Q2 2024 Shenandoah Telecommunications Co Earnings Call

Operator: Good morning, everyone. Welcome to Shenandoah Telecommunications' second quarter 2024 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.

Operator: Welcome to Shenandoah Telecommunications' second quarter 2020-24 earnings conference call. Today's conference is being recorded.

Kirk Andrews: 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 second quarter of 2024. Our results were announced in the press release distributed this morning. The presentation will be reviewing is included on the investor page at our Shentel.com website. 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.

Speaker Change: At this time, I would like to turn the conference over to Mr. Kirk Andrews, Director of Financial Planning and Analysis for Shentel.

Kirk Andrews: 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 2024. Our results were announced in a press release distributed this morning, and the presentation we'll be reviewing is included on the investor page of our Shentel.com website. 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.

Kirk Andrews: Good morning and thank you for joining us. The purpose of today's call is to review Shentel's results for the second quarter 2024. 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 Shentel.com website.

Kirk Andrews: 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.

Kirk Andrews: 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 TFO. After our prepared remarks, we will conduct a question-and-answer session.

Speaker Change: 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 .

Kirk Andrews: As always, let me refer you to slide two 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 statement. Therefore, we have provided a detailed discussion of various risk factors in our SEC filing, which you are encouraged to review. Your caution not to place undue reliance on these forward-looking statements. Except it's required by law, we undertake no obligations to publicly update or revise any forward-looking statements.

Kirk Andrews: 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 those projected. Therefore, we have provided a detailed discussion of various risk factors in our SEC filings, which you are encouraged to review.

Speaker Change: Therefore we have provided a detailed discussion of various risk factors in our SEC filings which you are encouraged to review.

Kirk Andrews: 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 statement. With that, I will now turn the call over to Chris. Go ahead, Chris.

Kirk Andrews: With that, I will now turn the call over to Chris.

Christopher French: Go ahead, Chris. Thanks, Kirk. We appreciate everyone joining us this morning and hope everyone is well. Before I discuss our second quarter financial and operating results, I'd like to comment on progress with execution of our Glow Fiber expansion strategy and network build-out. When we developed our Glow Fiber business plan five years ago, we identified a few operating metrics that we believe are key to driving returns on investment. Cost to pass the home was estimated to be in the $1,400 range. As we reached the halfway point of our targeted passings, we have seen cost increase, but we remain within this range.

Christopher French: Thanks, Kirk. We appreciate everyone joining us this morning and hope everyone is well. Before we discuss our second quarter financial and operating results, I'd like to comment on progress with the execution of our Glow Fiber Expansion Strategy and Network Buildout. When we developed our Glowfiber business plan five years ago, we identified a few operating metrics that we believe are key to driving returns on investment. The cost to pass the home was estimated to be in the $1,000 to $1,400 range.

Speaker Change: When we developed our Glowfiber business plan five years ago, we identified a few operating metrics that we believe are key to driving returns on investment.

Speaker Change: Cost to pass the home was estimated to be in the $1,000 to $1,400 range. As we reach the halfway point of our targeted passings, we have seen costs increase, but we remain within this range.

Christopher French: As we reach the halfway point of our targeted passings, we have seen costs increase, but we remain within this range. Our poo was estimated to be in the low to mid $70 range. Given higher take rates on internet speeds of 1 gigabit and above, our Glow Fiber Broadband Data ARPU is about 10% higher than our original assumptions. Terminal penetration is expected to be in the 35-40% range in most markets. While we're still in the early years of penetration for many of our market rollouts, our oldest cohorts have achieved or are trending well to reach this range. There are a couple of early indicator factors that give us confidence we will be able to repeat our success in additional markets. Our monthly turn rate continues to be in the low 1% range.

Christopher French: RPU was estimated to be in the low to mid-70 dollar range. Given higher take rates on internet speeds of 1 gig and above, our Glow Fiber broadband data RPU is about 10% higher than our original assumptions. Terminal penetration is expected to be in the 35-40% range in most markets. While we're still in the early years of penetration for many of our market rollouts, our oldest cohorts have achieved or are trending well to reach this range. There are a couple of early indicator factors that give us confidence we will be able to repeat our penetration success in additional markets.

Christopher French: Our monthly turn rate continues to be in the low 1% range. We think this industry leading metric is due to our ability to offer superior product value backed by outstanding local customer service. Our most recent Net Promoter Score for Glow Fiber broadband. Van Service was 69, which compares very favorably to low single digit or even negative scores for our cable competition. Network reliability, the fastest symmetrical broadband speeds, excellent local customer service, and fair pricing are differentiators. We also note that approximately 95% of our passings only have one broadband competitor. Lastly, we assume to view on terminal value of the fiber to the home business using traditional variables like perpetual growth rates and weighted average cost to capital.

Speaker Change: Our monthly turn rate continues to be in the low 1% range. We think this industry-leading metric is due to our ability to offer superior product value backed by outstanding local customer service.

Christopher French: We think this industry-leading metric is due to our ability to offer superior product value backed by outstanding local customer service. Our most recent net promoter score for GloFiber broadband service was 69, which compares very favorably to low single-digit or even negative scores for our cable competition. Network reliability, the fastest symmetrical broadband speeds, excellent local customer service, and fair pricing are our differentiators. We also note that approximately 95% of our customers only have one broadband competitor.

Speaker Change: Our most recent net promoter score for GloFiber broadband service was 69, which compares very favorably to low single digit or even negative scores for our cable competition.

