Passport Appointment System – Thomas B2B http://thomasb2b.com/ Fri, 22 Oct 2021 09:56:34 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://thomasb2b.com/wp-content/uploads/2021/10/icon-30-120x120.png Passport Appointment System – Thomas B2B http://thomasb2b.com/ 32 32 Cincinnati Bell Reports Fourth Quarter and Full Year 2019 Results https://thomasb2b.com/cincinnati-bell-reports-fourth-quarter-and-full-year-2019-results/ https://thomasb2b.com/cincinnati-bell-reports-fourth-quarter-and-full-year-2019-results/#respond Tue, 31 Aug 2021 05:32:55 +0000 https://thomasb2b.com/?p=86 CINCINNATI–(BUSINESS WIRE)–Cincinnati Bell Inc. (NYSE:CBB), today announced financial results for the full year and fourth quarter of 2019. Leigh Fox, President and Chief Executive Officer of Cincinnati Bell, commented, “2019 was another impressive year for Cincinnati Bell. The company’s superior fiber assets and robust IT services business continue to drive results year-after-year. I am proud […]]]>


CINCINNATI–()–Cincinnati Bell Inc. (NYSE:CBB), today announced financial results for the full year and fourth quarter of 2019.

Leigh Fox, President and Chief Executive Officer of Cincinnati Bell, commented, “2019 was another impressive year for Cincinnati Bell. The company’s superior fiber assets and robust IT services business continue to drive results year-after-year. I am proud of our team’s efforts and their ability to execute on our strategic objectives and deliver solid results in-line with our financial targets.”

Mr. Fox continued, “We are working to close our previously announced acquisition by Brookfield Infrastructure. This transaction creates clear and immediate value for shareholders, including an impressive 84% premium to the 60-day volume weighted average price prior to the announcement, and further highlights the value of our assets.”

CONSOLIDATED RESULTS

  • Consolidated revenue totaled $390 million for fourth quarter of 2019 and $1,537 million for the full year
  • Operating income was $15 million in the fourth quarter of 2019 and $73 million for the full year
  • Adjusted EBITDA totaled $103 million for the fourth quarter of 2019 and $405 million for the full year

Entertainment and Communications Segment

  • Entertainment and Communications revenue totaled $246 million for the fourth quarter of 2019 and $996 million for the full year

    • Cincinnati revenue totaled $169 million in the fourth quarter and $682 million for the full year of 2019

      • Fioptics revenue totaled $89 million for the fourth quarter and $353 million for the full year, up 2% and 4%, respectively, year-over-year
      • Fioptics internet subscribers totaled 250,600 at the end of the fourth quarter, up 11,600 compared to a year ago
      • Fioptics is available to approximately 75% of Greater Cincinnati, which includes a combination of fiber-to-the-premise (“FTTP”) and fiber-to-the-node (“FTTN”) addresses
      • In 2019, 12,500 additional homes and businesses were passed with FTTP, which is available to 484,800 addresses or approximately 60% of Cincinnati’s total addressable market
    • Hawaii revenue totaled $78 million in the fourth quarter and $314 million for the full year of 2019

      • Consumer / SMB Fiber revenue totaled $22 million for the fourth quarter and $87 million for the full year
      • Consumer / SMB Fiber internet subscribers totaled 68,200, adding 2,300 customers year-over-year
      • Consumer / SMB Fiber is available to approximately 50% of Hawaii, which includes a combination of FTTP and FTTN addresses
      • During 2019, 6,500 additional homes and businesses were passed with FTTP, which is available to 173,500 addresses, approximately 35% of Hawaii’s total addressable market
  • Adjusted EBITDA was $90 million for the fourth quarter of 2019 and $366 million for the full year

IT Services and Hardware Segment

  • IT Services and Hardware revenue totaled $150 million for the fourth quarter of 2019 and $567 million for the full year

    • Communications revenue was $52 million in the fourth quarter and $199 million for the full year, up $2 million and $20 million year-over-year, respectively
    • Consulting revenue totaled $38 million for the fourth quarter, consistent with the prior year, and $153 million for the full year, up $14 million year-over-year
    • Cloud revenue was $22 million in the fourth quarter and $92 million for the full year 2019, up $2 million and $15 million from the prior year, respectively, excluding insourcing initiatives from General Electric Company (“GE”)
    • Infrastructure Solutions revenue totaled $38 million in the fourth quarter and $124 million for the full year 2019, down $2 million and $12 million, respectively
  • Adjusted EBITDA was $19 million for the fourth quarter and $54 million for the full year, up $3 million and $6 million year-over-year, respectively, excluding the impact of GE’s insourcing initiatives

Cash Flow and Financial Position

  • Cash provided by operating activities totaled $259 million for the full year of 2019
  • Free cash flow totaled $46 million for the full year of 2019
  • Capital expenditures were $224 million for the full year of 2019

2019 Outlook

  • Cincinnati Bell’s revenue and Adjusted EBITDA results for the year ending December 31, 2019 were both in-line with the financial guidance for 2019, initially provided on February 14, 2019:

Category

2019

Guidance Range

2019

Actuals

Revenue

 

 

 

$1,515M – $1,575M

 

 

 

$1,537M

 

Adjusted EBITDA

 

 

 

$400M – $410M

 

 

 

$405M

 

Brookfield Infrastructure Transaction Details

On December 23, 2019, Cincinnati Bell announced an agreement (the “Brookfield Merger Agreement”) through which Brookfield Infrastructure and its institutional partners will acquire Cincinnati Bell in a transaction valued at approximately $2.6 billion, including debt (the “Transaction”).

Pursuant to the agreement, each issued and outstanding share of Cincinnati Bell common stock will be converted into the right to receive $10.50 in cash at closing of the Transaction. The Transaction price of $10.50 per share of Cincinnati Bell common stock represents a 36% premium to the closing per share price of $7.72 on December 20, 2019 and an 84% premium to the 60-day volume weighted average price.

Brookfield Infrastructure is a leading global company with a long-standing history as an owner and operator of high-quality infrastructure assets. It has a global portfolio of assets in the utilities, transport, energy and data infrastructure sectors across North and South America, Asia Pacific and Europe.

The Transaction is expected to close by the end of 2020. It has received unanimous approval of Cincinnati Bell’s Board of Directors and is subject to customary closing conditions, including Cincinnati Bell shareholder approval and regulatory approval.

Receipt of Unsolicited Acquisition Proposal

On January 22, 2020, Cincinnati Bell received a non-binding proposal from an infrastructure fund (the “Fund”) to acquire all of the outstanding shares of common stock of the Company for $12.00 per share in cash. Cincinnati Bell commenced discussions with the Fund following Cincinnati Bell’s board of directors having made the required determinations under the Brookfield Merger Agreement that allow it to do so. The Brookfield Merger Agreement remains in effect and accordingly the Cincinnati Bell board reaffirms its existing recommendation in support of the transaction with Brookfield Infrastructure at this time.

There can be no assurances that discussions with the Fund will result in a binding proposal or that a transaction with the Fund will be approved or consummated.

INVESTOR RELATIONS CONTACT:

Kei Lawson, 513-565-0510

E-mail: Takeitha.Lawson@cinbell.com

or

MEDIA CONTACT:

Josh Pichler, 513-565-0310

E-mail: Josh.Pichler@cinbell.com

Safe Harbor Note

This release may contain “forward-looking” statements, as defined in federal securities laws including the Private Securities Litigation Reform Act of 1995, which are based on our current expectations, estimates, forecasts and projections. Statements that are not historical facts, including statements concerning plans, objectives, goals, strategies, future events, future revenues or performance, financing needs, plans or intentions relating to acquisitions and restructuring, business trends, statements regarding the proposed merger with Brookfield Infrastructure (“the merger”) and the expected timetable for completing the merger, are forward-looking statements. Words such as “expects,” “anticipates,” “predicts,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “endeavors,” “strives,” “will”, “may,” or variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of future financial performance, anticipated growth and trends in businesses, and other characterizations of future events or circumstances are forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements contained in this report. The following important factors, among other things, could cause or contribute to actual results being materially and adversely different from those described or implied by such forward-looking statements, including, but not limited to:

  • those discussed in this release;
  • we operate in highly competitive industries, and customers may not continue to purchase products or services, which would result in reduced revenue and loss of market share;
  • we may be unable to grow our revenues and cash flows despite the initiatives we have implemented;
  • failure to anticipate the need for and introduce new products and services or to compete with new technologies may compromise our success in the telecommunications industry;
  • our access lines, which generate a significant portion of our cash flows and profits, are decreasing in number and if we continue to experience access line losses similar to the past several years, our revenues, earnings and cash flows from operations may be adversely impacted;
  • our failure to meet performance standards under our agreements could result in customers terminating their relationships with us or customers being entitled to receive financial compensation, which would lead to reduced revenues and/or increased costs;
  • we generate a substantial portion of our revenue by serving a limited geographic area;
  • a large customer accounts for a significant portion of our revenues and accounts receivable and the loss or significant reduction in business from this customer would cause operating revenues to decline and could negatively impact profitability and cash flows;
  • maintaining our telecommunications networks requires significant capital expenditures, and our inability or failure to maintain our telecommunications networks could have a material impact on our market share and ability to generate revenue;
  • increases in broadband usage may cause network capacity limitations, resulting in service disruptions or reduced capacity for customers;
  • we may be liable for material that content providers distribute on our networks;
  • cyber attacks or other breaches of network or other information technology security could have an adverse effect on our business;
  • natural disasters, terrorists acts or acts of war could cause damage to our infrastructure and result in significant disruptions to our operations;
  • the regulation of our businesses by federal and state authorities may, among other things, place us at a competitive disadvantage, restrict our ability to price our products and services and threaten our operating licenses;
  • we depend on a number of third party providers, and the loss of, or problems with, one or more of these providers may impede our growth or cause us to lose customers;
  • a failure of back-office information technology systems could adversely affect our results of operations and financial condition;
  • if we fail to extend or renegotiate our collective bargaining agreements with our labor unions when they expire or if our unionized employees were to engage in a strike or other work stoppage, our business and operating results could be materially harmed;
  • the loss of any of the senior management team or attrition among key sales associates could adversely affect our business, financial condition, results of operations and cash flows;
  • our debt could limit our ability to fund operations, raise additional capital, and fulfill our obligations, which, in turn, would have a material adverse effect on our businesses and prospects generally;
  • our indebtedness imposes significant restrictions on us; we depend on our loans and credit facilities to provide for our short-term financing requirements in excess of amounts generated by operations, and the availability of those funds may be reduced or limited;
  • the servicing of our indebtedness is dependent on our ability to generate cash, which could be impacted by many factors beyond our control;
  • we depend on the receipt of dividends or other intercompany transfers from our subsidiaries and investments;
  • the trading price of our common shares may be volatile, and the value of an investment in our common shares may decline;
  • the uncertain economic environment, including uncertainty in the U.S. and world securities markets, could impact our business and financial condition;
  • our future cash flows could be adversely affected if we are unable to fully realize our deferred tax assets;
  • adverse changes in the value of assets or obligations associated with our employee benefit plans could negatively impact shareowners’ deficit and liquidity;
  • third parties may claim that we are infringing upon their intellectual property, and we could suffer significant litigation or licensing expenses or be prevented from selling products;
  • third parties may infringe upon our intellectual property, and we may expend significant resources enforcing our rights or suffer competitive injury; we could be subject to a significant amount of litigation, which could require us to pay significant damages or settlements;
  • we could incur significant costs resulting from complying with, or potential violations of, environmental, health and human safety laws;
  • the risk that unexpected costs will be incurred;
  • risks and uncertainties relating to the merger, including the timing and likelihood of completion of the merger, including the failure to receive, on a timely basis or otherwise, the approval of our shareholders for the merger; the possibility that competing offers or acquisition proposals for the Company will be made; the possibility that any or all of the various conditions to the consummation of the merger may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); the occurrence of any event, change or other circumstance that could give rise to the termination of the merger, including in circumstances which would require us to pay a termination fee or other expenses; the effect of the announcement or pendency of the merger on our ability to retain and hire key personnel, our ability to maintain relationships with our customers, suppliers and others with whom we do business, or our operating results and business generally; risks related to diverting management’s attention from the Company’s ongoing business operations; and the risk that shareholder litigation in connection with the merger may result in significant costs of defense, indemnification and liability;
  • the other risks and uncertainties detailed in our filings with the SEC, including our Form 10-K report, Form 10-Q reports and Form 8-K reports; and
  • other factors outside the Company’s control.

These forward-looking statements are based on information, plans and estimates as of the date hereof and there may be other factors that may cause our actual results to differ materially from these forward-looking statements. We assume no obligation to update the information contained in this release except as required by applicable law.

Use of Non-GAAP Financial Measures

This press release contains information about adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA), Adjusted EBITDA margin, net debt, net income (loss) applicable to common shareholders excluding special items and free cash flow. These are non-GAAP financial measures used by Cincinnati Bell management when evaluating results of operations and cash flow. Management believes these measures also provide users of the financial statements with additional and useful comparisons of current results of operations and cash flows with past and future periods. Non-GAAP financial measures should not be construed as being more important than comparable GAAP measures. Detailed reconciliations of these non-GAAP financial measures to comparable GAAP financial measures have been included in the tables distributed with this release and are available in the Investor Relations section of www.cincinnatibell.com.

1Adjusted EBITDA provides a useful measure of operational performance. The Company defines Adjusted EBITDA as GAAP operating income plus depreciation, amortization, stock based compensation, restructuring and severance related charges, (gain) loss on sale or disposal of assets, transaction and integration costs, asset impairments, and other special items. Adjusted EBITDA should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with the measure as defined by other companies.

Adjusted EBITDA margin provides a useful measure of operational performance. The Company defines Adjusted EBITDA margin as Adjusted EBITDA divided by revenue. Adjusted EBITDA margin should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with the measure as defined by other companies.

2Free cash flow provides a useful measure of operational performance, liquidity and financial health. The Company defines free cash flow as cash provided by (used in) operating activities, adjusted for restructuring and severance related payments, transaction and integration payments, less capital expenditures and preferred stock dividends. Free cash flow should not be considered as an alternative to net income (loss), operating income (loss), cash flow from operating activities, or the change in cash on the balance sheet and may not be comparable with free cash flow as defined by other companies. Although the Company feels there is no comparable GAAP measure for free cash flow, the attached financial information reconciles cash provided by operating activities to free cash flow.

Net debt provides a useful measure of liquidity and financial health. The Company defines net debt as the sum of the face amount of short-term and long-term debt, unamortized premium and/or discount and unamortized note issuance costs, offset by cash and cash equivalents.

Net income (loss) applicable to common shareholders excluding special items in total and per share provides a useful measure of operating performance. Net income (loss) applicable to common shareholders excluding special items should not be considered as an alternative to comparable GAAP measures of profitability and may not be comparable with net income (loss) excluding special items as defined by other companies.

About Cincinnati Bell Inc.

With headquarters in Cincinnati, Ohio, Cincinnati Bell Inc. (NYSE: CBB) delivers integrated communications solutions to residential and business customers over its fiber-optic and copper networks including high-speed internet, video, voice and data. Cincinnati Bell provides service in areas of Ohio, Kentucky, Indiana and Hawaii. In addition, enterprise customers across the United States and Canada rely on CBTS and OnX, wholly-owned subsidiaries, for efficient, scalable office communications systems and end-to-end IT solutions. For more information, please visit www.cincinnatibell.com. The information on the Company’s website is not incorporated by reference in this press release.

Cincinnati Bell Inc.

Consolidated Statements of Operations

(Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

Three Months

Ended

December 31,

 

Change

 

Twelve Months

Ended

December 31,

 

Change

 

 

2019

 

2018

 

$

 

%

 

2019

 

2018

 

$

 

%

Revenue

 

$

390.4

 

 

$

399.0

 

 

$

(8.6

)

 

 

(2

)%

 

$

1,536.7

 

 

$

1,378.2

 

 

$

158.5

 

 

 

12

%

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and products

 

 

196.7

 

 

 

199.3

 

 

 

(2.6

)

 

 

(1

)%

 

 

784.6

 

 

 

698.7

 

 

 

85.9

 

 

 

12

%

Selling, general and administrative

 

 

93.1

 

 

 

93.2

 

 

 

(0.1

)

 

 

0

%

 

 

354.4

 

 

 

313.4

 

 

 

41.0

 

 

 

13

%

Depreciation and amortization

 

 

75.8

 

 

 

74.4

 

 

 

1.4

 

 

 

2

%

 

 

304.9

 

 

 

252.0

 

 

 

52.9

 

 

 

21

%

Restructuring and severance related charges

 

 

0.5

 

 

 

3.4

 

 

 

(2.9

)

 

 

(85

)%

 

 

6.9

 

 

 

8.3

 

 

 

(1.4

)

 

 

(17

)%

Transaction and integration costs

 

 

9.0

 

 

 

4.3

 

 

 

4.7

 

 

n/m

 

 

 

12.8

 

 

 

22.5

 

 

 

(9.7

)

 

 

(43

)%

Operating income

 

 

15.3

 

 

 

24.4

 

 

 

(9.1

)

 

 

(37

)%

 

 

73.1

 

 

 

83.3

 

 

 

(10.2

)

 

 

(12

)%

Interest expense

 

 

34.6

 

 

 

35.2

 

 

 

(0.6

)

 

 

(2

)%

 

 

139.6

 

 

 

131.5

 

 

 

8.1

 

 

 

6

%

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

n/m

 

 

 

 

 

 

1.3

 

 

 

(1.3

)

 

n/m

 

Other components of pension and postretirement benefit plans expense

 

 

2.8

 

 

 

3.0

 

 

 

(0.2

)

 

 

(7

)%

 

 

11.2

 

 

 

12.5

 

 

 

(1.3

)

 

 

(10

)%

Other (income) expense, net

 

 

(0.1

)

 

 

0.8

 

 

 

(0.9

)

 

n/m

 

 

 

(0.5

)

 

 

(1.6

)

 

 

1.1

 

 

 

(69

)%

Loss before income taxes

 

 

(22.0

)

 

 

(14.6

)

 

 

(7.4

)

 

 

51

%

 

 

(77.2

)

 

 

(60.4

)

 

 

(16.8

)

 

 

28

%

Income tax (benefit) expense

 

 

(1.4

)

 

 

15.4

 

 

 

(16.8

)

 

n/m

 

 

 

(10.6

)

 

 

9.4

 

 

 

(20.0

)

 

n/m

 

Net loss

 

 

(20.6

)

 

 

(30.0

)

 

 

9.4

 

 

 

(31

)%

 

 

(66.6

)

 

 

(69.8

)

 

 

3.2

 

 

 

(5

)%

Preferred stock dividends

 

 

2.6

 

 

 

2.6

 

 

 

 

 

 

 

 

 

10.4

 

 

 

10.4

 

 

 

 

 

 

 

Net loss applicable to common shareowners

 

$

(23.2

)

 

$

(32.6

)

 

$

9.4

 

 

 

(29

)%

 

$

(77.0

)

 

$

(80.2

)

 

$

3.2

 

 

 

(4

)%

Basic and diluted net loss per common share

 

$

(0.46

)

 

$

(0.65

)

 

 

 

 

 

 

 

 

 

$

(1.53

)

 

$

(1.73

)

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

– Basic

 

 

50.4

 

 

 

50.2

 

 

 

 

 

 

 

 

 

 

 

50.4

 

 

 

46.3

 

 

 

 

 

 

 

 

 

– Diluted

 

 

50.4

 

 

 

50.2

 

 

 

 

 

 

 

 

 

 

 

50.4

 

 

 

46.3

 

 

 

 

 

 

 

 

 

Cincinnati Bell Inc.

Entertainment and Communications Income Statement

(Unaudited)

(Dollars in millions)

 

 

 

Three Months

Ended

December 31,

 

Change

 

Twelve Months

Ended

December 31,

 

Change

 

 

2019

 

2018

 

$

 

%

 

2019

 

2018

 

$

 

%

Income Statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

246.4

 

 

$

251.9

 

 

$

(5.5

)

 

 

(2

)%

 

$

995.7

 

 

$

853.4

 

 

$

142.3

 

 

 

17

%

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and products

 

 

111.6

 

 

 

113.4

 

 

 

(1.8

)

 

 

(2

)%

 

 

450.4

 

 

 

388.2

 

 

 

62.2

 

 

 

16

%

Selling, general and administrative

 

 

45.2

 

 

 

47.9

 

 

 

(2.7

)

 

 

(6

)%

 

 

179.1

 

 

 

148.0

 

 

 

31.1

 

 

 

21

%

Depreciation and amortization

 

 

65.3

 

 

 

63.3

 

 

 

2.0

 

 

 

3

%

 

 

255.8

 

 

 

210.8

 

 

 

45.0

 

 

 

21

%

Restructuring and severance related charges

 

 

 

 

 

3.1

 

 

 

(3.1

)

 

n/m

 

 

 

4.9

 

 

 

3.1

 

 

 

1.8

 

 

 

58

%

Total operating costs and expenses

 

 

222.1

 

 

 

227.7

 

 

 

(5.6

)

 

 

(2

)%

 

 

890.2

 

 

 

750.1

 

 

 

140.1

 

 

 

19

%

Operating income

 

$

24.3

 

 

$

24.2

 

 

$

0.1

 

 

 

0

%

 

$

105.5

 

 

$

103.3

 

 

$

2.2

 

 

 

2

%

Cincinnati Bell Inc.

Entertainment and Communications Revenue

(Unaudited)

(Dollars in millions)

 

 

 

Three Months Ended

 

Three Months Ended

 

 

December 31, 2019

 

December 31, 2018

 

 

Cincinnati

 

Hawaii

 

Total

 

Cincinnati

 

Hawaii

 

Total

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer / SMB Fiber *

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data

 

$

39.9

 

 

$

8.3

 

 

$

48.2

 

 

$

36.5

 

 

$

7.2

 

 

$

43.7

 

Video

 

 

39.2

 

 

10.3

 

 

 

49.5

 

 

 

40.5

 

 

 

11.5

 

 

 

52.0

 

Voice

 

 

9.2

 

 

2.7

 

 

 

11.9

 

 

 

9.4

 

 

 

2.7

 

 

 

12.1

 

Other

 

 

0.4

 

 

0.2

 

 

 

0.6

 

 

 

0.3

 

 

 

0.1

 

 

 

0.4

 

Total Consumer / SMB Fiber

 

 

88.7

 

 

21.5

 

 

 

110.2

 

 

 

86.7

 

 

 

21.5

 

 

 

108.2

 

Enterprise Fiber

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data

 

 

21.1

 

 

10.1

 

 

 

31.2

 

 

 

21.5

 

 

 

9.0

 

 

 

30.5

 

Legacy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data

 

 

25.0

 

 

14.1

 

 

 

39.1

 

 

 

26.8

 

 

 

16.3

 

 

 

43.1

 

Voice

 

 

29.8

 

 

27.8

 

 

 

57.6

 

 

 

34.0

 

 

 

29.0

 

 

 

63.0

 

Other

 

 

3.9

 

 

4.4

 

 

 

8.3

 

 

 

3.4

 

 

 

3.7

 

 

 

7.1

 

Total Legacy

 

 

58.7

 

 

46.3

 

 

 

105.0

 

 

 

64.2

 

 

 

49.0

 

 

 

113.2

 

Total Entertainment & Communications

 

$

168.5

 

 

77.9

 

 

$

246.4

 

 

$

172.4

 

 

$

79.5

 

 

$

251.9

 

 

 

Twelve Months Ended

 

Twelve Months Ended

 

 

December 31, 2019

 

December 31, 2018

 

 

Cincinnati

 

Hawaii

 

Total

 

Cincinnati

 

Hawaii

 

Total

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer / SMB Fiber *

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data

 

$

155.4

 

 

$

32.1

 

 

$

187.5

 

 

$

142.5

 

 

$

13.5

 

 

$

156.0

 

Video

 

 

159.5

 

 

 

43.5

 

 

 

203.0

 

 

 

160.1

 

 

 

23.2

 

 

 

183.3

 

Voice

 

 

36.8

 

 

 

10.9

 

 

 

47.7

 

 

 

37.4

 

 

 

5.4

 

 

 

42.8

 

Other

 

 

1.5

 

 

 

0.7

 

 

 

2.2

 

 

 

1.2

 

 

 

0.2

 

 

 

1.4

 

Total Consumer / SMB Fiber

 

 

353.2

 

 

 

87.2

 

 

 

440.4

 

 

 

341.2

 

 

 

42.3

 

 

 

383.5

 

Enterprise Fiber

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data

 

 

84.9

 

 

 

39.4

 

 

 

124.3

 

 

 

84.3

 

 

 

17.7

 

 

 

102.0

 

Legacy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data

 

 

103.4

 

 

 

59.8

 

 

 

163.2

 

 

 

111.8

 

 

 

32.8

 

 

 

144.6

 

Voice

 

 

126.1

 

 

 

111.1

 

 

 

237.2

 

 

 

143.4

 

 

 

58.7

 

 

 

202.1

 

Other

 

 

14.1

 

 

 

16.5

 

 

 

30.6

 

 

 

13.5

 

 

 

7.7

 

 

 

21.2

 

Total Legacy

 

 

243.6

 

 

 

187.4

 

 

 

431.0

 

 

 

268.7

 

 

 

99.2

 

 

 

367.9

 

Total Entertainment & Communications

 

$

681.7

 

 

$

314.0

 

 

$

995.7

 

 

$

694.2

 

 

$

159.2

 

 

$

853.4

 

*

Represents Fioptics in Cincinnati

Cincinnati Bell Inc.

Entertainment and Communications Metric Information

(Unaudited)

(In thousands)

 

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

 

2019

 

2019

 

2019

 

2019

 

2018

Cincinnati Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fioptics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internet FTTP *

 

 

219.2

 

 

 

214.6

 

 

 

210.8

 

 

 

207.6

 

 

 

201.5

 

Internet FTTN *

 

 

31.4

 

 

 

32.5

 

 

 

34.0

 

 

 

35.7

 

 

 

37.5

 

Total Fioptics Internet

 

 

250.6

 

 

 

247.1

 

 

 

244.8

 

 

 

243.3

 

 

 

239.0

 

Video

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Video FTTP *

 

 

112.7

 

 

 

113.5

 

 

 

114.5

 

 

 

115.2

 

 

 

115.0

 

Video FTTN *

 

 

22.4

 

 

 

23.0

 

 

 

23.5

 

 

 

24.0

 

 

 

24.9

 

Total Fioptics Video

 

 

135.1

 

 

 

136.5

 

 

 

138.0

 

 

 

139.2

 

 

 

139.9

 

Voice

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fioptics Voice Lines

 

 

106.8

 

 

 

108.0

 

 

 

108.8

 

 

 

109.0

 

 

 

107.6

 

Fioptics Units Passed

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Units Passed FTTP *

 

 

484.8

 

 

 

482.0

 

 

 

480.1

 

 

 

477.6

 

 

 

472.3

 

Units Passed FTTN *

 

 

138.6

 

 

 

138.6

 

 

 

138.7

 

 

 

138.5

 

 

 

138.7

 

Total Fioptics Units Passed

 

 

623.4

 

 

 

620.6

 

 

 

618.8

 

 

 

616.1

 

 

 

611.0

 

Enterprise Fiber

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ethernet Bandwidth (Gb)

 

 

5,228

 

 

 

5,006

 

 

 

4,672

 

 

 

4,540

 

 

 

4,565

 

Legacy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DSL

 

 

64.0

 

 

 

65.9

 

 

 

67.9

 

 

 

69.6

 

 

 

72.0

 

Voice

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Voice Lines

 

 

196.8

 

 

 

202.9

 

 

 

210.3

 

 

 

218.0

 

 

 

226.2

 

*

Fiber-to-the-Premise (FTTP), Fiber-to-the-Node (FTTN)

Cincinnati Bell Inc.

Entertainment and Communications Metric Information

(Unaudited)

(In thousands)

 

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

 

2019

 

2019

 

2019

 

2019

 

2018

Hawaii Metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer / SMB Fiber

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Internet FTTP *

 

 

55.4

 

 

 

54.6

 

 

 

53.7

 

 

 

52.7

 

 

 

51.6

 

Internet FTTN *

 

 

12.8

 

 

 

13.2

 

 

 

13.4

 

 

 

13.9

 

 

 

14.3

 

Total Consumer / SMB Fiber Internet

 

 

68.2

 

 

 

67.8

 

 

 

67.1

 

 

 

66.6

 

 

 

65.9

 

Video

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Video FTTP *

 

 

30.6

 

 

 

31.8

 

 

 

33.0

 

 

 

33.5

 

 

 

33.8

 

Video FTTN *

 

 

12.1

 

 

 

13.2

 

 

 

13.9

 

 

 

14.3

 

 

 

15.0

 

Total Consumer / SMB Fiber Video

 

 

42.7

 

 

 

45.0

 

 

 

46.9

 

 

 

47.8

 

 

 

48.8

 

Voice

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer / SMB Fiber Voice Lines

 

 

30.0

 

 

 

30.1

 

 

 

30.1

 

 

 

30.3

 

 

 

30.3

 

Consumer / SMB Fiber Units Passed **

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Units Passed FTTP *

 

 

173.5

 

 

 

170.6

 

 

 

169.2

 

 

 

168.1

 

 

 

167.0

 

Units Passed FTTN *

 

 

72.9

 

 

 

72.8

 

 

 

72.9

 

 

 

73.4

 

 

 

73.5

 

Total Consumer / SMB Fiber Units Passed

 

 

246.4

 

 

 

243.4

 

 

 

242.1

 

 

 

241.5

 

 

 

240.5

 

Enterprise Fiber

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ethernet Bandwidth (Gb)

 

 

3,651

 

 

 

3,424

 

 

 

2,924

 

 

 

2,413

 

 

 

2,091

 

Legacy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DSL

 

 

42.9

 

 

 

44.3

 

 

 

45.7

 

 

 

47.2

 

 

 

48.7

 

Voice

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Legacy Voice Lines

 

 

177.1

 

 

 

183.0

 

 

 

187.6

 

 

 

192.8

 

 

 

197.8

 

*

Fiber-to-the-Premise (FTTP), Fiber-to-the-Node (FTTN)

**

Includes units passed for both consumer and business on Oahu and neighboring islands.

Cincinnati Bell Inc.

IT Services and Hardware Income Statement and Metric Information

(Unaudited)

(Dollars in millions)

 

 

 

Three Months

Ended

 

 

 

 

 

 

 

 

 

Twelve Months

Ended

 

 

 

 

 

 

 

 

 

 

December 31,

 

Change

 

December 31,

 

Change

 

 

2019

 

2018

 

$

 

%

 

2019

 

2018

 

$

 

%

Income Statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

150.4

 

 

$

153.9

 

 

$

(3.5

)

 

 

(2

)%

 

$

567.4

 

 

$

550.9

 

 

$

16.5

 

 

 

3

%

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services and products

 

 

91.3

 

 

 

92.6

 

 

 

(1.3

)

 

 

(1

)%

 

 

359.6

 

 

 

335.7

 

 

 

23.9

 

 

 

7

%

Selling, general and administrative

 

 

40.5

 

 

 

41.6

 

 

 

(1.1

)

 

 

(3

)%

 

 

154.3

 

 

 

152.1

 

 

 

2.2

 

 

 

1

%

Depreciation and amortization

 

 

10.4

 

 

 

11.0

 

 

 

(0.6

)

 

 

(5

)%

 

 

48.9

 

 

 

41.0

 

 

 

7.9

 

 

 

19

%

Restructuring and severance related charges

 

 

0.5

 

 

 

 

 

 

0.5

 

 

n/m

 

 

 

2.0

 

 

 

4.9

 

 

 

(2.9

)

 

 

(59

)%

Total operating costs and expenses

 

 

142.7

 

 

 

145.2

 

 

 

(2.5

)

 

 

(2

)%

 

 

564.8

 

 

 

533.7

 

 

 

31.1

 

 

 

6

%

Operating income (loss)

 

$

7.7

 

 

$

8.7

 

 

$

(1.0

)

 

 

(11

)%

 

$

2.6

 

 

$

17.2

 

 

$

(14.6

)

 

 

(85

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting

 

$

38.0

 

 

$

38.0

 

 

$

 

 

 

0

%

 

$

152.6

 

 

$

138.7

 

 

$

13.9

 

 

 

10

%

Cloud

 

 

22.3

 

 

 

26.2

 

 

 

(3.9

)

 

 

(15

)%

 

 

92.1

 

 

 

98.0

 

 

 

(5.9

)

 

 

(6

)%

Communications

 

 

51.7

 

 

 

49.4

 

 

 

2.3

 

 

 

5

%

 

 

198.7

 

 

 

178.5

 

 

 

20.2

 

 

 

11

%

Infrastructure Solutions

 

 

38.4

 

 

 

40.3

 

 

 

(1.9

)

 

 

(5

)%

 

 

124.0

 

 

 

135.7

 

 

 

(11.7

)

 

 

(9

)%

Total IT Services and Hardware Revenue

 

$

150.4

 

 

$

153.9

 

 

$

(3.5

)

 

 

(2

)%

 

$

567.4

 

 

$

550.9

 

 

$

16.5

 

 

 

3

%

 

 

December 31,

 

September 30,

 

June 30,

 

March 31,

 

December 31,

 

 

2019

 

2019

 

2019

 

2019

 

2018

Consulting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Billable Resources

 

 

1,034

 

 

 

1,007

 

 

 

1,039

 

 

 

1,039

 

 

 

1,039

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Communications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NaaS Locations

 

 

4,047

 

 

 

3,492

 

 

 

2,988

 

 

 

2,550

 

 

 

2,257

 

SD – WAN Locations

 

 

2,197

 

 

 

1,849

 

 

 

1,743

 

 

 

1,002

 

 

 

803

 

Hosted UCaaS Profiles*

 

 

274,654

 

 

 

270,335

 

 

 

254,679

 

 

 

244,482

 

 

 

239,581

 

*

Includes Hawaii Hosted UCaaS Profiles

Cincinnati Bell Inc.

Net Debt (Non-GAAP)

(Unaudited)

(Dollars in millions)

 

 

 

December 31,

 

December 31,

 

 

2019

 

2018

Receivables Facility

 

$

131.5

 

 

$

176.6

 

Credit Agreement – Tranche B Term Loan due 2024

 

 

592.5

 

 

 

598.5

 

Credit Agreement – Revolving Credit Facility

 

 

57.0

 

 

 

18.0

 

7 1/4% Senior Notes due 2023

 

 

22.3

 

 

 

22.3

 

7% Senior Notes due 2024

 

 

625.0

 

 

 

625.0

 

8% Senior Notes due 2025

 

 

350.0

 

 

 

350.0

 

Cincinnati Bell Telephone Notes

 

 

87.9

 

 

 

87.9

 

Other financing lease agreements

 

 

5.2

 

 

 

3.1

 

Capital leases

 

 

73.8

 

 

 

73.9

 

Net unamortized premium

 

 

1.3

 

 

 

1.7

 

Unamortized note issuance costs

 

 

(22.9

)

 

 

(27.2

)

Total debt

 

 

1,923.6

 

 

 

1,929.8

 

Less: Cash and cash equivalents

 

 

(11.6

)

 

 

(15.4

)

Net debt (Non-GAAP)

 

$

1,912.0

 

 

$

1,914.4

 

Cincinnati Bell Inc.

Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP)

(Unaudited)

(Dollars in millions)

 

 

 

Three Months Ended December 31, 2019

 

 

Entertainment &

Communications

 

IT Services &

Hardware

 

Corporate

 

Total

Company

Net loss (GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(20.6

)

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.4

)

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34.6

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.1

)

Other components of pension and postretirement benefit plans expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss) (GAAP)

 

$

24.3

 

 

$

7.7

 

 

$

(16.7

)

 

$

15.3

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

65.3

 

 

 

10.4

 

 

 

0.1

 

 

 

75.8

 

Restructuring and severance related charges

 

 

 

 

 

0.5

 

 

 

 

 

 

0.5

 

Transaction and integration costs

 

 

 

 

 

 

 

 

9.0

 

 

 

9.0

 

Stock-based compensation

 

 

 

 

 

 

 

 

2.0

 

 

 

2.0

 

Adjusted EBITDA (Non-GAAP)

 

$

89.6

 

 

$

18.6

 

 

$

(5.6

)

 

$

102.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin (Non-GAAP)

 

 

36

%

 

 

12

%

 

 

 

 

 

26

%

 

 

Three Months Ended December 31, 2018

 

 

Entertainment &

Communications

 

IT Services &

Hardware

 

Corporate

 

Total

Company

Net loss (GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(30.0

)

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15.4

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35.2

 

Other expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0.8

 

Other components of pension and postretirement benefit plans expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss) (GAAP)

 

$

24.2

 

 

$

8.7

 

 

$

(8.5

)

 

$

24.4

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

63.3

 

 

 

11.0

 

 

 

0.1

 

 

 

74.4

 

Restructuring and severance related charges

 

 

3.1

 

 

 

 

 

 

0.3

 

 

 

3.4

 

Transaction and integration costs

 

 

 

 

 

 

 

 

4.3

 

 

 

4.3

 

Stock-based compensation

 

 

 

 

 

 

 

 

1.1

 

 

 

1.1

 

Adjusted EBITDA (Non-GAAP)

 

$

90.6

 

 

$

19.7

 

 

$

(2.7

)

 

$

107.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin (Non-GAAP)

 

 

36

%

 

 

13

%

 

 

 

 

 

27

%

Year-over-year dollar change in Adjusted EBITDA

 

 

(1.0

)

 

 

(1.1

)

 

 

(2.9

)

 

 

(5.0

)

Year-over-year percentage change in Adjusted EBITDA

 

 

(1

)%

 

 

(6

)%

 

n/m

 

 

 

(5

)%

Cincinnati Bell Inc.

