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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:

For the quarterly period ended September 30, 2024

 

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:

 

For the transition period from_____to_____.

 

Commission File Number 0-3024

 

NUVERA COMMUNICATIONS, INC.

(Exact name of Registrant as specified in its charter)

 

  Minnesota   41-0440990  
  (State or other jurisdiction of   (I.R.S. Employer  
  incorporation or organization)   Identification No.)  

 

27 North Minnesota Street

New Ulm, Minnesota 56073

(Address of principal executive offices)

 

Registrant’s telephone number, including area code: (507) 354-4111

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐         

 

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ☐ Large, accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☒ Smaller reporting company ☐ Emerging growth company.

 

1
 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-a(b). ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Title of each class

Trading

Symbol

 Name of each exchange on which registered
Common Stock - $1.66 par value NUVR OTCQB Marketplace

 

The total number of shares of the registrant’s common stock outstanding as of November 14, 2024: 5,178,176.

 

2
 

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION
     

Item 1

Financial Statements

4-10
     

 

 Consolidated Statements of Income (unaudited) for the Three and Nine Months Ended September 30, 2024, and 2023 4
     

 

 Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2024, and 2023 5

 

    

 

 Consolidated Balance Sheets (unaudited) as of September 30, 2024, and December 31, 2023 6-7
     

 

 Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2024, and 2023 8
     

 

 Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Nine Months ended September 30, 2024, and 2023 9-10
     

 

 Condensed Notes to Consolidated Financial Statements (unaudited) 11-35
     

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 36-50
     

Item 3

Quantitative and Qualitative Disclosures about Market Risk

50
     

Item 4

Controls and Procedures

51
     

PART II – OTHER INFORMATION
     

Item 1

Legal Proceedings

51
     

Item 1A

Risk Factors

51-53
     

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

54
     

Item 3

Defaults upon Senior Securities

54
     

Item 4

Mine Safety Disclosures

54
     

Item 5

Other Information

54
     

Item 6

Exhibits Listing

54
     

Signatures

   55

 

 

3
 

 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

NUVERA COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

   

Three Months Ended

    

Nine Months Ended

  
   

September 30,

   

September 30,

 
   

2024

    

2023

    

2024

    

2023

  

OPERATING REVENUES:

                                

Voice Service

   $ 1,149,189     $ 1,363,543     $ 3,580,740     $ 3,969,394  

Network Access

     745,268       876,186       2,601,894       2,926,937  

Video Service

     2,928,080       3,005,010       8,891,820       9,120,164  

Data Service

     7,455,297       6,881,965       22,230,414       20,573,084  

A-CAM/FUSF

     4,208,559       2,971,267       11,100,259       8,950,127  

Other Non-Regulated

     1,129,942       1,272,507       3,334,187       3,478,406  

Total Operating Revenues

     17,616,335       16,370,478       51,739,314       49,018,112  
                                 

OPERATING EXPENSES:

                                

Plant Operations (Excluding Depreciation and Amortization)

     4,069,582       3,590,491       12,032,377       11,512,927  

Cost of Video

     2,202,721       2,346,037       6,871,102       7,229,269  

Cost of Data

     1,171,707       1,280,342       3,520,942       3,673,237  

Cost of Other Nonregulated Services

     368,152       485,149       1,173,505       1,275,125  

Depreciation and Amortization

     4,497,082       3,949,978       13,300,877       11,371,459  

Selling, General and Administrative

     2,507,707       2,372,515       8,138,521       7,608,787  

Total Operating Expenses

     14,816,951       14,024,512       45,037,324       42,670,804  
                                 

OPERATING INCOME

     2,799,384       2,345,966       6,701,990       6,347,308  
                                 

OTHER INCOME (EXPENSE)

                                

Interest Expense

     (3,076,442 )     (1,959,514 )     (8,164,140 )     (4,718,502 )

Interest/Dividend Income

     20,409       14,307       155,839       159,353  

Interest During Construction

     281,729       243,113       716,119       439,356  

Gain (Loss) on Sale of Investments

     -       (38,096 )     (257,807 )     4,022,401  

CoBank Patronage Dividends

     -       -       1,196,948       692,371  

Other Investment Income

     88,396       65,269       184,619       216,256  

Total Other Income (Expense)

     (2,685,908 )     (1,674,921 )     (6,168,422 )     811,235  
                                 

INCOME BEFORE INCOME TAXES

     113,476       671,045       533,568       7,158,543  
                                 

INCOME TAXES EXPENSE

     31,778       187,875       149,401       2,004,386  
                                 

NET INCOME

   $ 81,698     $ 483,170     $ 384,167     $ 5,154,157  
                                 

NET INCOME PER SHARE

                                

Basic

   $ 0.02     $ 0.09     $ 0.07     $ 1.01  

Diluted

   $ 0.02     $ 0.09     $ 0.07     $ 1.00  
                                 

DIVIDENDS PER SHARE

   $ 0.0000     $ 0.0000     $ 0.0000     $ 0.2800  
                                 

WEIGHTED AVERAGE SHARES OUTSTANDING

                          

Basic

     5,178,176       5,126,581       5,158,286       5,113,007  

Diluted

     5,362,674       5,211,382       5,311,760       5,175,507  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4
 

 

 

NUVERA COMMUNICATIONS, INC. 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

   

Three Months Ended

    

Nine Months Ended

  
   

September 30,

    

September 30,

  
   

2024

    

2023

    

2024

    

2023

  
                                 

Net Income

   $ 81,698     $ 483,170     $ 384,167     $ 5,154,157  
                                 

Other Comprehensive Loss:

                                

Unrealized Losses on Interest Rate Swaps

     (546,631 )     (125,051 )     (769,596 )     (222,693 )

Income Tax Benefit Related to Unrealized

                                

Losses on Interest Rate Swaps

     156,009       35,689       219,643       63,556  

Other Comprehensive Losses:

     (390,622 )     (89,362 )     (549,953 )     (159,137 )
                                 

Comprehensive Income Gain (Loss)

   $ (308,924 )   $ 393,808     $ (165,786 )   $ 4,995,020  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5
 

 

 

NUVERA COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   

September 30,

    

December 31,

  
   

2024

    

2023

  
                 
ASSETS         
                 

CURRENT ASSETS:

                

Cash

   $ 584,284     $ 1,259,904  

Receivables, Net

     2,731,711       3,411,892  

Income Taxes Receivable

     342,525       -  

Materials, Supplies, and Inventories

     27,829,932       34,438,857  

Financial Derivative Instruments

     573,032       -  

Prepaid Expenses and Other Current Assets

     2,417,949       2,245,160  

Total Current Assets

     34,479,433       41,355,813  
                 

INVESTMENTS & OTHER ASSETS:

                

Goodwill

     40,603,029       40,603,029  

Intangibles

     12,949,433       14,488,608  

Other Investments

     8,254,462       8,322,252  

Right of Use Asset

     1,096,639       1,348,290  

Financial Derivative Instruments

     -       1,342,628  

Other Assets

     857,222       884,122  

Total Investments and Other Assets

     63,760,785       66,988,929  
                 

PROPERTY, PLANT & EQUIPMENT:

                

Communications Plant

     308,482,581       277,357,371  

Other Property & Equipment

     33,807,633       32,433,191  

Video Plant

     19,242,671       18,848,612  

Total Property, Plant and Equipment

     361,532,885       328,639,174  

Less Accumulated Depreciation

     184,826,420       173,088,602  

Net Property, Plant & Equipment

     176,706,465       155,550,572  
                 

TOTAL ASSETS

   $ 274,946,683     $ 263,895,314  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6
 

 

NUVERA COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEETS (continued)

(Unaudited)

 

   

September 30,

    

December 31,

  
   

2024

    

2023

  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY         
                 

CURRENT LIABILITIES:

                

Current Portion of Long-Term Debt, Net of Unamortized Loan Fees

   $ -     $ -  

Accounts Payable

     12,265,856       12,803,435  

Checks Written in Excess of Cash Balances

     -       2,270,832  

Accrued Income Taxes

     -       581,098  

Other Accrued Taxes

     185,105       253,490  

Deferred Compensation

     44,504       45,797  

Accrued Compensation

     1,741,335       1,562,115  

Other Accrued Liabilities

     572,229       1,059,163  

Total Current Liabilities

     14,809,029       18,575,930  
                 

LONG-TERM DEBT, Net of Unamortized

                

Loan Fees

     137,566,660       122,891,638  
                 

NONCURRENT LIABILITIES:

                

Deferred Income Taxes

     22,812,457       23,032,099  

Other Accrued Liabilities

     996,657       1,132,799  

Deferred Compensation

     223,550       256,605  

Total Noncurrent Liabilities

     24,032,664       24,421,503  
                 

COMMITMENTS AND CONTINGENCIES:

            
                 

STOCKHOLDERS' EQUITY:

                

Preferred Stock - $1.66 Par Value, 10,000,000 Shares Authorized, No Shares Issued and Outstanding

     -       -  

Common Stock - $1.66 Par Value, 90,000,000 Shares Authorized, 5,178,176 and 5,133,207 Shares Issued and Outstanding

     8,630,293       8,555,345  

Accumulated Other Comprehensive Gain

     409,489       959,442  

Retained Earnings

     89,498,548       88,491,456  

Total Stockholders' Equity

     98,538,330       98,006,243  
                 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

   $ 274,946,683     $ 263,895,314  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

7
 

 

 

NUVERA COMMUNICATIONS, INC. 

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

    Nine Months Ended  
   

September 30,

    

September 30,

  
   

2024

    

2023

  

CASH FLOWS FROM OPERATING ACTIVITIES:

                

Net Income

   $ 384,167     $ 5,154,157  

Adjustments to Reconcile Net Income to Net Cash

                

Provided by Operating Activities:

                

Depreciation and Amortization

     13,589,054       11,526,448  

(Gains)/Losses on Investments

     257,807       (4,022,401 )

Undistributed Earnings of Other Equity Investments

     (151,126 )     (219,912 )

Noncash Patronage Refund

     (166,519 )     (123,745 )

Stock Issued in Lieu of Cash Payment

     299,008       373,175  

Distributions from Equity Investments

     127,529       28,048  

Stock-based Compensation

     288,412       172,820  

Changes in Assets and Liabilities:

                

Receivables

     654,346       (259,621 )

Income Taxes Receivable

     (342,525 )     283,665  

Inventory for Resale

     122,756       30,767  

Prepaid Expenses

     (62,336 )     (569,535 )

Other Assets

     45,008       (451,967 )

Accounts Payable

     84,360       (4,230 )

Checks Written in Excess of Cash Balance

     (2,270,832 )     -  

Accrued Income Taxes

     (581,098 )     1,350,222  

Other Accrued Taxes

     (68,385 )     (54,934 )

Other Accrued Liabilities

     (192,205 )     (906,890 )

Deferred Compensation

     (34,348 )     (100,022 )

Net Cash Provided by Operating Activities

     11,983,073       12,206,045  
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

                

Additions to Property, Plant, and Equipment, Net

     (38,437,630 )     (33,397,721 )

Materials and Supplies for Construction

     6,452,434       (17,827,735 )

Proceeds from Sale of Equity Investments

     -       5,876,305  

Other, Net

     239,797       216,511  

Net Cash Used in Investing Activities

     (31,745,399 )     (45,132,640 )
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

                

Principal Payments of Long-Term Debt

     (125,000,000 )     -  

Loan Proceeds

     125,000,000       30,000,000  

Loan Origination Fees

     (1,703,825 )     (17,811 )

Changes in Revolving Credit Facility

     16,090,669       3,116,119  

Grants Received for Construction of Plant

     4,699,862       1,521,677  

Dividends Paid

     -       (1,430,771 )

Net Cash Provided by Financing Activities

     19,086,706       33,189,214  
                 

NET CHANGE IN CASH

     (675,620 )     262,619  
                 

CASH at Beginning of Period

     1,259,904       310,556  
                 

CASH at End of Period

   $ 584,284     $ 573,175  
                 

Supplemental cash flow information:

                

Cash paid for interest

   $ 8,050,168     $ 5,286,760  

Net cash paid for income taxes

   $ 1,073,024     $ 370,500  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

8
 

 

 

NUVERA COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

 

   

THREE MONTHS ENDED SEPTEMBER 30, 2024

  
                   

Accumulated

                          
                   

Other

                          
   

Common Stock

    

Comprehensive

    

Unearned

    

Retained

    

Total

  
   

Shares

    

Amount

    

Gain

    

Compensation

    

Earnings

    

Equity

  
                                                 

BALANCE on June 30, 2024

     5,178,176     $ 8,630,293     $ 800,111     $ -     $ 89,306,998     $ 98,737,402  
                                                 

Non-Cash, Share-Based Compensation

                               109,852       109,852  

Net Income

                                     81,698       81,698  

Unrealized Loss on Interest Rate Swap

                     (390,622 )                     (390,622 )
                                                 

BALANCE on September 30, 2024

     5,178,176     $ 8,630,293     $ 409,489     $ -     $ 89,498,548     $ 98,538,330  

 

 

   

THREE MONTHS ENDED SEPTEMBER 30, 2023

  
                   

Accumulated

                          
                   

Other

                          
   

Common Stock

    

Comprehensive

    

Unearned

    

Retained

    

Total

  
   

Shares

    

Amount

    

Gain

    

Compensation

    

Earnings

    

Equity

  

BALANCE on June 30, 2023

     5,126,581     $ 8,544,302     $ 1,512,680     $ 78,231     $ 96,188,831     $ 106,324,044  
                                                 

Restricted Stock Grant

                             1,519               1,519  

Non-Cash, Share-Based Compensation

                               70,670       70,670  

Net Income

                                     483,170       483,170  

Unrealized Loss on Interest Rate Swap

                     (89,362 )                     (89,362 )
                                                 

BALANCE on September 30, 2023

     5,126,581     $ 8,544,302     $ 1,423,318     $ 79,750     $ 96,742,671     $ 106,790,041  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

9
 

 

NUVERA COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

 

   

NINE MONTHS ENDED SEPTEMBER 30, 2024

  
                   

Accumulated

                          
                   

Other

                          
   

Common Stock

    

Comprehensive

    

Unearned

    

Retained

    

Total

  
   

Shares

    

Amount

    

Gain

    

Compensation

    

Earnings

    

Equity

  
                                                 

BALANCE on December 31, 2023

     5,133,207     $ 8,555,345     $ 959,442     $ -     $ 88,491,456     $ 98,006,243  
                                                 

Directors' Stock Plan

     44,099       73,498                       326,480       399,978  

Employee Stock Plan

     870       1,450                       8,033       9,483  

Non-Cash, Share-Based Compensation

                               288,412       288,412  

Net Income

                                     384,167       384,167  

Unrealized Loss on Interest Rate Swap

                     (549,953 )                     (549,953 )
                                                 

BALANCE on September 30, 2024

     5,178,176     $ 8,630,293     $ 409,489     $ -     $ 89,498,548     $ 98,538,330  

 

 

   

NINE MONTHS ENDED SEPTEMBER 30, 2023

  
                   

Accumulated

                          
                   

Other

                          
   

Common Stock

    

Comprehensive

    

Unearned

    

Retained

    

Total

  
   

Shares

    

Amount

     Gain (Loss)    

Compensation

    

Earnings

    

Equity

  

BALANCE on December 31, 2022

     5,093,213     $ 8,488,689     $ 1,582,455     $ 79,892       92,430,816     $ 102,581,852  
                                                 

Directors' Stock Plan

     27,716       46,193                       341,277       387,470  

Employee Stock Plan

     5,652       9,420                       74,230       83,650  

Restricted Stock Grant

                             (142 )             (142 )

Non-Cash, Share-Based Compensation

                               172,962       172,962  

Net Income

                                     5,154,157       5,154,157  

Dividends

                                     (1,430,771 )     (1,430,771 )

Unrealized Loss on Interest Rate Swap

                     (159,137 )                     (159,137 )
                                                 

BALANCE on September 30, 2023

     5,126,581     $ 8,544,302     $ 1,423,318     $ 79,750     $ 96,742,671     $ 106,790,041  

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

10
 

 

NUVERA COMMUNICATIONS, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024 (Unaudited)

 

 

Note 1 – Basis of Presentation and Consolidation

 

The accompanying unaudited condensed consolidated financial statements of Nuvera Communications, Inc. and its subsidiaries (Nuvera) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, rules and regulations of the Securities and Exchange Commission (SEC) and, where applicable, conform to the accounting principles as prescribed by federal and state telephone utility regulatory authorities. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted or condensed pursuant to such rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring accruals) considered necessary for the fair presentation of the financial statements and present fairly the results of operations, financial position and cash flows for the interim periods presented as required by Regulation S-X, Rule 10-01. These unaudited interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

The preparation of our financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities at the date of the financial statements and during the reporting period. Actual results may differ from these estimates. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year as a whole or any other interim period.

 

Our consolidated financial statements report the financial condition and results of operations for Nuvera and its subsidiaries in one business segment: the Communications Segment. Inter-company transactions have been eliminated from the consolidated financial statements.

 

Revenue Recognition

See Note 2 – “Revenue Recognition” for a discussion of our revenue recognition policies.

 

Cost of Services (excluding depreciation and amortization)

Cost of services (excluding depreciation and amortization expense) includes all costs related to the delivery of communication services and products. These operating costs include all costs of performing services and providing related products including engineering, network monitoring and transportation costs.

 

Selling, General and Administrative Expenses

Selling, general and administrative expenses include direct and indirect selling expenses, customer service, billing and collections, advertising and all other general and administrative costs associated our operations.

 
11
 

 

Depreciation and Amortization Expense

We use the group life method (mass asset accounting) to depreciate the assets of our communications companies. Communications plant acquired in a given year is grouped into similar categories and depreciated over the remaining estimated useful life of the group. When an asset is retired, both the asset and the accumulated depreciation associated with that asset are removed from the books. Due to rapid changes in technology, selecting the estimated economic life of communications plant and equipment requires a significant amount of judgment. We periodically review data on expected utilization of new equipment, asset retirement activity and net salvage values to determine adjustments to our depreciation rates. We have not made any significant changes to the lives of these assets in the two-year period ended September 30, 2024. Depreciation expense was $11,761,702 and $10,009,933 for the nine months ended September 30, 2024, and 2023. The increase in depreciation expense was primarily due to an increase in our fiber-to-the-premise (FTTP) network to aid in our transition to a new advanced FTTP network, reflecting our continual investment in technology and infrastructure in order to meet our customer’s demands for our products and services. We amortize our definite-lived intangible assets over their estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment.

 

Grant money received from governmental entities for reimbursement of capital expenditures is accounted for as a reduction from the cost of the asset. As the grant was to be used in the Company’s regulated network, the Company accounts for this funding as aid to construction as outlined in the Federal Communications Commission (FCC) Part 32 “Uniform System of Accounts for Telecommunications Companies.” The resulting balance sheet presentation reflects the Company’s net investment in the assets in property, plant, and equipment. Depreciation is calculated and recorded based on the reduced cost of the investment therefore the impact of prior grants received is reflected in earnings as a reduction in depreciation. Grant funds are shown as inflows in the financing activities section of the statements of cash flows.

 

Income Taxes

 

The provision for income taxes consists of an amount for taxes currently payable and a provision for tax consequences deferred to future periods. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax basis. Significant components of our deferred taxes arise from differences (i) in the basis of property, plant, and equipment due to the use of accelerated depreciation methods for tax purposes, as well as (ii) in partnership investments and intangible assets due to the difference between book and tax basis. Our effective income tax rate is normally higher than the United States tax rate due to state income taxes and permanent differences.

 

We account for income taxes in accordance with GAAP, which requires an asset and liability approach to financial accounting and reporting for income taxes. As required by GAAP, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

As of September 30, 2024, and December 31, 2023, we had $0 of unrecognized tax benefits that if recognized would affect the tax rate. We do not expect the total amount of unrecognized tax benefits to materially change over the next twelve months.

 

We are primarily subject to United States, Minnesota, Iowa, Nebraska, North Dakota, and Wisconsin income taxes. Tax years subsequent to 2020 remain open to examination by federal and state tax authorities. Our policy is to recognize interest and penalties related to income tax matters as income tax expense. As of September 30, 2024, and December 31, 2023, we had $0 of interest or penalties accrued that related to income tax matters.

 
12
 

 

Earnings and Dividends Per Share

 

The basic and diluted net income per share is calculated as follows:

 

   

Three Months Ended

    

Three Months Ended

    

Nine Months Ended

    

Nine Months Ended

  
   

September 30, 2024

    

September 30, 2023

    

September 30, 2024

    

September 30, 2023

  
   

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

  
                                                                 

Net Income

   $ 81,698     $ 81,698     $ 483,170     $ 483,170     $ 384,167     $ 384,167     $ 5,154,157     $ 5,154,157  
                                                                 

Weighted-average common shares outstanding

     5,178,176       5,362,674       5,126,581       5,211,382       5,158,286       5,311,760       5,113,007       5,175,507  
                                                                 

Net income per share

   $ 0.02     $ 0.02     $ 0.09     $ 0.09     $ 0.07     $ 0.07     $ 1.01     $ 1.00  

 

The weighted-average shares outstanding, basic, and diluted, are calculated as follows:

 

   

Three Months Ended

    

Three Months Ended

    

Nine Months Ended

    

Nine Months Ended

  
   

September 30, 2024

    

September 30, 2023

    

September 30, 2024

    

September 30, 2023

  
   

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

  
                                                                 

Weighted-average common shares outstanding

     5,178,176       5,178,176       5,126,581       5,126,581       5,158,286       5,158,286       5,113,007       5,113,007  
                                                                 

Dilutive RSUs/Options

     -       184,498       -       84,801       -       153,474       -       62,500  
                                                                 

Weighted-average common shares outstanding

     5,178,176       5,362,674       5,126,581       5,211,382       5,158,286       5,311,760       5,113,007       5,175,507  

 

Nuvera’s Board of Directors (BOD) reviews quarterly dividend declarations based on our anticipated earnings, capital requirements and our operating and financial conditions.

 

Recent Accounting Developments

 

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide improvements primarily related to the rate reconciliation and incomes taxes paid information included in income tax disclosures. The Company would be required to disclose additional information regarding reconciling items equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory tax rate. Similarly, the Company would be required to disclose income taxes paid (net of refunds received) equal to or greater than five percent of total income taxes paid (net of refunds received). The amendments in ASU 2023-09 are effective January 1, 2025, including interim periods. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company will evaluate the impact of ASU 2023-09 on its financial statements.

 

13
 

 

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, amending reportable segment disclosure requirements to include disclosure of incremental segment information on an annual and interim basis. Among the disclosure enhancements are new disclosures regarding significant segment expenses that are regularly provided to the chief operating decision-maker and included within each reported measure of segment profit or loss, as well as other segment items bridging segment revenue to each reported measure of segment profit or loss. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, and are applied retrospectively. We continue to evaluate the impact of this update on our consolidated financial statements and disclosures and do not expect any changes to our current reportable segments.

 

We have implemented all applicable accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

We have reviewed all other significant newly issued accounting pronouncements and determined that they are either not applicable to our business or that no material effect is expected on our financial position and results of operations.

 

 

Note 2 – Revenue Recognition

 

The Company recognizes revenue based on the following single principles-based, five-step model that is applied to all services and contracts that are required with customers. These steps include (1) identify the contract(s)/service with the customer, (2) identify the performance obligations in the contract/service provided, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract/service provided and (5) recognize revenue when each performance obligation is satisfied.

 

Our revenue contracts/services provided with customers may include a promise or promises to deliver services such as broadband, video or voice services. Promised services are considered distinct as the customer can benefit from the services either on their own or together with other resources that are readily available to the customer and the Company’s promise to transfer service to the customer is separately identifiable from other promises in the contract. The Company accounts for services as separate performance obligations. Each service is considered a single performance obligation as it provides a series of distinct services that are substantially the same and have the same pattern of transfer.

 

The transaction price is determined at service or contract inception and reflects the amount of consideration to which we expect to be entitled in exchange for transferring service to the customer. This amount is generally equal to the market price of the services promised in the service provided or contract and may include promotional or bundling discounts. Most of our prices are based on tariffed rates filed with regulatory bodies or standard company price lists. The transaction price excludes amounts collected on behalf of third parties such as sales taxes and regulatory fees. Conversely, nonrefundable up-front fees, such as service activation and set-up fees, which are immaterial to our overall revenues, are included in the transaction price. In determining the transaction price, we consider our enforceable rights and obligations within the service or contract. We do not consider the possibility of a contract being cancelled, renewed, or modified, which is consistent with Accounting Standards Codification (ASC 606-10-32-4).

 

14
 

 

The transaction price is allocated to each performance obligation based on the standalone selling price of the service, net of the related discount, as applicable.

 

Revenue is recognized when performance obligations are satisfied by transferring service to the customer as described below.

 

Significant Judgments

 

The Company often provides multiple services to a customer. Provision of customer premise equipment (CPE) and additional service tiers may have a significant level of integration and interdependency with the subscription voice, video, Internet, or connectivity services. Judgment is required to determine whether the provision of CPE, installation services and additional service tiers are considered distinct and accounted for separately, or not distinct and accounted for together with the subscription services.

 

Allocation of the transaction price to the distinct performance obligations in bundled service subscriptions requires judgment. The transaction price for a bundle of services is frequently less than the sum of standalone selling prices of each individual service. Bundled discounts are allocated proportionally to the selling price of each individual service within the bundle. Standalone selling prices for the Company’s services are directly observable.

 

15
 

 

Disaggregation of Revenue

 

The following table summarizes revenue from contracts/services with customers for the quarters ended September 30, 2024, and 2023:

 

   

Quarters Ended September 30,

  
   

2024

    

2023

  

Voice Service¹

   $ 1,267,195     $ 1,505,320  

Network Access¹

     767,082       909,502  

Video Service¹

     2,928,080       3,005,010  

Data Service¹

     7,038,182       6,327,829  

Directory²

     132,073       151,562  

Other Contracted Revenue³

     502,857       653,417  

Other⁴

     485,210       600,171  
                 

Revenue from customers

     13,120,679       13,152,811  
                 

 

                

Subsidy and other revenue outside scope of ASC 606⁵

     4,495,656       3,217,667  
                 

Total revenue

   $ 17,616,335     $ 16,370,478  

 

 

¹ Month-to-Month contracts billed and cosumed in the same month.

 

 

² Directory revenue is contracted annually, however, this revenue is recognized monthly over the contract period as the advertising is used.

 

 

³ This includes long-term contracts where the revenue is recognized monthly over the term of the contract.

 

 

⁴ This includes CPE and other equipment sales.

 

 

⁵ This includes governmental subsidies and lease revenue outside the scope of ASC 606.

 

For the quarter ended September 30, 2024, approximately 71.73% of our total revenue was from month-to-month and other contracted revenue from customers. Approximately 25.52% of our total revenue was from revenue sources outside of the scope of ASC 606. The remaining 2.75% of total revenue was from other sources including CPE and equipment sales and installation.

 

For the quarter ended September 30, 2023, approximately 76.68% of our total revenue was from month-to-month and other contracted revenue from customers. Approximately 19.65% of our total revenue was from revenue sources outside of the scope of ASC 606. The remaining 3.67% of total revenue was from other sources including CPE and equipment sales and installation.

 

16
 

 

The following table summarizes revenue from contracts/services with customers for the nine months ended September 30, 2024, and 2023:

 

   

Nine Months Ended September 30,

  
   

2024

    

2023

  

Voice Services¹

   $ 3,967,091     $ 4,373,187  

Network Access¹

     2,667,704       3,027,881  

Video Service¹

     8,891,820       9,120,164  

Data Service¹

     20,618,880       18,850,042  

Directory²

     408,688       454,852  

Other Contracted Revenue³

     1,901,228       2,019,130  

Other⁴

     1,419,215       1,497,123  
                 

Revenue from customers

     39,874,626       39,342,379  
                 

Subsidy and other revenue

                

outside scope of ASC 606⁵

     11,864,688       9,675,733  
                 

Total revenue

   $ 51,739,314     $ 49,018,112  

 

¹ Month-to-Month contracts billed and cosumed in the same month.

 

 

² Directory revenue is contracted annually, however, this revenue is recognized monthly over the contract period as the advertising is used.

 

 

³ This includes long-term contracts where the revenue is recognized monthly over the term of the contract.

 

 

⁴ This includes CPE and other equipment sales.

 

 

⁵ This includes governmental subsidies and lease revenue outside the scope of ASC 606.

 

For the nine months ended September 30, 2024, approximately 74.33% of our total revenue was from month-to-month and other contracted revenue from customers. Approximately 22.93% of our total revenue was from revenue sources outside of the scope of ASC 606. The remaining 2.74% of total revenue was from other sources including CPE and equipment sales and installation.

 

17
 

 

For the nine months ended September 30, 2023, approximately 77.21% of our total revenue was from month-to-month and other contracted revenue from customers. Approximately 19.74% of our total revenue was from revenue sources outside of the scope of ASC 606. The remaining 3.05% of total revenue was from other sources including CPE and equipment sales and installation.

