Shenandoah Telecommunications Co

Good morning, everyone. Welcome to Shenandoah Telecommunications' fourth 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 at 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 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.chentel.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 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 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. 2023 was another strong year for Shentel as we continued executing our Glow Fiber expansion plan. As you can see on slide four, consolidated revenues and adjusted EBITDA grew approximately 8% and 19% respectively, driven by Glowfiber subscriber growth. Since our first full year of launching Glowfiber in 2020, our consolidated revenue and adjusted EBITDA have grown at a compound annual growth rate of approximately 9% and 18% respectively. We believe this is an industry leading pace among publicly traded broadband companies. As noted on slide five, we had over 41,700 Glowfiber subscribers as of December 2023, an increase of over 71% compared to 2022, and over 10 times 2020 subscribers. Glowfiber revenues have grown over 160% per year over the past three years, fueling our industry-leading consolidated revenue and adjusted EBITDA growth rates. Moving to slide six, we added over 86,000 new Glowfiber passings in 2023, almost a 20% increase from 2022, and over a threefold increase from 2020 levels. Our sales team has more than kept pace with our construction team. We added over 17,000 Glowfiber net customers representing a more than 32% increase over 2022 and a 62% annual growth rate since 2020. We expect to accelerate the pace of Glowfiber construction and sales again in the next year, continuing the annual improvements we've made in each of the past three years. Before I turn the call over to Jim, I'd like to give an update on our pending acquisition of Horizon Telecom. We've received most of the required regulatory approvals and expect to close the transaction in the second quarter, depending on the timing of the remaining regulatory approval. The Shentel and Horizon teams have been working well together in planning for the integration of the two companies. We now expect most of the system integration work to be completed in the first quarter of 2025. 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. I will start with our broadband financial results for 2023 on slide 8. Broadband revenue grew $20.3 million, or 8.1%, to $269.3 million. As Chris just mentioned, globe fiber revenue was the primary catalyst, growing $16.8 million, or 92%, from the prior year with strong customer growth of over 71%, and a 4% increase in data subscriber ARPU. Cable market revenues, excluding the impact of our discontinued beam service, grew 2.5 million, or 1.4%, due primarily to 1.8% growth in data subscriber ARPU. Commercial fiber revenue grew 3.3 million, or 8.5%, due primarily to 3 million in non-recurring early termination fees related to backhaul circuit disconnect. T-Mobile disconnected 338 backhaul circuits during 2023 as part of the previously announced shutdown of the former Sprint network. With most of the T-Mobile backhaul disconnects now behind us, we expect commercial fiber revenue in 2024 to decline by $3 million in lower backhaul revenue from a full year of lower T-Mobile backhaul circuits, $3 million in lower non-recurring early termination fees, and $1 million in additional T-Mobile churn in 2024, partially offset by continued growth in other customer segments. We expect commercial fiber revenue to return to mid to high single-digit growth rates starting in 2025. Broadband adjusted EBITDA grew $15.8 million, or 17.6%, to $105.8 million in 2023 when compared to 2022. due to the previously mentioned revenue growth of $20.3 million, partially offset by $4.6 million in higher advertising expenses to support the globe fiber expansion. Broadband adjusted EBITDA margins expanded 320 basis points year over year to 39.3% as we continue to see the benefits of operating leverage of our fiber network. As the broadband cost of service declined slightly year over year, despite adding over 17,000 road fiber customers over the past year. On slide nine, tower segment revenue declined slightly to 18.6 million due primarily to lower intercompany revenue for the decommissioning of Beam Fix Wireless Network in 2022. We have not recognized any tower lease churn from T-Mobile to date. We still expect T-Mobile to terminate 53 leases as part of the previously announced pay and walk agreement, though the timing is uncertain. These 53 leases will continue to generate rental revenue until all required equipment is removed from the leased property and an inspection notice is issued. Tower adjusted EBITDA declined $300,000 to $11.6 million due primarily to the lower intercompany revenue. Moving to slide 10, consolidated revenue grew 7.5% to $287.4 million in 2023 due to the previously mentioned growth in broadband. Consolidated adjusted EBITDA grew 19.3% to $90.6 million, also due to growth in broadband. Adjusted EBITDA margins expanded year over year from 28.4% to 31.5% in 2023 due to the scaling of our fiber network. Please note that we expect our consolidated revenue and adjusted EBITDA growth rates to slow in 2024 due to the previously mentioned $7 million in expected decline in broadband T-Mobile revenue. We expect consolidated revenue and adjusted EBITDA to return to similar growth rates in 2025 as we've reported over the past three years. We have $239 million of liquidity as of December 31st as displayed on slide 11. consisting of $139 million in cash and $100 million in available revolving line of credit. We drew down the remainder of our $300 million delayed draw term loans during the fourth quarter prior to the expiration of its availability. This liquidity position does not include the incremental $356 million in committed credit facility and preferred equity financing related to the Horizon transactions, which will close on the same day as the Horizon merger. Negative free cash flow for 2023 was $143 million, or $28 million more than prior year, due primarily to increased investments in expanding low-fiber and government-subsidized construction to unserved homes, partially offset by $26 million in income tax and sales tax refunds in 2023. Please note, we received $17.3 million in proceeds the closing of the 2.5 spectrum sale and 1.9 million in government grants related to unserved home construction that are reported separately from capital expenditures in the cash flow from investing activities. As reflected on slide 12, our outstanding debt was $300 million as of December 31st. We have no significant debt maturities until 2026. And now I'll turn the call over to Ed.

