Shenandoah Telecommunications Company Reports Second Quarter 2022 Results

Shenandoah Telecommunications Co

EDINBURG, Va., Aug. 03, 2022 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel”) (Nasdaq: SHEN) announced second quarter 2022 financial and operating results.

Second Quarter 2022 Highlights

• Revenue grew 8.8% to $66.0 million over the same period a year ago driven by 138.9% and 4.3% growth in Glo Fiber and incumbent cable data RGUs, respectively.

• Glo Fiber data net adds were approximately 3,300, an increase of 103.2% over the second quarter 2021 and 38.9% over the first quarter 2022.

• Glo Fiber homes and businesses passed grew 20% sequentially to approximately 113,000.

• Net loss from continuing operations was $3.2 million compared to net income of $1.6 million in the same period a year ago due primarily to impairment and restructuring charges related to the decommissioning of unprofitable Beam fixed wireless sites.

• Adjusted EBITDA grew 16.4%, to $18.6 million over the same period a year ago.

“We are pleased with the strong execution of our fiber first strategy and the increase in the pace of Glo Fiber net additions and revenue growth,” said President and CEO, Christopher E. French. "We reached the 100,000 fiber passings milestone in the second quarter and are on target to construct 75,000 new passings this year. We now have franchise agreements or government grant awards in place for approximately 430,000 fiber passings or 89% of our target passings in 2026."

Shentel's second-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, August 3, 2022. The webcast and related materials will be available on Shentel’s Investor Relations website at https://investor.shentel.com/.

Consolidated Second Quarter 2022 Results

• Revenue in the second quarter of 2022 grew 8.8% to $66.0 million compared with the second quarter of 2021, due to Broadband segment revenue growth of 9.2% and Tower segment revenue growth of 1.9%.

• Loss from continuing operations per share was $(0.06) in the second quarter of 2022 compared with income per share from continuing operations of $0.03 in the second quarter of 2021. The decline was due primarily to Beam branded fixed wireless impairment and restructuring charges and higher stock compensation expense.

• Adjusted EBITDA in the second quarter of 2022 grew $2.6 million or 16.4% to $18.6 million, compared with the second quarter of 2021, due primarily to 10.2% growth in Broadband segment and 8.8% lower Corporate expenses from lower professional fees.

Broadband

• Total broadband data Revenue Generating Units ("RGUs") as of June 30, 2022, were 125,003, representing 12.1% year over year growth. Penetration for incumbent cable and Glo Fiber were 51% and 15%, respectively, compared to 49% and 15%, respectively, as of June 30, 2021. Total Glo Fiber passings grew year over year by approximately 66,100.

• Broadband revenue in the second quarter of 2022 grew $5.2 million, or 9.2%, to $61.4 million compared with $56.2 million in the second quarter of 2021, primarily driven by a $3.9 million, or 8.9%, increase in Residential and Small and Medium Business ("SMB") revenue by a 138.9% and 4.3% increase, respectively, in Glo Fiber and incumbent cable broadband data RGUs.

• Cost of services increased approximately $2.0 million, or 8.5%, compared with the three months ended June 30, 2021, driven by higher maintenance and compensation expenses. Maintenance increased due to higher cable replacement, gasoline and field engineering costs. Compensation increased due to higher headcount to support the expansion of our Glo Fiber network, salary and wage increases and higher medical benefit costs.

• Selling, general and administrative expense increased $1.2 million, or 9.0%, compared with the three months ended June 30, 2021, due primarily to higher compensation and advertising expense to support Glo Fiber expansion.

• Depreciation and amortization increased $1.6 million, or 13.8%, compared with the three months ended June 30, 2021, primarily as a result of our network expansion of our Glo Fiber network.

• During the second quarter of 2022, the Company permanently ceased operating 20 of our 55 Beam fixed wireless sites and expects these sites to be completely decommissioned by December 31, 2022. Consequently, Shentel recorded $4.1 million and $0.4 million, respectively, of impairment and restructuring charges and re-classified the remaining Beam assets and liabilities as held for sale.

