Shenandoah Telecommunications Company (NASDAQ:SHEN) is a leading provider of high-speed broadband services in the Mid-Atlantic region of the United States. The company has undergone a strategic transformation, divesting its tower assets and acquiring Horizon Telecom, positioning it for accelerated growth in the fiber optic market.

Financials

In the fiscal year 2023, Shentel reported annual revenue of $287,379,000 and net income of $8,038,000. The company's annual operating cash flow was $113,774,000, while its free cash flow was -$142,776,000, reflecting significant investments in network expansion.

Shentel's first quarter of 2024 saw revenue grow 3.1% year-over-year to $69,248,000, driven by strong performance in its Residential & SMB - Glo Fiber Markets segment, which saw a 73.0% increase in revenue. This was partially offset by a 19.8% decline in Commercial Fiber revenue due to the expected decline in T-Mobile revenue as the company decommissioned the former Sprint network.

Business Overview

The company's Glo Fiber expansion continues to be a key focus, with Shentel adding over 26,000 new fiber passings in the first quarter of 2024, a 47% increase compared to the same period in the prior year. This brings the total Glo Fiber passings to 260,000, with an additional 15,000 passings acquired through the Horizon Telecom acquisition. Shentel now has a total of 275,000 Glo Fiber expansion market passings, representing 46% of its year-end 2026 target of 600,000 passings.

Shentel's Glo Fiber customer growth also accelerated, with the company adding over 5,000 new Glo Fiber customers in the first quarter, a new quarterly record. The total number of Glo Fiber customers reached almost 47,000, up 62% year-over-year. Broadband data penetration in Glo Fiber markets increased from 17.4% a year ago to 18% at the end of the first quarter.

In the company's legacy Cable Markets, broadband data subscribers decreased slightly year-over-year to 109,000, and broadband data churn increased to 1.67% due to competition from cable and fiber overbuilders. However, broadband data ARPU increased by 2.4% year-over-year to $85, offsetting some of the revenue decline from fewer revenue-generating units.

Shentel's Commercial Fiber business booked new sales totaling $110,000 in monthly revenue, up almost 4% year-over-year. The company's new installed monthly revenue for the first quarter was $66,000, and it finished the quarter with an installation backlog of approximately $165,000 in monthly revenue. While the T-Mobile network decommissioning will temporarily slow revenue and earnings growth in 2024, Shentel expects its Commercial Fiber business to return to historical growth rates in 2025 and beyond.

Recent Developments

The company's recent acquisition of Horizon Telecom is expected to contribute $50 million to $54 million in revenue and $12 million to $16 million in adjusted EBITDA for the nine months of April to December 2024. Horizon's fiber-rich network will open up new Glo Fiber expansion markets in Ohio, while doubling the size of Shentel's commercial fiber business.

Liquidity

Shentel's liquidity position remains strong, with pro forma liquidity of $484 million as of April 1, 2024, including $110 million in cash, $225 million in available delayed draw term loans, and $150 million in available revolver capacity. This positions the company well to fund its Glo Fiber expansion plans and the integration of Horizon Telecom.

Outlook

The company's Fiber First strategy, combined with the Horizon Telecom acquisition and the divestiture of its tower assets, has transformed Shentel into a pure-play fiber optic provider with significant growth potential. As the company continues to execute on its Glo Fiber expansion and integration of Horizon, investors can look forward to a future of fiber-powered growth and improved financial performance.

Conclusion

Shentel's focus on providing high-speed, reliable broadband services through its fiber optic network has positioned the company for long-term success in the rapidly evolving telecommunications landscape. With a strong liquidity position, a clear strategic vision, and a track record of successful execution, Shentel appears well-equipped to capitalize on the growing demand for fiber-based broadband services in its markets.