Earnings call transcript Q2 2023

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Operator

Good morning, everyone. Welcome to Shenandoah Telecommunications Second Quarter 2023 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Kirk Andrews. and Shentel. Planning Financial of Analysis for Director

Kirk Andrews

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

announced the later reviewing is will of in on this set were release Our www.shentel.com. release our page this today. be included this call. are a an Please forth presentation be the call note the distributed that results The announcing we'll details morning, in press at and available website, Investor made press replay audio

With and a us CFO. and Operating Vice McKay, session. question-and-answer President on French, the Senior call today conduct Finance Chief Chief Executive After are Chris our and Officer; President Volk, of Ed and prepared Jim Executive remarks, Officer; President will Vice we

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

statements. to reliance place are undertake You not cautioned required on Except these by obligation publicly undue forward-looking update any statements. forward-looking to as no we law, or revise

turn over Chris. to now call Go the I will Chris. And with that, ahead,

Chris French

the I morning, with continuation Kirk. and during everyone Thanks, execution second of growth joining First and well. solid hope Fiber the I'm the everyone this us with across our We is pleased the appreciate board. quarter

quarter to have passings added XXX,XXX. almost just increased in Slide passing X, the new XX,XXX As year-over-year we Glo noted under XX% Fiber and second on

the added growth. of by and over over second X,XXX subscribers revenue Our quarter base consolidated past the grown and quarter revenue last Glo our sales grew represented the year. XXX% XX% XX% Fiber same Fiber year customer the Glo has in team data

Fiber trends the be a Glo for value revenue these creating will and catalyst We expect years. over shareholder several continue next

businesses and reported recurring XX% adjusted Commercial to period EBITDA quarter, year Broadband networks With and growth $XXX,XXX basis are segment solid Cable strong ago. than growth XX%. of revenue the points revenue the during the respectively. adjusted second Our into of scalable, also growth expense management, converted data of our margins or than XX% EBITDA higher gross more XXX a extremely driving driving high-speed same margins $XXX,XXX, Fiber

of the turn to financial now to call details the results. review I'll that, With our Jim over

Jim Volk

Slide to Thank results you, $X.X Chris, to X and $XX.X million. financial of Broadband review XXXX. for X.X% refer the our second million good Please quarter grew morning, everyone. or to revenues

was primary ARPU. catalyst, slight As Glo and $X.X increase XXX% the customer in million the prior Chris or year Fiber noted, revenue over a period growing growth with strong from

quarter. ARPU or the $XXX,XXX from $XXX,XXX excluding X.X% from grew revenues to early related non-recurring million the growth fees revenue to growth in market recurring to the Cable revenue impact grew decommissioning. Beam termination disconnects in and due or due $XXX,XXX X.X% backhaul $XXX,XXX in Commercial in to and circuit $XX.X fiber

XX As is during T-Mobile and previously network Sprint second the shut former to disconnected backhaul announced, planning the down quarter. sites

We year this XXX the of network an in backhaul rationalization. part later expect as additional disconnects

partially to higher second quarter higher million expenses Broadband to period revenue XX.X% offset advertising in due to to adjusted $X.X $XX.X to EBITDA the due million Glo same of in Fiber in by growth grew primarily the XXXX the expense, when expansion. million, support compared $X.X

the same of termination higher see and T-Mobile. operating XX% the benefits to first our in early consistent included year period XX% XXXX, mentioned Fiber quarter Adjusted Chris of earlier, leverage we business. with Glo from of to the EBITDA fees margins As continue grew in which last

period same adjusted and revenue with the XXXX. On Slide segment Tower X, were EBITDA line in

decommissioning have churn from plan of Sprint have terminate previously recognized notices as network. We received announced former though T-Mobile part the any XX the we leases they to to of date, that -- not Sprint

to the quarter Consolidated previously in to the due $XX.X adjusted to in Consolidated EBITDA grew second Moving grew mentioned to in growth revenue Broadband. million due million, X.X% Slide to XX.X% growth $XX.X also Broadband. X.

We as have $XXX liquidity on Slide displayed June million of XX of as X.

