Transformation of nTelos to Sprint Affiliate Model nears Completion

Revenues Increase to $153.3 million

  Operating Income of $8.3 million

EDINBURG, Va., Aug. 02, 2017 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company ("Shentel") (NASDAQ:SHEN) announces financial and operating results for the three months ended June 30, 2017.

Consolidated Second Quarter Results

For the quarter ended June 30, 2017, the Company reported total revenues of $153.3 million, an increase of 17.6% compared to $130.3 million for the 2016 second quarter.  The second quarter of 2016 was the first quarter that included results of the nTelos acquisition and exchange transaction with Sprint completed on May 6, 2016.  While all segments reported revenue increases, the Wireless segment had the largest increase in the current quarter. The integration of nTelos' operations and the transition of its assets and customers is progressing ahead of schedule, and Shentel expects to complete both the migration of nTelos customers to the Sprint platform and its network upgrade by the end of the third quarter of 2017.

Wireless service revenues increased 24% as a result of the nTelos acquisition. Cable segment revenues increased 12.0% due to a 1.1% increase in average Revenue Generating Units (RGUs), video price increases to offset increases in programming costs, and new and existing customers selecting higher-speed data packages.  Wireline segment revenues increased 5.3% due to increases in fiber and access contracts.

Total operating expenses were $145.0 million in the second quarter of 2017 compared to $136.5 million in the prior year period.  Operating expenses in the second quarter of 2017 included $5.4 million of integration and acquisition costs associated with the nTelos acquisition and exchange transaction with Sprint.  An additional $1.7 million of costs were incurred to operate and support the nTelos back office and billing functions until customers can migrate to Sprint platforms.  This cost was included in cost of goods and services and selling, general and administrative expenses in the Wireless segment.

For the quarter ended June 30, 2017, the Company reported net loss of $0.1 million, compared to net loss of $7.0 million in the second quarter of 2016 representing an improvement of $6.9 million, or 99% over June 30, 2016. This improvement primarily relates to reductions in the integration and acquisition expenses, partially offset by an increase in depreciation and amortization, and higher interest on the increased balance of outstanding debt as a result of the nTelos acquisition.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization) increased 24% to $69.4 million in the second quarter of 2017 from $55.9 million in the second quarter of 2016. Continuing OIBDA (Adjusted OIBDA less the benefit received from the waived Sprint management fee) increased 21.0% to $60.3 million from $49.8 million in the second quarter of 2016.

During the second quarter of 2017, the Company announced the April 6, 2017 closing of its amended Affiliate agreement with Sprint, which expands its affiliate service territory with a population of 500,000 in the Parkersburg, WV; Huntington, WV and Cumberland, MD basic trading areas.  Including this expansion, Shentel has authorization to serve over 6 million POPs in the mid-Atlantic region as a Sprint PCS Affiliate.  Shentel has agreed to invest approximately $32 million over the next three years to upgrade and expand the existing wireless network in those regions.

President and CEO Christopher E. French commented, "Our second quarter results demonstrate continued momentum across the business, with revenue growth and improved Adjusted OIBDA in all segments. Our wireless business is driving our growth as we continue to efficiently execute the migration of nTelos customers and operations, which we expect to be completed by the end of the third quarter of 2017.  Additionally, we are pleased to have the opportunity to serve an expanded affiliate service territory through our amended affiliate agreement with Sprint, which will allow us to provide enhanced coverage for our subscribers through a broader presence in the Mid-Atlantic."

Wireless Segment

Second quarter wireless service revenues increased $20.8 million or 24.0%, primarily related to the impact of a full quarter of the addition of approximately 560,000 postpaid and prepaid customers from the nTelos acquisition.  Additionally, the segment benefited from a reduction in the postpaid management fees retained by Sprint as part of our amended affiliate agreement with Sprint.

