Shenandoah Telecommunications Company Reports Fourth Quarter and Full Year 2023 Results
- Significant growth in Glo Fiber data customers, passings, and revenue.
- Consolidated revenue grew by 7.5% to $287.4 million in 2023.
- Consolidated net income was $8.0 million in 2023 compared to a net loss of $8.4 million in 2022.
- Acquisition agreement to acquire 100% of the equity interests in Horizon Acquisition Parent LLC.
- Consolidated Adjusted EBITDA grew by 19.3% to $90.6 million in 2023.
- Broadband Total Broadband Data Revenue Generating Units grew by 13.0% in 2023.
- Broadband revenue grew by $20.2 million to $269.3 million in 2023.
- Tower segment revenue decreased by 1.5% to $18.6 million in 2023.
- Capital expenditures increased to $256.6 million in 2023.
- Cash and cash equivalents totaled $139.3 million as of December 31, 2023.
- Total indebtedness was $300 million as of December 31, 2023.
- Tower segment revenue decreased by 1.5% in 2023.
- Tower Adjusted EBITDA decreased by 2.8% in 2023.
- RLEC & Other revenue decreased by 6.7% in 2023.
- Tower operating income remained flat in 2023.
- Tower revenue for the fourth quarter of 2023 was consistent with revenue for the fourth quarter of 2022.
Insights
The reported growth in Shenandoah Telecommunications Company's (Shentel) Glo Fiber data customers and passings indicates a robust expansion strategy that has translated into significant revenue growth. A 71.7% increase in data customers and a 58.6% increase in passings are considerable achievements that suggest effective market penetration and operational efficiency. The reported 91.9% revenue growth for Glo Fiber is particularly impressive, outpacing the consolidated revenue growth of 7.5%. This disparity suggests that while Glo Fiber is a strong growth driver, other segments may be experiencing slower growth or facing challenges.
The turnaround from a net loss in 2022 to a net income in 2023 is a positive signal for investors, reflecting improved operational performance and possibly the benefits of strategic initiatives such as network rationalization and cost management. The 19.3% growth in Consolidated Adjusted EBITDA is another highlight, as it is a key indicator of the company's operational profitability and ability to generate cash flow. The forward-looking statement regarding the potential to double Glo Fiber data customer penetration over the next five years is ambitious and, if realized, could significantly enhance shareholder value.
However, the Capital Expenditures (CapEx) increase of $66.9 million, driven by expansion, raises questions about the long-term sustainability of such growth rates and the impact on free cash flow. Investors should consider the balance between growth investments and the generation of positive cash flow, as well as the implications of the planned acquisition of Horizon Acquisition Parent LLC for $385 million.
Shentel's strategic decision to focus on the expansion of its Glo Fiber Markets is indicative of the broader industry trend towards fiber-optic technology to meet growing consumer demand for higher-speed internet services. The reported penetration rates of 17.8% for Glo Fiber Markets and 50.8% for Cable Markets highlight the significant growth potential for Glo Fiber, given the lower current penetration compared to the more mature Cable Markets.
The company's ability to increase Average Revenue per Unit (ARPU) by 4.0% in Glo Fiber Markets is noteworthy as it suggests pricing power and value perception among consumers. The churn rate of 1.0% is also a critical metric, indicating strong customer retention amidst the expansion. The reported growth in Commercial Fiber revenue, despite the loss of T-Mobile backhaul circuits, shows resilience in the company's commercial offerings.
On the downside, the decline in Rural Local Exchange Carrier (RLEC) & Other revenue and the decrease in video subscribers in Cable Markets reflect broader industry challenges, such as the decline in traditional DSL subscribers and the trend of cord-cutting. These trends could have long-term implications for revenue diversification and stability.
Shentel's definitive agreement to acquire Horizon Acquisition Parent LLC and the plans to potentially sell some or all of its tower portfolio as part of its capital-raising strategy are significant strategic moves that require careful legal consideration. Regulatory approval will be a key factor for the acquisition and the outcome will have material implications for the company's operational scope and financial position.
The acquisition's consideration mix of cash and common stock illustrates a balanced approach to financing, which could mitigate the impact on the company's leverage. However, the increase in total indebtedness to $300 million as of the end of 2023 poses potential concerns regarding the company's debt capacity and financial flexibility post-acquisition.
Additionally, the completed sale of 2.5 GHz spectrum indicates proactive portfolio management and the associated cash inflow could have contributed to the company's liquidity position. Legal and regulatory expertise will continue to be pivotal in navigating these strategic initiatives while ensuring compliance and minimizing risk.
