shen-20230331
000035496312/312023Q1FALSEhttp://shentel.com/20230331#ServiceRevenueAndOtherMemberhttp://shentel.com/20230331#ServiceRevenueAndOtherMemberhttp://shentel.com/20230331#ServiceRevenueAndOtherMemberhttp://shentel.com/20230331#ServiceRevenueAndOtherMember111100003549632023-01-012023-03-3100003549632023-04-21xbrli:shares00003549632023-03-31iso4217:USD00003549632022-12-31iso4217:USDxbrli:shares00003549632022-01-012022-03-310000354963us-gaap:CommonStockMember2022-12-310000354963us-gaap:AdditionalPaidInCapitalMember2022-12-310000354963us-gaap:RetainedEarningsMember2022-12-310000354963us-gaap:RetainedEarningsMember2023-01-012023-03-310000354963us-gaap:CommonStockMember2023-01-012023-03-310000354963us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310000354963us-gaap:CommonStockMember2023-03-310000354963us-gaap:AdditionalPaidInCapitalMember2023-03-310000354963us-gaap:RetainedEarningsMember2023-03-310000354963us-gaap:CommonStockMember2021-12-310000354963us-gaap:AdditionalPaidInCapitalMember2021-12-310000354963us-gaap:RetainedEarningsMember2021-12-3100003549632021-12-310000354963us-gaap:RetainedEarningsMember2022-01-012022-03-310000354963us-gaap:CommonStockMember2022-01-012022-03-310000354963us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310000354963us-gaap:CommonStockMember2022-03-310000354963us-gaap:AdditionalPaidInCapitalMember2022-03-310000354963us-gaap:RetainedEarningsMember2022-03-3100003549632022-03-31shen:cell_site00003549632023-01-012022-12-3100003549632023-04-012023-03-3100003549632024-04-012023-03-3100003549632024-01-012022-12-310000354963shen:CobankMember2023-03-310000354963shen:CobankMember2022-12-310000354963shen:CobankMember2023-01-012023-03-310000354963shen:CobankMember2022-01-012022-03-31xbrli:pure0000354963shen:ValleyNetworkPartnershipMember2023-03-310000354963shen:ValleyNetworkPartnershipMember2022-12-310000354963us-gaap:SubsequentEventMembershen:ValleyNetworkPartnershipMember2023-04-012023-04-260000354963us-gaap:EquityMethodInvesteeMember2022-01-012022-03-310000354963us-gaap:LandMember2023-03-310000354963us-gaap:LandMember2022-12-310000354963us-gaap:LandImprovementsMember2023-01-012023-03-310000354963us-gaap:LandImprovementsMember2023-03-310000354963us-gaap:LandImprovementsMember2022-12-310000354963us-gaap:BuildingAndBuildingImprovementsMembersrt:MinimumMember2023-01-012023-03-310000354963us-gaap:BuildingAndBuildingImprovementsMembersrt:MaximumMember2023-01-012023-03-310000354963us-gaap:BuildingAndBuildingImprovementsMember2023-03-310000354963us-gaap:BuildingAndBuildingImprovementsMember2022-12-310000354963us-gaap:OtherMachineryAndEquipmentMembersrt:MinimumMember2023-01-012023-03-310000354963us-gaap:OtherMachineryAndEquipmentMembersrt:MaximumMember2023-01-012023-03-310000354963us-gaap:OtherMachineryAndEquipmentMember2023-03-310000354963us-gaap:OtherMachineryAndEquipmentMember2022-12-310000354963shen:EquipmentAndSoftwareMembersrt:MinimumMember2023-01-012023-03-310000354963shen:EquipmentAndSoftwareMembersrt:MaximumMember2023-01-012023-03-310000354963shen:EquipmentAndSoftwareMember2023-03-310000354963shen:EquipmentAndSoftwareMember2022-12-310000354963us-gaap:OtherPlantInServiceMember2023-03-310000354963us-gaap:OtherPlantInServiceMember2022-12-310000354963us-gaap:AssetUnderConstructionMember2023-03-310000354963us-gaap:AssetUnderConstructionMember2022-12-310000354963shen:BroadbandSegmentMember2023-03-310000354963shen:BroadbandSegmentMember2022-12-310000354963shen:AssetPurchaseAgreementMember2022-08-232022-08-230000354963us-gaap:FranchiseRightsMember2023-03-310000354963us-gaap:FranchiseRightsMember2022-12-310000354963shen:FCCSpectrumLicensesMember2023-03-310000354963shen:FCCSpectrumLicensesMember2022-12-310000354963shen:RailroadCrossingRightsMember2023-03-310000354963shen:RailroadCrossingRightsMember2022-12-310000354963us-gaap:CustomerRelationshipsMember2023-03-310000354963us-gaap:CustomerRelationshipsMember2022-12-310000354963us-gaap:OtherIntangibleAssetsMember2023-03-310000354963us-gaap:OtherIntangibleAssetsMember2022-12-310000354963shen:SpectrumPurchaseAgreementsMemberus-gaap:DisposalGroupHeldforsaleNotDiscontinuedOperationsMember2022-12-310000354963us-gaap:RevolvingCreditFacilityMember2021-07-010000354963us-gaap:RevolvingCreditFacilityMember2021-07-012021-07-010000354963shen:TermLoanA1Member2021-07-010000354963shen:TermLoanA1Member2021-07-012021-07-010000354963shen:TermLoanA2Member2021-07-010000354963shen:TermLoanA2Member2021-07-012021-07-010000354963shen:TermLoanA1Member2023-03-310000354963shen:TermLoanA1Member2022-12-310000354963shen:TermLoanA2Member2023-03-310000354963shen:TermLoanA2Member2022-12-310000354963us-gaap:LondonInterbankOfferedRateLIBORMembershen:TermLoanA1Member2023-01-012023-03-310000354963us-gaap:LondonInterbankOfferedRateLIBORMembershen:TermLoanA2Member2023-01-012023-03-3100003549632022-01-012022-12-310000354963shen:TermLoanA1Membersrt:ScenarioForecastMember2023-09-302024-06-300000354963shen:TermLoanA1Membersrt:ScenarioForecastMember2024-09-302026-03-310000354963srt:ScenarioForecastMembershen:TermLoanA2Member2027-04-012028-03-310000354963us-gaap:RestrictedStockUnitsRSUMember2023-01-012023-03-310000354963us-gaap:RestrictedStockUnitsRSUMember2023-03-310000354963shen:RelativeTotalShareholderReturnAwardsMember2023-01-012023-03-310000354963shen:RelativeTotalShareholderReturnAwardsMember2023-03-310000354963stpr:MD2023-01-012023-03-310000354963stpr:WV2023-01-012023-03-310000354963shen:ResidentialAndSMBCableMarketsMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2023-01-012023-03-310000354963shen:ResidentialAndSMBCableMarketsMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2023-01-012023-03-310000354963shen:ResidentialAndSMBCableMarketsMemberus-gaap:OperatingSegmentsMember2023-01-012023-03-310000354963shen:ResidentialAndSMBGloFiberMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2023-01-012023-03-310000354963shen:ResidentialAndSMBGloFiberMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2023-01-012023-03-310000354963shen:ResidentialAndSMBGloFiberMemberus-gaap:OperatingSegmentsMember2023-01-012023-03-310000354963shen:CommercialFiberMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2023-01-012023-03-310000354963shen:CommercialFiberMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2023-01-012023-03-310000354963shen:CommercialFiberMemberus-gaap:OperatingSegmentsMember2023-01-012023-03-310000354963shen:TowerLeaseMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2023-01-012023-03-310000354963shen:TowerLeaseMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2023-01-012023-03-310000354963shen:TowerLeaseMemberus-gaap:OperatingSegmentsMember2023-01-012023-03-310000354963shen:CarrierAccessRevenueMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2023-01-012023-03-310000354963shen:CarrierAccessRevenueMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2023-01-012023-03-310000354963shen:CarrierAccessRevenueMemberus-gaap:OperatingSegmentsMember2023-01-012023-03-310000354963shen:ServiceandOtherMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2023-01-012023-03-310000354963shen:ServiceandOtherMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2023-01-012023-03-310000354963shen:ServiceandOtherMemberus-gaap:OperatingSegmentsMember2023-01-012023-03-310000354963us-gaap:IntersegmentEliminationMembershen:BroadbandSegmentMember2023-01-012023-03-310000354963us-gaap:IntersegmentEliminationMembershen:TowerSegmentMember2023-01-012023-03-310000354963us-gaap:IntersegmentEliminationMemberus-gaap:CorporateAndOtherMember2023-01-012023-03-310000354963us-gaap:IntersegmentEliminationMember2023-01-012023-03-310000354963us-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2023-01-012023-03-310000354963us-gaap:OperatingSegmentsMembershen:TowerSegmentMember2023-01-012023-03-310000354963us-gaap:ServiceMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2023-01-012023-03-310000354963us-gaap:ServiceMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2023-01-012023-03-310000354963us-gaap:ServiceMemberus-gaap:CorporateNonSegmentMember2023-01-012023-03-310000354963us-gaap:ServiceMemberus-gaap:OperatingSegmentsMember2023-01-012023-03-310000354963us-gaap:CorporateNonSegmentMember2023-01-012023-03-310000354963us-gaap:OperatingSegmentsMember2023-01-012023-03-310000354963shen:ResidentialAndSMBCableMarketsMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2022-01-012022-03-310000354963shen:ResidentialAndSMBCableMarketsMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2022-01-012022-03-310000354963shen:ResidentialAndSMBCableMarketsMemberus-gaap:OperatingSegmentsMember2022-01-012022-03-310000354963shen:ResidentialAndSMBGloFiberMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2022-01-012022-03-310000354963shen:ResidentialAndSMBGloFiberMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2022-01-012022-03-310000354963shen:ResidentialAndSMBGloFiberMemberus-gaap:OperatingSegmentsMember2022-01-012022-03-310000354963shen:CommercialFiberMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2022-01-012022-03-310000354963shen:CommercialFiberMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2022-01-012022-03-310000354963shen:CommercialFiberMemberus-gaap:OperatingSegmentsMember2022-01-012022-03-310000354963shen:TowerLeaseMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2022-01-012022-03-310000354963shen:TowerLeaseMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2022-01-012022-03-310000354963shen:TowerLeaseMemberus-gaap:OperatingSegmentsMember2022-01-012022-03-310000354963shen:CarrierAccessRevenueMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2022-01-012022-03-310000354963shen:CarrierAccessRevenueMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2022-01-012022-03-310000354963shen:CarrierAccessRevenueMemberus-gaap:OperatingSegmentsMember2022-01-012022-03-310000354963shen:ServiceandOtherMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2022-01-012022-03-310000354963shen:ServiceandOtherMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2022-01-012022-03-310000354963shen:ServiceandOtherMemberus-gaap:OperatingSegmentsMember2022-01-012022-03-310000354963us-gaap:IntersegmentEliminationMembershen:BroadbandSegmentMember2022-01-012022-03-310000354963us-gaap:IntersegmentEliminationMembershen:TowerSegmentMember2022-01-012022-03-310000354963us-gaap:IntersegmentEliminationMemberus-gaap:CorporateAndOtherMember2022-01-012022-03-310000354963us-gaap:IntersegmentEliminationMember2022-01-012022-03-310000354963us-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2022-01-012022-03-310000354963us-gaap:OperatingSegmentsMembershen:TowerSegmentMember2022-01-012022-03-310000354963us-gaap:ServiceMemberus-gaap:OperatingSegmentsMembershen:BroadbandSegmentMember2022-01-012022-03-310000354963us-gaap:ServiceMemberus-gaap:OperatingSegmentsMembershen:TowerSegmentMember2022-01-012022-03-310000354963us-gaap:ServiceMemberus-gaap:CorporateNonSegmentMember2022-01-012022-03-310000354963us-gaap:ServiceMemberus-gaap:OperatingSegmentsMember2022-01-012022-03-310000354963us-gaap:CorporateNonSegmentMember2022-01-012022-03-310000354963us-gaap:OperatingSegmentsMember2022-01-012022-03-31

