SHEN - Earnings call transcript Q2 2018 | Shenandoah Telecommunications Company

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Operator

Good morning everyone and welcome to the Shenandoah Telecommunications Second Quarter 2018 Earnings Conference Call. Today's conference will be recorded. At this time, I would like to turn the call over to John Nesbett of IMS and Investors Relations for Shentel.

John Nesbett

Good morning and thank you for joining us. The purpose of today's call is to review Shentel's results for the quarter ended June 30, 2018. www.shentel.com. in we'll release on be page the announced and this our were on presentation the reviewing website results our distributed press morning, Investor The is included the Please call today. note audio that replay will made available an be later of forth are press the set call. release The this in details announcing With Finance French, Woodward, Chief and Operating and call Jim Chief and Vice Executive Chris the us Executive and are Officer; Vice President of President Senior CFO. on today President Dave Heimbach, Officer; session. question-and-answer a conduct we'll remarks, prepared our After

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

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

over turn ahead, Okay, Chris. call the Go Chris. now I'll to

Chris French

joining for thank good John, you, Thank and you morning us.

to as Officer. Vice who a served of like Chief Dave has Operating Shentel Broadband call. him President for wanted moment strong his proven now, first Dave been and Before joined team. to has few a introduce to to Operating and earnings a I'd Cincinnati Dave to I and to take with I be Rise Officer already as welcome previously Chief us Heimbach Executive addition our has months he us Bell, but begin

for reflected operating income, enhanced quarter significantly solid expenses. a was us XXXX our revenue growth, reduced in quarter as and operating net considerably profitability Second improved

you we've more mid-Atlantic X expanded territories serve year, to the a service than in area As of now million. the during our population know past wireless

With geographic our our enhanced us serve. we a speaks and for is is for capacity the and on levels to competitive focus in advantage growth our service of of area. and our increase markets coverage our footprint, and offerings extended promoting activation network the extensive reliability distribution The itself in network

watching against has company. over years. out the markets, of the welcome a had new the last the AT&T competitive of proposed a much waiting the excellent very mutually Sprint/T-Mobile providing stronger affiliate sense add and successful We with benefit duration combined all relationship to the to we're and in you. continue our relationship, with beneficial believe and particularly Verizon. to the larger a Shentel rural opportunity merger Regarding merger competitor XX makes to standpoint, from We've and would value Sprint Sprint during of tremendous provided our build we

continuing While customers. Sprint on to our we remains focus clarity business wait wireless future, for providing service our coverage on to more primary and our excellent the while grow

to XXX to revenues on you'll results the Moving X, our see Slide increased million.

in were strong Excluding the X.X growth million by revenue acquisition, quarter, absence the We operating integration and primarily that adopting the XXXX. of quarter to have impact million. of second XX.X increased included costs to regarding would XXX of in migration revenues second income the recognition, ASC related in a saw

wireless and X.X% decrease XX.X% XX,XXX 'XX, quarter up income are Second XXX.X XX.X to due highlights compared slightly compared of OIBDA XXXX. to the In slight largely and of subscriber second you'll customers in prepaid postpaid net 'XX. XXX. of million. ARPU million increased of compared quarter income to growth, to were a the second customers net revenues adoption operating and quarter million Adjusted the X, adjusted amortization improved significantly to ASC quarter Despite increased to depreciation see, our of before declines X.X or on second Slide loss

the revenues by XX X% the postpaid impact the X.X by adjusted prepaid growth million Excluding driven of in quarter wireless XXX, increased and for Wireless customers. to increased OIBDA million.

and growth Slide Cable increases pass video rate X, our XX.X higher-speed primarily data The in programming revenue to packages. high-speed customers in and million. to and costs was Moving higher to segment selecting through data X.X% increased voice growth due new existing to RGUs

second the million. million OIBDA million where to On quarter in XX.X External to business for detail wireless Slide revenues our to decreased ARPU. grew broadband compared X.X% to million primarily XX.X In we driven addition, million quarter second XX.X XX by grew X.X compared to XX.X% revenues 'XX. of adjusted XXXX, in X,

intercompany for our revenue or to fiber was our profiles Slide decreased by million. mobile revenue backhaul re-pricing circuits tower affiliate lease segment. However wireless streams. X.X This due primarily and XX.X% X to decrease

Our fiber X% generated by XX.X up million lease XXX second and our in X.X grew X.X% towers to lease revenue compared revenues approximately million quarter XXXX.

