Frontier Communications Parent, Inc.

Good morning. Thank you for attending today's Frontier Communications first quarter 2023 earnings call. My name is Megan and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star one on your telephone keypad. I would now like to pass the conference over to Spencer Kern, head of investor relations with Frontier Communications. Mr. Kern, please proceed.

Good morning and welcome to Frontier Communications first quarter 2023 earnings call. This is Spencer Kern, Frontier's head of investor relations. Joining me on the call today are John Stratton, our chairman, Nick Jeffrey, our president and chief executive officer, and Scott Beasley, our chief financial officer. Today's presentation can be followed within the webcast available in the events and presentation section of our investor relations website. Before we start, please turn to slide two. Here you will see our safe harbor disclaimer. This is a reminder that this conference call may include forward-looking statements that involve risks and uncertainties that may cause actual results to differ materially from those expressed today. During the call, you may also refer to certain non-GAAP financial measures, which are defined and reconciled in our earnings presentation, press release, and trending schedule. With that, I'll turn the call over to John.

Thanks Spencer, and good morning everyone. As you saw in our press release, Frontier delivered another strong quarter of operational results and reached its most critical milestone yet, a return to year-over-year EBITDA growth. And this is the first time in more than five years that Frontier has grown EBITDA. We've described 2023 as the year where we return to growth on both the top and bottom lines. Our Q1 EBITDA growth steps us nicely towards that goal. Before we review the quarter in detail, let's step back and take a look at where we are today on slide four. Over the past two years, we've expanded our fiber footprint and our customer reach, and our financial profile has significantly improved. Fiber now represents the majority of our customers, our revenue, and our EBITDA. If you look at the trailing 12 months, our fiber products alone generated $2.8 billion of revenue and $1.2 billion of EBITDA. That's a 43% EBITDA margin. Turning to the next slide, you'll see how our fiber engine is powering our return to growth. Slide five is a familiar chart, tracking our inflection points over the last two years. Since we first began seriously scaling our fiber build in the second quarter of 2021, our team has been relentless in achieving critical milestones. We've hit record fiber bills and record fiber broadband net ads in nearly every quarter since we reemerged as a public company. We've also set ambitious cost-saving targets, achieved them ahead of plan, and found even greater scope of opportunity to pursue. Nick will talk more about this in a few minutes. And as you recall, at the end of last year, our strong operational performance gave way to improving financials. as shown by our fourth quarter sequential EBITDA growth. Our financial performance this quarter has further improved, as mentioned, with absolute EBITDA growth for the first time in over five years. We're well positioned to deliver EBITDA growth for the full year in 2023, a result that hasn't been accomplished by Frontier in more than 10 years. Once achieved, we see substantial tailwinds powering even greater EBITDA growth in the years to follow. the next slide i'll describe what drives that growth there's an aspect of our financial performance that i believe is self-evident but easily lost amidst all of the other levers of value creation i'll take a moment to frame this in terms specific to our build as you know a fiber build has two defining characteristics first fiber requires significant upfront investments At Frontier, we've invested $1.6 billion in fiber infrastructure over the last two years and built fiber to nearly 2 million homes. That's roughly $830 per location. The second characteristic, fiber builds deliver predictable and substantial EBITDA growth. As we build our fiber, we've shown with a high degree of consistency that we can achieve penetration rates of 15 to 20% after 12 months and 25 to 30% after 24 months. While revenue has grown significantly alongside this penetration growth, it's been largely offset by our expected one-time acquisition costs. So as a result, in the trailing 12 months, this 2 million home cohort has only contributed about $10 million in EBITDA. In the next 24 months, however, we expect this same 2 million home cohort to release substantially more EBITDA, an estimated $230 million. And when the same cohort achieves our 45% penetration goal at full maturity, it will generate EBITDA in the range of $680 million. This powerful release of EBITDA is what drives very attractive returns in the mid to high teens. And once the fiber is initially built, it also results in substantial de-levering of the business. And that's why we love this business and why we're building way more than 2 million homes. Before I turn it over to Nick, I want to recognize the Frontier team for once again delivering on our four pillar strategy, build fiber, sell fiber, improve the customer experience, and drive operational efficiency. Everything this team has achieved is powered by our purpose, building Gigabit America, a purpose around which our entire workforce has now rallied. Nick and the team have been unwavering in their pursuit of building an extraordinary company for our customers and our employees. I'm pleased with our progress, and I have confidence that we'll continue to deliver on our goals for 2023. Nick, over to you to review our performance in the first quarter.