Q4 2022 Consolidated Communications Holdings Inc Earnings Call
Ladies and gentlemen, good morning, My name is Abby and I will be your conference operator today.
At this time I would like to welcome everyone to the consolidated Communications fourth quarter earnings Conference call.
Please be advised that today's conference is being recorded and all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press the star key followed by the number one on your telephone keypad.
If you would like to withdraw your question Press Star one again.
Thank you and I will now turn the call over to Philip Kranz Senior director of Investor Relations you May begin your conference.
Good morning, and thank you for joining consolidated Communications' fourth quarter 2022 earnings call. Our earnings release financial statements and presentation are posted on the Investor Relations section of our website at IR Doc consolidated Dot com.
Please review the Safe Harbor provisions on slide two of the presentation today.
Today's discussion includes forward looking statements about expected future events and financial results.
Those risks and uncertainties that may cause actual results to differ materially from those expressed today a discussion of factors that may affect future results is contained in consolidated's filings with the FCC in.
In addition, during this call we will refer to certain non-GAAP financial measures, which are defined and reconciled in our earnings presentation and press release.
With me today are Bob <unk>, President and Chief Executive Officer.
Fred Graffam, our Chief Financial Officer.
Following their prepared remarks, we will open the call up for questions I will now turn the call over to Bob you Dell.
Thank you Phil and good morning, everyone before I provide an update on the fourth quarter I will start on slide four and discuss our journey from a copper based telecom to a leading fiber broadband provider.
In early 2021 after solidifying our capital structure, we started the most aggressive fiber expansion plan in our company's 128 year history over the last two years, we've made remarkable progress on this growth plan. Our mission is to turn technology into solutions connecting people and enriching how they work and live our service commitment has never been stronger.
Longer as we deliver world class fiber broadband to the communities that need it the most unserved and underserved alike. Our commitment is borne out of a belief that access to education healthcare employment entertainment in the larger world is what creates vibrant communities and a better quality of life.
During 2022, we achieved several key milestones that demonstrate progress on our ongoing transformation and puts us on a path to return to revenue growth. Our total consumer broadband connections grew in 2022 fueled by the addition of more than 40000 fiber subscribers during the year.
The increase in fiber net adds of more than two five time drove our 2021 cohort penetration rate of just over 15%, which exceeded our one year target on the heels of another strong build year in 2022, we surpassed 1 million total gigabit fiber locations at year end and now have extended.
Fiber to nearly 40% of our addressable market. This is nearly a four times increase from the startup of our plant in 2021, an important inflection point.
Also we bolstered our liquidity and aligned our business with over $600 million aggregate divestitures. During the year, we will prudently redeploy these funds to support our continued fiber expansion plan longer term, we're looking to 2024 for another inflection point with year over year in revenue and EBIT growth.
Specifically, we are targeting a compound annual growth rate in the mid teens for EBITDA, beginning in 2024 and meaningful margin expansion as our fiber business becomes the majority of our overall broadband revenue finished then we believe our EBIT margins have upside to the mid to high 40% levels over the long term.
Committed to our plan of reaching over 70% fiber coverage across our markets.
Through continued execution of our transformation I am confident that we will generate significant shareholder value as we increase penetration in our fiber markets and grow fiber broadband revenue within consumer and commercial data transport.
I am incredibly excited to enter 2023 with a newly aligned leadership team that supports our evolving company and growth strategy. This includes the addition of three highly talented industry executives, who collectively have decades of telecom experience at major service providers as well as substantial experience driving fiber penetration.
And a demonstrated track record of delivering growth.
To drive our customer acquisition strategy across our consumer broadband business. We most recently brought on Gaurav <unk> as president of consumer <unk> brings.
<unk> brings a proven track record in the telecom industry will experience and success, gaining significant market penetration and growing consumer fiber revenue.
Really excited to have him on our team.
Most recently led Metro <unk> go to market strategy, and it's worked scaling new fiber services and establishing the infrastructure to accelerate performance. We pillars of has worked with us growing volume and driving penetration across alright expanded fiber base.
In early January danced all joined the company as president of our commercial carrier business.
He will oversee our commercial and carrier go to market strategy and is eager to help us capitalize on our broadband fiber investments and continue to grow commercial and carrier data services.
