Consolidated Communications Holdings, Inc. (CNSL) Bundle
Understanding Consolidated Communications Holdings, Inc. (CNSL) Revenue Streams
Understanding Consolidated Communications Holdings, Inc.’s Revenue Streams
Consolidated Communications Holdings, Inc. generates revenue primarily through its consumer, commercial, and carrier services. For the three months ended September 30, 2024, the company's total operating revenues amounted to $271.1 million, a decrease of 4% from $283.6 million in the same period of 2023. For the nine months ended September 30, 2024, total operating revenues were $814.5 million, down from $834.9 million, reflecting a 2% decline year-over-year.
Breakdown of Primary Revenue Sources
-
Consumer Services:
- Broadband (Data and VoIP): $82.4 million (Q3 2024), up 10% from $75.1 million (Q3 2023)
- Voice Services: $27.9 million (Q3 2024), down 12% from $31.6 million (Q3 2023)
- Video Services: Discontinued as of July 2024, previously $8.5 million (Q3 2023)
-
Commercial Services:
- Data Services: $54.6 million (Q3 2024), up 1% from $53.8 million (Q3 2023)
- Voice Services: $31.5 million (Q3 2024), down 1% from $31.8 million (Q3 2023)
-
Carrier Services:
- Data and Transport Services: $30.4 million (Q3 2024), down 3% from $31.4 million (Q3 2023)
- Voice Services: $3.4 million (Q3 2024), down 17% from $4.1 million (Q3 2023)
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the total operating revenues shows a decline, with a 4% decrease in Q3 2024 compared to Q3 2023 and a 2% decrease for the nine-month period. The following table summarizes the revenue performance:
| Period | Total Revenue (in millions) | Year-over-Year Change (%) |
|---|---|---|
| Q3 2024 | $271.1 | -4% |
| Q3 2023 | $283.6 | N/A |
| 9 Months 2024 | $814.5 | -2% |
| 9 Months 2023 | $834.9 | N/A |
Contribution of Different Business Segments to Overall Revenue
The contributions from various segments to the overall revenue for Q3 2024 are as follows:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Consumer | $110.3 | 40.7% |
| Commercial | $95.5 | 35.2% |
| Carrier | $34.1 | 12.6% |
| Other | $31.2 | 11.5% |
Analysis of Significant Changes in Revenue Streams
Key changes in revenue streams for the three months ended September 30, 2024, include:
- Broadband services increased by $7.3 million due to price increases and growth in fiber Internet services.
- Voice services revenues decreased by $3.7 million primarily due to customer churn.
- Video services experienced a complete discontinuation leading to a $8.5 million decrease.
- Overall, the revenue from other products and services decreased by $6.7 million due to a decline in revenue from public-private partnership projects.
The total revenue loss from the significant changes amounts to $12.5 million for Q3 2024 compared to Q3 2023.
A Deep Dive into Consolidated Communications Holdings, Inc. (CNSL) Profitability
A Deep Dive into Consolidated Communications Holdings, Inc. Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was 57.4%, compared to 53.3% for the same period in 2023. For the nine months ended September 30, 2024, it was 58.5%, up from 53.0% in 2023.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, was (6.7)%, improving from (11.2)% in 2023. For the nine months ended September 30, 2024, the margin was (5.6)%, compared to (17.4)% in 2023.
Net Profit Margin: The net profit margin for the three months ended September 30, 2024, was (18.1)%, while for the same period in 2023 it was (20.3)%. For the nine months ended September 30, 2024, the net profit margin stood at (17.2)%, compared to (24.3)% in 2023.
Trends in Profitability Over Time
In analyzing the trends, it is evident that while gross and operating profit margins have shown improvement year-over-year, net profit margins remain negative but are improving. The following table summarizes the profitability metrics over the last two years:
| Metric | Q3 2024 | Q3 2023 | Change (%) | YTD 2024 | YTD 2023 | Change (%) |
|---|---|---|---|---|---|---|
| Gross Profit Margin | 57.4% | 53.3% | +4.1% | 58.5% | 53.0% | +5.5% |
| Operating Profit Margin | (6.7)% | (11.2)% | +4.5% | (5.6)% | (17.4)% | +11.8% |
| Net Profit Margin | (18.1)% | (20.3)% | +2.2% | (17.2)% | (24.3)% | +7.1% |
Comparison of Profitability Ratios with Industry Averages
The company's profitability ratios are compared with industry averages as follows:
- Gross Profit Margin: Industry Average: 60% vs. Company: 57.4%
- Operating Profit Margin: Industry Average: 10% vs. Company: (6.7)%
- Net Profit Margin: Industry Average: 5% vs. Company: (18.1)%
Analysis of Operational Efficiency
Operational efficiency has been a focal point for the company, particularly in cost management:
- Cost of Services and Products: Decreased by $19.2 million (15%) in Q3 2024 compared to Q3 2023.
- Selling, General and Administrative Expenses: Increased by $2.9 million (3%) in Q3 2024 compared to Q3 2023.
- Transaction Costs: Decreased by $0.5 million (45%) in Q3 2024 compared to Q3 2023.
