Shenandoah Telecommunications Company (“Shentel”) (Nasdaq: SHEN)
announced second quarter 2020 financial and operating results.
Second Quarter 2020
Highlights
- Record quarter for Broadband data net additions of 6,000
- Wireless prepaid gross and net additions grew 15.8% and 469.2%,
respectively, over prior year period
- Sprint travel dispute favorably resolved with fee reset to
$18.0 million per year for 2019 to 2021
- Operating cash flow was $67.8 million consistent with prior
year period
- Normalized free cash flow grew 38.5% to $46.1 million compared
to the second quarter 2019, driven primarily by our Wireless
segment
"We continue to manage through the changes
created by COVID-19 and the Sprint/T-Mobile merger. Our
broadband business had strong operating results driven by demand
from stay-at-home and work-from-home initiatives, new offerings and
complementary temporary increases in bandwidth speeds and data
allowances," said President and CEO, Christopher E. French. "We
have the most robust broadband network in our service areas, and it
has continued to perform very well. Our wireless business began to
rebound in the second quarter with strong prepaid growth and all of
our COVID-19 related temporary retail store closures were able to
re-open by the end of the quarter. We expect to return to
pre-COVID postpaid sales levels when the economies in our markets
fully re-open. Our wireless segment continues to generate strong
and steady cash flow.”
Shentel's second-quarter earnings conference
call will be webcast at 8:00 a.m. ET on Thursday, July 30,
2020. The webcast and related materials will be available on
Shentel’s Investor Relations website at
https://investor.shentel.com.
COVID-19 Update
Broadband
- The stay-at-home directives by our governments spurred strong
demand for broadband services during the second quarter 2020
resulting in record data net additions of 6,000 and the first
quarter of positive video net additions since 2014.
- Approximately 700 COVID-19 related non-payment service
disconnections were deferred during the quarter ending June 30,
2020. We resumed normal collection practices on July 1, 2020
and expect this will have minimal impact on bad debt expense in
future periods.
Wireless
- Our markets continued to be affected by the stay-at-home
directives and the phased re-opening of local economies. We
re-opened all the Sprint branded retail stores by the end of June
that were temporarily closed in mid-March. Wireless postpaid gross
additions and voluntary churn declined year over year approximately
28% and 23%, respectively, for the three months ended June 30, 2020
due to the store closures and lower store traffic from the
stay-at-home directives.
- As a Sprint affiliate, our wireless segment participated in the
Keep Americans Connected pledge and deferred an estimated 2,300
COVID-19 related non-payment service disconnections during the
quarter ended June 30, 2020. While the majority of these
subscribers have agreed to payment plans with Sprint, we recognized
contra-revenue of $1.2 million during the second quarter of 2020,
which effectively represents the pass-through of Sprint’s bad debt
expense for these customers. Sprint resumed normal collection
practices on July 1, 2020.
- During the second quarter of 2020, Sprint issued $1.4 million
of credits to prepaid customers in our service territory to
alleviate the impacts of COVID-19 and keep these customers
connected. Issuance of these credits ceased on June 1, 2020.
- Expense for payroll paid to idled employees and as a premium
for certain employees interfacing with the general public, totaled
$1.1 million for the three months ended June 30, 2020 and was
presented within the cost of service and selling, general, and
administrative expense captions.
- With the stay-at-home directives continuing through the second
quarter, we also reduced our wireless advertising spend for the
three month period ended June 30, 2020 by $2.8 million from the
comparable prior year period.
Sprint Travel Dispute
Our travel revenue dispute with Sprint was resolved
through binding arbitration during June 2020. The arbitrators’
ruling reset the fee to $1.5 million per month through December 31,
2021. As a result, we recognized $21.0 million of travel revenue
during the second quarter 2020 for service that we have provided
since May 1, 2019. We recognized and collected $6.0 million
in travel revenue in 2019 prior to Sprint ceasing payments in May
2019. Sprint paid the $21.0 million in July 2020.
Consolidated Second Quarter 2020
Results
- Revenue in the second quarter of 2020 was $169.5 million
compared with $158.9 million in the second quarter of 2019, due to
the growth of $8.6 million, $1.9 million and $0.1 million in the
Wireless, Broadband and Tower segments, respectively. The Wireless
growth was driven by the resolution of the travel dispute with
Sprint.
- Adjusted OIBDA in the second quarter of 2020 increased $14.0
million to $80.9 million compared with $67.0 million in 2019 due
primarily to the aforementioned travel revenue dispute resolution
in the Wireless segment.
- Operating income increased 79.0% to $43.0 million in 2020 from
$24.0 million in 2019, primarily due to the resolution of the
travel revenue dispute in the Wireless segment.
- Earnings per diluted share grew 123.1% to $0.58 from $0.26 per
diluted share in 2019.
Wireless
- Shentel served 846,428 wireless postpaid subscribers at June
30, 2020, representing an increase of 4.3% compared with June 30,
2019. Second quarter 2020 postpaid gross adds were 37,832, as
compared to 52,799 in the second quarter of 2019. Net adds were
(1,343) as compared to 10,767 in the second quarter 2019. Postpaid
churn was 1.55% as compared to 1.74% in the second quarter 2019.
During the second quarter 2020, Sprint adopted the T-Mobile credit
and collection policies for Sprint branded customers including
those in the Shentel service area. Approximately 4,400
involuntary (non-payment) postpaid disconnects were accelerated
into our second quarter subscriber results. Excluding this
policy change, postpaid net additions and churn for the quarter
would have been 3,021 and 1.37%, respectively. Wireless postpaid
gross and net additions for the second quarter were adversely
affected by COVID-19.
- Shentel served 289,449 wireless prepaid subscribers at June 30,
2020, representing an increase of 7.6% compared with June 30, 2019.