Speaker Change: Network reliability, the fastest symmetrical broadband speeds, excellent local customer service, and fair pricing are our differentiators.

Christopher French: Lastly, we assume the view on the terminal value of the fiber-to-the-home business using traditional variables like perpetual growth rates and weighted average cost of capital. With recent announcements of fiber-to-the-home operators selling their businesses, it appears the precedent transaction value per passing for Greenfield Fiber Networks, with growth characteristics similar to Glow Fiber, is multiples of our cost-to-pass and higher than our own model assumption. In summary, we're pleased with our progress on the Glowfiber expansion to date, and these recent transactions have reaffirmed our view on potential long-term value creation.

Christopher French: With recent announcements of fiber to the home operators selling their businesses, it appears the precedent transaction value per passing for Greenfield fiber networks with growth characteristics similar to Glow Fiber are multiples of our cost to pass and higher than our own model assumption.

Speaker Change: With recent announcements of fiber-to-the-home operators selling their businesses, it appears the precedent transaction value per passing for greenfield fiber networks with growth characteristics similar to glow fiber are multiples of our cost-to-pass and higher than our own model assumption.

Christopher French: In summary, we're pleased with our glow fiber expansion progress to date in these recent transactions that reaffirmed our view on the potential long-term value creation.

Christopher French: As we shared on our last earnings call, we completed the acquisition of a high-based Horizon Telecom on April 1st. We're very pleased with our integration progress to date, including conversions of the back office systems, and we expect to complete our system integration work by the first quarter of 2025. As Jim will share later, we've already made significant progress achieving our synergy targets.

Christopher French: As we shared on our last earnings call, we completed the acquisition of Ohio-based Horizon Telecom on April 1st. We're very pleased with our integration progress to date, including conversions of the back office systems, and we expect to complete our system integration work by the first quarter of 2025. As Jim will share later, we've already made significant progress toward achieving our synergy target. I'll now turn to slide four to give an update on our strategy and execution.

Speaker Change: As we shared on our last earnings call, we completed the acquisition of Ohio-based Horizon Telecom on April 1st.

Speaker Change: As Jim will share later, we've already made significant progress achieving our synergy targets.

Christopher French: Now turn to slide 4 to give an update on our strategy execution. We ended the second quarter with approximately 298,000 glow fiber passings, including just under 16,000 we acquired as part of the Horizon acquisition. This gives a 63% growth rate from a year ago. As of the end of June, we have over 53,000 Glow Fiber customers representing a 62% year-over-year growth rate. We enter July with very good sales momentum, and what is seasonally the strongest quarter for growth sands.

Christopher French: We ended the second quarter with approximately 298,000 Glowfiber passes, including just under 16,000 we acquired as part of the Horizon acquisition. This gives a 63% growth rate from a year ago. As of the end of June, we had over 53,000 Glowfiber customers, representing a 62% year-over-year growth rate. We enter July with very good sales momentum in what is seasonally the strongest quarter for Gross Ads. With that, I'll now turn the call over to Jim to review the details of our financial results.

Speaker Change: We enter July with very good sales momentum in what is seasonally the strongest quarter for gross ads.

James Volk: With that, I'll now turn to call over to Jim to review the details of our financial results. Thank you, Chris, and good morning. I'll start on slide 6 for our financial results for the second quarter. Revenue grew 29% to 85.8 million in the second quarter, 2024. The former horizon markets contributed 16.7 million a revenue. Excluding the former horizon markets, revenues grew 3.6% over the same period a year ago, due to 5.4 million or 67% growth in glow fiber revenue, partially offset by declines in commercial, RLAC, and incumbent broadband market revenues. Glow fiber expansion markets grew broadband data RGUs by 56% and data R2 by 9%, driving the 3.6% revenue growth.

Speaker Change: With that, I'll now turn the call over to Jim to review the details of our financial results.

James Volk: Thank you, Chris, and good morning. I'll start with slide six for our financial results for the second quarter. Revenue grew 29% to $85.8 million in the second quarter of 2024. The former Horizon Markets contributed $16.7 million of revenue. Excluding the former horizon markets, revenues grew 3.6% over the same period a year ago due to $5.4 million, or 67% growth, in glow fiber revenue, partially offset by declines in commercial, Arlec, and incumbent broadband market revenue.

Jim Volk: Revenue grew 29% to $85.8 million in the second quarter of 2024. The former Horizon Markets contributed $16.7 million of revenue.

James Volk: Global fiber expansion markets grew broadband data RGUs by 56% and data R2 by 9%, driving the 3.6% revenue growth. However, commercial revenue declined due to the expected decline in T-Mobile revenue. As reported throughout 2023, T-Mobile disconnected backhaul circuits as part of their decommissioning of the former Sprint network.

Jim Volk: Glowfiber expansion markets grew broadband data RGUs by 56% and data R2 by 9% driving the 3.6% revenue growth.

James Volk: Commercial revenue declined due to the expected decline in T-Mobile revenue. As reported throughout 2023, T-Mobile disconnected that call circuits as part of their decommissioning of the former Sprint network. The revenue declines reflect a full period of these disconnects and a reduction in related early termination.

Speaker Change: As reported throughout 2023, T-Mobile disconnected backhaul circuits as part of their decommissioning of the former Sprint network. The revenue declines reflects a full period of these disconnects and a reduction in related early termination fees.

