SHENANDOAH TELECOMMUNICATIONS CO/VA/ Q3 FY2024 earnings call

• Horizon integration: Made significant progress, launched Glo Fiber brand in Ohio, completed four back-office system integrations, with ERP and payroll conversions expected by Jan 2025, aligned compensation and benefit programs starting Jan 2025, upsized synergy savings to $11M with first quarter 2025 realizing full savings.
• Glo Fiber strategy: Ended Q2 with ~320,000 Glo Fiber passings, 58% growth in passings from year ago, over 59,000 Glo Fiber customers with 58% Y/Y growth, record quarter with 6,000 net subscriber additions.
• Fiber construction and customer growth: Constructing fiber in 28 markets, passed ~554,000 homes/businesses, added over 300 route miles of fiber in Q3, over 59,000 Glo Fiber customers, broadband data penetration rates increasing as markets mature.
• Incumbent broadband markets: Broadband data subscribers slightly up Y/Y, data churn improved, broadband data ARPU increased, commercial fiber business saw significant increases in new sales bookings and installations.

Revenue grew 30% to $87.6 million in the third quarter of 2024. The former Horizon markets contributed $16.9 million of revenue. Excluding the former Horizon markets, revenue grew $3.3 million or 4.9% over the same period a year ago. Glo Fiber third quarter revenue was $15.1 million. The Glo Fiber legacy markets saw revenue, subscribers, and ARPU growth of 56%, 54%, and 7% respectively. Adjusted EBITDA grew 31% to $26.6 million in the third quarter of 2024. The former Horizon markets contributed $4.7 million of adjusted EBITDA. Excluding the former Horizon markets, adjusted EBITDA grew 8% from the same period a year ago.

• Expect margins to improve in future quarters with continued Glo Fiber revenue growth and realization of full $11M expense synergies.
• Plan to finish the year with capital investments in the $293 million to $325 million range, in line with previous guidance.

• Forward-looking statements subject to risks and uncertainties, actual results may differ materially, detailed risk factors in SEC filings should be reviewed.

Q: Have you seen any uptick in activity from Verizon in particular, but really any other competitors in your markets? And also, separately, some states have been putting BEAD funding out for bid. Anything in your territory that looks attractive and any meaningful amounts of -- or territories that you might be bidding on?

A: As far as the Verizon question, we have not seen any significant new Verizon activity as far as fiber builds in our markets. As far as the BEAD question, we do see some opportunities in our incumbent telephone footprint areas, but those opportunities, we don't feel are nearly as big as the opportunities where we've already received grants through The American Rescue Plan Act funds. So we're looking at BEAD closely, but some opportunity, but it's going to be a modest opportunity for us.

Q: As far as the 6,000 adds you had this quarter, are you seeing any benefits from Horizon? Or is that primarily Shentel? And then follow-up: Is there a timing as to when you would see the revenue synergies as far as Horizon is concerned? And then: And now that your footprint is getting bigger, is there going to be any kind of seasonality in the net adds number for Glo Fiber?

A: That 6,000 number is a combined number, but that is primarily the legacy Shentel markets. Our number of fiber passings in the legacy Shentel markets is significantly larger than the Horizon markets. In the Horizon markets, we only have about 15,000 to 16,000 passings right now. But that will grow over time. As far as the revenue synergies on the commercial side or just in general? Well, the big key there is ramping the construction engine back up for fiber-to-the-home. Horizon has hit the pause button on that construction. We've now restarted construction. We have about 51,000 new fiber passings in our construction pipeline. We've actually started construction. We turned up additional passings in October. So we're -- we should see some additional increases in customers in the fourth quarter in the Horizon markets with that new construction. We typically see second -- excuse me, third quarter as a large growth opportunity. The August time frame is typically our -- one of our larger months. So we'll continue to see seasonality similar to what we've seen in the past.