Good morning, everyone. Welcome to Shenandoah Telecommunications Second Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Kirk Andrews, Director of Financial Planning and Analysis for Shentel. Please go ahead.

Good morning, and thank you for joining us. The purpose of today's call is to review Shentel's results for the second quarter of 2021. Our results were announced in a press release distributed last night, and the presentation we'll be reviewing is included on the Investor page at our website, www.shentel.com. Please note that an audio replay of this call will be made available later today. The details are set forth in the press release announcing this call.

Thanks, Kirk. We appreciate everyone joining us this morning, and I hope everyone is staying healthy and safe. It took 3 years since Sprint announced their merger with T-Mobile, but we're very pleased to have completed the $1.94 billion sale of our Wireless assets and operations to T-Mobile on July 1.The sale successfully completes a 25-year chapter in the history of Shentel and allows us to temporarily delever our business, return significant value to our shareholders, and fully focus on our rapidly growing broadband business. Immediately following the sale, we've repaid all of our outstanding term loans totaling $681 million, and our Board of Directors approved an $18.75 per share special dividend, totaling approximately $937 million. The special dividend will be paid on August 2.As we look forward to growing our Broadband business, we closed on a $400 million new financing facility that will provide growth capital to expand our broadband networks from 279,000 homes and business passings to 730,000 passings. Jim will provide more details on the financing shortly. During the second quarter, we also began to transform our cost structure around our broadband and tower businesses. We announced workforce reductions in April that will allow us to realize $1.7 million in annual run rate cost savings in continuing operations as we exit the second quarter. As we complete these previously announced reductions, we expect the annual run rate cost savings to grow to $3.3 million as we exit the third quarter and $4 million as we enter 2022.Shifting now to our broadband network expansion on Slide 5. We continued our strong construction momentum in the second quarter with 19,000 new passings being added with the total passings now just under 279,000. Our Glo Fiber branded Fiber to the Home business added 12,000 new passings, doubling the pace of the last 2 quarters, including the launch of service in the Virginia markets of Roanoke and Lynchburg in April. Our Beam fixed wireless network added over 6,500 passings during the quarter with our Beam service now available to over 21,000 homes in 7 Virginia and West Virginia counties. We expect our integrated broadband network to reach approximately 329,000 passings by the end of 2021.Turning to Slide 6. Broadband data net additions were over 3,900, despite a seasonal bump in churn due primarily to college student move-outs in several of our markets.

Thank you, Chris, and good morning, everyone. Please refer to Slide 8 to discuss our financial results for the second quarter. Broadband revenues grew 12.2% to $56.2 million, driven by an increase of $6.3 million or 16.7% in residential and SMB revenue, due primarily from a 20.3% increase in broadband data RGUs. RLEC and other revenue declined $400,000 or 8.8% to $3.7 million, primarily from fewer DSL subscribers and lower government support. Broadband adjusted OIBDA for the second quarter grew $500,000 or 2.5% to $20.3 million from the same period a year ago. The revenue increase of $6.1 million was partially offset by $5.6 million in higher expenses. $3 million of the increase supported the expansion of our Glo Fiber and Beam services, including $1.2 million of compensation, commission expense, $1.1 million of advertising and telemarketing expenses and $700,000 of maintenance and line costs. Software and professional fees increased $1 million due to enhancements in our -- to our back office systems. We also incurred a recurring increase in video programming fees totaling $500,000 and a non-recurring increase in franchise and regulatory fees of $500,000.On Slide 9. Tower segment revenues grew 8.3% to $4.6 million, and adjusted OIBDA grew 9.3% to $3 million for the second quarter of 2021, due to an 8.5% growth in tenants. Moving to Slide 10. Consolidated revenues grew 11.7% to $60.7 million in the second quarter of 2021. Consolidated adjusted OIBDA for the quarter grew 29.6% to $16.3 million. The increases were primarily due to strong Broadband and Tower revenue growth and a 30% decline in corporate expenses. The decline in corporate expenses were due to a combination of lower compensation, legal and professional fees.

