• Shenandoah Telecommunications Company Reports Second Quarter 2024 Results

    Источник: Nasdaq GlobeNewswire / 07 авг 2024 06:00:00   America/Chicago

    EDINBURG, Va., Aug. 07, 2024 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel” or the “Company”) (Nasdaq: SHEN) announced second quarter 2024 financial and operating results.

    Second Quarter 2024 Highlights

    • On April 1, 2024, Shentel completed its previously announced acquisition of Horizon Acquisition Parent LLC (“Horizon”) for approximately $385 million, which consisted of $305 million in cash and 4.1 million shares of Shentel’s common stock issued to a selling shareholder of Horizon (“Horizon Transaction”). Cash consideration paid also included purchase price adjustments for capital expenditure reimbursements and working capital subject to subsequent adjustments as defined in the merger agreement. Horizon is a leading commercial fiber provider in Ohio and adjacent states.
    • Glo Fiber Expansion Markets1 added approximately 5,000 subscribers in the second quarter of 2024. Glo Fiber Expansion Markets ended the quarter with approximately 53,000 subscribers, including approximately 2,000 acquired from Horizon.
    • Glo Fiber Expansion Markets passings grew approximately 38,000, including 16,000 acquired from Horizon, to a total of approximately 298,000.
    • Revenue in the second quarter grew to $85.8 million, up $19.2 million, or 28.7%, compared to the same period in 2023. The former Horizon markets contributed $16.7 million in revenue. Excluding the former Horizon markets, Glo Fiber Expansion Markets revenue grew 67% over the same period in 2023.
    • Net loss from continuing operations was $12.8 million in the second quarter of 2024 compared with net loss from continuing operations of $1.4 million in the second quarter of 2023. This was due primarily to non-recurring integration and acquisition expenses and depreciation related to the Horizon acquisition.

    “We made good progress executing our Fiber First strategy with another solid quarter of Glo Fiber net subscriber additions and construction of new passings, and integration of our recent Horizon acquisition with its fiber rich network has gone well” said President and CEO, Christopher E. French. “Recently announced acquisitions of Fiber-To-The-Home companies have re-affirmed our investment thesis for our Glo Fiber line of business.”

    Shentel’s second-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, August 7, 2024. The webcast and related materials will be available on Shentel’s Investor Relations website at https://investor.shentel.com/.

    Second Quarter 2024 Results

    • Total Incumbent Broadband Markets2 and Glo Fiber Expansion Markets broadband data Revenue Generating Units (“RGUs”) as of June 30, 2024 were 164,566, representing 15.7% year-over-year growth driven primarily by Glo Fiber. Total Glo Fiber Expansion Markets passings grew year-over-year by 114,698 to 297,545.
    • Revenue in the second quarter of 2024 grew $19.2 million, or 28.7%, to $85.8 million, primarily driven by $16.7 million of revenue resulting from the acquisition of Horizon. The remaining $2.5 million in revenue growth is primarily driven by a $4.2 million, or 8.0%, increase in Residential & Small and Medium Business (“SMB”) revenue and partially offset by a $1.2 million, or 11.6%, decrease in Commercial Fiber revenue. Glo Fiber Expansion Markets was the driver of the Residential & SMB revenue growth due to a 56.3% increase in broadband data RGUs and an 8.8% increase in broadband data Average Revenue per User (“ARPU”). Commercial Fiber revenue decreased as expected due to the previously disclosed 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 June 30, 2024 increased approximately $9.8 million, or 39.5%, compared with the three months ended June 30, 2023, primarily driven by $8.9 million in cost of services resulting from the acquisition of Horizon. The remaining $0.9 million increase in cost of services is attributable to higher inventory and maintenance costs as the Company continues to expand the Glo Fiber network and a non-recurring charge related to exiting a planned Glo Fiber expansion market due to further analysis of projected market economics.
    • Selling, general and administrative expense for the three months ended June 30, 2024, increased $5.2 million, or 20.8%, compared with the three months ended June 30, 2023, primarily driven by $4.1 million of recurring selling, general and administrative costs acquired from Horizon. The remaining $1.1 million in incremental selling, general and administrative expense is primarily attributable to higher advertising and sales headcount to support the Glo Fiber expansion.
    • Integration and acquisition expense for the three months ended June 30, 2024 increased $11.0 million compared with the three months ended June 30, 2023, primarily driven by non-recurring acquisition-related costs related to the Horizon acquisition and integration.
    • Adjusted EBITDA for the three months ended June 30, 2024 increased to $23.3 million, representing a $3.8 million, or 19.7%, increase compared with the three months ended June 30, 2023. The former Horizon markets contributed $3.7 million. Excluding the former Horizon markets, Adjusted EBITDA grew $0.1 million, or 0.8%, driven by Glo Fiber growth and partially offset by the previously disclosed decline in T-Mobile revenue from prior period backhaul circuit disconnects as part of decommissioning the former Sprint network and declines in RLEC and Incumbent Cable revenues.
    • Depreciation and amortization for the three months ended June 30, 2024, increased $9.7 million, or 61.6%, compared with the three months ended June 30, 2023, primarily driven by $8.3 million of depreciation and amortization expense resulting from the acquisition of Horizon. The remaining increase in depreciation and amortization expense is attributable to the Company’s expansion of its Glo Fiber network.

