8-K
SHENANDOAH TELECOMMUNICATIONS CO/VA/ (SHEN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 8-K
_________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 26, 2020
_______________________________
Shenandoah Telecommunications Company
(Exact name of registrant as specified in its charter)
_______________________________
| Virginia | 0-9881 | 54-1162807 |
|---|---|---|
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
500 Shentel Way
Edinburg, Virginia 22824
(Address of Principal Executive Offices) (Zip Code)
(540) 984-4141
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
_______________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock (No Par Value) | SHEN | NASDAQ Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On February 26, 2020, Shenandoah Telecommunications Company (the “Company”) issued a press release announcing its financial position as of December 31, 2019, results of operations for the three and twelve months ended December 31, 2019, and other related information. The Company will also post supplemental earnings presentation materials on the investor section of the Company’s website at www.Shentel.com. A copy of the press release is furnished as Exhibit 99.1 and is incorporated herein by reference.
These materials may contain forward-looking statements about Shenandoah Telecommunications Company regarding, among other things, our business strategy, our prospects and our financial position. These statements can be identified by the use of forward-looking terminology such as “believes,” “estimates,” “expects,” “intends,” “may,” “will,” “should,” “could,” or “anticipates” or the negative or other variation of these or similar words, or by discussions of strategy or risks and uncertainties. Shenandoah Telecommunications Company undertakes no obligation to revise or update such statements to reflect current events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibit is furnished with this Current Report on Form 8-K.
99.1* Fourth Quarter 2019 Earnings Press Release
* Furnished herewith
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Shenandoah Telecommunications Company | ||
|---|---|---|
| Date: February 26, 2020 | By: | /s/ James J. Volk |
| James J. Volk | ||
| Senior Vice President – Chief Financial Officer<br>(Principal Financial Officer) |
EdgarFiling EXHIBIT 99.1
Shenandoah Telecommunications Company Reports Fourth Quarter and Full Year 2019 Results
EDINBURG, Va., Feb. 26, 2020 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel”) (Nasdaq: SHEN) announced fourth quarter and full year 2019 financial and operating results.
2019 Highlights
- Earnings per share increased 18.3% to $1.10.
- Consolidated 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 grew 5.9%, 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."
Shentel's fourth-quarter earnings conference call will be webcast at 8:30 a.m. ET on Thursday, February 27, 2020. The webcast and related materials will be available on Shentel’s Investor Relations website at https://investor.shentel.com/ .
Consolidated Full Year 2019 Results
- Revenue grew $3.1 million, or 0.5%, year over year to $633.9 million in 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 million in 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 18.3% 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.
Conference Call and Webcast
Teleconference Information:
Date: February 27, 2020 Time: 8:30 A.M. (ET) Dial in number: 1-888-695-7639
Password: 2493817
Audio webcast: http://investor.shentel.com/
An audio replay of the call will be available approximately two hours after the call is complete, through March 26, 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 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.com Or John Nesbett/Jennifer Belodeau IMS Investor Relations 203-972-9200 jnesbett@institutionalms.com
