• Shenandoah Telecommunications Company Reports First Quarter 2023 Results

    Source: Nasdaq GlobeNewswire / 28 Apr 2023 07:00:00   America/New_York

    EDINBURG, Va., April 28, 2023 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel”) (Nasdaq: SHEN) announced first quarter 2023 financial and operating results.

    First Quarter 2023 Highlights

    • Glo Fiber Markets data net additions were 4,507 or 87.3% higher than the first quarter of 2022.
    • Consolidated revenue grew 11.3% to $71.7 million compared to the first quarter of 2022. Glo Fiber Markets revenue grew 104.7% to $7.0 million and Broadband revenue grew 12.5% to $67.2 million over the same period.
    • Consolidated net income was $2.1 million in the first quarter of 2023, compared with net loss of $0.6 million in the first quarter of 2022.
    • Consolidated Adjusted EBITDA grew 28.6% to $22.4 million compared to the first quarter of 2022. Broadband Adjusted EBITDA grew 25.0% to $26.3 million over the same period.

    “We had a record quarter for Glo Fiber Markets data net additions and revenue, and for Broadband revenue and Adjusted EBITDA,” said President and CEO, Christopher E. French. "We are beginning to see the operating leverage and margin expansion in our Broadband business as Glo Fiber accelerates growth and increases scale."

    Shentel's first-quarter earnings conference call will be webcast at 8:00 a.m. ET on Friday, April 28, 2023. The webcast and related materials will be available on Shentel’s Investor Relations website at https://investor.shentel.com/.

    Consolidated First Quarter 2023 Results

    • Revenue in the first quarter of 2023 grew 11.3% to $71.7 million compared with the first quarter of 2022, due to Broadband segment revenue growth of 12.5%, partially offset by Tower segment revenue decline of 5.6%.
    • Net income per share was $0.04 in the first quarter of 2023 compared with net loss per share of $0.01 in the first quarter of 2022.
    • Adjusted EBITDA was $22.4 million in the first quarter of 2023 compared with $17.4 million in the first quarter of 2022 due to Broadband segment growth of 25.0% partially offset by Tower segment decline of 9.4%.

    Broadband

    • Total Cable Markets and Glo Fiber Markets broadband data Revenue Generating Units ("RGUs") as of March 31, 2023, were 138,713, representing 14.6% year over year growth. Penetration for Cable Markets and Glo Fiber Markets were 52% and 17%, respectively, compared to 51% and 15%, respectively, as of March 31, 2022. Total Glo Fiber Markets passings grew year over year by 71,447 from 93,611 to 165,058.
    • Broadband revenue in the first quarter of 2023 grew $7.5 million, or 12.5%, to $67.2 million compared with $59.7 million in the first quarter of 2022, primarily driven by a $3.6 million, or 104.7%, increase in Residential & Small and Medium Business ("SMB") - Glo Fiber Markets revenue. Residential & SMB - Glo Fiber Markets increased due to a 108.9% increase in broadband data RGUs. In addition, Residential & SMB - Cable Markets revenue grew $1.3 million, or 2.9%, due to a 2.5% increase in data RGUs and 2.4% increase in data ARPU. Commercial Fiber revenue increased $2.6 million, or 29.1%, primarily due to $1.8 million in non-recurring early termination fees and a $0.8 million increase in recurring revenue. T-Mobile disconnected 188 backhaul circuits during the first quarter as part of their previously announced rationalization of the former Sprint network. The Company expects 174 additional backhaul disconnects in 2023 as part of the network rationalization.
    • Cost of services increased approximately $0.3 million, or 1.0%, compared with the three months ended March 31, 2022 due to higher costs associated with consumable materials and supplies, maintenance and rent, partially offset by lower medical costs.
    • Selling, general and administrative expense increased $2.1 million, or 15.4%, compared with the three months ended March 31, 2022, due primarily to higher advertising costs associated with the Company's expansion of Glo Fiber and a change in strategy to drive more gross adds to low cost sales channels, higher information technology costs as a result of the Company's investment in upgraded systems, and higher property taxes associated with increased network assets associated with the expansion of Glo Fiber.
    • Depreciation and amortization expense increased $2.0 million, or 15.5%, compared with the three months ended March 31, 2022, primarily as a result of the Company's expansion of its Glo Fiber network.
    • Broadband operating income was $11.3 million in the first quarter of 2023, compared to $8.2 million in the first quarter of 2022.
    • Broadband Adjusted EBITDA was $26.3 million in the first quarter of 2023 compared to $21.1 million in the first quarter of 2022.

