UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM
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CURRENT REPORT
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Item 7.01. Regulation FD Disclosure
On August 6, 2019, Shenandoah Telecommunications Company (the “Company”) issued a press release announcing its financial position as of June 30, 2019, results of operations for the three and six months ended June 30, 2019, and other related information. The Company also posted supplemental earnings presentation materials on the investor section of the Company’s website at www.Shentel.com. A copy of the supplemental earnings presentation is furnished as Exhibit 99.1 and is incorporated herein by reference.
These materials may contain forward-looking statements about Shenandoah Telecommunications Company regarding, among other things, our business strategy, our prospects and our financial position. These statements can be identified by the use of forward-looking terminology such as “believes,” “estimates,” “expects,” “intends,” “may,” “will,” “should,” “could,” or “anticipates” or the negative or other variation of these or similar words, or by discussions of strategy or risks and uncertainties. Shenandoah Telecommunications Company undertakes no obligation to revise or update such statements to reflect current events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibit is furnished with this Current Report on Form 8-K.
99.1* Shenandoah Telecommunications Company Q2 2019 Earnings Conference Call supplement
* Furnished herewith
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SHENANDOAH TELECOMMUNICATIONS COMPANY | ||
| Date: August 6, 2019 | By: | /s/ James J. Volk |
| James J. Volk | ||
| Senior Vice President - Chief Financial Officer | ||
| (Principal Financial Officer) | ||
Exhibit 99.1
August 6, 2019 Q2 2019 Earnings Conference Call
2 Safe Harbor Statement This presentation includes “forward - looking statements” within the meaning of Section 27 A of the Securities Act and Section 21 E of the Securities Exchange Act of 1934 , as amended, regarding our business strategy, our prospects and our financial position . These statements can be identified by the use of forward - looking terminology such as “believes,” “estimates,” “expects,” “intends,” “may,” “will,” “should,” “could” or “anticipates” or the negative or other variation of these similar words, or by discussions of strategy or risks and uncertainties . These statements are based on current expectations of future events . If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from the Company’s expectations and projections . Important factors that could cause actual results to differ materially from such forward - looking statements include, without limitation, risks related to the following : q Increasing competition in the communications industry; and q A complex and uncertain regulatory environment. A further list and description of these risks, uncertainties and other factors can be found in the Company’s SEC filings which are available online at www . sec . gov, www . shentel . com or on request from the Company . The Company does not undertake to update any forward - looking statements as a result of new information or future events or developments .
3 Chris French President and CEO
4 Key Developments ▪ Sprint & T - Mobile Pending Merger Update ▪ Second Quarter 2019 Highlights ▪ Appointed Jim Volk as Chief Financial Officer
5 Jim Volk SVP of Finance and CFO
6 Second Quarter 2019 Consolidated Results ▪ Revenue ▪ $158.9 million in Q2'19 compared with $156.5 million in Q2'18 Adjusted OIBDA ▪ $67.0 million, representing a 42.1% Adjusted OIBDA margin, in Q2'19 compared with $63.7 million and 40.7% in Q2'18 ▪ Operating Income ▪ $24.0 million in Q2'19 compared with $21.2 million in Q2'18 ▪ Net Income ▪ $13.2 million in Q2'19 compared with $9.6 million in Q2'18
