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Cincinnati Bell (CBB) Q1 Loss Widens Y/Y, Revenues Increase

Zacks Equity Research

Cincinnati Bell Inc. CBB reported lower-than-expected first-quarter 2019 financial results, wherein both the top line and the bottom line missed the respective Zacks Consensus Estimate.

Net Loss

On a GAAP basis, net loss for the quarter was $29.5 million or loss of 59 cents per share compared with net loss of $10.9 million or loss of 26 cents per share in the year-ago quarter. The year-over-year deterioration despite top-line growth was mainly due to higher operating expenses.

Non-GAAP net loss came in at $24.1 million or loss of 48 cents per share compared with net loss of $8 million or loss of 19 cents per share in the prior-year quarter. The bottom line was wider than the Zacks Consensus Estimate of a loss of 21 cents.

Cincinnati Bell Inc Price, Consensus and EPS Surprise

Cincinnati Bell Inc Price, Consensus and EPS Surprise

Cincinnati Bell Inc price-consensus-eps-surprise-chart | Cincinnati Bell Inc Quote

Revenues

Quarterly revenues grew 28.4% year over year to $379.6 million resulting from investments in dense metro fiber and owing to expansion in the company’s IT services footprint. The top line, however, missed the consensus estimate of $387 million.

Segmental Performance

Revenues from Entertainment and Communications segment improved 43.7% year over year to $250.3 million, primarily driven by higher sales in fiber businesses. Cincinnati Bell’s merger with Hawaiian Telcom has significantly expanded its high-quality metro fiber asset portfolio to meet the increased need for bandwidth and support the demand for IoT ecosystems.

IT Services and Hardware segment revenues increased 6.8% year over year to $136.3 million, backed by contributions from Hawaiian Telcom. Cincinnati Bell’s transformation from traditional hardware reseller to service oriented IT solutions provider continues to generate healthy momentum across its enhanced North American footprint. The move has resulted in client diversification while optimization of higher-margin service revenue opportunities.

Other Details

Overall operating income was $10.1 million, compared with $24.2 million in the year-ago quarter due to higher operating costs. Adjusted EBITDA increased $18.8 million year over year to $97.6 million.

Cash Flow & Liquidity

During the first quarter, Cincinnati Bell generated $56.8 million of cash from operating activities compared with $58.5 million in the year-ago period. As of Mar 31 2019, the regional telephone company’s net debt (non-GAAP) totaled $1,928.4 million.

2019 Outlook

Cincinnati Bell has reiterated its guidance for full-year 2019, reflecting expected contributions from Hawaiian Telcom. Notably, the company expects revenues to be between $1,515 million and $1,575 million, and adjusted EBITDA in the range of $400-$410 million.

Going Forward

Cincinnati Bell is working toward expanding its portfolio of next-generation fiber offerings, while securing value for customers and shareholders. This positions the company at the forefront of innovation in telecommunications for future growth. Cincinnati Bell has reorganized the business and manages two distinct yet complementary operations. An IT Services business with a diverse customer reach and growing recurring revenue base, and a network business with attractive fiber-centric footprint with expanding Internet market share. The company is focused on augmenting its fiber network and increasing its IT solutions business along with a strategic approach to capital allocation.

Zacks Rank & Stocks to Consider

Cincinnati Bell currently has a Zacks Rank #5 (Strong Sell). A few better-ranked stocks in the broader industry are Deutsche Telekom AG DTEGY, Southwest Gas Holdings, Inc. SWX and Veolia Environnement S.A. VEOEY. While Deutsche Telekom sports a Zacks Rank #1 (Strong Buy), Southwest Gas and Veolia carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Deutsche Telekom has long-term earnings growth expectation of 9%.

Southwest Gas has long-term earnings growth expectation of 6.2%.

Veolia has long-term earnings growth expectation of 9.7%.

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