Thank you, Jim, and good morning, everyone. I'll start on slide 14 with an update on our integrated broadband network. We had a record quarter for fiber construction, adding over 33,000 new fiber passings and constructing almost 500 new route miles of fiber. The fourth quarter marked a milestone where Glow Fiber now passes more homes and businesses than our incumbent cable markets. In the fourth quarter, we launched the new Glow Fiber market of Salisbury, Maryland, And we now offer Glowfiber multi gigabit service in 22 markets with three additional market launches planned for 2024. Turning to slide 15, our total number of approved Glowfiber passings has grown to 564,000, primarily driven by a new franchise agreement to expand fiber services to approximately 40,000 additional homes and businesses in Frederick County, Maryland. We now have 74 franchise agreements in 25 markets across five states. We continued to work through challenges with pole attachment permits and underground locates, and our engineering and construction teams delivered a very strong fourth quarter, adding over 31,000 new-glow fiber passings and over 2,000 government-subsidized fiber passings, bringing our total fiber passings to over 236,000. Our number of planned government-subsidized passings decreased slightly quarter over quarter as we decreased the scope of one government grant project. However, our government Our construction backlog remains very robust, with approximately 351,000 incremental fiber passings approved for construction. As we ramp up glow fiber construction, we continue to see strong customer growth, as shown on slide 16. We added over 4,300 glow fiber customers in the fourth quarter to finish the year at over 41,700, and our data penetration rate reached 17.8%, up from 16.5% at the end of 2022. Our total number of data, video, and voice revenue generating units has reached over 51,000, up approximately 65% year-over-year. As Jim mentioned, our broadband data average revenue per user increased by 4% year-over-year to over $76, driven by a combination of additional equipment revenue and customers selecting higher speed tiers. For the quarter, 47% of our new residential subscribers adopted speed tiers of one gig or higher, including approximately 4% that took speeds of two gig or higher. At the end of the fourth quarter, approximately 11% of our total Glowfiber customers subscribed to video service, and approximately 12% subscribed to voice service. And finally, our churn remained very low at 1.0% for 2023, an improvement of seven basis points over the prior year as we continue to focus on providing the fastest speeds in our markets, outstanding local customer service, and fair straightforward pricing. Moving to slide 17, we highlight our data penetration rates as our markets age. All of our cohorts showed improvements in the fourth quarter, and we continue to see penetration rates above 18% after one year and above 30% after three years. Our oldest cohort launched four years ago has now reached a penetration rate of almost 39%. Ultimately, we expect to reach an average terminal penetration rate of about 38% five to six years after new passings are launched. Let's move on to our operating results for our cable markets on slide 18. Broadband data subscribers remain flat year over year and quarter over quarter, and we ended the year with over 109,000. Our total revenue generating units decreased by about 3% year over year as we continue to see declines in video service and residential voice service due to cord cutting. Our broadband data penetration decreased slightly year over year from 51.7% at the end of 2022 to 