Consolidated Communications Holdings, Inc.

Good morning. My name is Adam, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Consolidated Communications second quarter earnings conference call. Please be advised that today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this session, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I'd now like to turn the call over to Jennifer Spouty, Senior Vice President of Investor Relations and Corporate Communications. Jennifer, you may begin your conference.

Thank you and good morning. I'd like to welcome everyone to Consolidated Communications' second quarter 2021 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 progress with our Fiber Build Plan. Steve will provide details on our second quarter financial performance and an update on the Searchlight investment. Following their prepared remarks, we will open the call up for questions. Before we proceed, I will remind you our earnings release, financial statement, and earnings presentation are all posted on the investor relations section of our website at consolidated.com. Please review the Safe Harbor provisions on slide two of our presentation. Today's discussion includes statements about future events and financial results that are forward-looking and subject to risks and uncertainties. A discussion of factors that may affect future results is contained in consolidated filings with the SEC. Today's discussion will also include certain non-GAAP financial measures. Our earnings release includes reconciliations of these measures to the nearest GAAP equivalent. I will now turn the call over to Bob Udell.

Bob Udell Thank you, Jennifer, and good morning, everyone. We've had a highly productive second quarter, delivering stable revenue, strong broadband growth, and exceeded our very aggressive build plans. In the quarter, we upgraded 76,000 gig-capable fiber passings. And for the year, we have completed 122,000 fiber upgrades, which is a great start to our five-year, 1.6 million location build plan. The first half of the year demonstrates our team's strong execution on our fiber-first strategy. I'm proud of what the team has accomplished in just six months and the transformation that is taking place. With that, we are on track to achieve our target and upgrade over 300,000 locations in 2021. Our build plan is outlined on slide six of our investor presentation. The recent upgrades were primarily in northern New England, California, Texas, and Minnesota markets. Crews constructed almost 1,400 miles of new fiber in the second quarter, which is double the miles constructed in first quarter. We are placing 288 fiber count or larger cables to meet the high capacity needs of our consumer, commercial, and carrier customers for years to come. Our near net regional fiber networks allow for very attractive average cost per passing. Our cost per passing is approximately 465 year to date, which includes edge access equipment, labor, and fiber components. This is well within our expectations. Our go-to-market strategy has been meticulously planned out. We're offering simple packages with highly competitive pricing and an optimized customer experience. Our gig-capable symmetrical product offering with no data caps will be a key differentiator compared to cable. We are installing fiber services within three days and on time for our customers for their appointments. And we have significantly improved our contact center performance and productivity. Our premium tech support, which comes with all fiber connections, ensures the best possible experience. Additionally, investments we are making in our digital transformation projects will give our customers new self-serve options, making it easy to do business with us the way they want. In short, all of these factors support a highly competitive, differentiated fiber product and a transformed customer experience. Keene, New Hampshire is a great example of a recent local market launch with very positive receptivity to our new fiber product. Our marketing strategy included a community event, local sponsorships, and a competitive offer that is making it easy for residents to choose Consolidated. We have been working very closely with our partners and vendors to understand supply relative to our forecast. We are cautiously optimistic that we have sufficient CPE to meet our forecast for the remainder of the year. And from a construction perspective, we have high confidence we can achieve our 2021 fiber build objectives and are already in the planning stages with our vendors for 2022 and beyond. We are seeing early successes in penetration rates, and they are in line or exceeding our plan. Early Q1 build areas with cable competition have already achieved double-digit penetration. We added approximately 3,000 consumer fiber gig-capable subscribers in the second quarter and nearly 7,000 fiber subscribers year-to-date. In fact, some of our late Q4 cohorts in rural areas with less competition are at 51% penetration. We are very pleased with the sales activity and receptivity to our fiber offering. It's a powerful combination of delivering not only the fastest symmetrical speeds, but also a truly differentiated customer experience, which is key to our value proposition that comes with our new fiber services. We have completed five public-private partnership builds this year, totaling roughly 8,000 passings, and are well positioned to participate in any additional funding opportunities that allow us to expand broadband to rural America. This year alone, we have won bids for 16 additional municipal partnerships and have dozens more in the planning stages, not to mention a very solid track record with state and federal programs. Simply put, we understand the funding sources, have good relationships with our community partners, and have the infrastructure in place to build fiber at scale and support the network for the long term. Within our commercial channel, we're experiencing an increase of face-to-face meetings in most markets. which is good news. However, sales cycles or time from quote to close still seems extended due to lingering COVID-19 concerns. Our commercial go-to-market strategy is based on leveraging our fiber network to provide application solutions which grow data and Ethernet revenue. Our sales teams are always focused on network, and we utilize a solutions-based sales approach, which we call CCI Ignite. We work to become a trusted advisor to our customers and provide simple solutions to complex problems. Data and transport revenue grew 1.4% year-over-year, and it's up from roughly 1% growth in the first quarter. We are pleased with the momentum of our sales teams and the sales activity around Ethernet, unified communications, and SD-WAN, which are our leading solutions. As we build up carrier-grade capacity, We increased on net buildings by roughly 1400 or 11% year over year. We had nearly 200 strategic builds in the quarter and on net revenue represents roughly 90% of our revenue for commercial. Our strong balance sheet enables us to support this channel and commit the capital needed to grow the business with the highest return projects in focus. Our partner one agent channel performed well in the recent quarter and is highly engaged. This provides us 150 agents selling on our network who we continue to move upmarket and also who help bring in new logos. Our carrier team is actively engaged with emerging 5G network opportunities across all the major carriers. The carrier product mix, like commercial, is weighted toward Ethernet, and we are seeing more interest in carrier-grade wave solutions. Our Cary sales team is experienced, nimble, and proactive in pursuing network growth opportunities as we manage the pressures of price compression on second-generation contracts and an increasingly competitive landscape. We continue to be optimistic about business recovery and are pleased with the receptiveness for meetings and resolving projects. I'll now turn the call over to Steve, who will provide more insight on our second quarter financial results. Steve?