Shenandoah Telecommunications Co · NASDAQ:SHEN
Shenandoah Telecommunications — Q4 2018 Earnings Presentation
36 slides from Shenandoah Telecommunications's earnings presentation, Feb 28, 2019
Slide 1: Q4 2018 Earnings Conference Call
Q4 2018 Earnings Conference Call February 28, 2019
Slide 2: Safe Harbor Statement
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. Th
Slide 3: Use of Non-GAAP Financial Measures
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 activities an
Slide 4: Chris French, President and CEO
Chris French President and CEO 4
Slide 5: Full Year 2018 Highlights
Full Year 2018 Highlights ▪ Revenue ▪ $630.9 million in 2018 compared with $612.0 million in 2017. * 2018 includes a $9.8 million negative impact related to Topic 606. ▪ Operating Income ▪ $93.2 million in 2018 compared with $46.5 million in 2017. ▪ Net Income ▪ $46.6 million in 2018 compared with $
Slide 6: Fourth Quarter 2018 Highlights
Fourth Quarter 2018 Highlights ▪ Revenue ▪ $161.5 million in Q4'18 compared with $151.6 million in Q4'17. * Q4'18 includes a $2.0 million negative impact related to Topic 606. ▪ Operating Income ▪ $27.0 million in Q4'18 compared with $18.1 million in Q4'17. ▪ Net Income ▪ $14.9 million in Q4'18 comp
Slide 7: Dividend payment per share
Annual Dividend Paid Every Year Since 1960 $0.30 $0.27 $0.25 59th consecutive year of paying a dividend. Dividend payment per share $0.20 $0.15 $0.10 $0.05 $0.00 l 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 1
Slide 8: Wireless Highlights
Wireless Highlights ▪ Continued Growth Wireless PCS Customers ▪ 795,176 Postpaid customers Q4'18, up 8.0% over Q4'17 736,597 795,176 ▪ 258,704 Prepaid customers Q4'18, up 14.6% over Q4'17 225,822 258,704 ▪ Operating revenue $119.0 million, up 6.7% over Q4'17 ▪ Adjusted OIBDA $63.2 million, up 11.7%
Slide 9: Cable Highlights
Cable Highlights ▪ Continued Growth Cable RGUs ▪ Operating revenue $32.9 million, up 7.9% over Q4'17 135,145 133,086 ▪ Adjusted OIBDA $12.6 million, up 11.8% over Q4'17 Adjusted OIBDA Margin 37% Q4'17 Q4'18 34% 29% QTD Cable Adjusted OIBDA (in millions) 25% $12.6 $11.3 18% 15% 2013 2014 2015 2016 20
Slide 10: Wireline Highlights
Wireline Highlights ▪ Revenue and Adjusted OIBDA declines driven primarily by Wireline Statistics affiliate backhaul circuit repricing. 14,353 14,464 ▪ Continued stability in Wireline subscriber base. 15,000 ▪ Growth in commercial fiber partially offsetting legacy revenue 12,000 9,452 9,078 declines
Slide 11: Jim Woodward, SVP of Finance and CFO
Jim Woodward SVP of Finance and CFO 11
Slide 12: Consolidated Quarterly Results
Consolidated Quarterly Results Consolidated Results ($ in thousands, except per share amounts) Three Months Ended: 12/31/18 12/31/17 Change ($) Change (%) Operating revenue $161,484 $151,617 $ 9,867 6.5 % Operating expenses $134,490 $133,507 $ 983 0.7 % Operating income (loss) $ 26,994 $ 18,110 $ 8,
Slide 13: Adjusted OIBDA by Segment - Quarterly Results
Adjusted OIBDA by Segment - Quarterly Results Adjusted OIBDA by Segment Three Months Ended December 31, 2018 (in thousands) Wireless Cable Wireline Other Consolidated Operating income $ 25,977 $ 6,311 $ 3,178 $ (8,472) $ 26,994 Impact of ASC topic 606 (4,026) (17) (58) — (4,101) Depreciation and amo
Slide 14: Wireless Segment – Change in Adjusted OIBDA
