Good morning, everyone. Welcome to Shenandoah Telecommunications Third 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.

Good morning, and thank you for joining us. The purpose of today's call is to review Shentel's results for the third quarter of 2021. Our results were announced in our 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. With us on the call today are Chris French, President and Chief Executive Officer; Ed McKay, Executive Vice President and Chief Operating Officer; and Jim Volk, Senior Vice President of Finance and CFO. After our prepared remarks, we will conduct a question-and-answer session. As always, let me refer you to Slide 2 of the presentation, which contains our Safe Harbor disclaimer, and remind you that this conference call may include forward-looking statements subject to certain risks and uncertainties. These may cause our actual results to differ materially from the statements. Therefore, we have provided a detailed discussion on various risk factors in our SEC filings, which you're encouraged to review. You're 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. And with that, I'll now turn the call over to Chris. Go ahead, Chris.

Thanks, Kirk. We appreciate everyone joining us this morning and I hope everyone is staying healthy and safe. I'd like to start by providing an update on our strategy and future capital allocation plans. We continue to target 730,000 broadband passings by 2026. With strong momentum on business development, construction and sales. We are upgrading our target for glow fiber from 300,000 to 450,000 service goal addresses by 2026. Our government relations team continues to get a warm embrace by municipalities looking to offer a choice of broadband providers for their local residences and businesses. We have executed 17 new franchise agreements in 2021, adding approximately 160,000 future passings for a total of 304,000 passings with franchise approvals. Further, we have an attractive funnel of additional markets that have met our investment criteria, which we expect will lead to franchise agreements in the coming quarters. We're very bullish about our Glo Fiber results and prospects and over the next five years plan to invest more than $500 million building fiber to the home and connecting customers. In addition to investing in Glo, our team has been analyzing new opportunities to build broadband to unserved homes. Shentel has a long history investing in the latest technologies, so rural communities can enjoy the same state-of-the-art telecommunications services that are provided in rural markets -- excuse me in urban markets. Our proven track record positions as well to partner with county and state governments to develop cost effective and timely broadband solutions to reach these unserved locations. And unserved homes currently defined by most government agencies as a home without access to speeds of 25 megabits per second down and 3 megabits per second up. In the five states that we operate in. There are over $1.3 billion in government grant funds available…

Thank you, Chris. And good morning, everyone. Please refer to Slide 9 to discuss our financial results for the third quarter. Broadband revenue grew 14.2% to $57.9 million, driven by an increase of $5.3 million or 13.4% in residential and SMB revenue, due primarily from a 17% increase in broadband data RGUs. Commercial fiber revenue grew $1.8 million or 24% due to a combination of growth and customer connections, 700,000 non-recurring reduction in amortize revenue in 2020, and 500,000 non-recurring fiber sales type leases signed in 2021. Broadband adjusted OIBDA for the third quarter grew $3 million or 15.4% to $22.6 million for the same period a year ago. The revenue increase of $7.2 million was partially offset by $4.2 million in higher expenses. $2 million of the expense increase supported the expansion of our Glo Fiber and beam services. The incumbent cable expenses increased $2.2 million, primarily due to $1 million in higher maintenance costs and 600,000 in higher software fees due to enhancements in our back office systems. On Slide 10, Tower segment revenue declined 1.2% to $4.4 million in the third quarter 2021. And it's increased 13% offset by a 14.1% reduction in the average revenue per tenant. During the third quarter, T-Mobile exercised an option to convert 80 assumed tower leases to a month to month term, resulting in a change in revenue recognition accounting driving the decline. We anticipate these leases will churn in the next year or two, as T-Mobile rationalizes their network in our former wireless market. T-Mobile will continue to be our largest tenant post-rationalization with 182 leases with an average lease term of approximately seven years. We also signed our first lease with DISH, as they build out their national network. We anticipate there is a sizable opportunity with DISH to…

