• Shenandoah Telecommunications Company Reports First Quarter 2024 Results

    Source: Nasdaq GlobeNewswire / 03 May 2024 07:00:55   America/New_York

    EDINBURG, Va., May 03, 2024 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel” or the “Company”) (Nasdaq: SHEN) announced first quarter 2024 financial and operating results.

    Tower segment’s financial results will be presented as discontinued operations in the Company’s Consolidated Financial Statements. Under the new organizational and reporting structure, the Company has one reportable segment in continuing operations.

    First Quarter 2024 Highlights

    • Glo Fiber Markets added approximately 5,000 subscribers and ended the quarter with approximately 47,000 subscribers.
    • Glo Fiber passings grew 25,700 to a total of approximately 260,000.
    • As previously reported, Shentel completed the initial closing of the sale of substantially all of Shentel’s tower portfolio and operations (“Tower Portfolio”) to Vertical Bridge Holdco, LLC for $309.9 million in cash (the “Tower Transaction”) on March 29, 2024. The Company expects to pay up to $10.0 million in income taxes during the remainder of 2024 as a result of the gain on the sale after utilization of net operating loss carryforwards.
    • Revenue grew 3.1% to $69.2 million compared to the first quarter of 2023. Glo Fiber Markets revenue grew 73.0% to $12.1 million.
    • Net loss from continuing operations was $4.1 million in the first quarter of 2024 compared with net income from continuing operations of $0.7 million in the first quarter of 2023 due primarily to higher interest expense.
    • Net income from discontinued operations was $218.8 million in the first quarter of 2024, compared with net income of $1.3 million in the first quarter of 2023 due primarily to a gain recognized on the sale of the Tower Portfolio.

    “We had another record quarter for Glo Fiber net subscriber additions and a strong quarter of Glo Fiber passings released to sales, while also closing a major acquisition, a major divestiture and $356 million in financings.” said President and CEO, Christopher E. French. “We are making good progress on the Horizon integration, and we are well positioned for sustainable organic growth as we complete the integration by early 2025.”

    Shentel’s first-quarter earnings conference call will be webcast at 8:30 a.m. ET on Friday, May 3, 2024. The webcast and related materials will be available on Shentel’s Investor Relations website at https://investor.shentel.com/.

    First Quarter 2024 Results

    • Total Cable Markets and Glo Fiber Markets broadband data Revenue Generating Units (“RGUs”) as of March 31, 2024 were 155,687, representing 12.2% year-over-year growth. Penetration for Cable Markets and Glo Fiber Markets as of March 31, 2024 were 50% and 18%, respectively, compared to 52% and 17%, respectively, as of March 31, 2023. Total Glo Fiber Markets passings grew year-over-year by 94,509 to 259,567.
    • Revenue in the first quarter of 2024 grew $2.1 million, or 3.1%, to $69.2 million primarily driven by a $4.7 million, or 9.1%, increase in Residential & Small and Medium Business (“SMB”) revenue, partially offset by a $2.3 million, or 19.8%, decrease in Commercial Fiber revenue. Glo Fiber Markets was the driver of the Residential & SMB revenue growth due to a 62.3% increase in broadband data RGUs and a 9.7% increase in broadband data Average Revenue per User (“ARPU”). Commercial Fiber revenue decreased as expected due to the previously guided decline in T-Mobile revenue from prior period backhaul circuit disconnects as part of decommissioning the former Sprint network.
    • Cost of services for the three months ended March 31, 2024, increased approximately $0.6 million, or 2.2%, compared with the three months ended March 31, 2023, primarily driven by a 17% increase in average cost per video RGU as a result of annual programming cost increases and higher line costs from expanding our Glo Fiber network into new markets.
    • Selling, general and administrative expense for the three months ended March 31, 2024, increased $2.4 million, or 9.3%, compared with the three months ended March 31, 2023, primarily driven by higher advertising costs associated with the Company’s expansion of Glo Fiber, higher bad debt charges from macro economic conditions and higher payroll and stock compensation expenses.
    • Adjusted EBITDA of $19.3 million in the first quarter of 2024 was consistent with consolidated Adjusted EBITDA in the first quarter of 2023.
    • Depreciation and amortization increased $2.2 million, or 14.2%, compared with the three months ended March 31, 2023, primarily driven by the Company’s expansion of its Glo Fiber network.