James Volk: The revenue declines reflect a full period of these disconnects and a reduction in related early termination. We still expect about $7 million in lower T-Mobile revenue in 2024 compared to 2023, and for commercial fiber revenue to return to mid to high single-digit growth rates starting in 2025, as previously disclosed. The Arlek revenue decline was driven by DSL migrations to our faster broadband services and a decline in government support revenue. We expect government support revenue to increase in the second half of 2024.

James Volk: and the United States. We still expect about $7 million in lower T-Mobile revenue in 2024 compared to 2023, and for commercial fiber revenue to return to mid- to high-single-digit growth rates starting in 2025 as previously disclosed. Our lack revenue decline was driven by DSL vibrations to our faster broadband services and in declining government support revenues. We expect the government support revenue to increase in the second half of 2024. In Cumban broadband market revenue decline was due to lower data subscribers in the approximately 20% of our pastings where we face another broadband provider. Although our competitive response has been effective in maintaining our food levels and reducing turn in these markets, gross ads have declined in these markets, driving the decline in the subscribers of revenue.

Speaker Change: RLEC revenue decline was driven by DSL migrations to our faster broadband services and a decline in government support revenue.

Speaker Change: We expect the government support revenue to increase in the second half of 2024.

James Volk: Incumbent broadband market revenue decline was due to lower data subscribers in approximately 20% of our casts where we face another broadband provider. Although our competitive response has been effective in maintaining our food levels and reducing churn in these markets, gross head has declined in these markets, driving the decline in subscribers and revenue.

Speaker Change: Although our competitive response has been effective in maintaining our food levels and reducing churn in these markets, gross heads have declined in these markets driving the decline in subscribers and revenue.

James Volk: Adjusted EBITDAG grew 20% to 23.3 million in the second quarter of 2024. The former Horizon markets contributed 3.7 million of adjusted EBITDAG. Excluding Horizon, adjusted EBITDAG grew slightly from the same period a year ago. The slower than usual growth in adjusted EBITDAG was due primarily to the expected decline in T-Mobile revenue and non-recurring adjustments that we don't expect to recur in the second half of the year. Adjusted EBITDAG margin declined from 29% to 27% due to the same drivers and less sale and lower margin in the former Horizon business. We expect margins to improve in future quarters as we realize the full 10.6 million of target expense synergies.

James Volk: Adjusted EBITDA grew 20% to $23.3 million in the second quarter of 2024. The former Horizon Markets contributed $3.7 million of adjusted EBITDA. Excluding Horizon, Adjusted EBITDA grew slightly from the same period a year ago.

Speaker Change: Thank you very much.

James Volk: The slower-than-usual growth in adjusted EBITDA was due primarily to the expected decline in T-Mobile revenue and non-recurring adjustments that we don't expect to recur in the second half of the year. Adjusted EBITDA margin declined from 29% to 27% due to the same drivers and less scale and lower margin in the former Horizon business. We expect margins to improve in future quarters as we realize the full $10.6 million of target expense energy.

James Volk: As noted on slide 7, we realized 4.6 million, or 43%, of our annual run rate target synergies as we exit the second quarter. I would now like to update you on our liquidity position and debt maturities as of the end of the second quarter. As reflected on slide 8, our liquidity position was $412 million, including about $44 million in cash, $225 million in available delays for all-term loans, and 143 million in available revolver capacity.

James Volk: As noted on slide 7, we realize 4.6 million, or 43% of our annual run rate target synergies, as we exit the second quarter.

James Volk: I now like to update you on our liquidity position and debt maturities as of the end of the second quarter. As reflected on slide 8, our liquidity position was 412 million, including about 44 million cash, 225 million in available, delayed draw-altern loans, and 143 million in available revolver capacity. We are well positioned to fund our business plan. As of June 30, we have 297 million of outstanding debt. The first major maturity is June 2026. Our net leverage ratio based on annualized second quarter 2024 adjusted EBITDAG is 2.7 times. For bank loan purposes, net leverage is approximately 2.2 times when you consider addbacks for expected synergies and glow fiber market losses.

Speaker Change: I'd now like to update you on our liquidity position and debt maturities as of the end of the second quarter.

Speaker Change: As reflected on slide 8, our liquidity position was $412 million, including about $44 million in cash, $225 million in available delay-through-all-term loans, and $143 million in available revolver capacity.

James Volk: We are well positioned to fund our business plan. As of June 30th, we have $297 million of outstanding debt. The first major maturity is June 2026. Our net leverage ratio based on annualized second quarter 2024 adjusted EBITDA is 2.7 times. For bank loan purposes, net leverage is approximately 2.2 times when you consider add-backs for expected synergies and glow fiber market loss. Now, I'll turn the call over to Ed.

Speaker Change: We are well positioned to fund our business plan.

Speaker Change: As of June 30th, we have $297 million of outstanding debt.

James Volk: And now, I'll turn the call over to you.

Edward McKay: Thank you, Jim, and good morning. I'll start on slide 10 with an update on our Integrated Broadband Network. With the launch of Multi-Gigabit Broadband Services in Sussex County, Delaware, and Worms in Virginia, we now offer glow fiber in 27 markets across six states. We continue to build additional passings in our existing markets, and we have engineering permitting and/or construction and progress in five additional markets, including our newest market of State. Our extensive fiber optic network for connectable broadband markets now consists of over 16,000 route miles of fiber. As shown on slide 11, we now have approved franchise agreements in place for 633,000 glow-fiber passengers, including 62,000 in our new Ohio expansion markets.

