Shentel(SHEN) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Shenandoah Telecommunications Company as of June 30, 2025, and for the three and six-month periods then ended, including balance sheets, statements of operations, comprehensive income, equity, and cash flows, along with detailed notes explaining key accounting policies and transactions Unaudited Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $1.81 billion from $1.74 billion at year-end 2024, primarily driven by growth in Property, Plant, and Equipment, while total liabilities also rose, and shareholders' equity slightly decreased Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $1,814,674 | $1,740,273 | | Cash and cash equivalents | $29,077 | $46,272 | | Property, plant and equipment, net | $1,523,994 | $1,438,538 | | Total Liabilities | $837,277 | $739,226 | | Long-term debt, less current maturities | $501,611 | $407,675 | | Total Shareholders' Equity | $901,964 | $918,583 | Unaudited Condensed Consolidated Statements of Operations For Q2 2025, the company reported a net loss of $9.0 million, an improvement from a $12.9 million loss in the same period of 2024, while the six-month net loss was $18.2 million in 2025, compared to a net income of $201.8 million in 2024, which included a significant gain from discontinued operations Q2 2025 vs Q2 2024 Statement of Operations (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Service revenue and other | $88,568 | $85,799 | | Operating loss | $(9,108) | $(15,885) | | Loss from continuing operations | $(9,048) | $(12,773) | | Net (loss) income | $(9,048) | $(12,872) | | Net (loss) income per share | $(0.19) | $(0.24) | Six Months 2025 vs 2024 Statement of Operations (in thousands, except per share) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Service revenue and other | $176,466 | $155,047 | | Operating loss | $(15,200) | $(18,661) | | Loss from continuing operations | $(18,180) | $(16,863) | | Net (loss) income | $(18,180) | $201,824 | | Net (loss) income per share | $(0.38) | $3.84 | - The significant net income in the first six months of 2024 was driven by a $216.8 million gain on the sale of discontinued operations[10] Unaudited Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash from operations increased to $41.5 million, investing activities used $151.9 million primarily for capital expenditures, and financing provided $93.2 million from $100 million in credit facility borrowings, leading to a $17.2 million decrease in cash to $29.1 million Six Months Ended June 30 Cash Flow Summary (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $41,470 | $17,699 | | Net cash used in investing activities | $(151,908) | $(183,130) | | Net cash provided by financing activities | $93,243 | $69,955 | | Net decrease in cash | $(17,195) | $(95,476) | | Cash at end of period | $29,077 | $43,779 | - Capital expenditures for the first six months of 2025 were $169.4 million, up from $150.9 million in the same period of 2024[17] - The company received $100 million from credit facility borrowings in the first half of 2025, compared to none in the prior year period[17] Notes to Unaudited Condensed Consolidated Financial Statements The notes provide detailed explanations of the financial statements, including the basis of presentation, Horizon acquisition details, revenue segmentation, debt structure and covenants, derivative hedging, and discontinued operations related to the Tower Portfolio sale - The company provides broadband data, video, and voice services in eight states via fiber optic and hybrid fiber coaxial cable networks[18] - On April 1, 2024, Shentel completed the acquisition of Horizon for a total purchase price of $416.2 million, consisting of $349.4 million in cash and $71.8 million in common stock[24][25] - On March 29, 2024, the company completed the sale of its Tower Portfolio for $309.9 million, which is now treated as a discontinued operation[72] - The company operates as a single segment, and the Chief Operating Decision Maker (CODM) assesses performance at a consolidated level using Adjusted EBITDA[74] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for the three and six months ended June 30, 2025, highlighting revenue growth in Glo Fiber Expansion markets, declines in incumbent markets, the impact of the Horizon acquisition, liquidity, capital resources, and debt obligations Results of Operations For Q2 2025, total revenue grew 3.2% to $88.6 million, driven by a 40.5% increase in Glo Fiber Expansion revenue, while operating loss narrowed to $9.1 million; for the six-month period, revenue increased 13.8% to $176.5 million, boosted by the inclusion of Horizon's results Q2 2025 