Q2 2019 Earnings Call
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Once again this is the operator.
Today's conference will begin shortly.
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Thank you and good morning, everyone. We appreciate you joining us today for consolidated Communications second quarter 2019 earnings call.
On the call with me today are Bob you do President and Chief Executive Officer, and Steve Childers, Chief Financial Officer.
After our prepared remarks, we will open the call for questions.
Please review the Safe Harbor provisions in our press release and in our FCC filings.
Today's discussion will include statements about expected future events and financial results that are forward looking and subject to risks and uncertainties.
A discussion of factors that may affect future results is contained in Kim consolidated its filings with the FCC, which are available on our website.
Today's discussions will include certain non-GAAP financial measures. Our earnings release has been posted on the Investor Relations section of our website at consolidated Dot com.
It includes reconciliations of these measures to their nearest GAAP equivalent.
With that I will turn the call over to Bobby though.
Thanks, Lisa good morning, and thank you for joining consolidated communications second quarter earnings call.
Before we review operating and financial results of the quarter I will remind everyone that with the start of the third quarter of 2019, we are now operating under our new capital allocation plan, we paid our final dividend payment on may 1st and are now positioned to utilize over 27 million per quarter and free cash flow to de lever.
Now I'll discuss our second quarter results.
Beginning with our commercial and carrier channels, we experienced both year over year and quarter over quarter growth in data and transport revenues. The growth rate was just over 1% for the recent quarter and we anticipate finishing the full year with a 2% increase in data and transport.
In our commercial market voice and data applications often include multi product solutions or advanced commercial product suite, including Ethernet and cloud based services along with all our consultative sales approach allows us to compete and win new customers.
We continue to see opportunity within the financial and health care industries.
Recently.
We were chosen by two different local banks, one in Illinois, and one in Maine to provide their network voice why fight and data security solutions across all of their locations well. These services are essential to financial institutions, most small and mid market customers also don't wish to build out and support these services on their own.
The same trend is proving to be true of small to medium size health care providers throughout our footprint.
In our SMB customer group, we have added sales resources in our acquisition retention channels to promote our business one product bundle.
Business, one you have small businesses options and flexibility for their voice and data services at competitive pricing.
We have seen early success as we acquire new business customers and focus on reducing churn.
Our carrier channel continues to experience strong results in 2019.
As in the prior quarter, we see continued demand for wire for wholesale local and regional Ethernet as well as dedicated Internet access services as a result of our larger scale. We continue to leverage our 37000 mile fiber network for other carriers, who need connectivity to end users in our markets.
Total tower connections under contract increased by 167.5% as compared to the second quarter of 2018, reaching a new record high of 3790 tower connections.
This is the second sequential quarter with a 5% increase in new tower sales.
Our team won the healthcare IP network, and Oklahoma, consisting of a long term contract for eight locations with a total contract value of 1.8 million. We also secured a contract to provide connectivity to a carrier serving 32, northern new England locations for a national retailer.
We continue to see the benefits of our regional fiber network, enabling other carriers, who have national accounts to utilize our network has proven by these examples.
In addition to our care channel, having a great quarter I'm really excited to update you on our consumer channel highlights. We are encouraged by the positive signs we're seeing in the consumer business, including the performance in legacy markets and ongoing improvements in northern New England.
Data units have that humans have grown for two consecutive quarters and broadband revenue was up more than 2% from last year.
This week, we launched a next generation video product in northern New England.
Packets as part of a new triple play bundle CCTV will improve broadband attachment rate and reduce customer churn.
This is cool stuff the cloud based service delivers 200 channels of local and national content and includes high demand features such as replay and rewind TV. It's a cloud based DVR for viewing content anywhere at any time and has voice activated remote controls as an option.
PCIA TV in northern New England is a first step in transforming our consumer go to market strategy by delivering video service without the requirement for a set top box and dedicated installation.
It's the right product at the right time in northern New England and builds upon our work to grow revenue and improve the customer experience.
The reengineering our service delivery process has resulted in significant improvements in installation intervals on time arrivals and call Center wait times.
These and other service improvements were accomplished while generating over 5 million in additional annualized savings.
These steps were critical to taking advantage of the increase in speed capabilities that are happening across our network.
We continue to execute on our playbook and drive consumer broadband revenue growth and faster speeds. The addition of CCTV to the product portfolio in northern New England enhances our ability to expand our broadband connectivity and grow wallet share by appealing to a larger base of customers with a superior television service.
