Record Quarterly Operating Income Increases to $28.3 million

Third Quarter 2018 Highlights

  • Operating revenue of $158.7 million
  • Operating income of $28.3 million
  • Net income of $15.5 million, resulting in net income of $0.31 per share
  • Adjusted OIBDA of $74.1 million

Please refer to our Third Quarter 2018 Earnings Presentation Supplement available at https://investor.shentel.com/ for additional information, including matters that will be referenced during the Company’s conference call. Included in this release are certain non-GAAP financial measures that are not determined in accordance with US generally accepted accounting principles. Please refer to page 10 for additional information for non-GAAP measures.

EDINBURG, Va., Nov. 06, 2018 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel”) (NASDAQ: SHEN) announces financial and operating results for the three months ended September 30, 2018.

Third Quarter Results

Consolidated

  • Net income for the three months ended September 30, 2018 was $15.5 million, or $0.31 per share, compared with net income of $3.5 million, or $0.07 per share, in the third quarter of 2017. Effective January 1, 2018, the Company adopted the new revenue recognition standard (Topic 606) that requires the Company to record costs such as commissions for the national sales channel that are settled separately with Sprint as reductions of revenue. Previously these costs were recorded in costs of goods and services and in selling, general and administrative expense. Excluding the impact of adopting Topic 606, third quarter net income was $11.8 million, or $0.24 per basic share, due to the deferral of certain commissions and device costs as required by the new revenue recognition standard.

  • Operating revenue for the three months ended September 30, 2018 was $158.7 million, representing a year-over-year increase of 4.6%, compared with $151.8 million for the three months ended September 30, 2017. Excluding the impact of adopting Topic 606, total operating revenue increased approximately $11.5 million, or 7.6%, driven by Wireless and Cable operations.

  • Operating expenses for the third quarter of 2018 were $130.4 million, compared with $142.3 million for the equivalent quarter in the prior year. Excluding the impact of adopting Topic 606, operating expenses decreased approximately $2.2 million, or 1.6% due to the absence of acquisition and integration costs related to the prior year nTelos integration, and a decrease in depreciation and amortization as assets acquired in the nTelos acquisition were retired. These declines were partially offset by increases in network and selling costs associated with the continued expansion of our networks to support the increased demand from the growing subscriber base.

  • Operating income increased 199.0% in the third quarter of 2018 to $28.3 million from $9.5 million in the equivalent quarter of the prior year. Excluding the impact of adopting Topic 606, operating income increased approximately $13.7 million, or 144.8%.

  • Adjusted OIBDA for the three months ended September 30, 2018 was $74.1 million, compared with $66.9 million for the three months ended September 30, 2017. Continuing OIBDA for the three months ended September 30, 2018 was $64.5 million, compared with $57.9 million for the three months ended September 30, 2017. The adoption of Topic 606 did not have an impact on Adjusted OIBDA.

Wireless

  • Wireless operating revenue increased $3.6 million, compared with the three months ended September 30, 2017. Excluding the impact of Topic 606, wireless operating income increased 233%. The increase was driven by growth in postpaid and prepaid PCS subscribers, improvements in PCS average monthly churn for postpaid and prepaid, and was partially offset by a decline in postpaid average revenue per subscriber related to promotions and discounts.

  • Wireless operating expenses for the three months ended September 30, 2018 were $88.7 million, compared with $105.8 million for the three months ended September 30, 2017, a year over year decrease of 16.1%.  Excluding the impact of adopting Topic 606, operating expenses decreased $7.6 million due to repricing Wireless backhaul circuits to market rates, migrating Wireless voice traffic from traditional circuit-switched facilities to more cost effective VoIP facilities, reducing back-office expenses that were required to support former nTelos subscribers that migrated to Sprint's back-office in 2017, and a reduction in acquisition, integration and migration expenses as the integration of the acquired nTelos business was completed during 2017.

  • Wireless Adjusted OIBDA for the three months ended September 30, 2018 was $62.6 million, compared with $54.2 million for the three months ended September 30, 2017. Wireless Continuing OIBDA for the three months ended September 30, 2018 was $53.0 million, compared with $45.2 million from the three months ended September 30, 2017.

