Q1 2023 Altice USA Inc Earnings Call
Greetings and welcome to the Altice USA first quarter 2023 results conference call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
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Now I'd like to turn the call over to Nick Brown EVP of corporate Finance and development. Thank you you may begin.
Hello, everyone. Thank you for joining we are joined today by Al <unk> USA.
Dennis Matthew and our new CFO , Mark <unk>, who together will take you through the presentation and then be available for questions. After.
As today's presentation may contain forward looking statements. Please read the disclaimer on slide two.
Please go ahead.
Thanks, Nick and Hello, everyone I'm pleased to be here to discuss Altice USA Q1, 2023 result.
Before we begin I want to take a moment to thank our employees across the entire organization here in the last 60 days, we've welcomed a new telecom's management team and we continue to attract strong leadership talent across the organization.
We introduced a new mission and strategy and accelerated our culture of teamwork and accountability by putting the customer at the center of everything we do.
And while we certainly have more work to do I'm incredibly proud of how the team has rallied around our strategy to be the connectivity provider of choice across all the communities that we serve and I. Thank everyone for their endless commitment teamwork and energy.
So let's jump into the results starting on slide three with a summary of our first quarter performance.
Last quarter I shared that we were looking deeply into our go to market packages and that mobile would take on a more meaningful role while I am pleased to share that as you may have seen this week, we launched optimum complete our exciting new internet and mobile converged bundle offer.
This is an important milestone for us and something I've been heavily focused on with the team to ensure we bring to market a differentiated and customer friendly offer that delivers real value and transparency.
Go into more detail on this later in the presentation, but I'm pleased that even ahead of this launch we started to see an acceleration in our mobile customer growth in Q1.
Turning to our network, we were fortunate to have very mild weather. This winter and that played into our advantage. We strategically pulled forward some of our budgeted annual spend to deliver network upgrades accelerated path things earlier in the year. So that we can begin to see customer benefits and accelerate our go to mark.
<unk> strategies in these areas sooner.
This led to the delivery of an exceptional quarter in terms of broadband network construction, which is a key pillar of our growth strategy setting us up really well for the rest of the year specifically.
Specifically, we expanded our fiber path things by 214000 homes in Q1, ending Q1 with just under $2 4 million fiber passing and we're on track to deliver a record number of incremental fiber passing in Q2.
In light of this we saw a corresponding acceleration in fiber customer growth with net additions of 38000 in the quarter, which was our best fiber net add quarter ever we ended the quarter with 210000 fiber customers and expect this will continue to step up as we broaden the availability of multi gig services.
And have optimum complete as our primary offer.
Our goal is to meaningfully accelerate our fiber and mobile customer growth and penetration and I'm very focused on this with the team.
These are key metrics against which I will be measuring our success as they will be critical to getting our overall broadband customer relationships revenue and cash flow back to growth.
We also delivered 48000, new build path things in Q1, well ahead of schedule for the year, which will also help us drive new customer growth.
Turning to subscriber metrics total broadband customer net losses were 19000 in Q1, which was broadly in line with Q4, when we normalize for the benefit from the New York City Housing Authority program also known as nature. Despite some incremental macro pressures that I'll come back to shortly.
On our financials Q1 revenue declined five 3% year over year, mainly driven by continued pressure in our residential and advertising businesses.
Adjusted EBITDA declined 12, 4% year over year with a margin of 37, 9%.
Reflecting both the revenue decline and the step up in Opex. The company made last year to drive future growth.
As Mark will outline later I'm pleased to say that we have now stabilized opex and we see many opportunities to drive efficiencies from here, while executing against our growth strategy.
And cash flow was impacted mainly by a peak in capex as we accelerated network investments in the past couple of quarters, but we fully expect this to reverse later in the second half so that we will be positive free cash flow for the year Spa.
Specifically, our annual Capex target is unchanged as Mark will outline in more detail later in this presentation.
To close out the summary, we are pleased to announce that last week, we successfully closed on the issuance of a new $1 billion senior guaranteed notes.
The main use of proceeds is to refinance existing debt and following the earlier term loan refinancing we did in December we're now in a strong position to manage all of our near term maturity.
Let's turn to slide four for a recap of our optimum strategy and review the significance of optimum complete.
As I outlined last quarter, our mission is to make the optimum the connectivity provider of choice across all our communities. The four pillars of this strategy focused around the best customer experience the best customer relationships.
Network and the best people and I'm pleased to say that we've begun to make progress against all of these areas and many of the key initiatives I previewed with you in February .
First on customer experience.