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts)
| Quarter Ended December 31, | Year Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |||||||||
| Revenue: | ||||||||||||
| Service revenue and other | $ | 140,941 | $ | 142,637 | $ | 565,063 | $ | 562,456 | ||||
| Equipment revenue | 20,056 | 18,847 | 68,843 | 68,398 | ||||||||
| Total revenue | 160,997 | 161,484 | 633,906 | 630,854 | ||||||||
| Operating expenses: | ||||||||||||
| Cost of services | 49,574 | 47,660 | 198,753 | 194,022 | ||||||||
| Cost of goods sold | 19,578 | 17,952 | 65,914 | 63,959 | ||||||||
| Selling, general and administrative | 29,470 | 27,105 | 112,540 | 113,222 | ||||||||
| Depreciation and amortization | 39,495 | 41,773 | 159,653 | 166,405 | ||||||||
| Total operating expenses | 138,117 | 134,490 | 536,860 | 537,608 | ||||||||
| Operating income | 22,880 | 26,994 | 97,046 | 93,246 | ||||||||
| Other income (expense): | ||||||||||||
| Interest expense | (6,487 | ) | (7,663 | ) | (29,468 | ) | (34,847 | ) | ||||
| Other | (101 | ) | 831 | 3,461 | 3,713 | |||||||
| Income before income taxes | 16,292 | 20,162 | 71,039 | 62,112 | ||||||||
| Income tax expense | 2,771 | 5,310 | 16,104 | 15,517 | ||||||||
| Net income | $ | 13,521 | $ | 14,852 | $ | 54,935 | $ | 46,595 | ||||
| Net income per share, basic and diluted: | ||||||||||||
| Basic net income per share | $ | 0.27 | $ | 0.31 | $ | 1.10 | $ | 0.94 | ||||
| Diluted net income per share | $ | 0.27 | $ | 0.30 | $ | 1.10 | $ | 0.93 | ||||
| Weighted average shares outstanding, basic | 49,762 | 49,587 | 49,811 | 49,542 | ||||||||
| Weighted average shares outstanding, diluted | 50,067 | 50,112 | 50,101 | 50,063 |
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
| December 31, 2019 | December 31, 2018 | |||||
|---|---|---|---|---|---|---|
| Cash and cash equivalents | $ | 101,651 | $ | 85,086 | ||
| Other current assets | 137,380 | 125,116 | ||||
| Total current assets | 239,031 | 210,202 | ||||
| Investments | 12,388 | 10,788 | ||||
| Property, plant and equipment, net | 700,114 | 701,359 | ||||
| Intangible assets, net | 314,147 | 366,029 | ||||
| Goodwill | 149,070 | 146,497 | ||||
| Operating lease right-of-use assets | 392,589 | — | ||||
| Deferred charges and other assets, net | 53,352 | 49,891 | ||||
| Total assets | $ | 1,860,691 | $ | 1,484,766 | ||
| Total current liabilities | 147,336 | $ | 88,539 | |||
| Long-term debt, less current maturities | 688,464 | 749,624 | ||||
| Other liabilities | 555,469 | 204,356 | ||||
| Total shareholders’ equity | 469,422 | 442,247 | ||||
| Total liabilities and shareholders’ equity | $ | 1,860,691 | $ | 1,484,766 | ||
| SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES | ||||||
| --- | ||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
| (in thousands) | ||||||
| Year Ended December 31, | ||||||
| --- | --- | --- | --- | --- | --- | --- |
| 2019 | 2018 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 54,935 | $ | 46,595 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation | 139,543 | 142,111 | ||||
| Amortization of intangible assets | 20,535 | 24,294 | ||||
| Accretion of asset retirement obligations | 1,478 | 1,045 | ||||
| Bad debt expense | 1,743 | 1,983 | ||||
| Stock based compensation expense, net of amount capitalized | 3,817 | 4,959 | ||||
| Deferred income taxes | 11,644 | 6,208 | ||||
| Other adjustments | (1,489 | ) | 553 | |||
| Changes in assets and liabilities | 26,939 | 37,899 | ||||
| Net cash provided by operating activities | $ | 259,145 | $ | 265,647 | ||
| Cash flows from investing activities: | ||||||
| Capital expenditures | (138,792 | ) | (136,641 | ) | ||
