SHEN earnings call analysis

NASDAQ:SHEN Q4 2025 Earnings Call Transcript Generated on 6/6/2026 Liz | Conference Operator: Thank you for standing by. My name is Liz and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Shenandoah Telecommunications Company fourth quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Lucas Binder, Vice President of Corporate Finance for Chantel. Please go ahead. Lucas Binder | Vice President of Corporate Finance: Good morning and thank you for joining us. The purpose of today's call is to review Chantel's results for the fourth quarter and full year 2025. Our results were announced in a press release distributed this morning. In addition, we filed our Form 10-K and also a Form S-3 with the SEC to fulfill our Horizon merger contractual requirements to GCM. The presentation we will be reviewing is included on the investor page on our investor.chentel.com website. Please note that an audio reply of this call will be made available later today. The details are set forth in the press release announcing this call. With us on the call today are Ed McKay, President and Chief Executive Officer, and Jim Volk, Senior Vice President and Chief Financial Officer. After the prepared remarks, we will conduct a question and answer session. I refer you to slide two of the presentation, which contains our safe harbor disclaimer, and remind you that this conference may include forward-looking statements subject to certain risks and uncertainties that may cause our actual results to differ materially from these forward-looking statements. Additionally, we have provided a detailed discussion of various risk factors in our SEC filings, which you are encouraged to review. You are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements. With that, I will now turn the call over to Ed. Go ahead, Ed. Ed McKay | President and Chief Executive Officer: Thanks, Lucas, and good morning, everyone. Thank you for joining us today. This past year marked another important step forward for Centel as we continue to execute on our Fiber First strategy. Strong year-over-year growth in both glow fiber and commercial fiber drove a notable shift in our revenue mix with our fiber-based lines of business surpassing our incumbent broadband revenue in the fourth quarter. Throughout 2025, we remained disciplined and focused on our four strategic pillars that continue to guide our operational and financial priorities. Building on our long history of success, completing our fiber network expansion, accelerating growth, and positioning the business to inflect to positive free cash flow in 2027. I'm pleased with the way our team delivered on each of these priorities, strengthening our position, and keeping our strategy firmly on track. Starting on slide four, we share some of our four-year highlights. At year-end 2025, we passed approximately 427,000 homes and businesses in our low-fiber expansion markets, an annual increase of 81,000 passings. Our government subsidized passings in the government broadband markets more than doubled year over year to 22,000, and penetration in these areas has already reached 31%. We are well on our way to substantially completing construction for these capital intensive expansion projects by the end of 2026. Glow fiber data RGU's grew 35% in 2025 to 88,000, and we maintain data RPU by driving customers to higher speed tiers. Lastly, we successfully refinanced our debt with our inaugural ABS financing in December that will save us approximately 170 basis points in cash interest expense and extend our maturities to 2030. We finished 2025 with strong momentum, driving customer growth, expanding our high-value fiber business, and strengthening our balance sheet. This performance gives us confidence in our trajectory as we move into 2026. Turning to slide five, we show our integrated broadband network that spans more than 19,000 fiber route miles across eight states with over 679,000 total broadband passings. Our markets have compelling competitive dynamics that differentiate us from our peers in the broadband industry. Eighty-eight percent of our glow fiber passings are duopoly markets with only one fixed broadband competitor, and in our incumbent markets, 70 percent of our passings have no fixed broadband competitor. As we enter the home stretch of our Glowfiber expansion, we remain focused on return on investment. Due to rising aerial make ready costs in some areas, we have recently decided to pass on investments in certain Ohio markets where the cost to pass increased, reducing our ability to earn a return on our investments above our hurdle rate of 15%. As you can see on the map, all of the planned Glowfiber markets have been launched. And our primary focus in 2026 is adding passings in our Virginia, Pennsylvania, Maryland, and Ohio markets. Despite the reduction in targeted passings, we remain confident in our plans to achieve positive free cash flow in 2027. On slide six, our sales and marketing team continues to drive growth in our Glowfiber expansion markets. In the fourth quarter, we added 5,300 new customers and more than 6,000 total data, video, and voice revenue generating units. For full year 2025, we added approximately 23,000 new customers and 26,000 total RGUs. As a result, total Glow Fiber revenue generating units surpassed 103,000 by year end, up 33% compared to the prior year. Moving to slide seven, the fourth quarter marked our strongest construction period of the year, with more than 26,000 low-fiber passings completed, bringing total passings to just under 427,000. While the significant increase in new passings kept penetration flat quarter over quarter at 20.6%, penetration improved 1.8 percentage points year over year. Penetration trends across our Glowfiber cohorts are shown on slide eight and reflect blended penetration rates for both residential and small and medium business passings. Business passings account for about 8% of our total passings and they typically exhibit a slower penetration ramp than residential passings. However, business customers generate data ARPU that is more than 40% higher than residential customers. Due to the slower business ramp, cohorts with a higher concentration of business passings can show lower penetration. This dynamic is evident in the Q4 2023, Q1 and Q4 2024, and Q1 2025 cohorts, which have a significantly higher mix of business passings than other cohorts. Excluding the differences in residential and business mix, Penetration growth in our Glowfiber expansion markets has followed a consistent and predictable pattern with steady increases as cohorts mature. Our earliest cohorts launched in 2019 and 2020 now have an average data penetration rate of more than 37%. On slide nine, we highlight our most recent Net Promoter Score Customer Satisfaction Survey where we received an outstanding score of 61. This result compares very favorably with cable competitors that often have single digit scores. Our continued focus on customer service is a key driver of our low churn, with average monthly churn of 1.01% in the fourth quarter and 1.07% for full year 2025. Broadband data average revenue per user increased to more than $77 in the fourth quarter, representing a 2.3% year-over-year increase. Midway through the third quarter, we introduced new promotional rate plans offering higher speeds with a five-year price guarantee. With these plans available for a full quarter, more