SHEN - Earnings call transcript Q4 2021 | Shenandoah Telecommunications Company

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Operator

Good morning, everyone. Welcome to Shenandoah Telecommunications Fourth Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Kirk Andrews, Director of Financial Planning and Analysis for Shentel.

Kirk Andrews

you us. thank and morning, for joining Good The results for today's call review Shentel's is to XXXX. purpose of

Our results will Chief set included were are this night, announced replay details www.shentel.com. in our press Officer; are announcing an that on With Officer; Chris Vice French, Executive available call. question-and-answer presentation page and Senior and our audio Vice be Operating today release later Please press President Investor and the President The note President remarks, prepared and this session. release the of conduct us our we'll we reviewing Executive made Volk, the Chief a forth is call McKay, in on of Ed Finance call at website, and be After the distributed will last CFO. Jim today.

These Slide me risks materially conference the Harbor I from to factors you and may remind to As you encouraged our discussion our detailed SEC statements the to various always, to in of are which you forward-looking Safe this X differ results provided let a contains Therefore, uncertainties. filings, have include review. subject disclaimer, of statements. which our actual that refer presentation, and may cause risk certain

I reliance You or update revise as undue cautioned now we are Go not statements. the obligation to And ahead, turn to to publicly Chris. any that, on Except undertake with forward-looking these will place call required Chris. statements. no by over law, forward-looking

Christopher French

safe. that us morning trust and are appreciate you staying joining We healthy everyone this Kirk. Thanks, and

our business for $XX we Fiber divested with to year dividend to X, additions. a construction segment our million net at of Slide special to off growth and record truly a plan. and the $XXX our in wireless network Glo the $X.XX Fiber in invested on year ambitious for Fiber to customer our used billion divestiture, transformative pay a summarized time We First capital proceeds for Glo grow and pay to million Shentel. the As shareholders was the achieving raised find We all million Simultaneously successfully in $XXX largest almost business, debt. base, XXXX growth and XXXX

XXX,XXX of the We of franchise over and fiber were and over franchise XX,XXX goal announced of of subsidize over for passed XXX,XXX XX,XXX two state homes also new unserved build as fiber grants Glo end passings and a million passings. homes. in XXXX of approvals agreements start passings that the the secured to our winner We thirds have construction to as now construction $XX We local in to businesses with XXX,XXX XXXX addition Fiber backlog will XXXX. of

end incumbent We're by with excited of the growth XXXX the network. next for several of creation platform this and the about We than cable to more expect homes businesses our will fiber pass that very sustainable years. provide

obtained resized Additionally, as to reflect we organization rate run we savings. expense smaller focused million $X business, in broadband our annual our

software automation, to cost drive cost. lower and business practices, and our changes non-employee continue of We through to procurement facility opportunities out take

We our to have Shifting cost Slide XX,XXX a XXXX broadband ended construction each X, added expect in We've network since $X on by an over year new over savings construction in we passings achieve XX% million operating in with improvement XXXX. over the of We Fiber we first XX,XXX XXXX. beginning passings. XXXX. Glo pace of our now to increased incremental of now year the annual expansion identified XXXX that

passings to XXXX add expect We strong XX,XXX as we continue momentum. in our construction

to steady we're now network at fixed integrated In reaching beam passings with and ended of our XXX,XXX target likely stay in our stopped announced have we wireless, XXXX broadband approximately to XXXX way total, October, XXX,XXX. passings we passings As XX,XXX. of approximately broadband expansion with well our on

to Turning network had by for of We record broadband for approximately XX Glo net year additions year expansion. XX was XX,XXX. driven strong of a our XXXX, data another Fiber Slide X, net additions

cable below demand, Our full the of record data net broadband service business across beam net XXXX in turn underlying products In XXXX stimulated our theme pandemic and in higher when approximately XX% the additions of approximately data additions, but local added we approach operations, additions customer X.X%. XXXX. services, fair additions. is a elevated high internet XXXX The additional of pricing. net year than first outstanding year three all of incumbent our broadband quality This branded drove had

subscribers incumbent to our in additions, growth Jim growth our network. of driven review our of I'll call Fiber year data Glo be as we to double of to financial turn details with the modest results. the markets new cable beam record XXXX reach by the our over and expect in and enter We now that, With expected majority of the another