<unk> has more than 20 years of experience in the telecommunications and fiber network infrastructure industry. Most recently he served in key senior leadership roles at Zale.
In December Fred Graffam joined US as Chief Financial Officer. His experience spans 30 years and includes financial management operational leadership and expertise within the technology and telecom industry at both public and private company, including level III and Comcast.
Already had an influence on our planning process, our priority and his passion around unit economics is contagious.
Forward to meeting with the members of this investment community throughout the year.
We have also realigned various leadership pump Jets, John Ronnie who previously served as our CIO.
Became our Chief Technology Officer, He will lead the combined areas of network planning business intelligence in it.
And we will leverage his past experience leading in these areas.
<unk> continues as our executive Vice President of operations and now has responsibility for all aspects of our fiber deployment.
For all areas associated with fiber construction to be integrated into one team collectively this new team streamlined functions, providing added efficiencies with a focus on increasing market penetration through the ramp of additional sales channels I am more confident and energized than ever before and our ability to carry out achieve our growth plans.
We remain extremely bullish on fiber and we will leverage our fiber investments to grow across all areas of our business fiber is a superior product offering symmetrical speeds not available from cable or fixed wireless fiber provide decades of runway to meet customers evolving broadband needs as demand for data continues to rise put quite simply.
Fiber is best suited.
To serve our communities today and for years to come.
Importantly, and central to our investment thesis is that he enjoyed several distinct structural advantages as we continue on our transformation. This includes our incumbent position.
No our fiber expansion markets very well, given our long operating history, and our historical deployment of fiber hub deep into these communities.
We have a fiber rich carrier class network that we can cost effectively extend including existing conduit capacity for bearing facilities and pole access or we have aerial plant.
These network advantages provide us with favorable unit cost and with significant return economics as we execute on our plan.
Now, let's turn to slide 10, where I'll update you on our fiber build plan and.
In the fourth quarter, we upgraded 6700 locations and completed more than 400000 upgrades in 2022, our total fiber path things now extends to just over 1 million locations or 38% of our overall service area up from 10% in 2020.
Reaching this critical milestone we've seen an inflection point in consumer broadband such that we are now generating positive Brian and ads on the strength of our fiber business. This also was a catalyst for achieving consumer broadband revenue growth in both Q4 and for all of 2022.
Forward to the next few years, we plan to build fiber to more than 70% of capacity by mid 2026, well. This is roughly two quarters later than we previously predicted it's consistent with our plan to maximize public private partnerships as we execute on our bills. Once complete this will mark a seven times increase in fiber path from 2020 as a result.
For 2023, we're targeting at minimum 225000, new fiber locations.
Our 23 build target is a moderated level versus the prior two years as we focus on driving penetration within our existing base of fiber passing and we benefit from broadband revenue growth as a result of reaching the previously mentioned critical fiber coverage level of nearly 40%.
And also actively pursue any grant our infrastructure funding opportunities that align with our build plans that we can maximize the economies of our builds for complete areas.
The governmental funding opportunities, which we will continue to sync with our build plan helped to offset rural high cost passing and extend our reach to entire communities, allowing a return consistent with our model as we've noted in the past. This is an important aspect of our expansion strategy. In fact in 2019, we've been awarded approximately 105.
<unk> million dollars of broadband partnership in grant funding to support projects across just a few of our states.
Im happy to report a recent award from the New Hampshire office, a broadband initiatives of roughly $40 million to support our build of approximately 25000 locations across world New Hampshire.
When combined with our own investment of capital as the entire project will provide reliable fiber internet services to more than 57000 homes across the state and other recent award includes $16 7 million as part of the state of Maine connect ready grants that will support our favorability more than 18000 locations within our footprint.
These awards reflect the recognition of consolidated as a quality partner through its incumbent advantages with a stellar track record of building fiber. We are really excited to bring video fiber superfast symmetrical Internet service to additional communities in both Maine, and New Hampshire and this is just the beginning.
Tracking roughly $100 million additional broadband government partnership opportunities across our markets and feel well positioned to provide partnering communities. The best fiber broadband service at the best value we have.
