Q1 2021 Altice USA Inc Earnings Call

[music].

Ladies and gentlemen, thank you for standing by and welcome to the Altice USA first quarter 2021 earnings call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session. As a question during the session you will need the <unk>.

Red Star one on your telephone if you require any further assistance. Please press star zero. Thank you I would now like to turn the conference over to Mr. Nick Brown, Sir please begin.

Hello, everyone. Thanks for joining and amendment on handle that the outsourced USA.

The Guy and our CFO, Mike Girl, who will take you three of the presentation and then we'll have time for Q&A.

Today's presentation may contain forward looking statements. Please read the disclaimer on page two of the presentation deck.

Please go ahead.

Hello, everyone before we begin I once again want to express my gratitude for the hard work and commitment shown by the Altice USA team.

With our employees continuing to navigate the pandemic effectively together.

We've had a great start to the year delivering strong financials and customer growth in the first quarter, which positions us well for the rest of the year.

As such we are confident in reiterating our financial outlook for 2021.

Starting with slide three reported revenue grew one 2% year over year.

Adjusted to exclude customers past due payments greater than 90 days in the prior quarter in other words for customers, we consider to be current for pain adjusted broadband net adds for 20000 and adjusted residential customer net additions were 8000.

In addition, this quarter, we reached the fantastic milestone for pass the over 1 million homes with fiber to the home.

Furthermore, our product suite continues to expand just this week, we launched our smart Wi Fi six service to further drive an enhanced connectivity experience.

Turning to financials, we grew adjusted EBITDA for 2%, achieving adjusted EBITDA margin of 43, 4% of.

Or 44, 1% excluding mobile losses.

We also delivered our best ever first quarter free cash flow performance generating over half of billions dollars of free cash flow, which grew 82% year over year.

The supported incremental share repurchases of $523 million in Q1.

Finally earlier this month, we successfully completed the acquisition of the very fast growing cable business Morris broadband, which will nicely complement the organic growth we're seeing across the company.

Turning to slide for you can see that our revenue growth remained strong in this environment.

Hi lines of defense of the sort of business.

Total revenue growth grew one 2% year over year in the first quarter.

Residential revenue growth grew 1.3% supported by the exceptional customer growth we saw last year.

There is the services continues to be resilient growing 0.7% with early signs of recovery coming from positive reopening trends at both on Lightpath and SMB businesses.

Finally news and advertising was flat year over year at minus 0.4%, which is truly remarkable result, given the tough comparison to Q1 of last year pre pandemic.

Turning to slide five we've seen a normalization of customer and broadband growth following a record year in 2020 on.

On a reported basis, where the net loss of 1000 residential customer relationships remember in the fall. We had we were impacted by the combination of three Hurricanes Delta Lora and ideas and in the first quarter by the Texas Winter free for us.

<unk> and about 9000 customers in our customer count at the end of Q4, whose bills were past due more than 90 days, which is when we would usually disconnect those customers.

Through a combination of balance forgiveness payment plans the cash payments. These customers became current in Q1.

On an adjusted or current basis, including the storm affected comps, we realized customer net additions of 8000 in Q1, which as in prior quarters. We believe is the best measure of our underlying performance. We gained 12000 residential customers in the first quarter on a reported basis and 20000 broadband additions adjusting for the former.

The storm affected customers for now current again.

Overall, we're very pleased with the subscriber activity, we saw on the first quarter, including very strong and above expected retention in payment trends from past due customers who became current in the fourth quarter.

One thing to touch on is regulatory New York State May implement new legislation, which could prevent us from disconnecting. Some customers that are past due on their bills very similar to the New Jersey Executive order and FCC pledge, which we managed very effectively last year.

We have built all the tools to administer the type of legislation efficiently should it be ultimately signed by the governor.

This could mean, if past there will be likely continued customer and financial impact starting in Q2 in the same vein at the New Jersey order and the FCC pledge last year in that case, we would continue to report customer figures on both the reported basis and an adjusted for what we would consider current or paying basis for any customers over 90 days.

Additionally, we will be participating in the FCC emergency broadband benefit for E. B B program, which provides the discount of up to $50 per months towards broadband service for certain eligible customers. This gives us cautious optimism that we will continue to see of favorable payment trends across our broadband base.

Once we get past any residual noise from the storms in the New Jersey order in the first half.

Including the second quarter that tends to be a seasonally weaker one we expect more of a tailwind to customer growth in the second half of the year, especially as we see more benefit from our accelerated pace of edge outs.

We continue to expect the customer growth for the full year in 2021 to be at least in line with or better than 2000, and 2018, 2019, and 2018 levels non including approximately 30000 more broadband customers, which we added in the second quarter.

On video, we continue to see lower video attach rates in our base and kind.

The continued to expect video net losses to be similar to 2020.

We remain focused on customer retention of existing video customers and believe this is the combination with lower video attach rates and the mix shift towards broadband only will only be accretive to margins over time.

I also want to briefly touch you on briefly touch on our mobile customer trends.

