Shenandoah Telecommunications Co · NASDAQ:SHEN
Shenandoah Telecommunications — Investor Presentation (June 2018)
42 slides from Shenandoah Telecommunications's investor presentation, Jun 6, 2018
Slide 1: Shenandoah Telecommunications Company Investor Presentation June 2018
Shenandoah Telecommunications Company I NVESTOR P RESENTATION J UNE 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 193 towers with an average of 1.9 tenants each ▪ Fiber • We control 5,449 route miles of fiber. • New external fiber reve
Slide 6: Shentel Strategic Timeline 2008-2019+
AXSHENTEL 2016 - 2018 2019+ 2008 - 2010 2010 - 2013 2014-2015 2016 Acquisitions Upgrades (EEeeien Upgrades Reduced Capex > (reise 7 sort) Integration Reduced Capex Expansion Cable Cable Reduced Capex Telos / Sprint 4G LTE Build-Out Harvest . . . . ‘© Upgraded and * Decrease capital assets in West ne
Slide 7: Historical Net Income
7 Historical Net Income $29.6 $33.9 $40.9 ($0.9) $66.4 $4.8 -$5 $5 $15 $25 $35 $45 $55 $65 $75 2013 2014 2015 2016 2017 Q1 2018 ($ 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 12/31/17 ,
Slide 8: Adjusted OIBDA
8 Adjusted OIBDA $118.6 $132.1 $150.9 $246.1 $280.9 $68.7 34.0% 36.0% 38.0% 40.0% 42.0% 44.0% 46.0% 48.0% $0 $50 $100 $150 $200 $250 $300 2013 2014 2015 2016 2017 Q1 2018 $ in millions % of Revenue
Slide 9: Wireless Segment
AXSHENTEL WIRELESS SEGMENT
Slide 10: Wireless Network Coverage
• 7.0 million Market POPs • 5.9 million Covered POPs • 1.0 million total subscribers • 17.4% penetration of covered POPs • 1,742 CDMA base stations (sites) Wireless Network Coverage 10
Slide 11: Wireless Network Expansion
11 Wireless Network Expansion Effective February 1, 2018 Current Markets New Expansion Markets Optional Expansion Markets
Slide 12: Wireless Segment – Adjusted OIBDA
12 $93.4 $101.4 $110.1 $200.1 $230.4 $57.6 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% $0 $50 $100 $150 $200 $250 2013 2014 2015 2016 2017 Q1 2018 $ in millions % of Revenue Wireless Segment – Adjusted OIBDA
Slide 13: Wireless - Subscriber Growth
13 Wireless - Subscriber Growth (1) Prepaid totals in 2015, 2016, and 2017 were adjusted to exclude Lifeline subscribers . (2) Includes 405k postpaid and 155k prepaid subscribers acquired from nTelos and Sprint on 5/6/16. (3) Includes 19.1k postpaid and 6k prepaid subscribers acquired from Sprint on
Slide 14: Attractive Contract With Sprint
14 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 by Sprint.
Slide 15: Affiliate Terms
15 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 Postpaid Net Bi
Slide 16: Wireless - Mobile Tower Leasing
16 Wireless - Mobile Tower Leasing Steady Recurring Cash Flow ▪ Tower lease revenue of $2.9 million in Q1’18 with $2.0 million of OIBDA ▪ Long - term opportunity to increase leasing revenues given growing demand for data ▪ Company owns 193 cell towers Mobile Tower Revenue ($ millions)
Slide 17: Cable Segment
AXSHENTEL CABLE SEGMENT
Slide 18: Cable Segment – Adjusted OIBDA
18 Cable Segment – Adjusted OIBDA $11.7 $15.4 $24.5 $31.8 $40.5 $11.7 0% 5% 10% 15% 20% 25% 30% 35% 40% $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 2013 2014 2015 2016 2017 Q1 2018 $ in millions % of Revenue
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 – RGU Growth by Quarter
21 Cable – RGU * Growth by Quarter Customer Relationship 77,925 77,305 77,953 77,828 78,397 RGU's/Customer Relationship 1.70 1.71 1.71 1.71 1.70 ■ Video ■ Voice ■ High Speed Internet *Excludes RGU’s for customers located within our regulated telephone service area in Shenandoah County, VA
Slide 22: Cable – Average Revenue
22 Cable – Average Revenue Average Monthly Revenue per RGU Average Monthly Revenue per Customer Relationship *ARPU represents Average Revenue Per Unit. See Appendix for reconciliation of Cable segment operating revenues to Average revenue per RGU and per Customer Relationship.
Slide 23: 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 Segment
AXSHENTEL WIRELINE SEGMENT
Slide 25: Wireline Segment – Adjusted OIBDA
25 $26.1 $28.0 $29.7 $32.6 $34.3 $8.1 35.0% 40.0% 45.0% 50.0% $0 $5 $10 $15 $20 $25 $30 $35 $40 2013 2014 2015 2016 2017 Q1 2018 $ in millions % of Revenue Wireline Segment – Adjusted OIBDA
Slide 26: Wireline - Key Operational Results
26 Wireline - Key Operational Results ▪ Access line loss of 2.2% in past 12 months. ▪ 4,912 video subscribers at 3/31/18 Access lines (000s) DSL & Cable Modem Customers (000s)
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: Wireline and Cable Fiber Sales
28 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.