than 75% of our new residential subscribers selected speeds of one gig or higher, including 20% choosing two gig service and 5% choosing five gig service. The increase in ARPU was driven by our shift away from a first-month free promotion in prior periods, along with strong adoption of the five-year price guarantee plans in the fourth quarter. As these plans continue to roll through our base, we expect data ARPU to decline by approximately 1% over the next few quarters before stabilizing. Turning to slide 10, we show our operating performance for the incumbent broadband markets. At the end of 2025, we served about 112,000 broadband data customers, reflecting a year-over-year increase of over 600. Data voice and video RGUs totaled more than 158,000 at the end of the year, down 3% year-over-year, primarily due to video customers moving to online streaming services. Total broadband passings in our incumbent markets grew to 252,000 at year-end, up about 13,000 compared to the prior year. This increase was driven by the construction of government subsidized passings in previously unserved areas. We've substantially completed construction and fulfilled our grant obligations in Virginia, and we expect to complete the remaining 1300 government subsidized incumbent grant passings in West Virginia in 2026. As a result of our government grant fiber construction, approximately 21% of our incumbent broadband passings are now equipped with fiber to the home technology. As shown on slide seven, these new subsidized passings represent a strong growth catalyst for our incumbent markets, with data penetration exceeding 45% within six quarters of a neighborhood launch. Our earliest cohort from the first quarter of 2023 has reached 61% penetration, and we've already achieved an aggregate penetration of 31% across more than 22,000 subsidized passings. Moving to slide 12, monthly broadband data churn improved sequentially and remaining steady year over year at 1.47% for the fourth quarter. Our rate card strategy, offering greater value with higher speeds at the same price, continues to be effective at mitigating churn. As expected, broadband data ARPU declined 2.4% from a year ago to $82, given by the addition of new customers with more aggressive pricing in competitive markets. Our commercial fiber business is highlighted on slide 13. In the fourth quarter, incremental monthly bookings exceeded 155,000 in line with the prior year period. After record bookings in the first half of 2025, second half bookings increased almost 9% compared to the second half of 2024. We're seeing strong performance across a broad and diverse customer base, including wireless carriers, mid-market and enterprise customers, wholesale partners, educational institutions, and state and local governments. Our service delivery team installed $191,000 in new monthly revenue in the fourth quarter, modestly as we continue to work through the backlog and move bookings to revenue more quickly. Average monthly compression and disconnect churn remained very low at 0.6% in the fourth quarter, driven by exceptional support from our network operations center and sales team. Before I turn the call over to Jim, I want to briefly address a recently announced reduction in force. On February 23rd, we announced a workforce reduction of approximately 10% of our employees to better align our staffing levels with the planned completion of the construction phase of Glow Fiber. Impacting employees will have a standard departure date through the end of 2026, with the longest impact in the fourth quarter. All affected employees are eligible for severance pay and benefits, as well as career transition services. We expect to incur approximately $3.1 million in restructuring costs and anticipate annual savings of roughly $12.3 million starting in 2027, split evenly between operating expenses and capitalized labor. While our major Glow Fiber market expansion is nearing completion by year-end, we remain firmly focused on driving continued growth in Glow Fiber and commercial fiber and delivering the high level of service our customers expect and deserve. I'll now turn the call over to Jim to walk you through our 2025 financial results and our outlook for 2026. Jim Volk | Senior Vice President and Chief Financial Officer: Thank you, Ed, and good morning, everyone. I'll start on slide 15 with the financial results for the fourth quarter of 2025. Revenues grew 7.2% to 91.6 million, driven by another quarter of strong low fiber expansion market revenue growth of 6.5 million, or 39%, driven by a 37% increase in data subscribers and a 2% increase in data ARPU. Commercial fiber revenue grew 2 million, or 10.8% year-over-year, driven primarily by a negative deferred revenue adjustment in the fourth quarter of 2024. Incumbent broadband markets revenue declined 1.7 million, primarily due to lower video and data revenues from a 14.8 percent decline in video RGUs as customers switched to streaming video services, and a 2.4 percent decline in data ARPU due to a more aggressive rate card in competitive markets. Broadband data subscribers did grow 0.6% in the year-over-year. RLEC revenue declined 500,000, primarily due to lower DSL revenue from a 24.4% decline in DSL RGUs, partially due to customers migrating to our broadband data service in the recently constructed passings supported by government grants. Adjusted EBITDA grew $8 million, or 31.3% to $33.5 million, driven by $6.2 million in revenue growth and $1.8 million in lower expenses from a combination of horizon synergy savings, higher capitalized labor from a strong quarter of fiber construction, and lower bad debt. Adjusted EBITDA margins increased significantly. 670 basis points, 36.5% in the fourth quarter, due to a combination of recurring synergy savings, seasonality due to a strong quarter of fiber construction favorably impacting higher capitalized labor and lower network compensation expenses, and non-recurring debt expense adjustments. We expect adjusted EBITDA margin to decline slightly in the first half of 2026 before expanding again in the second half of 2026. On slide 16, we share our last five-year financial results. Revenues in adjusted EBITDA grew at a compounded annual growth rate of 10 percent and 16 percent respectively. We believe these growth rates are industry-leading among publicly traded broadband companies. Please note that we acquired 19 million of annual run rate EBITDA when we acquired Horizon in 2024. This was fully offset by 12 million of lower EBITDA when we sold our tower business in the same year and 7 million in lower EBITDA from backhaul revenue churn due to the one-time network rationalization event following T-Mobile's acquisition of Sprint. While we are proud of our team's performance over the past five years, we are even more excited about our growth prospects over the next five years when we expect low double-digit EBITDA growth rates combined with significantly lower capital intensity starting in 2027. Turning to slide 17 for our annual guidance for 2026, we expect 2026 revenues of $370 to $377 million, or 4.4% growth based upon the midpoint. We are guiding to adjusted EBITDA of $131 million to $136 million or 12.1% growth based upon the midpoint. We expect 2026 CapEx net of grant reimbursements to be $220 to $250 million or a 21% decline at the midpoint. Moving to slide 18, we invested $359 million in capital expenditures