Reconciliation of Net Income (GAAP) to Adjusted EBITDA (Non-GAAP)

(Unaudited)

(Dollars in millions)

 

 

 

Twelve Months Ended December 31, 2019

 

 

Entertainment &

Communications

 

IT Services &

Hardware

 

Corporate

 

Total

Company

Net loss (GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(66.6

)

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10.6

)

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

139.6

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.5

)

Other components of pension and postretirement benefit plans expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss) (GAAP)

 

$

105.5

 

 

$

2.6

 

 

$

(35.0

)

 

$

73.1

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

255.8

 

 

 

48.9

 

 

 

0.2

 

 

 

304.9

 

Restructuring and severance related charges

 

 

4.9

 

 

 

2.0

 

 

 

 

 

 

6.9

 

Transaction and integration costs

 

 

 

 

 

 

 

 

12.8

 

 

 

12.8

 

Stock-based compensation

 

 

 

 

 

 

 

 

7.4

 

 

 

7.4

 

Adjusted EBITDA (Non-GAAP)

 

$

366.2

 

 

$

53.5

 

 

$

(14.6

)

 

$

405.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin (Non-GAAP)

 

 

37

%

 

 

9

%

 

 

 

 

 

26

%

 

 

Twelve Months Ended December 31, 2018

 

 

Entertainment &

Communications

 

IT Services &

Hardware

 

Corporate

 

Total

Company

Net loss (GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(69.8

)

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9.4

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

131.5

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.3

 

Other income, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.6

)

Other components of pension and postretirement benefit plans expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss) (GAAP)

 

$

103.3

 

 

$

17.2

 

 

$

(37.2

)

 

$

83.3

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

210.8

 

 

 

41.0

 

 

 

0.2

 

 

 

252.0

 

Restructuring and severance related charges

 

 

3.1

 

 

 

4.9

 

 

 

0.3

 

 

 

8.3

 

Transaction and integration costs

 

 

 

 

 

 

 

 

22.5

 

 

 

22.5

 

Stock-based compensation

 

 

 

 

 

 

 

 

5.6

 

 

 

5.6

 

Adjusted EBITDA (Non-GAAP)

 

$

317.2

 

 

$

63.1

 

 

$

(8.6

)

 

$

371.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA Margin (Non-GAAP)

 

 

37

%

 

 

11

%

 

 

 

 

 

27

%

Year-over-year dollar change in Adjusted EBITDA

 

 

49.0

 

 

 

(9.6

)

 

 

(6.0

)

 

 

33.4

 

Year-over-year percentage change in Adjusted EBITDA

 

 

15

%

 

 

(15

)%

 

 

(70

)%

 

 

9

%

Cincinnati Bell Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in millions)

 

 

Three Months Ended

 

Twelve Months Ended

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

2019

 

2018

Cash provided by operating activities

 

$

70.2

 

 

$

91.9

 

 

$

259.1

 

 

$

214.7

 

Capital expenditures

 

 

(56.5

)

 

 

(79.9

)

 

 

(223.8

)

 

 

(220.6

)

Acquisitions of businesses

 

 

 

 

 

 

 

 

 

 

 

(216.8

)

Other, net

 

 

0.2

 

 

 

0.1

 

 

 

0.5

 

 

 

 

Cash used in investing activities

 

 

(56.3

)

 

 

(79.8

)

 

 

(223.3

)

 

 

(437.4

)

Net increase (decrease) in corporate credit and receivables facilities with initial maturities less than 90 days

 

 

2.0

 

 

 

0.4

 

 

 

(6.1

)

 

 

194.6

 

Repayment of debt

 

 

(8.1

)

 

 

(4.4

)

 

 

(21.5

)

 

 

(328.7

)

Debt issuance costs

 

 

 

 

 

(0.7

)

 

 

(0.8

)

 

 

(11.7

)

Dividends paid on preferred stock

 

 

(2.6

)

 

 

(2.6

)

 

 

(10.4

)

 

 

(10.4

)

Other, net

 

 

 

 

 

0.2

 

 

 

(0.8

)

 

 

(1.9

)

Cash used in financing activities

 

 

(8.7

)

 

 

(7.1

)

 

 

(39.6

)

 

 

(158.1

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(0.1

)

 

 

(0.2

)

 

 

 

 

 

(0.3

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

5.1

 

 

 

4.8

 

 

 

(3.8

)

 

 

(381.1

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

6.5

 

 

 

10.6

 

 

 

15.4

 

 

 

396.5

 

Cash, cash equivalents and restricted cash at end of period

 

$

11.6

 

 

$

15.4

 

 

$

11.6

 

 

$

15.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Cash Provided by Operating Activities (GAAP) to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Free Cash Flow (Non-GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash provided by operating activities

 

$

70.2

 

 

$

91.9

 

 

$

259.1

 

 

$

214.7

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(56.5

)

 

 

(79.9

)

 

 

(223.8

)

 

 

(220.6

)

Restructuring and severance related payments

 

 

1.1

 

 

 

1.7

 

 

 

14.3

 

 

 

16.4

 

Preferred stock dividends

 

 

(2.6

)

 

 

(2.6

)

 

 

(10.4

)

 

 

(10.4

)

Transaction and integration costs

 

 

0.3

 

 

 

3.0

 

 

 

7.0

 

 

 

40.9

 

Free cash flow (Non-GAAP)

 

$

12.5

 

 

$

14.1

 

 

$

46.2

 

 

$

41.0

 

Income tax payments (refunds)

 

$

(1.3

)

 

$

(0.6

)

 

$

0.5

 

 

$

(13.8

)

Cincinnati Bell Inc.

Capital Expenditures

(Unaudited)

(Dollars in millions)

 

 

 

Three Months Ended

 

 

December 31,

2019

 

September 30,

2019

 

June 30,

2019

 

March 31,

2019

 

December 31,

2018

Entertainment and Communications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cincinnati

 

$

36.4

 

 

$

33.7

 

 

$

34.1

 

 

$

30.8

 

 

$

50.5

 

Hawaii

 

 

14.6

 

 

 

17.6

 

 

 

13.8

 

 

 

20.3

 

 

 

21.8

 

Total Entertainment and Communications

 

 

51.0

 

 

 

51.3

 

 

 

47.9

 

 

 

51.1

 

 

 

72.3

 

IT Services and Hardware

 

 

5.5

 

 

 

5.4

 

 

 

6.1

 

 

 

5.4

 

 

 

7.4

 

Corporate

 

 

 

 

 

 

 

 

0.1

 

 

 

 

 

 

0.2

 

Total capital expenditures

 

$

56.5

 

 

$

56.7

 

 

$

54.1

 

 

$

56.5

 

 

$

79.9

 

Cincinnati Bell Inc.

Reconciliation of Net (Loss) Income Applicable to Common Shareholders (GAAP) to Net (Loss) Income Applicable to Common Shareholders, Excluding Special Items (Non-GAAP) and Adjusted Diluted Earnings Per Share (Non-GAAP)

(Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

Three Months Ended

 

 

December 31,

2019

 

December 31,

2018

Net loss applicable to common shareholders (GAAP)

 

$

(23.2

)

 

$

(32.6

)

Special items:

 

 

 

 

 

 

 

 

Restructuring and severance related charges

 

 

0.5

 

 

 

3.4

 

Pension settlement charges

 

 

 

 

 

0.1

 

Transaction and integration costs

 

 

9.0

 

 

 

4.3

 

Income tax effect of special items *

 

 

2.8

 

 

 

(3.0

)

Total special items

 

 

12.3

 

 

 

4.8

 

Net loss applicable to common shareowners, excluding special items (Non-GAAP)

 

$

(10.9

)

 

$

(27.8

)

Weighted average diluted shares outstanding**

 

 

50.4

 

 

 

50.2

 

Diluted loss per common share (GAAP)

 

$

(0.46

)

 

$

(0.65

)

Adjusted diluted loss per common share (Non-GAAP)

 

$

(0.22

)

 

$

(0.55

)

*

Special items have been tax effected utilizing the normalized effective tax rate for the period, with the exception of transaction and integration costs, which are treated as a discrete item.

**

Weighted average diluted shares outstanding based on net (loss) income applicable to common shareowners, excluding special items (Non-GAAP).

Cincinnati Bell Inc.

Reconciliation of Net (Loss) Income Applicable to Common Shareholders (GAAP) to Net (Loss) Income Applicable to Common Shareholders, Excluding Special Items (Non-GAAP) and Adjusted Diluted Earnings Per Share (Non-GAAP)

(Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

Twelve Months Ended

 

 

December 31,

2019

 

December 31,

2018

Net loss applicable to common shareholders (GAAP)

 

$

(77.0

)

 

$

(80.2

)

Special items:

 

 

 

 

 

 

 

 

Restructuring and severance related charges

 

 

6.9

 

 

 

8.3

 

Loss on extinguishment of debt

 

 

 

 

 

1.3

 

Pension settlement charges

 

 

 

 

 

0.1

 

Transaction and integration costs

 

 

12.8

 

 

 

22.5

 

Income tax effect of special items *

 

 

0.3

 

 

 

(3.6

)

Total special items

 

 

20.0

 

 

 

28.6

 

Net loss applicable to common shareowners, excluding special items (Non-GAAP)

 

$

(57.0

)

 

$

(51.6

)

Weighted average diluted shares outstanding**

 

 

50.4

 

 

 

46.3

 

Diluted loss per common share (GAAP)

 

$

(1.53

)

 

$

(1.73

)

Adjusted diluted loss per common share (Non-GAAP)

 

$

(1.13

)

 

$

(1.11

)

*

Special items have been tax effected utilizing the normalized effective tax rate for the period, with the exception of transaction and integration costs, which are treated as a discrete item.

**

Weighted average diluted shares outstanding based on net (loss) income applicable to common shareowners, excluding special items (Non-GAAP).

Cincinnati Bell Inc.

Reconciliation of Operating Income (GAAP) Guidance to Adjusted EBITDA (Non-GAAP) Guidance

(Unaudited)

(Dollars in millions)

 

 

 

Low

 

High

2019 Operating Income (GAAP) Guidance Range

 

$

72

 

 

$

91

 

Add:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

305

 

 

 

300

 

Restructuring and severance related charges

 

 

10

 

 

 

6

 

Transaction and integration costs

 

 

5

 

 

 

5

 

Stock compensation expense

 

 

8

 

 

 

8

 

 

 

 

 

 

 

 

 

 

2019 Adjusted EBITDA (Non-GAAP) Guidance Range

 

$

400

 

 

$

410

 

 



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https://thomasb2b.com/cincinnati-bell-reports-fourth-quarter-and-full-year-2019-results/feed/ 0
Unisys Announces 1Q21 Results | 2021-05-06 | Press Releases https://thomasb2b.com/unisys-announces-1q21-results-2021-05-06-press-releases/ https://thomasb2b.com/unisys-announces-1q21-results-2021-05-06-press-releases/#respond Tue, 31 Aug 2021 05:29:30 +0000 https://thomasb2b.com/?p=68 BLUE BELL, Pa. , May 6, 2021 /PRNewswire/ — Operating profit up 470 bps YoY to 8.6%; non-GAAP operating profit (4) up 440 bps YoY to 10.1% Cash from operations improved $335.0M YoY; Adjusted free cash flow (8) improved $51.8M YoY Cloud & Infrastructure (“C&I”) revenue growth of 18.6% YoY, supported by 24.2% YoY growth […]]]>


BLUE BELL, Pa. , May 6, 2021 /PRNewswire/ —

  • Operating profit up 470 bps YoY to 8.6%; non-GAAP operating profit (4) up 440 bps YoY to 10.1%
  • Cash from operations improved $335.0M YoY; Adjusted free cash flow (8) improved $51.8M YoY
  • Cloud & Infrastructure (“C&I”) revenue growth of 18.6% YoY, supported by 24.2% YoY growth in C&I revenue in the U.S. & Canada
  • No future required cash contributions to U.S. qualified defined-benefit pension plans projected based on year-end data and assumptions and the American Rescue Plan Act

Unisys Corporation (NYSE: UIS) today reported first-quarter 2021 financial results. “During the first quarter, we made progress on our key strategic and financial goals that we laid out at the beginning of the year,” said Unisys Chair and CEO Peter A. Altabef . “Profitability and cash flow improved year over year, we expected relatively flat revenue year over year, we implemented our new organizational structure, further improved our balance sheet, made important leadership hires and took key steps toward enhancing and expanding our solution portfolio to address changing client needs.”

In January 2021 , the company changed its organizational structure to more effectively address evolving client needs. With these changes, the company recast its reportable segments, but this did not impact the consolidated financial statements as of December 31, 2020 . The company’s reportable segments are Digital Workplace Services (DWS), Cloud & Infrastructure Solutions (C&I), and ClearPath Forward ® (CPF) .

Summary of First-Quarter 2021 Results

  • Revenue:
    • Revenue of $509.8M vs. $515.4M in 1Q20 (1.1% YoY decline; 2.9% YoY decline in constant currency (1) )
      • The company had expected profitability to be the key driver of improvement in the first quarter, as the YoY revenue decline was anticipated and was driven by a decline of approximately $16 million in Field Services, Travel and Transportation and BPO processing activities.
      • C&I revenue increased 18.6% YoY, supported by 24.2% YoY growth in C&I revenue in the U.S. & Canada .
  • Operating Profit:
    • Operating profit of $43.6M vs. $20.1M in 1Q20 (116.9% YoY increase)
      • Non-GAAP operating profit (4) of $51.4M vs. $29.4M in 1Q20 (74.8% YoY increase)
    • Operating profit margin of 8.6% vs. 3.9% in 1Q20 (470 bps improvement)
      • Non-GAAP operating profit margin of 10.1% vs. 5.7% in 1Q20 (440 bps improvement)
    • YoY operating profit margin increases driven by year-over-year increases in gross margin for DWS, C&I and CPF, and other improvements to efficiency and related cost-reduction initiatives.
  • Adjusted EBITDA and Net Income:
    • Adjusted EBITDA (5) of $93.9M vs. $72.3M in 1Q20 (29.9% YoY increase)
      • Adjusted EBITDA margin of 18.4% vs. 14.0% in 1Q20 (440 bps improvement)
    • Net loss from continuing operations of $157.8M vs. $53.2M in 1Q20
      • Net income margin of (31.0)% vs. (10.3)% in 1Q20 (2070 bps decline)
      • The company made additional progress toward its goal of $1.2B in gross pension liability reductions in the quarter, and a required $158.0M settlement charge related to these pension liability reduction initiatives drove the entirety of the YoY net loss.
    • Non-GAAP net income from continuing operations (6) of $29.8M vs. $1.2M in 1Q20
      • Non-GAAP net income margin of 5.8% vs. 0.2% in 1Q20 (560 bps improvement)
  • Earnings Per Share from Continuing Operations:
    • Loss per share from continuing operations of $2.45 vs. $0.85 in 1Q20
      • The company made additional progress toward its goal of $1.2B in gross pension liability reductions, and a required $158.0M settlement charge ( $2.45 per share) related to these pension liability reduction initiatives drove the entirety of the net loss per share.
    • Non-GAAP diluted earnings per share from continuing operations (6) was $0.46 vs. $0.02 in 1Q20
  • Cash Flow:
    • Cash used in operations of $42.9M vs. $377.9M in 1Q20, an improvement of $335.0M , helped by $306.1M lower postretirement contributions in 1Q21
    • Free cash flow (7) of $(70.4)M vs. $(405.6)M in 1Q20, an improvement of $335.2M , helped by $306.1M lower postretirement contributions in 1Q21
    • Adjusted free cash flow (8) of $(24.4)M vs. $(76.2)M in 1Q20, an improvement of $51.8M
    • No future-required cash contributions to U.S. qualified defined benefit pension plans projected based on year-end data and assumptions and the American Rescue Plan Act
  • Backlog:
    • Total company backlog (which includes license backlog due to new segment structure) of $3.4B vs. $3.6B as of 4Q20
      • The company’s legacy BPO business and the ClearPath Forward renewal schedule were the largest contributors to the sequential decline in backlog.

Financial Highlights by Segment:

DWS:

  • DWS revenue of $141.1M vs. $160.2M in 1Q20 (11.9% YoY decline; 13.5% YoY decline in constant currency)
    • YoY revenue decline was expected and was largely driven by lower revenues in Field Services, one of the company’s legacy solutions that has been impacted by COVID-19.
  • DWS gross profit of $18.5M vs. $7.2M in 1Q20 (156.9% YoY improvement)
    • DWS gross margin of 13.1% vs. 4.5% in 1Q20 (860 bps YoY improvement)
  • During 1Q21, the company signed a contract with a global publishing company in EMEA for service desk support, field services and asset management to automate and streamline global user support to help improve the user experience for the client’s associates.

C&I:

  • C&I revenue of $123.3M vs. $104.0M in 1Q20 (18.6% YoY growth; 15.1% YoY growth in constant currency)
    • Supported by 24.2% YoY growth in C&I revenue in the U.S. & Canada
  • C&I gross profit of $12.0M vs. $(2.8)M in 1Q20
    • C&I gross margin of 9.7% vs. (2.7)% in 1Q20 (1240 bps YoY improvement)
  • During 1Q21 the company signed a new-scope contract with existing client, California State University ( CSU ), the nation’s largest higher-education system. As part of the new contract, Unisys will provide Financial Operations, Security Operations and Cloud Operations services that will offer the client greater agility to execute digital cloud strategies that better serve the campuses and improve the student experience for nearly 500,000 students.

CPF:

  • CPF revenue of $167.6M vs. $171.7M in 1Q20 (2.4% YoY decline; 1.7% YoY decline in constant currency)
    • The YoY constant-currency decline was driven in part by loss of low-margin third-party contracts
  • CPF gross profit of $103.1M vs. $100.1M in 1Q20 (3.0% YoY increase)
    • CPF gross margin of 61.2% vs. 58.3% in 1Q20 (290 bps YoY increase)
  • During 1Q21, the Company began work on a new-scope contract with a European national government agency that manages processing and payment of public pension for 2 million people. Under the contract, Unisys will provide the client with ClearPath Forward consulting services to make their ClearPath Forward system more scalable and more interoperable with other systems.

Conference Call

Unisys will hold a conference call today at 5:00 p.m. Eastern Time to discuss its results. The listen-only webcast, as well as the accompanying presentation materials, can be accessed on the Unisys Investor website at www.unisys.com/investor . Following the call, an audio replay of the webcast, and accompanying presentation materials, can be accessed through the same link.

(1) Constant currency – The company refers to growth rates in constant currency or on a constant currency basis so that the business results can be viewed without the impact of fluctuations in foreign currency exchange rates to facilitate comparisons of the company’s business performance from one period to another. Constant currency is calculated by retranslating current and prior period results at a consistent rate.

(2) Pipeline – Pipeline represents prospective sale opportunities being pursued or for which bids have been submitted. There is no assurance that pipeline will translate into recorded revenue.

(3) Total Contract Value – TCV is the estimated total contractual revenue related to contracts signed in the period without regard for cancellation terms. New business TCV represents TCV attributable to new scope for existing clients and new logo contracts.

Non-GAAP and Other Information

Although appropriate under generally accepted accounting principles (“GAAP”), the company’s results reflect charges that the company believes are not indicative of its ongoing operations and that can make its profitability and liquidity results difficult to compare to prior periods, anticipated future periods, or to its competitors’ results. These items consist of certain portions of post-retirement, debt exchange and extinguishment and cost-reduction and other expenses. Management believes each of these items can distort the visibility of trends associated with the company’s ongoing performance. Management also believes that the evaluation of the company’s financial performance can be enhanced by use of supplemental presentation of its results that exclude the impact of these items in order to enhance consistency and comparativeness with prior or future period results. The following measures are often provided and utilized by the company’s management, analysts, and investors to enhance comparability of year-over-year results, as well as to compare results to other companies in our industry.

(4) Non-GAAP operating profit – The company recorded pretax post-retirement expense and pretax charges in connection with cost-reduction activities, debt exchange/extinguishment and other expenses. For the company, non-GAAP operating profit excluded these items. The company believes that this profitability measure is more indicative of the company’s operating results and aligns those results to the company’s external guidance, which is used by the company’s management to allocate resources and may be used by analysts and investors to gauge the company’s ongoing performance.

(5) EBITDA & adjusted EBITDA – Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated by starting with net income (loss) from continuing operations attributable to Unisys Corporation common shareholders and adding or subtracting the following items: net income attributable to noncontrolling interests, interest expense (net of interest income), provision for income taxes, depreciation and amortization. Adjusted EBITDA further excludes post-retirement, debt exchange/extinguishment, and cost-reduction and other expenses, non-cash share-based expense, and other (income) expense adjustment. In order to provide investors with additional understanding of the company’s operating results, these charges are excluded from the adjusted EBITDA calculation.

(6) Non-GAAP net income and non-GAAP diluted earnings per share – The company has recorded post-retirement expense and charges in connection with debt exchange/extinguishment and cost-reduction activities and other expenses. Management believes that investors may have a better understanding of the company’s performance and return to shareholders by excluding these charges from the GAAP diluted earnings/loss per share calculations. The tax amounts presented for these items for the calculation of non-GAAP diluted earnings per share include the current and deferred tax expense and benefits recognized under GAAP for these amounts.

(7) Free cash flow – The company defines free cash flow as cash flow from operations less capital expenditures. Management believes this liquidity measure gives investors an additional perspective on cash flow from on-going operating activities in excess of amounts used for reinvestment.