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to __________

Commission File No.: 000-09881

https://cdn.kscope.io/7297665f141d0e98cb63ca3065f2507e-shentela06.jpg
SHENANDOAH TELECOMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
Virginia 54-1162807
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

500 Shentel Way, Edinburg, Virginia    22824
(Address of principal executive offices)  (Zip Code)

(540) 984-4141 
(Registrant's telephone number, including area code) 
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
Common Stock (No Par Value)SHENNASDAQ Global Select Market50,246,901
(Title of Class)(Trading Symbol)(Name of Exchange on which Registered)(The number of shares of the registrant's common stock outstanding on April 21, 2023)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer Non-accelerated filerSmaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes   No 




SHENANDOAH TELECOMMUNICATIONS COMPANY
INDEX

  Page
Numbers
PART I.FINANCIAL INFORMATION 
   
Item 1.Financial Statements 
   
 Unaudited Condensed Consolidated Balance Sheets
  
 Unaudited Condensed Consolidated Statements of Operations
  
 Unaudited Condensed Consolidated Statements of Shareholders’ Equity
  
 Unaudited Condensed Consolidated Statements of Cash Flows
  
 Notes to Unaudited Condensed Consolidated Financial Statements
  
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
  
Item 3.Quantitative and Qualitative Disclosures about Market Risk
  
Item 4.Controls and Procedures
  
PART II.OTHER INFORMATION
  
Item 1.Legal Proceedings
Item 1A.Risk Factors
  
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
  
Item 6.Exhibits
  
 Signatures
  
2

Table of Contents

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)March 31,
2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents$48,396 $44,061 
Accounts receivable, net of allowance for doubtful accounts of $698 and $776, respectively
15,854 20,615 
Income taxes receivable5,079 29,755 
Prepaid expenses and other12,762 11,509 
Current assets held for sale22,432 22,622 
Total current assets104,523 128,562 
Investments13,118 12,971 
Property, plant and equipment, net739,587 687,553 
Goodwill and intangible assets, net81,392 81,515 
Operating lease right-of-use assets54,999 53,859 
Deferred charges and other assets13,021 13,259 
Total assets$1,006,640 $977,719 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt, net of unamortized loan fees$1,302 $648 
Accounts payable48,822 49,173 
Advanced billings and customer deposits12,391 12,425 
Accrued compensation6,857 9,616 
Current operating lease liabilities2,946 2,829 
Accrued liabilities and other16,103 17,906 
Current liabilities held for sale3,815 3,824 
Total current liabilities92,236 96,421 
Long-term debt, less current maturities, net of unamortized loan fees98,655 74,306 
Other long-term liabilities:
Deferred income taxes86,335 84,600 
Asset retirement obligations10,252 9,932 
Benefit plan obligations3,887 3,758 
Non-current operating lease liabilities51,629 50,477 
Other liabilities20,866 20,218 
Total other long-term liabilities172,969 168,985 
Commitments and contingencies (Note 12)
Shareholders’ equity:
Common stock, no par value, authorized 96,000; 50,247 and 50,110 issued and outstanding at March 31, 2023 and December 31, 2022, respectively
  