    Tower

    • Revenue decreased approximately $0.3 million, or 5.6%, for the three months ended March 31, 2023 compared with the three months ended March 31, 2022, primarily due to lower application fee revenue.
    • Tower operating income was $2.4 million in the first quarter of 2023, compared to $2.8 million in the first quarter of 2022.
    • Tower Adjusted EBITDA in the first quarter of 2023 decreased 9.4% to $2.9 million, compared with $3.2 million for the first quarter of 2022.

    Other Information

    • As of March 31, 2023, our cash and cash equivalents totaled $48.4 million and the availability under our delayed draw term loans and revolving line of credit was $300.0 million, for total available liquidity of $348.4 million. We expect to draw the remaining $200.0 million in delay draw term loans by June 30, 2023.
    • Capital expenditures were $67.7 million for the three months ended March 31, 2023 compared with $45.7 million in the comparable 2022 period. The $22.0 million increase in capital expenditures was primarily due to higher spending in the Broadband segment to enable our Glo Fiber market expansion.

    Earnings Call Webcast

    Date: Friday, April 28, 2023
    Time: 8:00 A.M. (ET)
    Listen via Internet: https://investor.shentel.com/ 

    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 broadband services through its high speed, state-of-the-art cable and fiber optic networks to customers in the Mid-Atlantic United States. The Company’s services include: broadband internet, video, and voice; fiber optic Ethernet, wavelength and leasing; and tower colocation leasing. The Company owns an extensive regional network with over 8,600 route miles of fiber and over 220 macro cellular towers. 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,” “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. 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 including high inflation, increases in costs, changes in regulation and other competitive factors. 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 OPERATIONS
    (in thousands, except per share amounts) Three Months Ended
    March 31,
       2023  2022 
    Service revenue and other $71,686 $64,414 
    Operating expenses:    
    Cost of services exclusive of depreciation and amortization  26,567  26,339 
    Selling, general and administrative  26,609  23,771 
    Depreciation and amortization  15,782  14,684 
    Total operating expenses  68,958  64,794 
    Operating income (loss)  2,728  (380)
    Other income (expense):    
    Other income (expense), net  1,117  (170)
    Income (loss) before income taxes  3,845  (550)
    Income tax expense  1,779  53 
    Net income (loss) $2,066 $(603)
         
    Net income (loss) per share, basic and diluted:    
    Basic net income (loss) per share $0.04 $(0.01)
         
    Diluted net income (loss) per share $0.04 $(0.01)
         
    Weighted average shares outstanding, basic  50,291  50,146 
    Weighted average shares outstanding, diluted  50,512  50,146 

    SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
    UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

    (in thousands)March 31,
    2023    		 December 31,
    2022
    ASSETS   
    Current assets:   
    Cash and cash equivalents$48,396 $44,061
    Accounts receivable, net of allowance for doubtful accounts of $698 and $776, respectively 15,854  20,615
    Income taxes receivable 5,079  29,755
    Prepaid expenses and other 12,762  11,509
    Current assets held for sale 22,432  22,622
    Total current assets 104,523  128,562
    Investments 13,118  12,971
    Property, plant and equipment, net 739,587  687,553
    Goodwill and intangible assets, net 81,392  81,515
    Operating lease right-of-use assets 54,999  53,859
    Deferred charges and other assets 13,021  13,259
    Total assets$1,006,640 $977,719
    LIABILITIES AND SHAREHOLDERS’ EQUITY   
    Current liabilities:   
    Current maturities of long-term debt, net of unamortized loan fees$1,302 $648
    Accounts payable 48,822  49,173
    Advanced billings and customer deposits 12,391  12,425
    Accrued compensation 6,857  9,616
    Current operating lease liabilities 2,946  2,829
    Accrued liabilities and other 16,103  17,906
    Current liabilities held for sale 3,815  3,824
    Total current liabilities 92,236  96,421
    Long-term debt, less current maturities, net of unamortized loan fees 98,655  74,306
    Other long-term liabilities:   
    Deferred income taxes 86,335  84,600
    Asset retirement obligations 10,252  9,932
    Benefit plan obligations 3,887  3,758
    Non-current operating lease liabilities 51,629  50,477
    Other liabilities 20,866  20,218
    Total other long-term liabilities 172,969  168,985
    Commitments and contingencies   
    Shareholders’ equity:   
    Common stock, no par value, authorized 96,000; 50,247 and 50,110 issued and outstanding at March 31, 2023 and December 31, 2022, respectively —  —
    Additional paid in capital 60,160  57,453
    Retained earnings 582,620  580,554
    Total shareholders’ equity 642,780  638,007
    Total liabilities and shareholders’ equity$1,006,640 $977,719


    SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES   
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   
    (in thousands)Three Months Ended
    March 31,
      2023   2022 
    Cash flows from operating activities:   
    Net income (loss)$2,066  $(603)
    Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
    Depreciation and amortization 15,782   14,684 
    Stock-based compensation expense, net of amount capitalized 3,717   3,143 
    Deferred income taxes 1,735   (349)
    Other, net 740   1,017 
    Changes in assets and liabilities:   
    Accounts receivable 4,488   5,890 
    Current income taxes 24,676   459 
    Operating lease assets and liabilities, net 129   80 
    Other assets (1,030)  (1,365)
    Accounts payable (837)  (4,130)
    Other deferrals and accruals (3,142)  (2,760)
    Net cash provided by operating activities 48,324   16,066 
        
    Cash flows from investing activities:   
    Capital expenditures (67,671)  (45,693)
    Proceeds from sale of assets and other 101   86 
    Net cash used in investing activities (67,570)  (45,607)
        
    Cash flows from financing activities:   
    Proceeds from credit facility borrowings 25,000   — 
    Taxes paid for equity award issuances (1,156)  (603)
    Payments for financing arrangements and other (263)  (219)
    Net cash provided by (used in) financing activities 23,581   (822)
    Net increase (decrease) in cash and cash equivalents 4,335   (30,363)
    Cash and cash equivalents, beginning of period 44,061   84,344 
    Cash and cash equivalents, end of period$48,396  $53,981 
        
    Supplemental Disclosures of Cash Flow Information   
    Interest paid$1,327  $— 
    Income tax refunds received$25,030  $— 

    Non-GAAP Financial Measures
    Adjusted EBITDA and Adjusted EBITDA Margin

    The Company defines Adjusted EBITDA as net income (loss) 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 income (loss), 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, 2023        
    (in thousands) Broadband Tower Corporate &
    Eliminations    		 Consolidated
    Net income (loss) $11,274  $2,421  $(11,629) $2,066 
    Depreciation and amortization  14,867   513   402   15,782 
    Other expense (income), net  62   —   (1,179)  (1,117)
    Income tax benefit  —   —   1,779   1,779 
    Stock-based compensation  —   —   3,717   3,717 
    Restructuring charges and other  131   —   —   131 
    Adjusted EBITDA $26,334  $2,934  $(6,910) $22,358 
             
    Adjusted EBITDA margin  39%  64% N/A  31%


    Three Months Ended March 31, 2022        
    (in thousands) Broadband Tower Corporate &
    Eliminations    		 Consolidated
    Net income (loss) $8,127  $2,753  $(11,483) $(603)
    Depreciation and amortization  12,876   484   1,324   14,684 
    Other expense (income), net  54   —   116   170 
    Income tax benefit  —   —   53   53 
    Stock-based compensation  —   —   3,143   3,143 
    Restructuring charges and other  17   —   (81)  (64)
    Adjusted EBITDA $21,074  $3,237  $(6,928) $17,383 
             
    Adjusted EBITDA margin  35%  67% N/A  27%

    Segment Results

    Three Months Ended March 31, 2023:

