SHEN
$38.00
Shenandoah Telecom
($.80)
(2.06%)
Earnings Details
2nd Quarter June 2018
Tuesday, August 7, 2018 7:00:00 AM
Tweet Share Watch
Summary

Shenandoah Telecom (SHEN) Recent Earnings

Shenandoah Telecom (SHEN) reported 2nd Quarter June 2018 earnings of $0.16 per share on revenue of $154.0 million. The consensus earnings estimate was $0.10 per share on revenue of $152.8 million. Revenue grew 0.5% on a year-over-year basis.

Shenandoah Telecommunications Co and its subsidiaries provides both regulated and unregulated telecommunications services to end-user customers and other telecommunications providers in Virginia, West Virginia, central Pennsylvania and western Maryland.

Results
Reported Earnings
$0.16
Earnings Whisper
-
Consensus Estimate
$0.10
Reported Revenue
$154.0 Mil
Revenue Estimate
$152.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Shenandoah Telecommunications Company Reports Second Quarter 2018 Results

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 revenues16,009  2,950  33,588  6,309 
Total operating revenues154,030  153,258  305,762  307,138 
Operating expenses:       
Cost of services49,134  48,416  98,476  97,193 
Cost of goods sold15,166  4,965  30,971  9,949 
Selling, general and administrative29,915  43,022  58,665  83,175 
Acquisition, integration and migration expenses  3,678    8,167 
Depreciation and amortization41,117  44,925  84,604  89,729 
Total operating expenses135,332  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, net56  73  24  193 
Non-operating income (loss), net783  1,224  1,804  2,479 
Income (loss) before income taxes10,686  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, basic49,547  49,115  49,511  49,083 
Weighted average shares outstanding, diluted50,070  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 assets129,573  94,310 
Total current assets195,142  172,895 
    
Investments11,949  11,472 
Property, plant and equipment, net668,339  686,327 
Intangible assets, net396,908  380,979 
Goodwill146,497  146,497 
Deferred charges and other assets, net34,021  13,690 
Total assets$1,452,856  $1,411,860 
    
Total current liabilities138,797  137,584 
Long-term debt, less current maturities715,265  757,561 
Other liabilities180,604  166,493 
Total shareholders' equity418,190  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 revenue1,799  14,210  16,009 
Total operating revenues158,066 (20,881)14,210 2,635 154,030 
Cost of services48,999   135 49,134 
Cost of goods sold6,328 (5,372)14,210  15,166 
Selling, general & administrative45,579 (15,509) (155)29,915 
Depreciation and amortization41,117    41,117 
Total operating expenses142,023 (20,881)14,210 (20)135,332 
Operating income16,043   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, basic49,547    49,547 
Weighted average shares o/s, diluted50,070    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 revenue1,609  14,210  15,819 
Tower and Other revenue3,244    3,244 
Total operating revenues116,368 (20,881)14,210 2,585 112,282 
Cost of services33,488    33,488 
Cost of goods sold6,244 (5,372)14,210  15,082 
Selling, general & administrative27,876 (15,509)  12,367 
Depreciation and amortization31,565    31,565 
Total operating expenses99,173 (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.

 

Primary Logo

Source: Shenandoah Telecommunications Co