 

A significant portion of our revenue is derived from customers who may generally cancel their subscriptions at any time without penalty. As such, the amount of revenue related to unsatisfied performance obligations is not necessarily indicative of the future revenue to be recognized from our existing customer base. Revenue from customers with a contractually specified term and non-cancelable service period will be recognized over the term of such contracts, which is generally three to ten years for these types of contracts.

 

Nature of Services

 

Revenues are earned from our customers primarily through the connection to our advanced fiber networks, digital and commercial television (TV) programming, Internet services (high-speed broadband), and hosted and managed services. Revenues for these services are billed based on set rates for monthly service or based on the amount of time the customer is utilizing our facilities. The revenue for these services is recognized over time as the service is rendered.

 

Voice Service – We receive recurring revenue for basic local services that enable end-user customers to make and receive telephone calls within a defined local calling area for a flat monthly fee. In addition to subscribing to basic local telephone services, our customers may choose from multiple voice service plans with a variety of custom calling features such as call waiting, call forwarding, caller identification and voicemail. Our voice over Internet protocol (VOIP) digital phone service is also available as an alternative to the traditional telephone line. Customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one-month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

 

Network Access – We provide access services to other communication carriers for the use of our facilities to terminate or originate long distance calls on our fiber network. Additionally, we bill monthly subscriber line charges (SLCs) to substantially all our customers for access to the public switched network. These monthly SLCs are regulated and approved by the FCC. In addition, network access revenue is derived from several federally administered pooling arrangements designed to provide support and distribute funding to us.

 

Revenues earned from other communication carriers accessing our network are based on the utilization of our network by these carriers as measured by minutes of use on the network or special access to the network by the individual carriers monthly. Revenues are billed at tariffed access rates for both interstate and intrastate calls and are recognized into revenue monthly based on the period the access was provided.

 

The National Exchange Carriers Association (NECA) pools and redistributes the SLCs to various communication providers through the Connect America Fund (CAF). These revenues are earned and recognized into revenue on a monthly basis. Any adjustments to these amounts received by NECA are adjusted for in revenue upon receipt of the adjustment.

 

18
 

 

On December 12, 2023, the Company announced that it confirmed eligibility for Consumer Broadband-only Loop Support (CBOL) funding through the Universal Service Administration Company (USAC). The incremental funding will be used to continue to support the Company’s multi-year fiber construction initiative. The Company began receiving a monthly benefit in November of 2023 with the first payment receipt confirmed in December. On an annualized basis this new program will provide $3.9 million of new funding based on the tariff filing and the Company’s expected line counts. The monthly CBOL subsidy formula is reviewed and subject to revision on an annual basis and subject to change based on updated USAC funding criteria July 1 of each year.

 

Video Service – We provide a variety of enhanced video services on a monthly recurring basis to our customers. Depending on geographical market availability, our video services range from limited basic service to advanced digital TV, which includes several plans each with hundreds of local, national music channels including premium and pay-per-view channels as well as video-on-demand service. Certain customers may also subscribe to our advanced video services, which consist of high-definition TV, digital video recorders (DVR) and Whole Home DVR. Our Whole Home DVR allows customers the ability to watch recorded shows on any TV in the house, record multiple shows at one time and utilize an intuitive on-screen guide and user interface. Video subscribers also have access to our TV Everywhere service which allows subscriber access to full episodes of available shows, movies and live screens using a computer or mobile device. We also receive monthly recurring revenue from our subscribers for providing commercial TV programming in competition with cable television services (CATV), satellite dish TV and off-air TV service providers. Customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one-month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

 

Data Service – We provide high speed Internet to business and residential customers depending on the nature of the network facilities that are available, the level of service selected and the location. Our revenue is earned based on the offering of various flat packages based on the level of service, data speeds and features. We also provide e-mail and managed services, such as web hosting and design, on-line file back up and on-line file storage. Data customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one-month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

 

Directory – Our directory publishing revenue in our telephone directories recurs monthly and is recognized as revenue on a monthly basis.

 

Other Contracted Revenue - Managed services and certain other data customers include advanced fiber-delivered communications and managed information technology solutions to mainly business customers, as well as high-capacity last-mile data connectivity services to wireless and wireline carriers. Services are primarily offered on a subscription basis with a contractually specified and non-cancelable service period. The non-cancelable contract terms for these customers generally range from three to ten years. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized ratably over the contract period as the subscription services are delivered. These services are billed as monthly recurring charges to customers.

 

19
 

 

Other – We also generate revenue from the sales, service and installation of CPE and other services. Sales and service of CPE are billed and recognized into revenue once the sale or service is complete or delivered. These sales and services are generally short-term in nature and are completed within one month. Other revenues are immaterial to our total revenues.

 

Subsidy and Other Revenue outside the Scope of ASC 606 – We receive subsidies from governmental entities to operate and expand our advanced fiber networks. In addition, we have revenue from leasing arrangements. Both of these revenue streams are outside of the scope of ASC 606.

 

Interstate access rates are established by a nationwide pooling of companies known as NECA. The FCC established NECA in 1983 to develop and administer interstate access service rates, terms, and conditions. Revenues are pooled and redistributed based on a company's actual or average costs. There has been a change in the composition of interstate access charges in recent years, shifting more of the charges to the end user and reducing the amount of access charges paid by the Interexchange Carriers (IXCs). We believe this trend will continue.

 

Intrastate access rates are filed with state regulatory commissions in Minnesota and Iowa.

 

The Company currently receives funding based on the Alternative Connect America Cost Model (A-CAM) as described below, except for Scott-Rice Telephone Co. (Scott-Rice), which receives funding from the Federal Universal Service Fund (FUSF). Scott-Rice’s settlements from the pools are based on nationwide average schedules, which includes the pooling and redistribution of revenues based on a company’s actual or average costs as described below.

 

A-CAM

 

As described above, with the exception of Scott-Rice, the remainder of our companies receive funding from the A-CAM.

 

Per the FCC Public Notice DA 19-115, the Company receives A-CAM support and has corresponding service deployment obligations under that program. The Company annually receives (i) $596,084 for its Iowa operations and (ii) $8,354,481 for its Minnesota operations. The Company will receive the A-CAM support for a period of 10 years, which started in 2019. The Company uses the funding that it receives through the A-CAM program to meet its defined broadband build-out obligations, which the Company is currently completing.

 

On September 29, 2023, Nuvera announced that it had notified the FCC that the Company had decided to remain on the current A-CAM funding, rather than moving to the Enhanced A-CAM (E-ACAM) program that the FCC introduced earlier in 2023. A-CAM and E-ACAM are FCC administered programs to subsidize the deployment of broadband to rural areas. E-ACAM is a successor to this program which requires participating carriers to offer broadband and voice services at speeds of 100/20 Megabits per second or faster to all E-ACAM required locations within its study area. Broadband providers were required to choose one of the two funding options and notify the FCC by September 29, 2023.

 

20
 

 

Accounts Receivable, Contract Assets and Contract Liabilities

 

The following table provides information about our receivables, contracts assets and contract liabilities from revenue contracts with our customers:

 

   

September 30,

    

December 31,

  
   

2024

    

2023

  
                 

Accounts receivable, net - beginning balance

   $ 1,966,012     $ 1,477,692  

Accounts receivable, net - ending balance

     1,985,831       1,966,012  
                 

Contract assets - beginning balance

     1,458,631       794,193  

Contract assets - ending balance

     1,471,384       1,458,631  
                 

Contract liabilities - beginning balance

     551,995       626,306  

Contract liabilities - ending balance

     369,637       551,995  

 

Accounts Receivable

 

A receivable is recognized in the period the Company provides goods and services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are generally 30-60 days.

 

Contract Assets

 

Contract assets include costs that are incremental to the acquisition of a contract. Incremental costs are those that result directly from obtaining a contract or costs that would not have been incurred if the contract had not been obtained, which primarily relates to sales commissions. We defer and amortize these costs over the expected customer life as the contract obligations are satisfied. We determined that the expected customer life is the expected period of benefit as the commission on the renewal contract is commensurate with the commission on the initial contract. During the quarters ended September 30, 2024, and 2023 the Company recognized expenses of $173,140 and $141,051, respectively, related to deferred contact acquisition costs. During the nine months ended September 30, 2024, and 2023 the Company recognized expenses of $496,127 and $340,786, respectively, related to deferred contact acquisition costs. Short-term contact assets are included in current assets under prepaid expenses and other current assets. Long-term contract assets are included in investments and other assets under other assets.

 

Contract Liabilities

 

Contract liabilities include deferred revenues related to advanced payments for services and nonrefundable, upfront service activation and set-up fees, which are generally deferred. In addition, contract liabilities include customer deposits that are not recognized as revenue but are instead returned to the customer after a holding period. Short-term contract liabilities include deferred revenues for advanced payments for managed services and other long-term contracts. This includes the current portion of the deferred revenues that will be recognized monthly within one year. Short-term contract liabilities are included in current liabilities under other accrued liabilities. Long-term contract liabilities include deferred revenues for advanced payments for managed services and other long-term contracts. This includes the portion longer than one year and the corresponding deferred revenues are recognized as revenue on a monthly basis based on the term of the contract. Long-term contract liabilities are included in noncurrent liabilities under other accrued liabilities. During the quarters ended September 30, 2024, and 2023, the Company recognized revenues of $34,436 and $54,413, respectively, related to deferred revenues. During the nine months ended September 30, 2024, and 2023, the Company recognized revenues of $272,294 and $302,831, respectively, related to deferred revenues.

 

21
 

 

Performance Obligations

 

ASC 606, Revenue from Contracts with Customers, requires that the Company disclose the aggregate amount of the transaction price that is allocated to remaining performance obligations that are unsatisfied as of September 30, 2024. The guidance provides certain practical expedients that limit this requirement. The service revenue contracts of the Company meet the following practical expedients provided by ASC 606:

 

 

1.

The performance obligation is part of a contract that has an original expected duration of one year or less.
 

2.

Revenue is recognized from the satisfaction of the performance obligations in the amount billable to the customer in accordance with ASC 606-10-55-18.

 

The Company has elected these practical expedients. Performance obligations related to our service revenue contracts are generally satisfied over time. For services transferred over time, revenue is recognized based on amounts invoiced to the customer as the Company has concluded that the invoice amount directly corresponds with the value of services provided to the customer. Management considers this a faithful depiction of the transfer of control as services are substantially the same and have the same pattern of transfer over the life of the contract. As such, revenue related to unsatisfied performance obligations that will be billed in future periods has not been disclosed.

 

 

Note 3 – Leases

 

Under FASB’s ASU 2016-02, “Leases,” which, together with its related clarifying ASUs, provided revised guidance for lease accounting and related disclosure requirements and established a right-to-use (ROU) model that requires lessees to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. The ASU also requires disclosures to allow financial statement users to better understand the amount, timing and uncertainty of cash flows arising from leases. These disclosures include qualitative requirements, providing additional information about the amounts recorded in the financial statements.

 

The following tables include the ROU assets and operating lease liabilities as of September 30, 2024, and December 31, 2023. Short-term operating lease liabilities are included in current liabilities in other accrued liabilities. Long-term operating lease liabilities are included in noncurrent liabilities in other accrued liabilities.

 

Right of Use Assets

  

Balance
September 30, 2024

    

Balance
December 31, 2023

  

Operating Lease Right-Of-Use Assets

   $ 1,096,639     $ 1,348,290  

 

22
 

 

Operating Lease Liabilities

  

Balance
September 30, 2024

    

Balance
December 31, 2023

  

Short-Term Operating Lease Liabilities

   $ 198,310     $ 352,969  

Long-Term Operating Lease Liabilities

     922,209       1,029,910  

Total

   $ 1,120,519     $ 1,382,879  

 

Maturity analysis under these lease agreements are as follows:

 

Maturity Analysis

  

Balance
September 30, 2024

  

2024 (remaining)

   $ 79,981  

2025

     243,974  

2026

     200,777  

2027

     151,630  

2028

     153,824  

Thereafter

     613,091  

Total

     1,443,277  

Less Imputed interest

     (322,758 )

Present Value of Operating Leases

   $ 1,120,519  

 

The following summarizes other information related to leases for the quarter ended September 30, 2024, as follows:

 

Weighted Average Remaining Lease Term (Years)

     7.60  

Weighted Average Discount Rate

     6.32 %

 

We amortize our leases over the shorter of the term of the lease or the useful life of the asset. Lease expenses for the quarter and nine months ended September 30, 2024, were $87,043 and $384,376. Lease expenses for the quarter and nine months ended September 30, 2023, were $123,588 and $334,295.

 

 

Note 4 – Fair Value Measurements

 

We have adopted the rules prescribed under GAAP for our financial assets and liabilities. GAAP includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques used to measure fair value that is either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels:

 

Level 1:

Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2:

Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs that are derived principally from or corroborated by observable market data.

Level 3:

Inputs are derived from valuation techniques where one or more significant inputs or value drivers are unobservable.

 

23
 

 

We have used financial derivative instruments to manage our overall cash flow exposure to fluctuations in interest rates. We accounted for derivative instruments in accordance with GAAP that requires derivative instruments to be recorded on the balance sheet at fair value. Changes in fair value of derivative instruments must be recognized in earnings unless specific hedge accounting criteria are met, in which case, the gains and losses are included in other comprehensive income rather than in earnings.

 

We have entered into interest rate swap agreements (IRSAs) with our lender, CoBank, ACB (CoBank) to manage our cash flow exposure to fluctuations in interest rates. These instruments are designated as cash flow hedges and are effective at mitigating the risk of fluctuations on interest rates in the marketplace. Any gains or losses related to changes in the fair value of these derivatives are accounted for as a component of accumulated other comprehensive gain (loss) for as long as the hedge remains effective.

 

The fair value of our IRSAs is discussed in Note 7 – “Interest Rate Swaps”. The fair value of our swap agreements was determined based on Level 2 inputs.

 

The fair value of our Goodwill as discussed in Note 5 – “Goodwill and Intangibles”. The fair value of our Goodwill was determined based on Level 3 inputs.

 

Other Financial Instruments

 

Other Investments - We conducted an evaluation of our investments in all of our investees in connection with the preparation of our audited financial statements as of December 31, 2023. As of September 30, 2024, we believe the carrying value of our investments is not impaired.

 

Debt – We estimate the fair value of our long-term debt based on the discounted future cash flows we expect to pay using current rates of borrowing for similar types of debt. Fair value of the debt approximates carrying value.

 

Other Financial Instruments - Our financial instruments also include cash equivalents, trade accounts receivable and accounts payable where the current carrying amounts approximate fair market value.

 

 

Note 5 – Goodwill and Intangibles

 

We account for goodwill and other intangible assets under GAAP. Under GAAP, goodwill and intangible assets with indefinite useful lives are not amortized but are instead tested for impairment (i) on at least an annual basis and (ii) when changes in circumstances indicate that the fair value of goodwill may be below its carrying value. These circumstances include but are not limited to (i) a significant adverse change in the business climate, (ii) unanticipated competition or (iii) an adverse action or assessment by a regulator. Determining impairment involves estimating the fair value of a reporting unit using a combination of (i) the income or discounted cash flow approach and (ii) the market approach that utilizes comparable companies’ data. If the carrying amount of a reporting unit exceeds its fair value, the amount of the impairment loss must be measured. The impairment loss is calculated by comparing the implied fair value of the reporting unit’s goodwill to its carrying amount. In calculating the implied fair value of the reporting unit’s goodwill, the fair value of the reporting unit is allocated to all the assets and liabilities of the reporting unit. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied value of goodwill. We recognize impairment loss when the carrying amount of goodwill exceeds its implied fair value. Our goodwill totaled $40,603,029 as of September 30, 2024, and December 31, 2023.

 

24
 

 

In 2023 and 2022, we engaged an independent valuation firm to aid in the completion of an annual impairment test for existing goodwill acquired. For 2023 and 2022, the testing was completed, and we determined that there was no impairment to goodwill for Scott-Rice and Sleepy Eye Telephone Company and no impairment to goodwill for Hutchinson Telephone Company (HTC) for 2022 as the determined fair value was sufficient to pass the impairment test. For 2023, after the testing, we determined that there was an impairment to goodwill for HTC of $9.3 million as the determined fair value was not sufficient to pass the impairment test.

 

Our intangible assets subject to amortization consist of acquired customer relationships, regulatory rights, and trade names. We amortize intangible assets with finite lives over their respective estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment. In addition, we periodically reassess the carrying value, useful lives, and classifications of our identifiable intangible assets.

 

The components of our identified intangible assets are as follows:

 

             

September 30, 2024

    

December 31, 2023

  
             

Gross

            

Gross

          
   

Useful

    

Carrying

    

Accumulated

    

Carrying

    

Accumulated

  
   

Lives (yrs)

    

Amount

    

Amortization

    

Amount

    

Amortization

  

Definite-Lived Intangible Assets

                                          

Customers Relationships

   14 - 15     $ 42,878,445     $ 33,271,101     $ 42,878,445     $ 32,053,361  

Regulatory Rights

     15         4,000,000       4,000,000       4,000,000       4,000,000  

Video Franchise

               3,000,000       535,725       3,000,000       214,290  

Trade Name

   3 - 5       310,106       310,106       310,106       310,106  

Indefinitely-Lived Intangible Assets

                                          

Video Franchise

               -       -       -       -  

Spectrum

               877,814       -       877,814       -  

Total

             $ 51,066,365     $ 38,116,932     $ 51,066,365     $ 36,577,757  
                                           

Net Identified Intangible Assets

                     $ 12,949,433             $ 14,488,608  

 

Amortization expense related to the definite-lived intangible assets was $1,539,175 and $1,361,526 for the nine months ended September 30, 2024, and 2023. Amortization expense for the remaining three months of 2024 and the five years subsequent to 2024 is estimated to be:

 

(October 1 – December 31)

   $ 513,059  

2025

   $ 2,047,312  

2026

   $ 2,042,389  

2027

   $ 1,335,247  

2028

   $ 1,335,247  

2029

   $ 1,335,247  

 

 

25
 

 
 

Note 6 – Secured Credit Facility

 

On June 21, 2024, Nuvera and CoBank entered into (i) an Agreement Regarding Amendments to Loan Documents and (ii) an Amended and Restated Revolving Loan Promissory Note. The agreements amended our existing credit facility with CoBank and secured a credit facility in the aggregate principal amount of $180.0 million.

 

Under the Agreements, among other things, (i) the Company received a $125.0 million term loan to replace existing debt, (ii) a $25.0 million delayed draw term loan, (iii) the Company’s revolving loan was decreased from $40.0 million to $30.0 million, (iv) the maturity dates of the term loans and revolving loan were set at June 21, 2029, and (v) the Company’s operating subsidiaries agreed to extend their previous guarantees, security interests and mortgages to cover the increased amount of the credit facility. The financing was secured to facilitate the Company’s advanced fiber-build plans announced on December 15, 2021. Refer to the Company’s 8-K filing with the SEC on June 25, 2024, for further details regarding the 2024 credit agreements with CoBank.

 

On December 21, 2023, Nuvera and CoBank entered into (i) an Agreement Regarding Amendments to Loan Documents and (ii) an Amended and Restated Revolving Loan Promissory Note. The agreements amended our existing credit facility with CoBank and increased the Company’s existing credit facility from an aggregate principal amount of $130.0 million to $140.0 million. Under the Agreements, among other things, (i) the Company’s revolving loan was increased from $30.0 million to $40.0 million and (ii) the Company’s operating subsidiaries agreed to extend their previous guarantees, security interests and mortgages to cover the increased amount of the revolving note. The financing was secured to facilitate the Company’s advanced fiber-build plans announced on December 15, 2021. Refer to the Company’s 8-K filing with the SEC on December 21, 2023, for further details regarding the credit agreements with CoBank.

 

Under the credit agreement, the Company and its respective subsidiaries have entered into security agreements under which substantially all the assets of Nuvera and its respective subsidiaries have been pledged to CoBank as collateral. In addition, Nuvera and its respective subsidiaries have guaranteed all the obligations under the credit facility. The credit agreement contains certain customary events of default, which include failure to make payments when due, the material inaccuracy of representations or warranties, failure to observe or perform certain covenants, cross-defaults, bankruptcy and insolvency-related events, certain judgments, certain ERISA-related events, or a change in control (as defined in the credit agreement).

 

New 2024 Credit Agreement:

 

 

●

TERM A-1 LOAN - $125,000,000 term note with interest payable quarterly. The final maturity date of this note is June 21, 2029. Eight quarterly principal payments of $781,250 are due commencing June 30, 2026, through March 31, 2028, and four quarterly principal payments of $1,562,500 commencing on June 30, 2028, through maturity date. A final balloon payment of $112,500,000 is due at maturity of this note on June 21, 2029.

 

26
 

 

 

●

DELAYED DRAW TERM LOAN - $25,000,000 Delayed Draw Term Loan with interest on any outstanding amounts payable quarterly. The final maturity date of this loan is June 21, 2029. Eight quarterly principal payments of 0.625% of the outstanding loan balance are due commencing June 30, 2026, through March 31, 2028, and four quarterly principal payments of 1.250% of the outstanding loan balance commencing on June 30, 2028, through maturity date. A final balloon payment of the balance of the Delayed Draw Term Loan is due at maturity of this note on June 21, 2029. We currently have drawn $0 on this Delayed Draw Term Loan as of September 30, 2024.

 

 

●

REVOLVING LOAN - $30,000,000 revolving loan with interest payable quarterly. The final maturity date of this note is June 21, 2029. We currently have drawn $15,256,942 on this revolving note as of September 30, 2024.

 

The term loan borrowings initially bear interest at a “Margin for Base Rate Loans” of 2.75% above the applicable base rate. The margin for base rate loans for term loans increases as our “Leverage Ratio” increases and decreases as our “Leverage Ratio” decreases. The revolving loan borrowings initially bear interest at a “Margin for Base Rate Loans” of 2.75% above the applicable base rate. The margin for base rate loans for revolving loans increases as our “Leverage Ratio” increases and decreases as our “Leverage Ratio” decreases.

 

We generally use variable-rate debt to finance our operations, capital expenditures and acquisitions. These variable-rate debt obligations expose us to variability in interest payments due to changes in interest rates. The terms of our credit facility with CoBank require that we enter into interest rate agreements designed to protect us against fluctuations in interest rates, in an aggregate principal amount and for a duration determined under the credit facility.

 

Under the new 2024 credit facility, Nuvera can enter into IRSAs in connection with amounts borrowed from CoBank. In connection with the closing of the new credit facility, the Company “rolled over” its two exiting IRSAs.

 

As described in Note 7 – “Interest Rate Swaps,” on August 1, 2018, we entered into an IRSA with CoBank covering $16,137,500 of our aggregate indebtedness to CoBank. As of September 30, 2024, our IRSA covered $8,933,750 with a weighted average interest rate of 6.71%.

 

As described in Note 7 – “Interest Rate Swaps,” on August 29, 2019, we entered into a second IRSA with CoBank covering an additional $42,000,000 of our aggregate indebtedness to CoBank. As of September 30, 2024, our IRSA covered $25,039,707, with a weighted average interest rate of 5.04%.

 

As described in Note 7 – “Interest Rate Swaps,” on September 17, 2024, we entered into a third IRSA with CoBank covering an additional $21,813,892 of our aggregate indebtedness. As of September 30, 2024, our IRSA covered $18,526,543, with a weighted average interest rate of 7.77%.

 

Our loan agreements with CoBank require us to have a minimum of 35% of our existing debt under IRSAs. As of September 30, 2024, we were in compliance with the above stated covenant in our loan agreements.

 

27
 

 

Our remaining outstanding debt of $87.8 million remains subject to variable interest rates at an effective weighted average interest rate of 8.71%, as of September 30, 2024.

 

As of September 30, 2024 our additional delayed draw term loan of $25.0 million and unused revolving credit facility of $14.7 million are subject to an unused commitment fee of 0.50% annually, until drawn. Once drawn, this debt would be subject to an effective weighted average interest rate based on current rate of interest in effect at the time.

 

Our loan agreements include restrictions on our ability to pay cash dividends to our stockholders. However, we are allowed to pay dividends in an amount up to $3,000,000 in any year as long as no default or event of default has occurred, and our current Total Leverage Ratio is equal to 4.25:1.00 or less. In addition, we are allowed to pay dividends in an unlimited amount in any year as long as no default or event of default has occurred, and our current Total Leverage Ratio is equal to 3.50:1.00 or less. Our current Total Leverage Ratio as of September 30, 2024, was 5.20. Our maximum Total Leverage Ratio under the new loan facility is 6.00:1.00.

 

Our credit facility requires us to comply with specified financial ratios and tests. These financial ratios include Total Leverage Ratio, debt service coverage ratio and equity to total assets ratio. On September 30, 2024, we were in compliance with all the stipulated financial ratios in our loan agreements.

 

There are security and loan agreements underlying our current CoBank credit facility that contain restrictions on our distributions to stockholders and investment in, or loans, to others. Also, our credit facility contains restrictions that, among other things, limits or restricts our ability to enter into guarantees and contingent liabilities, incur additional debt, issue stock, transact asset sales, transfers, or dispositions, and engage in mergers and acquisitions, without CoBank approval.

 

 

Note 7 – Interest Rate Swaps

 

We assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely affect expected future cash flows and by evaluating hedging opportunities.

 

We generally use variable-rate debt to finance our operations, capital expenditures and acquisitions. These variable-rate debt obligations expose us to variability in interest payments due to changes in interest rates. The terms of our credit facility with CoBank required that we enter into interest rate agreements designed to protect us against fluctuations in interest rates, in an aggregate principal amount and for a duration determined under the credit facility.

 

Under the new credit facility, Nuvera is required to have a minimum of 35% of existing debt with CoBank under IRSAs. In connection with the closing of the new credit facility, the Company “rolled over” its two exiting IRSAs.

 

To meet this objective, we have entered into an IRSA with CoBank covering $16,137,500 of our aggregate indebtedness to CoBank on August 1, 2018. The swap effectively locked in a portion of our variable-rate debt through July 2025. Under this IRSA, we have changed the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the IRSA, we pay a fixed contractual interest rate and (i) make an additional payment if the Secured Overnight Financing Rate (SOFR) variable rate payment is below a contractual rate or (ii) receive a payment if the SOFR variable rate payment is above the contractual rate.

 

28
 

 

On August 29, 2019, we entered into a second IRSA with CoBank covering an additional $42,000,000 of our aggregate indebtedness to CoBank. The swap effectively locked in a portion of our variable-rate debt through July 2025. Under this IRSA, we have changed the variable rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the IRSA, we pay a fixed contractual interest rate and (i) make an additional payment if the SOFR variable rate payment is below a contractual rate or (ii) receive a payment if the SOFR variable rate payment is above the contractual rate.

 

On September 17, 2024, we entered into a third IRSA with CoBank covering an additional $21,813,892 of our aggregate indebtedness to CoBank. The swap effectively locked in a portion of our variable-rate debt through July 2025. Under this IRSA, we have changed the variable rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the IRSA, we pay a fixed contractual interest rate and (i) make an additional payment if the SOFR variable rate payment is below a contractual rate or (ii) receive a payment if the SOFR variable rate payment is above the contractual rate.

 

Each month, we make interest payments to CoBank under its loan agreements based on the current applicable SOFR plus the contractual SOFR margin then in effect with respect to the loan, without reflecting our IRSAs. At the end of each calendar month, CoBank adjusts our aggregate interest payments based on the difference, if any, between the amounts paid by us during the month and the current effective interest rate. Net interest payments are reported in our consolidated income statement as interest expense.

 

Our IRSAs under our credit facilities both qualify as cash flow hedges for accounting purposes under GAAP. We reflect the effect of these hedging transactions in the financial statements. The unrealized gain/loss is reported in other comprehensive income. If we terminate our IRSAs, the cumulative change in fair value at the date of termination would be reclassified from accumulated other comprehensive gain (loss), which is classified in stockholders’ equity, into earnings on the consolidated statements of income.

 

The fair value of the Company’s IRSAs was determined based on valuations received from CoBank and were based on the present value of expected future cash flows using discount rates appropriate with the terms of the IRSAs. The fair value indicates an estimated amount we would be required to pay if the contracts were canceled or transferred to other parties. As of September 30, 2024, the fair value asset of these swaps was $573,032, which has been recorded net of deferred tax expense of $163,543, resulting in the $409,489 in accumulated other comprehensive income. As of September 30, 2023, the fair value asset of these swaps was $1,991,769, which has been recorded net of deferred tax of $568,451, resulting in the $1,423,318 in accumulated other comprehensive income.

 

 

Note 8 – Other Investments

 

We are a co-investor with other communication companies in several partnerships and limited liability companies. These joint ventures make it possible to offer services to customers, including digital video services and fiber transport services that we would have difficulty offering on our own. These joint ventures also make it possible to invest in modern technologies with a lower level of financial risk. We use the equity method of accounting for these investments that reflects original cost and recognition of our share of the net income or losses from the respective operations. See Note 11 – “Segment Information” for a listing of our investments.

 

29
 

 

In 2023, Nuvera recognized a gain of $4,060,775, net of escrow true ups, after the sale, in book value in connection with the sale of the FiberComm, LC (FiberComm) investment. In 2024, Nuvera recognized a loss of $242,257 with the settlement of the escrow account for FiberComm.

 

The FASB requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. As of September 30, 2024, and 2023, respectively, the Company had not recorded any other gains or losses on our investments.

