Shenandoah Telecommunications Co · NASDAQ:SHEN
Shenandoah Telecommunications — Investor Presentation (December 2018)
40 slides from Shenandoah Telecommunications's investor presentation, Dec 3, 2018
Slide 1: Shenandoah Telecommunications Company Investor Presentation September 2018
Shenandoah Telecommunications Company I NVESTOR P RESENTATION S EPTEMBER 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 works to ensure that rural communities have access to the same level of telecommunication services as found in urban areas in the U.S. Shentel is committed to enriching the lives of the subscribers and customers it serves with the highest quality of communications services by investing hea
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 • 193 towers generated $2.9 million of revenue in Q3’18, consistent witwh Q3’17 ▪ Fiber • We control 5,548 route miles of fiber. •
Slide 6: Company history and acquisitions timeline
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, Upgrades Cable ‘© Upgraded acquired
Slide 7: Consolidated - Historical Net Income
7 Consolidated - Historical Net Income $33.9 $40.9 ($0.9) $66.4 $31.7 -$5 $5 $15 $25 $35 $45 $55 $65 $75 2014 2015 2016 2017 Q3'18 YTD ($ 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 12/
Slide 8: Consolidated - Adjusted OIBDA
8 Consolidated - Adjusted OIBDA $132.1 $150.9 $246.1 $280.9 $212.5 $0 $50 $100 $150 $200 $250 $300 2014 2015 2016 2017 Q3'18 YTD
Slide 9: Wireless
ASHENTEL’ WIRELESS
Slide 10: Wireless Network Coverage
• 7.0 million Market POPs • 5.9 million Covered POPs • 1.0 million total subscribers • 17.6% penetration of covered POPs • 1,788 CDMA base stations (sites) Wireless Network Coverage 10
Slide 11: Wireless Network Expansion Effective February 1, 2018
11 Wireless Network Expansion Effective February 1, 2018 Current Markets New Expansion Markets Optional Expansion Markets
Slide 12: Wireless Highlights
12 Wireless Highlights ▪ Continued Growth ▪ 785,537 Postpaid customers Q3'18, up 7.9% over Q3'17 ▪ 255,462 Prepaid customers Q3'18, up 13.7% over Q3'17 ▪ $116.1 million of Wireless service revenue in Q3 '18 compared to $112.5 million in Q3 '17. ▪ Adjusted OIBDA $62.6 million, up 15.5% over Q3'17 QTD
Slide 13: Wireless - Subscriber Growth
13 Wireless - Subscriber Growth 287,867 312,512 722,562 736,597 785,537 145,162 129,855 206,672 225,822 255,462 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 2014 2015 2016 2017 Q3'18 YTD (1) Prepaid totals in 2015, 2016, and 2017 were adjusted to exclude Lifeline subscribers. (2) Includes 4
Slide 14: Wireless - Adjusted OIBDA
14 $101.4 $110.1 $200.1 $230.4 $180.2 $0 $50 $100 $150 $200 $250 2014 2015 2016 2017 Q3'18 YTD Wireless – Adjusted OIBDA
Slide 15: Wireless - Attractive Contract With Sprint
15 Wireless - Attractive Contract With Sprint ▪ Contract through November 2029 ▪ Two 10 - year renewals ▪ Payment at termination of 90% EBV (entire business value) for PCS. ▪ Postpaid revenues received from Sprint are recorded net of an 8% Management Fee and an 8.6% Net Service Fee that is retained
Slide 16: Wireless - Affiliate Terms
16 Wireless - Affiliate Terms SHENTEL PROVIDES ▪ Network (Towers, Cell Sites, Backhaul, Local Switch) ▪ Local Sales and Service ▪ Local Advertising & Promotions SPRINT PROVIDES Net Service Fee ▪ Billing/Collections ▪ Customer Care ▪ Long Distance ▪ Equipment Financing Postpaid Payment = 8.6% of Post
Slide 17: Fiber and Tower Highlights
17 Fiber and Tower Highlights ▪ Long - term opportunity to increase leasing revenues given growing demand for data ▪ Cable and Wireline non - affiliate fiber lease revenue is up 5.7% from Q3'17 ▪ 193 towers generated $2.9 million of Tower revenue in Q3'18, consistent with Q3'17. QTD Mobile Tower Rev
Slide 18: Cable
AXSHENTEL CABLE
Slide 19: Fiber network map
19 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 20: Cable Competitive Advantage
20 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 21: Cable - RGUs and Average Revenue
21 Cable - RGUs and Average Revenue ■ Video ■ Broadband ■ Voice ▪ Continued Growth ▪ Growth in average monthly revenue per RGU primarily due to broadband. ▪ 3,300+ customers upgraded their speeds in Q3 '18. ▪ Broadband penetration increased from 34.3% to 36.2%. Average Monthly Revenue per RGU * Aver
Slide 22: Cable - Adjusted OIBDA
22 Cable – Adjusted OIBDA $15.4 $24.5 $31.8 $40.5 $35.7 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 2014 2015 2016 2017 Q3'18 YTD
Slide 23: Cable - How Does Shentel Compare?