We reached 174000 lines at the end of Q1, which is equivalent to 3.77 per penetration of our residential customer base.

Our tiered data plans continued to gain traction with about 70% of our gross adds not taken our one gig and three gig plans in Q1.

These tiered plans along with our right sized unlimited prices are helping us drive much better gross margins as we continued to focus on profitability.

Substantially all of our customer devices have now been migrates then the T book T Mobile network delivering of premium network experience.

Which has helped us reduce churn by 20 per cent compared to the prior quarter and will also help us further reduce costs.

For the full year, we expect mobile EBITDA losses to continue to improve year on year.

Turning to slide six we continue to see on network performing very well, even with the heavier usage trends persisting into the beginning of this year.

Average monthly data usage per customer was up 39% year over year.

Focusing on on our only broadband customer base data usage has now reached over 600 gigabytes per customer per month.

Which is 26% higher than the average for our entire customer base, particularly as we're seeing elevated levels of video streaming activity.

We see no signs of the state of consumption growth slowing down and feel really well positioned with the quality of our networks to meet the customer demand.

Our recent smart Wi Fi six launched is the latest development of improving the customer experience, including three times faster Wi Fi speeds of more reliable connection with less interference and support for a lot more devices in the home.

In tandem with this data usage growth, we are continuing to see more and more customers, taking faster and faster broadband speeds.

43% of our gross additions took one gigabit broadband speeds in areas, where it was available up from 13% a year ago, and we remain very optimistic about one gig and multi gig opportunities.

Over 50 per cent of our customer base still not only takes 200 megabits per second for lower so this represents a multi year upgrade growth story.

Turning to slide seven the completion of our DOCSIS three one upgrade last year to support one gig availability across the 100 per cent of the optimum footprint increased our opportunity to continue to up sell customers the higher broadband speed tiers.

Our one gig customer penetration increased to nine 8% of Q1 up from two 4% a year ago.

Our average download speeds of more than doubled in the past three years, the 302 megabits per second and.

And as you can see this was an accelerating as customers are increasingly buying into and value in the step up to one gig.

Turning to slide eight we want to focus and to remind you on a long term fiber network strategy.

In Q1, we exceeded 1 million homes passed ready for service or about 20% of our optimum footprint we.

We are currently on track to pass the half a million homes the tier more in line with 2019 levels before the pandemic slowed down the permitting process in 2020.

Following the commercial launch of our fiber double and triple play offerings in the second half of last year fiber selling rates have picked up to about two thirds of gross additions up from just 14% a year ago.

This is supporting increased penetration of GTH path, passing up to three 6% now compared to 0.7% in Q1 2020.

We continue to expect accelerated adoption of our F. T th offering where we're really only started offering a more full suite of fiber products, including video last summer.

Today, two thirds of our fiber gross adds are taking are symmetric one gig product representing a great opportunity to differentiate our fiber offering and increase our revenue, especially as customers are increasingly appreciating higher upload speeds.

As a result, we are already seeing 25% higher customer satisfaction from our installed fiber customer base compared to our HFC cable customers.

This is a great indication of what the long term improved customer experience, where it's the expecting from our fiber investment not to mention the additional long term opex and capex efficiencies.

Separately, we are simultaneously accelerating on newbuild deployment, particularly around the edges of the sudden link footprint and our recent more of broadband transaction opens up even more newbuild opportunities in North Carolina.

We're also continuing to upgrade of about 400000 homes in the suddenly footprint through full upgrades of RF equipment to be up to one gig capable.

All in all we remain very busy on the network and expansion the front and expect this the translate the higher net customer additions over time.

On slide nine we want to highlight our success with our recent service electric of New Jersey acquisition and the additional opportunities we see in our Morris broadband acquisition.

Coal, we also were able to execute on significant margin expansion with a prior sudden link and cablevision acquisitions, while growing revenue sustainably and embarking on significant network upgrades to support future growth in.

And our margins would actually be to be even higher if it were the same scale as our some of our larger peers on the programming side.

First on the left for service electric you can see that based on our estimates we have already more than doubled service electrics adjusted EBITDA margin to approximately 40% and less than a year.

And we still expect further expansion from here.

As we rollout the optimum suite of products and services. We are also targeting increased customer penetration <unk> and revenue growth.

Morris broadband on the rights of the similar number of customer relationships, but much lower penetration just about 35 per cent broadband penetration as well as significant newbuild growth opportunities and surrounding areas.

This is one of the fastest growing cable business as we've seen in the U S market with relatively low margins and the network recently fully upgraded to DOCSIS 3.1 by.

By execute on very similar efficiencies to what we've achieved with the surface electric including programming synergies. We are targeting approximately 60% margins by next year. We also get significant tax benefits with the transaction as the transaction structure allowed us to complete step up basis for the acquired assets.

We continue to actively look for additional bolt on cable M&A opportunities as we believe the to be an extremely accretive use of capital given our track record.

On slide 10, looking at business services, we have begun to see of recovering revenue trends across our SMB and lightpath businesses, including our best month of customer growth in March that we've seen for about 18 months as major markets like Texas, and New York have begun reopening the.

