Q4 2022 Cable One Inc Earnings Call
<unk> America, and the clear way of operations contributed to Clearway fiber joining me on today's call is our president and CEO , Julie Wallets and Todd <unk>, our CFO with that let me turn the call over to Julie.
Thank you Jordan and good afternoon, everyone. We appreciate you joining us for today's call.
Our fourth quarter and full year financial results reached new highs in revenue adjusted EBITDA and margin. We expect continued opportunities for growth given that our long term secular drivers of demand for digital connectivity are more present than ever before.
Our purpose driven associates relentless focus on delivering our strategy that ultimately enables us to compete and win.
Our full year results produced a six 2% year over year increase in total revenues and eight 6% year over year increase in adjusted EBITDA, and an 11, 3% year over year increase in adjusted EBITDA less capital expenditures, our adjusted EBITDA margin improved 100.
10 basis points year over year to 53, 4%.
For the fourth quarter on an adjusted basis, our total revenues increased by 1% residential broadband revenue grew by five 1% and our business services revenue grew by four 6% on a consolidated basis, our Q4 adjusted EBITDA margin set another record at.
54, 8% and our adjusted EBITDA less capital expenditures increased by nine 5%.
Our sustained success is a result of our people products and disciplined investments.
Looking ahead, we have every confidence in continued long term growth as we execute against our ongoing strategy focused on connectivity and staying ahead of consumer trends.
Looking first at our residential Internet service when excluding the operations. We divested earlier this year, we added approximately 15000 customers over the past 12 months.
On a sequential quarterly basis, we saw a decrease of approximately 1700 customers as.
As we shared during the third quarter macroeconomic trends caused a slowdown in new home creation and move activity that resulted in a corresponding slowdown in growth connect this trend, which continued in the fourth quarter, along with new competitors in select markets adversely impacted our.
Customer accounts.
We remain encouraged by our retention of our base with churn in the fourth quarter of 2022 in line with 2019 levels and data usage for our residential broadband services surging to new highs translating to an increased selling and customer migration to higher tiers of service offerings as of the.
Fourth quarter more than half of the new customer selected speed tiers of 500, Meg or higher with one in three now selecting gig speeds we.
We implemented a $2 adjustment to our modem lease fees with our November billing cycles are first equipment based adjustment in five years they.
The increased selling coupled with a modem adjustment resulted in a 3% year over year growth in our residential broadband.
As I will share a little later, we will continue to add more value to our internet service offerings, including our next generation Wi Fi devices in a capital efficient manner.
Turning to competition.
At the end of the fourth quarter, only 35% of our markets had a wired competitor offering residential broadband download speeds of 100 megs or higher.
Which represents a relatively low percentage of our large geographically dispersed footprint.
As our record high revenue adjusted EBITDA and margins in 2022 show the economics of our business remains strong despite increasing competition our confidence in future growth is rooted in those things that differentiate us in our markets local expertise first mover advantage.
<unk> and the continued evolution and enhancement of our products and customer experience. Additionally.
Additionally, we are a capital efficient upgrade roadmap, which has been made possible by years of prior investment while the costs for competitors to build new networks in the rural markets. We serve is rapidly increasing.
We continue to keep an eye on fixed wireless competitive activity or third party research indicates that the unlimited data plan offered by mobile service providers is available in less than 35% of our markets today.
Mobile fixed wireless so a low cost option has known reliability and capacity issues there.
This contrasts sharply with cable on focus on being the premium Internet service provider in the markets we serve.
Our superior reliability and capacity have kept us insulated from this perceived threat.
Although we feel there could be a small portion of our historic win share from lower quality technologies like DSO trying out the mobile fixed wireless product. We're confident that these customers continued demands and needs for higher speeds increased capacity and consistent reliability will ultimately drive future Mike.
Gration and adoption.
Fixed broadband solutions like we offer.
Moving to business services on an adjusted basis, we experienced strong revenue growth of four 6% quarter over quarter, and six 2% year over year with enterprise fiber growth accelerating meaningfully faster than these rates and significant addressable market.
<unk> still ahead, while we are seeing near term pressure on new business creation caused by macroeconomic factors our business services team continues to execute on the items within their span of control that means an ongoing focus on high profitability customers offering the broadband.
Products, they want and providing the white glove service they expect all while driving efficiencies further into the business.