 

 

Note 9 – Guarantees

 

On March 31, 2023, Nuvera and the other owners of FiberComm sold 100% of their investment in FiberComm to ImOn Communications, LLC. FiberComm has been providing high quality Internet and voice services to businesses in the Sioux City, Iowa market for over 20 years. Nuvera owned a 20% interest in FiberComm through its wholly owned subsidiary Peoples Telephone Company (PTC). Nuvera announced the execution of the FiberComm sale agreement in January 2023.

 

Prior to the sale of Nuvera’s equity investment in FiberComm, Nuvera had guaranteed a portion of a ten-year loan owed by FiberComm, set to mature on April 30, 2026. On March 31, 2023, upon closing of the sale, the loan was paid and Nuvera was released from their guarantee of loan.

 

 

Note 10 – Incentive and Retirement Plans

 

In 2006, we implemented an Employee Incentive Plan for employees other than executive officers and a Management Incentive Plan for executive officers (collectively the 2006 Plan). In 2015, our BOD adopted, and our shareholders approved our 2015 Employee Stock Plan (2015 Plan), which permits the issuance of up to 200,000 shares of our Common Stock in stock awards for performance under the 2006 Plan. Each qualified employee of the Company may elect to receive up to 50% of their incentive compensation in Company Common Stock in lieu of cash. Each Company executive officer is required to receive 50% of their incentive compensation earned in Company Common Stock in lieu of cash. As of September 30, 2024, 148,877 shares remain available to be issued under the 2015 Plan.

 

 

Note 11 – Segment Information

 

We operate in the Communications Segment and have no other significant business segments. The Communications Segment consists of voice, data and video communication services delivered to the customer over our advanced fiber communications network. No single customer accounted for a material portion of our consolidated revenues.

 

30
 

 

The Communications Segment operates the following communications companies and has investment ownership interests as follows:

 

Communications Segment

 

 

●

Communications Companies:
 

▪

Nuvera Communications, Inc., the parent company.
 

▪

Hutchinson Telephone Company, a wholly owned subsidiary of Nuvera.
 

▪

Peoples Telephone Company, a wholly owned subsidiary of Nuvera.
 

▪

Scott-Rice Telephone Co., a wholly owned subsidiary of Nuvera.
 

▪

Sleepy Eye Telephone Company, a wholly owned subsidiary of Nuvera.
 

▪

Western Telephone Company, a wholly owned subsidiary of Nuvera; and
 

▪

Hutchinson Telecommunications, Inc., a wholly owned subsidiary of HTC, located in Litchfield and Glencoe, Minnesota.

 

 

●

Our investments and interests in the following entities include some management responsibilities:
 

▪

Broadband Visions, LLC (BBV) – 24.30% subsidiary equity ownership interest. BBV provides video headend and Internet services.
 

▪

Independent Emergency Services, LLC (IES) – 14.29% subsidiary equity ownership interest. IES is a provider of E-911 services to the State of Minnesota as well as a number of counties located in Minnesota; and
 

▪

Fiber Minnesota, LLC (FM) – 7.54% subsidiary equity ownership interest. FM is a Minnesota state-wide network that provides connectivity for regional businesses.

 

 

Note 12 – Commitments and Contingencies

 

On December 15, 2021, the Company announced plans for a fiber network initiative. The Company has made commitments to purchase materials and entered into contracts with various parties to successfully build this next-generation fiber network. As of September 30, 2024, the Company had outstanding contract amounts of approximately $12.3 million, with estimated completions of approximately $5.8 million in 2024 and $6.5 million in 2025.

 

We are involved in certain contractual disputes in the ordinary course of business. We do not believe the ultimate resolution of any of these existing matters will have a material adverse effect on our financial position, results of operations or cash flows.

 

Our capital budget for 2024 is approximately $41.1 million and will be financed through internally generated funds and our credit facility with CoBank debt financing.

 

 

Note 13 – Broadband Grants

 

On March 5, 2024, the Company was awarded a grant from the Minnesota Department of Employment and Economic Development (DEED). This Low-Density Broadband grant will provide up to 75% of the total cost of building fiber connections to homes and businesses for improved high-speed Internet in unserved and underserved communities in the Company’s service area. The Company is eligible to receive $1,884,429 of approximately $2,512,572 total project costs. The Company will provide the remaining 25% of the matching funds. The Company has not received any funds for this project as of September 30, 2024.

 

31
 

 

In 2023, the Company was awarded a grant from Redwood County under the Community Development Block Grant administered by the Southwest Minnesota Housing Partnership. The grant was to be used to build broadband fiber to residential customers in areas that qualify as low to moderate income. The Company was awarded $1,559,643 to complete this project. The Company has received $1,559,643 for this project as of September 30, 2024.

 

On December 8, 2022, the Company was awarded four broadband grants from the DEED. The grants will provide up to 45.0% to 50.0% of the total cost of building fiber connections to homes and businesses for improved high-speed Internet in unserved and underserved communities and businesses in the Company’s service area. The Company is eligible to receive $8,594,688 of approximately $18,139,749 total project costs. The Company will provide the remaining 50.0% to 55.0% matching funds. Construction and expenditures for these projects began in the spring of 2023. The Company has received $1,794,363 for these projects as of September 30, 2024.

 

In 2022, the Company was awarded two separate county grants from Nicollet County and Goodhue County to cover costs of building fiber connections to homes and businesses for improved high-speed Internet in unserved and underserved communities. The Company was initially eligible to receive up to $2,139,562 to complete these projects. The Company has received $1,345,855 for these projects as of September 30, 2024. The Goodhue County project was completed under budget and the Company is now eligible to receive up to $742,630 to complete these projects.

 

On January 29, 2021, the Company was awarded five broadband grants from the DEED. The grants will provide up to 35.4% of the total cost of building fiber connections to homes and businesses for improved high-speed Internet in unserved or underserved communities and businesses in the Company’s service area. The Company is eligible to receive $1,918,037 of the approximately $5,419,617 total project costs. The Company will provide the remaining 64.6% of matching funds. Construction and expenditures for these projects began in the spring of 2021. The Company has received $1,918,037 for these projects as of September 30, 2024.

 

 

Note 14 – Stock Based Compensation

 

The Company’s 2017 Omnibus Stock Plan (2017 OSP) was adopted by the Company’s BOD on February 24, 2017, and approved by the Company’s shareholders at the May 25, 2017, Annual Meeting of Shareholders. The 2017 OSP enables the Company to grant stock incentive awards to current and new employees, including officers, and to BOD members and service providers. The 2017 OSP permits stock incentive awards in the form of Options (incentive and non-qualified), stock appreciation rights, restricted stock, restricted stock units (RSUs), performance stock, performance units, and other awards in stock or cash. The 2017 OSP permits the issuance of up to 625,000 shares of our Common Stock in any of the above stock awards. As of September 30, 2024, 47,499 shares remain available for future grant under the 2017 OSP.

 

Starting in 2017, our BOD and Compensation Committee granted RSU awards to the Company’s executive officers under the 2017 OSP. We recognize share-based compensation expense for these RSUs over the vesting period of the RSUs, which is determined by our BOD. Forfeitures of RSUs are accounted for as they occur. Each executive officer was eligible to receive time-based RSUs and performance based RSUs. The time-based RSUs are computed as a percentage of the executive officer’s base salary based on the closing price of Company common stock on a date set by the BOD, and vest over a three-year period, subject to the executive officer being employed by the Company on the vesting date. The performance based RSUs are also computed as a percentage of the executive officer’s base salary based on the closing price of Company common stock on a date set by the BOD and vest over a three-year period based on the Company attaining an average Return on Invested Capital (ROIC) over that three-year period. The ROIC target is set by the BOD. Executive officers may earn more or fewer performance based RSUs based on if the actual ROIC achieved over the time period is more or less than target. Upon vesting of either time-based or performance based RSUs, the executive officers are issued Common Stock in exchange for the RSUs.

 

32
 

 

RSUs currently issued, exercised, or forfeited is as follows:

 

           

Targeted

    

Closing

    
   

Time-Based

    

Performance-Based

    

Stock

  

Vesting
   

RSUs

    

RSUs

    

Price

  

Date

Balance at December 31, 2022

     3,364       4,701            

Forfeited

     (516 )     (923 )          

Exercised

     (2,848 )     (3,778 )   $ 10.48  

12/31/2023

Balance at December 31, 2023

     -       -            

Forfeited

     -       -            

Exercised

     -       -            

Balance at September 30, 2024

     -       -            

 

Option Awards

 

In 2022, after considerable study, discussion and interaction with our consultants, the Compensation Committee decided to replace RSUs with non-qualified stock Options (Options). The Compensation Committee believes that grants of Options more directly align management long-term equity compensation with increased shareholder value creation at a time when the Company is engaged in significant investment and transformation as part of its long-term strategy. The Compensation Committee also determined to extend the grant of Options to include Named Executive Officers, senior employee directors and other employee directors as key members of the Company leadership team and contributors of our overall success.

 

33
 

 

As previously disclosed, the number of Options awarded was computed as a percentage of the employee’s base salary using a Black-Scholes formula using an exercise price equal to the closing price of Company common stock of $11.00 on March 28, 2024, $14.70 on March 31, 2023, and $21.20 on April 11, 2022. The 2024 Options will vest one-third each on March 31, 2025, 2026 and 2027. The 2023 Options will vest one-third each on March 31, 2024, 2025 and 2026. The 2022 Options will vest one-third each on April 11, 2023, 2024 and 2025.

 

           

Closing

    
           

Stock

  

Vesting
   

Options

    

Price

  

Date

Balance at December 31, 2021

     -            

Issued

     40,577     $ 21.20  

4/11/2023

Issued

     40,583     $ 21.20  

4/11/2024

Issued

     40,583     $ 21.20  

4/11/2025

Balance at December 31, 2022

     121,743            

Issued

     51,431     $ 14.70  

3/31/2024

Issued

     51,431     $ 14.70  

3/31/2025

Issued

     51,432     $ 14.70  

3/31/2026

Balance at December 31, 2023

     276,037            

Issued

     35,817     $ 11.00  

3/28/2025

Issued

     35,818     $ 11.00  

3/28/2026

Issued

     35,818     $ 11.00  

3/28/2027

Balance at September 30, 2024

     383,490            

 

The grant date fair value of employee stock Option awards is determined using the Black Scholes Option-pricing model. The following assumptions were used during the following periods:

 

   

2024 Grants

    

2023 Grants

    

2022 Grants

  
                         

Exercise Price

   $ 11.00     $ 14.70     $ 21.20  

Risk-Free Rate of Interest

     3.866 %     2.957 %     1.515 %

Expected Term (Years)

     10       10       10  

Expected Stock Price Volatility

     36.6 %     20.7 %     18.1 %

Dividend Yield

     2.11 %     2.83 %     2.44 %

  

34
 

 

The following table summarizes the Company’s employee stock Option activity under the 2017 OSP, which was approved by the Company’s shareholders, for the following periods:

 

                   

Weighted

    

Aggregate

  
   

Number of

    

Weighted

    

Average

    

Intrinsic

  
   

Shares

    

Average

    

Remaining

    

Value

  
   

Excercisable

    

Exercise Price

    

Term (Years)

    

(in Thousands)

  

Outstanding as of December 31, 2021

     -     $ -       -     $ -  

Granted

     121,743       21.20       7.53       -  

Forfeited

     -       -       -       -  

Outstanding as of December 31, 2022

     121,743     $ 21.20       7.53     $ -  

Granted

     154,294       14.70       8.50       -  

Forfeited

     -       -       -       -  

Outstanding as of December 31, 2023

     276,037     $ 17.57       8.07     $ -  

Granted

     107,453       11.00       9.49       -  

Forfeited

     -       -       -       -  

Outstanding as of September 30, 2024

     383,490     $ 15.73       8.47     $ -  

Exercisable as of September 30, 2024

     132,591     $ 15.73       8.47     $ -  

 

The Options had no intrinsic value as of September 30, 2024.

 

The weighted average grant date fair value per share for employee stock and non-employee Option grants issued on March 28, 2024, was $4.34. The weighted average grant date fair value per share for employee stock and non-employee stock Option grants issued on March 31, 2023, was $2.90. The weighted average grant date fair value per share for employee stock and non-employee Option grants issued on April 11, 2022, was $3.24. As of September 30, 2024, the total unrecognized compensation related to unvested employee and non-employee stock Option awards granted was $681,187, which the Company expects to recognize over a weighted-average period of approximately 1.96 years. As of December 31, 2023, the total unrecognized compensation related to unvested employee and non-employee stock Option awards granted was $503,254, which the Company expects to recognize over a weighted-average period of approximately 1.93 years.

 

On March 13, 2023, the Company BOD adopted changes to the Nuvera Communications, Inc. 2017 OSP. Most of the changes eliminate language specific to the requirements and limitations on grants under Internal Revenue Code Section162 (m), which has been repealed by Congress. This includes provisions related to “Performance-Based Exception” in several sections of the 2017 OSP. The BOD also increased the limit on annual grants from 50,000 to 100,000 shares per participant and eliminated separate provisions on new-hire stock grants and cash-based grants. The BOD also made minor changes to other sections of the 2017 OSP. The BOD did not increase the number of shares authorized for issuance under the 2017 OSP or change the terms of eligibility for participants under the 2017 OSP. The foregoing description of the changes to the 2017 OSP does not purport to be complete and is qualified in its entirety by reference to the full text of the 2017 OSP, as amended, which is filed as Exhibit 10.12 to the 2022 Annual Report on Form 10-K and is incorporated by reference.

 

 

Note 15 – Subsequent Events

 

We have evaluated and disclosed subsequent events through the filing date of this Quarterly Report on Form 10-Q.

 

35
 

 
 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward Looking Statements

 

From time to time, in reports filed with the SEC, in press releases, and in other communications to shareholders or the investing public, we may make forward-looking statements concerning possible or anticipated future financial performance, business activities or plans. These statements generally are identified by the words “believes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “may,” “will,” “would,” “seeks,” “targets,” “continues,” “should,” “will be,” “will continue,” or similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance, or achievements of Nuvera and its subsidiaries to be different from those expressed or implied in the forward-looking statements. These risks and uncertainties may include, but are not limited to: i) unfavorable general economic conditions that could negatively affect our operating results; ii) substantial regulatory change and increased competition; iii) our possible pursuit of acquisitions could be expensive or not successful; iv) we may not accurately predict technological trends or the success of new products; v) shifts in our product mix may result in declines in our operating profitability; vi) possible consolidation among our customers; vii) a failure in our operational systems or infrastructure could affect our operations; viii) data security breaches; ix) possible replacement of key personnel; x) elimination of governmental network support we receive; xi) our current debt structure may change due to increases in interest rates or our ability to comply with lender loan covenants and xii) possible customer payment defaults. For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the federal securities laws. Shareholders and the investing public should understand that these forward-looking statements are subject to risks and uncertainties which could affect our actual results and cause actual results to differ materially from those indicated in the forward-looking statements.

 

In addition, forward-looking statements speak only as of the date they are made, which is the filing date of this Form 10-Q. With the exception of the requirements set forth in the federal securities laws or the rules and regulations of the SEC, we do not undertake any obligation to update or review any forward-looking information, whether as a result of the latest information, future events or otherwise.

 

Critical Accounting Policies and Estimates

 

Management’s discussion and analysis of financial condition and results of operations stated in this Form 10-Q, are based upon Nuvera’s consolidated unaudited financial statements that have been prepared in accordance with GAAP, rules and regulations of the SEC and, where applicable, conform to the accounting principles as prescribed by federal and state telephone utility regulatory authorities. We presently give accounting recognition to the actions of regulators where appropriate. The preparation of our financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities at the date of the financial statements and during the reporting period. Actual results may differ from these estimates. Our senior management has discussed the development and selection of accounting estimates and the related Management Discussion and Analysis disclosure with our Audit Committee. For a summary of our significant accounting policies, see Note 1 – “Summary of Significant Accounting Policies” to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2023, which is incorporated herein by reference.

 

36
 

 

Results of Operations

 

Overview

 

Nuvera has an advanced fiber communications network and offers a diverse array of communications products and services. We provide broadband Internet access, video services and managed and hosted solutions services. In addition, we provide local voice service and network access to other communications carriers for connections to our networks as well as long distance service.

 

Our operations consist primarily of providing services to customers for a monthly charge. Because many of these services are recurring in nature, backlog orders and seasonality are not significant factors. Our working capital requirements include financing the construction of our advanced fiber networks. We also require capital to maintain our advanced fiber networks and infrastructure; fund the payroll costs of our highly skilled labor force; maintain inventory to service capital projects, maintain our communication equipment customers; pay dividends and provide for the carrying value of trade accounts receivable, some of which may take several months to collect in the normal course of business.

 

In the first nine months of 2024, we have seen our overall revenues increase primarily due to increased governmental support revenues and Internet growth mentioned below. However, we continue to see accelerated losses in our voice and video service customers as those customers make choices about their entertainment needs and personal finances. We have also experienced increased costs in the first nine months of 2024 which have affected our margins. In addition, we had anticipated increased inflation and supply chain issues in the inventory, equipment, and fiber we use in our business and had therefore purchased a large amount of these items to mitigate these potential issues and not disrupt our business operations.

 

With respect to liquidity, we continue to evaluate costs and spending across our organization. This includes evaluating discretionary spending and non-essential capital investment expenditures. As of September 30, 2024, we had $14.7 million of our bank revolver available for use if the need arises. In addition, we have a $25.0 million delayed draw term loan available to fund our fiber expansion plans.

 

We will continue to actively monitor the situation and may take further actions that alter our operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, suppliers, and shareholders.

 

Executive Summary

 

Highlights:

 

Banking/Dividends

 

 

●

On September 17, 2024, we entered into a third IRSA with CoBank covering an additional $21,813,892 of our aggregate indebtedness to CoBank. The swap effectively locked in a portion of our variable-rate debt through July 2025. Under this IRSA, we have changed the variable rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the IRSA, we pay a fixed contractual interest rate and (i) make an additional payment if the SOFR variable rate payment is below a contractual rate or (ii) receive a payment if the SOFR variable rate payment is above the contractual rate.

 

37
 

 

 

●

On June 21, 2024, Nuvera and CoBank entered into (i) an Agreement Regarding Amendments to Loan Documents and (ii) an Amended and Restated Revolving Loan Promissory Note. The agreements amended our existing credit facility with CoBank and secured a credit facility in the aggregate principal amount of $180.0 million. Under the Agreements, among other things, (i) the Company received a $125.0 million term loan to replace existing debt, (ii) a $25.0 million delayed draw term loan, (iii) the Company’s revolving loan was decreased from $40.0 million to $30.0 million, (iv) the maturity dates of the term loans and revolving loan were set at June 21, 2029, and (v) the Company’s operating subsidiaries agreed to extend their previous guarantees, security interests and mortgages to cover the increased amount of the credit facility. The financing was secured to facilitate the Company’s advanced fiber-build plans announced on December 15, 2021. Refer to the Company’s 8-K filing with the SEC on June 25, 2024, for further details regarding the credit agreements with CoBank.

 

 

●

On September 29, 2023, the BOD of Nuvera announced that it was suspending dividend payments to its shareholders and did not declare or pay a dividend in the 2023 third quarter. The BOD’s action reflects the Company’s commitment to maximize available capital for the foreseeable future as it executes on its Nuvera Gig Cities™ project. This decision focuses available capital on deploying fiber and capturing the growth opportunity in new and existing markets in southern Minnesota. Nuvera believes this investment in the largest infrastructure project in Company history is strengthening its competitive position as a regional provider.

 

Operations/FTTP Build

 

 

●

On December 12, 2023, the Company announced that it confirmed eligibility for CBOL funding through the USAC. The incremental funding will be used to continue to support the Company’s multi-year fiber construction initiative. The Company began receiving a monthly benefit in November of 2023 with the first payment receipt confirmed in December. On an annualized basis this new program will provide $3.9 million of new funding based on the tariff filing and the Company’s expected line counts. The monthly CBOL subsidy formula is reviewed and subject to revision on an annual basis and subject to change based on updated USAC funding criteria July 1 of each year.

 

 

●

On March 31, 2023, Nuvera and the other owners of FiberComm sold 100% of their interest in FiberComm to ImOn Communications, LLC. FiberComm has been providing high quality Internet and voice services to businesses in the Sioux City, Iowa market for over 20 years. Nuvera owned a 20% interest in FiberComm through its wholly owned subsidiary PTC. Nuvera announced the execution of the FiberComm sale agreement in January 2023. Nuvera recognized a gain of $4,060,775, net of escrow true ups of $242,257, in book value in connection with the sale of the FiberComm interest. Prior to the sale of Nuvera’s equity investment in FiberComm, Nuvera had guaranteed a portion of a ten-year loan owed by FiberComm, set to mature on April 30, 2026. On March 31, 2023, upon closing of the sale, the loan was paid and Nuvera was released from their guarantee of loan.

 

 

●

On December 15, 2021, the Company announced plans to build and deploy Gig fiber Internet across its network creating crucial access to the fastest speeds available for rural communities, small cities, and suburban areas across Minnesota. The Company will continue to build and deploy the Gig-speed service over the next few years. Nuvera’s goal is to bring Gig-speed service to as many communities as possible.

 

38
 

 

In 2024, we plan to upgrade 10,400 passings with fiber services and faster broadband speeds. These passings will include upgrading current customers from our old copper network and new edge out passings. As of September 30, 2024, we have upgraded 6,125 of the planned 10,400 passings with these fiber services.

 

Broadband Grants

 

 

●

On March 5, 2024, the Company was awarded a grant from the DEED. This Low-Density Broadband grant will provide up to 75% of the total cost of building fiber connections to homes and businesses for improved high-speed Internet in unserved and underserved communities in the Company’s service area. The Company is eligible to receive $1,884,429 of approximately $2,512,572 total project costs. The Company will provide the remaining 25% of the matching funds. The Company has not received any funds for this project as of September 30, 2024.

 

 

●

In 2023, the Company was awarded a grant from Redwood County under the Community Development Block Grant administered by the Southwest Minnesota Housing Partnership. The grant was to be used to build broadband fiber to residential customers in areas that qualify as low to moderate income. The Company was awarded $1,559,643 to complete this project. The Company has received $1,559,643 for this project as of September 30, 2024.

 

 

●

In 2022, the Company was awarded two separate county grants from Nicollet County and Goodhue County to cover costs of building fiber connections to homes and businesses for improved high-speed Internet in unserved and underserved communities. The Company was initially eligible to receive up to $2,139,562 to complete these projects. The Company has received $1,345,855 for these projects as of September 30, 2024. The Goodhue County project was completed under budget and the Company is now eligible to receive up to $742,630 to complete these projects.

 

 

●

On December 8, 2022, the Company was awarded four broadband grants from the DEED. The grants will provide up to 45.0% to 50.0% of the total cost of building fiber connections to homes and businesses for improved high-speed Internet in unserved and underserved communities and businesses in the Company’s service area. The Company is eligible to receive $8,594,688 of approximately $18,139,749 total project costs. The Company will provide the remaining 55.0% to 50% matching funds. Construction and expenditures for these projects began in the spring of 2023. The Company has received $1,794,363 for these projects as of September 30, 2024.

 

 

●

On January 29, 2021, the Company was awarded five broadband grants from the DEED. The grants will provide up to 35.4% of the total cost of building fiber connections to homes and businesses for improved high-speed Internet in unserved or underserved communities and businesses in the Company’s service area. The Company is eligible to receive $1,918,037 of the approximately $5,419,617 total project costs. The Company will provide the remaining 64.6% of matching funds. Construction and expenditures for these projects began in the spring of 2021. The Company has received $1,918,037 for these projects as of September 30, 2024.

 

39
 

 

 

●

Net income for the third quarter of 2024 totaled $81,698, which was a $401,472, or 83.09% decrease compared to the third quarter of 2023. This decrease was primarily due to an increase in interest expense and operating expenses, partially offset by an increase in operating revenues, all of which are described below.

 

 

●

Consolidated revenue for the third quarter of 2024 totaled $17,616,335, which was a $1,245,857 or 7.61% increase compared to the third quarter of 2023. This increase was primarily due to increases in governmental support revenues and data services, partially offset by decreases in legacy service revenues, video services and other revenue, all of which are described below.

 

Business Trends

 

Included below is a synopsis of business trends management believes will continue to affect our business in 2024. 

 

Voice and switched access revenues are expected to continue to be adversely impacted by future declines in access lines due to competition in the communications industry from CATV providers, VoIP providers, wireless, other competitors, and emerging technologies. As we experience access line losses, our switched access revenue will continue to decline consistent with industry-wide trends. A combination of changing minutes of use, carriers optimizing their network costs, lower demand for dedicated lines and downward rate pressures may affect our future voice and switched access revenues. Access line losses totaled 1,750 or 12.62% for the twelve months ended September 30, 2024, due to the reasons mentioned above.

 

The expansion of our advanced fiber communications network, growth in broadband connection sales along with continued migration to higher connectivity speeds and the sales of Internet value-added services such as on-line data backup and hosted and managed service solutions are expected to continue to offset the revenue declines from the access line trends discussed above.

 

To be competitive, we continue to invest in our fiber broadband network and continue to focus on the research and deployment of advanced technological products that include broadband services, wireless services, private line, VoIP, digital video, Internet protocol TV (IPTV) and hosted and managed services.

 

40
 

 

The table below presents our revenue by technology and advanced fiber-build progress for the last five quarters.

 

Nuvera Communications, Inc.

Reporting by Technology

 

   

Q3 2023

    

Q4 2023

    

Q1 2024

    

Q2 2024

    

Q3 2024

  

Premise Passings

                                                                                

Fiber - NuFiber/Gig-Cities

     27,429               35,173               37,957               39,535               41,298          

Non-Fiber

     37,436               31,755               29,743               28,519               27,816          

Total Passings

     64,865               66,928               67,700               68,054               69,114          

% Fiber Coverage

     42.3 %             52.6 %             56.1 %             58.1 %             59.8 %        
                                                                                 
                                                                                 

Internet/Broadband Connections/Share

                                                                                

Fiber Gig-Cities

                                                                                

Residential

     8,075               9,525               10,995               12,482               13,753          

Business

     795               903               1,036               1,142               1,261          

Totals

     8,870       32.3 %     10,428       29.6 %     12,031       31.7 %     13,624       34.5 %     15,014       36.4 %

Non-Fiber

                                                                                

Residential

     17,267               16,159               15,077               14,025               13,013          

Business

     1,475               1,381               1,238               1,202               1,090          

Totals

     18,742       50.1 %     17,540       55.2 %     16,315       54.9 %     15,227       53.4 %     14,103       50.7 %

Total Broadband Connections

     27,612       42.6 %     27,968       41.8 %     28,346       41.9 %     28,851       42.4 %     29,117       42.1 %

% Broadband on Fiber

     32.1 %             37.3 %             42.4 %             47.2 %             51.6 %        
                                                                                 
                                                                                 

Broadband Customer Revenue/ARPU

                                                                                

Internet/BB Revenue/ARPU

                                                                                

Fiber Gig-Cities

                                                                                

Residential

   $ 1,521,998     $ 66.62     $ 1,824,719     $ 67.10     $ 2,272,559     $ 72.89     $ 2,679,483     $ 73.96     $ 2,972,639     $ 74.32  

Business

   $ 456,968     $ 219.40     $ 471,078     $ 182.70     $ 516,762     $ 174.05     $ 574,883     $ 171.91     $ 579,972     $ 156.16 *

Totals

   $ 1,978,966     $ 79.69     $ 2,295,797     $ 77.11     $ 2,789,321     $ 81.68     $ 3,254,366     $ 82.24     $ 3,552,611     $ 81.27  

Non-Fiber

                                                                                

Residential

   $ 3,139,666     $ 59.33     $ 2,895,759     $ 58.54     $ 2,771,199     $ 59.57     $ 2,573,466     $ 59.88     $ 2,411,569     $ 60.13  

Business

   $ 530,347     $ 107.05     $ 503,995     $ 118.20     $ 463,458     $ 119.88     $ 434,154     $ 114.95     $ 428,742     $ 127.98  

Totals

   $ 3,670,013     $ 63.41     $ 3,399,754     $ 63.27     $ 3,234,657     $ 64.20     $ 3,007,620     $ 64.33     $ 2,840,311     $ 65.37  

Total Internet/BB Revenue

   $ 5,648,979             $ 5,695,551             $ 6,023,978             $ 6,261,986             $ 6,392,922          

% Revenue from Fiber

     35.0 %             40.3 %             46.3 %             52.0 %             55.6 %        
                                                                                 

Other Internet Reveneue

   $ 1,232,986             $ 1,240,438             $ 1,224,795             $ 1,264,358             $ 1,062,375          
                                                                                 

Total Internet Revenue

   $ 6,881,965             $ 6,935,989             $ 7,248,773             $ 7,526,344             $ 7,455,297          
                                                                                 

All Other Revenue

   $ 9,488,513             $ 9,837,867             $ 9,696,352             $ 9,651,510             $ 10,161,038          
                                                                                 

Total Revenue

   $ 16,370,478             $ 16,773,856             $ 16,945,125             $ 17,177,854             $ 17,616,335          

 

* Nuvera has experienced a decrease in its Fiber Gig-Cities Business ARPU.  This is primarily due to the aggressive conversion of our smaller business customers from non-fiber to fiber.