Second quarter 2020 prepaid gross additions grew 15.8% to 39,083
from the second quarter 2019. Net additions were 10,353, as
compared to 1,819 in the same period a year ago. Prepaid churn was
3.38%, an improvement over 3.97% for the prior year quarter.
Prepaid gross and net additions were favorably impacted by the
prepaid value proposition in a recessionary economy and COVID
related retention credits.
- Wireless revenue increased approximately $8.6 million, or 7.8%,
for the three months ended June 30, 2020 compared with the three
months ended June 30, 2019. The growth was driven by a $19.5
million increase in travel revenue due to the resolution of the
Sprint travel fee dispute, $1.5 million due to subscriber growth,
$0.7 million in higher roaming and MVNO revenues partially offset
by a $6.9 million decline in equipment revenue as retail stores
were temporarily closed amidst the COVID-19 outbreak, $3.2 million
in higher amortized customer contract costs, $1.4 million in COVID
related prepaid customer retention credits and $1.2 million of
COVID-19 related postpaid bad debt in connection with the Keep
Americans Connected pledge.
- Wireless operating expenses in the second quarter of 2020 were
$75.9 million compared to $90.2 million in the second quarter of
2019. The decrease was primarily attributable to a $8.0 million
decline in depreciation and amortization as certain assets acquired
from nTelos became fully utilized, a $6.3 million decline in cost
of goods sold on lower volume of equipment sales and $2.8 million
in lower advertising costs both driven by COVID-19 related slower
economic activity, partially offset by $1.1 million in COVID-19
related payroll expense, $0.6 million of legal fees to support the
Sprint dispute matter, $0.6 million in higher operating taxes due
to a non-recurring benefit recognized in the second quarter 2019,
higher cell site rent expense of $0.5 million related to our
network expansion and $0.4 million in employee retention bonus
accrual relating to the Sprint/T-Mobile merger.
- Wireless Adjusted OIBDA in the second quarter of 2020 was
$67.7 million, compared with $52.4 million for the second quarter
of 2019.
- Wireless operating income in the second quarter of 2020 was
$43.9 million, compared to $20.9 million for the second quarter of
2019.
Broadband
- Total Revenue Generating Units ("RGUs") as of June 30, 2020
were 199,667, representing an increase of 4.7% from June 30, 2019,
driven by a record quarter for incumbent cable and Glo Fiber data
net additions of 5,150 and 878, respectively, for the second
quarter 2020. Incumbent cable broadband penetration grew from 38.5%
to 44.1% and churn declined 83 basis points to 1.32%. Glo Fiber
added over 7,800 homes passed and ended the quarter with
approximately 13,000 homes passed and 10.1% broadband penetration.
Video net additions were approximately 100 in the second quarter
driven by 1.36% churn.
- Broadband revenue in the second quarter of 2020 increased $1.6
million or 3.3% to $50.1 million compared with $48.6 million in the
second quarter of 2019, primarily driven by a $2.2 million increase
in Cable Residential and SMB revenue and $0.9 million increase in
Fiber, enterprise and wholesale revenue partially offset by $1.2
million decrease in RLEC revenues.
- Broadband operating expenses in the second quarter of 2020 were
$41.4 million compared to $36.7 million in the second quarter of
2019. The increase was primarily due to $3.3 million in higher
payroll and benefit expense due to a combination of Glo Fiber and
fixed wireless start-up staffing, supplemental COVID-19
compensation expense for customer interfacing employees, an
increase in benefit plans and higher incentive accrual from strong
operating results and $1.2 million increase in depreciation and
amortization expense due to the expansion of our network.
- Broadband Adjusted OIBDA in the second quarter of 2020
decreased 8.5% to $20.0 million, compared with $21.9 million for
the second quarter of 2019 due primarily to the dilution of
start-up costs from Glo Fiber and fixed wireless.
- Broadband Operating income in the second quarter of 2020 was
$8.8 million, compared to $11.9 million in the second quarter of
2019.
Tower
- Total macro towers, small cells and tenants were 220, 8 and 413
as of June 30, 2020 as compared to 217, zero and 377, respectively,
as of June 30, 2019.
- Tower revenue in the second quarter of 2020 grew 41.0% to $4.3
million, compared with $3.0 million for the second quarter of 2019.
This increase was due to a 9.5% increase in tenants and an 20.8%
increase in the average lease rate driven by amendments to the
intercompany leases.
- Tower operating expenses in both the second quarter of 2020 and
2019 were approximately $2.0 million.
- Tower Adjusted OIBDA in the second quarter of 2020 grew
46.1% to $2.7 million, compared with $1.9 million for the second
quarter of 2019.
- Tower operating income in the second quarter of 2020 was $2.2
million, compared to $1.1 million for the second quarter of
2019.
Other Information
- Capital expenditures were $66.6 million for the six months
ended June 30, 2020 compared with $79.1 million in the comparable
2019 period. The $12.5 million decrease in capital expenditures was
primarily due to a $30.1 million decline in Wireless as the nTelos
and Parkersburg network expansions were completed in the first half
of 2019 and Richmond Sliver territory expansion projects have been
postponed as we await further clarity on the impact of ongoing
negotiations with the new T-Mobile. The decline in Wireless
spending was partially offset by $19.5 million in higher spending
in Broadband driven primarily by our Glo Fiber market
expansion.
- Outstanding debt at June 30, 2020 totaled $704.3 million, net
of unamortized loan costs, compared to $720.1 million as of
December 31, 2019. As of June 30, 2020, the Company had
liquidity of approximately $218.7 million,
including $75.0 million of revolving line of credit
availability.
