Shenandoah Telecommunications Company’s 2025 Earnings Call: CapEx Guidance and Competitive Pricing Claims Don’t Match

Date of Call: Feb 26, 2026

Financials Results

• Revenue: $91.6M for Q4 2025, up 7.2% YOY

Guidance:

• Revenue for 2026 expected to be $370M to $377M, representing ~4.4% growth at the midpoint.
• Adjusted EBITDA for 2026 expected to be $131M to $136M, representing ~12.1% growth at the midpoint.
• 2026 CapEx net of grant reimbursements expected to be $220M to $250M, representing a ~21% decline at the midpoint.

Business Commentary:

Fiber Network Expansion and Revenue Growth:

• Shentel's Glo Fiber passed approximately 427,000 homes and businesses by year-end 2025, an annual increase of 81,000 passings.
• Government subsidized passings in incumbent broadband markets more than doubled year-over-year to 22,000.
• This growth is attributed to the company's focus on fiber-first strategy and disciplined execution of its expansion plans.

Commercial Fiber Performance:

• In Q4 2025, Commercial Fiber incremental monthly bookings exceeded 155,000, aligning with the prior year period.
• The company's Commercial Fiber revenue grew 10.8% year-over-year.
• Strong performance is driven by a diverse customer base and effective service delivery.

Financial Refinancing and Cost Management:

• Shentel refinanced its debt with an inaugural ABS financing, saving approximately 170 basis points in cash interest expense.
• The company expects annual savings of roughly $12.3 million starting in 2027 due to a workforce reduction of approximately 10%.
• The refinancing and cost-saving measures are aimed at positioning the company for positive free cash flow by 2027.

Customer Retention and ARPU Trends:

• Monthly broadband data churn remained steady at 1.47% for Q4 2025.
• Broadband data average revenue per user increased to more than $77, representing a 2.3% year-over-year increase.
• Customer retention is supported by a rate card strategy offering higher speeds at the same price, while ARPU growth is driven by a shift to higher speed tiers.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed confidence in achieving positive free cash flow in 2027, highlighted strong revenue and EBITDA growth, and noted successful debt refinancing. Statements include: 'We are well on our way to substantially completing construction' and 'This is a very exciting time for Shentel and our shareholders.'

Q&A:

• Question from Hamed Khorsand (BWS Financial): About the markets that you've decided not to enter in Ohio, how much CapEx are you looking to save? And is it all being -- was it all planned for '26? So it already brings down the CapEx that you're projecting for '26?
  Response: The cost per passing is ~$1,400, with ~$1,000 in construction labor savings per passing. The decision was due to rising aerial make-ready costs making ROI below 15% unattainable; this impacts the 2026 CapEx guidance.

• Question from Hamed Khorsand (BWS Financial): From a competitive standpoint, you introduced this 5-year guarantee, I think, last quarter. Have you seen any step down as far as competitive pressures go? Or is it still the same?
  Response: After Shentel launched its 5-year price guarantee, the competitive impact on gross adds seen after a major cable competitor's similar offer was mitigated. No significant further competitive changes have been observed since.

• Question from Hamed Khorsand (BWS Financial): You had said, if I heard you right, that it takes a bit longer on the business than on the residential. How fast -- I don't think I heard you say how fast it takes for residential to sign up.
  Response: Residential customer penetration typically reaches the target rate of 37%+ within 5 to 7 years after a market launch. Business penetration is lower due to longer sales cycles and contracts.

• Question from Vikash Harlalka (New Street Research): Why did you feel the need to offer a 5-year price guarantee plans? Was it because competition was going in that direction? And then how does that impact ARPU growth?
  Response: The 5-year price guarantee was introduced in response to a competitive cable offer, which initially impacted gross adds but was then mitigated by Shentel's own offer. It is expected to cause a ~1% decline in ARPU over the next few quarters before stabilizing.