quarter in we're operating segments our demonstrated of progress energized solid by drive identified across the business. we've and the Our all growth to opportunities second

service needs increase proven as customers geographies. more existing are customers. communication our service reputation to us markets and serve, of Our the capacity has advantages particularly record provider the a of network our track position robust the of in packages reliable rural competitive excellent we leading upgraded and and that Shentel new attract growing coverage, a

through of focus reliable is we balance continued on our quality, for high Our the service XXXX. move foundation as growth the

to the CFO turn the results. call financial Woodward, our our details Jim of I'll review over Now, to

Jim Woodward

and good morning Chris, everyone. you, Thank

XXX in million look Slide our showed for On XX, take Let's our were operating compared results. of XXXX second million we to a changes XXXX. Revenues the at and XXX revenues in income. net quarter quarterly the

impact driven of ASC by XXX revenues the X operations. Excluding adoption of cable and increased the wireless the million

million. XX decreased by operating expenses Second quarter consolidated

of acquisition costs in adoption nTelos an decrease absence expenses a we retired and by by as in the amortization impact acquisition. and of acquired operating decreased the XXX million depreciation ASC of the assets driven the Excluding X

net over of or $X.XX million second quarter. the year's income compared prior We a XXXX, million recorded Our increased ASC to net impact quarter the the the of in XXX QX X.X operating adoption of $XX XX,XXX per share, was excluding of of loss income earnings-per-share $X.XX.

million see of also management OIBDA to OIBDA the slide waived shown the Adjusted XX, OIBDA second results an Moving quarter QX components segment, XX.X on compared representing XX%, the margin Slide Sprint OIBDA illustrates quarter the fee. was adjusted adjusted to you'll over our continuing driving of million quarter impact which in is change. the illustrate XXXX, for XX.X to by

waived acquired prepaid when fee million. to As management we committed up million month postpaid a to X% reminder, Sprint waive until XXX nTelos the and a fees reaches management X% X.X

habits in implementation in XXXX bridge We projects shows the benefit expenses backhaul the increases wireless the of services. OIBDA related high-speed provide decreased by to QX data from Slide adjusted to second segment internet-based and and the weakness bridge QX to Sprint. national lease which the impacted of increase by OIBDA cable by while increased increase affiliate 'XX as XXXX quarter, provided incurred lift re-pricing efforts. circuits XX segment between over reduction the wireless or waived our higher segment; our impact -- between period, wireline a of Cable of the driven re-pricing a offset the expect Slide was prepaid The OIBDA they grew from adjusted 'XX through material primarily by changes accounting video the in of adjusted revenue the post adjusted data management drivers revenue, our a X.X of consumption. as speeds bridge in primarily device and and an remediation QX and data decrease quarter OIBDA provide fee receive also changing of adjusted million related the consume result a requires OIBDA, in to our OIBDA, X.X higher we which an guidance $XXX,XXX well partially XX impacted intercompany by in customers high-speed million sales on for a was new corresponding million XXXX. On a was cost 'XX through greater OIBDA of On wireline the reflects quarter revenues. Slide wireless in adjusted of benefit more Consolidated revenues as XXXX XX X.X in we realized driven wireline

X.XX Turning our decline. times, we debt to well Barring our million capital was leverage of XX, as our any of levels and June metrics XX, on acquisitions, $XXX XXXX, inside Slide of ratio our outstanding significant expect leverage debt to X.XX. covenant debt and had we of

any pay on or XXXX. depreciation lower As significant rates investments, either for we taxes do XXXX Act, income accelerated a expect result state the not to tax the our capital cash in federal Tax and

to over Now, I presentation Dave. turn the

Dave Heimbach

the Jim, good and for thank words the call morning Chris of kind everyone. and Thanks, you the at start

and also like more retirement our input meet I've guidance like forward energized I'd you in the months. has thanks to of investors his say I'm First, and this his help that I'd what had I'm is. speak excited MacKenzie what I've team I've place short-time been in tremendous to looking this for with to to him to Earle opportunity the Shentel about the opportunity the seen meeting already several in a in Company's firsthand company great a here and or new coming on and congratulate that and future drive success. transition.