As I mentioned before another constant in our business has been the demand for data, which continues to reach new highs.
Our average data usage has grown at a CAGR of 26% over the past five years to nearly 640 gigabytes per month in the fourth quarter of 2022 with downstream usage 15 times higher than upstream.
By making balanced capital investments over that same period, we ensure the capacity was never a barrier to growth as of the fourth quarter of 2022 downstream and upstream utilization during peak hours never exceeded 23%.
As our network evolves with our Nextgen DOCSIS four <unk> roadmap, we will preserve our core principles staying well ahead of the demand curve with balanced upgrade investments that are meaningfully less than our competitors.
In the fourth quarter, we continued to execute against our integration roadmap with the launch of an advanced customer contact center platform across fidelity market with.
With a sharpened focus on transforming our business. We were pleased to see enhanced performance in all key contact center metrics, including time to answer service levels and associate productivity, we're very grateful to our fidelity associates for leading the way with this implementation, which we.
Ultimately roll out across the MSL retiring more than it doesn't separate software platforms in the process.
2023, we will see our next generation Wifi platform, arriving in our customers' homes.
This new product will provide us with greater insight into Internet health within the home, enabling proactive maintenance critical to reliability and customer satisfaction.
We understand that our customers do not differentiate between wired and wireless performance in their homes. So we continue to invest and rollout devices that provide seamless reliability no matter how customers choose to connect to our service.
Looking at our unconsolidated investments in total residential and business data customers grew by approximately 13200 or 3% on a sequential basis in the fourth quarter and more than 43900 customers for the full year <unk>.
'twenty two.
Does not include the operations of Metronet or simply where we have less significant investments.
The continued growth of these businesses compounds for a long term consistent strategy of aligning with proven management teams.
And the most reputable financial partners in this sector.
Before handing the call over to Todd I would like to mention a few other notable events from the quarter.
I'm pleased to share that Ken Johnson was promoted from SVP technology services to Chief Technology, and digital officer in this role Ken will lead our enterprise wide digital evolution, while retaining oversight of the company's technology roadmap.
Ken's visionary thinking combined with his business acumen knowledge of cable one and digital expertise will help continue to drive digital transformation throughout all areas of the company.
I'm also proud to note that cable one was recently named by the Wickes network as one of 2022 top companies for women to work. This is based on the results of their most recent workplace diversity survey. We are honored by this recognition, which is a direct reflection of our commitment to cultivating and inclusive.
And diverse workplace that is purpose driven and engaging enabling all of our associates to thrive.
As of year end 2022 women represented 33% of cable one's total associates, 36% of management level positions and 60% of our 10 member Board.
And now Todd who will provide a full recap of our fourth quarter financial performance.
Thanks, Julie starting with revenues total revenues for the fourth quarter of 2022 were $425 5 million compared to $432 6 million in the fourth quarter of 2021, a one 6% decrease the.
The decrease was primarily due to the contribution of operations to clear waved fiber at the beginning of the year and other divestitures during 2022.
On an adjusted basis, our total revenues increased by 1% for Q4 residential Internet revenue grew by five 1% and business services revenue grew by four 6%.
Operating expenses were $112 $6 million or 26, 5% of revenues in the fourth quarter of 2022 compared to $119 9 million or 27, 7% of revenues in the comparable quarter of the prior year a.
120 basis point improvement.
Selling general and administrative expenses were $85 7 million for the fourth quarter of 2022 compared to $94 9 million in the prior year quarter.
These expenses were 21% of revenues in the fourth quarter of 2022 compared to 21, 9% of revenues in Q4, 2021, a 180 basis point improvement.
Our income from operations for the fourth quarter increased $17 4 million or 14, 3% year over year in the fourth quarter, we recognized a net loss of $77 2 million or $13 38 per share. This was driven largely by a $128 eight.
$8 million noncash loss on the revaluation of our MBIA options, along with a one time $22 $9 million deferred income tax expense due to the adoption of unitary filing position for state income tax purposes.
Adjusted EBITDA was $233 2 million for the fourth quarter, an increase of three 5% when compared to 2021, our adjusted EBITDA margin for the fourth quarter of 2022 was 54, 8%, a 270 basis point improvement compared to the prior year.
For the full year adjusted EBITDA was $911 9 million.