in 2025 and collected $63 million in government grants for net CapEx of $296 million. We have completed construction of 84% of target global fiber passings and 94% of target incumbent government grant passings in unserved areas. In summary, capital intensity is trending down as we get closer to the end of the expansion phase. Capital intensity intensity declined from 91% in 24 to 83% in 25 and to a range of 59 to 67% in 26 based upon our guidance. For 2027, we are currently trending to the high end of the long-term target capital intensity range we provided a year ago. We expect our residential businesses to be in the 25% range and our commercial business in the 30% range initially, before declining further over time as our businesses scale. I'd now like to update you on our refinance credit facilities and liquidity on slide 19. As previously announced in December, we successfully refinanced our $675 million term loan and revolving credit facility with a hybrid capital structure featuring asset-backed securitization, or ABS notes, supported by most of our fiber business, and a revolving credit facility backed primarily by our incumbent business. The ABS notes include $567 million of privately placed investment grade notes to institutional investors due December 2030 with a weighted average interest rate of 5.69% and $175 million variable funding note facility or VFN with a group of financial institutions. The VFN has a maturity date of December 2029 and bears interest at SOPR plus 175 basis points. The VFN is a revolving facility within the ABS special purpose entities that is also investment graded and securitized by the same fiber assets and customer contracts. It is also governed by the same ABS indenture as the ABS notes. We did not borrow from the VFN as of December 31st, 2025. Concurrently, we established the new $175 million revolving credit facility, or RCF, with a group of financial investors maturing December 2030. The RCF bears interest at SOPR plus 250 to 300 basis points, depending upon net leverage as defined in the RCF agreement. We borrowed $75 million from the RCF as of December 31, 2025. Please note that these are two discrete credit facilities separated legally by special purpose entities established for ABS. Chantel and the non-ABS entities have no recourse to the loans of the ABS entities. Likewise, the ABS entities have no recourse to the loans of the RCF. As of December 31st, we have $642 million in outstanding debt with a weighted average interest rate of 5.75%. This compares favorably to September 30th weighted average interest rate of our prior credit facility of 7.47%, saving us 172 basis points in cash interest driven by the investment grade rated ABS notes. Based on our current debt levels, this will save us $11 million annually in cash interest. Total available liquidity was approximately $235 million as of December 31st. consisting of $27 million of cash and cash equivalents, $21 million in restricted cash as required by the ABS indenture, $44 million available under the VFN, $93 million under the RCF, and $50 million available under government grants. In addition, the company has over $130 million of VFN commitments that are not available to draw as of December 31st. The available capacity of the VFN will increase based upon fiber revenue growth from the ABS entities multiplied by a net operating income margin as defined in the ABS indenture and a 6.25 multiple. We are very pleased with our new credit facilities and the financial flexibility they will provide us in future years. In summary, As noted on slide 20, we have three catalysts converging that we expect will lead us to generating and growing positive free cash flow in 2027 and beyond. Low double-digit adjusted EBITDA growth rates driven by our fiber businesses, declining capital intensity as we exit the construction phase of our business plan in 2027, and declining cost of capital after refinancing our debt in December 2025 with primarily investment-grade ABS notes. This is a very exciting time for Centel and our shareholders. Thank you, operator. We are now ready for questions. Liz | Conference Operator: At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Hamed Khorasan with BWS Financial. Please go ahead. Hamed Khorasan | Analyst, BWS Financial: Hey, good morning. About the markets that you've decided not to enter in Ohio, how much CapEx are you looking to save? And is it all being – was it all planned for 26? So it already brings down the CapEx that you're projecting for 26? Jim Volk | Senior Vice President and Chief Financial Officer: Yeah, Ahmed, the CapEx per passing – you know, in this last year is roughly going to be around $1,400 per passing. Now, some of that money has been previously spent in prior years, and we're now really focusing primarily on just placing the fiber. So it's mainly construction labor at this stage, which will probably be about 75% of the $1,400 or call it, you know, $1,000 per passing. Yeah, the markets that we decided to pass on wasn't, wasn't an issue of timing as much as it was an issue of return on investment. As Ed mentioned in his scripted comments, the cost of aerial make ready has gone up significantly, like 2 and 3x in some markets, and it just made it uneconomical for us to build these markets and get a return on investment as we've expected of roughly 15%. Hamed Khorasan | Analyst, BWS Financial: Okay. From a competitive standpoint, you introduced this five-year guarantee, I think, last quarter. Have you seen any step down as far as competitive pressures go, or is it still the same? Ed McKay | President and Chief Executive Officer: Ahmed, recently one of our large cable competitors actually increased their prices on their five-year guarantee. That just happened recently here in the first quarter. Other than that, we haven't seen significant changes since we launched the five-year price guarantee. Hamed Khorasan | Analyst, BWS Financial: Okay. And then you had said, if I heard you right, that it takes a bit longer on the business down the residential. How fast – I don't think I heard you say how fast it takes for a residential to sign up. spk06: Sorry. Ed McKay | President and Chief Executive Officer: Say it again. For a residential customer – To sign up? Hamed Khorasan | Analyst, BWS Financial: Yeah, to sign up for service. I know you were talking about how there's a delayed factor when it comes to business customers. Ed McKay | President and Chief Executive Officer: Yeah, so with the business customers, in many cases they're under contract. We have to wait for that contract to roll off. And in some markets there are actually multiple providers going after business customers. So we expect terminal penetration on business customers to be lower than residential customers. But then residential customers that ramp to our target, you know, 37% plus penetration rate, we're tracking five to seven years after we launch a market. spk06: Okay. Thank you. Liz | Conference Operator: Your next question comes from the line of Vikash Harlalka with New Street Research. Please go ahead. Vikash Harlalka | Analyst, New Street Research: Hi, thanks so much for taking my question. I just have a couple of questions. Why did you feel the need to offer a five-year price guarantee plan? Was it because competition was going in that direction? And then how does that impact ARPU growth? And I'll ask my second after you answer