Shenandoah Telecommunications Company Reports Third Quarter 2018 Results

November 6, 2018 at 7:00 AM EST

Record Quarterly Operating Income Increases to $28.3 million

Third Quarter 2018 Highlights

  • Operating revenue of $158.7 million
  • Operating income of $28.3 million
  • Net income of $15.5 million, resulting in net income of $0.31 per share
  • Adjusted OIBDA of $74.1 million

Please refer to our Third 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., Nov. 06, 2018 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel”) (NASDAQ: SHEN) announces financial and operating results for the three months ended September 30, 2018.

Third Quarter Results

Consolidated

  • Net income for the three months ended September 30, 2018 was $15.5 million, or $0.31 per share, compared with net income of $3.5 million, or $0.07 per share, in the third quarter of 2017. Effective January 1, 2018, the Company adopted the new revenue recognition standard (Topic 606) that 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 adopting Topic 606, third quarter net income was $11.8 million, or $0.24 per basic share, due to the deferral of certain commissions and device costs as required by the new revenue recognition standard.

  • Operating revenue for the three months ended September 30, 2018 was $158.7 million, representing a year-over-year increase of 4.6%, compared with $151.8 million for the three months ended September 30, 2017. Excluding the impact of adopting Topic 606, total operating revenue increased approximately $11.5 million, or 7.6%, driven by Wireless and Cable operations.

  • Operating expenses for the third quarter of 2018 were $130.4 million, compared with $142.3 million for the equivalent quarter in the prior year. Excluding the impact of adopting Topic 606, operating expenses decreased approximately $2.2 million, or 1.6% 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 increased demand from the growing subscriber base.

  • Operating income increased 199.0% in the third quarter of 2018 to $28.3 million from $9.5 million in the equivalent quarter of the prior year. Excluding the impact of adopting Topic 606, operating income increased approximately $13.7 million, or 144.8%.

  • Adjusted OIBDA for the three months ended September 30, 2018 was $74.1 million, compared with $66.9 million for the three months ended September 30, 2017. Continuing OIBDA for the three months ended September 30, 2018 was $64.5 million, compared with $57.9 million for the three months ended September 30, 2017. The adoption of Topic 606 did not have an impact on Adjusted OIBDA.

Wireless

  • Wireless operating revenue increased $3.6 million, compared with the three months ended September 30, 2017. Excluding the impact of Topic 606, wireless operating income increased 233%. 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 postpaid average revenue per subscriber related to promotions and discounts.

  • Wireless operating expenses for the three months ended September 30, 2018 were $88.7 million, compared with $105.8 million for the three months ended September 30, 2017, a year over year decrease of 16.1%.  Excluding the impact of adopting Topic 606, operating expenses decreased $7.6 million due to repricing Wireless backhaul circuits to market rates, migrating Wireless voice traffic from traditional circuit-switched facilities to more cost effective VoIP facilities, reducing back-office expenses that were required to support former nTelos subscribers that migrated to Sprint's back-office in 2017, and a reduction in acquisition, integration and migration expenses as the integration of the acquired nTelos business was completed during 2017.

  • Wireless Adjusted OIBDA for the three months ended September 30, 2018 was $62.6 million, compared with $54.2 million for the three months ended September 30, 2017. Wireless Continuing OIBDA for the three months ended September 30, 2018 was $53.0 million, compared with $45.2 million from the three months ended September 30, 2017.

  • Shentel served 785,537 wireless postpaid retail PCS subscribers as of September 30, 2018, an increase of 57,583 over the third quarter of 2017.  Postpaid churn for the three months ended September 30, 2018, was 1.84%, compared with 2.19% for the three months ended September 30, 2017. The Company had net additions of 4,879 postpaid customers in the three months ended September 30, 2018, compared with net losses of 4,710 for the three months ended September 30, 2017. As of the three months ended September 30, 2018, tablets and data devices were 8.5% of the postpaid base.

Cable

  • Cable operating revenue for the third quarter of 2018 was $32.2 million, representing a year over year increase of 7.0% compared with $30.1 million for the three months ended September 30, 2017. The growth in Cable revenue was primarily due to increases in broadband and voice subscribers and video rate increases. The adoption of Topic 606 did not have a significant impact on Cable operating revenue.

