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Form 8-K
0000354963 False 0000354963 2023-08-02 2023-08-02 iso4217:USD xbrli:shares iso4217:USD xbrli:shares
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________

FORM 8-K

_________________

CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  August 2, 2023

_______________________________

Shenandoah Telecommunications Company

(Exact name of registrant as specified in its charter)

_______________________________

Virginia000-0988154-1162807
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification No.)

500 Shentel Way
P.O. Box 459

Edinburg, Virginia 22824

(Address of Principal Executive Offices) (Zip Code)

(540) 984-4141

(Registrant's telephone number, including area code)

Not applicable

(Former name or former address, if changed since last report)

_______________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock (No Par Value)SHENNASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging 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. ☐

 
 
Item 2.02. Results of Operations and Financial Condition.

On August 2, 2023, Shenandoah Telecommunications Company (the “Company”) issued a press release announcing its financial position as of June 30, 2023, results of operations for the three and six months ended June 30, 2023, and other related information. The Company also posted supplemental earnings presentation materials on the investor section of the Company’s website at www.Shentel.com. A copy of the press release is furnished as Exhibit 99.1 and is incorporated herein by reference.

These materials may contain forward-looking statements about Shenandoah Telecommunications Company regarding, among other things, our business strategy, our prospects and our financial position. These statements can be identified by the use of forward-looking terminology such as “believes,” “estimates,” “expects,” “intends,” “may,” “will,” “should,” “could,” or “anticipates” or the negative or other variation of these or similar words, or by discussions of strategy or risks and uncertainties. Shenandoah Telecommunications Company undertakes no obligation to revise or update such statements to reflect current events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

The following exhibit is furnished with this Current Report on Form 8-K.

99.1* Second Quarter 2023 Earnings Press Release
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Furnished herewith

 
 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 Shenandoah Telecommunications Company
   
  
Date: August 2, 2023By: /s/ James J. Volk        
  James J. Volk
  Senior Vice President – Chief Financial Officer
(Principal Financial Officer)
  

 
EdgarFiling

EXHIBIT 99.1

Shenandoah Telecommunications Company Reports Second Quarter 2023 Results

EDINBURG, Va., Aug. 02, 2023 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company (“Shentel”) (Nasdaq: SHEN) announced second quarter 2023 financial and operating results.

Second Quarter 2023 Highlights

“I am pleased with our solid execution of our Fiber First growth plan and the continued scaling of our fiber network. Broadband Adjusted EBITDA margin was 39% compared to 36% in the same period a year ago. We expect margins to increase as our Glo Fiber penetration rate grows,” said President and CEO, Christopher E. French.

Shentel’s second-quarter earnings conference call will be webcast at 8:30 a.m. ET on Wednesday, August 2, 2023. The webcast and related materials will be available on Shentel’s Investor Relations website at https://investor.shentel.com/.

Consolidated Second Quarter 2023 Results

Broadband

Tower

Other Information

Earnings Call Webcast

Date: Wednesday, August 2, 2023
Time: 8:30 A.M. (ET)
Listen via Internet: https://investor.shentel.com/ 

A replay of the call will be available for a limited time on the Investor Relations page of the Company’s website.

About Shenandoah Telecommunications

Shenandoah Telecommunications Company (Shentel) provides broadband services through its high speed, state-of-the-art cable and fiber optic networks to customers in the Mid-Atlantic United States. The Company’s services include: broadband internet, video, and voice; fiber optic Ethernet, wavelength and leasing; and tower colocation leasing. The Company owns an extensive regional network with over 9,000 route miles of fiber and over 220 macro cellular towers. For more information, please visit www.shentel.com.

