Shenandoah Telecommunications Company Reports Second Quarter 2018 Results

August 7, 2018 at 7:00 AM EDT
Company Achieves Triple Digit Operating Income Growth

Second Quarter 2018 Highlights

  • Second quarter operating revenue of $154.0 million

  • Second quarter operating income increased 126.6%

  • Second quarter net income of $7.8 million, resulting in net income of $0.16 per share

  • Second quarter Adjusted OIBDA of $69.8 million

Please refer to our Second Quarter 2018 Earnings Presentation Supplement available at https://investor.shentel.com/ for additional information, including matters that will be referenced during the Company’s conference call. Included in this release are certain non-GAAP financial measures that are not determined in accordance with US generally accepted accounting principles. Please refer to page 10 for additional information for non-GAAP measures.

EDINBURG, Va., Aug. 07, 2018 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel”) (NASDAQ: SHEN) announces financial and operating results for the three months ended June 30, 2018.

Second Quarter Results

Consolidated

  • Net income for the three months ended June 30, 2018 was $7.8 million, or $0.16 per share, compared with a net loss of $80 thousand, or less than $0.01 per share, in the second quarter of 2017. Effective January 1, 2018, the Company adopted the new revenue recognition standard, which requires the Company to record costs such as commissions for the national sales channel that are settled separately with Sprint as reductions of revenue. Previously these costs were recorded in costs of goods and services and in selling, general and administrative expense. Excluding the impact of this standard, second quarter net income was $5.9 million, or $0.12 per share, due to the deferral of certain commissions and device costs as required by the new revenue recognition standard.

  • Operating revenues for the three months ended June 30, 2018 were $154.0 million, a year over year increase of 0.5%, compared with $153.3 million for the three months ended June 30, 2017. Excluding the impact of the new revenue recognition standard, total operating revenues improved approximately $4.8 million, or 3.1%, driven by Wireless and Cable operations, partially offset by Wireline.

  • Operating expenses for the second quarter of 2018 were $135.3 million, compared with $145.0 million for the equivalent quarter in the prior year. Excluding the impacts of the new revenue recognition standard, operating expenses decreased $3.0 million, or 2.1% due to the absence of acquisition and integration costs related to the prior year nTelos integration, and a decrease in depreciation and amortization as assets acquired in the nTelos acquisition were retired. These declines were partially offset by increases in network and selling costs associated with the continued expansion of our networks to support the increase and demand for the subscriber base.

  • Operating income increased 126.6% in the second quarter of 2018 to $18.7 million from $8.3 million in the equivalent quarter of the prior year.

  • Adjusted OIBDA for the three months ended June 30, 2018 was $69.8 million, compared with $69.4 million for the three months ended June 30, 2017. Continuing OIBDA for the three months ended June 30, 2018 was $60.3 million, compared with $60.3 million for the three months ended June 30, 2017. The adoption of the new revenue recognition standard did not have an impact on adjusted OIBDA.

Wireless

  • Wireless operating revenues increased $2.2 million, excluding the impacts of adopting the new revenue recognition standard, compared with the three months ended June 30, 2017. The increase was driven by growth in postpaid and prepaid PCS subscribers, improvements in PCS average monthly churn for postpaid and prepaid, and was partially offset by a decline in average revenue per subscriber primarily related to promotions and discounts.

  • Wireless operating expenses for the three months ended June 30, 2018 were $92.5 million, compared with $107.8 million for the three months ended June 30, 2017, a year over year decrease of 14.2%.  Excluding the impacts of the new revenue recognition standard, operating expenses decreased $8.6 million due to the absence of acquisition and integration costs related to the prior year nTelos integration and a reduction in depreciation and amortization.  These decreases were partially offset by increases in network costs resulting from the completion of our 4G roll-out and expanded coverage area, as well as additional selling costs.

  • Wireless adjusted OIBDA for the three months ended June 30, 2018 was $60.1 million, compared with $58.2 million for the three months ended June 30, 2017. Wireless continuing OIBDA for the three months ended June 30, 2018 was $50.5 million, compared with $49.0 million from the three months ended June 30, 2017.