  • Cable operating expenses for the third quarter of 2018 were $26.3 million, a year over year decrease of 0.4% compared with $26.5 million for the three months ended September 30, 2017. The decrease was driven by a decline in video operating expenses. The Company lost 3,286 video users while adding 3,647 broadband users and 849 voice users, since September 30, 2017.

  • Cable Adjusted OIBDA for the three months ended September 30, 2018 was $11.8 million, compared with $10.0 million for the three months ended September 30, 2017.

Wireline

  • Wireline operating revenue for the three months ended September 30, 2018 was $19.6 million, compared with $19.9 million for the prior year third 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. The adoption of Topic 606 did not have a significant impact on Wireline operating revenue.

  • Wireline operating expenses for the three months ended September 30, 2018 were $14.5 million, compared with $14.8 million for the quarter ended September 30, 2017. This decrease was primarily attributable to a reduction in network costs.

  • Wireline Adjusted OIBDA for the three months ended September 30, 2018 was $8.5 million, compared with $8.4 million for the prior year equivalent quarter.

President and CEO Christopher E. French commented, "Throughout 2018, our focus has been on operational execution, particularly in terms of capitalizing on the competitive advantage provided by our state-of-the-art network and expanded wireless geographic area to drive distribution levels and activation rates in the markets we serve.  Our third quarter results built upon the momentum established in the first half of the year, as characterized by solid consolidated revenue growth, triple digit increases in operating income, significantly enhanced net profitability and improved adjusted OIBDA.

“In the Wireless segment, we saw growth in both postpaid and prepaid customers and believe our continued success adding customers is directly related to our ability to provide consistent coverage, optimal capacity and excellent service.  Our Cable segment showed continued progress as reflected in increased RGUs and 6% revenue growth.  As consumer expectations for high speed bandwidth and reliable service intensify, growing marketplace recognition of Shentel’s ability to deliver those capabilities allows us to attract new customers while also meeting the needs of existing customers seeking upgraded service plans.  The continued success and growth of our business relies on the satisfaction of our customers and we remain focused on providing reliable and robust network coverage and consistency across all offerings throughout our entire service footprint."

Network & Technology Highlights

  • Beginning in 2018, we began transitioning Wireless backhaul circuits from traditional circuit-switched facilities to VoIP facilities to reduce our overall network costs. We expect to complete the transition by year-end 2018.

Other Information

  • Capital expenditures were $92.3 million in the nine months ended September 30, 2018 compared with $109.4 million in the comparable 2017 period. Capital expenditures are expected to be between $145 million and $155 million for the full year 2018 depending on the timing of deliveries of equipment.  Delays in equipment deliveries could shift spending into 2019.

  • Outstanding debt at September 30, 2018 totaled $778.8 million, net of unamortized loan costs, compared to $822.0 million as of December 31, 2017.  As of September 30, 2018, no amounts were outstanding under the revolving line of credit. The total leverage ratio as of September 30, 2018 was 2.61.

  • We declared a cash dividend of $0.27 per share. The dividend is an increase of $0.01 per share or 3.8% over the 2017 dividend. The dividend will be payable November 30, 2018, to shareholders of record as of the close of business on November 12, 2018. The total payout to shareholders, before reinvestment, will be approximately $13.4 million. The Company has paid an annual dividend every year since 1960, when its predecessor Shenandoah Telephone Company declared its first dividend.

Conference Call and Webcast

Teleconference Information:

Date: November 6, 2018   
Time: 10:00 A.M. (ET)
Dial in number: 1-888-695-7639

Password: 1996245
 
Audio webcast: http://investor.shentel.com/

An audio replay of the call will be available approximately two hours after the call is complete, through December 6, 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
IMS Investor Relations
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
September 30,
  Nine Months Ended
September 30,
Operating revenue: 2018   2017   2018   2017
Service revenue and other $ 142,768     $ 149,788     $ 419,819     $ 450,617  
Equipment revenue 15,963     1,994     49,551     8,303  
Total operating revenue 158,731     151,782     469,370     458,920  
Operating expenses:              
Cost of services 47,886     48,552     146,362     145,744  
Cost of goods sold 15,036     7,282     46,007     17,232  
Selling, general and administrative 27,452     42,199     86,117     125,374  
Acquisition, integration and migration expenses     1,706         9,873  
Depreciation and amortization 40,028     42,568     124,632     132,297  
Total operating expenses 130,402     142,307     403,118     430,520  
Operating income (loss) 28,329     9,475     66,252     28,400  
Other income (expense):              
Interest expense (9,001 )   (9,823 )   (27,184 )   (28,312 )
Gain (loss) on investments, net 88     202     112     395  
Non-operating income (loss), net 966     1,003     2,770     3,482  
Income (loss) before income taxes 20,382     857     41,950     3,965  
Income tax expense (benefit) 4,848     (2,677 )   10,207     (1,830 )
Net income (loss) $ 15,534     $ 3,534     $ 31,743     $ 5,795  
               
