SHEN - Earnings call transcript Q2 2024 | Shenandoah Telecommunications Company

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Operator

Good morning, everyone. Welcome to Shenandoah Telecommunications Second 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 XXXX. for today's call review Shentel's is to the purpose of second quarter of

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

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

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

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

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

Christopher French

us joining everyone hope and appreciate is morning We this Kirk. everyone Thanks, well.

returns home the to estimated believe results, comment identified Glo that we our to I'd be our build-out. to pass Before progress to range. plan we a a network financial expansion execution operating business like metrics Glo When ago, we was discuss we Fiber X Cost Fiber of were $X,XXX and driving strategy key second to and investment. quarter operating on in with $X,XXX years on few our developed

seen we but As of within targeted cost range. the have we halfway point this passings, our remain increase, reach we

range. the to low be was to in estimated ARPU mid-$XX

our Terminal Internet most to broadband in on above, is about assumptions. original and our markets. speeds of X than in rates the Glo XX% higher Fiber expected is penetration range ARPU higher data Given take to gig XX% be XX%

While have our are years to early or for trending market cohorts reach the oldest still of many of achieved rollouts, this well our we're in range. penetration

a are early give couple us additional markets. we penetration that in to of be confidence repeat There able factors indicator success will our

Our in be to monthly the backed due X% service. continues this customer churn to offer product We by to industry-leading metric ability range. low local think superior value is rate our outstanding

to broadband fastest and service compares the Net speeds, was Score recent service even competition. cable which excellent local most differentiators. broadband for symmetrical very Promoter for XX, or Fiber fair negative reliability, Glo Our Network favorably low scores our are customer pricing single-digit

broadband of We competitor. on only that note approximately have passings also our XX%

Lastly, and of we cost it value view businesses, similar recent average using multiples passing higher business weighted our cost fiber-to-the-home and networks than Glo perpetual traditional value announcements to appears precedent the for pass assumed fiber the own of on Fiber fiber-to-the-home their are greenfield characteristics to with transaction With assumption. operators a like of selling of rates model our per variables terminal growth capital. growth

our Glo these expansion date have long-term progress pleased transactions creation. recent the Fiber our we're summary, to reaffirmed potential In with and on value view

Horizon system complete of work Ohio-based we our conversions including call, our progress to pleased We're last expect earnings on As integration we we of back Telecom office very the X. on the our with first quarter integration April by to completed systems, XXXX. shared acquisition the of and date,

our achieving share made will already Jim synergy later, we've As progress significant targets.

the XX,XXX on We we approximately XXX,XXX Horizon including with Slide of give gives Glo passings, an acquisition. X ended our the This to under XX% ago. update year part growth Fiber to a rate from quarter strategy I'll second just execution. now acquired a as turn

XX% representing seasonally end customers, the of for rate. we gross Glo adds. strongest year-over-year quarter XX,XXX July good is the of over Fiber have June, As We growth momentum what very entered sales a in with

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

James Volk

Thank you, good and Chris, morning.

quarter. I'll Slide former $XX.X XXXX. on results second for the X our financial million start for markets $XX.X the quarter grew of contributed revenue. million XX% to of second The Revenue in Horizon

to grew market $X.X offset by in revenues. Horizon Fiber X.X% period XX% commercial and Excluding growth incumbent ago year in former over broadband markets, the declines Glo revenues revenue, million the same partially a or due RLEC

RGUs Commercial revenue data in grew by the X.X% broadband due expected to ARPU X%, data Glo T-Mobile driving expansion the Fiber revenue. declined by XX% and growth. markets revenue decline

disconnected high circuits commercial to XXXX, expect the mid- still decline early growth backhaul to these decommissioning termination in part in revenue network. XXXX fiber as Sprint disclosed. full As reported period a in for former previously a as of of We starting about and reflects to their of T-Mobile $X T-Mobile to fees. return million throughout XXXX and reduction lower XXXX rates single-digit revenue related disconnects in compared The revenue