We're confident in our plan and bullish on fiber, which is our future. We are proceeding with a prudent build pace in 2023, and we have proven that we can ramp and bill quickly as circumstances warrant over the last two years, we have averaged just over 90000 upgrades per quarter, and we remain ready to quickly ramp fiber expansion as planned default.
Our cumulative 2021 cohort fiber penetration at the 12 month, Mark is 15, 1%, which is above our target of 14%.
We've achieved this largely through penetration of the single family home or <unk> channel and passengers that are ready for sale.
We have a comprehensive strategy to increase penetration across all cohorts virtually doubled our door to door sales team head count since the end of the year second we introduced the <unk> private brand in November 2021 based on this timing several of our communities, where we constructed fiber prior to that date didn't have a chance to experience the game change.
<unk>.
Customer experience that we're offering with video we are doubling back of Rerailing. These areas highlighting the stadium value proposition driving additional penetration third we've expanded our alternative channels recently, adding several new consumer sales partners to augment digital door to door and call center sales efforts across select markets.
And fourth we recently launched video network, a simple highly competitive fiber broadband service with the App, two <unk> or Wi Fi apps to support small businesses.
Network Leverages digital online sales channel to offer plans, including two gig over our 10 gig capable network targeting the small business or home office customer at a highly competitive price now.
Now, let's turn to slide 13, where I will cover the momentum we're experiencing in the consumer fiber business, which is contributing to overall consumer broadband growth. This is a key catalyst for us as we progress towards year over year growth in revenue and EBITDA in 2024.
In Q4 got it.
10600, <unk> fiber subscribers, an increase of more than two times the prior year.
Fiber broadband revenue normalized for Kansas.
$23 7 million up 51% year over year, and 12% increase from the third quarter. The positive traction were generating in fiber contributed to overall consumer broadband revenue growth of 5% in the fourth quarter and 3% for the full year of 2022.
Fiber subscriber trends remain consistent with over 70% choosing our one gig service while the vast majority are new subscribers or shifts to the fiber from copper is evident as fiber now makes up a full third of our consumer broadband connections, which is up from 22% a year ago looking at <unk> fiber art.
<unk> exceed copper by over $13 or 25%. This is a healthy spread and it provides us with ample upside to continue to drive meaningful revenue and EBITDA as our mix shifts to fiber.
In the fourth quarter consumer fiber broadband <unk> up four 5% year over year, driven by the increase in <unk>.
Now I'd like to turn to slide 14, where I will outline the tremendous opportunity that lies ahead trust within consumer broadband as we provide our communities with a superior fiber broadband products and continue our positive momentum.
We completed 2022 with roughly 123000 consumer fiber broadband customers, our penetration of 12% on our fiber passing the $1 million as we look to 2026, we believe we can grow our fiber customer base to over 500000, the equivalent of 25% penetration on our targeted fiber passing the two.
$2 million.
Under this scenario our fiber broadband revenue would approximate $450 million in 2026 up from $80 million in 2022, an increase of more than five times further with fiber projected to represent over 80% of our consumer broadband revenues, we expect considerable margin expansion as we leverage our revenue growth with improved <unk>.
<unk> that come from fiber.
Let's turn to our commercial and carrier channels, where we experienced data transport growth in both the fourth quarter and the full year normalized for Kansas.
An advantage in our commercial go to market strategy is our ability to differentiate with high quality and scalable fiber based network connectivity. This is supported by our cloud service toolkit, including Ucas broken that boys SD Wan and data security, enabling solutions, which meet our customers' needs and help to reduce churn.
Carrier, we benefited from capacity upgrades in the fiber to the tower business and a favorable delay in tower negotiations, which has largely offset expected market rate adjustments during 2022.
New fiber passing within our consumer routes provide opportunities for us to leverage the same fiber to grow both carrier and commercial data and transport services.
We increased our lit buildings by 7% in the fourth quarter after normalizing for Kansas, which correlates to higher margins increased opportunity to upsell and greater ability to ensure the best customer experience and more opportunities for video in that work.
I will now turn the call over to Fred who will provide more insights on our fourth quarter financial results Bret. Thanks.