Thanks, Jim, and good morning, everyone. I'll begin on Slide 15, where we show our 3 primary product offerings. Our Shentel incumbent cable networks serve both small towns and rural areas with gigabit broadband, voice services and cable TV services across 211,000 homes in businesses in Virginia, West Virginia, Maryland and Kentucky. OurGlo Fiber service targets higher density urban and suburban areas, while our Beam fixed wireless Internet service targets lower density rural areas where it can be cost prohibitive to build fiber or cable. We now passed 279,000 homes and businesses with our broadband services. This represents an increase of over 58,500 or almost 27% from the second quarter of 2020.Our Glo Fiber service is starting to edge-out of our original markets to areas with less existing Shentel fiber and into lower density suburban neighborhoods where utilities tend to be underground. These suburban areas have a higher cost to pass, but also typically have a higher penetration rate. Based on our performance to-date, we have increased our target terminal penetration for Glo to 38%, and our target cost per passing has also increased to between $1,000 and $1,400 as we construct in these lower density areas. We continue to expect our Broadband business to have industry-leading sustainable growth as we build out our networks over the next several years.

Our first question comes from the line of Ric Prentiss with Raymond James.

Just a couple of questions. First, as we listen to what's out there, we get a lot of questions on supply chain and COVID related questions. Talk to us a little bit about your supply chain building out the Beam and the Glo as well as labor force to hit kind of the targets for the homes passed.

Yes, Ric, this is Ed. I'll comment on that. We have seen a definite increase in the lead-times required for raw materials for our Glo Fiber construction, and that includes customer premise equipment as well. We're now ordering fiber over a year in advance. We're ordering CPE a year in advance as well. And we have a lot of fiber right now in our warehouse. So up to this point, we have not had any impact on our construction schedule because of supply chain issues, but we're monitoring that very closely. From a labor perspective, we're monitoring that closely as well, but we have not had any problems at this point, getting contractors into our network to build our networks.

And then, obviously, been a very busy summer so far, looks like continue to be busy. You mentioned a couple of times opportunistic on the M&A front. Can you talk to us little bit about what is happening out there in the broadband universe, both maybe near your footprint and anything outside of footprint?

I'd say near our footprint, there's just not a lot of opportunities right now, pretty high end valuations, but we're being very disciplined in our M&A approach. We believe we have significant upside in our organic growth plan, but we're monitoring this closely.

And anything outside footprint, any large ones that are being shopped around out there?

Nothing at this point to comment on. No.

And the final one for me, on the tower business. How should we think about the potential for churn? You mentioned T-Mobile's 7.5% of consolidated revenues. How should we think about what might happen with the tower portfolio? And related question, you mentioned 160 orders backlog, what's kind of the process time you guys are targeting to get amendment and new colos on the towers?

It's typically a fairly long process. We'll likely see some of that revenue in the fourth quarter, but most of that revenue from new tenants, particularly a DISH Network build out, we won't see the impact of that until 2022. But with T-Mobile, we certainly think there will be some rationalization of the network. We don't have the exact details at this point. But in general, we don't expect that rationalization to occur until after they turn down the Sprint CDMA network. We don't expect that to happen until 2022.As far as cell site backhaul that we provide now to T-Mobile, that's governed under a separate agreement, has industry standard early terminations provisions embedded in that. And from a tower portfolio standpoint, we don't consider that to be a strategic asset. So we would consider monetizing that to fund a more transformative broadband acquisition as opposed to issuing credit in the future or issuing equity in the future.

Our next question comes from the line of Dan Day with B. Riley Securities.

So the 300,000/215,000 homes passed targets for Glo and Beam respectively, can you maybe just provide some commentary on -- and that's for 2026, I believe. What needs to happen for you to either kind of materially exceed or miss those numbers? Just kind of -- and same question for the targeted penetration rates, just sort of looking for the level of variance and then the puts and takes on what we might need to think about for those numbers in the coming years?

Well, we feel very good about the construction plan at this point. As we've said earlier, we already have over 200,000 franchised households passed in the pipeline where we're actively doing engineering and construction work right now. So we feel very good about the construction there. We are keeping an eye on some of the universal broadband funding that is out there. We believe that's probably more of an opportunity right now than a threat to us. That funding is not going to be available in areas that we serve, either with our incumbent broadband business or with Glo. We do think with the level of funding that's proposed, in the state of Virginia, for example, there could be additional opportunity for us to build out Glo Fiber to the home. But as that Glo Fiber to the home opportunity increases, that could decrease our total addressable market for our Beam service, so we have the ability to shift resources from Beam to Glo as needed, and we're prepared to do that.