(8) Adjusted free cash flow – Because inclusion of the company’s post-retirement contributions, discontinued operations and cost-reduction charges/reimbursements and other payments in free cash flow may distort the visibility of the company’s ability to generate cash flow from its operations without the impact of these non-operational costs, management believes that investors may be interested in adjusted free cash flow, which provides free cash flow before these payments. This liquidity measure was provided to analysts and investors in the form of external guidance and is used by management to measure operating liquidity.

About Unisys

Unisys is a global IT services company that delivers successful outcomes for the most demanding businesses and governments. Unisys offerings include digital workplace services, cloud and infrastructure services and software operating environments for high-intensity enterprise computing. Unisys integrates security into all of its solutions. For more information on how Unisys delivers for its clients across the government, financial services and commercial markets, visit www.unisys.com .

Forward-Looking Statements

Any statements contained in this release that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, any projections or expectations of earnings, revenues, annual contract value, total contract value, new business ACV or TCV, backlog or other financial items; any statements of the company’s plans, strategies or objectives for future operations; statements regarding future economic conditions or performance; and any statements of belief or expectation. All forward-looking statements rely on assumptions and are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. In particular, statements concerning annual and total contract value are based, in part, on the assumption that each of those contracts will continue for their full contracted term. Risks and uncertainties that could affect the company’s future results include, but are not limited to, the following: uncertainty of the magnitude, duration and spread of the novel coronavirus (“COVID-19”) pandemic and the impact of COVID-19 and governments’ responses to it on the global economy and our business, growth, reputation, projections, prospects, financial condition, operations, cash flows and liquidity, our ability to attract, motivate and retain experienced personnel in key positions; our ability to grow revenue and expand margin in our Digital Workplace Services and Cloud and Infrastructure businesses; our ability to maintain our installed base and sell new solutions; the potential adverse effects of aggressive competition in the information services and technology marketplace; our ability to effectively anticipate and respond to volatility and rapid technological innovation in our industry; our ability to retain significant clients; our contracts may not be as profitable as expected or provide the expected level of revenues; our ability to develop or acquire the capabilities to enhance the company’s solutions; the potential adverse effects of the concentration of the company’s business in the global commercial sector of the information technology industry; our significant pension obligations and required cash contributions and the possibility that we may be required to make additional significant cash contributions to our defined benefit pension plans; our ability to use our net operating loss carryforwards and certain other tax attributes may be limited; the risks of doing business internationally when a significant portion of our revenue is derived from international operations; the business and financial risk in implementing future acquisitions or dispositions; cybersecurity breaches could result in significant costs and could harm our business and reputation; the performance and capabilities of third parties with whom we have commercial relationships; a failure to meet standards or expectations with respect to the company’s environmental, social and governance practices; our ability to access financing markets; a reduction in our credit rating; the adverse effects of global economic conditions, acts of war, terrorism, natural disasters or the widespread outbreak of infectious diseases; the impact of Brexit could adversely affect the company’s operations in the United Kingdom as well as the funded status of the company’s U.K. pension plans; a significant disruption in our IT systems could adversely affect our business and reputation; we may face damage to our reputation or legal liability if our clients are not satisfied with our services or products; the potential for intellectual property infringement claims to be asserted against us or our clients; the possibility that legal proceedings could affect our results of operations or cash flow or may adversely affect our business or reputation; and the company’s consideration of all available information following the end of the quarter and before the filing of the Form 10-Q and the possible impact of this subsequent event information on its financial statements for the reporting period. Additional discussion of factors that could affect the company’s future results is contained in its periodic filings with the Securities and Exchange Commission. The company assumes no obligation to update any forward-looking statements.

RELEASE NO.: 0506/9832

Unisys and other Unisys products and services mentioned herein, as well as their respective logos, are trademarks or registered trademarks of Unisys Corporation. Any other brand or product referenced herein is acknowledged to be a trademark or registered trademark of its respective holder.

UIS-Q

UNISYS CORPORATION

CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(Unaudited)

(Millions, except per share data)

Three Months Ended

March 31,

2021

2020

Revenue

Services

$ 420.4

$ 425.9

Technology

89.4

89.5

509.8

515.4

Costs and expenses

Cost of revenue:

Services

338.7

375.7

Technology

31.9

26.6

370.6

402.3

Selling, general and administrative

90.0

86.8

Research and development

5.6

6.2

466.2

495.3

Operating income

43.6

20.1

Interest expense

10.1

13.9

Other (expense), net

(182.6)

(48.1)

Loss from continuing operations before income taxes

(149.1)

(41.9)

Provision for income taxes

8.4

10.8

Consolidated net loss from continuing operations

(157.5)

(52.7)

Net income attributable to noncontrolling interests

0.3

0.5

Net loss from continuing operations attributable to Unisys Corporation

(157.8)

(53.2)

Income from discontinued operations, net of tax

1,068.5

Net income (loss) attributable to Unisys Corporation

$(157.8)

$1,015.3

Earnings (loss) per share attributable to Unisys Corporation

Basic

Continuing Operations

$ (2.45)

$ (0.85)

Discontinued Operations

17.06

Total

$ (2.45)

$ 16.21

Diluted

Continuing Operations

$ (2.45)

$ (0.85)

Discontinued Operations

17.06

Total

$ (2.45)

$ 16.21

UNISYS CORPORATION

SEGMENT RESULTS

(Unaudited)

(Millions)

Total

DWS

C&I

CPF

Other

Three Months Ended March 31, 2021

Customer revenue

$509.8

$141.1

$123.3

$167.6

$77.8

Intersegment

1.0

(1.0)

Total revenue

$509.8

$141.1

$123.3

$168.6

$76.8

Gross profit percent

27.3 %

13.1 %

9.7 %

61.2 %

Three Months Ended March 31, 2020

Customer revenue

$515.4

$160.2

$104.0

$171.7

$79.5

Intersegment

0.1

(0.1)

Total revenue

$515.4

$160.2

$104.0

$171.8

$79.4

Gross profit percent

21.9 %

4.5 %

(2.7)%

58.3 %

UNISYS CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Millions)

March 31,

2021

December 31,

2020

Assets

Current assets:

Cash and cash equivalents

$ 716.6

$ 898.5

Accounts receivable, net

410.3

460.5

Contract assets

45.1

44.3

Inventories

9.6

13.4

Prepaid expenses and other current assets

99.0

89.3

Total current assets

1,280.6

1,506.0

Properties

704.6

727.0

Less-accumulated depreciation and amortization

597.7

616.5

Properties, net

106.9

110.5

Outsourcing assets, net

163.6

173.9

Marketable software, net

195.5

193.6

Operating lease right-of-use assets

70.8

79.3

Prepaid postretirement assets

188.2

187.5

Deferred income taxes

134.1

136.2

Goodwill

108.6

108.6

Restricted cash

9.9

8.2

Other long-term assets

198.5

204.1

Total assets

$ 2,456.7

$ 2,707.9

Liabilities and deficit

Current liabilities:

Current maturities of long-term-debt

$ 19.9

$ 102.8

Accounts payable

172.7

223.2

Deferred revenue

248.0

257.1

Other accrued liabilities

289.3

352.0

Total current liabilities

729.9

935.1

Long-term debt

521.2

527.1

Long-term postretirement liabilities

1,230.0

1,286.1

Long-term deferred revenue

138.3

137.9

Long-term operating lease liabilities

57.5

62.4

Other long-term liabilities

65.6

71.4

Commitments and contingencies

Total Unisys Corporation stockholders’ deficit

(331.6)

(356.8)

Noncontrolling interests

45.8

44.7

Total deficit

(285.8)

(312.1)

Total liabilities and deficit

$ 2,456.7

$ 2,707.9

UNISYS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Millions)

Three Months Ended

March 31,

2021

2020

Cash flows from operating activities

Consolidated net loss from continuing operations

$ (157.5)

$ (52.7)

Income from discontinued operations, net of tax

1,068.5

Adjustments to reconcile consolidated net loss to net cash used for operating activities:

Gain on sale of U.S. Federal business

(1,059.5)

Foreign currency translation losses

2.9

15.8

Non-cash interest expense

0.9

1.5

Employee stock compensation

3.3

5.1

Depreciation and amortization of properties

7.6

8.2

Depreciation and amortization of outsourcing assets

16.1

16.0

Amortization of marketable software

15.5

13.6

Other non-cash operating activities

(0.6)

0.2

Loss on disposal of capital assets

0.8

0.8

Postretirement contributions

(21.6)

(327.7)

Postretirement expense

169.0

23.5

Deferred income taxes, net

(2.0)

(5.6)

Changes in operating assets and liabilities:

Receivables, net and contract assets

48.8

(18.6)

Inventories

3.7

5.6

Other assets

(15.2)

(14.2)

Accounts payable and current liabilities

(124.8)

(58.0)

Other liabilities

10.2

(0.4)

Net cash used for operating activities

(42.9)

(377.9)

Cash flows from investing activities

Net proceeds from sale of U.S. Federal business

1,164.7

Proceeds from investments

1,229.5

828.8

Purchases of investments

(1,235.5)

(870.5)

Investments in marketable software

(17.4)

(17.3)

Capital additions of properties

(5.1)

(5.6)

Capital additions of outsourcing assets

(5.0)

(4.8)

Other

(0.4)

(1.5)

Net cash (used for) provided by investing activities

(33.9)

1,093.8

Cash flows from financing activities

Net proceeds from short-term borrowings

59.5

Proceeds from issuance of long-term debt

1.5

2.1

Payments of long-term debt

(91.6)

(6.1)

Proceeds from exercise of stock options

2.7

Other

(7.4)

(4.7)

Net cash (used for) provided by financing activities

(94.8)

50.8

Effect of exchange rate changes on cash, cash equivalents and restricted cash

(8.6)

(31.0)

Increase (decrease) in cash, cash equivalents and restricted cash

(180.2)

735.7

Cash, cash equivalents and restricted cash, beginning of year

906.7

551.8

Cash, cash equivalents and restricted cash, end of year

$ 726.5

$ 1,287.5

UNISYS CORPORATION

RECONCILIATION OF SELECTED GAAP MEASURES TO NON-GAAP MEASURES

(Unaudited)

(Millions, except per share data)

Three Months Ended

March 31,

2021

2020

GAAP net loss from continuing operations attributable to Unisys Corporation

$(157.8)

$(53.2)

Postretirement expense:

pretax

169.0

23.5

tax

0.4

0.3

net of tax

168.6

23.2

Cost reduction and other expenses:

pretax

19.1

31.8

tax

0.1

0.6

net of tax

19.0

31.2

minority interest

net of minority interest

19.0

31.2

Non-GAAP net income from continuing operations attributable to Unisys Corporation

29.8

1.2

Add interest expense on convertible notes

Non-GAAP net income attributable to Unisys Corporation for diluted earnings per share

$ 29.8

$ 1.2

Weighted average shares (thousands)

64,423

62,650

Plus incremental shares from assumed conversion:

Employee stock plans

1,067

522

Convertible notes

Non-GAAP adjusted weighted average shares

65,490

63,172

Diluted earnings (loss) per share from continuing operations

GAAP basis

GAAP net loss from continuing operations attributable to Unisys Corporation for diluted earnings per share

$(157.8)

$(53.2)

Divided by weighted average shares

64,423

62,650

GAAP diluted loss per share

$ (2.45)

$(0.85)

Non-GAAP basis

Non-GAAP net income from continuing operations attributable to Unisys Corporation for diluted earnings per share

$ 29.8

$ 1.2

Divided by Non-GAAP adjusted weighted average shares

65,490

63,172

Non-GAAP diluted loss per share

$ 0.46

$ 0.02

UNISYS CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP

(Unaudited)

(Millions)

FREE CASH FLOW

Three Months Ended

March 31,

2021

2020

Cash provided by (used for) operations

$(42.9)

$(377.9)

Additions to marketable software

(17.4)

(17.3)

Additions to properties

(5.1)

(5.6)

Additions to outsourcing assets

(5.0)

(4.8)

Free cash flow

(70.4)

(405.6)

Postretirement funding

21.6

327.7

Discontinued operations

(9.0)

Cost reduction and other payments

24.4

10.7

Adjusted free cash flow

$(24.4)

$ (76.2)

UNISYS CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP

(Unaudited)

(Millions)

EBITDA

Three Months Ended

March 31,

2021

2020

Net loss from continuing operations attributable to Unisys Corporation

$(157.8)

$ (53.2)

Net income attributable to noncontrolling interests

0.3

0.5

Interest expense, net of interest income of $1.6, $2.4 respectively*

8.5

11.5

Provision for income taxes

8.4

10.8

Depreciation

23.7

24.2

Amortization

15.5

13.6

EBITDA

$(101.4)

$ 7.4

Postretirement expense

$ 169.0

$ 23.5

Cost reduction and other expenses**

19.1

31.8

Non-cash share based expense

3.3

5.1

Other expense, net adjustment***

3.9

4.5

Adjusted EBITDA

$ 93.9

$ 72.3

*Included in other expense, net on the consolidated statements of income

**Reduced for depreciation and amortization included above

***Other (income) expense, net as reported on the consolidated statements of income less postretirement expense, interest income and items included in cost reduction and other expenses

Three Months Ended

March 31,

2021

2020

Revenue

$ 509.8

$ 515.4

Net loss from continuing operations attributable to Unisys Corporation as a percentage of revenue

(31.0)%

(10.3)%

Adjusted EBITDA as a percentage of revenue

18.4 %

14.0 %

View original content: http://www.prnewswire.com/news-releases/unisys-announces-1q21-results-301286031.html

SOURCE Unisys Corporation



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TechnipFMC (FTI) Q1 2021 Earnings Call Transcript https://thomasb2b.com/technipfmc-fti-q1-2021-earnings-call-transcript/ https://thomasb2b.com/technipfmc-fti-q1-2021-earnings-call-transcript/#respond Tue, 31 Aug 2021 05:28:13 +0000 https://thomasb2b.com/?p=59 Image source: The Motley Fool. TechnipFMC (NYSE:FTI)Q1 2021 Earnings CallApr 28, 2021, 8:00 a.m. ET Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks: Operator Good day, and thank you for standing by. Welcome to the TechnipFMC first-quarter 2020 earnings conference call. [Operator instructions] I would now like to hand the conference over to your speaker […]]]>


Image source: The Motley Fool.

TechnipFMC (NYSE:FTI)
Q1 2021 Earnings Call
Apr 28, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the TechnipFMC first-quarter 2020 earnings conference call. [Operator instructions] I would now like to hand the conference over to your speaker today, Matt Seinsheimer. Please go ahead.

Matt SeinsheimerVice President, Investor Relations

Good morning, and good afternoon, and welcome to TechnipFMC’s first-quarter 2021 earnings conference call. Our news release and financial statements issued yesterday can be found on our website. I’d like to caution you with respect to any forward-looking statements made during this call. Although these forward-looking statements are based on our current expectations, beliefs and assumptions regarding future developments and business conditions, they are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by these statements.

Known material factors that could cause our actual results to differ from our projected results are described in our most recent 10-K, most recent 10-Q and other periodic filings with the U.S. Securities and Exchange Commission and the French AMF. We wish to caution you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any of our forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

I will now turn the call over to Doug Pferdehirt, TechnipFMC’s chairman and chief executive officer.

Doug PferdehirtChairman and Chief Executive Officer

Thank you, Matt. Our first quarter as a leading pure-play technology and services provider to both traditional and new energy industries began with solid financial results, with notable achievements that uniquely position us in the growing markets we serve. This was reflected through strong operational execution and improving market backdrop that is poised to be even stronger for longer and continued development of real and material opportunities for TechnipFMC in the energy transition. Starting with the operational performance.

We had an exceptional quarter in both operating segments. In subsea, revenue grew sequentially in the period, driven by particularly strong execution of project backlog that offset the seasonal reduction in installation activity. In surface technologies, our international operations represented nearly 70% of total segment revenue, and we remain focused on delivering profitable results, supported by strong execution, both in the international and U.S. markets.

In the U.S., we experienced sequential revenue growth despite the severe winter weather. Adjusted EBITDA from continuing operations totaled $165 million. Free cash flow from continuing operations totaled $137 million. We ended the quarter with net debt of $1.8 billion.

And earlier this week, we announced the partial sale of our stake in Technip Energies for approximately $360 million. Inbound orders from continuing operations improved sequentially to $1.7 billion. Subsea inbound more than doubled sequentially to $1.5 billion, reflecting solid order momentum and a book-to-bill of 1.1. Integrated projects comprise nearly 40% of our subsea order inbound in the quarter with particular strength in iEPCI orders and increased adoption of 2.0 technologies.

During the quarter, we announced two separate iEPCI projects with Energean, building upon our previous experience with the Karish development and leveraging our iFEED capabilities to further extend our collaborative relationship to additional opportunities. We also received an iEPCI contract for the Petronas Limbayong project in Malaysia, their first deepwater development, awarded based on our Subsea 2.0 technology and integrated execution. Other projects awards in the period included a contract for manifolds for the Petrobras Marlim and Voador fields offshore Brazil. The manifolds will utilize our next-generation all-electric robotic technology that replaces traditional subsea hydraulics, as well as thousands of mechanical parts, while providing real-time data and analysis on performance.

The use of digital automation and control allows for a more compact unit that is smaller, less complex and less costly with a significantly reduced carbon footprint. And the robotic software can be remotely upgraded increasing the overall reliability and availability of the subsea systems. Turning to the market outlook. Client conversations remain constructive, suggesting a further increase in activity.

Additionally, the external conditions that have driven oil and gas prices higher could provide greater price stability over the intermediate term. These include expansion in economic activity, driven by strong fiscal stimulus, COVID vaccinations and expanded reopenings of local economies and more constrained supply, a function of disciplined capital spend, particularly for OPEC Plus, whose actions appear focused on realizing a price that supports economic growth and continued energy investment. In surface technologies, international revenue continued to expand and represented nearly 70% of the segment in the quarter, driven by strength in the Middle East, North Sea and Asia Pacific. These markets demand higher specification equipment, global services and local capabilities, areas where we continue to further differentiate our offering.

In the Kingdom of Saudi Arabia, we are nearing completion and start-up of a new facility that will significantly increase our local manufacturing capabilities. And in the North Sea, our extensive experience and high-pressure, high-temperature technologies provide us significant opportunities in a region where activity remains robust and well supported by government incentives. We believe our unique capabilities will allow us to extend our leadership positions in these more resilient geographies. In subsea, we are confident in our 2021 outlook of more than $4 billion in inbound orders.

And we are well on our way to meeting this commitment just three months into the year. We expect continued benefit from our differentiated market strategy, as well as favorable market fundamentals. More specifically, we believe that integrated project awards have the potential to more than double versus the prior year. And the combination of direct awards and our service-related orders could represent 50% of total inbound for the full year.

We also believe that we will see order growth again in 2022, supported in part by an expanding list of opportunities on our opportunities map, where total project revenue or value grew 10% sequentially at the midpoint despite the award of three projects during the period. In summary, we see potential for a recovery in global activity that is longer and more sustainable than what has been experienced in previous cycles, allowing for continued investment in traditional markets while providing incremental capital for the development of new energy resources. With regard to new energy resources, we believe that renewable energy will be increasingly sourced and stored offshore for both environmental and scalability reasons. The momentum has clearly shifted for offshore wind, in particular, which has attracted considerable attention in recent months.

There was significant interest in the recent auction for seabed leases in the U.K., with sites auctioned for more than 10 times prices paid in the previous auction. Norway is also moving forward with North Sea Wind Power, awarding its first development licenses for both fixed and floating wind developments. And the United States has unveiled a growth — a goal to expand offshore wind energy in the coming decade by opening new areas for development, accelerating permits and increasing public project financing. We believe that an increasing share of this investment will be made in deeper waters, where winds are stronger and more consistent.

It is estimated that nearly 80% of the world’s offshore wind resource potential is in waters deeper than 60 meters. This will require floating and seabed infrastructure for energy generation, storage and transmission, all of which can be enabled by our Deep Purple technology. During the quarter, we announced two strategic partnerships, both of which are focused on generating renewable energy from novel wind and wave resources. First, we announced a partnership with Magnora to jointly pursue offshore wind project development opportunities.