Finally, we invested 66 million capital expenditures during the second quarter. In addition to normal increases associated with the seasonal construction period. The quarter includes roughly 10 million in non recurring capital expenditures with the majority associated.
With Restoril cost for Hurricane Michael in our Florida property by property and wrapping up integration related projects.
We are still projecting our full year capital expenditures to be within our guidance of 210 to 220 million.
I will now turn the call over to Steve for the financial review Steve.
Thanks, Bob and good morning to everyone today, I'll discuss our second quarter financial results as compared to the second quarter last year and I will also provide updated guidance for the full year 2019.
Operating revenues for the second quarter were $333.5 million.
After normalizing for the 2018 sale of our Virginia, I look properties revenue declined 4.4% for the quarter.
Now I'll discuss each of our customer channel.
In the quarter total commercial and carrier revenue declined 4.1 million.
Data and transport revenue totaled $88.5 million grew 1.1% for the quarter.
Revenue from voice services declined $4.2 million or 8.2% driven by the continued decrease in traditional access lines and associated services.
Additionally, in other revenue, which is primarily equipment and structured cabling was in line with our normalized run rate of around $13 million per quarter in the second quarter, we did not recognize.
Revenue from any large projects as we did in Q1 19 in Q4 18.
Consumer revenue was down $6.6 million or 4.8%.
Voice revenues accounted for 6.4 million a decline.
Video revenues declined $1.7 million and this trend is consistent with our pre CCBI TV strategy.
For the quarter consumer broadband revenue grew $1.5 million or 2.4%, we continue to execute on our strategy of driving revenue growth with faster network speeds as a speed upgrades are positively impacting ARPU and increasing sales and reducing churn.
Subsidy revenues were down 2.8 million driven by the final impact are driven by the impact of the final Caf two step down in transitional support that a core occurred in August of 2018, we expect subsidy revenue of approximately $18 million per quarter for the remainder of 2019.
Network access revenues declined $3.1 million or 8.4%.
Before leaving the revenue this discussion I would like to comment on recent speculation about the impact of transition from Caf two to the rural digital opportunity fund.
The FCC is scheduled to vote on the notice of proposed rulemaking today, and we will be seeking comments on their initial design.
First we do plan to be an active participant in the auction process and we are confident our fiber rich network will give us competitive advantage over those who don't have infrastructure in these rural markets.
This auction process allows us to be selective in relation to the census blocks, we will consider versus the caf two process that required a bid on the entire state.
We will be evaluating the funding within our existing service area as well as general changes, where we have fiber network.
Second the FCC asked numerous important questions, particularly related to the transitional funding. The caf two order talks about us receiving a seventh year of transitional funding through 2021 based on other carriers acceptance of funding and the FCC six comment on how it should do so.
The over all the overall original rule digital opportunity fund is larger than Caf two funding estimated to be $20.4 billion over a 10 year period.
We are excited about the opportunities for consolidated as the objectives of this fund are consistent with our commitment to drive rural broadband growth.
Now turning to operating expenses.
Operating expenses exclusive of depreciation and amortization were $221.9 million compared to 233.1 million for the second quarter of last year and $11.1 million or 4.8% improvement.
Cost of services and products declined 7.6 million driven by network cost optimization, and lower salaries and benefits as a result of reductions in headcount associated with various cost savings initiatives.
Yes unit cost improved $3.5 million during the quarter as we continue to realize head count synergy and operational efficiencies.
Offsetting the expense reductions were a few onetime items.
We increased our accrual for a multiyear settlement of a Pennsylvania gross receipt tax on it by 656000, and we also increased our bad debt reserve associated with the Windstream bankruptcy by 450000, and we believe our total overall reserve of 800000 is adequate.
At the end of the second quarter, we have exceeded our two year fairpoint synergy target of $75 million by roughly $5 million as the two year window for integration expense add back under our credit agreement is now closed. This is the last time, we will report against acquisition synergies, but as with prior acquisitions, we will continue to identify specific cost improvement initiatives and savings opportunities.
Net interest expense for the quarter was $34.7 million compared to $32.8 million for the same period last year.
The change was primarily due to LIBOR increases and at June Thirtyth, our weighted average cost of debt was approximately 5.6%.
Cash distributions from the company's wireless partnerships were $10.6 million in the second quarter compared to $11.2 million for the prior year.