• Broadband operating income in the second quarter of 2022 was $4.1 million, compared to $8.2 million in the second quarter of 2021, due primarily to the above noted Beam impairment and restructuring charges.

• Broadband Adjusted EBITDA in the second quarter of 2022 grew 10.2% to $22.0 million, compared with $20.0 million for the second quarter of 2021.

Tower

• Revenue increased approximately $0.1 million, or 1.9%, for the three months ended June 30, 2022 compared with the three months ended June 30, 2021, primarily due to a 3.8% increase in tenants.

• Tower operating income in the second quarter of 2022 was $2.3 million, compared to $2.5 million in the second quarter of 2021.

• Tower Adjusted EBITDA in the second quarter of 2022 was consistent with the second quarter of 2021 at $2.9 million for both periods.

Other Information

• As of June 30, 2022, our cash and cash equivalents totaled $33.3 million and the availability under our delayed draw term loans and revolving line of credit was $400.0 million, for total available liquidity of $433.3 million. On July 1, 2022, we drew a total of $25 million against our term loans. We expect to draw the remaining $275 million available under the term loans by June 2023.

• Capital expenditures were $88.7 million for the six months ended June 30, 2022 compared with $79.6 million in the comparable 2021 period. The $9.1 million increase in capital expenditures was primarily due to higher spending in the Broadband segment driven by the expansion of our Glo Fiber network.

Conference Call and Webcast

Date: Wednesday, August 3, 2022
Time: 8:30 A.M. (ET)
Registration link: Registration link

A live webcast of the call will be available on the “Investor Relations” page of the Company’s website at http://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, fiber optic and fixed wireless 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 7,900 route miles of fiber and over 200 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 COMPREHENSIVE (LOSS) INCOME
(in thousands, except per share amounts)	Three Months Ended June 30,							Six Months Ended June 30,
	2022				2021			2022				2021
Service revenue and other	$	66,021			$	60,700		$	130,435			$	120,391
Operating expenses:
Cost of services exclusive of depreciation and amortization		26,756				24,648			53,095				48,072
Selling, general and administrative		23,090				20,320			46,925				40,473
Restructuring expense		454				43			390				661
Impairment expense		4,068				—			4,407				99
Depreciation and amortization		14,790				13,299			29,135				26,466
Total operating expenses		69,158				58,310			133,952				115,771
Operating (loss) income		(3,137	)			2,390			(3,517	)			4,620
Other (expense) income:
Other (expense) income, net		(589	)			1,338			(759	)			2,938
(Loss) income from continuing operations before income taxes		(3,726	)			3,728			(4,276	)			7,558
Income tax (benefit) expense		(501	)			2,103			(448	)			2,988
(Loss) income from continuing operations		(3,225	)			1,625			(3,828	)			4,570
Income from discontinued operations, net of tax		—				51,566			—				100,038
Net (loss) income		(3,225	)			53,191			(3,828	)			104,608
Other comprehensive income:
Unrealized income on interest rate hedge, net of tax		—				313			—				1,086
Comprehensive (loss) income	$	(3,225	)		$	53,504		$	(3,828	)		$	105,694
Net (loss) income per share, basic and diluted:
Basic - (Loss) income from continuing operations	$	(0.06	)		$	0.03		$	(0.08	)		$	0.09
Basic - Income from discontinued operations, net of tax	$	—			$	1.03		$	—			$	2.00
Basic net (loss) income per share	$	(0.06	)		$	1.06		$	(0.08	)		$	2.09
Diluted - (Loss) income from continuing operations	$	(0.06	)		$	0.03		$	(0.08	)		$	0.09
Diluted - Income from discontinued operations, net of tax	$	—			$	1.03		$	—			$	2.00
Diluted net (loss) income per share	$	(0.06	)		$	1.06		$	(0.08	)		$	2.09
Weighted average shares outstanding, basic		50,157				49,945			50,133				49,945
Weighted average shares outstanding, diluted		50,157				50,075			50,133				50,067