- On April 1, 2020, T-Mobile publicly announced the completion of
its business combination with Sprint and subsequently delivered to
the Company a notice of Network Technology Conversion, Brand
Conversion and Combination Conversion (a “Conversion Notice”)
pursuant to the terms of the Company’s affiliate agreement with
Sprint. As described in more detail in the Company’s 2019 Annual
Report on Form 10-K, our Wireless segment has been an affiliate of
Sprint since 1999. The 90-day period following receipt of the
Conversion Notice for the parties to negotiate mutually agreeable
terms and conditions, under which the Company would continue as an
affiliate of T-Mobile, expired on June 30, 2020. The affiliate
agreement further provides that, if T-Mobile and the Company have
not negotiated a mutually acceptable agreement within the 90 day
period, then T-Mobile would have a period of 60 days thereafter to
exercise an option to purchase the assets of our Wireless
operations for 90% of the “Entire Business Value” (as defined under
our affiliate agreement and determined pursuant to the appraisal
process under the affiliate agreement); this period will expire on
August 31, 2020. If T-Mobile does not exercise its purchase option,
the Company would then have a 60 day period to exercise an option
to purchase the legacy T-Mobile network and subscribers in our
service area. If the Company does not exercise its purchase option,
T-Mobile must sell or decommission its legacy network and customers
in our service area.
- Our Sprint affiliate agreement required T-Mobile to comply with
certain restrictive operating requirements during the 90 day period
following their Conversion Notice which ended on June 30,
2020. T-Mobile publicly announced on July 22, 2020 its
intention to begin integration of the brands, rate plans, sales and
network on August 2, 2020. Although the impact to Sprint
customers in our affiliate area is uncertain at this point in time,
the integration plans are likely to adversely affect our Wireless
segment operating and financial results in future periods.
Free cash flow, normalized free cash flow and
Adjusted OIBDA are non-GAAP financial measures that are not
determined in accordance with US generally accepted accounting
principles. Reconciliations of these non-GAAP financial measures
are provided in this press release after the consolidated financial
statements.
Conference Call and Webcast
Teleconference Information:
Date: July 30, 2020 Time: 8:00 A.M.
(ET)Dial in number: 1-888-695-7639
Password: 1246368 Audio
webcast: http://investor.shentel.com/
An audio replay of the call will be available
approximately two hours after the call is complete, through
August 29, 2020 by calling (855) 859-2056.
About Shenandoah
Telecommunications
Shenandoah Telecommunications Company (Shentel)
provides a broad range of diversified communications services
through its high speed, state-of-the-art wireless, cable and fiber
optic networks to customers in the Mid-Atlantic United States. The
Company’s services include: wireless voice and data; broadband
internet, video, and digital voice; fiber optic Ethernet,
wavelength and leasing; telephone voice and digital subscriber
line; and tower colocation leasing. Shentel is the exclusive
personal communications service (“PCS”) Affiliate of Sprint in a
multi-state area covering large portions of central and western
Virginia, south-central Pennsylvania, West Virginia, and portions
of Maryland, Kentucky, and Ohio. 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’s filings with the SEC.
Those factors may include natural disasters, pandemics and
outbreaks of contagious diseases and other adverse public health
developments, such as COVID-19, changes in general economic
conditions, increases in costs, changes in regulation and other
competitive factors.
CONTACTS: Shenandoah Telecommunications
Company Jim Volk Senior Vice
President - Chief Financial Officer
540-984-5168
Jim.Volk@emp.shentel.comOr John
Nesbett/Jennifer Belodeau IMS Investor
Relations 203-972-9200
jnesbett@institutionalms.com
SHENANDOAH TELECOMMUNICATIONS COMPANY AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS(in thousands, except per share
amounts)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenue: |
|
|
|
|
|
|
|
Service revenue and other |
$ |
159,720 |
|
|
$ |
142,059 |
|
|
$ |
299,908 |
|
|
$ |
285,290 |
|
Equipment revenue |
9,806 |
|
|
16,855 |
|
|
22,806 |
|
|
32,467 |
|
Total revenue |
169,526 |
|
|
158,914 |
|
|
322,714 |
|
|
317,757 |
|
Operating expenses: |
|
|
|
|
|
|
|
Cost of services |
50,640 |
|
|
49,497 |
|
|
100,205 |
|
|
99,015 |
|
Cost of goods sold |
9,658 |
|
|
15,874 |
|
|
22,329 |
|
|
30,511 |
|
Selling, general and administrative |
31,394 |
|
|
27,170 |
|
|
62,385 |
|
|
55,892 |
|
Depreciation and amortization |
34,832 |
|
|
42,353 |
|
|
71,743 |
|
|
83,532 |
|