23 (1) Excludes cable and internet customers reported through the Wireline segment. (2) Peer Average information derived from SNL Kagan data as of 9/30/2017 for 10 comparably sized companies: Anne Arundel Bro adb and; Comporium Communications; Fidelity Communications Company; Hargray Cable; MetroCas
Slide 24: Wireline
ASHENTEL’ WIRELINE
Slide 25: Q3 '18 Wireline Highlights
25 Q3 ‘18 Wireline Highlights ▪ Continued Profitability ▪ Operating revenue $19.6 million, down 1.2% from Q3'17 ▪ Adjusted OIBDA $8.5 million, up 0.8% from Q3'17 ▪ 14,734 Broadband Customers at Q3'18, up 0.9% over Q3'17 QTD Wireline Adjusted OIBDA (in millions) Wireline Statistics
Slide 26: Wireline - Adjusted OIBDA
26 $28.0 $29.7 $32.6 $34.3 $24.6 $0 $5 $10 $15 $20 $25 $30 $35 $40 2014 2015 2016 2017 Q3'18 YTD Wireline – Adjusted OIBDA
Slide 27: Fiber network map
27 Shepherdstown Charleston Summersville Weston Beckley Covington Franklin Petersburg Amherst Atlanta , GA ( Telx ) Martinsville Danville Rustburg Appomattox Farmville Crewe Rocky Mount Dinwiddie Clarksville Blackstone Kenbridge Lawrenceville Radford Wytheville Keysville Lebanon Pineville Welch Lees
Slide 28: Capital Investment
ASHENTEL’ CAPITAL INVESTMENT
Slide 29: Capital Expenditures Investing in the Future
29 Capital Expenditures Investing in the Future Capex Spending ($ millions) ▪ 2018 Capex Budget Estimates * 52% Upgrades and Expansion of Acquired Territories * 14% Network Maintenance * 13% Success - Based * 12% Network Capacity * 9% Network Expansion ▪ Actual Capex of $92.3 million for the nine mo
Slide 30: Q&A
AXSHENTEL Q&A
Slide 31: Appendix
ASHENTEL’ APPENDIX
Slide 32: Adjusted OIBDA by Segment - Quarterly Results
32 Adjusted OIBDA by Segment - Quarterly Results Three Months Ended September 30, 2018 (in thousands) Wireless Cable Wireline Other Consolidated Operating income $ 27,352 $ 5,834 $ 5,122 $ (9,979 ) $ 28,329 Impact of ASC topic 606 (4,868 ) (172 ) (77 ) — (5,117 ) Depreciation and amortization 30,363
Slide 33: Wireless Segment - Change in Adjusted OIBDA
33 Wireless Segment – Change in Adjusted OIBDA Q3'18 vs. Q3'17 (millions) 48.2% Adj OIBDA Margin 53.9% Adj OIBDA Margin Revenue Impact $7.8 Expense Impact $0.6 ▪ Adjusted OIBDA growth of 15.5% to $62.6 million for the quarter ended September 30, 2018.
Slide 34: Cable Segment - Change in Adjusted OIBDA
34 Cable Segment – Change in Adjusted OIBDA Q3'18 vs. Q3'17 (millions) 33.1% Adj OIBDA Margin 36.6% Adj OIBDA Margin ▪ Adjusted OIBDA growth of 18.0% to $11.8 million for the quarter ended September 30, 2018.
Slide 35: Wireless Highlights
35 Wireless Highlights ▪ Continued Growth ▪ 785,537 Postpaid customers Q3'18, up 7.9% over Q3'17 ▪ 255,462 Prepaid customers Q3'18, up 13.7% over Q3'17 ▪ $116.1 million of Wireless service revenue in Q3 '18 compared to $112.5 million in Q3 '17. ▪ Adjusted OIBDA $62.6 million, up 15.5% over Q3'17 QTD
Slide 36: Average Monthly Billed Revenue per Subscriber
36 Average Monthly Billed Revenue per Subscriber Postpaid and Prepaid ($ in thousands, except subscribers and revenue per subscriber amounts) Q3'18 Q3'17 Postpaid billings $ 96,813 $ 94,013 Adjustment for write - offs 5,273 5,407 Postpaid billings excluding write - offs $ 102,086 $ 99,420 Average po
Slide 37: Wireless - ARPU Trend
37 Wireless - ARPU Trend Postpaid ARPU* *ARPU represents Average Revenue Per Unit. See Appendix for reconciliation of Wireless segment operating revenue to Postpaid ARP U. Prepaid ARPU*
Slide 38: Cable Highlights
38 Cable Highlights ▪ Continued Growth ▪ Operating revenue $32.2 million, up 7.0% over Q3'17 ▪ Adjusted OIBDA $11.8 million, up 18.0% over Q3'17 QTD Cable Adjusted OIBDA (in millions) Cable RGUs
Slide 39: Cable - Non-GAAP Financial Measure Average Revenue
39 Cable - Non - GAAP Financial Measure Average Revenue ($ in thousands, except subscriber and per subscriber amounts) Q3'18 Q3'17 Service revenue $ 26,955 $ 25,246 Fiber, FUSC, pass - through, and other 2,113 2,074 Internal revenue 451 430 Video, broadband and voice revenue 29,519 27,750 Other misc
Slide 40: Total Wireless Distribution
40 Total Wireless Distribution September 30, 2018 December 31, 2017 Company Owned Stores 33 40 Agent Postpaid Stores 127 102 Nationals – Postpaid 96 65 Total Postpaid Stores 256 207 Agent Boost Stores 142 125 Nationals – Boost 250 276 Total Boost Stores 392 401
Shenandoah Telecommunications — Investor Presentation (December 2018) on 6ix