this one. Ed McKay | President and Chief Executive Officer: Yeah, so it was in response to competition. One of our large cable competitors launched a five-year price guarantee plan. we did initially see some impact on gross ads when they launched it. Didn't see any impact on churn, but once we launched our own five-year price guarantee, that impact on gross ads we felt was mitigated. And as I mentioned in my script, we do expect short-term impact on ARPU as those five-year price guarantees roll through about 1% over the next few quarters, but we expect it to stabilize after that in our global fiber markets. Vikash Harlalka | Analyst, New Street Research: Got it. And I have one strategic question. We recently met with many small private fiber operators. There seems to be a lot of appetite for M&A. Could you just remind us how you're thinking about M&A? And if you're looking to buy fiber assets out there, what characteristics are you looking for in any potential targets? Ed McKay | President and Chief Executive Officer: Well, I'll say we've certainly seen consolidation start. We believe consolidation will continue. At this point in time, we're focused on successfully completing our build plan, accelerating customer growth, and then reaching that positive free cash flow inflection point in 2027. So that's really our main focus right now. As we look ahead further into the future, from an M&A standpoint, we'd be most interested in a pure play fiber provider less interested in a cable provider and not interested at all in a copper provider. spk06: Got it. Thanks so much. You're welcome. Thank you. Liz | Conference Operator: We have no further questions at this time. I will now turn the call back over to Jim Volk for closing remarks. Jim Volk | Senior Vice President and Chief Financial Officer: Well, thanks everyone for joining our call this morning. As I mentioned earlier, this is a very exciting time for Chantel. And we look forward to updating you on our progress in future quarters. Thank you. Have a good day. Liz | Conference Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. jsPDF 3.0.3 D:20260606090424-00'00'

NASDAQ:SHEN Q3 2025 Earnings Call Transcript Generated on 6/6/2026 Michelle | Conference Operator: Good afternoon, everyone. Welcome to the Shenandoah Telecommunications Third Quarter 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Mr. Lucas Bender, VP of Corporate Finance for Shentel. Shentel\ Thank you, Michelle. Good afternoon, and thank you for joining us. The purpose of today's call is to review Shentel's results for the third quarter of 2025. Our results were announced in a press release distributed after the market closed this afternoon, and the presentation we will be reviewing is included on the investor page on our investor.chentel.com website. Please note that an audio replay of this call will be made available later today. The details are set forth in the press release announcing this call. With us on the call today are Ed McKay, President and Chief Executive Officer, and Jim Volk, Senior Vice President and Chief Financial Officer. After the prepared remarks, we will conduct a question and answer session. I refer you to slide two of the presentation, which contains our safe harbor disclaimer, and remind you that this conference call may include forward-looking statements subject to certain risks and uncertainties that may cause our actual results to differ materially from these forward-looking statements. Additionally, we have provided a detailed discussion of various risk factors in our SEC filings, which you are encouraged to review. your caution not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements. With that, I will now turn the call over to Ed. Go ahead, Ed. Ed McKay | President and Chief Executive Officer, Shentel: Thanks, Lucas, and good afternoon, everyone. So thanks for joining us today. So as we begin the call, I'd like to share our vision for Shentel. We're focused on four key pillars that are driving operational execution and positioning us for long-term value creation. First, we're focused on building on our success. We have a proud history of delivering exceptional local customer service and deploying high quality networks in smaller markets. We're enhancing that foundation by integrating advanced technology and AI to boost operational efficiency. For example, we're currently using AI to streamline our technical support operations and optimize digital marketing, ensuring that the right offer reaches the right customer at the right time. Our second pillar is successfully completing our build. Finishing our network expansion remains a top priority, and I'm very proud of our team's achievements over the past six years. At the end of Q3, Glowfiber reached a major milestone, passing 400,000 homes and businesses in our greenfield expansion markets. We remain on track to substantially complete our build by the end of 2026. Our third pillar is accelerating growth. We're focused on driving penetration rates in glow fiber markets and expanding our commercial fiber business. We're growing the size of our direct sales team, and we've simplified our online purchase experience and launched targeted digital marketing with compelling rate plans. Our 100% fiber optic glow network gives us a clear competitive edge, and our many unique commercial fiber routes connect our smaller markets back to major metropolitan data centers. Finally, we're focused on achieving positive free cash flow. Prior to our heavy investment cycle in Glow Fiber expansion markets, Shentel consistently delivered positive free cash flow. Returning to that position is a key milestone, and we remain on track to reach positive free cash flow for the full year of 2027, driven by declining capital intensity and continued customer growth. To support this transition, we plan to refinance our credit facilities through a hybrid structure, asset-backed securitization for our glow fiber and commercial fiber businesses, paired with a new credit facility for our incumbent broadband business. We expect this approach to lower our cost of debt, strengthen our credit profile, and increase financial flexibility. These improvements will position us to capitalize on opportunities in a consolidating industry and deliver greater value to our investors. We anticipate completing the refinancing in the coming months. Thank you for your continued trust in Chantel. We remain focused on operational excellence, strategic agility, and delivering value to our customers and shareholders. Starting on slide four, we share some of our key highlights from the quarter. We reached the milestone of 400,000 total Glow Fiber passings driven by 21,000 homes released to sales in the third quarter. Glow fiber data revenue generating units grew to 83,000 at the end of the quarter, representing year-over-year growth of 39.5%, and glow fiber revenues grew 41.1%, reaching 21.3 million. Consolidated revenues reached 89.8 million, an increase of 2.5% year-over-year growth. Adjusted EBITDA climbed to $29.7 million, up 11.7% year-over-year, and our margins expanded 300 basis points to 33%. Jim will provide you with more details on the key drivers of our fine hour-to-hour results in a few minutes. Moving to slide five, we show our integrated broadband network that spans more than 18,000 fiber route miles across eight states. Our markets have compelling competitive dynamics that differentiate us from our broadband peers. 