Magnora holds a strategic position within the renewable energy sector as an owner in wind project development. The partnership has already commenced operations and is focused on opportunities in Scotland and Norway and will consider entering new markets in the coming months. Additionally, we announced a strategic partnership with Bombora to bring together both wind and wave power, utilizing Bombora’s mWave technology, coupled with proprietary technologies from TechnipFMC to convert wave energy into electricity. By combining both wind and wave, we believe we can generate even higher yields from floating turbines when compared to fixed projects, further lowering project development costs.

Importantly, we will look to further differentiate ourselves in the marketplace by utilizing the very same playbook that led to the successful transformation of our subsea business and extended our technological differentiation, increased project economics and improved our market positioning. And to be clear, we are playing the long game built around our differentiated technologies and integration capabilities and focused on selecting the right partners and the right projects. Remember, the benefits of this path were not obvious at the time we initiated iEPCI. Integrated project execution was a fundamental change in the approach to subsea project delivery, and its tremendous success gives us absolute confidence that we are taking the right steps to create a sustainable and high returns business to address the market demand for a renewable future.

I will now turn the call over to Alf Melin.

Alf MelinChief Financial Officer

Thank you, Doug. Total company revenue in the quarter was $1.6 billion, with adjusted EBITDA of $165 million. Inbound orders were $1.7 billion. Total company backlog was largely unchanged sequentially and stood at $7.2 billion at the end of the period.

Backlog for subsea was $6.9 billion, of which $3.9 billion is scheduled for execution beyond 2021. We ended the quarter with cash and cash equivalents of $753 million and net debt of $1.8 billion. During the quarter, we recognized a gain of $470 million related to our equity ownership in Technip Energies. This relates primarily to the change in the fair market value of our remaining stake, which for this initial period reflects the difference between book value at the time of separation and the market value at quarter end.

Income per share from continuing operations was $0.95 per diluted share in the quarter. When excluding the impact of the change in fair market value of Technip Energies and other charges that netted to an after-tax credit of $0.99, the adjusted loss from continuing operations per share was $0.03. With the partial spin-off of Technip Energies completed during the quarter, financial results for Technip Energies are now reported as discontinued operations in our financial statements. For the three months ended March 31, 2021, the results of discontinued operations on the income statement include the historical results of Technip Energies prior to its spin-off on February 16, 2021, and all separation-related costs incurred for the transaction.

Additionally, there were no assets or liabilities classified as discontinued operations on the balance sheet at the end of the quarter. Our investment in Technip Energies is now reflected in current assets at market value as of March 31, 2021. Now let me turn to the segment results. I will focus on our sequential performance with the first quarter compared to our fourth-quarter 2020 segment results.

In subsea, inbound orders were $1.5 billion in the quarter, providing us with a very strong start to the year. Revenue of $1.4 billion increased approximately 4%, benefiting from strong project execution of backlog. The geographic mix of projects mitigated the seasonal decline in activity. Subsea adjusted EBITDA margin of 9.7% improved sequentially by 100 basis points as the increased manufacturing productivity more than offset the decline in services activity.

In surface technologies, first-quarter revenue of $245 million decreased 6% sequentially, driven by the seasonal decline in customer activity and the timing of backlog conversion in international markets. Revenue in North America declined due in part to the company’s exit from certain underperforming markets, partially offset by growth in the U.S., where we benefited from further adoption of the iComplete ecosystem. Adjusted EBITDA margin of 11% declined 80 basis points versus the fourth quarter, primarily due to lower volumes, partially offset by continued improvement in operational performance and a lower cost structure. Turning to cash flow.

Cash from continuing operations was $182 million in the period. Capital expenditures were $44 million. This resulted in free cash flow of $137 million. During the quarter, Bpifrance acquired 100 million in Technip Energies’ shares from our retained stake as part of the share purchase agreement related to the spin-off.

Bpifrance had previously provided funding to us for up to 200 million of shares. As a result of their revised level of investment, we refunded 100 million to Bpifrance earlier this month. Neither of these items impact our free cash flow as the activities related to disposition of Technip Energies’ shares are reported in the investment section of our cash flow statement. Turning to corporate items.

Our corporate expense was $29 million in the period. Excluding charges totaling $3 million, the expense was $26 million. During the quarter, we experienced a $28 million gain on foreign exchange. We also incurred a $24 million loss on the early extinguishment of debt related to the refinancing of our debt structure at the time of the spin.

Tax expense for the quarter was $25 million. Now let me provide you with an update on our financial guidance for 2021. Our strong start to the year gives us further confidence in our outlook, and we reiterate our full-year segment guidance. As a reminder, guidance is based on continuing operations and thus excludes the impact of Technip Energies, which is reported as discontinued operations.

Separation-related tax items and costs were also reported in discontinued operations during the first quarter. And as a result of this change in where these expenses are recorded, we have removed the anticipated impacts from our guidance. Our full-year guidance for the tax provision has been revised lower to a range of $70 million to $80 million, which now excludes separation-related tax items of approximately $40 million, while free cash flow guidance for the full year has been revised higher to a range of $120 million to $220 million, which now excludes the separation-related tax items and costs of approximately $70 million. The estimated separation-related expenses remain in line with our expectations but are now included in discontinued operations.

These expenses were incurred during the first quarter, and we do not anticipate calling out any further material separation-related items in our financial statements. And finally, this week, we announced the sale of 26.8 million shares of our ownership stake in Technip Energies for proceeds of approximately $360 million to TechnipFMC. There is no tax liability associated with the sale of our shares. The share sale will reduce our ownership stake to 55.5 million shares or approximately 31% of Technip Energies’ outstanding shares.

As we have previously stated, we do not intend to remain a long-term shareholder of Technip Energies, and this transaction clearly demonstrates our commitment to exit our holdings in a timely and orderly manner. I will close by highlighting the key takeaways regarding our cash-related items. We ended the first quarter with cash and cash equivalents of $753 million and net debt of $1.8 billion. Free cash flow in the period was $137 million, and we expect that our performance over the remainder of the year will meet guidance.

And lastly, after adjusting for the $100 million refund to Bpifrance, net debt in the second quarter will benefit from approximately $260 million in proceeds related to the announced block sale transaction. This leaves us with increased liquidity and greater financial flexibility, while demonstrating solid progress toward our commitment to return to investment-grade status. I will now turn the call back over to Doug for his closing remarks.

Doug PferdehirtChairman and Chief Executive Officer

Thank you, Alf. In closing, our first-quarter results provide us with a very strong start to the year in support of our 2021 commitments. Our strong order inbound clearly demonstrates that we continue to solidify our leadership position in conventional energy. Looking ahead, we expect robust and sustained activity across our businesses, supported by improving market fundamentals and our competitive differentiation.

Our work to develop novel wind and wave energy and subsea hydrogen technologies through our Deep Purple project is progressing well. Strategic partnerships, such as Magnora and Bombora, will further advance and accelerate our efforts. We remain committed to delivering a 50% reduction in greenhouse gas emissions by 2030. To help achieve this goal, we have converted an existing vessel, the Deep Arctic, into the world’s first hybrid dive support vessel.

And we will continue to leverage our core strengths to create a unique position for TechnipFMC in the development of new energy sources, as we have done successfully in our conventional business. We are also very excited to announce that we will host an analyst day scheduled for the 16th of November where we will showcase our strategic priorities and initiatives that support them. Operator, you may now open the line for questions.

Questions & Answers:

Operator

[Operator instructions] Your first question comes from David Anderson with Barclays.

David AndersonBarclays Capital — Analyst

Good morning. How are you?

Doug PferdehirtChairman and Chief Executive Officer

Good morning, David. Very well. Thank you. Hope you’re well also.

David AndersonBarclays Capital — Analyst

I am. Let me start off with a kind of a big-picture question for you. With the business lines you’re in, I think you probably have more insight into global offshore production trends than just about anybody. Sorry to relive this with you, but subsea trees peaked at 550 in 2014, floating rigs at 260.

And we’ve been at less than half those levels for several years now. Yet the forecast I see say, for instance, show global offshore production staying flat after 2025 and only have decline rates of about 5% in their models and a surprising 4 million barrels of incremental new capacity coming on by ’25. I mean, I get it, these are long-cycle projects that take years to complete, but shouldn’t the huge drop in rigs and trees start manifesting in production soon? I’m really having trouble tying the two together. And really like to get your opinion how you’re thinking about kind of global offshore production over the next, let’s say, five years.

Doug PferdehirtChairman and Chief Executive Officer

Sure. And David, when you say manifest in — you’re speaking of increased activity, you said production but activity —

David AndersonBarclays Capital — Analyst

Well, I’m just looking at the production. I’m just tying together — yes, I’m just tying together the two and kind of your activity and the production and why they’re not really — why we’re not seeing that kind of showing up in the numbers and when you do start seeing up the numbers and when is really kind of offshore really starts to come down.

Doug PferdehirtChairman and Chief Executive Officer

Sure. And I just emphasize that because of the point that you made in your question, which was these are long-cycle projects, so there is a time lag between the activity and the actual increase in production. So look, let’s just kind of break it down a little bit. Obviously, our company has experienced not only the benefit of an increase in activity but a significant increase in our market position, if you will.

That’s a result of bringing to the market something new, something innovative, both in terms of technology, Subsea 2.0, as well as in terms of a unique commercial model, iEPCI, or the integrated project, where we’re the only single entity that can provide such a combination. This was manifested in the recent Petronas Limbayong award. This is Petronas’ first deepwater. They do a lot of offshore, but this was their first deepwater project, and they sold the benefit of both Subsea 2.0 and iEPCI, and if you will, combined into an iEPCI 2.0 award that went to our company.

So we’re seeing certain activity that, let’s say, the rest of the market is not experiencing. We are very privileged and very grateful for that. In addition to that, as I mentioned in my prepared remarks, we do see an increased level — well, we’ve been — I mentioned back in 2019 that we were seeing an increased level of front-end engineering of work or iFEED studies, as well as traditional feed studies, front-end engineering and design. And then, again, last year, in 2020, I emphasized how we were seeing a further increase in iEPCI studies.

As mentioned at the time, they’re nine to 18 months, depending upon the project and the customer at what time they can move forward to the FID phase. So we’re kind of seeing that manifest itself right now, which is why back in October of 2019 — 2020, excuse me, I was able to give guidance in terms of our potential inbound for this year, which at the time, let’s face it, was still — there still wasn’t a lot of visibility into the market at the time. But it’s that proprietary set of opportunities that we have that just give us a completely different view of the market. And that’s why we were able to provide the guidance we gave around — the indication around inbound orders for this year.

And again, off to a very strong start. So David, we are seeing it happen. I don’t — I think you have to look at TechnipFMC through a slightly different lens than, if you will, the rest of the market. And you have — just understanding that we have access to a market that is quite significant.

Again, I mentioned this year could be 50% of our inbound, could be direct awarded to our company. So yes, we’re seeing it, and it’s what gives us the confidence. And David, it’s been a long time, I think, since anybody in this industry has talked about 2022 inbound in first quarter of 2021 or, if you will, that far ahead. And as I said in my prepared remarks, we definitely are looking at a 2022 inbound.

Now obviously, things can happen. But barring extension of the pandemic or some other global economic crisis, we see 2022 as a further inflection point in our inbound orders and activity. That will then translate to production as those projects come online.

David AndersonBarclays Capital — Analyst

Gotcha. And then, so it was — obviously, impressive subsea orders this quarter. We’ve also heard some rather positive comments from some of the service guys. And as you’re starting to kind of ramp up — obviously, your iEPCI model seemed just perfectly suited for this kind of market.

I guess, if you’re looking out, I mean, — I give you a lot of credit for having the confidence kind of looking out to ’22. But kind of looking out the next several years, I guess, the question is, do you think there’s enough opportunities out there in this type of business? If we kind of stay on this level and maybe even ignoring some of the bigger projects, do you think that the subsea business overall can kind of get back to those double-digit year-on-year growth? And do you think that’s enough or — I’m talking in the next couple of years here. I’m not pushing it on near-term guidance. But do you think that’s enough to get subsea margins back into that kind of 13%-ish range of kind of where they were before that whole peak that we saw in the 13s, 14s?

Doug PferdehirtChairman and Chief Executive Officer

Yeah. Well, we provided our guidance for this year, and we, obviously, started off with a very good first quarter in our subsea margins. Obviously, subsea revenue was very strong. So we would expect, as we continue to move forward with the increased level of activity that we — that you should expect and we expect that we would deliver an increasing margin as well.

So if you look at our margin guidance right now, we’re not far from your target. So I think that when you put that target out there for the next two or three years is I think how you framed it, I don’t think that that’s an unrealistic expectation at all.

David AndersonBarclays Capital — Analyst

Great. Thank you, Doug.

Doug PferdehirtChairman and Chief Executive Officer

Thank you.

Operator

Your next question comes from Guillaume Delaby with Societe Generale.

Guillaume DelabySociete Generale — Analyst

Good morning. Thank you for taking my question. One question for Alf. Following the disposal of at least a partial spin-off, how should we think about your working capital? How should we model? Can you provide us maybe one, two or three, I would say, guideline, which would make sense for us? Thank you very much.

Alf MelinChief Financial Officer

Yeah, thank you for the question. So when we think about working capital, obviously, first of all, we acknowledge that we had some working capital inflow in this first quarter. And it’s not unusual that we’re gonna have some quarters that have some inflow and some outflow that varies. Over the period of a year, we’d like to think that it nets out to some degree.

But if we specifically look at the forecast for the rest of the year, we are confident in that we will be close to working capital neutral. So I mean, I would always start with a starting point to working capital neutral. And then, from that point, we will advise and forecast if there are unusual items that impacts beyond that. So when you look out for the full year this year, we expect to basically keep the working capital favorability we recognized so far in this first quarter, be more neutral for the rest of the year and end up with a free cash flow that is in line with our guidance.

Guillaume DelabySociete Generale — Analyst

Very clear. Thank you very much.

Operator

Your next question comes from Marc Bianchi with Cowen.

Marc BianchiCowen and Company — Analyst

Hi. Thank you. So Doug, you mentioned the subsea performance in the first quarter was strong, and it sounded like there was some manufacturing throughput that helped there. And certainly, as we progress from here, I would suspect that that stays at a similar level or improves, and then you get a seasonal recovery in services.

So just based on that understanding, I would think that your margins would be biased higher in the second and third quarter from where you were in the first. Just curious if you have any commentary around that.

Doug PferdehirtChairman and Chief Executive Officer

Sure, Marc. As you know, we give annual guidance. We try to avoid getting into the quarterly guidance routine. But I would not disagree with your thought in terms of there is certain efficiencies that we are seeing, obviously, recovery from everything that we went through and our supply chain went through in 2020.

We, obviously, have some very good, solid backlog. I mentioned this last quarter, maybe even the quarter before, and we’ll reemphasize it because it’s really quite important and I think unique to our company, our margins and backlog are improving. So it’s quality, not quantity or quality and quantity in our case. So that’s very, very important, as well as we continue to look forward.

That being said, we did — these are — this is a projects type business. So when you have increased performance and execution performance or cadence, that accelerates some milestones. But it doesn’t necessarily repeat every quarter because you achieve those milestones. Those milestones happen on an intermittent basis.

So I just want to caution that we just don’t draw a straight line from south to north. But understand that the business is performing very, very well. I’m very proud of the work that the women and men are doing and have done throughout a very difficult 2021 and now really seeing the potential of this company as we move forward as a stand-alone pure-play.

Marc BianchiCowen and Company — Analyst

Great. Thanks. Thanks for that, Doug. The next question I had was a bit longer-term and related to Deep Purple.

You mentioned technology there. And my understanding of Deep Purple is it’s perhaps more of a concept at this stage than actual technology development. I’d suspect you’d disagree with that. And I’m curious on your — on sort of what tangible technology you have that’s being developed toward that project.

And then also, if you could comment on the agreement with Magnora and sort of why Magnora versus perhaps some other offshore developers that could be out there.

Doug PferdehirtChairman and Chief Executive Officer

Sure. Two great questions. On the first, I’m going to — it’s not that I disagree with you. Certainly, it’s a unique concept.

And secondly, yes, we do have technology to support it. Bear in mind that we’re talking about a substance, if you will, that is very difficult to handle, both from a corrosive point of view but also from a stability point of view. So there’s a tremendous amount of technology development that has been going on for four years, Marc. We didn’t talk about this four years ago because we like to have something real that before we start talking about and, if you will, marketing things.

And it was important for us to develop this. It’s been a long process. Yes, it started as a concept over four years ago. But we’ve been well into the technology that’s called the TRL process, where you’re actually qualifying your products, where you’re qualifying their capabilities, ceiling surfaces, containment, etc., to be able to operate not only with a particularly challenging substance, hydrogen, but also to do it in a particularly challenging environment, which we know very, very well, which is subsea.

So if you’ll allow me to kind of throw out a little marketing opportunity here, we hope that you’ll participate in November in our analyst day because that will give us the opportunity to really showcase the technology, and that will be a big portion of that analyst day. So I’ll leave that where that is for now, but progressing quite well. And we’re well into multiple phases on the Deep Purple project. Magnora, thank you for asking.

Look, we’re very pleased to partner with Magnora. We felt it was — for us, it’s finding the right relationship where we can work well together, collaborate well together. That’s what our company does. We build deep intimate client relationships.

We work with clients for 20, 25 years on an exclusive basis in our traditional business, and we would expect to do the same as we move into the new energies. So we spend a lot of time in building that relationship before just jumping into a partnership. That being said, we are likely to have other partners in offshore wind as well. So we felt Magnora was the right partner at this time with a good opportunity set that we are very proud to be part of and to work with.

But it doesn’t mean that there won’t be other partners, just like in our traditional business, where we have multiple partners and multiple relationships.

Marc BianchiCowen and Company — Analyst

Great. Thanks so much.

Operator

Your next question comes from Amy Wong with UBS.

Amy WongUBS –Analyst

Hi, good morning, guys. A couple of questions from me. The first question is — I think one of the kind of notable data points for this quarter is in your subsea backlog. It seems to have had a pretty decent increase of inbound converting into 2021 execution.

So is that a fair observation? And if yes, is there any kind of trend to call out in terms of the types of projects your clients are moving forward with? Maybe there’s a bit of pent-up demand. That seems to mean like the inbound is converting to revenue in a slightly shorter time frame than usual.

Alf MelinChief Financial Officer

Yes, this is Alf here. I can take that one. Let’s say this — every quarter, there is some movement in the backlog scheduling. And in this case, you are absolutely right that there is some accelerated demand in our execution.

So we are able to capitalize on that. And that overall is driving us in terms of our look now at the full-year guidance for our revenue to trend a little bit more toward the high end of the guidance range for revenue in subsea. So overall, that’s a positive picture.

Doug PferdehirtChairman and Chief Executive Officer

And Amy, good afternoon. I’ll add to that. In terms of — you were asking, was there any change in, if you will, the client mix or the project mix. Clearly, as clients move to optimizing the utilization of their installed offshore infrastructure, in other words, doing more tiebacks or more brownfield opportunities, iEPCI and subsea 2.0 is — I mean, it’s just the right thing at the right time.

So we’ve already demonstrated now for years, our ability to be able to take a 20-month project and deliver it in 14 months, installed commission on the seabed. We’re working all through 2020. During the pandemic, we were working very closely with almost all of our major — all of the major subsea players, almost all of them, had programs under way to really study what additional resource could be tied back to their infrastructure, potentially their own or potentially that of another oil company. And we’ve been part of that discussion.

We’ve been, in some ways, part of — in working with multiple different oil companies to bring that to a reality because we have this unique solution where we can go out and deliver installed commission on the seabed in half the time as the conventional market or the competition. And that will drive, if you will, a quicker acceleration or conversion between the inbound and the revenue and the profitability as we see a greater mix of those type of projects in our backlog.