An increase of eight 6% when compared to 2021, our adjusted EBITDA margin for the full year 2022 was 53, 4%, a 110 basis point improvement compared to prior year.
As a reminder, the results for this period don't include the EBITDA generating assets that we contributed to clear wave fiber at the beginning of 2022.
Please note that we do not provide adjusted EBITDA growth rates on an adjusted basis. This is due to the challenges in providing the required non-GAAP reconciliations when taken into account corporate allocations that were a part of Hargreaves financial statements in 2021.
Capital expenditures totaled $106 $8 million for the fourth quarter of 2022, which equates to 45, 8% of adjusted EBITDA.
During the quarter, we invested $38 million of Capex for new market expansion and $9 1 million for integration activities.
For the full year capital expenditures totaled $414 1 million, which equates to 45, 4% of adjusted EBITDA when excluding the incremental capital expenditures related to new market expansion and integrations are capital expenditures for the full year were $34 five.
5% of adjusted EBITDA.
As we think about future capital expenditures, we expect our capital intensity associated with running the day to day business to decline as a percentage of EBITDA.
While continuing to Opportunistically invest capital in enhanced network capabilities features and functionality that drive customer satisfaction and profitable growth is.
As it relates to market expansion initiatives, whether funded privately or via grant you can expect us to maintain our historic return discipline when considering these investments.
Adjusted EBITDA less capital expenditures was $126 4 million for the fourth quarter of 2022, an increase of nine 5% from the prior year quarter.
For the full year adjusted EBITDA less capital expenditures was $497 8 million an increase of 11, 3% from the prior year.
We are committed to a balanced long term capital allocation strategy that includes this proactive investments in our existing network, new organic and inorganic investments capital structure optimization and return of capital all collectively align with building long term.
<unk> shareholder value.
In the fourth quarter of 2022, we repaid $12 $7 million in debt distributed $16 5 million in dividends to shareholders and repurchased over 61000 shares of our common stock for $46 3 million.
For the full year 2022, we repaid nearly $40 million in debt made dividend payments of over $66 million and repurchased over 294000 shares for $353 3 million.
We will remain steadfast in our philosophy of a disciplined prudent and proactive management of our balance sheet as of December 31, 2022, we had $215 million of cash and cash equivalents on hand, and we continue to generate significant free cash flow at.
At quarter end, our debt balance was approximately $3 8 billion consisting of approximately $2 3 billion in term loans $920 million in convertible notes $650 million in unsecured notes and $5 million of finance lease liabilities. We also have the full 500 million.
Available for additional borrowings under our revolver.
Our weighted average cost of debt for the quarter was 386% our net leverage ratio was three nine times and we had nearly 75% of our borrowings under long term fixed rate agreements.
As we disclosed in our earnings release earlier. This week, we completed an opportunistic financing transaction with a core group of our lenders that effectively extends maturities enhances committed liquidity and improve strategic flexibility on approximately $2 billion of our senior credit facilities all at comparable core.
<unk> to the existing agreements.
We are very grateful for the ongoing support of our long term capital partners and Theyre demonstrated confidence in our team and cable one's future strategic initiatives.
With that we are now ready for questions.
If you'd like to ask a question. Please press star followed by one on your telephone keypad if for any reason you'd like to remove that question. Please press star followed by two again to ask a question. It is star one.
Our first question is from Phil Cusick with Jpmorgan. Your line is now open.
Hi, This is Nick on for Phil. Thanks for taking the question I was wondering if you could update us on your thoughts on a mobile offering a lot of your peers and competitors have been outlining mobile and broadband strategies as a primary growth driver from here.
So is there anything that you've been seeing in your markets that would suggest that you would explore converged bundle further thanks.
Hey, Nick it's Julie I think we've spoken to this a bit in the past would we look at a mobile offering yes, we have explored the economics multiple times and we will keep an open mind about it right now we're focused on the business that we think we do best.
And we don't hear from our customers that they are clamoring for yet another provider of wireless service at this time.
Do you want to add yes, and I would add Nick it's Todd that when you think about the value proposition of that converged product in both the data and the mobile being reliable services and in many of our rural markets wireless reliability is actually not where it needs to be yet for us to consider that.
Got it thank you both.
Our next question comes from Greg Williams with Cowen. Your line is now open.
