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Shenandoah Telecommunications Company Reports First Quarter 2021 Results

/EIN News/ -- EDINBURG, Va., April 29, 2021 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel”) (Nasdaq: SHEN) announced first quarter 2021 financial and operating results.

First Quarter 2021 Highlights  

  • Broadband data net additions grew 61.9% to 4,245 including 1,366 and 370 for Glo Fiber and Beam, respectively.
  • Broadband data churn of 1.29%, 0.86% and 0.99% for incumbent cable, Glo Fiber and Beam, respectively.
  • In addition to the launch of Salem, Virginia, in January, Glo Fiber launched in two additional markets in April, Roanoke and Lynchburg Virginia.
  • Total Broadband homes and businesses passed grew over 13,000 to approximately 260,000.
  • Earnings per diluted share was $1.03 consisting of $0.06 for continuing operations and $0.97 for discontinued operations.

“We made excellent progress in executing our 2021 plan with strong growth in broadband data net additions, newly constructed passings, revenues and Adjusted OIBDA,” said President and CEO, Christopher E. French. “In particular, we are very pleased with our broadband data churn result in the quarter. We believe strongly that we have a superior value proposition to our competitors in all of the markets we serve and the continued gains in customer satisfaction we are experiencing are strong validation of our broadband investment thesis.”  

Shentel's first-quarter earnings conference call will be webcast at 8:00 a.m. ET on Friday, April 30, 2021. The webcast and related materials will be available on Shentel’s Investor Relations website at https://investor.shentel.com/.

Consolidated First Quarter 2021 Results

  • Revenue in the first quarter of 2021 grew 12.3% to $59.7 million due to the growth of 25.1% in Towers and 10.8% in Broadband segments.
  • Adjusted OIBDA in the first quarter of 2021 grew 19.1% to $17.1 million due to 8.3% growth in Broadband, and 40.5% growth in Tower.
  • Operating income in the first quarter of 2021 was $2.4 million compared with a loss of $1.4 million in the first quarter of 2020.
  • Earnings from continuing operations per diluted share was $0.06 in the first quarter of 2021 and earnings from discontinued operations grew 259.3% to $0.97 per diluted share from the first quarter of 2020.

Broadband

  • Broadband revenue in the first quarter of 2021 grew $5.4 million or 10.8% to $55.2 million compared with $49.8 million in the first quarter of 2020, primarily driven by $5.9 million or 16.0% increase in Residential and SMB revenue on 24.1% increase in broadband data RGUs. RLEC revenue declined by $0.6 million, or 15.2%, to $3.7 million due primarily to a decline in residential DSL subscribers, lower governmental support and lower intercompany phone service. We expect RLEC revenue to continue to decline.
  • Broadband operating expenses in the first quarter of 2021 were $44.7 million compared to $39.1 million in the first quarter of 2020, driven by costs incurred to support the growth of Glo Fiber and Beam fixed wireless, including a $2.1 million increase in compensation expense primarily from increased staffing, $1.7 million increase in depreciation, a $0.9 million increase in software and professional fees, and a $0.5 million increase in programming fees.
  • Broadband Adjusted OIBDA in the first quarter of 2021 grew 8.3% to $22.4 million, compared with $20.7 million for the first quarter of 2020.
  • Broadband Operating income in the first quarter of 2021 was $10.4 million, compared to $10.7 million in the first quarter of 2020.

Tower

  • Tower revenue grew 25.1% to $4.7 million due to 8.6% increase in tenants and 14.7% increase in average revenue per tenant.
  • Tower Adjusted OIBDA in the first quarter of 2021 grew 40.5% to $3.2 million, compared with $2.3 million for the first quarter of 2020.
  • Tower operating income in the first quarter of 2021 was consistent with 2020.

