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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 June 30, 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/f5cddf4a084c67c3341a5ec6d86c70c4-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 Market50,263,953
(Title of Class)(Trading Symbol)(Name of Exchange on which Registered)(The number of shares of the registrant's common stock outstanding on July 26, 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 Comprehensive Income (Loss)
  
 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 5.
Other Information
Item 6.Exhibits
  
 Signatures
  
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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 receivable4,647 29,755 
Prepaid expenses and other12,874 11,509 
Current assets held for sale19,742 22,622 
Total current assets78,911 128,562 
Investments13,016 12,971 
Property, plant and equipment, net786,446 687,553 
Goodwill and intangible assets, net81,270 81,515 
Operating lease right-of-use assets52,258 53,859 
Deferred charges and other assets15,557 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 payable41,238 49,173 
Advanced billings and customer deposits12,359 12,425 
Accrued compensation7,532 9,616 
Current operating lease liabilities3,076 2,829 
Accrued liabilities and other12,766 17,906 
Current liabilities held for sale3,804 3,824 
Total current liabilities81,831 96,421 
Long-term debt, less current maturities, net of unamortized loan fees123,795 74,306 
Other long-term liabilities:
Deferred income taxes87,830 84,600 
Asset retirement obligations10,187 9,932 
Benefit plan obligations4,035 3,758 
Non-current operating lease liabilities49,872 50,477 
Other liabilities20,483 20,218 
Total other long-term liabilities172,407 168,985 
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 capital62,888 57,453 
Retained earnings584,410 580,554 
Accumulated other comprehensive income, net of taxes2,127  
Total shareholders’ equity649,425 638,007 
Total liabilities and shareholders’ equity$1,027,458 $977,719 

See accompanying notes to unaudited condensed consolidated financial statements.
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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,
2023202220232022
Service revenue and other$71,341 $66,021 $143,027 $130,435 
Operating expenses:
Cost of services exclusive of depreciation and amortization26,076 26,756 52,643 53,095 
Selling, general and administrative25,691 23,090 52,300 46,925 
Restructuring expense 454  390 
Impairment expense836 4,068 1,020 4,407 
Depreciation and amortization16,369 14,790 31,967 29,135 
Total operating expenses68,972 69,158 137,930 133,952 
Operating income (loss)2,369 (3,137)5,097 (3,517)
Other income (expense):
Other income (expense), net177 (589)1,294 (759)
Income (loss) before income taxes2,546 (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 tax2,127  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, basic50,366 50,157 50,330 50,133 
Weighted average shares outstanding, diluted50,693 50,157 50,569 50,133 

See accompanying notes to unaudited condensed consolidated financial statements.

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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 EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance, March 31, 202350,247 $60,160 $582,620 $ $642,780 
Net income— — 1,790 — 1,790 
Stock-based compensation24 2,878 — — 2,878 
Common stock issued— 11 — — 11 
Shares surrendered for settlement of employee taxes upon issuance of vested equity awards(7)(161)— — (161)
Other comprehensive income, net of tax— — — 2,127 2,127 
Balance, June 30, 202350,264 $62,888 $584,410 $2,127 $649,425 
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance, December 31, 202250,110 $57,453 $580,554 $ $638,007 
Net income— — 3,856 — 3,856 
Stock-based compensation220 6,730 — — 6,730 
Common stock issued1 22 — — 22 
Shares surrendered for settlement of employee taxes upon issuance of vested equity awards(67)(1,317)— — (1,317)
Other comprehensive income, net of tax— — — 2,127 2,127 
Balance, June 30, 202350,264 $62,888 $584,410 $2,127 $649,425 
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance, March 31, 202250,049 $52,008 $592,321 $ $644,329 
Net loss— — (3,225)— (3,225)
Stock-based compensation41 2,557 — — 2,557 
Common stock issued— 8 — — 8 
Shares surrendered for settlement of employee taxes upon issuance of vested equity awards(13)(299)— — (299)
Balance, June 30, 202250,077 $54,274 $589,096 $ $643,370 
Shares of Common Stock (no par value)Additional Paid in CapitalRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance, December 31, 202149,965 $49,351 $592,924 $ $642,275 
Net loss— — (3,828)— (3,828)
Stock-based compensation151 5,809 — — 5,809 
Common stock issued1 16 — — 16 
Shares surrendered for settlement of employee taxes upon issuance of vested equity awards(40)(902)— — (902)
Balance, June 30, 202250,077 $54,274 $589,096 $ $643,370 

