SHEN - Earnings call transcript Q4 2017 | Shenandoah Telecommunications Company

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Operator

Good morning, everyone. And welcome to the Shenandoah Telecommunications Fourth Quarter and Year-End 2017 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Jennifer Belodeau of IMS and Investors Relations for Shentel.

Jennifer Belodeau

you us. thank and morning for joining Good The results ended for today's call December review Shentel's is to the XXXX. purpose of XX, quarter and year

this press Our that on us and made The our distributed we'll are page Executive at will session. press presentation Executive With in announcing be Senior Christopher website. Finance Chief French, available Operating Officer; our Vice be replay Investor today release the results call details Please of Woodward, shentel.com forth and call and Chief Financial note we'll call. included on MacKenzie, today. and a morning, and in our Chief audio are the Vice remarks, Officer. release conduct question-and-answer Jim is reviewing President, our prepared were Officer; announced After an later the this President President set Earle our a the

me contains may let statements always, conference refer call to of include Slide Harbor X you this remind risks cause you're certain Safe As and subject our presentation, may review. that These risk a to which in forward-looking you differ the various results filings, discussion actual statements. to Shentel uncertainties. and provides materially from detailed SEC our factors strongly of to encouraged which the our disclaimer

are in reconciliations them and call over these measures, comparable our in our undertake Also, on SEC to Slide X obligation the statement. provided to why on presentation. reliance cautioned Chris. Except turn or comments to reconciliations effort on we GAAP an are now financial to any in investors, undue also today use most These by measures. useful place information forward-looking law, appendix today's no note You're as publicly I'll not we non-GAAP these to that Details to include forward-looking required filings. we to statements. the included revise provide slide measures, update an including

Christopher French

morning. joining us Jenn. appreciate We this you, Thank everyone

make and significant to and initiatives, the different company continue progress growing communities our We serving many on customers.

expansion, introducing territory. a over region. amended in agreement Sprint most this growth again over recent completed the of well-positioned first area quarter sites to are of and upgrade the will As our in we to With providing in of affiliate well that year. to month, on as coverage customers, finishing former the planned service fourth for reliable very this our as we pleased marked results. after improve customer population expansion LTE XX% network, with we areas serve us better our way well expansion allows former improved and had XXXX, networks service Earlier the markets. our for this year-end nTelos expand experience metro completing drive of The sales mid-Atlantic full our continued more remainder Sprint's of nTelos With we opportunities we’re a these will The growth. our XG to and quarter our our in build our existing million the with between service networks, to area the $X and significant are

operating fourth OIBDA XX to slightly was X, Slide $XXX Adjusted million, the a income operating the million shows than X nTelos year. see results whereas from and increases to the full more For statement you’ll representing declined increase year, income doubled On quarter Slide a $XXX and prior XX% Revenue markets. reflecting revenue increased income XX% a our XX% $XX.X the reads year’s margin over the acquired from that million. million. benefit

one-time new the This to million. benefit absent but law, related quarter would tax be $X included non-cash that income the net

the dividend million, representing margin X We dividend also adjusted XXXX, December of increase flows consecutive the in the years. dividends. we've year XX shows $XX our was XXth with operations of XX from our of of XX%. fourth-quarter and last dividend OIBDA the dividend annual paid our cash We out fifth This continue to generate OIBDA raised history. Slide an consecutive strong year with

During and Slide increased of business. prepaid highlights almost both both shows wireless XXXX, the postpaid cable. to our our X subscribers. wireless grow in X counts customer we base and million subscriber reaching We continue

expected year. Tower X, we OIBDA XX. OIBDA Moving are our video. voice to and shown Slide numbers our by sixth in than in increased our as offset Adjusted margin and for business, more the high-speed increased Fiber cable RGUs again and XX% data straight in Slide the improved decline

this It’s adjusted transition. very continuing for to fiber critical important capitalize Earle the to new our Changing continues. continue that for investment role. further Operating want revenue while his Chief gears, search we and our and OIBDA. that I on our available Officer our with person our for to lease mention in right growing both find We I to being smooth appreciate we serve replacement fiber the assist to network search us for

