Shenandoah Telecommunications : Shentel reports 22% increase in Q2 net income

Posted 3 August 2015 12:00 AM by Shentel

Shentel has announced financial and operating results for the three and six months ended June 30, 2015.

Consolidated Second Quarter Results

For the quarter ended June 30, 2015, net income was $10.5 million compared to $8.6 million in the second quarter of 2014 due to continued growth in the Wireless and Cable segments. Operating income was $18.8 million, up 18.7% from the same quarter last year.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization) increased 12.7% to $37.2 million in the second quarter of 2015 from $33.0 million in the second quarter of 2014. Total revenues were $85.7 million, an increase of 5.3% compared to $81.4 million for the 2014 second quarter. Wireless revenues increased primarily as a result of growth in wireless subscribers, while Wireline segment revenues increased due to new fiber contracts. Cable segment revenues increased due to an increase in

Revenue Generating Units (RGUs) and improved product mix, with customers selecting higher-priced digital TV and higher-speed data packages. Total operating expenses were $67.0 million in the second quarter of 2015 compared to $65.6 million in the prior year period.

President and CEO Christopher E. French commented, "Our upgraded wireless and cable networks continue to appeal to new customers and existing customers who are subscribing to more offerings, which resulted in solid revenue growth and improved profitability in the second quarter. Increasingly, consumers expect reliable wireless coverage in any setting, and demand high speed broadband offerings and we're pleased that our state-of-the-art service networks are meeting their needs. Our balance sheet is strong, positioning us well for continued organic growth while providing us the flexibility to explore expansion opportunities."

Wireless Segment

Service revenues in the Wireless segment increased 1.8% to $48.7 million as compared to the second quarter of 2014. Postpaid service revenues decreased $0.4 million despite 6.4% growth in average customers, which was offset by lower service revenues primarily from customers selecting leasing and installment billing programs for handsets. During the second quarter, net prepaid service revenues grew

$1.2 million, or 11.1%, due primarily to a 6.3% growth in average prepaid customers and improved product mix as compared to the same period of 2014.

During the second quarter of 2015, net additions to postpaid subscribers were 5,414, up 104% compared to 2,648 postpaid subscriber additions in the second quarter of 2014. Net prepaid subscribers declined 2,352 during second quarter 2015, compared to a decline of 361 in the second quarter of 2014.

Second quarter operating expenses in the Wireless segment decreased $0.8 million overall, primarily due to lower postpaid handset costs as more customers finance their handsets through Sprint.

Second quarter adjusted OIBDA in the Wireless segment was $28.0 million, an increase of $2.2 million or 8.6% from the second quarter of 2014.

"Our ability to couple our regional advertising efforts with Sprint's national outreach allows us to effectively market the advantages of our leading edge network and our local customer service capabilities, which resulted in significant additions to our postpaid customer base this quarter," Mr. French stated. "However, we continue to see a downward trend in monthly service fees as customers choose lower revenue service plans related to handset financing and leasing plans."

Cable Segment

Revenue in the Cable segment increased $3.3 million or 15.9% to $24.2 million, due to 6.2% growth in average RGUs (the sum of voice, data, and video users), video rate increases, and customers selecting higher speed data access packages and higher priced digital TV services. Operating expenses increased by $1.7 million in second quarter 2015 over second quarter 2014.

Revenue generating units totaled 123,390 at the end of the second quarter of 2015, an increase of 6.2% over June 30, 2014.

Adjusted OIBDA in the Cable segment for second quarter 2015 was $5.7 million, up 46% from $3.9 million in the second quarter of 2014.

Mr. French stated, "Demand for our high speed internet and voice services remained strong in the quarter, outpacing the anticipated decrease in video subscribers. We are seeing increasing market recognition of our ability to provide high speed and reliability as reflected in new customer growth and the conversion of existing customers to upgraded service offerings and monthly subscription plans."

Wireline Segment

Operating income for the Wireline segment was $4.0 million as compared to $3.8 million in second quarter 2014. Access lines at June 30, 2015, were 21,615 compared to 21,842 at June 30, 2014. Carrier access and fiber revenue for the quarter was $10.2 million, a 5.3% increase from $9.6 million for the same quarter last year, due to growth in new fiber contracts.

Adjusted OIBDA for the Wireline segment for second quarter 2015 was $7.3 million, as compared to $6.5 million in second quarter 2014.

Other Information

Capital expenditures were $15.6 million in both the second quarter of 2015 and the comparable 2014 period.

Cash and cash equivalents as of June 30, 2015 were $92.1 million, compared to $68.9 million at December 31, 2014. Total outstanding debt at June 30, 2015 totaled $212.8 million compared to $230.0 million last year. The Company began making quarterly principal payments of $5.75 million on its debt in December 2014. At June 30, 2015, debt as a percent of total assets was 34.2%. The amount available to the Company through its revolver facility was $50 million as of June 30, 2015.

"Our solid balance sheet improved further during the quarter, providing improved liquidity and the flexibility for the continued growth of our customer base, capabilities and service offerings," Mr. French concluded.

About Shenandoah Telecommunications

Shenandoah Telecommunications Company (Shentel) provides a broad range of diversified communications services through its high speed, state-of-the-art network to customers in the Mid-Atlantic United States. The Company's services include: wireless voice and data; cable video, internet and voice; fiber network and services; and local and long distance telephone. Shentel is the exclusive personal communications service ("PCS") Affiliate of Sprint in portions of Pennsylvania, Maryland, Virginia and West Virginia. For more information, please visit www.shentel.com.

This release contains forward-looking statements that are subject to various risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of unforeseen factors. A discussion of factors that may cause actual results to differ from management's projections, forecasts, estimates and expectations is available in the Company filings with the SEC. Those factors may include changes in general economic conditions, increases in costs, changes in regulation and other competitive factors.

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS