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Shentel reports Q2 2016 revenue of $130 million

Posted 5 August 2016 5:08 PM by Shentel

Shenandoah Telecommunications Company (“Shentel”) (NASDAQ: SHEN) announces financial and operating results for the three and six months ended June 30, 2016.

Consolidated Second Quarter Results

For the quarter ended June 30, 2016, the Company reported total revenues of $130.3 million, an increase of 52.1% compared to $85.7 million for the 2015 second quarter. The increase was almost entirely due to the nTelos acquisition which was completed effective May 6, 2016. The integration of nTelos’ operations and the transition of its assets and customers is progressing as expected, with Shentel currently ahead of its schedule on the migration of nTelos customers to the Sprint platform.

Wireless service revenues increased 78.2% as a result of the acquisition of approximately 404,000 postpaid and 155,000 prepaid subscribers from nTelos and Sprint, and a reduction in postpaid fees retained by Sprint. Cable segment revenues increased 9.3% due to an increase in subscribers and Revenue Generating Units (RGUs), video price increases to offset increases in programming costs, as well as improved product mix with customers selecting higher-speed data packages. Wireline segment revenues increased 12.9% due to higher fiber lease revenues, as well as higher internet service fees as customers upgraded their services.

Total operating expenses were $136.5 million in the second quarter of 2016 compared to $67.0 million in the prior year period. Operating expenses in the second quarter of 2016 included $20.1 million of overall integration and acquisition costs associated with the nTelos acquisition, including $5.3 million in the Wireless segment and $14.8 million in the Other segment. An additional $2.3 million of costs to operate and support the nTelos back office and billing functions until customers can migrate to the Sprint platforms was included in cost of goods and services and selling, general and administrative expenses.

For the quarter ended June 30, 2016, the Company reported a net loss of $7.0 million, compared to net income of $10.5 million in the second quarter of 2015, primarily reflecting acquisition and integration costs incurred for its acquisition of nTelos.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization) increased 48.5% to $55.9 million in the second quarter of 2016 from $37.6 million in the second quarter of 2015. Continuing OIBDA (Adjusted OIBDA less the benefit received from the waived Sprint management fee over the next six years) increased 32.3% to $49.8 million.

President and CEO Christopher E. French commented, “Our second quarter results include the customers and assets we gained through our merger with nTelos and we’re pleased to have delivered revenue growth and increased OIBDA throughout all of our segments. This is a transformational time for our company as we work to ensure that we are effectively serving our newly expanded customer base with the consistent coverage and high speed access our state-of-the-art networks provide. The transition to one blended company is progressing well, and in addition to doubling our customer base we’re excited about the opportunities presented by our increased footprint which has enhanced our presence in the Mid-Atlantic region.”

Wireless Segment

Second quarter wireless service revenues increased $38.1 million or 78.2%, primarily related to the addition of both postpaid and prepaid customers as a result of the nTelos acquisition. Additionally, the segment benefitted from a reduction in the postpaid fees retained by Sprint as part of the amended affiliate agreement.

Excluding the subscribers added on May 6, 2016 in the nTelos acquisition, during the second quarter of 2016, net postpaid subscribers declined by 1,319 as compared to 5,414 net postpaid subscriber additions in the second quarter of 2015, while net prepaid subscribers declined by 6,912 during second quarter 2016, compared to a decline of 2,352 in the second quarter of 2015.

Second quarter adjusted OIBDA in the Wireless segment was $45.0 million, an increase of 60.5% from the second quarter of 2015. Continuing OIBDA in the Wireless segment was $38.9 million.

“Our wireless customer base has more than doubled, and we’ve added several highly complementary contiguous markets to our footprint. During the quarter, we incurred expenses related to the migration of certain nTelos customers to the Sprint billing platform, but we also continued to benefit from a reduction in Sprint’s fees. We are continuing to improve reliability and coverage in our acquired markets as our upgrade progresses,” Mr. French stated.

Cable Segment

Service revenues in the Cable segment increased $2.1 million or 9.3% to $24.2 million, due to 6.7% growth in average RGUs (the sum of voice, data, and video users), video rate increases implemented in January 2016 to pass through programming cost increases, and customers selecting higher speed data access packages. Operating expenses increased slightly to $25.2 million in the second quarter of 2016. Second quarter operating income was $1.2 million compared to an operating loss of $0.4 million in the prior year.

Revenue generating units totaled 130,871 at June 30, 2016, an increase of 6.7% over June 30, 2015.

Adjusted OIBDA in the Cable segment for second quarter 2016 was $7.3 million, up 28.0% from $5.7 million in the second quarter of 2015.

Mr. French stated, “Customers are increasingly demanding more from their broadband provider, and our enhanced products and services position us well to meet those needs. The strength of our offerings has enabled us to attract new customers and has motivated existing customers to increase their service selection and upgrade their monthly subscription plans.”

Wireline Segment

Revenue in the Wireline segment increased 12.9% to $18.6 million in the second quarter of 2016, as compared to $16.5 million in the second quarter of 2015. Carrier access and fiber revenue for the quarter was $12.3 million, an increase from $2.1 million for the same quarter last year, as a result of new fiber contracts. Operating expenses increased 7.3% or $0.9 million to $13.4 million for second quarter 2016, primarily due to costs to support new fiber contracts.

Adjusted OIBDA in the Wireline segment for second quarter 2016 was $8.3 million, as compared to $7.3 million in second quarter 2015.

Other Information

Capital expenditures were $39.6 million in the second quarter of 2016 compared to $15.6 million in the comparable 2015 period.

Cash and cash equivalents as of June 30, 2016 were $40.6 million, compared to $76.8 million at December 31, 2015. Total outstanding debt at June 30, 2016 totaled $815.6 million, net of unamortized loan costs, compared to $199.7 million as of December 31, 2015. At June 30, 2016, debt as a percent of total assets was 56.0%. The amount available to the Company through its revolver facility was $75.0 million, and from the delayed draw term loan, $50.0 million.

“Our balance sheet provides a solid platform for the continued growth of our customer base, and positions us well to enhance our service offerings and capabilities. The nTelos integration and the expansion of our operations to include additional customers and new markets is progressing well. We look forward to growing our position as one of the top six public wireless providers in the United States,” Mr. French concluded.

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 voice; fiber network and services; and local and long distance telephone. Shentel is the exclusive personal communications service (“PCS”) Affiliate of Sprint in portions of Pennsylvania, Maryland, Virginia and West Virginia. 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.

 


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