See accompanying notes to unaudited condensed consolidated financial statements.
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SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)Six Months Ended
June 30,
20232022
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 amortization31,967 29,135 
Stock-based compensation expense, net of amount capitalized6,320 5,528 
Impairment expense1,020 4,407 
Deferred income taxes2,491 (392)
Other, net1,118 1,985 
Changes in assets and liabilities:
Accounts receivable4,499 4,430 
Current income taxes25,108  
Operating lease assets and liabilities, net408 414 
Other assets1,937 (1,902)
Accounts payable(3,012)127 
Other deferrals and accruals(5,912)(1,180)
Net cash provided by operating activities69,800 38,724 
Cash flows from investing activities:
Capital expenditures(136,158)(88,706)
Proceeds from sale of assets and other508 279 
Net cash used in investing activities(135,650)(88,427)
Cash flows from financing activities:
Proceeds from credit facility borrowings50,000  
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 activities48,093 (1,306)
Net decrease in cash and cash equivalents(17,757)(51,009)
Cash and cash equivalents, beginning of period44,061 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 $ 

See accompanying notes to unaudited condensed consolidated financial statements.
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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, the computation of income taxes and the fair value of interest rate swaps. 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 comprehensive income (loss).

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The following tables present the activity of current and non-current contract assets:
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2023202220232022
Beginning Balance$8,756 $8,303 $8,646 $8,147 
Commission payments793 1,309 1,684 1,647 
Contract asset amortization(807)(1,185)(1,588)(1,367)
Ending Balance$8,742 $8,427 $8,742 $8,427 

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 $9.4 million and $9.5 million as of June 30, 2023 and December 31, 2022, respectively, and Shentel’s non-current contract liability balances were $1.3 million and $1.9 million as of June 30, 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 14, Segment Reporting, for a summary of the Company’s revenue streams.

Note 3. Investments

Investments consist of the following:
(in thousands)June 30,
2023
December 31,
2022
SERP investments at fair value$2,116 $1,889 
Cost method investments10,645 10,749 
Equity method investments255 333 
Total investments$13,016 $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: Shentel’s investment in CoBank’s Class A common stock, derived from the CoBank patronage program, represented substantially all of the Company’s cost method investments with a balance of $10.0 million at both June 30, 2023 and December 31, 2022, respectively. We recognized approximately $0.2 million and $0.1 million of patronage income in other income (expense) for the three months ended June 30, 2023 and 2022, respectively, and approximately $0.3 million and $0.2 million during the six months ended June 30, 2023 and 2022, respectively. 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 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.

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Note 4. Property, Plant and Equipment

Property, plant and equipment consist of the following:
 
($ in thousands)Estimated Useful LivesJune 30,
2023
December 31,
2022
Land$3,722 $3,722 
Land improvements
10 years
3,483 3,483 
Buildings and structures
10 - 45 years
96,175 93,461 
Cable and fiber
15 - 30 years
682,218 593,771 
Equipment and software
4 - 8 years
333,821 317,347 
Plant in service 1,119,419 1,011,784 
Plant under construction 163,610 144,534 
Total property, plant and equipment 1,283,029 1,156,318 
Less: accumulated depreciation and amortization(496,583)(468,765)
Property, plant and equipment, net $786,446 $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 June 30, 2023 and December 31, 2022 included amounts associated with capital expenditures of approximately $38.9 million and $43.8 million, respectively. Depreciation and amortization expense was $16.2 million and $14.6 million during the three months ended June 30, 2023 and 2022, respectively, and $31.7 million and $28.7 million during the six months ended June 30, 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 $21.1 million, composed of $17.3 million cash and approximately $3.8 million of liabilities to be assumed by the wireless carrier (the “Spectrum Transaction”). The Spectrum Transaction closed on July 6, 2023.

Note 5. Goodwill and Intangible Assets

Goodwill and intangible assets consist of the following:
 June 30, 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 (27,140)1,285 28,425 (26,910)1,515 
Other intangibles488 (344)144 488 (329)159 
Total finite-lived intangibles28,913 (27,484)1,429 28,913 (27,239)1,674 
Total goodwill and intangible assets$108,754 $(27,484)$81,270 $108,754 $(27,239)$81,515 

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Amortization expense was $0.1 million and $0.2 million during the three months ended June 30, 2023 and 2022, respectively, and $0.2 million and $0.4 million during the six months ended June 30, 2023 and 2022, respectively.