James Volk

everyone. Thank you, morning, Chris, and good

XXXX, to for results we changes years financial our XXXX. made the presentation our review for few a the metrics of and XXXX and non-GAAP statements note that I please XXXX, Before

reported to the only, is We adjusted did impact not period and metric The results. change OIBDA description non-GAAP previously as in or current have adjusted fact EBITDA. changed prior in

associated related costs quarter, and segment. in activities the labor error During certain the discovered previously overhead installation fourth statements issued capitalization in we our with to broadband customer an our financial of

the by of costs certain of immaterial in earnings we corrected filed of as Therefore, to Note financial of error our XXXX properly interim our details, of this and prior for asset. of cost $XXX,XXX current X more increased broadband error approximately prior last period the in financial and results. on XXXX. our impact would for statements recasting our morning XXXX to contract historical material service the to error and posted statements The see and determined the the Although if call appendix have revised fulfillment Please the website presentation annual previously impact capitalized night a the cumulative year. we expensing to the be financial statements, be reflect effect

charge of to period in fourth our add our an million related recognized to financial expansion like had beam our of embedded cease to we adjustments or that in We a also quarter announced that October. decision impairment highlight. results network nonrecurring, I'd unusual $X.X We number

of in We prior the In replacement cable period expense to inventory drop cable a our or fourth an fees other segment, slow axillary an section of certain $X.X when a costs was prospective we cost $X adjustment plan. to period began in replace charged $XXX,XXX fiber We service. the and moving and of in or to added structural service. small of quarter we million tenants recorded added of also our outside The reserve recorded million broadband cost lease. equipment analysis of execution defer from broadband adjustment application collected to Tower recorded for our

term added the in and lease. fourth the $XXX,XXX XXXX. we corporate million of adjusted period correction over per $X before revenue in by respectively, the this recognize now effect and accrued and In added quarter period EBITDA the professional adjustments million expenses, earnings cumulative will these of our reduced taxes adversely fees. We $XX.X error The income

revenue our increase in system XXXX. from $XXX,XXX expansion nonrecurring fiber and sales-type RLEC of $X expenses. obsolete a Revenue grew an ERP increase grew partially higher X SMB million $X the However, access and revenue are in a before to revenue. $X.X our residential please revenues replacement to DSL impact XXXX. revenue, and Adjusted driven to growth income we background, related non-recurring relatively for please or to to broadband in replace financial dark EBITDA Slide note $XXX.X of reducing by decline and that Fiber due to refer million $X.X current to EBITDA X.X% previously we expenses be by $XX.X the in growth by in discussed was XX.X% $XX.X this increase expect nonrecurring increased primarily and or declined million in XX.X% leases and million and the million development taxes $XXX,XXX supported residential fiber million RGUs. small, annually. Broadband our $XX.X and XX.X% discuss With of to offset of results million lower million cable Commercial an in charges costs million $XX.X approximately grew to subscribers future amortized adjusted net revenue earnings to due data beam $XX.X reduction inventory costs to in circuits, X.X% XXXX, services. X.X% $XX.X million. due operating that XXXX. to software expense Maintenance million in switched in of the expensing increase due planning Glo periods

revenue programming grew a $XXX,XXX increased and increased XX.X% Adjusted back to revenue. enhancements ground segment per revenue Tower primarily previously due a systems a fees $XX.X On lease primarily decline also due offset the tenants increase application to XXXX, EBITDA expenses. Slide revenue in partially $XX.X $X.X lease by discussed by due X.X% growth grew to and X, higher million offset to X.X% tenant office million $X.X Software in decline retrans to fees million and X.X% to in our million. in lease

