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Net income rises in first quarter at Shentel

Posted 4 May 2015 12:00 AM by Shentel

Shenandoah Telecommunications Company ("Shentel") (Nasdaq:SHEN) announces financial and operating results for the three months ended March 31, 2015.

Consolidated First Quarter Results

For the quarter ended March 31, 2015 net income was $10.3 million compared to $8.6 million in the first quarter of 2014 due to continued growth in the Wireless and Cable segments. Operating income was $18.5 million, up 18% from the same quarter last year.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization) increased 12.5% to $35.7 million in the first quarter of 2015 from $31.7 million in the first quarter of 2014. Total revenues were $84.3 million, an increase of 4.8% compared to $80.5 million for the 2014 first quarter. Wireless revenues increased primarily as a result of wireless subscriber growth. Additionally, cable segment revenues increased due to an increase in RGU (revenue generating unit) counts, video price increases and customers selecting higher-priced digital TV and higher-speed data packages. Total operating expenses were $65.8 million in the first quarter of 2015 compared to $64.8 million in the prior year period.

President and CEO Christopher E. French commented, "We are pleased to have delivered a strong quarter characterized by steady revenue growth and improved profitability. The enhanced coverage and high quality services available through our upgraded wireless and cable networks are attracting new customers who are subscribing to additional offerings. Our balance sheet remains strong, positioning us well for continued growth."

Wireless Segment

Service revenues in the wireless segment increased 2.4% to $48.4 million as compared to the first quarter of 2014. Postpaid service revenues increased $0.2 million due to 5.4% growth in average customers offset by lower service revenues primarily from customers selecting leasing and installment billing programs for handsets. During the first quarter, net prepaid service revenues grew $0.9 million, or 8.6%, due primarily to a 6.4% growth in average prepaid customers as compared to the same period of 2014.

During the first quarter of 2015, net additions to postpaid subscribers were 3,211, up 146% compared to 1,304 postpaid subscriber additions in the first quarter of 2014. Net additions to prepaid subscribers increased 76% to 2,621 during first quarter 2015, compared to 1,490 in the first quarter of 2014.

First quarter operating expenses in the Wireless segment decreased $1.2 million overall, primarily due to lower postpaid handset costs as more customers finance their handsets through Sprint.

First quarter adjusted OIBDA in the wireless segment was $27.5 million, an increase of $3.6 million or 15.2% from the first quarter of 2014.

"Our wireless segment experienced solid growth with increased customers in our post and prepaid offerings as we continued to leverage Sprint's national marketing along with our regional advertising to communicate the benefits of our upgraded network and high quality local customer service," Mr. French said. "Declining monthly recurring service fees is a function of decoupling of the phones from the service plans and service promotions. To date, reductions in recurring service revenues have been offset by reduced handset subsidies as a result of customers choosing to finance handsets under equipment installment billing or lease plans. Further pricing reductions could result in a modest reduction in our wireless net operating margin."

Cable Segment

Service revenue in the cable segment increased $2.5 million or 13.4% to $21.4 million, due to 6.6% growth in average RGUs (the sum of voice, data, and video users), video rate increases, and customers selecting higher speed data access packages and higher priced digital TV services. Operating expenses increased by $1.6 million in first quarter 2015 over first quarter 2014.

Revenue generating units totaled 124,015 at the end of the first quarter of 2015, an increase of 6.4% over March 31, 2014.

Adjusted OIBDA in the cable segment for first quarter 2015 was $5.1 million, up 33.3% from $3.8 million in the first quarter of 2014.

Mr. French stated, "We saw strong demand for our high speed internet and voice services in the quarter, which outpaced the anticipated decrease in video subscribers. With our updated cable network we are now capable of providing the high speed and reliability our customers expect. Likewise, we are building our reputation for quality service which has attracted new customers and encouraged existing customers to increase or upgrade their subscription plans."

Wireline Segment

Operating income for the wireline segment was $3.8 million as compared to $4.4 million in first quarter 2014. Access lines at March 31, 2015, were 21,669 compared to 21,955 at March 31, 2014. Carrier access and fiber revenue for the quarter was $9.5 million, a decrease from $9.9 million for the same quarter last year, due to favorable NECA pool adjustments that increased access revenues in the first quarter of 2014. Adjusted OIBDA for the wireline segment for first quarter 2015 was $6.9 million, as compared to $7.2 million in first quarter 2014.

Other Information

Capital expenditures were $9.5 million in the first quarter of 2015, compared to $17.2 million in the comparable 2014 period. 

Cash and cash equivalents as of March 31, 2015 were $77.2 million, compared to $68.9 million at December 31, 2014. Total outstanding debt at March 31, 2015 totaled $218.5 million compared to $224.3 million last year. The Company began making quarterly principal payments of $5.75 million on its debt in December 2014. At March 31, 2015, debt as a percent of total assets was 35.5%. The amount available to the Company through its revolver facility was $50 million as of March 31, 2015.

"Our solid balance sheet allows us to focus on expanding our customer base and provides the flexibility for continued enhancements to our capabilities and portfolio of services," Mr. French concluded.