    (in thousands)Broadband Tower Corporate &
    Eliminations    		 Consolidated
    External revenue       
    Residential & SMB - Cable Markets1$44,756 $— $—  $44,756
    Residential & SMB - Glo Fiber Markets1 7,003  —  —   7,003
    Commercial Fiber 11,698  —  —   11,698
    Tower lease —  4,538  —   4,538
    RLEC & Other 3,691  —  —   3,691
    Service revenue and other 67,148  4,538  —   71,686
    Intercompany revenue and other 55  38  (93)  —
    Total revenue 67,203  4,576  (93)  71,686
    Operating expenses       
    Cost of services 25,429  1,192  (54)  26,567
    Selling, general and administrative 15,571  450  10,588   26,609
    Depreciation and amortization 14,867  513  402   15,782
    Total operating expenses 55,867  2,155  10,936   68,958
    Operating income (loss)$11,336 $2,421 $(11,029) $2,728

    Three Months Ended March 31, 2022:

    (in thousands)Broadband Tower Corporate &
    Eliminations    		 Consolidated
    External revenue       
    Residential & SMB - Cable Markets1$43,492 $— $—  $43,492 
    Residential & SMB - Glo Fiber Markets1 3,421  —  —   3,421 
    Commercial Fiber 9,062  —  —   9,062 
    Tower lease —  4,746  —   4,746 
    RLEC & Other 3,689  —  —   3,689 
    Service revenue and other 59,664  4,746  —   64,410 
    Intercompany revenue and other 50  101  (147)  4 
    Total revenue 59,714  4,847  (147)  64,414 
    Operating expenses       
    Cost of services 25,168  1,292  (121)  26,339 
    Selling, general and administrative 13,489  318  9,964   23,771 
    Depreciation and amortization 12,876  484  1,324   14,684 
    Total operating expenses 51,533  2,094  11,167   64,794 
    Operating income (loss)$8,181 $2,753 $(11,314) $(380)

    _________________________________________
    (1)   Shentel has presented Residential & SMB - Cable Markets and Residential & SMB - Glo Fiber Markets separately for the three months ended March 31, 2023. These revenues were previously reported in one line under the description “Residential & SMB”. Shentel has amended the presentation for the three months ended March 31, 2022 for comparability.

    Supplemental Information

    Broadband Operating Statistics

     March 31,
    2023    		 March 31,
    2022
    Broadband homes and businesses passed (1)377,348  305,053 
    Cable Markets212,290  211,442 
    Glo Fiber Markets165,058  93,611 
        
    Residential & Small and Medium Business ("SMB") RGUs:   
    Broadband Data138,713  121,074 
    Cable Markets109,920  107,291 
    Glo Fiber Markets28,793  13,783 
    Video45,660  49,163 
    Voice40,135  36,042 
    Total Residential & SMB RGUs (excludes RLEC)224,508  206,279 
        
    Residential & SMB Penetration (2)   
    Broadband Data36.8% 39.7%
    Cable Markets51.8% 50.7%
    Glo Fiber Markets17.4% 14.7%
    Video12.1% 16.1%
    Voice11.2% 12.5%
        
    Fiber route miles8,663  7,611 
    Total fiber miles (3)709,123  564,097 

    ______________________________________________________
    (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.

    Broadband - Residential and SMB ARPU   
     Three Months Ended
    March 31,
      2023  2022
    Residential and SMB Revenue:   
    Broadband$33,174 $28,649
    Cable Markets 27,273  25,863
    Glo Fiber Markets 5,901  2,786
    Video 14,645  15,341
    Voice 3,030  2,916
    Discounts, adjustments and other 910  7
    Total Revenue$51,759 $46,913
        
    Average RGUs:   
    Broadband Data 136,271  119,083
    Cable Markets 109,758  106,590
    Glo Fiber Markets 26,513  12,493
    Video 46,268  49,445
    Voice 39,992  34,836
        
    ARPU: (1)   
    Broadband$81.09 $80.11
    Cable Markets$82.83 $80.88
    Glo Fiber Markets$74.18 $74.33
    Video$105.51 $103.42
    Voice$25.25 $27.90

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

    Tower Operating Statistics

     March 31,
    2023    		 March 31,
    2022
    Macro tower sites222 223
    Tenants445 468
    Average tenants per tower2.0 2.1

     


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