Shenandoah Telecommunications Co: Form 10-Q for the period ended Mar 31, 2026

The following management’s discussion and analysis includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “will,” “should,” “could” or “plan” and similar expressions as they relate to Shenandoah Telecommunications Company or its management are intended to identify these forward-looking statements. All statements regarding Shenandoah Telecommunications Company’s expected future financial position, operating results and cash flows, business strategy, financing plans, forecasted trends relating to the markets in which Shenandoah Telecommunications Company operates and similar matters are forward-looking statements. We cannot assure you that the Company’s expectations expressed or implied in these forward-looking statements will turn out to be correct. The Company’s actual results could be materially different from its expectations because of various factors, including, but not limited to, those discussed under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2025 (“2025 Form 10-K”). The forward-looking statements included in this Form 10-Q are made only as of the date of the statement. We undertake no obligation to revise or update such statements to reflect current events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events, except as required by law.

The following management’s discussion and analysis should be read in conjunction with the Company’s 2025 Form 10-K, including the consolidated financial statements and related notes included therein.

Overview

Shenandoah Telecommunications Company (“Shentel”, “we”, “our”, “us”, or the “Company”) is a provider of a comprehensive range of broadband communication services in eight contiguous states in the eastern United States.

Results of Operations

Three Months Ended March 31, 2026 Compared with the Three Months Ended March 31, 2025

The Company’s unaudited consolidated results from operations are summarized as follows:

($ in thousands)

Residential & SMB - Incumbent Broadband Markets revenue

Revenue from residential and small and medium business (“SMB”) customers in Incumbent Broadband Markets is primarily earned through the Company’s provision of data, video and voice services over primarily HFC cable and to a lesser extent FTTH networks in incumbent markets.

Residential & SMB - Incumbent Broadband Markets revenue decreased by $2.2 million, or 5.1%. The decrease was primarily due to a 14.6% decline in video RGUs and a 1.6% decline in data ARPU driven by the Company’s new rate card in a portion of its passings with another broadband provider.

Residential & SMB - Glo Fiber Expansion Markets revenue

Revenue from residential and SMB customers in Glo Fiber Expansion Markets is primarily earned through the Company’s provision of data, video and voice services over FTTH networks in new greenfield expansion markets.

Residential & SMB - Glo Fiber Expansion Markets revenue increased by $6.4 million, or 34.6%. The increase was primarily due to a 33.7% increase in data RGUs driven by the Company’s increase in penetration rates and increase in passings.

Commercial Fiber revenue

Shentel’s Commercial Fiber revenue is primarily earned through the Company’s provision of high-speed Ethernet, dedicated internet access, wavelength services, dark fiber leasing and managed services over fiber optic networks to commercial customers.

Commercial Fiber revenue increased by $0.9 million, or 4.7%. The increase was primarily due to increases in recurring revenue from additional circuit services sold to existing customers.

RLEC & Other revenue

Shentel’s RLEC & Other revenue is primarily earned through the Company’s provision of voice and DSL telephone services over copper networks, primarily in Shenandoah County, Virginia and Ross County, Ohio. Shentel also earns governmental support revenue through the federal USF.

RLEC & Other revenue decreased by $0.8 million, or 13.0%. The decrease was primarily due to a 28.0% decrease in DSL RGUs and $0.3 million decrease in government support revenue.

Cost of services

Cost of services primarily consist of costs to acquire and deliver video programming, internal labor to maintain our network and service our customers, third party network maintenance, and line expenses

Cost of services decreased by $1.2 million, or 3.7%. The decrease was primarily due to government grant reimbursements of certain indirect operating costs and a decrease in video programming costs driven by declining video RGUs.

Selling, general and administrative

Selling, general and administrative expenses consist of employee compensation, advertising, software maintenance, stock-based compensation, and operating taxes.

Selling, general and administrative expense increased by $2.4 million, or 7.7%. The increase was primarily due to an increase in advertising costs and payroll costs driven by expansion of the Glo Fiber homes passed and higher stock compensation.

Restructuring, integration and acquisition

Restructuring, integration and acquisition expense increased by $1.9 million, or 378.4% and primarily relates to accrued severance costs associated with the previously announced reduction in force.

Depreciation and amortization

Depreciation and amortization increased by $5.5 million, or 18.7%. The increase was primarily due to the Company’s expansion of its Glo Fiber network and a $2.8 million write-off of project costs under construction for markets that construction was cancelled due to higher costs to build.

Interest expense

Interest expense increased by $4.5 million, or 92.9%. The increase was primarily due to an increase in the Company’s outstanding debt.

Other income, net

Other income, net decreased by $0.7 million, or 93.9%. The decrease was primarily due to lower patronage income.

Income tax benefit

Income tax benefit increased by $3.0 million, or 267.1%. The increase was primarily due to higher pre-tax loss.

