Shenandoah Telecommunications Co · NASDAQ:SHEN
Shenandoah Telecommunications — Investor Presentation (April 2018)
40 slides from Shenandoah Telecommunications's investor presentation, Apr 3, 2018
Slide 1: Shenandoah Telecommunications Company Investor Presentation April 2018
Shenandoah Telecommunications Company I NVESTOR P RESENTATION A PRIL 2018 NASDAQ: SHEN
Slide 2: Safe Harbor Statement
2 Safe Harbor Statement This presentation includes “forward - looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, our business strategy, our prospects and our financial position
Slide 3: Use of Non-GAAP Financial Measures
3 Use of Non - GAAP Financial Measures Included in this presentation are certain non - GAAP financial measures that are not determined in accordance with US generally accepted accounting principles. These financial performance measures are not indicative of cash provided or used by operating activit
Slide 4: Shentel's Mission and Vision
4 Shentel will ensure that rural communities have access to the same level of telecommunication services as found anywhere else in the U.S. Shentel is committed to enriching the lives of the subscribers and customers we serve with the highest quality communications services by making major investmen
Slide 5: Company Overview
5 Company Overview ▪ Diverse Revenue Streams • 3 complementary revenue streams: Wireless, Cable and Wireline ▪ Tower Leasing Business Provides Steady Recurring Cash Flow • We own 192 towers with an average of 2.1 tenants each ▪ Fiber • We control 5,429 route miles of fiber; closed approximately $24
Slide 6: Shentel History 2008-2016
AXSHENTEL 2008 - 2010 Acquisitions Cable ‘© Acquired cable assets in West Virginia, Maryland and Virginia '* Many assets were previously neglected Wireless ‘© Acquired 50,000 Virgin Mobile customers and began selling Virgin Mobile and Boost prepaid 2010-2013 2014-2015 Upgrades Cable Reduced Capex ‘©
Slide 7: Historical Net Income
7 Historical Net Income $13.0 $16.3 $29.6 $33.9 $40.9 ($0.9) $66.4 -$5 $5 $15 $25 $35 $45 $55 $65 $75 2011 2012 2013 2014 2015 2016 2017 ($ in millions) * Includes a one - time non - cash tax benefit of $53.4 million as a result of the remeasurement of our deferred tax assets and liabilities as of 1
Slide 8: Adjusted OIBDA
8 Adjusted OIBDA $84.0 $93.1 $106.8 $118.6 $132.1 $150.9 $246.1 $280.9 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% $0 $50 $100 $150 $200 $250 $300 2010 2011 2012 2013 2014 2015 2016 2017 $ in millions % of Revenue
Slide 9: Wireless Segment
AXSHENTEL’ WIRELESS SEGMENT
Slide 10: Network Coverage Area
Network Coverage Area 10 • 5.3 million covered POPs • 962 thousand total subscribers • 18.3% penetration of covered POPs • 1,623 base stations
Slide 11: Wireless Network Expansion
11 Wireless Network Expansion Effective February 1,2018 Current Markets New Expansion Markets Optional Expansion Markets
Slide 12: Wireless - Status of Network Enhancements
12 Wireless - Status of Network Enhancements Acquired nTelos Service Area 107 186 220 363 Enhancement # of cell sites ■ Completed ■ Expected Completion in 2018
Slide 13: Wireless Segment - Adjusted OIBDA
13 $82.8 $93.4 $101.4 $110.1 $200.1 $230.4 20% 30% 40% 50% 60% 70% $0 $50 $100 $150 $200 $250 2012 2013 2014 2015 2016 2017 $ in millions % of Revenue Wireless Segment – Adjusted OIBDA
Slide 14: Wireless - Subscriber Growth
14 Wireless - Subscriber Growth (1) Prepaid totals in 2015, 2016, and 2017 were adjusted to exclude Lifeline subscribers. (2) Includes approximately 19,000 postpaid and 4,500 prepaid customers acquired from Sprint on 4/6/17.