7 Wireless Highlights Adjusted OIBDA (in millions) Operating Revenue (in millions) Adjusted OIBDA Margin $15.8 $94.4 $95.7 $16.5 $2.9 $2.9 $0.3 $0.4 $114.8 $114.1
8 Wireless Segment – Change in Adjusted OIBDA Q2'19 vs. Q2'18 (millions) 46.9% Adjusted OIBDA Margin 47.5% Adjusted OIBDA Margin Revenue Impact $(0.6) Expense Impact $1.0
9 Cable Highlights Adjusted OIBDA (in millions) Operating Revenue (in millions) Adjusted OIBDA Margin
10 Cable Segment – Change in Adjusted OIBDA Q2'19 vs. Q2'18 (millions) 38.2% Adjusted OIBDA Margin 38.5% Adjusted OIBDA Margin Revenue Impact $2.6 Expense Impact $(1.6)
11 Wireline Highlights Adjusted OIBDA (in millions) Operating Revenue (in millions) Adjusted OIBDA Margin
12 Capitalization 2.61x Leverage Ratio ▪ Refer to the Use of Non - GAAP Financial Measures for the calculation of the net leverage ratio. Net Leverage Ratio of 2.25x Effective Interest Rate of 3.79% Debt Maturity (in millions) Total Liquidity & Debt (in millions) $2.5 $10.9 $13.4 $5.0 $29.1 $34.1 $5.0 $29.1 $34.1 $5.0 $32.8 $37.8 $5.0 $173.0 $178.0 $5.0 $458.1 $458.1
13 Dave Heimbach EVP and COO
14 Wireless - Postpaid Metrics ARPU* Gross Additions / Net Change Churn * Refer to the Appendix for a trend of Postpaid ARPU for the last five quarters. and a reconciliation of Wireless segment opera tin g revenues to Postpaid ARPU. Subscribers
15 Wireless - Prepaid Metrics ARPU* Gross Additions / Net Change Churn * Refer to the Appendix for a trend of Postpaid ARPU for the last five quarters. and a reconciliation of Wireless segment ope rat ing revenues to Prepaid ARPU. Subscribers
16 Cable - RGUs and Average Revenue Average Monthly Revenue per RGU * Average Monthly Revenue per Customer * * Refer to the Appendix for a reconciliation of Cable segment operating revenue to average revenue per RGU and per customer relationship. Revenue Generating Units (RGU) Broadband Penetration
17 Fiber to the Home ("FTTH") Initiative ▪ FTTH "Edge Out" strategy to leverage existing robust fiber network and commercial customer base to target certain residential areas in three initial markets totaling approximately 40k incremental Homes Passed. ▪ Targeting markets that are in proximity of existing fiber assets where the incumbent phone company lacks a viable broadband offering. ▪ This metro fiber build will be leveraged to serve commercial customers and small cell opportunities. ▪ Will brand as Glo Fiber and differentiate through product performance, reliability, and local service. Homes Passed Market Launch Date 17.3K Harrisonburg, VA Q4'19 9.7K Winchester, VA Q4'19 11.7K Staunton, VA Q1'20 38.7K
18 Fixed Wireless Strategy ▪ Acquired 2.5 GHz spectrum for $17M enables fixed wireless broadband deployment to over 1M POPs in rural areas out of reach of cable or fiber providers. ▪ Will deploy carrier grade 5G ready LTE standard technology.
19 Capital Expenditures - Investing in the Future Capex Spending (in millions) FTTH - $22M Fixed Wireless - $20M Cable - $33M
20 Q&A
21 Use of Non - GAAP Financial Measures Included in this presentation are certain non - GAAP financial measures that are not determined in accordance with U . S . generally accepted accounting principles . These financial performance measures are not indicative of cash provided or used by operating activities and exclude the effects of certain operating, capital and financing costs and may differ from comparable information provided by other companies, and they should not be considered in isolation, as an alternative to, or more meaningful than measures of financial performance determined in accordance with U . S . generally accepted accounting principles . 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 certain differences . Shentel utilizes these financial performance measures to facilitate 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 these 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 .
