1 st Quarter 2015 Earnings Conference Call. May 4, 2015

Transcription

1 1 st Quarter 2015 Earnings Conference Call May 4, 2015

2 Agenda Company Overview Operational & Financial Review Eric Yeaman President & CEO Scott Barber COO Q & A 2

3 Presented Information In addition to historical information, this presentation includes certain statements and predictions that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of In particular, any statement, projection or estimate that includes or references the words believes, anticipates, intends, expects, or any similar expression falls within the safe harbor of forward-looking statements contained in the Reform Act. Actual results or outcomes may differ materially from those indicated or suggested by any such forward-looking statement for a variety of reasons, including, but not limited to: failures in Hawaiian Telcom s critical back office systems and IT infrastructure; breach of the our data security systems; increases in the amount of capital expenditures required to execute our business plan; the loss of certain outsourcing agreements, or the failure of any third party to perform under these agreements; adverse changes to applicable laws and regulations; the failure to adequately adapt to technological changes in the telecommunications industry, including changes in consumer technology preferences; adverse economic conditions in Hawaii; the availability of lump sum distributions under our union pension plan; limitations on the ability to utilize net operating losses due to an ownership change under Internal Revenue Code Section 382; the inability to service our indebtedness; limitations imposed on our business from restrictive covenants in the credit agreements; and severe weather conditions and natural disasters. More information on potential risks and uncertainties is available in recent filings with the Securities and Exchange Commission, including Hawaiian Telcom s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The information contained in this presentation is as of May 4, It is possible that subsequent events and developments will cause estimates to change. 3

4 Company Overview Eric Yeaman, President & CEO

5 First Quarter Highlights 1Q 15 Revenue of $97M Revenue totaled $97M, consistent with same period a year ago Adjusted EBITDA of $29M, up 0.4% Y/Y Generated net income of $1M Consumer Revenue Growth of 4.8% Consumer revenue totaled $38M, up 4.8% Y/Y driven by video & HSI Added ~1,600 video subs & over 200 consumer HSI subs Expanded reach of HTTV to 166,000 households on Oahu Business Data Revenue Growth of 5.8% Business revenue totaled $42M Business data revenue grew 5.8% Y/Y driven by increased demand for IP-based services and bandwidth Began Construction of Trans-Pacific Submarine Fiber Cable System Construction preparation began on the Southeast Asia United States (SEA-US) trans-pacific submarine fiber cable system Entered into a $5M agreement for sale of capacity 5

6 Hawaii Economic Outlook Tourism Growth Moderating February YTD Visitor Arrivals up 0.8% & Spending down 3.3% Positive Economic Outlook Construction to ramp up & lead growth in 2015 Unemployment Overall Hawaii Rate Economy Improves Y/Y Expected & Below to Continue National Rate to Improve Sources: Visitor Statistics: Hawaii Tourism Authority; Unemployment Rates: U.S. Bureau of Labor Statistics; Real GDP: Hawaii Department of Business, Economic Development & Tourism (DBEDT) & The Economic Research Organization at the University of Hawaii (UHERO). Data extracted on 4/22/15. 6

7 Grow the Business Consumer Market Hawaiian Telcom TV Delivering Strong Results Video Revenue & ARPU 1Q 15 video revenue grew to $7.5M 5.8% Y/Y increase in video ARPU Increased penetration of premium add-on services Added ~1.6K video subs in 1Q 15 ~29.7K total video subs ~17.9% penetration of households enabled Video Subscriber Mix Expanded enabled footprint to 166K Enabled 6K households in 1Q 15 ~57% of households enabled fiber-fed Launched new Video On Demand interface similar to Netflix Marketer of the Year and Best Marketing of a New Product / Service Gold Award 7

8 Grow the Business Business Market Deliver new & enhanced IP products Won additional contract to upgrade data network infrastructure & provide attached network services for the State Grow data center services Grow cloud services Launched Desktop-as-a-Service and Microsoft Cloud Solutions Comprehensive full service portfolio: Infrastructure-as-a-Service Desktop-as-a-Service Software-as-a-Service Security-as-a-Service Collocation, voice & data services 8

9 Grow the Business Wholesale Market 427 fiber cell sites completed at quarterend $6.2 million annualized revenue 72 additional sites under contract to build 9

10 Operational & Financial Review Scott Barber, COO

11 Quarterly Revenue & Adjusted EBITDA Total Revenue First quarter revenue $97.1M Growth from video & high-speed Internet services, business data, and SystemMetrics Offset secular decline in legacy voice Adjusted EBITDA $29.2M Adjusted EBITDA Slightly higher than the same period a year ago Cost reduction initiatives offset higher COGS related to video 0.4% 11

12 Consumer Channel Consumer Revenue Consumer revenue $37.5M Solid 4.8% Y/Y increase driven by $2.8M increase in video revenue 4.8% HTTV sub growth of ~1,600 ~29,700 total subscribers, 76% nonbulk/sfh drive higher Y/Y blended ARPU 1,886 Video Subscriber Adds 2,822 2,665 2,358 1,597 69% of video additions new to Hawaiian Telcom 1.8% consumer HSI sub growth Y/Y 93% of existing video subscribers have TV and broadband 7.3% increase in HSI ARPU as a result of higher speed tiers 12

13 Business Channel Business Revenue Business revenue $41.6M 5.8% Y/Y increase in business data revenue 26% Y/Y increase in business VoIP lines 1.1% business HSI subscriber growth Y/Y driven by business bundles 2.4% Y/Y increase in business HSI ARPU Business Data Revenue SystemMetrics revenue up 8% 5.8% 13

14 Wholesale Channel Wholesale Revenue Wholesale revenue $15.6M Wholesale carrier data revenue flat Y/Y Wholesale switched carrier access revenue declined $0.2M Y/Y Secular decline in minutes of use Wholesale Carrier Data Regulatory reform 14

15 Operating Expenses Quarterly Operating Expenses $71 Overall operating expense comparable Y/Y. Increased direct cost of services related to video fully offset by decreased utilities costs, and lower employee salaries and wages. 15

16 Capital Expenditures Quarterly CapEx $29.2 $23.9 Overall $5.2M increase in capital expenditures $2.3M SEA-US milestone payment and success-based capital spending on growth of next-generation services Total 2015 expected to be in the high-$90m range 16

17 Net Cash Flow Quarterly Net Cash Flow Cash flow improvement from working capital, offset by higher capex 17

18 Q&A