50.8% at the end of 2023. Although our broadband Data customers was flat year over year. We added approximately 37,000 new passings in 2023, primarily as part of government-subsidized projects in unserved areas. Broadband data churn was 1.58% for the fourth quarter of 2023, an improvement of five basis points year over year as we increased broadband speeds in the second half of the year, giving customer higher speeds and more value for the same price. For the entire year, churn was 1.65%, up about seven basis points year over year due to overbuilder competition in some markets. ARPU increased approximately 1.8% year over year to $82.75. Turning to slide 19, we highlight our broadband enterprise and wholesale commercial fiber business. In 2023, we booked new sales with monthly revenue totaling approximately $350,000, down about 5% year over year. Our new installed monthly revenue for 2023 was $353,000, and we finished the year with an installation backlog of approximately $140,000 in monthly revenue. For cell site backhaul connections, T-Mobile continues to reduce the number of circuits as part of their Sprint network rationalization project. In the fourth quarter of 2023, they removed 57 connections. As Jim mentioned, we expect additional churn as they complete their network turndown this year, and 167 of the remaining 190 backhaul connections are under a long-term contract. Excluding T-Mobile, churn and revenue compression will remain low at 0.4% for 2023. Turning to slide 20 in our tower segment, we ended 2023 with 453 total tower tenants and slightly over two tenants per tower. Our third-party tower tenants remain steady ending the year at 437. However, our intercompany leases increased with new leases for Shentel broadband network equipment at several additional tower sites. As Jim mentioned, we do expect T-Mobile to eventually reduce the number of tower leases as they complete their Sprint network rationalization project. And finally, our total number of towers decreased to 219 as we decommissioned two non-revenue towers and transferred one non-revenue tower to our broadband segment. Our 2023 capital spending and guidance for 2024 are reflected on slide 21. With StrongGlo fiber construction results in the fourth quarter, we finished 2023 with capital spending at the higher end of our previous guidance range at approximately $257 million. The significant increase over 2022 was driven by investments in Glow Fiber and government subsidized passings. In 2023, we invested $31 million in government subsidized projects, and we expect to be reimbursed for approximately 50% of these costs as we complete construction. Our Glow Fiber investment was $182 million in 2023, including approximately $156 million to design and construct new passings and approximately $17 million to connect new customers. For 2024, we're projecting capital spending in the $260 to $290 million range as we continue to accelerate construction for low fiber and government grant projects. We plan to invest approximately $32 million net of government subsidies to expand broadband to approximately 7,000 unserved homes. We also plan to invest about $190 million in Glow Fiber, including approximately $160 million to expand service to 100,000 new passings and $24 million to connect new customers. For commercial fiber business, we have budgeted approximately $11 million in success-based spending. We've also budgeted about $41 million in our incumbent cable business, including 10 million in DOCSIS upgrades to add additional capacity and provide higher speeds in competitive markets. Thank you very much, and operator, we're now ready for questions.