  • Shentel served 785,537 wireless postpaid retail PCS subscribers as of September 30, 2018, an increase of 57,583 over the third quarter of 2017.  Postpaid churn for the three months ended September 30, 2018, was 1.84%, compared with 2.19% for the three months ended September 30, 2017. The Company had net additions of 4,879 postpaid customers in the three months ended September 30, 2018, compared with net losses of 4,710 for the three months ended September 30, 2017. As of the three months ended September 30, 2018, tablets and data devices were 8.5% of the postpaid base.

Cable

  • Cable operating revenue for the third quarter of 2018 was $32.2 million, representing a year over year increase of 7.0% compared with $30.1 million for the three months ended September 30, 2017. The growth in Cable revenue was primarily due to increases in broadband and voice subscribers and video rate increases. The adoption of Topic 606 did not have a significant impact on Cable operating revenue.

  • Cable operating expenses for the third quarter of 2018 were $26.3 million, a year over year decrease of 0.4% compared with $26.5 million for the three months ended September 30, 2017. The decrease was driven by a decline in video operating expenses. The Company lost 3,286 video users while adding 3,647 broadband users and 849 voice users, since September 30, 2017.

  • Cable Adjusted OIBDA for the three months ended September 30, 2018 was $11.8 million, compared with $10.0 million for the three months ended September 30, 2017.

Wireline

  • Wireline operating revenue for the three months ended September 30, 2018 was $19.6 million, compared with $19.9 million for the prior year third quarter. The decrease in operating revenues was primarily attributable to migrating Wireless backhaul circuits from traditional circuit-switched facilities to more cost effective Voice Over IP ("VoIP") facilities. The adoption of Topic 606 did not have a significant impact on Wireline operating revenue.

  • Wireline operating expenses for the three months ended September 30, 2018 were $14.5 million, compared with $14.8 million for the quarter ended September 30, 2017. This decrease was primarily attributable to a reduction in network costs.

  • Wireline Adjusted OIBDA for the three months ended September 30, 2018 was $8.5 million, compared with $8.4 million for the prior year equivalent quarter.

President and CEO Christopher E. French commented, "Throughout 2018, our focus has been on operational execution, particularly in terms of capitalizing on the competitive advantage provided by our state-of-the-art network and expanded wireless geographic area to drive distribution levels and activation rates in the markets we serve.  Our third quarter results built upon the momentum established in the first half of the year, as characterized by solid consolidated revenue growth, triple digit increases in operating income, significantly enhanced net profitability and improved adjusted OIBDA.

“In the Wireless segment, we saw growth in both postpaid and prepaid customers and believe our continued success adding customers is directly related to our ability to provide consistent coverage, optimal capacity and excellent service.  Our Cable segment showed continued progress as reflected in increased RGUs and 6% revenue growth.  As consumer expectations for high speed bandwidth and reliable service intensify, growing marketplace recognition of Shentel’s ability to deliver those capabilities allows us to attract new customers while also meeting the needs of existing customers seeking upgraded service plans.  The continued success and growth of our business relies on the satisfaction of our customers and we remain focused on providing reliable and robust network coverage and consistency across all offerings throughout our entire service footprint."

Network & Technology Highlights

  • Beginning in 2018, we began transitioning Wireless backhaul circuits from traditional circuit-switched facilities to VoIP facilities to reduce our overall network costs. We expect to complete the transition by year-end 2018.

Other Information

  • Capital expenditures were $92.3 million in the nine months ended September 30, 2018 compared with $109.4 million in the comparable 2017 period. Capital expenditures are expected to be between $145 million and $155 million for the full year 2018 depending on the timing of deliveries of equipment.  Delays in equipment deliveries could shift spending into 2019.

  • Outstanding debt at September 30, 2018 totaled $778.8 million, net of unamortized loan costs, compared to $822.0 million as of December 31, 2017.  As of September 30, 2018, no amounts were outstanding under the revolving line of credit. The total leverage ratio as of September 30, 2018 was 2.61.

  • We declared a cash dividend of $0.27 per share. The dividend is an increase of $0.01 per share or 3.8% over the 2017 dividend. The dividend will be payable November 30, 2018, to shareholders of record as of the close of business on November 12, 2018. The total payout to shareholders, before reinvestment, will be approximately $13.4 million. The Company has paid an annual dividend every year since 1960, when its predecessor Shenandoah Telephone Company declared its first dividend.

