Good morning, my name is Casey and I will be your conference operator today. At this time, I would like to walk everyone to the Consolidated Communications Fourth Quarter Earnings Conference Call. . Thank you. I will now turn the call over to Jennifer Spaude, Senior Vice President of Investor Relations and Corporate Communications.

Jennifer, you may begin your conference..

Thank you and good morning. I would like to welcome everyone to Consolidated Communications Fourth Quarter 2020 earnings call. On the call today are Bob Udell, President and Chief Executive Officer; and Steve Childers, our Chief Financial Officer.

Bob's comments today will highlight our strategic initiatives, and our operational results, as well as our accelerated growth plans. Steve will provide some details on our fourth quarter and full-year financial performance and outlook for 2021. Following the prepared remarks today, we will open the call up for questions. .

Thanks, Jennifer, and good morning everyone. I'd like to welcome all of you to Consolidated Communications Fourth Quarter 2020 earnings call. And, I'm very excited to talk to you about how 2020-year was a pivotal year for Consolidated Communications. The pandemic brought unforeseen challenges yet our business performed very well.

This past year highlighted the critical importance of the services and support we provide, consumer, commercial and carrier customers as well as our success and adapting to meet and exceed our customer expectations. We were part of the Keep Americans Connected Pledge and rapidly installed upgraded and maintain services to our customers.

Our fiber network successfully handle the increased traffic levels and performed very well. Our teams ensure customer stay connected, it's stable and upgraded broadband connections, wherever they are and make safety, a priority at all times in their work. I am proud of what we accomplished in our business and for our customers.

Well, at the same time, growing strategic revenue and increasing our adjusted EBITDA year-over-year. 2020 also brought a strategic partnership for us with Searchlight Capital Partners, who committed to make a 425 million total investment resulting in an immediate capital infusion of 350 million, which we announced in September of last year.

In conjunction with this investment, we refinance our capital structure, which provides us the capital and financial flexibility to accelerate our fiber network expansion. We have over 600 million of liquidity and extended the debt maturities until 2027.

With our strong balance sheet and strategic partner in Searchlight, we will upgrade 1.6 million fiber passing over the next five years. We're building on an excellent platform for the future. We are well on our way to becoming a fiber first broadband company.

Our goal is to provide an excellent customer experience, grow our consumer and commercial broadband penetration rates, and increased data ARPUs and ultimately return the company to revenue growth. We couldn't be more excited about what lies ahead as we have a fully funded growth plan, a strong balance sheet, and increased liquidity.

Our 4th quarter results were very positive and demonstrate the stability of our business, the strong execution and improving revenue trends and increased adjusted EBITDA. .

Good morning, everyone. As Bob said, 2020 was a pivotal year and I would like to echo his comment, I could not be more proud of what our team accomplished. I'm very excited about how well positioned we are to execute on the fully funded 5-year build and growth plan.

So for today, I'm happy to share with you the details of our strong fourth quarter results as well as provide outlook for 2021. Our financial summary for the fourth quarter begins on slide 4 of our presentation. Operating revenue for the fourth quarter totaled $326.1 million, a decline of 1.5% or 250 basis point improvement compared to a year ago.

This is a result of the continued improved performance realized across all of our customer channels. As a result of the improved revenue trends and ongoing disciplined cost management, fourth quarter adjusted EBITDA totaled $132.3 million and was upto 1.1% or $1.4 million from a year ago. EBITDA margins remained strong at approximately 41%.

Now let's review our revenue results. Commercial and carrier revenue totaled 149.8 million in the fourth quarter of 0.6% year-over-year. Data and transport revenue performed particularly well and totaled $92.8 million, an increase of 3.2% year-over-year.

This growth continues to be fueled by our investment in fiber network and success within the carrier and commercial channels. Voice revenue declined $1.6 million or 3.5%, but represents a notable improvement from the decline of 5.7% in the fourth quarter of 2019.

We continue to be closely monitoring our SMB channel in our increasing the customer touch point to cultivate stronger relationships and provide value for this group of customers. Looking forward to 2021, we would expect data and transport to grow at least at a rate of 2% for 2021 and we also expect voice to perform consistent with 2020 trends.

