Image source: Windstream.
This morning, regional telecom Windstream (WINMQ) reported results for the first quarter of 2015. The company spun off most of its networking assets as Communications Sales & Leasing (NASDAQ: CSAL) on April 24, three weeks after closing the books on the quarter. So this report is fairly straightforward, but it will be difficult to make meaningful year-over-year comparisons for the next few quarters.
Analysts were looking for first-quarter sales of roughly $1.43 billion, resulting in a net loss of $0.06 per share. Windstream's sales actually shrunk by 3% year over year, landing at $1.41 billion. Adjusted for the six-for-one reverse stock split that took place alongside the CS&L spinoff, Windstream's year-ago earnings came in at $0.15 per share. This time, generally accepted accounting principles profit diminished to $0.05 per share.
It's unclear exactly what non-GAAP adjustments analysts were expecting, but Windstream didn't report any adjusted after-tax earnings figures. The company recorded a $27.7 million CS&L-related net tax benefit for the quarter, rather than the typical tax expenses, clouding the adjusted earnings figures even further.
But it's fair to say that Windstream reported modestly positive earnings while Wall Street expected a net loss. The minuscule revenue miss didn't hurt the company's bottom line.
Image source: Windstream.
Consumer sales held steady at $312 million. Only 18% of Windstream's DSL lines meet the proposed FCC definition of "broadband" service today. Windstream is investing in next-generation VDSL2 technologies; when that deployment is complete, 51% of the company's customers should have true broadband access.
Carrier service revenues declined 7% year over year to $177 million. Here, customers are disconnecting from Windstream's outdated copper-line network in favor of faster Carrier Ethernet services, running on a mix of coaxial cables and fiber-optics. The company is ramping up its national Carrier Ethernet backbone, which should stretch from Minneapolis to Florida and Boston to Denver by the end of the year.
In the enterprise segment, revenue declined 1% to $741 million. Data service sales are growing, but not quite fast enough to make up for the exodus of business-class voice customers. In hopes of capturing more data growth, Windstream is rolling out fiber connections over the last mile, replacing slower copper lines that used to be good enough.
To support the multiple hardware improvements outlined above, Windstream invested $189 million in capital expenses during the first quarter. That was up from $153 million in the year-ago period. The company expects capital expenses to hit roughly $850 million in 2015, an 8% boost over 2014.
Windstream shares hardly moved on the news in pre-market trading. No CS&L trades had been reported as of this writing, but the current bid/ask spread points to modestly higher prices today.
Separately, both Windstream and CS&L announced prorated dividend payments last night. Payable on July 15 to shareholders of record as of June 30, these fractional checks work out to a quarterly dividend of $0.60 per CS&L share and $0.15 for Windstream shares. For those playing along at home, CS&L now offers an 8.4% dividend yield while Windstream's yield works out to 5.9%.
"We are very focused on improving business revenue trends and are taking many proactive steps to accelerate sales and strengthen our competitive position," said Windstream CEO Tony Thomas in a press statement. "In addition, we are investing in both the business and consumer network to drive growth opportunities and improve the customer experience."