Seeing significant improvement thanks to our heightened focus on elevating quality and end to end CX. We had a 24 point NPS improvement in customer care during Q1 year over year as our teams performed better at addressing customer needs at the first attempt.
As we continue to drive network improvements and enhancing troubleshooting tools. We have also seen service visit rate decreased 15% year over year in Q1 and.
In addition, technical troubleshooting call rates also decreased 15% year over year in Q1 as customers experienced fewer technical issues related to our devices and network.
This reduction in transaction rate is a direct correlation on field care and overall customer experience improvements as.
As I said last quarter, we are particularly committed to these initiatives as they will lead to both cost and growth optimization and will continue to drive <unk> improvement in everything that we do.
Second our customer relationships, we have been deeply analyzing our go to market strategy to drive profitability long term customer value and customer growth as I said earlier in my summary, I am pleased that this week, we launched optimum complete with optimum complete customers have access to our award winning <unk>.
<unk> Internet plus optimum mobile services, delivering fast fiber rich Internet and Wi Fi in the home and five G nationwide wireless coverage on the go with one simple transparent price point, providing complete connectivity simplicity peace of mind and exceptional valley.
<unk>.
But optimum complete is more than just an offer it as a new value propositions to meet evolving customer needs by bringing them a full lineup of connectivity solutions through one provider.
It marks a shift in how we position and communicate about our products and packages and will help us foster deeper relationships with our customers that they rely on us for all their connectivity needs and choose to stay with us for the long term.
Given our increased investments over the last 12 to 18 months and better customer experience enhanced network expanded distribution channels and more progressive sales plans and one unified optimum brand now is the right time to launch this offering and utilized our customer facing channels to promote.
And market optimum complete without significant incremental investment.
This is truly our greatest offer of all time and you should see a lot of golf related marketing in the coming weeks to underline this point.
Third is delivering the best network as I noted in the summary, we had a best in class network expansion quarter, given our strategic decision to expedite our build and investments in plants and network upgrades across our whole footprint to ensure every market. We serve has reliable and quality broadband are net.
<unk> is our foundation and we believe these investments will be a major catalyst for broadband and customer growth.
And finally, a moment on our people we've made great strides in opening new feedback channels to give our employees the opportunity to share escalations and suggestions against our four pillars.
Thanks to their feedback we are enhancing our frontline tools and processes driving deeper engagement and prioritizing communication to connect our people to our mission.
These changes are driving tangible improvements in our customer experience and helping us lay the foundation for sustainable growth.
No one knows our customers and communities more than our people do so employee engagement and employee experience continues to be a key focus area for us now.
Now I want to go into more detail on the network pillar of our strategy on slide five.
First on the right hand side, you can see we've executed on about one third of our targeted Newbuild network extension in the first quarter with 48000 additional passengers. So we are well on track to hit 150000 for the full year. This remains a great source of new customer growth as we consistently.
<unk> are reaching 40% plus penetration in the first year of marketing to new homes.
With our fiber network you can see on the left hand side that we ended Q1 2023 with just under $2 4 million fiber passing adding.
Adding 214000 in the quarter, which is up about 50% from the same period last year.
We remain on track to deliver over 900000 fiber passing this year and expect a meaningful pickup in incremental fiber passing next quarter.
We should add more than 321000, we reached in the third quarter of last year. So our current pace of fiber construction is at record high levels.
The majority of these fiber upgrades have been focused in optimum east across the New York Tri State area, given the competitive landscape and conditions.
As noted last quarter across our optimum west footprint, we will continue to be more opportunistic about where we upgrade for fiber in the near term.
Focusing on areas that give us the best return on investment as we have many levers to pull here to drive growth, including our new converged offer and speed increases through the network upgrades without an immediate need for fiber.
Turning to slide six I want to dive deeper into fiber.
As our network construction engine works hard to deliver the upgrades and expansion that we just discussed we are hyper focused on commercializing and maximizing these investments to drive growth.
As I've said before I'm, a big believer that fiber is the best broadband technology for the long term and that belief is reinforced by signs of performance benefits, we've seen from fiber customers in Q1 for.
For example, we.
We are consistently seeing gross add <unk> for customers, taking our fiber product about $10 to $15 higher compared to HFC, including 7% higher Internet only <unk> as of Q1, especially as new fiber customers are typically taking higher.
Our symmetric speed tiers right now.
Tracking customer cohorts of the same tenure, we are now seeing over 10 percentage point improvement in customer stickiness or survivability and the first 12 months on fiber compared to HFC on an annualized basis.