Additional Information

Shentel provides broadband internet, video and voice services to residential and commercial customers in portions of Virginia, West Virginia, Maryland, Pennsylvania, Kentucky, Delaware, Ohio and Indiana, via fiber optic and hybrid fiber coaxial cable networks. We also lease dark fiber and provide Ethernet, Dedicated Internet Access and Wavelength fiber optic services to enterprise and wholesale customers throughout the entirety of our service area. Shentel’s Broadband business also provides voice and DSL telephone services as a Rural Local Exchange Carrier (“RLEC”) to customers in Shenandoah County and portions of adjacent counties in Virginia, and in Ross County and portions of adjacent counties in Ohio. These integrated networks are connected by over 19,400 route miles of fiber.

The following table indicates selected operating statistics.

(1) Homes and businesses are considered passed (“passings”) if we can connect them to our network without further extending the distribution system. Passings is an estimate based upon the best available information. Passings will vary among video, broadband data and voice services.

(2) Penetration is calculated by dividing the number of users by the number of passings or available homes, as appropriate.

(3) ARPU calculation = (Residential & SMB Revenue) / average RGUs / 3 months.

(4) Total fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance. For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

Financial Condition, Liquidity and Capital Resources

Sources and Uses of Cash: Shentel’s principal sources of liquidity are our cash and cash equivalents, restricted cash, cash generated from operations, government grants and borrowing capacity available under the Company’s VFN and RCF.

In 2021, Congress passed the American Rescue Plan Act and the Infrastructure Investment and Jobs Act to subsidize the deployment of high-speed broadband internet access in unserved areas. We have been awarded approximately $152.3 million in grants to serve approximately 27,900 unserved homes in the states of Virginia, Ohio, Maryland and West Virginia and to upgrade the capacity of the Ohio middle mile network. The grants will be paid to the Company as certain milestones are completed. As of March 31, 2026, the Company had received a total of $114.5 million in cash receipts and had $37.8 million in remaining reimbursements available under these grant programs. The Company expects to fulfill the majority of its obligations under these programs by the end of 2026.

As of March 31, 2026, the Company’s total available liquidity was $194.5 million, consisting of (i) unrestricted cash and cash equivalents totaling $43.8 million; (ii) restricted cash as required by the ABS indenture totaling $27.3 million (iii) $67.8 million of availability under Shentel Broadband’s RCF; (iv) $17.8 million under Shentel Issuer’s VFN; and (v) an aggregate of $37.8 million remaining reimbursements available under government grants, which reimbursements are subject to fulfilling the terms of the underlying agreements. In addition, the Company has $117.2 million of VFN commitments that are not available to draw as of March 31, 2026. The available capacity of the VFN will increase based on the secured fiber network revenue growth from the ABS Entities multiplied by (i) a margin as defined in the ABS Indenture and (ii) 6.25x multiple.

Net cash provided by operating activities from operations was approximately $24.4 million during the three months ended March 31, 2026, representing an increase of $3.8 million compared with the prior year period, primarily driven by increases in revenue and timing of changes in working capital.

Net cash used in investing activities from operations was approximately $64.1 million during the three months ended March 31, 2026, representing a decrease of $12.2 million compared with the prior year period, primarily driven by a $7.4 million decrease in capital expenditures as Shentel approaches the completion of its major Glo Fiber market expansion project and a $4.6 million increase in cash receipts from government grant programs.

Net cash provided by financing activities from operations was approximately $62.6 million during the three months ended March 31, 2026, representing a decrease of $34.4 million compared with the prior year period, primarily driven by a decrease in borrowings under various debt facilities.

Indebtedness: As of March 31, 2026, the Company’s net indebtedness was approximately $693.9 million, including $707.4 million in outstanding ABS Notes, the VFN, and the RCF, net of unamortized loan fees of $13.5 million. The borrowed Class A-2 Notes and the Class B Notes incur interest at 5.64% and 6.03%, respectively. The borrowed VFN and RCF bear interest at a variable rate determined by one-month term SOFR, plus a margin based on net leverage. The weighted-average interest rate was 5.74% for the ABS Notes, VFN, and RCF at March 31, 2026.

Shentel’s ABS Notes, which include Class A-2 Notes and Class B Notes, have outstanding balances of $489.1 million and $78.3 million, respectively. Shentel Issuer’s VFN has an outstanding balance of $40.0 million. Shentel’s RCF has an outstanding balance of $100.0 million. The ABS Notes have a contractually stated anticipated repayment date (“ARD”) of December 2030 with the exception of the VFN. The initial anticipated repayment date for the VFN is December 2029 which may be extended, at the option of Shentel, to December 2030, subject to the satisfaction of certain conditions. Shentel has not made any borrowings under its LFN as of March 31, 2026. Amounts borrowed under the LFN do not have an anticipated repayment date. The legal final maturity date of each class of the ABS Notes is in December 2055. If Shentel has not repaid or refinanced any Series 2025-1 Notes prior to the relevant ARD, additional interest will accrue on outstanding principal. Shentel Broadband’s RCF matures on December 5, 2030. No principal payments on Shentel Broadband’s RCF are required prior to the final maturity date.

Shentel and its non-ABS Entities have no recourse of the loans of the ABS Entities. Likewise, the ABS Entities have no recourse of the loans of Shentel Broadband.