Amy WongUBS –Analyst

Gotcha. OK. My second question just relates to your announcement to host an analyst day in November. Now quite a far — quite a long way away.

But just wanted to understand is FTI kind of post the spinning off energy. Are you guys pursuing a bit more like branch review of the strategy? And should we expect some big strategic update in November? Or are you characterizing this slightly differently is only just — or rather more focused on just looking at the technology?

Doug PferdehirtChairman and Chief Executive Officer

Well, Amy, let me start by saying we know you all are under a high demand and hugely popular, and that is a busy time of the year both in terms of conferences, as well as in terms of potentially other people having capital markets days or analyst days. So we just wanted to get on your calendar early, and we certainly hope that you’ll be able to join us. In terms of the structure, sure, you should expect that we’ll be talking strategy, as well as technology. We’re a company that drives change.

We’re a company of innovation. I think we continue to surprise to the upside and not only surprise to the upside but to deliver against what we state. So we are certainly excited for it. We think it will be time well spent, and we hope that you’ll be able to join us.

Amy WongUBS –Analyst

Right. thanks for the heads-up. I’ll turn it over.

Operator

Your next question comes from George O’Leary with TPH & Co.

George O’LearyTudor, Pickering, Holt & Co. — Analyst

Good morning, guys.

Doug PferdehirtChairman and Chief Executive Officer

Good morning.

George O’LearyTudor, Pickering, Holt & Co. — Analyst

Free cash flow guidance increase was very nice to see. I was just wondering if you could frame the low end and the high end, what drives kind of the low end and the high end of that range?

Alf MelinChief Financial Officer

Sure. So first of all, free cash flow guidance increased. And as we — I was trying to be very clear in my prepared remarks, this is a direct result of the separation-related expenses that we had previously assumed would be in our continuing operations that are now in our — were recorded in discontinued operations in the first quarter. But overall, if you’re honest, we are — if I’m honest, there is — mostly the variations will be around working capital timing.

So for the most part, even though we are confident in that we can deliver around a neutral working capital for the remainder of the year, there is still some risk there. Can we manage other pieces of the free cash flow, such as capital expenditures? Yes, possibly. So there are some dynamics in that. We’re, obviously, demonstrating here some of our belief in that our guidance in terms of the revenue potential in subsea and, even to some degree, the margin potential in Surface so far can drive some favorability.

So overall, we’re looking favorably at our ability to deliver the full-year free cash flow forecast as we have guided to.

George O’LearyTudor, Pickering, Holt & Co. — Analyst

All right. Very helpful. And then, just a bigger picture question with respect to the renewables or energy transition side of the equation. Just curious if you could frame the pathway or glide path to that side of the business becoming a material portion of revenue.

And then, maybe what’s the nearest-term opportunities are comprised of, whether it’s offshore wind, floating solar, tidal wave plus wind, all three. Just any color on the glide path and the composition.

Doug PferdehirtChairman and Chief Executive Officer

Yeah, George, a very good question, one that we spend a lot of time on and one that we — I alluded to or spoke to in the prepared remarks because I think it’s really, really critical. One, we’ll certainly be talking more about in November at our analyst day. But just to foreshadow it a little bit, first and foremost, our new energy strategy is around four pillars. That’s offshore wind, particularly floating wind.

And again, we believe that will comprise 80% of the total offshore wind. So we are not really chasing the fixed wind. It’s very fragmented. There is no integration, and there is very little technology other than the turbine — provided by the turbine manufacturer.

So just to chase that, to get short-term vessel utilization and to call that new energy or renewables revenue, I’m not really doing anything, right? I’m just using my boat for a different application. So we’re not looking at it that way. We’re looking at it as what can we bring — just like we do in the conventional energy, what can we bring to differentiate our company from a technology and from an integrated offering. So we’ll approach this very differently.

We believe it will allow us to generate the type of returns that would be acceptable to you and to our shareholders versus what is available in, if you will, just selling a vessel at a lower day rate in the renewables market — fixed — I’m sorry, fixed wind market today. So that’s what we mean about playing the long game. We did the same thing, if you remember, in our traditional business. Back in ’17 — or ’18 and ’19, we were very disciplined, and we didn’t just chase activity.

We said iEPCI, we believe, was going to work, and we were gonna have our capacity of our floating assets available to us to deliver those iEPCI projects. And that’s what we’re seeing today. And that’s why we are having the success and differentiating success today. So we’re doing the same thing in wind.

In wave, it’s very clear, we’re going to focus on the technology and the integration of the technology with wind. We believe if you put wind — we’ve demonstrated, if you put wind and wave together, we believe we can increase the output by as much as 30%. That’s significant. In addition to that, the ability to be able to store and/or convert offshore will be critical.

That’s our Deep Purple project. So we could be converting — generating to hydrogen and storing hydrogen. We could be storing in other forms of energy storage, wind and wave power as well and then the ability to be able to potentially distribute that offshore versus having to do everything at a nearshore port. We could do this type of transfer offshore.

So that covers kind of wind, wave, hydrogen. And then, in addition to that would be carbon, transportation and storage. I find it difficult to believe that to get to the levels required, which we all support that you will be sequestering that carbon — I’m sorry, you will be storing that carbon on land. So therefore, a lot of the sequestration will happen near the coast.

We will — we are and again, there’ll be more to come on this subject, we will be announcing very novel technology that will allow us to safely transport and store that carbon — the CO2 that is sequestered subsea or offshore, if you will. So that’s kind of our mentality. That’s the way we go about it. There’s those three pillars.

They’re not mutually exclusive. From our perspective, we will try to integrate as many of those together as possible. Bear in mind, 50% of the world subsea infrastructure is ours sitting on the sea floor today. Our ability to be able to use that potentially as distribution hubs, storage hubs or injection hubs could be very unique application.

It will require some very sophisticated technology, as we talked about earlier when I was answering the Deep Purple question to Marc, that this isn’t just using the same equipment. It’s a very different type of equipment, and we’ll be talking about that as we announce some technology — new technologies in the coming quarters. So you put all of that together, and it’s a very exciting road map for us. Now specifically to your question is — OK, when? When do we see it? And how big is the potential? Well, the potential is obvious.

I mean, I think the potential is as big as our conventional business. The question is when and is there a crossover, for how long do they — does one grow while the other is growing. We just got done saying that the conventional business is growing, and we see growth now through 2022 and potentially beyond. I’m just not going to go past 2022 for right now.

So with that, starting to see some growth in the renewables and maybe carbon happens and wind happens maybe before hydrogen, I don’t know. It’s kind of a combination. A lot of it has to do with local support. Legislation, other things will help drive, which one gets ahead of the other.

We just want to be well-positioned to be the offshore company, the offshore company as we are today in subsea for conventional hydrocarbon for the renewables. And whatever one takes off first, we’ll be well-positioned to benefit from that. But again, we’re going to track our renewable revenue as that sustainable revenue that can generate high returns versus just chasing utilization with our existing assets today.

George O’LearyTudor, Pickering, Holt & Co. — Analyst

Very helpful answer. Thank you, Doug.

Operator

Your next question comes from Michael Alsford with Citigroup.

Michael AlsfordCiti — Analyst

Thank you for taking my questions. I’ve got a couple, please. Firstly, if I could just lead off, you’ve done a great job driving greater efficiency through the business. But I guess, following separation, are there any significant areas, Doug, where you see the ability to reduce costs further across the organization?

Doug PferdehirtChairman and Chief Executive Officer

Well, Michael, as you know, this management team, there’s a relentless pursuit for operational improvement. And I can’t say enough about the leadership throughout our organization, of our engineering, manufacturing and supply chain, as well as in the operating segments and just across the organization. The word we use in this organization is simplicity. Let’s remove the complexity.

Obviously, that — we benefited from that now as a stand-alone pure-play company to remove some of the complexity and really be focused. And we’re driving that through everything that we do. So Michael, I’m not gonna announce a big massive cost-reduction program or something like that. But you should rest assured, every single day, we are looking to make the organization more efficient, which creates, by the way, a better work environment for our employees by removing complexity and costs.

Michael AlsfordCiti — Analyst

OK, thanks, Doug. And just a quick follow-up on the cash flow. I’m just wondering, was there any specific inflows within the quarter such as unwinding provisions or, say, tax rebates that help drive the good free cash flow result? Or was it simply just the flow of milestone payments on contracts during the quarter? Thanks.

Alf MelinChief Financial Officer

Yeah. So you’re talking about the first-quarter impact here?

Michael AlsfordCiti — Analyst

Exactly. Yes, I was just wondering whether there’s anything specific in that quarterly working capital inflow that helped drive free cash flow higher?

Alf MelinChief Financial Officer

Yes, yes, yes. So thanks for the question. Yes, there was some items in the first quarter that were beneficial. We had a settlement that went into the first quarter.

We did have some other negative items as well. But overall, that settlement benefited the free cash flow for the quarter.

Michael AlsfordCiti — Analyst

And just roughly how much was that?

Doug PferdehirtChairman and Chief Executive Officer

Yeah, Michael, let me just add to that. This was — there’s always — there’s what’s contributed from operations, and there’s always other things that come in and out of the cash flow. But these were all part of our forecasted cash flow. So nothing out of the ordinary or unexpected that created the positive momentum, just good, solid execution on the cash flow side.

Michael AlsfordCiti — Analyst

Great. OK, thanks.

Operator

Your next question comes from Waqar Syed with ATB Capital Markets.

Waqar SyedATB Capital Markets — Analyst

Thank you for taking my question. Two questions. First one, you’ve made a comment that you see a sustainable, long-term kind of growth activity offshore. And we’ve seen in the industry a lot of rationalization of employee base.

And the average employee that you need for subsea is a lot more sophisticated and trained. Do you have the right people and the right number of people to be able to efficiently manage that growth that could be a multiyear kind of upcycle?

Doug PferdehirtChairman and Chief Executive Officer

Thank you, Waqar. Look, we all have biases. There’s unconscious and conscious biases. I’m going to be very clear, this is a conscious bias.

I believe we have the best people, and I mean, that from my heart. What they have demonstrated and what they have delivered on a consistent basis, particularly during the last year is just nothing short of inspiring. So look, we — as we’ve made adjustments and the adjustments we had to make were unfortunate, we have done everything we can to protect the talent in the organization. And not only to protect, but to continue to provide them opportunities for development and to further progress their career within our company.

You raised a very valid point, though. The further you go into the supply chain, you sometimes find smaller companies and you sometimes find companies that are more codependent on one or two customers. In this case, we would be a customer versus a contractor. And so we also work very closely with our key suppliers.

And we shifted work around, just as our customers did for us. Some of our customers sat down and took work from the competition and gave it to us because they said they knew who they wanted to work with when it was all said and done, and they wanted to make sure that we had the volume that would help us through a difficult year last year. So we did the same with our suppliers. That being said, as we — any growth cycle does create pinch points.

But we’re doing our best to go in eyes wide open. And we’ve done a lot of work to protect and not only protect but to motivate and make sure that our workforce is well prepared to deliver. I will put in a plug, if you will, for the way that we do our business. iEPCI is a much more efficient way to do business in terms of assets, particularly human assets, as well as Subsea 2.0 in terms of the manufacturing roof line and the individuals required.

So it’s not just an upturn. We’re going into this upturn very different. We’re going in with the next-generation of subsea equipment that now represents, as I said, a significant portion of our total work now. So it’s a very different recovery for us that we believe we are well prepared for, Waqar.

But most definitely, eyes wide open and acknowledge that there will be pinch points as the growth continues.

Waqar SyedATB Capital Markets — Analyst

Thannks, Doug. And if I may squeeze in another question. Before you — before the separation of Technip Energies happened, you had a set of assumptions about how the interaction with your customers and employees and with investors change following the separation and not just interaction, but their behavior and how it would help FTI. Now the separation has happened, how is the reality being compared to your set of assumptions going into the separation?

Doug PferdehirtChairman and Chief Executive Officer

In regard to customer relations, customer relationships?

Waqar SyedATB Capital Markets — Analyst

That’s — yeah, obviously, all three kind of customers, employees and investors, starting with customers, you had a view that you could maybe get better. Maybe there will be some uptick in kind of revenues, either for Technip Energies or for you following the separation. And if that kind of — are you seeing some of that?

Doug PferdehirtChairman and Chief Executive Officer

Yeah, yeah. What’s clear, Waqar, is — and I kind of alluded to that just a minute ago, so I won’t go back through it. But our customers — we have — we are honored to have the deep intimate relationships that we have with many of our customers. They work with us differently than they work with many of the others in their supply chain.

That’s not a given. That’s earned over time based upon performance and trust and transparency. And it’s, obviously, stronger as a pure-play only because you had two — the holdco had two very different models with very — two very different contractual approaches. So this, if you will, allows that increase in the intimacy.

And I do believe that we are benefiting from that. And it’s not just what I believe, it’s — we’ve announced new — many — several new relationships over the past year. And we’ll be announcing even new relationships this year, most of which are exclusive to our company. In terms of the employees, we, obviously, have an opportunity now to be more focused, spend more time, be more visible.

Some of the bigger projects that we were doing in the past required an enormous amount of management bandwidth, focus and attention. And we now can spread that more equitably across the organization, which I think is the right thing to do. And in terms of shareholders, I hope we demonstrated in Q1 the value of an independent company.

Waqar SyedATB Capital Markets — Analyst

Thank you very much, Doug. Appreciate it.

Operator

And our last question comes from Bertrand Hodee with Kepler Chevreaux.

Bertrand HodeeKepler Cheuvreux — Analyst

Yes, thank you for taking my question. One on Mozambique. Back in 2019, you won a substantial contract, $1.1 billion, for the subsidies of Mozambique LNG. Can you give us an update, obviously, following the force majeure? Do you see any direct impact? And if you can share any color or especially what is left in the backlog from this contract? Thank you.

Doug PferdehirtChairman and Chief Executive Officer

Sure, Bertrand. Thank you very much for the question because I think it’s important, and I wanna clarify some of the things that have been written that were incorrect. So bear in mind that, yes, we announced this as a substantial award, meaning plus $1 billion. The recognition, a typical project of that size would — the revenue would be recognized over plus or minus a five-year period.

So you can kind of do the math, if you will, assuming it was linear, it’s not linear. But you can get an idea of kind of the annual impact, plus or minus. I will tell you right now, we are only beginning to have discussions with Total. Total is a very serious customer.

Total is a serious partner of ours. We have the deepest respect for Total. And the fact that Total was making decisions based upon the health and well-being and security of their personnel and their contractors’ personnel, including us, we deeply respect. Second point, this — we are an offshore company.

Our scope is offshore. We have no in-country exposure. All the work that we’re doing at this point is the manufacturing. We are well into the manufacturing of the subsea equipment.

So that will continue to go on for some time. We are progressing on plan, on schedule, and everything is going quite well. And it’s being done thousands of — hundred, well — yes, tens of thousand whatever — thousands — a long way from Mozambique, I haven’t done the calculation. So yes, just realize, we’re not doing any onshore infrastructure, if you will.

We’re an offshore company. And the work that we’re doing right now is in the manufacturing phase, which is being done far ways away. It’s progressing very, very well, and we continue to work on that. That being said, we deeply respect Total’s position on this, and we are gonna work closely with Total as Total, I’m sure, wants to do the best for their people and for our contractors.

And we’re confident that we’ll continue to move forward. Let me make sure that I’m very clear on this next point: if something was to occur or impact our revenue or profit from that project this year, just to be very clear, it would not lead us to revise our guidance, both in terms of the guidance on the revenue or the EBITDA range. What am I emphasizing by that? An important project — but we have many, many projects. We’re a large company.

We’re a global company, and we’re very well diversified. So there should be no concern that if, and I repeat if, because we are working very closely and it’s in the very early discussions, and again, we are not exposed to the issues that are — the potential security issues about working in-country, we are doing this work outside. But if, and repeating if there is an impact, it would not lead us to revise our guidance for 2021. I think I said 2020, I meant 2021, excuse me.

Bertrand HodeeKepler Cheuvreux — Analyst

OK, crystal clear, Doug. So to summarize, the only risk we can see is a delay in the offshore campaign installation down the road and in terms of schedule of the contract?

Doug PferdehirtChairman and Chief Executive Officer

Yes, that potential exists. But again, we’ve been given no — there’s been no decision made at this time. We’re working closely with Total.

Bertrand HodeeKepler Cheuvreux — Analyst

I’ll squeeze another one, another region. Can you give us a feel of what you see in terms of activity in the U.S., gulf of Mexico after, I would say, the election of Joe Biden? Do you see less traction? Do you see — and do you see into your iFEED, I would say, package of project, do you still see a traction in this region?

Doug PferdehirtChairman and Chief Executive Officer

Yeah. Like in many mature markets, the Gulf of Mexico being a very mature market for subsea, there’s a significant amount of infrastructure — operator-owned infrastructure that is not operating at capacity today. Kind of globally — a rough figure globally is most offshore infrastructure on average is only operating at about 60% of nameplate capacity. So therefore, there’s an opportunity to bring additional hydrocarbon into that facility to be processed without any significant increase in capital costs in terms of infrastructure.

So hence, brownfield, tieback opportunities. As I was talking to Amy, we’re uniquely positioned. We’ve been working with many operators in the Gulf Coast, same idea. Let’s look at your infrastructure, what assets you have around, what leases you have around your infrastructure, what other leases could potentially be tied back.

We have new technologies out there including pipe and pipe electric, trace-heating pipe that allows us to significantly increase the tieback radius by up to four times greater. So the circle that you would have drawn just two years ago around the infrastructure is the radius is now four times larger. And so there’s a lot of things that we’re going to be able to do. It will drive our subsea processing business as well in terms of subsea boosting.

So it’s exciting opportunities for us. And yes, the Gulf of Mexico, there’s lots of activity going on. I would not be surprised to also see potentially a greenfield project, a new greenfield hub being announced in the Gulf of Mexico this year as well.

Bertrand HodeeKepler Cheuvreux — Analyst

Thank you.

Operator

I would now like to turn the call back over to Matt Seinsheimer.

Matt SeinsheimerVice President, Investor Relations

This concludes our first-quarter conference call. A replay of the call will be available on our website beginning at approximately 8 p.m. British Summer Time today. If you have any further questions, please feel free to contact the investor relations team.

Thank you for joining us. Operator, you may now end the call.

Operator

[Operator signoff]

Duration: 68 minutes

Call participants:

Matt SeinsheimerVice President, Investor Relations

Doug PferdehirtChairman and Chief Executive Officer

Alf MelinChief Financial Officer

David AndersonBarclays Capital — Analyst

Guillaume DelabySociete Generale — Analyst

Marc BianchiCowen and Company — Analyst

Amy WongUBS –Analyst

George O’LearyTudor, Pickering, Holt & Co. — Analyst

Michael AlsfordCiti — Analyst

Waqar SyedATB Capital Markets — Analyst

Bertrand HodeeKepler Cheuvreux — Analyst

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Dream Impact Trust Reports First Quarter Results and the Release of Dream’s Impact Management System https://thomasb2b.com/dream-impact-trust-reports-first-quarter-results-and-the-release-of-dreams-impact-management-system/ https://thomasb2b.com/dream-impact-trust-reports-first-quarter-results-and-the-release-of-dreams-impact-management-system/#respond Tue, 31 Aug 2021 05:27:12 +0000 https://thomasb2b.com/?p=53 TORONTO–(BUSINESS WIRE)–DREAM IMPACT TRUST (TSX: MPCT.UN) (“Dream Impact”, “MPCT”, “we” or the “Trust”) today reported its financial results for the three months ended March 31, 2021 (“first quarter”). The Trust is pleased to announce the release of Dream’s inaugural impact report which outlines the Dream Impact Management System. This is a significant milestone for the […]]]>


TORONTO–()–DREAM IMPACT TRUST (TSX: MPCT.UN) (“Dream Impact”, “MPCT”, “we” or the “Trust”) today reported its financial results for the three months ended March 31, 2021 (“first quarter”).

