EX-99.1 2 exh_991.htm PRESS RELEASE EdgarFiling

EXHIBIT 99.1

Shenandoah Telecommunications Company Reports First Quarter 2020 Results

EDINBURG, Va., April 30, 2020 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel”) (Nasdaq: SHEN) announced first quarter 2020 financial and operating results.

First Quarter 2020 Highlights

  • Generated $36.0 million in normalized free cash flow and $61.1 million in operating cash flow.
  • Ended the quarter with $195.2 million of liquidity.
  • Broadband revenues and Adjusted OIBDA increased 6.2%, and 4.3%, respectively.  Operating income was flat with prior year.
  • Launched Glo Fiber into three new markets increasing homes passed to over 5,000.

"Although we do not operate in the densely populated urban markets most affected, the COVID-19 crisis began to affect our operating and financial results during the latter part of the first quarter of 2020," said President and CEO, Christopher E. French. “These effects were not material to our overall first quarter performance, but our postpaid gross additions decreased as a result of the temporary closure, beginning in the middle of March, of approximately 40% of our Sprint-branded retail stores and the stay-at-home directives in the states where we operate. We expect that the interruption of our wireless operating momentum will continue until the economies in the markets that we serve more fully re-open, but do not expect that the long-term growth prospects of our wireless business will be materially affected. Impacts from COVID-19 related closures to our broadband and tower segments have been minimal, and we have introduced a number of initiatives, including temporarily upgrading the broadband speeds of more than 27,000 customers to a minimum of 50Mbps, temporarily increasing broadband data allowances, and introducing lower cost pre-paid broadband plans, designed to benefit our customers during this difficult period. We continue to focus on protecting our employees while maintaining and enhancing our networks, and enabling our communities to further rely on our essential services during these difficult times.”

Shentel's first-quarter earnings conference call will be webcast at 8:00 a.m. ET on Thursday, April 30, 2020. The webcast and related materials will be available on Shentel’s Investor Relations website at https://investor.shentel.com.

Consolidated First Quarter 2020 Results

  • Revenue in the first quarter of 2020 was $153.2 million compared with $158.8 million in the first quarter of 2019, due primarily to a decline of $8.5 million in the Wireless segment, partially offset by growth of $2.9 million and $0.7 million in the Broadband and Tower segments, respectively. The Wireless segment recognized $4.5 million in lower travel revenue in the first quarter of 2020 compared to the first quarter of 2019 due to the ongoing dispute with Sprint over resetting of the travel fee. We expect to settle this dispute in the second quarter of 2020 through binding arbitration.

  • Adjusted OIBDA in the first quarter of 2020 decreased $3.5 million to $64.2 million compared with $67.7 million in 2019 due primarily to the $4.5 million travel revenue decline in the Wireless segment.

  • Operating income decreased 7.0% to $23.1 million in 2020 from $24.8 million in 2019.

  • Earnings per diluted share decreased 3.6% to $0.27 from $0.28 per diluted share in 2019.

Wireless

  • Shentel served 847,771 wireless postpaid subscribers at March 31, 2020, representing an increase of 5.8% compared with March 31, 2019. First quarter 2020 postpaid gross adds were 51,991, as compared to 60,477 in the third quarter of 2019 and 50,847 in the first quarter of 2019. Net adds were 3,577 as compared to 11,698 in the third quarter 2019 and 5,776 in the first quarter 2019. Postpaid churn was 1.91%, consistent with the third quarter and first quarter 2019. The COVID-19 related retail store closures and local government mandated stay at home directives in second half of March adversely affected gross and net additions during the quarter diluting the sales momentum from the network and distributions expansions we completed in the summer of 2019. At March 31, 2020, phones represented 87.1% of the postpaid base.

  • Shentel served 279,096 wireless prepaid subscribers at March 31, 2020, representing an increase of 4.4% compared with March 31, 2019. First quarter 2020 prepaid gross adds of 39,074 declined from 40,979 in the first quarter 2019. Net adds were 5,084, as compared to 8,516 in the same period a year ago. Prepaid phone churn was 4.13%, consistent with the first quarter 2019. Prepaid subscriber results were consistent with our expectations.

