Shenandoah Telecommunications Co

Thank you for standing by. My name is Liz and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Shenandoah Telecommunications Company fourth quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Lucas Binder, Vice President of Corporate Finance for Chantel. Please go ahead.

Good morning and thank you for joining us. The purpose of today's call is to review Chantel's results for the fourth quarter and full year 2025. Our results were announced in a press release distributed this morning. In addition, we filed our Form 10-K and also a Form S-3 with the SEC to fulfill our Horizon merger contractual requirements to GCM. The presentation we will be reviewing is included on the investor page on our investor.chentel.com website. Please note that an audio reply 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 Ed McKay, President and Chief Executive Officer, and Jim 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 remind 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 Ed. Go ahead, Ed.

Thanks, Lucas, and good morning, everyone. Thank you for joining us today. This past year marked another important step forward for Centel as we continue to execute on our Fiber First strategy. Strong year-over-year growth in both glow fiber and commercial fiber drove a notable shift in our revenue mix with our fiber-based lines of business surpassing our incumbent broadband revenue in the fourth quarter. Throughout 2025, we remained disciplined and focused on our four strategic pillars that continue to guide our operational and financial priorities. Building on our long history of success, completing our fiber network expansion, accelerating growth, and positioning the business to inflect to positive free cash flow in 2027. I'm pleased with the way our team delivered on each of these priorities, strengthening our position, and keeping our strategy firmly on track. Starting on slide four, we share some of our four-year highlights. At year-end 2025, we passed approximately 427,000 homes and businesses in our low-fiber expansion markets, an annual increase of 81,000 passings. Our government subsidized passings in the government broadband markets more than doubled year over year to 22,000, and penetration in these areas has already reached 31%. We are well on our way to substantially completing construction for these capital intensive expansion projects by the end of 2026. Glow fiber data RGU's grew 35% in 2025 to 88,000, and we maintain data RPU by driving customers to higher speed tiers. Lastly, we successfully refinanced our debt with our inaugural ABS financing in December that will save us approximately 170 basis points in cash interest expense and extend our maturities to 2030. We finished 2025 with strong momentum, driving customer growth, expanding our high-value fiber business, and strengthening our balance sheet. This performance gives us confidence in our trajectory as we move into 2026. Turning to slide five, we show our integrated broadband network that spans more than 19,000 fiber route miles across eight states with over 679,000 total broadband passings. Our markets have compelling competitive dynamics that differentiate us from our peers in the broadband industry. Eighty-eight percent of our glow fiber passings are duopoly markets with only one fixed broadband competitor, and in our incumbent markets, 70 percent of our passings have no fixed broadband competitor. As we enter the home stretch of our Glowfiber expansion, we remain focused on return on investment. Due to rising aerial make ready costs in some areas, we have recently decided to pass on investments in certain Ohio markets where the cost to pass increased, reducing our ability to earn a return on our investments above our hurdle rate of 15%. As you can see on the map, all of the planned Glowfiber markets have been launched. And our primary focus in 2026 is adding passings in our Virginia, Pennsylvania, Maryland, and Ohio markets. Despite the reduction in targeted passings, we remain confident in our plans to achieve positive free cash flow in 2027. On slide six, our sales and marketing team continues to drive growth in our Glowfiber expansion markets. In the fourth quarter, we added 5,300 new customers and more than 6,000 total data, video, and voice revenue generating units. For full year 2025, we added approximately 23,000 new customers and 26,000 total RGUs. As a result, total Glow Fiber revenue generating units surpassed 103,000 by year end, up 33% compared to the prior year. Moving to slide seven, the fourth quarter marked our strongest construction period of the year, with more than 26,000 low-fiber passings completed, bringing total passings to just under 427,000. While the significant increase in new passings kept penetration flat quarter over quarter at 20.6%, penetration improved 1.8 percentage points year over year. Penetration trends across our Glowfiber cohorts are shown on slide eight and reflect blended penetration rates for both residential and small and medium business passings. Business passings account for about 8% of our total passings and they typically exhibit a slower penetration ramp than residential passings. However, business customers generate data ARPU that is more than 40% higher than residential customers. Due to the slower business ramp, cohorts with a higher concentration of business passings can show lower