a XXXX Moving for grew to EBITDA XXXX Slide in million Consolidated the to $XX.X in driven of to lower million XX.X% $XXX.X respectively, respectively. fees. force to tower in revenues XX.X% corporate XX% and of growth grew by XX.X% revenue broadband due previously consolidated Tower in expenses, primarily growth due X.X% adjusted XX, X.X% the and year decline reduction to and professional announced X.X% broadband and and

income September million and flow available operations taxes the XX, million in as $XX continuing cash to and XXXX, and related strong the and Glo on sale ended cash million, XX, of facility. our was gain increased $XXX beam. investments [ph] of our we to in $XX fourth from with our in we as sequentially paid cash of Slide million million $XX $XXX Moving negative quarter wireless $XXX equivalents million in credit million We operations. hand XXXX including assets liquidity from $XXX Free and from from negative declined

increase guidance free expenditures will We flow loans million call. million the Ed to XXXX in Glo we to the on on capital the our expected of draw our delayed $XXX XXXX XXXX for fund Fiber $XXX negative in to the expect pace provide later investments. as cash draw term in

to revenue we annually providing the to due XXXX approximately provide As guidance, the our T-Mobile from fiber to are from we customer. look on from backhaul largest generate T-Mobile, half other and tower with related $XX leasing in forward, EBIT towers and transport services. uncertainty planning partially million space revenue adjusted from revenue our approximately and half to We not

in former call, As we decommissioning network. of wireless to following discussed their expect Sprint LTE CDMA area national T-Mobile the earnings the service last rationalize our we on network our

early are there part not our had to backhaul left that backhaul that revenue fees towers fees exact termination visibility disconnected could of timing, end that will contract, and forecasting. rationalization. the expect circuits circuits do we visibility the the years annual that the Ignoring the have of million important to to transport the we million that and triggered churn $X to if likely under another will the early term in be note Although in liability add T-Mobile impact we be X.X churn, term be have of and It $X are our about from of number to in XX range. degree prior of termination is complexity approximately of

T-Mobile provide calls you will And Fiber call future us we more turn companies for these now I'll growth subscriber provides revenue cable Glo headwinds, years. our strategy to several in play above over Ed. expansion and We have pure that will is when the significant incremental penetration opportunity well update sustainable clarity. a Despite

Edward McKay

Thanks, morning. Jim, and good

we where summarized So our primary XX I'll offerings. product begin Slide on

make toward our data, to offer grow networks our markets areas XXX,XXX of cable and of passings urban higher continue to homes in years. video our and businesses of Maryland to speeds and rural to incumbent areas next Kentucky. to Fiber XX% suburban West we Shentel towns in and total over currently and Tier and progress next Glo gigabit and Virginia, Tier XXX,XXX goal passings offer of passings Virginia, and over XXX,XXX voice targets small the X services the years. five density five X expect significant number Our we We

over now have addition XX,XXX new In XX franchise total executed of agreements new XXX,XXX XXXX, a over franchise and in approved passings. constructing passings we to

we double to Glo track of XXX,XXX As on to passings XXXX. end are current earlier, Fiber over by mentioned the Chris our

fixed any not we As beam to wireless broadband ceased we the and anticipate XXXX. previously due further influx of for areas, beam announced, we grants expansion passings additional do unserved in government have

government grant the actively passings targeted have five unserved from are years. areas pursuing we XX,XXX funding, over However, and next

with primarily telecommunication least success additional funds will a grants American five at with of counties. serve via as be XX,XXX will initiative the fiber. fiber-to-the-home to with to unserved early likely Virginia these Shentel connections. December, through partnership grants we expect the $XX broadband sourced leverage bring million We which XX,XXX over had These Plan funding. Rescue government share matching projects and counties, grants, over infrastructure were in of in Shentel these the has million announced of winner multi-gigabit their through $XX primarily Act local along broadband an from in from homes, will