  • Wireless revenue decreased approximately $8.5 million for the three months ended March 31, 2020 compared with the three months ended March 31, 2019. The decrease was primarily attributable to the aforementioned $4.5 million decline in travel revenue, $2.5 million in lower equipment revenue, $3.0 million in higher amortized customer contract costs, partially offset by a $1.7 million increase in postpaid and prepaid revenue from growth in subscribers.

  • Wireless operating expenses in the first quarter of 2020 were $80.7 million compared to $88.4 million in the first quarter of 2019. The decrease was primarily attributable to a $4.6 million decrease in depreciation and amortization as certain assets acquired from nTelos became fully utilized, a $1.9 million decline in cost of goods sold resulting from reduced volume of equipment sales, $1.0 million in lower advertising costs driven by temporary closure of certain retail stores, a $0.8 million sales and use tax settlement gain, partially offset by higher cell site rent expense of $1.0 million related to our network expansion.

  • Wireless Adjusted OIBDA in the first quarter of 2020 was $49.2 million, compared with $54.6 million for the first quarter of 2019.

  • Wireless operating income in the first quarter of 2020 was $23.4 million, compared to $24.2 million for the first quarter of 2019.

Broadband

  • Total Revenue Generating Units ("RGUs") as of March 31, 2020 were 193,654, representing an increase of 0.4% from March 31, 2019. Incumbent cable broadband penetration grew from 38.3% to 41.7% and broadband churn declined 5 basis points to 1.48%. Glo Fiber added over 3,600 homes passed and ended the quarter with approximately 5,350 homes passed and 8.5% broadband penetration.

  • Broadband revenue in the first quarter of 2020 grew $2.9 million or 6.2% to $49.8 million compared with $46.9 million in the first quarter of 2019, primarily driven by a $2.5 million increase in Cable Residential and SMB revenue and $1.1 million increase in Fiber, enterprise and wholesale revenue partially offset by $0.5 million decline in RLEC revenues.

  • Broadband operating expenses in the first quarter of 2020 were $39.8 million compared to $36.8 million in the first quarter of 2019. The increase was primarily due to $1.3 million of Glo Fiber start-up expenses, $0.9 million increase in depreciation and amortization expense due to the expansion of our network and $0.5 million increase in advertising expenses,

  • Broadband Adjusted OIBDA in the first quarter of 2020 grew 4.3% to $20.9 million, compared with $20.0 million for the first quarter of 2019.

  • Broadband Operating income in the first quarter of 2020 was $10.0 million, compared to $10.0 million in the first quarter of 2019.

Tower

  • Total towers and tenants were 226 and 408 as of March 31, 2020 as compared to 211 and 368, respectively, as of March 31, 2019.

  • Tower revenue in the first quarter of 2020 grew 23.0% to $3.7 million, compared with $3.0 million for the first quarter of 2019. This increase was due to a 10.9% increase in tenants and an 11.4% increase in the average lease rate.

  • Tower operating expenses in both the first quarter of 2020 and 2019 were $1.9 million.

  • Tower Adjusted OIBDA in the first quarter of 2020 grew 25.5% to $2.3 million, compared with $1.8 million for the first quarter of 2019.

  • Tower operating income in the first quarter of 2020 was $1.8 million, compared to $1.1 million for the first quarter of 2019.

Other Information

  • Capital expenditures were $32.3 million for the three months ended March 31, 2020 compared with $44.4 million in the comparable 2019 period. The $12.1 million decrease in capital expenditures was primarily due to a $17.0 million decline in Wireless as the Ntelos and Parkersburg network expansions were completed in the first half of 2019 partially offset by $5.0 million in higher spending in Broadband driven by our Glo Fiber market expansion.

  • Outstanding debt at March 31, 2020 totaled $712.2 million, net of unamortized loan costs, compared to $720.1 million as of March 31, 2019. As of March 31, 2020, the Company had liquidity of approximately $195.2 million, including $75.0 million of revolving line of credit availability.

