SHEN - Earnings call transcript Q3 2019 | Shenandoah Telecommunications Company

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Operator

Good morning, everyone. Welcome to the Shenandoah Telecommunications' Third Quarter 2019 Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Mr. John Nesbett of IMS and investor Relations for Shentel.

John Nesbett

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

release this in an we'll available details Our this and at on be announcing our were announced made Please a later the of page release results are note this www.shentel.com. that will in our investor The the replay set reviewing be distributed presentation press website, is audio forth included today. call. press morning, call

With the and today President Chris Chief remarks, and President are Executive Operating prepared will Vice our Vice Jim we Chief session. us Executive Finance conduct call on After question-and-answer French, and Volk, Senior Officer; President Dave and CFO. Officer; Heimbach, a

you the may conference and certain me X Harbor uncertainties. Slide Safe our let to presentation, contains forward-looking and always, reminds that of disclaimer risks statements subject As refer you which include this to

hence, may cause a encouraged results materially of to review. detailed which differ These the actual risk in filings, our I'll to discussion you're SEC provide various factors statements; from

place reliance You're update to obligation revise publicly Except statements. we undertake undue by not on no to statements. these or forward-looking any as cautioned required forward-looking law,

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

Christopher French

We to return we segments, everyone enabling and to In continued Thanks, us cash growth morning. John. across shareholders. quarter, appreciate value business our joining invest to third free the this us flow generate strong our both in

the see XXXX. months XX, $XX.X of ending you million free cash As Slide X flow for X, on generated Shentel September

spectrum million acquisition million million to broadband $XX of invested new offering, the initiative. Sandy license $X $XX Fiber-to-the-Home into time be gigahertz Broadband Big fixed the period, our same new business During have X.X wireless approximately our we used for and for for

This expense rate our million. repaid facility shareholder annual interest week, we X.X% the also commitment investments, increase. lowering cash over and returns, of an dividend prior of earlier growth a the the share. by interest a annual reflects year directors lowest $X.X loan, per marks $X.XX our increase Highlighting consecutive down Board our these and term million year payments. approved $XX It on to addition is our this Xth consecutive tier moving XXth Shentel's us of dividend of to In debt of to year

In addition to program. our repurchase authorized our share board the cash million $XX dividend, first for

expect the over to next months We warrant. this execute market as XX conditions program

quarter. business on had During the Fiber. expect execute net have years. our milestones indicators additions the wireless in This in Virginia these week, our growth long-term Harrisonburg, Fiber-to-the-Home we've the are We leading launched record third quarter, continued of of postpaid the coming of branded to strategies. we XX,XXX Both Glo in growth we we approximately that

call. the in our contributed uneven in Dave the will about later continuing results with more financial speak the these quarter over operating this recent achievements, our has wireless travel significantly to in segment. results fee dispute detail Despite Sprint

of be the each usage voice years per during our of of every our and minute respective cost based Sprint subscribers other's call, Shentel last roaming networks. travel Sprint's on As usage reset to data we is fee discussed using traffic three and and per the earnings and gigabyte

The paid find arbitration dispute resolution negotiating the XX be the recognized them we able of initiated regarding Sprint are sessions agreement, proceedings several past days, for confidential, XXXX. and resolution be will public cannot had we not with to an and While May any we over we expect owed ground to any amounts early XXXX make and other will we process a retroactive common comments arbitration. by so than

results, Jim merger to of comment of Sprint T-Mobile. our the review over I'd to to financial and call proposed status the like on turn I Before the

in pole the scheduled to and settlement the is X -- to dozen block long to to be lawsuit last tent on the The the deal and to December go three With the Justice trial weeks. a more lawsuit of two states. by Department is expected approval than appears on FCC's to the October, go in trial

the expected is segment by our is quarter XXXX if XXXX, ruling summer wireless to first A fall and on the in the happen clarity merger approved. of could

As interest discussed obtaining through, the if options. multiple shareholders. of Sprint on work merger in our calls, affiliate toward prior our agreement best outcome goes will the an And provides we

details to Jim With our that, now turn the I'll the results. financial of to over call review

James Volk

everyone. you, and Thank Chris, morning, good

to refer compared in Now the last OIBDA in of third was XXXX. the financials, please the to for X. for third the same $XXX.X the million $XXX.X was compared year. million quarter adjusted quarter turning Slide $XX.X million to quarter of $XX.X period to revenue million, XXXX, Consolidated Consolidated