Additional paid in capital60,160 57,453 
Retained earnings582,620 580,554 
Total shareholders’ equity642,780 638,007 
Total liabilities and shareholders’ equity$1,006,640 $977,719 

See accompanying notes to unaudited condensed consolidated financial statements.
3

Table of Contents
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)Three Months Ended
March 31,
20232022
Service revenue and other$71,686 $64,414 
Operating expenses:
Cost of services exclusive of depreciation and amortization26,567 26,339 
Selling, general and administrative26,609 23,771 
Depreciation and amortization15,782 14,684 
Total operating expenses68,958 64,794 
Operating income (loss)2,728 (380)
Other income (expense):
Other income (expense), net1,117 (170)
Income (loss) before income taxes3,845 (550)
Income tax expense1,779 53 
Net income (loss)$2,066 $(603)
Net income (loss) per share, basic and diluted:
Basic net income (loss) per share$0.04 $(0.01)
Diluted net income (loss) per share$0.04 $(0.01)
Weighted average shares outstanding, basic50,291 50,146 
Weighted average shares outstanding, diluted50,512 50,146 

See accompanying notes to unaudited condensed consolidated financial statements.

4

Table of Contents
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsTotal
Balance, December 31, 202250,110 $57,453 $580,554 $638,007 
Net income— — 2,066 2,066 
Stock-based compensation196 3,852 — 3,852 
Common stock issued1 11 — 11 
Shares surrendered for settlement of employee taxes upon issuance of vested equity awards(60)(1,156)— (1,156)
Balance, March 31, 202350,247 $60,160 $582,620 $642,780 
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsTotal
Balance, December 31, 202149,965 $49,351 $592,924 $642,275 
Net loss— — (603)(603)
Stock-based compensation110 3,252 — 3,252 
Common stock issued1 8 — 8 
Shares surrendered for settlement of employee taxes upon issuance of vested equity awards(27)(603)— (603)
Balance, March 31, 202250,049 $52,008 $592,321 $644,329 

See accompanying notes to unaudited condensed consolidated financial statements.
5

Table of Contents
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)Three Months Ended
March 31,
20232022
Cash flows from operating activities:
Net income (loss)$2,066 $(603)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization15,782 14,684 
Stock-based compensation expense, net of amount capitalized3,717 3,143 
Deferred income taxes1,735 (349)
Other, net740 1,017 
Changes in assets and liabilities:
Accounts receivable4,488 5,890 
Current income taxes24,676 459 
Operating lease assets and liabilities, net129 80 
Other assets(1,030)(1,365)
Accounts payable(837)(4,130)
Other deferrals and accruals(3,142)(2,760)
Net cash provided by operating activities48,324 16,066 
Cash flows from investing activities:
Capital expenditures(67,671)(45,693)
Proceeds from sale of assets and other101 86 
Net cash used in investing activities(67,570)(45,607)
Cash flows from financing activities:
Proceeds from credit facility borrowings25,000  
Taxes paid for equity award issuances(1,156)(603)
Payments for financing arrangements and other(263)(219)
Net cash provided by (used in) financing activities23,581 (822)
Net increase (decrease) in cash and cash equivalents4,335 (30,363)
Cash and cash equivalents, beginning of period44,061 84,344 
Cash and cash equivalents, end of period$48,396 $53,981 
Supplemental Disclosures of Cash Flow Information
Interest paid$1,327 $ 
Income tax refunds received$25,030 $ 

See accompanying notes to unaudited condensed consolidated financial statements.
6

Table of Contents
SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation and Other Information

Shenandoah Telecommunications Company and its subsidiaries (“Shentel”, “we”, “our”, “us”, or the “Company”) provide broadband data, video and voice services to residential and commercial customers in portions of Virginia, West Virginia, Maryland, Pennsylvania and Kentucky, via fiber optic and hybrid fiber coaxial cable networks. We also lease dark fiber and provide Ethernet and Wavelength fiber optic services to enterprise and wholesale customers throughout the entirety of our service area. The Company also provides voice and DSL telephone services to customers in Virginia’s Shenandoah County and portions of adjacent counties as a Rural Local Exchange Carrier (“RLEC”). These integrated networks are connected by a fiber network. All of these operations are contained within our Broadband reporting segment.

Our Tower segment owns 222 cell towers and leases colocation space on those towers to wireless communications providers.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X for interim financial information. All normal recurring adjustments considered necessary for a fair presentation have been included. Certain disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2022.

The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues and expenses and related disclosures. On an on-going basis we evaluate significant estimates and assumptions, including, but not limited to, revenue recognition, stock-based compensation, estimated useful lives of assets, impairment of goodwill and indefinite-lived intangible assets, intangible assets subject to amortization, and the computation of income taxes. Future events and their effects cannot be predicted with certainty; accordingly, the Company’s accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the financial statements will change as new events occur, as more experience is acquired, as additional information is obtained, and as the Company’s operating environment changes. Management evaluates and updates assumptions and estimates on an ongoing basis. Actual results may differ from these estimates under different assumptions or conditions.

Adoption of New Accounting Standards

There have been no material developments related to recently issued accounting standards, including the expected dates of adoption and estimated effects on the Company's unaudited condensed consolidated financial statements and note disclosures from those disclosed in the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 2022, that would be expected to impact the Company.

Note 2. Revenue from Contracts with Customers
Contract Assets

The Company’s contract assets primarily include commissions incurred to acquire contracts with customers. The Company incurs commission expenses related to in-house and third-party vendors which are capitalized and amortized over the expected customer benefit period which is approximately six years. The Company's current contract assets are included in prepaid expenses and other and the Company's non-current contract assets are included in deferred charges and other assets in its unaudited condensed consolidated balance sheets. Amortization of capitalized commission expenses is recorded in selling, general and administrative expenses in the Company's unaudited condensed consolidated statements of operations.

7

Table of Contents
The following tables present the activity of current and non-current contract assets:
Three Months Ended
March 31,
(in thousands)20232022
Beginning Balance$8,646 $8,147 
Commission payments891 338 
Contract asset amortization(781)(182)
Ending Balance$8,756 $8,303 

Contract Liabilities

The Company’s contract liabilities include services that are billed in advance and recorded as deferred revenue, as well as installation fees that are charged upfront without transfer of commensurate goods or services to the customer. The Company’s current contract liabilities are included in advanced billings and customer deposits and the Company’s non-current contract liabilities are included in other liabilities in its unaudited condensed consolidated balance sheets. Shentel's current contract liability balances were $9.5 million as of March 31, 2023 and December 31, 2022 and Shentel's non-current contract liability balances were $1.6 million and $1.9 million as of March 31, 2023 and December 31, 2022, respectively. Shentel expects its current contract liability balances to be recognized within revenues during the twelve-month periods following the respective balance sheet dates and its non-current contract liability balances to be recognized within revenues after the twelve-month periods following the respective balance sheet dates.

Refer to Note 13, Segment Reporting, for a summary of the Company's revenue streams.