prepaid our in phones were the down ads still in continue Now these end subsidized XX, of plans, XX% shows XXXX. XX% of increase change X.X% and of our respectively, the the in quarter had quarter on also represents customers quarter, XXX,XXX our growth and non-phone devices, customer expansion, of of of quarter quarter XX XX% with the I'll XX.X% XXXX, our an picked-up X,XXX,XXX X.X% upgraded the on customers. resulting the components total of compared XXX,XXX compared base at from the phone customers base. growth postpaid were wireless Sprint second the first the base of XXXX, for XX, net the end sequential postpaid and of At our of a the we On February Slide upgrades were first as to year-over-year. This at Slide and their Overall, including of to non-phones. total June postpaid XX% of for X% and a customers quarter X% presentation. of as from

adds ever XXXX we history of XX,XXX see added customers and we activity XX, for of On result XXXX Richmond XXXX. the a gross was Company. We got the and net the in in and the prospect growth. quarter the conversion note June with from Slide the show quarter required special organic You into store. the solid expansion XX,XXX good growth second Of rates had June when best the as the

to ratio quarter which positive nice port-out continue XX, improvement X quarter of postpaid the was and the versus a for churn second churn core for X.XX%. a was that area is have non-phones of legacy X.XX% port-in On X.XX We of second see versus XXXX. With the to X.XX%. in at XXXX. churn our Phone Slide at X.XX%, churn you quarter

Our improvement pressure a Sprint in by result as ARPU offset somewhat churn activity. was promotional

declined no to XX,XXX Similar of XXXX. to results, longer growth count. Moving September customers adds prepaid her quarter Sprint of to second adds part XX, and as to as expansion. lifeline XXXX, Slide net included Also, XXXX we are the the net prepaid Parkersburg adds postpaid include of came down

our expansion quarter made net of primary with Our local this advertising. area was The and service customers. entire both investment throughout we boost in improvement gains for reason both stores prepaid the

in primarily prepaid. push and nTelos is of with the didn't wholesale relationship wholesale Sprint prudent with make Our result prepaid rate recent Sprint success a

former a nTelos So, footprint. of we're in seeing the prepaid lot potential

see improvement at Looking you in an churn. XX, Slide prepaid

primarily However, and in prepaid discounts. we a saw reduction ARPU related promotions

XXX cable, Before track I year-end store XX% stores, respectively on representing to XXX about Sprint XXXX, By update boost since to on have stores we you and increases, XXXX. and branded I'd move the expansion. end XX% are our like to of

voice increase XXX deployed been driven our X,XXX that programming per year. of you'll have value relatively of roles showed X,XXX per we over January our price and moving Internet video added video continued offset the Slide to by peers, more broadband, higher to we this cable XX, total and see the speed RGUs RGU over our Like upgrading Now had past subscribers have users high-speed stable revenue lost subs. improvement many their quarter Average customer speed to customers. costs. We in customers, X,XXX provide our and the on

which customers prior all penetration a customers to During residential XX service. each tripled and meg, about the includes speed broadband quarter, speeds of third second is the our by tier provided the homes of we by first XX we above the role for that shown which our slide commercial migrated the another one passed customers, of the quarter view data up. on Slide preceded

a stable and and speed the in yielded we previous although that to expected, our increases higher video; have on our show remain percentage on As note like loss high-speed subscribers is underpenetrated or I'd recent churn decrease Internet upgrades penetration actually We with year. incremental where lower broadband network than focused markets capacity. video in and driving

Turning to wireline by seeing ARPU. we're on growing Slide stable annualized of with loss offset line broadband XX stats base access X.X%,

revenue, in we previously service that roughly began affiliated crossed into customers DSL revenue wins migrating by fiber over recently in Slide on next disclosed, have wireline double-digit recent market. growth of shown to Roanoke we overall partially in market in lease with cable lease is years. households modem has revenue broadband wireless offset As footprint external legacy our the The our couple revenue; nonaffiliated for saw fiber-based growth in in decline growth lease XX, XX%

Slide of We provides leverage had will what consistent XXXX. continue XXXX, calls. our the the we've Company for our CapEx on million strong going wholesale $XXX end for the which forward. target million quarter XX $XX capital estimated the previous with growth shown network of commercial is second budget in At spent to fiber and the markets budget to

call in to the than Jim cell acquired now site and I'll As closing back is previously expansion our disclosed of turn more territories. the comments. XXXX coverage allocated for Jim? upgrades CapEx half for of recently

Jim Woodward

Thanks, Dave.

with this with time let but that agreement impact scenarios will spent and unknowns I us. I accordance light to conclude affiliation Sprint/T-Mobile can are merger through different there not potential in At me few Before how shed could you Sprint. materialize walk on some positively speculating, going point, this numerous we're our a