  • On April 1, 2020, T-Mobile announced the completion of its business combination with Sprint and subsequently delivered to the Company a notice of Network Technology Conversion, Brand Conversion and Combination Conversion (a “Conversion Notice”) pursuant to the terms of the Company’s affiliate agreement with Sprint. As described in more detail in the Company’s 2019 Annual Report on Form 10-K, our Wireless segment has been an affiliate of Sprint since 1995. The affiliate agreement provides for a 90 day period following receipt of the Conversion Notice for the parties to negotiate mutually agreeable terms and conditions under which the Company would continue as an affiliate of T-Mobile. The affiliate agreement further provides that, if T-Mobile and the Company have not negotiated a mutually acceptable agreement within the 90 day period, then T-Mobile would have a period of 60 days thereafter to exercise an option to purchase the assets of our Wireless operations for 90% of the “Entire Business Value” (as defined under our affiliate agreement). If T-Mobile does not exercise its purchase option, the Company would then have a 60 day period to exercise an option to purchase the legacy T-Mobile network and subscribers in our service area. If the Company does not exercise its purchase option, T-Mobile must sell or decommission its legacy network and customers in our service area.

  • We have been closely monitoring the latest developments around the outbreak of a new strain of coronavirus ("COVID-19") and its impact globally. As we focus on our community and do our part to stop COVID-19 from spreading we have taken the following actions to keep families and businesses safe and connected virtually: 
    -- In our Broadband segment, we expanded our service offerings by temporarily increasing the minimum speed and data allowance of our broadband service to 50 Mbps and by 250 GB, respectively, each at no additional charge and introducing a new $25 per month prepaid internet service. 
    -- In our Wireless segment, we have supported Sprint’s adoption of the Keep Americans Connected pledge while temporarily closing approximately 40% of the Sprint branded retail locations in our service area to comply with federal and state mandates. 
    -- We have implemented alternative working arrangements where practicable to keep our employees safe and maintained our geographically redundant equipment, diverse fiber facilities and monitoring services to support maximum uptime of all our essential networks and services.

    While these actions did not have a material impact on our first quarter operating results nor do we expect them to impact our long-term growth prospects, we do expect them to temporarily dislocate our wireless operating momentum until the economies in the markets that we serve re-open.

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: April 30, 2020 
Time: 8:00 A.M. (ET)
Dial in number: 1-888-695-7639

Password: 6654869

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

An audio replay of the call will be available approximately two hours after the call is complete, through May 29, 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 natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as COVID-19, 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)
 Three Months Ended March 31,
 2020 2019
Revenue:   
Service revenue and other$140,188  $143,231 
Equipment revenue13,000  15,612 
Total revenue153,188  158,843 
Operating expenses:   
Cost of services49,565  49,518 
Cost of goods sold12,671  14,637 
Selling, general and administrative30,991  28,722 
Depreciation and amortization36,911  41,179 
Total operating expenses130,138  134,056 
Operating income23,050  24,787 
Other income (expense):   
Interest expense(6,211) (7,954)
Other733  1,287 
Income before income taxes17,572  18,120 
Income tax expense4,292  4,210 
Net income$13,280  $13,910 
    
Net income per share, basic and diluted:   
Basic net income per share$0.27  $0.28 
Diluted net income per share$0.27  $0.28 
Weighted average shares outstanding, basic49,888  49,775 
Weighted average shares outstanding, diluted50,036  50,115 
        


SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES 
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS 
(in thousands)
 March 31, December 31,
 2020 2019
    
Cash and cash equivalents$120,232  $101,651 
Other current assets137,677  140,102 
Total current assets257,909  241,753 
    
Investments12,011  12,388 
Property, plant and equipment, net695,920  701,514 
Intangible assets, net299,458  314,147 
Goodwill149,070  149,070 
Operating lease right-of-use assets382,973  392,589 
Deferred charges and other assets, net53,436  53,352 
Total assets$1,850,777  $1,864,813 
    
Total current liabilities139,644  $147,336 
Long-term debt, less current maturities680,531  688,464 
Other liabilities549,952  556,585 
Total shareholders’ equity480,650  472,428 
Total liabilities and shareholders’ equity$1,850,777  $1,864,813 
        


SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES  
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)       
 Three Months Ended March 31,
 2020 2019
Cash flows from operating activities:   
Net income$13,280  $13,910 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation32,468  35,520 
Amortization of intangible assets4,868  5,659 
Bad debt expense205  367 
Stock based compensation expense, net of amount capitalized2,905  1,714 
Deferred income taxes2,135  (3,378)
Other adjustments739  173 
Changes in assets and liabilities4,508  7,698 
Net cash provided by operating activities61,108  61,663 
    
Cash flows from investing activities:   
Capital expenditures(32,299) (44,420)
Cash disbursed for acquisitions  (10,000)
Proceeds from sale of assets and other274  45 
Net cash used in investing activities(32,025) (54,375)
    
Cash flows from financing activities:   
Principal payments on long-term debt(8,530) (19,889)
Taxes paid for equity award issuances(1,945) (2,698)
Proceeds from exercise of stock options(27) 72 
Net cash used in financing activities(10,502) (22,515)
Net increase (decrease) in cash and cash equivalents18,581  (15,227)
Cash and cash equivalents, beginning of period101,651  85,086 
Cash and cash equivalents, end of period$120,232  $69,859 
    

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:

                     
Three Months Ended March 31, 2020          
(in thousands) Wireless Broadband Tower Corporate &
Eliminations
 Consolidated
Operating income $23,444  $10,030  $1,795  $(12,219) $23,050 
Depreciation 21,010  10,717  470  271  32,468 
Amortization of intangible assets 4,714  154      4,868 
OIBDA 49,168  20,901  2,265  (11,948) 60,386 
Share-based compensation expense       2,905  2,905 
Non-recurring deal advisory fees       910  910 
Adjusted OIBDA $49,168  $20,901  $2,265  $(8,133) $64,201 
                     
Three Months Ended March 31, 2019          
(in thousands) Wireless Broadband Tower Corporate &
Eliminations
 Consolidated
Operating income $24,213  $10,049  $1,124  $(10,599) $24,787 
Depreciation 24,752  9,950  680  138  35,520 
Amortization of intangible assets 5,618  41      5,659 
OIBDA 54,583  20,040  1,804  (10,461) 65,966 
Share-based compensation expense       1,714  1,714 
Adjusted OIBDA $54,583  $20,040  $1,804  $(8,747) $67,680 
                     

Segment Results

Three Months Ended March 31, 2020Wireless  Broadband  Tower  Corporate &
Eliminations
 
 Consolidated 
(in thousands)                   
External revenue         
Postpaid$74,928  $  $    $74,928 
Prepaid13,109        13,109 
Tower lease    1,797    1,797 
Cable, residential and SMB (1)  34,943      34,943 
Fiber, enterprise and wholesale  5,488      5,488 
Rural local exchange carrier  4,756      4,756 
Travel, installation, and other3,351  1,816      5,167 
Service revenue and other91,388  47,003  1,797    140,188 
Equipment12,750  250      13,000 
Total external revenue104,138  47,253  1,797    153,188 
Revenue from other segments  2,533  1,933  (4,466)  
Total revenue104,138  49,786  3,730  (4,466) 153,188 
Operating expenses         
Cost of services33,439  19,243  939  (4,056) 49,565 
Cost of goods sold12,528  143      12,671 
Selling, general and administrative9,428  9,499  526  11,538  30,991 
Depreciation and amortization25,299  10,871  470  271  36,911 
Total operating expenses80,694  39,756  1,935  7,753  130,138 
Operating income (loss)$23,444  $10,030  $1,795  $(12,219) $23,050 
                    