Operating third million period. diluted or $X.XX $XX.X decreased share of prior-year $XX.X $X.X in million the income million for share, versus $XX.X million per the in to compared or quarter million $X.XX to $XX.X income Net XXXX. quarter was the diluted per

the earlier, in the consolidated segment. referenced travel Chris of continued Sprint driven were As by results adversely with in the the dispute wireless declines fee

million highlights quarter operating wireless million in $XXX.X $X.X the decline revenues dispute. The the In the for on revenue. fee to decrease in to travel any third third and X, as to due compared subscriber prior-year wireless million did period. to our decreased due revenue revenue a was recognize in travel the travel $XXX.X million We $X.X $X.X Slide quarter decline XXXX Sprint not in revenue million a in

over XX,XXX postpaid year, due by increase offset a combination from of $X.XX, higher the from promotional approximately subscribers. lower declines expense of due of were bad revenue Subscriber contract past partially gross an postpaid higher write-offs, amortization asset ARPU discounts, primarily debt to to higher adds

and pronouncement, XXX, contract including contra When certain ASC revenue the costs we expenses, adopted debt as bad new commissions like reported are recognition revenue.

segment the to for in million year in the Adjusted million third-quarter XXXX, the OIBDA period. compared $X.X $XX.X Wireless to $XX.X million prior decreased

more date business. year and sites partially September to million addition decline offset versus same Included $X.X escalators rents million, in lower tower our our tower a in XX, declines revenue at from wireless segment by XXX In cell the million ago, $X.X advertising expenses. a XXXX increased is lease $X.X of expense the

X.X towers, to a tenants to third with of million, of Tower for XXXX. as quarter end. ratio XXX grew $X.X quarter tower XX.X% of $X.X grew own million We OIBDA and the X.X% adjusted revenue per

Cable ARPU in Sandy RGUs Slide operating the our segment sales X, the X.X% third to in driven million $XXX,XXX million million expenses RGU. to XXXX. in of million, in to expenses an higher approximately by compared quarter Moving OIBDA Big quarter a of year-over-year $XXX,XXX results marketing to increased grew and increase $X.X XXXX, approximately expenses of revenue $X.X third-quarter in full million Cable Cable adjusted Fiber-to-the-Home $XX.X for or expenses, grew an due in X.X% to increase and higher expenses, in $XXX,XXX. higher per and maintenance $XXX,XXX $XX.X programming $XX.X from

XX%, and Excluding OIBDA been and the start-up cost would approximately cable our the XX% growth margins of have adjusted Fiber-to-the-Home respectively. initiative,

For business. continue our Slide RLEC the X, respectively, with enterprise our and year-over-year wireline revenue franchise growth results offset business XX.X% in to on Shenandoah of growth County, rates strong see X.X% and an we cable of decline fiber in our by X.X%,

Service in of the third the that of to XXXX. million RLEC the Overall, of due Universal quarter Fund in $X adjusted quarter of true-up of we of from primarily decreased the OIBDA annual the regulatory timing and received but wireline support received second funds $XX.X million revenues XXXX,

on balance sheet our Turning XX. Slide to

outstanding, of $XXX of XXXX, As of average interest September had XX, an million we debt X.XX%. rate with

our of credit our in cost secured by Our basis to after senior points declined in starting debt lowest agreement. declined XX the September, leverage net threshold level

annualized using quarter was X.XX% third ratio Our net leverage adjusted OIBDA. 'XX

in September, Chris loans As earlier, to mentioned amortization. $XX million prepaid we in addition our of scheduled term

the revolving in of ended liquidity, XXXX We in credit. million with line $XX $XXX second-quarter million including available

key will in flow growing capital, our business and Our a cost strong advantage balance be sheet, of cash generation long-term.

the Dave. over turn call I'll Now to

David Heimbach

Jim, of at highlights we going of I'll good subscribers business. postpaid everyone. Thanks, the approximately operational the the We key postpaid XXXX. XX, metrics Slide our end third of of start third from show had some and On quarter. quarter our wireless XXX,XXX the morning, over by

third record the third incremental of execution of and X,XXX point-of-sale ads quarter both marketing both device the in Net net by quarter on field were postpaid, and of and third-party IoT record driven year-over-year local The programs strength to XXXX. retail gain compared across additions terrific at for owned for the in was our XX,XXX approximately additions phone the XXXX distribution.