Net income (loss) per share, basic and diluted:              
Basic net income (loss) per share $ 0.31     $ 0.07     $ 0.64     $ 0.12  
Diluted net income (loss) per share $ 0.31     $ 0.07     $ 0.63     $ 0.12  
Weighted average shares outstanding, basic 49,559     49,133     49,527     49,100  
Weighted average shares outstanding, diluted 50,117     49,959     50,044     49,869  
                       

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

               
  September 30,
 2018
  December 31,
 2017
               
Cash and cash equivalents $ 75,207     $ 78,585  
Other current assets 130,858     94,310  
Total current assets 206,065     172,895  
       
Investments 12,296     11,472  
Property, plant and equipment, net 669,709     686,327  
Intangible assets, net 381,537     380,979  
Goodwill 146,497     146,497  
Deferred charges and other assets, net 53,723     13,690  
Total assets $ 1,469,827     $ 1,411,860  
       
Total current liabilities 137,615     137,584  
Long-term debt, less current maturities 694,045     757,561  
Other liabilities 193,182     166,493  
Total shareholders’ equity 444,985     350,222  
Total liabilities and shareholders’ equity $ 1,469,827     $ 1,411,860  
               


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


    Nine Months Ended
September 30,
    2018   2017
Cash flows from operating activities:        
Net income (loss)   $ 31,743     $ 5,795  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Depreciation   106,002     113,437  
Amortization   18,630     18,860  
Amortization reflected as rent expense in cost of services   372     2,173  
Bad debt expense   1,362     1,479  
Stock based compensation expense, net of amount capitalized   4,578     3,053  
Waived management fee   28,164     27,068  
Deferred income taxes   (1,989 )   (12,251 )
(Gain) loss on investments   (112 )   (308 )
Net (gain) loss from patronage and equity investments   (2,300 )   (2,315 )
Amortization of long-term debt issuance costs   3,472     3,572  
Accrued interest and other   205     1,633  
Changes in assets and liabilities:        
Accounts receivable   (5,492 )   6,418  
Inventory, net   741     31,604  
Income taxes receivable   14,932     (8,704 )
Other assets   (13,393 )   (162 )
Accounts payable   (1,913 )   (30,795 )
Income taxes payable       (435 )
Deferred lease   4,159     3,729  
Other deferrals and accruals   (361 )   (5,146 )
Net cash provided by (used in) operating activities   188,800     158,705  
         
Cash flows from investing activities:        
Acquisition of property, plant and equipment   (92,309 )   (109,435 )
Proceeds from sale of assets   540     356  
Cash distributions (contributions) from investments and other   (1 )   4  
Sprint expansion   (52,000 )   (6,000 )
Net cash provided by (used in) investing activities   (143,770 )   (115,075 )
         
Cash flows from financing activities:        
Principal payments on long-term debt   (46,375 )   (24,250 )
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   (2,033 )   (5,106 )
Net cash provided by (used in) financing activities   (48,408 )   (4,356 )
Net increase (decrease) in cash and cash equivalents   (3,378 )   39,274  
Cash and cash equivalents, beginning of period   78,585     36,193  
Cash and cash equivalents, end of period   $ 75,207     $ 75,467  
                 

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 September 30, 2018:

   
  Three Months Ended September 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
09/30/2018
Service revenue and other $ 161,076   $ (23,174 ) $   $ 4,866   $ 142,768  
Equipment revenue 2,178     13,785     15,963  
Total operating revenue 163,254   (23,174 ) 13,785   4,866   158,731  
Cost of services 48,001       (115 ) 47,886  
Cost of goods sold 7,870   (6,619 ) 13,785     15,036  
Selling, general & administrative 44,164   (16,555 )   (157 ) 27,452  
Depreciation and amortization 40,028         40,028  
Total operating expenses 140,063   (23,174 ) 13,785   (272 ) 130,402  
Operating income (loss) 23,191       5,138   28,329  
Other income (expense) (7,947 )       (7,947 )
Income tax expense (benefit) 3,486       1,362   4,848  
Net income (loss) $ 11,758   $   $   $ 3,776   $ 15,534  
           