Which translates to better churn rates across our fiber base remember last year. The improvement we were seeing here was about five percentage points annualized. So we're now over double this level.
And even though our overall customer NPS scores are increasing as we improve the experience for all customers. It's.
It is important to call out that we're still seeing fiber broadband NPS about 50% higher than HFC.
We have also seen a significant increase in fiber net additions to a record 38000 in Q1, which is almost four times higher than the same period last year as we're seeing both higher gross adds and migration.
We have a lot of opportunity to extract value out of our network upgrades in a way we haven't in the past and our growth product sales and marketing teams are working diligently. So we can start to realize the benefits of our network investments and drive even faster fiber broadband growth. This includes long.
Term reduced network operations customer operations and maintenance costs that will allow us to structurally reduce our opex and capex.
Recall fiber as in all passive network and when you would take out all the active pieces of equipment, which is normally where things may go wrong with legacy networks, you end up with a much more reliable resilient network service and a much better customer experience, which for example will lower the number of required technical service business.
<unk> calls into our call center and help us significantly reduce churn.
And the HFC World, we have about 750000 active pieces of equipment, including nodes amplifiers and other pieces of equipment in our network, we need to upgrade almost all of them every time, we want to increase frequency on the network to move to a new DOCSIS generation and the.
Fiber World, we will have less than 10000 active pieces of equipment that need upgrading when we want to move to the next generation. So it's a lot more scalable and a lot more cost effective to maintain on.
On the left hand side, you can see how we're bundling our fiber multi gig optimum complete bundles with unlimited mobile with really attractive offers available to both new and existing customers. Our approach is up tier customers the higher symmetrical internet speeds and combine that in home connectivity experience.
<unk> with mobile service positions us to take more share.
In light of this new converged strategy. Our focus is on driving improved average revenue per account and customer lifetime value rather than individual product <unk> youth.
You can expect to see more on this in the quarters to come.
We currently offer up to five gig symmetrical speeds across 65% of the optimum east fiber footprint.
Where we are the fastest residential broadband operator, that's five times faster than <unk> across the majority of where we compete with them.
To have the widest availability of eight gig symmetrical speeds in the country.
Cementing our position as by far the fastest residential broadband operator in our service area across the New York Tri State region.
This will give us a huge marketing advantage and we're positioning ourselves to be at the forefront of technological innovation for many years to come. This again demonstrates the power of the <unk> PON fiber network that we've built is it's very easy for us to step up the highest speed tier like this without one.
Huge incremental capital spend.
Liable broadband service.
Turning to slide seven.
And Q1, we reported a total customer broadband net loss of 19000 and residential broadband losses were also 19000 note. This number and the charge here includes our SMB broadband customer ads, which were flattened Q1 I want to note that going forward on earnings we will combine residential and SMB in our headline figures.
As I see opportunity to drive penetration across our entire network not just on the residential side.
Our fiber network and <unk> relationship are also extremely valuable marketing tools and the SMB market and I want to use this much more to deliver better customer trends in aggregate.
We see <unk> as a significant opportunity for us with more disciplined execution. That's an area, where we are dedicating more management attention by expanding the product portfolio leveraging best practices across both are SMB, and lightpath businesses and enhancing our mid market and enterprise business in the west.
But to summarize an overall trends similar to the last quarter and in line with our peers. We continued to be impacted by relatively low market activity with moves declining further given the right environment and current housing market conditions.
Despite this in the broader competitive environment, which is unchanged with continued pressure from both fixed wireless and competitive fiber operators.
Our subscriber trends were generally in line with Q4, when excluding the 9000 benefit from the nature program last quarter. However.
However, we did see a bit of an uptick in nonpaid churn in the in the quarter, which we attribute to macro related factors, which suggests that are underlying fred's are improving more than this comparison to queue for suggest.
And when we look at how we faired versus our cable peers compared to Q1 last year. We also take some comfort that we are doing relatively well given the additional macro headwinds and seeing more benefits from our recent investments then may be the headline numbers imply on first look I want to remind you that cue too is normally seasonally weaker.
For broadband trends because of our college town exposure in the west.
But when we get past this I remain optimistic that we'll be able to show you a more meaningful improvement in our customer trends given all of the positive forward indicators, we're seeing right now.
Finally on the right side of the slide we highlighted R accelerated mobile line that adds of 8000 in the quarter on a reported basis ending Q1 with 248000 mobile lines. However, if we had just for the loss of some free one gigabyte customers who are rolling off after the promotion we ran last year.