 

Certain historical numbers have changed to conform with the current year's presentation.

 

We continue to evaluate our operating structure to identify opportunities for increased operational efficiencies and effectiveness. This involves evaluating opportunities for task automation, network efficiency and the balancing of our workforce based on the current needs of our customers.

 

41
 

 

Financial results for the Communications Segment for the three and nine months ended September 30, 2024, and 2023 are included below:

 

Communications Segment

                                
   

Three Months Ended September 30,

                  
   

2024

    

2023

    

Increase (Decrease)

  

Operating Revenues

                                

Voice Service

   $ 1,149,189     $ 1,363,543     $ (214,354 )     -15.72 %

Network Access

     745,268       876,186       (130,918 )     -14.94 %

Video Service

     2,928,080       3,005,010       (76,930 )     -2.56 %

Data Service

     7,455,297       6,881,965       573,332       8.33 %

A-CAM/FUSF

     4,208,559       2,971,267       1,237,292       41.64 %

Other

     1,129,942       1,272,507       (142,565 )     -11.20 %

Total Operating Revenues

     17,616,335       16,370,478       1,245,857       7.61 %
                                 

Cost of Services, Excluding Depreciation and Amortization

     7,812,162       7,702,019       110,143       1.43 %

Selling, General and Administrative

     2,507,707       2,372,515       135,192       5.70 %

Depreciation and Amortization Expenses

     4,497,082       3,949,978       547,104       13.85 %

Total Operating Expenses

     14,816,951       14,024,512       792,439       5.65 %
                                 

Operating Income

   $ 2,799,384     $ 2,345,966     $ 453,418       19.33 %
                                 

Net Income

   $ 81,698     $ 483,170     $ (401,472 )     -83.09 %
                                 

Capital Expenditures

   $ 15,403,815     $ 18,305,302     $ (2,901,487 )     -15.85 %

 

42
 

 

Communications Segment

                                
   

Nine Months Ended September 30,

                  
   

2024

    

2023

    

Increase (Decrease)

  

Operating Revenues

                                

Voice Service

   $ 3,580,740     $ 3,969,394     $ (388,654 )     -9.79 %

Network Access

     2,601,894       2,926,937       (325,043 )     -11.11 %

Video Service

     8,891,820       9,120,164       (228,344 )     -2.50 %

Data Service

     22,230,414       20,573,084       1,657,330       8.06 %

A-CAM/FUSF

     11,100,259       8,950,127       2,150,132       24.02 %

Other

     3,334,187       3,478,406       (144,219 )     -4.15 %

Total Operating Revenues

     51,739,314       49,018,112       2,721,202       5.55 %
                                 

Cost of Services, Excluding Depreciation and Amortization

     23,597,926       23,690,558       (92,632 )     -0.39 %

Selling, General and Administrative

     8,138,521       7,608,787       529,734       6.96 %

Depreciation and Amortization Expenses

     13,300,877       11,371,459       1,929,418       16.97 %

Total Operating Expenses

     45,037,324       42,670,804       2,366,520       5.55 %
                                 

Operating Income

   $ 6,701,990     $ 6,347,308     $ 354,682       5.59 %
                                 

Net Income

   $ 384,167     $ 5,154,157     $ (4,769,990 )     -92.55 %
                                 

Capital Expenditures

   $ 38,437,630     $ 33,397,721     $ 5,039,909       15.09 %
                                 

Key metrics

                                

Access Lines

     12,120       13,870       (1,750 )     -12.62 %

Video Customers

     7,619       8,406       (787 )     -9.36 %

Data Customers

     34,501       32,931       1,570       4.77 %

 

Revenue

 

Voice Service – We receive recurring revenue for basic voice services that enable customers to make and receive telephone calls within a defined local calling area for a flat monthly fee. In addition to subscribing to basic local voice services, our customers may choose from multiple voice service plans with a variety of custom calling features such as call waiting, call forwarding, caller identification and voicemail. Voice service revenue was $1,149,189, which was $214,354 or 15.72% lower in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, and was $3,580,740 which was $388,654 or 9.79% lower in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. These decreases were primarily due to a decrease in access lines, which was the result of an accelerated industry trend of customers moving to other communications options or dropping their access lines altogether, partially offset by a combination of rate increases introduced into several of our markets in the past few years.

 

The number of access lines we serve as a company has been decreasing, which is consistent with a general industry trend, as customers are increasingly utilizing other technologies, such as wireless phones and IP services.

 

Network Access – We provide access services to other communications carriers for the use of our facilities to terminate or originate long distance calls on our fiber network. Additionally, we bill SLCs to substantially all of our customers for access to the public switched network. These monthly SLCs are regulated and approved by the FCC. In addition, network access revenue was derived from several federally administered pooling arrangements designed to provide network support and distribute funding to communications companies. Network access revenue was $745,268, which was $130,918 or 14.94% lower in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, and was $2,601,894, which is $325,043 or 11,11% lower in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. These decreases were primarily due to lower minutes of use on our network and lower special access revenues, which was the result of an accelerated industry trend of customers moving to other communications options or dropping their access lines altogether.

 

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In recent years, IXCs and others have become more aggressive in disputing both interstate carrier access charges and the applicability of access charges to their network traffic. We believe that long distance and other communication providers will continue to challenge the applicability of access charges either before the FCC or directly with the local exchange carriers. We cannot predict the likelihood of future claims and cannot estimate the impact.

 

Video Service – We provide a variety of enhanced video services on a monthly recurring basis to our customers. We receive monthly recurring revenue from our subscribers for providing commercial TV programming in competition with local CATV, satellite dish TV and off-air TV service providers. We serve twenty-two communities with our IPTV services and five communities with our CATV services. Video service revenue was $2,928,080, which was $76,930 or 2.56% lower in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023. Video service revenue was $8,891,820, which was $228,344 or 2.50% lower in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. These decreases were primarily due to a decrease in video customers, partially offset by a combination of rate increases introduced into several of our markets over the past few years. The decrease in video customers continues to be an accelerated industry trend of customers moving to other video options.

 

Data Service – We provide high speed Internet to business and residential customers depending on the nature of the network facilities that are available, the level of service selected and the location. Our revenue is earned based on the offering of various flat rate packages based on the level of service, data speeds and features. We also provide e-mail and managed services, such as web hosting and design, on-line file back up and on-line file storage. Data Service revenue was $7,455,297, which was $573,332 or 8.33% higher in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, and was $22,230,414, which was $1,657,330 or 8.06% higher in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. These increases were primarily due to an increase in fiber customers, customers upgrading their packages and speeds, and the implementation of a monthly equipment charge to our customers, partially offset by a decrease in non-fiber customers. We expect continued growth in this area will be driven by completing our advanced FTTP network, expansion of service areas and marketing managed service solutions to businesses.

 

A-CAM/FUSF – The Company currently receives funding based on the A-CAM, except for Scott-Rice, which receives funding from the FUSF. Scott-Rice’s settlements from the NECA pools are based on nationwide average schedules, which includes the pooling and redistribution of revenues based on a company’s average costs. See Note 2 – “Revenue Recognition” for a discussion regarding A-CAM and FUSF.

 

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A-CAM/FUSF support totaled $4,208,559, which was $1,237,292 or 41.64% higher in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023. A-CAM/FUSF support totaled $11,100,259, which was $2,150,132 or 24.02% higher in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. These increases were primarily due to our new CBOL funding through USAC, partially offset by lower CAF support funding for our operating companies. On December 12, 2023, the Company announced that it confirmed eligibility for CBOL funding through USAC. The incremental funding will be used to continue to support the Company’s multi-year fiber construction initiative. The Company began receiving a monthly benefit in November of 2023, with the first payment receipt confirmed in December. On an annualized basis this new program will provide $3.9 million of new funding based on the tariff filing and the Company’s expected line counts. The monthly CBOL subsidy formula is reviewed and subject to revision on an annual basis and subject to change based on updated USAC funding criteria July 1 of each year.

 

Other Revenue – Our customers are billed for toll and long-distance services on either a per call or flat-rate basis. This also includes the offering of directory assistance, operator service and long-distance private lines. We also generate revenue from directory publishing through an outside vendor, sales and service of CPE, bill processing and other customer services. Our directory publishing revenue in our telephone directories recurs monthly. We also provide retail sales and service of cellular phones and accessories through Telespire, a national wireless provider. We resell these wireless services as Nuvera Wireless, our branded product. We receive both recurring revenue for our wireless services, as well as revenue collected from the sales of wireless phones and accessories. Other revenue was $1,129,942, which was $142,565 or 11.20% lower in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, and was $3,334,187 which was $144,219 or 4.15% lower in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. These decreases were primarily due to lower long-distance revenues and a decrease in paper bill fees as customers transition to electronic billing, partially offset by an increase in the sales and installation of CPE.

 

Cost of Services (excluding Depreciation and Amortization)

 

Cost of services (excluding depreciation and amortization) was $7,812,162, which was $110,143 or 1.43% higher in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023. This increase was primarily due to increased maintenance and support agreements on our equipment and software, and increased costs to maintain a highly skilled workforce. Cost of services (excluding depreciation and amortization) was $23,597,926, which was $92,632 or 0.39% lower in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. This decrease was primarily due to lower programming costs from video content providers due to a loss of video customers. These decreases were partially offset by higher costs associated with increased maintenance and support agreements on our equipment and software, and increased costs to maintain a highly skilled workforce.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses were $2,507,707, which was $135,192 or 5.70% higher in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, and was $8,138,521, which was $529,734 or 6.96% higher in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. These increases were primarily due to increased customer acquisition costs associated with our FTTP network initiative.

 

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Depreciation and Amortization

 

Depreciation and amortization were $4,497,082, which was $547,104 or 13.85% higher in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, and was $13,300,877, which was $1,929,418 or 16.97% higher in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. These increases were primarily due to an increase in our FTTP network assets to aid in our transition to a new advanced FTTP network, reflecting our continual investment in technology and infrastructure in order to meet our customer’s demands for our products and services.

 

Operating Income

 

Operating income was $2,799,384, which was $453,418 or 19.33% higher in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023. Operating income was $6,701,990, which was $354,682 or 5.59% higher in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. These increases were primarily due to increased data services and governmental support revenues, partially offset by increased operating expenses, all of which are described above.

 

See Consolidated Statements of Income (for discussion below)

 

Other Income (Expense) and Interest Expense

 

Interest expense was $3,076,442, which was $1,116,928 or 57.00% higher in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, and was $8,164,140, which was $3,445,638 or 73.02% higher in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. These increases were primarily due to higher outstanding debt balances and increased interest rates on our non-swapped debt in connection with our term debt credit facility with CoBank to support our fiber-build initiative.

 

Interest and dividend income was $20,409, which was $6,102 or 42.65% higher in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, and was $155,839, which was $3,514 or 2.21% lower in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The three-month increase and the nine-month decrease were primarily due to the amount and timing of dividend income earned on our investments.

 

The gain on sale of investments in the first six months of 2023 reflects the sale of FiberComm by Nuvera and the other owners of FiberComm to ImOn Communications, LLC on March 31, 2023. The loss on sale of investments in the first six months of 2024 reflects the settlement of the FiberComm escrow account and the loss on the sale of our RTFC patronage.

 

Other income for the nine months ended September 30, 2024, and 2023, included a patronage credit earned with CoBank, which was a result of our debt agreements with them. The patronage credit allocated and received in 2024 was $1,196,948, compared to $692,371 allocated and received in 2023.This increase was primarily due to higher outstanding debt balances and increased interest rates on our non-swapped debt in connection with our term debt credit facility and revolving credit facility with CoBank to support our fiber-build initiative. CoBank determines and pays the patronage credit annually, generally in the first quarter of the calendar year, based on its results from the prior year. We record these patronage credits as income in the period they are allocated and received.

 

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Other investment income was $88,396, which was $23,127 or 35.43% higher in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023, and was $184,619, which was $31,637 or 14.63% lower in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. Other investment income is primarily from our equity ownerships in several partnerships and limited liability companies. Other investment income was higher in the three months ended September 30, 2024, compared to September 30,2024, due to an increase in the patronage paid on other investments. Other investment income was lower in nine months ended September 30, 2024, compared to September 30, 2023, due to the sale of FiberComm in the first quarter of 2023.

 

Income Taxes

 

Income tax expense was $31,778, which was $156,097 or 83.09% lower in the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023. Income tax expense was $149,401, which was $1,854,985 or 92.55% lower in the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. These decreases were primarily due to an increase in interest expense and reflects the gain from the sale of our FiberComm equity investment on March 31, 2023. The effective income tax rate for the nine months ending September 30, 2024, and 2023, was approximately 28.00%, respectively. The effective income tax rate differs from the federal statutory income tax rate primarily due to state income taxes and other permanent differences.

 

Liquidity and Capital Resources

 

Capital Structure

 

Nuvera’s total capital structure (long-term and short-term debt obligations, net of unamortized loan fees plus stockholders’ equity) was $236,104,990 as of September 30, 2024, reflecting 41.7% equity and 58.3% debt. This compares to a capital structure of $220,897,881 on December 31, 2023, reflecting 44.4% equity and 55.6% debt. In the communications industry, debt financing is most often based on operating cash flows. Specifically, our current use of our credit facilities is in a ratio of approximately 5.20 times debt to earnings before interest, taxes, depreciation, and amortization (EBITDA) (as defined in the loan documents), which is well within acceptable limits for our agreements and our industry. Our maximum Total Leverage Ratio under our new loan facility is 6:00:1:00. Our management believes adequate operating cash flows and other internal and external resources, such as our cash on hand and new credit facility are available to finance ongoing operating requirements, including capital expenditures, business development, debt service and temporary financing of trade accounts receivable.

 

Liquidity Outlook

 

Our short-term and long-term liquidity needs arise primarily from (i) capital expenditures; (ii) working capital requirements needed to support our growth; (iii) debt service; (iv) dividend payments, if declared, on our stock and (v) potential acquisitions.

 

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Our primary sources of liquidity for the nine months ended September 30, 2024, were proceeds from cash generated from operations and cash reserves held at the beginning of the period. As of September 30, 2024, we had a working capital surplus of $19,670,404. In addition, as of September 30, 2024, we had $14.7 million available under our revolving credit facility to fund any short-term working capital needs. Also, we have a $25.0 million delayed draw term loan available to fund our fiber expansion plans. The working capital surplus as of September 30, 2024, was primarily the result of elevated inventories to support our fiber-build initiative, a decrease in accounts payable and a delay in principal payments to CoBank as part of our new debt facility with them.

 

We have not conducted a public equity offering. We operate with original equity capital, retained earnings and additions to indebtedness in the form of senior debt and bank lines of credit.

 

Cash Flows

 

We expect our liquidity needs to include capital expenditures, payment of interest and principal on our indebtedness, income taxes and dividends. We use our cash inflow to manage the temporary increases in cash demand and utilize our revolving credit facility to manage more significant fluctuations in liquidity caused by growth initiatives.

 

While it is often difficult for us to predict the impact of general economic conditions, we believe that we will be able to meet our current and long-term cash requirements primarily through our operating cash flows and debt financing and anticipate that we will be able to plan for and match future liquidity needs with future internal and available external resources.

 

We periodically seek to add growth initiatives by either expanding our network or our markets through organic or internal investments or through strategic acquisitions. We believe we can adjust the timing or the number of our initiatives according to any limitations which may be imposed by our capital structure or sources of financing.

 

The following table summarizes our cash flow:

 

    Nine Months Ended September 30,  
    2024     2023  

Net cash provided by (used in):

                

Operating activities

   $ 11,983,073     $ 12,206,045  

Investing activities

     (31,745,399 )     (45,132,640 )

Financing activities

     19,086,706       33,189,214  

Change in cash

   $ (675,620 )   $ 262,619  

 

Cash Flows from Operating Activities

 

Cash generated by operations in the first nine months of 2024 was $11,983,073, compared to cash generated by operations of $12,206,045 in the first nine months of 2023. The decrease in cash from operating activities in 2024 was primarily due to the timing of the increase/decrease in assets and liabilities.

 

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Cash generated by operations continues to be our primary source of funding for existing operations, debt service and dividend payments to stockholders. Cash as of September 30, 2024, was $584,284, compared to $1,259,904 as of December 31, 2023.

 

Cash Flows Used in Investing Activities

 

We operate in a capital-intensive business. We continue to upgrade our advanced fiber networks for changes in technology in order to provide advanced services to our customers.

 

Cash flows used in investing activities were $31,745,399 during the first nine months of 2024 compared to $45,132,640 for the first nine months of 2023. Capital expenditures relating to our fiber initiative and on-going operations were $38,437,630 for the nine months ended September 30, 2024, compared to $33,397,721 for the nine months ended September 30, 2023. Materials and supply expenditures decreased by $6,452,434 in the first nine months of 2024 compared to an increase of $17,827,735 for the first nine months of 2023. The decrease for the nine months ended September 30, 2024, was primarily due to the use of materials on hand to support our fiber-build initiatives. Our investing expenditures were financed with cash flows from our current operations and advances on our line of credit and delayed draw term loan when needed. We believe that our current operations and new debt financing from CoBank will provide adequate cash flows to fund our plant additions for the remainder of the upcoming year; however, funding from our revolving credit facility and delayed draw term loan are available if the timing of our cash flows from operations does not match our cash flow requirements. As of September 30, 2024, we had $14.7 million available under our existing credit facility and $25.0 million on our delayed draw term loan to fund capital expenditures and other operating needs.

 

Cash Flows Provided by Financing Activities

 

Cash provided by financing activities for the nine months ended September 30, 2024, was $19,086,706. This included principal payments of $125,000,000, loan proceeds from our term loan of $125,000,000, loan origination fees of $1,703,825, changes in our revolving credit facility of $16,090,669 and grants received for construction of plant of $4,699,862. Cash provided by financing activities for the nine months ended September 30, 2023, was $33,189,214. This included loan proceeds from our delayed draw term loan of $30,000,000, loan origination fees of $17,811, changes in our revolving credit facility of $3,116,119, grants received for construction of plant of $1,521,677, and the distribution of $1,430,771 of dividends to our stockholders.

 

Working Capital

 

We had a working capital surplus (i.e., current assets minus current liabilities) of $19,670,404 as of September 30, 2024, with current assets of approximately $34.5 million and current liabilities of approximately $14.8 million, compared to a working capital surplus of $22,779,883 as of December 31, 2023. The ratio of current assets to current liabilities was 2.33 and 2.23 September 30, 2024, and December 31, 2023. The working capital surplus as of September 30, 2024, was primarily the result of elevated inventories to support our fiber-build initiative, a decrease in accounts payable and a delay in principal payments to CoBank as part of our new debt facility with them.

 

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As of September 30, 2024, and December 31, 2023, we were in compliance with all stipulated financial ratios in our loan agreements.

 

Our current Total Leverage Ratio as of September 30, 2024, was 5.20. Our maximum Total Leverage Ratio under the new loan facility is 6.00:1.00.

 

Dividends and Restrictions

 

We declared a quarterly dividend of $0.14 per share for the first and second quarters of 2023, which totaled $717,721 for the second quarter and $713,050 for the first quarter.

 

On September 29, 2023, the BOD of Nuvera announced that it was suspending dividend payments to its shareholders and did not declare or pay a dividend in the third quarter of 2023. In addition, the BOD of Nuvera did not declare or pay a dividend for the fourth quarter of 2023 or the first and second quarters of 2024. The BOD’s action reflects the Company’s commitment to maximize available capital for the foreseeable future as it executes on its Nuvera Gig Cities project. This decision focuses available capital on deploying fiber and capturing the growth opportunity in new and existing markets in southern Minnesota. Nuvera believes this investment in the largest infrastructure project in Company history is strengthening its competitive position as a regional provider.

 

There are security and loan agreements underlying our current CoBank credit facility that contain restrictions on our distributions to stockholders and investment in, or loans, to others. See below and Note 6 – “Secured Credit Facility” for additional information.

 

Our loan agreements include restrictions on our ability to pay cash dividends to our stockholders. However, we are allowed to pay dividends in an amount up to $3,000,000 in any year as long as no default or event of default has occurred, and our current Total Leverage Ratio is equal to 4.25:1.00 or less. In addition, we are allowed to pay dividends in an unlimited amount in any year as long as no default or event of default has occurred, and our current Total Leverage Ratio is equal to 3.50:1.00 or less. Our current Total Leverage Ratio as of September 30, 2024, was 5.20.

 

Our BOD reviews quarterly dividend declarations based on our anticipated earnings, capital requirements and our operating and financial conditions. The cash requirements of our current dividend payment practices are in addition to our other expected cash needs.

 

Long-Term Debt

 

See Note 6 – “Secured Credit Facility” for information pertaining to our long-term debt.

 

Recent Accounting Developments

 

See Note 1 – “Basis of Presentation and Consolidation” for a discussion of recent accounting developments.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not required for a smaller reporting company.

 

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Item 4. Controls and Procedures

 

Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e) or Rule 15d-15(e), as of the end of the period subject to this Report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective.

 

Management’s Report on Internal Control over Financial Reporting

 

As of the end of the period covered by this Quarterly Report on Form 10-Q (the Evaluation Date), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded, as of the end of the period covered by this Quarterly Report, that our disclosure controls and procedures ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There have been no material changes in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Other than the litigation incidental to our business, there are no pending material legal proceedings to which we are a party or to which any of our property is subject.

 

Item 1A. Risk Factors.

 

Our operations and financial results are subject to various risks and uncertainties, including but not limited to those described below, that could adversely affect our business, financial condition, results of operations, cash flows and the trading price of our common stock. For a summary of our risk factors, see Item 1A – “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2023, which is incorporated herein by reference.

 

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Risks Relating to Our Business

 

Our future growth is primarily dependent upon our expansion strategy, which may or may not be successful. We are strategically focused on driving growth by expanding our broadband network to provide services in communities that are in, near or adjacent to our network. This expansion strategy includes our fiber-to-the-home (FTTH) broadband service. This strategy is relatively new in the marketplace and the success of our strategy will depend on the degree to which we are able to successfully establish and continue to enhance this build, which is not assured. This strategy requires considerable management resources and capital investment, and it is uncertain whether and when it will contribute to positive free cash flow and the degree to which we will otherwise achieve our strategic objectives, on a timely basis or at all. As a result, we expect our capital expenditures to exceed the cash flow provided from continuing operations through 2024. Additionally, we must obtain franchises, construction permits and other regulatory approvals to commence operations in these communities. Delays in entering into regulatory agreements, receiving the necessary franchises and construction permits, procuring needed contractors, materials, or supplies, and conducting the construction itself could adversely impact our scheduled construction plans and, ultimately, our expansion strategy. Difficulty in obtaining necessary resources may also adversely affect our ability to expand into new markets as could our ability to adequately market a new brand to customers unfamiliar to us as we expand to markets where we do not currently operate. We may face resistance from competitors who are already in markets we wish to enter. If our expectations regarding our ability to attract customers in these communities are not met, or if the capital requirements to complete the network investment or the time required to attract our expected level of customers are incorrect, our financial performance and returns on investment may be negatively impacted.

 

We receive support from various funds established under federal and state laws, and the continued receipt of that support is not assured. A significant portion of our revenues come from network access and subsidies. An order adopted by the FCC in 2011 (2011 Order) significantly impacted the amount of support revenue we receive from the Universal Service Fund (USF), CAF and Intercarrier Compensation (ICC). The 2011 Order reformed core parts of the USF, broadly recast the existing ICC scheme, established the CAF to replace support revenues provided by the USF and redirected support from voice services to broadband services.

 

We receive subsidy payments from various federal and state universal service support programs, including high-cost support, Lifeline and E-Rate programs for schools and libraries. The total cost of the various FUSF programs has increased significantly in recent years, putting pressure on regulators to reform the programs and to limit both eligibility and support. We cannot predict future changes that may impact the subsidies we receive. However, a reduction in subsidies support may directly affect our profitability and cash flows.

 

We cannot predict future changes that may have an impact on the subsidies we receive. However, a reduction in subsidies support may directly affect our profitability and cash flows. In addition, the federal debt limit continues to be actively debated as plans for long-term national fiscal policy are discussed. Moreover, over the last decade, including 35 days beginning on December 22, 2018, the United States government has shut down several times and some regulatory agencies have had to furlough employees and stop some activities. Further, the outcome of any budget discussion could have a significant effect on programs that support us. The failure of Congress to approve future budgets or increase the debt ceiling of the of the United States on a timely basis or decrease funding for any of these programs could delay or result in the loss of support payments we receive.

 

Any delay or reduction in federal support may directly affect our profitability and cash flows and have an adverse effect on our business, results of operations and financial condition.

 

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Risks Relating to Our Stock

 

The price of our common stock may be volatile and may fluctuate substantially, which could negatively affect the holders of our common stock. The market price of our common stock may fluctuate widely as a result of various factors including, but not limited to, period-to-period fluctuations in our operating results, the volume of the sales of our common stock, the limited number of holders of our common stock and the resulting limited liquidity in our common stock, dilution, developments in the communications industry, the failure of securities analysts to cover our common stock, changes in financial estimates by securities analysts, competitive factors, regulatory developments, labor disruptions, general market conditions and market conditions affecting the stock of communications companies. Communications companies have, in the past, experienced extreme volatility in the trading prices and volumes of their securities, which has often been unrelated to operating performance. Elevated levels of market volatility may have a significant adverse effect on the market price of our common stock. In addition, in the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert management's attention and resources, which could have a material adverse impact on our business, financial condition, results of operations, liquidity, and/or the market price of our common stock.

 

Risks Relating to Our Indebtedness and Our Capital Structure

 

We have a substantial amount of debt outstanding due to our FTTP initiatives, which could adversely affect our business and restrict our ability to fund working capital and planned capital expenditures. As of September 30, 2024, we had $140.3 million of debt outstanding. Our substantial amount of expected indebtedness could adversely impact our business, including:

 

 

●

We may be required to use a substantial portion of our cash flow from operations to make principal and interest payments on our debt, which will reduce funds available for operations, capital expenditures, future business opportunities and strategic initiatives;
 

●

We may have limited flexibility to react to changes in our business and our industry;
 

●

It may be more difficult for us to satisfy our other obligations;
 

●

We may have a limited ability to borrow additional funds or to sell assets to raise funds if needed for working capital, capital expenditures to complete our FTTH initiatives, acquisitions, or other purposes;
 

●

We may become more vulnerable to general adverse economic and industry conditions, including changes in interest rates; and
 

●

We may be at a disadvantage compared to our competitors that have less debt.

 

We cannot guarantee that we will generate sufficient revenues to service our debt and have adequate funds left over to achieve or sustain profitability in our operations, meet our working capital and capital expenditure needs or compete successfully in our markets.

 

Our variable-rate debt subjects us to interest rate risk, which could have an impact on our cost of borrowing and operating results. Certain of our debt obligations are at variable rates of interest and expose us to interest rate risk. Increases in interest rates could have a negative impact on the results of our operations and operating cash flows. We utilize IRSAs to convert a portion of our variable-rate debt to a fixed-rate basis. However, we do not maintain interest rate hedging agreements for all our variable-rate debt and our existing hedging agreements may not fully mitigate our interest rate risk, may prove disadvantageous or may create additional risks. Changes in fair value of cash flow hedges that have been de-designated or determined to be ineffective are recognized in earnings. Significant increases or decreases in the fair value of these cash flow hedges could cause favorable or adverse fluctuations in the results of our operations.

 

53
 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

Issuer Purchases of Equity Securities (registered pursuant to Section 12 of the Exchange Act)

 

Repurchases of Nuvera common stock are made to support the Company’s stock-based employee compensation plans and for other corporate purposes. In May 2019, Nuvera announced the adoption of a $4.0 million stock repurchase program running through the end of 2021. Under the stock repurchase program, repurchases could be made from time to time using a variety of methods, including through open market purchases or in privately negotiated transactions in compliance with the rules of the SEC and other applicable legal requirements. The Company did not purchase any shares in the first quarters of 2024 and 2023, respectively, and there is no dollar amounts set aside for future repurchases under any stock repurchase plans.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

 

Item 5. Other Information.

 

None.

 

 

Item 6. Exhibits.

 

Exhibit

Number 

   Description
     
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32.1   Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
32.2   Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS   Inline XBRL Instance Document
     
101.SCH   Inline XBRL Taxonomy Extension Schema Document
     
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document
     
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document
     
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document
     
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document
     
104   Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101)

        

54
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

NUVERA COMMUNICATIONS, INC.

 

 

 

 

 

 

 

 

 

Dated: November 14, 2024

 

By   /s/ Glenn H. Zerbe  

 

 

 

Glenn H. Zerbe, President and Chief Executive Officer

 

 

 

 
       
Dated: November 14, 2024   By   /s/ Curtis O. Kawlewski  
    Curtis O. Kawlewski, Chief Financial Officer
       

 

 

 

55

EXHIBIT 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER UNDER RULE 13a-14(a) ADOPTED

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Glenn H. Zerbe, President and Chief Executive Officer of Nuvera Communications, Inc., certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024 of Nuvera Communications, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent functions):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

 

 

Date: November 14, 2024 

By 

/s/ Glenn H. Zerbe

 

 

 

Glenn H. Zerbe

 

 

 

President and Chief Executive Officer

 

 

 

 

 

 

 

 

EXHIBIT 31.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER UNDER RULE 13a-14(a) ADOPTED

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Curtis O. Kawlewski, Chief Financial Officer of Nuvera Communications, Inc., certify that:

 

1.