The Trust is pleased to announce the release of Dream’s inaugural impact report which outlines the Dream Impact Management System. This is a significant milestone for the Trust as the framework provides a systematic and transparent approach to defining and measuring impact across the Trust’s portfolio. Each of the qualifying impact assets within our portfolio has defined impact pathways which are aligned with one of our three impact verticals: environmental sustainability and resilience, attainable and affordable housing, and inclusive communities, in addition to the United Nations Sustainable Development Goals. The Trust intends to benchmark its performance, on an annual basis, against specific targets that will conform to principles set out by reputable third parties. We intend to continuously monitor and update our progress on our pathways through an internal scorecard and governance process. The Dream Impact Management System will be independently verified by a third-party consultant over the next year. Dream’s Impact Report can be found here.

Just over six months ago, we formally announced the repositioning of the Trust into a pure-play impact investment vehicle,” said Michael Cooper, Portfolio Manager. “With the release of our impact management system today, we are reinforcing our commitment to manage the impact generated by the Trust’s portfolio in a systematic and transparent manner. With the Trust’s high-quality portfolio and robust impact framework, we are focused on growing the vehicle, strategically deploying capital and executing on our extensive development pipeline to generate attractive market returns for our unitholders and be a leader in this field. Since the announcement of our impact investing strategy, we are pleased the unit price has increased by 36% and are focused on reducing the discount further. With the release of our framework, progress on our 2020 business plan, and being the first publicly traded impact business in Canada, we are working towards continuing to narrow the value gap.”

Selected financial and operating metrics for the three months ended March 31, 2021 are summarized below:

For the three months ended March 31,

 

2021

 

2020

Condensed consolidated results of operations

 

 

 

 

Net income (loss)

 

$

(6,212)

 

$

 

5,152

Cash generated from operating activities

 

6,009

 

394

Net income (loss) per unit⁽¹⁾

 

(0.10)

 

0.07

Cash generated from operating activities per unit

 

0.09

 

0.01

 

 

 

 

 

Distributions declared and paid per unit

 

0.10

 

0.10

Units outstanding – end of period

 

64,885,017

 

69,121,551

Units outstanding – weighted average

 

64,956,996

 

69,076,108

In the first quarter, the Trust reported a net loss of $6.2 million, compared to net income of $5.2 million in the prior year. The change in earnings period-over-period was primarily driven by fair value adjustments and fluctuations in foreign exchange on our investment in the Virgin Hotels Las Vegas. In addition, the Trust recognized reduced income contribution from scheduled repayments on the lending portfolio and an increase in general and administrative expenses. Refer to the Trust’s individual segment discussion described below for further details.

Due to the composition of the Trust’s portfolio, we expect fluctuations in earnings period to period until our development pipeline is further built out. For details on project occupancies and development timelines, refer to Section 1.4 “Summary of Portfolio Assets” and Section 10.1 “Summary of Impact Investments” of the Management’s Discussion and Analysis (“MD&A”) for the three months ended March 31, 2021.

As at March 31, 2021, the Trust had $91.9 million of cash-on-hand. The Trust’s debt-to-asset value(1) as at March 31, 2021 was 16.1%, an increase relative to 13.6% as of December 31, 2020, driven by financing obtained in relation to income properties acquired in the period. The Trust’s debt-to-total asset value, inclusive of project-level debt(1) and assets within our development segment, including equity accounted investments, was 41.5% compared to 38.5% as at December 31, 2020.

Subsequent to quarter-end, the Trust amended the collateral base of its credit facility, providing an incremental $50 million in liquidity upon close. The facility proceeds will be used to acquire income properties which meet our impact criteria, and which will further contribute to the Trust’s sources of recurring income.

RESULTS HIGHLIGHTS BY SEGMENT

Development

In the first quarter, the development segment generated a net loss of $4.7 million, compared to net income of $4.1 million in the prior year. The net loss in the period was driven by a fair value write-down of $6.3 million on the Trust’s investment in the Empire Lakeshore project due to a change in profit assumptions on unsold inventory. The fair value write-down was partially offset by fair value gains on commercial development blocks at Zibi, as a result of milestones achieved in the period. Included in the comparative period was a foreign exchange gain of $4.4 million related to the Trust’s investment in the Virgin Hotels Las Vegas. The Empire Lakeshore project is a non-core legacy asset inherited by the Trust in 2014 and developed by a third-party. To date, proceeds of $45.5 million have been received from the project, inclusive of the Trust’s capital. We anticipate the timing for the remaining profit distributions from this project to be over the next 15 months.

In the three months ended March 31, 2021, the Trust contributed $3.6 million to its developments, primarily related to the West Don Lands and Zibi, which includes District Thermal, our net zero carbon heating-cooling system for the Zibi community. We anticipate further capital investments in the range of $70 million to $80 million for our development projects over the next two years.

In the first quarter, the newly converted and renovated Virgin Hotels Las Vegas reopened to the public after a year of renovations. The hotel, which has more than 1,500 rooms, a 60,000 square foot (“sf”) casino, a 4,500-seat concert hall, restaurants and other state-of-the-art amenities, had a successful opening weekend, exceeding expectations for occupancy considering in-place COVID-19 capacity restrictions. The Trust has a 10% interest in the hotel and has invested $52.8 million to date.

Subsequent to March 31, 2021, the Federation of Canadian Municipalities (“FCM”) announced a $23 million financing initiative through FCM’s Green Municipal Fund for the build-out of District Thermal. The District Thermal Energy System, created in partnership with Hydro Ottawa, utilizes post-industrial waste energy for heating and the Ottawa River for cooling, to recycle greenhouse gas (“GHG”) emissions for the entire 34-acre Zibi development, making the community one of the largest and most sustainable in Canada.

Subsequent to March 31, 2021, we achieved first tenant occupancy at Block 2-3 at Zibi. By the end of 2021, an aggregate of 240,000 sf of commercial GLA will transfer from our development segment to our recurring income segment, with an additional 35,500 sf of commercial GLA and 162 residential rental units coming online in 2022 (at 100% project level). With the Trust’s extensive development pipeline we will continue to grow our recurring income segment through construction execution, in addition to seeking new potential investment opportunities.

On April 7, 2021, the Trust obtained zoning settlement approval from the City of Toronto council for its 5.3-acre Lakeshore East development. The site, which was approved for density of 1.25 million sf, is located in close proximity to the Canary and Distillery Districts, and immediately adjacent to Waterfront Toronto’s Quayside property (former Sidewalk Labs site). The Trust’s NAV as of December 31, 2020 was based on $178/sf at a density of approximately 1 million sf. As a result of the settlement approval, the value of the development is expected to increase due to the additional density. The Trust has a 37.5% interest in the development.

Recurring Income

In the three months ended March 31, 2020, the recurring income segment generated a net loss of $0.2 million compared to net income of $2.7 million in the prior year, primarily as a result of reduced income contribution from scheduled loan repayments and fair value adjustments related to transaction costs on acquired income properties in the current period.

In the first quarter, the Trust acquired two income properties, 76 Stafford and 68-70 Claremont, located in downtown Toronto, for total consideration of $33.6 million, including transaction costs. The assets were acquired through cash-on-hand and mortgages payable with a weighted average term of five years. The Trust received favourable financing terms for both assets as the properties have significant impact potential and are aligned with the Trust’s environmental sustainability and resilience and inclusive communities verticals. Over the next 12 months, the Trust will undertake certain capital expenditures to better align the properties with its verticals, including waste diversion, reduction of GHG emissions and energy usage, and increased accessibility, in line with the Trust’s overall impact strategy.

The Trust currently has a growing recurring income portfolio, which includes over 1 million sf of commercial space as at March 31, 2021 (at 100% project-level). The Trust expects to continue to grow this segment by deploying capital to further acquire income properties that are in line with its impact strategy, in addition to completing the Trust’s build-to-hold assets from its development pipeline. Refer to Section 2.2, “Recurring Income” of our Q1 2021 MD&A for further details on build-to-hold assets that will contribute to the Trust’s recurring income over the next five years.

Other(2)

In the first quarter, the Other segment generated a net loss of $1.3 million compared to $1.6 million in the prior year. Segment results were not directly comparable to the prior year due to changes within deferred unit compensation and asset management fee expenses, offset by the Trust’s income tax expense (recovery) position in each period. Changes in deferred unit compensation expense are driven by fluctuations in the Trust’s unit price. The increase in asset management fees relative to prior year was driven by the settlement of fees in cash versus units. As of December 31, 2020, the Trust’s arrangement with Dream Asset Management Corporation (“DAM”) to satisfy management fees payable in units, converted at Net Asset Value (“NAV”)(1) and recorded for accounting purposes based on the trading price on the date of settlement, expired. Since then, the Trust and Dream have agreed to extend the agreement for an additional three-year period, subject to unitholder approval at the upcoming annual general meeting on June 7, 2021. Accordingly, the asset management fees for the first quarter were recorded without the above trading price discount, as unitholder approval for the fee settlement extension has not yet been obtained. However, management expects that once approved, there will be a recovery in the asset management fee expense in June 2021.

Unit Buyback Activity

From the inception of the Trust’s unit buyback program in December 2014 to May 3, 2021, the Trust has repurchased 14.4 million units for cancellation, for a total cost of $89.5 million.

As at May 3, 2021, the Trust’s asset manager, DAM, owns 17.1 million units of the Trust, inclusive of 1.3 million units acquired under the Trust’s distribution reinvestment plan, 2.0 million units acquired in settlement of the asset management fee and the remainder acquired on the open market for DAM’s own account. In aggregate, DAM owns 26.4% of the Trust as at May 3, 2021.

Cash Generated from Operating Activities – Continuing Operations

Cash generated from operating activities in the three months ended March 31, 2021 was $6.0 million compared with $0.4 million in the prior year period. The increase of $5.6 million was primarily due to a return on investment from the Trust’s Empire Lakeshore investment and fluctuations in non-cash working capital.

The table below provides a summary of the Trust’s portfolio as at March 31, 2021:

As at

March 31, 2021

 

December 31, 2020

Development

$

273,378

 

$

276,725

Recurring income

179,389

 

169,040

Other(2)

74,821

 

94,112

Total debt payable

105,348

 

88,392

Total assets

652,632

 

648,514

Cash

91,858

 

110,671

Footnotes

(1)

 

For the Trust’s definition of the following non-IFRS measures: debt-to-asset value, debt-to-total asset value inclusive of project-level debt, net income (loss) per unit, and NAV, please refer to the cautionary statements under the heading “Non-IFRS Measures” in this press release and the Non-IFRS Measures and Other Disclosures section of the Trust’s MD&A.

(2)

 

Includes other Trust amounts not specifically related to the segments.

Conference Call

Senior management from the Dream group of companies, will host a virtual investor session on May 18, 2021 at 10:30 am (ET) to provide an overview of our impact investing and ESG initiatives, with special guest, Richard Florida, Vice-Chair, Impact, one of the world’s leading urbanists. In addition, Dream will feature a virtual fireside chat with Jay-Ann Gilfoy, CEO of Vancity Community Investment Bank (VCIB), Canada’s first values-driven bank, to discuss the power and purpose of using capital for impact. To register for the event, please click on this link, insert your registration details and a Webex log-in link will be emailed to you. A taped replay of the virtual conference will be available for 90 days on the Dream website under the Calendar of Events. Please contact klefever@dream.ca with any questions.

About Dream Impact

Dream Impact is an open-ended trust dedicated to impact investing. Impact investing is the intention of creating measurable positive, social and environmental change in our communities and for our stakeholders, while generating attractive market returns. Dream Impact’s underlying portfolio is comprised of exceptional real estate assets reported under two operating segments: development and recurring income, that would not be otherwise available in a public and fully transparent vehicle, managed by an experienced team with a successful track record in these areas. The objectives of the Trust are to create positive and lasting impacts for our stakeholders through our three impact verticals: environmental sustainability and resilience, attainable and affordable housing, and inclusive communities; balance growth and stability of the portfolio, increasing cash flow, unitholders’ equity and NAV(1) over time; leverage access to an experienced management team and strong partnerships in order to generate attractive returns for investors; provide investors with a portfolio of high-quality real estate development opportunities, concentrated in core geographic markets; and to provide predictable cash distributions to unitholders on a tax-efficient basis. For more information, please visit: www.dreamimpacttrust.ca.

Non-IFRS Measures

The Trust’s condensed consolidated financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”). In this press release, as a complement to results provided in accordance with IFRS, the Trust discloses and discusses certain non-IFRS financial measures, including debt-to-asset value, debt-to-total asset value inclusive of project-level debt, net income (loss) per unit and NAV, as well as other measures discussed elsewhere in this release. These non-IFRS measures are not defined by IFRS, do not have a standardized meaning and may not be comparable with similar measures presented by other issuers. The Trust has presented such non-IFRS measures as management believes they are relevant measures of our underlying operating performance and debt management. Non-IFRS measures should not be considered as alternatives to unitholders’ equity, net income, total comprehensive income or cash flows generated from operating activities (continuing), or comparable metrics determined in accordance with IFRS as indicators of the Trust’s performance, liquidity, cash flow and profitability. For a full description of these measures and, where applicable, a reconciliation to the most directly comparable measure calculated in accordance with IFRS, please refer to the “Non-IFRS Measures and Other Disclosures” section in the Trust’s MD&A for the three months ended March 31, 2021.

Forward-Looking Information

This press release may contain forward-looking information within the meaning of applicable securities legislation, including statements relating to the Trust’s objectives and strategies to achieve those objectives, our beliefs, plans, estimates, projections and intentions, and similar statements concerning anticipated future events, future growth and drivers thereof, results of operations, performance, business prospects and opportunities, market conditions, acquisitions or divestitures, leasing transactions, future maintenance and development plans and costs, capital investments, financing, the availability of financing sources, income taxes, litigation and the real estate and lending industries in general, in each case, that are not historical facts; as well as statements regarding: the Trust’s focus on impact investing and expectations for formalizing its approach to impact management over the next year; the Trust’s impact benchmarking strategy and its ability to achieve its impact and sustainability goals; the Trust’s ability to become a leader in impact investing; the Trust’s plans and proposals for current and future development projects, including projected sizes, densities, uses, costs, timing for expected zoning approvals, development milestones and their expected sustainability impact; development timelines, including commencement of construction and/or revitalization of our development projects and completion and occupancy dates, including plans for 76 Stafford and 68-70 Claremont; anticipated returns from our development projects and the timing thereof, including expected returns from the Empire Lakeshore development; the Trust’s growth prospects; the Trust’s ability to generate attractive returns for unitholders; the Trust’s expectations to amend its credit facility to revise the collateral base and generate an additional $50 million in immediate liquidity for the Trust and the Trust’s expectation to deploy such liquidity to acquire income properties meeting its impact criteria; expectations for the Trust’s development segment to generate returns and the timing thereof; the Trust’s expectations to make further capital investments in the range of $70 million to $80 million to development projects over the next two years; anticipated effect of our developments on returns, earnings, profits and future cash flows as milestones are achieved; the extension of our agreement with our asset manager to settle fees in units; and the anticipated growth in our recurring income segment and its effect on the Trust’s operating cash flows and distributions. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond the Trust’s control, which could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. These risks and uncertainties include, but are not limited to: adverse changes in general economic and market conditions; the impact of the novel coronavirus (COVID-19) pandemic on the Trust; changes to the regulatory environment; environmental risks; local real estate conditions, including the development of properties in close proximity to the Trust’s properties and changes in real estate values; timely leasing of vacant space and re-leasing of occupied space upon expiration; dependence on tenants’ and borrowers’ financial condition; the uncertainties of acquisition activity; the ability to effectively integrate acquisitions; dependence on our partners in the development, construction and operation of our real estate projects; uncertainty surrounding the development and construction of new projects and delays and cost overruns in the design, development, construction and operation of projects; our ability to execute on our strategic plans and meet financial obligations; interest and mortgage rates and regulations; inflation; availability of equity and debt financing and foreign exchange fluctuations. All forward-looking information in this press release speaks as of May 3, 2021. The Trust does not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required by law. Additional information about these assumptions and risks and uncertainties is disclosed in filings with securities regulators filed on SEDAR (www.sedar.com). These filings are also available at the Trust’s website at www.dreamimpacttrust.ca.



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FNCB Bancorp, Inc. Announces First Quarter 2021 Net Income https://thomasb2b.com/fncb-bancorp-inc-announces-first-quarter-2021-net-income/ https://thomasb2b.com/fncb-bancorp-inc-announces-first-quarter-2021-net-income/#respond Tue, 31 Aug 2021 05:26:59 +0000 https://thomasb2b.com/?p=50 DUNMORE, Pa., April 30, 2021 (GLOBE NEWSWIRE) — FNCB Bancorp, Inc. (NASDAQ: FNCB; www.fncb.com), the parent company of Dunmore-based FNCB Bank (the “Bank”), (collectively, (“FNCB”) today reported net income of $5.8 million, or $0.29 per basic and diluted share, for the three months ended March 31, 2021, an increase of $3.7 million, or 182.7% from $2.1 million, […]]]>


DUNMORE, Pa., April 30, 2021 (GLOBE NEWSWIRE) — FNCB Bancorp, Inc. (NASDAQ: FNCB; www.fncb.com), the parent company of Dunmore-based FNCB Bank (the “Bank”), (collectively, (“FNCB”) today reported net income of $5.8 million, or $0.29 per basic and diluted share, for the three months ended March 31, 2021, an increase of $3.7 million, or 182.7% from $2.1 million, or $0.10 per basic and diluted share, for the same three months of 2020.  The increase in earnings comparing the first quarters of 2021 and 2020 was primarily due to a $2.2 million, or 24.2%, increase in net interest income, a $1.1 million, or 63.8%, increase in non-interest income, and a $1.0 million,  or 83.8%, reduction in the provision for loan and lease losses. These positive factors were partially offset by an $0.5 million, or 117.0%, increase in income tax expense, which was due to the higher level of pre-tax net income.   

Annualized return on average assets and annualized return on average equity for the three months ended March 31, 2021 was 1.61% and 15.27%, respectively, compared to 0.69% and 6.06%, respectively, for the three months ended March 31, 2020. Dividends declared and paid were $0.060 per share for the first quarter of 2021, a 9.1% increase compared to $0.055 per share for the same period of 2020. Year-to-date 2021 dividends equated to an annualized dividend yield of approximately 3.2% based on the closing stock price of $7.54 per share at March 31, 2021.

First quarter 2021 performance

  • First quarter net income increased $3.7 million, or 182.7%, to $5.8 million, or $0.29 per share in 2021 compared to $2.1 million, or $0.10 per share in 2020;
  • Yield on earnings assets (FTE) decreased 21 basis points to 3.85% in 2021 from 4.06% in 2020;
  • Cost of funds decreased 55 basis points to 0.34% in 2021 from 0.89% in 2020;
  • Net interest margin (FTE) increased 24 basis points to 3.59% in 2021, compared to 3.35% in 2020;
  • Provision for loan and lease losses decreased $1.0 million, or 83.8%;
  • Non-interest income increased $1.1 million, or 63.8%;
  • Non-interest expense decreased $34 thousand, or 0.47%; and
  • Efficiency ratio improved to 51.87% in 2021 compared to 66.46% in 2020.

Summary financial position at March 31, 2021 as compared to December 31, 2020:

  • Total assets grew $34.4 million, or 2.3%, to $1.500 billion at March 31, 2021 from $1.466 billion at December 31, 2020;
  • Loans, net of deferred loan fees and cost and unearned income, increased $30.8 million, or 3.4%, to $931.9 million at March 31, 2021 from $901.1 million at December 31, 2020;
  • Included in net loans were PPP loans outstanding, net of loan origination fees and costs, of $103.5 million at March 31, 2021;
  • Total deposits increased $35.4 million, or 2.7% to $1.323 billion at March 31, 2021 from $1.287 billion at December 31, 2020;
  • Non-performing loans as a percentage of total loans improved to 0.52% at March 31, 2021 from 0.62% at December 31, 2020; and
  • The Bank’s total risk-based capital and leverage ratios improved to 16.26% and 9.88%, respectively, at March 31, 2021, compared to 15.79% and 9.57%, respectively, at December 31, 2020.

