Shenandoah Telecommunications (SHEN) Q2 2025 Earnings Call July 31, 2025 04:30 PM ET Speaker0Afternoon, everyone. Welcome to Shenandoah Telecommunications Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.You will hear an automated message advising your hand is raised. To withdraw y ...

Financial Performance & Outlook - Total revenue for 2025 is projected to be between $352 million and $357 million, representing an 8.1% increase at the midpoint compared to $328 million in 2024[9] - Adjusted EBITDA for 2025 is guided between $113 million and $118 million, a 21.6% increase at the midpoint from $95 million in 2024[9] - Capital expenditures, net of government grant reimbursements, are expected to be between $260 million and $290 million, a decrease of 8.3% from $300 million in 2024[9] - Adjusted EBITDA for the three months ended June 30, 2025, was $28388 thousand with a margin of 32%, compared to $23289 thousand and a 27% margin for the same period in 2024[36] Glo Fiber Expansion Markets - Glo Fiber added 5,700 new subscribers[5] - Glo Fiber expanded by over 16,000 new passings[5] - Glo Fiber revenue experienced a 40.5% growth[5] Broadband Metrics - Broadband average revenue per user (ARPU) in Glo Fiber Expansion Markets was $76.72 in Q2 2025, compared to $77.56 in Q2 2024[37] - Total broadband revenue increased from $39816 thousand in Q2 2024 to $44770 thousand in Q2 2025[37] - Total broadband revenue generating units (RGU) increased from 162,577 in Q2 2024 to 185,293 in Q2 2025[37] Commercial Fiber - The company had another record quarter for Commercial Fiber sales bookings[5]

Core Insights - Shenandoah Telecommunications Company ("Shentel") reported strong growth in its Glo Fiber segment, with revenue increasing by 40.5% year-over-year and an incremental margin of 71% [3][5] - The company achieved $13.8 million in annual run-rate synergies from the Horizon Telcom acquisition, fully realized in the second quarter of 2025 [3][5] - Adjusted EBITDA grew by 21.9% to $28.4 million, with an expanded margin from 27% in Q2 2024 to 32% in Q2 2025 [5][24] Financial Performance - Total revenue for Q2 2025 was $88.6 million, a 3.2% increase from Q2 2024 [5][6] - Glo Fiber Expansion Markets data subscribers increased by 43.1% to approximately 76,000 [5] - Net loss from continuing operations decreased to $9.0 million from $12.8 million in the same quarter last year [5][15] Revenue Breakdown - Glo Fiber Expansion Markets revenue rose by $5.7 million, or 40.5%, to $19.8 million [6] - Residential & SMB - Incumbent Broadband Markets revenue declined by $1.4 million, or 3.2%, due to a 14.5% drop in video RGUs [6] - Commercial Fiber revenue decreased by $1.2 million, or 6.0%, primarily due to a non-cash deferred revenue adjustment [6] Cost Management - Cost of services decreased by $1.9 million, or 5.5%, attributed to lower network payroll and programming costs [6] - Selling, general and administrative expenses fell by $0.5 million, or 1.6%, due to reduced professional fees [6] - Restructuring, integration, and acquisition expenses dropped significantly by $11.1 million, or 98.2%, compared to the previous year [6] Capital Expenditures and Financial Outlook - Capital expenditures for the first half of 2025 were $169.4 million, up from $150.9 million in the same period of 2024 [11] - The company initiated 2025 financial guidance, projecting total revenue between $352 million and $357 million, representing an 8.1% increase from 2024 [8][9] - Adjusted EBITDA guidance for 2025 is set between $113 million and $118 million, indicating a 21.6% growth [9] Operational Statistics - Total broadband homes passed increased by 92,847 to approximately 623,000 [5] - The company owns over 17,700 route miles of fiber, supporting its broadband services [12]

