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Frontier posted revenue growth in Q1 2024 for the first time in nearly a decade
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Fiber revenue now comprises more than 50% of its total revenue
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Frontier is preparing to capitalize on the Broadband Equity, Access and Deployment (BEAD) program for further expansion
Frontier entered this year with high expectations for its growth plan and so far, so good. In the first quarter of 2024, the company posted positive revenue growth for the first time in almost ten years.
Revenue in the first quarter came in at $1.46 billion, up 2% year over year. It may not seem like much but that's its fastest quarter of growth since 2015.
During its earnings call, Frontier CEO Nick Jeffery called the revenue shift “a major inflection point” for the company. And Jeffery made no mistake about what is driving the company’s growth story. You guessed it: fiber.
“It all starts with our clear strategy to build fiber, sell fiber, improve service for all our customers and increase operational efficiency,” he said.
Clearly, the fiber strategy has been playing out well. Fiber now accounts for more than 50% of Frontier’s revenue and 60% of its adjusted EBITDA.
In Q1, Frontier added 322,000 fiber passings and is "on track" to hit a total of 1.3 million in 2024. Fiber net adds came in at 88,000, more than offsetting copper losses to leave the company with 31,000 total broadband net additions.
Jeffery noted the “vast majority” of Frontier’s new customers come from cable. He also said the company hasn’t “really seen an impact” of fixed wireless access (FWA) in its fiber footprints, though the service does "nibble" at its copper base.
“Of course, broadband remains a competitive market. You know, we fight hard every single day,” he later added.
The company has grown its fiber customer base by nearly 60% since 2020, today with 2.1 million customers. Fiber now represents 70% of its total customer base. Frontier has reached 6.8 million fiber passings, or 68% of its ultimate goal to reach 10 million.
This year, Jeffery said the company is focused on driving three simple outcomes: “maintaining strong operational momentum, delivering revenue growth, and accelerating EBITDA."
Frontier looks to ACP, BEAD opportunities
Frontier has a relatively low exposure to the dying Affordable Connectivity Program (ACP). Only about 4% of its customers benefit from the program. However, Jeffery said there are other ACP customers out there that may find Frontier after the program ends.
This year the company started a promotional offer in certain parts of its footprint, providing 200 Mbps fiber internet for as low as $29.99 per month. That product was designed largely to “smooth out the transition from ACP,” Jeffery said. “We’re kind of prototyping what might work for those customers.”
When it comes to the Broadband Equity, Access and Deployment (BEAD) program, the strategy is a bit more aggressive.
CFO Scott Beasley said Frontier is “deeply involved in scaling up a team to go after BEAD in a disciplined but strong way.” That includes a newly built grants team and “a lot of data modeling.” According to Beasley, Frontier has already included BEAD eligible locations and adjacent areas into its build models.
It’s also begun outreach to some states and started the pre-qualification process with a handful of others. In terms of timing, it’s anybody's guess as to when BEAD money starts flowing. But Frontier is “ready for BEAD,” Beasley added. “We think it's an important program. We'll be disciplined on it. But we think that exciting way to expand our total addressable market.”
Q1 financials
Though consolidated revenue inched up year on year, net income fell from $3 million to $1 million.
Consumer fiber broadband ARPU grew 6% year over year. Frontier’s customer and ARPU growth drove an increase in fiber broadband revenue this quarter to $805 million, up from $729 million the year prior. Copper revenue fell from $689 million to $641 million.
Beasley attributed ARPU growth to three drivers: introducing faster speed tiers, price adjustments and expanding sales of value-added services. In Q1, over 60% of its new customers took speeds of one gig or faster, and nearly 50% of customers purchased at least one value added service (i.e. whole home Wi-Fi or premium tech support).
In the fourth quarter of 2023, Frontier achieved EBITDA growth for the first time in more than a decade. In Q1 of this year, it achieved 5% adjusted EBITDA growth year over year, the fastest quarter of growth since 2016. That amounted to $546 million of EBITDA, and $360 million of EBITDA from fiber products.
Regarding its overall revenue growth, Beasley said, “We feel good about the start to the year. We've said for Q2, we expect to be up year over year.”