Total operating expenses |
126,524 |
|
|
134,894 |
|
|
256,662 |
|
|
268,950 |
|
Operating income |
43,002 |
|
|
24,020 |
|
|
66,052 |
|
|
48,807 |
|
Other income (expense): |
|
|
|
|
|
|
|
Interest expense |
(5,044 |
) |
|
(7,522 |
) |
|
(11,255 |
) |
|
(15,476 |
) |
Other |
1,573 |
|
|
1,176 |
|
|
2,306 |
|
|
2,463 |
|
Income before income taxes |
39,531 |
|
|
17,674 |
|
|
57,103 |
|
|
35,794 |
|
Income tax expense |
10,284 |
|
|
4,524 |
|
|
14,576 |
|
|
8,734 |
|
Net income |
$ |
29,247 |
|
|
$ |
13,150 |
|
|
$ |
42,527 |
|
|
$ |
27,060 |
|
|
|
|
|
|
|
|
|
Net income per share, basic
and diluted: |
|
|
|
|
|
|
|
Basic net income per
share |
$ |
0.59 |
|
|
$ |
0.26 |
|
|
$ |
0.85 |
|
|
$ |
0.54 |
|
Diluted net income per
share |
$ |
0.58 |
|
|
$ |
0.26 |
|
|
$ |
0.85 |
|
|
$ |
0.54 |
|
Weighted average shares
outstanding, basic |
49,902 |
|
|
49,848 |
|
|
49,878 |
|
|
49,812 |
|
Weighted average shares
outstanding, diluted |
50,082 |
|
|
50,142 |
|
|
50,039 |
|
|
50,118 |
|
|
SHENANDOAH TELECOMMUNICATIONS COMPANY AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS(in thousands)
|
June 30, 2020 |
|
December 31, 2019 |
|
|
|
|
Cash and cash equivalents |
$ |
143,712 |
|
|
$ |
101,651 |
|
Other current assets |
155,821 |
|
|
140,102 |
|
Total current assets |
299,533 |
|
|
241,753 |
|
|
|
|
|
Investments |
12,661 |
|
|
12,388 |
|
Property, plant and equipment,
net |
703,012 |
|
|
701,514 |
|
Intangible assets, net |
285,081 |
|
|
314,147 |
|
Goodwill |
149,070 |
|
|
149,070 |
|
Operating lease right-of-use
assets |
376,912 |
|
|
392,589 |
|
Deferred charges and other
assets, net |
54,311 |
|
|
53,352 |
|
Total assets |
$ |
1,880,580 |
|
|
$ |
1,864,813 |
|
|
|
|
|
Total current liabilities |
145,327 |
|
|
$ |
147,336 |
|
Long-term debt, less current
maturities |
672,601 |
|
|
688,464 |
|
Other liabilities |
551,195 |
|
|
556,585 |
|
Total shareholders’
equity |
511,457 |
|
|
472,428 |
|
Total liabilities and shareholders’ equity |
$ |
1,880,580 |
|
|
$ |
1,864,813 |
|
|
SHENANDOAH TELECOMMUNICATIONS COMPANY AND
SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS(in thousands)
|
Six Months Ended June 30, |
|
2020 |
|
2019 |
Cash flows from operating
activities: |
|
|
|
Net income |
$ |
42,527 |
|
|
$ |
27,060 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation |
63,258 |
|
|
72,737 |
|
Amortization of intangible assets |
9,336 |
|
|
10,795 |
|
Bad debt expense |
436 |
|
|
764 |
|
Stock based compensation expense, net of amount capitalized |
4,520 |
|
|
2,307 |
|
Deferred income taxes |
8,714 |
|
|
3,434 |
|
Other adjustments |
1,923 |
|
|
275 |
|
Changes in assets and liabilities |
(1,775 |
) |
|
12,260 |
|
Net cash provided by operating activities |
128,939 |
|
|
129,632 |
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
Capital expenditures |
(66,626 |
) |
|
(79,124 |
) |
Cash disbursed for acquisitions |
— |
|
|
(10,000 |
) |
Proceeds from sale of assets and other |
286 |
|
|
105 |
|
Net cash used in investing activities |
(67,540 |
) |
|
(89,019 |
) |
|
|
|
|
Cash flows from financing
activities: |
|
|
|
Principal payments on long-term debt |
(17,061 |
) |
|
(24,777 |
) |
Taxes paid for equity award issuances |
(2,182 |
) |
|
(2,912 |
) |
Proceeds from exercise of stock options |
(95 |
) |
|
81 |
|
Net cash used in financing activities |
(19,338 |
) |
|
(27,608 |
) |
Net increase (decrease) in cash and cash equivalents |
42,061 |
|
|
13,005 |
|
Cash and cash equivalents, beginning of period |
101,651 |
|
|
85,086 |
|
Cash and cash equivalents, end of period |
$ |
143,712 |
|
|
$ |
98,091 |
|
|
|
|
|
Non-GAAP Financial
MeasuresAdjusted OIBDA
Adjusted OIBDA represents Operating income
before depreciation, amortization of intangible assets, stock-based
compensation and certain other items of revenue, expense, gain or
loss not reflective of our operating performance, which may or may
not be recurring in nature.
Adjusted OIBDA is a non-GAAP financial measure
that we use to evaluate our operating performance in comparison to
our competitors. Management believes that analysts and investors
use Adjusted OIBDA as a supplemental measure of operating
performance to facilitate comparisons with other telecommunications
companies. This measure isolates and evaluates operating
performance by excluding the cost of financing (e.g., interest
expense), as well as the non-cash depreciation and amortization of
past capital investments, non-cash share-based compensation
expense, and certain other items of revenue, expense, gain or loss
not reflective of our operating performance, which may or may not
be recurring in nature.
Adjusted OIBDA has limitations as an analytical
tool and should not be considered in isolation or as a substitute
for operating income, net income or any other measure of financial
performance reported in accordance with U.S. Generally Accepted
Accounting Principles (“GAAP”).