Adjusted EBITDA was $130.4 million compared to $135.8 million in the second quarter last year, primarily due to declines in revenue, but offset by the expense savings as previously discussed.
Adjusted diluted net loss per share was three cents compared to a negative 10 cents for the prior year.
In the second quarter Capex totaled $66.4 million as a result of the $10 million spent on non recurring projects as Bob discussed earlier.
Total liquidity, including cash on hand.
And availability under our revolver was approximately $79 million.
For the second quarter, our total net leverage ratio was 4.41 times.
As in the second quarter, we did make our final dividend payment on May Onest and we also had our semi annual bond interest payment on April 1st with the dividend payment now behind US we are focused on executing our new capital allocation policy, which is committed to deleveraging improving our balance sheet and cost of capital as we said on our Q1 call. All the 2019 dividend savings or the full $55 million will be re purpose to paying down debt with a debt pay down we will opportunistically target taking out the highest cost of debt with the shortest maturity.
With this strategy, we are confident we will improve our capital structure as we accelerate deleveraging toward our goal of refining or given the net leverage.
Below four times no later than mid 2021 in advance of refinancing our unsecured debt.
As part of the new capital allocation policy, we are enhancing guidance to include adjusted EBITDA, which we are expecting will be in the range of $520 million to $525 million for full year 2019.
Cash interest costs are still expected to be in the range of $130 million to $135 million.
Guidance for capital expenditures is unchanged and is expected to be in the range of $2 million to $220 million.
And we expect cash income taxes to be less than 3 million with that I'll now turn the call back over to Bob for closing remarks.
Thank you Steve in closing, we are confident in our business and the value we bring to our customers as well as the competitive position we have in the regions. We serve as we look to the future. We are clearly focused on our new capital allocation plan and delivering results as we work to further expand broadband services and improve the customer experience.
With that Kristina, we'll now take questions.
Ladies and gentlemen, if you have a question at this time.
Please press Star then the number one on your Touchtone telephone.
If your question has been answered and you wish to remove yourself from the queue pressed upon.
Our first question comes from the line of Frank Louthan from Raymond James.
Great. Thank you.
So.
Just a quick question on two things one are there any other properties you sold the Virginia property last year any other properties you might consider rationalizing.
As you are especially as you're looking to de lever over the next few years are you fairly comfortable with sort of some of the more disparate footprint that you have.
What percentage.
It's on is on fiber and co ax and on copper.
If you can give us that break down if you have an idea of how much of the copper has over 100 megs or some other another metric like that just want to get a sense for that.
The full company and what the make up of the plant is thanks.
Hey, Frank This is Steve I'll take the first part of your question and Bob can.
Address the second part so with respect to your question about potential asset sales.
In the quarter, we did.
We actually did have a one transaction of about $13 million in cash proceeds where we sold some polls too.
Utility company in Northern New England, there's still the ultimate closure literally the last day of the.
Of the quarter, but we're continuing to sort of evaluate that type of transaction.
That really looking not only monetize some some of the.
Poll assets, if you will but also looking to improve operations in support of those Poles. So your question your broader question on other assets.
In the portfolio. We are looking at we have inquiries on some of our properties some of those particularly some of the legacy.
Fair point properties.
Just to remind you in the past we have sold equipment business.
That was part of the Inventus acquisition, we have sold our Iowa, Iowa, We have sold our Virginia I look so we are willing to.
Consider.
Valuation or base or consideration based on valuation so.
Was continued to talk about those over time.
And related to the plant.
Mix, because we're constantly making upgrade investments.
If you look across the way we look at it as accessible speed, we can compete effectively with.
25, Meg and up product and we can see.
To 76%.
Of our customer base, we can get 50, Meg to roughly 40% and we are growing our one gig that's in the 10% range on a on a incremental basis each quarter as we connect and shorten loop lengths. So so thats roughly the way we look at it and we see ample opportunity with the 550000 upgrades that we did last year to continue to build penetration.
Sufficient enough to launch the video product.
To over a million targeted subs in northern New England, starting this month in Portland, and and feel confident in our ability to keep upgrading the network within the capital envelope that we allocate.
Currently.
Within our capital structure.
Okay, great. Thank you and.
Steve back on the.
Asset rationalization zero.
Number or is there you have a.
Amount of assets that potentially could could fall into that bucket that you could sell or just kind of stay tuned.
I would stay tuned it's all situational based on valuation so.
Okay, all right great. Thank you very much.