  • Shentel served 780,658 wireless postpaid retail PCS subscribers as of June 30, 2018, up 6.6% over the second quarter of 2017.  Postpaid churn for the three months ended June 30, 2018, was 1.67%, compared with 2.00% for the three months ended June 30, 2017. The Company had net additions of 5,797 postpaid customers in the three months ended June 30, 2018, compared with net additions of 15,514 for the three months ended June 30, 2017. As of the three months ended June 30, 2018, tablets and data devices were 14% of the postpaid base reflecting a net gain of 821 for these devices over the prior year.

Cable

  • Cable operating revenues for the second quarter of 2018 were $32.1 million, a year over year increase of 8.6% compared with $29.6 million for the three months ended June 30, 2017. The increase was primarily due to growth in broadband ARPU and rate increases for video services.

  • Cable operating expenses were flat at $26.0 million in the second quarter of both 2018 and 2017. The Company added 3,519 High Speed Data users and 790 voice users, and lost 3,448 video users.

  • Cable adjusted OIBDA for the three months ended June 30, 2018 was $12.3 million, an increase of 23.7%.

Wireline

  • Wireline operating revenues for the three months ended June 30, 2018 were $19.1 million, compared with $19.6 million for the prior year second quarter. The decrease in operating revenues was primarily attributable to migrating Wireless backhaul circuits from traditional circuit-switched facilities to more cost effective Voice Over IP ("VoIP") facilities.

  • Wireline operating expenses for the three months ended June 30, 2018 were $14.3 million, compared with $14.2 million for the quarter ended June 30, 2017, due primarily to costs to support new fiber contracts.

  • Wireline adjusted OIBDA for the three months ended June 30, 2018 was $8.0 million, compared with $8.6 million for the prior year equivalent quarter, primarily driven by the decline in revenue.

President and CEO Christopher E. French commented, “Shentel delivered solid second quarter results which included consolidated revenue growth, significantly enhanced operating income and improved net profitability. In the past year, our Wireless geographic coverage area has grown significantly with the expansion of our affiliate agreement with Sprint, and we are focused on driving distribution and activation levels in our expanded footprint. During the second quarter, our wireless segment achieved growth in both postpaid and prepaid customers, reflective of Shentel’s reputation as a provider of reliable coverage, excellent service and robust capacity which has positioned us as the ‘carrier of choice’ in the markets in which we operate."

“Revenues in our cable segment grew 9% in the second quarter, with increased RGUs, and we are encouraged by the opportunity to capture additional market share as consumers seek the high speed bandwidth and dependable service that our network provides.  In the Wireline segment we continued our focus on growth in our regional fiber network and transitioning our legacy telephone area from DSL service to cable modem service. Our focus on providing high quality, reliable service across all of our offerings remains the cornerstone of our service commitment to our customers and the foundation for our continued growth."

Network & Technology Highlights

  • Beginning in 2018, we began transitioning Wireless backhaul circuits from traditional circuit-switched facilities to VoIP facilities, in our Wireline operations. We expect to complete the transition by year-end 2018 and expect to realize a reduction in overall Wireless network costs beginning in 2019.

Other Information

  • Capital expenditures were $62.3 million in the six months ended June 30, 2018 compared with $68.8 million in the comparable 2017 period. The Company's estimated 2018 capital budget remains $163 million.

  • Cash and cash equivalents as of June 30, 2018 were $65.6 million, compared with $78.6 million at December 31, 2017.

  • Outstanding debt at June 30, 2018 totaled $799.9 million, net of unamortized loan costs, compared to $822.0 million as of December 31, 2017.  As of June 30, 2018, no amounts were outstanding under the revolving line of credit. The total leverage ratio as of June 30, 2018 was 2.89.

Conference Call and Webcast

Teleconference Information:

Date: August 7, 2018   
Time: 10:00 A.M. (ET)
Dial in number: 1-888-695-7639

Password: 1890438
 
Audio webcast: http://investor.shentel.com/

An audio replay of the call will be available approximately two hours after the call is complete, through August 16, 2018 by calling (855) 859-2056.