The following tables reconcile Adjusted OIBDA to
operating income, which we consider to be the most directly
comparable GAAP financial measure:
Three Months Ended
June 30, 2020 |
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Wireless |
|
Broadband |
|
Tower |
|
Corporate & Eliminations |
|
Consolidated |
Operating income |
|
$ |
43,872 |
|
|
$ |
8,767 |
|
|
$ |
2,229 |
|
|
$ |
(11,866 |
) |
|
$ |
43,002 |
|
Depreciation |
|
19,545 |
|
|
11,078 |
|
|
477 |
|
|
(310 |
) |
|
30,790 |
|
Amortization of intangible assets |
|
4,301 |
|
|
167 |
|
|
— |
|
|
— |
|
|
4,468 |
|
OIBDA |
|
67,718 |
|
|
20,012 |
|
|
2,706 |
|
|
(12,176 |
) |
|
78,260 |
|
Share-based compensation expense |
|
— |
|
|
— |
|
|
— |
|
|
1,615 |
|
|
1,615 |
|
Deal advisory fees |
|
— |
|
|
— |
|
|
— |
|
|
1,060 |
|
|
1,060 |
|
Adjusted OIBDA |
|
$ |
67,718 |
|
|
$ |
20,012 |
|
|
$ |
2,706 |
|
|
$ |
(9,501 |
) |
|
$ |
80,935 |
|
Three Months Ended
June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Wireless |
|
Broadband |
|
Tower |
|
Corporate & Eliminations |
|
Consolidated |
Operating income |
|
$ |
20,928 |
|
|
$ |
11,880 |
|
|
$ |
1,096 |
|
|
$ |
(9,884 |
) |
|
$ |
24,020 |
|
Depreciation |
|
26,447 |
|
|
9,882 |
|
|
756 |
|
|
132 |
|
|
37,217 |
|
Amortization of intangible assets |
|
5,016 |
|
|
120 |
|
|
— |
|
|
— |
|
|
5,136 |
|
OIBDA |
|
52,391 |
|
|
21,882 |
|
|
1,852 |
|
|
(9,752 |
) |
|
66,373 |
|
Share-based compensation expense |
|
— |
|
|
— |
|
|
— |
|
|
593 |
|
|
593 |
|
Adjusted OIBDA |
|
$ |
52,391 |
|
|
$ |
21,882 |
|
|
$ |
1,852 |
|
|
$ |
(9,159 |
) |
|
$ |
66,966 |
|
Six Months Ended June
30, 2020 |
|
|
|
|
|
|
|
|
|
|
(in
thousands) |
|
Wireless |
|
Broadband |
|
Tower |
|
Corporate & Eliminations |
|
Consolidated |
Operating income |
|
$ |
67,316 |
|
|
$ |
18,797 |
|
|
$ |
4,024 |
|
|
$ |
(24,085 |
) |
|
$ |
66,052 |
|
Depreciation |
|
40,555 |
|
|
21,795 |
|
|
947 |
|
|
(39 |
) |
|
63,258 |
|
Amortization of intangible assets |
|
9,015 |
|
|
321 |
|
|
— |
|
|
— |
|
|
9,336 |
|
OIBDA |
|
116,886 |
|
|
40,913 |
|
|
4,971 |
|
|
(24,124 |
) |
|
138,646 |
|
Share-based compensation expense |
|
— |
|
|
— |
|
|
— |
|
|
4,520 |
|
|
4,520 |
|
Deal advisory fees |
|
— |
|
|
— |
|
|
— |
|
|
1,970 |
|
|
1,970 |
|
Adjusted OIBDA |
|
$ |
116,886 |
|
|
$ |
40,913 |
|
|
$ |
4,971 |
|
|
$ |
(17,634 |
) |
|
$ |
145,136 |
|
Six Months Ended June
30, 2019 |
|
|
|
|
|
|
|
|
|
|
(in
thousands) |
|
Wireless |
|
Broadband |
|
Tower |
|
Corporate & Eliminations |
|
Consolidated |
Operating income |
|
$ |
45,141 |
|
|
$ |
21,929 |
|
|
$ |
2,220 |
|
|
$ |
(20,483 |
) |
|
$ |
48,807 |
|
Depreciation |
|
51,199 |
|
|
19,832 |
|
|
1,436 |
|
|
270 |
|
|
72,737 |
|
Amortization of intangible assets |
|
10,634 |
|
|
161 |
|
|
— |
|
|
— |
|
|
10,795 |
|
OIBDA |
|
106,974 |
|
|
41,922 |
|
|
3,656 |
|
|
(20,213 |
) |
|
132,339 |
|
Share-based compensation expense |
|
— |
|
|
— |
|
|
— |
|
|
2,307 |
|
|
2,307 |
|
Adjusted OIBDA |
|
$ |
106,974 |
|
|
$ |
41,922 |
|
|
$ |
3,656 |
|
|
$ |
(17,906 |
) |
|
$ |
134,646 |
|
|
Segment Results
Three Months Ended June 30,
2020:
(in thousands) |
Wireless |
|
Broadband |
|
Tower |
|
Corporate & Eliminations |
|
Consolidated |
External revenue |
|
|
|
|
|
|
|
|
|
Postpaid |
$ |
73,269 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
73,269 |
|
Prepaid |
12,432 |
|
|
— |
|
|
— |
|
|
— |
|
|
12,432 |
|
Tower lease |
— |
|
|
— |
|
|
1,829 |
|
|
— |
|
|
1,829 |
|
Cable, residential and SMB (1) |
— |
|
|
35,829 |
|
|
— |
|
|
— |
|
|
35,829 |
|
Fiber, enterprise and wholesale |
— |
|
|
5,663 |
|
|
— |
|
|
— |
|
|
5,663 |
|
Rural local exchange carrier |
— |
|
|
4,602 |
|
|
— |
|
|
— |
|
|
4,602 |
|
Travel, installation, and other |
24,438 |
|
|
1,658 |
|
|
— |
|
|
— |
|
|
26,096 |
|
Service revenue and other |
110,139 |
|
|
47,752 |
|
|
1,829 |
|
|
— |
|
|
159,720 |
|
Equipment |
9,610 |
|
|
196 |
|
|
— |
|
|
— |
|
|
9,806 |
|
Total external revenue |
119,749 |
|
|
47,948 |
|
|
1,829 |
|
|
— |
|
|
169,526 |
|
Revenue from other segments |
— |
|
|
2,185 |
|
|
2,430 |
|
|
(4,615 |
) |
|
— |
|
Total revenue |
119,749 |
|
|
50,133 |
|
|
4,259 |
|
|
(4,615 |
) |
|
169,526 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
Cost of services |
33,237 |
|
|
20,640 |
|
|
1,315 |
|
|
(4,552 |
) |
|
50,640 |
|
Cost of goods sold |
9,437 |
|
|
221 |
|
|
— |
|
|
— |
|
|
9,658 |
|
Selling, general and administrative |
9,783 |
|
|
9,260 |
|
|
238 |
|
|
12,113 |
|
|
31,394 |
|
Depreciation and amortization |
23,420 |
|
|
11,245 |
|
|
477 |
|
|
(310 |
) |
|
34,832 |
|
Total operating expenses |
75,877 |
|
|
41,366 |
|
|
2,030 |
|
|
7,251 |
|
|
126,524 |
|
Operating income (loss) |
$ |
43,872 |
|
|
$ |
8,767 |
|
|
$ |
2,229 |
|
|
$ |
(11,866 |
) |
|
$ |
43,002 |
|
____________________________(1) SMB refers to Small and
Medium Businesses.