Conference Call and Webcast

Teleconference Information:

Date: November 6, 2018   
Time: 10:00 A.M. (ET)
Dial in number: 1-888-695-7639

Password: 1996245
 
Audio webcast: http://investor.shentel.com/

An audio replay of the call will be available approximately two hours after the call is complete, through December 6, 2018 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 network to customers in the Mid-Atlantic United States.  The Company’s services include: wireless voice and data; cable video, internet and digital voice; fiber network and services; and regulated local and long distance telephone. 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, North Carolina, 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, Inc.
James F. Woodward
Senior Vice President, Finance and Chief Financial Officer
540-984-5990
James.Woodward@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)

    
 Three Months Ended
September 30,
 Nine Months Ended
September 30,
Operating revenue:2018 2017 2018 2017
Service revenue and other$142,768  $149,788  $419,819  $450,617 
Equipment revenue15,963  1,994  49,551  8,303 
Total operating revenue158,731  151,782  469,370  458,920 
Operating expenses:       
Cost of services47,886  48,552  146,362  145,744 
Cost of goods sold15,036  7,282  46,007  17,232 
Selling, general and administrative27,452  42,199  86,117  125,374 
Acquisition, integration and migration expenses  1,706    9,873 
Depreciation and amortization40,028  42,568  124,632  132,297 
Total operating expenses130,402  142,307  403,118  430,520 
Operating income (loss)28,329  9,475  66,252  28,400 
Other income (expense):       
Interest expense(9,001) (9,823) (27,184) (28,312)
Gain (loss) on investments, net88  202  112  395 
Non-operating income (loss), net966  1,003  2,770  3,482 
Income (loss) before income taxes20,382  857  41,950  3,965 
Income tax expense (benefit)4,848  (2,677) 10,207  (1,830)
Net income (loss)$15,534  $3,534  $31,743  $5,795 
        
Net income (loss) per share, basic and diluted:       
Basic net income (loss) per share$0.31  $0.07  $0.64  $0.12 
Diluted net income (loss) per share$0.31  $0.07  $0.63  $0.12 
Weighted average shares outstanding, basic49,559  49,133  49,527  49,100 
Weighted average shares outstanding, diluted50,117  49,959  50,044  49,869 
            

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

        
 September 30,
 2018
 December 31,
 2017
        
Cash and cash equivalents$75,207  $78,585 
Other current assets130,858  94,310 
Total current assets206,065  172,895 
    
Investments12,296  11,472 
Property, plant and equipment, net669,709  686,327 
Intangible assets, net381,537  380,979 
Goodwill146,497  146,497 
Deferred charges and other assets, net53,723  13,690 
Total assets$1,469,827  $1,411,860 
    
Total current liabilities137,615  137,584 
Long-term debt, less current maturities694,045  757,561 
Other liabilities193,182  166,493 
Total shareholders’ equity444,985  350,222 
Total liabilities and shareholders’ equity$1,469,827  $1,411,860 
        


SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)


  Nine Months Ended
September 30,
  2018 2017
Cash flows from operating activities:    
Net income (loss) $31,743  $5,795 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Depreciation 106,002  113,437 
Amortization 18,630  18,860 
Amortization reflected as rent expense in cost of services 372  2,173 
Bad debt expense 1,362  1,479 
Stock based compensation expense, net of amount capitalized 4,578  3,053 
Waived management fee 28,164  27,068 
Deferred income taxes (1,989) (12,251)
(Gain) loss on investments (112) (308)
Net (gain) loss from patronage and equity investments (2,300) (2,315)
Amortization of long-term debt issuance costs 3,472  3,572 
Accrued interest and other 205  1,633 
Changes in assets and liabilities:    
Accounts receivable (5,492) 6,418 
Inventory, net 741  31,604 
Income taxes receivable 14,932  (8,704)
Other assets (13,393) (162)
Accounts payable (1,913) (30,795)
Income taxes payable   (435)
Deferred lease 4,159  3,729 
Other deferrals and accruals (361) (5,146)
Net cash provided by (used in) operating activities 188,800  158,705 
     
Cash flows from investing activities:    
Acquisition of property, plant and equipment (92,309) (109,435)
Proceeds from sale of assets 540  356 
Cash distributions (contributions) from investments and other (1) 4 
Sprint expansion (52,000) (6,000)
Net cash provided by (used in) investing activities (143,770) (115,075)
     