<unk> recall that we disclosed we added about 36000 of these three customers in the first quarter and second quarters of last year, our mobile net ads would have been 15000 in Q1. So you can see the underlying growth of paying customers is accelerating.
Going forward I will be focusing on the paying mobile customer trends and how we use mobile as a tool to reduce broadband churn is this is what is going to have the biggest impact.
Though we are having some success now and converting some legacy customers to paying status or promotional focus now is going to be around optimum complete as we expect this new value proposition will help us accelerate mobile growth by driving stickiness and greater customer lifetime value.
Before turning it to Mark to walk you through our financials in more detail, let me close by saying that I remain optimistic and encouraged by the trends that we're seeing in the work being done by our teams against our four key strategic pillars by continuing to drive disciplined execution centered around the best network best customer.
Our experienced best customers and best people, we will return to long term sustainable customer revenue in free cash flow growth.
With that I'll hand, it over to Mark to walk you through our financials in more detail.
Thank you Dennis it's a pleasure to be here. This afternoon for my first earnings call CFO <unk> USA.
I look forward to getting to know you all more in the days and weeks to come.
Let me begin with a financial overview on slide nine.
Total reported revenue in Q1 declined 5.3% year over year, driven by declines in residential and news and advertising Reza.
Residential revenue was down five 6% year over year, mainly driven by the impact of the cumulative video and broadband subscriber losses, we've seen over the last year.
Dennis highlighted we are focused returning to broadband customer growth with our new optimum complete converged bundles. We believe we are striking the right balance between volume and rate.
Business services revenues declined 1.1% year over year, although excluding about $3 million in one time sprint early termination fees from the prior year and the Lightpath business. This would have been closer to flat.
Our SMB division, excluding enterprise and carry revenue was flat year over year on a flat customer and <unk> growth.
But as Dennis mentioned earlier, we are heavily focused on accelerating growth here.
News and advertising was done 13, 9% year over year in Q1 or down 11% excluding political revenue.
We are seeing some overall softness in the advertising market and less political spend but on top of this remember this time last year.
We saw strong growth in gaming revenue titled Legalization in New York, which has slowed down.
We've also seen less COVID-19 related to spend in the healthcare segment.
Now turning to slide 10.
Our cash Capex was up approximately 47% year over year at $583 million in Q1, mainly driven by increase investments in fiber upgrades and new bills as we've really stepped on the gas here since Dennis joined to try and bring forward the customer benefits.
We are reiterating our guidance for a range of between $1.7 billion in 1.8 billion of cash Capex for 2023, but it will clearly be more front end loaded this year as we've had fewer delays in our fiber in new Bill construction plans then we typically see during the first quarter due to favourable weather.
Without fiber in new builds capital intensity would have been about 14% of revenue.
More broadly to include <unk> in customer premise equipment or total growth capital represented about 72% of total capex.
I wanted to show you a breakout capex categories here and as you can see it's predominantly growth and expansion related capital.
That drives the recent increases as well as a higher network infrastructure spend on HFC side as we look to complete our DOCSIS three dot one upgrade of the west footprint.
We have invested to upgrade an incremental 50000 passengers in the west <unk> one in the fourth quarter, reaching 86% of this footprint. So.
So we are on track for about 200000 DOCSIS upgrades. This year. This strength in the network everywhere, we can to compete more effectively and wind back sure recall, we are already 100 per cent upgraded to <unk> one in the east. So our focus here is on fiber upgrades.
We've also seen a step up in Lightpath capex within the business services segment as we're building out in Miami in Boston from which we should see a greater revenue benefit next year.
As a reminder of the fiber build we're targeting for this year will include more empty use in the east and more Arafat conversions in the west at a lower cost per passing so while we expect similar numbers of new fiber homes in 2023 as we did in 2022 are full year Capex still will come down below 2020 to let.
Halls.
Slide 11 shows a bridge of free cash flow for the first quarter.
In alignment with goals that Denis mentioned earlier, our focus is returning to consistent customer revenue in free cash flow growth that will enable us to return to our targeted leverage levels.
Free cash flow for the quarter was negative 166 million do principally to hire capex spending in the quarter and the working capital outflow related to higher crude capital in the prior quarter. However.
However, I want to reiterate that we expect positive free cash flow for the full year anticipating much stronger performance in the second half.
To be more specific the increased spend and capital is timing related and we expect it will continue to decline throughout 2023 I want to emphasize that this is a peak in capex for us in the year and not a new run right.
Without the additional $200 million a fiber capex in the first quarter free cash flow would have been positive $34 million.