Thanks, Bob and good morning to everyone I'll start by saying I am excited to have joined consolidated at such a unique point in our history and I am grateful for the opportunity to work with this management and board as we transform the company and realize the benefits of our ongoing fiber expansion through accelerated revenue and EBITDA growth.
I'll now provide an overview of our fourth quarter results.
This year, we simplified the company with over $600 million of asset divestitures, which has significantly bolstered our liquidity in support of our fiber expansion plans.
Most recently, we closed on the Kansas divestiture on November 30 for approximately $82 million in gross proceeds.
To help provide some context on our results in certain parts of our discussion today I will provide normalized results to exclude the impact of Ohio, and Kansas divestitures from the appropriate periods when doing so I will refer to this as normalized.
Total operating revenues for the fourth quarter was $296 million and adjusted EBITDA was $101 $7 million.
Normalized revenues in Q4 was $288 3 million a decline of $15 8 million or five 2% versus the prior year approximately.
Approximately 64% of the decline was driven by lower other products and services revenues of $5 $7 million.
Due largely to reduced recognition of public private partnership construction projects and lower subsidy revenue.
$4 $3 million.
The lower subsidy revenue reflects the caf II step down and transition to our dock, which was partly offset by the recognition of Texas High cost fund settlements related to prior years.
The remaining decline was primarily due to lower voice and video services revenue importantly, we experienced healthy revenue growth across our strategic areas of our business, including consumer broadband and commercial and carrier data transport, which partly offset these declines in 2024, we expect these areas of our business to drive improved revenue and EBITDA.
As we leverage our fiber infrastructure investments.
The decline in reported adjusted EBITDA of $24 $5 million was impacted by the factors mentioned above in addition to lower wireless partnership distributions of $5 $7 million the fourth quarter marks the last quarter for these distributions given the sale of our five wireless limited partnership interest to Verizon, which closed in September .
'twenty two.
Now I'll review revenue by customer channel.
Turning to our consumer channel normalized total revenue was $112 million down two 8% compared to a year ago.
Normalized consumer broadband revenue was $67 $9 million up five 3% driven by strong consumer fiber revenue growth of 51%.
Tumor fiber net adds were up more than two times from a year ago as video and fiber continues to gain momentum for the full year deliver consumer positive broadband net adds of 724, a significant turnaround from nearly 60800 net consumer broadband losses in 2021.
With fiber coverage of almost 40% we are well positioned to continue generating positive net adds moving forward.
Consumer fiber <unk> was $67 14 in the fourth quarter up sequentially and year over year, driven by speed mix as customers continue to take higher speeds of fiber services.
The fiber speed mix of gig plus is up 15 percentage points on a year over year basis.
Consumer voice revenue normalized for $34 million down $4 6 million or 11, 8%, primarily due to continued erosion of access lines and associated services.
Video revenue normalized was $10 2 million a decline of $2 1 million or 17% year over year as we continued to deemphasize our linear video.
With the Kansas divestiture, we've reduced our video revenues by nearly 18% further we are accelerating our efforts to transition customers to streaming over the top video services to drive higher speed broadband adoption.
The transition from video is also driving a reduction in video programming costs, thus improving margins and free cash flow.
Commercial revenue normalized was $97 7 million down $2 1 million or two 1%.
Data services revenue normalized was $53 7 million in the fourth quarter up one 3% year over year, primarily driven by direct internet access growth.
Looking ahead, our fiber expansion provides opportunities for commercial data growth with new products such as our recent launch of <unk> at work.
Voice services revenue normalized was $33 9 million.
Down $1 8 million or five 1% in the recent quarter, primarily driven by a decline in traditional voice services led by long distance and associated services.
Carrier revenue normalized with $37 $6 million up $7 million or.
Or one 9% versus the prior year.
Data and transport services revenue normalized for $33 6 million up $1 2 million or three 7% from a year ago our.
Q4 carrier transport revenue benefited from capacity upgrades in the fiber to the tower business and a favorable delay in tower negotiations, which have largely offset expected market rate adjustments as previously discussed our fiber to the tower business is under pricing pressures due to contract renewal negotiations with the major wireless providers.
Typically for the full year 2022, including the effective churn and pricing step Downs, we had expected to see revenue reductions in the range of $6 million to $7 million.