Cash flows from financing activities:    
Principal payments on long-term debt (46,375) (24,250)
Proceeds from revolving credit facility borrowings 15,000   
Proceeds from credit facility borrowings   25,000 
Principal payments on revolving credit facility (15,000)  
Taxes paid for equity award issuances (2,033) (5,106)
Net cash provided by (used in) financing activities (48,408) (4,356)
Net increase (decrease) in cash and cash equivalents (3,378) 39,274 
Cash and cash equivalents, beginning of period 78,585  36,193 
Cash and cash equivalents, end of period $75,207  $75,467 
         

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), effective January 1, 2018, using the modified retrospective method as discussed in Note 2, Revenue from Contracts with Customers. The following table identifies the impact that the application of Topic 606 had on the Company for the three months ended September 30, 2018:

  
 Three Months Ended September 30, 2018
  Topic 606 Impact - CONSOLIDATED 
($ in thousands, except per share amounts)Prior to Adoption of
Topic 606
Changes in
Presentation (1)
Equipment
Revenue (2)
Deferred
Costs (3)
As Reported
09/30/2018
Service revenue and other$161,076 $(23,174)$ $4,866 $142,768 
Equipment revenue2,178  13,785  15,963 
Total operating revenue163,254 (23,174)13,785 4,866 158,731 
Cost of services48,001   (115)47,886 
Cost of goods sold7,870 (6,619)13,785  15,036 
Selling, general & administrative44,164 (16,555) (157)27,452 
Depreciation and amortization40,028    40,028 
Total operating expenses140,063 (23,174)13,785 (272)130,402 
Operating income (loss)23,191   5,138 28,329 
Other income (expense)(7,947)   (7,947)
Income tax expense (benefit)3,486   1,362 4,848 
Net income (loss)$11,758 $ $ $3,776 $15,534 
      
Earnings (loss) per share     
Basic$0.24   $0.07 $0.31 
Diluted$0.23   $0.08 $0.31 
Weighted average shares outstanding, basic49,559    49,559 
Weighted average shares outstanding, diluted50,117    50,117 
        
(1) Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs for both postpaid and prepaid, and to provide on-going support to their prepaid customers in our territory were historically recorded as expense when incurred. Under Topic 606, these amounts represent consideration payable to our customer, Sprint, and are recorded as a reduction of revenue. In 2017, these amounts were approximately $44.8 million for the postpaid national commissions, previously recorded in selling, general and administrative, $18.7 million for national device costs previously recorded in cost of goods and services, and $16.9 million for the on-going service to Sprint's prepaid customers, previously recorded in selling, general and administrative.
        
(2) Costs incurred by the Company for the sale of devices under Sprint’s device financing and lease programs were previously recorded net against revenue. Under Topic 606, the revenue and related costs from device sales are recorded gross. These amounts were approximately $63.8 million in 2017.
        
(3) Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs, which historically have been expensed when incurred, are deferred and amortized against revenue over the expected period of benefit of approximately 21 to 53 months. In Cable and Wireline, installation revenues are recognized over a period of approximately 10-11 months. The deferred balance as of September 30, 2018 is approximately $71.9 million and is classified on the balance sheet as current and non-current assets, as applicable.
        

The following table identifies the impact that the application of Topic 606 had on the Company's Wireless operations for the three months ended September 30, 2018:


 Three Months Ended September 30, 2018
  Topic 606 Impact - WIRELESS 
($ in thousands)Prior to Adoption of
Topic 606
Changes in
Presentation (1)
Equipment
Revenue (2)
Deferred
Costs (3)
As Reported
09/30/2018
Service revenue$114,615 $(23,174)$ $4,858 $96,299 
Equipment revenue1,881  13,785  15,666 
Tower and other revenue4,134    4,134 
Total operating revenue120,630 (23,174)13,785 4,858 116,099 
Cost of services32,253    32,253 
Cost of goods sold7,774 (6,619)13,785  14,940 
Selling, general & administrative27,746 (16,555)  11,191 
Depreciation and amortization30,363    30,363 
Total operating expenses98,136 (23,174)13,785  88,747 
Operating income (loss)$22,494 $ $ $4,858 $27,352 
                
(1) Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs for both postpaid and prepaid, and to provide on-going support to their prepaid customers in our territory were historically recorded as expense when incurred. Under Topic 606, these amounts represent consideration payable to our customer, Sprint, and are recorded as a reduction of revenue. In 2017, these amounts were approximately $44.8 million for the postpaid national commissions, previously recorded in selling, general and administrative, $18.7 million for national device costs previously recorded in cost of goods and services, and $16.9 million for the on-going service to Sprint's prepaid customers, previously recorded in selling, general and administrative.
 