EDINBURG, Va., Feb. 21, 2024 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel”) (Nasdaq: SHEN) announced fourth quarter and full year 2023 financial and operating results.
2023 Highlights
- Glo Fiber data customers grew
71.7% year-over-year to approximately 42,000. - Glo Fiber passings grew by approximately 86,400, or
58.6% , to approximately 234,000. - Glo Fiber revenue grew
91.9% to$35.1 million . - Consolidated revenue grew
7.5% to$287.4 million . - Consolidated net income in 2023 was
$8.0 million , compared with consolidated net loss of$8.4 million in 2022. - Consolidated Adjusted EBITDA1 grew
19.3% to$90.6 million in 2023, compared with$76.0 million in 2022. - Announced in October 2023 agreement to acquire
100% of the equity interests in Horizon Acquisition Parent LLC.
“Glo Fiber continues to be the major catalyst for our strong growth and is now our largest line of business in terms of passings. Since our first full year of Glo Fiber operations in 2020, our consolidated revenue and Adjusted EBITDA compounded annual growth rates (“CAGR”) have been industry-leading among publicly-traded broadband companies at
Shentel’s fourth-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, February 21, 2024. The webcast and related materials will be available on Shentel’s Investor Relations website at https://investor.shentel.com/. For Analysts, please register to dial-in at this link.
Full Year 2023 Results
Broadband
- Total Broadband Data Revenue Generating Units (“RGUs”) grew 17,459, or
13.0% , in 2023 to 151,389. Glo Fiber Markets Data RGUs grew 17,424, or71.7% , year-over-year to 41,710, driven by network expansion of 86,393 passings and churn of1.0% . Cable Markets Data RGUs grew 35 to 109,679. Penetration for Glo Fiber Markets and Cable Markets were17.8% and50.8% , respectively, as of December 31, 2023.
- Broadband revenue grew
$20.2 million , or8.1% , to$269.3 million . Residential & SMB revenue in Glo Fiber Markets increased approximately$16.8 million , or91.9% , during 2023, primarily driven by71.7% year-over-year growth in data RGUs and a4.0% increase in data Average Revenue per Unit (“ARPU”). Residential & SMB revenue in Cable Markets, excluding discontinued Beam operations, increased approximately$2.5 million , or1.4% , during 2023, primarily driven by1.8% year-over-year growth in data ARPU. Commercial Fiber revenue increased approximately$3.3 million , or8.5% , during 2023, primarily driven by$3.0 million in T-Mobile non-recurring early termination fees and$0.3 million in recurring revenue driven by year-over-year growth in connections. T-Mobile disconnected 338 backhaul circuits during 2023 as part of their previously announced rationalization of the former Sprint network. The Company expects approximately$1 million of additional annual revenue churn as part of the network rationalization. Rural Local Exchange Carrier (“RLEC”) & Other revenue decreased approximately$1.1 million , or6.7% , compared with 2022, primarily driven by a decline in residential DSL subscribers.
- Broadband operating expenses decreased approximately
$0.2 million , or0.1% , to$228.1 million in 2023, compared with 2022. The primarily drivers were lower impairment charges and depreciation charges resulting from the discontinuation of Beam fixed wireless in 2022 as well as lower payroll costs due to higher capitalized labor. These lower expenses were partially offset by higher line costs due to the expansion of the network into new markets, and higher advertising costs associated with the Company’s expansion of Glo Fiber.
- Broadband operating income in 2023 was
$41.1 million , an increase of98.6% compared with$20.7 million in 2022.
- Broadband Adjusted EBITDA2 in 2023 was
$105.8 million , an increase of17.6% compared with$90.0 million in 2022.
Tower
- Total macro towers and tenants were 219 and 453, respectively, as of December 31, 2023 compared with 222 and 446, respectively, as of December 31, 2022.
- Revenue decreased approximately
$0.3 million , or1.5% , in 2023 to$18.6 million compared with 2022. This decrease was primarily driven by lower intercompany lease revenue from ceasing Beam service in 2022.
- Operating expenses decreased approximately
$0.3 million , or2.8% , in 2023 compared with 2022, primarily driven by lower depreciation as a result of fewer depreciable tower assets in 2023 compared to 2022.
- Tower operating income in 2023 was
$9.5 million , approximately flat compared with$9.5 million in 2022.
- Tower Adjusted EBITDA3 in 2023 was
$11.6 million , a decrease of2.8% compared with$11.9 million in 2022.
1 Non-GAAP measure. See the disclosure captioned “Non-GAAP Financial Measures” below in this press release for more details and a reconciliation to the most comparable GAAP measure.
