Good morning, everyone. Welcome to Shenandoah Telecommunications Second Quarter 2023 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 second quarter 2023. Our results were announced in a press release distributed this morning, 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 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. And with that, I will now turn the call over to Chris. Go ahead, Chris.

Thanks, Kirk. We appreciate everyone joining us this morning, and I hope everyone is well. I'm pleased with the continuation of our Fiber First growth during the second quarter and with the solid execution across the board. As noted on Slide 4, we added almost 18,000 new Glo Fiber passings in the second quarter and have increased passing 63% year-over-year to just under 183,000. Our sales team added 4,000 data subscribers in the second quarter and has grown the Glo Fiber customer base by 92% over the past year. Glo Fiber revenue grew 101% over the same quarter last year and represented 78% of our consolidated revenue growth. We expect these Glo Fiber revenue trends will continue and be a catalyst for creating shareholder value over the next several years. Our Cable and Commercial businesses also reported solid recurring revenue growth of $900,000 and $500,000, respectively. With strong expense management, our Broadband segment converted 77% of the revenue growth into adjusted EBITDA growth during the second quarter, driving adjusted EBITDA margins to 39% or 300 basis points higher than the same period a year ago. Fiber networks are extremely scalable, driving high-speed data gross margins of more than 80%. With that, I'll now turn the call over to Jim to review the details of our financial results.

Thank you, Chris, and good morning, everyone. Please refer to Slide 6 to review our financial results for the second quarter of 2023. Broadband revenues grew $5.3 million or 8.6% to $66.7 million. As Chris noted, Glo Fiber revenue was the primary catalyst, growing $4.1 million or over 100% from the prior year period with strong customer growth and a slight increase in ARPU. Cable market revenues grew $900,000 or 2.2% due to growth in ARPU and excluding the impact from Beam decommissioning. Commercial fiber revenue grew $900,000 or 9.8% to $10.3 million due to $500,000 in recurring revenue from circuit growth and $400,000 in non-recurring early termination fees related to the backhaul disconnects in the quarter. As previously announced, T-Mobile is planning to shut down the former Sprint network and disconnected 22 backhaul sites during the second quarter. We expect an additional 151 backhaul disconnects later in the year as part of this network rationalization. Broadband adjusted EBITDA grew 18.4% to $26.1 million in the second quarter when compared to the same period in 2022 due to revenue growth of $5.3 million, partially offset by $1.2 million in higher expenses due to higher advertising expense, primarily to support the Glo Fiber expansion. As Chris mentioned earlier, we continue to see the benefits of operating leverage of our Glo Fiber business. Adjusted EBITDA margins grew to 39% from 36% in the same period last year and consistent with the first quarter of 2023, which included higher early termination fees in T-Mobile. On Slide 7, Tower segment revenue and adjusted EBITDA were in line with the same period 2022. We have not recognized any churn from T-Mobile to date, though we have received notices that they plan to terminate 53 leases as part of the previously announced decommissioning of the Sprint…

Thanks, Jim. And good morning, everyone. I'll begin on Slide 12 with an update on our integrated Broadband network that now consists of over 9,000 route miles of fiber, and we have confirmed that we have no lead sheath cables in our network. We had another record quarter for fiber construction as we built over 350 new route miles for Glo Fiber passing, commercial fiber customers and government grant projects in unserved areas. This was an improvement of more than 20% over our construction rate in the first quarter, and we are on track to accelerate our number of fiber passings in the second half of the year. At the end of the second quarter, we turned up our newest Glo Fiber markets of Shippensburg and Waynesboro in Pennsylvania, and we now have Glo Fiber multi-gigabit service available in 19 markets with four additional market launches planned by the end of the year. We also added new franchise agreements to bring Glo Fiber to 18,000 additional homes and businesses, including the new market of Orange in Virginia and additional boroughs and townships adjacent to our existing markets in Pennsylvania. Turning to Slide 13. Our number of approved Glo Fiber passings has grown to 478,000 with 65 franchise agreements in 23 markets across five states. In addition, we continue to have success with government grant awards. And in the second quarter, we were awarded $6.3 million in grants to bring Broadband to over 2,000 additional unserved homes surrounding our Cable footprint. We've now been awarded a total of more than $87 million in grants that will enable us to extend Broadband to over 27,000 unserved locations, primarily through Fiber to the Home technology. In the second quarter, we added over 18,000 new fiber passings, including 400 new government subsidized passings, and…

[Operator Instructions] Our first question comes from the line of Frank Louthan of Raymond James.