About Shenandoah Telecommunications

Shenandoah Telecommunications Company (Shentel) provides a broad range of diversified communications services through its high speed, state-of-the-art network to customers in the Mid-Atlantic United States.  The Company’s services include: wireless voice and data; cable video, internet and digital voice; fiber network and services; and regulated local and long distance telephone. Shentel is the exclusive personal communications service (“PCS”) Affiliate of Sprint in a multi-state area covering large portions of central and western Virginia, south-central Pennsylvania, West Virginia, and portions of Maryland, North Carolina, Kentucky, and Ohio.  For more information, please visit www.shentel.com.

This release contains forward-looking statements that are subject to various risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of unforeseen factors. A discussion of factors that may cause actual results to differ from management's projections, forecasts, estimates and expectations is available in the Company’s filings with the SEC. Those factors may include changes in general economic conditions, increases in costs, changes in regulation and other competitive factors.

CONTACTS:
Shenandoah Telecommunications, Inc.
James F. Woodward
Senior Vice President, Finance and Chief Financial Officer
540-984-5990
James.Woodward@emp.shentel.com

Or
John Nesbett/Jennifer Belodeau
Institutional Marketing Services (IMS)
203-972-9200
jnesbett@institutionalms.com

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

       
  Three Months Ended
June 30,
  Six Months Ended
June 30,
Operating revenues: 2018   2017   2018   2017
Service revenues and other $ 138,021     $ 150,308     $ 272,174     $ 300,829  
Equipment revenues 16,009     2,950     33,588     6,309  
Total operating revenues 154,030     153,258     305,762     307,138  
Operating expenses:              
Cost of services 49,134     48,416     98,476     97,193  
Cost of goods sold 15,166     4,965     30,971     9,949  
Selling, general and administrative 29,915     43,022     58,665     83,175  
Acquisition, integration and migration expenses     3,678         8,167  
Depreciation and amortization 41,117     44,925     84,604     89,729  
Total operating expenses 135,332     145,006     272,716     288,213  
Operating income (loss) 18,698     8,252     33,046     18,925  
Other income (expense):              
Interest expense (8,851 )   (9,389 )   (18,183 )   (18,489 )
Gain (loss) on investments, net 56     73     24     193  
Non-operating income (loss), net 783     1,224     1,804     2,479  
Income (loss) before income taxes 10,686     160     16,691     3,108  
Income tax expense (benefit) 2,862     240     4,038     847  
Net income (loss) $ 7,824     $ (80 )   $ 12,653     $ 2,261  
               
Net income (loss) per share:              
Basic $ 0.16     $     $ 0.26     $ 0.05  
Diluted $ 0.16     $     $ 0.25     $ 0.05  
Weighted average shares outstanding, basic 49,547     49,115     49,511     49,083  
Weighted average shares outstanding, diluted 50,070     49,115     50,029     49,850  
                       

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

       
  June 30,
 2018
  December 31,
 2017
       
Cash and cash equivalents $ 65,569     $ 78,585  
Other current assets 129,573     94,310  
Total current assets 195,142     172,895  
       
Investments 11,949     11,472  
Property, plant and equipment, net 668,339     686,327  
Intangible assets, net 396,908     380,979  
Goodwill 146,497     146,497  
Deferred charges and other assets, net 34,021     13,690  
Total assets $ 1,452,856     $ 1,411,860  
       
Total current liabilities 138,797     137,584  
Long-term debt, less current maturities 715,265     757,561  
Other liabilities 180,604     166,493  
Total shareholders' equity 418,190     350,222  
Total liabilities and shareholders' equity $ 1,452,856     $ 1,411,860  
               

