Frontier Communications Delivers Record New Fiber Locations and Fiber Broadband Customer Growth

Reports Third-Quarter 2021 Financial Results

Consolidated Financial Results¹

Frontier reported consolidated revenue for the third quarter ended September 30, 2021 of $1.58 billion, a 6.1% decline from consolidated revenue reported in the third quarter of 2020, as growth in consumer fiber broadband was more than offset by declines in video, voice, and wholesale services. Consumer fiber broadband revenue increased 14.6% over the third quarter of 2020 to $243 million in the third quarter, driven by strong growth in fiber broadband customers and average revenue per customer (“ARPU”). Consumer fiber broadband net adds were approximately 29,000 in the third quarter, the ninth consecutive quarter of positive consumer fiber net adds, resulting in fiber broadband customer growth of 5.1%.

Third quarter 2021 operating income was $284 million and net income was $126 million.

Adjusted EBITDA was $587 million and Adjusted EBITDA margin was 37.2%, compared to Adjusted EBITDA of $670 million and Adjusted EBITDA margin of 39.9% in the third quarter of 2020². The year-over-year decline in Adjusted EBITDA and Adjusted EBITDA margin was driven by revenue declines, partially offset by cost savings initiatives, including the emphasis on reducing video content costs.

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Capital expenditures were $377 million in the quarter, an increase from $314 million in the third quarter of 2020, as fiber expansion initiatives accelerated.

Consumer Results

Business and Wholesale Results

Capital Structure

Frontier successfully raised $1.0 billion of 6.000% second lien secured debt on October 13, 2021. Including the $1.0 billion debt raise, Frontier currently has total liquidity of approximately $2.7 billion, including a cash balance of approximately $2.2 billion and $535 million of available capacity in its revolving credit facility. Frontier’s net leverage ratio for the four quarters ended September 30, 2021 was approximately 2.2x³. Frontier has no long-term debt maturities prior to 2027.

2021 Outlook

Frontier today reaffirmed its operational and financial guidance expectations for 2021.

Frontier’s guidance for the full year 2021 is:

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Conference Call Information

Frontier Communications will host a conference call with the financial community to discuss third quarter 2021 results today, November 3, 2021, at 8:30 a.m. Eastern Time (ET).

Investor Contact

About Frontier Communications

Non-GAAP Financial Measures

Frontier uses certain non-GAAP financial measures in evaluating its performance, including EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin, operating free cash flow, adjusted operating expenses, and leverage ratio, each of which is described below. Management uses these non-GAAP financial measures internally to (i) assist in analyzing Frontier’s underlying financial performance from period to period, (ii) analyze and evaluate strategic and operational decisions, (iii) establish criteria for compensation decisions, and (iv) assist in the understanding of Frontier’s ability to generate cash flow and, as a result, to plan for future capital and operational decisions. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors regarding Frontier’s financial condition and results of operations because these measures, when used in conjunction with related GAAP financial measures (i) provide a more comprehensive view of Frontier’s core operations and ability to generate cash flow, (ii) provide investors with the financial analytical framework upon which management bases financial, operational, compensation, and planning decisions and (iii) present measurements that investors and rating agencies have indicated to management are useful to them in assessing Frontier and its results of operations.



A reconciliation of these measures to the most comparable financial measures calculated and presented in accordance with GAAP is included in the accompanying tables. These non-GAAP financial measures are not measures of financial performance or liquidity under GAAP, nor are they alternatives to GAAP measures and they may not be comparable to similarly titled measures of other companies.



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EBITDA is defined as net income (loss) less income tax expense (benefit), interest expense, investment and other income (loss), pension settlement costs, gains/losses on extinguishment of debt, reorganization items, and depreciation and amortization. EBITDA margin is calculated by dividing EBITDA by total revenue.



Adjusted EBITDA is defined as EBITDA, as described above, adjusted to exclude, certain pension/OPEB expenses, restructuring costs and other charges, stock-based compensation, and certain other non-recurring items. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by total revenue.