Three Months Ended June 30,
2019:
(in thousands) |
Wireless |
|
Broadband |
|
Tower |
|
Corporate & Eliminations |
|
Consolidated |
External revenue |
|
|
|
|
|
|
|
|
|
Postpaid |
$ |
75,997 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
75,997 |
|
Prepaid |
13,603 |
|
|
— |
|
|
— |
|
|
— |
|
|
13,603 |
|
Tower lease |
— |
|
|
— |
|
|
1,751 |
|
|
— |
|
|
1,751 |
|
Cable, residential and SMB |
— |
|
|
33,581 |
|
|
— |
|
|
— |
|
|
33,581 |
|
Fiber, enterprise and wholesale |
— |
|
|
4,921 |
|
|
— |
|
|
— |
|
|
4,921 |
|
Rural local exchange carrier |
— |
|
|
5,581 |
|
|
— |
|
|
— |
|
|
5,581 |
|
Travel, installation, and other |
4,971 |
|
|
1,654 |
|
|
— |
|
|
— |
|
|
6,625 |
|
Service revenue and other |
94,571 |
|
|
45,737 |
|
|
1,751 |
|
|
— |
|
|
142,059 |
|
Equipment |
16,548 |
|
|
307 |
|
|
— |
|
|
— |
|
|
16,855 |
|
Total external revenue |
111,119 |
|
|
46,044 |
|
|
1,751 |
|
|
— |
|
|
158,914 |
|
Revenue from other segments |
— |
|
|
2,507 |
|
|
1,270 |
|
|
(3,777 |
) |
|
— |
|
Total revenue |
111,119 |
|
|
48,551 |
|
|
3,021 |
|
|
(3,777 |
) |
|
158,914 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
Cost of services |
32,668 |
|
|
19,014 |
|
|
895 |
|
|
(3,080 |
) |
|
49,497 |
|
Cost of goods sold |
15,742 |
|
|
131 |
|
|
— |
|
|
1 |
|
|
15,874 |
|
Selling, general and administrative |
10,318 |
|
|
7,524 |
|
|
274 |
|
|
9,054 |
|
|
27,170 |
|
Depreciation and amortization |
31,463 |
|
|
10,002 |
|
|
756 |
|
|
132 |
|
|
42,353 |
|
Total operating expenses |
90,191 |
|
|
36,671 |
|
|
1,925 |
|
|
6,107 |
|
|
134,894 |
|
Operating income (loss) |
$ |
20,928 |
|
|
$ |
11,880 |
|
|
$ |
1,096 |
|
|
$ |
(9,884 |
) |
|
$ |
24,020 |
|
|
Six Months Ended June 30,
2020:
(in thousands) |
Wireless |
|
Broadband |
|
Tower |
|
Corporate & Eliminations |
|
Consolidated |
External revenue |
|
|
|
|
|
|
|
|
|
Postpaid |
$ |
148,197 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
148,197 |
|
Prepaid |
25,541 |
|
|
— |
|
|
— |
|
|
— |
|
|
25,541 |
|
Tower lease |
— |
|
|
— |
|
|
3,626 |
|
|
— |
|
|
3,626 |
|
Cable, residential and SMB |
— |
|
|
70,772 |
|
|
— |
|
|
— |
|
|
70,772 |
|
Fiber, enterprise and wholesale |
— |
|
|
11,151 |
|
|
— |
|
|
— |
|
|
11,151 |
|
Rural local exchange carrier |
— |
|
|
9,358 |
|
|
— |
|
|
— |
|
|
9,358 |
|
Travel, installation, and other |
27,789 |
|
|
3,474 |
|
|
— |
|
|
— |
|
|
31,263 |
|
Service revenue and other |
201,527 |
|
|
94,755 |
|
|
3,626 |
|
|
— |
|
|
299,908 |
|
Equipment |
22,360 |
|
|
446 |
|
|
— |
|
|
— |
|
|
22,806 |
|
Total external revenue |
223,887 |
|
|
95,201 |
|
|
3,626 |
|
|
— |
|
|
322,714 |
|
Revenue from other segments |
— |
|
|
4,718 |
|
|
4,363 |
|
|
(9,081 |
) |
|
— |
|
Total revenue |
223,887 |
|
|
99,919 |
|
|
7,989 |
|
|
(9,081 |
) |
|
322,714 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
Cost of services |
66,676 |
|
|
39,883 |
|
|
2,254 |
|
|
(8,608 |
) |
|
100,205 |
|
Cost of goods sold |
21,965 |
|
|
364 |
|
|
— |
|
|
— |
|
|
22,329 |
|
Selling, general and administrative |
19,211 |
|
|
18,759 |
|
|
764 |
|
|
23,651 |
|
|
62,385 |
|
Depreciation and amortization |
48,719 |
|
|
22,116 |
|
|
947 |
|
|
(39 |
) |
|
71,743 |
|
Total operating expenses |
156,571 |
|
|
81,122 |
|
|
3,965 |
|
|
15,004 |
|
|
256,662 |
|
Operating income (loss) |
$ |
67,316 |
|
|
$ |
18,797 |
|
|
$ |
4,024 |
|
|
$ |
(24,085 |
) |
|
$ |
66,052 |
|
|
Six Months Ended June 30,
2019:
(in thousands) |
Wireless |
|
Broadband |
|
Tower |
|
Corporate & Eliminations |
|
Consolidated |
External revenue |
|
|
|
|
|
|
|
|
|
Postpaid |
$ |
152,179 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
152,179 |
|
Prepaid |
26,733 |
|
|
— |
|
|
— |
|
|
— |
|
|
26,733 |
|
Tower lease |
— |
|
|
— |
|
|
3,514 |
|
|
— |
|
|
3,514 |
|
Cable, residential and SMB |
— |
|
|
66,007 |
|
|
— |
|
|