I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024 of Nuvera Communications, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

 

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

 

 

Date: November 14, 2024

 

/s/ Curtis O. Kawlewski

 

 

 

Curtis O. Kawlewski

 

 

 

Chief Financial Officer

 

 

 

 

 

 

 

 

EXHIBIT 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

UNDER 18 U.S.C. SECTION 1350

PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Nuvera Communications, Inc. on Form 10-Q for the period ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Glenn H. Zerbe, President and Chief Executive Officer of the Company, certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Nuvera Communications, Inc.

 

 

 

 

Date: November 14, 2024

 

/s/ Glenn H. Zerbe

 
    Glenn H. Zerbe  

 

 

President and Chief Executive Officer

 

 

 

 

 

EXHIBIT 32.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

UNDER 18 U.S.C. 1350

PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Nuvera Communications, Inc. on Form 10-Q for the period ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Curtis O. Kawlewski, Chief Financial Officer of the Company, hereby certify, pursuant to and for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

 

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Nuvera Communications, Inc.

 

 

 

 

Date: November 14, 2024 

 

/s/ Curtis O. Kawlewski

 

 

 

Curtis O. Kawlewski

 

 

 

Chief Financial Officer

 

 

 

 
v3.24.3
Document And Entity Information - shares
 9 Months Ended
Sep. 30, 2024
Nov. 14, 2024
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2024  
Document Transition Report false  
Entity File Number 0-3024  
Entity Registrant Name NUVERA COMMUNICATIONS, INC.  
Entity Incorporation, State or Country Code MN  
Entity Tax Identification Number 41-0440990  
Entity Address, Address Line One 27 North Minnesota Street  
Entity Address, City or Town New Ulm  
Entity Address, State or Province MN  
Entity Address, Postal Zip Code 56073  
City Area Code 507  
Local Phone Number 354-4111  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Title of 12(b) Security Common Stock - $1.66 par value  
Trading Symbol NUVR  
Entity Common Stock, Shares Outstanding (in shares)   5,178,176
Entity Central Index Key 0000071557  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2024  
Document Fiscal Period Focus Q3  
Amendment Flag false  
v3.24.3
Consolidated Statements of Income (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
OPERATING REVENUES:        
Revenues $ 17,616,335 $ 16,370,478 $ 51,739,314 $ 49,018,112
OPERATING EXPENSES:        
Depreciation and Amortization 4,497,082 3,949,978 13,300,877 11,371,459
Selling, General and Administrative 2,507,707 2,372,515 8,138,521 7,608,787
Total Operating Expenses 14,816,951 14,024,512 45,037,324 42,670,804
OPERATING INCOME 2,799,384 2,345,966 6,701,990 6,347,308
OTHER INCOME (EXPENSE)        
Interest Expense (3,076,442) (1,959,514) (8,164,140) (4,718,502)
Interest/Dividend Income 20,409 14,307 155,839 159,353
Interest During Construction 281,729 243,113 716,119 439,356
Gain (Loss) on Sale of Investments 0 (38,096) (257,807) 4,022,401
CoBank Patronage Dividends 0 0 1,196,948 692,371
Other Investment Income 88,396 65,269 184,619 216,256
Total Other Income (Expense) (2,685,908) (1,674,921) (6,168,422) 811,235
INCOME BEFORE INCOME TAXES 113,476 671,045 533,568 7,158,543
INCOME TAXES EXPENSE 31,778 187,875 149,401 2,004,386
NET INCOME $ 81,698 $ 483,170 $ 384,167 $ 5,154,157
NET INCOME PER SHARE        
Basic (in dollars per share) $ 0.02 $ 0.09 $ 0.07 $ 1.01
Diluted (in dollars per share) 0.02 0.09 0.07 1
DIVIDENDS PER SHARE (in dollars per share) $ 0 $ 0 $ 0 $ 0.28
WEIGHTED AVERAGE SHARES OUTSTANDING        
Basic (in shares) 5,178,176 5,126,581 5,158,286 5,113,007
Diluted (in shares) 5,362,674 5,211,382 5,311,760 5,175,507
Voice Service [Member]        
OPERATING REVENUES:        
Revenues $ 1,149,189 $ 1,363,543 $ 3,580,740 $ 3,969,394
OPERATING EXPENSES:        
Cost of revenue 2,202,721 2,346,037 6,871,102 7,229,269
Network Access [Member]        
OPERATING REVENUES:        
Revenues 745,268 876,186 2,601,894 2,926,937
Video Service [Member}        
OPERATING REVENUES:        
Revenues 2,928,080 3,005,010 8,891,820 9,120,164
Data Service [Member]        
OPERATING REVENUES:        
Revenues 7,455,297 6,881,965 22,230,414 20,573,084
OPERATING EXPENSES:        
Cost of revenue 1,171,707 1,280,342 3,520,942 3,673,237
A-CAM/FUSF [Member]        
OPERATING REVENUES:        
Revenues 4,208,559 2,971,267 11,100,259 8,950,127
Other Non-regulated [Member]        
OPERATING REVENUES:        
Revenues 1,129,942 1,272,507 3,334,187 3,478,406
OPERATING EXPENSES:        
Cost of revenue 368,152 485,149 1,173,505 1,275,125
Plant Operations [Member]        
OPERATING EXPENSES:        
Cost of revenue $ 4,069,582 $ 3,590,491 $ 12,032,377 $ 11,512,927
v3.24.3
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Net Income $ 81,698 $ 483,170 $ 384,167 $ 5,154,157
Other Comprehensive Loss:        
Unrealized Losses on Interest Rate Swaps (546,631) (125,051) (769,596) (222,693)
Income Tax Benefit Related to Unrealized Losses on Interest Rate Swaps 156,009 35,689 219,643 63,556
Other Comprehensive Losses: (390,622) (89,362) (549,953) (159,137)
Comprehensive Income Gain (Loss) $ (308,924) $ 393,808 $ (165,786) $ 4,995,020
v3.24.3
Consolidated Balance Sheets (Unaudited) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
CURRENT ASSETS:    
Cash $ 584,284 $ 1,259,904
Receivables, Net 2,731,711 3,411,892
Income Taxes Receivable 342,525 0
Materials, Supplies, and Inventories 27,829,932 34,438,857
Financial Derivative Instruments 573,032 0
Prepaid Expenses and Other Current Assets 2,417,949 2,245,160
Total Current Assets 34,479,433 41,355,813
INVESTMENTS & OTHER ASSETS:    
Goodwill 40,603,029 40,603,029
Intangibles 12,949,433 14,488,608
Other Investments 8,254,462 8,322,252
Right of Use Asset 1,096,639 1,348,290
Financial Derivative Instruments 0 1,342,628
Other Assets 857,222 884,122
Total Investments and Other Assets 63,760,785 66,988,929
PROPERTY, PLANT & EQUIPMENT:    
Property, Plant, and Equipment, Gross 361,532,885 328,639,174
Less Accumulated Depreciation 184,826,420 173,088,602
Net Property, Plant & Equipment 176,706,465 155,550,572
TOTAL ASSETS 274,946,683 263,895,314
CURRENT LIABILITIES:    
Current Portion of Long-Term Debt, Net of Unamortized Loan Fees 0 0
Accounts Payable 12,265,856 12,803,435
Checks Written in Excess of Cash Balances 0 2,270,832
Accrued Income Taxes 0 581,098
Other Accrued Taxes 185,105 253,490
Deferred Compensation 44,504 45,797
Accrued Compensation 1,741,335 1,562,115
Other Accrued Liabilities 572,229 1,059,163
Total Current Liabilities 14,809,029 18,575,930
LONG-TERM DEBT, Net of Unamortized Loan Fees 137,566,660 122,891,638
NONCURRENT LIABILITIES:    
Deferred Income Taxes 22,812,457 23,032,099
Other Accrued Liabilities 996,657 1,132,799
Deferred Compensation 223,550 256,605
Total Noncurrent Liabilities 24,032,664 24,421,503
Commitments and Contingencies  
Equity, Attributable to Parent [Abstract]    
Preferred Stock - $1.66 Par Value, 10,000,000 Shares Authorized, No Shares Issued and Outstanding 0 0
Common Stock - $1.66 Par Value, 90,000,000 Shares Authorized, 5,178,176 and 5,133,207 Shares Issued and Outstanding 8,630,293 8,555,345
Accumulated Other Comprehensive Gain 409,489 959,442
Retained Earnings 89,498,548 88,491,456
Total Stockholders' Equity 98,538,330 98,006,243
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 274,946,683 263,895,314
Communications Plant [Member]    
PROPERTY, PLANT & EQUIPMENT:    
Property, Plant, and Equipment, Gross 308,482,581 277,357,371
Property, Plant and Equipment, Other Types [Member]    
PROPERTY, PLANT & EQUIPMENT:    
Property, Plant, and Equipment, Gross 33,807,633 32,433,191
Video Plant [Member]    
PROPERTY, PLANT & EQUIPMENT:    
Property, Plant, and Equipment, Gross $ 19,242,671 $ 18,848,612
v3.24.3
Consolidated Balance Sheets (Unaudited) (Parentheticals) - $ / shares
Sep. 30, 2024
Dec. 31, 2023
Preferred Stock, Par or Stated Value Per Share (in dollars per share) $ 1.66 $ 1.66
Preferred Stock, Shares Authorized (in shares) 10,000,000 10,000,000
Preferred Stock, Shares Issued (in shares) 0 0
Preferred Stock, Shares Outstanding (in shares) 0 0
Common Stock, Par or Stated Value Per Share (in dollars per share) $ 1.66 $ 1.66
Common Stock, Shares Authorized (in shares) 90,000,000 90,000,000
Common Stock, Shares, Issued (in shares) 5,178,176 5,133,207
Common Stock, Shares, Outstanding (in shares) 5,178,176 5,133,207
v3.24.3
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net Income $ 384,167 $ 5,154,157
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:    
Depreciation and Amortization 13,589,054 11,526,448
(Gains)/Losses on Investments 257,807 (4,022,401)
Undistributed Earnings of Other Equity Investments (151,126) (219,912)
Noncash Patronage Refund (166,519) (123,745)
Stock Issued in Lieu of Cash Payment 299,008 373,175
Distributions from Equity Investments 127,529 28,048
Stock-based Compensation 288,412 172,820
Changes in Assets and Liabilities:    
Receivables 654,346 (259,621)
Income Taxes Receivable (342,525) 283,665
Inventory for Resale 122,756 30,767
Prepaid Expenses (62,336) (569,535)
Other Assets 45,008 (451,967)
Accounts Payable 84,360 (4,230)
Checks Written in Excess of Cash Balance (2,270,832) 0
Accrued Income Taxes (581,098) 1,350,222
Other Accrued Taxes (68,385) (54,934)
Other Accrued Liabilities (192,205) (906,890)
Deferred Compensation (34,348) (100,022)
Net Cash Provided by Operating Activities 11,983,073 12,206,045
CASH FLOWS FROM INVESTING ACTIVITIES:    
Additions to Property, Plant, and Equipment, Net (38,437,630) (33,397,721)
Materials and Supplies for Construction 6,452,434 (17,827,735)
Proceeds from Sale of Equity Investments 0 5,876,305
Other, Net 239,797 216,511
Net Cash Used in Investing Activities (31,745,399) (45,132,640)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Principal Payments of Long-Term Debt (125,000,000) 0
Loan Proceeds 125,000,000 30,000,000
Loan Origination Fees (1,703,825) (17,811)
Changes in Revolving Credit Facility 16,090,669 3,116,119
Grants Received for Construction of Plant 4,699,862 1,521,677
Dividends Paid 0 (1,430,771)
Net Cash Provided by Financing Activities 19,086,706 33,189,214
NET CHANGE IN CASH (675,620) 262,619
CASH at Beginning of Period 1,259,904 310,556
CASH at End of Period 584,284 573,175
Supplemental cash flow information:    
Cash paid for interest 8,050,168 5,286,760
Net cash paid for income taxes $ 1,073,024 $ 370,500
v3.24.3
Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)
Common Stock [Member]
AOCI Attributable to Parent [Member]
Unearned Compensation [Member]
Retained Earnings [Member]
Total
Balance (in shares) at Dec. 31, 2022 5,093,213        
Balance at Dec. 31, 2022 $ 8,488,689 $ 1,582,455 $ 79,892 $ 92,430,816 $ 102,581,852
Non-Cash, Share-Based Compensation       172,962 172,962
Net Income       5,154,157 5,154,157
Unrealized Loss on Interest Rate Swap   (159,137)     (159,137)
Restricted Stock Grant     (142)   (142)
Directors' Stock Plan (in shares) 27,716        
Directors' Stock Plan $ 46,193       387,470
Stock Issued During Period, Value, Directors Stock Plan       341,277  
Employee Stock Plan (in shares) 5,652        
Employee Stock Plan $ 9,420       83,650
Stock Issued During Period, Value, Employee Stock Plan       74,230  
Dividends       (1,430,771) (1,430,771)
Balance (in shares) at Sep. 30, 2023 5,126,581        
Balance at Sep. 30, 2023 $ 8,544,302 1,423,318 79,750 96,742,671 106,790,041
Balance (in shares) at Jun. 30, 2023 5,126,581        
Balance at Jun. 30, 2023 $ 8,544,302 1,512,680 78,231 96,188,831 106,324,044
Non-Cash, Share-Based Compensation       70,670 70,670
Net Income       483,170 483,170
Unrealized Loss on Interest Rate Swap   (89,362)     (89,362)
Restricted Stock Grant     1,519   1,519
Balance (in shares) at Sep. 30, 2023 5,126,581        
Balance at Sep. 30, 2023 $ 8,544,302 1,423,318 79,750 96,742,671 106,790,041
Balance (in shares) at Dec. 31, 2023 5,133,207        
Balance at Dec. 31, 2023 $ 8,555,345 959,442 0 88,491,456 98,006,243
Non-Cash, Share-Based Compensation       288,412 288,412
Net Income       384,167 384,167
Unrealized Loss on Interest Rate Swap   (549,953)     (549,953)
Directors' Stock Plan (in shares) 44,099        
Directors' Stock Plan $ 73,498       399,978
Stock Issued During Period, Value, Directors Stock Plan       326,480  
Employee Stock Plan (in shares) 870        
Employee Stock Plan $ 1,450       9,483
Stock Issued During Period, Value, Employee Stock Plan       8,033  
Balance (in shares) at Sep. 30, 2024 5,178,176        
Balance at Sep. 30, 2024 $ 8,630,293 409,489 0 89,498,548 98,538,330
Balance (in shares) at Jun. 30, 2024 5,178,176        
Balance at Jun. 30, 2024 $ 8,630,293 800,111 0 89,306,998 98,737,402
Non-Cash, Share-Based Compensation         109,852
Net Income       81,698 81,698
Unrealized Loss on Interest Rate Swap   (390,622)     (390,622)
Balance (in shares) at Sep. 30, 2024 5,178,176        
Balance at Sep. 30, 2024 $ 8,630,293 $ 409,489 $ 0 $ 89,498,548 $ 98,538,330
v3.24.3
Note 1 - Basis of Presentation and Consolidation
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

Note 1 – Basis of Presentation and Consolidation

 

The accompanying unaudited condensed consolidated financial statements of Nuvera Communications, Inc. and its subsidiaries (Nuvera) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, rules and regulations of the Securities and Exchange Commission (SEC) and, where applicable, conform to the accounting principles as prescribed by federal and state telephone utility regulatory authorities. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted or condensed pursuant to such rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring accruals) considered necessary for the fair presentation of the financial statements and present fairly the results of operations, financial position and cash flows for the interim periods presented as required by Regulation S-X, Rule 10-01. These unaudited interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

The preparation of our financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities at the date of the financial statements and during the reporting period. Actual results may differ from these estimates. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year as a whole or any other interim period.

 

Our consolidated financial statements report the financial condition and results of operations for Nuvera and its subsidiaries in one business segment: the Communications Segment. Inter-company transactions have been eliminated from the consolidated financial statements.

 

Revenue Recognition

See Note 2 – “Revenue Recognition” for a discussion of our revenue recognition policies.

 

Cost of Services (excluding depreciation and amortization)

Cost of services (excluding depreciation and amortization expense) includes all costs related to the delivery of communication services and products. These operating costs include all costs of performing services and providing related products including engineering, network monitoring and transportation costs.

 

Selling, General and Administrative Expenses

Selling, general and administrative expenses include direct and indirect selling expenses, customer service, billing and collections, advertising and all other general and administrative costs associated our operations.

 

 

Depreciation and Amortization Expense

We use the group life method (mass asset accounting) to depreciate the assets of our communications companies. Communications plant acquired in a given year is grouped into similar categories and depreciated over the remaining estimated useful life of the group. When an asset is retired, both the asset and the accumulated depreciation associated with that asset are removed from the books. Due to rapid changes in technology, selecting the estimated economic life of communications plant and equipment requires a significant amount of judgment. We periodically review data on expected utilization of new equipment, asset retirement activity and net salvage values to determine adjustments to our depreciation rates. We have not made any significant changes to the lives of these assets in the two-year period ended September 30, 2024. Depreciation expense was $11,761,702 and $10,009,933 for the nine months ended September 30, 2024, and 2023. The increase in depreciation expense was primarily due to an increase in our fiber-to-the-premise (FTTP) network to aid in our transition to a new advanced FTTP network, reflecting our continual investment in technology and infrastructure in order to meet our customer’s demands for our products and services. We amortize our definite-lived intangible assets over their estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment.

 

Grant money received from governmental entities for reimbursement of capital expenditures is accounted for as a reduction from the cost of the asset. As the grant was to be used in the Company’s regulated network, the Company accounts for this funding as aid to construction as outlined in the Federal Communications Commission (FCC) Part 32 “Uniform System of Accounts for Telecommunications Companies.” The resulting balance sheet presentation reflects the Company’s net investment in the assets in property, plant, and equipment. Depreciation is calculated and recorded based on the reduced cost of the investment therefore the impact of prior grants received is reflected in earnings as a reduction in depreciation. Grant funds are shown as inflows in the financing activities section of the statements of cash flows.

 

Income Taxes

 

The provision for income taxes consists of an amount for taxes currently payable and a provision for tax consequences deferred to future periods. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax basis. Significant components of our deferred taxes arise from differences (i) in the basis of property, plant, and equipment due to the use of accelerated depreciation methods for tax purposes, as well as (ii) in partnership investments and intangible assets due to the difference between book and tax basis. Our effective income tax rate is normally higher than the United States tax rate due to state income taxes and permanent differences.

 

We account for income taxes in accordance with GAAP, which requires an asset and liability approach to financial accounting and reporting for income taxes. As required by GAAP, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

As of September 30, 2024, and December 31, 2023, we had $0 of unrecognized tax benefits that if recognized would affect the tax rate. We do not expect the total amount of unrecognized tax benefits to materially change over the next twelve months.

 

We are primarily subject to United States, Minnesota, Iowa, Nebraska, North Dakota, and Wisconsin income taxes. Tax years subsequent to 2020 remain open to examination by federal and state tax authorities. Our policy is to recognize interest and penalties related to income tax matters as income tax expense. As of September 30, 2024, and December 31, 2023, we had $0 of interest or penalties accrued that related to income tax matters.

 

 

Earnings and Dividends Per Share

 

The basic and diluted net income per share is calculated as follows:

 

   

Three Months Ended

    

Three Months Ended

    

Nine Months Ended

    

Nine Months Ended

  
   

September 30, 2024

    

September 30, 2023

    

September 30, 2024

    

September 30, 2023

  
   

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

  
                                                                 

Net Income

   $ 81,698     $ 81,698     $ 483,170     $ 483,170     $ 384,167     $ 384,167     $ 5,154,157     $ 5,154,157  
                                                                 

Weighted-average common shares outstanding

     5,178,176       5,362,674       5,126,581       5,211,382       5,158,286       5,311,760       5,113,007       5,175,507  
                                                                 

Net income per share

   $ 0.02     $ 0.02     $ 0.09     $ 0.09     $ 0.07     $ 0.07     $ 1.01     $ 1.00  

 

The weighted-average shares outstanding, basic, and diluted, are calculated as follows:

 

   

Three Months Ended

    

Three Months Ended

    

Nine Months Ended

    

Nine Months Ended

  
   

September 30, 2024

    

September 30, 2023

    

September 30, 2024

    

September 30, 2023

  
   

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

  
                                                                 

Weighted-average common shares outstanding

     5,178,176       5,178,176       5,126,581       5,126,581       5,158,286       5,158,286       5,113,007       5,113,007  
                                                                 

Dilutive RSUs/Options

     -       184,498       -       84,801       -       153,474       -       62,500  
                                                                 

Weighted-average common shares outstanding

     5,178,176       5,362,674       5,126,581       5,211,382       5,158,286       5,311,760       5,113,007       5,175,507  

 

Nuvera’s Board of Directors (BOD) reviews quarterly dividend declarations based on our anticipated earnings, capital requirements and our operating and financial conditions.

 

Recent Accounting Developments

 

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide improvements primarily related to the rate reconciliation and incomes taxes paid information included in income tax disclosures. The Company would be required to disclose additional information regarding reconciling items equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory tax rate. Similarly, the Company would be required to disclose income taxes paid (net of refunds received) equal to or greater than five percent of total income taxes paid (net of refunds received). The amendments in ASU 2023-09 are effective January 1, 2025, including interim periods. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company will evaluate the impact of ASU 2023-09 on its financial statements.

 

 

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, amending reportable segment disclosure requirements to include disclosure of incremental segment information on an annual and interim basis. Among the disclosure enhancements are new disclosures regarding significant segment expenses that are regularly provided to the chief operating decision-maker and included within each reported measure of segment profit or loss, as well as other segment items bridging segment revenue to each reported measure of segment profit or loss. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, and are applied retrospectively. We continue to evaluate the impact of this update on our consolidated financial statements and disclosures and do not expect any changes to our current reportable segments.

 

We have implemented all applicable accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

We have reviewed all other significant newly issued accounting pronouncements and determined that they are either not applicable to our business or that no material effect is expected on our financial position and results of operations.
v3.24.3
Note 2 - Revenue Recognition
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]

Note 2 – Revenue Recognition

 

The Company recognizes revenue based on the following single principles-based, five-step model that is applied to all services and contracts that are required with customers. These steps include (1) identify the contract(s)/service with the customer, (2) identify the performance obligations in the contract/service provided, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract/service provided and (5) recognize revenue when each performance obligation is satisfied.

 

Our revenue contracts/services provided with customers may include a promise or promises to deliver services such as broadband, video or voice services. Promised services are considered distinct as the customer can benefit from the services either on their own or together with other resources that are readily available to the customer and the Company’s promise to transfer service to the customer is separately identifiable from other promises in the contract. The Company accounts for services as separate performance obligations. Each service is considered a single performance obligation as it provides a series of distinct services that are substantially the same and have the same pattern of transfer.

 

The transaction price is determined at service or contract inception and reflects the amount of consideration to which we expect to be entitled in exchange for transferring service to the customer. This amount is generally equal to the market price of the services promised in the service provided or contract and may include promotional or bundling discounts. Most of our prices are based on tariffed rates filed with regulatory bodies or standard company price lists. The transaction price excludes amounts collected on behalf of third parties such as sales taxes and regulatory fees. Conversely, nonrefundable up-front fees, such as service activation and set-up fees, which are immaterial to our overall revenues, are included in the transaction price. In determining the transaction price, we consider our enforceable rights and obligations within the service or contract. We do not consider the possibility of a contract being cancelled, renewed, or modified, which is consistent with Accounting Standards Codification (ASC 606-10-32-4).

 

 

The transaction price is allocated to each performance obligation based on the standalone selling price of the service, net of the related discount, as applicable.

 

Revenue is recognized when performance obligations are satisfied by transferring service to the customer as described below.

 

Significant Judgments

 

The Company often provides multiple services to a customer. Provision of customer premise equipment (CPE) and additional service tiers may have a significant level of integration and interdependency with the subscription voice, video, Internet, or connectivity services. Judgment is required to determine whether the provision of CPE, installation services and additional service tiers are considered distinct and accounted for separately, or not distinct and accounted for together with the subscription services.

 

Allocation of the transaction price to the distinct performance obligations in bundled service subscriptions requires judgment. The transaction price for a bundle of services is frequently less than the sum of standalone selling prices of each individual service. Bundled discounts are allocated proportionally to the selling price of each individual service within the bundle. Standalone selling prices for the Company’s services are directly observable.

 

 

Disaggregation of Revenue

 

The following table summarizes revenue from contracts/services with customers for the quarters ended September 30, 2024, and 2023:

 

   

Quarters Ended September 30,

  
   

2024

    

2023

  

Voice Service¹

   $ 1,267,195     $ 1,505,320  

Network Access¹

     767,082       909,502  

Video Service¹

     2,928,080       3,005,010  

Data Service¹

     7,038,182       6,327,829  

Directory²

     132,073       151,562  

Other Contracted Revenue³

     502,857       653,417  

Other⁴

     485,210       600,171  
                 

Revenue from customers

     13,120,679       13,152,811  
                 

 

                

Subsidy and other revenue outside scope of ASC 606⁵

     4,495,656       3,217,667  
                 

Total revenue

   $ 17,616,335     $ 16,370,478  

 

 

¹ Month-to-Month contracts billed and cosumed in the same month.

 

 

² Directory revenue is contracted annually, however, this revenue is recognized monthly over the contract period as the advertising is used.

 

 

³ This includes long-term contracts where the revenue is recognized monthly over the term of the contract.

 

 

⁴ This includes CPE and other equipment sales.

 

 

⁵ This includes governmental subsidies and lease revenue outside the scope of ASC 606.

 

For the quarter ended September 30, 2024, approximately 71.73% of our total revenue was from month-to-month and other contracted revenue from customers. Approximately 25.52% of our total revenue was from revenue sources outside of the scope of ASC 606. The remaining 2.75% of total revenue was from other sources including CPE and equipment sales and installation.

 

For the quarter ended September 30, 2023, approximately 76.68% of our total revenue was from month-to-month and other contracted revenue from customers. Approximately 19.65% of our total revenue was from revenue sources outside of the scope of ASC 606. The remaining 3.67% of total revenue was from other sources including CPE and equipment sales and installation.

 

 

The following table summarizes revenue from contracts/services with customers for the nine months ended September 30, 2024, and 2023:

 

   

Nine Months Ended September 30,

  
   

2024

    

2023

  

Voice Services¹

   $ 3,967,091     $ 4,373,187  

Network Access¹

     2,667,704       3,027,881  

Video Service¹

     8,891,820       9,120,164  

Data Service¹

     20,618,880       18,850,042  

Directory²

     408,688       454,852  

Other Contracted Revenue³

     1,901,228       2,019,130  

Other⁴

     1,419,215       1,497,123  
                 

Revenue from customers

     39,874,626       39,342,379  
                 

Subsidy and other revenue

                

outside scope of ASC 606⁵

     11,864,688       9,675,733  
                 

Total revenue

   $ 51,739,314     $ 49,018,112  

 

¹ Month-to-Month contracts billed and cosumed in the same month.

 

 

² Directory revenue is contracted annually, however, this revenue is recognized monthly over the contract period as the advertising is used.

 

 

³ This includes long-term contracts where the revenue is recognized monthly over the term of the contract.

 

 

⁴ This includes CPE and other equipment sales.

 

 

⁵ This includes governmental subsidies and lease revenue outside the scope of ASC 606.

 

For the nine months ended September 30, 2024, approximately 74.33% of our total revenue was from month-to-month and other contracted revenue from customers. Approximately 22.93% of our total revenue was from revenue sources outside of the scope of ASC 606. The remaining 2.74% of total revenue was from other sources including CPE and equipment sales and installation.

 

 

For the nine months ended September 30, 2023, approximately 77.21% of our total revenue was from month-to-month and other contracted revenue from customers. Approximately 19.74% of our total revenue was from revenue sources outside of the scope of ASC 606. The remaining 3.05% of total revenue was from other sources including CPE and equipment sales and installation.

 

A significant portion of our revenue is derived from customers who may generally cancel their subscriptions at any time without penalty. As such, the amount of revenue related to unsatisfied performance obligations is not necessarily indicative of the future revenue to be recognized from our existing customer base. Revenue from customers with a contractually specified term and non-cancelable service period will be recognized over the term of such contracts, which is generally three to ten years for these types of contracts.

 

Nature of Services

 

Revenues are earned from our customers primarily through the connection to our advanced fiber networks, digital and commercial television (TV) programming, Internet services (high-speed broadband), and hosted and managed services. Revenues for these services are billed based on set rates for monthly service or based on the amount of time the customer is utilizing our facilities. The revenue for these services is recognized over time as the service is rendered.