Our next question comes from the line of Davis Hebert from Wells Fargo.
Good morning, everyone. Thanks for taking the questions.
First I wanted to ask about a follow up on the Fairpoint footprint.
How would you say that new customer acquisition is going.
Now that were.
A few months I guess six months or more into your recent 500000 home upgrade.
To to put it bluntly really well.
Are the gating factors were not only the network upgrades with but then.
The benefits brought by the the contract Renegotiations last August in Northern New England, and that opened up process reengineering across the installation.
Pipeline, if you will and.
And it's been.
Incredibly.
Positive the PTX now are actually interested in in the door hangers and helping our get the service.
Bye.
Letting the Nabors know when we do installs that that the services available.
We're getting much smarter on how we market and we did a lot of.
Live to marketing initially with the 500000 upgrades to build volume and now we're getting very neighborhood specific and doing both digital and a cross between direct mail.
And so the marketing efficiency for acquisitions getting getting more.
Effective so.
I would say that well we have a a boost always this time of year from seasonality were well above.
But what we had hoped.
We could see once we turned all those process improvements on and and were seeing that momentum continue here into the third quarter.
Great. Thanks for that and then on the Ccs TV initiative.
As you went through new customer acquisition is this something that customers are demanding just wondering the thought process and.
And pursuing that initiative and what would be the advantage of having a proprietary platform versus partnering with one of these virtual providers that have.
Become a growth engine like you to TV for example.
Well, we we need it to be inclusive of local content and we know in each of our markets. What the content packages are that interest them. We've done that focus group work. So this is really.
A platform that helps us evolve out of the set top box deployment costs and into a more simple installed.
And the and the bottom line for US is we want to be in that in the triple play business, but it just hasn't been attractive as the content costs have risen.
And part of that.
Extends to what the payback that is on that set top box, but we always have seen a pull through for for broadband and so the the.
The motivation is to have a complete triple play that's easier for the customer to digest and install digest and operate it gives them the flexibility to still have lean back TV and it is not our own proprietary program.
It's based on a.
Moby TV.
Android platform that is more of an open architecture, but we're using our own content and operating it.
In.
In our environment.
So and positioning it as a a triple play so that those that want to digest TV in the more traditional linear way.
What is necessary to get Netflix or some of the other over the top items.
Across you're a smart TV. So this is really well positioned to take folks from linear TV environment give them. The same look and feel same kind of remote controls ease of install and then migrate them to a lower.
Lower capital intensive installation process and I will add that this is new.
To the northern New England market, because we Havent had a product there a video product there previously so it's another.
Upward.
Pressure positive pressure on.
Net.
Broadband growth in our environment, which which we think helps as we look forward to building more penetration in that the Underpenetrated area, where we have great fiber assets.
And then Bob just a follow up on that where would you say your penetration is currently in the Fairpoint footprint.
It's in the low teens.
The 13 12, 13% range Theres some areas.
We've we've been operating.
In a rural area with the 25, Meg or higher product, where we're in the 20 220, 324% penetration, but quite frankly.
It's it's really only in the last year, we've paid a ton of attention to this consumer opportunity and.
To penetration improvement including process.
Enrolled the employee base and so we're now finally seeing the benefits of all that hard work.
Great. Thank you and then one last question for me.
As you focus on your balance sheet over the next couple of years can you talk about a couple of ways you can accelerate that leverage reduction is it bond repurchases in the open market at a discount for.
Could you look at the wireless partnerships as a.
A way to to sell a higher maybe a higher valuation asset.
Just to your thought process, what might the hurdles be for something like that thank you.
Steve.
Yeah. Thanks, David on the on the question on the on the accelerated de leveraging.
I mean number one is incumbent upon us to execute against our.
Business plan and hit our EBITDA guidance for this year and going into 2020, but I think your question about the the bond repurchases, yes, we will be.
If it's $5 million in dividend savings towards the last half of the year will be going directly against debt reduction will prioritize that.
For the best use of cash highest return of going against us.
Senior notes in our open market purchases so.
Again that depends on.
Market dynamics and availability, but we'll see what we can get done.
There your question with respect to the wireless that's probably a pretty long putt for us considering.
Historical tax base in that asset.
It's probably.
Selling let's talk about we'd be happy to talk to them, but we're we really enjoy the cash flow that we have today to help us.
Invest in the business and accelerate our deleveraging and the insight that gives us for.