• Question from Vikash Harlalka (New Street Research): We recently met with many small private fiber operators. There seems to be a lot of appetite for M&A. Could you just remind us how you're thinking about M&A? And if you're looking to buy fiber assets out there, what characteristics are you looking for in any potential targets?
  Response: Current focus is on completing the build plan and reaching positive free cash flow in 2027. Future M&A interest would be in pure-play fiber providers, not cable or copper providers.

Contradiction Point 1

Financial Guidance and Growth Outlook

Contradiction on the timeline for achieving positive free cash flow.

Vikash Harlalka (New Street Research) - Vikash Harlalka (New Street Research)

20260226-2025 Q4: Current focus is on completing the build plan and achieving positive free cash flow in 2027. - Edward McKay(CEO)

Given the current appetite for M&A in the fiber sector, what is your strategy for acquiring assets and what target characteristics are you prioritizing? - Frank Louthan (Raymond James & Associates)

2025Q3: The major inflection point for shareholder value will be the return to positive free cash flow, expected in 2027. - James Volk(CFO)

Contradiction Point 2

Capital Expenditure (CapEx) Planning

Contradiction on the achievability of previously planned 2026 CapEx.

Hamed Khorsand (BWS Financial) - Hamed Khorsand (BWS Financial)

20260226-2025 Q4: The decision [to exit markets] was based on rising aerial make-ready costs... making a 15% return on investment unachievable. Some costs were already spent in prior years, and the impact is reflected in the 2026 CapEx guidance. - James Volk(CFO)

How much CapEx are you saving by not entering certain Ohio markets, and is this savings entirely planned for 2026, thereby reducing your projected CapEx for that year? - Frank Louthan (Raymond James & Associates)

2025Q3: The industry is consolidating, and Shentel wants to be a player. The planned refinancing provides financial flexibility to expand the company’s footprint and drive efficiencies through technology and the winding down of construction. - Edward McKay(CEO)

Contradiction Point 3

Capital Expenditure (CapEx) Guidance and Acceleration Rationale

Contradiction on the primary driver for accelerating CapEx spending.

Hamed Khorsand (BWS Financial) - Hamed Khorsand (BWS Financial)

20260226-2025 Q4: The decision was based on rising aerial make-ready costs (2-3x increase) making a 15% return on investment unachievable... The impact is reflected in the 2026 CapEx guidance. - James Volk(CFO)

How much CapEx are you saving by not entering certain Ohio markets, and is all of it planned for 2026? - Hamed Khorsand (BWS Financial Inc.)

2025Q2: Primary Driver: The construction team successfully built government grant projects faster than expected. Strategic Rationale: Accelerating capital spending... helps bring more passings online earlier, which supports faster subscriber and revenue growth. - Edward McKay(COO)

Contradiction Point 4

Impact of Competitive Pricing Guarantees on Growth

Contradiction on whether competitive pricing guarantees have pressured net subscriber growth.

Vikash Harlalka (New Street Research) - Vikash Harlalka (New Street Research)

20260226-2025 Q4: The plan was a response to a competitor's 5-year guarantee, which initially impacted gross adds but not churn. - Edward McKay(CEO)

Was the decision to offer a 5-year price guarantee plan driven by competitive pressures? - Hamed Khorsand (BWS Financial Inc.)

2025Q2: Despite [competitor] actions, Shentel added 20% more net subscribers in Q2 2025 compared to Q2 2024. - Edward H. McKay(COO)

Contradiction Point 5

Competitive Pressure Assessment

Change in characterization of competitive environment from minimal to increased pressure.

Hamed Khorsand (BWS Financial) - Hamed Khorsand (BWS Financial)

20260226-2025 Q4: Recently, a large cable competitor increased its 5-year guarantee price, but overall, no significant changes in competitive pressure have been observed since Shentel launched its own 5-year price guarantee. - Edward McKay(CEO)

Has the 5-year guarantee introduced last quarter reduced competitive pressures, or have they remained the same? - Hamed Khorsand (BWS Financial)

2025Q1: Competition is minimal. Overlap with Brightspeed is only ~5% of passings. No significant fiber deployments in Glo Fiber markets are seen. - Edward McKay(CEO)