migrations decline faster revenue government a to in RLEC revenue. support was services and decline driven our broadband by DSL

revenue broadband our We expect lower another data approximately we government the passings broadband in revenue the provider. of support where decline XX% face in half was second due of increase XXXX. subscribers the to market Incumbent to

markets our ARPU markets, effective decline in revenue. competitive been and and have these in in in subscribers adds maintaining gross levels reducing churn driving response has the declined these Although

in EBITDA XX% Horizon to second $XX.X quarter million former markets Adjusted of The million XXXX. contributed $X.X grew EBITDA. the adjusted

in and same declined drivers former half the The business. adjusted to period was expected decline in to primarily nonrecurring the a second from growth due slightly EBITDA Horizon and in adjusted T-Mobile revenue the year. expect the to adjustments recur that slower the we XX% Horizon, margin less Excluding EBITDA margin don't XX% Adjusted grew year ago. due same in EBITDA usual than sale lower and to of the from

target million in margins realize as to expense quarters we expect We improve full future synergies. the of $XX.X

realized X, on XX% or run we second we our Slide $X.X target million rate as annual synergies of quarter. noted exit the As

debt position as end you and I'd the our now the like quarter. maturities to second update liquidity of on of

on Slide position $XXX about revolver $XXX reflected X, in delay-draw available cash, million loans $XXX As million liquidity available in was $XX and capacity. million, of million term including our

are well business fund our to We positioned plan.

As of June XX, we $XXX have of outstanding million debt.

maturity major first is XXXX. The June

ratio Our net is EBITDA based quarter leverage on XXXX adjusted second annualized X.Xx.

for consider losses. bank For when market approximately net add-backs leverage Fiber loan synergies Glo purposes, and X.Xx is you expected

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

Edward McKay

morning. Thank and you, Jim, good

I'll start XX our on Slide update an on with broadband network. integrated

across in services and Delaware, in With states. County, the Virginia, offer XX we X broadband markets of Warrenton, now Sussex launch Glo multi-gigabit Fiber

additional We in our construction market markets, in X existing we and including engineering, Steubenville, Ohio. permitting to passings markets, build and/or of newest continue additional our have in progress

connects network our consists optic markets of broadband fiber over route extensive of miles now XX,XXX flavor. Our that

our for As in passings, in shown on Slide Glo including franchise approved we XX,XXX place XXX,XXX Ohio markets. XX, Fiber agreements now expansion new have

builds. have in We In more Fiber part passings quarter, Ohio subsidized including almost the new passings XXX,XXX, and areas, of constructed Horizon XX,XXX our bringing X,XXX in including to former as new than addition, we XX,XXX fiber Glo projects markets fiber markets. total approved in expansion government government grant passings unserved in our second

pleased the built quarter with more second are passing than second we XXXX and of XXXX. built in the our quarter We we've construction in XX% pace, of

and XXX,XXX in of engineering, passings construction, including stages robust in with Our construction additional passings XX,XXX Ohio. is permitting pipeline various

at acquisition in Glo ramp quarter by shown Fiber ended our we see second we on number and the our up adds This almost we X,XXX almost customers markets, customer Slide as the customers of quarter. strong Year-over-year, Horizon As expansion Glo includes growth XX% over net X,XXX second in as to construction from the continue XX. as increased well Fiber XX,XXX.

revenue end Mid-Atlantic XX.X% year markets reached year-over-year. constructed the quarter, XX,XXX XX,XXX end Our XX% Glo to during time of these the we the up number same in almost penetration in at and total the period. Fiber passings our generating markets data, quarter, and a over of ago video XX% data broadband additional almost second rates units of increased from voice that at

rate XX.X% at addition the Horizon quarter. declined with the With broadband second of XX.X% former to end slightly data markets penetration, the overall penetration our of

Our selecting tiers revenue additional speeds combination revenue quarter, X% subscribers higher. to In that average second residential the X% user gig broadband due rate including gig or increased took customers tiers. of of our equipment over X adopted speed or data speed adjustments, of year-over-year per higher approximately XX% and X a of higher,

