Shenandoah (NASDAQ:SHEN) released first-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below.

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The full earnings call is available at https://edge.media-server.com/mmc/p/7rjdgeuc/

Summary

Shenandoah reported a 4.8% increase in consolidated revenues and a 15% rise in adjusted EBITDA year over year, with Glo Fiber expansion contributing significantly to growth.

The company expanded its Glo Fiber markets with an additional 22,000 passings, totaling 449,000 passings, and added 6,000 net customers, reflecting a 9% growth over the prior year.

Shenandoah anticipates completing its Glo Fiber expansion by 2026, targeting 510,000 total passings, and aims to achieve positive free cash flow by 2027.

The commercial fiber business experienced a 4.7% revenue growth, driven by demand from wireless carriers and school systems, while incumbent broadband markets faced a decline due to customers switching to streaming services.

Management highlighted competitive pressures from Starlink in rural markets but expressed confidence in retaining customers through increased speed offerings and competitive pricing.

Full Transcript

OPERATOR

Good morning everyone. Welcome to Shenandoah Telecommunications first quarter 2026 earnings conference call. Today's conference 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 (VP of Corporate Finance)

Good morning and thank you for joining us. The purpose of today's call is to review Shentel's results for the first quarter 2026. Our results were announced in a press release distributed this morning. In addition, we filed our Form 10Q with the SEC. The presentation we will be reviewing is included on the Investor page on our investor.shentel.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 2 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 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. Good morning everyone and thank you for joining us today. Starting on slide 4, I'll share some of our first quarter highlights. During the quarter we released 22,000 passings, to sales, bringing our total GloFiber expansion markets passings, to 449,000. We added approximately 6,000 Glo fiber net customers in the first quarter, a 9% improvement over the prior year period and we now serve a total of 94,000 customers. Our commercial fiber business also delivered a strong quarter with 196,000 in sales, bookings and revenue growth of 4.7% year over year. Collectively, these results demonstrate the excellent momentum we continue to see in our fiber businesses. We were also pleased with our first quarter financial results. Consolidated revenues and adjusted EBITDA grew 4.8% and 15% year over year respectively and we remain on track to deliver positive free cash flow in 2027. Turning to slide 5, we highlight our integrated broadband network that spans more than 19,000 fiber route miles across eight states with over 700,000 total broadband passings, as shown on the map. All planned GLO fiber markets have now been launched and our primary focus is adding passings, in our existing Virginia, Pennsylvania, Maryland and Ohio markets. We remain on track to complete our GLO fiber expansion in 2026 reaching 510,000 passings, on slide 6. Our sales and marketing team continues to drive strong growth across our GloFiber expansion markets and during the first quarter we added approximately 6,000 new customers and nearly 7,000 total video, voice and data revenue generating units. Our five year price guarantee rate card introduced in the second half of 2025 is gaining traction supported by the expansion of our door to door sales channel. Over the past 12 months we have added more than 23,000 new data customers, more than 26,000 total Revenue Generating Units (RGUs) as well. Total Glo fiber revenue generating units surpassed 110,000 in the first quarter, up 31% compared to the prior year. Moving to slide 7, first quarter construction was strong with over 22,000 passings, added bringing the total to more than 449,000. Coupled with the continued increase in homes, passed penetration rose to 20.9%, a 30 basis point increase over the fourth quarter and 150 basis point increase year over year. Penetration Trends across our Glo fiber cohorts are shown on slide 8 and reflect blended penetration rates for both residential and small and medium business passings,. We are expecting data penetration rates of approximately 37% five to seven years after launching a market and our most mature COHorts launched in 2019 and 2020 have now exceeded this with an average penetration rate of 37.5%. In addition to providing the fastest speeds in our markets, we continue to focus on providing outstanding local customer service as shown on slide 9. Our average monthly churn was 0.92% in the first quarter which continues to be among the best in the industry. Broadband Data Average revenue per user for the first quarter was stable sequentially and year over year at more than $77. We continue to have success selling up the rate card with nearly 82% of our new residential customers in the first quarter, selecting speeds of 1 gig or higher including 18% choosing 2 gig service and 5% choosing 5 gig service. Our commercial fiber business is highlighted on Slide 10. In the first quarter, incremental monthly sales bookings exceeded 196,000 driven by strong demand from wireless carriers, wholesale customers and school systems. Our service Delivery team installed 167,000 in new monthly revenue during the quarter and the acquired Horizon backlog that drove elevated installation activity in 2025 is now substantially complete. Average monthly compression and disconnect churn remained very low at 0.4% in the first quarter, reflecting exceptional support from both our network operations center and sales team. Turning to slide 11, we show our operating results for our incumbent broadband markets. At the end of the first quarter, we served more than 111,000 broadband data customers. Data voice and video Revenue Generating Units (RGUs) totaled more than 156,000 at year end, down 4% year over year, primarily due to video customers moving to online streaming services. Total broadband passings, in our incumbent markets stayed steady compared to the fourth quarter, and we expect to complete 1800 additional government subsidized incumbent grant passings, in 2026, primarily in West Virginia. As shown on Slide 12, the recently constructed subsidized passings, represent a strong growth segment for incumbent markets, with data penetration exceeding 40% within six quarters of a neighborhood launch. Average penetration in our 2023 cohorts is over 52%, with the oldest cohort reaching 71%. We've already achieved an aggregate penetration of 37% across 23,000 subsidized passings,. Moving to Slide 13, monthly broadband data churn was stable sequentially and up modestly year over year at 1.46% for the first quarter. The slight uptick in churn was due to promotional activity from satellite competition in some of our most rural markets without a fixed wireline competitor in these markets, we implemented a speed increase late in the first quarter, providing customers with higher speeds at the same price to better differentiate our service from satellite offerings across approximately a third of our passings,. Where we face another fixed broadband competitor. Our rate card strategy of offering greater value with higher speeds at the same price continues to be effective at mitigating churn. As expected, broadband data ARPU declined 1.6% from a year ago to $82, driven by the addition of new customers with more aggressive pricing in our competitive markets. I'll now turn the call over to Jim to walk you through our first quarter financial results.