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

	June 30, 2022			December 31, 2021
Cash and cash equivalents	$	33,335		$	84,344
Other current assets		76,656			82,023
Current assets held for sale		19,821			—
Total current assets		129,812			166,367
Investments		12,897			13,661
Property, plant and equipment, net		609,785			554,162
Intangible assets, net and goodwill		69,612			69,853
Operating lease right-of-use assets		55,872			56,414
Deferred charges and other assets, net		13,439			10,298
Total assets	$	891,417		$	890,733
Current liabilities held for sale		3,843			38
Total other current liabilities		67,211			67,252
Non-current liabilities held for sale		—			3,807
Total other long-term liabilities		176,993			177,361
Total shareholders’ equity		643,370			642,275
Total liabilities and shareholders’ equity	$	891,417		$	890,733

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)	Six Months Ended June 30,
	2022				2021
Cash flows from operating activities:
Net (loss) income	$	(3,828	)		$	104,608
Income from discontinued operations, net of tax		—				100,038
(Loss) income from continuing operations		(3,828	)			4,570
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		29,135				26,466
Stock-based compensation expense		5,528				834
Impairment expense		4,407				99
Deferred income taxes		(392	)			3,132
Other, net		1,985				(201	)
Changes in assets and liabilities:
Accounts receivable		4,430				4,369
Current income taxes		—				(1,305	)
Operating lease assets and liabilities, net		414				(428	)
Other assets		(1,902	)			(6,070	)
Accounts payable		127				560
Other deferrals and accruals		(1,180	)			(3,852	)
Net cash provided by operating activities - continuing operations		38,724				28,174
Net cash provided by operating activities - discontinued operations		—				125,011
Net cash provided by operating activities		38,724				153,185
Cash flows from investing activities:
Capital expenditures		(88,706	)			(79,562	)
Proceeds from sale of assets and other		279				189
Net cash used in investing activities - continuing operations		(88,427	)			(79,373	)
Net cash used in investing activities - discontinued operations		—				(928	)
Net cash used in investing activities		(88,427	)			(80,301	)
Cash flows from financing activities:
Taxes paid for equity award issuances		(835	)			(1,627	)
Payments for debt issuance costs		—				(53	)
Payments for financing arrangements and other		(471	)			(751	)
Net cash used in financing activities - continuing operations		(1,306	)			(2,431	)
Net cash used in financing activities - discontinued operations		—				(17,061	)
Net cash used in financing activities		(1,306	)			(19,492	)
Net (decrease) increase in cash and cash equivalents		(51,009	)			53,392
Cash and cash equivalents, beginning of period		84,344				195,397
Cash and cash equivalents, end of period	$	33,335			$	248,789
Supplemental Disclosures of Cash Flow Information
Interest paid	$	—			$	(7,740	)
Income taxes paid	$	—			$	(20,954	)

Non-GAAP Financial Measures
Adjusted EBITDA

The Company defines Adjusted EBITDA as net income (loss) 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 income (loss) 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. 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, 2022
(in thousands)		Broadband				Tower				Corporate & Eliminations				Consolidated
Net income (loss) from continuing operations		$	4,042			$	2,285			$	(9,552	)		$	(3,225	)
Depreciation and amortization			13,396				633				761				14,790
Impairment expense			4,068				—				—				4,068
Other expense (income), net			65				—				524				589
Income tax expense (benefit)			—				—				(501	)			(501	)
EBITDA			21,571				2,918				(8,768	)			15,721
Stock-based compensation			—				—				2,385				2,385
Restructuring charges and other			443				—				11				454
Adjusted EBITDA		$	22,014			$	2,918			$	(6,372	)		$	18,560
Adjusted EBITDA margin			36	%			62	%			N/A				28	%

Three Months Ended June 30, 2021
(in thousands)		Broadband				Tower				Corporate & Eliminations				Consolidated
Net income (loss) from continuing operations		$	8,117			$	2,509			$	(9,001	)		$	1,625
Depreciation and amortization			11,774				449				1,076				13,299
Other expense (income), net			62				—				(1,400	)			(1,338	)
Income tax expense (benefit)			—				—				2,103				2,103
EBITDA			19,953				2,958				(7,222	)			15,689
Stock-based compensation			—				—				192				192
Restructuring charges and other			28				—				43				71
Adjusted EBITDA		$	19,981			$	2,958			$	(6,987	)		$	15,952
Adjusted EBITDA margin			36	%			64	%		N/A					26	%