    Other Information

    • Capital expenditures were $150.9 million for the six months ended June 30, 2024 compared with $135.3 million in the comparable 2023 period. The $15.7 million increase in capital expenditures was primarily driven by $9.8 million of capital expenditures in the former Horizon markets. The remaining $5.9 million increase in capital expenditures is attributable to increased capital expenditures for expansion of Glo Fiber Expansion Markets and government-subsidized markets.
    • On April 1, 2024, the Company issued $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. The additional financing consisted of $225 million of delay-draw term loans due June 2028 and $50 million in incremental revolving line of credit due June 2026.
    • As of June 30, 2024, our cash and cash equivalents totaled $43.8 million.

    __________________________
    1     Glo Fiber Expansion Markets consists of FTTH passings in greenfield expansion markets in the Shentel and former Horizon markets.
    2 Incumbent Broadband Markets consists of Shentel Incumbent Cable Markets and Horizon Incumbent Telephone Markets with Fiber-To-The-Home (“FTTH”) passings.

    Earnings Call Webcast

    Date: Wednesday, August 7, 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 broadband services through its high speed, state-of-the-art fiber optic and cable networks to residential and commercial customers in eight 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 16,000 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 (LOSS) INCOME
    (in thousands, except per share amounts)Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
      2024   2023   2024   2023 
    Service revenue and other$85,799  $66,644  $155,047  $133,809 
    Operating expenses:       
    Cost of services exclusive of depreciation and amortization 34,541   24,753   60,526   50,183 
    Selling, general and administrative 30,239   25,041   58,217   51,069 
    Integration and acquisition 11,325   301   11,943   432 
    Impairment expense —   836   —   1,020 
    Depreciation and amortization 25,579   15,831   43,022   30,916 
    Total operating expenses 101,684   66,762   173,708   133,620 
    Operating (loss) income (15,885)  (118)  (18,661)  189 
    Other (expense) income:       
    Interest expense (3,996)  (905)  (8,072)  (1,297)
    Other income, net 1,908   1,082   3,644   2,591 
    (Loss) income from continuing operations before income taxes (17,973)  59   (23,089)  1,483 
    Income tax (benefit) expense (5,200)  1,459   (6,226)  2,141 
    Loss from continuing operations (12,773)  (1,400)  (16,863)  (658)
    Discontinued operations:       
    (Loss) income from discontinued operations, net of tax (99)  3,190   1,882   4,514 
    Gain on the sale of discontinued operations, net of tax —   —   216,805   — 
    Total (loss) income from discontinued operations, net of tax (99)  3,190   218,687   4,514 
    Net (loss) income (12,872)  1,790   201,824   3,856 
            
    Other comprehensive income:       
    Gain on interest rate hedge, net of tax 143   2,127   1,737   2,127 
    Comprehensive (loss) income$(12,729) $3,917  $203,561  $5,983 
            
    Net (loss) income per share, basic and diluted:       
    Loss from continuing operations$(0.24) $(0.03) $(0.32) $(0.01)
    (Loss) income from discontinued operations, net of tax —   0.07   4.16   0.09 
    Net (loss) income per share$(0.24) $0.04  $3.84  $0.08 
            