92% of our Glowfiber passings are duopoly markets with only one fixed broadband competitor. And in our incumbent markets, 70% of our passings have no fixed broadband competitor. On slide six, our sales and marketing team continues to drive growth in our Glowfiber expansion markets. In the third quarter, we added 6,400 new customers and approximately 7,200 total data, video, and voice revenue generating units. 600 of the new customer additions were from our recent Blacksburg, Virginia acquisition that we closed and integrated in July. Over the last 12 months, we've added more than 23,000 data RGUs across the Glowfiber expansion markets. We ended the third quarter with approximately 83,000 Glowfiber customers, 39% increase year-over-year. Our total Glowfiber revenue generating units reached more than 97,000 at the end of the quarter, up 37% from the same period a year ago. Moving to slide seven, Glowfiber passings exceeded 400,000 at the end of the third quarter, an increase of 81,000 year-over-year. Broadband data penetration in our Glowfiber expansion markets climbed 2.1 percentage points to 20.6% at the end of the third quarter. As shown on slide eight, growth in our Glowfiber expansion markets has followed a consistent predictable pattern with steady increases in data penetration rates as cohorts mature. We typically achieve 15% data penetration rates within the first year and 25% by year three. Our earliest cohorts, which launched in 2019 and 2020, have now reached an average data penetration rate of 37%. We're also pleased with our sales and marketing team's ability to quickly engage customers when launching new neighborhoods, as demonstrated by our 8% penetration rate for communities introduced in the third quarter. On slide 9, monthly broadband data churn for the quarter remains steady at 1.17%. As a reminder, third quarter is the seasonally highest churn quarter due to greater move churn, especially around schools and universities. Our broadband data average revenue per user remains strong in the third quarter at roughly $77, supported by customer adoption of higher speed tiers. In the middle of the third quarter, we introduced new promotional rate plans that offer enhanced speeds with a five-year price guarantee. As a result of this new plan, we saw an increase in subscriber gross additions in the second half of the quarter, with 68% of our new residential customers choosing speeds of one gig or higher, including 12% choosing speeds of two gig and 3% choosing speeds of five gig. As a Greenfield overbuilder and share taker, we have not raised broadband service prices since we launched Glow Fiber six years ago. In addition, our fiber networks have ample excess capacity and are superior to our competitors' DOCSIS networks in providing faster, symmetrical speeds. Our new promotional plans leverage our competitive advantage as well, and we believe they will be a key driver in accelerating growth. As more customers select these new plans, we expect minimal impact to Data ARPU in the next couple of quarters and a decline of approximately 1% for 2026. Turning to slide 10, we show our operating performance for the incumbent broadband markets. At the end of the third quarter, we served about 112,000 broadband data customers, reflecting a year-over-year increase of 580. Data voice and video RGUs totaled 160,000 at the end of the third quarter, down 3% year-over-year, primarily due to video customers moving to online streaming options. Total broadband homes and businesses passed in our incumbent markets grew to 248,000 at the end of the quarter, up about 14,000 over the same period a year ago. This increase was driven by construction of new government subsidized passings in previously unserved areas. As a result, approximately 20% of our incumbent broadband passings are now equipped with fiber-to-the-home technology. As shown on slide 11, these new passings represent a strong growth catalyst in our incumbent markets, and we're seeing data penetration exceed 45% five quarters after a neighborhood is launched. Our oldest cohort from first quarter of 2023 has reached 61% penetration, and we've achieved an aggregate penetration of 30% across more than 19,000 subsidized passings. Moving to slide 12, monthly broadband data churn improved six basis points year over year, reaching 1.61% in the third quarter. Our rate card strategy of offering higher speeds and more value for the same price continues to be effective in mitigating churn. Broadband data ARPU declined 1% from a year ago as expected to $82. Our commercial fiber business is highlighted on slide 13. In the third quarter, we continued to execute with sales of almost 157,000 in incremental monthly revenue, an increase of 19% over the prior year quarter. This followed record-setting sales in the first half of the year. We're seeing strong performance across a broad and diverse customer base, including wireless carriers, mid-market and enterprise customers, wholesale partners, educational institutions, and state and local governments. Our service delivery team installed 215,000 in new monthly revenue in the third quarter, similar to prior periods. Average monthly compression and disconnect churn remain very low at 0.4% in the third quarter, driven by exceptional support from our network operations center and our sales team. So I'll now turn the call over to Jim to walk you through our financials and outlook for the rest of 2025. Jim Volk | Senior Vice President and Chief Financial Officer, Shentel: Thank you, Ed, and good afternoon, everyone. I'll start on slide 15 with the financial results for the third quarter 2025. Revenue grew 2.5% to $89.8 million, driven by another quarter of strong global fiber expansion market revenue growth of $6.2 million, or 41.1%. The global fiber revenue growth was partially offset by declines in our other lines of business. Incumbent broadband markets revenue declined $1.6 million, primarily due to a 15% decline in video RGUs due to customers switching to streaming video services. The commercial fiber revenue declined 1.1 million, primarily due to 900,000 in non-cash deferred revenue adjustments for one of our national wireless carrier customers, and a 500,000 decline in early termination fees earned in 2024. Excluding these variances, Commercial fiber revenue grew 2.3% over the same period in 2024. RLAC revenue declined $1.3 million, primarily due to lower government support revenue and a 21% decrease in DSL subscribers, as many of these customers have migrated to our recently constructed broadband Internet service. Adjusted EBITDA grew $3.1 million, or 11.7%, to $29.7 million, driven by the previously mentioned revenue growth and $900,000 and lower operating expenses as we recognize synergy savings from the Horizon acquisition. Adjusted EBITDA margins increased 300 basis points to 33% in the third quarter of 2025. Moving to slide 16, we invested $212 million in capital expenditures year to date, net of 39.9 million in government subsidies collected. We constructed over 1,700 route miles of fiber in the last year, and we have completed construction on 89% of the planned 22,000 government subsidized unserved passings in our incumbent markets. We expect to complete this construction in mid-2026, and this will be a driver of lower capital intensity in future years. Turning to slide 17, we are reiterating our annual guidance. We