X.XX%, and roll-offs. churn to of XX new points was their year level to Verizon with pricing of Postpaid increase account the one-third plan the and XFINITY of one-third unlimited the to due And line-level year promo increase due some as approximately one-time increase remainder port the to events. was Mobile over rose basis in and response some IoT churn of of churn a ads, a combination outs result to

year over versus XX,XXX year representing and XX% of prior-year the postpaid total gross In phones increased XX% contrast, additions activations over with period. by up XX%

Sprint primarily to ARPU base. already mentioned, devices Jim As by mix the the extent, promotional driven declined discounting $X.XX postpaid and IoT a in approximately of the increase in lesser year-over-year,

quarter the quarter to third with to for of a ratio X.X ratio This out quarter port Xth positive port enjoyed marks we've consecutive a the in X XXXX.

year-over-year. an continue with of retail X% We increase and our to postpaid quarter branded almost Sprint also increase XXX doors, presence the finished

X.X% our comprised XX% was and upgraded quarter devices. tablets of the in and the Lastly, of base data postpaid base device of their

for and were third we quarter. just XX,XXX of approximately period. ads XX, had X,XXX, the XXX,XXX with prior-year respectively, prepaid over at consistent additions third-quarter the XXXX, gross with Slide to subscribers and Moving the gross end Prepaid net the

to points to second the increased base. prepaid prepaid in we of the year-over-year our dropped We XX% remained subsiding prepaid we the increased our XX basis dealers XX% total Boost appeared be the quarter XXX ARPU year-over-year brand by the sensed door as while our prepaid on trepidation Boost mix of Third quarter commented locations subscribers roughly that doors X.XX%, churn of by at some QX. on as to $X.XX from

A the XXX,XXX provided presentation. We and we RGU RGUs to business. of XX X.X% Slide to conform public reconciliation our Cable appendix in to the approximately total to changed cable of $XXX,XXX, company bulk approximately peers. prior the is In calculation the year. the prior Turning compared the to calculation RGUs that in third-quarter grew industry methodology to note XXXX,

card. We rate the broadband pleased year-over-year this price new XX.X% broadband X.X% quarter and RGUs Average strength in third $XX.XX, of our report last combination quarter revenue speeds XX.X% and broadband annual our increases. penetration year X,XXX on added are from a increased growth in speed to organic net upgrades grew that RGU of driven to roughly through quarter to the broadband per by video the and

Over of speeds upgrade new the to homes in PowerHouse in in of gig second, now addition broadband and a up the improving The speed field cable our our more centers of ago, operations year rate rate having with approximately branded and markets passed to and migrated a per satisfaction, base customer moat card of XX% one new X areas capable to recent serve. are are markets XX% we upgraded our is in contact improve competitive launched all roughly teams reduce service construct we the in cable investments to serving deeper card. churn

XX-basis-point quarter third broadband in announced the optic In of for average latency initiative network. churn XXX% speed quarter, our multi-gigabit Glo fiber XXXX, a year in symmetrical fact, XX a reduction capable new we we XXX% called this Last second. while be over will Fiber-to-the-Home to speeds Fiber, quarter year launch compared per the the over of increased which plans saw ultra-low as to megabits subscribed

initiative exciting region operated strength our heritage while existing commercial customer new networks flavors our this of leverage years, as and that the service fiber our local provider. will various noted the depth network, strong in regional Shentel Out the We of has fiber of municipal a and Edge Fiber-to-the-Home growing relationships for

his to service Glo offering in as this the remarks, pleased in and Slide in Virginia Chris expect commercially Virginia, opening Fiber we to in first that we've Harrisonburg, few by the Winchester, XX, On launched end report of our mentioned just are week, year. neighborhoods begin

begun and begin markets, With roughly Salem construction addition in Front the construction the XX,XXX in to these in first first residential we Lynchburg, commercial two quarter few years. and addresses passing Virginia, Royal next over to slated in we've anticipate and Stanton new and

across progress completed launching X.X acquisition gigahertz of Virginia, fixed households goal Southeastern where XXXX, the making of our of megahertz we offering broadband between and and targeting of portions XX of toward new Ohio, great rural recently spectrum. Virginia XX wireless roughly in second the West also half We're a XXX,XXX

initiatives continue Fiber on several as launch our will you progress our commercial at update build quarters. status of both in fixed to of wireless Glo over We plans and the services next we

of as at Finally, provides XXXX period XX related third-quarter The $XXX update Slide compared in the initiative. the to spending segment in $X Capital the Fiber-to-the-Home of continued same last plans. in XXXX is million primarily million the our were Wireless an increase and our support acquired $XX.X spending million segment an to Cable year. network launch a to expansion expenditures the territories, increase in in capital the to end spending $X.X increase to related million of the the

is in spending purchases prior statement. our Our guidance after XXXX separately excluding from $XXX same million, capital spectrum shown that are flow quarter cash the

much. ready take very we're now And operator, you Thank to questions.

Operator

our question Instructions] Silver first Riley [Operator from And FBR. with comes Zack B.