    Other Information

    • Capital expenditures were $70.1 million for the three months ended March 31, 2024 compared with $67.5 million in the comparable 2023 period. The $2.6 million increase in capital expenditures was primarily driven by inventory timing and DOCSIS upgrades in Cable Markets and Glo Fiber and government-subsidized market expansion.
    • On April 1, 2024, Shentel completed its previously announced acquisition of Horizon Acquisition Parent LLC (“Horizon”) for $385 million including $305 million in cash and issuing 4,100,375 shares of Shentel’s common stock to a selling shareholder of Horizon (“Horizon Transaction”). Horizon is a leading commercial fiber provider in Ohio and adjacent states. Shentel funded the cash portion of the acquisition with a combination of existing cash resources, proceeds from Tower Transaction, and issuance of $81 million of 7% Participating Exchangeable Perpetual Preferred Stock (“Preferred Stock”).
    • On April 1, 2024, the Company amended and upsized its credit facility by $275 million to a total of $675 million to provide growth capital to fund its Glo Fiber expansion to approximately 600,000 passings by the end of 2026.
    • As of March 31, 2024, our cash and cash equivalents totaled $389.7 million. On a pro forma basis for the Horizon Transaction, issuance of Preferred Stock and credit facility amendment and upsizing, total available liquidity was $484 million including approximately $109 million in cash and cash equivalents, $225 million in delayed draw term loans and $150 million in revolving line of credit. On a pro forma basis for the above transactions, debt, net of the Company’s cash balance, was approximately $190 million.

    Earnings Call Webcast

    Date: Friday, May 3, 2024
    Time: 8:30 A.M. (ET)
    Listen via Internet: https://investor.shentel.com/
    For Analysts, please register to dial-in at this link.

    A replay of the call will be available for a limited time on the Investor Relations page of the Company’s website.

    About Shenandoah Telecommunications

    Shenandoah Telecommunications Company (Shentel) provides residential and commercial broadband services through its high speed, state-of-the-art fiber optic and cable networks to customers in seven contiguous states in the eastern United States. The Company’s services include: broadband internet, video, voice, high-speed Ethernet, dark fiber leasing, and managed network services. The Company owns an extensive regional network with over 15,600 route miles of fiber. For more information, please visit www.shentel.com.

    This release contains forward-looking statements about Shentel regarding, among other things, its business strategy, its prospects and its financial position. These statements can be identified by the use of forward-looking terminology such as “believes,” “estimates,” “expects,” “intends,” “may,” “will,” “plans,” “should,” “could,” or “anticipates” or the negative or other variation of these or similar words, or by discussions of strategy or risks and uncertainties. The forward-looking statements are based upon management’s beliefs, assumptions and current expectations and may include comments as to Shentel’s beliefs and expectations as to future events and trends affecting its business that are necessarily subject to uncertainties, many of which are outside Shentel’s control. Although management believes that the expectations reflected in the forward-looking statements are reasonable, forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at which such performance or results will be achieved, and actual results may differ materially from those contained in or implied by the forward-looking statements as a result of various factors. A discussion of other factors that may cause actual results to differ from management’s projections, forecasts, estimates and expectations is available in Shentel’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2023 and our Quarterly Reports on Form 10-Q. Those factors may include, among others, the expected savings and synergies from the Horizon Transaction may not be realized or may take longer or cost more than expected to realize, changes in overall economic conditions including rising inflation, regulatory requirements, changes in technologies, changes in competition, demand for our products and services, availability of labor resources and capital, natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as COVID-19, and other conditions. The forward-looking statements included are made only as of the date of the statement. Shentel 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, except as required by law.

    CONTACTS:
              Shenandoah Telecommunications Company
              Jim Volk
              Senior Vice President and Chief Financial Officer
              540-984-5168
              Jim.Volk@emp.shentel.com


     
    SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    (in thousands, except per share amounts) Three Months Ended
    March 31,
       2024   2023 
    Service revenue and other $69,248  $67,165 
    Operating expenses:    
    Cost of services exclusive of depreciation and amortization  25,985   25,431 
    Selling, general and administrative  28,596   26,159 
    Depreciation and amortization  17,443   15,269 
    Total operating expenses  72,024   66,859 
    Operating (loss) income  (2,776)  306 
    Other (expense) income:    
    Interest expense  (4,076)  (392)
    Other income, net  1,736   1,509 
    (Loss) income from continuing operations before income taxes  (5,116)  1,423 
    Income tax (benefit) expense  (1,026)  682 
    (Loss) income from continuing operations  (4,090)  741 
    Discontinued operations:    
    Income from discontinued operations, net of tax  1,981   1,325 
    Gain on the sale of discontinued operations, net of tax  216,805   — 
    Total income from discontinued operations, net of tax  218,786   1,325 
    Net income  214,696   2,066 
         
    Other comprehensive income:    
    Unrealized gain on interest rate hedge, net of tax  1,594   — 
    Comprehensive income $216,290  $2,066 
         
    Net income per share, basic and diluted:    
    Basic - (Loss) income from continuing operations $(0.08) $0.01 
    Basic - Income from discontinued operations, net of tax  4.33   0.03 
    Basic net income per share $4.25  $0.04 
         
