HickoryTech's CEO Discusses Q4 2011 Results - Earnings Call Transcript

HickoryTech Corporation ( HTCO)

Q4 2011 Earnings Call

March 7, 2012 10:00 AM ET

Executives

Jennifer Spaude – Director, IR

John Finke – President and CEO

David Christensen – SVP and CFO

Analysts

Justine Ruiss – Sidoti

Presentation

Operator

Good morning. My name is Lindsay, and I will be your conference operator today. At this time, I would like to welcome everyone to the HickoryTech’s Fourth Quarter 2011 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session.

(Operator Instructions)

Thank you. Ms. Jennifer Spaude, Director of Investor Relations and Marketing please go ahead.

Jennifer Spaude

Good morning, and thank you for joining HickoryTech’s fourth quarter 2011 earnings conference call. I’m Jennifer Spaude and with me today are John Finke, HickoryTech’s President and Chief Executive Officer; and David Christensen, Senior Vice President and Chief Financial Officer.

Before we get started, I will refer you to the Investor Relations section of our website at hickorytech.com where you will find a presentation for today’s call.

Our Safe Harbor statement is shown on slide 2 of the presentation. As a reminder information in today’s presentation contains certain statements and predictions that are not historical facts but are forward-looking in nature. These forward-looking statements are based on current expectations, estimates and projections about the industry in which HickoryTech operates and management’s beliefs and assumptions as of the time of this call.

Such forward-looking statements are subject to uncertainties. Actual results or outcomes may differ materially from those indicated or suggested by any forward-looking statements, whether as a result of new information, future events or otherwise.

You are cautioned not to place undue reliance on these forward-looking statements made during this conference call. These statements are not guarantees of future performance and involve certain risks, uncertainties and probabilities which are difficult to predict. There are many such risks and uncertainties which could affect the economy, our industry and our company in particular, some or all of which could affect future results. More information on our potential risks and uncertainties is available in the company’s recent filings with the Securities and Exchange Commission, including HickoryTech’s Annual Form 10-K report, which will be filed by here today, our Quarterly Form 10-Q reports, and Form 8-K reports.

Our presentation today also contains certain non-GAAP financial measures. Reconciliation of these non-GAAP measures to the most directly comparable GAAP measures are available in our presentation.

All participants are advised that the audio of this conference call is being broadcast and is being recorded for playback purposes. The audio will be archived on HickoryTech’s Investor Relations website for the next 30 days. Following management’s discussion, we will open the call to a Q&A session.

At this time, I’d like to turn the call over to John Finke.

John Finke

Thank you, Jennifer and good morning everyone. I’m pleased with our fourth quarter and fiscal 2011 financial results and the significant progress we’ve made during the year as we focused on our strategic initiatives and continued the company’s transformation. It was a year of making investments in the future of HickoryTech, as we met and exceeded our objectives for fiscal 2011. We remain committed to following our strategic plan and pursuing opportunities which will grow our company while increasing shareholder value.

I’m also pleased to report that we closed on our acquisition of IdeaOne on March 1st. The IdeaOne acquisition which was announced in early December further expands our business and broadband services and gives us immediate access to the Fargo market for future growth opportunities.

IdeaOne recorded fiscal 2011 revenue of $12.3 million the majority of which was from the business customer base. We expect the acquisition to be immediately accretive on a free cash flow basis and we plan to continue to invest in the Fargo market as the deep metro fiber based footprint is already connected to our regional fiber network. We will provide additional redundancy to the Fargo market with our broadband stimulus route from Greater Minnesota to Fargo in 2012.

The combination of these two networks is expected to provide additional growth opportunities for our company as we market our business services in this market. IdeaOne provides data networking, Internet, colocation, phone and hosting services to approximately 3600 business and residential customers in the Fargo area. The company has 40 employees and the acquisition will add 225 route miles of fiber to HickoryTech’s Regional Fiber Network. The network facilities which extend in fiber to 650 buildings include multiple 10 gigabit fiber rings, Ethernet capabilities, soft-switching infrastructure and colocation services.

Now looking at our fourth quarter and fiscal 2011 earnings. I’ll begin my remarks today with full year 2011 highlights and then Dave will take you through the financial details of our fourth quarter results as well as our guidance for 2012. 2011 revenue totaled $163.5 million up 1% from fiscal 2010. Within our Business sector fiber and data revenue totaled $45.9 million up 2% year-over-year. However, up 14% when you exclude the fiber construction project which added $5 million of onetime revenue in 2010.

We were able to replace a large one-time revenue stream from 2010 with organic recurring revenue in 2011. Our fiber and data revenue growth is driven by strong sales of high capacity data services within the wholesale market as well as continued growth in our retail business services.

We are actively engaged in coating wireless backhaul solutions and had some success in this area in 2011.

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