penetration. This dynamic is evident in the Q4 2023, Q1 and Q4 2024, and Q1 2025 cohorts, which have a significantly higher mix of business passings than other cohorts. Excluding the differences in residential and business mix, Penetration growth in our Glowfiber expansion markets has followed a consistent and predictable pattern with steady increases as cohorts mature. Our earliest cohorts launched in 2019 and 2020 now have an average data penetration rate of more than 37%. On slide nine, we highlight our most recent Net Promoter Score Customer Satisfaction Survey where we received an outstanding score of 61. This result compares very favorably with cable competitors that often have single digit scores. Our continued focus on customer service is a key driver of our low churn, with average monthly churn of 1.01% in the fourth quarter and 1.07% for full year 2025. Broadband data average revenue per user increased to more than $77 in the fourth quarter, representing a 2.3% year-over-year increase. Midway through the third quarter, we introduced new promotional rate plans offering higher speeds with a five-year price guarantee. With these plans available for a full quarter, more than 75% of our new residential subscribers selected speeds of one gig or higher, including 20% choosing two gig service and 5% choosing five gig service. The increase in ARPU was driven by our shift away from a first-month free promotion in prior periods, along with strong adoption of the five-year price guarantee plans in the fourth quarter. As these plans continue to roll through our base, we expect data ARPU to decline by approximately 1% over the next few quarters before stabilizing. Turning to slide 10, we show our operating performance for the incumbent broadband markets. At the end of 2025, we served about 112,000 broadband data customers, reflecting a year-over-year increase of over 600. Data voice and video RGUs totaled more than 158,000 at the end of the year, down 3% year-over-year, primarily due to video customers moving to online streaming services. Total broadband passings in our incumbent markets grew to 252,000 at year-end, up about 13,000 compared to the prior year. This increase was driven by the construction of government subsidized passings in previously unserved areas. We've substantially completed construction and fulfilled our grant obligations in Virginia, and we expect to complete the remaining 1300 government subsidized incumbent grant passings in West Virginia in 2026. As a result of our government grant fiber construction, approximately 21% of our incumbent broadband passings are now equipped with fiber to the home technology. As shown on slide seven, these new subsidized passings represent a strong growth catalyst for our incumbent markets, with data penetration exceeding 45% within six quarters of a neighborhood launch. Our earliest cohort from the first quarter of 2023 has reached 61% penetration, and we've already achieved an aggregate penetration of 31% across more than 22,000 subsidized passings. Moving to slide 12, monthly broadband data churn improved sequentially and remaining steady year over year at 1.47% for the fourth quarter. Our rate card strategy, offering greater value with higher speeds at the same price, continues to be effective at mitigating churn. As expected, broadband data ARPU declined 2.4% from a year ago to $82, given by the addition of new customers with more aggressive pricing in competitive markets. Our commercial fiber business is highlighted on slide 13. In the fourth quarter, incremental monthly bookings exceeded 155,000 in line with the prior year period. After record bookings in the first half of 2025, second half bookings increased almost 9% compared to the second half of 2024. We're seeing strong performance across a broad and diverse customer base, including wireless carriers, mid-market and enterprise customers, wholesale partners, educational institutions, and state and local governments. Our service delivery team installed $191,000 in new monthly revenue in the fourth quarter, modestly as we continue to work through the backlog and move bookings to revenue more quickly. Average monthly compression and disconnect churn remained very low at 0.6% in the fourth quarter, driven by exceptional support from our network operations center and sales team. Before I turn the call over to Jim, I want to briefly address a recently announced reduction in force. On February 23rd, we announced a workforce reduction of approximately 10% of our employees to better align our staffing levels with the planned completion of the construction phase of Glow Fiber. Impacting employees will have a standard departure date through the end of 2026, with the longest impact in the fourth quarter. All affected employees are eligible for severance pay and benefits, as well as career transition services. We expect to incur approximately $3.1 million in restructuring costs and anticipate annual savings of roughly $12.3 million starting in 2027, split evenly between operating expenses and capitalized labor. While our major Glow Fiber market expansion is nearing completion by year-end, we remain firmly focused on driving continued growth in Glow Fiber and commercial fiber and delivering the high level of service our customers expect and deserve. I'll now turn the call over to Jim to walk you through our 2025 financial results and our outlook for 2026.