Based primarily on the timing of finalizing some of the contracts. During 2022, we ultimately recognized approximately $4 million of lower revenue with that said for 2023, we expect to see an impact in the $14 million range, an increase of approximately $10 million versus the impact experienced in 2022.
We believe there remains meaningful upside in our carrier business and our carrier team is pursuing new revenue opportunities through capacity upgrades for our wireless and wholesale customers as well as adding new towers.
Wireless tower connections under contract totaled approximately 4100 up 9% versus last year.
Our team continues to leverage our core network upgrades to provide a path to 10 gig backhaul capabilities at the tower site for carriers network access revenues normalize totaled $26 million down $1 2 million or four 3% primarily due to declines in special access circuit revenue as carriers move from Tdm to Ethernet based transport.
Solutions.
Cost of services and products expense declined $4 2 million largely due to savings from lower video programming costs included the impact of the sale of our Kansas operations and a decline in <unk> fiber costs related to additional PPP initiatives in the prior year, partially offset by higher utility and fuel expense.
Selling general and administrative expenses increased $8 $9 million, primarily due to marketing and advertising expenses related to the expansion of the company's consumer fiber product higher professional fees for customer service and process improvements initiatives as well as severance costs.
Net interest expense was $33 2 million, a decrease of $4 $9 million compared to a year ago. The decrease was primarily a result of noncash interest of $7 $3 million in 2021 on the search side note.
Which was converted to perpetual preferred stock in connection with the second stage closing of its investment in December 2021, partially offsetting the decrease was higher interest on the term loan.
Committed capital expenditures totaled $124 3 million in the fourth quarter and were $601 $1 million for the full year, we had strong execution of our fiber build upgrading nearly 403000 policies, which exceeded our target for 2022.
Included in our Capex spend in the fourth quarter was the acceleration of certain pre committed inventory purchases, which will have a beneficial impact for us in 2023.
In addition, as previously discussed during 2022, we experience some inflationary pressures in the form of equipment surcharges and increased contractor labor.
Significant portion of our build activity in 2023 will continue to be in our northern New England markets, where we're ultimately targeting 70% of our fiber upgrades, we have significant cost to build advantages in M&A, which results in a favorable cost of paths.
We continue to estimate our average cost per passing to be approximately $650 in.
In 2023 per passing Bill this remains significantly below our peer group.
Into 2023, we are in good shape with our supply chain, having thoughtful purchase inventory to support our build as well as CPE to support continued growth in our fiber business.
Our average direct cost to connect in the $750 to $800 range. This is up in part due to some inflationary pressures combined with our use of Wi Fi extenders to improve the customer service experience, even with the slightly elevated cost to connect the unit economics of the fiber business remains strong.
On the strategic front, we will continue to review all markets in our portfolio for investment or monetization.
Any such asset divestitures as further funding to execute on our fiber expansion plan.
Criteria in this market by market review includes evaluating the economics of the fiber build market level competition and potential valuations.
Moving to our capital structure, approximately 77% of our total debt is fixed.
That we have 500 million dollar interest rate hedge against our $1 billion term loan to July 2023, further our $1 1 billion of senior notes have fixed coupons, notwithstanding the heightened interest rate environment. Our overall average cost of debt is 648% up nominally from six 2% in the prior quarter.
<unk>.
Our net debt leverage was four eight times at December 31.
As of December 31, the company maintain liquidity with cash and short term investments of approximately $414 million and $225 million of available borrowing capacity on our revolving credit facility subject to certain covenant ratios as announced in late November we extended the maturity of our $250 million revolving credit facility.
From $2025 to 2027 subject to a springing maturity and enhanced our financial flexibility with ample liquidity, we are well positioned to continue executing on our growth plans with no debt maturities until 2027.
Today, we are providing 2023 guidance, which is outlined on slide 18 is as follows.
Adjusted EBITDA is expected to be in the range of $310 million to $330 million capital expenditures are expected to be in the range of $425 million to $445 million. Our capital allocations are approximately 42% supporting the fiber build 40% supporting success based opportunities and 18% for maintenance in <unk>.
Before opening for questions. Let me highlight on slide 16 are key strategic priorities in 2023.