Jim Volk (Senior Vice President and Chief Financial Officer)

Thank you, Ed and good morning everyone. I'll start on slide 15 with financial results for the first quarter, revenues grew 4.8% to 92.2 million, driven by another quarter of strong GloFiber expansion. Market revenue growth of 6.4 million, or 34.6% due to a 33.7% increase in data subscribers and stable data. ARPU commercial fiber revenue grew 900,000, or 4.7% year over year, driven primarily by growth among existing customers in the enterprise and carrier verticals. Incumbent broadband markets revenue declined 2.2 million primarily due to lower video revenue from a 14.6% decline in video RGUs as customers switch to streaming video services and to a lesser extent lower data revenues due to a 1.6% decline in data ARPU from a more aggressive rate card in competitive markets. Rural Local Exchange Carrier (RLEC) revenues declined 800,000 primarily due to lower DSL revenue from a 28% decline in DSL revenue RGUs and lower government grant support revenues. Approximately half of the decline in DSL RGUs was due to customer upgrades to our broadband service. Adjusted EBITDA grew 4.1 million or 15% to 31.7 million, driven by 4.3 million in revenue growth and slightly higher operating expenses. Adjusted EBITDA margins increased 300 basis points to 34.4% in the first quarter 2026 as compared to the first quarter 2025 due to a combination of high incremental margins in GloFiber, fewer lower margin video customers and a favorable true up related to a government Grant. Turning to Slide 16, we reiterate our annual guidance for 2026. We expect revenues of 370 to 377 million adjusted EBITDA of 131 to 136 million and CapEx net of grant reimbursements to be 220 to 250 million. Moving to Slide 17, we invested 75.8 million in capital expenditures in the first quarter 2026 and collected 11.5 million in government grants for net CapEx of 64.3 million. CapEx declined 16% compared to the first quarter 2025 due to completing 91% of the incumbent broadband market's government subsidized builds to unserved areas in 2025. We have also completed construction of 88% of our target globe fiber passings as of March 31st and expect to complete the GloFiber expansion by the end of 26. I now like to update you on our liquidity and debt maturities on Slide 18. As of March 31, we had 707 million in outstanding debt and 636 million of net debt. We have no debt maturities until 2029. Total available liquidity was approximately 195 million as of March 31, consisting of 44 million of cash and cash equivalents, 27 million in restricted cash, 18 million available under the VFN, 68 million available under the RCF, and 38 million remaining reimbursements available under government grants. In addition, the company has over 117 million of VFN commitments that are not available to draw. As of March 31, we expect the available VFN capacity to reach the commitment levels with continued growth in the secured fiber network revenues from the ABS entities. In summary, as noted on slide 19, 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 and declining cost of capital after refinancing our debt in 2025. Thank you and operator. We are now ready for questions.