Management uses EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin to assist it in comparing performance from period to period and as measures of operational performance. Management believes that these non-GAAP measures provide useful information for investors in evaluating Frontier’s operational performance from period to period because they exclude depreciation and amortization expenses related to investments made in prior periods and are determined without regard to capital structure or investment activities. By excluding capital expenditures, debt repayments and dividends, among other factors, these non-GAAP financial measures have certain shortcomings. Management compensates for these shortcomings by utilizing these non-GAAP financial measures in conjunction with the comparable GAAP financial measures.



Adjusted net income (loss) attributable to Frontier common shareholders is defined as net income (loss) attributable to Frontier common shareholders and excludes restructuring costs and other charges, pension settlement costs, reorganization items, certain income tax items and the income tax effect of these items, and certain other non-recurring items. Adjusting for these items allows investors to better understand and analyze Frontier’s financial performance over the periods presented.



Management defines operating free cash flow, a non-GAAP measure, as net cash provided from operating activities less capital expenditures. Management uses operating free cash flow to assist it in comparing liquidity from period to period and to obtain a more comprehensive view of Frontier’s core operations and ability to generate cash flow. Management believes that this non-GAAP measure is useful to investors in evaluating cash available to service debt and pay dividends. This non-GAAP financial measure has certain shortcomings; it does not represent the residual cash flow available for discretionary expenditures, as items such as debt repayments and preferred stock dividends are not deducted in determining such measure. Management compensates for these shortcomings by utilizing this non-GAAP financial measure in conjunction with the comparable GAAP financial measure.



Adjusted operating expenses is defined as operating expenses adjusted to exclude depreciation and amortization, restructuring and other charges, goodwill impairment charges, certain pension/OPEB expenses, stock-based compensation, and certain other non-recurring items. Investors have indicated that this non-GAAP measure is useful in evaluating Frontier’s performance.

Net leverage ratio is calculated as net debt (total debt less cash and cash equivalents) divided by Adjusted EBITDA for the most recent four quarters. Investors have indicated that this non-GAAP measure is useful in evaluating Frontier’s debt levels.

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The information in this press release should be read in conjunction with the financial statements and footnotes contained in Frontier’s documents filed with the U.S. Securities and Exchange Commission.