Shentel serviced 732,664 wireless postpaid customers at June 30, 2017, up 2.1% over June 30, 2016, and up over 2.1% compared with the first quarter of 2017.  Second quarter postpaid churn was 2.0% for the total company and 1.5% in the Legacy area. The Company had a net loss of 3,450 postpaid customers in the quarter with the Legacy area adding 2,845. Tablets were only 9.5% of postpaid gross PCS subscriber additions for the quarter, down from 10.1% in the first quarter of 2017.

Shentel serviced 246,800 prepaid wireless customers at June 30, 2017, a decrease of 42,511 compared to the second quarter of last year.  This decrease includes the 24 thousand impact of Sprint defining the length of time an inactive customer would be carried in the customer counts and a 4,300 reduction related to the government's more stringent qualifications for the Assurance service.  Total second quarter prepaid churn was 5.5% and 5.4% in the Legacy area.  The Company has a net loss of 2,719 prepaid customers in the second quarter of 2017, with the Legacy area losing 134.  In the second quarter, Sprint purged approximately 4,300 Assurance customers that didn't meet the federal government's more stringent qualifications for service.

During the second quarter, the Company migrated 26,504 postpaid nTelos customers to Sprint's back office, for a total of 142,852 since the acquisition. As planned, the prepaid migration was completed in late December, and the outsourced prepaid billing arrangement was terminated. At the current pace, Shentel expects to complete migrating the remaining postpaid nTelos customers by the end of the third quarter 2017.

Second quarter Adjusted OIBDA in the Wireless segment was $58.2 million, an increase of 29.4% from the second quarter of 2016.  Continuing OIBDA in the Wireless segment was $49.0 million, up $10.1 million from the second quarter of 2016.

Mr. French continued, "During the past year we have more than doubled our wireless customer base with the addition of legacy nTelos customers and we are making solid progress with our ongoing efforts to improve our network and enhance our service offerings, so that we continue to attract new customers.  The wireless segment has long been a growth driver for our Company, and we are energized by the many opportunities we're seeing to bring our reliable coverage and comprehensive service plans to a growing audience of consumers."

Cable Segment

Service revenues in the Cable segment increased $2.7 million or 11.2% to $26.9 million, primarily due to 1.1% growth in RGUs (the sum of voice, data, and video users) to 132,287 as of June 30, 2017, video rate increases implemented in January 2017 to pass through programming cost increases, and new and existing customers selecting higher speed data access packages.  Operating expenses increased 2.5% or $0.6 million in the second quarter of 2017. Operating income was $3.7 million compared with $1.2 million in the prior year, primarily due to the continued transformation of our Cable segment from a video focus to broadband.

Adjusted OIBDA in the Cable segment for second quarter 2017 was $9.9 million, up 35.6% from $7.3 million in the second quarter of 2016.

"Access to high speed bandwidth is a priority among cable subscribers and our state-of-the-art network provides both the speed and the reliability that our customers demand.  This gives us a competitive advantage in attracting new subscribers and in meeting the needs of existing customers looking to upgrade their service packages," Mr. French stated.

Wireline Segment

Revenue in the Wireline segment increased 5.3% to $19.6 million in the second quarter of 2017, as compared to $18.6 million in the second quarter of 2016.  Carrier access and fiber revenue for the second quarter of 2017 was $13.0 million, an increase of 6.1% from the same quarter last year, primarily as a result of new fiber contracts. Increases in broadband service revenue offset the loss of regulated voice service revenue.  Operating expenses increased 5.6% or $0.8 million to $14.2 million for second quarter 2017, primarily due to costs to support new fiber contracts.

Adjusted OIBDA in the Wireline segment for second quarter 2017 was $8.6 million, as compared to $8.3 million in second quarter 2016.

Other Information

Capital expenditures were $30.2 million in the second quarter of 2017 compared to $39.6 million in the comparable 2016 period. To date, the company has spent or committed $92.3 or about 59% of the estimated 2017 capital budget.

Cash and cash equivalents as of June 30, 2017 were $59.8 million, compared to $36.2 million at December 31, 2016. Total outstanding debt at June 30, 2017 totaled $844.0 million, net of unamortized loan costs, compared to $829.3 million as of December 31, 2016.  At June 30, 2017, debt as a percent of total assets was 58.5%. The amount available to the Company through its revolver facility was $75.0 million.