2 Non-GAAP measure. See the disclosure captioned “Non-GAAP Financial Measures” below in this press release for more details and a reconciliation to the most comparable GAAP measure.
3 Non-GAAP measure. See the disclosure captioned “Non-GAAP Financial Measures” below in this press release for more details and a reconciliation to the most comparable GAAP measure.
Consolidated Fourth Quarter 2023 Results
- Consolidated revenue in the fourth quarter of 2023 grew
3.6% to$72.5 million compared with the fourth quarter of 2022 primarily due to growth of3.7% in the Broadband segment.
- Consolidated net income in the fourth quarter of 2023 was
$2.6 million , compared with net loss of$1.8 million in the fourth quarter of 2022.
- Consolidated Adjusted EBITDA in the fourth quarter of 2023 was
$22.9 million , an increase of$1.9 million , or8.8% , compared with the fourth quarter of 2022 due to growth of8.9% in the Broadband segment and9.3% growth in the Tower segment, partially offset by a9.2% increase in corporate expenses.
Broadband
- Broadband revenue in the fourth quarter of 2023 grew
$2.4 million , or3.7% , to$67.9 million compared with$65.5 million in the fourth quarter of 2022. Residential & SMB revenue in Glo Fiber Markets increased approximately$4.7 million , or79.2% , during 2023, primarily driven71.7% year-over-year growth in data RGUs and7.1% increase in data ARPU. Residential & SMB revenue in Cable Markets decreased approximately$0.4 million , or0.8% , during 2023, primarily driven by a11.2% decrease in video subscribers due to accelerated cord cutting. Commercial Fiber revenue decreased approximately$1.1 million , or10.4% , primarily driven by timing of T-Mobile early termination fees. T-Mobile disconnected 338 backhaul circuits during 2023 as part of their previously announced rationalization of the former Sprint network. RLEC & Other revenue decreased approximately$0.6 million , or15.3% , compared with 2022, primarily driven by a decline in residential DSL subscribers.
- Broadband operating expenses in the fourth quarter of 2023 were
$57.1 million compared with$61.9 million in the fourth quarter of 2022. The decrease was primarily due to$4.8 million in lower depreciation due to 2022 accelerated depreciation of Beam network assets associated with the Company’s decision to permanently cease Beam operations, for which no equivalent accelerated depreciation was present in 2023.
- Broadband operating income in the fourth quarter of 2023 was
$10.8 million , an increase of200% compared with$3.6 million in the fourth quarter of 2022.
- Broadband Adjusted EBITDA in the fourth quarter of 2023 was
$26.8 million , an increase of8.9% compared with$24.6 million for the fourth quarter of 2022.
Tower
- Tower revenue for the fourth quarter of 2023 was consistent with revenue for fourth quarter of 2022.
- Tower operating income in the fourth quarter of 2023 was
$2.5 million , an increase of32.2% compared with$1.9 million for the fourth quarter of 2022, primarily due to lower depreciation and rent expense.
- Tower Adjusted EBITDA in the fourth quarter of 2023 was
$3.0 million , an increase of9.3% compared with$2.7 million for the fourth quarter of 2022.
Other Information
- As previously announced, on October 24, 2023, Shentel entered into a definitive agreement to acquire
100% of the equity interests in Horizon Acquisition Parent LLC for$385 million . Consideration will consist of$305 million in cash and$80 million of Shentel common stock. Closing is expected to occur in the first half of 2024 after regulatory approvals are received.
- The Company plans to raise additional growth capital for the FTTH network expansion, government grant projects and general corporate purposes, which may include the sale of some or all of its tower portfolio as well as exploring other strategic alternatives.
- Capital expenditures were
$256.6 million for the year ended December 31, 2023 compared with$189.6 million in 2022. The$66.9 million increase in capital expenditures was primarily due to higher spending in the Broadband segment driven by the expansion of Glo Fiber Markets.
- As of December 31, 2023, our cash and cash equivalents totaled
$139.3 million and the availability under our revolving line of credit was$100.0 million , for total available liquidity of$239.3 million . During 2023, we borrowed a total of$225.0 million under our term loans and had total indebtedness of$300 million as of December 31, 2023.
- On July 6, 2023, the Company closed on the sale of its 2.5 GHz spectrum for
$17.3 million in cash and$3.8 million in assumed liabilities.