| Cash disbursed for acquisitions | (10,000 | ) | (52,000 | ) | ||
| Cash disbursed for FCC spectrum licenses | (16,742 | ) | — | |||
| Proceeds from sale of assets and other | 200 | 841 | ||||
| Net cash used in investing activities | $ | (165,334 | ) | $ | (187,800 | ) |
| Cash flows from financing activities: | ||||||
| Principal payments on long-term debt | (53,197 | ) | (51,264 | ) | ||
| Dividends paid, net of dividends reinvested | (13,943 | ) | (12,866 | ) | ||
| Repurchase of common stock | (7,231 | ) | — | |||
| Proceeds from revolving credit facility borrowings | — | 15,000 | ||||
| Principal payments on revolving credit facility | — | (15,000 | ) | |||
| Taxes paid for equity award issuances | (2,911 | ) | (3,245 | ) | ||
| Payments for debt issuance costs | — | (3,971 | ) | |||
| Proceeds from exercise of stock options | 36 | — | ||||
| Net cash used in financing activities | $ | (77,246 | ) | $ | (71,346 | ) |
| Net increase in cash and cash equivalents | 16,565 | $ | 6,501 | |||
| Cash and cash equivalents, beginning of period | 85,086 | 78,585 | ||||
| Cash and cash equivalents, end of period | $ | 101,651 | $ | 85,086 |
Non-GAAP Financial Measures Adjusted 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:
| Year Ended December 31, 2019 | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | Wireless | Broadband | Tower | Corporate | Consolidated | |||||||
| Operating income | $ | 88,541 | $ | 42,521 | $ | 5,899 | $ | (39,915 | ) | $ | 97,046 | |
| Depreciation | 96,094 | 40,831 | 2,025 | 593 | 139,543 | |||||||
| Amortization of intangible assets | 20,062 | 473 | — | — | 20,535 | |||||||
| OIBDA | 204,697 | 83,825 | 7,924 | (39,322 | ) | 257,124 | ||||||
| Share-based compensation expense | — | — | — | 3,817 | 3,817 | |||||||
| Adjusted OIBDA | $ | 204,697 | $ | 83,825 | $ | 7,924 | $ | (35,505 | ) | $ | 260,941 | |
| Year Ended December 31, 2018 | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| (in thousands) | Wireless | Broadband | Tower | Corporate | Consolidated | |||||||
| Operating income | $ | 88,004 | $ | 41,620 | $ | 4,843 | $ | (41,221 | ) | $ | 93,246 | |
| Depreciation | 100,950 | 38,140 | 2,454 | 567 | 142,111 | |||||||
| Amortization of intangible assets | 24,117 | 177 | — | — | 24,294 | |||||||
| OIBDA | 213,071 | 79,937 | 7,297 | (40,654 | ) | 259,651 | ||||||
| Share-based compensation expense | — | — | — | 4,959 | 4,959 | |||||||
| Adjusted OIBDA | $ | 213,071 | $ | 79,937 | $ | 7,297 | $ | (35,695 | ) | $ | 264,610 | |
| Quarter ended December 31, 2019 | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (in thousands) | Wireless | Broadband | Tower | Corporate | Consolidated | |||||||
| Operating income | $ | 20,908 | $ | 9,371 | $ | 2,439 | $ | (9,838 | ) | $ | 22,880 | |
| Depreciation | 23,110 | 11,842 | (113 | ) | 201 | 35,040 | ||||||
| Amortization of intangible assets | 4,714 | 166 | — | — | 4,880 | |||||||
| OIBDA | 48,732 | 21,379 | 2,326 | (9,637 | ) | 62,800 | ||||||
| Share-based compensation expense | — | — | — | 659 | 659 | |||||||
| Adjusted OIBDA | $ | 48,732 | $ | 21,379 | $ | 2,326 | $ | (8,978 | ) | $ | 63,459 | |
| Quarter Ended December 31, 2018 | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| (in thousands) | Wireless | Broadband | Tower | Corporate | Consolidated | |||||||
| Operating income | $ | 24,957 | $ | 9,487 | $ | 1,023 | $ | (8,473 | ) | $ | 26,994 | |
| Depreciation | 25,154 | 9,898 | 894 | 163 | 36,109 | |||||||
| Amortization of intangible assets | 5,620 | 44 | — | — | 5,664 | |||||||
| OIBDA | 55,731 | 19,429 | 1,917 | (8,310 | ) | 68,767 | ||||||
| Share-based compensation expense | — | — | — | 381 | 381 | |||||||
| Adjusted OIBDA | $ | 55,731 | $ | 19,429 | $ | 1,917 | $ | (7,929 | ) | $ | 69,148 |
