“We delivered another quarter of record-breaking operational results,” said Nick Jeffery, President and Chief Executive Officer of Frontier. “Our team set a new pace for building and selling fiber this quarter. At the same time, we radically simplified our business and delivered significant cost savings ahead of plan. This is a sign of a successful turnaround.
“Our team has rallied around our purpose of Building Gigabit America and is laser-focused on executing our fiber-first strategy. As the second-largest fiber builder and the largest pure-play fiber provider in the country, we are well-positioned to win.”
Third-quarter 2022 Highlights
- Built fiber to a record 351,000 locations to reach a total of 4.8 million fiber locations, nearly halfway to our target of 10 million fiber locations
- Added a record 66,000 fiber broadband customers, resulting in fiber broadband customer growth of 15.8% compared with the third quarter of 2021
- Revenue of $1.44 billion, net income of $120 million, and Adjusted EBITDA of $508 million
- Capital expenditures of $772 million, including $18 million of subsidy-related build capital expenditures, $442 million of non-subsidy-related build capital expenditures, and $170 million of customer-acquisition capital expenditures.
- Net cash from operations of $284 million, driven by healthy operating performance and increased focus on working capital management
- Nearly achieved our $250 million gross annual cost savings target more than one year ahead of plan, enabling us to raise our target to $400 million by the end of 2024
Third-quarter 2022 Consolidated Financial Results
Frontier reported consolidated revenue for the quarter ended September 30, 2022, of $1.44 billion, an 8.4% decline compared with the quarter ended September 30, 2021, as growth in consumer fiber broadband was offset by declines in subsidy, video, voice, and wholesale.
- Consolidated revenue growth was particularly impacted by the expiration of CAF II funding at the end of the fourth quarter of 2021
- Excluding subsidy-related revenue, consolidated revenue for the quarter ended September 30, 2022, declined 4.5% compared with the quarter ended September 30, 2021, an improvement in the year-over-year rate of decline reported for the quarter ended June 30, 2022
Third-quarter 2022 operating income was $169 million and net income was $120 million.
Adjusted EBITDA was $508 million and Adjusted EBITDA margin was 35.2%, compared to Adjusted EBITDA of $587 million and Adjusted EBITDA margin of 37.2% in the third quarter of 2021. The year-over-year decline in Adjusted EBITDA and Adjusted EBITDA margin was primarily driven by revenue declines and higher energy-related costs, partially offset by lower video content expense, lower selling, general and administrative expenses, and cost-saving initiatives.
Capital expenditures were $772 million, an increase from $377 million in the third quarter of 2021, as fiber expansion initiatives accelerated.
Third-quarter 2022 Consumer Results
- Consumer revenue of $785 million declined 1.9% from the third quarter of 2021, as strong growth in fiber broadband was offset by declines in legacy video, voice, and other
- Consumer fiber revenue of $424 million increased 3.6% over the third quarter of 2021, as growth in consumer broadband revenue offset declines in voice, video, and other
- Consumer fiber broadband revenue of $278 million increased 14.4% over the third quarter of 2021, driven by growth in fiber broadband customers
- Consumer fiber broadband customer net additions of 64,000, a two-fold increase from the third quarter of 2021, resulted in consumer fiber broadband customer growth of 16.3% from the third quarter of 2021
- Consumer fiber broadband customer churn of 1.60% increased from 1.56% in the third quarter of 2021, primarily due to higher involuntary disconnects
- Consumer fiber broadband ARPU of $62.97 declined 0.6% from the third quarter of 2021, as price increases and speed upgrades were offset by the introduction of autopay and gift-card incentives in the third quarter of 2021. Excluding the impact of gift-card accounting, consumer fiber broadband ARPU increased 1.6% over the third quarter of 2021
Third-quarter 2022 Business and Wholesale Results
- Business and wholesale revenue of $641 million declined 7.5% from the third quarter of 2021, primarily due to declines in our copper footprint
- Business and wholesale fiber revenue of $267 million increased 1.1% sequentially, but declined 2.9% from the third quarter of 2021
- Business fiber broadband customer churn of 1.36% increased from 1.26% in the third quarter of 2021
- Business fiber broadband ARPU of $107.28 increased 2.4% from the third quarter of 2021
As of September 30, 2022, Frontier had total liquidity of $3.3 billion, including a cash and short-term investments balance of approximately $2.6 billion and $0.8 billion of available borrowing capacity on its revolving credit facility. Frontier’s net leverage ratio for the four quarters ended September 30, 2022, was approximately 3.1x.3 Frontier has no long-term debt maturities prior to 2027.