What the plans are around five to expansion and investment in the markets in which we've got great interest in obtaining the backhaul opportunities one great. Thank you very much.
Great. Thanks for taking the questions within the consumer business you saw solid year over year broadband growth of over 2% is this level of growth sustainable in the second half of this year and then video and voice revenues saw pretty consistent year over year declines versus last quarter. Any reason to believe there would be an improvement over the next few quarters. Thank you.
Yeah, John Thanks for the question, we typically see some seasonality in Q4 on the northern New England.
Overall.
This is a bit of a high watermark for the year, but I do believe and we're seeing the run rate potential that it will be better than past year over year comparison. So we we feel like we're in a good position.
As I stated for.
And answers to the previous questions with the both the network upgrades the process.
And now launching the video product.
The second part of your question related to.
Video declines.
That's pretty consistent with what we've expected.
From a budgetary perspective, you have to realize that we look at it from a cash flow.
Viewpoint and.
We are.
We're balancing where we need the video product in order to get deeper broadband penetrations with the Capex. It takes.
To to support that product and so you'll see us through 2020.
Migrate our legacy properties to this new video platform over time.
But.
Just looking back three years and the change of our of our video strategy.
The capital avoidance and the reallocation of that Capex for.
Long term return.
As a as proven.
To be beneficial to our.
Management of cash and and our capital intensity.
Great. Thank you.
Our next question comes from the line of Jason Kim from Goldman Sachs.
Hi, This is actually Jonathan on for Jason Kim. Thanks for taking my question for my first one it looks like you bought back about 5 million of unsecured bonds during the quarter and I know on the call and as previously you said you're targeting bonds as a priority for dot Dot reduction I was just wondering how we should think about you guys potentially tapping more into your revolver to fund bond purchases. If you thought the price is very attractive.
With build as we build cash post dividend.
And.
Yes, we have integration behind us the spike in Capex for Q2. So we're looking to build cash should we are we will be balance going into the revolver. So I think as we build cash will probably be in a position where I think we'd be comfortable using up to half of the revolver. If we needed to to be in there, but again, we'll hopefully we'll be building cash and we won't have to tap and I think as you know.
I'm not sure I'm not going to give you guidance on like of the 55 million that were bought that were.
Targeting for debt repayment, how much of that is going to go against that but we are going to do as much as we can.
Great and then you guys have done a great job, realizing and exceeding your merger synergy target how should we think about your ability to continue to right size the cost structure heading into 2020, and you see like what type of opportunities do you see that shocked more cost out of the fairpoint side of the business.
Well I can't say, it's always unique to the fairpoint side, but I feel really confident in both this management team and.
Our ability to look at automation opportunities and refinements and business process.
To to continue in the cost efficiency effort.
It's.
It's no secret that we continue to find efficiency opportunities as we bring.
Companies together post integration.
And and it's no different here.
We're implementing some artificial intelligence components into our call centers.
That's not yet realized.
You know the the actual efficiencies that we're going to gain there, but but a few of the initiatives have already paid.
For the investment and and so the potential I think is even greater and so along those lines, we're going to continue to invest in ways that allow customers to self serve. This this history. This industry is historically behind what the hotels. The the travel industry has done on on airplanes and it's it's not.
That complicated.
To make it more effective for those that want to interface with us.
From a from a online or a portal perspective.
And and were seeing tools available to make that more reality and and more efficient to implement.
And along the way.
The the back office front.
We are finding technology that allows us to to isolate and and build.
Data repositories that are unique to local geographies, but still have that access by the service order and the service delivery processes.
And with tools that weren't available when we did integrations five or 10 years ago, So I feel real confident and our ability to continue to pursue.
EBITDA margins and.
And cost reductions that balance the revenue.
In order to produce a.
A predictable EBITDA.
For.
For this business and that is demonstrated by our giving EBITDA guidance now going forward.
Great and just one last quick question that EBITDA guidance you gave.
Or is it the Sam.
Wireless distributions that you guided for in the beginning of the year and it was like 32 to 34.
That you previously have stated.
Well, yes there.
Hey, Ashley. This this is Steve we would we probably think there is an upside to the 32 to 34 and so our guidance is I mean, I think core business was based on 500 to 525, we feel even more bullish about the guidance with what our view for wireless is the last half of the year.
So if you get if you wanted to raise a little bit we'd be okay with that.
Got it great. Thank you for answering my questions.
Our next question comes from the line of Brian song from Oreo Mark Partners.