record the operating as lease weaknesses, the related notice for was matters have fully been the disclosed believe on the December used to previously to The resolved to not our extend know, are term you expense space. rent of which We and that a remediated material time primarily lease to to deadline a tower filed delay the resources straight-line basis, XX. filing due evaluate we significant As XX-K. need principally to devote

material weaknesses control. internal the we identified We in our correcting are

to the more priority environment. issues is strong and environment for a control and committed Going are implementing robust it us to have internal forward, resolving controlled we these top our

as quarter, Jim, the the turn say as the want pleased with over well I made during Before call I we overall. are we to to XXXX how fourth progress

our opportunities to LTE completed At We’re this network. have us. ahead the excited a of upgrade we XG state-of-the-art point, about very

demonstrating commitment serve. those further our affiliate expanded offering and expansive we reliable relationship Sprint with coverage our have in We to to the markets service

is strong brand for and solid Our known service. performance customer network

capture new the call the highest options. Jim progress over customers, to now past which the building in CFO all of the to of competitive details service robust I’ll Woodward, our in our financial while position we terms to are providing Given over turn year from our a results. review increasingly an quality network,

Jim Woodward

shows $XXX average million and begin revenues and everyone. compared subscriber, Slide I’ll changes Revenues away you, XX, move decrease the operating revenue which per and good The in the for fourth to with by of the Sprint primarily million, $XXX result subsidized was wireless our morning Thank were price net plans. income. XXXX. in XXXX quarter from lower driven which is lower plans Chris, from

of or benefit XXXX related of of million income quarter. over increased part Act. the million $XX remeasurement We to one-time the $XX net quarter. compared Net loss of as the to income Tax operating in the $XX deferred income non-cash tax taxes million, Our to recorded last the slight our a year's prior $XXX,XXX includes a lower to reflect of XX% rates

analysis While as estimate of of liabilities our we we impact complete reasonable could Tax the the all Tax of deferred estimate the made a that the Act impacts change on XXXX have assets and tax of our Act.

million, our income in of the be XXXX a of X net QX to compared impact XXX,XXX loss Excluding reform, would tax XXXX.

$XX impact integration fee. management the adjusted even I’d the on to Slide to OIBDA, waived was related representing Moving OIBDA expenses, excluding includes acquisition of year adjusted million. and continuing out XX, was million Sprint XX%. compared QX of for margin an also with $XX OIBDA which the to XX Also, is of Slide XX impact at that adjusted point XXXX, like in OIBDA million, last

measure the nTelos, OIBDA when we provide fees Sprint a We As postpaid up until a waived to to million. that are waiving of X% reminder, to impact waive XXX and million committed of continuing the the prepaid investors X% total aware fees. reaches acquired the the $X.X management month management fee ensure

the one-time expect quarter only by driving waived down, OIBDA adjusted Cable consolidated over adjusted in Virgin adjusted factor prior result out the in OIBDA. cable OIBDA year. also our mobile is high-speed in results was you data XXXX. We grown. segment. as in and speeds higher as walk Wireless QX data brands, Internet-based will handset and prepaid rise habits the results, revenues understand integration X On traditional as OIBDA a of wireline Wireless well fourth lower changes higher management the promotional adjusted Prepaid and the Slide was of consume revenues. XX of adjusted adjusted the better and once consumption. changing in consumer the on wireless to the the driven alternatives declined activity video, higher our and XX end slightly On revenues OIBDA but Slide and to fee which up Slide To the the were costs. heavy The $X factors XX in demonstrated streaming cost prepaid boost The high-speed subsidies XXXX, in increases continent is more changing drivers fees as QX programing and QX by Cable our revenues XXXX customers adjusted changes in as postpaid XXXX. a in OIBDA million a the from of lift of million habits is primarily acquisition and video OIBDA. walk reflects requires greater due reduction of data by grew voice the expenses. the drivers have media to are quarter-over-quarter, costs increases they acquisition-related

area. revenue fiber in that investment our our grow supporting to continue also We

in levels our acquisitions, our any our capital we February late XXX. was outstanding reducing to ratio debt XX/XX/XXXX repriced debt metrics basis debt times of of decline. of to our XX million covenant leverage well and significant points. rate expect XXX the Also, and Turning inside of by as leverage debt had X.X our we Borrowing interest we

expect by XXXX to repricing to million. X.X reduce We approximately the expense interest

of capital tax you in to would and federal or our result the depreciation not pay a investments, and XXXX taxes lower income the state Act cash accelerated any XXXX. As on Tax rate expect