Great. Thanks for taking my question first one is just on <unk>. It ticked up nicely this quarter over last quarter were in the third quarter was a little more flattened.
You alluded to.
And equipment fee up $2 is that across the entire base. So as I think about next year, you can see a 2% plus or uptick overall give.
Given that everyone's can recharge to extra dollars.
Second question is just on helping.
Helping us through the margin through 2023.
I think theyre up 270 bps year over year and 2022.
But there's a lot of moving parts, whether it's inflation hargrave with video exit broadband mix and then you mentioned the Nextgen Wi Fi platform.
I imagine there are some costs into that.
And then of course, you have cost levers you can pull so if you can help me with the margin trajectory year over year that would be great. Thanks.
I'll start with our too so.
The modem adjustment, which took place in November and spark light for customers, who rent equipment from us versus have their own modem.
Which is the majority.
The large majority of our customers and spark light, but the <unk> that you see in the fourth quarter is driven primarily from organic migration to higher tiers I mean, when you are selling in.
At 500, plus speeds at 53% and one in three people are taking gig.
And it's not just selling its migrations of existing customers as well.
That is what is driving the <unk> modem adjustment was actually very small in the quarter. So what are you seeing more of that next year, meaning this year now yes.
But the vast amount of the <unk> is driven by customer choice.
Are valuing our reliable product you see the data.
<unk>.
Data use is continuing to grow and folks equate that with while our packages have tied together speed and data and so they are moving up to get a service that they feel search them best and <unk>.
By the way are to increase.
And noncompetitive markets.
Okay.
And Greg I'll address the margin question that you had.
And we can unpack it more if you'd like but I mean, there's.
Theres a couple of things there obviously.
The history of cable one and our proven track record of being a very cost effective operator is something that we are extremely focused on and always have been and always will be and looking at.
Cost efficient delivery of our product when you think about obviously, where our product mix shift is.
The higher growth higher margin residential data and business services continues to be.
Inorganic driver of that improved margin, along with obviously than things like execution of our integration strategy and where we continue to take cost out of the business there, where we continue to take costs out of the business on what is still but even smaller video product where the programming expenses are.
Meaningful.
Benefit to us in terms of our our margin there we've had a few things as you said that are moving around our health insurance thing for everybody has moved up a little bit.
That offsets that are software platform costs are up a little bit even though we're staying very focused on that we had some system conversion costs that were in 'twenty. One that are in 22 related to some large platform migrations. Those are some of the key factors that have been driving the margins, but I will tell you that we fully expected.
Our confident we can continue to drive that margin higher and I think part of the reason is we actually track and measure.
What percentage of our margin shift is coming from the mix shift versus our continuous improvement mindset and projects. So that is something we track.
So it helps keep our eye on the ball.
Got it thank you.
Thank you.
Our next question comes from Frank Louthan with Raymond James Your line is now open.
Great. Thank you.
Can you give us an update on the progress in the joint venture has made some.
Okay.
Analyst day last year, if you can update that from year end that'd be great and then just conceptually where do you. What do you think you can do to get back to more sustainable positive.
Broadband subscriber growth going forward.
Is that just a function of more of the housing market and the sort of macro factors or is there anything that you can do that and see that on the horizon.
So Frank I am going to start with the sustainable growth question and the first one I'm not sure you broke up a little bit you asked something about an update on statistics from Investor day, but.
An update on the joint venture on the clear wave you gave some financial metrics you'd yesterday.
Anything from year end on that so we can see how that progress is going.
Okay, alright so.
Sustainable growth.
So we had a marginal loss in the fourth quarter and you all need to know that that was not taken lightly.
Our team here, especially after the rest of the year showed growth.
We are missing connects and as you know moves and household starts are lower.
But but we have to have.
Conversation as well.
<unk>.
What's going on with competition.
If we if we start that conversation.
Competition is not a monolith for us, especially when you look like cable one we are geographically dispersed throughout 24 states and our average market size is about 20000 customers or about 58000 homes passed.
So that gives you some context to what these places look like.
Our overall competition for folks that provide over 100 megs is about 36% of our footprint so still relatively small.
When we think about fixed wireless the folks if we look at the unlimited service offering that's available in less than 35% of our footprint as well fiber.
Fiber competitors are available in about 25% of the footprint. So again trying to give you some context, what do we look like when does the competition look like why am I doing that because because I assume that that some of these connects have.