Overall operational efficiency is improving as evidenced by decreasing costs, particularly in service delivery and administrative expenses.
Debt vs. Equity: How Consolidated Communications Holdings, Inc. (CNSL) Finances Its Growth
Debt vs. Equity: How Consolidated Communications Holdings, Inc. Finances Its Growth
Overview of the Company's Debt Levels
As of September 30, 2024, the total long-term debt of Consolidated Communications Holdings, Inc. was approximately $2.38 billion. This includes:
- Term loans: $994.2 million
- Revolving loans: $200.0 million
- 6.50% Senior notes due 2028: $750.0 million
- 5.00% Senior notes due 2028: $400.0 million
- Finance leases: $40.4 million
The company also reported a current portion of long-term debt and finance leases of $20.6 million.
Debt-to-Equity Ratio and Comparison to Industry Standards
The debt-to-equity ratio for Consolidated Communications was approximately 4.82 as of September 30, 2024, calculated by dividing total debt of $2.38 billion by total equity of $494 million. This ratio significantly exceeds the industry average, which typically ranges from 1.0 to 2.5 for telecommunications companies, indicating a higher reliance on debt financing compared to equity financing.
Recent Debt Issuances, Credit Ratings, or Refinancing Activity
In the nine months ended September 30, 2024, the company issued $243.8 million in long-term debt. As of September 30, 2024, the weighted-average interest rate on outstanding borrowings under the credit facility was 8.89%. The company has maintained compliance with its credit agreement covenants, which include a maximum consolidated first lien leverage ratio.
How the Company Balances Between Debt Financing and Equity Funding
Consolidated Communications balances its debt and equity financing through a strategic focus on capital expenditures for network expansion, particularly in fiber broadband. The company has relied heavily on debt to fund its operations and growth initiatives, as evidenced by the increase in long-term debt over the years. Additionally, the company has utilized paid-in-kind dividends on its Series A preferred stock, which amounted to $12.3 million as of September 30, 2024.
| Debt Component | Amount (in millions) |
|---|---|
| Term Loans | $994.2 |
| Revolving Loans | $200.0 |
| 6.50% Senior Notes | $750.0 |
| 5.00% Senior Notes | $400.0 |
| Finance Leases | $40.4 |
| Total Long-Term Debt | $2,381.3 |
| Current Portion of Long-Term Debt | $20.6 |
Assessing Consolidated Communications Holdings, Inc. (CNSL) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio of the company as of September 30, 2024, was 0.76, compared to 0.81 as of December 31, 2023. This indicates a decline in liquidity, suggesting that the company has less ability to cover its short-term liabilities with its short-term assets.
The quick ratio, which excludes inventory from current assets, was not explicitly reported but can be inferred to be lower than the current ratio, indicating potential liquidity concerns if inventory is not a significant asset.
Analysis of Working Capital Trends
The working capital deficit increased to $79.3 million as of September 30, 2024, from $61.1 million at the end of 2023. This increase reflects a worsening position in terms of liquid assets available to meet short-term obligations.
Cash Flow Statements Overview
Below is an overview of the cash flows for the nine months ended September 30, 2024, compared to the same period in 2023:
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Cash flows from operating activities | $36,103 | $102,593 |
| Cash flows from investing activities | ($221,798) | ($326,485) |
| Cash flows from financing activities | $225,328 | ($12,343) |
| Change in cash and cash equivalents | $39,633 | ($236,235) |
The net cash provided by operating activities decreased significantly by $66.5 million compared to the previous year, primarily due to a decline in accounts payable and accrued expenses. Investing activities reflected substantial cash outflows, primarily for capital expenditures.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, cash and cash equivalents stood at $44.4 million. The company's working capital deficit has raised concerns about its ability to meet short-term obligations without additional financing. However, the increase in cash flows from financing activities indicates reliance on external financing, which may mitigate some liquidity risks.
The company reported outstanding borrowings of $200 million under its revolving credit facility, with a weighted-average interest rate of 8.89% as of September 30, 2024. This reliance on debt financing may pose future liquidity challenges if operational cash flows do not improve significantly.
Is Consolidated Communications Holdings, Inc. (CNSL) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The current price-to-earnings (P/E) ratio is −3.44, indicating that the company is currently operating at a loss, which is typical for companies experiencing financial challenges.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio stands at 0.61, suggesting that the stock is trading below its book value, which may indicate undervaluation.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value-to-EBITDA (EV/EBITDA) ratio is reported at 5.39, which is considered reasonable in the telecommunications sector, indicating a moderate valuation relative to earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between $1.77 and $3.13. As of the latest update, the stock is trading at approximately $1.90, reflecting a −5.00% change year-to-date.
Dividend Yield and Payout Ratios
The company does not currently pay a dividend. Therefore, the dividend yield is 0% and the payout ratio is not applicable.
Analyst Consensus
According to the latest analyst ratings, the consensus is to hold the stock. Analysts suggest caution due to the company's financial performance and market conditions.
| Valuation Metric | Current Value |
|---|---|
| P/E Ratio | −3.44 |
| P/B Ratio | 0.61 |
| EV/EBITDA Ratio | 5.39 |
| 12-Month Stock Price Range | $1.77 - $3.13 |
| Current Stock Price | $1.90 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Consolidated Communications Holdings, Inc. (CNSL)
Key Risks Facing Consolidated Communications Holdings, Inc.