XXXX audit weaknesses wanted K. to discuss XXXX reported Lastly, in on the the follow-up the material and I

term. did As extent, mainly rent Chris the reported impact the during a the of for analysis lease straight-line our accounting, and continuation large needed time amendments additional expense. original is accounting rent we To in The material weaknesses the a to lease this expense XXXX. mentioned, cash made previous not review

remediating and controls made control items XXXX. over and the weaknesses in these the The financial significant reporting. we’re to open, committed internal noted our on XXXX, company During clearing weaknesses in internal material improving progress remain

changes which I customer based has the driven a company's is on reduction is to effective the Sprint the revenue or give operating the in new expect operating any flows or would Before versus geography. the The customer are This revenue operating that in adopted a primarily turn fact XXXX, We not and There recognition like Shentel At guidance expense. The some reduction our as today. most call file in significant which is you I to revenue. to finalized. revenues impact our not generally turn some evaluation, after previously time, amounts have to standard. expenses of in for operating new will greater X, adjusted update income results accounted Earle, call ASX revenue Items and go over on the is immaterial. adoption periods XXX, on material – been additional January the ASC adoption. by under FASB’s the an this results. become to XXX in driving the the standard an expected in our payable were Earle into our on of impact do on of we be OIBDA operations net that plan to will depth this XX-K, cash factors I’ll information to

Earle MacKenzie

XX, ended good customers. Slide postpaid January We fourth but quarter in the XXX,XXX wireless We provided and morning. Jim Thanks numbers and release year-end excluding with on I’ll XXX,XXX and prepaid recap. assurance subs, year press subscriber the activity XX. start on I’ll

was reported As fourth of increase XX,XXX had former with which gross over XXXX X% XX% XX, of adds the covered exciting fourth a Slide that is net adds Over XXXX. XX% X,XXX postpaid – Tablets wherein quarter postpaid the approximately were the and which XX% data port-in watches, customers our plans. remain data We were service to base. ads upgrades ads days, fourth-quarter for fourth-quarter X.X% X,XXX in phones X.XX former fourth a the devices. XX% being net Included data quarter where subsidized The rate On the year-end, gross of which with X. of area. we data devices of Apple XX% pops. approximately news higher nTelos of in devices. ads, quarter the We net and in had the ads free were net has XX approximately of fourth had wherein quarter. the ratio XX,XXX at nTelos the the of postpaid fourth-quarter area, XX% in on

the December. is port-in X.X from to news good nTelos to the area in X in ratio Additional in X X.X to October, approximately former up grew

to X.X continue and investor particularly in strong area X XXXX momentum ratio for port-in February. that the have seen have Virginia. We with into the averaging Sales former January been nTelos

the primarily of separate along nTelos in have area and taking customers that in and decrease plans stats numbers ARPU postpaid lines due integration don't Slide and advantage provide going third, previously the plan subsidized the XX on to we nTelos fourth-quarter postpaid customers the for The forward. unlimited multi-line with churn the to is promotional reductions complete, we plans shows transformation With reported phone ARPU. free. with former fourth, further of fifth

promotions these up As on fourth, we and third, expire, lines. to the will fifth collect $XX

and down quarter. Fourth X% [ph] fourth shown net ads customers. Moving in with continues the prepaid XXXX of last the December XX,XXX XXXX due to strong. expansion year. prepaid from trend XX, quarter significantly same boost down quarter network. ARPU nTelos XXXX. churn to elevated, $XXX fourth the that card losses is on same but last our on of ads Prepaid We the The ads quarter in the ads Mobile Virgin XX strong nTelos prepaid Slide XX had quarter the in year, X,XXX million with net gross of the shutdown is were in Slide net prepaid net and report from upgrade churn remain recall was on platform you the Slide