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, as of June 30, 2023 and December 31, 2022. 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)June 30,
2023
December 31,
2022
Prepaid maintenance expenses$6,830 $7,444 
Broadband contract acquisition costs3,026 2,809 
Other3,018 1,256 
Prepaid expenses and other$12,874 $11,509 

Deferred charges and other assets, classified as long-term assets, included the following:
(in thousands)June 30,
2023
December 31,
2022
Broadband contract acquisition costs$5,716 $5,837 
Interest rate swaps2,438  
Prepaid expenses and other7,403 7,422 
Deferred charges and other assets$15,557 $13,259 

Accrued liabilities and other, classified as current liabilities, included the following:
(in thousands)June 30,
2023
December 31,
2022
Accrued programming costs$3,142 $3,306 
Pension plan 3,341 
Other current liabilities9,624 11,259 
Accrued liabilities and other$12,766 $17,906 

Other liabilities, classified as long-term liabilities, included the following:
(in thousands)June 30,
2023
December 31,
2022
Noncurrent portion of deferred lease revenue$18,788 $18,679 
Noncurrent portion of financing leases1,414 1,500 
Other281 39 
Other liabilities$20,483 $20,218 

In 2021, Shentel’s Board of Directors adopted a resolution to terminate its pension plan. The Company terminated the pension plan and all benefits were distributed in June 2023 through the combination of lump sum payments and the purchase of non-participating annuity contracts at the option of the pension plan participants. The Company made an additional $2.9 million contribution from its cash balance as a result of the settlement and recognized a settlement gain of $0.7 million in other income (expense).

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Note 7. Leases

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

The components of lease costs were as follows:

ClassificationThree Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2023202220232022
Finance lease cost
Amortization of leased assetsDepreciation$119 $119 $238 $238 
Interest on lease liabilitiesInterest expense19 21 39 42 
Operating lease cost
Operating expense1
1,762 2,999 3,605 5,662 
Lease cost$1,901 $3,139 $3,883 $5,942 
_________________________________________
(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 June 30, 2023:
(in thousands)Operating LeasesFinance LeasesTotal
2023$2,534 $55 $2,589 
20245,750 178 5,928 
20255,421 180 5,601 
20264,601 153 4,754 
20273,750 155 3,905 
2028 and thereafter64,996 1,359 66,355 
Total lease payments87,052 2,080 89,132 
Less: Interest(34,104)(565)(34,669)
Present value of lease liabilities$52,948 $1,515 $54,463 

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

June 30,
2023
December 31,
2022
Operating leases
Weighted average remaining lease term (years)19.420.0
Weighted average discount rate4.8 %4.5 %
Finance leases
Weighted average remaining lease term (years)12.813.9
Weighted average discount rate5.2 %5.2 %

Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands)2023202220232022
Cash paid for operating lease liabilities$1,497 $1,511 $3,181 $3,103 
Operating lease right-of-use assets obtained in exchange for new lease liabilities (includes new leases or modification of existing leases)456 430 1,721 2,070 

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The Company recognized $4.7 million and $4.4 million of operating lease revenue for the three months ended June 30, 2023 and 2022, respectively, and $9.2 million and $9.8 million of operating lease revenue for the six months ended June 30, 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 comprehensive income (loss). Substantially all of our lease revenue relates to fixed lease payments.

Below is a summary of our minimum rental receipts under the lease agreements in place as of June 30, 2023:
(in thousands)Operating Leases
2023$8,093 
202415,110 
202514,006 
202610,941 
20279,425 
2028 and thereafter22,794 
Total $80,369 

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)June 30,
2023
December 31,
2022
Term loan A-1$62,500 $37,500 
Term loan A-262,500 37,500 
Total debt125,000 75,000 
Less: unamortized loan fees(149)(46)
Total debt, net of unamortized loan fees$124,851 $74,954 

In May 2023, Shentel amended the Credit Agreement resulting in (a) a change of the floating index rate from the one-month term London Inter-Bank Offered Rate (“LIBOR”) to the one-month term Secured Overnight Financing Rate (“SOFR”), (b) an extension of the borrowing deadline under the Term Loans from June 30, 2023 to December 31, 2023, and (c) an extension of the first principal repayment date for the Term Loans from September 30, 2023 to March 31, 2024. Management evaluated the amendment and concluded that the amendment event represents a modification of the existing Credit Agreement; therefore, modification accounting was applied.