 

Voice Service – We receive recurring revenue for basic local services that enable end-user customers to make and receive telephone calls within a defined local calling area for a flat monthly fee. In addition to subscribing to basic local telephone services, our customers may choose from multiple voice service plans with a variety of custom calling features such as call waiting, call forwarding, caller identification and voicemail. Our voice over Internet protocol (VOIP) digital phone service is also available as an alternative to the traditional telephone line. Customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one-month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

 

Network Access – We provide access services to other communication carriers for the use of our facilities to terminate or originate long distance calls on our fiber network. Additionally, we bill monthly subscriber line charges (SLCs) to substantially all our customers for access to the public switched network. These monthly SLCs are regulated and approved by the FCC. In addition, network access revenue is derived from several federally administered pooling arrangements designed to provide support and distribute funding to us.

 

Revenues earned from other communication carriers accessing our network are based on the utilization of our network by these carriers as measured by minutes of use on the network or special access to the network by the individual carriers monthly. Revenues are billed at tariffed access rates for both interstate and intrastate calls and are recognized into revenue monthly based on the period the access was provided.

 

The National Exchange Carriers Association (NECA) pools and redistributes the SLCs to various communication providers through the Connect America Fund (CAF). These revenues are earned and recognized into revenue on a monthly basis. Any adjustments to these amounts received by NECA are adjusted for in revenue upon receipt of the adjustment.

 

 

On December 12, 2023, the Company announced that it confirmed eligibility for Consumer Broadband-only Loop Support (CBOL) funding through the Universal Service Administration Company (USAC). The incremental funding will be used to continue to support the Company’s multi-year fiber construction initiative. The Company began receiving a monthly benefit in November of 2023 with the first payment receipt confirmed in December. On an annualized basis this new program will provide $3.9 million of new funding based on the tariff filing and the Company’s expected line counts. The monthly CBOL subsidy formula is reviewed and subject to revision on an annual basis and subject to change based on updated USAC funding criteria July 1 of each year.

 

Video Service – We provide a variety of enhanced video services on a monthly recurring basis to our customers. Depending on geographical market availability, our video services range from limited basic service to advanced digital TV, which includes several plans each with hundreds of local, national music channels including premium and pay-per-view channels as well as video-on-demand service. Certain customers may also subscribe to our advanced video services, which consist of high-definition TV, digital video recorders (DVR) and Whole Home DVR. Our Whole Home DVR allows customers the ability to watch recorded shows on any TV in the house, record multiple shows at one time and utilize an intuitive on-screen guide and user interface. Video subscribers also have access to our TV Everywhere service which allows subscriber access to full episodes of available shows, movies and live screens using a computer or mobile device. We also receive monthly recurring revenue from our subscribers for providing commercial TV programming in competition with cable television services (CATV), satellite dish TV and off-air TV service providers. Customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one-month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

 

Data Service – We provide high speed Internet to business and residential customers depending on the nature of the network facilities that are available, the level of service selected and the location. Our revenue is earned based on the offering of various flat packages based on the level of service, data speeds and features. We also provide e-mail and managed services, such as web hosting and design, on-line file back up and on-line file storage. Data customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one-month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

 

Directory – Our directory publishing revenue in our telephone directories recurs monthly and is recognized as revenue on a monthly basis.

 

Other Contracted Revenue - Managed services and certain other data customers include advanced fiber-delivered communications and managed information technology solutions to mainly business customers, as well as high-capacity last-mile data connectivity services to wireless and wireline carriers. Services are primarily offered on a subscription basis with a contractually specified and non-cancelable service period. The non-cancelable contract terms for these customers generally range from three to ten years. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized ratably over the contract period as the subscription services are delivered. These services are billed as monthly recurring charges to customers.

 

 

Other – We also generate revenue from the sales, service and installation of CPE and other services. Sales and service of CPE are billed and recognized into revenue once the sale or service is complete or delivered. These sales and services are generally short-term in nature and are completed within one month. Other revenues are immaterial to our total revenues.

 

Subsidy and Other Revenue outside the Scope of ASC 606 – We receive subsidies from governmental entities to operate and expand our advanced fiber networks. In addition, we have revenue from leasing arrangements. Both of these revenue streams are outside of the scope of ASC 606.

 

Interstate access rates are established by a nationwide pooling of companies known as NECA. The FCC established NECA in 1983 to develop and administer interstate access service rates, terms, and conditions. Revenues are pooled and redistributed based on a company's actual or average costs. There has been a change in the composition of interstate access charges in recent years, shifting more of the charges to the end user and reducing the amount of access charges paid by the Interexchange Carriers (IXCs). We believe this trend will continue.

 

Intrastate access rates are filed with state regulatory commissions in Minnesota and Iowa.

 

The Company currently receives funding based on the Alternative Connect America Cost Model (A-CAM) as described below, except for Scott-Rice Telephone Co. (Scott-Rice), which receives funding from the Federal Universal Service Fund (FUSF). Scott-Rice’s settlements from the pools are based on nationwide average schedules, which includes the pooling and redistribution of revenues based on a company’s actual or average costs as described below.

 

A-CAM

 

As described above, with the exception of Scott-Rice, the remainder of our companies receive funding from the A-CAM.

 

Per the FCC Public Notice DA 19-115, the Company receives A-CAM support and has corresponding service deployment obligations under that program. The Company annually receives (i) $596,084 for its Iowa operations and (ii) $8,354,481 for its Minnesota operations. The Company will receive the A-CAM support for a period of 10 years, which started in 2019. The Company uses the funding that it receives through the A-CAM program to meet its defined broadband build-out obligations, which the Company is currently completing.

 

On September 29, 2023, Nuvera announced that it had notified the FCC that the Company had decided to remain on the current A-CAM funding, rather than moving to the Enhanced A-CAM (E-ACAM) program that the FCC introduced earlier in 2023. A-CAM and E-ACAM are FCC administered programs to subsidize the deployment of broadband to rural areas. E-ACAM is a successor to this program which requires participating carriers to offer broadband and voice services at speeds of 100/20 Megabits per second or faster to all E-ACAM required locations within its study area. Broadband providers were required to choose one of the two funding options and notify the FCC by September 29, 2023.

 

 

Accounts Receivable, Contract Assets and Contract Liabilities

 

The following table provides information about our receivables, contracts assets and contract liabilities from revenue contracts with our customers:

 

   

September 30,

    

December 31,

  
   

2024

    

2023

  
                 

Accounts receivable, net - beginning balance

   $ 1,966,012     $ 1,477,692  

Accounts receivable, net - ending balance

     1,985,831       1,966,012  
                 

Contract assets - beginning balance

     1,458,631       794,193  

Contract assets - ending balance

     1,471,384       1,458,631  
                 

Contract liabilities - beginning balance

     551,995       626,306  

Contract liabilities - ending balance

     369,637       551,995  

 

Accounts Receivable

 

A receivable is recognized in the period the Company provides goods and services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are generally 30-60 days.

 

Contract Assets

 

Contract assets include costs that are incremental to the acquisition of a contract. Incremental costs are those that result directly from obtaining a contract or costs that would not have been incurred if the contract had not been obtained, which primarily relates to sales commissions. We defer and amortize these costs over the expected customer life as the contract obligations are satisfied. We determined that the expected customer life is the expected period of benefit as the commission on the renewal contract is commensurate with the commission on the initial contract. During the quarters ended September 30, 2024, and 2023 the Company recognized expenses of $173,140 and $141,051, respectively, related to deferred contact acquisition costs. During the nine months ended September 30, 2024, and 2023 the Company recognized expenses of $496,127 and $340,786, respectively, related to deferred contact acquisition costs. Short-term contact assets are included in current assets under prepaid expenses and other current assets. Long-term contract assets are included in investments and other assets under other assets.

 

Contract Liabilities

 

Contract liabilities include deferred revenues related to advanced payments for services and nonrefundable, upfront service activation and set-up fees, which are generally deferred. In addition, contract liabilities include customer deposits that are not recognized as revenue but are instead returned to the customer after a holding period. Short-term contract liabilities include deferred revenues for advanced payments for managed services and other long-term contracts. This includes the current portion of the deferred revenues that will be recognized monthly within one year. Short-term contract liabilities are included in current liabilities under other accrued liabilities. Long-term contract liabilities include deferred revenues for advanced payments for managed services and other long-term contracts. This includes the portion longer than one year and the corresponding deferred revenues are recognized as revenue on a monthly basis based on the term of the contract. Long-term contract liabilities are included in noncurrent liabilities under other accrued liabilities. During the quarters ended September 30, 2024, and 2023, the Company recognized revenues of $34,436 and $54,413, respectively, related to deferred revenues. During the nine months ended September 30, 2024, and 2023, the Company recognized revenues of $272,294 and $302,831, respectively, related to deferred revenues.

 

 

Performance Obligations

 

ASC 606, Revenue from Contracts with Customers, requires that the Company disclose the aggregate amount of the transaction price that is allocated to remaining performance obligations that are unsatisfied as of September 30, 2024. The guidance provides certain practical expedients that limit this requirement. The service revenue contracts of the Company meet the following practical expedients provided by ASC 606:

 

 

1.

The performance obligation is part of a contract that has an original expected duration of one year or less.
 

2.

Revenue is recognized from the satisfaction of the performance obligations in the amount billable to the customer in accordance with ASC 606-10-55-18.

 

The Company has elected these practical expedients. Performance obligations related to our service revenue contracts are generally satisfied over time. For services transferred over time, revenue is recognized based on amounts invoiced to the customer as the Company has concluded that the invoice amount directly corresponds with the value of services provided to the customer. Management considers this a faithful depiction of the transfer of control as services are substantially the same and have the same pattern of transfer over the life of the contract. As such, revenue related to unsatisfied performance obligations that will be billed in future periods has not been disclosed.
v3.24.3
Note 3 - Leases
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Lessee, Operating Leases [Text Block]

Note 3 – Leases

 

Under FASB’s ASU 2016-02, “Leases,” which, together with its related clarifying ASUs, provided revised guidance for lease accounting and related disclosure requirements and established a right-to-use (ROU) model that requires lessees to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. The ASU also requires disclosures to allow financial statement users to better understand the amount, timing and uncertainty of cash flows arising from leases. These disclosures include qualitative requirements, providing additional information about the amounts recorded in the financial statements.

 

The following tables include the ROU assets and operating lease liabilities as of September 30, 2024, and December 31, 2023. Short-term operating lease liabilities are included in current liabilities in other accrued liabilities. Long-term operating lease liabilities are included in noncurrent liabilities in other accrued liabilities.

 

Right of Use Assets

  

Balance
September 30, 2024

    

Balance
December 31, 2023

  

Operating Lease Right-Of-Use Assets

   $ 1,096,639     $ 1,348,290  

 

 

Operating Lease Liabilities

  

Balance
September 30, 2024

    

Balance
December 31, 2023

  

Short-Term Operating Lease Liabilities

   $ 198,310     $ 352,969  

Long-Term Operating Lease Liabilities

     922,209       1,029,910  

Total

   $ 1,120,519     $ 1,382,879  

 

Maturity analysis under these lease agreements are as follows:

 

Maturity Analysis

  

Balance
September 30, 2024

  

2024 (remaining)

   $ 79,981  

2025

     243,974  

2026

     200,777  

2027

     151,630  

2028

     153,824  

Thereafter

     613,091  

Total

     1,443,277  

Less Imputed interest

     (322,758 )

Present Value of Operating Leases

   $ 1,120,519  

 

The following summarizes other information related to leases for the quarter ended September 30, 2024, as follows:

 

Weighted Average Remaining Lease Term (Years)

     7.60  

Weighted Average Discount Rate

     6.32 %

 

We amortize our leases over the shorter of the term of the lease or the useful life of the asset. Lease expenses for the quarter and nine months ended September 30, 2024, were $87,043 and $384,376. Lease expenses for the quarter and nine months ended September 30, 2023, were $123,588 and $334,295.
v3.24.3
Note 4 - Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Derivatives and Fair Value [Text Block]

Note 4 – Fair Value Measurements

 

We have adopted the rules prescribed under GAAP for our financial assets and liabilities. GAAP includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques used to measure fair value that is either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels:

 

Level 1:

Inputs are quoted prices in active markets for identical assets or liabilities.

Level 2:

Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs that are derived principally from or corroborated by observable market data.

Level 3:

Inputs are derived from valuation techniques where one or more significant inputs or value drivers are unobservable.

 

 

We have used financial derivative instruments to manage our overall cash flow exposure to fluctuations in interest rates. We accounted for derivative instruments in accordance with GAAP that requires derivative instruments to be recorded on the balance sheet at fair value. Changes in fair value of derivative instruments must be recognized in earnings unless specific hedge accounting criteria are met, in which case, the gains and losses are included in other comprehensive income rather than in earnings.

 

We have entered into interest rate swap agreements (IRSAs) with our lender, CoBank, ACB (CoBank) to manage our cash flow exposure to fluctuations in interest rates. These instruments are designated as cash flow hedges and are effective at mitigating the risk of fluctuations on interest rates in the marketplace. Any gains or losses related to changes in the fair value of these derivatives are accounted for as a component of accumulated other comprehensive gain (loss) for as long as the hedge remains effective.

 

The fair value of our IRSAs is discussed in Note 7 – “Interest Rate Swaps”. The fair value of our swap agreements was determined based on Level 2 inputs.

 

The fair value of our Goodwill as discussed in Note 5 – “Goodwill and Intangibles”. The fair value of our Goodwill was determined based on Level 3 inputs.

 

Other Financial Instruments

 

Other Investments - We conducted an evaluation of our investments in all of our investees in connection with the preparation of our audited financial statements as of December 31, 2023. As of September 30, 2024, we believe the carrying value of our investments is not impaired.

 

Debt – We estimate the fair value of our long-term debt based on the discounted future cash flows we expect to pay using current rates of borrowing for similar types of debt. Fair value of the debt approximates carrying value.

 

Other Financial Instruments - Our financial instruments also include cash equivalents, trade accounts receivable and accounts payable where the current carrying amounts approximate fair market value.
v3.24.3
Note 5 - Goodwill and Intangibles
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]

Note 5 – Goodwill and Intangibles

 

We account for goodwill and other intangible assets under GAAP. Under GAAP, goodwill and intangible assets with indefinite useful lives are not amortized but are instead tested for impairment (i) on at least an annual basis and (ii) when changes in circumstances indicate that the fair value of goodwill may be below its carrying value. These circumstances include but are not limited to (i) a significant adverse change in the business climate, (ii) unanticipated competition or (iii) an adverse action or assessment by a regulator. Determining impairment involves estimating the fair value of a reporting unit using a combination of (i) the income or discounted cash flow approach and (ii) the market approach that utilizes comparable companies’ data. If the carrying amount of a reporting unit exceeds its fair value, the amount of the impairment loss must be measured. The impairment loss is calculated by comparing the implied fair value of the reporting unit’s goodwill to its carrying amount. In calculating the implied fair value of the reporting unit’s goodwill, the fair value of the reporting unit is allocated to all the assets and liabilities of the reporting unit. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied value of goodwill. We recognize impairment loss when the carrying amount of goodwill exceeds its implied fair value. Our goodwill totaled $40,603,029 as of September 30, 2024, and December 31, 2023.

 

 

In 2023 and 2022, we engaged an independent valuation firm to aid in the completion of an annual impairment test for existing goodwill acquired. For 2023 and 2022, the testing was completed, and we determined that there was no impairment to goodwill for Scott-Rice and Sleepy Eye Telephone Company and no impairment to goodwill for Hutchinson Telephone Company (HTC) for 2022 as the determined fair value was sufficient to pass the impairment test. For 2023, after the testing, we determined that there was an impairment to goodwill for HTC of $9.3 million as the determined fair value was not sufficient to pass the impairment test.

 

Our intangible assets subject to amortization consist of acquired customer relationships, regulatory rights, and trade names. We amortize intangible assets with finite lives over their respective estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment. In addition, we periodically reassess the carrying value, useful lives, and classifications of our identifiable intangible assets.

 

The components of our identified intangible assets are as follows:

 

             

September 30, 2024

    

December 31, 2023

  
             

Gross

            

Gross

          
   

Useful

    

Carrying

    

Accumulated

    

Carrying

    

Accumulated

  
   

Lives (yrs)

    

Amount

    

Amortization

    

Amount

    

Amortization

  

Definite-Lived Intangible Assets

                                          

Customers Relationships

   14 - 15     $ 42,878,445     $ 33,271,101     $ 42,878,445     $ 32,053,361  

Regulatory Rights

     15         4,000,000       4,000,000       4,000,000       4,000,000  

Video Franchise

               3,000,000       535,725       3,000,000       214,290  

Trade Name

   3 - 5       310,106       310,106       310,106       310,106  

Indefinitely-Lived Intangible Assets

                                          

Video Franchise

               -       -       -       -  

Spectrum

               877,814       -       877,814       -  

Total

             $ 51,066,365     $ 38,116,932     $ 51,066,365     $ 36,577,757  
                                           

Net Identified Intangible Assets

                     $ 12,949,433             $ 14,488,608  

 

Amortization expense related to the definite-lived intangible assets was $1,539,175 and $1,361,526 for the nine months ended September 30, 2024, and 2023. Amortization expense for the remaining three months of 2024 and the five years subsequent to 2024 is estimated to be:

 

(October 1 – December 31)

   $ 513,059  

2025

   $ 2,047,312  

2026

   $ 2,042,389  

2027

   $ 1,335,247  

2028

   $ 1,335,247  

2029

   $ 1,335,247  

 

 

 
v3.24.3
Note 6 - Secured Credit Facility
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Debt Disclosure [Text Block]

Note 6 – Secured Credit Facility

 

On June 21, 2024, Nuvera and CoBank entered into (i) an Agreement Regarding Amendments to Loan Documents and (ii) an Amended and Restated Revolving Loan Promissory Note. The agreements amended our existing credit facility with CoBank and secured a credit facility in the aggregate principal amount of $180.0 million.

 

Under the Agreements, among other things, (i) the Company received a $125.0 million term loan to replace existing debt, (ii) a $25.0 million delayed draw term loan, (iii) the Company’s revolving loan was decreased from $40.0 million to $30.0 million, (iv) the maturity dates of the term loans and revolving loan were set at June 21, 2029, and (v) the Company’s operating subsidiaries agreed to extend their previous guarantees, security interests and mortgages to cover the increased amount of the credit facility. The financing was secured to facilitate the Company’s advanced fiber-build plans announced on December 15, 2021. Refer to the Company’s 8-K filing with the SEC on June 25, 2024, for further details regarding the 2024 credit agreements with CoBank.

 

On December 21, 2023, Nuvera and CoBank entered into (i) an Agreement Regarding Amendments to Loan Documents and (ii) an Amended and Restated Revolving Loan Promissory Note. The agreements amended our existing credit facility with CoBank and increased the Company’s existing credit facility from an aggregate principal amount of $130.0 million to $140.0 million. Under the Agreements, among other things, (i) the Company’s revolving loan was increased from $30.0 million to $40.0 million and (ii) the Company’s operating subsidiaries agreed to extend their previous guarantees, security interests and mortgages to cover the increased amount of the revolving note. The financing was secured to facilitate the Company’s advanced fiber-build plans announced on December 15, 2021. Refer to the Company’s 8-K filing with the SEC on December 21, 2023, for further details regarding the credit agreements with CoBank.

 

Under the credit agreement, the Company and its respective subsidiaries have entered into security agreements under which substantially all the assets of Nuvera and its respective subsidiaries have been pledged to CoBank as collateral. In addition, Nuvera and its respective subsidiaries have guaranteed all the obligations under the credit facility. The credit agreement contains certain customary events of default, which include failure to make payments when due, the material inaccuracy of representations or warranties, failure to observe or perform certain covenants, cross-defaults, bankruptcy and insolvency-related events, certain judgments, certain ERISA-related events, or a change in control (as defined in the credit agreement).

 

New 2024 Credit Agreement:

 

 

●

TERM A-1 LOAN - $125,000,000 term note with interest payable quarterly. The final maturity date of this note is June 21, 2029. Eight quarterly principal payments of $781,250 are due commencing June 30, 2026, through March 31, 2028, and four quarterly principal payments of $1,562,500 commencing on June 30, 2028, through maturity date. A final balloon payment of $112,500,000 is due at maturity of this note on June 21, 2029.

 

 

 

●

DELAYED DRAW TERM LOAN - $25,000,000 Delayed Draw Term Loan with interest on any outstanding amounts payable quarterly. The final maturity date of this loan is June 21, 2029. Eight quarterly principal payments of 0.625% of the outstanding loan balance are due commencing June 30, 2026, through March 31, 2028, and four quarterly principal payments of 1.250% of the outstanding loan balance commencing on June 30, 2028, through maturity date. A final balloon payment of the balance of the Delayed Draw Term Loan is due at maturity of this note on June 21, 2029. We currently have drawn $0 on this Delayed Draw Term Loan as of September 30, 2024.

 

 

●

REVOLVING LOAN - $30,000,000 revolving loan with interest payable quarterly. The final maturity date of this note is June 21, 2029. We currently have drawn $15,256,942 on this revolving note as of September 30, 2024.

 

The term loan borrowings initially bear interest at a “Margin for Base Rate Loans” of 2.75% above the applicable base rate. The margin for base rate loans for term loans increases as our “Leverage Ratio” increases and decreases as our “Leverage Ratio” decreases. The revolving loan borrowings initially bear interest at a “Margin for Base Rate Loans” of 2.75% above the applicable base rate. The margin for base rate loans for revolving loans increases as our “Leverage Ratio” increases and decreases as our “Leverage Ratio” decreases.

 

We generally use variable-rate debt to finance our operations, capital expenditures and acquisitions. These variable-rate debt obligations expose us to variability in interest payments due to changes in interest rates. The terms of our credit facility with CoBank require that we enter into interest rate agreements designed to protect us against fluctuations in interest rates, in an aggregate principal amount and for a duration determined under the credit facility.

 

Under the new 2024 credit facility, Nuvera can enter into IRSAs in connection with amounts borrowed from CoBank. In connection with the closing of the new credit facility, the Company “rolled over” its two exiting IRSAs.

 

As described in Note 7 – “Interest Rate Swaps,” on August 1, 2018, we entered into an IRSA with CoBank covering $16,137,500 of our aggregate indebtedness to CoBank. As of September 30, 2024, our IRSA covered $8,933,750 with a weighted average interest rate of 6.71%.

 

As described in Note 7 – “Interest Rate Swaps,” on August 29, 2019, we entered into a second IRSA with CoBank covering an additional $42,000,000 of our aggregate indebtedness to CoBank. As of September 30, 2024, our IRSA covered $25,039,707, with a weighted average interest rate of 5.04%.

 

As described in Note 7 – “Interest Rate Swaps,” on September 17, 2024, we entered into a third IRSA with CoBank covering an additional $21,813,892 of our aggregate indebtedness. As of September 30, 2024, our IRSA covered $18,526,543, with a weighted average interest rate of 7.77%.

 

Our loan agreements with CoBank require us to have a minimum of 35% of our existing debt under IRSAs. As of September 30, 2024, we were in compliance with the above stated covenant in our loan agreements.

 

 

Our remaining outstanding debt of $87.8 million remains subject to variable interest rates at an effective weighted average interest rate of 8.71%, as of September 30, 2024.

 

As of September 30, 2024 our additional delayed draw term loan of $25.0 million and unused revolving credit facility of $14.7 million are subject to an unused commitment fee of 0.50% annually, until drawn. Once drawn, this debt would be subject to an effective weighted average interest rate based on current rate of interest in effect at the time.

 

Our loan agreements include restrictions on our ability to pay cash dividends to our stockholders. However, we are allowed to pay dividends in an amount up to $3,000,000 in any year as long as no default or event of default has occurred, and our current Total Leverage Ratio is equal to 4.25:1.00 or less. In addition, we are allowed to pay dividends in an unlimited amount in any year as long as no default or event of default has occurred, and our current Total Leverage Ratio is equal to 3.50:1.00 or less. Our current Total Leverage Ratio as of September 30, 2024, was 5.20. Our maximum Total Leverage Ratio under the new loan facility is 6.00:1.00.

 

Our credit facility requires us to comply with specified financial ratios and tests. These financial ratios include Total Leverage Ratio, debt service coverage ratio and equity to total assets ratio. On September 30, 2024, we were in compliance with all the stipulated financial ratios in our loan agreements.

 

There are security and loan agreements underlying our current CoBank credit facility that contain restrictions on our distributions to stockholders and investment in, or loans, to others. Also, our credit facility contains restrictions that, among other things, limits or restricts our ability to enter into guarantees and contingent liabilities, incur additional debt, issue stock, transact asset sales, transfers, or dispositions, and engage in mergers and acquisitions, without CoBank approval.
v3.24.3
Note 7 - Interest Rate Swaps
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 7 – Interest Rate Swaps

 

We assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely affect expected future cash flows and by evaluating hedging opportunities.

 

We generally use variable-rate debt to finance our operations, capital expenditures and acquisitions. These variable-rate debt obligations expose us to variability in interest payments due to changes in interest rates. The terms of our credit facility with CoBank required that we enter into interest rate agreements designed to protect us against fluctuations in interest rates, in an aggregate principal amount and for a duration determined under the credit facility.

 

Under the new credit facility, Nuvera is required to have a minimum of 35% of existing debt with CoBank under IRSAs. In connection with the closing of the new credit facility, the Company “rolled over” its two exiting IRSAs.

 

To meet this objective, we have entered into an IRSA with CoBank covering $16,137,500 of our aggregate indebtedness to CoBank on August 1, 2018. The swap effectively locked in a portion of our variable-rate debt through July 2025. Under this IRSA, we have changed the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the IRSA, we pay a fixed contractual interest rate and (i) make an additional payment if the Secured Overnight Financing Rate (SOFR) variable rate payment is below a contractual rate or (ii) receive a payment if the SOFR variable rate payment is above the contractual rate.

 

 

On August 29, 2019, we entered into a second IRSA with CoBank covering an additional $42,000,000 of our aggregate indebtedness to CoBank. The swap effectively locked in a portion of our variable-rate debt through July 2025. Under this IRSA, we have changed the variable rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the IRSA, we pay a fixed contractual interest rate and (i) make an additional payment if the SOFR variable rate payment is below a contractual rate or (ii) receive a payment if the SOFR variable rate payment is above the contractual rate.

 

On September 17, 2024, we entered into a third IRSA with CoBank covering an additional $21,813,892 of our aggregate indebtedness to CoBank. The swap effectively locked in a portion of our variable-rate debt through July 2025. Under this IRSA, we have changed the variable rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the IRSA, we pay a fixed contractual interest rate and (i) make an additional payment if the SOFR variable rate payment is below a contractual rate or (ii) receive a payment if the SOFR variable rate payment is above the contractual rate.

 

Each month, we make interest payments to CoBank under its loan agreements based on the current applicable SOFR plus the contractual SOFR margin then in effect with respect to the loan, without reflecting our IRSAs. At the end of each calendar month, CoBank adjusts our aggregate interest payments based on the difference, if any, between the amounts paid by us during the month and the current effective interest rate. Net interest payments are reported in our consolidated income statement as interest expense.

 

Our IRSAs under our credit facilities both qualify as cash flow hedges for accounting purposes under GAAP. We reflect the effect of these hedging transactions in the financial statements. The unrealized gain/loss is reported in other comprehensive income. If we terminate our IRSAs, the cumulative change in fair value at the date of termination would be reclassified from accumulated other comprehensive gain (loss), which is classified in stockholders’ equity, into earnings on the consolidated statements of income.

 

The fair value of the Company’s IRSAs was determined based on valuations received from CoBank and were based on the present value of expected future cash flows using discount rates appropriate with the terms of the IRSAs. The fair value indicates an estimated amount we would be required to pay if the contracts were canceled or transferred to other parties. As of September 30, 2024, the fair value asset of these swaps was $573,032, which has been recorded net of deferred tax expense of $163,543, resulting in the $409,489 in accumulated other comprehensive income. As of September 30, 2023, the fair value asset of these swaps was $1,991,769, which has been recorded net of deferred tax of $568,451, resulting in the $1,423,318 in accumulated other comprehensive income.
v3.24.3
Note 8 - Other Investments
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Other Investments [Text Block]

Note 8 – Other Investments

 

We are a co-investor with other communication companies in several partnerships and limited liability companies. These joint ventures make it possible to offer services to customers, including digital video services and fiber transport services that we would have difficulty offering on our own. These joint ventures also make it possible to invest in modern technologies with a lower level of financial risk. We use the equity method of accounting for these investments that reflects original cost and recognition of our share of the net income or losses from the respective operations. See Note 11 – “Segment Information” for a listing of our investments.

 

 

In 2023, Nuvera recognized a gain of $4,060,775, net of escrow true ups, after the sale, in book value in connection with the sale of the FiberComm, LC (FiberComm) investment. In 2024, Nuvera recognized a loss of $242,257 with the settlement of the escrow account for FiberComm.

 

The FASB requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. As of September 30, 2024, and 2023, respectively, the Company had not recorded any other gains or losses on our investments.
v3.24.3
Note 9 - Guarantees
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Guarantees [Text Block]

Note 9 – Guarantees

 

On March 31, 2023, Nuvera and the other owners of FiberComm sold 100% of their investment in FiberComm to ImOn Communications, LLC. FiberComm has been providing high quality Internet and voice services to businesses in the Sioux City, Iowa market for over 20 years. Nuvera owned a 20% interest in FiberComm through its wholly owned subsidiary Peoples Telephone Company (PTC). Nuvera announced the execution of the FiberComm sale agreement in January 2023.