Accordingly, our first priority is increasing fibre penetration across what we call our three CS consumer commercial and carrier channels on a normalized basis, we grew strategic revenue across our three six and 2022.
With over 1 billion fiber passing we now have a solid five infrastructure and expanding sales channels that we will leverage across our business to generate additional material growth.
Our second priority is to deliver an improved customer experience through higher N. P. S scores, which will result in increased customer retention and referrals with an industry leading M. P. S score with fitting fibre we know how to deliver an exceptional customer experience success with this priority means we reduce churn and turn our customers into promoters of our company.
Making our job a little bit easier.
Third priority for the year, it's a drive operational efficiencies improving it cost across our business by reducing costs associated with repeatable activities as we optimize processes and productivity.
And as consolidate transforms into a fiber first probably been company, we remain committed to sustainability and R. E. S. G priorities as we build fiber we're building a more sustainable network. We continue to make good progress with R. E. S. T goals and we're excited to share an update with you when we release our annual asked you report in the coming months.
New go to market key leaders on board driving additional sales channels and market penetration supported by an exceptional stadium customer experience and a strong liquidity position. We've entered 2023 with tons of energy and excitement and look forward to reaching additional milestones as we execute on our fiber transformation.
Operator, now take questions at this time.
Thank you.
And I would like to remind everyone in order to ask a question press Star and then the number one on your telephone keypad and we will pass for just a moment to compile the <unk> roster.
And we will take our first question from Greg Williams with Cowan Your line is open.
Great. Thanks for the for the call in and taking my questions. The first one is just on the subscriber kaden. So it looks like you lost 184th subs and I think that excludes Kansas, just want to make sure and and and help us with the cadence and how do you think about getting back to you positive and that adds and just I'm packing that I think he said that Ah.
<unk> majority of your fiber add your new so that implies most of your copper is is going somewhere else are they going to cable or is fixed wireless encroaching Union territory.
Second question just on Capex.
And the fiber to the home pullback it sounds like Catholics is coming in later than the $500 million range were sort of expecting and it and it sounds like as a function of the fiber to the home pullback from your original plan is that essentially the decision Hawaii pulled back to you to to save on Capex is this like a financial decision.
<unk> or is it more of an operational decision like a couple of days ago. Your peers are saying they wanted to synchronize their installs and distributions with their aggressive bills and I'm trying to figure out. If this was more of a done with for financial reasons rather than operational thanks.
Thanks, Greg and appreciate the question, let me, let me start with vast 0.1st on the Capex and and so when you look at our plan B.
Overall objective has been to get to 70% fiber coverage and we're going to exceed that if you do the math on with a sales Kansas City.
Lifestyle, we know that we're going to be greater than 70 per cent. We just don't know how far and so we feel like we've made excellent progress on the build out and we can see in some markets that were our trajectory is good towards the second year and others were not quite satisfied and so we're still having started really robust with the digital channel.
We're still building out the post build rally plan for the re rally areas you know the.
Second and third wave, if you will and and we don't have the synchronized customer acquisition engine to go back into the even prefigured locations as well as those approaching the.
Post one year second year phase of the.
The next next growth so we're not far off but we just can see that we need to strengthen an in built up that channel and and and you know.
Thus yossi grabbing one of the Premier executives, we think that can help lead that from a go to market strategy. So then going back to the net positive for the year. Yeah. We were slightly under positive in the fourth quarter, we got hit pretty hard with the weather in northern New <unk>.
We've seen that suicide in first quarter and so we're very confident.
And being a significantly positive and and the 2023 here and and you know look at fourth quarter as really you know nearly flat in total totally positive for the years Yeah. Yeah just to add your your question about whether that is adjusted for Kansas yesterday to Kansas sale is.
Not reflected in those numbers. So that is a true nerd add number for the quarter, excluding the impact of the of the sales Kansas.
Got it and anything on fixed wireless.
In terms of fixed wireless.
Cable, we're seeing primarily you know a single competitor in 90% of our operating areas Ah and.
One competitor or less on a fixed wireless site, it's still around the edges, you're gonna see that I think is an Arab solution, but there's nothing that beats the symmetrical.
Fiber product and the nature of a 10 gig you know.