<unk> gone to a competitor.
Do have third party competitive intelligence that shows that the wind share T mobile is lower and cover footprint than it is theyre not national average for example, but that still doesn't negate. The fact that some of these can next are likely going to.
So.
Our job quite honestly is to get connects but not at any price and not at any cost.
So what that means is we need to be appropriately responsive to competitors.
But mostly it means doing what I think we're really good at which is focusing on our customers and offering products in a way that is updated and meaningful value to them now that might mean different pricing and packaging you might recall there was a point in time I guess it was probably two.
2018 2019.
Years before Kevin Blair to me now, but we had.
We're probably over rotated on <unk> versus growth and we fix that.
And guess, what we can fix it again.
<unk>.
We have.
Such varied impacts from from competitors.
Think of two markets that we have that have a fiber overbuild or one for over a decade and one is relatively newer neither one of them have made virtually any impact on us.
Virtually any.
I can think about another market that has two competitors one of which is fiber based.
And after we lost initially because customers do like shiny and new.
The market normalizes.
And that market has been growing all year and 'twenty two.
So there there are different patterns of growth that emerge with competition and I think again the important thing that we keep our eye on is getting connects.
But in a disciplined way since 2013, we havent eroded our HFC profitability by bundling some subsidies.
So I wouldn't expect that to start I think what you will see is measured responses and that is because we touched before we implement that might make us a little bit slower.
We're being more surgical and proven once we get something out.
Our churn.
This is just fine it's slow it's about the same as 2019, but that doesn't mean that we're not focusing on it as well.
So that.
We can continue to drive it even lower as a matter of fact, we partnered with an AI company to model and predictably help us save customers.
I hope that answers your question.
Yes, that's very helpful.
And on the JV and fragrance Todd on the on the JV side, obviously, the clearway fiber JV was effective one one.
2022 so.
We will now as we look forward start to anniversary now the performance of that.
In ours, but the.
The momentum in that business is going extremely well.
As you know and as we've discussed extensively.
One of the great benefits of that transaction was we had an extremely proven operational leadership team day zero, we don't have to go and find a new team.
That team from hard Gray, that's running that has built out.
Operationally, our great leadership bench.
The accelerated pace at which they're expanding in those markets.
Has been very.
Very impressive that the disciplined market selection.
Where they're obviously focused in.
Building out over weaker Underinvested network operators.
<unk> proven to be very successful.
And it's really our opportunity.
To participate in some of this accelerated expansion and do so with an extremely well capitalized JV.
Okay.
Alright, great. Thank you very much.
And our next question comes from Craig Moffett with SBB.
Line is now open.
Alright. Thank you two questions if I could first.
I Wonder if you could just go back to the conversation you were having a few minutes ago about broadband.
Broadband <unk>.
You noted that fixed wireless broadband offerings tend to be less reliable and weaker but they are very very price aggressive at the moment, particularly in more rural markets, where the carriers.
We have a bit more capacity and a longer runway does that change at all your you're thinking about the the rate at which broadband <unk> in your markets can grow or.
Or do you think that your broadband or who will be largely unaffected by by those offerings and then second I Wonder if you could just talk a bit about your decision to start fading out linear video.
And in particular, how much capacity you will get back.
From that phase out or.
Were offering higher speed broadband services and over what kind of timeframe are we going to see that across the whole footprint.
Thanks for bringing up that question, Craig I should have actually spoken to it so I appreciate it.
Yes.
First of all.
Again fixed wireless broadband doesn't have their offering available in the majority of our footprint.
That being said.
Although <unk> is high and I know that you are aware that our prices are not.
We've only had two two prices for entry level service since I've been CEO . It was $55 for our 100 Meg.
Product, which we migrated to a 200 Meg product.
Last year, because the majority.
The majority of customers are choosing speeds well above that 100, Meg product. So right now $65 as a price for our 200 Meg product at this time, even though the <unk> is meaningfully higher than that is because customers are choosing I think that shows the.
The price elasticity that this product test now that being said it doesn't mean that.
But as I as I mentioned looking at different pricing and packaging in our marketing approach isn't in our sites.
Linear video I don't know that I, if you want.
The technicalities of what we're getting in terms of capacity that is not something I can speak to I'm not sure. If you can or not yes, Craig it's Todd.