As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Our first question will come from the line of Frank Luthan, with Raymond James.

Great. Thank you. When you get the Horizon deal completed and you're kind of at a full construction ramp, how many homes do you expect to be passing per year? And then what is sort of the catch-up from the marketing standpoint? How many do you think you can add? And this first question and second question is T-Mobile selling fixed wireless in the legacy wireless markets that you sold to them? Thank you.

Frank, this is Ed. So I'll answer the T-Mobile question first. Yes, they do offer their fixed wireless service in the legacy markets that we sold to them. Up to this point, we have not seen any material impact from the T-Mobile fixed wireless. As far as the construction rate, as I mentioned, we plan on building 100,000 additional glow fiber passings this year. We do believe we'll be able to accelerate that somewhat with the addition of Horizon as well. So we expect to pace over 100,000 passings. Okay.

All right. Thank you very much.

Our next question will come from the line.

of dan day with b riley securities yeah hey guys um thanks for taking the questions um so just um i i noticed uh you talked about exploring other strategic alternatives in the press release to um maybe race and growth capital um just maybe frame up what those might look like you know obviously you talked about a tower sale if you could provide an update there and just as you think about strategic alternatives, whether you'd think about a sale of any non-tower assets. Thanks.

Yeah, Dan, we're looking at multiple options to raise additional growth capital. Towers is one of the possibilities. We don't have anything to update today on that. The important thing to note is we don't really need the capital until 2025, so we have plenty of time to explore different alternatives Another possibility that we've taken an early look at is maybe entering the asset securitization market, the ABS market, for some of our more chore fiber markets. So we're going to explore all different options and then come out with what we think is the best option to continue to provide capital to grow our business.

Okay, great. Thanks, Jim.

And then just on the CapEx guidance for 2024, you talked about the increase in the incumbent cable, DOCSIS upgrades, all that sort of stuff. Like, is this new sort of $40 million-ish maintenance CapEx run rate in incumbent cable the way we should think about it, or is this sort of a one-time upgrade and then we sort of go back to a little lower than that? And then just to be clear, on the 180 to 200 guidance for GLOW and Fiber to the Home, are you including any passings from the incremental 100,000 from the Horizon acquisition there, or would that all be CapEx upside to that?

Yeah, so this is Ed. I'll answer the Horizon question first. The 100,000 that I mentioned was just the legacy you know chantal glow fiber business uh not any incremental passings from uh horizon and as far as the the cable capex you know the guidance is you know roughly 40 to 40 million dollars in total capex for uh for 2024 as i mentioned about 10 million of that is docsis upgrade so uh i think over the next you know five years as we do complete our DOCSIS upgrades. We'll see some elevated CapEx there, and then we'll come down as we complete the DOCSIS upgrades.

Yeah, Dan, you know, on the DOCSIS upgrades, we're planning to spend about $65 million over the next five years. About $10 million of that will be this year. So you can layer that in on top, and once we complete that project, you should see the cable markets, you know, CapEx come down again.

And I guess to ask the question on the, the glow fiber one, a little bit different way. Um, if you do, um, you know, execute on some of the passings in the say Ohio markets, like would there be, um, would that, would that 190 million, um, need to come up to, to account for that? I guess is the question I was asking.

Yeah, Dan, we will, once the deal closes, um, and right now we're looking at likely second quarter, um, We will provide updated guidance on the capital spending for 24. It will go up as we continue to invest in the Ohio markets, as you mentioned. And also the number of passings on the fiber to the home side will give you some updated guidance on that as well. We do expect to add about 100,000 homes in the Ohio markets over the next three years. How many are going to come on in 24? We'll provide an update once the deal closes.

Awesome. Thanks, guys. Yep.

Thank you, Dan. As a reminder, that is star 1-1 to ask a question. Our next question will come from the line of Ahmed Korsand with BWS Financial.

Hi. Good morning. So the first question I had was, are you seeing any changes in the competitive landscape regarding global fiber in recent months and quarters? As you're talking about, there's the overbuild.

So no significant changes in the competitive landscape. We still primarily compete with one of the big incumbent cable providers there. And they've continued with promotional pricing, but no significant changes as far as what they're offering from a package standpoint.

And are you doing anything different on the promotional standpoint as you enter these new markets?

We're still really leading with fair, straightforward pricing. We do offer the first month of service free, but we're not providing these deep promotional discounts that our incumbent cable competitor is providing.

OK. And then as far as the subscriber signing on initially, Are you seeing any changes in the packages they're subscribing to? Are they opting initially for the higher tier price or are they coming in at the lower tier?

They're continuing to shift more toward the higher tiers. As I mentioned, almost half of our new customers are signing up for gigabit speeds or higher. So we're definitely capturing the higher end of the market as customers want more bandwidth.

And my last question is that Has there been any changes as far as your cost in your capital expenditure model? And how much has that been?

So I will say we previously gave a range of $1,000 to $1,400 per passing for new construction for Glow Fiber. We are at the higher end of that range now. We're building in some less dense areas. and the cost for construction has gone up.

We've seen it level off in the past year, but we did see some significant increases before that.

Okay, great. Thank you. Thanks, Annette.

That concludes today's question and answer session. I'd like to turn the call back to Jim Volk for closing remarks.

Yeah, thank you all for joining.