expect 2025 revenues of $352 to $357 million and adjusted EBITDA of $113 to $118 million. CapEx net of grant reimbursements of $55 to $65 million is expected to be $260 million to $290 million. I'd now like to update you on our liquidity and debt positions on slide 18. Liquidity was $230 million on September 30th, including $23 million in cash, $118 million in available revolver capacity, and $72 million in remaining reimbursements under available government grants. At the end of the third quarter, we had $535 million of outstanding debt. Our first Our first material maturity is July 2027. Thank you, and operator, we are now ready for questions. Michelle | Conference Operator: Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for our first question. Our first question will come from the line of Frank Loudon with Raymond James and Associates. Your line is open. Please go ahead. Frank Loudon | Analyst, Raymond James & Associates: Great, thank you. So I want to get your thoughts on creating longer term shareholder value, either through M&A, either as a buyer or seller. Is that on the table? And then if not, what else can you do to drive higher shareholder returns? And that's the first question. And then I have a follow up. Thanks. Ed McKay | President and Chief Executive Officer, Shentel: Sure, Frank. This is Ed. Appreciate the question. You know, the industry is consolidating, and we want to be a player in that. We think the refinancing we're working on gives us the flexibility to be a player there, and we're looking for opportunities to expand our footprint. We're also looking to drive efficiencies in our business. Some of the technology we're deploying will help us there, and also we'll be getting to efficiencies as we wind down our construction process. Jim Volk | Senior Vice President and Chief Financial Officer, Shentel: Yeah, Frank, if I could add to that, you know, the global fiber expansion is coming to an end in 2026, and we expect the positive free cash flow inflection point is a significant accomplishment, and we will be generating several years in front of us of significant free cash flow in 2028 and beyond. So, I think that will be another driver, you know, based upon our organic plan. Frank Loudon | Analyst, Raymond James & Associates: Okay. All right. And then, so, I think you mentioned you're at 30% penetration in your subsidized passings. Can you remind us how many subsidized passings have you been granted and what you get? And then ultimately, what's sort of the target penetration for those builds? Ed McKay | President and Chief Executive Officer, Shentel: Yes. In our incumbent cable markets, about 22,000 is what we're targeting. And we expect penetration in the high 60% range. Frank Loudon | Analyst, Raymond James & Associates: Okay. Ed McKay | President and Chief Executive Officer, Shentel: And we also have several thousand other passings in closed fiber markets as well. Frank Loudon | Analyst, Raymond James & Associates: Okay. All right, great. Okay, thank you very much. Michelle | Conference Operator: Thank you, and one moment for our next question. Our next question comes from the line of Hamid Khorasan with BWS Financial Inc. Your line is open. Please go ahead. Hamid Khorasan | Analyst, BWS Financial Inc.: Hi, I just want to say that you're – Pricing actually took with Glow Fiber. What sparked that? Are you seeing increased competition or just a lack of consumer willingness to take on the new service that you had to feel like you had to do a new pricing scheme? Ed McKay | President and Chief Executive Officer, Shentel: Ahmed, good afternoon. Good question there. So Comcast launched a five-year price guarantee in our markets in June. We did see a little bit of impact there on the gross ad side. No impact on the churn side, though, but we decided to respond with our own five-year guarantee. We've got enhanced bandwidth speeds, and that five-year guarantee started in mid-August, and we've seen a significant lift in gross ads since then. In fact, they're above the levels we experienced before Comcast launched their five-year plan. But we continue to believe we have a competitive advantage there, not only with speed, but with our local customer service and our network reliability as well. Unidentified Analyst | Analyst: Why isn't this growth leading to you raising your guidance? Ahmed, this is Jim. Jim Volk | Senior Vice President and Chief Financial Officer, Shentel: I can respond to that one. It takes several quarters of for growth to accumulate here. So it's not something that you get in the first quarter. But our customer churn is very low, as you're aware. Generally, we've been averaging about 1% per year. So we think these customers will be with us for 100 plus months. So it'll take an accumulation of higher gross ads for a couple of quarters before you see a significant lift in our revenues. Unidentified Analyst | Analyst: Okay. Thank you. Michelle | Conference Operator: Thank you, and I'm showing no further questions, and I would like to hand the conference back over to Jim Volk for any further remarks. Ed McKay | President and Chief Executive Officer, Shentel: Yes, thank you all for joining. Jim Volk | Senior Vice President and Chief Financial Officer, Shentel: We're at a very exciting point in our evolution, and we look forward to updating you at our next quarterly call. Have a good evening. Michelle | Conference Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. jsPDF 3.0.3 D:20260606090425-00'00'

NASDAQ:SHEN Q2 2025 Earnings Call Transcript Generated on 6/6/2026 Corey | Conference Operator: Good afternoon, everyone. Welcome to Shenandoah Telecommunications' second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Today's conference call is being recorded. At this time, I would like to turn the conference over to Mr. Lucas Bender, VP of Corporate Finance for Shentel. Lucas Bender | Vice President of Corporate Finance: Thank you very much, Corey. Good afternoon, and thank you for joining us. The purpose of today's call is to review Shentel's results for the second quarter of 2025. Our results were announced in a press release distributed after the market closed this afternoon. And the presentation we will be reviewing is included on the investor page on our investor.chentel.com website. Please note that an audio replay of this call will be made available later today. The details are set forth in the press release announcing this call. With us on the call today are Chris French, President and Chief Executive Officer, Ed McKay, Executive Vice President and Chief Operating Officer, and Jim Volk, Senior Vice President and Chief Financial Officer. After the prepared remarks, we will conduct a question and answer session. I refer you to slide two of the presentation, which contains our safe harbor disclaimer and remind you that this conference may include forward-looking statements subject to certain risks and uncertainties that may cause our actual results to differ materially from these forward-looking statements. Additionally, we have provided a detailed discussion of various risks, factors, in our FCC filings, which you are encouraged to review. You are cautioned not to place undue reliance on these forward-looking statements. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements. With that, I will now turn the call over to Chris. Go ahead, Chris. Chris French | President and Chief Executive Officer: Thanks, Lucas. We appreciate everyone joining us this afternoon, and I hope everyone is well. I'm pleased to lead off our call this afternoon by announcing with the unanimous support of our board, Ed McKay has been promoted to be our next president and chief executive officer. Together with Ed's promotion, I will be stepping into the role of executive chairman of the board. Both of these changes will be effective September 1st. This is a direct result of a thoughtful and deliberate CEO succession plan that the board and I developed several years ago. I also think this is a great time to undertake this transition. We are executing well on our 501st strategy and are now seeing accelerating growth generated by our network expansion. Having worked closely with Ed since he joined our organization in 2004, it is clear that he is the right person for me to hand the chief executive leadership responsibilities to and to guide our organization through the next phase of our growth. Ed has played a key role in our most significant transactions and initiatives over the past years, and his experience and expertise are well suited to lead the continued execution of our growth strategy. Importantly, he fully understands our customer-first and win-together culture, which are keys to both meeting our customer needs and delivering value to shareholders. I'm looking forward to being able to support Ed and his senior management team and I am excited about the prospects for our future. Turning to our results for the quarter, we show highlights on slide four. The second quarter was another solid quarter for executing our Fiber First growth plan. We added 5,700 new Glowfiber subscribers and over 16,000 new Glowfiber passings. Glowfiber revenues grew 40.5% over the same period 2024 to $19.8 million. Our results build on the evolution of Glow Fiber over the past six years. I'm very proud of what our team has accomplished to build a thriving $80 million revenue line of business with almost 380,000 total passings. In addition to the residential fiber business, our commercial fiber business had another outstanding quarter with over 200,000 in monthly recurring revenue sales bookings. Although it's expected to take a couple quarters to install and convert these sales into revenue, sales bookings are an early indicator of future growth. Combined, we expect low-fiber residential and commercial fiber revenues to be larger than our incumbent revenues in 2026. It's been truly rewarding to see the transformation from a mature cable and telephone operator into a rapidly growing fiber-first business. With that, I'll now turn the call over to Jim to review the details of our financial results. Jim Volk | Senior Vice President and Chief Financial Officer: Thank you, Chris, and good afternoon, everyone. I'll start on slide six with the financial results for the second quarter of 2025. Revenue grew 3.2% to $88.6 million, driven by another quarter of StrongGlo fiber market's revenue growth of $5.7 million, or 40.5%, driven by an increase in subscribers. The globe fiber revenue growth was partially offset by declines in incumbent broadband markets and commercial fiber revenue of 1.4 million and 1.2 million respectively. The incumbent broadband markets revenue decline was primarily due to a 15% decline in video RGUs due to customers switching to streaming video services. The commercial fiber revenue was primarily due to $900,000 in early termination fees received in the second quarter of 2024 and $800,000 in non-cash deferred revenue adjustments for one of our national wireless carrier customers. Excluding these variances, commercial fiber revenue grew 2.7% over the same period, 2024. In the second quarter, we executed a new agreement with the National Wireless Carrier customer that combined the legacy Shentel and Horizon backhaul circuits under one service level agreement, extended legacy Shentel circuit maturities to 2031 to align with the former Horizon circuit maturities, and reduced the pricing of the former Horizon circuits beginning in 2027. The second quarter deferred revenue adjustment reflects the application of straight-line accounting related to the 2027 pricing step-down. Overall, we are very pleased to secure these long-term revenue commitments with a high-quality, investment-grade customer. Adjusted EBITDA grew $5.1 million for 21.9% to $28.4 million, driven by the previously mentioned revenue growth and $2.4 million in lower operating expenses. Adjusted EBITDA margins increased from 27% in the second quarter of 2024 to 32% in the second quarter of 2025, driven by the high incremental margin associated with the Globe Fiber subscriber additions and a full quarter of realizing the $13.8 million in annual run rate synergies expected from our Horizon Telecom acquisition. The Globe Fiber incremental margin was 71% in the second quarter 2025 when compared to the second quarter 2024, which highlights the strong operating leverage of our fiber network. Turning to slide seven, we are initiating annual guidance. We expect 2025 revenues to be $352 to $357 million and adjusted EBITDA to be $113 million to $118 million. Net of grant reimbursements is expected to be $260 million to $290 million. The midpoint of the guidance implies 8% year-over-year revenue growth and 22% year-over-year adjusted EBITDA growth, with CapEx declining approximately 8%. I'd now like to update you on our liquidity and debt positions on slide 8. Liquidity was $260 million on June 30th. including $29 million in cash, $143 million in available revolver capacity, and $95 million in remaining reimbursements under government grants. As of the end of the second quarter, we had $513 million of outstanding debt. Our first material maturity is July 2027. Lastly, we closed and integrated a small tuck-in fiber to the home acquisition in early July The acquisition adds 1,500 passings and approximately 700 customers to our Blacksburg, Virginia, growth fiber market. We acquired this business for $5 million. After CapEx and OpEx synergies, the implied purchase price multiple is about eight times 2026 pro forma adjusted EBITDA. And now I'll turn the call over to Ed. Ed McKay | Executive Vice President and Chief Operating Officer: Thank you, Jim, and good afternoon, everyone. I'll start on slide 10 with our integrated broadband network that now spans more than 17,700 route miles across eight states. During the second quarter, our engineering and construction teams set a new record by constructing over 500 new route miles of fiber. This included 16,000 new glow fiber passings, 3,000 new subsidized passings in our incumbent broadband markets, and connections to additional commercial fiber customers. We now pass approximately 623,000 homes and businesses with broadband services, and Glowfiber represents about 61% of these passes. As highlighted on slide 11, our sales and marketing team continues to drive growth in our Glowfiber expansion markets. In the second quarter, we added 5,700 new customers and approximately 6,400 total data, video, and voice revenue generating units. Year over year, we grew our customer base by 43% and ended the second quarter with over 76,000 Glow Fiber subscribers. Our total Glow Fiber revenue generating units reached 90,000 at the end of the quarter, up 40% year over year. Broadband data penetration in our Glow Fiber markets climbed to 20% at the end of the second quarter, up from approximately 