Windstream narrows 1Q losses, notes recent Earthlink, Broadview deals

Windstream Holding Inc. narrowed first quarter losses from a year ago as the Little Rock-based telecom continues to expand its fast-growing fiber optic and broadband network to keep pace with resident and business consumers unending quest for faster and more reliable Internet connections.

For the period ended March 31, Windstream on Thursday (May 4) reported a net loss of $111 million, or 89 cents per share, compared to a loss of $232 million, or $2.52 cents per share, in the same period a year ago. Total revenues of $1.34 were down 7.7% from $1.37 billion in the first quarter of 2016.

Wall Street analysts had expected the company to report first quarter a loss of 28 cents on revenue of $1.54 billion, according to Thomson Reuters.

“Windstream’s focused operational strategy and targeted network investments continue to drive improvements to our business and create value for our shareholders. Additionally, our recent strategic transactions with EarthLink and Broadview Networks will expand our capabilities to provide cutting edge technology solutions to customers,” said Windstream President and CEO Tony Thomas.

Three weeks ago, Windstream announced a deal to acquire Broadview Networks Holdings Inc., in an all-cash deal worth at $227.5 million. Broadview is based in Rye Brook, N.Y., where it provides cloud-based solutions to small and medium-sized businesses under the “OfficeSuite” brand.

Windstream, which plans to finance the transaction with cash reserves and available revolving credit capacity, said it expects to realize approximately $30 million in annual operating synergies within two years. The transaction will improve Windstream’s balance sheet by reducing leverage through realization of synergies and will be accretive to free cash flow in the first year, company officials.

On Feb. 27, Windstream completed its acquisition of former rival EarthLink Holdings Corp. of Atlanta after both companies’ shareholders approved the $1.1 billion deal over the weekend. Windstream officials said the company expects to achieve more than $150 million in annual operating and capital expense synergies within 36 months of closing, an increase of $25 million over its initial estimates.

“Our first-quarter results were in line with our expectations, and we are making solid progress on achieving our 2017 goals. The integration with EarthLink is off to an excellent start and our synergy plans remain on track,” Thomas said. “We saw improved ILEC consumer revenue and broadband trends during the quarter. Enterprise contribution margin also grew year-over-year. We expect Adjusted OIBDAR and margin trends to improve through 2017 as a result of continued access expense management and synergies ramping throughout the year.”

Companywide, local exchange carrier (ILEC) consumer and small business service revenues were $391 million, a decrease of 1.5% from the same period a year ago, and contribution margin was $222 million compared to $228 million year-over-year. Windstream’s wholesale service revenues were $158 million, a decrease of 3.5% year-over-year, and contribution margin was $108 million compared to $118 million in the same period a year ago.

Enterprise service revenues were $516 million, a 5% increase from the same period a year ago, and contribution margin was $83 million compared to $71 million year-over-year. Competitive exchange carrier (CLEC) consumer and small business service revenue was $140 million, a 9% increase year-over-year, and contribution margin was $49 million compared to $41 million in the same period a year ago.

Adjusted revenues and sales, which combine historical financial information of Windstream and EarthLink, grew to $1.52 billion compared to $1.63 billion a year ago. Adjusted capital expenditures were $231 million in the quarter, a decline of 7% year-over-year.