Hey, guys. Thanks for taking my questions.
On the on the back of the last question I, just want to get some better clarity on.
The synergies going forward.
And specifically how much.
Cost savings, you're expecting from headcount reductions and any other cost reductions Debbie.
Potentially quantified or realized immediately.
Yeah I appreciate the question but.
I am sure you can imagine giving that level of detail.
He is a is not reasonable to too.
We're managing to a 30, 839% EBITDA margin and we feel like we've got access to all the right levers to do that some is going to be natural.
Reduction in head count because of changes in business focus or or process changes.
That result in some.
Organizational restructures, but the bottom line is some of that cost goes back into sales.
And.
And generating.
More.
Broadband expansion in commercial and carrier and so it's a balancing of what we see as.
The the.
Opportunities to accelerate efficiency gains what it brings with it in terms of customer benefit and we've got.
10, 20 of those projects going all the time, what I can say is we're we're in.
Customer.
Efficiency and and business refinement mode, we're not in integration mode anymore, and so some of the integration resources that would typically.
Be using for due diligence and things like that are being.
Spun off and so.
As we finalize our integration efforts that cost has been.
You know being processed out of the business.
Because we don't see M&A.
And new acquisitions or the scale of Fairpoint.
In the next two or three year horizon.
Okay. That's helpful. Thank you.
And then my second question is on.
Yes reductions.
So if I'm doing the math just very high level back in on the low you're basically taking now leveraged by quite almost half its hard so that would imply about.
On another call it 200 $225 million of.
Debt Paydown.
Can you just maybe help me maybe bridge that little better in terms of how much of that debt pay down is going to be coming from.
Your free cash flow or any other sources that you might be thinking of.
Well, so the 200 million I'm not sure what time period, you're looking at a particularly again our got our target is to be a four times no later than mid 2021 to facilitate.
The refinancing right. So the first $55 million goes directly towards debt repayment I think largely going into 2020.
Again, we haven't we're not giving guidance range for 2020, but to hit the leverage targets a lot of that has to go against debt repayment in 2020. So I think if we stay where we are going to stabilize EBITDA going into 2020 and 21. So I think you got it again I think we.
I think what most models have less out there doing is are going down four or 5% a year. We are going to flat net number out. So like you take have you take that into consideration. Your calculus and then you can assume that most of the debt savings $110 million. It's we're saving with the dividend a large portion of that even in 20 will be going to debt repayment and then to the earlier questions that we had on asset sales theres anything that makes sense relative to valuation is not a distraction.
So our our business and focus on current execution that could help accelerate the numbers.
Okay, Yes, so you're right that the 200 million that I had was the span of the two years up to 2021 that you guys that will reach the level. So I guess I'm just confirming here that.
That 200 million debt reduction in aggregate will.
Largely all come from your free cash flow is that right.
That's correct. That's that's certainly the intent correct.
Okay. That's all thank you very much.
Our next question comes from the line of Mike Mccormack from Guggenheim Partners.
Hey, guys. Thanks, maybe just a quick comment on the competitive landscape I guess first on the consumer know some beside any differences between those two segments anything new going on.
And then secondly.
With respect to the enterprise market anything that you can comment on pricing there would be great. Thanks.
Hey, Mike. Thanks for the question, we're really seeing the same competitive dynamic we've seen.
For the last few years after we got through some carrier price compression that that really.
Came along in the late 17 timeframe or maybe early 17 timeframe.
And and so on the on the commercial side.
I would say that it's interesting.
If you look across the industry people are making decisions it seems a little bit slower, even though consumer spending is up and consumer confidence is up.
Driving that spending so its.
We attribute that to a couple of things one the solutions with cloud applications.
Our providing better retention, but they're taking longer cycle times to sell.
And because you are really having to deal with not only a CIO or in Italy, but also the the process owners inside your target business and and so that's that's a.
Turning up the heat.
Or are turning up the Wick, if you will on our verticals, which we're doing very well with and we're expanding them across the multiple regions. We have strength in one region, taking it to others.
So.
I don't see the price.
Pressure, there and I also don't see our competitors, beating us on many deals.
In in the commercial space I, just see longer longer lead times.
So hopefully that's responsive to your question.
Yeah, that's great. Thank you.
Our next question comes from the line of Eric Brazil from Jefferies.
Hi, Good morning, This is Todd Morgan.
Two questions I guess some comments you made in the call here.