This includes some seasonal businesses like resorts opening earlier than usual to make up for 2020.

Business services grew 0.7% year over year in Q1 up from about flat in Q4.

We continue to see strong demand for higher speed tiers from education, and health care verticals, driven by remote learning and telehealth solutions as well as growth in corporate demand to allow for remote work conditions.

Our new Lightpath management team is already gaining traction of extending beyond its historical enterprise customer focus into strategic wholesale and carrier communications infrastructure opportunities.

We've also been actively looking at entering into new tier one enterprise markets as an additional growth opportunity and should have more to say here in the coming months.

For the full year, we expect business services to continue to generate positive revenue growth with recovery picking up more in the back half of the year.

Now turning to our news and advertising business on Slide 11, we are very pleased we've been able to keep up with revenue is flat approximately year over year. Despite the tougher comps pretense pre pandemic, a year ago and with a sharp drop off in political spend from the end of 2020.

We continue to see of recovery in local advertising and the comparisons year over year should be a lot easier in Q2, which is when this market bottomed out last year.

We anticipate this recovery will continue through this year as markets reopen and business confidence improves and expect to be flattish on the year over year basis, even with a tougher comp in the second half due to political.

And now I'll hand, you over the mic to go over the financials in more detail.

Thank you Dexter and good afternoon, everyone. Thank you very much for joining us today.

I'm now on slide 12, where you can see we posted an adjusted EBITDA margin of 43, 4% in the first quarter of 130 basis points year over year.

For the quarter, we grew adjusted EBITDA for 2% versus the first quarter of 2020.

Excluding mobile EBITDA losses on Q1, EBITDA margin was 44, 1% compared to 43, 1% of year ago for 110 basis point of improvement.

You'll notice on quarterly mobile mobile losses have started to come down now as we reach scale and see the gross margin benefits Dexter described coming true.

In Q1, our EBITDA less capex operating free cash flow margin of 34, 8% was up almost 500 basis points year over year due to a combination of EBITDA margin growth in light of Capex as we are still ramping up on the pace of our fiber rollout of new loans.

Turning to slide 13 on capital intensity was eight 6% in Q1 and without fiber of new home builds growth investment. This would have been six 5%.

Remember, we were impacted by permitting delays on the last year due to the pandemic, but we are now re accelerating all of our network initiatives. So we shouldnt see on Capex spend increase back up to historical levels over the next few quarters.

We remain focused on accelerated newbuild activities upgrades to portions of our network in select areas in our western footprint.

Continued rollout of our fiber to the home build in the east to create a platform for sustainable volume based organic growth.

As Dexter outlined we are excited about the long term potential of out of network to keep delivering superior connectivity solutions to our customers at a reasonable cost.

Slide 14 highlights another very strong quarter of free cash flow generation, which grew 82% year over year to a total of $537 million.

This was our highest ever level of Q1 free cash flow on a really good starts for the year.

It's a similar story to last year with the combination of revenue growth.

The cost management and lighter capex from the temporary slowdown in our fiber build.

Well as refinancing savings flowing through reduced interest costs.

Cash taxes were only $10 million of Q1.

But recall, we do expect this to increase later this year since we exhausted most of our federal net operating loss deductions in the 2020 tax year.

However between our recent Morris broadband transaction and other tax planning initiatives total cash total cash taxes may now be closer to $300 million to $350 million in 2021 lower than we previously expected.

Our cash flows from financing activities included the outflow of just over $500 million related to our share repurchase program.

On slide 15, we provide an update to our balance sheet.

First of all I am very pleased to announce our recent upgrade by S&P to a corporate issuer rating of double b with a stable outlook, including on improvement in our recovery ratings of our credit facilities and guaranteed notes and an upgrade to our senior notes rating from BB to BB plus.

This is a direct reflection of our numerous efforts to continue to strengthen and term out of our balance sheet.

As well as the more positive view on our operational execution and the defensiveness of our business on the cable sector more broadly.

In 2020, we refinanced for $4 billion in depth, achieving run rate annual interest savings of over $200 million compared to 2019, which reduced our total cost of borrowings of four 7%.

The weighted average life of our debt is currently six three years.

We have no annual bond maturities greater than $1 billion before 2025, all of which could be covered by the free cash flow generation capacity from our revolver.

We will continue to proactively and opportunistically manage our liabilities in the same way going forward with plenty of additional refinancing opportunities.

We have demonstrated throughout the pandemic that we retain the best in class access to the debt capital market and we remain extremely comfortable with the strength and resilience of our balance sheet as the supported by our recent ratings up.

Finally on slide 16, we provide a recap of our financial outlook for 2021, which we are reiterating today.

We expect to grow both revenue and adjusted EBITDA for the full year.

Reducing leverage to under five three times and we remind you that on medium term leverage target remains unchanged at between four five times of five zero times.

We expect cash capex in the range of one three to $1 4 billion.

As we ramp up of fiber rollout on new builds.