We definitely look at our strategy of.
Deemphasizing video we are obviously, a first mover in that and predominantly the strategy was strategy was driven by the reclamation of that spectrum.
For data and we continue to kind of move down that path.
Matter of when not if in terms of full reclamation of that from the quad linear video side.
And that's part of our roadmap for technological innovation.
Going to DOCSIS four <unk>.
Speeds more symmetrical speeds and <unk>.
<unk> been able to reclaim.
Sure.
<unk>.
Meaningful megahertz of spectrum from the linear video.
Thought about it.
I was listening to your customer.
Sorry say that again.
No I was just going to say is a reasonable guess that's around 480 or so megahertz of spectrum dedicated to video today.
That's less that's the part I was trying to figure out what's in that.
Less okay.
When we do when we do our <unk> hundred 60 immediately goes to one gig gigahertz.
In terms of.
What youre able to join to dedicate to data.
What I was saying as I was listening to customer calls last week and a customer who had converted to spark late TB not only was using spark like TV, but for the first time in his life was doing other streaming services and having a blast, which again bodes really well for our HFC product.
Okay. Thank you for that that's going to be interesting to watch.
Our next question is from Brandon <unk> with Keybanc. Your line is now open.
Two capital related questions for you and thanks for taking the questions Capex card is clearly running pretty high $400 million and I think you had guided us for it to be lower than fourth quarter and it was obviously up but I think at the end of the day. What we're all wondering is what are we getting out of it.
We don't really see it from like a new homes passed standpoint.
And so I guess, what I'm really trying to starting to want to understand like where the returns are.
This investment and then just on the share repurchase program.
We utilized the vast majority of the half a billion dollar authorization what are your thoughts around doing a larger authorization.
Or are you trying to position the company to Delever to acquire Mega broadband. Thanks.
Okay.
Yes, Brandon so on the capital side, we've kind of talked about is that.
<unk> run rate for 2022 was plus or minus.
That 100.
It was a little higher in certain quarters as we were.
<unk> supply chain challenges and making sure we had access to equipment, making sure we are giving our team the tools and resources to continue to expand.
And that was a little bit higher as you look at the quarter here, but I would still say that quarterly run rate is a good estimate.
Yes, we're still out in some cases 12 to 18 months on certain elements of equipment, but it's definitely getting better.
From what it was a year ago at this time.
When it was anybody's guess right, but so we will be able to manage that around that number I think what.
<unk> outlined to you and to many others as well.
A lot of that capital that we've been investing is in already preparing the roadmap to four we're not in this incremental as we go to four O that is.
All of that investment and that's what we've already been investing in and spending on as it relates to network architecture and spacing of that and we don't have obviously be generally available equipment, yet for <unk>, which will be later this year.
And implementation in early 'twenty, four but the element.
Making sure. The network is ready is where you have already seen a lot of that proactive investment and then thirdly as we continue to think about in home health and equipment around.
The advanced Wi Fi CPE.
We are actively and very proactively investing in that as well because we see the highly retentive conversions of that as it relates to customer satisfaction and customer retention with that higher end customer willingness to pay.
For that better in home health.
Those would be kind of the key things there and we absolutely feel very confident we can continue to drive returns around that capital.
As we look at.
The discipline around what we've always had is.
Leading IRR is associated with how we're going to allocate that capital.
Are you going to be balanced as we've talked about so to your question about shares and repurchasing shares obviously, where price points have been in the second half of and especially the fourth quarter of 2022, while our dollar amount came down meaningfully or number of shares that we repurchased was not that different from what it was in the past because of the price.
Point at which we were able to take in those shares and we will continue to be opportunistic on that we.
We do have to maintain balance as it relates to other accretive opportunities in the future and I've talked to the investor community a lot around we're very comfortable with where our leverage is but we're not going to be using utilizing leverage to go and repurchase shares in the capital markets environment I think that conservative then.
Discipline is what also.
Gave a lot of confidence to our lenders and extending $2 billion of capital at the same pricing that we basically have today.
Thank you.
You bet.
There.
Our next question is from Steven <unk> with Wells Fargo Your.
Your line is now open.
Thank you and I joined a little late so apologies.
If you've been through all of these already maybe first just on competition just any sense. If the increased pace you talked about of 100 megabit and fiber competition is changing or if that two percentage points per quarter is kind of a decent outlook for how it will continue to pace through throughout the year.