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

     
    Six Months Ended
June 30,
    2018   2017
Cash Flows From Operating Activities:        
Net income (loss)   $ 12,653     $ 2,261  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Depreciation   71,637     76,695  
Amortization reflected as operating expense   12,967     12,950  
Amortization reflected as rent expense in cost of services   175     593  
Bad debt expense   758     886  
Stock based compensation expense, net of amount capitalized   3,407     2,418  
Waived management fee   18,606     18,107  
Deferred income taxes   (9,325 )   (11,954 )
(Gain) loss on investments   (24 )   (187 )
Net (gain) loss from patronage and equity investments   (1,552 )   (1,447 )
Amortization of long-term debt issuance costs   2,365     2,385  
Accrued interest and other   101     854  
Changes in assets and liabilities:        
Accounts receivable   (11,060 )   5,196  
Inventory, net   (503 )   25,049  
Income taxes receivable   16,722     (1,908 )
Other assets   3,909     (126 )
Accounts payable   2,486     (40,558 )
Income taxes payable       (435 )
Deferred lease   1,353     2,493  
Other deferrals and accruals   2,469     (6,478 )
Net cash provided by (used in) operating activities   127,144     86,794  
         
Cash Flows From Investing Activities:        
Acquisition of property, plant and equipment   (62,322 )   (68,766 )
Proceeds from sale of assets   447     269  
Cash distributions (contributions) from investments and other   (3 )   7  
Sprint expansion   (52,000 )   (6,000 )
Net cash provided by (used in) investing activities   (113,878 )   (74,490 )
         
Cash Flows From Financing Activities:        
Principal payments on long-term debt   (24,250 )   (12,125 )
Proceeds from revolving credit facility borrowings   15,000      
Proceeds from credit facility borrowings       25,000  
Principal payments on revolving credit facility   (15,000 )    
Taxes paid for equity award issuances   (2,032 )   (1,598 )
Net cash provided by (used in) financing activities   (26,282 )   11,277  
Net increase (decrease) in cash and cash equivalents   (13,016 )   23,581  
Cash and cash equivalents, beginning of period   78,585     36,193  
Cash and cash equivalents, end of period   $ 65,569     $ 59,774  
                 

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), effective January 1, 2018, using the modified retrospective method as discussed in Note 2, Revenue from Contracts with Customers. The following table identifies the impact that the application of Topic 606 had on the Company for the three months ended June 30, 2018:

   
  Three Months Ended June 30, 2018
  Topic 606 Impact - CONSOLIDATED
($ in thousands, except per share amounts) Prior to
Adoption of
Topic 606
Changes in
Presentation
(1)
Equipment
Revenue (2)
Deferred
Costs (3)
As Reported
6/30/2018
Service revenue and other $ 156,267   $ (20,881 ) $   $ 2,635   $ 138,021  
Equipment revenue 1,799     14,210     16,009  
Total operating revenues 158,066   (20,881 ) 14,210   2,635   154,030  
Cost of services 48,999       135   49,134  
Cost of goods sold 6,328   (5,372 ) 14,210     15,166  
Selling, general & administrative 45,579   (15,509 )   (155 ) 29,915  
Depreciation and amortization 41,117         41,117  
Total operating expenses 142,023   (20,881 ) 14,210   (20 ) 135,332  
Operating income 16,043       2,655   18,698  
Other income (expense) (8,012 )       (8,012 )
Income tax expense (benefit) 2,144       718   2,862  
Net income $ 5,887   $   $   $ 1,937   $ 7,824  
           
Earnings per share          
Basic $ 0.12       $ 0.04   $ 0.16  
Diluted $ 0.12       $ 0.04   $ 0.16  
Weighted average shares o/s, basic 49,547         49,547  
Weighted average shares o/s, diluted 50,070         50,070  
               

(1)     Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs, and to provide on-going support to their prepaid customers in our territory were historically recorded as expense when incurred. Under Topic 606, these amounts represent consideration payable to our customer, Sprint, and are recorded as a reduction of revenue. In 2017, these amounts were approximately $44.8 million for the national commissions, previously recorded in selling, general and administrative, $18.7 million for national device costs previously recorded in cost of goods and services, and $16.9 million for the on-going service to Sprint's prepaid customers, previously recorded in selling, general and administrative.

(2)     Costs incurred by the Company for the sale of devices under Sprint’s device financing and lease programs were previously recorded net against revenue. Under Topic 606, the revenue from device sales is recorded gross as equipment revenue and the device costs are recorded gross and reclassified to cost of goods and services. These amounts were approximately $63.8 million in 2017.