And lastly, we are planning on $1 $5 billion on share repurchases. This year, having completed just over a third of this amount of amount in Q1 of them.

Before we close I would also like to take a moment for think the altice USA team for another great quarter and reiterate that we are really well positioned for 2021.

And with that we will now take any questions.

As a reminder to ask a question you will need the press star one on your telephone. So we do on your question press the pound.

Once again Thats star one on your telephone.

Your first question comes from the line of Philip <unk> from Jpmorgan. Your line is open.

Hey, guys. Thanks.

Let's dig into the confidence on the full year adds at this point.

You talked about seasonally slower on the second quarter, which which means a lot in the back half.

Can you talk about how many homes do you expect of income available for sale around that time for with much better service.

And then second it's probably early but what do you see on payments in the hurricane areas, where used euro sales in March. Thank you.

Sure.

Hey, Phil.

Listen I think we are on track to upgrade of 400, thousands suddenly homes.

The first batch of those are already starting to get released now.

And we should have the bulk of them all released by the third quarter of.

This year.

That's going to drive increased penetration opportunities for us.

Obviously, the two M&A transactions, the CECO and Morris broadband share.

So very strong opportunities for for us to increase penetration.

<unk> there.

And on the build out perspective, we did 34000 in the first quarter.

We're targeting to get to 125 to 150, thousands for the year and hopefully accelerate going into 2022.

So we're on track there as we are slightly ahead of our budget on FTE th so.

I think we remain very confident here that we're going to continue to see.

Very good opportunities to increase penetration.

On both through Newbuild upgrades and our recent acquisitions.

So that is kind of what we've been signaling here for for the better part of a couple of months that.

Of that we expect after a seasonally weak second quarter, where we see an extraordinary amount usually of moves.

Happening that the back to business in Q3 and Q4.

We're going to see some good opportunities to continue to drive penetration and drive growth.

In terms of the payments.

<unk>.

Sorry.

Did you ask did you want on into higher for did you say.

I was kind of say is that higher move right.

Do you anticipate losing share in those moves.

The <unk> in particular is it.

As of share gainer, now or am I looking at that the wrong way.

Yeah, I think you we have on higher anticipated.

Dissipated moves always in the second quarter due the sudden link.

Which are impacted a lot by university towns, even though.

It's the bit skewed given the pandemic you do see a lot of activity in the second quarter in May and June.

We are seeing some.

Reversal of moved let's call it.

On a out of.

Some of our operating footprint homes.

I would assume back into the metropolis areas, where we're not.

In places like that so.

We do see just much more seasonal moves here.

Not a competitive dynamic relative to files.

Just people moving out of our footprint.

And then you mentioned in terms of payment terms I think we've seen very good reaction.

Two.

The payments, particularly on the New Jersey, FCC pledge numbers that we finished off of the year over 60% of those clients.

Some become current.

And in terms of storm related.

We're just going into.

End of March and beginning of April into some of the first batches of those 9000 people.

Coming due so it's too early to tell the reaction there, but we have seen some good reactivity on some non pay disconnects typically that we would see of non pay disconnects in the Louisiana area.

Coming due and paying very quickly.

Becoming current so we're we're optimistic here that we're going to see a stronger than expected trends in payment and that's what we've seen on the retention side is that non pay disconnects continue to trend much below average relative to 2018 and 19.

Which doesn't surprise us given given the pandemic dynamics and the resilience of the broadband product so stronger moves.

Better retention.

And good payment terms that we're seeing from overdue customers.

Got it thanks Dexter.

Sure.

Your next question comes from the line of Craig Moffett from most of it's Nathan Your line is open yes.

Yes, Hi, Dexter can you talk about what your expectations are for federal stimulus and and how youre sort of operationalize and the preparation for for those funds being available for customers in your footprint.

And specifically.

Will you have a new product for broadband that is priced at the $50 range that.

That sort of dovetails with what's available under the stimulus and then I have one follow up question about margins if I could.

So the product itself of $50.

Not match exactly that it's because it is a subsidy where effectively we subsidize the client and they get reimbursement through an arm of the FTC.

We are very well prepared particularly since we have.

On a large amount in the EBV program, which is targeted very much for.

For remote working and the remote schooling.

To be targeting those SMB clients, which we are heavily.

The weighted towards and and enterprise clients the Lightpath at.

The focus on that so typically what we expect to happen is school districts and schools.

On a going out there and are effectively saying, we would like to allocate.

X amount of subscriptions.

Two to our students and that could be up to a 100% because a lot of municipalities are still heavily doing remote learning.

And then when they allocate the.

Some of those subscriptions.

We go ahead and do those installed and up and then go and get the subsidy back from from the Federal government right. So we are ready to go the EBV program has not been put into place yet but.

But we expected imminently and as you May know I think the $3 2 billion.

Of that that's available.

From a first come first serve so we're very prepared on that side.

There's also as you know sorry.

For what it might mean in terms of numbers.

We don't right I mean, we don't want to we don't want the preempts.

What could happen right.

