Release Date: May 03, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Shenandoah Telecommunications Co successfully closed the sale of its tower assets for $310 million, a significant valuation at approximately 31 times the 2023 Tower segment adjusted EBITDA.
- The company completed the acquisition of Horizon Telecom, enhancing its commercial fiber business and expanding its Glo Fiber network into new markets in Ohio.
- Shenandoah Telecommunications Co reported strong interest from lenders and financial sponsors during its financing processes, securing $356 million in new financings to support growth.
- The company added 5,000 new Glo Fiber customers in the quarter, setting a new record and demonstrating strong market demand for its services.
- Shenandoah Telecommunications Co has a robust pipeline for expansion, with plans to grow its Glo Fiber expansion market to 600,000 by the end of 2026.
Negative Points
- Commercial revenue declined by 19.8% due to the expected churn of T-Mobile revenue, reflecting the decommissioning of the former Sprint network.
- The company faces challenges in accelerating the installation pace for Horizon's contracted sales backlog, which has been slower than expected.
- Adjusted EBITDA remained flat compared to the first quarter of 2023, as revenue growth was offset by higher expenses associated with expanding the Glo Fiber business and other factors.
- Broadband data churn in cable markets increased to 1.67%, driven by competition from cable and fiber overbuilders in some markets.
- Despite the strategic acquisitions and expansions, the company anticipates temporary slowdowns in revenue and earnings growth due to the T-Mobile revenue decline, with recovery expected in 2025.
Q & A Highlights
Q: Can you discuss the impact of the new Glo Fiber ads? Are they primarily from new market entries or increased penetration in existing markets?
A: (Edward McKay, EVP & COO) The increase in Glo Fiber ads is due to both new market entries and deeper penetration in existing markets. We're seeing accelerated customer additions both from new constructions and increased penetration rates in mature markets.
Q: Are the new Glo Fiber customers switching from other providers, or are they new to broadband services?
A: (Edward McKay, EVP & COO) Most of the new Glo Fiber customers are switching from major cable providers, indicating a competitive advantage in attracting users from existing services.
Q: What are the growth prospects for Horizon this year, and what expectations should we have for 2025?
A: (James Volk, CFO & SVP) Horizon's revenue has been growing at low single-digit rates. We have a significant backlog of contracted sales awaiting installation, which we are working to accelerate. We expect to see more substantial growth and improvements by 2025 as these efforts mature.
Q: How significant is the contribution of the newly acquired Horizon to Shentel's overall strategy?
A: (Christopher French, President & CEO) The acquisition of Horizon significantly enhances our commercial fiber business and doubles its size. It opens new markets in Ohio and is integral to our fiber-first strategy, contributing to our goal of expanding our Glo Fiber network.
Q: Can you provide an update on the financial performance in the first quarter and the impact of recent transactions?
A: (James Volk, CFO & SVP) The first quarter saw a revenue increase of 3.1% to $69.3 million, driven by strong growth in residential and SMB segments. The financial transactions, including the sale of our tower assets and the acquisition of Horizon, have positioned us well with a pro forma liquidity of $484 million as of April 1.
Q: What are the expectations for capital expenditures following the Horizon acquisition?
A: (James Volk, CFO & SVP) For the nine months of 2024 post-acquisition, we expect capital expenditures to range from $30 million to $39 million, focusing on success-based investments in commercial fiber and expanding the Glo Fiber network in Ohio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