(3)     Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs, which historically have been expensed when incurred, are deferred and amortized against revenue over the expected period of benefit of approximately 21 to 24 months. In Cable and Wireline, installation revenues are recognized over a shorter period of benefit. The deferred balance as of June 30, 2018 is approximately $53.9 million and is classified on the balance sheet as current and non-current assets, as applicable.

The following table identifies the impact that the application of Topic 606 had on the Company's Wireless operations for the three months ended June 30, 2018:

   
  Three Months Ended June 30, 2018
  Topic 606 Impact - WIRELESS
($ in thousands) Prior to
Adoption of
Topic 606
Changes in
Presentation
(1)
Equipment
Revenue (2)
Deferred
Costs (3)
As Reported
6/30/2018
Service revenue $ 111,515   $ (20,881 ) $   $ 2,585   $ 93,219  
Equipment revenue 1,609     14,210     15,819  
Tower and Other revenue 3,244         3,244  
Total operating revenues 116,368   (20,881 ) 14,210   2,585   112,282  
Cost of services 33,488         33,488  
Cost of goods sold 6,244   (5,372 ) 14,210     15,082  
Selling, general & administrative 27,876   (15,509 )     12,367  
Depreciation and amortization 31,565         31,565  
Total operating expenses 99,173   (20,881 ) 14,210     92,502  
Operating income $ 17,195   $   $   $ 2,585   $ 19,780  
                               

(1)     Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs, and to provide on-going support to their prepaid customers in our territory were historically recorded as expense when incurred. Under Topic 606, these amounts represent consideration payable to our customer, Sprint, and are recorded as a reduction of revenue. In 2017, these amounts were approximately $44.8 million for the national commissions, previously recorded in selling, general and administrative, $18.7 million for national device costs previously recorded in cost of goods and services, and $16.9 million for the on-going service to Sprint's prepaid customers, previously recorded in selling, general and administrative.

(2)     Costs incurred by the Company for the sale of devices under Sprint’s device financing and lease programs were previously recorded net against revenue. Under Topic 606, the revenue from device sales is recorded gross as equipment revenue and the device costs are recorded gross and reclassified to cost of goods and services. These amounts were approximately $63.8 million in 2017.

(3)     Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs, which historically have been expensed when incurred, are deferred and amortized against revenue over the expected period of benefit of approximately 21 to 24 months. The deferred balance as of June 30, 2018 is approximately $53.9 million and is classified on the balance sheet as current and non-current assets, as applicable.

Non-GAAP Financial Measures

In managing our business and assessing our financial performance, management supplements the information provided by the financial statement measures prepared in accordance with GAAP with Adjusted OIBDA and Continuing OIBDA, which are considered “non-GAAP financial measures” under SEC rules.

Adjusted OIBDA is defined as operating income (loss) before depreciation and amortization, adjusted to exclude the effects of:  certain non-recurring transactions; impairment of assets; gains and losses on asset sales; actuarial gains and losses on pension and other post-retirement benefit plans; and share-based compensation expense, amortization of deferred costs related to the impacts of the adoption of Topic 606, and adjusted to include the benefit received from the waived management fee by Sprint. Continuing OIBDA is defined as Adjusted OIBDA, less the benefit received from the waived management fee by Sprint. Adjusted OIBDA and Continuing OIBDA should not be construed as an alternative to operating income as determined in accordance with GAAP as a measure of operating performance.

In a capital-intensive industry such as telecommunications, management believes that Adjusted OIBDA and Continuing OIBDA and the associated percentage margin calculations are meaningful measures of our operating performance.  We use Adjusted OIBDA and Continuing OIBDA as supplemental performance measures because management believes these measures facilitate comparisons of our operating performance from period to period and comparisons of our operating performance to that of our peers and other companies by excluding potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation expenses) as well as the other items described above for which additional adjustments were made.  In the future, management expects that the Company may again report Adjusted OIBDA and Continuing OIBDA excluding these items and may incur expenses similar to these excluded items.  Accordingly, the exclusion of these and other similar items from our non-GAAP presentation should not be interpreted as implying these items are non-recurring, infrequent or unusual.