Capacity at the side of the house. So I think you know it's.
Gonna be out there, but it's not going to be a significant impact.
Got it thank you.
Thank you.
And as a reminder, it is star one if you would like to ask a question.
And we will take our next question from Michael Rollins with City. Your line is open.
Thanks, and good morning, Uhm I too much.
Hey.
Taking the questions I'm sure if I could first on the EBITDA guidance for 2023 can you share a bit more of the bridges, what's causing the EBITDA to come down and twenty-three relative to what the right organic number he's in 2022.
And then maybe help us think a little bit more about that inflection going forward that you were describing and then the second question is just on the Capex side. So.
And thank you for breaking up some of the categories on the guidance fly curious if you could help us think about what the remaining capex looks like through 2026, when you're expecting to be largely dealt with your builds.
We're capex could fall two in 2027.
You know I'm thinking about you know how much of this is related to the bill.
And then can you <unk> I think you gave it earlier, but just remind us what the total amount of public funds. You currently have access to that can.
Potentially offset some of that capex.
Thanks.
Okay, Let me start with.
The first question and Fredell take most of those but let me let me give you. The context. This this is our inflection year. We've we've crest the the net positive and and that's the focus is broadband that ads and predominantly shifting them.
Next to fiber one third fibre broadband and two thirds copper we started at 10% addressable network, where at 38% as we wrap up 2022 and will be approaching 50 per cent at the end of 23, if you look through history, it's about that ratio there.
Is required to start with the transition.
From from.
From copper to totally fibre network platform and that sets up for revenue positive EBITDA positive I'll, let the bread take the bridge on Ya. Yeah. We haven't provided normalized numbers for 2022, I will say that the the major components of the year over year.
Reduction is about $50 million for the for the.
At the tail, so that we had during the year, including the wireless partnerships the Kansas sale and we did have a handful of tower sales that are also reflected in that number. So that's the biggest piece of the of the reduction year over year. We noted another $20 million of legacy Ah sung largely to phone revenues that as part of that.
Reduction year every year. We are also as we talked about I talked about in my script. The carrier business is seeing some pressure about $10 million, we expect year over year and then finally, we are investing more in marketing next year and I think that's actually that's a good thing we want to drive the fiber business and so while we're not disclosing.
That number that's also an element of the over the year over year change and.
And so.
Uhm before.
We get into the.
Capital piece that I've got three new team members and and so we are going to do some of marketing test some sort of regional diversity and and strategy.
[noise] focused on maximizing our penetrations and and built out of <unk>.
Re rally team that will allow us to to be more aggressive and and some of the the base. After the first wave from a construction perspective. So we're we're being aggressive to ensure that this is.
The turn here that we get the most out of as we exit 2023.
Going to Capitol.
I'll comment on the public private partnership opportunities, we have roughly 150 million.
A million of opportunity that we've either either already captured or are in the final Ah I'm sorry are in agreement and in the the construction pipeline right now some of that most recently won.
Will possibly impact fourth quarter and give us upside on build and it most of it will end up in 2024. So it's what gives me great confidence that will be well above the 70% of addressable market as we exit 2025, or even mid 2026 and.
And so when you look at the overall.
Cost per passing that positively impacts that and it allows us to build out complete markets, which improve the marketing efficiency, yeah, and you know again.
Predicting 2027 is a bit of a challenge I will I will point to two things one historically the company has run it the $70 million ish level of maintenance capital. Historically, so predicting 2027 total capital is really going to be driven by your assumptions on success based and so.
You know.
You can project out what we've given you cohort penetration is actually giving you a lot of data with respect to where we think we're going to be in 2026th on customers that that sort of drives a level of net activity. So I would I would I.
I would use your assumptions on your cat.
Capital for success based acquisition to project out what you think the 2027 success based numbers are but the company historically from a maintenance or obligatory perspective has been in the $70 million range. You may want to put some assumptions with respect to some inflationary pressures, but that that's how I would think about it.
And thanks for all that detail and can just have that success based peace how much of that is.
Related to the consumer and fiber peace.
Worse, he's the enterprise and wholesale piece that might not be tied directly to a gross had number coordinated add number that you're reporting.