Slide 15: Attractive Contract With Sprint
15 Attractive Contract With Sprint ▪ Contract through 2029 ▪ Two 10 - year renewals ▪ Payment at termination of 90% ▪ Postpaid Sprint fees of 16.6% ( Management: 8%; Service: 8.6%) ▪ Management fee waived on a cash basis , expected to continue through 2022. Approximately $256 million in total.
Slide 16: Affiliate Terms
16 Affiliate Terms SHENTEL PROVIDES ▪ Network (Towers, Cell Sites, Backhaul, Local Switch) ▪ Local Sales and Service ▪ Local Advertising & Promotions Payment = 83.4% of Net Billings SPRINT PROVIDES Net Service Fee ▪ Billing/Collections ▪ Customer Care ▪ Long Distance ▪ Equipment Financing Payment =
Slide 17: Wireless - Mobile Tower Leasing
17 Wireless - Mobile Tower Leasing Steady Recurring Cash Flow ▪ Tower lease revenue of $ 11.5 million in FY’17 with $7.5 million of EBITDA ▪ Long - term opportunity to increase leasing revenues given growing demand for data ▪ Company owns 192 cell towers Mobile Tower Revenue ($ millions)
Slide 18: Cable Segment
AXSHENTEL’ CABLE SEGMENT
Slide 19: Cable Segment - Adjusted OIBDA
19 Cable Segment – Adjusted OIBDA $10.3 $11.7 $15.4 $24.5 $31.8 $40.5 0% 5% 10% 15% 20% 25% 30% 35% 40% $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 2012 2013 2014 2015 2016 2017 $ in millions % of Revenue
Slide 20: Fiber Network Map
20 Shepherdstown Charleston Summersville Weston Beckley Covington Franklin Petersburg Amherst Atlanta , GA ( Telx ) Martinsville Danville Rustburg Appomattox Farmville Crewe Rocky Mount Dinwiddie Clarksville Blackstone Kenbridge Lawrenceville Radford Wytheville Keysville Lebanon Pineville Welch Lees
Slide 21: Cable Competitive Advantage
21 Cable Competitive Advantage Verizon/ CenturyLink /Frontier ▪ DSL – slower service ▪ Requires significant capital expenditure to offer comparable service to Cable ▪ Loss of cash flow from shrinking voice service ▪ Bundling of satellite video with their voice and DSL Dish/DirecTV ▪ Bundling of telc
Slide 22: Cable - RGU Growth by Quarter
22 Cable - RGU Growth by Quarter Customers 77,366 77,925 77,305 77,953 77,828 RGU's/Customer 1.71 1.70 1.71 1.71 1.71 ■ Video ■ Voice ■ High Speed Internet
Slide 23: Cable - Average Revenue
23 Cable – Average Revenue Average Monthly Revenue per RGU Average Monthly Revenue per Customer
Slide 24: How Does Shentel Compare?