Conference Call and Webcast
Date: Wednesday, February 21, 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 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 fiber optic and cable and 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 approximately 9,900 route miles of fiber and 219 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, among others, the ability to obtain the required regulatory approvals and satisfy the closing conditions required for the Horizon Transaction, Shentel’s ability to obtain the financing for the Horizon Transaction, the closing of the Transaction may not occur on time or at all, 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 - Chief Financial Officer
540-984-5168
Jim.Volk@emp.shentel.com
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands, except per share amounts)
(Figures for the quarters ended December 31, 2023 and 2022 are unaudited)
| Quarter Ended December 31, | Year Ended December 31, | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||
| Service revenue and other | $ | 72,510 | $ | 70,012 | $ | 287,379 | $ | 267,371 | ||||||
| Operating expenses: | ||||||||||||||
| Cost of services exclusive of depreciation and amortization | 25,707 | 26,974 | 106,101 | 107,546 | ||||||||||
| Selling, general and administrative | 26,929 | 23,240 | 103,631 | 92,392 | ||||||||||
| Restructuring expense | — | 220 | — | 1,251 | ||||||||||
| Impairment expense | — | 357 | 2,552 | 5,241 | ||||||||||
| Depreciation and amortization | 16,834 | 21,891 | 65,471 | 68,899 | ||||||||||
| Total operating expenses | 69,470 | 72,682 | 277,755 | 275,329 | ||||||||||
| Operating income (loss) | 3,040 | (2,670 | ) | 9,624 | (7,958 | ) | ||||||||
| Other income (expense): | ||||||||||||||
| Other income (expense), net | (733 | ) | 619 | 1,387 | (1,348 | ) | ||||||||
| Income (loss) before income taxes | 2,307 | (2,051 | ) | 11,011 | (9,306 | ) | ||||||||
| Income tax expense (benefit) | (282 | ) | (228 | ) | 2,973 | (927 | ) | |||||||
| Net income (loss) | $ | 2,589 | $ | (1,823 | ) | $ | 8,038 | $ | (8,379 | ) | ||||
| Other comprehensive income (loss): | ||||||||||||||
| Unrealized (loss) income on interest rate hedge, net of tax | (1,574 | ) | — | 1,668 | — | |||||||||
| Comprehensive (loss) income | $ | 1,015 | $ | (1,823 | ) | $ | 9,706 | $ | (8,379 | ) | ||||
| Net income (loss) per share, basic and diluted: | ||||||||||||||
| Basic net income (loss) per share | $ | 0.05 | $ | (0.04 | ) | $ | 0.16 | $ | (0.17 | ) | ||||
| Diluted net income (loss) per share | $ | 0.05 | $ | (0.04 | ) | $ | 0.16 | $ | (0.17 | ) | ||||
| Weighted average shares outstanding, basic | 50,422 | 50,194 | 50,396 | 50,155 | ||||||||||
| Weighted average shares outstanding, diluted | 50,971 | 50,194 | 50,715 | 50,155 | ||||||||||
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| (in thousands) | 2023 | 2022 | |||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | $ | 139,255 | $ | 44,061 | |
| Accounts receivable, net of allowance for credit losses of | 19,782 | 20,615 | |||
| Income taxes receivable | 4,691 | 29,755 | |||
| Prepaid expenses and other | 11,782 | 11,509 | |||
| Current assets held for sale | 561 | 22,622 | |||
| Total current assets | 176,071 | 128,562 | |||
| Investments | 13,198 | 12,971 | |||
| Property, plant and equipment, net | 879,499 | 687,553 | |||
| Goodwill and intangible assets, net | 81,123 | 81,515 | |||
| Operating lease right-of-use assets | 50,640 | 53,859 | |||
| Deferred charges and other assets | 13,698 | 13,259 | |||
| Total assets | $ | 1,214,229 | $ | 977,719 | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||
| Current liabilities: | |||||
| Current maturities of long-term debt, net of unamortized loan fees | $ | 7,095 | $ | 648 | |
| Accounts payable | 53,546 | 49,173 | |||