Forward-Looking Statements

This release contains “forward-looking statements” related to future events. Forward-looking statements address our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, our ability to comply with the covenants in the agreements governing our indebtedness and other matters. These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and performance and contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” “may,” “will,” “would,” or “target.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. A wide range of factors could materially affect future developments and performance, including but not limited to: our significant indebtedness, our ability to incur substantially more debt in the future, and covenants in the agreements governing our current indebtedness that may reduce our operating and financial flexibility; declines in Adjusted EBITDA relative to historical levels that we are unable to offset through potential EBTIDA enhancements; our ability to successfully implement strategic initiatives, including our fiber buildout and other initiatives to enhance revenue and realize productivity improvements; our ability to secure necessary construction resources, materials and permits for our fiber buildout initiative; our ability to effectively manage our operations, operating expenses, capital expenditures, debt service requirement and cash paid for income taxes and liquidity; competition from cable, wireless and wireline carriers, satellite, fiber “overbuilders” and over the top companies, and the risk that we will not respond on a timely or profitable basis; our ability to successfully adjust to changes in the communications industry, including the effects of technological changes and competition on our capital expenditures, products and service offerings; risks related to disruption in our networks, infrastructure and information technology that result in customer loss and/or incurrence of additional expenses; the impact of potential information technology or data security breaches or other cyber-attacks or other disruptions; our ability to retain or attract new customers and to maintain relationships with customers, including wholesale customers; our reliance on a limited number of key supplies and vendors; declines in revenue from our voice services, switched and nonswitched access and video and data services that we cannot stabilize or offset with increases in revenue from other products and services; our ability to secure, continue to use or renew intellectual property and other licenses used in our business; our ability to hire or retain key personnel; our ability to dispose of certain assets or asset groups or to make acquisition of certain assets on terms that are attractive to us, or at all;  the effects of changes in the availability of federal and state universal service funding or other subsidies to us and our competitors and our ability to obtain future subsidies, including participation in the proposed RDOF program; our ability to meet our CAF II and RDOF obligations and the risk of penalties or obligations to return certain CAF II and RDOF funds; our ability to defend against litigation and potentially unfavorable results from current pending and future litigation; our ability to comply with applicable federal and state consumer protection requirements; the effects of governmental legislation and regulation on our business, including costs, disruptions, possible limitations on operating flexibility and changes to the competitive landscape resulting from such legislation or regulation; the impact of regulatory, investigative and legal proceedings and legal compliance risks; our ability to effectively manage service quality in the states in which we operate and meet mandated service quality metrics; the effects of changes in income tax rates, tax laws, regulations or rulings, or federal or state tax assessments; the effects of changes in accounting policies or practices; our ability to successfully renegotiate union contracts; the effects of increased medical expenses and pension and postemployment expenses; changes in pension plan assumptions, interest rates, discount rates, regulatory rules and/or the value of our pension plan assets; the likelihood that our historical financial information may no longer be indicative of our future performance and our implementation of fresh start accounting; the impact of adverse changes in economic, political and market conditions in the areas that we serve, the U.S. and globally, including, but not limited to, disruption in our supply chain, inflation in pricing for key materials or labor, or other adverse changes resulting from epidemics, pandemics and outbreaks of contagious diseases, including the COVID-19 pandemic, natural disasters, economic or political instability or other adverse public health developments; potential adverse impacts of the COVID-19 pandemic on our business and operations, including potential disruptions to the work of our employees arising from health and safety measures such as social distancing, working remotely and recent federal vaccine mandates, our ability to effectively manage increased demand on our network, our ability to maintain relationships with our current or prospective customers and vendors as well as their abilities to perform under current or proposed arrangements with us, including impacts of potential stress on our supply chain; risks associated with our emergence from the Chapter 11 Cases, including, but not limited to, the continuing effects of the Chapter 11 Cases on us and our relationships with our suppliers, customers, service providers or employees and changes in the composition of our board of directors and senior management;  volatility in the trading price of our common stock, which has a limited trading history; substantial market overhang from the common stock issued in the Chapter 11 reorganization; certain provisions of Delaware law and our certificate of incorporation that may prevent efforts by our stockholders to change the direction or management of our Company; and certain other factors set forth in our other filings with the SEC.  This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative and is not intended to be exhaustive.  You should consider these important factors, as well as the risks and other factors contained in Frontier’s filings with the U.S. Securities and Exchange Commission, including our most recent reports on Form 10-K and Form 10-Q.  These risks and uncertainties may cause actual future results to be materially different than those expressed in such forward-looking statements.  We do not intend, nor do we undertake any duty, to update any forward-looking statements.

Frontier Communications Parent, Inc.

Unaudited Consolidated Financial Data

Reconciliation of Non-GAAP financial results for Combined Frontier

Note: The following results are reported separately for the three months ended September 30, 2021 (our Successor period).  While the basis of accounting for the Predecessor and Successor are different as a result of the application of fresh start accounting, we have calculated combined Non-GAAP results for the three months ended September 30, 2021.

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Frontier Communications Parent, Inc.

Unaudited Consolidated Financial Data

Reconciliation of Non-GAAP financial results for Combined Frontier

Note: The following results are reported separately for the four months ended April 30, 2021 (our Predecessor period prior to emergence) and for the five months ended September 30, 2021 (our Successor period).  While the basis of accounting for the Predecessor and Successor are different as a result of the application of fresh start accounting, we have calculated combined Non-GAAP results for the nine months ended September 30, 2021.