Earnings (loss) per share          
Basic $ 0.24       $ 0.07   $ 0.31  
Diluted $ 0.23       $ 0.08   $ 0.31  
Weighted average shares outstanding, basic 49,559         49,559  
Weighted average shares outstanding, diluted 50,117         50,117  
               
(1) Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs for both postpaid and prepaid, 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 postpaid 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 and related costs from device sales are recorded gross. 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 53 months. In Cable and Wireline, installation revenues are recognized over a period of approximately 10-11 months. The deferred balance as of September 30, 2018 is approximately $71.9 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 September 30, 2018:


  Three Months Ended September 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
09/30/2018
Service revenue $ 114,615   $ (23,174 ) $   $ 4,858   $ 96,299  
Equipment revenue 1,881     13,785     15,666  
Tower and other revenue 4,134         4,134  
Total operating revenue 120,630   (23,174 ) 13,785   4,858   116,099  
Cost of services 32,253         32,253  
Cost of goods sold 7,774   (6,619 ) 13,785     14,940  
Selling, general & administrative 27,746   (16,555 )     11,191  
Depreciation and amortization 30,363         30,363  
Total operating expenses 98,136   (23,174 ) 13,785     88,747  
Operating income (loss) $ 22,494   $   $   $ 4,858   $ 27,352  
                               
(1) Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs for both postpaid and prepaid, 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 postpaid 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 and related costs from device sales are recorded gross. 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 53 months. The deferred balance as of September 30, 2018 is approximately $71.9 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 months ended September 30, 2018 and 2017:

Adjusted OIBDA and Continuing OIBDA

                     
Three Months Ended September 30, 2018                    
(in thousands)   Wireless   Cable   Wireline   Other   Consolidated
Operating income   $ 27,352     $ 5,834     $ 5,122     $ (9,979 )   $ 28,329  
Impact of ASC topic 606   (4,868 )   (172 )   (77 )       (5,117 )
Depreciation and amortization   30,363     6,102     3,435     128     40,028  
Share-based compensation expense               1,171     1,171  
Benefit received from the waived management fee (1)   9,558                 9,558  
Amortization of intangibles netted in rent expense   197                 197  
Actuarial (gains) losses on pension plans               (82 )   (82 )
Adjusted OIBDA   62,602     11,764     8,480     (8,762 )   74,084  
Waived management fee   (9,558 )               (9,558 )
Continuing OIBDA   $ 53,044     $ 11,764     $ 8,480     $ (8,762 )   $ 64,526  
                                         


                     
Three Months Ended September 30, 2017                    
(in thousands)   Wireless   Cable   Wireline   Other   Consolidated
Operating income   $ 6,745     $ 3,626     $ 5,089     $ (5,985 )   $ 9,475  
Depreciation and amortization   32,929     6,192     3,249     198     42,568  
(Gain) loss on asset sales   193     (19 )       (10 )   164  
Share-based compensation expense   277     172     73     118     640  
Benefit received from the waived management fee (1)   8,961                 8,961  
Amortization of intangibles netted in rent expense   1,580                 1,580  
Temporary back-office costs to support the billing operations through migration (2)   1,209                 1,209  
Integration and acquisition related expenses, and other   2,292             15     2,307  
Adjusted OIBDA   54,186     9,971     8,411     (5,664 )   66,904  
Waived management fee   (8,961 )               (8,961 )
Continuing OIBDA   $ 45,225     $ 9,971     $ 8,411     $ (5,664 )   $ 57,943  
                                         
_______________________________________________________
(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 September 30, 2018                    
(in thousands)   Wireless   Cable   Wireline   Other   Eliminations   Consolidated
External revenue                        
Service revenue   $ 96,299     $ 28,578     $ 5,443     $     $     $ 130,320  
Equipment revenue   15,666     234     63             15,963  
Other   2,871     2,104     7,473             12,448  
Total external revenue   114,836     30,916     12,979             158,731  
Internal revenue   1,263     1,266     6,643         (9,172 )    
Total operating revenue   116,099     32,182     19,622         (9,172 )   158,731  
Operating expenses                        
Cost of services   32,253     14,837     9,266     (12 )   (8,458 )   47,886  
Cost of goods sold   14,940     78     19     (1 )       15,036  
Selling, general and administrative   11,191     5,331     1,780     9,864     (714 )   27,452  
Depreciation and amortization   30,363     6,102     3,435     128         40,028  
Total operating expenses   88,747     26,348     14,500     9,979     (9,172 )   130,402  
Operating income (loss)   $ 27,352     $ 5,834     $ 5,122     $ (9,979 )   $     $ 28,329  
                                                 


