Cincinnati Bell Reports Third Quarter 2016 Results

HIGHLIGHTS
  • Consolidated revenue increased $12 million compared to the prior year - revenue from strategic products was up 18 percent year-over-year
  • Entertainment and Communications revenue totaled $193 million, up $8 million from a year ago - Fioptics revenue was up 32 percent compared to the prior year
  • Net income totaled $19 million, resulting in diluted earnings per share of $0.38
  • Issued $425 million of 7% senior notes due 2024 - proceeds used to redeem 8 3/8% senior notes due 2020

CINCINNATI - November 2, 2016 - Cincinnati Bell Inc. (NYSE:CBB) today announced financial results for the third quarter of 2016, highlighted by year-over-year consolidated revenue and Adjusted EBITDA1 growth.  Strategic revenues totaled $163 million, increasing 18 percent over the prior year on strong demand for fiber products and IT services.  Fioptics video subscribers totaled 133,400 at the end of the quarter, up 23 percent compared to a year ago.  Total internet subscribers were 299,800, an increase of 18,500 compared to the prior year.  In the third quarter, 30,800 additional units were passed with Fioptics, which is now available to 509,500 addresses, or approximately 64 percent of Greater Cincinnati.

"The momentum created by our strategic investments generated year-over-year consolidated revenue and Adjusted EBITDA growth in consecutive quarters," said Ted Torbeck, chief executive officer.  Torbeck also added, "The refinancing of our senior notes at a significantly lower coupon rate improves the overall health of our balance sheet and highlights the progress made towards transforming Cincinnati Bell into a fiber-based communications and IT solutions company."

CONSOLIDATED RESULTS2
Consolidated revenue for the third quarter of 2016 was $312 million, up 4 percent from the prior year.  Operating income for the quarter totaled $26 million and Adjusted EBITDA remained strong at $78 million.  Net income was $19 million, resulting in diluted earnings per share of $0.38.  In the third quarter, we recognized a $33 million gain on the sale of CyrusOne common shares and an $11 million loss on the extinguishment of $323 million of debt. 

Entertainment and Communications Segment
  • Entertainment and Communications revenue for the quarter totaled $193 million, up $8 million compared to the prior year.
  • Fioptics revenue for the quarter was $65 million, up 32 percent from the prior year.
    • Strategic revenue for business and carrier markets totaled $50 million (including $4 million of Fioptics revenue) for the quarter, up $6 million year-over-year.
    • Operating income totaled $21 million in the third quarter, compared to $30 million in the prior year.  
  • Adjusted EBITDA for the quarter was $69 million, up 1 percent year-over-year.
IT Services and Hardware Segment
  • Revenue of $123 million for the quarter was up 5 percent over the prior year.
    • Strategic revenue was $51 million in the quarter, up 10 percent compared to the prior year.
    • Telecom and IT hardware revenue was $66 million for the quarter, compared to $65 million in the third quarter of 2015.
  • Operating income totaled $8 million for the quarter, down 5 percent compared to the prior year.  
  • Adjusted EBITDA was $12 million, up 11 percent compared to a year ago. 
2016 Outlook
Cincinnati Bell reaffirms its financial 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 November 2 at 10:00 a.m. (ET) to discuss its results for the third quarter of 2016.  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) 397-5350.  Callers located outside of the U.S. and Canada may dial (719) 325-2449.  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 Wednesday, November 16, 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 8137299.  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.

2Consolidated Results for the three and nine months ended September 30, 2015 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, unamortized premium and/or discount and note issuance costs, 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.