(2) Costs incurred by the Company for the sale of devices under Sprint’s device financing and lease programs were previously recorded net against revenue. Under Topic 606, the revenue and related costs from device sales are recorded gross. These amounts were approximately $63.8 million in 2017.
 
(3) Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs, which historically have been expensed when incurred, are deferred and amortized against revenue over the expected period of benefit of approximately 21 to 53 months. The deferred balance as of September 30, 2018 is approximately $71.9 million and is classified on the balance sheet as current and non-current assets, as applicable.
 

Non-GAAP Financial Measures

In managing our business and assessing our financial performance, management supplements the information provided by the financial statement measures prepared in accordance with GAAP with Adjusted OIBDA and Continuing OIBDA, which are considered “non-GAAP financial measures” under SEC rules.

Adjusted OIBDA is defined as operating income (loss) before depreciation and amortization, adjusted to exclude the effects of:  certain non-recurring transactions; impairment of assets; gains and losses on asset sales; actuarial gains and losses on pension and other post-retirement benefit plans; and share-based compensation expense, amortization of deferred costs related to the impacts of the adoption of Topic 606, and adjusted to include the benefit received from the waived management fee by Sprint. Continuing OIBDA is defined as Adjusted OIBDA, less the benefit received from the waived management fee by Sprint. Adjusted OIBDA and Continuing OIBDA should not be construed as an alternative to operating income as determined in accordance with GAAP as a measure of operating performance.

In a capital-intensive industry such as telecommunications, management believes that Adjusted OIBDA and Continuing OIBDA and the associated percentage margin calculations are meaningful measures of our operating performance.  We use Adjusted OIBDA and Continuing OIBDA as supplemental performance measures because management believes these measures facilitate comparisons of our operating performance from period to period and comparisons of our operating performance to that of our peers and other companies by excluding potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation expenses) as well as the other items described above for which additional adjustments were made.  In the future, management expects that the Company may again report Adjusted OIBDA and Continuing OIBDA excluding these items and may incur expenses similar to these excluded items.  Accordingly, the exclusion of these and other similar items from our non-GAAP presentation should not be interpreted as implying these items are non-recurring, infrequent or unusual.

While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the current period allocation of costs associated with long-lived assets acquired or constructed in prior periods, and accordingly may obscure underlying operating trends for some purposes.  By isolating the effects of these expenses and other items that vary from period to period without any correlation to our underlying performance, or that vary widely among similar companies, management believes Adjusted OIBDA and Continuing OIBDA facilitates internal comparisons of our historical operating performance, which are used by management for business planning purposes, and also facilitates comparisons of our performance relative to that of our competitors.  In addition, we believe that Adjusted OIBDA and Continuing OIBDA and similar measures are widely used by investors and financial analysts as measures of our financial performance over time, and to compare our financial performance with that of other companies in our industry.

Adjusted OIBDA and Continuing OIBDA have limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.  These limitations include, but are not limited to, the following:

  • they do not reflect capital expenditures;
  • they do not reflect the impacts of adoption of Topic 606;
  • many of the assets being depreciated and amortized will have to be replaced in the future and Adjusted and Continuing OIBDA do not reflect cash requirements for such replacements;
  • they do not reflect costs associated with share-based awards exchanged for employee services;
  • they do not reflect interest expense necessary to service interest or principal payments on indebtedness;
  • they do not reflect gains, losses or dividends on investments;
  • they do not reflect expenses incurred for the payment of income taxes; and
  • other companies, including companies in our industry, may calculate Adjusted and Continuing OIBDA differently than we do, limiting its usefulness as a comparative measure.

In light of these limitations, management considers Adjusted OIBDA and Continuing OIBDA as a financial performance measure that supplements but does not replace the information reflected in our GAAP results.

The adoption of the new revenue recognition standard did not impact Adjusted OIBDA.