Core Insights - Shenandoah Telecommunications (SHEN) subsidiary Glo Fiber has launched a 100% fiber-optic broadband service in select neighborhoods of Hillsboro, OH, aiming to enhance digital infrastructure in the region [1] - Glo Fiber currently serves approximately 363,000 homes and businesses and plans to expand to 550,000 by the end of 2026, with a significant revenue increase of 27% year over year to $87.9 million [5][8] - The company utilizes advanced XGS-PON technology to deliver Internet speeds of up to 5 Gbps, providing reliable and symmetrical broadband services [2] Company Performance - In the first quarter of 2025, Glo Fiber added 5,400 subscribers and 16,600 new passings, resulting in a 52% year-over-year revenue growth in Glo Fiber Expansion Markets [5] - Adjusted EBITDA increased by 43% to $27.6 million, supported by strong performance in established markets [5] - The company is optimistic about free cash flow from mature markets, which now have margins exceeding 40% [5] Market Expansion - Glo Fiber's construction efforts are set to continue through early 2026, with over 3,000 homes and businesses in Hillsboro gaining access to high-speed Internet [1] - The company aims to reach 440,000 homes by the end of 2025 and 550,000 by the end of 2026 [6] - Glo Fiber's services include Whole Home Wi-Fi, video streaming, and digital phone services, enhancing customer experience with transparent pricing and local support [3][4] Competitive Landscape - Despite the positive growth, Glo Fiber faces challenges such as intense spending on buildouts and competition in certain markets [6] - Management is implementing strategies like selective promotions and inventory stockpiling to mitigate potential impacts from these challenges [6]

Core Viewpoint - Shenandoah Telecommunications Company (Shentel) is expanding its Glo Fiber service in Blacksburg, Virginia, through the acquisition of Blacksburg Broadband LLC, expected to be completed by early to mid-July [1][2]. Company Overview - Glo Fiber, powered by Shentel, offers 100% fiber broadband services with upload and download speeds of up to 5 gigabits per second (Gbps) [3][5]. - The company serves approximately 363,000 homes and businesses, providing reliable, symmetrical broadband service using advanced technology, including XGS-PON 10 Gbps networks [5][6]. - Shentel operates an extensive regional network with over 17,200 route miles of fiber, delivering broadband services across eight contiguous states in the eastern United States [6]. Competitive Advantages - Glo Fiber differentiates itself by providing exceptional reliability, symmetrical speeds of up to 5 Gbps, straightforward pricing without long-term contracts, and prompt local customer service [7]. - The acquisition of WideOpen Blacksburg is expected to enhance Glo Fiber's existing gigabit fiber network and improve service offerings in the Blacksburg area [2][3].

Financial Data and Key Metrics Changes - Revenues grew 27% to $87.9 million, with former Horizon markets contributing $15.2 million. Excluding Horizon, revenues increased by $3.5 million or 5% compared to Q1 2024 [11] - Adjusted EBITDA increased by 43% to $27.6 million, with former Horizon markets contributing $4.4 million. Excluding Horizon, adjusted EBITDA grew by $4 million or 21% year-over-year [12] - Adjusted EBITDA margins improved from 28% in Q1 2024 to 31% in Q1 2025, driven by high incremental margins from Glo Fiber subscribers [12] Business Line Data and Key Metrics Changes - Glo Fiber added 5,400 new subscribers and 16,600 new passings, with revenues increasing by 52% year-over-year [6] - Legacy Glo Fiber markets revenue grew by $5.6 million or 47%, while incumbent broadband markets revenue declined by $2.2 million due to a 14% drop in video RGUs [11] - The commercial sales team achieved record sales bookings of just under $200,000 in monthly recurring revenues [9] Market Data and Key Metrics Changes - Broadband data penetration in Glo Fiber expansion markets reached 19.4%, up from 18% a year earlier [17] - Monthly broadband data churn remained low at 0.9% for Glo Fiber [18] - Incumbent broadband markets saw a 2.7% year-over-year increase in broadband data customers, totaling approximately 112,000 [19] Company Strategy and Development Direction - The company plans to complete the construction phase of Glo Fiber expansion and government grant projects by the end of 2026, targeting 550,000 total Glo Fiber passings [16] - The company aims to achieve free cash flow positivity in 2027, with significant growth expected in 2028 and beyond [29] - The company is focusing on areas where it is the only fiber provider, avoiding competition with established players like Verizon [39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth prospects in Glo Fiber markets, highlighting the potential for free cash flow generation as penetration rates increase [6][7] - The company expects to realize a total of $8.5 million in incremental synergies in 2025 from the Horizon acquisition [12] - Management noted that they are well-positioned to execute their capital plan and do not anticipate significant impacts from tariffs on construction costs [22][24] Other Important Information - Liquidity was reported at $335 million as of March 31, including $88 million in cash and $143 million in available revolver capacity [13] - The company plans to refinance its credit facilities, aiming to access the asset-backed securitization market for its fiber business [14] Q&A Session Summary Question: Potential for ABS securities and optimal capital structure - Management expects ABS to save about 100 basis points in interest expense and plans to use investment-grade tranches [27][28] Question: CapEx investment timeline and future capital intensity - CapEx is expected to drop to 20-25% of revenues starting in 2027, with free cash flow positivity anticipated in 2027 [29][30] Question: Subscriber growth challenges and competitive pressures - Management indicated that they are not yet facing difficulties in adding subscribers and have seen continued growth in mature markets [36] Question: Refinancing process and cost factors - The internal restructuring for refinancing is expected to save approximately $7 million in interest expense annually [41]

