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Shentel settles Sprint roaming dispute, but T-Mobile deal still MIA

EDINBURG, Va. –

2019 Highlights

• Earnings per share increased 18.3% to $1.10.

• Consilidated normalized free cash flow grew 7.9% to a record $139.2 million.

• Record Wireless postpaid gross and net additions of 235,953 and 49,018, respectively.

• Broadband revenues, Adjusted OIBDA and Operating Income grew5.9%, 4.9% and 2.2%, respectively, from 2018.

• Completed upgrades to DOCSIS 3.1 in our cable markets enabling broadband speeds up to 1 Gbps and completed wireless network growth-related capital investments in recently acquired markets.

• Launched Fiber to the Home ("FTTH") service branded Glo Fiber in Harrisonburg, Virginia.

"We are pleased with the progress we made in 2019 in executing our strategic plan. Our recently completed investments in our cable and wireless networks have already begun to produce positive returns with our cable broadband penetration growing from 37.4% to 40.6% in 2019 and our Wireless business achieving a record year of postpaid gross and net additions," said President and CEO, Christopher E. French. "In addition, we launched our new fiber edge-out strategy, Glo Fiber, and acquired valuable mid-band spectrum in our region for our planned fixed wireless broadband launch later this year. We expect these investments will drive long-term growth in our Broadband business for the next several years and we are well positioned financially and operationally to continue the positive momentum in 2020."

Consolidated Full Year 2019 Results

• Revenue grew $3.1 million, or 0.5%, year over year to $633.9 millionin 2019 driven primarily by Broadband revenue growth of $10.8 million partially offset by Wireless revenue decline of $7.1 million. The Wireless segment recognized $12.0 million in lower travel revenue in 2019 compared to 2018 due to the ongoing dispute with Sprint over resetting the travel fee.

• Adjusted OIBDA decreased $3.7 million to $260.9 millionin 2019 from $264.6 million in 2018 due to the $12 million travel revenue decline in the Wireless segment partially offset by growth of $3.9 million in Broadband, $3.6 million in the core Wireless business, excluding the impact from travel, and $0.6 million in Towers.

• Operating income increased 4.1% in 2019 to $97.0 million from $93.2 million in 2018.

• Earnings per diluted share grew 19.3% to $1.10 from $0.93 per diluted share in 2018.

Wireless

Wireless revenue decreased $7.1 million in 2019 to $443.4 million, compared with $450.5 million in 2018. The decrease was attributable to the aforementioned $12 million decline in travel revenue partially offset by $3.2 million increase in postpaid and prepaid revenue from approximately 6% growth in subscribers and $1.6 million increase in roaming and MVNO revenues.

Wireless operating expenses in 2019 were $354.8 million, compared with $362.5 million in 2018, a year over year decrease of $7.6 million, primarily due to a $9.3 million decline in depreciation and amortization expense as certain assets acquired from nTelos became fully depreciated, $4.3 million decline in line costs from lower backhaul rates, a $2.0 million decline in operational taxes, $1.8 million decline in advertising costs and $0.7 million decline in retail store rents, partially offset by a $10.5 million increase in tower rents from a combination of an increase of 107 cell sites and higher tower rents rates from 2018.

Wireless Adjusted OIBDA in 2019 was $204.7 million, compared with $213.1 million in 2018.

Wireless operating income in 2019 was $88.5 million, compared with $88.0 million in 2018.

Broadband

Broadband revenue grew $10.8 million or 5.9% to $193.9 million in 2019 compared with $183.1 million in 2018. The increase was primarily attributable to a $10.1 million or 8.2% growth in Residential and SMB revenue, $3.3. million or 13.4% growth in Fiber enterprise and wholesale revenue partially offset by $3.2 million or 12.3% decline in RLEC revenue.

Broadband operating expenses increased approximately $9.9 million, or 7.0%, to $151.4 million in 2019, compared with 2018, primarily due to $2.9 million of operating expenses incurred in the launch of Glo Fiber, $3.0 million in higher depreciation and amortization expense, $1.6 million in increased cost of service due to the expansion of our network footprint and higher programming and retransmission fees, $1.5 million in payroll increases and $0.8 million in higher advertising and commissions.

Broadband Adjusted OIBDA in 2019 grew 4.9% to $83.8 million, compared with $79.9 million in 2018.

Broadband operating income in 2019 was $42.5 million, compared with $41.6 million in 2018.

Tower

Tower revenue in 2019 was $13.0 million, representing a year over year increase of 6.5% compared with $12.2 million in 2018. The increase was due to a 10.1% increase in tenants and a 2.5% increase in the lease rate.

Tower operating expenses in 2019 were $7.1 million, compared with $7.4 million for 2018. The decline was due to lower depreciation and amortization expense.

Tower Adjusted OIBDA grew 8.6% to $7.9 million, compared with $7.3 million in 2018.

Tower operating income in 2019 was $5.9 million, compared with $4.8 million in 2018.

Consolidated Fourth Quarter 2019 Results

Revenue in the fourth quarter of 2019 was $161.0 million compared with $161.5 million in the fourth quarter of 2018, as Broadband and Tower segments growth of $3.8 million and $0.7 million were offset by $4.5 million in lower Sprint travel revenue resulting from the ongoing dispute with Sprint over resetting the travel fee.