		For the five months ended				For the four months ended				For the nine months ended
		September 30,				April 30,				September 30,				September 30,
		2021				2021				2021				2020
($ in millions and shares in thousands, except per share amounts)		(Successor)				(Predecessor)				(Non-GAAP Combined)				(Predecessor)
Statement of Operations Data
Revenue		$	2,637			$	2,231			$	4,868			$	5,460
Operating expenses:
Network access expenses			304				264				568				767
Network related expenses			682				566				1,248				1,305
Selling, general and administrative expenses			690				537				1,227				1,255
Depreciation and amortization			452				506				958				1,204
Loss on disposal of Northwest Operations			-				-				-				160
Restructuring costs and other charges			19				7				26				87
Total operating expenses			2,147				1,880				4,027				4,778
Operating income			490				351				841				682
Investment and other income (loss), net			(39	)			1				(38	)			(29	)
Pension settlement costs			-				-				-				(159	)
Reorganization items, net			-				4,171				4,171				(273	)
Interest expense			(152	)			(118	)			(270	)			(664	)
Income (loss) before income taxes			299				4,405				4,704				(443	)
Income tax expense (benefit)			74				(136	)			(62	)			(91	)
Net income (loss)			225				4,541				4,766				(352	)
Weighted average shares outstanding - basic			244,402				104,584				NM				104,460
Weighted average shares outstanding - diluted			245,600				104,924				NM				104,460
Basic net earnings (loss)
per common share		$	0.92			$	43.42			NM				$	(3.37	)
Diluted net earnings (loss) per common share		$	0.92			$	43.28			NM				$	(3.37	)
Other Financial Data:
Capital expenditures		$	646			$	500			$	1,146			$	825

 

Frontier Communications Parent, Inc.

Unaudited Financial Data for Non-GAAP Combined Frontier and for Remaining Properties

Note: The following results are reported separately for the four months ended April 30, 2021 (our Predecessor period prior to emergence) and for the five months ended September 30, 2021 (our Successor period).  While the basis of accounting for the Predecessor and Successor are different as a result of the application of fresh start accounting, we have calculated combined Non-GAAP results for the three and nine months ended September 30, 2021. Additionally, the following financial information presents disaggregation of revenue for the operations located in the remaining 25 states (“Remaining Properties”) after excluding the Northwest Operations (“Northwest Ops”) through the date of sale from the Consolidated Company’s results. See Schedule C for a reconciliation to the Total Company Results.

⁽¹⁾ Due to changes in methodology during the second quarter of 2021, historical periods have been updated to reflect the comparable amounts.

Frontier Communications Parent, Inc.

Unaudited Operating Data for Remaining Properties

⁽¹⁾ Due to changes in methodology during the second quarter of 2021, historical periods have been updated to reflect the comparable amounts.

⁽²⁾ Excludes wholesale customers.

Frontier Communications Parent, Inc.

Condensed Consolidated Balance Sheet Data

 

Frontier Communications Parent, Inc.

Unaudited Consolidated Cash Flow Data

Frontier Communications Parent, Inc.

Unaudited Financial Data for Non-GAAP Combined Frontier

Note: The following results are reported separately for the four months ended April 30, 2021 (our Predecessor period prior to emergence) and for the five months ended September 30, 2021 (our Successor period).  While the basis of accounting for the Predecessor and Successor are different as a result of the application of fresh start accounting, we have calculated combined Non-GAAP results for the nine months ended September 30, 2021.

SCHEDULE A

Frontier Communications Parent, Inc.

Unaudited Financial Data for Non-GAAP Combined Frontier and for Remaining Properties

Reconciliation of Non-GAAP Financial Measures

Note: The following results include activity for the four months ended April 30, 2021 (our Predecessor period prior to emergence) and the five months ended September 30, 2021 (our Successor period).  While the basis of accounting for the Predecessor and Successor are different as a result of the application of fresh start accounting, we have calculated combined Non-GAAP results for the nine months ended September 30, 2021.

Frontier Communications Parent, Inc.

Unaudited Consolidated Financial Data

Reconciliation of Non-GAAP Financial Measures for Remaining Properties

Note: The following results include activity for the four months ended April 30, 2021 (our Predecessor period prior to emergence) and for the five months ended September 30, 2021 (our Successor period).  While the basis of accounting for the Predecessor and Successor are different as a result of the application of fresh start accounting, we have calculated combined Non-GAAP results for the nine months ended September 30, 2021. The following table presents Non-GAAP measures for the operations located in the remaining 25 states (“Remaining Properties”) after excluding the Northwest Operations (“Northwest Ops”) through the date of sale from the consolidated Company’s results. See Schedule F for a reconciliation to the Total Company results.

SCHEDULE C

Frontier Communications Parent, Inc.

Unaudited Consolidated Financial Data

Reconciliation of Non-GAAP Financial Measures for Remaining Properties to Consolidated Frontier