 

Prior to the sale of Nuvera’s equity investment in FiberComm, Nuvera had guaranteed a portion of a ten-year loan owed by FiberComm, set to mature on April 30, 2026. On March 31, 2023, upon closing of the sale, the loan was paid and Nuvera was released from their guarantee of loan.
v3.24.3
Note 10 - Incentive and Retirement Plans
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Retirement Benefits [Text Block]

Note 10 – Incentive and Retirement Plans

 

In 2006, we implemented an Employee Incentive Plan for employees other than executive officers and a Management Incentive Plan for executive officers (collectively the 2006 Plan). In 2015, our BOD adopted, and our shareholders approved our 2015 Employee Stock Plan (2015 Plan), which permits the issuance of up to 200,000 shares of our Common Stock in stock awards for performance under the 2006 Plan. Each qualified employee of the Company may elect to receive up to 50% of their incentive compensation in Company Common Stock in lieu of cash. Each Company executive officer is required to receive 50% of their incentive compensation earned in Company Common Stock in lieu of cash. As of September 30, 2024, 148,877 shares remain available to be issued under the 2015 Plan.
v3.24.3
Note 11 - Segment Information
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

Note 11 – Segment Information

 

We operate in the Communications Segment and have no other significant business segments. The Communications Segment consists of voice, data and video communication services delivered to the customer over our advanced fiber communications network. No single customer accounted for a material portion of our consolidated revenues.

 

 

The Communications Segment operates the following communications companies and has investment ownership interests as follows:

 

Communications Segment

 

 

●

Communications Companies:
 

▪

Nuvera Communications, Inc., the parent company.
 

▪

Hutchinson Telephone Company, a wholly owned subsidiary of Nuvera.
 

▪

Peoples Telephone Company, a wholly owned subsidiary of Nuvera.
 

▪

Scott-Rice Telephone Co., a wholly owned subsidiary of Nuvera.
 

▪

Sleepy Eye Telephone Company, a wholly owned subsidiary of Nuvera.
 

▪

Western Telephone Company, a wholly owned subsidiary of Nuvera; and
 

▪

Hutchinson Telecommunications, Inc., a wholly owned subsidiary of HTC, located in Litchfield and Glencoe, Minnesota.

 

 

●

Our investments and interests in the following entities include some management responsibilities:
 

▪

Broadband Visions, LLC (BBV) – 24.30% subsidiary equity ownership interest. BBV provides video headend and Internet services.
 

▪

Independent Emergency Services, LLC (IES) – 14.29% subsidiary equity ownership interest. IES is a provider of E-911 services to the State of Minnesota as well as a number of counties located in Minnesota; and
 

▪

Fiber Minnesota, LLC (FM) – 7.54% subsidiary equity ownership interest. FM is a Minnesota state-wide network that provides connectivity for regional businesses.
v3.24.3
Note 12 - Commitments and Contingencies
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]

Note 12 – Commitments and Contingencies

 

On December 15, 2021, the Company announced plans for a fiber network initiative. The Company has made commitments to purchase materials and entered into contracts with various parties to successfully build this next-generation fiber network. As of September 30, 2024, the Company had outstanding contract amounts of approximately $12.3 million, with estimated completions of approximately $5.8 million in 2024 and $6.5 million in 2025.

 

We are involved in certain contractual disputes in the ordinary course of business. We do not believe the ultimate resolution of any of these existing matters will have a material adverse effect on our financial position, results of operations or cash flows.

 

Our capital budget for 2024 is approximately $41.1 million and will be financed through internally generated funds and our credit facility with CoBank debt financing.
v3.24.3
Note 13 - Broadband Grants
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Government Assistance [Text Block]

Note 13 – Broadband Grants

 

On March 5, 2024, the Company was awarded a grant from the Minnesota Department of Employment and Economic Development (DEED). This Low-Density Broadband grant will provide up to 75% of the total cost of building fiber connections to homes and businesses for improved high-speed Internet in unserved and underserved communities in the Company’s service area. The Company is eligible to receive $1,884,429 of approximately $2,512,572 total project costs. The Company will provide the remaining 25% of the matching funds. The Company has not received any funds for this project as of September 30, 2024.

 

 

In 2023, the Company was awarded a grant from Redwood County under the Community Development Block Grant administered by the Southwest Minnesota Housing Partnership. The grant was to be used to build broadband fiber to residential customers in areas that qualify as low to moderate income. The Company was awarded $1,559,643 to complete this project. The Company has received $1,559,643 for this project as of September 30, 2024.

 

On December 8, 2022, the Company was awarded four broadband grants from the DEED. The grants will provide up to 45.0% to 50.0% of the total cost of building fiber connections to homes and businesses for improved high-speed Internet in unserved and underserved communities and businesses in the Company’s service area. The Company is eligible to receive $8,594,688 of approximately $18,139,749 total project costs. The Company will provide the remaining 50.0% to 55.0% matching funds. Construction and expenditures for these projects began in the spring of 2023. The Company has received $1,794,363 for these projects as of September 30, 2024.

 

In 2022, the Company was awarded two separate county grants from Nicollet County and Goodhue County to cover costs of building fiber connections to homes and businesses for improved high-speed Internet in unserved and underserved communities. The Company was initially eligible to receive up to $2,139,562 to complete these projects. The Company has received $1,345,855 for these projects as of September 30, 2024. The Goodhue County project was completed under budget and the Company is now eligible to receive up to $742,630 to complete these projects.

 

On January 29, 2021, the Company was awarded five broadband grants from the DEED. The grants will provide up to 35.4% of the total cost of building fiber connections to homes and businesses for improved high-speed Internet in unserved or underserved communities and businesses in the Company’s service area. The Company is eligible to receive $1,918,037 of the approximately $5,419,617 total project costs. The Company will provide the remaining 64.6% of matching funds. Construction and expenditures for these projects began in the spring of 2021. The Company has received $1,918,037 for these projects as of September 30, 2024.
v3.24.3
Note 14 - Stock Based Compensation
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Share-Based Payment Arrangement [Text Block]

Note 14 – Stock Based Compensation

 

The Company’s 2017 Omnibus Stock Plan (2017 OSP) was adopted by the Company’s BOD on February 24, 2017, and approved by the Company’s shareholders at the May 25, 2017, Annual Meeting of Shareholders. The 2017 OSP enables the Company to grant stock incentive awards to current and new employees, including officers, and to BOD members and service providers. The 2017 OSP permits stock incentive awards in the form of Options (incentive and non-qualified), stock appreciation rights, restricted stock, restricted stock units (RSUs), performance stock, performance units, and other awards in stock or cash. The 2017 OSP permits the issuance of up to 625,000 shares of our Common Stock in any of the above stock awards. As of September 30, 2024, 47,499 shares remain available for future grant under the 2017 OSP.

 

Starting in 2017, our BOD and Compensation Committee granted RSU awards to the Company’s executive officers under the 2017 OSP. We recognize share-based compensation expense for these RSUs over the vesting period of the RSUs, which is determined by our BOD. Forfeitures of RSUs are accounted for as they occur. Each executive officer was eligible to receive time-based RSUs and performance based RSUs. The time-based RSUs are computed as a percentage of the executive officer’s base salary based on the closing price of Company common stock on a date set by the BOD, and vest over a three-year period, subject to the executive officer being employed by the Company on the vesting date. The performance based RSUs are also computed as a percentage of the executive officer’s base salary based on the closing price of Company common stock on a date set by the BOD and vest over a three-year period based on the Company attaining an average Return on Invested Capital (ROIC) over that three-year period. The ROIC target is set by the BOD. Executive officers may earn more or fewer performance based RSUs based on if the actual ROIC achieved over the time period is more or less than target. Upon vesting of either time-based or performance based RSUs, the executive officers are issued Common Stock in exchange for the RSUs.

 

 

RSUs currently issued, exercised, or forfeited is as follows:

 

           

Targeted

    

Closing

    
   

Time-Based

    

Performance-Based

    

Stock

  

Vesting
   

RSUs

    

RSUs

    

Price

  

Date

Balance at December 31, 2022

     3,364       4,701            

Forfeited

     (516 )     (923 )          

Exercised

     (2,848 )     (3,778 )   $ 10.48  

12/31/2023

Balance at December 31, 2023

     -       -            

Forfeited

     -       -            

Exercised

     -       -            

Balance at September 30, 2024

     -       -            

 

Option Awards

 

In 2022, after considerable study, discussion and interaction with our consultants, the Compensation Committee decided to replace RSUs with non-qualified stock Options (Options). The Compensation Committee believes that grants of Options more directly align management long-term equity compensation with increased shareholder value creation at a time when the Company is engaged in significant investment and transformation as part of its long-term strategy. The Compensation Committee also determined to extend the grant of Options to include Named Executive Officers, senior employee directors and other employee directors as key members of the Company leadership team and contributors of our overall success.

 

 

As previously disclosed, the number of Options awarded was computed as a percentage of the employee’s base salary using a Black-Scholes formula using an exercise price equal to the closing price of Company common stock of $11.00 on March 28, 2024, $14.70 on March 31, 2023, and $21.20 on April 11, 2022. The 2024 Options will vest one-third each on March 31, 2025, 2026 and 2027. The 2023 Options will vest one-third each on March 31, 2024, 2025 and 2026. The 2022 Options will vest one-third each on April 11, 2023, 2024 and 2025.

 

           

Closing

    
           

Stock

  

Vesting
   

Options

    

Price

  

Date

Balance at December 31, 2021

     -            

Issued

     40,577     $ 21.20  

4/11/2023

Issued

     40,583     $ 21.20  

4/11/2024

Issued

     40,583     $ 21.20  

4/11/2025

Balance at December 31, 2022

     121,743            

Issued

     51,431     $ 14.70  

3/31/2024

Issued

     51,431     $ 14.70  

3/31/2025

Issued

     51,432     $ 14.70  

3/31/2026

Balance at December 31, 2023

     276,037            

Issued

     35,817     $ 11.00  

3/28/2025

Issued

     35,818     $ 11.00  

3/28/2026

Issued

     35,818     $ 11.00  

3/28/2027

Balance at September 30, 2024

     383,490            

 

The grant date fair value of employee stock Option awards is determined using the Black Scholes Option-pricing model. The following assumptions were used during the following periods:

 

   

2024 Grants

    

2023 Grants

    

2022 Grants

  
                         

Exercise Price

   $ 11.00     $ 14.70     $ 21.20  

Risk-Free Rate of Interest

     3.866 %     2.957 %     1.515 %

Expected Term (Years)

     10       10       10  

Expected Stock Price Volatility

     36.6 %     20.7 %     18.1 %

Dividend Yield

     2.11 %     2.83 %     2.44 %

  

 

The following table summarizes the Company’s employee stock Option activity under the 2017 OSP, which was approved by the Company’s shareholders, for the following periods:

 

                   

Weighted

    

Aggregate

  
   

Number of

    

Weighted

    

Average

    

Intrinsic

  
   

Shares

    

Average

    

Remaining

    

Value

  
   

Excercisable

    

Exercise Price

    

Term (Years)

    

(in Thousands)

  

Outstanding as of December 31, 2021

     -     $ -       -     $ -  

Granted

     121,743       21.20       7.53       -  

Forfeited

     -       -       -       -  

Outstanding as of December 31, 2022

     121,743     $ 21.20       7.53     $ -  

Granted

     154,294       14.70       8.50       -  

Forfeited

     -       -       -       -  

Outstanding as of December 31, 2023

     276,037     $ 17.57       8.07     $ -  

Granted

     107,453       11.00       9.49       -  

Forfeited

     -       -       -       -  

Outstanding as of September 30, 2024

     383,490     $ 15.73       8.47     $ -  

Exercisable as of September 30, 2024

     132,591     $ 15.73       8.47     $ -  

 

The Options had no intrinsic value as of September 30, 2024.

 

The weighted average grant date fair value per share for employee stock and non-employee Option grants issued on March 28, 2024, was $4.34. The weighted average grant date fair value per share for employee stock and non-employee stock Option grants issued on March 31, 2023, was $2.90. The weighted average grant date fair value per share for employee stock and non-employee Option grants issued on April 11, 2022, was $3.24. As of September 30, 2024, the total unrecognized compensation related to unvested employee and non-employee stock Option awards granted was $681,187, which the Company expects to recognize over a weighted-average period of approximately 1.96 years. As of December 31, 2023, the total unrecognized compensation related to unvested employee and non-employee stock Option awards granted was $503,254, which the Company expects to recognize over a weighted-average period of approximately 1.93 years.

 

On March 13, 2023, the Company BOD adopted changes to the Nuvera Communications, Inc. 2017 OSP. Most of the changes eliminate language specific to the requirements and limitations on grants under Internal Revenue Code Section162 (m), which has been repealed by Congress. This includes provisions related to “Performance-Based Exception” in several sections of the 2017 OSP. The BOD also increased the limit on annual grants from 50,000 to 100,000 shares per participant and eliminated separate provisions on new-hire stock grants and cash-based grants. The BOD also made minor changes to other sections of the 2017 OSP. The BOD did not increase the number of shares authorized for issuance under the 2017 OSP or change the terms of eligibility for participants under the 2017 OSP. The foregoing description of the changes to the 2017 OSP does not purport to be complete and is qualified in its entirety by reference to the full text of the 2017 OSP, as amended, which is filed as Exhibit 10.12 to the 2022 Annual Report on Form 10-K and is incorporated by reference.
v3.24.3
Note 15 - Subsequent Events
 9 Months Ended
Sep. 30, 2024
Notes to Financial Statements  
Subsequent Events [Text Block]

Note 15 – Subsequent Events

 

We have evaluated and disclosed subsequent events through the filing date of this Quarterly Report on Form 10-Q.

 

 
v3.24.3
Insider Trading Arrangements
 9 Months Ended
Sep. 30, 2024
Insider Trading Arr Line Items  
Rule 10b5-1 Arrangement Adopted [Flag] false
Rule 10b5-1 Arrangement Terminated [Flag] false
Non-Rule 10b5-1 Arrangement Adopted [Flag] false
Non-Rule 10b5-1 Arrangement Terminated [Flag] false
v3.24.3
Significant Accounting Policies (Policies)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Revenue [Policy Text Block]

Revenue Recognition

See Note 2 – “Revenue Recognition” for a discussion of our revenue recognition policies.

 
Cost of Goods and Service [Policy Text Block]

Cost of Services (excluding depreciation and amortization)

Cost of services (excluding depreciation and amortization expense) includes all costs related to the delivery of communication services and products. These operating costs include all costs of performing services and providing related products including engineering, network monitoring and transportation costs.

 
Selling, General and Administrative Expenses, Policy [Policy Text Block]

Selling, General and Administrative Expenses

Selling, general and administrative expenses include direct and indirect selling expenses, customer service, billing and collections, advertising and all other general and administrative costs associated our operations.

 
Depreciation, Depletion, and Amortization [Policy Text Block]

Depreciation and Amortization Expense

We use the group life method (mass asset accounting) to depreciate the assets of our communications companies. Communications plant acquired in a given year is grouped into similar categories and depreciated over the remaining estimated useful life of the group. When an asset is retired, both the asset and the accumulated depreciation associated with that asset are removed from the books. Due to rapid changes in technology, selecting the estimated economic life of communications plant and equipment requires a significant amount of judgment. We periodically review data on expected utilization of new equipment, asset retirement activity and net salvage values to determine adjustments to our depreciation rates. We have not made any significant changes to the lives of these assets in the two-year period ended September 30, 2024. Depreciation expense was $11,761,702 and $10,009,933 for the nine months ended September 30, 2024, and 2023. The increase in depreciation expense was primarily due to an increase in our fiber-to-the-premise (FTTP) network to aid in our transition to a new advanced FTTP network, reflecting our continual investment in technology and infrastructure in order to meet our customer’s demands for our products and services. We amortize our definite-lived intangible assets over their estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment.

 

Grant money received from governmental entities for reimbursement of capital expenditures is accounted for as a reduction from the cost of the asset. As the grant was to be used in the Company’s regulated network, the Company accounts for this funding as aid to construction as outlined in the Federal Communications Commission (FCC) Part 32 “Uniform System of Accounts for Telecommunications Companies.” The resulting balance sheet presentation reflects the Company’s net investment in the assets in property, plant, and equipment. Depreciation is calculated and recorded based on the reduced cost of the investment therefore the impact of prior grants received is reflected in earnings as a reduction in depreciation. Grant funds are shown as inflows in the financing activities section of the statements of cash flows.
Income Tax, Policy [Policy Text Block]

Income Taxes

 

The provision for income taxes consists of an amount for taxes currently payable and a provision for tax consequences deferred to future periods. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax basis. Significant components of our deferred taxes arise from differences (i) in the basis of property, plant, and equipment due to the use of accelerated depreciation methods for tax purposes, as well as (ii) in partnership investments and intangible assets due to the difference between book and tax basis. Our effective income tax rate is normally higher than the United States tax rate due to state income taxes and permanent differences.

 

We account for income taxes in accordance with GAAP, which requires an asset and liability approach to financial accounting and reporting for income taxes. As required by GAAP, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

As of September 30, 2024, and December 31, 2023, we had $0 of unrecognized tax benefits that if recognized would affect the tax rate. We do not expect the total amount of unrecognized tax benefits to materially change over the next twelve months.

 

We are primarily subject to United States, Minnesota, Iowa, Nebraska, North Dakota, and Wisconsin income taxes. Tax years subsequent to 2020 remain open to examination by federal and state tax authorities. Our policy is to recognize interest and penalties related to income tax matters as income tax expense. As of September 30, 2024, and December 31, 2023, we had $0 of interest or penalties accrued that related to income tax matters.

 
Earnings Per Share, Policy [Policy Text Block]

Earnings and Dividends Per Share

 

The basic and diluted net income per share is calculated as follows:

 

   

Three Months Ended

    

Three Months Ended

    

Nine Months Ended

    

Nine Months Ended

  
   

September 30, 2024

    

September 30, 2023

    

September 30, 2024

    

September 30, 2023

  
   

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

  
                                                                 

Net Income

   $ 81,698     $ 81,698     $ 483,170     $ 483,170     $ 384,167     $ 384,167     $ 5,154,157     $ 5,154,157  
                                                                 

Weighted-average common shares outstanding

     5,178,176       5,362,674       5,126,581       5,211,382       5,158,286       5,311,760       5,113,007       5,175,507  
                                                                 

Net income per share

   $ 0.02     $ 0.02     $ 0.09     $ 0.09     $ 0.07     $ 0.07     $ 1.01     $ 1.00  

 

The weighted-average shares outstanding, basic, and diluted, are calculated as follows:

 

   

Three Months Ended

    

Three Months Ended

    

Nine Months Ended

    

Nine Months Ended

  
   

September 30, 2024

    

September 30, 2023

    

September 30, 2024

    

September 30, 2023

  
   

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

  
                                                                 

Weighted-average common shares outstanding

     5,178,176       5,178,176       5,126,581       5,126,581       5,158,286       5,158,286       5,113,007       5,113,007  
                                                                 

Dilutive RSUs/Options

     -       184,498       -       84,801       -       153,474       -       62,500  
                                                                 

Weighted-average common shares outstanding

     5,178,176       5,362,674       5,126,581       5,211,382       5,158,286       5,311,760       5,113,007       5,175,507  

 

Nuvera’s Board of Directors (BOD) reviews quarterly dividend declarations based on our anticipated earnings, capital requirements and our operating and financial conditions.

 
New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Developments

 

In December 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide improvements primarily related to the rate reconciliation and incomes taxes paid information included in income tax disclosures. The Company would be required to disclose additional information regarding reconciling items equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory tax rate. Similarly, the Company would be required to disclose income taxes paid (net of refunds received) equal to or greater than five percent of total income taxes paid (net of refunds received). The amendments in ASU 2023-09 are effective January 1, 2025, including interim periods. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The Company will evaluate the impact of ASU 2023-09 on its financial statements.

 

 

In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, amending reportable segment disclosure requirements to include disclosure of incremental segment information on an annual and interim basis. Among the disclosure enhancements are new disclosures regarding significant segment expenses that are regularly provided to the chief operating decision-maker and included within each reported measure of segment profit or loss, as well as other segment items bridging segment revenue to each reported measure of segment profit or loss. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, and are applied retrospectively. We continue to evaluate the impact of this update on our consolidated financial statements and disclosures and do not expect any changes to our current reportable segments.

 

We have implemented all applicable accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

 

We have reviewed all other significant newly issued accounting pronouncements and determined that they are either not applicable to our business or that no material effect is expected on our financial position and results of operations.
v3.24.3
Note 1 - Basis of Presentation and Consolidation (Tables)
 9 Months Ended
Sep. 30, 2024
Notes Tables  
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
   

Three Months Ended

    

Three Months Ended

    

Nine Months Ended

    

Nine Months Ended

  
   

September 30, 2024

    

September 30, 2023

    

September 30, 2024

    

September 30, 2023

  
   

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

  
                                                                 

Net Income

   $ 81,698     $ 81,698     $ 483,170     $ 483,170     $ 384,167     $ 384,167     $ 5,154,157     $ 5,154,157  
                                                                 

Weighted-average common shares outstanding

     5,178,176       5,362,674       5,126,581       5,211,382       5,158,286       5,311,760       5,113,007       5,175,507  
                                                                 

Net income per share

   $ 0.02     $ 0.02     $ 0.09     $ 0.09     $ 0.07     $ 0.07     $ 1.01     $ 1.00  
Schedule of Weighted Average Number of Shares [Table Text Block]
   

Three Months Ended

    

Three Months Ended

    

Nine Months Ended

    

Nine Months Ended

  
   

September 30, 2024

    

September 30, 2023

    

September 30, 2024

    

September 30, 2023

  
   

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

    

Basic

    

Diluted

  
                                                                 

Weighted-average common shares outstanding

     5,178,176       5,178,176       5,126,581       5,126,581       5,158,286       5,158,286       5,113,007       5,113,007  
                                                                 

Dilutive RSUs/Options

     -       184,498       -       84,801       -       153,474       -       62,500  
                                                                 

Weighted-average common shares outstanding

     5,178,176       5,362,674       5,126,581       5,211,382       5,158,286       5,311,760       5,113,007       5,175,507  
v3.24.3
Note 2 - Revenue Recognition (Tables)
 9 Months Ended
Sep. 30, 2024
Notes Tables  
Disaggregation of Revenue [Table Text Block]
   

Quarters Ended September 30,

  
   

2024

    

2023

  

Voice Service¹

   $ 1,267,195     $ 1,505,320  

Network Access¹

     767,082       909,502  

Video Service¹

     2,928,080       3,005,010  

Data Service¹

     7,038,182       6,327,829  

Directory²

     132,073       151,562  

Other Contracted Revenue³

     502,857       653,417  

Other⁴

     485,210       600,171  
                 

Revenue from customers

     13,120,679       13,152,811  
                 

 

                

Subsidy and other revenue outside scope of ASC 606⁵

     4,495,656       3,217,667  
                 

Total revenue

   $ 17,616,335     $ 16,370,478  
   

Nine Months Ended September 30,

  
   

2024

    

2023

  

Voice Services¹

   $ 3,967,091     $ 4,373,187  

Network Access¹

     2,667,704       3,027,881  

Video Service¹

     8,891,820       9,120,164  

Data Service¹

     20,618,880       18,850,042  

Directory²

     408,688       454,852  

Other Contracted Revenue³

     1,901,228       2,019,130  

Other⁴

     1,419,215       1,497,123  
                 

Revenue from customers

     39,874,626       39,342,379  
                 

Subsidy and other revenue

                

outside scope of ASC 606⁵

     11,864,688       9,675,733  
                 

Total revenue

   $ 51,739,314     $ 49,018,112  
Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block]
   

September 30,

    

December 31,

  
   

2024

    

2023

  
                 

Accounts receivable, net - beginning balance

   $ 1,966,012     $ 1,477,692  

Accounts receivable, net - ending balance

     1,985,831       1,966,012  
                 

Contract assets - beginning balance

     1,458,631       794,193  

Contract assets - ending balance

     1,471,384       1,458,631  
                 

Contract liabilities - beginning balance

     551,995       626,306  

Contract liabilities - ending balance

     369,637       551,995  
v3.24.3
Note 3 - Leases (Tables)
 9 Months Ended
Sep. 30, 2024
Notes Tables  
Lease, Cost [Table Text Block]

Right of Use Assets

  

Balance
September 30, 2024

    

Balance
December 31, 2023

  

Operating Lease Right-Of-Use Assets

   $ 1,096,639     $ 1,348,290  

Operating Lease Liabilities

  

Balance
September 30, 2024

    

Balance
December 31, 2023

  

Short-Term Operating Lease Liabilities

   $ 198,310     $ 352,969  

Long-Term Operating Lease Liabilities

     922,209       1,029,910  

Total

   $ 1,120,519     $ 1,382,879  

Weighted Average Remaining Lease Term (Years)

     7.60  

Weighted Average Discount Rate

     6.32 %
Lessee, Operating Lease, Liability, to be Paid, Maturity [Table Text Block]

Maturity Analysis

  

Balance
September 30, 2024

  

2024 (remaining)

   $ 79,981  

2025

     243,974  

2026

     200,777  

2027

     151,630  

2028

     153,824  

Thereafter

     613,091  

Total

     1,443,277  

Less Imputed interest

     (322,758 )

Present Value of Operating Leases

   $ 1,120,519  
v3.24.3
Note 5 - Goodwill and Intangibles (Tables)
 9 Months Ended
Sep. 30, 2024
Notes Tables  
Schedule of Finite-Lived Intangible Assets [Table Text Block]
             

September 30, 2024

    

December 31, 2023

  
             

Gross

            

Gross

          
   

Useful

    

Carrying

    

Accumulated

    

Carrying

    

Accumulated

  
   

Lives (yrs)

    

Amount

    

Amortization

    

Amount

    

Amortization

  

Definite-Lived Intangible Assets

                                          

Customers Relationships

   14 - 15     $ 42,878,445     $ 33,271,101     $ 42,878,445     $ 32,053,361  

Regulatory Rights

     15         4,000,000       4,000,000       4,000,000       4,000,000  

Video Franchise

               3,000,000       535,725       3,000,000       214,290  

Trade Name

   3 - 5       310,106       310,106       310,106       310,106  

Indefinitely-Lived Intangible Assets

                                          

Video Franchise

               -       -       -       -  

Spectrum

               877,814       -       877,814       -  

Total

             $ 51,066,365     $ 38,116,932     $ 51,066,365     $ 36,577,757  
                                           

Net Identified Intangible Assets

                     $ 12,949,433             $ 14,488,608  
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

(October 1 – December 31)

   $ 513,059  

2025

   $ 2,047,312  

2026

   $ 2,042,389  

2027

   $ 1,335,247  

2028

   $ 1,335,247  

2029

   $ 1,335,247  
v3.24.3
Note 14 - Stock Based Compensation (Tables)
 9 Months Ended
Sep. 30, 2024
Notes Tables  
Share-Based Payment Arrangement, Restricted Stock Unit, Activity [Table Text Block]
           

Targeted

    

Closing

    
   

Time-Based

    

Performance-Based

    

Stock

  

Vesting
   

RSUs

    

RSUs

    

Price

  

Date

Balance at December 31, 2022

     3,364       4,701            

Forfeited

     (516 )     (923 )          

Exercised

     (2,848 )     (3,778 )   $ 10.48  

12/31/2023

Balance at December 31, 2023

     -       -            

Forfeited

     -       -            

Exercised

     -       -            

Balance at September 30, 2024

     -       -            
Share-Based Compensation Arrangement by Share-Based Payment Award, Conversion of Restricted Stock Units to Options [Table Text Block]
           

Closing

    
           

Stock

  

Vesting
   

Options

    

Price

  

Date

Balance at December 31, 2021

     -            

Issued

     40,577     $ 21.20  

4/11/2023

Issued

     40,583     $ 21.20  

4/11/2024

Issued

     40,583     $ 21.20  

4/11/2025

Balance at December 31, 2022

     121,743            

Issued

     51,431     $ 14.70  

3/31/2024

Issued

     51,431     $ 14.70  

3/31/2025

Issued

     51,432     $ 14.70  

3/31/2026

Balance at December 31, 2023

     276,037            

Issued

     35,817     $ 11.00  

3/28/2025

Issued

     35,818     $ 11.00  

3/28/2026

Issued

     35,818     $ 11.00  

3/28/2027

Balance at September 30, 2024

     383,490            
Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]
   

2024 Grants

    

2023 Grants

    

2022 Grants

  
                         

Exercise Price

   $ 11.00     $ 14.70     $ 21.20  

Risk-Free Rate of Interest

     3.866 %     2.957 %     1.515 %

Expected Term (Years)

     10       10       10  

Expected Stock Price Volatility

     36.6 %     20.7 %     18.1 %

Dividend Yield

     2.11 %     2.83 %     2.44 %
Share-Based Payment Arrangement, Option, Activity [Table Text Block]
                   

Weighted

    

Aggregate

  
   

Number of

    

Weighted

    

Average

    

Intrinsic

  
   

Shares

    

