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Windstream (WIN) Q2 Loss Narrower than Expected, Sales Lag

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Windstream Holdings Inc. (WIN - Free Report) reported mixed financial results in the second quarter of 2017.  While net loss was narrower than the Zacks Consensus Estimate, revenues fell below the same.

On a GAAP basis, the company reported net loss of $68.1 million or a loss of 37 cents per share compared with a net income of $1.5 million or 1 cent per share in the year-ago quarter. Windstream’s quarterly loss per share of 37 cents was narrower than the Zacks Consensus Estimate of a loss of 45 cents.

Total revenue increased 10% year over year to $1,491.6 million in the reported quarter, missing the Zacks Consensus Estimate of $1,499 million. Service revenues increased 10% to $1,465.6 million while Product revenues declined 8% to $26 million.

In the reported quarter, total operating expense was $1,384.8 million, up 15% year over year. Operating income was $106.8 million compared with $154.6 million in the prior-year quarter. Adjusted OIBDA (operating income before depreciation and amortization) was $336.9 million, down a substantial 38.3% year over year although it improved sequentially by $1.6 million.

Cash Flow

In the second quarter of 2017, Windstream generated $221.2 million of cash from operations compared with $297.3 million in the prior-year quarter. Adjusted free cash flow was a negative $23.3 million in the reported quarter.

Liquidity

Windstream exited the second quarter of 2017 with $24.7 million of cash and cash equivalents and $5,579.2 million of total debt compared with $59.1 million and $4,863.3 million, respectively, at the end of 2016. At the end of the reported quarter, the debt-to-capitalization ratio was 0.90 compared with 0.97 at the end of 2016.

Segment-Wise Information

Consumer & Small Business - ILEC:  Total revenue was $387.2 million, down 2% year over year. Of the total, Consumer revenues were $308.8 million, down 0.7%. Small Business – ILEC revenues totaled $78.4 million, down 6.9%. Total profit for the segment was $212.4 million, down 3.7%.

Consumer & Small Business – CLEC:  Revenues totaled $193.1 million, down 18.4% year over year. Segment profit was $72.1 million, down 23.6%.

Wholesale:  Revenues came in at $176 million, down 7.9% year over year. Segment profit was $116.4 million, down 7.9%.

Enterprise:  Total revenue was $574.9 million, down 4.7% year over year. Of the total, Service revenues were $563.9 million, down 4.2%. Product sales were $11 million, down 24.1%. Total profit for the segment was $102.8 million, flat year over year.

Subscriber Statistics

As of Jun 30, 2017, the company had 1.3078 million household customers, down 6.8%. High-speed internet customer base was 1.0258 million, down 4.6% while the digital TV customer base was 0.3007 million, down 12.1%. ILEC small business customers totaled 0.1303 million, down 7.6%. Enterprise customers were 0.0346 million, down 4.4% year over year. CLEC consumer customers were 0.6497 million, down 4.9% and CLEC small business customers were 0.0900 million, down 20.5%.

Windstream Holdings, Inc. Price, Consensus and EPS Surprise

 

Windstream Holdings, Inc. Price, Consensus and EPS Surprise | Windstream Holdings, Inc. Quote

Outlook

For 2017, Windstream expects total service revenues to be inline with full year 2016. The company projects capital expenditure in the band of $790–$840 million. Adjusted OIBDAR is anticipated at around $2,020 – $2,040 million. Management expects to generate around $200 million of free cash flow in 2017.

Recent Development

In Apr 2017, Windstream entered into a $228 million deal to acquire Broadview Networks, a leading provider of cloud-based unified communications solutions to small and mid-sized businesses (SMBs). If the deal finally materializes, it will enable the company to achieve economies of scale to compete with CenturyLink Inc. (CTL - Free Report) , NII Holdings Inc. (NIHD - Free Report) and Frontier Communications Corp. (FTR - Free Report) . Windstream has a Zacks Rank #5 (Strong Sell). However, all other stocks mentioned above, carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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