— |
|
|
66,007 |
|
Fiber, enterprise and wholesale |
— |
|
|
9,749 |
|
|
— |
|
|
— |
|
|
9,749 |
|
Rural local exchange carrier |
— |
|
|
10,819 |
|
|
— |
|
|
— |
|
|
10,819 |
|
Travel, installation, and other |
12,989 |
|
|
3,300 |
|
|
— |
|
|
— |
|
|
16,289 |
|
Service revenue and other |
191,901 |
|
|
89,875 |
|
|
3,514 |
|
|
— |
|
|
285,290 |
|
Equipment |
31,839 |
|
|
628 |
|
|
— |
|
|
— |
|
|
32,467 |
|
Total external revenue |
223,740 |
|
|
90,503 |
|
|
3,514 |
|
|
— |
|
|
317,757 |
|
Revenue from other segments |
— |
|
|
4,929 |
|
|
2,540 |
|
|
(7,469 |
) |
|
— |
|
Total revenue |
223,740 |
|
|
95,432 |
|
|
6,054 |
|
|
(7,469 |
) |
|
317,757 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
Cost of services |
65,200 |
|
|
38,075 |
|
|
1,841 |
|
|
(6,101 |
) |
|
99,015 |
|
Cost of goods sold |
30,169 |
|
|
342 |
|
|
— |
|
|
— |
|
|
30,511 |
|
Selling, general and administrative |
21,397 |
|
|
15,093 |
|
|
557 |
|
|
18,845 |
|
|
55,892 |
|
Depreciation and amortization |
61,833 |
|
|
19,993 |
|
|
1,436 |
|
|
270 |
|
|
83,532 |
|
Total operating expenses |
178,599 |
|
|
73,503 |
|
|
3,834 |
|
|
13,014 |
|
|
268,950 |
|
Operating income (loss) |
$ |
45,141 |
|
|
$ |
21,929 |
|
|
$ |
2,220 |
|
|
$ |
(20,483 |
) |
|
$ |
48,807 |
|
|
Supplemental Information
Wireless Operating
Statistics
The following tables indicate selected operating
statistics of Wireless, including Sprint subscribers, as of the
dates shown:
|
|
June 30, 2020 |
|
June 30, 2019 |
Retail PCS total subscribers - postpaid |
|
846,428 |
|
|
811,719 |
|
Retail PCS phone subscribers |
|
735,028 |
|
|
726,899 |
|
Retail PCS connected device subscribers |
|
111,400 |
|
|
84,820 |
|
Retail PCS subscribers -
prepaid |
|
289,449 |
|
|
269,039 |
|
PCS market POPS (000) (1) |
|
7,227 |
|
|
7,227 |
|
PCS covered POP (000) (1) |
|
6,379 |
|
|
6,285 |
|
Macro base stations (cell
sites) |
|
1,968 |
|
|
1,910 |
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
Postpaid: |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Gross PCS total subscriber additions |
|
37,832 |
|
|
52,799 |
|
|
89,823 |
|
|
103,646 |
|
Gross PCS phone additions |
|
26,567 |
|
|
39,948 |
|
|
63,301 |
|
|
77,734 |
|
Gross PCS connected device additions |
|
11,265 |
|
|
12,851 |
|
|
26,522 |
|
|
25,912 |
|
Net PCS total subscriber (losses) additions (2) |
|
(1,343 |
) |
|
10,767 |
|
|
2,234 |
|
|
16,543 |
|
Net PCS phone (losses) additions |
|
(3,967 |
) |
|
4,069 |
|
|
(6,278 |
) |
|
3,444 |
|
Net PCS connected device additions |
|
2,624 |
|
|
6,698 |
|
|
8,512 |
|
|
13,099 |
|
PCS monthly retail total churn % (2) |
|
1.55 |
% |
|
1.74 |
% |
|
1.73 |
% |
|
1.81 |
% |
PCS monthly phone churn % |
|
1.38 |
% |
|
1.62 |
% |
|
1.57 |
% |
|
1.68 |
% |
PCS monthly connected device churn % |
|
2.63 |
% |
|
2.88 |
% |
|
2.80 |
% |
|
3.09 |
% |
Prepaid: |
|
|
|
|
|
|
|
|
Gross PCS subscriber additions |
|
39,083 |
|
|
33,753 |
|
|
78,157 |
|
|
74,732 |
|
Net PCS subscriber additions |
|
10,353 |
|
|
1,819 |
|
|
15,437 |
|
|
10,335 |
|
PCS monthly retail churn % |
|
3.38 |
% |
|
3.97 |
% |
|
3.76 |
% |
|
4.06 |
% |
______________________________(1) "POPS"
refers to the estimated population of a given geographic
area. Market POPS are those within a market area which we are
authorized to serve under our Sprint PCS affiliate agreements, and
Covered POPS are those covered by our network. The data source for
POPS is U.S. census data.(2) Includes an estimated 4,364
involuntary (nonpayment) postpaid disconnects were accelerated into
our second quarter subscriber results due to a change in Sprint
collection policy. Excluding this policy change, postpaid net
additions for the three and six months ending June 30, 2020 would
have been 3,021 and 6,598, respectively, and churn would have been
1.37% and 1.64%, respectively.