Average

    

Remaining

    

Value

  
   

Excercisable

    

Exercise Price

    

Term (Years)

    

(in Thousands)

  

Outstanding as of December 31, 2021

     -     $ -       -     $ -  

Granted

     121,743       21.20       7.53       -  

Forfeited

     -       -       -       -  

Outstanding as of December 31, 2022

     121,743     $ 21.20       7.53     $ -  

Granted

     154,294       14.70       8.50       -  

Forfeited

     -       -       -       -  

Outstanding as of December 31, 2023

     276,037     $ 17.57       8.07     $ -  

Granted

     107,453       11.00       9.49       -  

Forfeited

     -       -       -       -  

Outstanding as of September 30, 2024

     383,490     $ 15.73       8.47     $ -  

Exercisable as of September 30, 2024

     132,591     $ 15.73       8.47     $ -  
v3.24.3
Note 1 - Basis of Presentation and Consolidation (Details Textual)
 9 Months Ended
Sep. 30, 2024
USD ($)
Sep. 30, 2023
USD ($)
Dec. 31, 2023
USD ($)
Number of Reportable Segments 1    
Depreciation $ 11,761,702 $ 10,009,933  
Unrecognized Tax Benefits 0   $ 0
Income Tax Examination, Penalties and Interest Accrued $ 0   $ 0
Domestic Tax Jurisdiction [Member]      
Open Tax Year 2020 2021 2022 2023 2024    
State and Local Jurisdiction [Member]      
Open Tax Year 2020 2021 2022 2023 2024    
v3.24.3
Note 1 - Basis of Presentation and Consolidation - Schedule of Earnings Per Share (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Net Income $ 81,698 $ 483,170 $ 384,167 $ 5,154,157
Net Income $ 81,698 $ 483,170 $ 384,167 $ 5,154,157
Basic (in shares) 5,178,176 5,126,581 5,158,286 5,113,007
Diluted (in shares) 5,362,674 5,211,382 5,311,760 5,175,507
Net income per share (in dollars per share) $ 0.02 $ 0.09 $ 0.07 $ 1.01
Net income per share (in dollars per share) $ 0.02 $ 0.09 $ 0.07 $ 1
v3.24.3
Note 1 - Basis of Presentation and Consolidation - Schedule of Weighted Average Number of Shares (Details) - shares
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Basic (in shares) 5,178,176 5,126,581 5,158,286 5,113,007
Dilutive RSUs/Options (in shares) 184,498 84,801 153,474 62,500
Diluted (in shares) 5,362,674 5,211,382 5,311,760 5,175,507
v3.24.3
Note 2 - Revenue Recognition (Details Textual) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Related Party, CBOL Funding     $ 3,900,000  
Professional and Contract Services Expense $ 173,140 $ 141,051 496,127 $ 340,786
Contract with Customer, Liability, Revenue Recognized 34,436 $ 54,413 $ 272,294 $ 302,831
A-CAM [Member]        
Revenue, Contract Term     10 years  
IOWA        
Construction Contractor, Receivable, Excluding Contract Retainage 596,084   $ 596,084  
MINNESOTA        
Construction Contractor, Receivable, Excluding Contract Retainage $ 8,354,481   $ 8,354,481  
Minimum [Member]        
Revenue, Contract Term     3 years  
Maximum [Member]        
Revenue, Contract Term     10 years  
Month-to-month and Other Contracted Revenue [Member] | Revenue Benchmark [Member] | Product Concentration Risk [Member]        
Revenue, Percentage 71.73% 76.68% 74.33% 77.21%
Outside of the Scope of ASC 606 [Member] | Revenue Benchmark [Member] | Product Concentration Risk [Member]        
Revenue, Percentage 25.52% 19.65% 22.93% 19.74%
Other Revenue [Member] | Revenue Benchmark [Member] | Product Concentration Risk [Member]        
Revenue, Percentage 2.75% 3.67% 2.74% 3.05%
Product and Service, Other [Member] | Minimum [Member]        
Revenue, Contract Term     3 years  
Product and Service, Other [Member] | Maximum [Member]        
Revenue, Contract Term     10 years  
v3.24.3
Note 2 - Revenue Recognition - Schedule of Disaggregation of Revenue (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Revenue from Contract with Customer, Excluding Assessed Tax $ 13,120,679 $ 13,152,811 $ 39,874,626 $ 39,342,379
Subsidy and other revenue outside scope of ASC 606 [1] 4,495,656 3,217,667 11,864,688 9,675,733
Total revenue 17,616,335 16,370,478 51,739,314 49,018,112
Voice Service [Member]        
Revenue from Contract with Customer, Excluding Assessed Tax [2] 1,267,195 1,505,320 3,967,091 4,373,187
Total revenue 1,149,189 1,363,543 3,580,740 3,969,394
Network Access [Member]        
Revenue from Contract with Customer, Excluding Assessed Tax [2] 767,082 909,502 2,667,704 3,027,881
Total revenue 745,268 876,186 2,601,894 2,926,937
Video Service [Member}        
Revenue from Contract with Customer, Excluding Assessed Tax [2] 2,928,080 3,005,010 8,891,820 9,120,164
Total revenue 2,928,080 3,005,010 8,891,820 9,120,164
Data Service [Member]        
Revenue from Contract with Customer, Excluding Assessed Tax [2] 7,038,182 6,327,829 20,618,880 18,850,042
Total revenue 7,455,297 6,881,965 22,230,414 20,573,084
Directory [Member]        
Revenue from Contract with Customer, Excluding Assessed Tax [3] 132,073 151,562 408,688 454,852
Other Contracted Revenue [Member]        
Revenue from Contract with Customer, Excluding Assessed Tax [4] 502,857 653,417 1,901,228 2,019,130
Product and Service, Other [Member]        
Revenue from Contract with Customer, Excluding Assessed Tax [5] $ 485,210 $ 600,171 $ 1,419,215 $ 1,497,123
[1] This includes governmental subsidies and lease revenue outside the scope of ASC 606.
[2] Month-to-Month contracts billed and cosumed in the same month.
[3] Directory revenue is contracted annually, however, this revenue is recognized monthly over the contract period as the advertising is used.
[4] This includes long-term contracts where the revenue is recognized monthly over the term of the contract.
[5] This includes CPE and other equipment sales.
v3.24.3
Note 2 - Revenue Recognition - Schedule of Assets and Liabilities for Contracts with Customers (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Accounts receivable, net - beginning balance $ 1,966,012 $ 1,477,692
Accounts receivable, net - ending balance 1,985,831 1,966,012
Contract assets - beginning balance 1,458,631 794,193
Contract assets - ending balance 1,471,384 1,458,631
Contract liabilities - beginning balance 551,995 626,306
Contract liabilities - ending balance $ 369,637 $ 551,995
v3.24.3
Note 3 - Leases (Details Textual) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Operating Lease, Expense $ 87,043 $ 123,588 $ 384,376 $ 334,295
v3.24.3
Note 3 - Leases - Schedule for Lease Costs (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Right of Use Asset $ 1,096,639 $ 1,348,290
Short-Term Operating Lease Liabilities $ 198,310 352,969
Weighted Average Remaining Lease Term (Years) (Year) 7 years 7 months 6 days  
Weighted Average Discount Rate 6.32%  
Long-Term Operating Lease Liabilities $ 922,209 1,029,910
Total $ 1,120,519 $ 1,382,879
v3.24.3
Note 3 - Leases - Schedule of Operating Lease Liability Maturity (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
2024 (remaining) $ 79,981  
2025 243,974  
2026 200,777  
2027 151,630  
2028 153,824  
Thereafter 613,091  
Total 1,443,277  
Less Imputed interest (322,758)  
Present Value of Operating Leases $ 1,120,519 $ 1,382,879
v3.24.3
Note 4 - Fair Value Measurements (Details Textual)
$ in Thousands
 9 Months Ended
Sep. 30, 2024
USD ($)
Equity Method Investment, Other-than-Temporary Impairment $ 0
v3.24.3
Note 5 - Goodwill and Intangibles (Details Textual) - USD ($)
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Dec. 31, 2022
Goodwill $ 40,603,029   $ 40,603,029  
Amortization of Intangible Assets $ 1,539,175 $ 1,361,526    
Scott-Rice [Member]        
Goodwill, Impairment Loss     0 $ 0
Sleepy Eye Telephone Company [Member]        
Goodwill, Impairment Loss     0 0
Hutchinson Telephone Company [Member]        
Goodwill, Impairment Loss     $ 9,300,000 $ 0
v3.24.3
Note 5 - Goodwill and Intangibles - Schedule of Finite-Lived Intangible Assets (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Finite-Lived Intangible Assets, Gross $ 51,066,365 $ 51,066,365
Finite-Lived Intangible Assets, Accumulated Amortization 38,116,932 36,577,757
Net Identified Intangible Assets 12,949,433 14,488,608
Video Franchise [Member]    
Indefinite-Lived Intangible Assets 0 0
Spectrum [Member]    
Indefinite-Lived Intangible Assets 877,814 877,814
Customer Relationships [Member]    
Finite-Lived Intangible Assets, Gross 42,878,445 42,878,445
Finite-Lived Intangible Assets, Accumulated Amortization $ 33,271,101 32,053,361
Customer Relationships [Member] | Minimum [Member]    
Finite-Lived Intangible Assets, Useful Life (Year) 14 years  
Customer Relationships [Member] | Maximum [Member]    
Finite-Lived Intangible Assets, Useful Life (Year) 15 years  
Regulatory Rights [Member]    
Finite-Lived Intangible Assets, Useful Life (Year) 15 years  
Finite-Lived Intangible Assets, Gross $ 4,000,000 4,000,000
Finite-Lived Intangible Assets, Accumulated Amortization 4,000,000 4,000,000
Video Franchise [Member]    
Finite-Lived Intangible Assets, Gross 3,000,000 3,000,000
Finite-Lived Intangible Assets, Accumulated Amortization 535,725 214,290
Trade Names [Member]    
Finite-Lived Intangible Assets, Gross 310,106 310,106
Finite-Lived Intangible Assets, Accumulated Amortization $ 310,106 $ 310,106
Trade Names [Member] | Minimum [Member]    
Finite-Lived Intangible Assets, Useful Life (Year) 3 years  
Trade Names [Member] | Maximum [Member]    
Finite-Lived Intangible Assets, Useful Life (Year) 5 years  
v3.24.3
Note 5 - Goodwill and Intangibles - Schedule of Finite-Lived Intangible Assets, Future Amortization Expense (Details)
Sep. 30, 2024
USD ($)
(October 1 – December 31) $ 513,059
Finite-Lived Intangible Asset, Expected Amortization, Year One 2,047,312
Finite-Lived Intangible Asset, Expected Amortization, Year Two 2,042,389
Finite-Lived Intangible Asset, Expected Amortization, Year Three 1,335,247
Finite-Lived Intangible Asset, Expected Amortization, Year Four 1,335,247
Finite-Lived Intangible Asset, Expected Amortization, Year Five $ 1,335,247
v3.24.3
Note 6 - Secured Credit Facility (Details Textual)
 9 Months Ended
Sep. 30, 2024
USD ($)
Sep. 17, 2024
USD ($)
Jun. 21, 2024
USD ($)
Jun. 20, 2024
USD ($)
Dec. 21, 2023
USD ($)
Dec. 20, 2023
USD ($)
Aug. 29, 2019
USD ($)
Aug. 01, 2018
USD ($)
Debt Instrument, Variable Interest Rate, Type [Extensible Enumeration] us-gaap:BaseRateMember              
Dividends, Contingency, Maximum Amount Authorized from Total Leverage Ratio $ 3,000,000              
Total Leverage Ratio 5.2              
Minimum [Member]                
Debt Instrument, Covenants, Percentage of Debt Under IRSAs 35.00%              
Maximum [Member]                
Dividends, Contingency, Total Leverage Ratio Required 4.25              
Dividends, Contingency, Total Leverage Ratio Required, Unlimited Dividends 3.5              
Total Leverage Ratio 6              
First IRSA With CoBank [Member] | Interest Rate Swap [Member]                
Debt Instrument, Face Amount $ 16,137,500             $ 16,137,500
Derivative, Notional Amount $ 8,933,750              
Debt, Weighted Average Interest Rate 6.71%              
Second IRSA With CoBank [Member] | Interest Rate Swap [Member]                
Debt Instrument, Face Amount $ 42,000,000           $ 42,000,000  
Derivative, Notional Amount $ 25,039,707              
Debt, Weighted Average Interest Rate 5.04%              
Third IRSA with CoBank [Member] | Interest Rate Swap [Member]                
Debt Instrument, Face Amount   $ 21,813,892            
Derivative, Notional Amount $ 18,526,543              
Debt, Weighted Average Interest Rate 7.77%              
Delayed Draw Term Loan (DDTL) [Member] | CoBank Credit Facility [Member]                
Debt Instrument, Face Amount     $ 25,000,000          
CoBank [Member]                
Debt Instrument, Face Amount     180,000,000   $ 140,000,000 $ 130,000,000    
Long-Term Debt $ 87,800,000              
Debt, Weighted Average Interest Rate 8.71%              
CoBank [Member] | Minimum [Member]                
Debt Instrument, Covenants, Percentage of Debt Under IRSAs 35.00%              
CoBank [Member] | Revolving Credit Facility [Member]                
Debt Instrument, Face Amount $ 30,000,000              
Line of Credit Facility, Maximum Borrowing Capacity     30,000,000 $ 40,000,000 $ 40,000,000 $ 30,000,000    
Long-Term Line of Credit $ 15,256,942              
Line of Credit Facility, Commitment Fee Percentage 0.50%              
CoBank [Member] | Term A1 Loan [Member]                
Debt Instrument, Basis Spread on Variable Rate 2.75%              
CoBank [Member] | Revolving Loan [Member]                
Debt Instrument, Basis Spread on Variable Rate 2.75%              
CoBank [Member] | Term A1 Loan [Member]                
Debt Instrument, Face Amount $ 125,000,000   $ 125,000,000          
Debt Instrument, Periodic Payment Terms, Balloon Payment to be Paid 112,500,000              
CoBank [Member] | Term A1 Loan [Member] | Debt Instrument, Redemption, Period One [Member]                
Debt Instrument, Periodic Payment, Principal 781,250              
CoBank [Member] | Term A1 Loan [Member] | Debt Instrument, Redemption, Period Two [Member]                
Debt Instrument, Periodic Payment, Principal 1,562,500              
CoBank [Member] | Delayed Draw Term Loan (DDTL) [Member]                
Debt Instrument, Face Amount 25,000,000              
Long-Term Debt 0              
Line of Credit Facility, Current Borrowing Capacity $ 14,700,000              
Line of Credit Facility, Commitment Fee Percentage 0.50%              
CoBank [Member] | Delayed Draw Term Loan (DDTL) [Member] | Debt Instrument, Redemption, Period One [Member]                
Debt Instrument, Number of Quarterly Periodic Payments 8              
Debt Instrument, Principal, Periodic Payment, Percentage of Outstanding Loan Balance 0.625%              
CoBank [Member] | Delayed Draw Term Loan (DDTL) [Member] | Debt Instrument, Redemption, Period Two [Member]                
Debt Instrument, Number of Quarterly Periodic Payments 4              
Debt Instrument, Principal, Periodic Payment, Percentage of Outstanding Loan Balance 1.25%              
v3.24.3
Note 7 - Interest Rate Swaps (Details Textual) - USD ($)
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 17, 2024
Jun. 21, 2024
Dec. 31, 2023
Dec. 21, 2023
Dec. 20, 2023
Aug. 29, 2019
Aug. 01, 2018
Accumulated Other Comprehensive Income (Loss), Net of Tax $ 409,489       $ 959,442        
Interest Rate Swap [Member]                  
Interest Rate Derivative Assets, at Fair Value 573,032 $ 1,991,769              
Deferred Income Tax Expense (Benefit) 163,543 568,451              
Accumulated Other Comprehensive Income (Loss), Net of Tax 409,489 $ 1,423,318              
First IRSA With CoBank [Member] | Interest Rate Swap [Member]                  
Debt Instrument, Face Amount 16,137,500               $ 16,137,500
Second IRSA With CoBank [Member] | Interest Rate Swap [Member]                  
Debt Instrument, Face Amount $ 42,000,000             $ 42,000,000  
Third IRSA with CoBank [Member] | Interest Rate Swap [Member]                  
Debt Instrument, Face Amount     $ 21,813,892            
CoBank [Member]                  
Debt Instrument, Face Amount       $ 180,000,000   $ 140,000,000 $ 130,000,000    
Minimum [Member]                  
Debt Instrument, Covenants, Percentage of Debt Under IRSAs 35.00%                
Minimum [Member] | CoBank [Member]                  
Debt Instrument, Covenants, Percentage of Debt Under IRSAs 35.00%                
v3.24.3
Note 8 - Other Investments (Details Textual) - USD ($)
 3 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Gain (Loss) on Sale of Investments $ 0 $ (38,096) $ (257,807) $ 4,022,401  
Fibercomm [Member]          
Gain (Loss) on Sale of Investments         $ 4,060,775
Gain (Loss) on Investments     $ (242,257)    
v3.24.3
Note 9 - Guarantees (Details Textual)
Mar. 31, 2023
Sale of Stock, Percentage of Ownership before Transaction 100.00%
Fibercomm [Member]  
Equity Method Investment, Ownership Percentage 20.00%
v3.24.3
Note 10 - Incentive and Retirement Plans (Details Textual)
 9 Months Ended
Sep. 30, 2024
shares
Employee Incentive Plan, Percentage Of Compensation In Lieu Of Cash 50.00%
Management Incentive Plan, Percentage Of Compensation In Lieu Of Cash 50.00%
Employee 2015 Stock Plan [Member]  
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Authorized 200,000
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Available for Grant 148,877
v3.24.3
Note 11 - Segment Information (Details Textual)
Sep. 30, 2024
Broadband Visions LLC [Member]  
Equity Method Investment, Ownership Percentage 24.30%
Independent Emergency Services LLC [Member]  
Equity Method Investment, Ownership Percentage 14.29%
Fiber Minnesota LLC [Member]  
Equity Method Investment, Ownership Percentage 7.54%
v3.24.3
Note 12 - Commitments and Contingencies (Details Textual)
$ in Millions
Sep. 30, 2024
USD ($)
Capital Budget $ 41.1
Outstanding Commitments For Materials [Member]  
Other Commitment 12.3
Outstanding Contract [Member]  
Contractual Obligation, to be Paid, Year One 5.8
Contractual Obligation, to be Paid, Year Two $ 6.5
v3.24.3
Note 13 - Broadband Grants (Details Textual)
 7 Months Ended 9 Months Ended
Sep. 30, 2024
USD ($)
Sep. 30, 2024
USD ($)
Minnesota DEED Low-Density Broadband Grant [Member]    
Government Assistance, Percentage of Total Cost to Build Fiber Connections Awarded 75.00%  
Government Contract Receivable $ 1,884,429 $ 1,884,429
Total Project Costs   $ 2,512,572
Government Assistance, Percentage of Total Cost of Building Fiber Connections Matched By Company   25.00%
Government Contract Receivable, Progress Payment Offset 0 $ 0
Redwood County Community Development Block Grant [Member]    
Government Contract Receivable, Progress Payment Offset 1,559,643 1,559,643
Government Assistance, Award Amount 1,559,643 1,559,643
December 2022 DEED Broadband Grants [Member]    
Government Contract Receivable 8,594,688 8,594,688
Total Project Costs   18,139,749
Government Contract Receivable, Progress Payment Offset 1,794,363 $ 1,794,363
December 2022 DEED Broadband Grants [Member] | Minimum [Member]    
Government Assistance, Percentage of Total Cost to Build Fiber Connections Awarded   45.00%
Government Assistance, Percentage of Total Cost of Building Fiber Connections Matched By Company   50.00%
December 2022 DEED Broadband Grants [Member] | Maximum [Member]    
Government Assistance, Percentage of Total Cost to Build Fiber Connections Awarded   50.00%
Government Assistance, Percentage of Total Cost of Building Fiber Connections Matched By Company   55.00%
Nicollet County and Goodhue County Grants [Member]    
Government Contract Receivable 2,139,562 $ 2,139,562
Government Assistance, Award Amount 1,345,855 1,345,855
Goodhue County Grants [Member]    
Government Contract Receivable 742,630 $ 742,630
January 2021 DEED Broadband Grants [Member]    
Government Assistance, Percentage of Total Cost to Build Fiber Connections Awarded   35.40%
Government Contract Receivable 1,918,037 $ 1,918,037
Total Project Costs   $ 5,419,617
Government Assistance, Percentage of Total Cost of Building Fiber Connections Matched By Company   64.60%
Government Contract Receivable, Progress Payment Offset $ 1,918,037 $ 1,918,037
v3.24.3
Note 14 - Stock Based Compensation (Details Textual) - USD ($)
 9 Months Ended 12 Months Ended
Mar. 28, 2024
Mar. 31, 2023
Apr. 11, 2022
Sep. 30, 2024
Dec. 31, 2023
Mar. 13, 2023
Share-Based Payment Arrangement, Option [Member]            
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount       $ 681,187 $ 503,254  
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition       1 year 11 months 15 days 1 year 11 months 4 days  
Share-Based Payment Arrangement, Option [Member] | Share-Based Payment Arrangement, Tranche Three [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price       $ 11    
Share-Based Payment Arrangement, Option [Member] | Share-Based Payment Arrangement, Tranche Two [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price       14.7    
Share-Based Payment Arrangement, Option [Member] | Share-Based Payment Arrangement, Tranche One [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price       $ 21.2    
Omnibus 2017 Stock Plan [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Authorized       625,000    
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Available for Grant       47,499    
Omnibus 2017 Stock Plan [Member] | Share-Based Payment Arrangement, Option [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Number of Shares Authorized       100,000   50,000
Non-qualified 2024 Options [Member] | Share-Based Payment Arrangement, Tranche Three [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period       1 year    
Non-qualified 2024 Options [Member] | Share-Based Payment Arrangement, Tranche Two [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period       1 year    
Non-qualified 2024 Options [Member] | Share-Based Payment Arrangement, Tranche One [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period       1 year    
Non-qualified 2024 Options [Member] | Share-Based Payment Arrangement, Option [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Vested, Weighted Average Grant Date Fair Value $ 4.34          
Non-Qualified 2023 Options [Member] | Share-Based Payment Arrangement, Tranche Three [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period       1 year    
Non-Qualified 2023 Options [Member] | Share-Based Payment Arrangement, Tranche Two [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period       1 year    
Non-Qualified 2023 Options [Member] | Share-Based Payment Arrangement, Tranche One [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period       1 year    
Non-Qualified 2023 Options [Member] | Share-Based Payment Arrangement, Option [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Vested, Weighted Average Grant Date Fair Value   $ 2.9        
Non-qualified 2022 Options [Member] | Share-Based Payment Arrangement, Tranche Three [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period       1 year    
Non-qualified 2022 Options [Member] | Share-Based Payment Arrangement, Tranche Two [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period       1 year    
Non-qualified 2022 Options [Member] | Share-Based Payment Arrangement, Tranche One [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Vesting Period       1 year    
Non-qualified 2022 Options [Member] | Share-Based Payment Arrangement, Option [Member]            
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Vested, Weighted Average Grant Date Fair Value     $ 3.24      
v3.24.3
Note 14 - Stock Based Compensation - Schedule of Restricted Stock Unit Activity (Details) - $ / shares
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Exercised, Share Price (in dollars per share)   $ 10.48
Exercised, Vesting Date   Dec. 31, 2023
Time-based Restricted Stock Units [Member]    
Balance (in shares) 0 3,364
Forfeited, Time-Based RSU's (in shares) 0 (516)
Exercised, Time-Based RSU's (in shares) 0 (2,848)
Balance (in shares) 0 0
Targeted Performance-based Restricted Stock Units [Member]    
Balance (in shares) 0 4,701
Forfeited, Time-Based RSU's (in shares) 0 (923)
Exercised, Time-Based RSU's (in shares) 0 (3,778)
Balance (in shares) 0 0
v3.24.3
Note 14 - Share Based Compensation - Schedule of Conversion from Restricted Stock Units to Options (Details) - $ / shares
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Dec. 31, 2022
Balance, Options (in shares) 276,037 121,743 0
Balance, Options (in shares) 383,490 276,037 121,743
Share-Based Payment Arrangement, Tranche One [Member] | Non-qualified 2022 Options [Member]      
Issued, Options (in shares)     40,577
Issued, Closing Stock Price (in dollars per share)     $ 21.2
Issued, Vesting Date     Apr. 11, 2023
Share-Based Payment Arrangement, Tranche One [Member] | Non-Qualified 2023 Options [Member]      
Issued, Options (in shares)   51,431  
Issued, Closing Stock Price (in dollars per share)   $ 14.7  
Issued, Vesting Date   Mar. 31, 2024  
Share-Based Payment Arrangement, Tranche One [Member] | Non-qualified 2024 Options [Member]      
Issued, Options (in shares) 35,817    
Issued, Closing Stock Price (in dollars per share) $ 11    
Issued, Vesting Date Mar. 28, 2025    
Share-Based Payment Arrangement, Tranche Two [Member] | Non-qualified 2022 Options [Member]      
Issued, Options (in shares)     40,583
Issued, Closing Stock Price (in dollars per share)     $ 21.2
Issued, Vesting Date     Apr. 11, 2024
Share-Based Payment Arrangement, Tranche Two [Member] | Non-Qualified 2023 Options [Member]      
Issued, Options (in shares)   51,431  
Issued, Closing Stock Price (in dollars per share)   $ 14.7  
Issued, Vesting Date   Mar. 31, 2025  
Share-Based Payment Arrangement, Tranche Two [Member] | Non-qualified 2024 Options [Member]      
Issued, Options (in shares) 35,818    
Issued, Closing Stock Price (in dollars per share) $ 11    
Issued, Vesting Date Mar. 28, 2026    
Share-Based Payment Arrangement, Tranche Three [Member] | Non-qualified 2022 Options [Member]      
Issued, Options (in shares)     40,583
Issued, Closing Stock Price (in dollars per share)     $ 21.2
Issued, Vesting Date     Apr. 11, 2025
Share-Based Payment Arrangement, Tranche Three [Member] | Non-Qualified 2023 Options [Member]      
Issued, Options (in shares)   51,432  
Issued, Closing Stock Price (in dollars per share)   $ 14.7  
Issued, Vesting Date   Mar. 31, 2026  
Share-Based Payment Arrangement, Tranche Three [Member] | Non-qualified 2024 Options [Member]      
Issued, Options (in shares) 35,818    
Issued, Closing Stock Price (in dollars per share) $ 11    
Issued, Vesting Date Mar. 28, 2027    
v3.24.3
Note 14 - Stock Based Compensation - Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions (Details)
 9 Months Ended
Sep. 30, 2024
$ / shares
Non-qualified 2024 Options [Member]  
Exercise Price (in dollars per share) $ 11
Risk-Free Rate of Interest 3.866%
Expected Term (Years) (Year) 10 years
Expected Stock Price Volatility 36.60%
Dividend Yield 2.11%
Non-Qualified 2023 Options [Member]  
Exercise Price (in dollars per share) $ 14.7
Risk-Free Rate of Interest 2.957%
Expected Term (Years) (Year) 10 years
Expected Stock Price Volatility 20.70%
Dividend Yield 2.83%
Non-qualified 2022 Options [Member]  
Exercise Price (in dollars per share) $ 21.2
Risk-Free Rate of Interest 1.515%
Expected Term (Years) (Year) 10 years
Expected Stock Price Volatility 18.10%
Dividend Yield 2.44%
v3.24.3
Note 14 - Share Based Compensation - Schedule of Stock Option Activity (Details) - Omnibus 2017 Stock Plan [Member] - USD ($)
$ / shares in Units, $ in Thousands
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Dec. 31, 2022
Outstanding, Number of Shares (in shares) 276,037 121,743 0
Outstanding, Weighted Average Exercise Price (in dollars per share) $ 17.57 $ 21.2 $ 0
Issued, Options (in shares) 107,453 154,294 121,743
Issued, Closing Stock Price (in dollars per share) $ 11 $ 14.7 $ 21.2
Granted, Weighted Average Remaining Term (Year) 9 years 5 months 26 days   7 years 6 months 10 days
Granted, Aggregate Intrinsic Value (in dollars per share) $ 0 $ 0 $ 0
Forfeited, Number of Shares (in shares) 0 0 0
Forfeited, Weighted Average Exercise Price (in dollars per share) $ 0 $ 0 $ 0
Outstanding, Weighted Average Remaining Term (Year) 8 years 5 months 19 days 8 years 25 days 7 years 6 months 10 days
Outstanding, Aggregate Intrinsic Value $ 0 $ 0 $ 0
Outstanding, Number of Shares (in shares) 383,490 276,037 121,743
Outstanding, Weighted Average Exercise Price (in dollars per share) $ 15.73 $ 17.57 $ 21.2
Exercisable, Number of Shares (in shares) 132,591    
Exercisable, Weighted Average Exercise Price (in dollars per share) $ 15.73    
Exercisable, Weighted Average Remaining Term (Year) 8 years 5 months 19 days    
Exercisable, Aggregate Intrinsic Value $ 0    
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