Our broadband year-over-year, data churn increase a by for of the our second quarter out slight was X.XX%, moving customers markets. driven

year. previous churn Our extremely consistent low the and remained competitors with to

rates XX, On across rates data continue our mature, we all and we've our penetration as our cohorts. to Slide penetration increase updated markets

new penetration is a reach expected average penetration years XX%, after we Glo lower expect data and penetration first The X from in after Glo exceed the of Fiber XX%, rates planned of due to rates XX%. penetration area. to we than The penetration Ohio of approximately addition rates after launching X expected see year market, Ultimately, decline to service years, our Fiber rates have typically typically in markets, XX% X about terminal which a markets. Mid-Atlantic terminal XX% launching to terminal

penetration demographics. underwriting Our models with align market terminal

be on to investments construction Although cost homes shared Ohio expect expected similar our pass we expect returns to to market penetration may to in lower, we've markets, we also be lower previously. and those average still be

with losses fiber-to-the-home Shentel markets These metrics by for data to approximately and Horizon consistent Total Slide results cable XXX,XXX our Shentel generating offsetting operating and markets Horizon. XX. with units subscribers data, in our RGUs year-over-year former X,XXX incumbent of voice broadband year-over-year passes. slightly customers Broadband acquisition data driven from cable acquired increased Horizon to for remained Let's markets. incumbent telephone the revenue broadband shift markets approximately our at on cover video incumbent XXX,XXX

second telephone there at and XX.X%, upside markets markets parity in provider. Horizon with cable penetration penetration Horizon respectively. and We of to penetration the improve of the is incumbent in the markets the cable to quarter gain believe end overall decreased former Our incumbent the data with the XX.X% Shentel XX.X% and

unserved Over the constructed our projects passings markets. cable part past in as year, grant government X,XXX in areas incumbent we've fiber of over

subsidized these part fiber we construction total areas unserved see the We few as over opportunities of have projects, significant a we next XX,XXX of approved and in passings growth complete customer as years. government

as from value an pressure increased the of to than churn quarter, more second price. most the for improvement customers higher $XX markets, broadband over year-over-year revenue RGUs. broadband some by decrease for speeds Broadband in and X.XX% ARPU the past year-over-year Despite data the offsetting X.X% the of year, XX competitive points data giving portions increased in basis of fewer we to improved same speeds more incumbent

previously the seen end incumbent supported the of by We've connectivity quarter, in from with plans about the customer disconnects the our of the end XX At about of accounting only basis program impact the customers for ACP. churn affordable points of quarter. limited ACP were second broadband on X.X%

offer We quarter. these and customers low-priced to continue the of their current than plan at the the former ACP end balance XX% were more second customers a on of

commercial XX% on business. where of addition second booked up totaling to year-over-year highlight the will new fiber we Slide move I our markets. the quarter, XXX,XXX XX, In we former in revenue, monthly broadband sales with the over Horizon

Our new was $XXX,XXX we installed backlog second an with and in quarter installation approximately quarter the for monthly revenue. of the $XXX,XXX revenue finished monthly

T-Mobile rationalization the compression earlier, of of year-over-year network care operations to monthly sales Jim great impact network decreased the our customers. churn as and teams our to discussed continue and that take X.X% Excluding

$XXX guidance spending approximately investments million, the through million Slide Total in full end approximately year former markets. for of $XX Our capital reflected year-to-date Horizon XX. and XXXX including the quarter second are on totaled the capital

in between Our and $XX with in to government million $XXX and $XXX $XX investments Glo finish we year our markets. expectations million been year-to-date, plan in Horizon including investments the former to and capital line with million million range, have subsidized Fiber the

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

Operator

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

Frank Louthan

gotten indication seen T-Mobile? dropped or what us of you they year? on for you tower the markets? How of business? wanted fiber have expanding its walk notices Verizon And have decommissioning is And that I in have year that see, the then pace by much the can through upgrades kind you Sorry. to your rest any this the changes of