22 Q2'19 Adjusted OIBDA by Segment - Quarterly Results Three Months Ended June 30, 2019 (in thousands) Wireless Cable Wireline Other Consolidated Operating income $ 22,024 $ 6,786 $ 5,094 $ (9,884 ) $ 24,020 Depreciation and amortization 32,219 6,555 3,447 132 42,353 OIBDA 54,243 13,341 8,541 (9,752 ) 66,373 Share - based compensation expense — — — 593 593 Adjusted OIBDA $ 54,243 $ 13,341 $ 8,541 $ (9,159 ) $ 66,966 Total operating revenue $ 114,140 $ 34,690 $ 19,527 (9,443 ) $ 158,914 Adjusted OIBDA margin 47.5 % 38.5 % 43.7 % N/A 42.1 % During Q2 2019, we modified our definition of Adjusted OIBDA to exclude cash savings realized under the benefit received from wa ived management fee and our non - cash amortization of deferred contract costs, as well as certain other immaterial items. This change enhances the comparability of our non - GAAP performance measure with similar performance measures reported by comparable companies in our industry. In the table below, we reconcile our new definition of Adjusted OIBDA to the previously reported Adjusted OIBDA. Three Months Ended June 30, 2019 (in thousands) Wireless Cable Wireline Other Consolidated Adjusted OIBDA from above $ 54,243 $ 13,341 $ 8,541 $ (9,159 ) $ 66,966 Non - cash amortization of deferred contract costs (3,903 ) (32 ) (51 ) 2 (3,984 ) Benefit received from the waived management fee 9,692 — — — 9,692 Other (19 ) 3 — 326 310 Adjusted OIBDA as previously reported $ 60,013 $ 13,312 $ 8,490 $ (8,831 ) $ 72,984
23 Q1'19 Adjusted OIBDA by Segment - Quarterly Results Three Months Ended March 31, 2019 (in thousands) Wireless Cable Wireline Other Consolidated Operating income $ 25,337 $ 5,703 $ 4,346 $ (10,599 ) $ 24,787 Depreciation and amortization 31,050 6,458 3,533 138 41,179 OIBDA 56,387 12,161 7,879 (10,461 ) 65,966 Share - based compensation expense — — — 1,714 1,714 Adjusted OIBDA $ 56,387 $ 12,161 $ 7,879 $ (8,747 ) $ 67,680 Total operating revenue $ 115,654 $ 33,709 $ 18,909 (9,429 ) $ 158,843 Adjusted OIBDA margin 48.8 % 36.1 % 41.7 % N/A 42.6 % During Q2 2019, we modified our definition of Adjusted OIBDA to exclude cash savings realized under the benefit received from wa ived management fee and our non - cash amortization of deferred contract costs, as well as certain other immaterial items. This change enhances the comparability of our non - GAAP performance measure with similar performance measures reported by comparable companies in our industry. In the table below, we reconcile our new definition of Adjusted OIBDA to the previously reported Adjusted OIBDA. Three Months Ended March 31, 2019 (in thousands) Wireless Cable Wireline Other Consolidated Adjusted OIBDA from above $ 56,387 $ 12,161 $ 7,879 $ (8,747 ) $ 67,680 Non - cash amortization of deferred contract costs (4,211 ) (237 ) (64 ) (2 ) (4,514 ) Benefit received from the waived management fee 9,628 — — — 9,628 Other 19 136 — 27 182 Adjusted OIBDA as previously reported $ 61,823 $ 12,060 $ 7,815 $ (8,722 ) $ 72,976
24 Q4'18 Adjusted OIBDA by Segment - Quarterly Results Three Months Ended December 31, 2018 (in thousands) Wireless Cable Wireline Other Consolidated Operating income $ 25,977 $ 6,311 $ 3,178 $ (8,472 ) $ 26,994 Depreciation and amortization 31,668 6,339 3,604 162 41,773 OIBDA 57,645 12,650 6,782 (8,310 ) 68,767 Share - based compensation expense — — — 381 381 Adjusted OIBDA $ 57,645 $ 12,650 $ 6,782 $ (7,929 ) $ 69,148 Total operating revenue $ 118,999 $ 32,899 $ 18,701 (9,115 ) $ 161,484 Adjusted OIBDA margin 48.4 % 38.5 % 36.3 % N/A 42.8 % During Q2 2019, we modified our definition of Adjusted OIBDA to exclude cash savings realized under the benefit received from wa ived management fee and our non - cash amortization of deferred contract costs, as well as