    Weighted average shares outstanding, basic and diluted 54,730   50,366   52,620   50,330 


    SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
    UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

    (in thousands)June 30,
    2024    		 December 31,
    2023
    ASSETS   
    Current assets:   
    Cash and cash equivalents$43,779 $139,255
    Accounts receivable, net of allowance for credit losses of $1,333 and $886, respectively 29,639  19,782
    Income taxes receivable 5,537  4,691
    Prepaid expenses and other 20,567  11,782
    Current assets held for sale —  561
    Total current assets 99,522  176,071
    Investments 15,135  13,198
    Property, plant and equipment, net 1,337,252  850,337
    Goodwill and intangible assets, net 169,489  81,123
    Operating lease right-of-use assets 20,444  13,024
    Deferred charges and other assets 14,491  11,561
    Non-current assets held for sale —  68,915
    Total assets$1,656,333 $1,214,229
    LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ EQUITY   
    Current liabilities:   
    Current maturities of long-term debt, net of unamortized loan fees$8,726 $7,095
    Accounts payable 57,725  53,546
    Advanced billings and customer deposits 14,928  12,394
    Accrued compensation 12,308  11,749
    Current operating lease liabilities 3,138  2,222
    Accrued liabilities and other 15,264  7,747
    Current liabilities held for sale —  3,602
    Total current liabilities 112,089  98,355
    Long-term debt, less current maturities, net of unamortized loan fees 288,570  292,804
    Other long-term liabilities:   
    Deferred income taxes 186,305  85,664
    Benefit plan obligations 4,971  3,943
    Non-current operating lease liabilities 11,431  7,185
    Other liabilities 40,505  16,912
    Non-current liabilities held for sale —  56,696
    Total other long-term liabilities 243,212  170,400
    Commitments and contingencies (Note 15)   
    Temporary equity:   
    Redeemable noncontrolling interest 79,380  —
    Shareholders’ equity:   
    Common stock, no par value, authorized 96,000; 54,572 and 50,272 issued and outstanding at June 30, 2024 and December 31, 2023, respectively —  —
    Additional paid in capital 143,784  66,933
    Retained earnings 785,893  584,069
    Accumulated other comprehensive income, net of taxes 3,405  1,668
    Total shareholders’ equity 933,082  652,670
    Total liabilities, temporary equity and shareholders’ equity$1,656,333 $1,214,229


    SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES   
    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   
    (in thousands)Six Months Ended
    June 30,
      2024   2023 
    Cash flows from operating activities:   
    Net income$201,824  $3,856 
    Income from discontinued operations, net of tax 218,687   4,514 
    Loss from continuing operations (16,863)  (658)
    Adjustments to reconcile net income to net cash provided by operating activities, net of effects of business acquisition   
    Depreciation and amortization 43,022   30,916 
    Stock-based compensation expense, net of amount capitalized 6,236   6,320 
    Impairment expense —   1,020 
    Deferred income taxes (6,226)  2,860 
    Provision for credit losses 1,266   1,141 
    Other, net 150   (313)
    Changes in assets and liabilities:   
    Accounts receivable 965   4,499 
    Current income taxes 234   25,108 
    Operating lease assets and liabilities, net (233)  73 
    Other assets (3,354)  2,233 
    Accounts payable (1,140)  (3,012)
    Other deferrals and accruals (882)  (6,696)
    Net cash provided by operating activities - continuing operations 23,175   63,491 
    Net cash (used in) provided by operating activities - discontinued operations (5,476)  6,309 
    Net cash provided by operating activities 17,699   69,800 
        
    Cash flows from investing activities:   
    Capital expenditures (150,914)  (135,261)
    Government grants received 7,653   110 
    Cash disbursed for acquisition, net of cash acquired (347,411)  — 
    Proceeds from sale of assets and other 1,715   508 
    Net cash used in investing activities - continuing operations (488,957)  (134,643)
    Net cash provided by (used in) investing activities - discontinued operations 305,827   (1,007)
    Net cash used in investing activities (183,130)  (135,650)
        