We look forward to updating you in 2024 of what we expect will be a very exciting year. Thanks, everyone, and have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect. you Thank you. Thank you. Thank you. Good morning, everyone. Welcome to Shenandoah Telecommunications' fourth 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 at 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 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.chentel.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 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 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. 2023 was another strong year for Shentel as we continued executing our Glow Fiber expansion plan. As you can see on slide four, consolidated revenues and adjusted EBITDA grew approximately 8% and 19% respectively, driven by Glowfiber subscriber growth. Since our first full year of launching Glowfiber in 2020, our consolidated revenue and adjusted EBITDA have grown at a compound annual growth rate of approximately 9% and 18% respectively. We believe this is an industry leading pace among publicly traded broadband companies. As noted on slide five, we had over 41,700 Glowfiber subscribers as of December 2023, an increase of over 71% compared to 2022, and over 10 times 2020 subscribers. Glowfiber revenues have grown over 160% per year over the past three years, fueling our industry-leading consolidated revenue and adjusted EBITDA growth rates. Moving to slide six, we added over 86,000 new Glowfiber passings in 2023, almost a 20% increase from 2022, and over a threefold increase from 2020 levels. Our sales team has more than kept pace with our construction team. We added over 17,000 Glowfiber net customers representing a more than 32% increase over 2022 and a 62% annual growth rate since 2020. We expect to accelerate the pace of Glowfiber construction and sales again in the next year, continuing the annual improvements we've made in each of the past three years. Before I turn the call over to Jim, I'd like to give an update on our pending acquisition of Horizon Telecom. We've received most of the required regulatory approvals and expect to close the transaction in the second quarter, depending on the timing of the remaining regulatory approval. The Shentel and Horizon teams have been working well together in planning for the integration of the two companies. We now expect most of the system integration work to be completed in the first quarter of 2025. 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. I will start with our broadband financial results for 2023 on slide 8. Broadband revenue grew $20.3 million, or 8.1%, to $269.3 million. As Chris just mentioned, globe fiber revenue was the primary catalyst, growing $16.8 million, or 92%, from the prior year with strong customer growth of over 71%, and a 4% increase in data subscriber ARPU. Cable market revenues, excluding the impact of our discontinued beam service, grew 2.5 million, or 1.4%, due primarily to 1.8% growth in data subscriber ARPU. Commercial fiber revenue grew 3.3 million, or 8.5%, due primarily to 3 million in non-recurring early termination fees related to backhaul circuit disconnect. T-Mobile disconnected 338 backhaul circuits during 2023 as part of the previously announced shutdown of the former Sprint network. With most of the T-Mobile backhaul disconnects now behind us, we expect commercial fiber revenue in 2024 to decline by $3 million in lower backhaul revenue from a full year of lower T-Mobile backhaul circuits, $3 million in lower non-recurring early termination fees, and $1 million in additional T-Mobile churn in 2024, partially offset by continued growth in other customer segments. We expect commercial Fiber revenue to return to mid to high single-digit growth rates starting in 2025. Broadband adjusted EBITDA grew $15.8 million or 17.6% to $105.8 million in 2023 when compared to 2022. due to the previously mentioned revenue growth of $20.3 million, partially offset by $4.6 million in higher advertising expenses to support the globe fiber expansion. Broadband adjusted EBITDA margins expanded 320 basis points year over year to 39.3% as we continue to see the benefits of operating leverage of our fiber network. As the broadband cost of service declined slightly year over year, despite adding over 17,000 low-fiber customers over the past year. On slide nine, tower segment revenue declined slightly to $18.6 million due primarily to lower intercompany revenue for the decommissioning of Beam Fix Wireless Network in 2022. We have not recognized any tower lease churn from T-Mobile to date. We still expect T-Mobile to terminate 53 leases as part of the previously announced pay and walk agreement, though the timing is uncertain. These 53 leases will continue to generate rental revenue until all required equipment is removed from the lease property and an inspection notice is issued. Tower adjusted EBITDA declined $300,000 to $11.6 million due primarily to the lower intercompany revenue. Moving to slide 10. Consolidated revenue grew 7.5% to $287.4 million in 2023 due to the previously mentioned growth in broadband. Consolidated adjusted EBITDA grew 19.3% to $90.6 million, also due to growth in broadband. Adjusted EBITDA margins expanded year-over-year from 28.4% to 31.5% in 2023 due to the scaling of our fiber network. Please note that we expect our consolidated revenue and adjusted EBITDA growth rates to slow in 2024 due to the previously mentioned $7 million in expected decline in broadband T-Mobile revenue. We expect consolidated revenue and adjusted EBITDA to return to similar growth rates in 2025 as we've reported over the past three years. We have $239 million of liquidity as of December 31st as displayed on slide 11 consisting of $139 million in cash and $100 million in available revolving line of credit. We drew down the remainder of our $300 million delayed draw term loans during the fourth quarter prior to the expiration of its availability. This liquidity position does not include the incremental $356 million in committed credit facility preferred equity financing related to the Horizon transaction, which will close on the same day as the Horizon merger. Negative free cash flow for 2023 was $143 million, or $28 million more than prior year, due primarily to increased investments in expanding low-fiber and government-subsidized construction to unserved homes, partially offset by $26 million in income tax and sales tax refunds in 2023. Please note, we received $17.3 million in proceeds from the closing of the 2.5 spectrum sale and $1.9 million in government grants related to unserved home construction that are reported separately from capital expenditures in the cash flow from investing activities. As reflected on slide 12, our outstanding debt was $300 million as of December 31st. We have no significant debt maturities until 2026. And now I'll turn the call over to Ed.

