Shenandoah Telecommunications Company Q2 FY2026 earnings call

• Fiber Deployment and Customer Growth

  • Achieved a record 6,200 net Glowfiber customer additions in Q2 2026, surpassing 100,000 total Glowfiber data customers for 31.3% year-over-year growth.
  • The full network spans over 19,800 fiber route miles across 8 states, with ~730,000 total broadband passings. 93% of target Glowfiber passings are complete, and the company remains on track to reach 510,000 total Glowfiber passings by the end of 2026, when the full build is expected to be substantially complete.
  • Glowfiber total revenue generating units (RGUs) reached over 117,000, up 30% year-over-year, with data penetration rising to 21.1% (up 93 basis points year-over-year). Mature Glowfiber cohorts average 35% penetration, putting the company on track to hit its 37% 5-7 year penetration target.
  • Commercial fiber had incremental monthly sales bookings over 180,000, with 209,000 in new installed monthly revenue and very low churn of 0.4%.

• Customer Retention and Product Strategy

  • Glowfiber average monthly churn was 1.21% (among the best in the industry), with nearly half of churn driven by customer relocations; virtually no churn from satellite competition was recorded this quarter.
  • Over 80% of new residential Glowfiber customers select 1Gbps or faster speeds, including 19% choosing 2Gbps and 5% choosing 5Gbps service. Broadband ARPU was just under $77, slightly down sequentially and year-over-year.
  • For incumbent rural markets, a new lower-priced rate card introduced in Q1 2026 has already reduced satellite-related churn, and management expects it to drive higher subscriber growth and further retention improvements over time.
  • Incumbent subsidized fiber passings have exceeded 40% aggregate penetration, with 2023 cohorts averaging over 59% penetration and the oldest cohort reaching 72%. 95% of all subsidized fiber passings are complete as of Q2 end.

• Financial and Strategic Positioning

  • The company's Fiber First strategy, initiated in 2019, has driven sustained fiber growth, with a strategic geographic advantage from proximity to major data center hubs in Ashburn, VA and Columbus, OH.
  • As of Q2 end, the company has 78% fixed-rate debt, no debt maturities until 2029, and total available liquidity of $159 million. Management expects to reach positive and growing free cash flow starting in 2027.

Consolidated total revenue for Q2 2026 was $93.5 million, a 5.5% year-over-year increase. Adjusted EBITDA was $32 million, up 12.9% year-over-year, with an adjusted EBITDA margin of 34.3% (up 200 basis points year-over-year).

1. Combined Fiber (Glowfiber + Commercial Fiber): Revenue grew 21.4% year-over-year, reaching 51% of consolidated revenue (the first time fiber exceeded the combined revenue of other segments). Glowfiber expansion market revenue grew 32.8% year-over-year ($6.5 million increase), driven by 31.3% growth in data subscribers. Commercial fiber revenue grew 9.8% year-over-year ($1.9 million increase), supported by recurring enterprise and carrier vertical growth.
2. Incumbent Broadband: Revenue declined $2.5 million year-over-year, driven by a 14.1% drop in video revenue generating units (RGUs) from industry-wide streaming shifts and a 2.6% decline in data ARPU.
3. Arlec: Revenue declined $1 million year-over-year, primarily due to a 31% drop in DSL RGUs (half of which transferred to Shentel's own fiber broadband) and lower government grant support revenue.

• Management reaffirmed its full-year 2026 guidance with no revisions: total revenue is expected to be $370 to $377 million, adjusted EBITDA is expected to be $131 to $136 million, and net capital expenditures (after government grant reimbursements) are expected to be $220 to $250 million.
• Management confirmed the long-term margin target remains 40% consolidated EBITDA margin within the next couple of years, with a long-term target of 50% margin. 300 to 400 basis points of annual margin growth is expected over the next two years.
• Both Glowfiber expansion and all subsidized fiber construction are expected to be substantially complete by the end of 2026.

• Wired broadband competition impacts roughly 35% of the incumbent broadband passings, contributing to modestly elevated churn and requiring competitive pricing that has reduced ARPU.
• Persistent inflation has put pressure on household budgets in rural incumbent markets, leading to softer demand and modestly higher churn in those areas.
• Satellite competition has historically impacted churn in rural incumbent markets, though this impact declined significantly in Q2 2026 after new pricing adjustments and reduced satellite promotional activity.

Q: An analyst asks for an update on the potential data center opportunity in Shentel's footprint, notes the company already secured a master service agreement (MSA) with one major hyperscaler, and asks if a single customer is sufficient to move forward with the opportunity. / A: Management confirms progress is ongoing but no specific new projects are ready to announce. Shentel holds a key strategic advantage because it already has existing fiber and conduit in close proximity to major regional data centers, allowing it to deliver services without the large capital outlay required by other providers, so a single high-quality opportunity can be viable. (228 characters)

Q: An analyst asks management to confirm the long-term consolidated EBITDA margin targets after the company transitions from heavy construction to capital-light, free cash flow-positive operations. / A: Management confirms the targets are unchanged: the company expects to grow margins by 300 to 400 basis points per year over the next couple of years, and has clear visibility to reach a 40% consolidated EBITDA margin within two years, with a 50% long-term margin target remaining in place. (219 characters)

Q: An analyst asks for more detail on the current competitive landscape, specifically if there is additional competitor encroachment beyond satellite competition, and whether the new pricing strategy has addressed existing competitive pressures. / A: Management states 35% of the incumbent footprint overlaps with a wired competitor, and Shentel is priced competitively with faster speeds than that rival. Satellite competition only impacted rural incumbent markets, and that impact is now minimal; the new rate card positions Shentel well with faster speeds, lower latency, and better service than satellite offerings. (252 characters)

Q: An analyst asks what caused the drop in satellite-related churn between Q1 and Q2 2026, and how many satellite customers migrate to Glowfiber when the company builds into new markets. / A: Management says the reduction in churn stems from two factors: the new lower-rate rural price card (which offers faster speeds at lower prices than satellite) and satellite providers pulling back aggressive free equipment and low introductory promotions. Most new Glowfiber customers come from incumbent cable providers or new move-ins, not satellite migrations. (261 characters)