    Cash flows from financing activities:   
    Principal payments on long-term debt (2,618)  — 
    Proceeds from credit facility borrowings —   50,000 
    Payments for debt amendment costs (4,390)  (300)
    Proceeds from the issuance of redeemable noncontrolling interest, net of financing fees paid 79,380   — 
    Taxes paid for equity award issuances (1,671)  (1,317)
    Payments for financing arrangements and other (746)  (290)
    Net cash provided by financing activities 69,955   48,093 
    Net decrease in cash and cash equivalents (95,476)  (17,757)
    Cash and cash equivalents, beginning of period 139,255   44,061 
    Cash and cash equivalents, end of period$43,779  $26,304 
        
    Supplemental Disclosures of Cash Flow Information   
    Interest paid, net of amounts capitalized$(6,526) $(841)
    Income tax (paid) refunds received, net$(7,085) $25,481 


    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
    June 30,    		 Six Months Ended
    June 30,
    (in thousands) 2024   2023   2024   2023 
    Loss from continuing operations$(12,773) $(1,400) $(16,863) $(658)
    Depreciation and amortization 25,579   15,831   43,022   30,916 
    Impairment expense —   836   —   1,020 
    Other expense (income), net 2,088   (177)  4,428   (1,294)
    Income tax (benefit) expense (5,200)  1,459   (6,226)  2,141 
    Stock-based compensation 2,270   2,603   6,236   6,320 
    Integration and acquisition 11,325   301   11,943   432 
    Adjusted EBITDA$23,289  $19,453  $42,540  $38,877 
            
    Adjusted EBITDA margin 27%  29%  27%  29%


    Supplemental Information

    Operating Statistics

     June 30,
    2024    		 June 30,
    2023
    Homes and businesses passed (1)530,076  396,035 
    Incumbent Broadband Markets (4)232,531  213,188 
    Glo Fiber Expansion Markets (5)297,545  182,847 
        
    Residential & Small and Medium Business ("SMB") Revenue Generating Units ("RGUs"):   
    Broadband Data164,566  142,247 
    Incumbent Broadband Markets (4)111,256  109,404 
    Glo Fiber Expansion Markets (5)53,310  32,843 
    Video42,079  44,800 
    Voice44,126  40,313 
    Total Residential & SMB RGUs (excludes RLEC)250,771  227,360 
        
    Residential & SMB Penetration (2)   
    Broadband Data31.0% 35.9%
    Incumbent Broadband Markets (4)47.8% 51.3%
    Glo Fiber Expansion Markets (5)17.9% 18.0%
    Video7.9% 11.3%
    Voice8.7% 10.7%
        
    Fiber route miles16,029  9,082 
    Total fiber miles (3)1,798,211  767,173 

    ______________________________________________________
    (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.
    (4) Incumbent Broadband Markets consists of Shentel Incumbent Cable Markets and Horizon Incumbent Telephone Markets with Fiber-To-The-Home (“FTTH”) passings.
    (5) Glo Fiber Expansion Markets consists of FTTH passings in greenfield expansion markets in the Shentel and former Horizon markets.

    Residential and SMB ARPU       
     Three Months Ended
    June 30,    		 Six Months Ended
    June 30,
      2024  2023  2024  2023
    Residential and SMB Revenue:       
    Broadband Data$40,823 $34,152 $79,404 $67,326
    Incumbent Broadband 28,324  27,172  56,122  54,445
    Glo Fiber Expansion Markets 12,499  6,980  23,282  12,881
    Video 14,913  14,411  29,307  29,056
    Voice 3,283  3,054  6,306  6,084
    Discounts, adjustments and other 34  950  524  1,860
    Total Residential and SMB Revenue$59,053 $52,567 $115,541 $104,326
            
    Average RGUs:       
    Broadband Data 162,581  140,481  157,999  138,376
    Incumbent Broadband 111,689  109,716  110,472  109,737
    Glo Fiber Expansion Markets 50,892  30,765  47,527  28,639
    Video 42,443  45,229  41,869  45,749
    Voice 43,865  40,164  42,277  40,078
            
    ARPU: (1)       
    Broadband Data$83.70 $81.03 $83.76 $81.06
    Incumbent Broadband$84.53 $82.55 $84.67 $82.69
    Glo Fiber Expansion Markets$81.86 $75.63 $81.64 $74.96
    Video$117.12 $106.21 $116.66 $105.85
    Voice$24.95 $25.35 $24.86 $25.30

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


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