But we would anticipate to see some nice uptick from that.

I just can't give you on the volume estimates.

We just don't know.

Got it and then just and then.

Oh, sorry go ahead.

None of them know then as you know there's the E rate program as well.

It was really a target towards <unk>.

Low income broadband.

Type customers as well as COVID-19 impact of households.

Which are which we are also ready to go on actively because that has been an ongoing program federal program, but now needs to be applied to.

<unk>, the specifics, which we're expecting to happen at any time.

And then just thank you for that that's helpful and just on margins.

Is the trend historically, we've seen lower margins in the first quarter should we sort of expect the same kind of seasonality pattern going forward.

That we've seen in the past end of things are obviously, a little bit disrupted with COVID-19. So is there anything unusual in the in the margin trajectory seasonally.

No.

As you know first quarter, we see all of the step ups in programming cost occurring.

Which is why we always see a dip from fourth quarter of the first quarter and then we work our way up throughout the year to end the fourth quarter and the year at a higher higher levels than the previous year and we expect that to continue.

Okay got it thank you.

Okay.

Your next question comes from the line of Doug Mitchelson from Credit Suisse. Your line is open.

So much I guess, one for Dexter one for for Mike Dexter.

You've got an interesting footprint right with half of optimum.

All covered by fiber and have not and then and then suddenly Lincoln smaller markets is there anything noticed notable regarding broadband trends, whether it's sort of gross add or a churn. When you look at those three different groups were one was sort of tougher easier than you expected over the last year.

And for Mike on <unk> I think.

Broadband might have come in at a little bit less than video a little bit more or anything related to reallocation of bundle discounts or anything else unusual in those <unk> numbers or can we just use those as a good baseline going forward. Thanks.

Sure on the first on the first side listen from a competitive standpoint people always focus on the files footprint. We continue to only see about 25% of our gross out activity on.

Occurring in the files footprint, which is consistent even with the the pandemic here that.

That we had so nothing nothing to the signal obviously.

Files, and fiber overbuild or whether that be AT&T or others.

Our aggressive on price. So we are cognizant of.

Of that occurring.

But AT&T has about 8% to 10% overbuild on fiber on a suddenly footprint the <unk>.

Rest of the DSL, we don't believe that for the remainder of DSL footprint, which is about 40%.

Of of additional footprint in in sudden link is going to be the priority for AT&T. The overbuild given the small rural communities that they are there.

There, but we're monitoring that very closely.

So we're not seeing any anything different.

It did not surprise us that in Q3 and Q4 of last year when filed was back on line.

Relative to the the second quarter, where they were pretty much offline in terms of installs given their unions.

But there were a lot more aggressive and took some market share then and we gave back some of that we saw those numbers in the back half of <unk> of 2020.

But nothing nothing the signal out of the ordinary there.

There were some reports that we had losses.

An excessive amount of customers about 140000 based on common data to files in the second half of last year that number is more like 30, thousands so and for those of you who subscribe to common link data and.

Look at trends the trends are about four five times off of the reality.

So we're monitoring all of that we continue to see.

Great opportunities in our non fiber overlap.

Our markets suddenly continues to see very strong performance and even in the AT&T overlap of subscribers, we were basically flat on market share relative to AT&T.

Last year, so we're not seeing any excessive obviously are <unk> pressure.

The curse occasionally as people are promotional.

And we're very good at reacting to those if or if not being proactive on market share related initiatives. So nothing to signal out of the ordinary.

Great and on <unk>.

<unk>.

Yeah, Doug This is Mike so yeah, you're right on the money a lot of the the deviation in the ARPA growth trends of of broadband and video versus what Youre used to saying is the fact the function of the county allocations or lack thereof, I should say so I think we grew broadband offer just a little less than 6%, whereas we've been reporting low double digits of we'd always said about a third of the broadband offer growth was the.

Owning allocation that was driven by some changes that took place where we put suddenly go on to the be it the same BSS Oss system as the optimum and then the manner in which we implemented the rate event was somewhat unique in February of 'twenty. We've now anniversary both of those things. So it's not as prominent of driver and so the result of as Youll see a little lower broadband <unk> growth on a little more robust.

So our per growth because we're no longer pushing as much money on a year over year basis, no longer pushing as much revenue from the video and voice products to the broadband products via that allocation methodology, I don't want to get into the weeds too much on it but.

You're right on the money that is the driver for the kind of the change in year over year trend that youre seeing there of less less of a driver would be the manner in which we're implementing are worried about this year. We've talked about this rather than doing one large rate event in February we started of rate event in November and we're doing it really in 12 monthly installments of segmenting, our customer base based on when they roll off promo and the number of other factors. So the rate of adds.

It's more of a perpetual type thing that takes place in 12 different tranches over the course of the year and sort of the manifests itself in the offer of a little bit differently as well alright, great. Thank you both.

Your next question comes from the line of Mr. Brett Feldman from Goldman Sachs. Your line is open.

Yeah. Thanks for taking the question I, just wanted to get a little more insight into.