Other Information

  • The closing of the sale of our Wireless assets is now expected to occur in early third quarter 2021, subject to execution of the definitive asset purchase agreement, securing required regulatory approvals and fulfillment of customary closing conditions. The Company and T-Mobile submitted required regulatory filings to the Department of Justice (DOJ), the Federal Communications Commission (FCC), and the Public Service Commission of West Virginia (PSCWV), in March 2021. The premerger notification waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, expired on April 26, 2021, without the DOJ’s Antitrust Division or the Federal Trade Commission taking any action in connection with the proposed transaction thus allowing the parties to consummate the transaction upon receipt of pending regulatory approvals from the FCC and the PSCWV.
  • In connection with the pending sale of the Wireless assets, we announced a workforce reduction that is expected to result in the termination of approximately 340 employees, or 30% of the Company’s workforce. Approximately 90% of the reductions are employees who support wireless operations and who will not automatically transfer to T-Mobile as part of the pending Wireless asset sale. Most of the employees impacted by the workforce reduction will exit the Company in 2021 following the closing of the pending sale and any required transition services.
  • The Company currently expects to incur approximately $5.8 million of severance expense during 2021, with approximately $1.7 million attributable to continuing operations and $4.1 million related to discontinued operations. Approximately $0.8 million of severance expense was recognized during the first quarter of 2021, with $0.6 million related to continuing operations and $0.2 million related to discontinued operations. The remaining severance expenses are expected to be incurred when the sale of our Wireless operations is completed, which is expected to be during the third quarter of 2021. The workforce reduction is expected to decrease the Company's annualized run-rate operating expenses for continuing operations by approximately $4 million.
  • As previously announced, the Company currently expects the after-tax proceeds from the sale of our discontinued Wireless operations to be approximately $1.5 billion, which will be used repay approximately $689 million of outstanding term loans under our existing credit agreement (which will then be terminated) and to fund a special dividend of $18.75 per share to Shentel’s shareholders. The Company expects to pay the special dividend in the third quarter 2021 after the close of the transaction, subject to the approval of Shentel’s Board of Directors. Additionally, the Company intends to repay approximately $3 million of swap liabilities.
  • Cash and cash equivalents grew $33.8 million to $229.2 million as of March 31, 2021 driven by strong cash flow from discontinued operations. The Company had liquidity of approximately $304.2 million, including $75.0 million of revolving line of credit availability.
  • Capital expenditures were $39.5 million for the three months ended March 31, 2021 compared with $23.4 million in the comparable 2020 period. The $16.1 million increase in capital expenditures was primarily due to higher spending in the Broadband segment driven by the expansion of Glo Fiber and Beam.

2021 Outlook
The Company is affirming the full-year 2021 guidance as summarized below:

($ in millions)   Year Ending December 31,   Year Ended December 31, 2019   % Change 2020 to 2021 Midpoint   % Change 2019 to 2020
    2021   2020      
    Guidance   Actual      
    Low   High          
Revenue   $ 241     $ 248     $ 221       $ 207       10.6 %   6.8 %
Operating Income (loss)   $ 7     $ 14     $ (1 )     $ (1 )     nm   %
Adjusted OIBDA   $ 69     $ 76     $ 57       $ 49       27.2 %   16.3 %
Capital Expenditures   $ 157     $ 168     $ 120       $ 67       35.4 %   79.1 %

Adjusted OIBDA is a non-GAAP financial measure that is not determined in accordance with US generally accepted accounting principles. Reconciliations of this non-GAAP financial measures are provided in this press release after the consolidated financial statements.

Conference Call and Webcast

Teleconference Information:

Date: April 30, 2021
Time: 8:00 A.M. (ET)
Dial in number: 1-888-695-7639

Password: 5934209

Audio webcast: http://investor.shentel.com/

An audio replay of the call will be available approximately two hours after the call is complete, through May 30, 2021 by calling (855) 859-2056.

About Shenandoah Telecommunications

Shenandoah Telecommunications Company (Shentel) provides a broad range of diversified communications services through its high speed, state-of-the-art wireless, cable and fiber optic and fixed wireless networks to customers in the Mid-Atlantic United States. The Company’s services include: broadband internet, video, and digital voice; fiber optic Ethernet, wavelength and leasing; telephone voice and digital subscriber line; tower colocation leasing; and wireless voice and data. Shentel is the exclusive personal communications service (“PCS”) Affiliate of Sprint in a multi-state area covering large portions of central and western Virginia, south-central Pennsylvania, West Virginia, and portions of Maryland, and Kentucky. For more information, please visit www.shentel.com.