Segment Results
| Year ended December 31, 2019<br>(in thousands) | Wireless | Broadband | Tower | Corporate & Eliminations | Consolidated | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| External revenue | ||||||||||||
| Postpaid | $ | 302,031 | $ | — | $ | — | — | $ | 302,031 | |||
| Prepaid | 53,540 | — | — | — | 53,540 | |||||||
| Tower lease | — | — | 6,964 | — | 6,964 | |||||||
| Cable, residential and SMB | — | 134,187 | — | — | 134,187 | |||||||
| Fiber, enterprise and wholesale | — | 20,187 | — | — | 20,187 | |||||||
| Rural local exchange carrier | — | 21,074 | — | — | 21,074 | |||||||
| Travel, installation, and other | 20,160 | 6,920 | — | — | 27,080 | |||||||
| Service revenue and other | 375,731 | 182,368 | 6,964 | — | 565,063 | |||||||
| Equipment | 67,659 | 1,184 | — | — | 68,843 | |||||||
| Total external | 443,390 | 183,552 | 6,964 | — | 633,906 | |||||||
| Revenue from other segments | — | 10,392 | 6,020 | (16,412 | ) | — | ||||||
| Total revenue | 443,390 | 193,944 | 12,984 | (16,412 | ) | 633,906 | ||||||
| Operating expenses | ||||||||||||
| Cost of services | 131,745 | 76,674 | 3,894 | (13,560 | ) | 198,753 | ||||||
| Cost of goods sold | 65,148 | 766 | — | — | 65,914 | |||||||
| Selling, general and administrative | 42,225 | 32,679 | 1,166 | 36,470 | 112,540 | |||||||
| Depreciation and amortization | 115,731 | 41,304 | 2,025 | 593 | 159,653 | |||||||
| Total operating expenses | 354,849 | 151,423 | 7,085 | 23,503 | 536,860 | |||||||
| Operating income (loss) | $ | 88,541 | $ | 42,521 | $ | 5,899 | $ | (39,915 | ) | $ | 97,046 | |
| Year ended December 31, 2018<br>(in thousands) | Wireless | Broadband | Tower | Corporate & Eliminations | Consolidated | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| External revenue | ||||||||||||
| Postpaid | $ | 300,775 | $ | — | $ | — | $ | — | $ | 300,775 | ||
| Prepaid | 51,602 | — | — | — | 51,602 | |||||||
| Tower lease | — | — | 7,180 | — | 7,180 | |||||||
| Cable, residential and SMB | — | 124,072 | — | — | 124,072 | |||||||
| Fiber, enterprise and wholesale | — | 18,218 | — | — | 18,218 | |||||||
| Rural local exchange carrier | — | 23,485 | — | — | 23,485 | |||||||
| Travel, installation, and other | 30,572 | 6,552 | — | — | 37,124 | |||||||
| Service revenue and other | 382,949 | 172,327 | 7,180 | — | 562,456 | |||||||
| Equipment | 67,510 | 888 | — | — | 68,398 | |||||||
| Total external | 450,459 | 173,215 | 7,180 | — | 630,854 | |||||||
| Revenue from other segments | — | 9,905 | 5,016 | (14,921 | ) | — | ||||||
| Total revenue | 450,459 | 183,120 | 12,196 | (14,921 | ) | 630,854 | ||||||
| Operating expenses | ||||||||||||
| Cost of services | 127,045 | 75,066 | 4,121 | (12,210 | ) | 194,022 | ||||||
| Cost of goods sold | 63,583 | 376 | — | — | 63,959 | |||||||
| Selling, general and administrative | 46,760 | 27,741 | 778 | 37,943 | 113,222 | |||||||
| Depreciation and amortization | 125,067 | 38,317 | 2,454 | 567 | 166,405 | |||||||
| Total operating expenses | 362,455 | 141,500 | 7,353 | 26,300 | 537,608 | |||||||
| Operating income (loss) | $ | 88,004 | $ | 41,620 | $ | 4,843 | $ | (41,221 | ) | $ | 93,246 | |
| Quarter ended December 31, 2019<br>(in thousands) | Wireless | Broadband | Tower | Corporate & Eliminations | Consolidated | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| External revenue | ||||||||||||
| Postpaid | $ | 75,623 | $ | — | $ | — | — | $ | 75,623 | |||
| Prepaid | 13,115 | — | — | — | 13,115 | |||||||
| Tower lease | — | — | 1,598 | — | 1,598 | |||||||
| Cable, residential and SMB | — | 34,484 | — | — | 34,484 | |||||||
| Fiber, enterprise and wholesale | — | 5,276 | — | — | 5,276 | |||||||
| Rural local exchange carrier | — | 5,175 | — | — | 5,175 | |||||||