Getting capex back up to the run rate do you anticipate it's obviously been a bit lower and you talked about some of the zoning issues from your comments it sounds like some of that permitting has been has been rectified and so are we at a point, where we would expect the fiber to the home capex to get back up the trend and then I think you'd made a comment about potentially looking to edge out.

Your enterprise footprint.

That being considered incremental capital project or would you expect that it would be contained within your typical capex envelope.

Yes listen on the fiber to the home Youre exactly right.

We have ramped.

Started the ramp up in the Q4 of last year.

And starting to spend that money.

In the beginning of this year and expect to continue.

To ramp that up throughout the year.

To get to that 500000, new homes ready for service targets that we have for the year.

So we're right on schedule, there is nothing to flag or even a little bit of ahead of schedule. There. So you will start seeing more fiber investment coming in the back half of this year.

Including as well, obviously, what the agile.

On the permitting processes occur summer months tend to be heavy on the newbuild activity.

So you'll see more spend going coming into Q3 and Q4.

On the edge outs relating to Lightpath.

They've gone out and looked at some small acquisitions of networks.

On a.

Across across the country are very focused in the northeast.

They've been successful on some of those the very small numbers less than $50 million in total.

And we expect that to be very accretive transactions in the next couple of years.

But that we expect that to be part of the entire envelope throughout the year, but it's again, it's less than it's actually less than $40 million.

Thank you.

Your next question comes from the line of John Hodulik from UBS Your.

Your line is open.

Great. Thank you Dexter.

There's a lot of noise in the market right now about the.

Competition for from fixed wireless services, just just your thoughts on.

How do you expect that competition to ramp up and impact of your high speed data numbers and then turn.

Turning back to the regulatory side of it looks like the New York State budget proposal.

Requires a low end of $15 service for for 25 Megabits per second in the state I think it's just the proposal right now but.

Do you see that as a risk to the business or if you could talk about the exposure there.

If that were to get past that'd be great. Thanks.

Sure.

On the competitive fixed wireless listen I think we've been speaking about this regularly for the past couple of years.

We don't anticipate to see Ah.

Big challenge from the product in our footprint.

Today as you saw were broadband only subscribers today, which are pretty much the the relevant ones for the fixed wireless.

Substitution type customers or 600 gigs per month.

And with price points.

Starting in the for the one gig products.

We're between $35 to $70 on promo right. So we don't we don't anticipate that to be something that is going to affect specifically our footprint very well.

And then as we look at the more rural areas, where we have one gig available.

Throughout the Sun link.

It's difficult to see how the economics work to try and put a a less performing product in place.

Attractive numbers in order to get penetration.

So that we know we're not seeing any noise in our in our footprint at all.

From protect potentially fixed wireless substitution.

On the regulatory side, yes, we have seen that as you may know, we do have the <unk>.

$15 30, Meg product low income broadband.

I think we have currently about 15000 customers on that.

That number typically was more like the 120000 customers, 94% of those who initially initiate sign ups for the low income broadband product at the $15 of price points and the upgrading to a higher tier.

And so we do have a very small percentage of our subscribers that actually take the low income broadband.

Tier and those who do take it now.

94% of them either on the initial call or subsequently shortly thereafter are upgrading to a higher tier.

That is something that we readily have made available for.

The better part of for years really since some since the closing of the of the Cablevision transaction, even a little bit longer than that.

So that's something that's quite prevalent in the market today, and we will continue to do.

Great. Thanks Victor.

Your next question comes from the line of Ben Swinburne from Morgan Stanley. Your line is open.

Thanks, Good afternoon.

I guess two questions first on cash taxes, thanks for the updated guidance.

It sounds like the Morris acquisition, maybe is creating some sort of basis step up you can depreciate against taxable income I'm trying to understand if this is a durable benefit we'll see beyond 2021. So that's that's the first question and then the <unk>.

<unk>.

At least it seems like there's a lot of aggressive promotions from Verizon.

On the broadband side out there in the optimum footprint of <unk>.

If the extra you would describe the the competitive intensity as having changed much at all.

Q1, Q2 of its kind of status quo be interested in your thoughts there. Thank you.

I'll turn the microphone to hit the cash taxes, yeah, Yeah sure. So yeah, Ben I think listen I think the guidance. We gave previously we always qualified as being subject to.

Additional planning initiatives and opportunities.

Certainly werent thinking of Moores broadband in that context, but part of the part of the lowering of the guidance on cash taxes as a function of being able to get more concrete numbers around some of those opportunities as the which ones are.

Our attainable on which arent on Morris broadband you're right the transaction was structured.

As an asset purchase for tax purposes, we haven't finished the purchase price allocation, but the extent that's allocated to hard tangible assets would be deductible right away and you're one of 2021.

Sent that it's allocated for intangible assets, which will be immaterial number we'll take that over 15 years.

It's not sustainable for 2021 levels, but there is certainly a sustainable benefit.

<unk>.

Got it okay.

From a competitive dynamic.

No no nothing nothing to flag, specifically out there that's not.