Both Term Loan A-1 and Term Loan A-2 bore interest at one-month LIBOR plus a margin of 1.50% until May 2023 and now bear interest at one-month term SOFR 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 6.64% and 5.89% at June 30, 2023 and December 31, 2022, respectively. The Company’s cash payments for interest were $1.8 million during the three months ended June 30, 2023 and $3.1 million during the six months ended June 30, 2023. Shentel had no debt outstanding during the three and six months ended June 30, 2022; therefore, the Company made no interest payments during the three and six months ended June 30, 2022. Shentel is charged commitment fees on unutilized portions of its Revolver and Term Loans. The Company recorded $0.1 million and $0.2 million related to these fees for the three months ended June 30, 2023 and 2022, respectively, and $0.3 million and $0.4 million related to these fees for the six months ended June 30, 2023 and 2022, respectively, which is included in other income (expense), net in the unaudited condensed consolidated statements of comprehensive income (loss).

The Credit Agreement contains a borrowing deadline of December 31, 2023, after which the Company will not be able to borrow against the undrawn portion of the Term Loans.

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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 June 30, 2023, Term Loan A-1 requires quarterly principal repayments of $0.4 million from March 31, 2024 through June 30, 2024; then increasing to $0.8 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 June 30, 2023, Term Loan A-2 requires quarterly principal repayments of $0.2 million from March 31, 2024 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 June 30, 2023:

(in thousands)Amount
2023$ 
20242,969 
20253,750 
202657,656 
2027625 
2028 60,000 
Total$125,000 

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.

Note 9. Derivatives and Hedging

During the second quarter of 2023, Shentel entered into pay fixed (2.90%), receive variable (one-month term SOFR) interest rate swaps totaling $150.0 million of notional principal (the “Swaps”). The Swaps contain monthly payment terms beginning in May 2024, which extend through their maturity dates in June 2026. The Swaps are designated as a cash flow hedge, representing 50% of the Company’s expected outstanding debt (including expected future borrowings under the Term Loans). The Company uses the Swaps to manage its exposure to interest rate risk for its long-term variable-rate Term Loans.

The table below presents the fair value of the Swaps as well as their classification in the unaudited condensed consolidated balance sheets. The fair value of these instruments was estimated using an income approach and observable market inputs (Level 2):
(in thousands)June 30,
2023
Balance sheet line item of derivative financial instruments:
Prepaid expenses and other$428 
Deferred charges and other assets2,438 
Total derivatives designated as hedging instruments$2,866 

The hedge was determined to be highly effective and therefore all change in the fair value of the swaps was recognized through other comprehensive income. The Company recognized $2.1 million of unrealized gains, net of deferred taxes totaling $0.7 million, for the three and six months ended June 30, 2023. Since the Company did not have outstanding interest rate swaps in the prior year period, there were no gains or losses recorded for the three or six months ended June 30, 2022. Shentel expects to begin reclassifying amounts related to the Swaps from accumulated other comprehensive income to interest expense in May 2024, when the payment period of the Swaps, and thus the period containing the hedged transactions, begins.

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Note 10. 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 June 30, 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 and six months ended June 30, 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
June 30,
Six Months Ended
June 30,
(in thousands)2023202220232022
Expected tax expense (benefit) at federal statutory$535 $(783)$1,342 $(898)
State income tax expense (benefit), net of federal tax effect134 (181)344 (213)
Excess tax deficiency from share-based compensation and other expense, net87 463 849 663 
Income tax expense (benefit)$756 $(501)$2,535 $(448)

The Company received $25.6 million in cash refunds for income taxes for the six months ended June 30, 2023. The Company made $0.1 million in cash payments for income taxes for the six months ended June 30, 2022.