Your line now open. is

Zack Silver

Okay, great. Thanks for taking the question.

one churn churn first the but of some in due versus promotional from that postpaid ARPU dipped some postpaid ARPU of just -- is mentioned The the on expiring. deals the to you the quarter, to the line-level some was also

some a promotional off? been have have So to I'm of big you just dip those trying would if coming there did lines why reconcile such

David Heimbach

Dave. is This Zack. Sure,

plans think to base migration or that unlimited under come are churning. those way rate that they to new we're legacy ARPU that's driver that as new seeing biggest pretty attributed on. on plans, that really And but respect were unlimited some to discounting unlimited the enjoying I those on promotional the to in are in postpaid the heavy shift relates rate folks coming declines rate plans with subscribers

the And promos a primarily result that's new is to driver the of additions. And the really financing subscriber ARPU shift handset as that of offering principal is Sprint incentivize decline. mix

is I probably the -- say IoT mix three the shift the that probably decline. balance. shift So mix And quarters really the is that it's of would

Zack Silver

thank it, then just And to follow-up. you. Got

anything know quarter, there mean anything Just the last but your -- travel you I mean read can't and that relationship say but I -- to on I on I think side, it much, asked the merger into is is to this this I something we this T-Mobile into they're around should with it? where that can't travel get the dispute? Sprint or distracted in guess about just your this Sprint with with maybe is with read and I relationship

David Heimbach

York, we've No, nothing number Zack. we our New you, We've constructive had, one that through provided reached where we most even point agreement. at the a disputes This conference -- of to we were recently had felt to the reported on. had negotiations, into your a to while read we having in years, it just to in next as it. There's things was through one take we needed as that like different step

Zack Silver

sense. then more one makes And I could. That if

that with Verizon Anything some gotten FirstNet about the deepening talked mean mentioned And getting is has their you I of -- they have bit plans. XXX guess, a I of on Just the or -- more on promotional. other deployment megahertz? rebranded their AT&T Kemo, carriers, also, rollout,

David Heimbach

the churn toward Verizon. seeing. extent, concrete stands in is tough entering the of activity it big been No, we've one we and some think market. us the us of to in understand that the end That's primarily lesser super a for to one big was And the the terms, quarter rate trends out Right. saw, to one's particularly in the quarter, again, of discounting we shift increased this just Comcast terms for their unlimited related the the to and of plan related into a versus

Zack Silver

it. Got Thanks, Dave.

Operator

Our Instructions] BWS Hamed next question [Operator Khorsand from comes Financial. with

Your line is open. now

Hamed Khorsand

good morning. Hi,

your in So that how are match just that to and those much would right you discounting forward hurt comment on able -- that was to there follow-up ARPU?

David Heimbach

We strength distribution our as given of we proposition this out Verizon, Yes, let spell operate points. and our Sprint our certainly, service think of as off -- our points a in look, superior compelling that and far about we me it's a increase is less price represent we think But X here you, we're total as XXX know, in rate have Hamed, network, really we the of and I Dave. believe the churn basis and -- it value for equation certainly footprint. to card, strength of that of out a markets, the national than you the basis talking value

sky thing. the variance nothing, falling in explain to no quarter. It's we a it's is some of just saw So the way

Hamed Khorsand

you're as XX,XXX being and something able postpaid just a that on purely to you're And trends in far you. the finally this different you're seeing Or of doing? is a having ads side, seeing postpaid I wireless. And the the there mean large over matter got net then continually Okay, penetrate it. as is network

David Heimbach

It's Yes, and that territories, it's that coverage that. of for have years the networks in distribution. expanding upgrading following then and adding with rapidly a rinse we repeat territory, wash been those strategy employing now

So when results impact new driving tremendous growth. of terms are a doors, doors our you those about see new new on having us in talk opening

incredibly we're so pleased with that in performance And team's regard. our

Hamed Khorsand

And to going several take as do far anything months, expected concerned? Sprint OpEx is is are this arbitration to as if you different

David Heimbach

No, the not travel lieu of we're business dispute. Sprint the in to changes any planning material

Hamed Khorsand

you. Okay, thank

Operator

at further back to time, to over like no Volk any Mr. closing turn showing this for And I'm remarks? questions. I'd the call

James Volk

in Yes. for to look Thank have good and Thanks, call updated forward keeping on today a joining you future you, quarters. our everyone, progress our we and day.

Operator

Ladies call. participating. conference and this gentlemen, Thank today's for you concludes

disconnect. now may You

Shenandoah Telecommunications (SHEN) 1 Nov 192019 Q3 Earnings call transcript