Financial Data and Key Metrics Changes - Revenues grew 27% to $87.9 million, with former Horizon markets contributing $15.2 million. Excluding Horizon, revenues increased by $3.5 million or 5% year-over-year [11] - Adjusted EBITDA increased 43% to $27.6 million, with former Horizon markets contributing $4.4 million. Excluding Horizon, adjusted EBITDA grew by $4 million or 21% [12] - Adjusted EBITDA margins improved from 28% in Q1 2024 to 31% in Q1 2025, driven by high incremental margins from Glo Fiber subscribers [12] Business Line Data and Key Metrics Changes - Glo Fiber expansion markets added 5,400 new subscribers and 16,600 new passings, with revenues increasing by 52% year-over-year [6] - Legacy Glo Fiber markets revenue grew by $5.6 million or 47%, driven by subscriber increases, while incumbent broadband markets revenue declined by $2.2 million due to a 14% drop in video RGUs [11] - The commercial sales team achieved record sales bookings of just under $200,000 in monthly recurring revenues [9] Market Data and Key Metrics Changes - Glo Fiber's broadband data penetration in expansion markets rose to 19.4%, up from 18% a year earlier [17] - Monthly broadband data churn remained low at 0.9% [18] - Incumbent broadband markets saw a 2.7% year-over-year increase in broadband data customers, totaling approximately 112,000 [19] Company Strategy and Development Direction - The company plans to complete the construction phase of Glo Fiber expansion and government grant projects by the end of 2026, targeting 550,000 total Glo Fiber passings [16] - The company aims to achieve free cash flow positivity by 2027, with significant growth expected in 2028 and beyond [29] - The company is focusing on areas where it is the only fiber provider, avoiding competition with established players like Verizon [39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth prospects in Glo Fiber markets, highlighting the potential for free cash flow generation as penetration rates increase [6][7] - The company expects to realize a total of $8.5 million in incremental synergies in 2025 [12] - Management noted that they are well-positioned to execute their capital plan and complete construction projects by the end of 2026 [24] Other Important Information - Liquidity was reported at $335 million as of March 31, including $88 million in cash and $143 million in available revolver capacity [13] - The company executed an amendment to its credit facility to extend maturities and increase the net leverage covenant [13][14] - Capital expenditures in Q1 were $76 million, with full-year guidance set between $250 million and $280 million [21] Q&A Session Summary Question: Potential for ABS securities and optimal capital structure - Management expects ABS to save about 100 basis points in interest expense and plans to use investment-grade tranches [27][28] Question: Glo Fiber capital expenditure plans - Construction to reach 550,000 passings is expected to complete by the end of 2026, with capital intensity dropping to 20-25% of revenues starting in 2027 [29][30] Question: Subscriber growth challenges - Management indicated that they are not yet facing difficulties in adding subscribers, with continued growth in mature markets [36] Question: Competitive pressures - There is minimal competition, with only a small overlap with BrightSpeed, and management is targeting areas with limited competition [37][39] Question: Refinancing process and cost factors - Internal projects are underway to save on interest rates, with expected savings of approximately $7 million annually [41]