OPERATOR

Thank you. As a reminder 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 questions. Our first question comes from Hamed Corsan with PWS Financial. You may proceed.

Ed McKay (President and Chief Executive Officer)

Good morning. First question is are you seeing any changes or challenges in adding subscribers given the competitive nature that you're talking about in your markets? In our Glo fiber markets, we're not. You know, our net adds were up 9% over the first quarter of 2025. So we're, we're very pleased with our progress there. You know, we did mention in our incumbent markets we did see a little bit of churn to Starlink promotions with some of the promotional offers they launched in the first quarter. But other than that, we're on plan as expected. Okay. And then as far as the change up goes, ending your construction phase and going into more of a subscriber growth phase here, are you going to be increasing marketing expense or is this: Should we expect just Capex to decline and it's just going to be incremental here to cash flow?

Hamed Corsan

Yeah, I would expect marketing expense to be similar and the primary impact will be the decline in capex. Okay, great. Thank you.

OPERATOR

Our next question comes from Christian Schwab with Craig Hallam.

Christian Schwab

You may proceed. Yeah, congratulations on the solid results on your Average Selling Price (ASP) on the GloFiber business and in the recent areas and trends of moving from not just one gig speed or higher at 82% but having people want 2% and 5%. Do you think those trends are sustainable over a multi year period? And do you have any target expectations for customers needs for higher speed at two gigabytes? Excuse me. And above, as your penetration rates go to your target levels on the fiber that's been laid in the last few years, meaning your blended Average Selling Price (ASP) at 77. I think in most markets your 1 gig product is priced around $65. So do you see Average Selling Price (ASP) trends in that business increasing over time or is

Ed McKay (President and Chief Executive Officer)

it too early to tell? I'd say medium term we are offering five year price guarantees on the higher speed tiers, but longer term I think there's opportunity there and we were very pleased with the speed mix in the past quarter. The demand is out there for those higher speeds and we do think that's sustainable going forward. Okay, fantastic. And then on the commercial fiber business, could you just remind us what your growth objectives are there and how you see that market over a multi year timeframe doing for you and the potential for you to add additional subscribers? Well, I'll start and then I'll pass it over to Jim. One opportunity we do see is with data centers moving out to our more rural areas. We think that's an additional opportunity for incremental revenue. We're really not playing in the hyperscaler space today. There have been several data center announcements in our markets. We think we certainly have the opportunity to win our share of those services and that would be additive to our current revenue. And I'll let Jim talk a little about the growth projections.

Jim Volk (Senior Vice President and Chief Financial Officer)

Yeah, Christian, we're generally expecting mid single digit revenue growth rates from the commercial business over like a three or four year period. It's important to note this is a little bit of a lumpy business. Some of the larger deals like what Ed mentioned that we're working on on the hyperscale and some of the carrier business tends to be a little lumpy. But we do have each quarter we're adding more enterprise customers along the way as well. But yeah, we think there's a nice growth opportunity here in the mid single digit growth rates.

Christian Schwab

Great. And then to follow up on the data center, for clarity, can you just remind us of the miles of fiber and the connectivity potential that you have in data center so people can understand maybe potentially a little bit better why data center customers would be coming to you.

Ed McKay (President and Chief Executive Officer)

So 19,000 plus route miles of fiber in total. Our fiber network stretches from Chicago all the way to the Washington D.C. ashburn, Virginia area. We hit major markets in between like Columbus, Ohio, like Pittsburgh, and we have many unique fiber routes. So as these data centers move out further from the metropolitan areas, seeking areas with land and power, we believe we have the opportunity to take advantage of those unique fiber routes that we have and gain some of that business.