This release contains forward-looking statements that are subject to various risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of unforeseen factors. A discussion of factors that may cause actual results to differ from management's projections, forecasts, estimates and expectations, is available in the Company’s filings with the SEC. Those factors may include changes in general economic conditions, increases in costs, changes in regulation and other competitive factors.

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
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share amounts) Three Months Ended
March 31,
  2021   2020
Service revenue and other $ 59,691     $ 53,134    
Operating expenses:      
Cost of services 23,283     20,317    
Selling, general and administrative 20,153     22,096    
Restructuring expense 618        
Depreciation and amortization 13,266     12,085    
Total operating expenses 57,320     54,498    
Operating income (loss) 2,371     (1,364 )  
Other income:      
Other income, net 1,600     749    
Income (loss) before income taxes 3,971     (615 )  
Income tax expense (benefit) 922     (765 )  
Income from continuing operations 3,049     150    
Income from discontinued operations, net of tax 48,472     13,130    
Net income 51,521     13,280    
       
Net income per share, basic and diluted:      
Basic - Income from continuing operations $ 0.06     $    
Basic - Income from discontinued operations, net of tax $ 0.97     $ 0.27    
Basic net income per share $ 1.03     $ 0.27    
       
Diluted - Income from continuing operations $ 0.06     $    
Diluted - Income from discontinued operations, net of tax $ 0.97     $ 0.27    
Diluted net income per share $ 1.03     $ 0.27    
       
Weighted average shares outstanding, basic 49,947     49,888    
Weighted average shares outstanding, diluted 50,081     50,036    
             

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

  March 31,
2021
  December 31,
2020
       
Cash and cash equivalents $ 229,182     $ 195,397  
Other current assets 79,561     80,024  
Current assets held for sale 1,117,528     1,133,294  
Total current assets 1,426,271     1,408,715  
       
Investments 13,376     13,769  
Property, plant and equipment, net 468,383     440,427  
Intangible assets, net and Goodwill 106,543     106,759  
Operating lease right-of-use assets 52,738     50,387  
Deferred charges and other assets, net 14,998     11,650  
Non-current assets held for sale      
Total assets $ 2,082,309     $ 2,031,707  
       
Current liabilities held for sale 443,089     $ 452,202  
Total current liabilities 759,228     $ 755,859  
Long-term debt, less current maturities      
Non-current liabilities held for sale      
Other liabilities 246,038     241,252  
Total shareholders’ equity 633,954     582,394  
Total liabilities and shareholders’ equity $ 2,082,309     $ 2,031,707  
               


SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


  Three Months Ended
March 31,
(in thousands) 2021   2020
Cash flows from operating activities:      
Net income $ 51,521       $ 13,280    
Income from operations of discontinued operations, net of tax 48,472       13,130    
Income from continuing operations 3,049       150    
       
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation 13,043       11,931    
Amortization of intangible assets 223       154    
Bad debt expense 137       205    
Stock based compensation expense, net of amount capitalized 642       2,739    
Deferred income taxes 5,256       (385 )  
Other adjustments (339 )     (257 )  
Changes in assets and liabilities (12,875 )     (1,283 )  
Net cash provided by operating activities – continuing operations 9,136       13,254    
Net cash provided by operating activities – discontinued operations 75,530       47,854    
Net cash provided by operating activities 84,666       61,108    
       
Cash flows from investing activities:      
Capital expenditures (39,482 )     (23,362 )  
Proceeds from sale of assets and other 14       263    
Net cash used in investing activities – continuing operations (39,468 )     (23,099 )  
Net cash used in investing activities – discontinued operations (882 )     (8,926 )  
Net cash used in investing activities (40,350 )     (32,025 )  
       
Cash flows from financing activities:      
Taxes paid for equity award issuances (1,486 )     (1,945 )  
Other (496 )     (27 )  
Net cash used in financing activities – continuing operations (1,982 )     (1,972 )  
Net cash used in financing activities – discontinued operations (8,549 )     (8,530 )  
Net cash used in financing activities (10,531 )     (10,502 )  
       
Net increase in cash and cash equivalents 33,785       18,581    
Cash and cash equivalents, beginning of period 195,397       101,651    
Cash and cash equivalents, end of period $ 229,182       $ 120,232    
                   

Non-GAAP Financial Measures
Adjusted OIBDA

Adjusted OIBDA represents Operating income before depreciation, amortization of intangible assets, stock-based compensation and certain other items of revenue, expense, gain or loss not reflective of our operating performance, which may or may not be recurring in nature.