Wireless Segment – Change in Adjusted OIBDA Q4'18 vs. Q4'17 (millions) $4.4 $63.2 $5.0 $(2.8) $56.6 50.7% 53.1% Adj Adj OIBDA OIBDA Margin Margin Revenue Impact Expense Impact $9.4 $(2.8) Q4'17 Postpaid Prepaid Expenses Q4'18 Revenue Revenue and and Other Wholesale ▪ Adjusted OIBDA growth of 11.7% t
Slide 15: Cable Segment – Change in Adjusted OIBDA
Cable Segment – Change in Adjusted OIBDA Q4'18 vs. Q4'17 (millions) $2.4 $12.6 $(1.1) $11.3 38.4% Adj OIBDA 37.1% Margin Adj OIBDA Margin Q4'17 Broadband Maintenance & Other Q4'18 Service Revenue ▪ Adjusted OIBDA growth of 11.8% to $12.6 million for the quarter ended December 31, 2018. 15
Slide 16: Wireline Segment – Change in Adjusted OIBDA
Wireline Segment – Change in Adjusted OIBDA Q4'18 vs. Q4'17 (millions) $0.6 $8.8 42.6% Adj OIBDA Margin $6.7 $(2.7) 36.0% Adj OIBDA Margin Q4'17 Regulatory Maintenance Costs, Q4'18 Refund Repricing of Affiliate (NECA) Circuits & Other 16
Slide 17: Kentucky Expansion
Kentucky Expansion ▪ Acquired the assets of Big Sandy Broadband, Inc. ("Big Sandy") on February 28, 2019. ▪ Adds approximately 4,700 RGUs for Cable segment. * Increases existing RGU base by approximately 3.5%. * Adds more than 2,200, or 3.2%, broadband RGUs. ▪ Purchase was funded with cash on hand.
Slide 18: Capitalization - Q4'18 vs. Q4'17
Capitalization - Q4'18 vs. Q4'17 (millions) $900 $822.0 $800 $770.2 $700 $600 4.23% 3.97% Eff. Int. Rate Eff. Int Rate $500 $400 2.93x 2.61x 2.54x Leverage Ratio Leverage Ratio $300 $200 $100 $78.6 $85.1 $0 Q4'17 Q4'18 Cash & Cash Equivalents Debt ▪ Reduced leverage ratio and effective interest rate
Slide 19: Dave Heimbach, EVP and COO
XG Dave Heimbach EVP and COO AXSHENTEL
Slide 20: 2018 Highlights
2018 Highlights ▪ Strong Subscriber Growth ▪ Added 58,579 net postpaid PCS subscribers. ▪ Added 32,882 net prepaid PCS subscribers. ▪ Added 4,261 net broadband subscribers in Cable, an increase of 6.7%, while growing broadband ARPU 9.2% year over year. ▪ Commercial fiber revenue growth of 7.3% year
Slide 21: Wireless Subscriber Changes - Q4'18 Year Over Year
Wireless Subscriber Changes - Q4'18 Year Over Year (in thousands) 1,053.9 962.4 258.7 225.8 795.2 736.6 54.0 37.5 15.7 15.7 15.2 17.2 38.3 19.2 20.3 December 31, 2017 Richmond Organic December 31, 2018 Expansion Growth Area Postpaid Prepaid 21
Slide 22: Wireless - Postpaid Metrics
Wireless - Postpaid Metrics ▪ Record gross and net additions in the fourth quarter with net adds up 11.5% year over year. QTD Churn ▪ Churn improved 5 basis points over Q4'17 and 22 basis points year over year. 1.95% 1.90% ▪ The new Sprint rate card combined with changes in promotional discounting m
Slide 23: Wireless - Prepaid Metrics
Wireless - Prepaid Metrics ▪ Net additions grew 167.3% over Q4'17 on the strength of the Boost brand. QTD Churn ▪ Churn improved 50 basis points over Q4'17 driven by improvements in the network and greater distribution. 5.05% 4.55% ▪ Prepaid ARPU remains stable, down 0.3% from Q4'17. QTD Gross Addit
Slide 24: Cable - RGUs and Average Revenue
Cable - RGUs and Average Revenue ▪ 6.2% growth in average monthly revenue per Average Monthly Revenue per RGU * RGU primarily due to broadband. ▪ Broadband penetration increased from 34.6% to $74.44 36.8%. $70.07 ▪ Launched Gigabit service to 105,010 homes passed in our Virginia markets and introduc
