Array Digital Infrastructure, Inc. 2026 Q2 Earnings Call

Please go ahead. Good morning, thank you for joining us.

The presentation we prepared to accompany our comments this morning can be found on the investor relations sections of the TDS and Array websites. With me today and offering prepared comments are on behalf of TDS, Walter Carlson, President and CEO, Vicki L. Villacrez, Executive Vice President and Chief Financial Officer. On behalf of TDS Telecom, Ken Dixon, President and CEO of TDS Telecom. Chris Bothfeld, Vice President of Financial Analysis and Strategic Planning of TDS. On behalf of Array Digital Infrastructure, Anthony Carlson, President and CEO of Array. This call is being simultaneously webcast on the TDS and Array investor relations websites. Please see the websites for the slides referenced on this call, including non-GAAP reconciliations. TDS and Array filed their SEC forms 8-K, including the press releases earlier this morning.

As shown on slide two, the information set forth in the presentation and discussed during this call contains statements about expected future events and financial results that are forward-looking and subject to risks and uncertainties. Please review the safe harbor paragraphs in our press releases and the full description of risk factors included in our SEC filings. I will now turn the call over to TDS President and CEO, Walter Carlson.

Walter? Thanks, John, good morning, everyone.

Today, we are pleased to share the second quarter results for TDS and Array Digital Infrastructure. Before we get to those results, I wanted to note that we will not be providing an update today on the status of TDS's previously announced offer to acquire the minority interest of Array in an all-stock transaction. That process is ongoing. TDS will not be commenting further or taking questions on this topic during today's call. Now, turning to our 2026 enterprise priorities, we are at the midpoint of the year, and we continue to make steady progress across each of these five focus areas. As I've noted previously, our focus remains on advancing our strategy with financial and operational discipline. In addition, both business units continue to advance their individual operational goals. TDS Telecom added meaningful fiber addresses and customers during the quarter.

Array increased tower tenancy quarter-over-quarter and has now successfully completed transactions to monetize virtually all of its spectrum outside of the C-band. I continue to be pleased with the progress each business unit is making and by the work underway to strengthen our culture during this period of transformation. I would like to personally thank every associate across the enterprise for their continued commitment and contributions. I will now turn the call over to Vicki.

Thank you, Walter, and good morning, everyone. The transactions we have completed over the past year, including Array's spectrum sale to Verizon in June, have strengthened our balance sheet and created meaningful capital flexibility. That improved flexibility provides a strong foundation for how we approach capital allocation and strategic opportunities. It allows us to continue to make decisions with a clear focus on financial health, strategic alignment, and long-term value. Slide four provides an update on our progress. First, TDS Telecom continues to advance its long-term objective of 2.1 million marketable fiber service addresses and delivered approximately 66,000 addresses in the second quarter. The team's execution and momentum in this area drove our decision to increase Telecom's fiber service address and capital guidance for the year. While each market build is evaluated with our traditional financial discipline, our build cadence is not currently constrained by capital.

That allows us to accelerate in attractive markets where we can take advantage of the opportunity to be the first to fiber. Our fiber network continues to perform well with consumers, both financially and operationally, and our transition to be fully fiber is the right strategic imperative and one that we believe will provide sustained value to TDS. Second, we remain committed to M&A and are actively evaluating opportunities that align with our strategy in a financially disciplined, accretive, business case-driven fashion. In mid-April, we announced an agreement to acquire Granite State Communications and are on track for a third quarter close that will add 11,000 fully fibered service addresses to the portfolio. As I've communicated in the past, we are primarily focused on small to medium-sized opportunities that are either already fibered up or have an accretive economic path to all fiber and support our clustering strategy.

Finally, with respect to shareholder returns, TDS continues to pay a modest quarterly dividend, and Array issued a special dividend in the quarter of $11 per common share. TDS was not in the market for share repurchases during the second quarter because we were restricted from doing so due to the TDS offer to Array. As of the end of the quarter, we had $520 million remaining under the TDS share repurchase authorization, and we remain committed to executing on that program as business, market, and other conditions permit. Across all three elements, the company intends to continue to be disciplined, balancing the needs of the business, evaluating future returns, and taking into account market and other conditions as we move forward. Thank you, and now I will turn the call over to Ken Dixon to discuss TDS's fiber business.

Thank you, Vicki, and good morning, everyone. TDS Telecom continues to execute on our fiber growth plan, building fiber addresses, driving fiber sales, and transforming our operations. This quarter, we again made progress across all three priorities. As shown on slide six, we delivered approximately 66,000 marketable fiber service addresses in the quarter, bringing us to approximately 106,000 for the first half of the year. This represents the strongest first-half delivery in company history and even exceeds what we accomplished in the second half of 2025, which is typically our peak construction period. It reflects both strong execution by our teams as well as expanded construction capacity. We have a robust pipeline of addresses currently under construction, positioning us well for the remainder of the year.

This pipeline includes a mix of addresses from our fiber expansion in new areas, as well as fiber upgrades in our existing markets through our Fiber Deeper program and federal E-ACAM program. As a reminder, we are the largest recipient of E-ACAM, which provides federal support to bring high-speed broadband to hard-to-reach rural areas where it would otherwise not be economical. We are leveraging this support to accelerate our fiber expansion in 22 states, bringing fiber to more than 300,000 addresses in our incumbent footprint. We have already met the 2026 obligations in three states and now have the highest crew counts ever in the remaining E-ACAM markets to deliver on our 2026 milestones. In summary, our build teams are delivering at a record pace. This gives us confidence to increase our 2026 guidance for fiber service address delivery to 250,000-300,000, increasing our range by 50,000.

Turning to sales, we ended the quarter with approximately 15,000 fiber net adds, up 47% year-over-year. As we continue to grow our fiber footprint, we are hyper-focused on converting these new service addresses into customers and improving the overall customer experience. We continue to build out our sales teams across all our markets. These sales teams are focused on both pre-launch sales as well as penetrating new open-for-sale addresses after market delivery. We have significantly expanded our door-to-door sales capacity and we're pleased with the improved performance of our dotcom channel. In our cable markets, we're beginning to see the benefit of expanded sales teams and targeted investment, which are now driving increased gross adds. As I mentioned last quarter, our cable markets are some of the best in the country, and we see significant opportunity to grow here.

Overall, we have good sales momentum as we head into the back half of the year. However, we have more work to do. Our operational transformation is centered on efficiency, improving the customer experience, and simplification. We continue to make progress modernizing our systems and remain on track with our transformation roadmap, making it easier for customers to do business with us. For example, our technicians now utilize the same platform across all of our markets, which simplifies our back-office processes and provides an improved customer experience. Further, we have several additional enhancements underway that are on schedule to be completed in the back half of the year. We will provide updates on these transformation initiatives as they advance. Turning to slide seven. Our long-term goals reflect our continued focus on executing our fiber growth strategy that delivers scale, speed, and long-term value.