Edward McKay: Thank you, Jim, and good morning. I'll start on slide 10 with an update on our integrated broadband. With the launch of multi-gigabit broadband services in Sussex County, Delaware, and Warrenton, Virginia, we now offer Glowfiber in 27 markets across six states, continue to build additional fiber routes in our existing markets, and we have engineering permitting and or construction in progress in five additional markets, including our newest market of Steubenville, Ohio. Our extensive fiber optic network that connects our broadband markets now consists of over 16,000 route miles of fiber.

Speaker Change: And now I'll turn the call over to Ed.

Ed McKay: With the launch of multi-gigabit broadband services in Sussex County, Delaware and Warrington, Virginia, we now offer Glowfiber in 27 markets across six states.

Ed McKay: We continue to build additional passings in our existing markets, and we have engineering permitting and or construction in progress in five additional markets, including our newest market of Steubenville, Ohio.

Edward McKay: As shown on slide 11, we now have approved franchise agreements in place for 633,000 glow fiber pathings, including 62,000 in our new Ohio expansion line. In addition, we have 28,000 fiber paths approved as part of government grant projects in unserved areas, including 4,500 in the former Horizon Market.

Ed McKay: As shown on slide 11, we now have approved franchise agreements in place for 633,000 glow fiber pathings, including 62,000 in our new Ohio expansion markets.

Edward McKay: In addition, we have 28,000 passings approved as part of government grant projects and unserved areas, including 4,500 in the form of horizon markets. We constructed almost 24,000 new fiber passings in the second quarter, bringing our total fiber passings to more than 302,000, including our new glow-fiber expansion markets in Ohio and government-subsidized builds. We are pleased with our construction pace, and we built 30% more passings in the second quarter of 2024 than we built in the second quarter of 2023. Our construction pipeline is robust with 358,000 additional passings in various stages, engineering, permitting, and construction, including 51,000 passings in Ohio.

Edward McKay: We constructed almost 24,000 new fiber passings in the second quarter, bringing our total fiber passings to more than 302,000, including our new blow fiber expansion markets in Ohio and government-subsidized builds. We are pleased with our construction pace, and we built 30% more fiber passages in the second quarter of 2024 than we built in the second quarter of 2023. Our construction pipeline is robust with 358,000 additional pipelines in various stages of engineering, permitting, and construction, including 51,000 pipelines in Ohio.

Ed McKay: We are pleased with our construction pace and we built 30% more passings in the second quarter of 2024 than we built in the second quarter of 2023.

Edward McKay: As we ramp up glow-fiber construction in our expansion markets, we continue to see strong customer growth, as shown on slide 12. Year over year, we increased our number of glow-fiber customers by 62% and ended the second quarter at over 53,000. This includes almost 2,000 customers from the Horizon acquisition, as well as almost 5,000 net ads in the second quarter. Our total number of data, video, and voice revenue generating units reached almost 65,000 at the end of the quarter, up almost 58% year over year. Glow-fiber broadband data penetration rates in our mid-Atlantic markets increased from 18% a year ago to 18.2% at the end of the second quarter, and we constructed over 99,000 additional passings in these markets during that same time period.

Edward McKay: As we ramp up gold fiber construction in our expansion markets, we continue to see strong customer growth, as shown on slide 12. Year-over-year, we increased our number of Glowfiber customers by 62 percent and ended the second quarter at over 53,000. This includes almost 2,000 customers from the Horizon acquisition as well as almost 5,000 net ads in the second quarter.

Ed McKay: As we ramp up glow fiber construction in our expansion markets, we continue to see strong customer growth as shown on slide 12.

Ed McKay: This includes almost 2,000 customers from the Horizon acquisition, as well as almost 5,000 net ads in the second quarter.

Edward McKay: Our total number of data, video, and voice revenue generating units reached almost 65,000 at the end of the quarter, up almost 58% year over year. Glow fiber broadband data penetration rates in our mid-Atlantic markets increased from 18% a year ago to 18.2% at the end of the second quarter, and we constructed over 99,000 additional paths in these markets during that same time period. With the addition of former Horizon markets with 12.8% penetration, our overall broadband data penetration rate declined slightly to 17.9% at the end of the second quarter.

Ed McKay: Low fiber broadband data penetration rates in our Mid-Atlantic markets increased from 18 percent a year ago to 18.2 percent at the end of the second quarter and we constructed over 99,000 additional passings in these markets during that same time period.

Edward McKay: With the addition of former horizon markets, with 12.8% penetration, our overall broadband data penetration rate declined slightly to 17.9% at the end of the second quarter. Our broadband data average revenue per user increased over 8% year over year due to a combination of rate adjustments, additional equipment revenue, and customers selecting higher speed tiers. In the second quarter, 50% of our residential subscribers adopted speed tiers of 1 gig or higher, including approximately 7% that took speeds of 2 gig or higher. Our broadband data turned for the second quarter was 1.18%, a slight increase year over year driven by customers moving out of our markets.

Ed McKay: With the addition of former Horizon markets with 12.8% penetration, our overall broadband data penetration rate declined slightly to 17.9% at the end of the second quarter.

