Good morning, everyone. Welcome to the Shenandoah Telecommunications First Quarter 2022 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 first quarter of 2022. 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. 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 of various risk factors in our SEC filings, which you are 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'll start with an update on our broadband network expansion on Slide 4. We had another record quarter for newly constructed Glo Fiber passings of 18,000 and ended the first quarter with almost 94,000 Glo Fiber passings bringing our total passings across all of our broadband networks to over 332,000. Our engineering and construction teams are executing very well, and we're well on our way to reaching our goal of 150,000 Glo passings by year-end. Turning to Slide 5. We added about 3,600 net data additions during the first quarter with Glo Fiber contributing 2,400. The Glo Fiber net additions were 14% higher than the fourth quarter 2021 and 76% higher than the first quarter of last year. We finished the quarter on a high note with almost 1,000 Glo data net adds in March and have seen this momentum continue into April. Our Incumbent Cable business added over 900 data net additions during the first quarter. With our Incumbent Cable data penetration now near 51% and approaching our expected terminal penetration in the mid-30% range, we expect slower but steady growth in the coming periods from this business. Similar to recent quarters, we had another strong quarter of delighting and retaining our customers with churn of 1.3% across all of our data products, driven by high-quality broadband services, outstanding local customer service and fair pricing. Before turning the call over to Jim, I'd like to comment on the priorities that we have set for ourselves to achieve our long-term financial goals. To accomplish our aggressive fiber first growth strategy, we've increased our focus in a couple of important areas. One priority is further investing in our people. In today's highly competitive…

Thank you, Chris, and good morning, everyone. Please refer to Slide 7 to discuss our financial results for the first quarter of 2022. Broadband revenue grew 8.3% to $59.7 million, driven by an increase of 9.3% in Residential and SMB revenue, due primarily from a 14.1% increase in broadband data RGUs. Commercial fiber revenue grew 6.9% to $9.1 million, due primarily to growth in circuits. T-Mobile backhaul revenue was consistent with the fourth quarter 2021. Adjusted EBITDA for the first quarter declined 5.4% to $21.1 million. Our broadband expenses increased at a faster rate than our revenues in the first quarter due to the following major drivers. First, $2 million of the expense increase supported the expansion of our Glo Fiber services, $1.8 million related to higher medical benefits, salary and vendor rates, $700,000related to the upgrade and conversion of our ERP, CRM and OSS systems, as Chris just noted. $600,000 was due to the change in accounting practice for cable replacements that we made in the fourth quarter of 2021. Excluding Glo Fiber and Beam negative adjusted EBITDA and the software upgrade and conversion costs, our broadband adjusted EBITDA margins would have been 41% this quarter versus the 35% reported. We expect broadband adjusted EBITDA margins to improve modestly in the second half of this year and grow over 40% by 2024, as we streamline our beam operations, Glo Fiber churns EBITDA positive and the software development cost strength. On Slide 8, Tower segment revenue grew $100,000 to $4.8 million in the first quarter, due primarily to a 5.6% increase in tenants, partially offset by a 3.6% decline in lease revenue per tenant. T-Mobile tower lease revenue was consistent with prior quarter. Adjusted EBITDA was flat with prior year period as well. Moving to Slide 9. Consolidated revenue grew 7.9% to $64.4 million in the first quarter due to growth in broadband and tower revenues of 8.3% and 3.9%, respectively. Consolidated adjusted EBITDA for the quarter grew 2.4% to $17.4 million, due primarily to an 18% decline in corporate expenses, driven by the previously announced reduction in force and lower professional fees. As announced in February, we expect to achieve $5 million in annual run rate cost savings by the end of 2022, as we implement several non-employee cost reduction initiatives. Approximately $4 million of the annual savings will kick in, in the second quarter of this year with most of the savings benefiting corporate expenses. Moving to Slide 10. Free cash flow and cash on hand declined $30 million in the first quarter. We ended the quarter with a strong liquidity position of $454 million. We expect to begin draws on the delayed draw term loans in the second quarter and expect to draw $75 million to $100 million in 2022, down slightly from prior guidance, as we now expect to receive an income tax refund of $30 million in the second half of 2022. And now, I'll turn the call over to Ed.

Thanks, Jim, and good morning. I'll begin on Slide 12, where we depict our rapidly expanding broadband network. Despite the winter weather, we had our best quarter ever for new construction, adding over 200 route miles of fiber, bringing our total to over 7,600. We have now launched Glo Fiber services in 13 markets with the addition of Blacksburg, Virginia. Year-to-date, we have added 5 new franchise agreements with a total of 21,000 new target passings, including the new market of Salisbury, Maryland. Engineering and construction work continues to ramp up in both our existing markets and the four additional markets we plan to launch in 2022, and we are well on our way to achieving our goal of over 75,000 new homes and businesses passed this year. Turning to Slide 13. We now have approximately 339,000 approved Glo passings with franchise agreements in place, and we are 75% of the way to our goal of 450,000 passings by 2026. As Chris mentioned, we had a record quarter for construction and now have service available to almost 94,000 homes and businesses. As we previously announced, Shentel has been awarded approximately $54 million in state and local grant funding, which will be used to bring gigabit broadband to over 16,000 un-served homes. Based on our preliminary design work, we anticipate being able to pass more homes with fiber than originally planned. Engineering is currently underway, and we plan to ramp up construction in the second half of 2022 after we execute the government grant contracts with each county. In total, we have a construction backlog of approximately 261,000 fiber passing in addition to the 94,000 Glo Fiber passings already constructed. Turning to Slide 14 for our operating results for our Glo Fiber business. We had another record quarter for customer growth…

Our first question will come from the line of Frank Louthan from Raymond James. You may begin.

