Cincinnati Bell Reports Fourth Quarter and Full Year 2018 Results

FULL YEAR HIGHLIGHTS

• Revenue totaled $1,378 million generating strong Adjusted EBITDA¹
  of $372 million – both in-line with financial guidance reflecting the
  merger with Hawaiian Telcom (closed on July 2, 2018)
• Operating income totaled $83 million, up $28 million year-over-year
• Hawaiian Telcom contributed revenue of $175 million and Adjusted
  EBITDA of $47 million
• Cincinnati Fioptics revenue totaled $341 million, up 10% from a year
  ago
• IT Services and Hardware Adjusted EBITDA totaled $63 million, up $24
  million from the prior year
• Cash provided by operating activities totaled $215 million, up $11
  million year-over-year
• Free cash flow² totaled $41 million, up $13 million
  year-over-year

FOURTH QUARTER 2018 HIGHLIGHTS

• Revenue of $399 million and Adjusted EBITDA of $108 million, up 3% and
  2% respectively compared to the third quarter of 2018
• Operating income totaled $24 million, up $10 million sequentially
• Fiber to the Premise (“FTTP”) internet net activations offset legacy
  declines in both Cincinnati and Hawaii, adding 4,700 and 2,100 FTTP
  internet subscribers, respectively
• Entertainment and Communications revenue of $252 million, consistent
  with the prior quarter
• IT Services and Hardware revenue of $154 million, up 9% compared to
  the third quarter of 2018

CINCINNATI–(BUSINESS WIRE)–Cincinnati Bell Inc. (NYSE:CBB), today announced financial results for
the full year and fourth quarter of 2018.

Leigh Fox, President and Chief Executive Officer of Cincinnati Bell,
commented, “The success of our expanded high-quality metro fiber assets
and ability to capitalize on Cincinnati Bell’s 140+ year history as a
communications provider continues to differentiate us from our
traditional peer group.

“I am proud of our strong financial performance and our ability to
execute on our strategy of building two complementary lines of business.
Looking ahead to 2019, our strategy is consistent – we will continue to
invest where we are winning. We remain focused on efficiently expanding
our fiber network and growing our IT Solutions business while
maintaining a disciplined approach to capital allocation,” Mr. Fox
concluded.

CONSOLIDATED RESULTS

• Consolidated revenue totaled $399 million for fourth quarter of 2018
  and $1,378 million for the full year
• Operating income was $24 million in the fourth quarter of 2018 and $83
  million for the full year
• Adjusted EBITDA totaled $108 million for the fourth quarter of 2018
  and $372 million for the full year
• Net losses of $30 million and $70 million for the fourth quarter and
  full year of 2018, respectively, were due to transaction and
  integration costs as well as increased interest expense due to
  financing the mergers with Hawaiian Telcom and OnX

Entertainment and Communications Segment

• Entertainment and Communications revenue totaled $252 million for the
  fourth quarter of 2018 and $853 million for the full year
  • Cincinnati revenue totaled $172 million in the fourth quarter and
    $694 million for the full year, both down 1% from the prior year
    due to legacy declines, excluding the one-time $5 million fiber
    build project in the second quarter of 2017
    • Fioptics revenue totaled $87 million for the fourth quarter
      and $341 million for the full year, up 8% and 10%,
      respectively, year-over-year
    • Fioptics internet subscribers totaled 239,000 at the end of
      the fourth quarter, up 12,400 compared to a year ago
    • Fioptics video subscribers totaled 139,900, down 6,600
      year-over-year
    • Fioptics is available to 611,000 homes and businesses, or
      approximately 75% of Greater Cincinnati which includes fiber
      to the premise (“FTTP”) and fiber to the node (“FTTN”)
    • In 2018, we passed 41,000 new addresses with FTTP, and now
      offer FTTP to 58% of Cincinnati’s total addressable market
  • Hawaii revenue totaled $80 million in the fourth quarter of 2018,
    consistent with the prior quarter, and contributed $159 million
    since the close of the merger on July 2, 2018
    • Consumer / SMB Fiber internet subscribers totaled 65,900, up
      1,900 compared to the previous quarter
    • Video subscribers were 48,800, consistent with the prior
      quarter
    • Consumer/SMB Fiber is available to approximately 221,500
      addresses on Oahu, covering approximately 68% of the island
• Adjusted EBITDA was $91 million for the fourth quarter of 2018 and
  $317 million for the full year, up $24 million and $40 million,
  respectively, due to contributions from Hawaiian Telcom

Cincinnati Bell’s continued investment in dense metro fiber has allowed
the Company to lock in fiber density value for its shareholders as
demand for faster data speed and broadband usage continues to accelerate.