Six Months Ended June 30, 2022
(in thousands)		Broadband				Tower				Corporate & Eliminations				Consolidated
Net income (loss) from continuing operations		$	12,169			$	5,038			$	(21,035	)		$	(3,828	)
Depreciation and amortization			25,933				1,117				2,085				29,135
Impairment expense			4,407				—				—				4,407
Other expense (income), net			119				—				640				759
Income tax expense (benefit)			—				—				(448	)			(448	)
EBITDA			42,628				6,155				(18,758	)			30,025
Stock-based compensation			—				—				5,528				5,528
Restructuring charges and other			460				—				(70	)			390
Adjusted EBITDA		$	43,088			$	6,155			$	(13,300	)		$	35,943
Adjusted EBITDA margin			36	%			64	%		N/A					28	%

Six Months Ended June 30, 2021
(in thousands)		Broadband				Tower				Corporate & Eliminations				Consolidated
Net income (loss) from continuing operations		$	18,333			$	5,211			$	(18,974	)		$	4,570
Depreciation and amortization			23,437				930				2,099				26,466
Impairment expense			99				—				—				99
Other expense (income), net			132				—				(3,070	)			(2,938	)
Income tax expense (benefit)			—				—				2,988				2,988
EBITDA			42,001				6,141				(16,957	)			31,185
Stock-based compensation			—				—				834				834
Restructuring charges and other			248				—				666				914
Adjusted EBITDA		$	42,249			$	6,141			$	(15,457	)		$	32,933
Adjusted EBITDA margin			38	%			66	%		N/A					27	%

Segment Results

Three Months Ended June 30, 2022:

(in thousands)	Broadband			Tower			Corporate & Eliminations				Consolidated
External revenue
Residential & SMB	$	47,899		$	—		$	—			$	47,899
Commercial Fiber		9,340			—			—				9,340
RLEC & Other		4,124			—			—				4,124
Tower lease		—			4,615			—				4,615
Service revenue and other		61,363			4,615			—				65,978
Intercompany revenue and other		49			87			(93	)			43
Total revenue		61,412			4,702			(93	)			66,021
Operating expenses
Cost of services		25,440			1,378			(62	)			26,756
Selling, general and administrative		13,958			406			8,726				23,090
Restructuring expense		443			—			11				454
Impairment expense		4,068			—			—				4,068
Depreciation and amortization		13,396			633			761				14,790
Total operating expenses		57,305			2,417			9,436				69,158
Operating income (loss)	$	4,107		$	2,285		$	(9,529	)		$	(3,137	)

Three Months Ended June 30, 2021:

(in thousands)	Broadband			Tower			Corporate & Eliminations				Consolidated
External revenue
Residential & SMB	$	43,989		$	—		$	—			$	43,989
Commercial Fiber		6,531			—			—				6,531
RLEC & Other		3,605			—			—				3,605
Tower lease		—			2,019			—				2,019
Service revenue and other		54,125			2,019			—				56,144
Intercompany revenue and other		2,102			2,595			(141	)			4,556
Total revenue		56,227			4,614			(141	)			60,700
Operating expenses
Cost of services		23,440			1,318			(110	)			24,648
Selling, general and administrative		12,806			338			7,176				20,320
Restructuring expense		27			—			16				43
Depreciation and amortization		11,775			449			1,075				13,299
Total operating expenses		48,048			2,105			8,157				58,310
Operating income (loss)	$	8,179		$	2,509		$	(8,298	)		$	2,390

Six Months Ended June 30, 2022:

(in thousands)	Broadband			Tower			Corporate & Eliminations				Consolidated
External revenue
Residential & SMB	$	94,812		$	—		$	—			$	94,812
Commercial Fiber		18,402			—			—				18,402
RLEC & Other		7,813			—			—				7,813
Tower lease		—			9,361			—				9,361
Service revenue and other		121,027			9,361			—				130,388
Intercompany revenue and other		99			188			(240	)			47
Total revenue		121,126			9,549			(240	)			130,435
Operating expenses
Cost of services		50,608			2,670			(183	)			53,095
Selling, general and administrative		27,430			724			18,771				46,925
Restructuring expense		460			—			(70	)			390
Impairment expense		4,407			—			—				4,407
Depreciation and amortization		25,933			1,117			2,085				29,135
Total operating expenses		108,838			4,511			20,603				133,952
Operating income (loss)	$	12,288		$	5,038		$	(20,843	)		$	(3,517	)

Six Months Ended June 30, 2021:

(in thousands)	Broadband			Tower			Corporate & Eliminations				Consolidated
External revenue
Residential & SMB	$	86,919		$	—		$	—			$	86,919
Commercial Fiber		12,916			—			—				12,916
RLEC & Other		7,236			—			—				7,236
Tower lease		—			4,169			—				4,169
Service revenue and other		107,071			4,169			—				111,240
Intercompany revenue and other		4,310			5,110			(269	)			9,151
Total revenue		111,381			9,279			(269	)			120,391
Operating expenses
Cost of services		45,717			2,566			(211	)			48,072
Selling, general and administrative		23,531			572			16,370				40,473
Restructuring expense		132			—			529				661
Impairment expense		99			—			—				99
Depreciation and amortization		23,437			930			2,099				26,466
Total operating expenses		92,916			4,068			18,787				115,771
Operating income (loss)	$	18,465		$	5,211		$	(19,056	)		$	4,620

Supplemental Information

Broadband Operating Statistics

	June 30, 2022			June 30, 2021
Broadband homes and businesses passed (1)	324,186			257,155
Incumbent Cable	211,681			210,787
Glo Fiber	112,505			46,368
Residential & Small and Medium Business ("SMB") RGUs:
Broadband Data	125,003			111,475
Incumbent Cable	107,878			103,465
Glo Fiber	17,125			7,169
Video	49,027			51,355
Voice	39,535			34,664
Total Residential & SMB RGUs (excludes RLEC)	213,565			197,494
Residential & SMB Penetration (2)
Broadband Data	38.6	%		43.3	%
Incumbent Cable	51.0	%		49.1	%
Glo Fiber	15.2	%		15.5	%
Video	15.1	%		20.0	%
Voice	12.9	%		14.4	%
Fiber route miles	7,906			7,041
Total fiber miles (3)	589,923			440,236

______________________________________________________
(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 June 30,							Six Months Ended June 30,
	2022			2021				2022			2021
Residential and SMB Revenue:
Broadband	$	29,568		$	25,571			$	58,217		$	50,103
Incumbent Cable		26,123			24,177				51,986			47,641
Glo Fiber		3,445			1,394				6,231			2,462
Video		15,210			15,611				30,551			31,263
Voice		2,994			2,893				5,910			5,792
Discounts, adjustments and other		127			(86	)			134			(239	)
Total Revenue	$	47,899		$	43,989			$	94,812		$	86,919
Average RGUs:
Broadband Data		123,153			108,996				121,832			106,954
Incumbent Cable		107,738			102,688				107,878			101,403
Glo Fiber		15,415			6,308				13,954			5,551
Video		49,146			51,715				49,295			52,076
Voice		38,463			33,993				36,650			33,462
ARPU: (1)
Broadband	$	79.94		$	78.17			$	80.02		$	78.05
Incumbent Cable	$	80.82		$	78.48			$	80.85		$	78.30
Glo Fiber	$	74.49		$	73.66			$	74.42		$	73.92
Video	$	103.16		$	100.62			$	103.29		$	100.06
Voice	$	25.95		$	28.37			$	26.88		$	28.85

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(1)   Average Revenue Per RGU calculation = (Residential & SMB Revenue * 1,000) / average RGUs / 3 months

Tower Operating Statistics

	June 30, 2022		June 30, 2021
Macro tower sites	223		223
Tenants	465		448
Average tenants per tower	2.0		1.9