Financial Data and Key Metrics Changes - Revenues grew 27% to $87.9 million, with former Horizon markets contributing $15.2 million. Excluding Horizon, revenues increased by $3.5 million or 5% compared to Q1 2024 [11] - Adjusted EBITDA increased by 43% to $27.6 million, with former Horizon markets contributing $4.4 million. Excluding Horizon, adjusted EBITDA grew by $4 million or 21% year-over-year [12] - Adjusted EBITDA margins improved from 28% in Q1 2024 to 31% in Q1 2025, driven by high incremental margins from Glo Fiber subscribers and synergy savings [12] Business Line Data and Key Metrics Changes - Glo Fiber expansion markets added 5,400 new subscribers and 16,600 new passings, resulting in a 52% revenue increase compared to the same period in 2024 [6] - Legacy Glo Fiber markets revenue grew by $5.6 million or 47%, driven by subscriber increases, while incumbent broadband markets revenue declined by $2.2 million due to a 14% drop in video RGUs [11] - The commercial sales team achieved record sales bookings of just under $200,000 in monthly recurring revenues [8] Market Data and Key Metrics Changes - Glo Fiber's broadband data penetration reached 19.4%, up from 18% a year earlier, with monthly broadband data churn remaining low at 0.9% [19] - Incumbent broadband markets saw a 2.7% year-over-year increase in broadband data customers, ending Q1 with approximately 112,000 customers [20] - Overall broadband data penetration decreased to 46.5% due to the addition of acquired passings in the Horizon territory [21] Company Strategy and Development Direction - The company plans to complete the construction phase of Glo Fiber expansion and government grant projects by the end of 2026, targeting 550,000 total Glo Fiber passings [16] - The company aims to achieve free cash flow positivity by 2027, with significant growth expected in 2028 and beyond [30] - The company is focusing on a hybrid capital structure to lower the cost of debt, planning to access the ABS market for its fiber business [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth prospects in Glo Fiber markets, highlighting the potential for free cash flow generation as penetration rates increase [6] - The company noted a favorable response from customers to enhanced rate plans and value propositions introduced in the past year [7] - Management expects EBITDA margins to continue growing by 300 to 400 basis points annually as customer additions increase [33] Other Important Information - Liquidity as of March 31 was $335 million, including $88 million in cash and $143 million in available revolver capacity [13] - Capital expenditures in Q1 totaled $76 million, with full-year guidance set between $250 million and $280 million [22] - The company has not been significantly impacted by price increases due to tariffs, with most materials sourced domestically [23][24] Q&A Session Summary Question: Potential for ABS securities and optimal capital structure - Management expects ABS to save about 100 basis points in interest expense and plans to use investment-grade tranches [28] Question: Glo Fiber capital expenditure plans - The company anticipates completing Glo Fiber construction by the end of 2026, with capital intensity expected to drop to 20-25% of revenues starting in 2027 [30] Question: Subscriber growth challenges - Management indicated that they are not yet facing difficulties in adding subscribers, with continued growth observed even in mature markets [36] Question: Competitive pressures - There is minimal competition in Glo Fiber markets, with only a small overlap with BrightSpeed [37] Question: Refinancing process and cost implications - The internal restructuring for refinancing is expected to save approximately $7 million in annual interest expense [40]

Financial Performance - Revenue increased by 27% and Adjusted EBITDA increased by 43% year-over-year [7] - Adjusted EBITDA for Q1 2025 was $27593 thousand with a margin of 31%, compared to $19251 thousand and 28% in Q1 2024 [35] Broadband Expansion and Performance - Strong growth in Glo Fiber Expansion Markets [4] - Glo Fiber Free Cash Flow in "mature" markets [4] - Improvement in Incumbent Broadband Markets subscriber growth and churn [4] - Glo Fiber Expansion Markets RGUs increased from 44163 in Q1 2024 to 67868 in Q1 2025 [36] - Incumbent Broadband Markets RGUs increased from 109255 in Q1 2024 to 111528 in Q1 2025 [36] Network Construction - Glo Fiber Expansion Markets passings under construction are at 440000 [14] - Incumbent Broadband Markets passings under construction are at 254000 [14] Commercial Fiber - Record quarter for Commercial Fiber sales bookings [4] Liquidity - Liquidity stands at $3565 million [9]