Based after after or is purchase with are their of days purchase our this of shareholders T-Mobile to finance they acquire networks. laid a of affiliate XX T-Mobile developed merger T-Mobile to the were criteria the affiliate have will that purchase of has agreement, include up new As to to interest an too a in the turn they T-Mobile to which out soon new specific have remain a potential are assumptions. the the with pursue on know the as and addendum merger decide implications but Shentel wireless, If early wireless days the to the would to approved, network Shentel a as outcomes. must and wanted raise agreement. to on capital business, the If acceptable for buy I Shentel negotiate wireless merger new XXX-day unable price this the to T-Mobile and based customers criteria XX within option closing if period mutually new buy decide, five years. two the questions not does T-Mobile next in towers the If If they which at our we're of new criteria they our evaluation the we of to customers, finance of purchase the off process prognosticate the in will best the predetermined T-Mobile buy all not network the valuation we potential fiber not guide cost business, for the that business mind. specific overlaps network the their years. and purchase, that chose

questions. you, will investments continue we are quality service. growing now technology, business providing operator ready in and remain local we on to So our for and focused high Thank through

Operator

Raymond [Operator James. Prentiss Instructions] Ric from question have a We from

is line open. Your

Ric Prentiss

postpaid churn line helps about and us from for wondering little are churn Can And churn? maybe -- nicely. then also promotions postpaid trend the as the one is there on on the a thinking remove saw operational through question. you they pressure Operationally, just wireless take bit improved what you One what as Sprint side, strategic question then some that? you

Dave Heimbach

there on quarter to results postpaid. So, the primary contributors three the churn in is

which as it's year is every called simple first a one seasonality. The happens

years usually as in probably The second and that seen well. you've quarter our prior is quarter best

that pun the one initiatives. and intended with tighter the is is one can are to take third for I decisions second policy. the management credit say would The respect and credit things no you we And

we're in numbers was pleased made what a there. but earlier with quarter and now initiative to while we the takes last momentum seeing in that year QX change year starting the second and So, to the manifest pay-off which the gave results that it's to were in a

The the second continue through in performing of to and were better augments of nTelos around. peoples' areas that to is willingness coverage as stick continues to just terms in so the network seeing capacity particularly better impact improve the or flow network

Ric Prentiss

As taking promotions half the you think off going forward the with table? of Sprint

Dave Heimbach

Chris customers been as any BYOB tour French there savings I some rate Southern we're stores what count folks Virginia really also But, and stores. I has of don't seeing And even I is received. well $XX The feedback impact not heard the and odd negative in Bring-Your-Own-Device stores. as is whatsoever. markets the our month new remember and XX say while from plan many well on introduction new loss the a of little a I just well received very prevailing would a did but our visited how we've

So we're seeing not any negatively impact there.

Ric Prentiss

your bigger picture side, have evidence you the And territories? of any T-Mobile on seen overbuilding into

Dave Heimbach

happening well. megahertz in yes know whether out about Any something unique that but they're is understand I build sure leveraging as that that's also XXX plans, spectrum and they've there and in evidence? our for to public say their -- Well, we interest are you we undertaking generally respect been as their can't region their with

Ric Prentiss

on try so get thing definitely one opposed get I you just it some thanks you might done and the have through? -- Sprint-T-Mobile trying though and of try more where be about been terrific merger, accelerate Sprint-T-Mobile others, would CapEx is markets Sprint and Because in it stages, go has considered am how to to early; modest and the to make for still doing markets might some sense those other be what merger they and consider would marketing with earlier Jim as them wondering to we thought think expansions they are value might into plans those the expansions thoughts obviously and on guys terrific very if it's

Dave Heimbach

This it think wheels thoughts, Jim level motion. about CapEx I the think to is in when about Dave over and the all and of for again his but take I'll spent we I have

are it to touched this pretty in year busting external the pace close to We we we're building good a etc., terms capacity augments, I fiber will sites decrease to XXX at of currently, expense. and build cell tower new mean, have

So, note team a advice. the at humping to guess good and clip always -- we we really opportunities it, but look that take have pretty we'll saying was I accelerate you I is for certainly

Jim Woodward

the think I I area because that's exactly right, going to to plans at where that plan no which with and do T-Mobile No, the just them, that's begin to get they return. aggressive in the we're think pace Sprint, build that shareholder we are

so get a quickly realize we'll to we and need effectively out can these selling start look. that we so we So built areas take

Ric Prentiss

existing how in control scenario? there, to flexibility expansions and very some merger was how was that there's contemplated a in And value the those original about climate turf not changing thinking contract, because probably the

Jim Woodward

Ric. it Well, This was is Jim.

business a the expansion to areas. the has in here our So contract says the to that spent either that is value new the better these the been calculate CapEx that of that value used wireless this whatever happens, or in event provision we'll economic in get if

those new hurt territory and territories will that Parkersburg off new when think see in in I is built mean think be can -- I having but about and pretty that to conversations will that call what by it's do that will just which out nTelos have probably at we here in we'll those depending evaluation we start, and we that al. sliver area I not conversation Richmond you better much, So around don't get on