| Travel, installation, and other | 3,779 | 1,891 | — | — | 5,670 | |||||||
| Service revenue and other | 92,517 | 46,826 | 1,598 | — | 140,941 | |||||||
| Equipment | 19,845 | 211 | — | — | 20,056 | |||||||
| Total external | 112,362 | 47,037 | 1,598 | — | 160,997 | |||||||
| Revenue from other segments | — | 2,795 | 2,190 | (4,985 | ) | — | ||||||
| Total revenue | 112,362 | 49,832 | 3,788 | (4,985 | ) | 160,997 | ||||||
| Operating expenses | ||||||||||||
| Cost of services | 33,452 | 19,271 | 1,102 | (4,251 | ) | 49,574 | ||||||
| Cost of goods sold | 19,408 | 170 | — | — | 19,578 | |||||||
| Selling, general and administrative | 11,195 | 9,012 | 360 | 8,903 | 29,470 | |||||||
| Depreciation and amortization | 27,399 | 12,008 | (113 | ) | 201 | 39,495 | ||||||
| Total operating expenses | 91,454 | 40,461 | 1,349 | 4,853 | 138,117 | |||||||
| Operating income (loss) | $ | 20,908 | $ | 9,371 | $ | 2,439 | $ | (9,838 | ) | $ | 22,880 | |
| Quarter ended December 31, 2018<br>(in thousands) | Wireless | Broadband | Tower | Corporate & Eliminations | Consolidated | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |
| External revenue | ||||||||||||
| Postpaid | $ | 75,970 | $ | — | $ | — | $ | — | $ | 75,970 | ||
| Prepaid | 13,341 | — | — | — | 13,341 | |||||||
| Tower lease | — | — | 1,830 | — | 1,830 | |||||||
| Cable, residential and SMB | — | 31,676 | — | — | 31,676 | |||||||
| Fiber, enterprise and wholesale | — | 4,589 | — | — | 4,589 | |||||||
| Rural local exchange carrier | — | 5,528 | — | — | 5,528 | |||||||
| Travel, installation, and other | 7,937 | 1,766 | — | — | 9,703 | |||||||
| Service revenue and other | 97,248 | 43,559 | 1,830 | — | 142,637 | |||||||
| Equipment | 18,651 | 196 | — | — | 18,847 | |||||||
| Total external | 115,899 | 43,755 | 1,830 | — | 161,484 | |||||||
| Revenue from other segments | — | 2,302 | 1,270 | (3,572 | ) | — | ||||||
| Total revenue | 115,899 | 46,057 | 3,100 | (3,572 | ) | 161,484 | ||||||
| Operating expenses | ||||||||||||
| Cost of services | 30,555 | 18,891 | 1,119 | (2,905 | ) | 47,660 | ||||||
| Cost of goods sold | 17,833 | 119 | — | — | 17,952 | |||||||
| Selling, general and administrative | 11,780 | 7,618 | 64 | 7,643 | 27,105 | |||||||
| Depreciation and amortization | 30,774 | 9,942 | 894 | 163 | 41,773 | |||||||
| Total operating expenses | 90,942 | 36,570 | 2,077 | 4,901 | 134,490 | |||||||
| Operating income (loss) | $ | 24,957 | $ | 9,487 | $ | 1,023 | $ | (8,473 | ) | $ | 26,994 |
Supplemental Information
Wireless Operating Statistics
The following tables indicate selected operating statistics of Wireless, including Sprint subscribers, as of the dates shown:
| December 31, 2019 | December 31, 2018 (2) | |||||||
|---|---|---|---|---|---|---|---|---|
| Retail PCS total subscribers - postpaid | 844,194 | 795,176 | ||||||
| Retail PCS phone subscribers | 740,958 | 723,455 | ||||||
| Retail PCS connected device subscribers | 103,236 | 71,721 | ||||||
| Retail PCS subscribers - prepaid | 274,012 | 258,704 | ||||||
| PCS market POPS (000) (1) | 7,227 | 7,023 | ||||||
| PCS covered POP (000) (1) | 6,324 | 6,109 | ||||||
| Macro base stations (cell sites) | 1,960 | 1,853 | ||||||
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Postpaid: | 2019 | 2018 | 2019 | 2018 (2) | ||||
| Gross PCS total subscriber additions | 71,830 | 54,517 | 235,953 | 190,334 | ||||
| Gross PCS phone additions | 50,188 | 42,114 | 174,237 | 156,601 | ||||
| Gross PCS connected device additions | 21,642 | 12,403 | 61,716 | 33,733 | ||||
| Net PCS total subscriber additions | 20,777 | 9,639 | 49,018 | 20,236 | ||||
| Net PCS phone additions | 8,654 | 4,179 | 19,846 | 12,310 | ||||
| Net PCS connected device additions | 12,123 | 5,460 | 29,172 | 7,926 | ||||