Note 3. Investments

Investments consist of the following:
(in thousands)March 31,
2023
December 31,
2022
SERP investments at fair value$1,993 $1,889 
Cost method investments10,792 10,749 
Equity method investments333 333 
Total investments$13,118 $12,971 

SERP Investments at Fair Value: The fair value of the SERP investments are based on unadjusted quoted prices in active markets and are classified as Level 1 of the fair value hierarchy. Changes to the investments' fair value are presented in Other income (expense), while the reciprocal changes in the liability are presented in selling, general and administrative expense.

Cost Method Investments: Our investment in CoBank’s Class A common stock, derived from the CoBank patronage program, represented substantially all of our cost method investments with a balance of $10.1 million and $10.0 million at March 31, 2023 and December 31, 2022, respectively. We recognized approximately $0.1 million of patronage income in other income (expense) for the three months ended March 31, 2023 and 2022. The Company expects that approximately 88% of the patronage distributions will be collected in cash and 12% in equity in 2023.

Equity Method Investments: At March 31, 2023 and December 31, 2022, the Company had a 20.0% ownership interest in Valley Network Partnership (“ValleyNet”). ValleyNet has ceased operations and is in the process of being dissolved. In April 2023, Shentel received a payment of $0.1 million, representing Shentel's remaining capital in the partnership, and the investment balance was derecognized from Shentel's unaudited condensed consolidated balance sheets. Prior to the commencement of dissolution proceedings, the Company and ValleyNet purchased capacity on one another’s fiber network, through related party transactions. We recognized revenue of $0.2 million during the three months ended March 31, 2022. We recognized cost of service of $28.2 thousand for the three months ended March 31, 2022.

8

Table of Contents
Note 4. Property, Plant and Equipment

Property, plant and equipment consist of the following:
 
($ in thousands)Estimated Useful LivesMarch 31,
2023
December 31,
2022
Land$3,722 $3,722 
Land improvements
10 years
3,483 3,483 
Buildings and structures
10 - 45 years
94,488 93,461 
Cable and fiber
15 - 30 years
635,083 593,771 
Equipment and software
4 - 8 years
324,783 317,347 
Plant in service 1,061,559 1,011,784 
Plant under construction 161,576 144,534 
Total property, plant and equipment 1,223,135 1,156,318 
Less: accumulated depreciation and amortization(483,548)(468,765)
Property, plant and equipment, net $739,587 $687,553 

Property, plant and equipment net, increases were primarily attributable to capital expenditures in the Broadband segment due to expansion of Glo Fiber assets and market expansion. The Company's accounts payable as of March 31, 2023 and December 31, 2022 included amounts associated with capital expenditures of approximately $44.3 million and $43.8 million, respectively. Depreciation and amortization expense was $15.7 million and $14.5 million during the three months ended March 31, 2023 and 2022, respectively.

On August 23, 2022, the Company entered into a definitive asset purchase agreement (the "Spectrum Purchase Agreement") with a wireless carrier pursuant to which the Company agreed to sell certain Federal Communications Commission ("FCC") spectrum licenses and leases previously utilized in the Company's Beam branded fixed wireless service for total consideration of approximately $21.5 million, composed of $17.7 million cash and approximately $3.8 million of liabilities to be assumed by the wireless carrier (the "Spectrum Transaction"). The Spectrum Transaction is expected to close by the end of the third quarter of 2023, subject to the receipt of regulatory approvals and other customary closing conditions.

Note 5. Goodwill and Intangible Assets

Goodwill and intangible assets consist of the following:
 March 31, 2023December 31, 2022
(in thousands)Gross
Carrying
Amount
Accumulated Amortization and OtherNetGross
Carrying
Amount
Accumulated Amortization and OtherNet
Goodwill - Broadband$3,244 $— $3,244 $3,244 $— $3,244 
Indefinite-lived intangibles:
Cable franchise rights64,334 — 64,334 64,334 — 64,334 
FCC Spectrum licenses12,122 — 12,122 12,122 — 12,122 
Railroad crossing rights141 — 141 141 — 141 
Total indefinite-lived intangibles76,597 — 76,597 76,597 — 76,597 
Finite-lived intangibles:
Subscriber relationships28,425 (27,025)1,400 28,425 (26,910)1,515 
Other intangibles488 (337)151 488 (329)159 
Total finite-lived intangibles28,913 (27,362)1,551 28,913 (27,239)1,674 
Total goodwill and intangible assets$108,754 $(27,362)$81,392 $108,754 $(27,239)$81,515 

Amortization expense was $0.1 million and $0.2 million for the three months ended March 31, 2023 and 2022, respectively.
9

Table of Contents

As described in Note 4, Property, Plant and Equipment, the Company entered into the Spectrum Purchase Agreement to sell FCC spectrum licenses associated with Beam. As a result of the expected sale, the Company concluded that the FCC spectrum licenses met the held for sale criteria; accordingly, $13.8 million of indefinite-lived licenses and $5.9 million of finite-lived licenses are presented as held for sale, along with the corresponding $3.8 million of operating lease liabilities related to the finite-lived licenses. The Company evaluated the events described here and in Note 4, Property, Plant and Equipment and determined that these events do not represent a strategic shift in the Company’s business.

Note 6. Other Assets and Accrued Liabilities

Prepaid expenses and other, classified as current assets, included the following:
(in thousands)March 31,
2023
December 31,
2022
Prepaid maintenance expenses$8,413 $7,444 
Broadband contract acquisition costs2,985 2,809 
Other1,364 1,256 
Prepaid expenses and other$12,762 $11,509 

Deferred charges and other assets, classified as long-term assets, included the following:
(in thousands)March 31,
2023
December 31,
2022
Broadband contract acquisition costs$5,771 $5,837 
Prepaid expenses and other7,250 7,422 
Deferred charges and other assets$13,021 $13,259 

Accrued liabilities and other, classified as current liabilities, included the following:
(in thousands)March 31,
2023
December 31,
2022
Accrued programming costs$3,625 $3,306 
Pension plan3,478 3,341 
Other current liabilities9,000 11,259 
Accrued liabilities and other$16,103 $17,906 

Other liabilities, classified as long-term liabilities, included the following:
(in thousands)March 31,
2023
December 31,
2022
Noncurrent portion of deferred lease revenue$19,180 $18,679 
Noncurrent portion of financing leases1,413 1,500 
Other273 39 
Other liabilities$20,866 $20,218 

In 2021, the Company adopted a resolution to terminate its pension plan. The expected termination will result in a payout of all existing obligations either through lump sum payments or through the purchase of annuity contracts at the option of the pension plan's participants. The Company expects the pension plan termination to be completed by June 30, 2023. Consequently, the net benefit plan obligation for the pension plan is presented in accrued liabilities and other in the Company's unaudited condensed consolidated balance sheets at March 31, 2023 and December 31, 2022, respectively.

Note 7. Leases

We lease various broadband network and telecommunications sites, fiber optic cable routes, warehouses, retail stores, and office facilities for use in our business.

10

Table of Contents
The components of lease costs were as follows:

ClassificationThree Months Ended
March 31,
(in thousands)20232022
Finance lease cost
Amortization of leased assetDepreciation$119 $119 
Interest of lease liabilitiesInterest expense20 21 
Operating lease cost
Operating expense1
1,843 2,663 
Lease Cost$1,982 $2,803 
_________________________________________
(1)Operating lease expense is presented in cost of service or selling, general and administrative expense based on the use of the relevant facility.

