Shenandoah Telecommunications (Shentel) Q1 2026 Earnings Call - Glo Fiber Expansion Hits 449K Passings, EBITDA Jumps 15% as Construction Phase Winds Down

Conference Moderator, Conference Operator, Shenandoah Telecommunications: 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 Binder, VP of Corporate Finance for Shentel.

Lucas Binder, Vice President of Corporate Finance, Shenandoah Telecommunications: Good morning, and thank you for joining us. The purpose of today’s call is to review Shentel’s results for the first quarter of 2026. Our results were announced in a press release distributed this morning. In addition, we filed our Form 10-Q 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 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. 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, Shenandoah Telecommunications: Thanks, Lucas. Good morning, everyone. 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 Glo Fiber 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. 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. 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 8 states with over 700,000 total broadband passings. As shown on the map, all planned Glo Fiber markets have now been launched. 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 Glo Fiber 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 5-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 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 a 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% 5 to 7 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 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 1,800 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 our incumbent markets, with data penetration exceeding 40% within 6 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 in 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, Shenandoah Telecommunications: Thank you, Ed. 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 Glo Fiber 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 switched 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. RLEC revenues declined $800,000, primarily due to lower DSL revenue from a 28% decline in DSL 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 of 2026 as compared to the first quarter of 2025 due to a combination of high incremental margins in Glo Fiber, 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 million-$377 million, adjusted EBITDA of $131 million-$136 million, and CapEx net of grant reimbursements to be $220 million-$250 million.

Moving to slide 17, we invested $75.8 million in capital expenditures in the first quarter of 2026 and collected $11.5 million in government grants for net CapEx of $64.3 million. CapEx declined 16% compared to the first quarter of 2025 due to completing 91% of the incumbent broadband markets government subsidized builds to unserved areas in 2025. We have also completed construction of 88% of our target Glo Fiber passings as of March 31st and expect to complete the Glo Fiber expansion by the end of 2026. I’d now like to update you on our liquidity and debt maturities on slide 18. As of March 31st, 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 31st, 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 31st. 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. Operator, we are now ready for questions.

Conference Moderator, Conference Operator, Shenandoah Telecommunications: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for questions. Our first question comes from Hamed Khorsand with BWS Financial. You may proceed.

Hamed Khorsand, Analyst, BWS Financial: Hey, good morning. First question is, are you seeing any changes or, you know, challenges in adding subscribers given the competitive nature that you’re talking about in your markets?

Ed McKay, President and Chief Executive Officer, Shenandoah Telecommunications: In our Glo Fiber markets, we’re not. You know, our net adds were up 9% over the first quarter of 2025. 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 with some of the promotional offers they launched in the first quarter. Other than that, we’re on plan as expected.

Hamed Khorsand, Analyst, BWS Financial: Okay. As far as the changeup goes, you know, you know, ending your construction phase and going into more of a subscriber growth phase here, are you going to be increasing marketing expense, or should we expect just CapEx to decline, and it’s just gonna be incremental here to cash flow?

Ed McKay, President and Chief Executive Officer, Shenandoah Telecommunications: I would expect marketing expense to be similar, and the primary impact will be the decline in CapEx.

Hamed Khorsand, Analyst, BWS Financial: Okay, great. Thank you.

Ed McKay, President and Chief Executive Officer, Shenandoah Telecommunications: Thank you.

Hamed Khorsand, Analyst, BWS Financial: Thanks.

Conference Moderator, Conference Operator, Shenandoah Telecommunications: Our next question comes from Christian Schwab with Craig-Hallum. You may proceed.

Christian Schwab, Analyst, Craig-Hallum: Yeah. Congratulations on the solid results. On your ASP on the Glo Fiber business, and in the recent areas and trends of moving, you know, from not just 1 gig speed or higher at 82%, but having people want 2% and 5%, do you think those trends are sustainable over a multiyear period? Do you have any target expectations for customers’ needs for higher speeds at, you know, 2 gigabits-- 2 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, you know, your blended ASP at 77, I think in most markets, your 1 gig product is, you know, priced around $65.

Do you see ASP trends in that business, increasing over time, or is it too early to tell?

Ed McKay, President and Chief Executive Officer, Shenandoah Telecommunications: I’d say, you know, medium term, you know, we are offering 5-year price guarantees on the higher speed tiers. But, you know, longer term, I think there’s opportunity there. We were very pleased with the speed mix in the past quarter. You know, the demand is out there for those higher speeds, and we do think that’s sustainable going forward.

Christian Schwab, Analyst, Craig-Hallum: Okay, fantastic. 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 multiyear timeframe doing for you and the potential for you to add additional subscribers?

Ed McKay, President and Chief Executive Officer, Shenandoah Telecommunications: Well, I’ll start and then I’ll pass it over to Jim. You know, one opportunity we do see is with the data centers moving out to our more rural areas. We think that’s an additional opportunity for incremental revenue. You know, we’re really not playing in the hyperscaler space today. There have been several data center announcements in our markets. You know, we think we certainly have the opportunity to win our share of those services, and that would be additive to our current revenue. I’ll let Jim talk a little about the growth projections.