Christian Schwab

Can you give us an idea, you know, what the revenue potential would be not this year, but over a multi year time? Frame. Given that trend as data centers move out a little bit away from metro into rural areas, that might want to take advantage of your 19,000 fiber miles. Can you give us an idea of the revenue potential? Not an estimate, but, you know, maybe an aspiration or goal that you guys may have for that market?

Jim Volk (Senior Vice President and Chief Financial Officer)

Yeah, Christian, I think it would be a little premature to get into revenue expectations. But I can tell you there is about 20 data centers being either built or being built close to our fiber in, in the eight states that we operate in. So not clear to me whether all of them are actually going to get built. But if they do get built, we think we're in, in a prime position to win some business here. Great.

Christian Schwab

Fantastic. No other questions. Thank you.

OPERATOR

Thank you. And as a reminder to ask a question, please press Star one one on your telephone. Our next question comes from Vikash Harlaka with New Street Research.

Vikash Harlaka

Hi. Thanks so much for taking my question. There's a lot of concern among broadband investor base around pricing power and broadband ARPU growth for the industry. Do you think the broadband businesses have pricing power today or are we entering a period of deflation for the business? And then I have a follow up.

Ed McKay (President and Chief Executive Officer)

So I'll say in our Glo Fiber business, we're expecting fairly flat ARPU in the near term. I think over time we do gain that pricing power. And in our incumbent business we mentioned earlier, you know, as we've seen some competition in our markets, you know, we have seen a slight decline in, in ARPU there. So it's a, I think it's a bit of a bit of a mix depending on which business you're looking at.

Jim Volk (Senior Vice President and Chief Financial Officer)

Got it. If I could add to that, in our incumbent business, about 2/3 of the passings, we are the only fixed wireline provider. So we do think we have some pricing power there as well.

Vikash Harlaka

Got it. That's helpful. And then I just wanted to go back to your comment about increased competition from Starling during the quarter. It sounds like the competition was mainly because Starlink had some promotions. And so did you lose customers on the growth outside or churn or both? And do you see this competition as continuing from here and if so, what's your plan on addressing this increased competition? Thank you.

Ed McKay (President and Chief Executive Officer)

So we only saw the impact in the most rural areas of our incumbent broadband market. We saw really no impact in Glo Fiber and no impact in the majority of our incumbent passings. So what they started offering in the first quarter was $15 off for four months as a promotion. But I think the biggest factor was they offered free equipment. It was previously $350, you know, so we'll see how long this, this lasts. You know, they could be offering these promotions, you know, in preparation for a potential IPO later this year. But we have the ability to increase speeds, so we've done that. Late in the first quarter, we increased speed significantly in our rural incumbent areas. Most of those customers that left were on legacy rate cards. So we've given those customers more value for the same price and we think that will help mitigate it.

Vikash Harlaka

Very helpful. Thanks so much.

Ed McKay (President and Chief Executive Officer)

Thank you.

OPERATOR

Thank you. Our next question comes from Christian Schwab with Craig Hallam.

Christian Schwab

Yeah, just a quick follow up on that. Just on the Starlink promotion in your most rural markets, these are very slow speeds? Can you just quantify a little bit more clarity around your commentary to compete with Starlink, how you increased, give us an idea of what speed you were operating at to what speed you can move customers to compete with Starlink, because this really is in the competition for fiber at 1, 2 and 5-gig speeds.

Jim Volk (Senior Vice President and Chief Financial Officer)

Yeah. So in all of these markets, we have the ability to offer gigabit speeds. And I think it was a, customers were looking for a potentially lower priced alternative. But when you compare our, our pricing to Starlink's pricing after that promotional discount expires, we're actually favorable from a pricing standpoint and a speed standpoint. So we'll see how long these customers stay on Starlink. We certainly think we have the opportunity to win some of those back as well.

Christian Schwab

Okay. Thanks for the clarity. You're welcome. Thank you.

OPERATOR

Thank you. I would now like to turn the call back over to Ed McKay for any closing remarks.

Ed McKay (President and Chief Executive Officer)

Thank you for joining us today. We look forward to updating you on our progress in future quarters. And operator, that concludes our call.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.