Conference Call and Webcast

The Company will host a conference call and simultaneous webcast Wednesday, August 2, 2017, at 10:00 A.M. Eastern Time.

Teleconference Information:

August 2, 2017 10:00 A.M. (ET) 
Dial in number: 1-888-695-7639

Password: 59565247
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 10, 2017 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 portions of Pennsylvania, Maryland, Virginia, West Virginia, and portions of 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.

Non-GAAP Financial Measure

In managing our business and assessing our financial performance, management supplements the information provided by 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 by us as operating income (loss) before depreciation and amortization, adjusted to exclude the effects of:  certain non-recurring transactions; impairment of assets; impairment of assets gains and losses on asset sales; straight-line adjustments for the waived management fee by Sprint; amortization of the affiliate contract expansion intangible asset reflected as a contra revenue; actuarial gains and losses on pension and other post-retirement benefit plans; and share-based compensation expense.  Adjusted OIBDA should not be construed as an alternative to operating income as determined in accordance with GAAP as a measure of operating performance.  Continuing OIBDA is defined by us as Adjusted OIBDA, less the benefit received from the waived management fee by Sprint over the next approximately six-year period, showing Sprint's support for our acquisition and our commitment to enhance the network.

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 they facilitate comparisons of our operating performance from period to period and comparisons of our operating performance to that of 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 the following:

• they do not reflect capital expenditures;
• many of the assets being depreciated and amortized will have to be replaced in the future and Adjusted OIBDA 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 OIBDA 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 financial performance measures that supplement but do not replace the information reflected in our GAAP results.

The following table shows Adjusted OIBDA for the three and six months ended June 30, 2017 and 2016:

The following table reconciles 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, 2017 and 2016:

The following tables reconcile Adjusted OIBDA and Continuing OIBDA to operating income by major segment for the three and six months ended June 30, 2017 and 2016:

Supplemental Information

Subscriber Statistics

The following tables show selected operating statistics of the Wireless segment, including the effects of the nTelos acquisition and the exchange with Sprint on May 6, 2016 and  the acquisition of expansion area on April 6, 2017, as of the dates shown:

The June 30, 2016 numbers shown above include the following assets:

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

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

Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker.  The Company has three reportable segments, which the Company operates and manages as strategic business units organized by lines of business:  (1) Wireless, (2) Cable, and (3) Wireline.   A fourth segment, Other, primarily includes Shenandoah Telecommunications Company, the parent holding company.

The Wireless segment has provides digital wireless service to a portion of a multi-state area covering the region from Harrisburg, York and Altoona, Pennsylvania, to Harrisonburg, Virginia, south-central and western Virginia, West Virginia, and portions of Maryland, North Carolina, Kentucky and Ohio, as a Sprint PCS Affiliate. This segment also owns cell site towers built on leased land, and leases space on these towers to both affiliates and non-affiliated service providers throughout the same multi-state area described above.

The Cable segment provides video, internet and voice services in Virginia, West Virginia and Maryland, and leases fiber optic facilities throughout southern Virginia and West Virginia. It does not include video, internet and voice services provided to customers in Shenandoah County, Virginia.

The Wireline segment provides regulated and unregulated voice services, DSL internet access, and long distance access services throughout Shenandoah County and portions of Rockingham, Frederick, Warren and Augusta counties, Virginia. The segment also provides video and cable modem services in portions of Shenandoah County, and leases fiber optic facilities throughout the northern Shenandoah Valley of Virginia, northern Virginia and adjacent areas along the Interstate 81 corridor through West Virginia, Maryland and portions of central and southern Pennsylvania.

CONTACTS:



Shenandoah Telecommunications, Inc.Adele Skolits

CFO and VP of Finance

540-984-5161

Adele.skolits@emp.shentel.com



Or



John Nesbett/Jennifer Belodeau

Institutional Marketing Services (IMS)

203-972-9200

jnesbett@institutionalms.com

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