Edward McKay: Our broadband data average revenue per user increased over 8% year over year due to a combination of rate adjustments, additional equipment revenue, and customers selecting higher speed tiers. In the second quarter, 50% of our residential subscribers adopted speed tiers of one gigabit or higher, including approximately 7% that took speeds of two gigabits or higher. Our broadband data churn for the second quarter was 1.18%, a slight increase year over year driven by customers moving out of our market. I've determined that the competitors remain extremely low and consistent with the previous year.

Ed McKay: Our broadband data turn for the second quarter was 1.18%, a slight increase year over year driven by customers moving out of our markets.

Edward McKay: Our turn to competitors remained extremely low and consistent with the previous year. On slide 13, we've updated our data penetration rates as our markets mature, and we continue to increase penetration rates across all our cohorts. The first year after launching a Glow-fiber market, we typically see data penetration rates of approximately 17%, and after three years, penetration rates typically exceed 25%. Ultimately, we expect to reach average terminal penetration rates of about 37% five to six years after launching service in a new area. The decline of expected terminal penetration from 38% to 37% is due to the addition of planned, Ohio Glow-fiber markets, which have lower expected terminal penetration rates than our minibulanic markets.

Edward McKay: On slide 13, we've updated our data penetration rates as our markets mature, and we continue to increase penetration rates across all our cohorts. The first year after launching a Glow Fiber market, we typically see data penetration rates of approximately 17%, and after 3 years, penetration rates typically exceed 25%. Ultimately, we expect to reach average terminal penetration rates of about 37 percent five to six years after launching service in a new area.

Ed McKay: The first year after launching a Glow Fiber market, we typically see data penetration rates of approximately 17%, and after 3 years, penetration rates typically exceed 25%.

Edward McKay: The decline of expected terminal penetration from 38% to 37% is due to the addition of planned Ohio Glow Fiber, which has lower expected terminal penetration rates than our mid-Atlantic market. Our underwriting models align terminal penetration with market demographics. Although expected market penetration may be lower in our Ohio markets, we also expect average construction costs for passing homes to be lower, and we still expect returns on investments to be similar to those we've shared previously.

Ed McKay: The decline of expected terminal penetration from 38% to 37% is due to the addition of planned Ohio glow fiber markets.

Edward McKay: Markets. Our underwriting models align terminal penetration with market demographics. Although expected market penetration may be lower in our Ohio markets, we also expect average construction costs to pass homes to be lower, and we still expect returns on investments to be similar to those we've shared previously.

Ed McKay: which have lower expected terminal penetration rates than our mid-Atlantic markets.

Ed McKay: Although expected market penetration may be lower in our Ohio markets, we also expect average construction costs to pass homes to be lower, and we still expect returns on investments to be similar to those we've shared previously.

Edward McKay: Let's shift to our operating results for our incumbent broadband markets on Slide 14. These metrics cover our Shentel incumbent cable markets and former Horizon telephone markets with fiber of the home passes. Broadband data subscribers increase slightly year-over-year to 111,000, driven by the acquisition of approximately 3,000 broadband data customers for Horizon. Total data, voice and video revenue generating units remain consistent year-over-year and approximately 186,000, with RGUs acquired from Horizon offsetting losses in Shentel incumbent cable markets. Our overall data penetration decreased to 47.8% at the end of the second quarter, with penetration in the Shentel incumbent cable markets and the Horizon incumbent telephone markets of 49.6% and 21.6%, respectively.

Edward McKay: Let's shift to our operating results for our incumbent broadband markets on slide 14. These metrics cover our Shentel incumbent cable markets and former Horizon Telephone markets with fiber-to-the-home patterns. Broadband data subscribers increased slightly year over year to 111,000, driven by the acquisition of approximately 3,000 broadband data customers from Horizon. Total data, voice, and video revenue-generating units remain consistent year-over-year at approximately 186,000, with RGUs acquired from Horizon offsetting losses in Shentel incumbent cable markets.

Speaker Change: Thank you for joining us.

Speaker Change: Let's shift to our operating results for our incumbent broadband markets on slide 14.

Speaker Change: These metrics cover our Shentel incumbent cable markets and former Horizon Telephone markets with fiber-to-the-home passes.

Speaker Change: Broadband data subscribers increased slightly year-over-year to 111,000 driven by the acquisition of approximately 3,000 broadband data customers from Horizon.

Speaker Change: Total data, voice, and video revenue generating units remain consistent year over year at approximately 186,000 with RGUs acquired from Horizon offsetting losses in Shentel incumbent cable markets.

Edward McKay: Our overall data penetration decreased to 47.8% at the end of the second quarter, with penetration in the Shentel incumbent cable markets and the Verizon incumbent telephone markets of 49.6% and 21.6%, respectively. We believe there is upside in the former Horizon markets to improve penetration and gain parity with the cable providers. Over the past year, we've constructed over 4,000 fiber paths as part of government grant projects in unserved areas in our incumbent cable market.

Speaker Change: Our overall data penetration decreased to 47.8% at the end of the second quarter, with penetration in the Shentel incumbent cable markets and the Verizon incumbent telephone markets of 49.6% and 21.6% respectively.

Edward McKay: We believe there is upside in the form of horizon markets to improve penetration and gain parity with the cable provider. Over the past year, we've constructed over 4,000 fiber passings as part of government grant projects and un-served areas in our incumbent cable markets. We have a total of 20,000 fiber passings approved as part of government-subsidized projects, and we see significant customer growth opportunities in these un-served areas as we complete construction over the next few years. Despite the competitive pressure in portions of some incumbent markets, broadband data are increased by 2.4% year-over-year to more than $84, offsetting most of the decrease in revenue from fewer RGUs.