Operator

from comes from question Yong Amy Macquarie. next And

open. Your line is

Amy Yong

Jim. Dave, one for one you, for you,

rates what for about what kind coming Sprint's could forward? And similar think then, with of guess, going operational kind I little on the give the have to activity How down cash nTelos guess, interesting up ARPU, leverage do you. we of trend opportunities expect see priorities versus then in promotional be that the you flow do being in we is forward? question, I should legacy, territories? Jim, Dave, sense and of last going helpful. expansion And penetration a opportunities First, M&A bit if you I will us obviously, legacy think And free some and refocused, you lining a

Dave Heimbach

first the question first. take I'll Amy,

very budget the observation Earle, hey, is meantime, as and put fiscal Ric. that team end terms out mean, quarter would team listen, the a this team, really think yours you and second the In my feeling well-thought-out advice plan be results the very firing got operational opportunity, the But I'm year together if evidenced to of on all like well cylinders. as the my coming in by all thought and I I

In good practice, the would have I I significant. have on, arrival things terms management say mean would that that terms premature it's there's in seen signal than additional tucks I are miss different. I prior to anything team expected general and as of my focus opportunities or for there retirement. discussing can to nothing Earle's substantially but would just here prior you some would and what we probably see to me of

We're stage -- premature trends, hopeful. rates, discontinuation in a it's results of reason declines abate forward we a in and stabilize increases the again optimistic to start and ARPU. are bit regarding postpaid the but we go BYOD say some seen that of one that basis, the as on In introduction. at given we that hopefully even we've were the Sprint, terms is ARPU just us the encouraged what call promotional will seen activity, I for the are rate we've run by the would little of some hopeful optimistic are and plan, us ARPU new for the is to look the that And of rate

Jim Woodward

Jim. Amy, good morning, this is

are So allocation the exactly coming capital the levels right down. on look debt I you're mean

we're come assets on were in look way far accretive up then will expand expansions we hold to cable works goes those. see So to kind inquisitor of new an as take that a Sprint at. how fiber look But territory as as or at opportunities

So that gets we to capacity. of may in new a a But be deploy to one if to also might do good capital in gets some able and and way idea have are team deploy some they in the to going that wherever we growth, place are for place be good organic both.

Operator

Our comes from next Khorsand question Hamed BWF Financial. from

line is Your open.

Hamed Khorsand

the about Could any about talk if ads have in that wireless quarter? there's business a on perspective from you you impact the the and seasonality

Dave Heimbach

fact seasonality really I the in the is a manifests the that very on quarter successful driver of we the Yes, in really Dave. gross impact this second in this is terms this. was promotion, we there of second ran done Hamed, churn front year seasonality but the the -- -- which activation primary have

We is sales have a noticed, local of gap advertising year on a traffic has we team essentially noticed did -- as months, back result, to phenomenal and for in a last in the sweetener so offers early for a year hyper that served line a into to lot the a to tool, a spend as noticing card row. that and We $XX actually marketing spending we about offered the we drive one the as prepaid had $XXX incentive some what's offered June second great better and increased it was about and up for a have efforts a stores. capitalized job addition and competitive very the good and and done as summer got But during gift that was and rich just results. phenomenal in too half we that, closing

think that better getting time that I fact the even over demonstrates So the at this. is team

the So that was quarter second of the driver results. primary

Hamed Khorsand

of that customers a bit, away standpoint? the little quarter-over-quarter just because moving ceiling slowed then broadband right switching you're penetration down just to is a is hitting and now? the Or And QX growth from business, that just seasonal

Dave Heimbach

second so there. a -- comment -- kind one think of on bit it's your see of result. a question Amy's as up you're quarter, the little going point, and you're the to I seasonally, Yes, right, is But bit lurking to big pick result is to move respond quarter the behind elevated a a that maybe little churn

Focusing be done something penetration that where I recent something are and yes, that we've to particularly markets duly go noted on, rates underpenetrated focus and on is and some our focused team where our are mature we broadband relatively -- forward. area us very a upgrades of a so the relative will for on

Operator

over would I closing no am showing turn to Woodward questions I further Jim at Instructions] [Operator back this like call time. the to now for remarks.

Jim Woodward

continuing Thank on our you joining you progress. everyone to to forward look and for us today and update we

Operator

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

day. and wonderful may You disconnect have a

Shenandoah Telecommunications (SHEN) 10 Aug 182018 Q2 Earnings call transcript