Shenandoah Telecommunications Company Reports First Quarter 2023 Results

Shenandoah Telecommunications Co

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 Markets	212,290			211,442
Glo Fiber Markets	165,058			93,611
Residential & Small and Medium Business ("SMB") RGUs:
Broadband Data	138,713			121,074
Cable Markets	109,920			107,291
Glo Fiber Markets	28,793			13,783
Video	45,660			49,163
Voice	40,135			36,042
Total Residential & SMB RGUs (excludes RLEC)	224,508			206,279
Residential & SMB Penetration (2)
Broadband Data	36.8	%		39.7	%
Cable Markets	51.8	%		50.7	%
Glo Fiber Markets	17.4	%		14.7	%
Video	12.1	%		16.1	%
Voice	11.2	%		12.5	%
Fiber route miles	8,663			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 sites	222		223
Tenants	445		468
Average tenants per tower	2.0		2.1