    Diluted - (Loss) income from continuing operations $(0.08) $0.01 
    Diluted - Income from discontinued operations, net of tax  4.29   0.03 
    Diluted net income per share $4.21  $0.04 
         
    Weighted average shares outstanding, basic  50,520   50,291 
    Weighted average shares outstanding, diluted  51,011   50,512 
         


     
    SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
    UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
    (in thousands)March 31,
    2024    		 December 31,
    2023
    ASSETS   
    Current assets:   
    Cash and cash equivalents$389,735  $139,255 
    Accounts receivable, net of allowance for credit losses of $1,064 and $886, respectively 18,228   19,782 
    Income taxes receivable 2,618   4,691 
    Prepaid expenses and other 15,025   11,782 
    Current assets held for sale 561   561 
    Total current assets 426,167   176,071 
    Investments 13,408   13,198 
    Property, plant and equipment, net 896,208   850,337 
    Goodwill and intangible assets, net 81,083   81,123 
    Operating lease right-of-use assets 14,170   13,024 
    Deferred charges and other assets 14,886   11,561 
    Non-current assets held for sale —   68,915 
    Total assets$1,445,922  $1,214,229 
    LIABILITIES AND SHAREHOLDERS’ EQUITY   
    Current liabilities:   
    Current maturities of long-term debt, net of unamortized loan fees$7,879  $7,095 
    Accounts payable 50,281   53,546 
    Advanced billings and customer deposits 12,267   12,394 
    Accrued compensation 7,337   11,749 
    Current operating lease liabilities 2,266   2,222 
    Accrued liabilities and other 11,003   7,747 
    Current liabilities held for sale —   3,602 
    Total current liabilities 91,033   98,355 
    Long-term debt, less current maturities, net of unamortized loan fees 290,716   292,804 
    Other long-term liabilities:   
    Deferred income taxes 163,726   85,664 
    Benefit plan obligations 4,161   3,943 
    Non-current operating lease liabilities 8,362   7,185 
    Other liabilities 16,281   16,912 
    Non-current liabilities held for sale —   56,696 
    Total other long-term liabilities 192,530   170,400 
    Commitments and contingencies (Note 13)   
    Shareholders’ equity:   
    Common stock, no par value, authorized 96,000; 50,447 and 50,272 issued and outstanding at March 31, 2024 and December 31, 2023, respectively —   — 
    Additional paid in capital 69,616   66,933 
    Retained earnings 798,765   584,069 
    Accumulated other comprehensive income, net of taxes 3,262   1,668 
    Total shareholders’ equity 871,643   652,670 
    Total liabilities and shareholders’ equity$1,445,922  $1,214,229 


        
    SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (in thousands)Three Months Ended
    March 31,
      2024   2023 
    Cash flows from operating activities:   
    Net income$214,696  $2,066 
    Income from discontinued operations, net of tax 218,786   1,325 
    (Loss) income from continuing operations (4,090)  741 
    Adjustments to reconcile net income to net cash provided by operating activities:   
    Depreciation and amortization 17,443   15,269 
    Stock-based compensation expense, net of amount capitalized 3,966   3,717 
    Deferred income taxes (1,026)  2,083 
    Provision for credit losses 756   383 
    Other, net (184)  214 
    Changes in assets and liabilities:   
    Accounts receivable 1,726   4,488 
    Current income taxes —   24,676 
    Operating lease assets and liabilities, net 75   2 
    Other assets (4,495)  (904)
    Accounts payable (38)  (837)
    Other deferrals and accruals (1,218)  (4,152)
    Net cash provided by operating activities - continuing operations 12,915   45,680 
    Net cash provided by operating activities - discontinued operations 2,243   2,644 
    Net cash provided by operating activities 15,158   48,324 
        
    Cash flows from investing activities:   
    Capital expenditures (70,053)  (67,468)
    Government grants received 2,710   — 
    Proceeds from sale of assets and other —   101 
    Net cash used in investing activities - continuing operations (67,343)  (67,367)
    Net cash provided by (used in) investing activities - discontinued operations 305,827   (203)
    Net cash provided by (used in) investing activities 238,484   (67,570)
        
    Cash flows from financing activities:   
    Principal payments on long-term debt (1,312)  — 
    Proceeds from credit facility borrowings —   25,000 
    Taxes paid for equity award issuances (1,456)  (1,156)
    Payments for financing arrangements and other (394)  (263)
    Net cash (used in) provided by financing activities - continuing operations (3,162)  23,581 
    Net cash provided by financing activities - discontinued operations —   — 
    Net cash (used in) provided by financing activities (3,162)  23,581 
    Net increase in cash and cash equivalents 250,480   4,335 
    Cash and cash equivalents, beginning of period 139,255   44,061 
    Cash and cash equivalents, end of period$389,735  $48,396 
        