| Advanced billings and customer deposits | 13,241 | 12,425 | |||
| Accrued compensation | 11,749 | 9,616 | |||
| Current operating lease liabilities | 3,081 | 2,829 | |||
| Accrued liabilities and other | 9,643 | 17,906 | |||
| Current liabilities held for sale | — | 3,824 | |||
| Total current liabilities | 98,355 | 96,421 | |||
| Long-term debt, less current maturities, net of unamortized loan fees | 292,804 | 74,306 | |||
| Other long-term liabilities: | |||||
| Deferred income taxes | 88,147 | 84,600 | |||
| Asset retirement obligations | 10,069 | 9,932 | |||
| Benefit plan obligations | 3,943 | 3,758 | |||
| Non-current operating lease liabilities | 48,358 | 50,477 | |||
| Other liabilities | 19,883 | 20,218 | |||
| Total other long-term liabilities | 170,400 | 168,985 | |||
| Commitments and contingencies | |||||
| Shareholders’ equity: | |||||
| Common stock, no par value, authorized 96,000; 50,272 and 50,110 issued and outstanding at December 31, 2023 and 2022, respectively | — | — | |||
| Additional paid in capital | 66,933 | 57,453 | |||
| Retained earnings | 584,069 | 580,554 | |||
| Accumulated other comprehensive income, net of taxes | 1,668 | — | |||
| Total shareholders’ equity | 652,670 | 638,007 | |||
| Total liabilities and shareholders’ equity | $ | 1,214,229 | $ | 977,719 | |
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| (in thousands) | 2023 | 2022 | |||||
| Cash flows from operating activities: | |||||||
| Net income (loss) | $ | 8,038 | $ | (8,379 | ) | ||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
| Depreciation and amortization | 64,981 | 68,175 | |||||
| Amortization of intangible assets | 490 | 724 | |||||
| Accretion of asset retirement obligations | 621 | 531 | |||||
| Provision for credit losses | 2,898 | 1,972 | |||||
| Stock-based compensation expense, net of amount capitalized | 10,033 | 8,528 | |||||
| Deferred income taxes | 2,973 | (1,414 | ) | ||||
| Impairment expense | 2,552 | 5,241 | |||||
| Gain on sale of FCC spectrum licenses | (1,328 | ) | — | ||||
| Other, net | (504 | ) | 427 | ||||
| Changes in assets and liabilities: | |||||||
| Accounts receivable | (189 | ) | (583 | ) | |||
| Current income taxes | 25,064 | 434 | |||||
| Operating lease right-of-use assets | 3,614 | 6,322 | |||||
| Other assets | 5,043 | (451 | ) | ||||
| Accounts payable | (2,869 | ) | 19 | ||||
| Lease liabilities | (3,098 | ) | (5,471 | ) | |||
| Other deferrals and accruals | (4,545 | ) | (1,180 | ) | |||
| Net cash provided by operating activities | 113,774 | 74,895 | |||||
| Cash flows from investing activities: | |||||||
| Capital expenditures | (256,550 | ) | (189,609 | ) | |||
| Government grants received | 1,904 | — | |||||
| Proceeds from the sale of FCC spectrum licenses | 17,300 | — | |||||
| Refund received for deposit on FCC spectrum leases | — | 3,996 | |||||
| Proceeds from sale of assets and other | 655 | 1,434 | |||||
| Net cash used in investing activities | (236,691 | ) | (184,179 | ) | |||
| Cash flows from financing activities: | |||||||
| Proceeds from credit facility borrowings | 225,000 | 75,000 | |||||
| Payments for debt issuance costs | (300 | ) | — | ||||
| Dividends paid, net of dividends reinvested | (4,523 | ) | (3,991 | ) | |||
| Taxes paid for equity award issuances | (1,387 | ) | (1,076 | ) | |||
| Payments for financing arrangements and other | (679 | ) | (932 | ) | |||
| Net cash provided by financing activities | 218,111 | 69,001 | |||||
| Net increase (decrease) in cash and cash equivalents | 95,194 | (40,283 | ) | ||||
| Cash and cash equivalents, beginning of period | 44,061 | 84,344 | |||||
| Cash and cash equivalents, end of period | $ | 139,255 | $ | 44,061 | |||
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), 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.