we As decommissioned the XG XXX-megahertz into and sites to coverage The sites significant in quarter, sell XXX have will XXXX, added remaining now new upgrade completed in of the XXXX add of sell XG Systemwide, and the we have number approximately new XX% sites which our network last and completed XXXX be year. added the cost operating this spectrum news quarter completed. We the and in added sites. new fourth overlapping a from approximately XXXX. we increase will the will XXX sites of in reported

costs speed generating previously we loss users, users, with a video year revenue on our users. programming XX, we XXX of fourth in cable addition ended of high in data Slide to that net XXX with quarter phone the units Moving reported XXX,XXX the XXX in XX increases Significant and XXXX our for passed year. cable video customers pattern our and believe the [ph] seen XXXX, elevate The we the over video same on which losses revenue and past were Slide shown in we’ve per this to retran RGU January continues users quarters. will increase on

per high per month. customer data exceeds speed Our now average $XX revenue

to We their have We voice OIBDA data tells continue and price plus speed each eliminated Slide were impact no in speed the at and We XX, below. our our operating high-speed increasing speed data customer completed increase XXX the significant and meg enrolled to XX margins. XXX video income existing same similar made upgrade data change users, We of a no of high-speed up role. XX, our penetrations. penetrations month one data and just service XX, tier, all Meg they contributing having on at story customers to revenues. paying, XX XX-meg and high-speed decreasing customers

expect customer was positive. customers segment results. reaction can from you very shows XX our Slide the wireline As impacted the

lose customer the has access levels no get similar period continue to but loss have telephone to a to longer we regulated to voice required before broadband. lines, the slowed to a service We

We it continue customers option. to are In migrating moving add where cable broadband is to from cable to to more XXXX, customers customers DSL aggressive modem DSL be an we in with modem. going

we cable in DSL that to in the modem plan our years, customers few next network area the down cable area. the regulated DSL footprint our cable service to Over telephone move shut overlaps all and

DSL network. a to where invest regulated to networks in coper our of speeds continuing parts only we higher are the We have telephone provide

grow, in XXXX fiber down Slide to nonaffiliated for but Slide spent With fiber finishing service our XXXX. is CapEx signed that our budget million new less estimated $XX lower in up million XXXX to and had then to years projects, expansion, provided the a the $XXX.X million the XX% XXXX We for with We XXXX. for continue over CapEx and of we XXXX in XXXX, XXXX revenues in new dollars to areas, call. XXXX, wireless XXXX. in $XXX fourth carryforward contracts total the along both XXXX. affiliated of million you the contracts from nonaffiliated XX nTelos more signed see timing XX, through million. Moving from dollar $X.X addition in projected some than $XXX quarter Due projected we shows

XX% the territories, As shown upgrade the the dollars generated building slide, fiber in including the only new on coverage into we for amount is being are XX% nTelos the right of area. of new such there success-based. means is network, of these the customer. side and up XX% acquired X% increased for a the the revenues capacity, spend Success-based maintenance, XX% if expansion for and as for finishing expanding

turn Jim, I to We to Sprint strategic agreement take as Before I’d talk about addition moment see this a like the X. Shentel. with expansion to over call the to recent back a February signed effective

I in customers twice if of parameter that as our customers many their likely is on a of discussed is As reason are of they outside network. before, our live county of churn our The to community our have wireless the for interest network.

in the sites million new network experience. currently X.X and network XXX,XXX provide that to the often the travel Taking the they of us Sprint areas provides covers approximately match all the quality to urban they allows areas, a POPs. service over network urban between approximately network customers better to these the that areas, Sprint don't cell the The in quality Sprint of areas. with in providing have coverage into providing rest POPs of So, service bridge has our Sprint to improve quality a territory XXX

additional Eastern option, have Kentucky. the POPs cover in but to We no an XXX,XXX obligation

we years. approximately in the XX,XXX next the detailed areas, over a upon the invest network Sprint more were that customers, initially splitting up three reported actual to getting expect number approximately but We We is the XX,XXX. market million in $XX accounting

us adjustment previously the we referenced release. million website Slide between and Pennsylvania, our on reported We’ve for XX a $X an revised is have enhance the press XX important is link of of will turn Pennsylvania an now Richmond. I’ll Pittsburgh. have a of up York, area the our service our back Lancaster between We the to our that of Central million. entire received wheeling that Harrisburg area to XX service D.C. missing number expansion map picked state the Virginia and in We Jim. call Washington and and million to price in County, which excluding amount added counties bridge gives the coverage outside Philadelphia. West over Virginia, This

Jim Woodward

Thank remarks. Operator, the posting you. for instructions prepared the question. That concludes you would our review

Operator

Absolutely. We Raymond Prentiss first to go [Operator will of Instructions] Ric James.

