Investor Presentation 4Q13

8/12/2019 Investor Presentation 4Q13

1/20

4th Quarter 2013 Earnings Conference Call

February 27, 2014


2/20

Safe Harbor Statement

Safe Harbor Statement

Windstream claims the protection of the safe-harbor for forward-looking statementscontained in the Private Securities Litigation Reform Act of 1995. Forward-lookingstatements are subject to uncertainties that could cause actual future events and results to

differ materially from those expressed in the forward-looking statements. Forward-lookingstatements include, but are not limited to, Windstreams 2014 guidance for revenue,adjusted OBIDA, adjusted capital expenditures, adjusted free cash flow, dividend payoutratio, and cash tax payments for 2014 and 2015. These statements, along with otherforward-looking statements, including statements regarding Windstreams business outlook,

current capital allocation strategy, capital expenditure levels in future periods, its currentdividend practice, and the companys ability to generate, and amount of, cash flows infuture periods, are based on estimates, projections, beliefs, and assumptions thatWindstream believes are reasonable but are not guarantees of future events and results. Forrisk factors that could cause actual results and events to differ materially from thoseexpressed, refer to Windstreams filings with the Securities and Exchange Commission.

Regulation G Disclaimer

This presentation includes certain non-GAAP financial measures. Reconciliations of these-

2

available on our website at www.windstream.com/investors.


3/20

Adjusted EPS Excludes Non-Operational Items

4Q13 2013

Reported EPS $.20 $.40

Non-operational items(1):

M&I, Restructuring expense andOther(2)

$.02 $.13

Non-cash ension income $.13 $.13

Adjusted EPS $.09 $.40

Excluding non-operational items, Adj. EPS was $.09 in 4Q and $.40 for 2013

(1) Presented on an after-tax basis(2) Includes early debt extinguishment fee ($65M for 2013) and an adjustment related to expense associated with the formation of

Windstream Holdings, Inc. ($4M in 4Q13 and $9M in 2013) 3


4/20

Windstream Participants

Jeff Gardner

Tony ThomasChief Financial Officer

Brent WhittingtonChief Operating Officer

SVP & Treasurer

4


5/20

2013 Highlights

Growing strategic revenue Strategic revenue now 73% of

total revenue and grew 2%

Maintaining margins Stable adjusted OIBDA

margins of 39%

Investing capital for

Invested ~ 2/3 of capex ongrowth initiatives

Improved maturity profile,lowered cash interest by $45Mand reduced debt by $210M

Generated $891M in 2013 FCF

Returnin ca ital to

5

to shareholdersshareholders


6/20

2014 Strategic Priorities

Improve business sales1

Become ONE Windstream across allenterprise systems

Invest in strategic capital initiatives3

6Goal: Drive revenue growth with stable, sustainable free cash flow


7/20

Windstream Year-over-Year Revenue Change

As strategic growth revenues become a greater percentage of our business andICC reform impact becomes smaller, we expect improved financial trends

As strategic growth revenues become a greater percentage of our business andICC reform impact becomes smaller, we expect improved financial trends

Expect significant improvement in switchedaccess / USF revenues beginning in 2014

$6,140

$5,988($63) ($54)

FY 2012 Revenue Strategic GrowthRevenue (1)

Switched Access /USF Revenue

Consumer Voice &Other

All Other (2) FY 2013 Revenue

7

arges mpac rom re orm s e n us; go ng orwar eintercarrier rate step-downs are much smaller

(1) Strategic growth areas include total business and consumer broadband revenue(2) All Other includes wholesale voice, data and miscellaneous, Other revenues and product sales excluding business and consumer broadband sales.


8/20

Business Strategy Delivering Solid Revenue and ARPU

Business Channel HighlightsBusiness Channel Highlights

Business Service Revenues

$917 $914 $913 $916 $920

($ in millions)

Business service ARPU of $642, up 8% y/y

Key Drivers

$398 $400 $405 $407 $412

,

Differentiated, personalized service

27 data centers

$354 $347 $342 $341 $341

Cloud, managed hosting, colocation

Carrier revenue up 1% due to fiber-to-the-tower installations

4Q12 1Q13 2Q13 3Q13 4Q13

Voice/Misc. Carrier Data & Integrated Services

8(1) Average business service revenue excluding carrier revenue per customer per month