Year and I'm, just wondering as you think about competition, increasing do you think that that was the reason for the more challenged net adds that you saw in Q4 and is that something that you would expect to persist throughout 2023, and then I have a couple of follow ups.
Okay.
I honestly wouldn't use.
The two points per quarter because.
What what we've been reporting on is what we know and as we get better tools.
We update that information. So for example, we now can use the FCC broadband maps in order to see exactly where competition is maybe we werent counting that when we counted them on one side of the street and not the other side of industry and so this is just us doing.
Our due diligence on getting.
What we have where.
I think once we get that which I would say, it's probably pretty much are now.
Then maybe we could start tracking it in that form and fashion, but I don't think that we can draw conclusions that.
What <unk> seen is because there has been an increase in competition I think it's just us being able to curate and.
And.
But the numbers down on especially quite honestly.
Why are we challenged and net adds I think your question was something like is it increasing competition and even in markets that don't have competition Steve.
We're seeing some compression on connect so I don't think its that I think.
I don't have my head in the sand I do think that.
There's folks that will take a low priced option from whomever it might be offering yet we've been able to maintain our high highly profitable customer base, but again, even in markets that are not competitive.
There just aren't a lot of news or household formation going on right now.
Yeah, Steve we've really seen the ground insurance in our local markets around where they were over indexing on new home construction, new builds contractors basically saying.
We're still going but just on Pos right Raymond.
<unk> got or in the rate environment.
Buyer conviction in the last six months, we all know change meaningfully when the fed changed meaningfully.
That's really helpful. And then kind of related do you think about trying to lean a little harder into <unk> in this environment just to try to reaccelerate some of the residential broadband revenue component.
Okay.
I think ideally we take a balanced approach I mean, our ambition is to be the most trusted broadband provider and we're not going to abuse that trust with.
Erin price hikes.
If we can add value and drive our appeal you betcha.
But ideally.
It would be a balanced approach.
Okay.
And then sorry, if I missed this.
Earlier in July .
Doug you might've missed earlier, when Julie was talking a lot about the migration and the customer choice in the demand curve associated with the speed and the reliability, which is really driving that <unk>.
But I can unpack that further with you.
Offline.
Yes, that'd be great.
And then just on Opex savings was pretty significant in the fourth quarter any expectation that we can think about for how you might be managing opex or an opex growth rate to think about for for 2023.
Yeah, we did address that as well, but I've talked a lot about both the opex being driven by.
A meaningful amount of.
Savings around the programming and the franchise fees as our video product continues to.
BD emphasized.
Offset a little bit by some of the higher health insurance, which I think a lot of folks have.
Been navigating.
But still 120 basis point improvement on Opex.
And it's something that we have a really really close eye on the ball as it relates to that and in addition to SG&A, where we saw almost a 200 basis point improvement.
Driving margins as we continue to think that we can expand margins even from here.
And then and then lastly on the MDI write down does that have any impact on how we should think about the call and put options and is.
Is there any way that you're thinking about those call and put options at this point.
No thats the Monte Carlo simulation that we have to go through annually on the option value. It's annually revisited last year when they did it obviously valuations were higher so that gets taken into account risk free rates and discount rates get taken into account and thats, obviously meaningfully higher with where the feds moved.
Market multiples, but also even the leverage on that business.
When that was run last year. It was prior to their dividend, which you guys will recall, we took our share of at the end of 2021 on December 31, so things like that go into it but it's noncash it moves around a lot.
I don't look at it as something that is how you should be looking at the normalized earnings of the business or an indication of whether we will or won't.
Look too.
Transact on that R. R. R R.
Interest in <unk>, and our alignment with MBIA as Great partners has always been because the business is doing extremely well they are a higher growth business theyre lower penetrated than us they are more rural than us they have an amazing leadership team.
So we will stay very close with them.
As it relates to how we think about the long term partnership.
Great. Thank you and sorry for making you repeat yourself a little bit.
That's all right don't worry about.
That's all we have for today, so I'll pass the call back over to the management team.
Thank you Jason we appreciate everyone joining us for today's call and look forward to speaking with you again next quarter. Thanks Tal.
Okay.
That concludes the conference call. Thank you for your participation you may now disconnect your lines.