Consolidated Communications Inc. (CNSL)
Q3 2008 Earnings Call
November 6, 2008; 11:00 am ET
Bob Currey - President and Chief Executive Officer
Steve Childers - Chief Financial Officer
Matt Smith - Director of Investor Relations
Michael Nelson - Stanford Group
Patrick Rien - Barclays Capital
Previous Statements by CNSL
» Consolidated Communications Holdings, Inc. Q3 2009 Earnings Call Transcript
» Consolidated Communications Holdings, Inc. Q4 2008 Earnings Call Transcript
» Consolidated Communications Holdings, Inc. Q2 2008 Earnings Call Transcript
I would now like to turn the conference over to Mr. Matt Smith, Director of Investor Relations. Mr. Smith, please go ahead.
Thank you Nicole and good morning everyone. We appreciate you joining us for this third quarter 2008 earnings conference call. With me on the call today are Bob Currey, President and Chief Executive Officer and Steve Childers, Chief Financial Officer. After the prepared remarks we will conduct a question-and-answer session.
I will now review the Safe Harbor provisions of this call and then turn it over to Bob. This call may contain forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements reflect among other things, management’s current expectations, plans and strategies, and anticipated financial results, all of which are subject to known and unknown risks, uncertainties and factors that may cause the actual results to differ materially from those expressed or implied by these forward-looking statements.
Please see our public filings with the Securities and Exchange Commission for more information about forward-looking statements and related risk factors. In addition, during this call we will discuss certain non-GAAP financial measures. Our earnings release for this quarter’s results which has been posted to the Investor Relations section of our website contains reconciliations of these measures to their nearest GAAP equivalent.
I will now turn the call over to Bob, who will provide an overview of our financial and operating results. Steve Childers will then provide a more detailed review of the third quarter financials. Bob.
Thank you, Matt, and thank you all for joining us today. I am pleased to once again report solid financial results and total connection growth despite some challenges related to Hurricane Ike and the economy.
Both adjusted EBITDA and cash available for dividends were in line with our expectations. The Pennsylvania integration continues to be ahead of schedule and ahead of budget. I am particularly pleased with the reception to our triple play bundle in Pennsylvania, helping drive the access line loss there to its lowest level in two years. In fact, IPTV has had the fastest start over the first six months than in any of our past launches.
Let me talk a moment about the hurricane. Although our Texas markets were hit the hardest by the storm, it tracked through all of our markets and even caused substantial power outages in Pennsylvania. We were fortunate to have limited structural damage and we proactively suspended our marketing and installation activities to focus on service restoral. Our employees showed a relentless commitment to our customers and I could not be more proud of their efforts.
Our revenue for the quarter was $103.8 million. Excluding the expense impact from Hurricane Ike, adjusted EBITDA was $47.4 million and the dividend payout ratio was a strong 66.7%. Steve will discuss the detailed financials, as well as the impacts from the hurricane later on this call.
From an operational view, we grew total connections sequentially in the quarter and 6,600 or 1.5%, year-over-year. We continue to deliver strong broadband growth with our industry leading DSL and IPTV increasing by nearly 4% over last quarter and 19% year-over-year.
DSL lines and service increased by 2,600 or 3% over the second quarter and IPTV increased by 1,300 or 9.5% sequentially, even though we shut down our marketing and installation activities for two to three weeks in Texas, our largest market.
As you know, we introduced our DVR product in April and the penetration rate on that product has more than doubled to 13% over the last quarter. The DVR does bolster the product line and aids in ARPU growth.
We added nearly 1,700 ILEC VOIP lines in the quarter which is split between new and existing customers. Approximately 1,300 of the growth in lines were for residential customers. The product offering is both, customer retention and a strong growth opportunity for us.
As we mentioned last quarter, while in some cases this does cannibalize traditional voice services. It supports attractive margins and retains the customer by offering a product that they want. It is yet another way that we compete with the cable providers.
Regarding access lines, as we announced on our last quarter’s call, both Suddenlink and Comcast launched their voice service in our Texas markets in the second quarter, as did NewWave Communications in the Western Illinois market. The third quarter was the first full quarter after the launches and as expected, we felt it.
On the other hand, our Pennsylvania markets have continued to experience improved ILEC line loss trends. The line loss during the third quarter alone for Pennsylvania was 0.008% or when annualized 3.2%. The year-over-year rate was 5.4%, which is the lowest level in more than two years.
This continued improvement is just another example of our demonstrated ability to respond to the competition with our diversified and customer driven product set. For the Pennsylvania CLEC business, we had another strong quarter, growing access line equivalents by approximately 1,000 giving us a 6.7% year-to-date increase.