Note 11. Stock Compensation and Earnings (Loss) per Share

The Company granted approximately 385,000 restricted stock units (“RSUs”) at a weighted average grant price of $19.05 to employees and directors during the six months ended June 30, 2023. Approximately 190,000 RSUs with a weighted average grant price of $25.01 vested and 8,000 RSUs with a weighted average grant price of $21.64 were forfeited during the six months ended June 30, 2023. The total fair value of RSUs vested was $4.8 million during the six months ended June 30, 2023. Approximately 837,000 RSUs with a weighted average grant price of $21.64 remained outstanding as of June 30, 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 six months ended June 30, 2023. Approximately 30,000 RTSRs with a weighted average grant price of $56.32 vested and no RTSRs were forfeited during the six months ended June 30, 2023. The total fair value of RTSRs vested was $1.1 million during the six months ended June 30, 2023. Approximately 293,000 RTSRs with a weighted average grant price of $25.80 remained outstanding as of June 30, 2023. The amount of RTSRs issued are determined on the vesting date based upon the Company’s stock performance compared to a group of peer companies. The vested amounts above exclude the vesting date 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
June 30,
Six Months Ended
June 30,
(in thousands)2023202220232022
Stock compensation expense2,878 2,557 6,730 5,809 
Capitalized stock compensation(275)(172)(410)(281)
Stock compensation expense, net$2,603 $2,385 $6,320 $5,528 

As of June 30, 2023, there was $13.2 million of total unrecognized compensation cost related to non-vested incentive awards which is expected to be recognized over weighted average period of 2.5 years.

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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
June 30,
Six Months Ended
June 30,
(in thousands, except per share amounts)2023202220232022
Calculation of net income (loss) per share:
Net income (loss)$1,790 $(3,225)$3,856 $(3,828)
Basic weighted average shares outstanding50,366 50,157 50,330 50,133 
Basic net income (loss) per share$0.04 $(0.06)$0.08 $(0.08)
Effect of stock-based compensation awards outstanding:
Basic weighted average shares outstanding50,366 50,157 50,330 50,133 
Effect from dilutive shares and options outstanding327  239  
Diluted weighted average shares outstanding50,693 50,157 50,569 50,133 
Diluted net income (loss) per share$0.04 $(0.06)$0.08 $(0.08)
There were approximately 119,000 and 411,000 anti-dilutive equity awards outstanding during the three and six months ended June 30, 2023, respectively. There were approximately 212,000 and 155,000 potentially dilutive equity awards for the three and six months ended June 30, 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 periods.

Note 12. Government Grants

During the six months ended June 30, 2023, Shentel was awarded an additional $16.1 million in new 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, $6.3 million awarded under the Virginia Telecommunications Initiative in Virginia, and $0.4 million under the Line Extension Advancement and Development program in West Virginia. The Company recognizes grant receivables at the time it becomes probable that the Company will be eligible to receive the grant, which is estimated to correspond with the date when specified build-out milestones are achieved. The Company has not recognized any material amounts under these programs as of June 30, 2023 and December 31, 2022.

Note 13. 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 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 14. Segment Reporting

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.



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Three Months Ended June 30, 2023:
(in thousands)BroadbandTowerCorporate & EliminationsConsolidated
External revenue
Residential & SMB - Cable Markets$44,403 $ $— $44,403 
Residential & SMB - Glo Fiber Markets8,164  — 8,164 
Commercial Fiber10,253  — 10,253 
Tower lease 4,715 — 4,715 
RLEC & Other3,806  — 3,806 
Service revenue and other66,626 4,715 — 71,341 
Intercompany revenue and other51 38 (89) 
Total revenue66,677 4,753 (89)71,341 
Operating expenses
Cost of services24,752 1,379 (55)26,076 
Selling, general and administrative15,924 349 9,418 25,691 
Impairment expense836   836 
Depreciation and amortization15,490 538 341 16,369 
Total operating expenses57,002 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)BroadbandTowerCorporate & EliminationsConsolidated
External revenue
Residential & SMB - Cable Markets$43,843 $ $— $43,843 
Residential & SMB - Glo Fiber Markets4,056  — 4,056 
Commercial Fiber9,340  — 9,340 
Tower lease 4,615 — 4,615 
RLEC & Other4,124  — 4,124 
Service revenue and other61,363 4,615 — 65,978 
Intercompany revenue and other49 87 (93)43 
Total revenue61,412 4,702 (93)66,021 
Operating expenses
Cost of services25,440 1,378 (62)26,756 
Selling, general and administrative13,958 406 8,726 23,090 
Restructuring expense443  11 454 
Impairment expense4,068   4,068 
Depreciation and amortization13,396 633 761 14,790 
Total operating expenses57,305 2,417 9,436 69,158 
Operating income (loss)$4,107 $2,285 $(9,529)$(3,137)