Slide 25: DOCSIS 3.1 Deployment
DOCSIS 3.1 Deployment ▪ 63% of homes passed are now capable of supporting 1Gbps ▪ 96% of homes passed are now capable of supporting at least 100Mbps 25
Slide 26: Fiber and Tower Highlights
Fiber and Tower Highlights Fiber ▪ Cable and Wireline non-affiliate commercial Fiber Lease Revenue (in millions) fiber lease revenue is up 7.3% from 2017. ▪ Annual FTTT revenue of $2.9 million, an $48.6 $47.4 increase of 11% year over year. 28.0 25.3 Tower ▪ 208 towers generated $11.6 million of ren
Slide 27: Capital Expenditures - Investing in the Future
Capital Expenditures - Investing in the Future Capex Spending ($ millions) ▪ 2019 Capex Budget Estimates ▪ 17% Upgrades and Expansion of Acquired $173 Territories $20 ▪ 22% Network Expansion $146 $148 $5 $137 $10 ▪ 27% Network Capacity $32 $23 $8 $21 $16 ▪ 21% Network Maintenance $35 $27 ▪ 13% Succe
Slide 28: Q&A
AXSHENTEL Q&A 28
Slide 29: Appendix
Appendix AXSHENTEL
Slide 30: Wireless Network Expansion
Wireless Network Expansion Effective February 1,2018 New Expansion Markets ▪ 1.1 million Market POPs ▪ 0.6 million Covered POPs ▪ 0.2 million optional expansion POPs ▪ 54 thousand total subscribers ▪ 105 CDMA base stations (sites) 30
Slide 31: Average Monthly Billed Revenue per Subscriber - Postpaid and Prepaid
Average Monthly Billed Revenue per Subscriber - Postpaid and Prepaid ($ in thousands, except subscribers and revenue per subscriber amounts) Q4'18 Q4'17 Postpaid billings $ 97,005 $ 91,260 Adjustment for write-offs 5,695 6,277 Postpaid billings excluding write-offs $ 102,700 $ 97,537 Average postpai
Slide 32: Wireless - ARPU Trend
Wireless - ARPU Trend Postpaid ARPU Prepaid ARPU $44.46 $43.22 $43.52 $43.42 $43.45 $37.46 $36.73 $37.11 $37.51 $37.37 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 32
Slide 33: Wireless - Network Statistics at December 31, 2018
Wireless - Network Statistics at December 31, 2018 Wireless Network Statistics Cell sites Sites with 2nd LTE carrier 1,243 Sites with three carriers, including a 2nd carrier @ 1900 MHz 550 Sites with 2.5 GHz LTE 457 Sites with LTE 1,853 % of sites with LTE capabilities 99.7% Traffic % LTE traffic 98
Slide 34: QTD Fiber and Tower Highlights
QTD Fiber and Tower Highlights ▪ Cable and Wireline external commercial fiber lease revenue is down 1.8% from QTD Fiber Lease Revenue (in millions) Q4'17 $13.2 ▪ 208 towers generated $3.0 million of Tower 7.6 $11.6 revenue in Q4'18, up slightly from Q4'17. 6.1 QTD Mobile Tower Revenue (in millions)
Slide 35: Cable - Non-GAAP Financial Measure Average Revenue
Cable - Non-GAAP Financial Measure Average Revenue ($ in thousands, except subscriber and per subscriber amounts) Q4'18 Q4'17 Service revenue $ 27,443 $ 25,452 Fiber, FUSC, pass-through, and other 2,196 2,079 Internal revenue 485 456 Video, internet and voice revenue 30,124 27,987 Other miscellaneou
Slide 36: Cable - Metrics
Cable - Metrics As of December 31, 2018 2017 Homes passed 185,133 184,910 Total revenue generating units 135,145 133,086 Customer relationships 80,114 77,828 RGUs per customer relationship 1.69 1.71 Video Revenue generating units 43,600 46,613 Penetration 23.6% 25.2% Digital video RGUs 78.8% 76.2% B
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