additional pursue to states including Virginia, Maryland, and continue grant We West the Pennsylvania. of opportunities

and XX, to Slide launches Salem, cable, that XXXX Maryland. route now new over Carlisle Hanover Jefferson and fourth of expanding network have Virginia in active XXXX, of Virginia, Glo in Lynchburg, earlier our and markets year, our our total. launched fiber, Martinsburg the quarter total to XXXX These Glo markets rapidly with Frederick, incumbent market launches Fiber County Fiber XX in fixed of Turning in miles in In and Pennsylvania, wireless West networks. and Roanoke Glo broadband in in the service we depicted eight along our we launched bringing connecting consists

markets, of primarily construction addition we in our Initiative five outlined We surrounding markets Virginia to wins. major cable areas systems In XXXX. expansion in target have already plan counties our our where fiber is and and five work Telecommunications significant red The that place. highlight infrastructure launch underway engineering existing we in Grant to additional

our on XXX,XXX grew our data XX. quarter RGUs, at over incumbent Cable from increase prior in starting to Slide In the to XXX the operating about XXX,XXX. of compared is end business, XXX,XXX XXXX Let's X.X% approximately XXXX RGUs to with acquired Canadian total move X.X% year on prior the results year-over-year approximately This year. We year. end significant added to compared to cable a broadband net including

increased XX.X% XXXX penetration fourth Our incumbent XX.X% this quarter. quarter data of the broadband from in cable to

value revenue XXXX and local our our data continued broadband subscribers Our ties speed average by powerhouse average with fourth grew per of customer in continued X.XX% subscribed second. rate to user into service. second in in $XX.XX increased to data of driven megabits of of strong and and card, XX% quarter. per per and record XXXX reached is year-over-year are success megabits a our XX local this is our the to Broadband communities, quarter now the on churn XX of the X.X% our plans performance higher or now over X.XX%. Churn low download fourth $XX

growth record the Fiber rate total Slide XX.X% ended XX,XXX another Turning at year our with business, penetration XX markets. had for to Glo a RGUs approximately we aggregate quarter customer data for and broadband across all

Our the XX,XXX. Glo year-over-year end increased by customer relationships XXXX Fiber approximately at to quarter over

$XX.XX. churn Our the X.XX% for fourth at at year-over-year broadband data ARPU to Fiber year was remains Glo data quarter. the very low down rate X.XX% for

in However, to change to this level. level of due revenue account the accounting is from for year a product the deferred beginning

subs our now our of ARPU one of sequential customer of gig since and overall new on the services. was data or XX% fourth remained speed adopted XXXX QX quarter of a of Our higher, Glo these has to $XX.XX. up tier XX% higher slightly fairly consistent base subscribes basis and In the beginning to XXXX ARPU tiers

our play. rates Slide XX% were XX% in streaming to XX% services Our quarter Glo double of X% only, voice play At triple in data data play, XX as the of and perform TV with in continued markets a Fiber the our were and XX% and customers well, broadband single penetration end demonstrates were a respectively. XXXX, attachment age.

penetration Our see and fourth XXXX growth of steady already the we passings at as mature. in the launched markets are quarter X.X% rate

to We service XXXX per per customers this households. we on our of $XX Fiber XX% take second pattern this penetration XX, in XXXX approximately beam launched megabit continue our we supports of the after fixed XX,XXX our broadband XXXX. markets, On now wireless launched target now our and air growth in We rate penetration data almost highlight terminal sites XXXX Glo passed plan. of and have neighborhoods QX a rate service. markets. two our Approximately Slide years, added of approximately thirds two customers quarter initial month have Our in XX and in XX target XX.X% fourth originally target

plan our for reliable that X.XX% continues X.XX% additional Although to we do beam service would for broadband otherwise XXXX, not unserved churn the very remains year areas sites our service provide and at the low to in to be construct and quarter.

