 percent compared to a year ago, totaling $54 million for the quarter and $191 million for the year.
    • Strategic revenue for business and carrier customers totaled $45 million for the quarter and $175 million for the full year, including Fioptics revenue of $3 million and $10 million, respectively. Excluding backhaul revenue for services provided to our former wireless business, strategic revenue from business and carrier customers was up 10 percent for the quarter and 9 percent for the year.
  • Adjusted EBITDA was $69 million for the quarter and $283 million for the full year 2015. Operating income was $28 million and $130 million for the fourth quarter and full year, respectively. Adjusted EBITDA and operating income were down from a year ago due primarily to additional operating expenses associated with accelerating our fiber investment and costs absorbed as a result of shutting down wireless operations.
  • Fioptics video subscribers increased by 5,600 in the quarter totaling 114,400, up 25 percent compared to the end of 2014.
  • Record high 287,400 total internet subscribers at the end of the fourth quarter, up 17,500 subscribers from a year ago.
    • Fioptics internet subscribers were a record high 153,700 at the end of 2015, up more than 35 percent compared to a year ago.
    • Fioptics internet net activations totaled 10,100 in the quarter and 40,000 for the year.
  • In 2015, we passed 97,000 units with Fioptics. The Fioptics suite of products is now available to 432,000 residential and business customers, or 53 percent of Greater Cincinnati.
IT Services and Hardware Segment
  • Revenue for the quarter was $105 million, down $5 million from the fourth quarter of 2014. Full year revenue was $435 million, up $2 million compared to the prior year.
    • Strategic revenue was $48 million in the quarter, up 30 percent over the prior year. Full year strategic revenue was $179 million, up 29 percent over the prior year.
    • Telecom and IT hardware revenue was $49 million for the quarter, compared to $65 million in the fourth quarter of 2014. Full year telecom and IT hardware revenue was $230 million, down 13 percent compared to the prior year.
  • Adjusted EBITDA for the quarter was $9 million, up $3 million from a year ago. Full year Adjusted EBITDA totaled $37 million, up 15 percent from the prior year.
Investment in CyrusOne
  • Proceeds from the monetization of our CyrusOne investment totaled $644 million during 2015 - monetized 1.4 million common shares in the fourth quarter of 2015 for cash proceeds of $48 million.
  • Remaining 9.5 percent ownership of CyrusOne valued at approximately $250 million.
2016 Outlook
Cincinnati Bell is providing the following guidance for 2016:
 
Category 2016 Guidance
Revenue $1.2 billion
Adjusted EBITDA $303 million*
*Plus or minus 2 percent

Conference Call/Webcast
Cincinnati Bell will host a conference call on February 18 at 10:00 a.m. (ET) to discuss its results for the fourth quarter and full year 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) 891-7634. Callers located outside of the U.S. and Canada may dial (719) 325-2492. A taped replay of the conference call will be available approximately one hour after the conclusion of the call until 1:00 p.m. on Thursday, March 3, 2016. 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 1666944. 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 and 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.

2 Consolidated Results for the three and twelve months ended December 31, 2015 and 2014 report our former wireless segment results as discontinued operations. Effective March 31, 2015, the Company no longer provides wireless services.

Adjusted 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 Inc. (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. For more information, please visit www.cincinnatibell.com.