While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the current period allocation of costs associated with long-lived assets acquired or constructed in prior periods, and accordingly may obscure underlying operating trends for some purposes.  By isolating the effects of these expenses and other items that vary from period to period without any correlation to our underlying performance, or that vary widely among similar companies, management believes Adjusted OIBDA and Continuing OIBDA facilitates internal comparisons of our historical operating performance, which are used by management for business planning purposes, and also facilitates comparisons of our performance relative to that of our competitors.  In addition, we believe that Adjusted OIBDA and Continuing OIBDA and similar measures are widely used by investors and financial analysts as measures of our financial performance over time, and to compare our financial performance with that of other companies in our industry.

Adjusted OIBDA and Continuing OIBDA have limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.  These limitations include, but are not limited to, the following:

  • they do not reflect capital expenditures;
  • they do not reflect the impacts of adoption of Topic 606;
  • many of the assets being depreciated and amortized will have to be replaced in the future and Adjusted and Continuing OIBDA do not reflect cash requirements for such replacements;
  • they do not reflect costs associated with share-based awards exchanged for employee services;
  • they do not reflect interest expense necessary to service interest or principal payments on indebtedness;
  • they do not reflect gains, losses or dividends on investments;
  • they do not reflect expenses incurred for the payment of income taxes; and
  • other companies, including companies in our industry, may calculate Adjusted and Continuing OIBDA differently than we do, limiting its usefulness as a comparative measure.

In light of these limitations, management considers Adjusted OIBDA and Continuing OIBDA as a financial performance measure that supplements but does not replace the information reflected in our GAAP results.

The adoption of the new revenue recognition standard did not impact Adjusted OIBDA.

The following tables reconcile Adjusted OIBDA and Continuing OIBDA to operating income, which we consider to be the most directly comparable GAAP financial measure, for the three and six months ended June 30, 2018 and 2017:

Adjusted OIBDA and Continuing OIBDA

                     
Three Months Ended June 30, 2018                    
                     
(in thousands)   Wireless   Cable   Wireline   Other   Consolidated
Operating Income   $ 19,780     $ 6,083     $ 4,793     $ (11,958 )   $ 18,698  
Impact of ASC topic 606   (924 )   4     (25 )       (945 )
Depreciation and amortization   31,565     6,179     3,240     133     41,117  
Share based compensation expense               1,370     1,370  
Benefit received from the waived management fee (1)   9,558                 9,558  
Amortization of intangibles netted in rent expense   93                 93  
Actuarial (gains) losses on pension plans               (82 )   (82 )
Adjusted OIBDA   60,072     12,266     8,008     (10,537 )   69,809  
Waived management fee   (9,558 )               (9,558 )
Continuing OIBDA   $ 50,514     $ 12,266     $ 8,008     $ (10,537 )   $ 60,251  
                                         


                     
Three Months Ended June 30, 2017                    
                     
(in thousands)   Wireless   Cable   Wireline   Other   Consolidated
Operating Income   $ 6,352     $ 3,696     $ 5,408     $ (7,204 )   $ 8,252  
Depreciation and amortization   35,551     6,090     3,155     129     44,925  
(Gain) loss on asset sales   21     (73 )   (3 )   (1 )   (56 )
Share based compensation expense   364     206     86     193     849  
Benefit received from the waived management fee (1)   9,167                 9,167  
Amortization of intangibles netted in rent expense   334                 334  
Temporary back office costs to support the billing operations through migration (2)   1,693             (8 )   1,685  
Integration and acquisition related expenses, and other   4,734             (446 )   4,288  
Adjusted OIBDA   58,216     9,919     8,646     (7,337 )   69,444  
Waived management fee   (9,167 )               (9,167 )
Continuing OIBDA   $ 49,049     $ 9,919     $ 8,646     $ (7,337 )   $ 60,277  
                                         

________________________________
 (1)    Under our amended affiliate agreement, Sprint agreed to waive the Management Fees charged on both postpaid and prepaid revenues, up to $4.2 million per month, until the total amount waived reaches approximately $255.6 million, which is expected to occur in 2022.
 (2)    Represents back office expenses required to support former nTelos subscribers that migrated to the Sprint back office.