Thanks, Jim and good morning. I'll begin on Slide 15. As Chris indicated earlier, we've updated our target 2026 passings for each of our services. Our Shentel incumbent cable networks are now expected to reach 220,000 homes and businesses as we age out our HFC networks and build a new housing developments. We've increased our Glo Fiber target passings from 300,000 to 450,000 in our higher density, Tier 3 and 4 markets. With the influx of government grant funding for unserved areas we are reducing our beam fixed wireless target passings to 28,000. These beam sites are either currently in service or are already under construction, and we expect to be complete by year-end. We plan to pause further beam expansion until we have better visibility in areas where government grants are awarded. Finally, we have identified approximately 32,000 unserved homes where we are pursuing government grants to subsidize building broadband to these communities. We have proposed fiber to the home, fixed wireless or hybrid fiber and fixed wireless networks depending on the terrain and available funding. We expect terminal penetration to be approximately 70% in these rural unserved markets where we build fiber -- the only true broadband provider. The cost per passing net of subsidies will be dependent on grant awards and network architecture. Our total target passings by 2026 remains at 730,000. But with fiber passes now approximately 64% of total passings and fixed wireless only 6%. We expect to continue to have a broadband business have industry leading unsustainable growth as we build out our networks over the next several years. Our shift to a fiber first strategy is really driven by two factors. First, our success in securing Glo Fiber franchise agreements and ramping up construction. And second, the large influx of government broadband funding…

Thank you. Our first question comes from Ric Prentiss with Raymond James. Your line is open.

Hey, good morning.

Good morning, Ric.

Thanks for taking questions, couple of question guys. First, on the dividend obviously, resizing it to the new size of the company post the wire sale. But walk us little bit about, why pay a dividend at all, I know you've got 62 years of history that you are in a capital deployment phase, and it is a very modest yielding dividend. So just walk us through the logic of how you thought through the different options?

Hey, Ric, this is Chris. I guess the dividend is trying to balance multiple issues. As you're aware, we still have a large retail shareholder base. So there is somewhat of a tradition in history of paying an annual dividend. And as you recognize we had like that when we point out that we've done it for 62 consecutive years now. So it is -- we did resize it. Obviously, the company is significantly smaller post the sale of wireless. But we also think with the growth prospects that we have. And our pretty fortress strength balance sheet that we have the ability to both invest in those growth opportunities to create more value. And then hopefully over time is that growth phase in returns that we're able to share some of those returns with shareholders.

And how about stock buybacks. Remind us where you are as far as the availability to do stock buyback and appetite?

Jim can correct me, but I think we're able to. But at this point, given the growth prospects that we have, any excess cash that we have we're planning to reinvest in the growth of the business. And of course, we're keeping an eye also on the discussions in the federal government right now with some discussion about potential tax on buybacks. So we don't know how that's going to play out either.

Yes, Rick, we do have capacity in our credit agreement to do stock buybacks if we so choose. But as Chris mentioned, we think the best use of our capital right now is to invest in fiber to them.

Okay, a couple other quick ones. On Slide 11 you've point out the corporate costs. Obviously, the debts in this quarter . You mentioned, we're taking more costs out of the corporate side $3.3 million run rate. In fourth quarter another $4 million run rate in early '22. So should we then assume that corporate costs instead of like on Slide 12 in the $28.9 million. I will connect it down to $21 million and tend to go even lower than that?

Ric, there is some expense reductions that we're seeing this year that won't repeat next year. Specifically related to the -- to our incentive bonus. We do expect that to go up. And that's about a $1 million lower expenses in the third quarter than what we would typically have. So I would guide you for the near-term about expenses of around $7 million a quarter is probably about right. And then as we've talked about in the past. We do this is an area that we're focusing on. But it will take us a couple years to reduce it meaningfully down to where we can get our total SG&A expenses to be about 20% of revenues, which is our goal as we get three or four years down the road. And that will be due to a combination of lowering expenses and also growing top-line revenues as well and scaling our Glo Fiber and Beam businesses.

Okay, last one for me probably to Ed. You guys mentioned how you really got good service compared to the copper DSL out as the Glo Fiber out there. Where do people turn to, I had an investor ask the other day, I thought it was really good question. If DSL is the only choice as the people that are just leaving the category completely or what where are they turning to? And what's kind of the exit called why they're leaving?

A lot of cases their turn is moving out of the area. We do have some involuntary churn in there. But in most cases, they are not moving to the DSL competitor in the market.

Okay, thanks guys.

Thank you, Rick.