Negative Glo by homes, in and prior sales in million was more tax due Fiber in half $XX construction first the income to received flow quarter. and primarily unserved million free cash government increased expanding first XXXX partially the year offset the investments $XX subsidized tax refunds during than to

of in spectrum July We sale proceeds on X.X closed cash which million. generated the $XX also gigahertz

debt XX, beginning XXXX rate to XX, reflected extend delay base of the Slide amended change As in quarter end We XXXX. 'XX. credit from on maturities date the of we variable SOFR, significant the to December second LIBOR delay XXXX, March have our our to loan draw until to repayments and facility no term

in expense as 'XX million interest to a expect approximately We during $X save result.

over to the turn call I'll Ed. now And

Ed McKay

And on integrated no Jim. Thanks, Slide that our of consists over we cables sheath lead route with in network now an X,XXX on everyone. update fiber, morning, begin XX of miles we and have good our that confirmed I'll network. Broadband have

for areas. we our number record of Fiber half over in fiber customers projects first an had construction grant year. This another the on government are passings more the accelerate construction We unserved fiber was over in the improvement of built as and second XXX quarter, fiber passing, XX% to for than track new miles and in we of Glo quarter our route rate commercial

in of market launches of the have Glo Shippensburg Fiber At with in quarter, Waynesboro multi-gigabit the Glo end service up additional four and XX second by planned Pennsylvania, Fiber now our available markets we the the end of year. and newest we markets turned

bring XX,XXX the new townships also We to in in franchise adjacent markets our additional Glo and market homes Virginia boroughs added agreements to businesses, new and including of additional to Pennsylvania. existing Orange Fiber and

XX. to Slide Turning

XXX,XXX to has with Fiber grown passings XX agreements across states. markets Our XX number franchise of in approved five Glo

in our Cable with And footprint. we awarded awards. success additional quarter, bring million were to surrounding homes Broadband continue X,XXX the grant over grants government $X.X in to unserved we to second addition, In have

total of We've more locations, grants enable Broadband now unserved us through Home XX,XXX awarded will to been $XX million Fiber extend technology. that in primarily to to than over a the

second fiber. XX,XXX added over passings, XXX new XXX,XXX fiber the new quarter, homes passings, pass we than including now with more In government we and subsidized businesses and

for In passings addition, with our construction. robust incremental construction backlog XXX,XXX remains very approved

growth up ramp as see continue strong we on As shown we customer XX. Slide construction, to

Fiber year-over-year, penetration XX% rate data in in ago. the XX,XXX to almost ending and customers Chris we saw As almost We've past a year, quarter, customers climbed second from our XX.X% mentioned, XX,XXX. XX% data added Broadband Glo with increased quarter up second the year the

approximately and number data, XX% total reached Our video year-over-year. of revenue-generating almost XX,XXX, units up has voice

higher Our revenue of data and selecting increased and user X.X% customers a additional average the tiers. quarter. Broadband by year-over-year $XX.XX reached per driven equipment by This combination revenue speed for was

XX% our the Fiber higher, available. service For adopted is Glo our higher. second in approximately attachment service including of TV X% almost quarter XX% speed approximately subscribers video X is where the areas quarter, of speed and the gig new that X tiers or gig about of for to residential passings or took rate was tiers the XX% of Glo available video

the available passings XX% all voice quarter. attachment Glo service was to Our is the Fiber and Glo for rate over

XXXX. Glo approximately of of At points second video of our quarter, low our and the to subscribed second of finally, subscribed service Fiber And to to over total basis approximately XX% quarter XX% X.X%, an voice churn remain customers the improvement the continues very end service. at XX

Slide on Moving our penetration to markets XX. data our rates We as highlight age.

the increase in and quarter a Our of we steady about ago X%. across XX% cohort cohorts that average weighted already all launched a reached XXXX with of growth has second year quarter-over-quarter saw penetration,

reach expect to XX%, launched. after approximately to to an the five rate market terminal continue penetration average six years is We of

Slide operating Let's cable for X.X% Broadband customers in move results at the approximately XXX,XXX. of grew on end quarter to year-over-year on the data XX. our our about markets

we units total service X% voice year-over-year as declines video about due to in cutting. Our to see residential cord and decreased service continue revenue-generating and by

at of the second end Our data year-over-year quarter. the XX% to from penetration increased XX.X%