This release contains forward-looking statements about Shentel regarding, among other things, its business strategy, its prospects and its financial position. These statements can be identified by the use of forward-looking terminology such as “believes,” “estimates,” “expects,” “intends,” “may,” “will,” “should,” “could,” or “anticipates” or the negative or other variation of these or similar words, or by discussions of strategy or risks and uncertainties. The forward-looking statements are based upon management’s beliefs, assumptions and current expectations and may include comments as to Shentel’s beliefs and expectations as to future events and trends affecting its business that are necessarily subject to uncertainties, many of which are outside Shentel’s control. Although management believes that the expectations reflected in the forward-looking statements are reasonable, forward-looking statements are not, and should not be relied upon as, a guarantee of future performance or results, nor will they necessarily prove to be accurate indications of the times at which such performance or results will be achieved, and actual results may differ materially from those contained in or implied by the forward-looking statements as a result of various factors. A discussion of other factors that may cause actual results to differ from management’s projections, forecasts, estimates and expectations is available in Shentel’s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2022 and our Quarterly Reports on Form 10-Q. Those factors may include natural disasters, pandemics and outbreaks of contagious diseases and other adverse public health developments, such as COVID-19, changes in general economic conditions including high inflation, increases in costs, changes in regulation and other competitive factors. The forward-looking statements included are made only as of the date of the statement. Shentel undertakes no obligation to revise or update such statements to reflect current events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events, except as required by law.

CONTACTS:

Shenandoah Telecommunications Company
Jim Volk
Senior Vice President and Chief Financial Officer
540-984-5168
Jim.Volk@emp.shentel.com


SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share amounts)Three Months Ended
June 30,		 Six Months Ended
June 30,
  2023   2022   2023   2022 
Service revenue and other$71,341  $66,021  $143,027  $130,435 
Operating expenses:       
Cost of services exclusive of depreciation and amortization 26,076   26,756   52,643   53,095 
Selling, general and administrative 25,691   23,090   52,300   46,925 
Restructuring expense —   454   —   390 
Impairment expense 836   4,068   1,020   4,407 
Depreciation and amortization 16,369   14,790   31,967   29,135 
Total operating expenses 68,972   69,158   137,930   133,952 
Operating income (loss) 2,369   (3,137)  5,097   (3,517)
Other income (expense):       
Other income (expense), net 177   (589)  1,294   (759)
Income (loss) before income taxes 2,546   (3,726)  6,391   (4,276)
Income tax expense (benefit) 756   (501)  2,535   (448)
Net income (loss)$1,790  $(3,225) $3,856  $(3,828)
        
Other comprehensive income:       
Unrealized income on interest rate hedge, net of tax 2,127   —   2,127   — 
Comprehensive income (loss)$3,917  $(3,225) $5,983  $(3,828)
        
Net income (loss) per share, basic and diluted:       
Basic net income (loss) per share$0.04  $(0.06) $0.08  $(0.08)
        
Diluted net income (loss) per share$0.04  $(0.06) $0.08  $(0.08)
        
Weighted average shares outstanding, basic 50,366   50,157   50,330   50,133 
Weighted average shares outstanding, diluted 50,693   50,157   50,569   50,133 
        


SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)June 30,
2023		 December 31,
2022
ASSETS   
Current assets:   
Cash and cash equivalents$26,304  $44,061 
Accounts receivable, net of allowance for doubtful accounts of $726 and $776, respectively 15,344   20,615 
Income taxes receivable 4,647   29,755 
Prepaid expenses and other 12,874   11,509 
Current assets held for sale 19,742   22,622 
Total current assets 78,911   128,562 
Investments 13,016   12,971 
Property, plant and equipment, net 786,446   687,553 
Goodwill and intangible assets, net 81,270   81,515 
Operating lease right-of-use assets 52,258   53,859 
Deferred charges and other assets 15,557   13,259 
Total assets$1,027,458  $977,719 
LIABILITIES AND SHAREHOLDERS’ EQUITY   
Current liabilities:   
Current maturities of long-term debt, net of unamortized loan fees$1,056  $648 
Accounts payable 41,238   49,173 
Advanced billings and customer deposits 12,359   12,425 
Accrued compensation 7,532   9,616 
Current operating lease liabilities 3,076   2,829 
Accrued liabilities and other 12,766   17,906 
Current liabilities held for sale 3,804   3,824 
Total current liabilities 81,831   96,421 
Long-term debt, less current maturities, net of unamortized loan fees 123,795   74,306 
Other long-term liabilities:   
Deferred income taxes 87,830   84,600 
Asset retirement obligations 10,187   9,932 
Benefit plan obligations 4,035   3,758 
Non-current operating lease liabilities 49,872   50,477 
Other liabilities 20,483   20,218 
Total other long-term liabilities 172,407   168,985 
Commitments and contingencies (Note 13)   
Shareholders’ equity:   
Common stock, no par value, authorized 96,000; 50,264 and 50,110 issued and outstanding at June 30, 2023 and December 31, 2022, respectively —   — 
Additional paid in capital 62,888   57,453 
Retained earnings 584,410   580,554 
Accumulated other comprehensive income, net of taxes 2,127   — 
Total shareholders’ equity 649,425   638,007 
Total liabilities and shareholders’ equity$1,027,458  $977,719 


SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES   
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS   
(in thousands)Six Months Ended
June 30,
  2023   2022 
Cash flows from operating activities:   
Net income (loss)$3,856  $(3,828)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depreciation and amortization 31,967   29,135 
Stock-based compensation expense, net of amount capitalized 6,320   5,528 
Impairment expense 1,020   4,407 
Deferred income taxes 2,491   (392)
Other, net 1,118   1,985 
Changes in assets and liabilities:   
Accounts receivable 4,499   4,430 
Current income taxes 25,108   — 
Operating lease assets and liabilities, net 408   414 
Other assets 1,937   (1,902)
Accounts payable (3,012)  127 
Other deferrals and accruals (5,912)  (1,180)
Net cash provided by operating activities 69,800   38,724 
    
Cash flows from investing activities:   
Capital expenditures (136,158)  (88,706)
Proceeds from sale of assets and other 508   279 
Net cash used in investing activities (135,650)  (88,427)
    
Cash flows from financing activities:   
Proceeds from credit facility borrowings 50,000   — 
Payments for debt issuance costs (300)  — 
Taxes paid for equity award issuances (1,317)  (835)
Payments for financing arrangements and other (290)  (471)
Net cash provided by (used in) financing activities 48,093   (1,306)
Net decrease in cash and cash equivalents (17,757)  (51,009)
Cash and cash equivalents, beginning of period 44,061   84,344 
Cash and cash equivalents, end of period$26,304  $33,335 
    
Supplemental Disclosures of Cash Flow Information   
Interest paid$3,111  $— 
Income tax refunds received, net$25,481  $— 


Non-GAAP Financial Measures
Adjusted EBITDA and Adjusted EBITDA Margin

The Company defines Adjusted EBITDA as net income (loss) calculated in accordance with GAAP, adjusted for the impact of depreciation and amortization, impairment, other income (expense), net, interest income, interest expense, income tax expense (benefit), stock compensation expense, transaction costs related to acquisition and disposition events (including professional advisory fees, integration costs, and related compensatory matters), restructuring expense, tax on equity award vesting and exercise events, and other non-comparable items. A reconciliation of net income (loss), which is the most directly comparable GAAP financial measure, to Adjusted EBITDA is provided below herein.

Adjusted EBITDA margin is the Company’s calculation of Adjusted EBITDA, divided by revenue calculated in accordance with GAAP.

The Company uses Adjusted EBITDA and Adjusted EBITDA margin as supplemental measures of performance to evaluate operating effectiveness and assess its ability to increase revenues while controlling expense growth and the scalability of the Company’s business growth strategy. Adjusted EBITDA is also a significant performance measure used by the Company in its incentive compensation programs. The Company believes that the exclusion of the expense and income items eliminated in calculating Adjusted EBITDA and Adjusted EBITDA margin provides management and investors a useful measure for period-to-period comparisons of the Company’s core operating results by excluding items that are not comparable across reporting periods or that do not otherwise relate to the Company’s ongoing operations. Accordingly, the Company believes that Adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating the Company’s operating results. However, use of Adjusted EBITDA and Adjusted EBITDA margin as analytical tools has limitations, and investors and others should not consider them in isolation or as substitutes for analysis of our financial results as reported under GAAP. In addition, other companies may calculate Adjusted EBITDA and Adjusted EBITDA margin or similarly titled measures differently, which may reduce their usefulness as comparative measures.