Your line open. is

Unidentified Analyst

[indiscernible] guys on Hi Ric. for it’s

quick on of seem year-over-year, and goods that? was Just what wireless one drop related to or and is driving had a that the services the and straight-line to quarter cost

Christopher French

little it wireless straight very revenues. in I was, a was think more but primarily the over time Yes, with the and reflection it of cost goods had of do line, to

Unidentified Analyst

Thanks. Great.

Operator

Thank you.

Young question comes Amy Macquarie. of from next Our

line is Your open. now

Amy Young

Jim. of Couple Earle, well? quick good questions. morning Good Hope doing you are morning

expansion the then next new [ph] XXX XXXX? over that [ph] deal CapEx of have it the couple the the X you XX years? a contemplate on have First, And just more Can Is with expect follow-ups. Thanks. for you're Sprint. I expectations that clarify you

Earle MacKenzie

number do also Parkersburg, that some up the for have recent a the in and significant to Yes, the order dollars, dollars and area approximately - is to expansion money for but Earle. amount not includes most obviously Yes, we It to the expansion. expansion of that planning. XX It it that some we up announced to it is sites nTelos this last XX Cumberland that the time do finish year finish does. takes of includes in includes

part will the what of spending of in that be the be expansion year. quarter most of fourth So, in we will this

Amy Young

XX is two years, did penetration then I your assuming be record or – walk for And of help very next we record you basically that rather? now. kind through rates you’re developing this it. correctly over strong has Got track track hear should XX,XXX inheriting Can obviously what X.X the million us your been subs

kind able agreement? this have you achieve nTelos been assume of with same the we So, should penetration rates we that to new expansion in

Earle MacKenzie

XX customers is not a to although time a same because Over the we’re we marketing that some coverage dollars lot the until great is, results, achieve the we yet, spend months months and there, not in it’s us of there realistically expect there kind these answer yes. but have is to some XX take coverage and going going do of to there to can areas get network. coverage competitive We

it the the that accelerated way growth come I most of for to nTelos – best So, of think way the year is the will about footprint. growth think out this

of early out next recent of year, seeing then numbers middle of XXXX, accelerate Cumberland come will start expansion. is when the we start the seeing numbers the of area Parkersburg, will we Towards out XXXX and the most towards end

Amy Young

I could one in Got you. And just last then, if squeeze maybe question.

the I result think and sense you're the can a expecting going give a jumps? as little to that bit XXXX just on OpEx XXXX in of elevated you of Thanks. be us magnitude is this,

Christopher French

when the the way we’re year rent talking think Yes, backhaul, a I the maintenance. a new you cell the plus year average and about best on for about the cost electricity this XX, is it last month about The adding new look per XXX sites. $XXXX sell and or at is, month tower site between think to

because income can significant towers, fairly building on we that month see per is time, the sold of these sites. the sell will month over in per over those increase part not So, we’re side all those we period expenses. statement of as in one cost are you of sites see coming $XX,XXX increase that a goods bringing that’s Obviously, but

Amy Young

Great. Thank you.

Christopher French

welcome. You're

Operator

you. Thank

Khorsand Hamed BWS of line the Financials. from of comes question next Our

is Your now open. line

Hamed Khorsand

Hi, morning. good

as seeing and the QX launch late subscriber release? any this into new effect you wireless are in there the was off ads spillover from as QX, quarter of late past goes iPhone first because far any So, that impact

Earle MacKenzie

and of we’re phone years. keeping in think finding customers the are little year iPhone I’ve the probably several seen iPhone that I probably what seeing marketplace some What for is few longer the has quite their a Actually you’re last X. you're been release this promotions has reflected Hamed, is that that’s where on impact seeing the free get-one there in in the that buy-one

although so, having really have seen in about have doubt XXXX lift it the haven't previous it, iPhone in impact no And by release. the seen years we does we nearly some that

Hamed Khorsand

Okay. And of lines as timing as the the then What’s talking and ARPU X? X, roll-off what’s were Sprint the the you when far would X, promo you the see additional from about?