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Six Months Ended June 30, 2023:
(in thousands)BroadbandTowerCorporate & EliminationsConsolidated
External revenue
Residential & SMB - Cable Markets$89,159 $ $— $89,159 
Residential & SMB - Glo Fiber Markets15,167  — 15,167 
Commercial Fiber21,951  — 21,951 
Tower lease 9,253 — 9,253 
RLEC & Other7,497  — 7,497 
Service revenue and other133,774 9,253 — 143,027 
Intercompany revenue and other106 76 (182) 
Total revenue133,880 9,329 (182)143,027 
Operating expenses
Cost of services50,181 2,571 (109)52,643 
Selling, general and administrative31,495 799 20,006 52,300 
Impairment expense1,020   1,020 
Depreciation and amortization30,173 1,051 743 31,967 
Total operating expenses112,869 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)BroadbandTowerCorporate & EliminationsConsolidated
External revenue
Residential & SMB - Cable Markets$87,336 $ $— $87,336 
Residential & SMB - Glo Fiber Markets7,476  — 7,476 
Commercial Fiber18,402  — 18,402 
Tower lease 9,361 — 9,361 
RLEC & Other7,813  — 7,813 
Service revenue and other121,027 9,361 — 130,388 
Intercompany revenue and other99 188 (240)47 
Total revenue121,126 9,549 (240)130,435 
Operating expenses
Cost of services50,608 2,670 (183)53,095 
Selling, general and administrative27,430 724 18,771 46,925 
Restructuring expense460  (70)390 
Impairment expense4,407   4,407 
Depreciation and amortization25,933 1,117 2,085 29,135 
Total operating expenses108,838 4,511 20,603 133,952 
Operating income (loss)$12,288 $5,038 $(20,843)$(3,517)

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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
June 30,
Six Months Ended
June 30,
(in thousands)2023202220232022
Total consolidated operating income (loss) $2,369 $(3,137)$5,097 $(3,517)
Other income (expense), net177 (589)1,294 (759)
Income (loss) before income taxes$2,546 $(3,726)$6,391 $(4,276)

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.

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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 14, Segment Reporting, in our unaudited condensed consolidated financial statements for additional information.

Second Quarter of 2023 Developments

Debt amendment:
In May 2023, Shentel amended the Credit Agreement resulting in (a) a change of the floating index rate from the one-month term London Inter-Bank Offered Rate to the one-month term Secured Overnight Financing Rate, (b) an extension of the borrowing deadline under the Term Loans from June 30, 2023 to December 31, 2023, and (c) an extension of the first principal repayment date for the Term Loans from September 30, 2023 to March 31, 2024.

Hedging arrangements:
In May 2023, Shentel entered into pay fixed, receive variable interest rate swaps totaling $150.0 million of notional principal (the “Swaps”). The Swaps contain monthly payment terms beginning in May 2024, which extend through their maturity dates in June 2026. The Swaps are designated as a cash flow hedge, representing 50% of the Company’s expected outstanding debt (including expected future borrowings under the Term Loans). The Company uses the Swaps to manage its exposure to interest rate risk for its long-term variable-rate Term Loans.

Pension plan termination:
In 2021, Shentel’s Board of Directors adopted a resolution to terminate its pension plan. The Company terminated the pension plan and all benefits were distributed in June 2023 through the combination of lump sum payments and the purchase of non-participating annuity contracts at the option of the pension plan participants. The Company made an additional $2.9 million contribution from its cash balance as a result of the settlement and recognized a settlement gain of $0.7 million in other income (expense).

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Results of Operations

Three Months Ended June 30, 2023 Compared with the Three Months Ended June 30, 2022

The Company’s consolidated results from operations are summarized as follows:
Three Months Ended June 30,Change
($ in thousands)2023% of Revenue2022% of Revenue$%
Revenue$71,341 100.0 $66,021 100.0 5,320 8.1 
Operating expenses68,972 96.7 69,158 104.8 (186)(0.3)
Operating income (loss)2,369 3.3 (3,137)(4.8)5,506 175.5 
Other income (expense), net177 0.2 (589)(0.9)766 (130.1)
Income (loss) before taxes2,546 3.6 (3,726)(5.6)6,272 168.3 
Income tax expense756 1.1 (501)(0.8)1,257 250.9 
Net income (loss)$1,790 2.5 $(3,225)(4.9)5,015 (155.5)

Revenue
Revenue increased approximately $5.3 million, or 8.1%, during the three months ended June 30, 2023 compared with the three months ended June 30, 2022, primarily driven by growth of $5.3 million, or 8.6%, in the Broadband 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 decreased approximately $0.2 million, or 0.3%, for the three months ended June 30, 2023 compared with the three months ended June 30, 2022, primarily driven by $0.3 million and $0.2 million of lower Broadband and Tower operating expenses, respectively, partially offset by $0.3 million of incremental Corporate operating expenses.