Speaker Change: We believe there is an upside in the former Horizon markets to improve penetration and gain parity with the cable provider.

Speaker Change: Over the past year we've constructed over 4,000 fiber passings as part of government grant projects in unserved areas in our incumbent cable markets.

Edward McKay: We have a total of 28,000 fiber passes approved as part of government-subsidized projects, and we see significant customer growth opportunities in these unserved areas as we complete construction over the next few years. Despite the competitive pressure in portions of some incumbent markets, broadband data ARPU increased by 2.4% year-over-year to more than $84, offsetting most of the decrease in revenue from fewer RGUs. Broadband data churn improved to 1.69% for the second quarter, an improvement of 12 basis points year over year as we increased broadband speeds over the past year, giving customers higher speeds and more value for the same price.

Speaker Change: Despite the competitive pressure in portions of some incumbent markets, broadband data ARPU increased by 2.4% year-over-year to more than $84, offsetting most of the decrease in revenue from fewer RGUs.

Edward McKay: Broadband data turn approved of 1.69% for the second quarter and improvement of 12 basis points year-over-year as we increase broadband speeds of the past year, giving customers higher speeds and more value for the same price. We see limited impact from the end of the Affordable Connectivity Program, with ACP customer disconnects accounting for about 15 basis points of the turn in the second quarter. At the end of the quarter, only about 3.5% of our incumbent broadband customers were on plans previously supported by ACP. We continued off of these customers a low price plan, and more than 80% of the former ACP customers were current on the balance at the end of the second quarter.

Speaker Change: Broadband data churn improved to 1.69% for the second quarter and improvement of 12 basis points year-over-year as we increase broadband speeds over the past year giving customers higher speeds and more value for the same price.

Edward McKay: We've seen limited impact from the end of the Affordable Connectivity Program, with ACP customer disconnections accounting for about 15 basis points of the churn in the second quarter. At the end of the quarter, only about 3.5% of our incumbent broadband customers were on plans previously supported by ACP. We continue to offer these customers a low price plan, and more than 80% of the former ACP customers were current on their balance at the end of the second quarter.

Speaker Change: We've seen limited impact from the end of the affordable connectivity program with ACP customer disconnects accounting for about 15 basis points of the churn in the second quarter.

Speaker Change: At the end of the quarter, only about 3.5% of our incumbent broadband customers were on plans previously supported by ACP.

Speaker Change: We continue to offer these customers a low price plan and more than 80% of the former ACP customers were current on the balance at the end of the second quarter.

Edward McKay: I will move on to slide 15 where we highlight our broadband commercial fiber business. In the second quarter, we booked new sales totally in $154,000 monthly revenue, up over 50% year-over-year with the addition of the former Horizon Markets. Our new installed monthly revenue for the second quarter was approximately $186,000, and we finished the quarter with an installation backlog of $701,000 monthly revenue. Excluding the impact of the T-Mobile network rationalization that Jim discussed earlier, monthly churning compression decreased year-over-year to 0.5% as our sales and network operations teams continue to take great care of our customers.

Edward McKay: I will move on to slide 15, where we highlight our broadband commercial fiber. In the second quarter, we booked new sales totaling $154,000 in monthly revenue, up over 50% year-over-year with the addition of the former Horizon Mark. Our new installed monthly revenue for the second quarter was approximately $186,000, and we finished the quarter with an installation backlog of $701,000 in monthly revenue. Excluding the impact of the T-Mobile network rationalization that Jim discussed earlier, monthly churn and compression decreased year-over-year to 0.5% as our sales and network operations teams continue to take great care of our customers.

Speaker Change: I will move on to slide 15 where we highlight our broadband commercial fiber business.

Speaker Change: In the second quarter, we booked new sales totaling $154,000 in monthly revenue, up over 50% year-over-year with the addition of the former Horizon Markets.

Speaker Change: Excluding the impact of the T-Mobile network rationalization that Jim discussed earlier, monthly churn and compression decreased year-over-year to 0.5 percent as our sales and network operations teams continue to take great care of our customers.

Edward McKay: and Dr. Smith.

Edward McKay: Our year-to-date capital spending in full-year guidance for 2024 are reflected on slide 16. Total capital investments through the end of the second quarter totaled approximately 151 million, including approximately 11 million in the form of Horizon markets. Our Glow Fiber and government-subsidized investments have been in line with our expectations year-to-date, and we plan to finish the year with capital investments in the $290-$329 million range, including between 30 and 39 million in form of horizon markets.

Edward McKay: Our year-to-date capital spending and full year guidance for 2024 are reflected on slide 16. Total capital investments through the end of the second quarter totaled approximately $151 million, including approximately $11 million in the former horizon. Our Glofiber and government-subsidized investments have been in line with our expectations year to date, and we plan to finish the year with capital investments in the $290 to $329 million range, including between $30 and $39 million in the former Hirad Marks. Thank you very much, and Operator, we're now ready for questions.

Speaker Change: Our year-to-date capital spending and full year guidance for 2024 are reflected on slide 16.

Speaker Change: Total capital investments through the end of the second quarter totaled approximately $151 million, including approximately $11 million in the former Horizon Markets.

Speaker Change: Our Glofiber and government subsidized investments have been in line with our expectations year-to-date and we plan to finish the year with capital investments in the 290 to 329 million dollar range, including between 30 and 39 million in former horizon markets.