certain other immaterial items. This change enhances the comparability of our non - GAAP performance measure with similar performance measures reported by comparable companies in our industry. In the table below, we reconcile our new definition of Adjusted OIBDA to the previously reported Adjusted OIBDA. Three Months Ended December 31, 2018 (in thousands) Wireless Cable Wireline Other Consolidated Adjusted OIBDA from above $ 57,645 $ 12,650 $ 6,782 $ (7,929 ) $ 69,148 Non - cash amortization of deferred contract costs (4,026 ) (17 ) (58 ) — (4,101 ) Benefit received from the waived management fee 9,599 — — — 9,599 Other (30 ) — — (1,441 ) (1,471 ) Adjusted OIBDA as previously reported $ 63,188 $ 12,633 $ 6,724 $ (9,370 ) $ 73,175
25 Q3'18 Adjusted OIBDA by Segment - Quarterly Results 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 Depreciation and amortization 30,363 6,102 3,435 128 40,028 OIBDA 57,715 11,936 8,557 (9,851 ) 68,357 Share - based compensation expense — — — 1,171 1,171 Adjusted OIBDA $ 57,715 $ 11,936 $ 8,557 $ (8,680 ) $ 69,528 Total operating revenue $ 116,099 $ 32,182 $ 19,622 (9,172 ) $ 158,731 Adjusted OIBDA margin 49.7 % 37.1 % 43.6 % N/A 43.8 % During Q2 2019, we modified our definition of Adjusted OIBDA to exclude cash savings realized under the benefit received from wa ived management fee and our non - cash amortization of deferred contract costs, as well as certain other immaterial items. This change enhances the comparability of our non - GAAP performance measure with similar performance measures reported by comparable companies in our industry. In the table below, we reconcile our new definition of Adjusted OIBDA to the previously reported Adjusted OIBDA. Three Months Ended September 30, 2018 (in thousands) Wireless Cable Wireline Other Consolidated Adjusted OIBDA from above $ 57,715 $ 11,936 $ 8,557 $ (8,680 ) $ 69,528 Non - cash amortization of deferred contract costs (4,868 ) (172 ) (77 ) — (5,117 ) Benefit received from the waived management fee 9,558 — — — 9,558 Other 197 — — (82 ) 115 Adjusted OIBDA as previously reported $ 62,602 $ 11,764 $ 8,480 $ (8,762 ) $ 74,084
26 Q2'18 Adjusted OIBDA by Segment - Quarterly Results Three Months Ended June 30, 2018 (in thousands) Wireless Cable Wireline Other Consolidated Operating income $ 22,251 $ 6,083 $ 4,793 $ (11,958 ) $ 21,169 Depreciation and amortization 31,565 6,179 3,240 133 41,117 OIBDA 53,816 12,262 8,033 (11,825 ) 62,286 Share - based compensation expense — — — 1,370 1,370 Adjusted OIBDA $ 53,816 $ 12,262 $ 8,033 $ (10,455 ) $ 63,656 Total operating revenue $ 114,753 $ 32,111 $ 19,112 (9,475 ) $ 156,501 Adjusted OIBDA margin 46.9 % 38.2 % 42.0 % N/A 40.7 % During Q2 2019, we modified our definition of Adjusted OIBDA to exclude cash savings realized under the benefit received from wa ived management fee and our non - cash amortization of deferred contract costs, as well as certain other immaterial items. This change enhances the comparability of our non - GAAP performance measure with similar performance measures reported by comparable companies in our industry. In the table below, we reconcile our new definition of Adjusted OIBDA to the previously reported Adjusted OIBDA. Three Months Ended June 30, 2018 (in thousands) Wireless Cable Wireline Other Consolidated Adjusted OIBDA from above $ 53,816 $ 12,262 $ 8,033 $ (10,455 ) $ 63,656 Non - cash amortization of deferred contract costs (3,394 ) (26 ) (27 ) — (3,447 ) Benefit received from the waived management fee 9,558 — — — 9,558 Other 94 — — (83 ) 11 Adjusted OIBDA as previously reported $ 60,074 $ 12,236 $ 8,006 $ (10,538 ) $ 69,778
