Q314 Review by Barry Posternak

Q314 ended September 30th, and FRP reported their earnings results on November 5th. The report came

back showing declining trends in almost every significant metric.

Total revenue decreased by about $6M year-on-year. FRP’s access lines decreased 7.8% year-on-year, which was worse

than last quarter’s results of a 7.1% decline. It’s adjusted EBITDA decreased by $5.8M year-on-year, which was again

worse than last quarter’s decline of $2.2M.

This is also excluding strike related expenses totaling $17M. FRP improved its free cash flow, totaling $4M year-to-year only due to

cutting capex by $5M year-to-year. Future revenue was hurt due to customer requests to delay their projects. The GAAP total net loss

for this quarter was $38M.

FRP mentioned that there was an increase in overtime and medical claims causing its EBITDA to be lower than originally

expected. The company also has an outstanding debt of $930M, which is very large in comparison to free cash flow generation.

Going forward, the strike, which started on Oct. 17, remains the principal driver of the stock. In the present quarter, FRP will have a full

quarter strike impact rather than the partial quarter strike impact in the last quarter. The direct P&L is expected to be neutral due to offsetting

elements. Customer service will be negatively impacted and large clients will be hesitant to start any new projects knowing that FRP’s most

experienced employees are on strike.

Even though the result of the strike is the largest catalyst for driving the stock at the moment, FRP’s poor operational results will still have a

significant effect on the stock price due to large amount of debt on the balance sheet. It is interesting to note that that stock did not decline the day of their quarterly earnings report, but the proceeding two days after

saw a decline of 10.7%, apparently in reaction to the bad quarter.

I remain short the stock. I anticipate earnings will continue to decline as the strike continues and outside business

pressures from tough competition, continued poor customer service, and natural landline losses continue to

pressure revenue and earnings.