| Year Ended December 31, 2023 | ||||||||||||||||
| (in thousands) | Broadband | Tower | Corporate & Eliminations | Consolidated | ||||||||||||
| Net income (loss) | $ | 42,308 | $ | 9,495 | $ | (43,765 | ) | $ | 8,038 | |||||||
| Depreciation and amortization | 61,897 | 2,103 | 1,471 | 65,471 | ||||||||||||
| Impairment expense | 2,552 | — | — | 2,552 | ||||||||||||
| Other income, net | (1,179 | ) | — | (208 | ) | (1,387 | ) | |||||||||
| Income tax expense (benefit) | — | — | 2,973 | 2,973 | ||||||||||||
| Stock-based compensation | — | — | 10,033 | 10,033 | ||||||||||||
| Restructuring charges and transaction related fees | 221 | — | 2,694 | 2,915 | ||||||||||||
| Adjusted EBITDA | $ | 105,799 | $ | 11,598 | $ | (26,802 | ) | $ | 90,595 | |||||||
| Adjusted EBITDA margin | 39 | % | 62 | % | N/A | 32 | % | |||||||||
| Year Ended December 31, 2022 | ||||||||||||||||
| (in thousands) | Broadband | Tower | Corporate & Eliminations | Consolidated | ||||||||||||
| Net income (loss) | $ | 20,467 | $ | 9,512 | $ | (38,358 | ) | $ | (8,379 | ) | ||||||
| Depreciation and amortization | 63,175 | 2,416 | 3,308 | 68,899 | ||||||||||||
| Impairment expense | 5,241 | — | — | 5,241 | ||||||||||||
| Other expense, net | 240 | — | 1,108 | 1,348 | ||||||||||||
| Income tax expense (benefit) | — | — | (927 | ) | (927 | ) | ||||||||||
| Stock-based compensation | — | — | 8,528 | 8,528 | ||||||||||||
| Restructuring charges and transaction related fees | 849 | — | 402 | 1,251 | ||||||||||||
| Adjusted EBITDA | $ | 89,972 | $ | 11,928 | $ | (25,939 | ) | $ | 75,961 | |||||||
| Adjusted EBITDA margin | 36 | % | 63 | % | N/A | 28 | % | |||||||||
| Quarter Ended December 31, 2023 | ||||||||||||||||
| (in thousands) | Broadband | Tower | Corporate & Eliminations | Consolidated | ||||||||||||
| Net income (loss) | $ | 10,791 | $ | 2,490 | $ | (10,692 | ) | $ | 2,589 | |||||||
| Depreciation and amortization | 15,995 | 503 | 336 | 16,834 | ||||||||||||
| Impairment expense | — | — | — | — | ||||||||||||
| Other expense, net | 20 | — | 713 | 733 | ||||||||||||
| Income tax benefit | — | — | (282 | ) | (282 | ) | ||||||||||
| Stock-based compensation | — | — | 1,669 | 1,669 | ||||||||||||
| Restructuring charges and transaction related fees | 16 | — | 1,321 | 1,337 | ||||||||||||
| Adjusted EBITDA | $ | 26,822 | $ | 2,993 | $ | (6,935 | ) | $ | 22,880 | |||||||
| Adjusted EBITDA margin | 39 | % | 64 | % | N/A | 32 | % | |||||||||
| Quarter Ended December 31, 2022 | ||||||||||||||||
| (in thousands) | Broadband | Tower | Corporate & Eliminations | Consolidated | ||||||||||||
| Net income (loss) | $ | 3,546 | $ | 1,884 | $ | (7,253 | ) | $ | (1,823 | ) | ||||||
| Depreciation and amortization | 20,451 | 854 | 586 | 21,891 | ||||||||||||
| Impairment expense | 357 | — | — | 357 | ||||||||||||
| Other expense (income), net | 63 | — | (682 | ) | (619 | ) | ||||||||||
| Income tax benefit | — | — | (228 | ) | (228 | ) | ||||||||||
| Stock-based compensation | — | — | 1,229 | 1,229 | ||||||||||||
| Restructuring charges and transaction related fees | 220 | — | — | 220 | ||||||||||||
| Adjusted EBITDA | $ | 24,637 | $ | 2,738 | $ | (6,348 | ) | $ | 21,027 | |||||||
| Adjusted EBITDA margin | 38 | % | 58 | % | N/A | 30 | % | |||||||||
Segment Results
Year ended December 31, 2023
(in thousands) | Broadband | Tower | Corporate & Eliminations | Consolidated | |||||||||
| External revenue | |||||||||||||
| Residential & SMB - Cable Markets1 | $ | 176,879 | $ | — | $ | — | $ | 176,879 | |||||
| Residential & SMB - Glo Fiber Markets1 | 35,103 | — | — | 35,103 | |||||||||
| Commercial Fiber | 42,132 | — | — | 42,132 | |||||||||
| RLEC & Other | 14,791 | — | — | 14,791 | |||||||||
| Tower lease | — | 18,474 | — | 18,474 | |||||||||
| Service revenue and other | 268,905 | 18,474 | — | 287,379 | |||||||||
| Intercompany revenue and other | 348 | 161 | (509 | ) | — | ||||||||
| Total revenue | 269,253 | 18,635 | (509 | ) | 287,379 | ||||||||
| Operating expenses | |||||||||||||
| Cost of services | 100,841 | 5,625 | (365 | ) | 106,101 | ||||||||
| Selling, general and administrative | 62,834 | 1,412 | 39,385 | 103,631 | |||||||||
| Impairment expense | 2,552 | — | — | 2,552 | |||||||||