Three Months Ended June 30, 2023        
(in thousands) Broadband Tower Corporate &
Eliminations		 Consolidated
Net income (loss) $9,613  $2,487  $(10,310) $1,790 
Depreciation and amortization  15,490   538   341   16,369 
Impairment expense  836   —   —   836 
Other expense (income), net  62   —   (239)  (177)
Income tax benefit  —   —   756   756 
Stock-based compensation  —   —   2,603   2,603 
Restructuring charges and other  71   —   230   301 
Adjusted EBITDA $26,072  $3,025  $(6,619) $22,478 
         
Adjusted EBITDA margin  39%  64% N/A  32%


Three Months Ended June 30, 2022        
(in thousands) Broadband Tower Corporate &
Eliminations		 Consolidated
Net income (loss) $4,042  $2,285  $(9,552) $(3,225)
Depreciation and amortization  13,396   633   761   14,790 
Impairment expense  4,068   —   —   4,068 
Other expense (income), net  65   —   524   589 
Income tax benefit  —   —   (501)  (501)
Stock-based compensation  —   —   2,385   2,385 
Restructuring charges and other  443   —   11   454 
Adjusted EBITDA $22,014  $2,918  $(6,372) $18,560 
         
Adjusted EBITDA margin  36%  62% N/A  28%


Six Months Ended June 30, 2023        
(in thousands) Broadband Tower Corporate &
Eliminations		 Consolidated
Net income (loss) $20,887  $4,908  $(21,939) $3,856 
Depreciation and amortization  30,173   1,051   743   31,967 
Impairment expense  1,020   —   —   1,020 
Other expense (income), net  124   —   (1,418)  (1,294)
Income tax benefit  —   —   2,535   2,535 
Stock-based compensation  —   —   6,320   6,320 
Restructuring charges and other  202   —   230   432 
Adjusted EBITDA $52,406  $5,959  $(13,529) $44,836 
         
Adjusted EBITDA margin  39%  64% N/A  31%


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


Segment Results

Three Months Ended June 30, 2023:
(in thousands)Broadband Tower Corporate &
Eliminations		 Consolidated
External revenue       
Residential & SMB - Cable Markets1$44,403  $—  $—  $44,403 
Residential & SMB - Glo Fiber Markets1 8,164   —   —   8,164 
Commercial Fiber 10,253   —   —   10,253 
Tower lease —   4,715   —   4,715 
RLEC & Other 3,806   —   —   3,806 
Service revenue and other 66,626   4,715   —   71,341 
Intercompany revenue and other 51   38   (89)  — 
Total revenue 66,677   4,753   (89)  71,341 
Operating expenses       
Cost of services 24,752   1,379   (55)  26,076 
Selling, general and administrative 15,924   349   9,418   25,691 
Impairment expense 836   —   —   836 
Depreciation and amortization 15,490   538   341   16,369 
Total operating expenses 57,002   2,266   9,704   68,972 
Operating income (loss)$9,675  $2,487  $(9,793) $2,369 


Three Months Ended June 30, 2022:
(in thousands)Broadband Tower Corporate &
Eliminations		 Consolidated
External revenue       
Residential & SMB - Cable Markets1$43,843  $—  $—  $43,843 
Residential & SMB - Glo Fiber Markets1 4,056   —   —   4,056 
Commercial Fiber 9,340   —   —   9,340 
Tower lease —   4,615   —   4,615 
RLEC & Other 4,124   —   —   4,124 
Service revenue and other 61,363   4,615   —   65,978 
Intercompany revenue and other 49   87   (93)  43 
Total revenue 61,412   4,702   (93)  66,021 
Operating expenses       
Cost of services 25,440   1,378   (62)  26,756 
Selling, general and administrative 13,958   406   8,726   23,090 
Restructuring expense 443   —   11   454 
Impairment expense 4,068   —   —   4,068 
Depreciation and amortization 13,396   633   761   14,790 
Total operating expenses 57,305   2,417   9,436   69,158 
Operating income (loss)$4,107  $2,285  $(9,529) $(3,137)


Six Months Ended June 30, 2023:
(in thousands)Broadband Tower Corporate &
Eliminations		 Consolidated
External revenue       
Residential & SMB - Cable Markets1$89,159  $—  $—  $89,159 
Residential & SMB - Glo Fiber Markets1 15,167   —   —   15,167 
Commercial Fiber 21,951   —   —   21,951 
Tower lease —   9,253   —   9,253 
RLEC & Other 7,497   —   —   7,497 
Service revenue and other 133,774   9,253   —   143,027 
Intercompany revenue and other 106   76   (182)  — 
Total revenue 133,880   9,329   (182)  143,027 
Operating expenses       
Cost of services 50,181   2,571   (109)  52,643 
Selling, general and administrative 31,495   799   20,006   52,300 
Impairment expense 1,020   —   —   1,020 
Depreciation and amortization 30,173   1,051   743   31,967 
Total operating expenses 112,869   4,421   20,640   137,930 
Operating income (loss)$21,011  $4,908  $(20,822) $5,097 