Refer to Note 8, Debt, in the Company’s unaudited condensed consolidated financial statements within this Form 10-Q and Note 10, Debt, in the Company’s consolidated financial statements in the Company’s 2025 Form 10-K for more information about the outstanding debt.

As of March 31, 2026, the Company was in compliance with the financial covenants related to our outstanding debt.

We expect our cash on hand, restricted cash, cash flows from operations, availability of funds from our RCF and VFN agreements and government grants will be sufficient to meet our anticipated liquidity needs for business operations for the next twelve months. There can be no assurance that we will continue to generate cash flows at or above current levels.

During the three months ended March 31, 2026, our capital expenditures of $75.8 million exceeded our net cash provided by operating activities by $51.5 million, and we expect our capital expenditures to exceed the cash flows provided from operations through 2026, as we expand our Glo Fiber broadband network.

The actual amount and timing of our future capital requirements may differ materially from our estimates depending on the demand for our products and services, new market developments and expansion opportunities.

Our cash flows from operations could be adversely affected by events outside our control, including, without limitation, changes in overall economic conditions including rising inflation, regulatory requirements, changes in technologies, changes in competition, demand for our products and services, availability of labor resources and capital, natural disasters, pandemics and other adverse public health developments, such as COVID-19, and other conditions. Our ability to attract and maintain a sufficient customer base, particularly in our Broadband markets, is critical to our ability to maintain a positive cash flow from operations. The foregoing events individually or collectively could affect our results.

During 2025, Shentel formed Shentel Guarantor LLC, Shentel Issuer LLC, Shentel Asset Entity I LLC and Shentel Asset Entity II LLC (collectively, the “ABS Entities”), each a bankruptcy-remote subsidiary of the Company. The ABS Entities were formed as part of a securitization transaction, pursuant to which certain of the Company’s fiber network assets and related customer contracts primarily in Virginia, Ohio, Pennsylvania, Indiana, Maryland and West Virginia were contributed to Shentel Asset Entity I LLC and Shentel Asset Entity II LLC (collectively, the “ABS Asset Entities”). As of March 31, 2026, all of the Company’s commercial fiber network assets and approximately 307,000 Glo Fiber passings were contributed to the ABS Asset Entities. The cash flow from these contributed assets are used to service the obligations under Shentel’s ABS Notes.

Our RCF requires consolidated financial statements of restricted subsidiaries under the RCF (the “Non-ABS Entities” or the “Restricted Subsidiaries”) and unrestricted subsidiaries (the “ABS Entities” or the “Unrestricted Subsidiaries”). Below is the unaudited condensed consolidating balance sheet as of March 31, 2026 and December 31, 2025, and the unaudited condensed consolidating statement of operations for the three months ended March 31, 2026.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

27

(in thousands)

28

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

Critical Accounting Policies

There have been no material changes to the critical accounting policies previously disclosed in Part II, Item 8 of our 2025 Form 10-K for the year ended December 31, 2025.

As of March 31, 2026, the Company has an outstanding debt balance of $707.4 million, which includes ABS Notes, VFN, and the RCF. Shentel’s ABS Notes, which include Class A-2 Notes and Class B Notes, have outstanding balances of $489.1 million and $78.3 million, respectively. The borrowed Class A-2 Notes and the Class B Notes incur interest at the fixed rate 5.64% and 6.03%, respectively; therefore, the Class A-2 and the Class B Notes are not subject to fluctuations in market interest rates. The borrowed RCF bears interest at a variable rate determined by one-month term SOFR, plus a margin based on net leverage. The borrowed VFN bears interest at a variable rate determined by a one-month term SOFR, plus a fixed margin.

As of March 31, 2026, the Company had $40.0 million and $100.0 million of gross variable rate debt outstanding under the VFN and RCF, respectively. The interest rate was 5.41% and 6.16% for the VFN and RCF, respectively, at March 31, 2026. An increase in market interest rates of 1.00% would add approximately $1.4 million to annual interest expense.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer (the certifying officers) have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2026. Our certifying officers concluded that our disclosure controls and procedures were effective as of March 31, 2026.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We discuss in our Annual Report on Form 10-K various risks that may materially affect our business. We use this section to update this discussion to reflect material developments since our Form 10-K was filed. As of March 31, 2026, the Company has identified an additional risk factor due to ongoing global geopolitical conflicts, including conflicts impacting energy‑producing regions, contributing to increased volatility in global oil and fuel markets. Actions taken by governments globally in response to such conflicts, including sanctions and trade restrictions, have increased uncertainty regarding global oil and fuel supply and pricing.

Continued geopolitical instability or further governmental actions globally could result in additional increases in oil and fuel costs, which may adversely affect our operating expenses and financial results.

Ongoing geopolitical tensions and military conflicts in the Middle East, including the conflict involving Iran, may adversely affect our operations. Escalating conflict in or near major oil‑producing or shipping corridors could lead to higher fuel and energy prices, increasing our transportation and other operational costs. Any sustained increase in fuel prices could negatively impact our margins and may have an adverse effect on our business and results of operations.