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Date

Thursday, July 31, 2025, at 4:30 p.m. ET

Call participants

  • President and Chief Executive Officer (current, through Aug. 31) — Christopher E. French
  • Executive Vice President and Chief Operating Officer; Incoming President and Chief Executive Officer (effective Sept. 1) — Edward H. McKay
  • Senior Vice President and Chief Financial Officer — James J. Volk
  • Vice President, Investor Relations — Lucas Binder

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Takeaways

  • Executive Leadership Transition— Edward H. McKay will become President and CEO on September 1, with Christopher E. French moving to Executive Chairman, as a result of a planned succession process.
  • Revenue— $88.6 million, driven by Glo Fiber revenue growth.
  • Glo Fiber Revenue— $19.8 million, increasing 40.5% compared to Q2 2024.
  • Glo Fiber Subscribers— 5,700 new Glo Fiber subscriber additions, lifting total subscribers to over 76,000.
  • Total Broadband Passings— Approximately 623,000 homes and businesses with broadband services, with Glo Fiber representing 61% of broadband passings.
  • Glo Fiber Passings— 16,000 Glo Fiber passings added; nearly 380,000 total passings achieved.
  • Original Broadband Market Revenue— $1.4 million decline in incumbent broadband markets revenue, primarily due to a 15% fall in video RGUs from customer migration to streaming services.
  • Commercial Fiber Revenue— $1.2 million decrease in commercial fiber revenue for Q2 2025, reflecting $900,000 in one-time early termination fees in 2024 and $800,000 noncash deferred revenue adjustment; underlying growth was 2.7% for commercial fiber revenue when excluding these effects.
  • Adjusted EBITDA— Adjusted EBITDA was $28.4 million, a rise of $5.1 million or 21.9% in adjusted EBITDA, aided by $2.4 million in lower operating expenses.
  • Adjusted EBITDA Margin— Adjusted EBITDA margin increased to 32% from 27% in Q2 2024, due to high Glo Fiber incremental margins and realized acquisition synergies.
  • Glo Fiber Incremental Margin— 71% compared to Q2 2024.
  • Annual Guidance Initiated— Revenue projected at $352 million–$357 million, adjusted EBITDA at $113 million–$118 million, and CapEx (net of grants) is expected to be $260 million–$290 million.
  • Capital Expenditures (YTD)— full-year CapEx outlook raised slightly to reflect accelerated grant projects and network upgrades.
  • Liquidity— $260 million in liquidity, comprised of $29 million in cash, $143 million available revolver, and $95 million in remaining government grant reimbursements.
  • Outstanding Debt— $513 million of outstanding debt, with the first significant maturity scheduled for July 2027.
  • Fiber Network Expansion— Over 500 new route miles of fiber constructed, a company record.
  • Broadband Data Penetration (Glo Fiber Markets)— Increased to 20%.
  • Monthly Data Churn (Glo Fiber)— Improved to 1.15%.
  • Average Revenue Per User (Glo Fiber Data)— Approximately $77, 53% of new subscribers selected one gig or higher speeds.
  • Commercial Fiber New Sales Bookings— $203,000 in incremental monthly revenue booked, up 32% year over year.
  • Backlog (Commercial Fiber)— $493,000 in monthly revenue awaiting installation.
  • Recent Acquisition— Closed and integrated a $5 million tuck-in acquisition in Blacksburg, Virginia, adding 1,500 passings and about 700 customers; purchase price reflects about 8x projected 2026 pro forma adjusted EBITDA after synergies.

Summary

Shenandoah Telecommunications (SHEN -2.18%) delivered a quarter marked by the formal announcement of a CEO transition and the company’s first release of annual financial guidance. Management disclosed a record pace of fiber network expansion, including accelerated construction driven by faster-than-anticipated completion of government-subsidized projects. The Glo Fiber business achieved rapid customer growth and margin expansion, positioning it to overtake legacy operations in revenue contribution by 2026.

  • French said, "We expect Glo Fiber residential and commercial fiber revenues to be larger than our incumbent revenues in 2026," signaling a revenue mix shift within the business.
  • McKay clarified that the uptick in 2025 capital expenditures results from the construction team’s faster-than-planned execution on government projects, advancing broadband passings and related revenue opportunities into 2025 and 2026.
  • Management introduced formal financial guidance to provide "more visibility and transparency" to investors, with a stated intention to continue the practice in future years.
  • McKay reported that churn in commercial fiber remained "very low at 0.4%".