Turning to our consumer channel revenue totaled $125.2 million, which represents a year-over-year decline of 2.6% in the fourth quarter primarily due to the fourth quarter seasonality impacts in northern New England.

Notably consumer broadband grew for the seventh consecutive quarter on a year-over-year basis, totaling $66.3 million, which represented a 2.8% increase versus a year ago. In our earnings presentation, we introduced a new metric consumer data ARPU, which emphasizes our strategy of leading with the highly competitive broadband services.

Data ARPU for the fourth quarter was $54.41, up 6.6% over a year ago. We expect to continue to grow data ARPU as we increase speed and upsell customers. We also continue to see improvement in trajectory of consumer voice revenue for the quarter, revenue was down 6.3% of $2.8 million from the prior year.

This represents significant improvement as full year 2020 compared to 2019, the rate of voice erosion was cut in half. .

Thanks, Steve. So, as we enter the next phase of our growth and transformation, let's talk about strategic priorities, which you see in our earnings release deck on slide 11. Our number one priority is accelerating our fiber build to scale and grow broadband services.

As we talked about we are embarking on a 5-year investment initiative, where we will upgrade 1.6 million passings with fiber enabling, multi-gigabit speeds across more than 70% of our footprint. Our second priority is leveraging our fiber assets to continue to grow commercial and carrier services.

That's a solid revenue source for us and a source of growth. We are targeting 2% data transport revenue growth in 2021 and we'll continue to target 90% plus of those new sales being on that. And third, we are transforming the customer experience.

We're going to make it easier for our customers to upgrade bandwidth and just do business with us in general. Our digital transformation project will be instrumental and improving order and support processes and we're striving for an industry-leading net promoter score.

It is our intent to deliver a superior fiber product offering with a best-in-class customer experience. These priorities put us on a path to returning to top line growth by 2023 and this return to growth is very exciting.

Our plan is fully funded and we are now positioned to execute on our fiber expansion plans as we build momentum and become a stronger fiber based broadband provider. Now I'd like to take this opportunity to announce, Eric will be joining our team next week as President of our Consumer Small Business Unit.

Eric brings extensive industry experience having led the fiber market expansion plan for Google fiber in the Southeast and we're thrilled to have Eric bringing his experience and perspective to our team. In closing, I want to reiterate what an important time this is for our company and how excited we are to be executing on our fiber expansion plans.

Our path forward is about building long-term sustainability and value for our investors, our customers and our employees. We have a strong stable business and experienced management team and a significantly improved financial position. I couldn't be more excited for what the future holds. So now, Casey, we will take questions at this time..

Great, thank you. . We do have a question that has come through from the line of Greg Williams from Cowen. Please go ahead. Your line is now open..

Great, thanks for taking my question.

Just, Bob, can you just talk about the margin profile as you get to the fiber to the home deployments in a mature state and what are your penetration goals of your fiber builds over the next few years?. Thanks..

Greg. Let me start with the penetration goals. First, our plan is conservative. I can tell you what our experiences and our plan is built around mid '30s over a 3-year period.

So, in the first two years, I'd expect us to be close to 30% and that's starting, If you look at a cohort or as we call them Fiber Distribution Hub from the point where it's ready for sale through 0 plus 2 years.

So, our plan is conservative, but prior experience as I excited in some of the examples, few minutes ago, our experience has been, we can get to 20% in a year and we have some many areas where we've been able to get to 30% in two years.

So, I think our expectations are to be in the duopoly parity state, not long after the third-year anniversary of opening a new neighborhood or fiber distribution. So that now to the margins on the product, I mean fiber is higher margin than our traditional telecom base, because of the maintenance benefits that comes with the last mile-fiber.

So, I would say you can expect gross margins north of 70% in many cases, I think you get higher and I think EBITDA margins for this business as the transitions to fiber based approach 50%, if not higher.

And so that's why we're so excited about accelerating this transition, it brings a lot of benefits that we haven't even factored into our plan because we're conservative as we've built our capital investment strategy..

Great, thanks..

. There are no further questions at this time. I will turn the call back over to Mr. Bob Udell..

Well, thank you. Casey and thank you everyone for joining us. This is a very exciting time for our company and a very important transition year for us and we appreciate you turning in and look forward to updating you on our first quarter results. Have a great day..

And this concludes today’s conference call. You may now disconnect..