IT Services and Hardware Segment

• IT Services and Hardware revenue totaled $154 million for the fourth
  quarter of 2018 and $551 million for the full year, up $22 million and
  $166 million year-over-year respectively due to contributions from OnX
  and Hawaiian Telcom
  • Consulting revenue totaled $45 million for the fourth quarter and
    $165 million for the full year, up $5 million and $76 million
    year-over-year, respectively
  • Cloud revenue was $26 million in the fourth quarter and $98
    million in 2018, up $3 million and $17 million, respectively,
    compared to the prior year
  • Communications revenue of $50 million in the fourth quarter and
    $179 million for the full year, up $10 million and $18 million
    year-over-year, respectively
  • Infrastructure Solutions revenue of $33 million in the fourth
    quarter and $109 million in 2018, up $4 million and $55 million,
    respectively
• Adjusted EBITDA was $20 million for the fourth quarter and $63 million
  for the full year, up $5 million and $24 million, respectively,
  including contributions from OnX

The company’s transformation from a traditional hardware reseller to a
service oriented IT solutions provider continues to generate momentum
across its expanded North American footprint, resulting in client
diversification and the ability to capitalize on significant higher
margin service revenue opportunities.

Cash Flow and Financial Position

• Cash provided by operating activities totaled $215 million for the
  full year of 2018, an increase of $11 million year-over-year
• Free cash flow totaled $41 million for the full year of 2018, compared
  to $28 million a year ago
• Liquidity of $207 million as of December 31, 2018, with no significant
  maturities until 2024
• Capital expenditures were $221 million for the full year of 2018,
  including $44 million for Hawaiian Telcom since the close of the
  merger on July 2, 2018
• Gross Net Operating Loss carryforward of $674 million as of December
  31, 2018

2019 Outlook

• Hawaiian Telcom is projected to contribute $350 million to $360
  million of revenue in 2019, growing Adjusted EBITDA year-over-year to
  $95 million to $100 million
• Additional insourcing initiatives from one of our largest customers is
  conservatively expected to decrease Adjusted EBITDA by $15 million to
  $20 million during 2019 as compared to the prior year
• Cincinnati Bell is providing the following guidance for 2019, which
  includes the assumptions previously described:

Conference Call/Webcast

Cincinnati Bell will host a conference call on Thursday, February 14,
2019 at 9:00 a.m. (ET) to discuss its financial results for the fourth
quarter and full year of 2018. A live webcast of the call will be
available via the Investor Relations section of www.cincinnatibell.com.
Callers can dial toll-free (800) 263-0877 or toll (323) 794-2094. A
taped replay of the conference call will be available starting at 12:00
p.m. (ET) on Thursday, February 14, 2019 until Thursday, February 28,
2019 at midnight ET. To access the telephone replay, please dial
toll-free (888) 203-1112 or toll (719) 457-0820, and then enter the
conference ID number 9120332. An archived webcast will be available for
replay following the conclusion of the live event in the Investor
Relations section of www.cincinnatibell.com.

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 about the beliefs, expectations and future
plans and strategies of the Company, are forward-looking statements.
Actual results may differ materially from those expressed in any
forward-looking statements. 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 union 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 possibility that the expected synergies and value
creation from our acquisition of Hawaiian Telcom will not be realized or
will not be realized within the expected time period; the risk that the
businesses of the Company and Hawaiian Telcom and other acquired
companies will not be integrated successfully; the risk that unexpected
costs will be incurred; and 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.

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. During the first quarter ended
March 31, 2018, the Company revised its methodology to calculate
Adjusted EBITDA to exclude stock-based compensation expense to align
more closely with its peer group. In addition, the presentation of
Adjusted EBITDA is adjusted for the amended accounting guidance adopted
by the Company on January 1, 2018 and implemented retrospectively, which
requires pension and postretirement benefit costs (excluding current
service cost component) to be reported below operating income. 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.

Contacts

Cincinnati Bell Inc.
Investor contact:
Kei
Lawson, 513-565-0510
Takeitha.Lawson@cinbell.com

Media contact:
Josh Pichler, 513-565-0310
Josh.Pichler@cinbell.com

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