The following table summarizes the expected maturity of lease liabilities as of March 31, 2023:
(in thousands)Operating LeasesFinance LeasesTotal
2023$3,946 $71 $4,017 
20245,613 178 5,791 
20255,379 180 5,559 
20264,770 153 4,923 
20273,992 155 4,147 
2028 and thereafter65,522 1,359 66,881 
Total lease payments89,222 2,096 91,318 
Less: Interest(34,647)(584)(35,231)
Present value of lease liabilities$54,575 $1,512 $56,087 

Other information related to operating and finance leases was as follows:

March 31,
2023
December 31,
2022
Operating leases
Weighted average remaining lease term (years)19.420.0
Weighted average discount rate4.6 %4.5 %
Finance leases
Weighted average remaining lease term (years)13.113.9
Weighted average discount rate5.2 %5.2 %

Three Months Ended
March 31,
(in thousands)20232022
Cash paid for operating lease liabilities$1,684 $1,592 
Operating lease right-of-use assets obtained in exchange for new lease liabilities (includes new leases or modification of existing leases)1,265 1,640 

We recognized $4.5 million and $5.4 million of operating lease revenue for the three months ended March 31, 2023 and 2022, respectively, related to the cell site colocation space and dedicated fiber optic strands that we lease to our customers, which is included in Service revenue and other in the unaudited condensed consolidated statements of operations. Substantially all of our lease revenue relates to fixed lease payments.

11

Table of Contents
Below is a summary of our minimum rental receipts under the lease agreements in place as of March 31, 2023:
(in thousands)Operating Leases
2023$11,549 
202414,244 
202513,318 
202610,275 
20278,784 
2028 and thereafter22,048 
Total $80,218 

Note 8. Debt

Our Credit Agreement, dated July 1, 2021 (the “Credit Agreement”) contains (i) a $100 million, five-year undrawn revolving credit facility (the “Revolver”), (ii) a $150 million five-year delayed draw amortizing term loan (“Term Loan A-1”) and (iii) a $150 million seven-year delayed draw amortizing term loan (“Term Loan A-2” and collectively with Term Loan A-1, the “Term Loans”). The following loans were outstanding under the Credit Agreement:

(in thousands)March 31,
2023
December 31,
2022
Term loan A-1$50,000 $37,500 
Term loan A-250,000 37,500 
Total debt100,000 75,000 
Less: unamortized loan fees(43)(46)
Total debt, net of unamortized loan fees$99,957 $74,954 

Both Term Loan A-1 and Term Loan A-2 bear interest at one-month LIBOR plus a margin of 1.50%. The margin of 1.50% is variable and determined by the Company’s net leverage ratio. The interest rate was 6.36% and 5.89% at March 31, 2023 and December 31, 2022, respectively. The Company's cash payments for interest were $1.3 million during the three months ended March 31, 2023. Shentel had no debt outstanding during the three months ended March 31, 2022; therefore, the Company made no interest payments during the three months ended March 31, 2022. Shentel is charged commitment fees on unutilized portions of its Revolver and Term Loans. The Company recorded $0.2 million related to these fees for the three months ended March 31, 2023 and 2022 which is included in other income (expense), net in the unaudited condensed consolidated statements of operations.

The Credit Agreement contains a borrowing deadline of June 30, 2023, after which the Company will not be able to borrow against the undrawn portion of the Term Loans.

The Credit Agreement includes various covenants, including total net leverage ratio and debt service coverage ratio financial covenants.

Shentel’s Term Loans require quarterly payments based on a percentage of the outstanding balance. Based on the outstanding balance as of March 31, 2023, Term Loan A-1 requires quarterly principal repayments of $0.3 million from September 30, 2023 through June 30, 2024; then increasing to $0.6 million quarterly from September 30, 2024 through March 31, 2026, with the remaining balance due June 30, 2026. Based on the outstanding balance as of December 31, 2022, Term Loan A-2 requires quarterly principal repayments of $0.1 million through March 31, 2028, with the remaining balance due June 30, 2028.

The following table summarizes the expected payments of Shentel's outstanding borrowings as of March 31, 2023:

12

Table of Contents
(in thousands)Amount
2023$875 
20242,375 
20253,000 
202645,500 
2027500 
202847,750 
Total $100,000 

The Credit Agreement is fully secured by a pledge and unconditional guarantee from the Company and all of its subsidiaries, except Shenandoah Telephone Company. This provides the lenders a security interest in substantially all of the assets of the Company.

The International Exchange (ICE) Benchmark Administration ceased the publication of one-week and two-month LIBOR on December 31, 2021 and the remaining tenors (overnight, one-month, three-month, six-month and 12-month) will cease to be published on June 30, 2023. The Company's term loans and revolver identify LIBOR as a reference rate for tenors ceasing on June 30, 2023 and maturing after 2023. Alternative reference rates that replace LIBOR may not yield the same or similar economic results over the terms of the financial instruments. The transition from LIBOR could result in us paying higher or lower interest rates on our current LIBOR-indexed term loans. The Credit Agreement includes provisions that provide for the identification of a LIBOR replacement rate. Any changes to the reference rate will be agreed through an amendment to the Credit Agreement and are expected to reference the Secured Overnight Financing Rate and be entered into during 2023. Additionally, we expect to utilize the accounting relief available under Accounting Standards Codification ("ASC") 848, Reference Rate Reform, and therefore do not expect significant modification to current accounting.

Note 9. Income Taxes

The Company files U.S. federal income tax returns and various state income tax returns. The Company is not subject to any state or federal income tax audits as of March 31, 2023. The Company's income tax returns are generally open to examination from 2019 forward and the net operating losses acquired in the acquisition of nTelos are open to examination from 2002 forward.

The effective tax rates for the three months ended March 31, 2023 and 2022, differ from the statutory U.S. federal income tax rate of 21% primarily due to the state income taxes, excess tax benefits and other discrete items.
 Three Months Ended
March 31,
(in thousands)20232022
Expected tax expense (benefit) at federal statutory$807 $(115)
State income tax expense (benefit), net of federal tax effect210 (32)
Excess tax deficiency from share-based compensation and other expense, net762 200 
Income tax expense $1,779 $53 

The Company received $25.0 million in cash refunds for income taxes for the three months ended March 31, 2023. The Company made no cash payments and received no cash refunds for income taxes for the three months ended March 31, 2022.

Note 10. Stock Compensation and Earnings (Loss) per Share

The Company granted approximately 343,000 restricted stock units ("RSUs") at a weighted average grant price of $18.86 to employees and directors during the three months ended March 31, 2023. Approximately 166,000 RSUs with a weighted average grant price of $25.29 vested and 8,000 RSUs with a weighted average grant price of $21.54 were forfeited during the three months ended March 31, 2023. The total fair value of RSUs vested was $4.2 million during the three months ended March 31, 2023. Approximately 819,000 RSUs with a weighted average grant price of $21.30 remained outstanding as of March 31, 2023.

The Company granted approximately 134,000 Relative Total Shareholder Return RSUs (“RTSRs”) awards at a weighted average grant price of $23.64 to employees during the three months ended March 31, 2023. Approximately 30,000 RTSRs with
13

Table of Contents
a weighted average grant price of $56.32 vested and no RTSRs were forfeited during the three months ended March 31, 2023. The total fair value of RTSRs vested was $1.1 million during the three months ended March 31, 2023. Approximately 293,000 RTSRs with a weighted average grant price of $25.80 remained outstanding as of March 31, 2023. The amount of RTSRs issued are adjusted on the vesting date based upon the Company's stock performance compared to a group of peer companies. The vested amounts above exclude the adjustment and issuance of RTSRs based on actual performance, which totaled approximately 13,000 RTSRs, resulting in lower shares issued upon vesting of the RTSRs than originally granted.