Great. Thank you. Is there anything you could do to sort of accelerate the marketing and penetration of Broadband? Just curious if we start to see a broader ramp with that with the passings. And then walk us through sort of longer term, your leverage plans. Where do you see yourself peaking on leverage? And then how quickly can that EBITDA grow to bring that back down? And where are you comfortable sort of in the long term as a baseline target? Thanks.

Yeah. So thanks for the question, Frank. So this is Ed. I'll start. So as far as ramping up the Glo customer subscriber base, we are continuing to focus on sales through our web sales channel. That's our most cost-effective channel. We have seen a significant increase year-over-year in the percentage of sales through the web. We have also started to offer some additional promotional activity on that web channel to encourage sales there, and we're seeing good traction from there. And then I'll let Jim answer the question on the leverage.

Yeah, Frank, we expect peak leverage to get to about 3.9 times in '25 and then we -- it should start to decline, and by '27, we should be down to about 2.5 times and declining well beyond that as we start -- as Glo Fiber starts to kick off a lot of free cash flow.

All right, great. That's helpful. Thank you.

Thank you. Stand by for our next question. Our next question come from the line of Dan Day of B. Riley.

Just a quick one for me. Any updated thoughts on how you're looking at M&A as your capital allocation lever? You talked a little bit about it in past, just whether it's something you're actively looking into or, just, sort of view it more as -- maybe it's something that comes maybe it doesn't?

Yeah, Dan. Again, we continue to look for -- to be opportunistic and look for another [beachhead] (ph) to continue our Glo Fiber expansion strategy. And that could come in the form of buying an incumbent Cable business, buying a fiber business, we would entertain either one. Ideally, it would be sizable enough that would have a good strong base business, but with the opportunity to expand out from there to, again, kind of replicate what we're doing in the Mid-Atlantic area in other parts of the country.

This is the second straight quarter with the EBITDA margin over 31% combined. At the end of the year, I think it's a little higher than we had been modeling and talking about just [Technical Difficulty] whether there's anything -- the T-Mobile network rationalization, that's keeping that a little higher? Any knowledge in that moving forward?

Yeah. So Dan, we're still -- T-Mobile is still in the process of rationalizing the network. And as we -- Ed and I both mentioned on the call, there's more churn to come from that. We expect for the 12 months following the end of that process, which is likely to be this year, that the margin will probably go down by 200 basis points. But then after that, you should -- with all that flushed through the system, you should start to see margins grow pretty rapidly as Glo Fiber continues to grow and penetrate. And we're thinking going back to the Broadband business, getting the Broadband EBITDA margin should be in the 40% range by, call it, ‘25 and then growing increasingly year after year from there.

Do you have a goal for when you expect just Glo Fiber itself to the EBITDA positive?

Dan, we turned EBITDA positive at the end of last year, and we are EBITDA positive this year. Likely to be single digits in terms of EBITDA, but we are -- we have been positive all of '23.

[Operator Instructions] Our next question comes from the line of Hamed Khorsand of BWS Financial.

Hey, good morning. So first question is, is there anything going on in Glo as far as marketing is concerned or competition is concerned where the quarterly adds fluctuate even though your passings continue to go up?

No, I would say historically, the second quarter is the slowest quarter for us. But really no significant changes from a competitive standpoint. In fact, we've seen the competition back off on some of their more competitive promotional offers that they previously were making.

And with the warmer months kicking in as of Q2, should I expect CapEx would -- plan just accelerates here before winter comes around. Will there be new passings in Q3?

Yeah. So, a lot of the construction we did in Q2 was in preparation for passings in Q3. A lot of the markets we're building in right now are markets where we did not have existing fiber infrastructure in place. So we had to establish a pop and then build fiber out to the neighborhoods. A lot of our construction in the second quarter was building that fiber to get out to the neighborhoods. And so we think we're well positioned to accelerate construction in the second half of the year.

Okay. And then the cash you received from the spectrum sale, is that just going to be used purely for the CapEx program?

Yes, Hamed. We plan to reinvest that into the Broadband business.

Okay, great. Thank you.

Yeah. Thanks, Hamed.

[Operator Instructions] As there are no more questions in queue, I would now like to turn the conference back to Jim Volk for closing remarks. Sir?

Yes. Thank you all for joining. We look forward to updating you on our progress in future quarters. Have a great day.

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