Jim Volk, Senior Vice President and Chief Financial Officer, Shenandoah Telecommunications: Yeah, Christian, we’re generally expecting mid-single digit revenue growth rates from the commercial business over like a 3 or 4, you know, 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, you know, that we’re working on the hyperscalers and some of the carrier business tends to be a little lumpy. We do have, you know, each quarter, we’re adding more enterprise customers along the way as well. Yeah, we think there’s a nice growth opportunity here in the mid-single digit growth rates.

Christian Schwab, Analyst, Craig-Hallum: Great. In a follow-up on the data center for clarity, can you just remind us of the miles of fiber that you have and the connectivity potential that you have in data center? 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, Shenandoah Telecommunications: 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. We have many unique fiber routes. 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 advantages of those unique fiber routes that we have and gain some of that business.

Christian Schwab, Analyst, Craig-Hallum: Can you give us an idea, you know, what the revenue potential would be, not this year, but over a multiyear timeframe, 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?

Ed McKay, President and Chief Executive Officer, Shenandoah Telecommunications: Yeah.

Jim Volk, Senior Vice President and Chief Financial Officer, Shenandoah Telecommunications: Yeah, Christian, I think it would be a little premature to get into revenue expectations. I can tell you there is about 20 data centers being either built or built close to our fiber in the 8 states that we operate in. Not clear to me whether all of them are actually gonna get built. If they do get built, we think we’re in a prime position to win some business here.

Christian Schwab, Analyst, Craig-Hallum: Great. Fantastic. No other questions. Thank you.

Conference Moderator, Conference Operator, Shenandoah Telecommunications: Thank you. As a reminder, to ask a question, please press star one one on your telephone. Our next question comes from Vikash Harlalka with Neem Tree Research. You may proceed.

Vikash Harlalka, Analyst, Neem Tree Research: 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 that broadband businesses have pricing power today, or are we entering a period of deflation for the business? I have a follow-up.

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

Vikash Harlalka, Analyst, Neem Tree Research: Got it.

Jim Volk, Senior Vice President and Chief Financial Officer, Shenandoah Telecommunications: Yeah, Vikash, if I could add to that. In our incumbent business, about two-thirds of the passings, we are the only fixed wireline provider. We do think we have some pricing power there as well.

Vikash Harlalka, Analyst, Neem Tree Research: Got it. That’s helpful. I just wanted to go back to your comment about increased competition from Starlink during the quarter. It sounds like the competition was mainly because Starlink had some promotions. Did you lose customers on the growth side or churn or both? Do you see this competition as continuing from here? If so, what’s your plan on addressing this increased competition? Thank you.

Ed McKay, President and Chief Executive Officer, Shenandoah Telecommunications: We only saw the impact in the most rural areas of our incumbents, broadband market. We saw really no impact in Glo Fiber and no impact in the majority of our incumbent passings. What they started offering in the first quarter was $15 off for 4 months as a promotion. I think the biggest factor was they offered free equipment. It was previously $350. You know, so we’ll see how long this lasts. You know, they could be offering these promotions, you know, in preparation for a potential IPO later this year. We have the ability to increase speeds, so we’ve done that. Late in the first quarter, we increased speeds significantly in our, you know, rural incumbent, you know, areas.

Most of those customers that left were on legacy rate cards. We’ve given those customers more value for the same price, and we think that will help mitigate it.

Vikash Harlalka, Analyst, Neem Tree Research: Very helpful. Thanks so much.

Ed McKay, President and Chief Executive Officer, Shenandoah Telecommunications: Thank you.

Conference Moderator, Conference Operator, Shenandoah Telecommunications: Thank you. Our next question comes from Christian Schwab with Craig-Hallum. You may proceed.

Christian Schwab, Analyst, Craig-Hallum: 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, you know, quantify a little bit more clarity around your commentary, you know, 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? ’Cause this really isn’t a competition for fiber at 1, 2, and 5 gig speeds.

Ed McKay, President and Chief Executive Officer, Shenandoah Telecommunications: Yeah. In all of these markets, we have the ability to offer gigabit speeds. You know, I think it was, you know, customers were looking for, you know, potentially lower priced alternative. When you compare our pricing to Starlink’s pricing, after that promotional discount expires, we’re actually favorable from a pricing standpoint and a speed standpoint. We’ll see how long these customers, you know, stay on Starlink. You know, we certainly think we have the opportunity to win some of those back as well.

Christian Schwab, Analyst, Craig-Hallum: Okay. Thanks for the clarity.

Ed McKay, President and Chief Executive Officer, Shenandoah Telecommunications: You’re welcome. Thank you.

Conference Moderator, Conference Operator, Shenandoah Telecommunications: 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, Shenandoah Telecommunications: Thank you for joining us today. We look forward to updating you on our progress in the future quarters. Operator, that concludes our call.

Conference Moderator, Conference Operator, Shenandoah Telecommunications: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.