However, slowest a Broadband quarter. RGUs of seasonality second standpoint, the data the approximately we quarter. decline a quarter our From typically saw XXX in is

data for due economy in the driven by the we basis basis involuntary was The our points churn, basis Broadband softness of XX churn. of was addition, increase up points X which the approximately with in quarter. In to X X.X% some at points year-over-year believe due markets, to churn was remaining voluntary

As some disclosed, previously our competition have in we markets. overbuilder we

currently a with announced years to percentage the or of we is construction the and cable cable to grow passings expect high competitor with next few this over approximately teens, in XX% incumbent projects. fiber Our

markets Broadband years. subsidized and see passings as construction I XX,XXX for growth of excellent we will unserved to our point the Broadband Cable approximately that areas as extend opportunity this around several next will over planned our government out we complete subscriber an

per and higher average completed as revenue for speeds Broadband the customers more user we strong $XX.XX roles, tiers. X.X% year-over-year second also customers bringing to and to price. speed In speed to migrate data the higher continue value to our same increased remained quarter, approximately

we XX, Slide wholesale and commercial fiber to business. Turning our highlight Broadband enterprise

$XXX,XXX, sales a new second approximately year-over-year. revenue with During we totaling X% quarter, the improvement monthly booked

E-Rate dozen than Our more wins under contract. our library school included a for contracts the systems systems new bringing and three quarter to XX total

quarter over revenue, We in also second incremental installed monthly new services of improvement totaling XXXX. $XX,XXX a XX% the

largest customer, circuits continue For rationalization and site of connections, number part cell our to project. they their as T-Mobile is the of Sprint network backhaul reduce

The XXX long-term year, approximately a past in XXXX. XXX connections, are and we remaining additional contract. have mentioned, Jim removed XXX sites disconnects the expect under Over seven-year they as

churn second but Commercial our Excluding at remained revenue the quarter. T-Mobile, business X.X% and increase low did compression for year-over-year, Fiber for

tower XX tenants segment. with to ended tower. in the quarter Tower two We approximately Turning XXX our Slide and tenants per total

tenants to third-party increased Tower XXX. Our

in intercompany as XX% our decreased to Tower down from XX% wireless sites we XXXX. However, Beam leases fixed turned

year. they do mentioned, Jim of project we leases this complete rationalization Sprint the reduce the to network Tower later number as As expect T-Mobile

these $XXX capital provides the by won Slide construction. we Fiber the approximately Finally, and We've unserved in where XX year-over-year $XX Glo projects of year-to-date, in guidance million XX% driven complete significant We’ve and grants. we expect of increase capital was markets for million year. The be government construction invested subsidized as costs our ramp-up we year-to-date. government projects almost invested for reimbursed in approximately to markets spending our the and

$XX we and Fiber, have million $XX connect new construction engineering customers. year-to-date, invested $X million approximately including to for Glow million For and

full million First to remains as range continue $XXX $XXX the in million year, we Fiber For to guidance execute our strategy. on the our growth

you now much. And very ready questions. for operator, Thank we're

Operator

Our Louthan from of James. the comes Raymond first question Instructions] of [Operator line Frank

Frank Louthan

walk Is if term, we long comfortable where us on curious through with the your accelerate longer see of to then that how could you Thanks. leverage? anything Great. leverage broader the Thank do And down? EBITDA can of peaking marketing are Just yourself of start you. Where sort Broadband? grow then ramp term sort quickly sort in that you the penetration to do bring of see passings. there to you And plans. a as with and And baseline target? a that back

Ed McKay

Yeah.

So thanks Frank. question, for the

So start. this is I'll Ed.