Earle MacKenzie

we’re about giving in Hamed us is, that that has I been in the will really mentioned what talking over they more are all several important roll-off certainly the the quarter. year, specifically last are what’s is fourth a They but promotions ones Sprint for years. the they

you have on As promotions, people those years. we’re expecting quarter this dollars to end take into second away announced on to has promotional starting pull are several and going who to they them of some so those quarter that know of publicly those promotions had probably the Sprint customers back for start from the

the some is five lines remember have promotions $XX. the in and to that bill have then you they maybe If for the half past of cut run in

translate going we to and at we year but into should that we start of higher the roll-up ARPU. So, that it’s know having promotions going those forward that seeing next all happen potentially some impact over once, should expect not and

Hamed Khorsand

and new than to traction subscriber quarter are the going ad one lastly, far have with as of kind Okay. the increase QX you additions And QX, spend are you of – as seeing wireless now here? more what you any seeing trends the that

Earle MacKenzie

definitely Yes, so traction. we're seeing

we We mentioned, are, as elevated I gross ads. had

we we’re traffic them the high people tell the yet, And The base we of decrease very we're churn customer going impact closing we’re part got We’re in our nTelos new that to footprint. dropped customers nTelos to a story we phone and where got of and to, tell had one of a who story able has get group stores in really see nTelos in nTelos our customer and starting in is. to down. in group customers into churn reason more Sprint's where the that come our former as you we’ve coverage and are and What the We because groups. already that coming The stores area. no or rate starting in hasn't getting customers. nicely. the very only to When to those two when touch already churn having a yet understand we we them very, had customers acquired see when the over They had able who Sprint they started came They customer phone. seen were Sprint Sprint haven't got the dropping recall a we to really those bill. churn is of were to from nTelos ability

as the group. churn expected always continues so looking that reality assume get lags really be better churn we’re any to year As that see area this better we area forward that and time and network will impact next Perception the in we why any that would and the in our legacy than don't area? we different reason start over year this dropping will nTelos by that the

Hamed Khorsand

seen users is or far on from finally, to prepaid. this as are as postpaid then as conversion you just a to you’ve And just mechanics adjustments you of Okay. lagging subscribers seeing comes last what here to going of far postpaid as a go it adjustments total customer? Sprints while nice year's increase bill, prepaid Are more prepaid in accounting subscribers

Earle MacKenzie

a good question. That’s

saw, good quarter of customers year. you I that the prepaid the quarter. lot up a a lot very, time are to seen is first fourth And different quarter is a is. especially having first of quarter, prepaid population prepaid best quarter can of the not Hamed the They what segment And those. we’re not buy moving of really Fourth very tell you, have from We postpaid.

customer the is support that Boost. not shift within level, base. the other brand and of the nice from Virgin is mobile The thing that to at having Boost same spending being monthly the seeing they because our decreases brand we’re are nearly our money so in Sprint our the very but not mobile mobile Virgin customer Virgin base in mobile that numbers our is we’re base, is brand supported what virgin increases kind Boost to impacts customer

time some at that in customers impact. percentage guess I biggest of mobile small be that the So, our will pretty have and Virgin point our

the first being very very are very, prepaid robust, business having for as still seeing We’re mentioned I quarter. is we us very good solid a and

Hamed Khorsand

All time. right. your Thank you for

Earle MacKenzie

welcome. You're

Operator

no questions back like to I you. remarks. I’m turn queue Woodward would And showing at time. to further Jim conference in for this closing the Thank over

Jim Woodward

Thank you participating interest look call updating we today everyone on you our And Shentel. for and to your forward future our in calls. in in progress

Operator

participation for today's you This thank today's concludes your conference. in gentlemen, and Ladies program.

disconnect. now good have Everyone, a day. may You

Shenandoah Telecommunications (SHEN) 15 Mar 182017 Q4 Earnings call transcript