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Shentel reports 40% net income increase for Q4

Posted 26 February 2016 12:00 AM by julia

Shenandoah Telecommunications Company (“Shentel”) (NASDAQ: SHEN) announces financial and operating results for the three months and year ended December 31, 2015.

Consolidated Fourth Quarter Results

For the quarter ended December 31, 2015, net income increased 40% to $12.1 million, compared to $8.6 million in the fourth quarter of 2014, primarily due to operating improvements in the Cable segment as well as continued growth in the Wireless and Wireline segments. Operating income was $21.7 million, an increase of 33% from the same quarter last year.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization) increased 17.5% to $40.1 million in the fourth quarter of 2015 from $34.2 million in the fourth quarter of 2014. Total revenues were $87.3 million, an increase of 5.4% compared to $82.8 million for the 2014 fourth quarter. Cable segment revenues increased due to an increase in subscribers and Revenue Generating Units (RGUs), video price increases, as well as improved product mix with customers selecting higher-speed data packages. Wireless revenues decreased as customers shifted to service plans that excluded subsidized phones, while Wireline segment revenues increased due to higher fiber revenues, as well as higher internet service fees as customers upgraded their services. Total operating expenses were $65.6 million in the fourth quarter of 2015 compared to $66.5 million in the prior year period.

President and CEO Christopher E. French commented, “We are pleased to have delivered continued revenue growth and enhanced profitability in the fourth quarter, while also increasing our customer base, as demonstrated by the record growth in postpaid additions to our wireless business. Our upgraded wireless and cable networks provide reliable coverage and access to premium high speed internet service, positioning us well as the carrier of choice in the markets in which we operate.”

Consolidated Full Year Results

For the year ended December 31, 2015, net income increased 20.6% to $40.9 million, compared to $33.9 million in 2014. Operating income was $74.1 million, an increase of 19.6% as compared to $61.9 million in the prior year.

Adjusted OIBDA increased 14.2% to $150.9 million in 2015 from $132.1 million in 2014. Total revenues were $342.5 million, an increase of 4.8% compared to $326.9 million in 2014. Cable segment revenues increased due to an increase in subscribers and RGUs, video price increases, as well as improved product mix with customers selecting higher-speed data packages. Wireless revenues increased primarily as a result of growth in wireless subscribers, while Wireline segment revenues increased due to higher fiber revenues as well as higher internet service fees as customers upgraded their services. Total operating expenses were $268.4 million in 2015 compared to $265.0 million in the prior year.

Wireless Segment

Fourth Quarter average postpaid subscribers grew a record 6.7%, while postpaid service revenues in the Wireless segment decreased $1.2 million or 3.1% as compared to the fourth quarter of 2014 primarily as a result of postpaid customers selecting lower-priced service plans associated with leasing and installment billing programs for handsets. Offsetting the decrease in postpaid revenue was a decrease in the cost of postpaid handset subsidies of $1.2 million. In the fourth quarter, net prepaid

service revenues grew $0.9 million, or 8.4%, due primarily to improved product mix and 1.1% growth in average prepaid customers as compared to the same period of 2014.

During the fourth quarter of 2015, net additions to postpaid subscribers were 8,985, up 84% compared to 4,891 net postpaid subscriber additions in the fourth quarter of 2014. Net prepaid subscribers declined by 2,264 during fourth quarter 2015, compared to 5,036 added in the fourth quarter of 2014.

Fourth quarter adjusted OIBDA in the Wireless segment was $27.4 million, an increase of 3.6% from the fourth quarter of 2014.

“Our state of the art wireless network provides reliable coverage, coupled with the strength of our service offering, drove record growth in our postpaid customer base during the quarter,” Mr. French stated. “Monthly service fees and handset subsidy costs have continued to decline as customers select lower revenue service plans related to handset financing and leasing plans.”

Cable Segment

Revenue in the Cable segment increased $3.5 million or 15.8% to $25.7 million, due to 3.8% growth in average RGUs (the sum of voice, data, and video users), video rate increases implemented in January 2015 to pass-through programming cost increases, and customers selecting higher speed data access packages. Operating expenses declined 2.6% to $23.5 million in the fourth quarter of 2015. Fourth quarter operating income was $2.2 million compared to an operating loss of $1.9 million in the prior year.

Revenue generating units totaled 126,071 at the end of 2015, an increase of 3.6% over December 31, 2014.

Adjusted OIBDA in the Cable segment for fourth quarter 2015 was $8.2 million, up 90% from $4.3 million in the fourth quarter of 2014.

Mr. French stated, “Customers are demanding more from their broadband provider, and our enhanced service capabilities and product offerings are attracting new customers and encouraging our existing customers to transition to upgraded monthly subscription plans.”

Wireline Segment

Revenue in the Wireline segment increased 15.3% to $18.1 million in the fourth quarter of 2015, as compared to $15.7 million in the fourth quarter of 2014. Carrier access and fiber revenue for the quarter was $11.8 million, an increase from $9.8 million for the same quarter last year, due to growth in new fiber contracts. Operating expenses increased 7.4% or $0.9 million to $13.5 million for fourth quarter 2015, primarily due to costs to support new fiber contracts.

Adjusted OIBDA for the Wireline segment for fourth quarter 2015 was $8.0 million, as compared to $6.3 million in fourth quarter 2014.

Other Information

On October 20, 2015, the Company declared a dividend of $0.48 per share payable December 1, 2015 to shareholders of record on November 5, 2015, with a payout of $11.6 million. The Company also declared a two-for-one stock split effective for shareholders of record as of December 31, 2015.

Capital expenditures were $30.0 million in the fourth quarter of 2015 compared to $17.0 million in the comparable 2014 period.

Cash and cash equivalents as of December 31, 2015 were $76.8 million, compared to $68.9 million at December 31, 2014. Total outstanding debt at December 31, 2015 totaled $201.3 million compared to

$224.3 million as of December 31, 2014. The Company began making quarterly principal payments of $5.75 million on its debt in December 2014. According to the terms of the Company’s credit agreement, a decrease in the Company’s leverage triggered a 0.25% decrease in the interest rate on the Company’s outstanding debt during 2015. At December 31, 2015, debt as a percent of total assets was 32.0%. The amount available to the Company through its revolver facility was $50 million.

“Our balance sheet remains solid, providing a platform for continued growth of our customer base, and for improvements to our capabilities and service offerings. We look forward to the closing of the nTelos acquisition and to expanding our operations to include additional customers and new markets,” Mr. French concluded.

Conference Call and Webcast

The Company will host a conference call and simultaneous webcast today, Friday, February 26, 2016, at 10 A.M. Eastern Time.

Teleconference Information: Friday, February 26, 2016 10:00 A.M. (ET) Dial in number: 1-888-695-7639

Password: 51713132 Audio webcast: http://investor.shentel.com/

An audio replay of the call will be available approximately one hour after the call is complete, through March 4, 2016 by calling (855) 859-2056.

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