Thank you, Jim, and good morning, everyone. I'll start on slide 14 with an update on our integrated broadband network. We had a record quarter for fiber construction, adding over 33,000 new fiber passings and constructing almost 500 new route miles of fiber. The fourth quarter marked a milestone where Glow Fiber now passes more homes and businesses than our incumbent cable markets. the fourth quarter we launched new the new glow fiber market of salisbury maryland and we now offer glow fiber multi-gigabit service in 22 markets with three additional market launches planned for 2024. turning to slide 15 our total number of approved glow fiber passings has grown to 564 000 primarily driven by a new franchise agreement to expand fiber services to approximately 40 000 additional homes and businesses in frederick county maryland We now have 74 franchise agreements in 25 markets across five states. We continue to work through challenges with pole attachment permits and underground locates, and our engineering and construction teams delivered a very strong fourth quarter, adding over 31,000 new glow fiber passings and over 2,000 government-subsidized fiber passings, bringing our total fiber passings to over 236,000. Our number of planned government subsidized passings decreased slightly quarter over quarter as we decreased the scope of one government grant project. However, our government, our construction backlog remains very robust with approximately 351,000 incremental fiber passings approved for construction. As we ramp up glow fiber construction, we continue to see strong customer growth as shown on slide 16. We added over 4,300 Glow Fiber customers in the fourth quarter to finish the year at over 41,700, and our data penetration rate reached 17.8% up from 16.5% at the end of 2022. Our total number of data, video, and voice revenue generating units has reached over 51,000, up approximately 65% year over year. As Jim mentioned, our broadband data average revenue per user increased by 4% year over year to over $76, driven by a combination of additional equipment revenue and customers selecting higher speed tiers. For the quarter, 47% of our new residential subscribers adopted speed tiers of one gig or higher, including approximately 4% that took speeds of two gig or higher. At the end of the fourth quarter, approximately 11% of our total Glowfiber customers subscribed to video service, and approximately 12% subscribed to voice service. And finally, our churn remained very low at 1.0% for 2023, an improvement of seven basis points over the prior year as we continue to focus on providing the fastest speeds in our markets, outstanding local customer service, and fair straightforward pricing. Moving to slide 17, we highlight our data penetration rates as our markets age. All of our cohorts showed improvements in the fourth quarter, and we continue to see penetration rates above 18% after one year and above 30% after three years. Our oldest cohort launched four years ago has now reached a penetration rate of almost 39%. Ultimately, we expect to reach an average terminal penetration rate of about 38% five to six years after new passings are launched. Let's move on to our operating results for our cable markets on slide 18. Broadband data subscribers remained flat year over year and quarter over quarter, and we ended the year with over 109,000. Our total revenue generating units decreased by about 3% year over year as we continued to see declines in video service and residential voice service due to cord cutting. Our broadband data penetration decreased slightly year over year from 51.7% at the end of 2022 to 50.8% at the end of 2023. Although our broadband data customers was flat year over year, we added approximately 37,000 new passings in 2023, primarily as part of government subsidized projects in unserved areas. Broadband data churn was 1.58% for the fourth quarter of 2023, an improvement of five basis points year over year as we increased broadband speeds in the second half of the year, giving customer higher speeds and more value for the same price. For the entire year, churn was 1.65% up about seven basis points year over year due to overbuilder competition in some markets. ARPU increased approximately 1.8% year over year to $82.75. Turning to slide 19, we highlight our broadband enterprise and wholesale commercial fiber business. In 2023, we booked new sales with monthly revenue totaling approximately 350,000 down about 5% year over year. Our new installed monthly revenue for 2023 was $353,000, and we finished the year with an installation backlog of approximately $140,000 in monthly revenue. For cell site backhaul connections, T-Mobile continues to reduce the number of circuits as part of their Sprint network rationalization project. In the fourth quarter of 2023, they removed 57 connections. As Jim mentioned, we expect additional churn as they complete their network turndown this year, and 167 of the remaining 190 backhaul connections are under a long-term contract. Excluding T-Mobile, churn and revenue compression will remain low at 0.4 percent for 2023. Turning to slide 20 in our tower segment, we ended 2023 with 453 total tower tenants and slightly over two tenants per tower. Our third-party tower tenants remain steady ending the year at 437. However, our intercompany leases increased with new leases for Shentel broadband network equipment at several additional tower sites. As Jim mentioned, we do expect T-Mobile to eventually reduce the number of tower leases as they complete their Sprint network rationalization project. And finally, our total number of towers decreased to 219 as we decommissioned two non-revenue towers and transferred one non-revenue tower to our broadband segment. Our 2023 capital spending and guidance for 2024 are reflected on slide 21. With StrongGlo fiber construction results in the fourth quarter, we finished 2023 with capital spending at the higher end of our previous guidance range at approximately $257 million. The significant increase over 2022 was driven by investments in Glow Fiber and government subsidized passings. In 2023, we invested $31 million in government subsidized projects, and we expect to be reimbursed for approximately 50% of these costs as we complete construction. Our Glow Fiber investment was $182 million in 2023, including approximately $156 million to design and construct new passings and approximately $17 million to connect new customers. For 2024, we're projecting capital spending in the 260 to $290 million range as we continue to accelerate construction for Glow Fiber and government grant projects. We plan to invest approximately 32 million net of government subsidies to expand broadband to approximately 7,000 unserved homes. We also plan to invest about 190 million in Glow Fiber, including approximately 160 million to expand service to 100,000 new passings and $24 million to connect new customers. For a commercial fiber business, we have budgeted approximately $11 million in success-based spending. We've also budgeted about $41 million in our incumbent cable business, including $10 million in DOCSIS upgrades to add additional capacity and provide higher speeds in competitive markets. Thank you very much, and operator, we're now ready for questions.