The following tables reconcile Adjusted OIBDA and Continuing OIBDA to operating income, which we consider to be the most directly comparable GAAP financial measure, for the three months ended September 30, 2018 and 2017:

Adjusted OIBDA and Continuing OIBDA

           
Three Months Ended September 30, 2018          
(in thousands) Wireless Cable Wireline Other Consolidated
Operating income $27,352  $5,834  $5,122  $(9,979) $28,329 
Impact of ASC topic 606 (4,868) (172) (77)   (5,117)
Depreciation and amortization 30,363  6,102  3,435  128  40,028 
Share-based compensation expense       1,171  1,171 
Benefit received from the waived management fee (1) 9,558        9,558 
Amortization of intangibles netted in rent expense 197        197 
Actuarial (gains) losses on pension plans       (82) (82)
Adjusted OIBDA 62,602  11,764  8,480  (8,762) 74,084 
Waived management fee (9,558)       (9,558)
Continuing OIBDA $53,044  $11,764  $8,480  $(8,762) $64,526 
                     


           
Three Months Ended September 30, 2017          
(in thousands) Wireless Cable Wireline Other Consolidated
Operating income $6,745  $3,626  $5,089  $(5,985) $9,475 
Depreciation and amortization 32,929  6,192  3,249  198  42,568 
(Gain) loss on asset sales 193  (19)   (10) 164 
Share-based compensation expense 277  172  73  118  640 
Benefit received from the waived management fee (1) 8,961        8,961 
Amortization of intangibles netted in rent expense 1,580        1,580 
Temporary back-office costs to support the billing operations through migration (2) 1,209        1,209 
Integration and acquisition related expenses, and other 2,292      15  2,307 
Adjusted OIBDA 54,186  9,971  8,411  (5,664) 66,904 
Waived management fee (8,961)       (8,961)
Continuing OIBDA $45,225  $9,971  $8,411  $(5,664) $57,943 
                     
_______________________________________________________
(1) Under our amended affiliate agreement, Sprint agreed to waive the Management Fees charged on both postpaid and prepaid revenues, up to $4.2 million per month, until the total amount waived reaches approximately $255.6 million, which is expected to occur in 2022.
(2) Represents back-office expenses required to support former nTelos subscribers that migrated to the Sprint back office.
 

Segment Results

           
Three Months Ended September 30, 2018          
(in thousands) Wireless Cable Wireline Other Eliminations Consolidated
External revenue            
Service revenue $96,299  $28,578  $5,443  $  $  $130,320 
Equipment revenue 15,666  234  63      15,963 
Other 2,871  2,104  7,473      12,448 
Total external revenue 114,836  30,916  12,979      158,731 
Internal revenue 1,263  1,266  6,643    (9,172)  
Total operating revenue 116,099  32,182  19,622    (9,172) 158,731 
Operating expenses            
Cost of services 32,253  14,837  9,266  (12) (8,458) 47,886 
Cost of goods sold 14,940  78  19  (1)   15,036 
Selling, general and administrative 11,191  5,331  1,780  9,864  (714) 27,452 
Depreciation and amortization 30,363  6,102  3,435  128    40,028 
Total operating expenses 88,747  26,348  14,500  9,979  (9,172) 130,402 
Operating income (loss) $27,352  $5,834  $5,122  $(9,979) $  $28,329 
                         


           
Three Months Ended September 30, 2017          
(in thousands) Wireless Cable Wireline Other Eliminations Consolidated
External revenue            
Service revenue $107,395  $26,934  $5,126  $  $  $139,455 
Equipment revenue 1,742  219  33      1,994 
Other 2,129  1,937  6,267      10,333 
Total external revenue 111,266  29,090  11,426      151,782 
Internal revenue 1,239  999  8,425    (10,663)  
Total operating revenue 112,505  30,089  19,851    (10,663) 151,782 
Operating expenses            
Cost of services 33,825  14,858  9,796    (9,927) 48,552 
Cost of goods sold 7,216  55  11      7,282 
Selling, general and administrative 30,099  5,358  1,706  5,772  (736) 42,199 
Acquisition, integration and migration expenses 1,691      15    1,706 
Depreciation and amortization 32,929  6,192  3,249  198    42,568 
Total operating expenses 105,760  26,463  14,762  5,985  (10,663) 142,307 
Operating income (loss) $6,745  $3,626  $5,089  $(5,985) $  $9,475 
                         

Supplemental Information

Subscriber Statistics

The following tables indicate selected operating statistics of Wireless, including Sprint subscribers, as of the dates shown:

       
  9/30/2018 (3) 12/31/2017 (4) 9/30/2017 (4)
Retail PCS subscribers - postpaid 785,537  736,597  727,954 
Retail PCS subscribers - prepaid (1) 255,462  225,822  224,609 
PCS market POPS (000) (2) 7,024  5,942  6,047 
PCS covered POP (000) (2) 5,921  5,272  5,157 
CDMA base stations (sites) 1,788  1,623  1,544 
Towers owned 193  192  201 
Non-affiliate cell site leases 192  192  192 
          
_______________________________________________________
(1) As of September 2017, the Company is no longer including Lifeline subscribers to be consistent with Sprint's policy. Historical customer counts have been adjusted accordingly.
(2) "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. As of December 31, 2017, 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.
(3) Beginning February 1, 2018 includes Richmond Expansion Area.
(4) Beginning April 6, 2017 includes Parkersburg Expansion Area.
          


