Windstream reports 4Q loss of $87 million, upbeat concerning $1 billion Earthlink deal

Windstream Holdings Inc.’s results fell into negative territory in the fourth quarter but company officials on Wednesday (March 1) are still upbeat as the Little Rock telecom begins a new chapter in its history with the $1 billion acquisition of Atlanta-based Earthlink Inc. that closed earlier in the week.

For the period ended Dec. 31, 2016, Windstream reported a net loss of $87 million, 94 cents per share, compared to net income of $141 million or $1.41 per share in the same period a year ago. Fourth-quarter 2016 results include a pre-tax expense of $61 million related to the company’s pension plan and other one-time items, bringing net losses in the quarter to 51 cents per share.

Total revenues in the fourth quarter were $1.31 billion, down 8.4% from $1.43 billion a year ago. Wall Street had expected the Arkansas fiber optic and technology provider to report a fourth quarter loss of 63 cents per share on revenue of $1.34 billion, according to Thomson Reuters.

For the full year, Windstream reported a loss of $383.5 million, or $4.11 per share, compared to net income of $27 million, or four cents per share. Revenue fell slightly to $5.39 billion, compared to $5.76 billion in the fiscal 2015.

“Our 2016 results demonstrate continued progress executing our focused operational strategy. We achieved the financial guidance provided for 2016, delivered consistent results across our core business units and returned value to shareholders through our dividend,” said Tony Thomas, Windstream President and CEO.

Thomas added that Windstream 2017 priorities are building on the company’s growth and advancements over the past year, including the Earthlink acquisition.

“Our EarthLink merger integration planning is progressing well, and we expect to achieve $150 million in annual synergies within three years, exceeding our original expectations by $25 million,” Thomas said. “We will deliver improved consumer trends as we deliver faster broadband speeds to more customers. We will drive continued growth in enterprise contribution margin in 2017. And we will continue to leverage next generation technology, such as SD-WAN, to drive sales and improve the customer experience.”

Overall, Windstream’s consumer and small business ILEC service revenues were $392 million in the fourth quarter, a decrease of 1% from the same period a year ago, and $1.58 billion for the year, a decline of 1% from 2015. Consumer average revenue per household increased in the fourth quarter for the eighth quarter in a row and more than 6% year-over-year driven by broadband speed penetration gains across all tiers and sales of bundled services.

Wholesale service revenues were $153 million in the fourth quarter, a decrease of 11% year-over-year, and $631 million for the year, a decline of 8% from 2015. Contribution margin was $109 million, or 71% in the fourth quarter, and $452 million or 72% for the year.

Enterprise service revenues were $486 million in the fourth quarter, a decrease of 2% year-over-year, and $1.96 billion for the year, an increase of 1% from 2015. Contribution margin was $85 million or 17% in the fourth quarter, an increase of $8 million or 10 percent year-over-year, and $319 million or 16% for the year, an increase of $78 million or 32 percent from 2015.

Small business CLEC service revenues were $111 million in the fourth quarter, a decline of 16% year-over-year, and $484 million for the year, a decrease of 13% from 2015. Contribution margin was $35 million or 32% in the fourth quarter and $155 million or 32% for the year.

Windstream said it generated $107 million in adjusted free cash flow for 2016, has no near-term debt maturities, and expects to reduce leverage by 0.5 times after synergies through the EarthLink merger. Going forward, the Little Rock technology giant said it expects total service revenue declines to be similar to full-year 2016 trends. The company expects operating income before times to fall in the range of $2 billion to $2.06 billion. Adjusted capital expenditures are expected to be between $790 million and $840 million.

In early trading on Wednesday, Windstream shares were trending upward at 1.6%, or 12 cents at $7.59 on the Nasdaq stock exchange. Over the past 52 weeks, the company’s shares have traded in the range of $6.63 on the low end to a high of $10.46.