And then a follow-up on pricing for Beam. Just -- I know it's very early days in that product, only a couple of hundred subscribers right now. Just 2/3, it sounds like are in sort of that middle tier. How do you think about how -- it's always tough pricing out a new product. How do you think about maybe tweaking pricing? Do you think you have it right, especially for that higher tier, maybe to do switching from satellite? Just anything on pricing would be great.

We think we have it -- right, we have 3 tiers currently. We start out with $60 per month, 25 meg plan, then moved to a $50 per month plan -- or excuse me, 50 meg per month at $80. And then we have a higher 100 meg plan at $160 per month. But I think with these rural customers, reliability is most important. So we believe we're priced very competitively to go up against other wireless ISPs that may already be there. And typically, they could be charging $100 per month for a 10 meg service. And we also believe we have an advantage over satellite and DSL. So I think reliability is the key. We believe these customers will pay to get that reliable service out in these rural markets.

The EBV program, can you provide any commentary around that? Is it so far mostly existing customers upgrading speeds, or are you seeing a material number of new customers coming in because of that program? And just anything around that would be great.

So total right now, we have about 450 EBB customers. The vast majority of them have been existing customers. So we're not seeing a whole lot of traction with new customers at this point. But that is something with our door-to-door sales team, we are having leave behind materials so that customers can get into the EBB program.

Our next question comes from the line of Hamed Khorsand with BWS Financial.

So first off, I just want to ask, if you're seeing any changes in the consumer habits as far as subscription and churn now that COVID restrictions are much looser?

Churn is up slightly, as we mentioned, but it is much lower than it was for pre-COVID levels. So we have not seen a dramatic change. A slight increase in churn, but it's still very, very positive across all of our product lines.

But your adds in cable were down quite a bit. Is that a return to the seasonality of pre-COVID?

Correct. The net adds were down quite a bit. But yes, that is going -- that's the tailwinds from COVID are decreasing. So we expect to be more in line with our net adds this quarter going forward as opposed to how we were last year in the middle of COVID. We are starting to see a shift in our net adds towards Glo and Beam. Over 50% of our net adds in the past quarter were Glo and Beam, and we expect to see that continue to accelerate. But in our incumbent cable business, we think this quarter is -- represents what we're likely to see going forward.

And as far as T-Mobile being 7.5% of revenue, how long would that last for? Do you have a time frame from T-Mobile?

We do not yet. We still don't have details on their plan at this point. We are engaging conversations with them, but we just don't have an update for that at this time.

And then I know previous questions about the acquisitions, but is there any plans to make acquisitions that you would make a comment like that?

Yes. Ed, if I could jump in on this one. We have a great organic growth plan that's going to allow us to grow the business quite a bit in the next 5 years and create a lot of shareholder value. I would view us as an opportunistic M&A player here. We are looking for acquisitions. We've done some small tuck-ins, and we'll continue to do that and maybe something bigger if the right opportunity crosses.

But that was really the reason why I was asking questions, because you've laid out a CapEx program that kind of is robust. So I was trying to see like, where do you think it's lacking that you would think that acquisition is cheaper to do it? Or you want to grow somewhere.

Yes. On acquisitions, generally the tuck-ins are just unique opportunities. They tend to be very accretive. We're buying. They're not -- those deals aren't as frothy as some of the larger deals that have been announced in the last year or so. And then for something more transformative, it would be a scale opportunity. It will allow us to have a bigger platform and a bigger scale and hopefully allow us to expand our Glo and Beam products that we're launching.

Thank you. There are no further questions at this time. I would now like to turn the call over to Mr. Jim Volk for closing remarks.

Well, thank you again for everyone joining our call and following our progress. July has been a pretty busy month. Early August, we'll come kind of to the end of our transformation process here with the special dividend being paid. And we just want to thank everyone for being loyal shareholders, and I look forward to keeping you updated on our progress going forward. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.