As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Our first question will come from the line of Frank Luthan with Raymond James.

Great, thank you. When you get the Horizon deal completed, And you're kind of at a full construction ramp. How many homes do you expect to be passing per year? And then what is sort of the catch-up from the marketing standpoint? How many do you think you can add? And this first question. And the second question, is T-Mobile selling fixed wireless in the legacy wireless markets that you sold to them? Thank you.

Frank, this is Ed, so I'll answer the T-Mobile question first. Yes, they do offer their fixed wireless service in the legacy markets that we sold to them. Up to this point, we have not seen any material impact from T-Mobile fixed wireless. As far as the construction rate, as I mentioned, we plan on building 100,000 you know, additional glow fiber passings this year. We do believe we'll be able to accelerate that somewhat with the addition of Horizon as well. So, we expect to, you know, pace, you know, over 100,000 passings.

Okay. All right. Thank you very much.

Our next question will come from the line of Dan Day with B Reilly Securities.

Yeah. Hey, guys. Thanks for taking the questions. I noticed you talked about exploring other strategic alternatives in the press release to maybe raise some growth capital. Just maybe frame up what those might look like. Obviously, you talked about a tower sale, if you could provide an update there. As you think about strategic alternatives, whether you'd think about a sale of any non-tower assets. Thanks.

