Shentel(SHEN) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Q1 2025 revenue rose 26.9% to $87.9 million due to acquisitions and expansion, but operating and net losses widened Unaudited Condensed Consolidated Balance Sheets Total assets increased to $1.83 billion by March 31, 2025, driven by network expansion and debt, with a slight equity decrease Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $87,547 | $46,272 | $41,275 | | Property, plant and equipment, net | $1,483,796 | $1,438,538 | $45,258 | | Total assets | $1,825,453 | $1,740,273 | $85,180 | | Long-term debt, less current maturities | $504,199 | $407,675 | $96,524 | | Total liabilities | $831,044 | $739,226 | $91,818 | | Total shareholders' equity | $910,473 | $918,583 | ($8,110) | Unaudited Condensed Consolidated Statements of Operations Q1 2025 revenue rose 26.9% to $87.9 million, but faster expense growth led to wider operating and net losses of $9.1 million Q1 2025 vs Q1 2024 Operating Results (in thousands, except per share amounts) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Service revenue and other | $87,898 | $69,248 | 26.9% | | Total operating expenses | $93,990 | $72,024 | 30.5% | | Operating loss | $(6,092) | $(2,776) | 119.4% | | Loss from continuing operations | $(9,132) | $(4,090) | 123.3% | | Net (loss) income | $(9,132) | $214,696 | N/A | | Net (loss) income per share | $(0.19) | $4.25 | N/A | Unaudited Condensed Consolidated Statements of Cash Flows Net cash from operations increased to $20.5 million in Q1 2025, with capital expenditures largely funded by $97.0 million in new debt Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $20,524 | $15,158 | | Net cash (used in) provided by investing activities | $(76,260) | $238,484 | | Net cash provided by (used in) financing activities | $97,011 | $(3,162) | | Net increase in cash and cash equivalents | $41,275 | $250,480 | | Cash and cash equivalents, end of period | $87,547 | $389,735 | - Capital expenditures increased to $83.2 million in Q1 2025 from $70.1 million in Q1 2024, reflecting continued investment in network expansion[16] - The company drew $100.0 million from its credit facility in Q1 2025 to fund its activities, a significant change from no borrowings in the prior-year period[16] Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the Horizon acquisition's impact, strong fiber segment growth, increased debt to $515.8 million, and discontinued operations' effect on comparisons - The acquisition of Horizon was completed on April 1, 2024, for $416.2 million, with accounting finalized as of April 1, 2025[23][24] Revenue by Activity Type (in thousands) | Revenue Stream | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Residential & SMB - Incumbent | $43,359 | $43,809 | (1.0)% | | Residential & SMB - Glo Fiber | $18,444 | $12,118 | 52.2% | | Commercial Fiber | $19,612 | $9,938 | 97.3% | | RLEC & Other | $6,483 | $3,383 | 91.6% | | Total Service Revenue | $87,898 | $69,248 | 26.9% | - Total debt outstanding increased to $515.8 million as of March 31, 2025, with $150.0 million hedged using interest rate swaps to manage risk[44][53] - In Q1 2024, the company recognized $218.8 million in net income from discontinued operations, primarily from a $294.3 million pre-tax gain on the Tower Portfolio sale[71][72] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2025 revenue growth to acquisitions and fiber expansion, with strong liquidity, but capital expenditures are expected to exceed operating cash flow through 2026 - In April 2025, the company agreed to acquire fiber-to-the-home assets in Virginia for $5 million, passing over 1,500 homes and businesses[82] - On April 16, 2025, the company amended its credit agreement to extend the maturity of its Revolver and Term Loan A-1 to July 1, 2027, and increased the maximum permitted Total Net Leverage Ratio to 4.75:1.00[83][84] Key Operating Statistics | Metric | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Total homes and businesses passed (count) | 603,649 | 476,081 | | Glo Fiber Expansion Markets passings (count) | 362,861 | 259,567 | | Total Residential & SMB RGUs (count) | 246,857 | 219,874 | | Glo Fiber Expansion Markets RGUs (count) | 70,565 | 46,729 | | Fiber route miles (miles) | 17,224 | 10,132 | - Total available liquidity as of March 31, 2025, was approximately $334.6 million, comprising $87.5 million in cash, $143.0 million in revolver availability, and $104.1 million in available government grants[109] - Capital expenditures of $83.2 million in Q1 2025 exceeded net cash from operations by $62.7 million, a trend expected to continue through 2026 due to network expansion[117] Quantitative and Qualitative Disclosures about Market Risk The company faces interest rate risk on its variable-rate debt, partially hedged by swaps, with a 1.00% rate increase potentially raising annual interest expense by $5.1 million - As of March 31, 2025, the company had $515.8 million of gross variable rate debt outstanding with a weighted-average interest rate of 6.71%[122] - A 1.00% increase in market interest rates would add approximately $5.1 million to annual interest expense[122] - The company hedges its interest rate exposure on $150.0 million of its term loans using pay-fixed, receive-variable interest rate swaps, effectively paying a fixed rate of 2.90% plus a margin[123] Controls and Procedures As of March 31, 2025, disclosure controls were effective, with internal control monitoring extended to the acquired Horizon business - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[124] - Internal control monitoring processes have been extended to include the operations of Horizon, acquired in 2024[125] PART II. OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings, none expected to materially affect its financial condition or operations - Management does not expect current legal proceedings to have a material adverse effect on the company's business, financial condition, or cash flows[127] Risk Factors No material updates to the risk factors previously disclosed in the company's Annual Report on Form 10-K were identified - As of March 31, 2025, the Company has not identified any needed updates to the risk factors included in its most recent Form 10-K[128] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales occurred; employees surrendered 67,000 shares at $11.75 per share for tax withholding Shares Surrendered for Tax Withholding Q1 2025 | Period | Number of Shares Surrendered (in thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | February 1 to February 28 | 67 | $11.75 | | Total | 67 | | Other Information No officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025 - No officers or directors adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended March 31, 2025[133] Exhibits This section provides an index of exhibits filed with the Form 10-Q, including officer certifications and Inline XBRL data files