Great. Thank you. Walk us through sort of the expectations for ramping the marketing for the broadband as you're doing the growth? And then the second question on the pace of the grant funding, when do you expect to receive those funds? And how is that going to be accounted for as a show up as revenue or is it - to offset the CapEx? And when should we expect that construction to be finished? Thanks.

So as far as the capital reimbursement from the government grant projects, we expect the cost recovery to lag three to six months behind our construction. And we're targeting roughly 2 years to complete those government grant projects that we have on the table right now. As far as marketing in the new Glo markets, one of the keys for us is a local community involvement. So we think with COVID hopefully tailing off here and things opening back up, we think that provides a big advantage to us. One of the areas we focus on is local community events. So this spring already, we've really started to engage. So we think there's a big opportunity there.

So is the seasonality of good weather coming off of Q1 going to help? Should we start to see that benefit pull through?

Yeah. We believe the good weather will not - only help this community events, but our door-to-door sales team is more successful in times with more daylight hours and better weather. So we do expect to see continued growth.

Very, good. That's great. Thank you.

Frank, on the accounting for the grants, we will account for them as A to construction. So they will offset CapEx. They will not be considered revenue.

All right. Great. That's really helpful. All right. Thank you very much.

Our next question will come from the line of Dan Day from B. Riley Securities. Your line is open.

Yeah. Morning, guys. So just first one on Glo Fiber. It looks like the ARPU over the last 1.5 years, trending down from sort of high 70s to mid-70s. Just wondering if you can sort of provide your expectations for that moving forward?

Well, I would say the downward trend was more of an accounting issue than actual ARPU really over the past year, ARPU has been steady. It has not declined. So I think going forward, we expect ARPU to be roughly in that same area. We don't expect a large increase there because most - as we said, almost half of our customers are currently taking gig service. There's probably not a lot of upside there for them to take higher speeds at this point.

Got it. Okay. And then on commercial fiber and towers, just any change in the outlook on the T-Mobile churn that we've sort of flagged over the last few months. And it looks like it sort of hasn't showed up in the revenue line on those two segments yet. So just any thoughts on the outlook for this year for those segments?

You're right. We have not seen any impact yet. I think T-Mobile has publicly said June 30 is when they will start to shut down the legacy Sprint CDMA LTE network. But we're still working with T-Mobile. And as we mentioned, have clarity from a backhaul standpoint, how many circuits are actually going to be impacted as they rationalize the network.

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

All right. Thanks, Dan.

Our next question comes from the line of Hamed Khorsand from BWS Financial. Your line is open.

Good morning. Just I wanted to understand if you're changing any of your marketing strategy with the Glo and what your reception has been like so far as far as the targeting of these customers with the increase in home passings?

So we've seen excellent response at the middle and high end of the market. We are taking a look at our rate card to see if there's what we can do to capture customers at the lower end of that market possibly. But we're very pleased with the higher end services that we're selling with almost half of our customers taking to gigabit speeds.

And is the response that you're getting in line with what you were expecting? Because like you said, you're increasing your passing, but the penetration rates declined a bit?

I would say, yes, it is in line with our expectations. And the big factor there was we released a significant number of households passed to the sales team at the end of the first quarter. And that's really what's driving down that penetration rate. But we expect that rate to ramp back up going forward.

Okay. So something like maybe a 1 to 2-year return on those home passings then?

Jim, I'll let you comment on that one?

I'm sorry, on that. Could you repeat that, please?

So as to those home passings that were just released in Q1 to expect something like a 1 to 2-year return to get the customers to pick up service?

Yeah. So on that, you referred to the - what we call the vintage slide where we show kind of the homes passed by when they were launched. You can kind of see the curve that develops. But essentially, after about 2 years, we expect to - penetration to be in the 20% range for the homes that were launched then. And that's generally about the time when those markets turn EBITDA positive. So we already have several markets EBITDA positive as we talk today. And we expect the Glo subsegment or product line to be EBITDA positive as a whole by the end of the year. So we're making great progress on monetizing the Glo fiber investments here.

Okay. Last question is, was the $30 million refund expected? And is your plan just purely to invest in the CapEx projects?

Yeah. This was due to really 2021. The refund was coming out of 2021. At the end of the year, when we actually did our final accrual and started preparing the tax return, we realized we had overpaid the estimate that we - estimated payment that we made in the fourth quarter. So that's where it's being driven from.

No, I understood. I just want to understand if the $30 million is this going to be used for CapEx? Or is it going to be used for share buybacks or dividends or anything?

Yes. No, it's going to - we're mainly focusing on reinvesting our cash to deploy Glo Fiber going forward. We have a heavy investment plan in front of us on that. So we'll continue to be reinvested back in the business.

Okay, great. Thank you.

All right. Thanks, Hamed.

Thank you. I'm not showing any further questions in the queue. I'd like to turn the call over to Jim for any closing remarks.

Well, thanks everyone for the continued interest in Shentel, and I hope everyone has a great Friday. Thank you.

And this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great week.