9/20

Consumer Strategy Balances Profitability & Unit Growth

Consumer Channel HighlightsConsumer Channel Highlights

$334 328

Strong demand for faster speeds andvertical services

Consumer Service Revenues($ in millions)

Key Drivers

$191 $184 $180 $177 $173

318 65% of 4Q13 sales purchased faster

speeds

~34% of 4Q13 sales purchased a

$27 $27 $27 $27 $26

$116 $117 $120 $119 $119

vert ca serv ce secur ty, v rusprotection, back-up, tech-help)

Consumer BB ARPU increased 6% y/y

4Q12 1Q13 2Q13 3Q13 4Q13Video / Misc Broadband Voice & LD

u ure roa an grow r vers: Increasing addressable market by

~75k homes

9(1) Average consumer high speed Internet revenue per Internet customer per month

- nves men s expanavailability and improve BB speeds


10/20

Consistent Margins Even With Shifting Revenue Mix

40%

Consistent Adjusted OIBDA Margins

38.6%Windstreams culture of

disciplined expense

management has led to20%25%30%

35%

consistent OIBDA

margins of 38 40%

0%

5%

10%

15%

2010 20132011 2012

917 $924 $915

Adjusted OIBDATotal Cash Expenses

ost structureimprovements ledto sequential

improvement in

$617 $575 $576

4Q12 3Q13 4Q13

10

us e

4Q12 3Q13 4Q13


11/20

Capital Efficient Investing for Long-Term Success

Fiber network now spans 118,000 route miles

Results of 2013 Capital Investments of $812M

Built 3 new data centers; Windstream now has 27 data centers

Enhanced broadband network speeds and capabilities

Deployed fiber to over 2,000 towers during 2013; have completed 4,500 towers to datean ave current y un er construct on

Capex declining as

$161$187 $197 $190 $168 $170

$150$134

$62$80 $80 $66

$50$38

$36 Non-Recurring(FttT / Stimulus)

non-recurringprojects decrease

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13

Recurring Capex(in millions)

(1) Adjusted capex excludes the impact of integration capital expenditures which were $5M in 4Q13 and $29M in FY 2013 11

Long-term expectation for recurring capex to be within a range of

11-13% of revenue, inclusive of growth initiatives


12/20

Strong FCF Supports Capital Needs and Dividends

$576

Q413 Free Cash Flow of $213MQ413 Free Cash Flow of $213M

$213 $64

$170

$192 $1

$149

Q413Adj.

OIBDAAdj. Capex(1)

CashInterest

Cash TaxesFree Cash

FlowCash

Dividends

Free CashFlow AfterDividends

FY 2013 Free Cash Flow of $891M; Payout Ratio of 67%FY 2013 Free Cash Flow of $891M; Payout Ratio of 67%

$2,318

$891 $298

812

$609 $6

$594

12

FY 2013Adj.

OIBDA

Adj. Capex(1) CashInterest

Cash Taxes Free CashFlow

CashDividends

Free CashFlow After

Dividends

(1) Adjusted capex excludes the impact of integration capital expenditures which were $5M in 4Q13 and $29M in FY 2013


13/20

Continuing to Improve the Balance Sheet

DebtMaturityProfile(asof12/31/13)Debt maturity profile is well-positioned with $660M in revolver availability

$700

$2,032

$1,378

$1.25B revolver with

$660M in availability

$590 $387 $278 $590

$1,332$1,100

$850 $950

$502

$1,300

$100

$660Avail

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Thereafter

TermLoan UndrawnRevolver SrNotes

Reduced outstanding debt by 210M; ended the quarter with a revolver balance of 590M

Extended near-term maturities and improved liquidity position

Generated cash interest savin s of 45M oin forward

13


14/20

2014 Guidance

2014 Guidance

Expect revenue within the range of(2.5%) to 1% versus 2013 revenue

Capital Expenditures $800M - $850M

Adjusted Free Cash FlowPayout ratio

$775M - $885M68% - 78%

14

$ in millions Expect 2014 cash taxes of less than $30 million Adjusted Free Cash Flow defined as Adjusted OIBDA minus adjusted capex, cash interest and cash taxes


15/20

Appendix

15


16/20


17/20


18/20


19/20


20/20

Investor Presentation 4Q13

Documents

Transcript of Investor Presentation 4Q13