Frontier Communications Parent, Inc.

Good morning. Thank you for attending today's Frontier Communications second 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. I would now like to pass the conference over to Spencer Kern, Senior Vice President, Investor Relations at Frontier Communications.

Good morning and welcome to Frontier Communications' second quarter 2023 earnings call. This is Spencer Kern, Frontier's head of investor relations. Joining me on the call today are 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 see our safe harbor disclaimer on slide two. 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, we 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 our President and Chief Executive Officer, Nick Jeffrey.

Thanks, Spencer, and good morning, everybody. As you saw in our press release, we delivered another quarter of strong operational results. Before we dive into the quarter, let's briefly step back and take a look at our market dynamics. On slide four, you'll see that we operate in an attractive industry which is underpinned by explosive growth in data usage and an influx of government funding that recognizes the critical need for reliable, high-speed broadband connectivity. Fiber as a technology is best positioned to meet this demand with faster symmetrical speeds and lower latency than either cable or wireless alternatives. There are four factors that differentiate Frontier from other fiber broadband companies. Firstly, our scale gives us a significant advantage on the speed and cost of our fiber build. Secondly, in 85% of the markets where we operate, we have one or zero competitors who are capable of competing with Frontier in delivering gigabit speeds. Thirdly, our business generates healthy operating cash flow that we carefully reinvest back into our high return fiber expansion. And fourthly, we have what I believe is the best team in the business. Experienced, disciplined, and full of grit, they are the driving force of our results quarter after quarter. Our investment thesis is simple. Build fiber infrastructure to deliver the best broadband product available and capture a minimum of 45% penetration in our fiber markets, which is approximately five times our copper penetration today. Over the course of the last two years, we've executed well against our strategy and the team delivered again this quarter. Now, let's turn to slide five to review the highlights of our second quarter. Our fiber build remains on track. Halfway through the year, we are well on our way to achieving our target of 1.3 million fiber locations built. We've had another strong quarter selling fiber. We added 66,000 fiber broadband customers in the quarter, and that's up 22% versus Q2 of last year. And the changes we've made to bring our ARPU in line with the market are working. ARPU is up 3% sequentially, and I expect it will trend upwards from here. While we're pleased with the performance in our consumer business, the star of the quarter was our business and wholesale segment. Business and wholesale revenue broke through to positive territory for the first time in six years. That's even more profound against the backdrop of our telecom peers who continue to report mid to high single-digit revenue declines in this segment. When we started 2023, we described it as the year that we would return to growth on both our top and bottom lines. And I'm pleased to share that the team's strong operational performance has powered our company to positive year-over-year EBITDA growth through the first half of the year. And while we haven't turned positive on the top line just yet, we are showing positive revenue growth outside of our low-margin video business. Lastly, I want to highlight our recent fiber securitization transaction, which priced $2.1 billion of committed capital that we will use to continue to fund our fiber expansion. The securitization market is exclusively reserved for high quality businesses with stable and predictable cash flows that support attractive valuations. We're incredibly proud to be the first publicly traded company in the US to secure funding for fiber to the home infrastructure, and Scott will talk more about this later in the call. If you turn to the next slide, you'll see that our fiber customer growth and fiber net ads are both trending in the right direction. What's even more impressive is that we grew our customer base while making discipline changes to our pricing and packaging. We reduced our use of gift cards, adjusted our prices to market, unbundled value-added services, and incentivized customers to choose Gig Plus speeds. These changes delivered measurable results. In the second quarter, more than half of our new customers chose Gig Plus speeds, One third of our new customers took one or more value added service. A new customer intake ARPU climbed into the $70 range. We then spent the first two months of the quarter refocusing our sales force and optimizing our channels. And I'm thrilled to report that June was our second best sales month to date. On the next slide, there's more detail on how we delivered our best quarter in business and wholesale in six years. For the second quarter in a row, SMB and Enterprise had double-digit fiber revenue growth. And our wholesale business had a standout quarter, driving revenue growth for the segment overall. Now, two years ago, we began to overhaul our wholesale operations. We brought our pricing in line with the market, signed a strategic agreement with our largest customer, and shifted our business towards growth areas like fiber to the tower and edge data centers. The strong bookings that we've talked about for the past year are now successfully converting into revenue growth. And it's encouraging to see our transformation from a legacy copper business into a fiber-based digital infrastructure business. That covers the highlights from the quarter. Now let's talk about the value our fiber build creates and our path to realizing that value. Please turn to slide eight. As we've shared, our plan is to pass at least 10 million locations with fiber and to do so at very attractive IRRs in the mid to high teens. At the end of the second quarter, we are more than halfway there with over 6 million fiber locations and the IRRs remain just as attractive as we initially thought. Assuming the macro climate and capital markets remain stable, we're confident in our plan to pass at least 1.3 million new fiber locations annually and complete our committed build to 10 million locations. And while we see a clear path to 10 million fiber locations, our ambitions go far beyond that. We plan to be active participants in government programs like BEAD and to pursue additional opportunities both in and out of our footprint. We know that as we build fiber, we build value. And it's our goal to build as much value as possible for the benefit of all our stakeholders. Now, before I turn it over to Scott, I want to pause for a moment to review our performance against our strategy. You can see on slide nine that our transformation is now fully in flight. We've expanded our fiber footprint by 80% and increased our customer base by 40% since we started this journey. all while improving the way we serve our customers and doubling our initial cost savings goal. It's our high-performing frontline and operational teams that are driving these transformational results, and I want to thank them for delivering yet another strong quarter. We all have an important role to play in building Gigabit America, and I really, really appreciate the hard work it takes to turn a business like this around. So thank you all. Lastly, I'd like to address the recent Wall Street Journal articles on lead sheets cables. First and foremost, we deeply care about the health and safety of our people, customers, and the communities we serve. Our policy has always been to comply with all environmental and occupational safety regulations, and we have no reason to believe that lead in frontier cables has caused any health or environmental harm. Based on our own internal evaluation, we wanted to provide an update on our initial assessment. And while these results are still preliminary, based on our analysis, we estimate that lead clad cables represent a single digit percentage of our roughly 685,000 total miles of metallic cabling in our network. And we will not be able to provide any additional detail on this topic during the call. So, Scott, now over to you.