Slide 29: Capital Investment
AXSHENTEL CAPITAL INVESTMENT
Slide 30: Capital Expenditures Investing in the Future
30 Capital Expenditures Investing in the Future Capital Expenditures ($ millions) 52% Upgrades and Expansion of Acquired Territories 14% Network Maintenance 13% Success - Based 12% Network Capacity 9% Network Expansion 2018 Budget :
Slide 31: Q&A
AXSHENTEL Q&A
Slide 32: Appendix
AXSHENTEL APPENDIX
Slide 33: Adjusted OIBDA - Quarterly Results
33 Adjusted OIBDA - Quarterly Results For the Quarter Ended: (In thousands) ( 3/31/18 3/31/17 Change ($) Change (%) Operating income $ 14,348 $ 10,673 $ 3 ,675 34 % Deferral of costs due to Topic 606 ( 248 ) — ( 248 ) — Plus depreciation and amortization 43,487 44 ,804 ( 1 ,317 ) (3 )% Plus (gain) l
Slide 34: Adjusted OIBDA by Segment Q1'18
34 Adjusted OIBDA by Segment ($ millions) Wireless Cable Wireline Other Consolidated (In thousands) Q1'18 Q1'18 Q1'18 Q1'18 Q1'18 Operating income $ 14 ,861 $ 5 ,527 $ 4,772 $ (10 ,812) $ 14,348 Deferral of costs due to Topic 606 ( 354) 141 (35) — (248) Plus depreciation and amortization 3 3,925 6 ,
Slide 35: Adjusted OIBDA by Segment Q1'17
35 Adjusted OIBDA by Segment ($ millions) Wireless Cable Wireline Other Consolidated (In thousands) Q1'1 7 Q1'1 7 Q1'1 7 Q1'1 7 Q1'17 Operating income $ 9,137 $ 3,139 $ 5,073 $ ( 6,676) $ 10,673 Plus depreciation and amortization 3 5,752 5,788 3,132 132 44,804 Plus (gain) loss on asset sales (24) (2
Slide 36: Wireless Segment – Change in Adjusted OIBDA Q1'18 vs. Q1'17
36 Wireless Segment – Change in Adjusted OIBDA Q1'18 vs. Q1'17 ($ millions) 61.4 57.6 53% Adj OIBDA Margin 52% Adj OIBDA Margin 1.7 (0.4) (0.9) (1.2) (1.5) (1.5) Revenue impact (0.8) Expense impact (3.0)
Slide 37: Cable Segment – Change in Adjusted OIBDA Q1'18 vs. Q1'17
37 Cable Segment – Change in Adjusted OIBDA Q1'18 vs. Q1'17 ($ millions) 32% Adj OIBDA Margin 37% Adj OIBDA Margin
Slide 38: Wireless - Postpaid Statistics
38 Postpaid Churn Postpaid ARPU* Wireless - Postpaid Statistics *ARPU represents Average Revenue Per Unit. See reconciliation of Wireless segment operating revenues to Postpaid ARPU.
Slide 39: Wireless - Prepaid Statistics
39 Prepaid Churn Prepaid ARPU* Wireless - Prepaid Statistics *ARPU represents Average Revenue Per User. See reconciliation of Wireless segment operating revenues to Prepaid ARPU. 7.3 2.6 1.2 (38.3) 5.01% 4.42%
Slide 40: Non-GAAP Financial Measures: Billed Revenue per Subscriber
40 Non - GAAP Financial Measures Billed Revenue per Prepaid & Postpaid Subscriber Calculation of Billed revenue per subscriber = (Gross billed revenue less discounts*1,000) / Average subscribers / 3 months 1Q 2018 1Q 2017 Postpaid net billings $ 93,290 $ 92,989 Plus: Adjustment for write - offs 5,33
Slide 41: Cable - Non-GAAP Financial Measure Average Revenue
41 Cable - Non - GAAP Financial Measure Average Revenue Q1 2018 Q1 2017 Service Revenue $ 28,471 $ 26,411 Fiber, FUSC, Pass - through & Other 1,944 1,252 Internal Revenue (1,031 ) (567 ) Video, Internet & Voice Revenue 29,384 27,096 Other miscellaneous revenue 2,327 1,917 Total Operating Revenue $ 3
Slide 42: Total Wireless Distribution
42 Total Wireless Distribution March 31, 2018 December 31, 2017 Company Owned Stores 38 40 Agent Postpaid Stores 111 102 Nationals – Postpaid 62 65 Total Postpaid Stores 211 207 Agent Boost Stores 145 125 Nationals – Boost 284 276 Total Boost Stores 429 401
Shenandoah Telecommunications — Investor Presentation (June 2018) on 6ix