Thank you. Our next question comes from Dan Day with B. Riley Securities. Your line is open.

Yes, good morning guys. Thanks for taking my question. Just wondering if obviously big pivot here to the fiber as opposed to the fixed wireless, just -- if you could share some of the feedback you've gotten from municipalities on why they heavily prefer the fiber build as opposed to fixed wireless? Is it concerns around the price or the speed or reliability, whatever on the fixed wireless side, or kind of what's driving that and what's changed in your thinking?

So really, it's the state that's driving that. And Virginia is the one that's furthest along right now, but it's really speeds that are driving the decision toward fiber. And with the level of funding that's out there, there is significant more dollars that can fund fiber to the home, whether that's Shentel, building the fiber to the home or another provider building fiber to home areas, we believe there is going to be a lot more fiber, as opposed to fixed wireless in the future.

Yes, great. Just -- and then with the fiber build, you know, you're kind of two years in, I think October 19 was the first one. Can you maybe talk a little bit about your marketing approach here, what's changed, what you've kind of learned works and doesn't work and getting people to take the product. And then specifically interested in how promotional you're kind of willing to get maybe one year teaser rates or something like that to induce that switch from the incumbent cable providers?

Yes, up to this point, we have not done much in the area of promotions, we've been able to win customers just based on the superior the speeds that we're offering particularly on the upstream speeds. But as far as competitive response, we have not seen anything that we haven't expected from the incumbent cable companies up to this point, nothing that would change our projections, we are considering options for additional promotions going forward to continue to grow that customer base.

Dan, the one thing I add there, I think one of our keys to success with Glo Fiber is we're differentiating by our customer service, when they call -- they're talking to somebody locally, Virginia, and we only think that makes a very big difference.

Got you. Thank you guys, and then last one for me. It looks like in the markets you've launched so far, you're getting about 12 to 13 points of penetration a year. So that gets you about three or a little over three years to get to that terminal 38% penetration rate. Is that the right way to think about it. You think you can accelerate that timeline? And anything around that would be great.

Yes, I think that's generally the right timeline. It is somewhat market specific, depending on the demographics in that market. Really, I think that's generally the right timeline. Those markets that we launched back in the fourth quarter of 2019, they're in the low 30s right now, as far as penetration rate.

Great. All right, guys, appreciate you taking my questions. I'll turn it over.

All right. Thanks, Dan.

Thank you. Our next question comes from Hamed Khorsand with BWS Financial. Your line is open.

Hey, good morning. I just wanted to see if the risk here on the Beam pass about, it sounds like you're depending on government to create the funding to for future investments. I mean, is there considerable risk that you're taking on that front? It just ends up being a dormant business.

So at this point, we think there's still significant upside in the areas that we have Beam deployed with the rules right now for funding that government funding is not available in those areas where we've already deployed that, that Beam broadband service. So we're continuing to support the Beam product. We don't have any plan to terminate that service. And we do believe there's significant upside there with those existing households every pass.

Okay, and then on the franchises for your Glo Fiber expansion. Is that really more about the local governments looking at fiber as the main draw or are they saying like, look, there's wireless opportunity as well? Is that becoming a competitive factor if you're winning those franchises?

For Glo, the focus of those municipalities is they want fiber in there, and they want a competitor in there. So I'd say at this point, fixed wireless is not is not really on the radar screen, within these municipalities, they want fiber, and then they want local companies, the fact that we're local has helped us get a lot of traction with these municipalities as far as getting the franchise agreements.

Okay, have you seen any changes as far as the adoption curve is concerned with Glo Fiber as now you're in multiple markets with customers adopting service, and how much you have to invest in to get those incremental customers?

We've not seen significant changes at this point. But as we go into these new markets, brand awareness is very, very important. We're targeting really local marketing. We've assigned Regional Sales Directors in each one of our markets that specifically targets that markets, Phil's relationships in that market and takes care of both the marketing and the sales. So we think that local focus will help drive growth.

Okay, great. Thank you.

Thank you, and I'm currently showing no further questions at this time, I'd like to turn the call back over to Jim Volk for closing remarks.

Well, I want to thank everyone for joining our call early on a Friday morning. I hope everybody has a great day and a great weekend and we look forward to continuing to cover story in future quarters. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.