                     
Three Months Ended September 30, 2017                    
(in thousands)   Wireless   Cable   Wireline   Other   Eliminations   Consolidated
External revenue                        
Service revenue   $ 107,395     $ 26,934     $ 5,126     $     $     $ 139,455  
Equipment revenue   1,742     219     33             1,994  
Other   2,129     1,937     6,267             10,333  
Total external revenue   111,266     29,090     11,426             151,782  
Internal revenue   1,239     999     8,425         (10,663 )    
Total operating revenue   112,505     30,089     19,851         (10,663 )   151,782  
Operating expenses                        
Cost of services   33,825     14,858     9,796         (9,927 )   48,552  
Cost of goods sold   7,216     55     11             7,282  
Selling, general and administrative   30,099     5,358     1,706     5,772     (736 )   42,199  
Acquisition, integration and migration expenses   1,691             15         1,706  
Depreciation and amortization   32,929     6,192     3,249     198         42,568  
Total operating expenses   105,760     26,463     14,762     5,985     (10,663 )   142,307  
Operating income (loss)   $ 6,745     $ 3,626     $ 5,089     $ (5,985 )   $     $ 9,475  
                                                 

Supplemental Information

Subscriber Statistics

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

             
    9/30/2018 (3)   12/31/2017 (4)   9/30/2017 (4)
Retail PCS subscribers - postpaid   785,537     736,597     727,954  
Retail PCS subscribers - prepaid (1)   255,462     225,822     224,609  
PCS market POPS (000) (2)   7,024     5,942     6,047  
PCS covered POP (000) (2)   5,921     5,272     5,157  
CDMA base stations (sites)   1,788     1,623     1,544  
Towers owned   193     192     201  
Non-affiliate cell site leases   192     192     192  
                   
_______________________________________________________
(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
September 30,
    2018   2017
Gross PCS subscriber additions - postpaid   48,111     43,320  
Net PCS subscriber additions (losses) - postpaid   4,879     (4,710 )
Gross PCS subscriber additions - prepaid (1)   38,486     37,653  
Net PCS subscriber additions (losses) - prepaid (1)   3,408     2,571  
PCS average monthly retail churn % - postpaid   1.84 %   2.19 %
PCS average monthly retail churn % - prepaid (1)   4.62 %   5.25 %
             
_______________________________________________________
(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 September 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:

             
    September 30,
2018
  December 31,
2017
  September 30,
2017
Homes passed (1)   185,119     184,910     184,881  
Customer relationships (2)            
Video users   41,807     44,269     45,290  
Non-video customers   37,619     33,559     32,663  
Total customer relationships   79,426     77,828     77,953  
Video            
Customers (3)   44,093     46,613     47,379  
Penetration (4)   23.8 %   25.2 %   25.6 %
Digital video penetration (5)   77.8 %   76.2 %   76.0 %
Broadband            
Available homes (6)   185,119     184,910     184,881  
Users (3)   67,089     63,918     63,442  
Penetration (4)   36.2 %   34.6 %   34.3 %
Voice            
Available homes (6)   185,119     182,379     182,350  
Users (3)   23,268     22,555     22,419  
Penetration (4)   12.6 %   12.4 %   12.3 %
Total revenue generating units (7)   134,450     133,086     133,240  
Fiber route miles   3,436     3,356     3,340  
Total fiber miles (8)   134,411     122,011     121,331  
Average revenue generating units   133,617     132,759     132,704  
                   
(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:

             
    September 30,
2018
  December 31,
2017
  September 30,
2017
Telephone access lines   17,786     17,933     18,006  
Long distance subscribers   9,107     9,078     9,107  
Video customers (1)   4,796     5,019     5,110  
Broadband customers   14,734     14,665     14,605  
Fiber route miles   2,112     2,073     2,040  
Total fiber miles (2)   158,526     154,165     149,944  
                   
_______________________________________________________
(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.
 

Shentel_wTagline_RGB.jpg

Source: Shenandoah Telecommunications Co

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