Other income (expense), net
Other income, net increased $0.8 million, or 130.1%, for the three months ended June 30, 2023 compared with the three months ended June 30, 2022, primarily driven by a pension settlement gain resulting from the termination of Shentel’s pension plan in June 2023.

Income tax (benefit) expense
The Company recognized $0.8 million of income tax expense for the three months ended June 30, 2023, compared with $0.5 million of income tax benefit for the three months ended June 30, 2022. The $1.3 million increase in income tax expense was driven by higher pre-tax income during the three months ended June 30, 2023.

Six Months Ended June 30, 2023 Compared with the Six Months Ended June 30, 2022

The Company’s consolidated results from operations are summarized as follows:
Six Months Ended June 30,Change
($ in thousands)2023% of Revenue2022% of Revenue$%
Revenue$143,027 100.0 $130,435 100.0 12,592 9.7 
Operating expenses137,930 96.4 133,952 102.7 3,978 3.0 
Operating income (loss)5,097 3.6 (3,517)(2.7)8,614 (244.9)
Other income (expense), net1,294 0.9 (759)(0.6)2,053 (270.5)
Income (loss) before taxes6,391 4.5 (4,276)(3.3)10,667 (249.5)
Income tax expense2,535 1.8 (448)(0.3)2,983 665.8 
Net income (loss)$3,856 2.7 $(3,828)(2.9)7,684 (200.7)

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Revenue
Revenue increased approximately $12.6 million, or 9.7%, during the six months ended June 30, 2023 compared with the six months ended June 30, 2022, primarily driven by growth of $12.8 million, or 10.5%, in the Broadband segment, partially offset by a decline of $0.2 million, or 2.3%, 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 $4.0 million, or 3.0%, for the six months ended June 30, 2023 compared with the six months ended June 30, 2022, primarily driven by $4.0 million of incremental Broadband operating expenses.

Other income (expense), net
Other income, net increased $2.1 million, or 270.5%, for the six months ended June 30, 2023 compared with the six months ended June 30, 2022, primarily driven by sales taxes refunds received and interest income related to tax refunds during the six months ended June 30, 2023, as well as a pension settlement gain resulting from the termination of Shentel’s pension plan in June 2023.

Income tax (benefit) expense
The Company recognized $2.5 million of income tax expense for the six months ended June 30, 2023, compared with $0.4 million of income tax benefit for the six months ended June 30, 2022. The $3.0 million increase in income tax expense was driven by higher pre-tax income during the six months ended June 30, 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, and 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 9,000 route miles of fiber.

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The following table indicates selected operating statistics of our Broadband segment:
 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 %
Residential & SMB ARPU (3)
Broadband Data$81.03 $79.94 
Cable Markets$82.55 $80.82 
Glo Fiber Markets$75.63 $74.49 
Video$106.21 $103.16 
Voice$25.35 $25.95 
Fiber route miles9,082 7,906 
Total fiber miles (4)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)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.
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Three Months Ended June 30, 2023 Compared with the Three Months Ended June 30, 2022

Broadband results from operations are summarized as follows:
Three Months Ended June 30,Change
($ in thousands)2023% of Revenue2022% of Revenue$%
Broadband operating revenue
Residential & SMB - Cable Markets (1)$44,403 66.6 $43,843 71.4 560 1.3 
Residential & SMB - Glo Fiber Markets (1)8,164 12.2 4,056 6.6 4,108 101.3 
Commercial Fiber10,255 15.4 9,343 15.2 912 9.8 
RLEC & Other3,855 5.8 4,170 6.8 (315)(7.6)
Total broadband revenue66,677 100.0 61,412 100.0 5,265 8.6 
Broadband operating expenses
Cost of services24,752 37.1 25,440 41.4 (688)(2.7)
Selling, general, and administrative15,924 23.9 13,958 22.7 1,966 14.1 
Restructuring expense—&#