That's not normal course of business that we've seen when people get promotional one quarters for the next on.

Or whatnot right I think.

The AT&T noise relative to their rollouts.

Fiber is.

It's not affecting us today, and the sudden link footprint and the files of files right. So.

As you know that's 25% of our activity.

And it's hand to hand combat all the time.

But we remain well positioned there, particularly with the fiber to the home upgrade.

That we're continuing.

Got it thank you both.

Yes.

Your next question comes from the line of Michael Rollins from Citi. Your line is open.

Thanks. Good afternoon first I was curious on the chart that you showed on fiber penetration, where you've upgraded to fiber to the home can you provide some greater context in terms of the penetration after a year or two years same store type of information.

And maybe the overall.

Potential benefit youre getting in that market from having <unk>.

Fiber on top of where you've had the the coax previously.

And then secondly, just a quick question on price.

Or because you mentioned the opportunity to keep Upselling customers can you give us a sense of the.

The financial benefit when the customer trades up to higher tiers.

Yes.

On the first thing on five of them I think it's a little too early given that the penetration levels. We're really only at three 6% in last year of what <unk>, 7%.

To give you real data, we do see customer satisfaction level of 25% higher.

Which is right in line with expectations, if not better than expected so early on.

Does the install process is a little bit longer.

Then then the the <unk>.

Typical <unk>.

But we're seeing two thirds of our gross adds.

In our fiber footprint for subscribing to fiber, taking one gig right. So that clearly is of great signal for us.

That we're seeing such high demand of symmetric one gig speed.

Speeds in our fiber footprint and we expect that to continue to accelerate so as our roadmap.

Is going to accelerate from one gig to more than one gig over the next couple of years.

We have a really nice runway here.

To continue to push.

Hi, Hi high speed broadband adds.

And to your point about Upsells to continue to drive Upsells in the product, but we really do with the higher satisfaction rate just by definition that means we anticipate to see lower.

Colin and touch points relative to our customer service, which is going to help us drive opex.

Lower on the field services and coal service side.

And obviously from the Capex then efficiency standpoint, as we continue to grow volume here, and we're going to get closer and closer.

Two to having a big drop off on our Capex as we as we finish of our fiber to the home rollout.

To your point about the broadband upgrades. The typical one speed upgrades is of 10 dollar type.

Type of a price points. So when people go to one hundreds of two one year of 200 of 300.

And when they go from 302 of gig that's usually typically more of like a 20 dollar uptick in terms of price points. So that is a straight margin go straight down the bottom line.

Very attractive doesn't take any work really from our standpoint too to upgrade them.

And those are very very sticky customers. So the.

That we continue to see as a strong driver of growth as people continue to upgrade.

Thank you.

Your next question comes from the line of Jonathan Health Plan for Munich Street Research. Your line is open.

Thanks, Dexter just going back to the day.

The stimulus impact are you expecting that the show up more in net adds or in <unk> and can you help us dimensionalize it a little bit so we can sort of.

Put it in the context of guidance is this something that could move.

Moving to potentially well above the guidance that you've given the net adds.

Where did the sort of consistent with 2018 2019.

Or is that sort of an exaggeration of how big of an impact this could be.

Yeah.

I think it's just too early to tell I'm sorry, John that's on this on this on this point.

Right, we don't want to fall into the trap of being too optimistic here.

On it we do think it's a very attractive opportunity that we're going to be pushing very strongly given the relationships that we have the very strong relationships, we have with schools.

Hospitals and as such.

Our footprint, we'd be we anticipate being able to to be of very coordinated here to.

To try and get the the remote learning and remote work at home customers.

That would that would qualify here for them for the broadband subsidy.

But it's just too early to tell it hasn't actually come into place yet.

So given that we're dealing with the federal government here on.

I'm not holding my breath, yet, even though it keep the T. Everyone keeps on telling me it's imminent.

Got it a quick follow up on wireless if I may be the trend in net adds that we're seeing at the moment is this the are you sort of expecting to keep adding at about this rate and low losses to improve.

Now that you've done this complicated transition to the T. Mobile network is there an opportunity to start to ramp up of the pace of net adds on the wireless business.

So I don't want to put pressure on my mobile team who've done a great job here of driving churn lower and we are of great partnership with our friends over at T mobile.

But.

As churn rates continue to fall given the better performance.

And the increase.

Focus on the tools that we have and that we continue to deliver.

On the anticipation is that we would start investing.

More heavily in media.

Towards the backend back end of this of this year, let's call. It a back to school September onwards, where we would anticipate we would only do that to the extent that we would expect to get a lot more gross adds right. So.

For now I suspect Youll see very similar trends in Q2.

With the with the perspective that in Q3.

A little bit more aggressive towards the back end of Q3 with the marketing to drive growth.

Really drive growth going into 2022.

Excellent. Thanks Dexter.

Yeah.

Your next question comes from the line of speakers for Pheno from Bernstein. Your line is open.

Hi, I wanted to follow up on John's question about fixed wireless specifically, if you could share of rough percentage of the sudden link subscribers, who take the say 200, megabits or less of speed or whatever level would indicate to us some price sensitivity.

