- Revenue growth of 18 percent year-over-year
- Net income up 66 percent over Q2 2009
- Enventis fiber and data revenue grew 63 percent and Telecom Broadband revenue increased 10 percent year-over-year
- Company’s Fiscal 2010 outlook increased for net income and EBITDA
MANKATO, Minn., July 28, 2010—HickoryTech Corporation (Nasdaq: HTCO) today reported second quarter 2010 operating results including revenue of $38.3 million, up 18 percent over the comparable period in 2009. Net income totaled $3.5 million, or 27 cents per diluted share, a 66 percent increase over the $2.1 million, reported a year ago. A release of income tax reserves added $800,000 to the second quarter net income in 2010. Excluding the income tax release, net income totaled $2.7 million, an increase of 28 percent year-over-year.
“We are making progress on our strategic initiatives to increase the value of our company,” said John Finke, HickoryTech’s president and chief executive officer. “We initiated a joint fiber construction project in the second quarter to expand our fiber network to new markets. This project, which increases earnings, is an example of our commitment to take calculated risks to grow our company, while leveraging current assets, existing cost structure and core competencies.”
As part of HickoryTech’s growth plan, it is upgrading its fiber network in Des Moines, Iowa, and extending its fiber network to Sioux Falls, South Dakota and Fargo, North Dakota. Capital expenditures in the second quarter totaled $7.1 million, up from the $4.7 million a year ago. A portion of those fiber expansion plans include a joint construction project with another carrier, contributing $1.1 million of revenue and $200,000 of net income to second quarter operating results for the Enventis fiber and data product line.
“We had another strong quarter within our Enventis Sector with 63 percent fiber and data revenue growth and a consecutive quarter of solid equipment and services sales,” said Finke. We are pleased with this business’ performance in the first half of the year and the current backlog of equipment and service sales scheduled for the second half of the year is encouraging.”
Enventis Sector (before intersegment eliminations)
Enventis Sector revenue before eliminations totaled $21.2 million, up 44 percent compared to one year ago. Costs and expenses in the Enventis Sector, including depreciation, totaled $19 million, an increase of 45 percent year-over-year, the result of adding CP Telecom operations and higher equipment sales. Enventis Sector net income totaled $1.4 million, up 33 percent from the $1.0 million reported one year ago. The Enventis net income increase was mainly driven by ongoing growth of fiber and data services and recovery in the equipment and services business.
- Fiber and data revenue totaled $10.8 million, up 63 percent year-over-year, the result of strong sales of fiber services, the addition of CP Telecom, and the impact of a joint construction project with another carrier.
- Equipment and service revenue totaled $10.4 million, up 28 percent year-over-year. Second quarter equipment and services revenue included a higher level of maintenance contracts, which have higher margins. Net income for the equipment and services product line has increased 227 percent in 2010 due to sales increases and operating cost reductions.
Telecom Sector (before intersegment eliminations)
Telecom Sector revenue totaled $17.6 million, down 2 percent year-over-year. Telecom Sector results were stable and continue to be affected by a decline in network access and local service revenue, offset in part by broadband growth. Costs and expenses including depreciation totaled $14.6 million for the second quarter, an increase of 2 percent year-over-year. Telecom Sector net income for the second quarter totaled $1.8 million, a 20 percent decrease from one year ago driven by the anticipated decline of traditional telecom recurring revenue.
- Broadband revenue totaled $3.3 million, up 10 percent from the comparable period in fiscal 2009. Broadband revenue includes DSL, Data and Digital TV services. Digital TV subscribers increased 11 percent, to 9,841, and DSL subscribers increased 2 percent, to 19,359.
- Network access revenue was $5.9 million, down 2 percent year-over-year.
- Local service revenue totaled $3.6 million, down 6 percent from fiscal 2009. Local access lines declined 7 percent year-over-year. Local service declines are a result of competition and wireless substitution.
Capital Expenditures and Debt Position
Capital expenditures totaled $7.1 million for the second quarter of 2010, and were $2.4 million higher than the comparable period in 2009. Enventis Sector capital expenditures totaled $3.9 million. Telecom Sector capital expenditures were $3.2 million. HickoryTech’s long-term and current debt position as of June 30, 2010 was $121.3 million, an increase of $5.1 million from the previous quarter ended March 31, 2010. The company’s construction season along with increased equipment sales caused a temporary increase in debt at the end of second quarter 2010.
“We’re especially pleased with our performance in the first half of this year,” Finke said. “We are investing in long-term growth initiatives, expanding our network and looking for opportunities to grow recurring revenues.”
2010 Annual Company Expectations Increased
HickoryTech increased its fiscal 2010 outlook in several areas as follows:
- Revenue is targeted in the range of $150 million to $158 million (no change)
- Net Income is targeted in the range of $9.7 million to $10.6 million (previously $8.7 to $9.6 million)
- Capital spending is targeted in the range of $22 million to $26 million (no change)
- EBITDA is targeted in the range of $41.5 million to $44 million (previously $40.5 to $43 million)
- A year-end debt balance is targeted in the range of $117 million to $120 million (previously $117 to $119 million)
Conference Call and Webcast
HickoryTech will host a conference call and webcast on Thursday, July 29 at 9 a.m. CT. The dial-in number for the call is 877-774-2369 (U.S. and Canada) and the participant pass code is 85702241. A simultaneous webcast of the call and presentation will be available through a link on HickoryTech’s Investor Relations webpage at
http://investor.hickorytech.com.
About HickoryTech
HickoryTech Corporation (dba HickoryTech and Enventis) is a leading integrated communications provider in the markets it serves. With headquarters in Mankato, Minn., the corporation has approximately 450 employees and a regional fiber network with facilities-based operations in Minnesota and Iowa. Enventis serves businesses of all sizes across a five-state region with IP-based voice, data and network solutions. HickoryTech provides bundled residential and business services including high-speed Internet, Digital TV and voice services in its legacy telecom markets. The Company trades on the Nasdaq Stock Exchange (symbol: HTCO). For more information, visit
www.hickorytech.com.
Non-GAAP Measures
To supplement the Company’s financial statements presented in accordance with GAAP, the Company provides certain non-GAAP financial measures of financial performance. These non-GAAP measures include earnings before interest, income taxes, depreciation and amortization. The Company’s reference to these non-GAAP measures should be considered in addition to results prepared under current accounting standards, but are not a substitute for, or superior to, GAAP results. These non-GAAP measures are provided to enhance investors’ overall understanding of the Company’s current financial performance and ability to generate cash flows. In many cases non-GAAP financial measures are used by analysts and investors to evaluate the Company’s performance. Reconciliation to the nearest GAAP measure included in this press release can be found in the financial table included below.
Forward-looking Statement
Certain statements included in this press release that are not historical facts are "forward-looking statements." Such forward-looking statements are based on current expectations, estimates and projections about the industry in which HickoryTech operates and management's beliefs and assumptions. The forward-looking statements are subject to uncertainties. These statements are not guarantees of future performance and involve certain risks, uncertainties and probabilities. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they were made. HickoryTech undertakes no obligation to update any of its forward-looking statements, except as required by law.