total XX, XX.X% of the XG national orders tenants open including new tenants tenants Slide XXX XXX. beam to year-over-year of existing backlog tenants, with At a increased build upgrades fourth fixed to tower includes to of Turning of intercompany XX wireless they network. XX a we for operations. our quarter Dish end the This primarily had the to from as addition prepare related

addition, In executed four with Dish. we leases have

provides drivers for Finally, capital fixed XXXX XXXX approximately XXXX. Capital primary in beam XX million Glo XXXX. to guidance year-over-year in our expansions $XXX The and our our were networks. spending the wireless $XXX.X were for the million Slide and compared expenditures of Fiber

for full Fiber and we The completing invest million the $XXX expand For Initiative passings XXXX to in award Telecommunications in is very million for and $XXX up for to focused preliminary new our operator, year Glo investment is constructing new including construction Of and we're on XX,XXX now XXXX, fiber to questions. million, for in new $XXX XXXX, related our over $XX our approximately is Thank XXX,XXX areas. you Virginia million wrapping in Glo $XX to to networks. guidance and continue grant is passings construction much, ready connecting aggressively approximately materials, remainder work. engineering, million $XXX million the subscribers as

Operator

the Instructions] of comes Day Please B. question. your Riley. question from first Thank ask Your Dan you. from [Operator line

Dan Day

Yes, good my morning, you taking appreciate guys. questions. I

level approach that of XXs, segment thinking be low about the broadband depressed just that how the in on It seemed XXs, outside for EBITDA a quarter. quarter, bit high we XXXX? Just to margin, little first should one obviously

So what be kind is should that thinking still moving about number we modeling of forward?

James Volk

Dan. Yes,

a So comments made my scripted there's numbers at of bit couple, I there's the quarter noise in our fourth as a quite in beginning.

So, I $X to in XXXX still beam Those still $X guess we is, about XXXX. million losses to and Glo. losses were million related both first were we incurring in were

be the do in to positive the on But expect adjusted we're drag on beam XXXX. the the turning We a half to second cusp Glo likely year, this we be year. breakeven expect of to turn of in EBITDA so

expenses fourth of out expense million $X the In was addition year of some in impact that that is that, is incremental period going The I estimating there forward about what hit to of top heavy a on highlighted. we're quarter that.

to So, adjusted EBITDA EBITDA continued beam should number Glo will we in beam until EBITDA broadband That XX% our high losses side summarize, go beam. that Glo for excluding be expected and the around coming margins XX% on from house. with likely of the margins be positive the margin and number, the both

Dan Day

there out and you. just thank but issues it, did you costs, as, like pressures labor with raw and seeing Fiber? anything Got build specifically out crews you job and just the as that? And all materials far all construction any labor as with good guys security then Glo on construction that, you're know that, cost a I and

James Volk

security, this no Dan, point. of to construction issues Yes, up crews

long-term focus we've companies. previous regional I As We've on them. in calls, had mentioned, construction primarily we partnerships with been,

gone our previously. with but costs we keep we're have they to up were network rates able what slightly, in that some line also seeing efficiencies in were think our architecture I

Dan Day

that's made or last the increasing bill, this that? with been me of new whether any EBV speeds just uptake I new customers, program, anything permanent with program, it's on then infrastructure like increased one And know ones sort existing from permanent the

James Volk

EBV significant significant still programs, the point. replacement point. No traction changes at this but around at We this no on customers and have the additional XXXX

Dan Day

over. guys taking questions. my right. it turn you appreciate All I'll I

Christopher French

Okay, thanks, Dan.