So our most cost-effective up through focus base, customer Glo sales as continuing sales the as our channel. subscriber are to That's on far web ramping we channel.

significant We a have sales web. percentage increase year-over-year of in through the seen the

there. also leverage. encourage on I'll promotional traction answer activity have web question Jim the let and from additional good then started we're to there, channel seeing We sales on some offer the that to And

Jim Volk

we times decline, -- X.X off a then declining kick Yeah, 'XX, X.X Fiber of start as to about we to we that we to peak Frank, be about in down lot 'XX by it should to as flow. Glo well to starts and expect free cash and times leverage beyond and -- start get should

Frank Louthan

you. great. That's helpful. right, All Thank

Operator

you. our next Thank Stand by question. for

come Our the Riley. from Dan of of Day next question B. line

Dan Day

your looking of -- as it's that just as it's one a or, you're about view Just maybe updated you're doesn't? a whether talked it something You more just, on it me. for quick capital allocation how in actively sort it past, something thoughts comes little lever? bit Any at maybe into M&A looking

Jim Volk

business, look to the from Fiber continue strategy. base and fiber continue good Mid-Atlantic -- buying our in entertain again, Yeah, form we a with either what parts look for business, be another buying an Glo we're have opportunistic it Dan. we of the other would to business, [beachhead] could in would one. that would (ph) replicate to Cable for Again, enough sizable out but incumbent come And that expand kind to opportunity strong country. Ideally, a the to, of in the of there be area expansion doing

Dan Day

of end Difficulty] that's the the little EBITDA straight is T-Mobile that -- in At year, a the little had combined. This a [Technical been XX% and network than quarter about moving margin modeling just with knowledge whether higher? there's second over talking higher I the the keeping that anything it's Any think we rationalization, forward?

Jim Volk

Yeah.

we're still as still to mentioned process the the on we come -- in Ed there's and So of Dan, that. -- the rationalizing call, from is network. T-Mobile churn more both I And

We range there. system, going that by, the margin likely to from the following Glo you be Fiber ‘XX increasingly probably with months basis expect grow we're Broadband then will pretty XXX margins see Broadband the the in margin to and it, after go be And all growing for of to XX continues that year as process, grow EBITDA start should flushed penetrate. and that year, is thinking should then which should call down getting after rapidly business, year that, XX% you end through the -- to back the this points. But by the

Dan Day

when Do Fiber a goal Glo just you to EBITDA expect have positive? itself the for you

Jim Volk

Dan, we EBITDA we year. terms but positive -- positive of of are of been at this digits have end turned all are we to single 'XX. EBITDA EBITDA, last be in Likely year, positive and we the

Operator

[Operator Hamed Financial. Instructions] line question comes of next Our of from the Khorsand BWS

Hamed Khorsand

Hey, good morning.

So in where concerned marketing or as your on to even is question Glo continue go far is, anything passings up? as is competition going concerned the fluctuate is adds quarterly though first there

Ed McKay

competitive for standpoint. the would no us. I historically, changes a quarter the significant No, from say quarter really is But second slowest

competition were seen fact, previously on the back In offers some more promotional that making. competitive off of they their we've

Hamed Khorsand

around. And with accelerates in new kicking QX, there just of I the Will should passings as months warmer -- comes be CapEx QX? before would in plan expect winter here

Ed McKay

Yeah.

of So, where in not a A in markets the we place. in of building we're right in fiber are the preparation QX we for lot markets lot construction passings in have was existing now QX. infrastructure did did

fiber and then out to to neighborhoods. quarter had that the the we pop get to in A out to establish second our neighborhoods. So lot of a build the building fiber construction was

think the we in year. to positioned well second of so And the construction we're half accelerate

Hamed Khorsand

the going the is to Okay. for spectrum just the used cash from you And sale, program? that be received CapEx then purely

Jim Volk

We Hamed. reinvest Yes, to the into Broadband business. plan that

Hamed Khorsand

Okay, you. great. Thank

Jim Volk

Yeah. Thanks, Hamed.

Operator

back like Sir? there Instructions] more are turn Volk the As to closing [Operator I Jim now no to questions for queue, in remarks. conference would

Jim Volk

forward on quarters. Have all you Thank future our day. to great progress you Yes. for in joining. look a updating We

Operator

this today's And conference participating. call. for concludes Thank you

disconnect. You may now

Shenandoah Telecommunications (SHEN) 2 Aug 232023 Q2 Earnings call transcript