Six Months Ended June 30, 2022:
(in thousands)Broadband Tower Corporate &
Eliminations		 Consolidated
External revenue       
Residential & SMB - Cable Markets1$87,336  $—  $—  $87,336 
Residential & SMB - Glo Fiber Markets1 7,476   —   —   7,476 
Commercial Fiber 18,402   —   —   18,402 
Tower lease —   9,361   —   9,361 
RLEC & Other 7,813   —   —   7,813 
Service revenue and other 121,027   9,361   —   130,388 
Intercompany revenue and other 99   188   (240)  47 
Total revenue 121,126   9,549   (240)  130,435 
Operating expenses       
Cost of services 50,608   2,670   (183)  53,095 
Selling, general and administrative 27,430   724   18,771   46,925 
Restructuring expense 460   —   (70)  390 
Impairment expense 4,407   —   —   4,407 
Depreciation and amortization 25,933   1,117   2,085   29,135 
Total operating expenses 108,838   4,511   20,603   133,952 
Operating income (loss)$12,288  $5,038  $(20,843) $(3,517)

_________________________________________
(1)   Shentel has presented Residential & SMB - Cable Markets and Residential & SMB - Glo Fiber Markets separately for the three and six months ended June 30, 2023. These revenues were previously reported in one line under the description “Residential & SMB”. Shentel has amended the presentation for the three and six months ended June 30, 2022 for comparability.

Supplemental Information

Broadband Operating Statistics
 June 30,
2023		 June 30,
2022
Broadband homes and businesses passed (1)396,035  324,186 
Cable Markets213,188  211,681 
Glo Fiber Markets182,847  112,505 
    
Residential & Small and Medium Business ("SMB") RGUs:   
Broadband Data142,247  125,003 
Cable Markets109,404  107,878 
Glo Fiber Markets32,843  17,125 
Video44,800  49,027 
Voice40,313  39,535 
Total Residential & SMB RGUs (excludes RLEC)227,360  213,565 
    
Residential & SMB Penetration (2)   
Broadband Data35.9% 38.6%
Cable Markets51.3% 51.0%
Glo Fiber Markets18.0% 15.2%
Video11.3% 15.1%
Voice10.7% 12.9%
    
Fiber route miles9,082  7,906 
Total fiber miles (3)767,173  589,923 

______________________________________________________
(1)   Homes and businesses are considered passed (“passings”) if we can connect them to our network without further extending the distribution system. Passings is an estimate based upon the best available information. Passings will vary among video, broadband data and voice services.
(2)   Penetration is calculated by dividing the number of users by the number of passings or available homes, as appropriate.
(3)   Total fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance. For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

Broadband - Residential and SMB ARPU  
 Three Months Ended
June 30,		 Six Months Ended
June 30,
  2023   2022   2023   2022 
Residential and SMB Revenue:       
Broadband$34,152  $29,568  $67,326  $58,217 
Cable Markets 27,172   26,123   54,445   51,986 
Glo Fiber Markets 6,980   3,445   12,881   6,231 
Video 14,411   15,210   29,056   30,551 
Voice 3,054   2,994   6,084   5,910 
Discounts, adjustments and other 950   127   1,860   134 
Total Revenue$52,567  $47,899  $104,326  $94,812 
        
Average RGUs:       
Broadband Data 140,481   123,153   138,376   121,832 
Cable Markets 109,716   107,738   109,737   107,878 
Glo Fiber Markets 30,765   15,415   28,639   13,954 
Video 45,229   49,146   45,749   49,295 
Voice 40,164   38,463   40,078   36,650 
        
ARPU: (1)       
Broadband$81.03  $79.94  $81.06  $80.02 
Cable Markets$82.55  $80.82  $82.69  $80.85 
Glo Fiber Markets$75.63  $74.49  $74.96  $74.42 
Video$106.21  $103.16  $105.85  $103.29 
Voice$25.35  $25.95  $25.30  $26.88 

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

Tower Operating Statistics
 June 30,
2023		 June 30,
2022
Macro tower sites222  223 
Tenants448  465 
Average tenants per tower1.9  2.0