Shenandoah Telecommunications Q2 Earnings Call Highlights

Key Points

• Second-quarter results improved: Revenue rose 5.5% year over year to $93.5 million, while adjusted EBITDA increased 12.9% to $32 million, lifting the margin to 34.3%.
• Fiber became the company’s largest revenue engine: Fiber revenue grew 21.4% and exceeded half of total revenue for the first time. Glo Fiber added a record 6,200 customers, surpassing 100,000 data customers, while total passings exceeded 475,000.
• 2026 outlook was reaffirmed: Shentel maintained revenue guidance of $370 million to $377 million, adjusted EBITDA guidance of $131 million to $136 million, and net capital expenditure guidance of $220 million to $250 million. Management expects positive free cash flow in 2027 as fiber construction winds down.

Shenandoah Telecommunications NASDAQ: SHEN reported second-quarter revenue growth and higher adjusted EBITDA as its Glo Fiber expansion and commercial fiber operations continued to gain scale, with fiber businesses accounting for more than half of consolidated revenue for the first time.

Revenue rose 5.5% from a year earlier to $93.5 million, while adjusted EBITDA increased 12.9% to $32 million. Adjusted EBITDA margin expanded 200 basis points year over year to 34.3%.

President and Chief Executive Officer Ed McKay said the quarter included several milestones for the company’s fiber-first strategy. Glo Fiber added a record 6,200 net data customers during the quarter and surpassed 100,000 data customers, a 31.3% increase from the prior year. Total Glo Fiber revenue-generating units exceeded 117,000, up 30% year over year.

Fiber Revenue Surpasses Legacy Businesses

Fiber revenue, which includes Glo Fiber and commercial fiber operations, climbed 21.4% year over year and represented 51% of total second-quarter revenue. It was the first quarter in which fiber revenue exceeded the combined revenue from the company’s incumbent broadband markets and rural local exchange carrier, or RLEC, business.

Glo Fiber expansion-market revenue increased $6.5 million, or 32.8%, driven by subscriber growth and stable year-over-year data average revenue per user, according to Chief Financial Officer Jim Volk. Commercial fiber revenue increased $1.9 million, or 9.8%, aided by recurring revenue gains in enterprise and carrier customer segments, as well as certain non-cash items.

Meanwhile, incumbent broadband-market revenue declined $2.5 million, largely due to lower video revenue as customers continued shifting to streaming services. Video revenue-generating units fell 14.1% year over year, while incumbent broadband data ARPU declined 2.6% to $81. RLEC revenue declined by $1 million, primarily reflecting lower DSL revenue and reduced government grant-support revenue.

McKay said the company’s Glo Fiber construction added more than 26,000 passings in the second quarter, bringing its total Glo Fiber passings to more than 475,000. Shentel expects to substantially complete its Glo Fiber expansion in 2026, reaching approximately 510,000 passings. It ended the quarter with roughly 730,000 total broadband passings across eight states and more than 19,800 fiber route miles.

Customer Growth, Churn and Pricing

Glo Fiber penetration reached 21.1% during the quarter, up 20 basis points sequentially and 93 basis points from a year earlier. The company expects data penetration of about 37% five to seven years after entering a market. Its most mature Glo Fiber cohorts, launched through the third quarter of 2021, averaged 35% penetration after surpassing the five-year mark.

Glo Fiber monthly churn averaged 1.21% in the second quarter. McKay said nearly half of churn, or about 59 basis points, reflected customers relocating. He added that the company saw virtually no Glo Fiber churn to satellite providers.

More than 80% of new residential Glo Fiber customers selected speeds of one gigabit or higher during the quarter. That included nearly 19% choosing two-gig service and almost 5% selecting five-gig service. Glo Fiber broadband data ARPU was just under $77, down slightly year over year.

In incumbent markets, monthly broadband data churn rose modestly to 1.73%, which management attributed to seasonal moving activity, wired competition in about 35% of passings, and weaker demand in some rural markets. The company introduced a new rural-market rate card late in the first quarter, which reduced ARPU by an additional 1.6% but improved satellite-related churn, McKay said.

During the question-and-answer session, McKay said satellite providers had reduced some aggressive promotions, including free equipment offers and lower introductory pricing. He said those changes, together with Shentel’s new pricing, contributed to lower satellite-related churn in the second quarter and further improvement in June.

Commercial Fiber and Data Center Opportunity

Commercial fiber incremental monthly sales bookings exceeded $180,000 in the second quarter, while service delivery installations added $209,000 in new monthly revenue. The business served demand from commercial and enterprise customers, including wireless carriers, wholesale customers and school systems. Average monthly compression and disconnect churn in commercial fiber was 0.4%.

McKay said Shentel has added resources to its commercial and small-to-medium business sales efforts. He also pointed to potential data center demand near major hubs in Ashburn, Virginia, and Columbus, Ohio.

While the company had no specific data center customer developments to report, McKay said it has a master service agreement with a major hyperscaler that could enable future purchases of services. He said Shentel’s existing fiber and conduit near some data centers could allow it to provide services with less capital investment than some competitors.

Guidance, Capital Spending and Liquidity

Shentel reiterated its full-year 2026 guidance:

• Revenue of $370 million to $377 million
• Adjusted EBITDA of $131 million to $136 million
• Capital expenditures, net of government grant reimbursements, of $220 million to $250 million

Volk said second-half revenue and adjusted EBITDA should benefit from continued high-margin Glo Fiber growth and lower operating expenses from a previously announced reduction in force.

The company invested $146 million in capital expenditures during the first half of 2026 and collected $20 million in government grants, resulting in net capital expenditures of $126 million, down 18% from the first half of 2025. Construction was complete for 95% of subsidized passings and 93% of targeted Glo Fiber passings as of June 30.

Shentel ended the quarter with $728 million of outstanding debt and $674 million of net debt. Total available liquidity was $159 million, and the company said it has no debt maturities until 2029. Volk said 78% of debt was fixed rate.

Management said it expects to begin generating positive free cash flow in 2027 as fiber-driven EBITDA growth combines with declining capital intensity after construction projects are completed. McKay also said the company expects EBITDA margins to expand by 300 to 400 basis points annually over the next several years, with visibility to reaching a 40% consolidated margin within a couple of years.

About Shenandoah Telecommunications (NASDAQ:SHEN)

Shenandoah Telecommunications Company operates as a diversified communications provider offering both wireless and wireline services across rural markets in the Mid-Atlantic region. Headquartered in Edinburg, Virginia, the company designs, builds and maintains network infrastructure to deliver mobile connectivity, high-speed broadband access and related telecommunications solutions to residential, business and wholesale customers.

In its wireless segment, the company owns and operates a portfolio of cellular towers and associated spectrum under a long-term partnership with a national carrier.

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