Stock-based compensation expense was as follows:

 Three Months Ended
March 31,
(in thousands)20232022
Stock compensation expense3,852 3,252 
Capitalized stock compensation(135)(109)
Stock compensation expense, net$3,717 $3,143 

As of March 31, 2023, there was $15.2 million of total unrecognized compensation cost related to non-vested incentive awards which is expected to be recognized over weighted average period of 2.8 years.

We utilize the treasury stock method to calculate the impact on diluted earnings (loss) per share that potentially dilutive stock-based compensation awards have. The following table indicates the computation of basic and diluted earnings (loss) per share:
Three Months Ended
March 31,
(in thousands, except per share amounts)20232022
Calculation of net income (loss) per share:
Net income (loss)$2,066 $(603)
Basic weighted average shares outstanding50,291 50,146 
Basic net income (loss) per share$0.04 $(0.01)
Effect of stock-based compensation awards outstanding:
Basic weighted average shares outstanding50,291 50,146 
Effect from dilutive shares and options outstanding221  
Diluted weighted average shares outstanding50,512 50,146 
Diluted net income (loss) per share$0.04 $(0.01)
There were approximately 478,000 anti-dilutive equity awards outstanding during the three months ended March 31, 2023. There were approximately 147,000 potentially dilutive equity awards for the three months ended March 31, 2022; however, these securities were excluded from the calculation of diluted weighted average shares outstanding due to the fact that they were anti-dilutive as a result of the Company's net loss for the period.

Note 11. Government Grants

During the first quarter of 2023, Shentel received an additional $9.8 million in newly awarded grants to strategically expand the Company's broadband network in order to provide broadband services to unserved residences. The additional grants consisted of $9.4 million awarded under the Connect Maryland Network Infrastructure Grant Program in Maryland, and $0.4 million under the Line Extension Advancement and Development program in West Virginia.

Note 12. Commitments and Contingencies

We are committed to make payments to satisfy our lease liabilities. The scheduled payments under those obligations are summarized in Note 7, Leases. We also have outstanding unconditional purchase commitments to procure marketing services and IT software licenses through 2026.

From time to time the Company is involved in various litigation matters arising out of the normal course of business. The Company consults with legal counsel on those issues related to litigation and seeks input from other experts and advisors with
14

Table of Contents
respect to such matters. Estimating the probable losses or a range of probable losses resulting from litigation, government actions and other legal proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages, may involve discretionary amounts, present novel legal theories, are in the early stages of the proceedings, or are subject to appeal. Whether any losses, damages or remedies ultimately resulting from such matters could reasonably have a material effect on the Company’s business, financial condition, results of operations, or cash flows will depend on a number of variables, including, for example, the timing and amount of such losses or damages (if any) and the structure and type of any such remedies. The Company’s management does not presently expect any litigation matters to have a material adverse impact on the Company's financial position, results of operations and cash flows.

Note 13. Segment Reporting

Shentel has presented Residential & SMB - Cable Markets and Residential & SMB - Glo Fiber Markets separately for the three months ended March 31, 2023. These revenues were previously reported in one line under the description “Residential & SMB”. Shentel has amended the presentation for the three months ended March 31, 2022 for comparability.

Three Months Ended March 31, 2023:
(in thousands)BroadbandTowerCorporate & EliminationsConsolidated
External revenue
Residential & SMB - Cable Markets$44,756 $ $— $44,756 
Residential & SMB - Glo Fiber Markets7,003  — 7,003 
Commercial Fiber11,698  — 11,698 
Tower lease 4,538 — 4,538 
RLEC & Other3,691  — 3,691 
Service revenue and other67,148 4,538 — 71,686 
Intercompany revenue and other55 38 (93) 
Total revenue67,203 4,576 (93)71,686 
Operating expenses
Cost of services25,429 1,192 (54)26,567 
Selling, general and administrative15,571 450 10,588 26,609 
Depreciation and amortization14,867 513 402 15,782 
Total operating expenses55,867 2,155 10,936 68,958 
Operating income (loss)$11,336 $2,421 $(11,029)$2,728 

15

Table of Contents
Three Months Ended March 31, 2022:
(in thousands)BroadbandTowerCorporate & EliminationsConsolidated
External revenue
Residential & SMB - Cable Markets$43,492 $ $— $43,492 
Residential & SMB - Glo Fiber Markets3,421  — 3,421 
Commercial Fiber9,062  — 9,062 
Tower lease 4,746 — 4,746 
RLEC & Other3,689  — 3,689 
Service revenue and other59,664 4,746 — 64,410 
Intercompany revenue and other50 101 (147)4 
Total revenue59,714 4,847 (147)64,414 
Operating expenses
Cost of services25,168 1,292 (121)26,339 
Selling, general and administrative13,489 318 9,964 23,771 
Depreciation and amortization12,876 484 1,324 14,684 
Total operating expenses51,533 2,094 11,167 64,794 
Operating income (loss)$8,181 $2,753 $(11,314)$(380)

A reconciliation of the total of the reportable segments’ operating income (loss) to unaudited condensed consolidated income (loss) before income taxes is as follows:
 Three Months Ended
March 31,
(in thousands)20232022
Total consolidated operating income (loss) $2,728 $(380)
Other income (expense), net1,117 (170)
Income (loss) before income taxes$3,845 $(550)

The Company’s chief operating decision maker (CODM) does not currently review total assets by segment since the assets are centrally managed and some of the assets are shared by the segments. Accordingly, total assets by segment are not provided.

16

Table of Contents
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions as they relate to Shenandoah Telecommunications Company or its management are intended to identify these forward-looking statements. All statements regarding Shenandoah Telecommunications Company’s expected future financial position, operating results and cash flows, business strategy, financing plans, forecasted trends relating to the markets in which Shenandoah Telecommunications Company operates and similar matters are forward-looking statements. We cannot assure you that the Company’s expectations expressed or implied in these forward-looking statements will turn out to be correct. The Company’s actual results could be materially different from its expectations because of various factors, including, but not limited to, those discussed under the caption Risk Factors in the Companys Annual Report on Form 10-K for its fiscal year ended December 31, 2022 ("2022 Form 10-K").
The following management’s discussion and analysis should be read in conjunction with the Company’s 2022 Form 10-K, including the consolidated financial statements and related notes included therein.

Overview

Shenandoah Telecommunications Company (“Shentel”, “we”, “our”, “us”, or the “Company”) is a provider of a comprehensive range of broadband communication services and cell tower colocation space in the Mid-Atlantic portion of the United States.

"Management’s Discussion and Analysis of Financial Condition and Results of Operations" ("MD&A") is organized around our reportable segments. Refer to Note 13, Segment Reporting, in our unaudited condensed consolidated financial statements for additional information.

Results of Operations

Three Months Ended March 31, 2023 Compared with the Three Months Ended March 31, 2022

The Company’s consolidated results from operations are summarized as follows:
Three Months Ended March 31,Change
($ in thousands)2023% of Revenue2022% of Revenue$%
Revenue$71,686 100.0 $64,414 100.0 7,272 11.3 
Operating expenses68,958 96.2 64,794 100.6 4,164 6.4 
Operating income (loss)2,728 3.8 (380)(0.6)3,108 (817.9)
Other income (expense), net1,117 1.6 (170)(0.3)1,287 (757.1)
Income (loss) before taxes3,845 5.4 (550)(0.9)4,395 (799.1)
Income tax expense1,779 2.5 53 0.1 1,726 3,256.6 
Net income (loss)$2,066 2.9 $(603)(0.9)2,669 (442.6)

Revenue
Revenue increased approximately $7.3 million, or 11.3%, during the three months ended March 31, 2023 compared with the three months ended March 31, 2022, primarily driven by growth of $7.5 million, or 12.5%, in the Broadband segment, partially offset by a decline of $0.3 million, or 5.6%, in the Tower segment. Refer to the discussion of the results of operations for the Broadband and Tower segments, included within this MD&A, for additional information.