| Depreciation and amortization | 61,897 | 2,103 | 1,471 | 65,471 | |||||||||
| Total operating expenses | 228,124 | 9,140 | 40,491 | 277,755 | |||||||||
| Operating income (loss) | $ | 41,129 | $ | 9,495 | $ | (41,000 | ) | $ | 9,624 | ||||
Year ended December 31, 2022
| (in thousands) | Broadband | Tower | Corporate & Eliminations | Consolidated | ||||||||||
| External revenue | ||||||||||||||
| Residential & SMB - Cable Markets1 | $ | 175,681 | $ | — | $ | — | $ | 175,681 | ||||||
| Residential & SMB - Glo Fiber Markets1 | 18,293 | — | — | 18,293 | ||||||||||
| Commercial Fiber | 38,821 | — | — | 38,821 | ||||||||||
| RLEC & Other | 16,035 | — | — | 16,035 | ||||||||||
| Tower lease | — | 18,541 | — | 18,541 | ||||||||||
| Service revenue and other | 248,830 | 18,541 | — | 267,371 | ||||||||||
| Intercompany revenue and other | 185 | 378 | (563 | ) | — | |||||||||
| Total revenue | 249,015 | 18,919 | (563 | ) | 267,371 | |||||||||
| Operating expenses | ||||||||||||||
| Cost of services | 102,267 | 5,712 | (433 | ) | 107,546 | |||||||||
| Selling, general and administrative | 56,776 | 1,279 | 34,337 | 92,392 | ||||||||||
| Restructuring expense | 849 | — | 402 | 1,251 | ||||||||||
| Impairment expense | 5,241 | — | — | 5,241 | ||||||||||
| Depreciation and amortization | 63,175 | 2,416 | 3,308 | 68,899 | ||||||||||
| Total operating expenses | 228,308 | 9,407 | 37,614 | 275,329 | ||||||||||
| Operating income (loss) | $ | 20,707 | $ | 9,512 | $ | (38,177 | ) | $ | (7,958 | ) | ||||
Quarter ended December 31, 2023
(in thousands) | Broadband | Tower | Corporate & Eliminations | Consolidated | |||||||||
| External revenue | |||||||||||||
| Residential & SMB - Cable Markets1 | $ | 44,041 | $ | — | $ | — | $ | 44,041 | |||||
| Residential & SMB - Glo Fiber Markets1 | $ | 10,611 | $ | — | $ | — | $ | 10,611 | |||||
| Commercial Fiber | 9,766 | — | — | 9,766 | |||||||||
| RLEC & Other | 3,479 | — | — | 3,479 | |||||||||
| Tower lease | — | 4,613 | — | 4,613 | |||||||||
| Service revenue and other | 67,897 | 4,613 | — | 72,510 | |||||||||
| Intercompany revenue and other | 27 | 49 | (76 | ) | — | ||||||||
| Total revenue | 67,924 | 4,662 | (76 | ) | 72,510 | ||||||||
| Operating expenses | |||||||||||||
| Cost of services | 24,394 | 1,360 | (47 | ) | 25,707 | ||||||||
| Selling, general and administrative | 16,724 | 309 | 9,896 | 26,929 | |||||||||
| Depreciation and amortization | 15,995 | 503 | 336 | 16,834 | |||||||||
| Total operating expenses | 57,113 | 2,172 | 10,185 | 69,470 | |||||||||
| Operating income (loss) | $ | 10,811 | $ | 2,490 | $ | (10,261 | ) | $ | 3,040 | ||||
Quarter ended December 31, 2022
(in thousands) | Broadband | Tower | Corporate & Eliminations | Consolidated | ||||||||||
| External revenue | ||||||||||||||
| Residential & SMB - Cable Markets1 | $ | 44,540 | $ | — | $ | — | $ | 44,540 | ||||||
| Residential & SMB - Glo Fiber Markets1 | 5,922 | — | — | 5,922 | ||||||||||
| Commercial Fiber | 10,897 | — | — | 10,897 | ||||||||||
| RLEC & Other | 4,083 | — | — | 4,083 | ||||||||||
| Tower lease | — | 4,570 | — | 4,570 | ||||||||||
| Service revenue and other | 65,442 | 4,570 | — | 70,012 | ||||||||||
| Intercompany revenue and other | 61 | 123 | (184 | ) | — | |||||||||
| Total revenue | 65,503 | 4,693 | (184 | ) | 70,012 | |||||||||
| Operating expenses | ||||||||||||||
| Cost of services | 25,466 | 1,658 | (150 | ) | 26,974 | |||||||||
| Selling, general and administrative | 15,400 | 297 | 7,543 | 23,240 | ||||||||||
| Restructuring expense | 220 | — | — | 220 | ||||||||||
| Impairment expense | 357 | — | — | 357 | ||||||||||
| Depreciation and amortization | 20,451 | 854 | 586 | 21,891 | ||||||||||
| Total operating expenses | 61,894 | 2,809 | 7,979 | 72,682 | ||||||||||
| Operating income (loss) | $ | 3,609 | $ | 1,884 | $ | (8,163 | ) | $ | (2,670 | ) | ||||
_________________________________________
(1) Shentel has presented Residential & SMB - Cable Markets and Residential & SMB - Glo Fiber Markets separately for 2023. These revenues were previously reported in one line under the description “Residential & SMB”. Shentel has amended the presentation for 2022 for comparability.