vs Q2 2024 Revenue by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | Change % | | :--- | :--- | :--- | :--- | | Residential & SMB - Incumbent Broadband | $42,837 | $44,243 | (3.2)% | | Residential & SMB - Glo Fiber Expansion | $19,796 | $14,093 | 40.5% | | Commercial Fiber | $19,483 | $20,723 | (6.0)% | | RLEC & Other | $6,452 | $6,740 | (4.3)% | | Total revenue | $88,568 | $85,799 | 3.2% | - The 40.5% increase in Glo Fiber revenue was driven by a 43.1% year-over-year growth in data RGUs[92] - Restructuring, integration, and acquisition expenses decreased by 98.2% in Q2 2025 compared to Q2 2024, as the prior year included significant costs related to the Horizon acquisition[99] - For the six months ended June 30, 2025, total revenue increased 13.8% to $176.5 million, with Commercial Fiber revenue growing 27.3%, largely due to the inclusion of Horizon's results for the full period[104] Financial Condition, Liquidity and Capital Resources As of June 30, 2025, total available liquidity was $266.7 million, comprising $29.1 million in cash, $143.0 million available under its revolver, and $94.6 million in government grants, with net indebtedness at $511.8 million - Total available liquidity as of June 30, 2025, was $266.7 million[124] - The company has been awarded approximately $151.1 million in government grants to expand broadband to unserved areas, with $94.6 million still available as of June 30, 2025[123] - Capital expenditures of $169.4 million in the first half of 2025 exceeded net cash from operations by $125.7 million, a trend expected to continue through 2026 due to Glo Fiber expansion[132] - The company was in compliance with all financial covenants in its Credit Agreement as of June 30, 2025, after an amendment increased the maximum Total Net Leverage Ratio to 4.75:1.00[130] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company is exposed to market risk from interest rate fluctuations on its $513.1 million variable-rate debt, where a 1.00% increase would add $5.1 million to annual interest expense, mitigated by interest rate swaps on $150.0 million notional principal at a fixed rate of 2.90% through June 2026 - As of June 30, 2025, the company had $513.1 million of gross variable rate debt outstanding[137] - A hypothetical 1.00% increase in interest rates would increase annual interest expense by approximately $5.1 million[137] - The company uses interest rate swaps with a notional principal of $150.0 million to hedge against interest rate risk on a portion of its term loans, effectively paying a fixed rate of 2.90% plus margin[138] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The certifying officers concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[139] - No material changes in internal control over financial reporting occurred during the quarter[140] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings in the ordinary course of business but does not believe the final outcome of any current matters is reasonably likely to have a material adverse effect on its business, financial condition, or results of operations - Management does not believe that the outcome of any current litigation is reasonably likely to have a material adverse effect on the company's financial position or results[142] Item 1A. Risk Factors The company refers to the risk factors disclosed in its Annual Report on Form 10-K and notes one additional risk factor identified as of June 30, 2025, related to potential cost pressures from tariffs - One additional risk factor related to potential cost pressures from tariffs has been identified since the last Annual Report[143] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the period, though 18,000 shares were surrendered by employees to cover tax withholding obligations related to the vesting of stock awards - No unregistered sales of equity securities occurred during the quarter[144] Shares Surrendered for Tax Withholding (Q2 2025) | Month | Number of Shares Surrendered (in thousands) | Average Price Paid per Share | | :--- | :--- | :--- | | April | — | $— | | May | — | — | | June | 18 | $13.23 | | Total | 18 | | Item 5. Other Information No officers or directors adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No officers or directors adopted or terminated any Rule 10b5-1 trading arrangements during the second quarter of 2025[148] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including Amendment No. 4 to the Credit Agreement, certifications from principal officers, and XBRL data files - Key exhibits filed include Amendment No. 4 to the Credit Agreement and certifications by the Principal Executive Officer and Principal Financial Officer[151]