Shenandoah Telecommunications Company (SHEN) Q2 2024 earnings summary

Executive summary

• Completed acquisition of Horizon, expanding commercial fiber business and Glo Fiber markets, funded with cash and stock, and integration progressing well with synergy targets being met.

• Glo Fiber expansion strategy remains on track, with passings released to sales rising from 182,847 in Q2'23 to 297,545 in Q2'24, and ending data subscribers increasing from 32,843 to 53,310 year-over-year.

• Glo Fiber ARPU is about 10% above initial assumptions, with higher take rates for gigabit speeds and over 50% of customers choosing 1 gig or higher.

• Terminal penetration in mature markets is trending toward 35%-40%, with churn rates in the low 1% range and a Net Promoter Score of 69.

• Sale of Tower Portfolio for $309.9 million, reclassifying it as discontinued operations and marking a strategic business shift.

Financial highlights

• Q2 2024 revenue grew 29% year-over-year to $85.8 million, with $16.7 million from Horizon markets; excluding Horizon, revenue grew 3.6%.

• Adjusted EBITDA rose 20% to $23.3 million; margin declined from 29% to 27% due to T-Mobile revenue loss and Horizon integration.

• Net loss from continuing operations was $12.8 million in Q2 2024, compared to $1.4 million in Q2 2023, mainly due to integration and acquisition expenses and increased depreciation.

• Operating expenses increased 52.3% in Q2 2024, mainly due to Horizon integration, higher depreciation, and Glo Fiber expansion.

• Net income for the six months ended June 30, 2024 was $201.8 million, reflecting a $218.7 million gain from discontinued operations (Tower sale).

Outlook and guidance

• Full-year 2024 capital investments projected at $290-$329 million, including $30-$39 million in Horizon markets and $180–$200 million for Glo Fiber expansion.

• Commercial fiber revenue expected to return to mid- to high single-digit growth in 2025 after T-Mobile disconnects are absorbed.

• Government support revenue anticipated to increase in the second half of 2024.

• Management expects current liquidity, cash flows, and credit availability to meet operational needs for the next twelve months.

• Capital expenditures are expected to exceed cash flows from operations through 2026 as Glo Fiber network expansion continues.