24 Peer Average information derived from SNL Kagan data as of 9/30/2017 for 10 comparably sized companies: Anne Arundel Broadba nd; Comporium Communications; Fidelity Communications Company; Hargray Cable; MetroCast Cablevision; Northland Cable; Schurz Communications, Inc.; Vast Broadband; W EHC O V
Slide 25: Wireline Segment
AXSHENTEL’ WIRELINE SEGMENT
Slide 26: Wireline Segment - Adjusted OIBDA
26 $25.9 $26.1 $28.0 $29.7 $32.6 $34.3 35.0% 40.0% 45.0% 50.0% $0 $5 $10 $15 $20 $25 $30 $35 $40 2012 2013 2014 2015 2016 2017 $ in millions % of Revenue Wireline Segment – Adjusted OIBDA
Slide 27: Wireline - Key Operational Results
27 Wireline - Key Operational Results Access lines (000s) DSL & Cable Modem Customers (000s) ▪ Access line loss of 2.8 % . ▪ Effective Q4’15, subscribers were offered a cable modem internet option up to 1 50 Mbps , without the need to subscribe to voice services. ▪ 5,019 video subscribers at Decembe
Slide 28: Fiber Network Map
28 Shepherdstown Charleston Summersville Weston Beckley Covington Franklin Petersburg Amherst Atlanta , GA ( Telx ) Martinsville Danville Rustburg Appomattox Farmville Crewe Rocky Mount Dinwiddie Clarksville Blackstone Kenbridge Lawrenceville Radford Wytheville Keysville Lebanon Pineville Welch Lees
Slide 29: Wireline and Cable Fiber Sales
29 Wireline and Cable Fiber Sales ($ millions) Fiber Lease Revenue New External Fiber Lease Contracts * * Estimated amounts represent the first 10 years of expected contract value. Contract Terms range from 36 to 120 months. 42.6 27.1
Slide 30: Capital Investment
AXSHENTEL’ CAPITAL INVESTMENT
Slide 31: Capital Expenditures
31 Capital Expenditures Investing in the Future Capex Spending ($ millions) 52% Upgrades and Expansion of Acquired Territories 14% Network Maintenance 13% Success - Based 12% Network Capacity 9% Network Expansion 2018 Capex Budget:
Slide 32: Q&A
AXSHENTEL Q&A
Slide 33: Appendix
AXSHENTEL APPENDIX
Slide 34: Adjusted OIBDA
34 Adjusted OIBDA ($ millions) For the Year Ended: 12/31/2017 12/31/2016 Change ($) Change (%) Operating income $ 46.5 $ 22.5 24.0 107 % Plus Depreciation and amortization 177.0 143.7 33.3 23 % Plus (Gain) loss on asset sales 0.1 0. 0 0.1 — % Plus Share based compensation 3.6 3.0 0.6 20 % Plus the b
Slide 35: Adjusted OIBDA by Segment
35 Adjusted OIBDA by Segment ($ millions) Wireless Cable Wireline Other 2017 2016 2017 2016 2017 2016 2017 2016 Operating income $ 34.1 $ 26.2 $ 15.8 $ 7 .0 $ 21.0 $ 20.5 $ ( 24.4 ) $ ( 31.2 ) Plus Depreciation and amortization 139.6 107.6 24.0 23.9 12.8 11.7 0. 6 0. 4 Plus (Gain) loss on asset sale
Slide 36: Wireless Segment - Change in Adjusted OIBDA 2017 vs. 2016
36 Wireless Segment – Change in Adjusted OIBDA 2017 vs. 2016 ($ millions) Postpaid Revenues Prepaid Revenues Travel Revenues Other Prepaid Acquisition Costs Network Costs Total
Slide 37: Cable Segment - Change in Adjusted OIBDA 2017 vs. 2016
37 Cable Segment – Change in Adjusted OIBDA 2017 vs. 2016 ($ millions )
Slide 38: Wireless - Postpaid Statistics
38 Postpaid Churn Postpaid ARPU* Wireless - Postpaid Statistics *ARPU represents Average Revenue Per Unit. See Appendix for reconciliation of Wireless segment operating revenues to Postpaid ARPU.
Slide 39: Wireless - Prepaid Statistics
39 Prepaid Churn Prepaid ARPU* Wireless - Prepaid Statistics Prepaid subscribers reported in the Q4'16 and subsequent periods include the impact of a change in policy as to how long an inactive customer is included in the customer counts. This policy change, implemented in December 2016, effectively
Slide 40: Total Wireless Distribution
40 Total Wireless Distribution December 31, 2017 Company Owned Stores 40 Agent Postpaid Stores 102 Nationals – Postpaid 65 Total Postpaid Stores 207 Agent Boost Stores 125 Nationals – Boost 276 Total Boost Stores 401
Shenandoah Telecommunications — Investor Presentation (April 2018) on 6ix