Shenandoah Telecommunications' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Shenandoah Telecommunications Company (SHEN)

Q1 2012 Earnings Call

May 4, 2012 2:00 pm ET

Executives

Adele M. Skolits – Vice President-Finance, Chief Financial Officer and Treasurer

Christopher E. French – Chairman, President and Chief Executive Officer

Earle A. MacKenzie – Executive Vice President and Chief Operating Officer

Analysts

Richard Prentiss – Raymond James

Gregory Burns – Sidoti & Company, LLC.

Ric Prentiss – Raymond James

Presentation

Operator

Good day, ladies and gentlemen, and welcome to Shenandoah Telecommunications’ First Quarter 2012 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we’ll conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call maybe recorded.

I would now like to turn the conference over to Ms. Adele Skolits. Ma’am, you may begin.

Adele M. Skolits

Good morning and thank you for joining us. The purpose of today’s call is to review Shentel’s results for the quarter ended March 31, 2012. Our results were announced in a press release distributed this morning and the presentation we’ll be reviewing is included on our website at www.shentel.com. Please note that a replay of the call will be made available later today. The details were set forth in the press release announcing this call.

With us on the call today are Christopher French, our President and Chief Executive Officer and Earle MacKenzie, our Executive Vice President and Chief Operating Officer. After our prepared remarks, we will conduct a question-and-answer session.

I’ll begin with Slide 2 of the presentation. While we don’t provide guidance with respect to specific future financial results, we caution that this call may contain forward-looking statements, which involve a number of known and unknown risks and uncertainties. These may cause our actual results to differ materially from these statements. Shentel provides a detailed discussion of various risk factors in our SEC filings, which you’re strongly encouraged to review. You’re cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement.

Also, in an effort to provide useful information to investors, we note on Slide 3 that our comments today include non-GAAP financial measures. Details on these measures, including why we use them and reconciliations to the most comparable GAAP measures are included in our SEC filings.

I’ll turn the call over to Chris now.

Christopher E. French

Thank you, Adele. We appreciate everyone joining us today. I’m pleased to report that we started the year with a great first quarter. We had significant improvement in our financial results led by customer and revenue growth in our Wireless and Cable segments. Installation and construction is now underway with our wireless network upgrade as we prepared to transition to 4G LTE as part of Sprint Nextel Network Vision project.

Financial highlights are shown on slide 5. Net income was $4.5 million for the quarter, up 50% from the first quarter of 2011. Net income from continuing operations was up 42% to $4.4 million for the quarter. The earnings improvement was driven by an $8.4 million increase in revenues and was achieved in spite of recording $2 million of accelerated appreciation associated with the wireless network upgrades. Adjusted OIBDA was up $3.6 million over the first quarter of 2011, an increase of 17%.

Moving to Slide 6, revenues reached $68.8 million, an increase of almost 14% over the first quarter of 2011. Wireless customer growth and RGU growth in our cable segment drove the revenue increase. We continued our streak of quarterly positive net-adds in wireless, ending the quarter with just over 365,000 postpaid and prepaid subscribers.

Our Cable segment continued to add RGUs reaching almost to 139,600 at quarter end. Growth in average billings per customer particularly in the wireless segment also contributed significantly to the revenue growth.

Specific Wireless segment highlights are shown on Slide 7. We again had positive net wireless additions in both our postpaid and prepaid services with the number of total customers up nearly 2.6% over the year-end 2011 number, and 14.8% higher than first quarter 2011.

We added 2,064 net postpaid customers during the quarter reaching a total of 250,684, which is a year-over-year increase of 5.4%. Prepaid customers grew by 7,285 in the first quarter to a total of 114,384. Continued prepaid growth was helped by churn of just 3.65% this quarter relative to 4.5% for the first quarter of 2011. Customer and revenue growth contributed to an increase of operating income in the Wireless segment of $0.5 million over the first quarter of 2011.

Cable segment highlights are shown on Slide 8. The upgrades of the cable systems acquired in 2010 are now 90% complete, and we expect the remaining markets to be completed this year. Our Cable segment total RGUs increased by 2,361 in the first quarter, an increase of 1.7% over the year-end 2011 total. We experienced a slight decrease in basic video RGUs, but had good increases in digital video, high0speed internet and voice services.

I’ll now turn the call back to Adele to review the details of our financial results.

Adele M. Skolits

Thanks you, Chris. I’ll begin on Slide 10. Adjusted operating income before depreciation and amortization or OIBDA for Q1 ’12 was $25 million, or up $3.6 million from Q1 ’11. In order to better understand the forces driving this change, I’ve provided the OIBDA results by segment on Slide 11. Here you get a picture of how the segments results are contributing to the consolidated financial results. In a moment, I’ll go into the wireless and cable OIBDA changes in depth.

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