Yeah, Dan, we're looking at multiple options to raise additional growth capital. Towers is one of the possibilities. We don't have anything to update today on that. The important thing to note is we don't really need the capital until 2025, so we have plenty of time to explore different alternatives. Another possibility that we've taken an early look at is maybe entering the asset securitization market. the ABS market for some of our more chore fiber markets. So we're going to explore all different options and then come out with what we think is the best option to continue to provide capital to grow our business.

Okay, great. Thanks, Jim.

And then just on the CapEx guidance for 2024, You talked about the increase in the incumbent cable, DOCSIS upgrades, all that sort of stuff. Like, is this new sort of $40 million-ish maintenance capex run rate in incumbent cable the way we should think about it, or is this sort of a one-time upgrade and then we sort of go back to a little lower than that? And then, just to be clear, on the 180 to 200 guidance for GLOW and Fiber to the Home, including any passings from the incremental 100,000 from the Horizon acquisition there, or would that all be CapEx upside to that?

Yeah, so this is Ed. I'll answer the Horizon question first. The 100,000 that I mentioned was just the legacy, you know, Shentel, Glow Fiber business, not any incremental passings from Horizons. And as far as the cable CapEx, the guidance is roughly $40 million in total CapEx for 2024. As I mentioned, about $10 million of that is DOCSIS upgrades. So I think over the next five years, as we do complete our DOCSIS upgrades, we'll see some elevated CapEx there, and then we'll come down as we complete the DOCSIS upgrades.

Yeah, Dan, you know, on the DOCSIS upgrades, we're planning to spend about $65 million over the next five years. About $10 million of that will be this year. So you can layer that in on POP. And once we complete that project, you should see the cable markets, you know, CapEx come down again.

And I guess to ask the question on the Glow Fiber one a little bit different way, if you do – you know, execute on some of the passings in the, say, Ohio markets? Like, would there be, would that $190 million need to come up to account for that? I guess is the question I was asking.

Yeah, Dan, we will, once the deal closes, and right now we're looking at likely second quarter, we will provide updated guidance on the capital spending for 24. You know, it will go up as we continue to invest in the Ohio markets, as you mentioned. And also the number of passings on the fiber to the home side, we'll give you some updated guidance on that as well. We do expect to add about 100,000 homes in the Ohio markets over the next three years. How many are going to come on in 24? We'll provide an update once the deal closes.

Awesome. Thanks, guys. Yep. Thank you, Dan.

As a reminder, that is star 1-1 to ask a question. Our next question will come from the line of Ahmed Korsand with BWS Financial.

Hi, good morning. So the first question I had was, are you seeing any changes in the competitive landscape regarding global fiber in recent months and quarter? As you're talking about, you know, there's the overbuild.

So no significant changes in the competitive landscape. We still primarily compete with one of the big incumbent cable providers there. And they've continued with promotional pricing, but no significant changes as far as what they're offering from a package standpoint.

And are you doing anything different on the promotional standpoint as you enter these new markets?

No, we're still really leading with, you know, Fair, straightforward pricing. We do offer the first month of service free, but we're not providing these deep promotional discounts that our incumbent cable competitor is providing.

Okay. And then as far as the subscriber signing on initially, are you seeing any changes in the packages they're subscribing to? Are they opting initially for the higher tier price or are they coming in at the lower tier?

They're continuing to shift more toward the higher tiers. As I mentioned, almost half of our new customers are signing up for gigabit speeds or higher. So we're definitely capturing the higher end of the market as customers want more bandwidth.

And my last question is that, has there been any change as far as your cost in your capital expenditure model? And how much has that been?

So I will say we previously gave a range of $1,000 to $1,400 per passing for new construction for Glow Fiber. We are at the higher end of that range now. We're building in some less dense areas, and the cost for construction has gone up. We've seen it level off in the past year, but we did see some significant increases before that.

Great. Thank you. Thanks, Ahmed.

That concludes today's question and answer session. I'd like to turn the call back to Jim Volk for closing remarks.

Yeah, thank you all for joining.

We look forward to updating you in 2024 of what we expect will be a very exciting year. Thanks, everyone, and have a great day.

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