Segment Results

                     
Three Months Ended June 30, 2018                    
(in thousands)   Wireless   Cable   Wireline   Other   Eliminations   Consolidated
External revenues                        
Service revenues   $ 93,219     $ 28,748     $ 5,301     $     $     $ 127,268  
Equipment revenues   15,819     144     46             16,009  
Other   2,000     2,122     6,631             10,753  
Total external revenues   111,038     31,014     11,978             154,030  
Internal revenues   1,244     1,097     7,134         (9,475 )    
Total operating revenues   112,282     32,111     19,112         (9,475 )   154,030  
Operating expenses                        
Cost of services   33,488     15,125     9,373     12     (8,864 )   49,134  
Cost of goods sold   15,082     63     20     1         15,166  
Selling, general and administrative   12,367     4,661     1,686     11,812     (611 )   29,915  
Depreciation amortization   31,565     6,179     3,240     133         41,117  
Total operating expenses   92,502     26,028     14,319     11,958     (9,475 )   135,332  
Operating income (loss)   $ 19,780     $ 6,083     $ 4,793     $ (11,958 )   $     $ 18,698  
                                                 


Three Months Ended June 30, 2017                    
(in thousands)   Wireless   Cable   Wireline   Other   Eliminations   Consolidated
External revenues                                        
Service revenues   $ 107,681     $ 26,883     $ 5,128     $     $     $ 139,692  
Equipment revenues   2,779     147     24             2,950  
Other   2,439     1,948     6,229             10,616  
Total external revenues   112,899     28,978     11,381             153,258  
Internal revenues   1,234     586     8,195         (10,015 )    
Total operating revenues   114,133     29,564     19,576         (10,015 )   153,258  
Operating expenses                        
Cost of services   33,497     14,920     9,329         (9,329 )   48,416  
Cost of goods sold   4,972     (9 )   1             4,965  
Selling, general and administrative   29,637     4,867     1,683     7,521     (686 )   43,022  
Acquisition, integration and migration expenses   4,124             (446 )       3,678  
Depreciation and amortization   35,551     6,090     3,155     129         44,925  
Total operating expenses   107,781     25,868     14,168     7,204     (10,015 )   145,006  
Operating income (loss)   $ 6,352     $ 3,696     $ 5,408     $ (7,204 )   $     $ 8,252  
                                                 

Supplemental Information

Subscriber Statistics

The following tables indicate selected operating statistics of Wireless, including Sprint subscribers, as of the dates shown:

             
    6/30/2018 (3)   12/31/2017 (4)   6/30/2017 (4)
Retail PCS Subscribers - Postpaid   780,658     736,597     732,664  
Retail PCS Subscribers - Prepaid (1)   252,054     225,822     222,038  
PCS Market POPS (000) (2)   7,023     5,942     6,047  
PCS Covered POP (000) (2)   5,908     5,272     5,137  
CDMA Base Stations (sites)   1,770     1,623     1,541  
Towers Owned   193     192     195  
Non-affiliate Cell Site Leases   192     192     205  

_______________________________________________________

(1) As of September 2017, the Company is no longer including Lifeline subscribers to be consistent with Sprint's policy. Historical customer counts have been adjusted accordingly.
(2) "POPS" refers to the estimated population of a given geographic area.  Market POPS are those within a market area which we are authorized to serve under our Sprint PCS affiliate agreements, and Covered POPS are those covered by our network. As of December 31, 2017, the data source for POPS is U.S. census data. Historical periods previously referred to other third party population data and have been recast to refer to U.S. census data.
(3) Beginning February 1, 2018 includes Richmond Expansion Area.
(4) Beginning April 6, 2017 includes Parkersburg Expansion Area.

     
    Three Months Ended
June 30,
    2018   2017
Gross PCS Subscriber Additions - Postpaid   44,629     40,408  
Net PCS Subscriber Additions (Losses) - Postpaid   5,797     15,514  
Gross PCS Subscriber Additions - Prepaid (1)   33,840     35,103  
Net PCS Subscriber Additions (Losses) - Prepaid (1)   1,863     7,267  
PCS Average Monthly Retail Churn % - Postpaid   1.67 %   2.00 %
PCS Average Monthly Retail Churn % - Prepaid (1)   4.25 %   4.92 %

_______________________________________________________

(1) As of September 2017, the Company is no longer including Lifeline subscribers to be consistent with Sprint's policy. Historical customer counts and churn % have been adjusted accordingly.

