Good morning, everyone. Welcome to the Shenandoah Telecommunications Fourth Quarter 2020 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 fourth quarter and full year 2020. 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; Dave Heimbach, 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. .

Thanks, Kirk. We appreciate everyone joining us this morning, and I hope everyone is staying healthy and safe. As reflected on Slide 4, we had a record year of broadband results with about 18,800 high-speed data net additions, more than 2.5x higher than 2018 and '19.

Our success was driven by excellent execution of our growth strategy that we accelerated over 2 years ago when Dave joined the company. We now have 3 last-mile broadband networks tied together by over 6,700 route miles of fiber.

Our largest and most developed network, the incumbent cable business, added over 14,600 net additions due to strong demand for faster data speeds at a fair value from our customers who are increasingly working and learning from home.

Glo Fiber contributed 4,000 net additions in its first full year of operations, exceeding our expectations for construction pace, penetration rates and churn. Glo has validated our investment thesis, and we plan to accelerate the pace of expansion.

Our Beam fixed wireless broadband service was launched in late October and contributed approximately 100 net additions. Dave will provide more detail on these outstanding results later on the call. Turning to Slide 5.

We now have product offerings to serve a variety of market dynamics with our Glo Fiber service targeting higher-density urban markets and Beam fixed wireless service targeting lower-density rural areas. We now reach approximately 247,000 homes passed, an increase of over 38,000 from the end of 2019.

We plan to accelerate our investments in both Glo and Beam and expect to reach approximately 730,000 homes passed over the next 5 years. The common denominator in all of our offerings is to provide the leading high-speed Internet service available in each market, combined with superior local customer service.

With projected Glo and Beam terminal penetration rates in the low to mid-30s percent range and incumbent cable penetration in the mid-50% range, we expect our Broadband business to have industry-leading sustainable growth for the next several years. .

Thank you, Chris, and good morning, everyone. Please refer to Slide 8 to discuss our financial results for the fourth quarter.

Broadband revenue grew 7.8% to $53.7 million in the fourth quarter of 2020, driven by an increase of $4.3 million or 11.6% growth in residential and SMB revenue, due primarily from a 22.3% increase in broadband data net -- data RGUs. Commercial fiber revenue grew $700,000 or 8.7% to $8.7 million, driven by higher enterprise and backhaul connections.

RLEC and other revenue declined $1.1 million or 20.5% to $4.2 million, primarily from lower DSL subscribers and intercompany phone service. Broadband adjusted OIBDA for the fourth quarter grew $700,000 or 3.5% to $21.4 million from the same period a year ago.

The revenue increase of $3.9 million was partially offset by higher maintenance costs of $1.2 million and compensation expense of $1.8 million due to a combination of Glo Fiber and Beam start-up staffing, higher incentive expense from strong operating results and enhanced benefit plans. .

Thanks, Jim, and good morning, everyone. I'll begin on Slide 16 with our incumbent cable business in which total RGUs grew a robust 7.9% year-over-year in the fourth quarter to approximately 182,300 compared to approximately 168,900 in the same period in the prior year.

We added roughly 2,100 net broadband data RGUs in the quarter and ended the year with 98,500 data RGUS, which is an exceptional 17.4% increase to the prior year period.

We're also very pleased to report that our incumbent cable broadband data penetration rate increased from 40.6% in the fourth quarter last year to 47.2% this quarter on the continued strength of our new broadband data speeds, our new rate card, service improvements and increased demand related to the pandemic.

Incumbent cable broadband data churn in the fourth quarter continued to improve, declining 10 basis points versus the prior year quarter to an impressive 1.54%, representing the 15th consecutive quarter of year-over-year churn improvement.

Broadband data average revenue per user in the quarter increased slightly versus the prior year period to $78.14 as our new Powerhouse branded rate card leveraging an improved value proposition based on our DOCSIS 3.1 speed upgrades now comprises 74% of the base.

At the end of the fourth quarter 2019, 35% of incumbent cable data customers were on rate plans of 10 megabits per second or less, whereas now 79% are on plans of 25 megabits per second or higher with an average subscribed download speed of 83 megabits per second, which is well beyond the reach of our DSL competitors. Turning to Slide 17.

As Chris mentioned at the start of the call, we had an outstanding first full year executing our new Fiber to the Home Edge Out strategy, Glo Fiber.

Glo had approximately 5,800 total RGUs at the end of the fourth quarter with a 14.5% aggregate broadband data penetration rate across all markets comprised of just over 4,000 new Glo Fiber customer relationships. We continue to see extraordinarily low churn in our Glo Fiber high-speed data product with less than 1% churn in the quarter at 0.88%.

Broadband data ARPU was down sequentially to $77.25 in the quarter as a result of new activation revenue timing, but not due to discounting.

In fact, we continue to see a higher percentage of new subscribers electing our higher-priced gigabit speed tier, with 44% of new subs in the quarter adopting this plan comprising 40% of the overall Glo Fiber base. Our streaming TV and voice services continue to perform very well with 28% and 15% attachment rates in the quarter, respectively.

At the end of 2020, 67% of Glo Fiber customers were a single-play broadband data only, 25% of subs were in a double-play and 8% were in a triple-play. .

. Your first question comes from the line of Hamed Khorsand with BWS Financial..

I was just -- the first question I had was about the Glo Fiber.

I was looking to see -- if you're seeing this kind of penetration and results from subscribers early on, does that promote competition come in? How do you create a moat, so you're not seeing increased competition as you're seeing early success?.

Hamed, this is Dave. Yes, thanks for the question. The competitive landscape in the markets that we have targeted for Glo Fiber is universally the case where the incumbent LEC or the incumbent phone company is only providing DSL-based services and the vast majority of the share belongs to the incumbent cable company.

We believe that with the construction of a fiber network, which, as I'm sure you can appreciate, is pretty disruptive to the community that, that in and of itself, getting franchising, getting permitting and completing the construction is a competitive moat in and of itself, just having developed and deployed the infrastructure, number one.

Number two, we believe that the value proposition of a fully symmetrical, future-proof, fiber-based connection, which is far superior to anything anybody else can get in these markets, is the second aspect of that competitive moat.

And thirdly, we think that those services provided by a local company that is adding jobs and investing in these communities is going to engender a lot of goodwill amongst the subscriber base as well as the community is large.

And so we're not particularly -- there's a lot of things that keep us up at night, but the competitive encroachment of somebody else is not one of those. We're monitoring the competitive response by the cable incumbents very closely. But thus far, we've had success and don't see any signs of that slowing..

Okay.

And my other question was, are you seeing any seasonality in the business now that COVID restrictions are loosening? Or is it just too early?.

Too early for that. I'd say the only seasonality we're seeing at the start of the first quarter is we've had a lot of unpleasant weather in this part of the country, a lot of snow and ice storms, and that's hampered construction efforts and door-to-door selling efforts here more recently.

But obviously, as the weather warms up, it's going to be close to 60 degrees here today, we think that will turn..

. I am showing no further questions at this time. I would now like to turn the conference over to Jim Volk, CFO..

Well, thank you, everyone, for joining our call this morning. We look forward to keeping you updated on our progress with our broadband growth strategy in future quarters. Have a good day..

Thank you for participating. You may disconnect at this time..