Operating expenses
Operating expenses increased approximately $4.2 million, or 6.4%, for the three months ended March 31, 2023 compared with the three months ended March 31, 2022, driven by $4.3 million of incremental Broadband operating expenses, partially offset by $0.2 million of lower Corporate operating expenses.

17

Table of Contents
Other income (expense), net
Other income (expense), net increased $1.3 million primarily due to sales taxes refunds received and interest income related to tax refunds during the three months ended March 31, 2023

Income tax (benefit) expense
For the three months ended March 31, 2023 the Company recognized an income tax expense of $1.8 million, compared with $0.1 million of income tax benefit for the three months ended March 31, 2022. The $1.7 million increase in income tax expense was driven by higher pre-tax income during the three months ended March 31, 2023.

Broadband

Our Broadband segment provides broadband internet, video and voice services to residential and commercial customers in portions of Virginia, West Virginia, Maryland, Pennsylvania, and Kentucky, via hybrid fiber coaxial cable under the brand name of Shentel, fiber optics under the brand name of Glo Fiber. The Broadband segment also leases dark fiber and provides Ethernet and Wavelength fiber optic services to enterprise and wholesale customers throughout the entirety of our service area. The Broadband segment also provides voice and DSL telephone services to customers in Virginia’s Shenandoah County and portions of adjacent counties as a Rural Local Exchange Carrier (“RLEC”). These integrated networks are connected by over 8,600 fiber route mile network.

The following table indicates selected operating statistics of our Broadband segment:
 March 31,
2023
March 31,
2022
Broadband homes and businesses passed (1)377,348 305,053 
Cable Markets212,290 211,442 
Glo Fiber Markets165,058 93,611 
Residential & Small and Medium Business ("SMB") RGUs:
Broadband Data138,713 121,074 
Cable Markets109,920 107,291 
Glo Fiber Markets28,793 13,783 
Video45,660 49,163 
Voice40,135 36,042 
Total Residential & SMB RGUs (excludes RLEC)
224,508 206,279 
Residential & SMB Penetration (2)
Broadband Data36.8 %39.7 %
Cable Markets51.8 %50.7 %
Glo Fiber Markets17.4 %14.7 %
Video12.1 %16.1 %
Voice11.2 %12.5 %
Residential & SMB ARPU (3)
Broadband Data$81.09 $80.11 
Cable Markets$82.83 $80.88 
Glo Fiber Markets$74.18 $74.33 
Video$105.51 $103.42 
Voice$25.25 $27.90 
Fiber route miles8,663 7,611 
Total fiber miles (4)709,123 564,097 
_______________________________________________________
(1)Homes and businesses are considered passed (“passings") if we can connect them to our network without further extending the distribution system. Passings is an estimate based upon the best available information. Passings will vary among video, broadband data and voice services.
(2)Penetration is calculated by dividing the number of users by the number of passings or available homes, as appropriate.
(3)Average Revenue Per RGU calculation = (Residential & SMB Revenue) / average RGUs / 3 months
(4)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.
18

Table of Contents

Three Months Ended March 31, 2023 Compared with the Three Months Ended March 31, 2022

Broadband results from operations are summarized as follows:
Three Months Ended March 31,Change
($ in thousands)2023% of Revenue2022% of Revenue$%
Broadband operating revenue
Residential & SMB - Cable Markets (1)$44,756 66.6 $43,492 72.8 1,264 2.9 
Residential & SMB - Glo Fiber Markets (1)7,003 10.4 3,421 5.7 3,582 104.7 
Commercial Fiber11,700 17.4 9,064 15.2 2,636 29.1 
RLEC & Other3,744 5.6 3,737 6.3 0.2 
Total broadband revenue67,203 100.0 59,714 100.0 7,489 12.5 
Broadband operating expenses
Cost of services25,429 37.8 25,168 42.1 261 1.0 
Selling, general, and administrative15,571 23.2 13,489 22.6 2,082 15.4 
Depreciation and amortization14,867 22.1 12,876 21.6 1,991 15.5 
Total broadband operating expenses55,867 83.1 51,533 86.3 4,334 8.4 
Broadband operating income$11,336 16.9 $8,181 13.7 3,155 38.6 
_________________________________________
(1)Shentel has presented Residential & SMB - Cable Markets and Residential & SMB - Glo Fiber Markets separately for the three months ended March 31, 2023. These revenues were previously reported in one line under the description “Residential & SMB”. Shentel has amended the presentation for the three months ended March 31, 2022 for comparability.

Residential & SMB - Cable Markets revenue
Residential & SMB - Cable Markets revenue for the three months ended March 31, 2023 increased approximately $1.3 million, or 2.9%, compared with the three months ended March 31, 2022, primarily driven by 2.5% year-over-year growth in data RGUs and 2.4% increase in data ARPU driven by increased customer demand for higher speed data service.

Residential & SMB - Glo Fiber Markets revenue
Residential & SMB - Glo Fiber Markets revenue for the three months ended March 31, 2023 increased approximately $3.6 million, or 104.7%, compared with the three months ended March 31, 2022, primarily driven by 108.9% year-over-year growth in data RGUs driven by the Company's expansion of Glo Fiber.

Commercial Fiber revenue
Commercial Fiber revenue for the three months ended March 31, 2023 increased approximately $2.6 million, or 29.1%, compared with the three months ended March 31, 2022, primarily driven by $1.8 million in T-Mobile non-recurring early termination fees and $0.8 million in recurring revenue driven by 17.1% increase in connections. T-Mobile disconnected 188 backhaul circuits during the first quarter as part of their previously announced rationalization of the former Sprint network. The Company expects 174 additional backhaul disconnects in 2023 as part of the network rationalization.

Cost of services
Cost of services for the three months ended March 31, 2023, increased approximately $0.3 million, or 1.0%, compared with the three months ended March 31, 2022, primarily driven by higher costs associated with consumable materials and supplies, maintenance and rent, partially offset by lower medical costs.

Selling, general and administrative
Selling, general and administrative expense for the three months ended March 31, 2023, increased $2.1 million, or 15.4%, compared with the three months ended March 31, 2022, primarily driven by higher advertising costs associated with the Company's expansion of Glo Fiber and a change in strategy to drive more gross adds to low cost sales channels, higher information technology costs as a result of the Company's investment in upgraded systems, and higher operating taxes associated with increased network assets associated with the expansion of Glo Fiber.

Depreciation and amortization
Depreciation and amortization increased $2.0 million, or 15.5%, compared with the three months ended March 31, 2022, primarily as a result of the Company's expansion of its Glo Fiber network.
19

Table of Contents
Tower

Our Tower segment owns cell towers and leases colocation space on the towers to wireless communications providers. Substantially all of our owned towers are built on ground that we lease from the respective landlords.