And then the second question if I could I wondered how you are feeling about the broadband pricing environment, given the attention drawn to that issue by the White house infrastructure of blueprint recently, thank you.

I don't have the number off top my head Peter walked the follow up with you on some inside.

I do know that the average speeds typically on southern link tend to be higher than the optimum.

As you May remember suddenly had the already start it's one gig upgrade.

Very early on relative to Cablevision.

When we took over cable vision in 2016, I think 95% of the subscribers.

They're on average around 60 Megs right.

With the very small amounts of them at the hunt at 100 Megs.

And so I would I would guess that.

Less than.

Then the 50% overall that we have.

Of subscribers that are doing 200, megs of below or at sudden link.

But I'll ask my team to get back to you with some more specificity on that.

And then relating to <unk>.

The administration's commentary on pricing.

I mean.

Okay.

Can't begin to two zinc ore.

Or be able to articulate what whatever that could mean.

We know the acting FCC chairman chairwoman at today.

There is no discussion.

At all about price regulation or price points on broadband and she is very focused on world.

And on <unk>, but.

I think this is too early to tell as to whether anything happens from from the administration standpoint.

We took the regulatory on broadband I think theres, just nothing of the pipeline today other than the comments.

Because it causes you to behave any differently.

No I mean listen the market's competitive right there is.

There is no free lunch.

So.

Whatever the administration.

It seems to be perceiving or whatnot.

Seeing around.

The of nature, where gross and gross adds the <unk> on broadband.

Depending on the quarter.

Balanced.

I think on which competitive environment we are in.

Well you know I think that's going to be very clear.

And as well as their discussion around.

For bill relating to broadband upgrades or build outs for of municipalities.

Sure.

Get to.

Pretty.

219 trillion versus 600 billion.

Five of them.

Phil.

But that there's still a lot of discussions around this.

The bill.

And I'd be surprised that the allocated.

In the hundreds of billions.

Infrastructure build from the Miss out municipality standpoint that typically has never been good money spent.

And there seems to be obviously of bid offer on the table between the two sides in terms of the size of this overall infrastructure Bill.

By it's so early on.

All of here as to.

And what may happen.

Thank you for Dexter.

Yeah.

Your next question comes from the line of Steven Cahall from Wells Fargo. Your line is open.

Thank you maybe first just wondering how youre thinking about video subscriber losses. This year. It seems like Q1 sort of came on exactly where you would expect them to be we did see some news that the NFL is going to be putting more content on streaming and theres just a lot more streaming services out there. So maybe you can help us conceptualize, what you think that pace of of videos.

The declines might be and how you think about that in terms of the EBITDA performance of of the business and then with the cash tax increase for the year, but no increase the share repurchases should we just expect a little bit of extra cash if you do generated to pay down to the balance sheet at this point or any other color there would be great. Thank you.

Losses, I think we have.

Hit hit our stride in terms of absolute numbers.

Obviously from a percentage standpoint.

The increase given that the absolute number of seem to be quite stable.

Around that.

So it's 200 thousands.

And that's really again driven by.

All of our attachment rates on video gross adds which is.

When economic standpoint for us.

Perry.

Seeing anything different out there.

Clearly.

On the streaming activity and the amount of direct to consumer streaming offers.

Programmers out there.

A lot of options here.

Who don't want the big bundle coming from cable.

And that's going to continue to help us I think from an economic standpoint.

On margins.

Ability.

As the programming costs.

The pressure at some point here.

The two.

Two.

Our peers and our content partners, who are looking to continue the price.

Affiliate fees.

When the DTC offerings out there.

Great.

Not too far away from the shifts there in that trend.

It's actually look at the whole video.

System as an opportunity.

Due to lower.

Our direct costs on programming.

So to lower our.

Customer touch points.

Field service.

Fair and lower our Capex spend.

Yes.

Now the whole equation on that as you know the the free cash flow breakeven for gross adds.

It continues to get pushed out at once to two and a half years of couple of years ago and now it's more like three years today and I suspect it may be at three and a half years pretty soon.

That just makes us.

Less and less.

The gross add video subscribers.

And for them, which is really going to help our profitability numbers on our free cash flow.

Yeah.

On the second question if I may.

The change in cash taxes is not that material quite frankly, I think we guided zone.

Of the neighborhood of 400 previously notwithstanding 300 to 350 I don't think it was meaningful enough to to revisit the share repurchase guidance on what we'll see how the rest of the your flushes on also mindful that we do on it.

We do have to cover the Morris broadband acquisition, which wasn't necessarily anticipated in that guidance.

We're saying we're still in concert with the share repurchase out of that one.

$5 billion.

Got it thanks.

This concludes our Q&A session I will turn the call over.

I'll turn the call over back to Mr. Nick Brown for any closing remarks.

Thank you everyone for joining do let US know if you have any follow up questions. Otherwise, we look forward to catching up with you on the next few weeks. Thanks again.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Yes.

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