Operator: Thank you very much, and operator, we're now ready for questions. Now begin the question and answer session. If you have dialed in and would like to ask the question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Operator: Now we begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue, and your first question comes from the line of Frank Louthan with Raymond James. Please go ahead.

Frank Louthan: Sorry. Hey, great. Thank you.

Speaker Change: Now begin the question and answer session.

Operator: If you are called upon to ask your question and are listening via loudspeaker on your device, please speak up, raise your hands, and ensure that your phone is not on mute when asking your question. Again, press star one to join the queue.

Frank Louthan: I wanted to see, have you seen any changes or indication that Verizon is expanding its fiber upgrades in your markets? And then can you walk us through the pace of the tower decommissionings by T-Mobile? How much have they dropped this year, and what kind of notices have you gotten for the rest of the year on that business thing? Hey, Frank, this is it.

Frank Louthan: And your first question comes from the line of Frank Lutton with Raymond James. Please go ahead. Sorry, hey, great. Thank you. I wanted to see if have you seen any changes or indication that Verizon is expanding its fiber upgrades in your market.

Frank Louthan: And then can you walk us through the pace of the tower decommissioning by T-Mobile? How much have they dropped this year? And what kind of notices have you gotten for the rest of the year on that business? Thanks.

Speaker Change: And then, can you walk us through the pace of the tower decommissionings by T-Mobile? How much have they dropped this year, and what kind of notices have you gotten for the rest of the year on that business? Thanks.

Edward McKay: Frank, this is it. I'll comment first on Verizon and kick it over to Jim to talk about T-Mobile. But from a Verizon fiber at home standpoint, we've not seen any material activity in our markets. We've seen a few isolated neighborhoods where they've built fiber at home, but then a significant announcement or construction projects underway that we've seen.

Edward McKay: Frank, this is Ed. I'll comment first on Verizon and then hand it over to Jim to talk about T-Mobile. But from a Verizon fiber-to-the-home standpoint, we've not seen any material activity in our markets. We've seen a few isolated neighborhoods where they've built fiber-to-the-home, but no significant announcements or construction projects.

James Volk: Yeah, and Frank, could you repeat the question on T-Mobile, please? Yeah, what can you just quantify sort of the pace of revenue that's been lost as T-Mobile's kind of decommissioned things this year and any indications or notices they've given you for what that will, you know, will look like for the full years. How much of that will go away in 2024? Okay.

James Volk: Yeah, and Frank, could you repeat the question on T-Mobile, please?

Speaker Change: Thank you. Bye.

Frank Louthan: Yeah, can you just quantify sort of the pace or revenue that you know that's been lost as T-Mobile kind of decommissioned things this year and any indications or notices they've given you for what that will look like for the full years? How much of that will go away in 2024?

Speaker Change: Yeah, and Frank, could you repeat the question on T-Mobile, please?

James Volk: Okay. Yeah.

James Volk: Yeah, so Frank, most of the, almost all of the disconnects for the back hall occurred in 23. We've had a few lingering ones that came in in the first half of 24, but relatively very small dollars. So the guidance that we shared with you earlier in the year was we expect about 7 million less in T-Mobile revenue in 24 compared to 23. Today, it looks like we're about three and a half million of that, so far, has come through. So it looks like we're right on schedule of where we thought we would be. Okay. All right.

Speaker Change: Okay yeah so Frank most of the almost all of the disconnects for the backhaul occurred in 23. We've had a few lingering ones that came in in the first half of 24 but relatively very small dollars.

James Volk: So, Frank, almost all of the disconnects for the backhaul occurred in 23. We've had a few lingering ones that came in in the first half of 24, but relatively relatively small amounts. So, the guidance that we shared with you earlier in the year was that we expect about 7 million less in T-Mobile revenue in 24 compared to 23. To date, it looks like we're about 3.5 million of that so far have come through. So, it looks like we're right on schedule.

Speaker Change: So...

James Volk: Okay, all right, that's helpful. Frank, just to add to it, we have about 170 backhaul circuits that are under long-term contracts. I think we have six years left on the contracts. So we're basically at a steady pace now from that revenue stream. And of course, our team is working to expand that relationship and add additional backhaul circuits down the road. But we've hit the point where we're at the steady state, if that also helps answer your question. Okay, great. And then, as far as your 2026 debt stack, when does that go current in 2025? And what conversations have you had about trying to refinance that?

James Volk: And the rest, yeah, Frank, just that that's what we have about 170 back hall circuits that are under long-term contracts. You know, I think we have six years left on the contracts. So, so we're basically at a steady pace now from that revenue streams. And of course, our team is working to expand that relationship and add additional, you know, back hall circuits down the road. But we've hit the point that we're at the steady state. Defense also helps answer your question. James.

Speaker Change: Frank, just to add to it, we have about 170 backhaul circuits that are under long-term contracts. I think we have six years left on the contracts.

James Volk: Okay, great.

James Volk: And then, as far as your 2026 debt stack, when does that go current in 2025, and what conversations have you had about trying to refinance that? Yeah, so 150 million of our term loans mature as in June of 26. I haven't had any concrete conversations with our banks on refinancing at this stage. I'm kind of targeting the second half the next year to take care of doing the refinancing. And whether that's under the current term facility that we have today with our banks or whether that's on a new facility to be determined. We're looking at different options of how to minimize or cost of that.