The subscriber statistics shown above include the following:

             
    February 1, 2018   April 6, 2017   May 6, 2016
    Richmond Expansion
Area
  Parkersburg
Expansion Area
  nTelos Area
PCS Subscribers - Postpaid   38,343     19,067     404,965  
PCS Subscribers - Prepaid (1)   15,691     4,517     154,944  
Acquired PCS Market POPS (000)   1,082     511     3,099  
Acquired PCS Covered POPS (000)   602     244     2,298  
Acquired CDMA Base Stations (sites) (2)   105         868  
Towers           20  
Non-affiliate Cell Site Leases           10  

_______________________________________________________

(1) Excludes Lifeline subscribers.

(2) As of June 30, 2018 we have shut down 107 overlap sites associated with the nTelos Area.

The following table shows selected operating statistics for Cable as of the dates shown:

             
    June 30,
2018
  December 31, 2017   June 30,
2017
Homes Passed (1)   185,016     184,910     184,834  
Customer Relationships (2)            
Video Users   42,483     44,269     46,014  
Non-video customers   35,773     33,559     31,291  
Total customer relationships   78,256     77,828     77,305  
Video            
Customers (3)   44,800     46,613     48,248  
Penetration (4)   24.2 %   25.2 %   26.1 %
Digital video penetration (5)   76.9 %   76.2 %   81.5 %
High-speed internet            
Available Homes (6)   185,016     184,910     184,834  
Users (3)   65,466     63,918     61,947  
Penetration (4)   35.4 %   34.6 %   33.5 %
Voice            
Available Homes (6)   185,016     182,379     182,303  
Users (3)   22,882     22,555     22,092  
Penetration (4)   12.4 %   12.4 %   12.1 %
Total Revenue Generating Units (7)   133,148     133,086     132,287  
Fiber Route Miles   3,426     3,356     3,301  
Total Fiber Miles (8)   133,702     122,011     114,366  
Average Revenue Generating Units   132,287     132,759     132,829  
                   

(1) Homes and businesses are considered passed (“homes passed”) if we can connect them to our distribution system without further extending the transmission lines.  Homes passed is an estimate based upon the best available information.

(2) Customer relationships represent the number of billed customers who receive at least one of our services.

(3) Generally, a dwelling or commercial unit with one or more television sets connected to our distribution system counts as one video customer.  Where services are provided on a bulk basis, such as to hotels and some multi-dwelling units, the revenue charged to the customer is divided by the rate for comparable service in the local market to determine the number of customer equivalents included in the customer counts shown above.

(4) Penetration is calculated by dividing the number of users by the number of homes passed or available homes, as appropriate.

(5) Digital video penetration is calculated by dividing the number of digital video users by total video users.  Digital video users are video customers who receive any level of video service via digital transmission.  A dwelling with one or more digital set-top boxes or digital adapters counts as one digital video user.

(6) Homes and businesses are considered available (“available homes”) if we can connect them to our distribution system without further extending the transmission lines and if we offer the service in that area.

(7) Revenue generating units are the sum of video, voice and high-speed internet users.

(8) Total Fiber Miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance.  For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

The following table shows selected operating statistics for Wireline as of the dates shown:

             
    June 30, 2018   December 31,
2017
  June 30, 2017
Telephone Access Lines   17,017     17,933     18,077  
Long Distance Subscribers   8,930     9,078     9,139  
Video Customers (1)   4,850     5,019     5,180  
DSL and Cable Modem Subscribers   14,694     14,665     14,605  
Fiber Route Miles   2,099     2,073     2,017  
Total Fiber miles (2)   157,008     154,165     146,967  

_______________________________________________________

(1) Wireline’s video service passes approximately 16,500 homes.

(2) Fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance.  For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

 

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Source: Shenandoah Telecommunications Co

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