Industry glossary

  • Glo Fiber: Shenandoah Telecommunications Company's all-fiber broadband product line serving residential and commercial customers.
  • Passings: Homes and businesses passed by the company’s network infrastructure and eligible to receive service.
  • RGU: Revenue-generating unit, defined as a subscription or account that brings in recurring revenue (typically data, voice, or video for the company’s service lines).
  • Incremental Margin: The additional profit earned from each unit of new revenue, reflecting operating leverage from fixed-network costs.

Full Conference Call Transcript

Lucas Binder: Thank you very much, Corey. Good afternoon, and thank you for joining us. The purpose of today's call is to review Shenandoah Telecommunications Company's results for 2025Q2. 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.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 Christopher E. French, President and Chief Executive Officer; Edward H. McKay, Executive Vice President and Chief Operating Officer; and James J.

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 reminds 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 Christopher E. French. Go ahead, Chris.

Christopher E. French: 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, Edward H. 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 1. 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 fiber-first 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 the senior management team, and I'm 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 Glo Fiber subscribers and over 16,000 new Glo Fiber passings. Glo Fiber revenues grew 40.5% over the same period in 2024 to $19.8 million. Our results build on the evolution of Glo 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 of quarters to install and convert these sales into revenue, sales bookings are an early indicator of future growth. Combined, we expect Glo 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 James J. Volk to review the details of our financial results.

James J. Volk: 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 strong Glo Fiber markets revenue growth of $5.7 million or 40.5%, driven by an increase in subscribers. The Glo 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 market's revenue decline was primarily due to a 15% decline in video RGUs, due to customers switching to streaming video services.

The commercial fiber revenue decline was primarily due to $900,000 in early termination fees received in 2024 and $800,000 in noncash deferred revenue adjustments for one of our national wireless carrier customers. Excluding these variances, commercial fiber revenue grew 2.7% over the same period in 2024. In the second quarter, we executed a new agreement with the national wireless carrier customer that combined the legacy Shenandoah Telecommunications Company and Horizon backhaul circuits under one service level agreement, extended legacy Shenandoah Telecommunications Company service maturities to 2031 to align with the former Horizon circuit maturities, and reduced the pricing of the former Horizon circuit 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 or 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 Glo 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 Glo Fiber incremental margin was 71% in the second quarter of 2025 when compared to the second quarter of 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 million to $357 million and adjusted EBITDA to be $113 million to $118 million. CapEx, 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 eight.

Liquidity was $260 million on June 30, 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 Glo Fiber market. We acquired this business for $5 million. After CapEx and OpEx synergies, the implied purchase price multiple is about 8x 2026 pro forma adjusted EBITDA. And now I'll turn the call over to Edward H. McKay.

Edward H. McKay: 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 team set a new record by constructing over 500 new route miles of fiber. This included 16,000 new Glo 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 Glo Fiber represents about 61% of these passings. As highlighted on slide 11, our sales and marketing team continues to drive growth in our Glo Fiber 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 Glo Fiber subscribers. Our total Glo Fiber revenue-generating units reached 90,000 at the end of the quarter, up 40% year over year. Broadband data penetration in our Glo 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% who opted for speeds of two gig or higher. As shown on slide 12, growth in our Glo 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, up 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 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 support to our commercial customers, and our average monthly compression and disconnect churn remained 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, we expect capital investments to be in the $260 million to $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 Shenandoah Telecommunications Company 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 Shenandoah Telecommunications Company 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 Glo Fiber, 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.

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 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please wait while we compile the Q&A roster. Our first question comes from the line of Hamed Khorsand of BWS Financial. Hamed, your line is open.

Hamed Khorsand: Hi. So I just want to start off with your expansion in Glo 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?

Edward H. McKay: 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 with our models of having standard, straightforward pricing. So we believe we have the opportunity to increase speed. We have a lot more speed availability to us than cable contenders. 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 Khorsand: And then on the CapEx side, you talked about accelerating in 2025. So what drew that decision to do that now versus next year?

Edward H. McKay: Yeah. It was basically success by our construction team in building the government 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 Khorsand: Does that help you with the revenue in any way in '26 because now you've already built it out?

Edward H. McKay: 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 Khorsand: And last quick one. Why the decision to have guidance all of a sudden in the middle of the year?

James J. Volk: Yes, Hamed, we just wanted to provide more visibility and transparency over our business. And we thought 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 Khorsand: Great. Thank you.

James J. Volk: Thank you, Hamed.

Operator: Thank you very much. I'm showing no further questions at this time. I would now like to turn it back to James J. Volk for closing remarks.

James J. Volk: I'd just like to thank everyone for joining our call this afternoon, and I wish everyone a good evening.

Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.