The following table indicates selected operating statistics of the Tower segment:
March 31,
2023
March 31,
2022
Macro tower sites222 223 
Tenants 445 468 
Average tenants per tower2.0 2.1 

Three Months Ended March 31, 2023 Compared with the Three Months Ended March 31, 2022

Tower results from operations are summarized as follows:
Three Months Ended March 31,Change
($ in thousands)2023% of Revenue2022% of Revenue$%
Tower revenue$4,576 100.0 $4,847 100.0 (271)(5.6)
Tower operating expenses2,155 47.1 2,094 43.2 61 2.9 
Tower operating income$2,421 52.9 $2,753 56.8 (332)(12.1)

Revenue
Revenue decreased approximately $0.3 million, or 5.6%, for the three months ended March 31, 2023 compared with the three months ended March 31, 2022, primarily due to lower application fee revenue.

Operating expenses
Operating expenses for the three months ended March 31, 2023 were consistent with operating expenses for the three months ended March 31, 2022.
20

Table of Contents
Financial Condition, Liquidity and Capital Resources

Sources and Uses of Cash: Our principal sources of liquidity are our cash and cash equivalents, cash generated from operations, and borrowings under our Credit Agreement, dated July 1, 2021 (the "Credit Agreement").

In 2021, Congress passed the America Rescue Plan Act to subsidize the deployment of high-speed broadband internet access in unserved areas. We have been awarded approximately $81.2 million in grants to serve approximately 22,800 unserved homes in the states of Virginia, West Virginia and Maryland. The grants will be paid to the Company as certain milestones are completed. The Company expects to its fulfill its performance obligations during the period from 2023 to 2025.

As of March 31, 2023, our cash and cash equivalents totaled $48.4 million and the availability under our delayed draw term loans and revolving line of credit was $300.0 million, for total available liquidity of $348.4 million.

Operating activities generated approximately $48.3 million of cash during the three months ended March 31, 2023, representing an increase of $32.3 million compared with the prior year period, driven primarily by tax refunds received during the three months ended March 31, 2023 and changes in working capital.

Net cash used in investing activities increased $22.0 million during the three months ended March 31, 2023, compared with the three months ended March 31, 2022, due to a $22.0 million increase in capital expenditures as a result of higher spending in the Broadband segment to enable our Glo Fiber market expansion.

Net cash provided by financing activities was $23.6 million during the three months ended March 31, 2023, compared with net cash used in financing activities of $0.8 million for the three months ended March 31, 2022. The change was primarily due to $25.0 million borrowed under the Company's team loans during the three months ended March 31, 2023, partially offset by increases in cash paid for taxes associated with equity award issuances.

The Company has received approximately $28.6 million in cash refunds for income and sales taxes during the three months ended March 31, 2023.

Indebtedness: During the three months ended March 31, 2023, we borrowed $12.5 million under each of the delayed draw term loan facilities available under the Credit Agreement for a total of $25.0 million. The commitments of the lenders under the Credit Agreement to make these term loans to us expire on June 30, 2023. After this date, we will not be able to borrow any undrawn portion of the term loan commitments. We expect to borrow the remaining $200.0 million available under these term loans by June 2023 to fund planned capital expenditures to continue our Glo Fiber network expansion. As of March 31, 2023, the Company’s indebtedness totaled approximately $100.0 million, net of unamortized loan fees of $43.0 thousand, with an annualized overall weighted average effective interest rate of approximately 7.08%.

The Company will be required to commence making principal repayments of these term loans on September 30, 2023. The amount of these principal repayments is calculated as a percentage of the principal amount of the Term Loans outstanding. Based on the principal amounts outstanding as of March 31, 2023, (i) the first term loan will require quarterly principal repayments of $0.3 million from September 30, 2023 through June 30, 2024, then increasing to $0.6 million quarterly from September 30, 2024 through March 31, 2026, with the remaining balance due June 30, 2026, and (ii) the second term loan will require quarterly principal repayments of $0.1 million through March 31, 2028, with the remaining balance due June 30, 2028. These repayment amounts, as well as our interest expense, will increase to the extent we borrow any of the remaining $200.0 million available under the term loans by the borrowing deadline as we expect.

Refer to Note 8, Debt, for more information about the Company's Credit Facility.

As of March 31, 2023, the Company was in compliance with the financial covenants in our Credit Agreement.

We expect our cash on hand, cash flow from operations, and availability of funds from our Credit Agreement as well as government grants will be sufficient to meet our anticipated liquidity needs for business operations for the next twelve months. There can be no assurance that we will continue to generate cash flows at or above current levels.

During the first quarter of 2023, our capital expenditures of $67.7 million exceeded our cash flow provided from continuing operations by $19.3 million, and we expect our capital expenditures will continue to exceed the cash flow provided from operations through 2025, as we expand our Glo Fiber broadband network to potentially reach over 450,000 passings. During 2023, we anticipate funding up to $320.0 million in capital expenditures related to continuing our Glo Fiber network expansion with net cash provided by operating activities, proceeds from our delayed draw term loans and government grants.

21

Table of Contents
The actual amount and timing of our future capital requirements may differ materially from our estimates depending on the demand for our products and services, new market developments and expansion opportunities.

Our cash flows from operations could be adversely affected by events outside our control, including, without limitation, 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. Our ability to attract and maintain a sufficient customer base, particularly in our Broadband markets, is critical to our ability to maintain a positive cash flow from operations. The foregoing events individually or collectively could affect our results.

Critical Accounting Policies

There have been no material changes to the critical accounting policies previously disclosed in Part II, Item 8 of our 2022 Form 10-K for the year ended December 31, 2022.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have borrowed a total of $100 million pursuant to the variable rate delayed draw term loans available under the Credit Agreement, and we expect to continue to borrow under our Credit Agreement as needed to fund the Company's future capital expenditures. We expect to draw an additional $200.0 million against the Credit Agreement by June 2023. Fluctuations in interest rates on future borrowings could result in increased market risk.

As of March 31, 2023, the Company had $100.0 million of gross variable rate debt outstanding, bearing interest at an annualized weighted average effective rate of 7.08%. An increase in market interest rates of 1.00% would add approximately $1.0 million to annual interest expense. 
 
ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer (the certifying officers) have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of March 31, 2023. Our certifying officers concluded that our disclosure controls and procedures were effective as of March 31, 2023.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
22

Table of Contents
PART II

ITEM 1. LEGAL PROCEEDINGS

We are currently involved in, and may in the future become involved in, legal proceedings, claims and investigations in the ordinary course of our business. Although the results of these legal proceedings, claims and investigations cannot be predicted with certainty, we do not believe that the final outcome of any matters that we are currently involved in are reasonably likely to have a material adverse effect on our business, financial condition or results of operations. Regardless of final outcomes, however, any such proceedings, claims, and investigations may nonetheless impose a significant burden on management and employees and be costly to defend, with unfavorable preliminary or interim rulings.

ITEM 1A. RISK FACTORS

We discuss in our Annual Report on Form 10-K various risks that may materially affect our business. We use this section to update this discussion to reflect material developments since our Form 10-K was filed. As of March 31, 2023, the Company has not identified any needed updates to the risk factors included in our most recent Form 10-K.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

None.

Use of Proceeds from Registered Securities

None.

Purchases of Equity Securities by the Issuer or Affiliated Purchasers

In conjunction with the vesting of stock awards or exercise of stock options, the grantees may surrender awards necessary to cover the statutory tax withholding requirements and any amounts required to cover stock option strike prices associated with the transaction. The following table provides information about shares surrendered during the quarter ended March 31, 2023, to settle employee tax withholding obligations related to the vesting of stock awards.