James Volk: Yeah, so $150 million of our term loans mature in June of 2026. I haven't had any concrete conversations with our banks on refinancing at this stage. I am kind of targeting the second half of next year to take care of doing the refinancing. And whether that's under the current term facility that we have today with our banks or whether that's on a new facility to be determined. We're looking at different options to minimize our cost of debt.

Speaker Change: Yeah, so $150 million of our term loans matures in June of 2026.

Speaker Change: I am kind of targeting the second half of next year to take care of doing the refinancing.

Frank Louthan: Okay, great. Thank you.

Frank Louthan: Okay, great.

Frank Louthan: Thank you.

Frank Louthan: All right. Thanks, Frank.

Hamed Khorsand: The next question comes from the line of Hammond, Khorsand, with BWS Financial. Please go ahead. Hi, good morning. So first, the question I had is, do you feel obligated or pressure in any way to lower pricing in your markets where you're seeing competition at all or in another format is also where you're entering with low fiber for the first time? Do you think that you have to enter with a lower rate card?

Operator: Your next question comes from the line of Hamed Khorsand with BWES Financial. Please go ahead.

Frank: All right, thanks Frank.

Hamed Khorsand: Hi, good morning. So the first question I had is do you feel obligated or pressured in any way to lower prices in your markets where you're seeing competition at all or in another format is also where you're entering, you know, with glow fiber for the first time? Do you think that you have to enter with a lower rate card?

Speaker Change: And another format is also where you're entering with Glowfiber for the first time. Do you think that you have to enter with a lower rate card?

Edward McKay: This is Ed. I'll start off with that. We really don't, at this point, 95% of our passings in glow fiber don't have a fiber competitor, so we believe we have the superior product from a speed standpoint, and we're really focused on local customer service and fair, straightforward pricing. So we do not feel the need to offer significant discounts as we go into these markets, and we've had success adding customers without doing that.

Edward McKay: Yeah, I mean, this is Ed.

Edward McKay: I'll start over that. We really don't at this point. 95% of our passings in low fiber don't have a fiber competitor. So we believe we have the superior product from a speed standpoint. We're really focused on local customer service, and if they're straightforward, pricey. So we do not feel the need to offer significant discounts as we go into these markets, and we've had success adding customers without doing that. Okay, and those customers are coming on with you as a low fiber. Are they quickly opting for the higher speeds, or are they transitioning after six or twelve months to a different speed?

Speaker Change: We really don't at this point, 95% of our passings in glow fiber don't have a fiber competitor.

Edward McKay: Okay, and when those customers are coming on board with you as a global fiber, are they quickly opting for the higher speeds? Or are they transitioning after, you know, six or 12 months to a different speed?

Speaker Change: Okay, and those customers that are coming on with you as a Glow Fiber, are they quickly opting for the higher speeds or are they transitioning after you know six or twelve months to a different speed?

Edward McKay: We do see some upgrades, but out of the gates, over half of our customers are selecting gig speeds or higher. Last quarter, it was 43% selecting one gig, and then actually 7% selected two gig speeds. So, out of the gate, we're seeing customers self-select the higher speeds.

Edward McKay: We do see some upgrades, but out of the gate, over half of our customers are selecting gigabit speeds or higher. Last quarter, it was 43% selecting one gigabit, and then actually 7% selected two gigabit speeds. So out of the gate, we're seeing customers self-select higher speeds.

Speaker Change: We do see some upgrades, but out of the gates, you know, over half of our customers are selecting gig speeds or higher.

Edward McKay: All right, my last question was about the CAPEX plan for this year. Given the commentary about cost rising, any plan to accelerate some of the CAPEX? So, at this point, we don't plan to accelerate the CAPEX. Really, what's keeping us from doing that is permitting and make-ready work for poll attachments. That's the biggest challenge that's keeping our construction pace where it is currently. So, at this point, we don't plan to accelerate that to the CAPEX.

Hamed Khorsand: All right, my last question was about the CapEx plan for this year. Given the commentary about costs rising, any plan to accelerate some of the CapEx?

Edward McKay: So at this point, we don't plan to accelerate the CAPEX. Really, what's keeping us from doing that is permitting and making ready work for pole attachments. That's the biggest challenge. It's keeping our construction pace where it is currently. So I'd say at this point, we don't plan to accelerate that CAPEX.

Speaker Change: So, at this point, we don't plan to accelerate the CAPEX. Really, what's keeping us from doing that is permitting and make-ready work for pole attachments.

Speaker Change: That's the biggest challenge. It's keeping our construction pace where it is currently. So, I'd say at this point, we don't plan to accelerate that capex.

Speaker Change: Thank you.

James Volk: That concludes our Q&A session.

James Volk: That concludes our Q&A session. I will now turn the conference back over to Jim Volk, Senior Vice President of Finance and CFO, for closing remarks.

Speaker Change: Thank you.

James Volk: I will now turn the conference back over to James Ball, Senior Vice President of Finance and CFL, for closing remarks. Thank you for all, everyone, for joining us today. We look forward to updating on our fiber first strategy and progress in the future quarters. Have a good day.

James Volk: Thank you everyone for joining us today. We look forward to updating you on our Fiber First strategy and progress in the coming quarters. Have a good day.

Speaker Change: Thank you for all for everyone for joining us today. We look forward to updating our Fiber First strategy and progress in the future quarters. Have a good day.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now go.

Operator: You may now disconnect.

Operator: Please wait; the conference will begin shortly.