Edward McKay

standpoint, I'll a a isolated is significant Ed. seen this Fiber-to-the-Home on where that markets. we've they or in construction never Verizon kick then but underway not We've Verizon build T-Mobile. activity to we've from Jim to our Frank, seen talk material announcements fiber-to-the-home, it neighborhoods comment first and projects few any about over But seen. a

James Volk

repeat you please? could the And Yes. on T-Mobile, Frank, question

Frank Louthan

look given quantify of like of that away just for revenue decommission Can you indications Yes. pace of as the in this How what will for T-Mobile's been will notices year? XXXX? year? you they've -- that's can sort or much kind lost the And you any things go that of full

James Volk

Yes. Okay.

'XX. for backhaul relatively -- of a the first occurred the most of ones all few 'XX, in, So that Frank, half had small of in lingering in the the came almost disconnects but dollars. very We've

with guidance that revenue T-Mobile year less the 'XX. we so was $X.X you through. we're in looks about compared expect that we So to far in To date, earlier shared of it the million $X come million like in has 'XX about

it right we're schedule we where looks on like with thought be. we So would

Frank Louthan

That's helpful.

James Volk

Yes, to add Frank, just it. to

have XXX that backhaul We contracts. circuits about under long-term are

left we think years on I have contracts. X the

answer steady But state, steady relationship now question. expand And also and the additional streams. add from hit team your of we're the pace that circuits course, So to revenue our that we've to we're basically that helps that is if at point down the backhaul road. a at working

Frank Louthan

stack, And you trying then had XXXX? what conversations current go does that? in your when debt to as about that XXXX have far And refinance as

James Volk

Yes.

matures 'XX. million of June our $XXX So term in loan of

of to We haven't facility the any banks of the concrete different under our take of year a debt. second haven't whether conversations at of half with our -- care And on have whether facility, to or to refinancing. doing next had banks looking how that's our on the at term with that's of minimize stage. kind cost I that I'm determined. we targeting options this We're today new current be refinancing

Operator

the Your next Financial. from comes Hamed BWS of question Khorsand line with

Hamed Khorsand

that to to had lower entering Glo is with your format for in enter all pressured any also the with is, where lower So seeing markets a you you're another you're pricing or competition first in think at you I way you time. obligated feel question first rate or where have do card. Fiber Do

Edward McKay

have Ed. point, in don't fiber Yes. off competitor. at I'll Glo a this passings that. this start don't with of We Hamed, our is XX% really Fiber

and have on focused pricing. local So product customer we believe fair we the from a we're service superior really speed standpoint, straightforward

success not do markets, discounts offer we these to into feel customers doing significant without adding the had we we've need So go as that. and

Hamed Khorsand

Okay. coming different higher with or Glo they And X transitioning customers months opting Or they you Fiber. are for are a speeds? as those quickly Are on after speed? the a XX to

Edward McKay

gig XX% higher. X some out gate, quarter, do customers X% see selecting it Last half are over selected and actually the speed gig of We upgrades, but our of gig was or X selecting then speeds. X

self-select out we're the gate, the of So seeing speeds. higher customers -- we're

Hamed Khorsand

All year. question for right. And the my about was last plan CapEx this

CapEx? Given the commentary about cost rising, any plan to accelerate some of the

Edward McKay

So what's is doing at the make-ready Really, don't plan permitting pole point, challenge is our we accelerate for this construction biggest where from keeping currently. the That's us that's that CapEx. pace it attachments. keeping and to work

to So plan I'd say at this accelerate the don't point, CapEx. we

Operator

concludes That session. our Q&A

over remarks. President now and Senior to Vice will CFO, our back the I turn closing Jim for conference of Volk, Finance

James Volk

a forward in quarters. to day. Have good Thank you and for future today. joining strategy our Fiber First all progress We -- look us updating the everyone for on

Operator

Thank Ladies joining. for and gentlemen, all that you concludes today's call.

may disconnect. now You

Shenandoah Telecommunications (SHEN) 7 Aug 242024 Q2 Earnings call transcript