    Supplemental Disclosures of Cash Flow Information   
    Interest paid$5,262  $1,327 
    Income tax refunds received, net$—  $25,030 


    Non-GAAP Financial Measures
    Adjusted EBITDA and Adjusted EBITDA Margin

    The Company defines Adjusted EBITDA as net (loss) income from continuing operations calculated in accordance with GAAP, adjusted for the impact of depreciation and amortization, impairment, other income (expense), net, interest income, interest expense, income tax expense (benefit), stock compensation expense, transaction costs related to acquisition and disposition events (including professional advisory fees, integration costs, and related compensatory matters), restructuring expense, tax on equity award vesting and exercise events, and other non-comparable items. A reconciliation of net (loss) income from continuing operations, which is the most directly comparable GAAP financial measure, to Adjusted EBITDA is provided below herein.

    Adjusted EBITDA margin is the Company’s calculation of Adjusted EBITDA, divided by revenue calculated in accordance with GAAP.

    The Company uses Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of performance to evaluate operating effectiveness and assess its ability to increase revenues while controlling expense growth and the scalability of the Company’s business growth strategy. Adjusted EBITDA is also a significant performance measure used by the Company in its incentive compensation programs. The Company believes that the exclusion of the expense and income items eliminated in calculating Adjusted EBITDA and Adjusted EBITDA margin provides management and investors a useful measure for period-to-period comparisons of the Company’s core operating results by excluding items that are not comparable across reporting periods or that do not otherwise relate to the Company’s ongoing operations. Accordingly, the Company believes that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating the Company’s operating results. However, use of Adjusted EBITDA and Adjusted EBITDA margin as analytical tools has limitations, and investors and others should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. In addition, other companies may calculate Adjusted EBITDA and Adjusted EBITDA margin or similarly titled measures differently, which may reduce their usefulness as comparative measures.

      Three Months Ended
    March 31,
    (in thousands)  2024   2023 
    (Loss) income from continuing operations $(4,090) $741 
    Depreciation and amortization  17,443   15,269 
    Other expense (income), net  2,340   (1,117)
    Income tax (benefit) expense  (1,026)  682 
    Stock-based compensation  3,966   3,717 
    Restructuring charges and other  618   131 
    Adjusted EBITDA $19,251  $19,423 
         
    Adjusted EBITDA margin  28%  29%


    Supplemental Information

    Operating Statistics

     March 31,
    2024    		 March 31,
    2023
    Homes and businesses passed (1)476,081  377,348 
    Cable Markets216,514  212,290 
    Glo Fiber Markets259,567  165,058 
        
    Residential & Small and Medium Business ("SMB") Revenue Generating Units ("RGUs"):   
    Broadband Data155,687  138,713 
    Cable Markets108,958  109,920 
    Glo Fiber Markets46,729  28,793 
    Video40,148  45,660 
    Voice40,734  40,135 
    Total Residential & SMB RGUs (excludes RLEC)236,569  224,508 
        
    Residential & SMB Penetration (2)   
    Broadband Data32.7% 36.8%
    Cable Markets50.3% 51.8%
    Glo Fiber Markets18.0% 17.4%
    Video8.4% 12.1%
    Voice8.9% 11.2%
        
    Fiber route miles10,132  8,663 
    Total fiber miles (3)883,199  709,123 

    ______________________________________________________
    (1)   Homes and businesses are considered passed (“passings”) if we can connect them to our network without further extending the distribution system. Passings is an estimate based upon the best available information. Passings will vary among video, broadband data and voice services.
    (2)   Penetration is calculated by dividing the number of users by the number of passings or available homes, as appropriate.
    (3)   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.


    Residential and SMB ARPU    
      Three Months Ended
    March 31,
       2024   2023 
    Residential and SMB Revenue:    
    Broadband Data $38,581  $33,174 
    Cable Markets  27,798   27,273 
    Glo Fiber Markets  10,783   5,901 
    Video  14,394   14,645 
    Voice  3,023   3,030 
    Discounts, adjustments and other  490   910 
    Total Revenue $56,488  $51,759 
         
    Average RGUs:    
    Broadband Data  153,418   136,271 
    Cable Markets  109,255   109,758 
    Glo Fiber Markets  44,163   26,513 
    Video  41,294   46,268 
    Voice  40,690   39,992 
         
    ARPU: (1)    
    Broadband Data $83.83  $81.09 
    Cable Markets $84.81  $82.83 
    Glo Fiber Markets $81.39  $74.18 
    Video $116.19  $105.51 
    Voice $24.77  $25.25 

    ______________________________________________________
    (1)   Average Revenue Per RGU calculation = (Residential & SMB Revenue) / average RGUs / 3 months.


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