| PCS monthly retail total churn % | 2.05 | % | 1.90 | % | 1.92 | % | 1.82 | % |
| PCS monthly phone churn % | 1.88 | % | 1.76 | % | 1.77 | % | 1.69 | % |
| PCS monthly connected device churn % | 3.30 | % | 3.40 | % | 3.21 | % | 3.35 | % |
| Prepaid: | ||||||||
| Gross PCS subscriber additions | 39,352 | 38,225 | 152,098 | 150,662 | ||||
| Net PCS subscriber additions | 2,461 | 3,242 | 15,308 | 17,191 | ||||
| PCS monthly retail churn % | 4.52 | % | 4.56 | % | 4.26 | % | 4.45 | % |
___________________________
| ^(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. Historical periods previously referred to other third party population data and have been recast to refer to U.S. census data.^ |
|---|---|
| ^(2)^ | ^Acquired the Richmond Expansion Area on February 1, 2018 with market POPs of 1,082,000 and covered POPs of 602,000. 2018 net adds results exclude 38,343 postpaid and 15,691 prepaid subscribers acquired.^ |
Broadband Operating Statistics
| December 31, 2019 | December 31, 2018 | |||
|---|---|---|---|---|
| Broadband homes passed (1) | 208,298 | 201,633 | ||
| Broadband customer relationships (2) | 100,890 | 95,328 | ||
| Video: | ||||
| RGUs (3) | 53,673 | 58,672 | ||
| Penetration (4) | 25.8 | % | 29.1 | % |
| Digital video penetration (5) | 95.0 | % | 78.8 | % |
| Broadband: | ||||
| RGUs (3) | 84,045 | 75,389 | ||
| Penetration (4) | 40.3 | % | 37.4 | % |
| Voice: | ||||
| RGUs (3) | 31,380 | 29,474 | ||
| Penetration (4) | 16.2 | % | 15.9 | % |
| Total Cable and Glo Fiber RGUs | 169,098 | 163,535 | ||
| RLEC homes passed | 25,846 | 26,782 | ||
| RLEC customer relationships (2) | 10,306 | 11,226 | ||
| RLEC RGUs: | ||||
| Data RLEC | 7,797 | 9,104 | ||
| Penetration (4) | 30.2 | % | 34.0 | % |
| Voice RLEC | 14,332 | 15,698 | ||
| Penetration (4) | 55.5 | % | 58.6 | % |
| Total RLEC RGUs | 22,129 | 24,802 | ||
| Total RGUs | 191,227 | 188,337 | ||
| Fiber route miles | 6,139 | 5,641 | ||
| Total fiber miles (6) | 320,444 | 300,200 |
___________________________
| ^(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)^ | ^Customer relationships represent the number of billed customers who receive at least one of our services.^ |
| ^(3)^ | ^As of September 30, 2019, the Company revised its methodology for counting RGUs associated with hotels, multiple dwelling units ("MDUs") and certain commercial customers. We now count each dwelling or unit of service as a separate RGU. Prior year information has been recast to reflect our revised methodology. Previously we counted RGUs on an equivalent basis consistent with carriage fee practices.^ |
| ^(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
| December 31, 2019 | December 31, 2018 | |
|---|---|---|
| Towers owned | 225 | 208 |
| Tenants (1) | 404 | 367 |
| Average tenants per tower | 1.8 | 1.8 |
___________________________
^(1) Includes 201 and 174 intercompany tenants for our Wireless segment as of December 31, 2019 and 2018, respectively.^
Reconciliation of Non-GAAP Measures Normalized Free Cash Flow and Free Cash Flow
| Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||
| Net cash provided by operating activities | $ | 65,686 | $ | 76,847 | $ | 259,145 | $ | 265,647 | |||
| Less: Capital expenditures (1) | (22,988 | ) | (44,332 | ) | (119,954 | ) | (136,641 | ||||
| Normalized free cash flow | 42,698 | 32,515 | 139,191 | 129,006 | |||||||
| Glo Fiber and Fixed Wireless capital expenditures | (8,766 | ) | — | (18,838 | ) | — | |||||
| Free cash flow | $ | 33,932 | $ | 32,515 | $ | 120,353 | $ | 129,006 |
(1) Excludes capital expenditures for the development of Glo Fiber and Fixed Wireless.
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 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.