Consolidated Communications Holdings, Inc. faces several internal and external risks that could significantly impact its financial health and operational performance. Below is a breakdown of these risks, along with relevant financial data and insights.
Industry Competition
The telecommunications industry is highly competitive, with numerous players vying for market share. The company has experienced a 1% decline in consumer customers, from 498,198 in September 2023 to 494,660 in September 2024. The shift towards alternative technologies has resulted in a decline in voice service revenues by 12% year-over-year, reflecting a broader industry trend.
Regulatory Changes
Regulatory factors pose a significant risk to operations. The company is subject to extensive federal and state regulations governing telecommunications services. Any changes in these regulations could adversely affect service offerings and profitability. For instance, the Federal Communications Commission (FCC) has the authority to impose penalties for non-compliance, which could lead to increased operational costs.
Market Conditions
Fluctuations in market conditions can also impact financial performance. The company reported a $139.2 million net loss for the nine months ended September 30, 2024, compared to a $202.8 million loss in the same period of 2023. This indicates ongoing challenges in achieving profitability amidst a changing market landscape.
Operational Risks
Operational risks include the potential for service disruptions and the need for substantial capital expenditures. The company has invested heavily in expanding its fiber network, with cash flows from operating activities reported at $36.1 million for the nine months ended September 30, 2024, down from $102.6 million in the same period in 2023. Such investments are essential for maintaining competitive service levels but can strain financial resources.
Financial Risks
Financially, the company has significant debt obligations, with $200 million outstanding under its revolving credit facility as of September 30, 2024. The weighted-average interest rate on these borrowings was reported at 8.89%. High-interest expenses, which increased by $21.1 million year-over-year, can further strain the company’s financial health.
Mitigation Strategies
In response to these risks, the company has initiated cost-saving initiatives, including a workforce reduction that led to severance costs of $10.4 million in Q3 2024. Furthermore, the company aims to enhance operational efficiencies to align with its fiber-first strategy, thereby improving customer experience and potentially stabilizing revenues.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Industry Competition | 1% decline in consumer customers | Voice service revenues decreased by 12% |
| Regulatory Changes | Subject to extensive federal and state regulations | Potential penalties for non-compliance |
| Market Conditions | Net loss of $139.2 million in 2024 | Loss increased from $202.8 million in 2023 |
| Operational Risks | Heavy investment in fiber network | Operating cash flows decreased to $36.1 million |
| Financial Risks | $200 million outstanding debt | Interest expenses increased by $21.1 million |
| Mitigation Strategies | Cost-saving initiatives and workforce reduction | Severance costs of $10.4 million in Q3 2024 |
Future Growth Prospects for Consolidated Communications Holdings, Inc. (CNSL)
Future Growth Prospects for Consolidated Communications Holdings, Inc.
Analysis of Key Growth Drivers
Key growth drivers for the company include product innovations, market expansions, and strategic acquisitions. The company is focusing on expanding its fiber broadband network, which is projected to enhance service offerings and customer reach. As of September 30, 2024, the company reported an increase in fiber Gig+ capable customers to 249,656, up from 175,748 in the previous year, reflecting a growth of 42%.
Future Revenue Growth Projections and Earnings Estimates
Revenue from broadband services increased by $7.3 million and $29.3 million during the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. The total operating revenues for the nine months ended September 30, 2024, were $814.5 million, slightly down from $834.9 million in 2023. Analysts project continued growth in broadband services, particularly as the company expands its fiber network.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has entered into multiple public-private partnerships (PPP) to enhance rural broadband access. These agreements are aimed at building new fiber-to-the-premise (FTTP) networks, which are expected to significantly contribute to revenue growth. In addition, the company is actively pursuing strategic acquisitions to bolster its service capabilities and market presence.
Competitive Advantages That Position the Company for Growth
Consolidated Communications holds a competitive advantage through its extensive fiber network and the ability to offer high-speed internet access up to 2 Gbps. As of September 30, 2024, the company had 399,520 consumer data connections, a 3% increase from the previous year. This expansion in capacity and service offerings positions the company favorably against competitors in the telecommunications market.
| Metric | September 30, 2024 | September 30, 2023 | Change | Percentage Change |
|---|---|---|---|---|
| Fiber Gig+ Customers | 249,656 | 175,748 | 73,908 | 42% |
| Broadband Services Revenue (3 Months) | $82.4 million | $75.1 million | $7.3 million | 10% |
| Total Operating Revenues (9 Months) | $814.5 million | $834.9 million | ($20.4 million) | (2.4%) |
| Consumer Data Connections | 399,520 | 386,221 | 13,299 | 3% |
Overall, the strategic focus on expanding fiber capabilities, coupled with strong growth in broadband service revenues, positions the company for significant growth in the coming years.
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Resources:
- Consolidated Communications Holdings, Inc. (CNSL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Consolidated Communications Holdings, Inc. (CNSL)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Consolidated Communications Holdings, Inc. (CNSL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.