Adjusted OIBDA in the fourth quarter of 2019 was $63.5 million compared with $69.1 million in the fourth quarter of 2018 due to a decline in the Wireless segment.

Operating income in the fourth quarter of 2019 was $22.9 million compared with $27.0 million in the fourth quarter of 2018.

Net income in the fourth quarter of 2019 was $13.5 million or $0.27 per diluted share compared with net income of $14.9 million or $0.30 per diluted share in the fourth quarter of 2018.

Wireless

Shentel served 844,194 wireless postpaid subscribers at December 31, 2019, representing an increase of 6.2% compared with 795,176 subscribers as of December 31, 2018. Fourth quarter 2019 postpaid gross adds increased 31.8% to 71,830, net adds increased 115.6% to 20,777. Postpaid phone net adds more than doubled to 8,654 and postpaid phone churn increased 12 basis points to 1.88% compared to fourth quarter 2018. At December 31, 2019, phones represented 87.8% of the postpaid base.

Shentel served 274,012 wireless prepaid subscribers at December 31, 2019, representing an increase of 5.9% compared with 258,704 subscribers as of December 31, 2018. Fourth quarter 2019 prepaid gross adds, net adds and churn were consistent with the fourth quarter 2018.

Wireless revenue decreased $3.5 million, to $112.4 million for the fourth quarter of 2019 compared with the fourth quarter of 2018. Sprint travel revenue declined $4.5 million due to the continuing dispute over resetting the travel fee partially offset by $1.2 million of higher equipment revenue due to higher postpaid gross adds.

Wireless operating expenses in the fourth quarter of 2019 were $91.5 million compared to $90.9 million in the fourth quarter of 2018. The increase was due to $3.0 million in higher tower rents and maintenance due to an increase of 107 cell sites in our network, $1.6 million in higher equipment cost of goods sold due to higher gross adds offset by $0.8 million in lower property taxes, and $3.0 million in lower depreciation and amortization as certain assets acquired from nTelos became fully depreciated.

Wireless Adjusted OIBDA in the fourth quarter of 2019 was $48.7 million, compared with $55.7 million for the fourth quarter of 2018.

Wireless Operating Income in the fourth quarter of 2019 was $20.9 million, compared to $25.0 million for the fourth quarter of 2018.

Broadband

Total Revenue Generating Units ("RGUs") as of December 31, 2019 were 191,227, representing an increase of 1.5% which includes the addition of approximately 4,800 RGUs obtained through the Big Sandy acquisition and 177 RGUs from the late October launch of Glo Fiber. Glo Fiber ended the year with approximately 1,723 homes passed representing 7.4% penetration. Cable broadband penetration grew from 37.4% to 40.6% and broadband churn declined 19 basis points to 1.64%.

Broadband revenue in the fourth quarter of 2019 grew $3.8 million or 8.2% to $49.8 million compared with $46.0 million in the fourth quarter of 2018, primarily driven by $2.8 million increase in Residential and SMB revenue and $1.1 million increase in Fiber enterprise and wholesale revenue.

Broadband operating expenses in the fourth quarter of 2019 were $40.5 million compared to $36.6 million in the fourth quarter of 2018. The increase was primarily due to $1.1 million of expenses incurred with the launch of Glo Fiber and a $2.1 million increase in depreciation expense due to the expansion of our network.

Broadband Adjusted OIBDA in the fourth quarter of 2019 grew 10.0% to $21.4 million, compared with $19.4 million for the fourth quarter of 2018.

Broadband Operating income in the fourth quarter of 2019 was $9.4 million, compared to $9.5 million in the fourth quarter of 2018.

Tower

Total towers and tenants were 225 and 404 as of December 31, 2019 as compared to 208 and 367, respectively, as of December 31, 2018.

Tower revenue in the fourth quarter of 2019 grew 22.2% to $3.8 million, compared with $3.1 million for the fourth quarter of 2018.

Tower operating expenses in the fourth quarter of 2019 were $1.3 million, compared with $2.1 million for the fourth quarter of 2018. The decline was due to lower depreciation and amortization expense.

Tower Adjusted OIBDA in the fourth quarter of 2019 grew 21.3% to $2.3 million, compared with $1.9 million for the fourth quarter of 2018.

Tower operating income in the fourth quarter of 2019 was $2.4 million, compared to $1.0 million for the fourth quarter of 2018.

Other Information

Capital expenditures were $138.8 million for the year ended December 31, 2019 compared with $136.6 million in 2018. The $2.2 million increase in capital expenditures due primarily to Broadband segment's $19.0 million investment in Glo Fiber and fixed wireless, partially offset by lower wireless and tower capital expenditures.

The Company declared and paid a cash dividend of $13.9 million, or $0.29 per share, in the fourth quarter 2019.

During the fourth quarter of 2019, we repurchased and retired 200,410 shares of our outstanding common stock in the open market purchases, pursuant to the previously-announced share repurchase program, for a total of $7.2 million. As of December 31, 2019, approximately $72.8 million remained available to repurchase shares under the share repurchase program.

Outstanding debt at December 31, 2019 totaled $720.1 million, net of unamortized loan costs, compared to $770.2 million as of December 31, 2018. As of December 31, 2019, the Company had liquidity of approximately $176.7 million, including $75.0 million of revolving line of credit availability.

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.

Shentel

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