Shenandoah Telecommunications Company Q4 FY2025 earnings call

Key Points - Continued execution on Fiber First strategy with strong growth in glow fiber and commercial fiber, fiber-based lines of business surpassed incumbent broadband revenue in Q4 2025. - Focused on four strategic pillars, completed fiber network expansion, aiming for positive free cash flow in 2027. - At year-end 2025, passed ~427,000 homes and businesses in low-fiber expansion markets, government subsidized passings doubled to 22,000. - Glow fiber data RGU's grew 35% in 2025. Successfully refinanced debt with ABS financing saving ~170 basis points in cash interest expense. - Integrated broadband network spans over 19,000 fiber route miles across 8 states with over 679,000 total broadband passings. - In Q4, 26,000 low-fiber passings completed, penetration flat quarter over quarter but up 1.8 percentage points year over year. - Net Promoter Score Customer Satisfaction Survey score of 61, low churn with average monthly churn 1.01% in Q4 and 1.07% for full year 2025. - Broadband data ARPU increased to over $77 in Q4, new promotional rate plans introduced. - Operating performance in incumbent broadband markets: ~112,000 broadband data customers, data voice and video RGUs down 3% year over year. - Commercial fiber business had incremental monthly bookings in line with prior year, second half bookings up almost 9% compared to second half 2024. - Recently announced 10% workforce reduction to align staffing with Glow Fiber construction phase completion, expecting $3.1 million in restructuring costs and $12.3 million annual savings starting 2027.

Fourth quarter revenues grew 7.2% to $91.6 million. Low fiber expansion market revenue grew $6.5 million (39%) due to 37% increase in data subscribers and 2% increase in data ARPU. Commercial fiber revenue grew $2 million (10.8%). Incumbent broadband markets revenue declined $1.7 million due to lower video and data revenues. RLEC revenue declined $500,000 due to lower DSL RGUs. Adjusted EBITDA grew $8 million (31.3%) to $33.5 million. Glow fiber data RGU's grew 35% in 2025 to 88,000. Government subsidized passings in government broadband markets more than doubled year over year to 22,000. Fourth quarter added 5,300 new customers and over 6,000 total data, video, and voice revenue generating units. Full year 2025 added ~23,000 new customers and 26,000 total RGUs. Total Glow Fiber revenue generating units surpassed 103,000 by year end. Incumbent broadband markets ended 2025 with ~112,000 broadband data customers. Commercial fiber business had incremental monthly bookings exceeding $155,000 in fourth quarter.

Guidance - 2026 revenues expected $370 to $377 million (4.4% growth midpoint). - Adjusted EBITDA expected $131 million to $136 million (12.1% growth midpoint). - 2026 CapEx net of grant reimbursements expected $220 to $250 million (21% decline midpoint). - Capital intensity trending down, from 91% in 2024 to 83% in 2025 and range 59 to 67% in 2026. - Expect adjusted EBITDA margin to decline slightly in first half of 2026 then expand in second half.

Risks - Rising aerial make ready costs in some areas led to decision to pass on investments in certain Ohio markets where return on investment couldn't meet hurdle rate of 15%. - Competition could impact ARPU and market share, such as recent price increase by a large cable competitor on five-year guarantee plan. - Dependence on government grants for construction in certain markets, any issues with grant obligations could impact expansion plans. - Churn risk if customer service standards decline, although current churn is low.

Q&A - Q: About markets decided not to enter in Ohio, how much CapEx to save and if it affects 2026 CapEx?

A: CapEx per passing ~$1,400, mainly construction labor now ~$1,000 per passing, markets passed on due to return on investment issue, affects 2026 CapEx. - Q: From competitive standpoint, any step down since introducing five-year guarantee?

A: Recently a large cable competitor increased prices on five-year guarantee, otherwise no significant changes since launch. - Q: How fast for residential customers to sign up?

A: Residential customers ramp to target penetration rate 5 to 7 years after market launch. - Q: Why offer five-year price guarantee plan and impact on ARPU?

A: In response to competition, initially saw impact on gross ads but mitigated after own launch, expect short-term ARPU decline ~1% over next few quarters then stabilize. - Q: Thoughts on M&A, characteristics of potential targets?

A: Focused on completing build plan now, future M&A interested in pure play fiber providers, less in cable or copper providers.