Broadband Operating
Statistics
|
|
June 30, 2020 |
|
June 30, 2019 |
Broadband homes passed (1) (2) |
|
220,442 |
|
|
206,262 |
|
Incumbent Cable |
|
207,269 |
|
|
206,262 |
|
Glo Fiber |
|
13,173 |
|
|
— |
|
Broadband customer
relationships (3) |
|
101,816 |
|
|
88,860 |
|
|
|
|
|
|
Video: |
|
|
|
|
RGUs |
|
53,153 |
|
|
57,215 |
|
Penetration (4) |
|
24.1 |
% |
|
27.7 |
% |
Digital video penetration (5) |
|
94.3 |
% |
|
90.3 |
% |
Broadband: |
|
|
|
|
RGUs |
|
92,695 |
|
|
79,507 |
|
Incumbent Cable |
|
91,364 |
|
|
79,507 |
|
Glo Fiber |
|
1,331 |
|
|
— |
|
Penetration (4) |
|
42.0 |
% |
|
38.5 |
% |
Incumbent Cable penetration (4) |
|
44.1 |
% |
|
38.5 |
% |
Glo Fiber penetration (4) |
|
10.1 |
% |
|
— |
% |
Voice: |
|
|
|
|
RGUs |
|
32,252 |
|
|
30,754 |
|
Penetration (4) |
|
16.5 |
% |
|
16.2 |
% |
Total Cable and Glo
Fiber RGUs |
|
178,100 |
|
|
167,476 |
|
|
|
|
|
|
RLEC homes passed |
|
25,852 |
|
|
25,814 |
|
RLEC customer relationships
(3) |
|
12,587 |
|
|
13,528 |
|
RLEC RGUs: |
|
|
|
|
Data RLEC |
|
7,755 |
|
|
8,424 |
|
Penetration (4) |
|
30.0 |
% |
|
32.6 |
% |
Voice RLEC |
|
13,812 |
|
|
14,873 |
|
Penetration (4) |
|
53.4 |
% |
|
57.6 |
% |
Total RLEC
RGUs |
|
21,567 |
|
|
23,297 |
|
|
|
|
|
|
Total
RGUs |
|
199,667 |
|
|
190,773 |
|
|
|
|
|
|
Fiber route miles |
|
6,478 |
|
|
5,833 |
|
Total fiber miles (6) |
|
346,969 |
|
|
307,125 |
|
_______________________________(1) Homes
and businesses are considered passed (“homes passed”) if we can
connect them to our distribution system without further extending
the transmission lines. Homes passed is an estimate based upon
the best available information. Homes passed have access to video,
broadband and voice services.(2) Includes approximately
16,600 RLEC homes passed where we are the dual incumbent telephone
and cable provider.(3) Customer relationships represent the
number of billed customers who receive at least one of our
services.(4) Penetration is calculated by dividing the number
of users by the number of homes passed or available homes, as
appropriate.(5) Digital video penetration is calculated by
dividing the number of digital video users by total video
users. Digital video users are video customers who receive any
level of video service via digital transmission. A dwelling
with one or more digital set-top boxes or digital adapters counts
as one digital video user.(6) Total fiber miles are measured
by taking the number of fiber strands in a cable and multiplying
that number by the route distance. For example, a 10 mile
route with 144 fiber strands would equal 1,440 fiber miles.
Tower Operating Statistics
|
|
June 30, 2020 |
|
June 30, 2019 |
Macro towers owned |
|
220 |
|
|
217 |
|
Small cell sites |
|
8.0 |
|
|
— |
|
Tenants (1) |
|
413 |
|
|
377 |
|
Average tenants per tower |
|
1.8 |
|
|
1.7 |
|
______________________________(1) Includes 206 and 177
intercompany tenants for our Wireless segment as of June 30, 2020
and 2019, respectively.
Reconciliation of Non-GAAP Measures Normalized Free Cash
Flow and Free Cash Flow
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(in thousands) |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Net cash provided by operating activities |
|
$ |
67,831 |
|
|
$ |
67,969 |
|
|
$ |
128,939 |
|
|
$ |
129,632 |
|
Less: Capital expenditures
(1) |
|
(21,767 |
) |
|
(34,704 |
) |
|
(46,871 |
) |
|
(79,124 |
) |
Normalized free cash flow |
|
46,064 |
|
|
33,265 |
|
|
82,068 |
|
|
50,508 |
|
Glo Fiber and Beam capital
expenditures |
|
(12,560 |
) |
|
— |
|
|
(19,755 |
) |
|
— |
|
Free cash flow |
|
$ |
33,504 |
|
|
$ |
33,265 |
|
|
$ |
62,313 |
|
|
$ |
50,508 |
|
______________________________(1) Excludes capital
expenditures for the development of Glo Fiber and Fixed Wireless
(Beam).
Free cash flow and normalized free cash flow are
non-GAAP financial measures that, when viewed with our GAAP
results, provides a more complete understanding of factors and
trends affecting our cash flows. Free cash flow is calculated by
subtracting capital expenditures from net cash provided by
operating activities. Normalized free cash flow is calculated by
subtracting capital expenditures, excluding spending on the
development of Glo Fiber and Beam fixed wireless services, from net
cash provided by operating activities. We believe they are more
conservative measures of our cash flow since purchases of fixed
assets are necessary for ongoing operations and expansion. Free
cash flow and normalized free cash flow are utilized by our
management, investors and analysts to evaluate cash available that
may be used to pay scheduled principal payments on our debt
obligations and provide further investment in the business.
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