  Three Months Ended
September 30,
  2018 2017
Gross PCS subscriber additions - postpaid 48,111  43,320 
Net PCS subscriber additions (losses) - postpaid 4,879  (4,710)
Gross PCS subscriber additions - prepaid (1) 38,486  37,653 
Net PCS subscriber additions (losses) - prepaid (1) 3,408  2,571 
PCS average monthly retail churn % - postpaid 1.84% 2.19%
PCS average monthly retail churn % - prepaid (1) 4.62% 5.25%
       
_______________________________________________________
(1) As of September 2017, the Company is no longer including Lifeline subscribers to be consistent with Sprint's policy. Historical customer counts and churn % have been adjusted accordingly.
       

The subscriber statistics shown above include the following:

       
  February 1, 2018 April 6, 2017 May 6, 2016
  Richmond Expansion Area Parkersburg Expansion Area nTelos Area
PCS subscribers - postpaid 38,343  19,067  404,965 
PCS subscribers - prepaid (1) 15,691  4,517  154,944 
Acquired PCS market POPS (000) 1,082  511  3,099 
Acquired PCS covered POPS (000) 602  244  2,298 
Acquired CDMA base stations (sites) (2) 105    868 
Towers     20 
Non-affiliate cell site leases     10 
          
_______________________________________________________
(1) Excludes Lifeline subscribers.
(2) As of September 30, 2018 we have shut down 107 overlap sites associated with the nTelos Area.
          

The following table shows selected operating statistics for Cable as of the dates shown:

       
  September 30,
2018
 December 31,
2017
 September 30,
2017
Homes passed (1) 185,119  184,910  184,881 
Customer relationships (2)      
Video users 41,807  44,269  45,290 
Non-video customers 37,619  33,559  32,663 
Total customer relationships 79,426  77,828  77,953 
Video      
Customers (3) 44,093  46,613  47,379 
Penetration (4) 23.8% 25.2% 25.6%
Digital video penetration (5) 77.8% 76.2% 76.0%
Broadband      
Available homes (6) 185,119  184,910  184,881 
Users (3) 67,089  63,918  63,442 
Penetration (4) 36.2% 34.6% 34.3%
Voice      
Available homes (6) 185,119  182,379  182,350 
Users (3) 23,268  22,555  22,419 
Penetration (4) 12.6% 12.4% 12.3%
Total revenue generating units (7) 134,450  133,086  133,240 
Fiber route miles 3,436  3,356  3,340 
Total fiber miles (8) 134,411  122,011  121,331 
Average revenue generating units 133,617  132,759  132,704 
          
(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.
(2) Customer relationships represent the number of billed customers who receive at least one of our services.
(3) Generally, a dwelling or commercial unit with one or more television sets connected to our distribution system counts as one video customer.  Where services are provided on a bulk basis, such as to hotels and some multi-dwelling units, the revenue charged to the customer is divided by the rate for comparable service in the local market to determine the number of customer equivalents included in the customer counts shown above.
(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) Homes and businesses are considered available (“available homes”) if we can connect them to our distribution system without further extending the transmission lines and if we offer the service in that area.
(7) Revenue generating units are the sum of video, voice and high-speed internet users.
(8) 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.
          

The following table shows selected operating statistics for Wireline as of the dates shown:

       
  September 30,
2018
 December 31,
2017
 September 30,
2017
Telephone access lines 17,786  17,933  18,006 
Long distance subscribers 9,107  9,078  9,107 
Video customers (1) 4,796  5,019  5,110 
Broadband customers 14,734  14,665  14,605 
Fiber route miles 2,112  2,073  2,040 
Total fiber miles (2) 158,526  154,165  149,944 
          
_______________________________________________________
(1) Wireline’s video service passes approximately 16,500 homes.
(2) 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.