_______________________________________________________
(1) SMB refers to Small and Medium Businesses.

Three Months Ended March 31, 2019Wireless  Broadband  Tower  Corporate & Eliminations  Consolidated 
(in thousands)                   
External revenue         
Postpaid$76,182  $  $  $  $76,182 
Prepaid13,130        13,130 
Tower lease    1,763    1,763 
Cable, residential and SMB  32,426      32,426 
Fiber, enterprise and wholesale  4,828      4,828 
Rural local exchange carrier  5,238      5,238 
Travel, installation, and other8,018  1,646      9,664 
Service revenue and other97,330  44,138  1,763    143,231 
Equipment15,291  321      15,612 
Total external revenue112,621  44,459  1,763    158,843 
Revenue from other segments  2,422  1,270  (3,692)  
Total revenue112,621  46,881  3,033  (3,692) 158,843 
Operating expenses         
Cost of services32,532  19,061  946  (3,021) 49,518 
Cost of goods sold14,427  211    (1) 14,637 
Selling, general and administrative11,079  7,569  283  9,791  28,722 
Depreciation and amortization30,370  9,991  680  138  41,179 
Total operating expenses88,408  36,832  1,909  6,907  134,056 
Operating income (loss)$24,213  $10,049  $1,124  $(10,599) $24,787 
                    
                    

Supplemental Information

Wireless Operating Statistics

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

  March 31,
 2020
 March 31,
 2019
Postpaid:    
Retail PCS total subscribers 847,771  800,952 
Retail PCS phone subscribers 738,410  722,830 
Retail PCS connected device subscribers 109,361  78,122 
Gross PCS total subscriber additions 51,991  50,847 
Gross PCS phone additions 36,734  37,786 
Gross PCS connected device additions 15,257  13,061 
Net PCS total subscriber additions 3,577  5,776 
Net PCS phone additions (losses) (2,311) 105 
Net PCS connected device additions 5,888  5,671 
PCS monthly retail total churn % 1.91% 1.89%
PCS monthly phone churn % 1.76% 1.74%
PCS monthly connected device churn % 2.97% 3.35%
Prepaid:      
Retail PCS subscribers 279,096  267,220 
Gross PCS subscriber additions 39,074  40,979 
Net PCS subscriber additions 5,084  8,516 
PCS monthly retail churn % 4.13% 4.14%
     
PCS market POPS (000) (1) 7,227  7,023 
PCS covered POP (000) (1) 6,325  6,261 
Macro base stations (cell sites) 1,966  1,874 

_______________________________________________________
(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.

Broadband Operating Statistics

  March 31,
2020
 March 31,
 2019
Broadband homes passed (1) (2) 212,129  206,113 
Broadband customer relationships (3) 103,287  95,933 
     
Video:    
RGUs 53,067  59,202 
Penetration (4) 25.0% 28.7%
Digital video penetration (5) 94.3% 85.7%
Broadband:      
RGUs 86,667  78,867 
Penetration (4) 40.9% 38.3%
Voice:      
RGUs 31,836  30,737 
Penetration (4) 16.3% 16.2%
Total Cable and Glo Fiber RGUs 171,570  168,806 
     
RLEC homes passed 25,848  25,798 
RLEC customer relationships (3) 10,111  11,101 
RLEC RGUs:    
Data RLEC 7,947  8,744 
Penetration (4) 30.7% 33.9%
Voice RLEC 14,137  15,262 
Penetration (4) 54.7% 59.2%
Total RLEC RGUs 22,084  24,006 
     
Total RGUs 193,654  192,812 
     
Fiber route miles 6,273  5,799 
Total fiber miles (6) 334,802  303,511 

_______________________________________________________

(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) Includes approximately 16,600 RLEC homes passed where we are the dual incumbent telephone and cable provider.
(3) Customer relationships represent the number of billed customers who receive at least one of our services.
(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

  March 31,
2020
 March 31,
2019
Towers owned 226  211 
Tenants (1) 408  368 
Average tenants per tower 1.8  1.7 

_______________________________________________________
(1) Includes 203 and 175 intercompany tenants for our Wireless segment as of March 31, 2020 and 2019, respectively.

Reconciliation of Non-GAAP Measures Normalized Free Cash Flow and Free Cash Flow

  Three Months Ended
  March 31,
(in thousands) 2020 2019
Net cash provided by operating activities $61,108  $61,663 
Less: Capital expenditures (1) (25,104) (44,420)
Normalized free cash flow 36,004  17,243 
Glo Fiber and Fixed Wireless capital expenditures (7,195)  
Free cash flow $28,809  $17,243 
         

_______________________________________________________ 
(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.