18% a year ago, and monthly broadband data churn for the second quarter improved year over year to 1.15%. Our broadband data average revenue per user remained strong in the second quarter at roughly $77, supported by customer adoption of higher speed tiers. In the quarter, 53% of new residential subscribers chose speeds of one gig or higher, including 9% that opted for speeds of two gig or higher. As shown on slide 12, Growth in our glow fiber markets has followed a consistent, predictable pattern with steady increases in data penetration rates as cohorts mature. We typically achieve 15% data penetration rates within the first year and 25% by year three. Our earliest cohorts launched in 2019 and 2020 now have an average data penetration rate of 36%. We're also pleased with our sales and marketing team's ability to quickly engage customers when launching new neighborhoods, as demonstrated by our 9% penetration rate for communities introduced in the second quarter. Turning to slide 13, we show our operating performance for incumbent broadband markets. At the end of the second quarter, we had about 112,000 broadband data customers, reflecting a slight year-over-year increase. Data, voice, and video RGUs totaled 161,000 at the end of the second quarter, down 3% year over year, primarily due to video customers moving to online streaming options. Monthly broadband data churn improved 10 basis points year over year, reaching 1.59% in the second quarter. Our rate card strategy of offering higher speeds and more value for the same price continues to be effective in mitigating churn while maintaining a stable broadband data ARPU around $83. Overall broadband data penetration declined to roughly 46% at the end of the second quarter, primarily due to recently constructed government subsidized passings. However, these areas represent strong growth potential, and we've seen data penetration reaching 45% just one year after a neighborhood launch. Our commercial fiber business is highlighted on slide 14. In the second quarter, we set another record for sales with new contracts totaling over $203,000 in incremental monthly revenue of 32% year-over-year. Our service delivery team installed $210,000 in new monthly revenue in the quarter, and our remaining installation backlog is $493,000 in monthly revenue. We've made significant progress installing the backlog we inherited from Horizon in the second quarter of 2024, and we expect to have the original backlog materially complete by year end 2025. Our network operations center and sales team continue to provide exceptional support to our commercial customers, and our average monthly compression and disconnect churn remain very low at 0.4% in the second quarter. Current capital spending and guidance for the full year are shown on slide 15. Year-to-date, we've invested 152 million, net of 17 million in government subsidies. Total year-to-date capital spending is slightly elevated over 2024, primarily due to commercial fiber construction to complete the Horizon installation backlog and grant construction projects in our incumbent broadband markets. For the full year, $290 million range, net of 55 to 65 million in government subsidies. This is slightly higher than our previous guidance, primarily because we've accelerated incumbent broadband grant projects and network upgrades from 2026 into 2025. Before I wrap up, I would like to thank Chris and our board of directors for entrusting me with the opportunity to lead Shentel as our next president and CEO. I'm very grateful for their support and leadership, and I look forward to continuing to work with them to shape our strategy and build on the strong foundation we've established for fiber growth. I'm also excited to continue partnering with our Shentel management team and dedicated employees to execute on our growth strategy. We still have significant work ahead of us to drive customer growth and complete the construction phase of Glowfiber, and I'm confident in our team's ability to deliver strong results and create lasting value for both our customers and our shareholders. Thank you, and operator, we're now ready for questions. Corey | Conference Operator: Thank you very much. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please wait while we compile the Q&A roster. Our first question comes from the line of Hamed Khorasan of BWS Financial. Hamed, your line's open. Hamed Khorasan | Analyst at BWS Financial: Hi. So I just want to start off with your expansion in Glow Fiber. Could you just talk about any competitive pressures at all with the ads that you're seeing? Is it becoming more and more difficult in any way? Ed McKay | Executive Vice President and Chief Operating Officer: No, as far as competitive pressure, we have seen some of the big cable providers change their rate plans. They're offering five-year guarantees in some cases. I think it's too soon to really know the impact of that. But I will say that their price plans are very consistent to our models of having standard, straightforward pricing. So we believe we have opportunity to increase speed. We have a lot more speed availability to us than cable competitors. And we think that speed advantage combined with our local customer service and our network reliability really give us an edge. But for the quarter, we were up 20% on net ads over the second quarter last year. So we're pleased with the growth. Hamed Khorasan | Analyst at BWS Financial: And then on the CapEx side, you talked about accelerating in 26. What drew that decision to do that now versus next year? Ed McKay | Executive Vice President and Chief Operating Officer: It was basically success by our construction team in building the government grant projects. We were able to construct more mileage faster than we expected. So instead of spending the money in 26, we pulled it into 2025. That's the primary driver. Hamed Khorasan | Analyst at BWS Financial: Does that help you with revenue in any way in 26? Because now you've already built it out. Ed McKay | Executive Vice President and Chief Operating Officer: It helps us. As I mentioned, we're seeing rapid penetration on those government grant projects, 45% after one year. So I think pulling the construction forward, having more passings in these government subsidized areas will help us from a subscriber standpoint and therefore revenue standpoint. Hamed Khorasan | Analyst at BWS Financial: And last quick one, why the decision to have guidance all of a sudden in the middle of the year? Jim Volk | Senior Vice President and Chief Financial Officer: Yeah, Ahmed, we just wanted to provide more visibility and transparency over our business, and we thought – you know, providing some annual guidance, not just this year, but in future years as well, would be a good practice to adopt to allow you and other shareholders and potential shareholders more visibility into our business. Hamed Khorasan | Analyst at BWS Financial: Great. Thank you. Corey | Conference Operator: Thank you, Ahmed. Thank you very much. I'm showing no further questions at this time. I would now like to turn it back to Jim Bulk for closing remarks. Jim Volk | Senior Vice President and Chief Financial Officer: I'd just like to thank everyone for joining our call this afternoon, and I wish everyone a good evening. Corey | Conference Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect. jsPDF 3.0.3 D:20260606090426-00'00'