Operator

question Lucian from of your comes RJF. question. Your from Frank next the [ph] Please ask line

Unidentified Analyst

that. follow were me, Hey, margins Dan's bit part question, just side. What thank for margin in you you. it margin we first we of How the missed below the about deltas in the should don't the you you report out? the call And last so, where came I walk EBITDA expecting? said to EBIT are at the to of the part then and on that's I some quite can a should versus of the basis? quarter still XX% you're looking but a settling what on you, on be what in maybe forward was line can the expecting, the go bigger we quarter, expect going Street for think And

James Volk

Yes, Frank.

move would EBITDA So XX% expect the we forward. the we in be looking margins to forward, broadband high for range as

As becomes year, half should Dan here, ball in I as positive margins matures that as look to grow be EBITDA forward should and of from aspect. my expect positive contribute, that mentioned, I and beam crystal which earlier, to at grow second and this then starts that to those going the we

and to we Glo six, margins So EBITDA seven kind up the eventually out years do we margins we as business, scale further five down grow of XX% get to or out, four we expect the as the as we about the years road. look five, expect reach

Unidentified Analyst

EBITDA Some of on report that EBITDA the the you margins those for company be? will that number what line consolidated

James Volk

Consolidated numbers?

Unidentified Analyst

Hmm…

James Volk

so numbers expect scale up and expect the XXXX six to continue grow that. down in bit range then little we start going get the contributions, business years get the see, to low-to-mid than into start XX% expenses, to margins we to XX% in corporate five we road. consolidated be XXXX. the in you get a again, Fiber in Glo to so we When will Let's range lower as as And to the EBITDA, we that were contributions the high we factor are

Unidentified Analyst

thank all you. right, Okay,

James Volk

Okay.

Operator

the questions. [Operator Hamed Financial. Khorsand Instructions] from your of Your next line ask question Please from BWS comes

Hamed Khorsand

morning. Good

true? that to So just I the like want first business keep to because are going, see beam it your off, sounds is intentions

Christopher French

plan We XXXX. on already the built beam any construction to in continue operate just towers. any and don't building business. on any paused Correct. sites plan Yes, to we've We new

Hamed Khorsand

to So would to add it? able still be subscribers you

Christopher French

we will we yes be the would existing -- adding Correct, actively subscribers sites. to

Hamed Khorsand

[ph] expect on the it immediately? pastors happen side out to year, Fiber what point generate aggressive Glo the this would on and you right build would All subscribers at

James Volk

could not it hear please? you repeat question, I Hamed the could

Hamed Khorsand

home you as to I'm timing from what the pastors XX,XXX the about on, your actually timing add this trying right, on customers adding come these XX,XXX? is are for be [ph] XX,XXX ability as Oh, year the just these gauge talking would and as to to

Christopher French

are higher back number passings, year that is you So point. distributed to half the as slightly will for the construction those the roughly sales on XX,XXX these of year, will the turn team complete our the then over selling at we start and throughout probably a we complete construction XX,XXX or them but

So it will be throughout the year that we're adding customers on these new household passings.

Hamed Khorsand

that size Glo larger ad is that given increase? also mean And growing will in spending geographically, your does

Christopher French

probably I but think will the of slightly be new as increase ad increases. spending higher, will number it passings our the

Hamed Khorsand

that's have your an impact numbers? EBITDA to on But not going

Christopher French

ahead think I -- oh go Correct, our Jim.

James Volk

factored in assumes Yes, said, includes, advertising we that open be there breakeven XXXX margin that's that like EBITDA to was up we're into, the more as we're on and increase an going I markets.

Hamed Khorsand

Okay, Got you. it? thank

Operator

back like Thank turn Volk. the you. conference I to time. at now I'm this Jim questions would showing no to further

James Volk

you X that make Strategy the but not us a AM way We on future not our today. forward for Have thank [And what joining Fiber updating the to any I'm guys good was, progress sure day. First call, quarters. in on call.] in look you

Operator

you our conclude for today. for does participating. conference Thank That

may You disconnect. all

Shenandoah Telecommunications (SHEN) 1 Mar 222021 Q4 Earnings call transcript