Yeah, I would say it's.
70, 30, I believe is where we landed for this year. So 70 per cent success space related to the fiber business 30 per cent related to the carrier and commercial doses.
And how were incredibly disciplined on the commercial and carrier side on the success face that's why you've seen us be pretty consistent with the data transport growth, there and Murphy and feeling even more.
I'm excited about you know.
Some some network near net opportunities that are built up provided for small business and commercial.
Thank you.
Thanks, Mike.
As a reminder, it is star one if you would like to ask a question and we will take our next question from Robin Williams with Octagon credit investors. Your line is open.
[noise] hi, Thanks for taking the question I just wanted <unk> to get some color on how you guys think about deep penetration rates as we move into that to your cohort you'll have some 2020 bills that you completed 24 per cent target on those can you just give us a little bit of color held those are tracking purchases kind of the 15 per cent at the one year.
Mark.
Yeah, It's if you look at the.
The.
Based fibre.
Where in the in the 20% range and most of that is gonna be you know two two to two and a half three year with with a few exceptions.
Exceptions, and and so we think there's great upside to get that to the mid thirties, and and giving it the full rally plan attention now that we have the city brand out there in the customer experience that goes with it and the Wifi gear. It's just you know a resource alley.
Haitian after that.
Big.
Push unbilled in new market lunches, and so we felt good about the first year penetrations, but you know those are some of the areas, where where we're going back in rerouting with a new brand and and then also and you know in the first.
First year builds where we've had more whether challenges with sales and feet on the street, we've got a a hard pressed in in those markets early this year as to whether continues to free up.
Thanks, a lot that's helpful and then just.
Do you have year over year kind of.
Inflection for for financial results of 2024, but I think last call or was called before you talk about kind of second half of 23, showing potentially sequential growth maybe not year over year is that still the expectation kinda in light of the the lighter guidance on either side.
Yeah the.
We have set up before.
The.
The trick for US is we were taking a hard look at the carrier business and the timing of the renegotiation of the contracts, which is actually a positive thing for us the longer that delays presents a little bit of a challenge on predicting the sequential revenue growth for 2022.
So we believe strongly that 20, I'm, sorry, 23, sorry, we believe strongly that will see growth in 2024 predicting when to turn happens given some of the nuances of the carrier business, we decided not to not to reiterate that.
Okay, and and frankly I've got three new team members members and and we're doing a lot of work with the go to market strategy.
And so well you know internally, we're absolutely focused on on the turn and and seeing that sequentially.
We're trying to maximize.
The wireless.
Backhaul opportunities as Fred mentioned and doing a lot of work on the go.
To market strategy on the consumer side, new small business offering in saying that work, so I'm pretty optimistic and feel great about you know the.
The ramp through 2000 twenty-three, but the offset on the on the carrier contracts are in wireless backhaul.
It's just it's just a little bit less predictable.
Got it and then just kind of follow up on that if I may thinking about how far through you guys are on the fiber to the tower kind of re negotiations.
And he expected you know additional pricing pressure from that front or do you feel like you're in a good spot now kind of going through the base and and getting that behind you asked this run right into the numbers.
Yeah, I am quite confident.
That will get that behind us in 2023, and and it's opening a door for for more towers and so what we're essentially doing and and the reason it's less predictable as we're trading some breakdowns for new opportunity and and I feel good about that the partnership Tony is good the relationships are solid.
You know, we're we're changing some partnerships in different markets based on access to capital for those partners and and so you know I think we're in a good spot. It's you know just in the mid negotiation stage and and so a little bit less predictable as to when we found you know finish it up.
But it's a perfect. Thanks for taking all my questions.
As a reminder is star one if you would like to ask a question.
Mhm and ladies and gentlemen that has all the time, we have for questions today of them now like to turn the call back over to Bob few Dallas for additional Alright, we're closing remarks.
Thank you and thank you all for joining the call today, we're very excited about our energy and and the team dynamic we've developed with the the restructuring of our team and I'm very appreciative of your interest in consolidated so thanks for tuning in and we look forward to updating you on our next call.
Have a great day.
Ladies and gentlemen, this concludes cities conference call me. Thank you for your participation you may now disconnect.
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