Adjusted OIBDA is a non-GAAP financial measure that we use to evaluate our operating performance in comparison to our competitors. Management believes that analysts and investors use Adjusted OIBDA as a supplemental measure of operating performance to facilitate comparisons with other telecommunications companies. This measure isolates and evaluates operating performance by excluding the cost of financing (e.g., interest expense), as well as the non-cash depreciation and amortization of past capital investments, non-cash share-based compensation expense, and certain other items of revenue, expense, gain or loss not reflective of our operating performance.

Adjusted OIBDA has limitations as an analytical tool and should not be considered in isolation or as a substitute for operating income, net income or any other measure of financial performance reported in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).

The following tables reconcile Adjusted OIBDA to operating income, which we consider to be the most directly comparable GAAP financial measure:

Three Months Ended March 31, 2021                
(in thousands)   Broadband   Tower   Corporate & Eliminations   Consolidated
Operating income (loss) from continuing operations   $ 10,427     $ 2,702     $ (10,758 )     $ 2,371  
Depreciation   11,538     481     1,024       13,043  
Amortization   223               223  
OIBDA   22,188     3,183     (9,734 )     15,637  
Stock compensation expense           642       642  
Deal advisory fees   115         109       224  
Restructuring expense   105         513       618  
Adjusted OIBDA   $ 22,408     $ 3,183     $ (8,470 )     $ 17,121  
                                   


Three Months Ended March 31, 2020                
(in thousands)   Broadband   Tower   Corporate & Eliminations   Consolidated
Operating income (loss) from continuing operations   $ 10,662     $ 1,795     $ (13,821 )     $ (1,364 )  
Depreciation   9,880     470     1,581       11,931    
Amortization   154               154    
OIBDA   20,696     2,265     (12,240 )     10,721    
Stock compensation expense           2,739       2,739    
Deal advisory fees           910       910    
Adjusted OIBDA   $ 20,696     $ 2,265     $ (8,591 )     $ 14,370    
                                     

2021 Outlook – Adjusted OIBDA

($ in millions)   Year Ending December 31,   Year Ended December 31, 2019
    2021   2020  
    Guidance   Actual  
    Low   High      
Operating Income (loss)   $ 7     $ 14     $ (1 )     $ (1 )  
Depreciation   $ 53     $ 53     $ 48       $ 46    
Amortization   $ 1     $ 1     $ 1       $ 1    
Stock compensation expense   $ 6     $ 6     $ 6       $ 3    
Deal advisory fees   $     $     $ 3       $    
Restructuring expense and other   $ 2     $ 2     $       $    
Adjusted OIBDA   $ 69     $ 76     $ 57       $ 49    
                                     

Segment Results

Three Months Ended March 31, 2021:

(in thousands)   Broadband   Tower   Corporate & Eliminations   Consolidated
External revenue                
Residential & SMB   $ 42,930     $     $       $ 42,930  
Commercial Fiber   6,385               6,385  
RLEC & Other   3,631               3,631  
Tower lease       2,150           2,150  
Service revenue and other   52,946     2,150           55,096  
Revenue for service provided to the discontinued Wireless operations   2,208     2,515     (128 )     4,595  
Total revenue   55,154     4,665     (128 )     59,691  
Operating expenses                
Cost of services   22,136     1,248     (101 )     23,283  
Selling, general and administrative   10,725     234     9,194       20,153  
Restructuring expense   105         513       618  
Depreciation and amortization   11,761     481     1,024       13,266  
Total operating expenses   44,727     1,963     10,630       57,320  
Operating income (loss)   $ 10,427     $ 2,702     $ (10,758 )     $ 2,371  
                                   