Supplemental Information
Broadband Operating Statistics
| December 31, 2023 | December 31, 2022 | |||||
| Broadband homes and businesses passed (1) | 449,635 | 359,529 | ||||
| Cable Markets | 215,763 | 212,050 | ||||
| Glo Fiber Markets | 233,872 | 147,479 | ||||
| Residential & Small and Medium Business ("SMB") Revenue Generating Units ("RGUs"): | ||||||
| Broadband Data | 151,389 | 133,930 | ||||
| Cable Markets | 109,679 | 109,644 | ||||
| Glo Fiber Markets | 41,710 | 24,286 | ||||
| Video | 43,152 | 46,975 | ||||
| Voice | 40,757 | 39,951 | ||||
| Total Residential & SMB RGUs (excludes RLEC) | 235,298 | 220,856 | ||||
| Residential & SMB Penetration (2) | ||||||
| Broadband Data | 33.7 | % | 37.3 | % | ||
| Cable Markets | 50.8 | % | 51.7 | % | ||
| Glo Fiber Markets | 17.8 | % | 16.5 | % | ||
| Video | 9.6 | % | 13.1 | % | ||
| Voice | 9.5 | % | 11.7 | % | ||
| Fiber route miles | 9,875 | 8,346 | ||||
| Total fiber miles (3) | 861,980 | 656,033 | ||||
_________________________________________
(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 RGUs 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 | ||||||||||||
| Quarter Ended December 31, | Year Ended December 31, | |||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||
| Residential and SMB Revenue: | ||||||||||||
| Broadband Data | $ | 36,679 | $ | 31,916 | $ | 139,102 | $ | 120,803 | ||||
| Cable Markets | 27,400 | 26,945 | 108,822 | 105,433 | ||||||||
| Glo Fiber Markets | 9,279 | 4,971 | 30,280 | 15,370 | ||||||||
| Video | 13,791 | 14,558 | 56,924 | 60,023 | ||||||||
| Voice | 3,057 | 3,079 | 12,203 | 12,030 | ||||||||
| Discounts and adjustments | 1,125 | 909 | 3,753 | 1,118 | ||||||||
| Total Revenue | $ | 54,652 | $ | 50,462 | $ | 211,982 | $ | 193,974 | ||||
| Average RGUs: | ||||||||||||
| Broadband Data | 149,134 | 132,123 | 142,598 | 125,484 | ||||||||
| Cable Markets | 109,528 | 109,403 | 109,591 | 108,053 | ||||||||
| Glo Fiber Markets | 39,606 | 22,720 | 33,007 | 17,431 | ||||||||
| Video | 43,621 | 47,571 | 44,876 | 48,654 | ||||||||
| Voice | 40,726 | 39,910 | 40,372 | 38,217 | ||||||||
| ARPU: | ||||||||||||
| Broadband Data | $ | 81.98 | $ | 80.46 | $ | 81.27 | $ | 80.14 | ||||
| Cable Markets | $ | 83.39 | $ | 82.10 | $ | 82.75 | $ | 81.31 | ||||
| Glo Fiber Markets | $ | 78.10 | $ | 72.93 | $ | 76.45 | $ | 73.48 | ||||
| Video | $ | 105.38 | $ | 102.01 | $ | 105.71 | $ | 102.80 | ||||
| Voice | $ | 25.02 | $ | 25.72 | $ | 25.19 | $ | 26.23 | ||||
_________________________________________
(1) Average Revenue Per Data RGU calculation = (Residential & SMB Revenue * 1,000) / average data RGUs / 12 months
Tower Operating Statistics
| December 31, 2023 | December 31, 2022 | |||
| Macro tower sites | 219 | 222 | ||
| Tenants | 453 | 446 | ||
| Average tenants per tower | 2.0 | 1.9 |
FAQ
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