“We are pleased with our strong first quarter 2021 results,” stated Gerard A. Champi, President and CEO. “PPP was once again a major focus for us this quarter with the government’s extension of this program on January 11, 2021. During the first quarter of 2021, the FNCB team assisted 540 business customers secure $59.0 million in additional funding under round two of the program. Additionally, loan origination fees recognized on the forgiveness of first round PPP loans contributed to our year-over-year earnings performance and margin improvement. We anticipate that the majority of outstanding PPP loans will be forgiven by the end of 2021 and earnings will continue to be favorably impacted by the additional fee recognition. We continued to see strong deposit growth, which was driven by the second round of PPP funding and additional fiscal stimulus payments, and were able to further reduce our funding costs. Most importantly, during the first quarter, we worked with health care providers to be able to secure and provide vaccines for our employees, as the health and safety of our FNCB family remains foremost,” concluded Champi. 

Impact of the COVID-19 pandemic

While the effects from the COVID-19 pandemic continue to impact national, regional and local economies, the Unites States economy has begun to show signs of recovering and with the availability and distribution of vaccines, governments have started to lift restrictions on businesses. All FNCB community offices are open, and while fully operational, are still operating under the pandemic preparedness plan. We continue to follow CDC and Commonwealth of Pennsylvania guidelines and take additional precautions to ensure the safety of our customers and our employees. Additionally, FNCB has worked with local health care providers to secure and offer vaccinations to all eligible employees.

While positive developments have occurred, we are keenly aware that FNCB’s business and consumer customers may continue to experience varying degrees of financial distress, as uncertainty related to the pandemic still exists. Should the number of cases rise, or new COVID-19 variant infections increase, additional economic restrictions could be mandated again. Commercial activity has improved, but has not returned to pre-pandemic levels, which may result in asset quality deterioration. Our commercial customer base includes businesses in industries such as hotel/lodging, restaurants, hospitality, and retail and commercial real estate, all of which have been significantly impacted by the COVID-19 pandemic. We continue to closely monitor customers within these industries as the economic recovery unfolds.

On December 27, 2020, another COVID-19 relief bill was signed into law that extended and modified several provisions of the PPP.  This included an additional allocation of $284 billion in funding. The SBA reactivated the PPP on January 11, 2021, and on January 19, 2021, FNCB began originating additional loans through the PPP. The SBA will continue to accept new applications for this new round of funding through May 31, 2021.  During the three months ended March 31, 2021, FNCB originated and received SBA approval and funding for 540 PPP loans totaling $59.0 million and received $2.8 million in related deferred loan origination fees associated with this funding.  During the three months ended March 31, 2021, FNCB received forgiveness for PPP loans totaling $30.2 million originated in 2020 under the first round of funding, with $1.3 million in PPP loan origination fees, net of loan origination costs, recognized into interest income upon forgiveness. PPP loans, net of deferred loan origination fees and costs, outstanding at March 31, 2021 were $103.5 million. FNCB expects to apply and receive forgiveness for the majority of these loans by the end of 2021.

Management expects the COVID-19 pandemic, as well as certain provisions of legislative and regulatory relief efforts, to continue to impact FNCB’s operations. The full impact is unknown, continues to evolve and will be contingent upon the speed and extent of recovery. At this time, management cannot determine or estimate the full magnitude of the impact and cannot provide any assurances as to how the crisis may ultimately affect FNCB’s results of operations or financial position. Management believes that FNCB’s balance sheet and capital position are strong, and we will continue to address any issues related to the pandemic in a safe and sound manner as they arise.

Summary Results 

Net interest income on a tax-equivalent basis increased $2.3 million, or 24.9%, to $11.6 million for the three months ended March 31, 2021 from $9.3 million for the comparable period of 2020. The improvement in tax-equivalent net interest income comparing the first quarters of 2021 and 2020 reflected a $1.2 million, or 10.6%, increase in tax-equivalent interest income, coupled with a $1.1 million, or 57.0%, reduction in interest expense. The increase in tax-equivalent interest income was largely due to higher volumes of earning assets and the recognition of PPP origination fees, partially offset by a decrease in the tax-equivalent yield on earning assets. Average earning assets increased $183.8 million, or  16.5%, to $1.296 billion for the first quarter of 2021 from $1.112 billion for the same quarter of 2020 due to higher loan and investment volumes. Comparing the first quarters of 2021 and 2020, average loans increased $86.9 million, or 10.4%, to $920.4 million from $833.5 million, respectively, and average investment securities increased $90.6 million, or 33.4%, to $362.0 million from $271.4 million, respectively. The increase in loan volumes primarily reflected the origination of PPP loans, net of forgiveness received, while the higher level of investment securities was due to the deployment of a portion of excess liquidity into the investment portfolio. The tax-equivalent yield on earning assets decreased 21 basis points to 3.85% for the first quarter of 2021 from 4.06% for the same quarter of 2020, which partially offset the positive impact on interest income from higher volumes of earning assets. The 57.0% decrease in interest expense was primarily due to a 55-basis point reduction in the cost of funds to 0.34% for the three months ended March 31, 2021 from 0.89% for the same three months of 2020. Specifically, the average rate paid for interest-bearing deposits decreased 49 basis points to 0.32% for the first quarter of 2021 from 0.81% for the same period of 2020. The average rates paid for interest-bearing demand and time deposits, which reflected the reduction in market interest rates, decreased 48 basis points and 58 basis points, respectively, comparing the three months ended March 31, 2021 and 2020. FNCB experienced strong deposit growth due to additional fiscal stimulus in the first quarter of 2021. Additionally, changing customer deposit preferences due to the reduction in economic activity and uncertainty related to the COVID-19 pandemic also contributed to the deposit growth, as well as factoring into deposit migration from time deposits into non-maturity deposits. Specifically, average interest-bearing deposits increased $177.9 million, or 21.7%, to $999.1 million from $821.2 million comparing the first quarters of 2021 and 2020, respectively. Average interest-bearing demand deposits increased $167.0 million, or 31.6%, to $695.8 million for the first quarter of 2021 compared to $528.8 million for the same quarter of 2020, while average savings deposits increased $20.4 million, or 21.7%, to $114.3 million from $94.0 million comparing the first quarters of 2021 and 2020, respectively. Conversely, average time deposits decreased $9.5 million to $188.9 million for the three months ended March 31, 2021 from $198.4 million for the same three months of 2020. FNCB used the excess liquidity from deposit growth to reduce its reliance on and repay higher-costing borrowed funds. As a result, average borrowed funds decreased $51.5 million, or 83.3%, to $10.3 million from $61.8 million comparing the first quarters of 2021 and 2020. FNCB’s tax-equivalent net interest margin improved 24 basis points to 3.59% for the first quarter of 2021 from 3.35% for the same quarter of 2020. The margin improvement was primarily impacted by activity related to PPP loans, coupled with reduction in funding costs. On a linked quarter basis, FNCB’s tax-equivalent net interest margin decreased 11 basis points from 3.70% for the fourth quarter of 2020.

Non-interest income increased $1.1 million, or 63.8%, to $2.8 million for the three months ended March 31, 2021 from $1.7 million for the same three months of 2020. The increase resulted primarily from a gain of $422 thousand from a bank-owned life insurance death benefit claim that was recognized in the first quarter of 2021, coupled with increases in net gains on equity securities and net gains on the sale of mortgage loans held for sale. Net gains on equity securities totaled $364 thousand for the first quarter of 2021, an increase of $350 thousand compared to $14 thousand for the same quarter of 2020. FNCB recorded net gains on the sale of mortgage loans of $224 thousand for the three months ended March 31, 2021, an increase of $128 thousand, or 133.3%, compared to $96 thousand for the same three-month period of 2020. Additionally, FNCB experienced increases in net gains on available-for-sale debt securities, loan related fees and deposit service charges. Net gains on the sales of available-for-sale securities totaled $213 thousand for the first quarter of 2021, an increase of $64 thousand, or 43.0%, compared to $149 thousand for the same quarter of 2020. Additionally, loan-related fees increased $77 thousand, or 137.5% to $133 thousand for the three months ended March 31, 2021, compared to $56 thousand for the same period of 2020, while an increase in debit card usage contributed to the $49 thousand, or 5.9%, increase in deposit service charges to $874 thousand from $825 thousand comparing the three months ended March 31, 2021 and 2020.

Non-interest expense was relatively constant at $7.2 million, decreasing by $34 thousand, or 0.5%, comparing the three months ended March 31, 2021 and 2020. The decrease primarily reflected reductions in salaries and benefits, advertising expenses and other operating expenses. Salaries and benefits decreased $193 thousand, or 4.9% to $3.7 million for the three months ended March 31, 2021, from $3.9 million for the same period in 2020, due primarily to the deferral of payroll-related loan origination costs associated with PPP loans. Advertising expenses decreased $90 thousand, or 43.5%, to $117 thousand for the first quarter of 2021 from $207 thousand for the same quarter of 2020, as FNCB reduced its advertising during the pandemic. Other operating expenses decreased $97 thousand, or 11.1%, to $775 thousand from $872 thousand comparing the three months ended March 31, 2021 and 2020. This decrease reflected reductions in OREO-related expenses, coupled with reductions in office expense, auto expense and travel and entertainment expense due to travel restrictions and a large percentage of staff working remotely. These expense reductions were offset by increases in regulatory assessments of $129 thousand, or 218.6%, data processing of $94 thousand, or 13.0%, professional fees of $71 thousand, or 37.8%, and occupancy expense of $55 thousand, or 9.9%, comparing the three months ended March 31, 2021 and 2020.  Regulatory assessments for the first quarter of 2020 were reduced by the remainder of the FDIC’s small bank assessment credit. There were no such assessment credits in 2021. The increase in data processing expense reflected added costs associated with employees working remotely, coupled with additions to FNCB’s digital banking services, while the increase in professional fees was primarily due to additional costs associated with FNCB’s annual audit. The increase in FNCB’s occupancy expense was largely due to higher snow removal costs. 

Asset Quality

Despite the economic uncertainty related to the pandemic, FNCB’s asset quality improved during the first quarter of 2021 as total non-performing loans decreased $739 thousand, or 13.2%, to $4.8 million, or 0.52% of total loans, at March 31, 2021 from $5.6 million, or 0.62% of total loans, at December 31, 2020. The improvement primarily reflected the payoff of one commercial relationship and the return of two other commercial loan relationships to accrual status. Year-over-year, non-performing loans decreased $3.8 million, or 43.5%, from $8.6 million, or 1.03% of total loans, at March 31, 2020. FNCB’s loan delinquency rate (total delinquent loans as a percentage of total loans) was 0.70% at March 31, 2021 compared to 0.99% at December 31, 2020 and 1.41% at March 31, 2020. Annualized net loans charged off, as a percentage of average loans, was 0.03% for the three months ended March 31, 2021 compared to 0.09% for the same three months of 2020. FNCB recorded a provision for loan and lease losses of $186 thousand for the first quarter of 2021 compared to $1.2 million for the first quarter of 2020. The larger provision recorded for the first quarter of 2020 was directly related to the economic disruption and uncertainty caused by the onset of COVID-19 pandemic. The allowance for loan and lease losses was $12.1 million, or 1.30% of total loans at March 31, 2021, compared to $11.9 million, or 1.33% of total loans at December 31, 2020 and $9.9 million, or 1.19%, at March 31, 2020. Excluding PPP loans, which are 100.0% guaranteed by the federal government, this ratio was 1.46% at March 31, 2021.

Financial Condition

Total assets increased $34.4 million, or 2.3%, to $1.500 billion at March 31, 2021 from $1.466 billion at December 31, 2020. The change in total assets primarily reflected increases in net loans and available-for-sale debt securities, which were partially offset by a decrease in cash and cash equivalents. Net loans increased $30.7 million, or 3.5%, to $919.9 million at March 31, 2021 from $889.2 million at December 31, 2020, primarily due to the origination and funding of a second round of PPP loans, partially offset by first-round PPP loan forgiveness. Available-for-sale debt securities increased $57.4 million, or 16.4%, to $407.4 million at March 31, 2021 from $350.0 million at December 31, 2020, which primarily reflected the deployment of a portion of FNCB’s excess liquidity into the investment portfolio. Conversely, the deployment caused cash and cash equivalents to decrease $57.3 million, or 36.7%, to $98.5 million at March 31, 2021 from $155.8 million at December 31, 2020. Total deposits increased $35.4 million, or 2.7%, to $1.323 billion at March 31, 2021 from $1.287 billion at December 31, 2020.  Specifically, non-interest bearing deposits increased $48.0 million, or 17.7%, due primarily to the second round of PPP loan funding and additional fiscal stimulus payments. Partially offsetting the increase in non-interest bearing deposits was a $12.7 million, or 1.2%, reduction in interest-bearing deposits reflecting the continued runoff and migration of certificates of deposit. Borrowed funds remained constant at $10.3 million at March 31, 2021 and December 31, 2020, comprised entirely of $10.3 million in FNCB’s junior subordinated debentures.

Total shareholders’ equity decreased $930 thousand, or 0.6%, to $154.9 million at March 31, 2021 from $155.9 million at December 31, 2020.  Contributing to the decrease in capital was a $5.6 million decrease in accumulated other comprehensive income related primarily to the depreciation in the fair value of FNCB’s available-for-sale debt securities, net of deferred taxes, and dividends declared and paid of $1.2 million for the three months ended March 31, 2021.  These reductions to capital were partially offset by net income for the three months ended March 31, 2021 of $5.8 million. FNCB Bank’s regulatory capital improved as the total risk-based capital ratio and Tier 1 leverage ratios increased to 16.26% and 9.88% at March 31, 2021 from 15.79% and 9.57% at December 31, 2020, respectively.

Availability of Filings

Copies of FNCB’s most recent Annual Report on Form 10-K and Quarterly Reports on form 10-Q will be provided upon request from: Shareholder Relations, FNCB Bancorp, Inc., 102 East Drinker Street, Dunmore, PA 18512 or by calling (570) 348-6419. FNCB’s SEC filings including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q are also available free of charge on the Investor Relations page of FNCB’s website, www.fncb.com, and on the SEC website at: http://www.sec.gov/edgar/searchedgar/companysearch.html 

About FNCB Bancorp, Inc.:

FNCB Bancorp, Inc. is the bank holding company of FNCB Bank. Locally-based for 110 years, FNCB Bank continues as a premier community bank in Northeastern Pennsylvania – offering a full suite of personal, small business and commercial banking solutions with industry-leading mobile, online and in-branch products and services. FNCB currently operates through 17 community offices located in Lackawanna, Luzerne and Wayne Counties and remains dedicated to making its customers’ banking experience simply better. For more information about FNCB, visit www.fncb.com

INVESTOR CONTACT:

James M. Bone, Jr., CPA
Executive Vice President and Chief Financial Officer               
FNCB Bank
(570) 348-6419
james.bone@fncb.com

FNCB may from time to time make written or oral “forward-looking statements,” including statements contained in our filings with the Securities and Exchange Commission (“SEC”), in our reports to shareholders, and in our other communications, which are made in good faith by us pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements with respect to FNCB’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond our control). The words “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “project,” “future” and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause FNCB’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the effect of the novel Coronavirus Disease 2019 (“COVID-19”) pandemic on FNCB and its customers, the Commonwealth of Pennsylvania and the United States, related to the economy and overall financial stability; government and regulatory responses to the COVID-19 pandemic; government intervention in the U.S. financial system including the effects of recent legislative, tax, accounting and regulatory actions and reforms, including, but not limited to, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the Tax Cuts and Jobs Act; political instability; the ability of FNCB to manage credit risk; weakness in the economic environment, in general, and within FNCB’s market area; the deterioration of one or a few of the commercial real estate loans with relatively large balances contained in FNCB’s loan portfolio; greater risk of loan defaults and losses from concentration of loans held by FNCB, including those to insiders and related parties; if FNCB’s portfolio of loans to small and mid-sized community-based businesses increases its credit risk; if FNCB’s ALLL is not sufficient to absorb actual losses or if increases to the ALLL were required; FNCB is subject to interest-rate risk and any changes in interest rates could negatively impact net interest income or the fair value of FNCB’s financial assets; if management concludes that the decline in value of any of FNCB’s investment securities is other-than-temporary could result in FNCB recording an impairment loss; if FNCB’s risk management framework is ineffective in mitigating risks or losses to FNCB; if FNCB is unable to successfully compete with others for business; a loss of depositor confidence resulting from changes in either FNCB’s financial condition or in the general banking industry; if FNCB is unable to retain or grow its core deposit base; inability or insufficient dividends from its subsidiary, FNCB Bank; if FNCB loses access to wholesale funding sources; interruptions or security breaches of FNCB’s information systems; any systems failures or interruptions in information technology and telecommunications systems of third parties on which FNCB depends; security breaches; if FNCB’s information technology is unable to keep pace with growth or industry developments or if technological developments result in higher costs or less advantageous pricing; the loss of management and other key personnel; dependence on the use of data and modeling in both its management’s decision-making generally and in meeting regulatory expectations in particular; additional risk arising from new lines of business, products, product enhancements or services offered by FNCB; inaccuracy of appraisals and other valuation techniques FNCB uses in evaluating and monitoring loans secured by real property and other real estate owned; unsoundness of other financial institutions; damage to FNCB’s reputation; defending litigation and other actions; dependence on the accuracy and completeness of information about customers and counterparties; risks arising from future expansion or acquisition activity; environmental risks and associated costs on its foreclosed real estate assets; any remediation ordered, or adverse actions taken, by federal and state regulators, including requiring FNCB  to act as a source of financial and managerial strength for the FNCB Bank in times of stress;  costs arising from extensive government regulation, supervision and possible regulatory enforcement actions; new or changed legislation or regulation and regulatory initiatives; noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations; failure to comply with numerous “fair and responsible banking” laws; any violation of laws regarding privacy, information security and protection of personal information or another incident involving personal, confidential or proprietary information of individuals; any rulemaking changes implemented by the Consumer Financial Protection Bureau; inability to attract and retain its highest performing employees due to potential limitations on incentive compensation contained in proposed federal agency rulemaking; any future increases in FNCB Bank’s FDIC deposit insurance premiums and assessments; and the success of FNCB at managing the risks involved in the foregoing and other risks and uncertainties, including those detailed in FNCB’s filings with the SEC.

FNCB cautions that the foregoing list of important factors is not all inclusive. Readers are also cautioned not to place undue reliance on any forward-looking statements, which reflect management’s analysis only as of the date of this report, even if subsequently made available by FNCB on its website or otherwise. FNCB does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of FNCB to reflect events or circumstances occurring after the date of this press release.

Readers should carefully review the risk factors described in the Annual Report and other documents that FNCB periodically files with the SEC, including its Form 10-K for the year ended December 31, 2020. 

 
 
FNCB Bancorp, Inc.
Selected Financial Data
                               
    Mar 31,     Dec 31,     Sept 30,     Jun 30,     Mar 31,  
    2021     2020     2020     2020     2020  
Per share data:                                        
Net income (fully diluted)   $ 0.29     $ 0.26     $ 0.20     $ 0.20     $ 0.10  
Cash dividends declared   $ 0.060     $ 0.055     $ 0.055     $ 0.055     $ 0.055  
Book value   $ 7.65     $ 7.70     $ 7.41     $ 7.19     $ 6.84  
Tangible book value   $ 7.65     $ 7.70     $ 7.41     $ 7.19     $ 6.84  
Market value:                                        
High   $ 8.94     $ 7.95     $ 6.93     $ 7.19     $ 8.54