27 Q1'18 Adjusted OIBDA by Segment - Quarterly Results Three Months Ended March 31, 2018 (in thousands) Wireless Cable Wireline Other Consolidated Operating income $ 17,267 $ 5,527 $ 4,772 $ (10,812 ) $ 16,754 Depreciation and amortization 33,925 6,024 3,394 144 43,487 OIBDA 51,192 11,551 8,166 (10,668 ) 60,241 Share - based compensation expense — — — 2,037 2,037 Adjusted OIBDA $ 51,192 $ 11,551 $ 8,166 $ (8,631 ) $ 62,278 Total operating revenue $ 112,804 $ 31,711 $ 19,707 (10,084 ) $ 154,138 Adjusted OIBDA margin 45.4 % 36.4 % 41.4 % N/A 40.4 % During Q2 2019, we modified our definition of Adjusted OIBDA to exclude cash savings realized under the benefit received from wa ived management fee and our non - cash amortization of deferred contract costs, as well as certain other immaterial items. This change enhances the comparability of our non - GAAP performance measure with similar performance measures reported by comparable companies in our industry. In the table below, we reconcile our new definition of Adjusted OIBDA to the previously reported Adjusted OIBDA. Three Months Ended March 31, 2018 (in thousands) Wireless Cable Wireline Other Consolidated Adjusted OIBDA from above $ 51,192 $ 11,551 $ 8,166 $ (8,631 ) $ 62,278 Non - cash amortization of deferred contract costs (2,760 ) 141 (35 ) — (2,654 ) Benefit received from the waived management fee 9,048 — — — 9,048 Other 81 — — (82 ) (1 ) Adjusted OIBDA as previously reported $ 57,561 $ 11,692 $ 8,131 $ (8,713 ) $ 68,671
28 ($ in thousands) Q2'19 Total Debt $ 760,459 Cash* $ 50,000 Total Debt less Cash $ 710,459 LTM EBITDA per Credit Facility Agreement** $ 315,519 Net leverage ratio 2.25 Net Leverage Ratio * Cash is limited to $50.0 million for purposes of this calculation under the terms of the credit facility agreement. ** EBITDA is calculated in accordance with the credit facility agreement and includes the benefit received from the waived management fee and other items not included in non - GAAP Adjusted OIBDA.
29 Appendix
30 Wireless Average Revenue per User (ARPU) * Represents a quarterly average ** Average monthly billed revenue per subscriber = (billed revenue excluding write - offs*1,000) / average subscribers / 3 months ($ in thousands, except subscribers and revenue per subscriber amounts) Q2'18 Q2'19 Postpaid billings $ 96,127 $ 97,779 Adjustment for write - offs 5,087 4,795 Postpaid billings excluding write - offs $ 101,214 $ 102,574 Average postpaid subscribers* 775,186 804,506 Average monthly billed revenue per postpaid subscriber** $ 43.52 $ 42.50 Prepaid billings $ 27,915 $ 30,328 Average prepaid subscribers* 250,746 268,156 Average monthly billed revenue per prepaid subscriber** $ 37.11 $ 37.70
31 Cable - Average Revenue * Represents a quarterly average **ARPU calculation = (video, broadband & voice revenue * 1,000) / average subscribers / 3 months ($ in thousands, except subscriber and per subscriber amounts) Q2'18 Q2'19 Service revenue $ 28,748 $ 30,716 Fiber, FUSC, pass - through and other 2,014 2,528 Internal revenue (1,097 ) (1,481 ) Video, broadband and voice revenue 29,665 31,763 Other miscellaneous revenue 2,446 2,927 Total operating revenue $ 32,111 $ 34,690 Average Subscribers* Revenue generating units (RGUs) 132,287 138,016 Average customer relationships 78,407 83,097 Average Revenue Per User (ARPU)** Revenue generating units (RGUs) $ 74.75 $ 76.71 Customer relationships $ 126.12 $ 127.41
32 Cable - Metrics As of June 30, 2018 2019 Homes passed 185,016 189,762 Total revenue generating units 133,148 138,572 Customer relationships 78,256 83,521 RGUs per customer relationship 1.70 1.66 Video Revenue generating units 44,800 42,874 Penetration 24.2 % 22.6 % Digital video penetration 76.9 % 90.3 % Broadband Revenue generating units 65,466 71,893 Penetration 35.4 % 37.9 % Voice Revenue generating units 22,882 23,805 Penetration 12.4 % 12.5 %