Three Months Ended March 31, 2020:

(in thousands)   Broadband   Tower   Corporate & Eliminations   Consolidated
External revenue                
Residential & SMB   $ 37,009     $     $       $ 37,009    
Commercial Fiber   6,200               6,200    
RLEC & Other   4,044               4,044    
Tower lease       1,797           1,797    
Service revenue and other   47,253     1,797           49,050    
Revenue for service provided to the discontinued Wireless operations   2,533     1,933     (382 )     4,084    
Total revenue   49,786     3,730     (382 )     53,134    
Operating expenses                
Cost of services   19,386     939     (8 )     20,317    
Selling, general and administrative   9,704     526     11,866       22,096    
Depreciation and amortization   10,034     470     1,581       12,085    
Total operating expenses   39,124     1,935     13,439       54,498    
Operating income (loss)   $ 10,662     $ 1,795     $ (13,821 )     $ (1,364 )  
                                     

Supplemental Information

Broadband Operating Statistics

  March 31,
2021
  March 31,
2020
Broadband homes and businesses passed (1) 259,891     212,129  
Incumbent Cable (2) 210,210     206,782  
Glo Fiber 34,441     5,347  
Beam 15,240      
       
Broadband customer relationships (3) 115,921     103,287  
       
Residential & SMB RGUs:      
Broadband Data 107,569     86,667  
Incumbent Cable (2) 101,576     86,214  
Glo Fiber 5,524     453  
Beam 469      
Video (2) 51,989     53,067  
Voice (2) 33,322     31,836  
Total Residential & SMB RGUs (excludes RLEC) 192,880     171,570  
       
Residential & SMB Penetration (4)      
Broadband Data 41.4 %   40.9 %
Incumbent Cable 48.3 %   41.7 %
Glo Fiber 16.0 %   8.5 %
Beam 3.1 %   %
Video 20.0 %   25.0 %
Voice 14.6 %   16.3 %
       
Fiber route miles 6,888     6,273  
Total fiber miles (5) 407,710     334,802  

______________________________________________________

(1) Homes and businesses are considered passed (“homes passed”) if we can connect them to our network without further extending the distribution system. Homes passed is an estimate based upon the best available information. Homes passed will vary among video, broadband data and voice services.
(2) The Company acquired Canaan Cable on December 31, 2020 adding 1,100 homes passed, 512 data RGUs, 324 video RGUs and 164 voice RGUs.
(3) Customer relationships represent the number of billed customers who receive at least one of our services.
(4) Penetration is calculated by dividing the number of users by the number of homes passed or available homes, as appropriate.
(5) 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,
  2021   2020
Residential and SMB Revenue:      
Broadband $ 24,585       $ 19,833    
Incumbent Cable 23,465        19,768     
Glo Fiber 1,068        65     
Beam 52        —     
Video 15,652       14,821    
Voice 2,899       2,827    
Discounts and adjustments (206 )     (472 )  
Total Revenue $ 42,930        $ 37,009     
       
Average RGUs:      
Broadband Data 105,149       84,890    
Incumbent Cable 100,117        84,621     
Glo Fiber 4,795        269     
Beam 237        —     
Video 52,436       52,995    
Voice 32,931       31,593    
       
ARPU: (1)      
Broadband $ 77.93       $ 77.88    
Incumbent Cable $ 78.12        $ 77.87     
Glo Fiber $ 74.24        $ 80.55     
Beam $ 73.14        $ —     
Video $ 99.50       $ 93.22    
Voice $ 29.34       $ 29.83    

______________________________________________________

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

Tower Operating Statistics

  March 31,
2021
  March 31,
2020
Macro tower sites 223     220  
Tenants (1) 443     408  
Average tenants per tower 2.0     1.85  

______________________________________________________

(1) Includes 236 and 203 intercompany tenants for our Wireless operations, (reported as a discontinued operation), and Broadband operations, as of March 31, 2021 and 2020, respectively.

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