Talking about the tower opportunity and I was hoping you could just speak a little bit further about that specifically is the growth opportunity you see there are really coming from sort of true new tower builds and how much of the fiveg future or do you really need to see to really drive that or where is that kind of continued growth coming from and I guess secondly, capex in the quarter. You commented that at least year to date is a little bit higher because of the nonrecurring expenses in yet.
Full year Capex guidance. The same other are there sort of reduce spending plans elsewhere or is that just simply within the range that you provided thank you.
Let me start with a Capex question Todd first.
I really don't see reduced spending.
As well, let me say it this way.
We have some Caf project connect America fund projects that were wrapping up.
For the year, but really the spike is really built around the season, the seasonal access to to frozen ground.
That that kind of breaks free once you get into the April .
And may and so.
10 up.
<unk> ability to cut loose and to get things done.
In our central North markets as well as the northern New England and the projects that we had in Q as as cause to second quarter to be probably the highest of the year we feel.
That.
That theres a lot of the equipment now that the purchase of the labor is what continues to follow through third quarter. So it will be obviously less and then things really curtail in fourth quarter just by nature of.
Those contractors that we have in.
Leave.
And the northern markets and in the things that we continue to finish up are those that are really customer facing or revenue projects.
That that are driven by customer expectations and needs. So I think it's a normal course that will be better in guiding.
In the future, but the but the one times are really.
What spiked it.
Higher than what we've seen in past second quarters.
The other question remind me Todd, Yes, if you could speak a little bit more about the tower opportunity I mean, obviously I have good momentum here. We're just we're just how do you what are the drivers you need to see to kind of see that continue thanks.
Well, we're already seeing the drivers I mean, 18, T. smart and that is driving.
Both a competitive response and their own build outs.
Which.
Whether were.
In disguise in discussions with them or a sub four others, who are getting that opportunity in various markets.
That provides some some leading indicators.
Fiveg opportunities or expansion opportunities you also have across the other towers with the Fiveg spectrum.
That and the equipment standardization that's occurring.
Oh, Gee spectrum opportunities the more dense markets being build out first but there is a constant densification effort across the rural areas and and we see this for our suburban and rural markets that we serve we see this as a great opportunity in fact, we're using it and where we can to extend our broadband footprint and and trying to create an opportunity where we can help accelerate fiveg deployment for carriers interested in allowing us to offset some of their their build needs because we truly believe that having the fiber network.
In a market like we do in which a rural provider can serve commercial carrier and consumer customers put you in the best long term sustainable position and us were doing everything within our power and we're finding success in making our network attractive for for wireless extensions and we see this as early first second inning of opportunities.
That's helpful. Then thank you.
Our last question comes from the line of Jennifer Fritzsche from Wells Fargo.
Great. Thank you just following up on that last question. We just got off the rising costs. They can you talk about fiber and using some of the fiber to replace some of the back call just to confirm you're not I would think that's happening in more urban markets would you say Verizon continues to be a growing partner or is it fair to say, you're not seeing that type of activity.
Yeah that that that's always.
A push pull discussion that occurs Jennifer with a with a number of carriers and even large institutional customers, where they have fiber for other reasons theyre going to look to exploit that and and that isn't the case in most of the markets. We serve so we're in a good position to continue to expand our relationship with Verizon and <unk> and where we think considered a good quality.
Provider in fact have won some towers back from from competitors based on our service response and and reputation. So yes, I don't I wouldn't say.
We we don't hear about it because we do but even those dark fiber initial request that we've gotten in the past have turned into managed service opportunities for us.
Because we can build it fast and and have a good quality reputation.
Great and then can I ask you just on the line.
So early with dish in itself, but are you having conversations with like what I'll call other emerging wireless entities that could present, yet another opportunity.
We're all over.
Every every angle of of the Timo sprint merger and positioning ourselves to be.
A network provider for whoever wants to expand in the in our suburban and rural markets.
So we're very eager to see.
Activity take place there and we're excited about how the deal is finally solidified getting solidified and NC little overlap in our sprint.
Timo relationship that provides any risk and really believe there's upside to investment in rural America that'll come from that so we're excited.
Thank you.
There are no question at this time I will now turn the call over back to Mr., Bob you down.
We appreciate your questions today and sincerely appreciate your continued support of our company I. Appreciate you joining our call and we look forward to updating you on third quarter next time.
Ladies and gentlemen, thank you for joining US. This concludes today's conference call you may now disconnect.
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