We do view the overall fiber abilities, a fixed time they spend in clearly when we get to the end of this upgrade program, we could realize significant overall savings not just from reduced plant build cost, but we expect plant maintenance and legacy HFC capacity investments to drops significantly.
Second I want to also remind you that typically the first quarter is seasonally our lowest quarter for EBITDA.
Given programming step ups at the beginning of the year.
Before we pass through any related rate increases.
This will step up through the years Capex steps down in the first quarter were also annualized in all of the additional growth in customer experience Opex investments, we made last year. So the year over year trends should also improve as we go through the year. Lastly, we are heavily focused on Opex control right now.
And removing transactional volumes is Dennis discussed earlier.
To that end, we've already taken down run right spend from the fourth quarter levels, which is a good start and we should expect those trends to continue throughout the year.
Sep earliest worth noting our cash interest costs are up year over year with recent rate increases and refinancing activities, but we should see some stabilization now around this level.
Finally, slide 12 is an update of our debt maturity profile pro forma for recent refinancing activities last week, we successfully closed the issuance of a new $1 billion senior guarantee note do May 2028 issued at CSC holdings with the proceeds we have temporarily repaid outstanding borrowing.
Drawn under a revolving credit facility.
But our intention is to use the additional liquidity to help cover the senior notes we have maturing in 2024 since they are non-callable today.
Recall in December we successfully extended the maturity of approximately $2 billion or 50% of our shorter dated term loans to 2028 within an incremental term loan b six.
Pro forma for this 1 billion guarantee notes offering we will have sufficient liquidity to address the 2024 maturity and together was expected future free cash flow generation will be in a strong position to manage the remainder of the 25 and 26 maturities.
Pro forma for this recent transaction net leverage remains unchanged.
The weighted average life of our debt pro forma for this transaction will be five five years since the revolving credit facility balance has been reduced although this will increase once we repay the 24 notes.
As we again demonstrated recently will continue to proactively manage our debt maturity profile.
And with that we will now take any questions.
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Our first questions come from the line of cell Cusec with J P. Morgan. Please proceed with your questions.
Hi, guys. Thank you a few on the same theme.
<unk> you said your goal is to meaningfully accelerate fiber growth and penetration to return to overall <unk>.
Revenue and growth when do you expect to get their.
Business return to subscriber growth by year end.
How do you expect seasonality this year I think you mentioned some of the your your <unk> challenges in terms of of colleges.
And then finally, if you can talk about the sales initiatives you've implemented in the last few months since you got there and the potential timing of the impact from those thanks very much.
Well. Thank you for your questions I remain very optimistic that we are going to continue to see.
Improvements in the business, we're heading in the right direction as I look at the underlying trends, we continue to see improvements in terms of year over year reductions in key operational metrics like <unk>.
Call in right, 15% last year over year service visit right, 15% last year over year are NPS year.
Year over year up by 2024 points and so that's why I am optimistic that we are laying the right foundation to ultimately get us to subscriber growth and then as I look at the fiber trends in particular.
I see that are are Pooh trends are 10 to $15.
Head of HFC as I look at churn 10 points.
Better.
And I'll also call out the west or tactics in the west are working.
Last three out of five months, we have been positive broadband and so I remain very optimistic that we have made.
Made the right investments, we've been increased our door to door channels Chan.
Channel we've.
Continued to expand retail and we're seeing strong output from these channels. We've also been very focused on driving performance induce channels. Our call Center for example, we've improved yield.
By 20%.
In the first quarter and so we are still laying the foundation, we are still driving.
Execution discipline, which is going to help us achieve ultimately growth, but I don't want to speculate on exact timing at right.
Right now but.
I do expect seasonally lower.
Q too.
It will be.
Better than historic seasonality, but.
There is going to be a bit of a seasonally lowered Q too.
You asked about the sales initiatives our number one initiative is optimum complete we launched that on Monday, and we're already seeing the benefits. We had two of our best days selling mobile on Monday, and Tuesday, and so.
That is all pointing in the right direction.
Thanks to us yeah.
Thank you. Our next question is coming from the line of breath Feldman with Goldman Sachs. Please proceed with your questions.
Yeah. Thanks for taking the question, obviously, we seen.
Other cable peers have a lot of success with their conversed offers that may seem like a bit of a naive question, but what gives you confidence that leading with the conversed offer is what the market wants and that the incremental customer really is most likely to gravitate towards someone who can give them multiple services as opposed to maybe just a much better deal on broadband and then.
Investors and analysts what are we going to be monitoring to see that optimum completed having the desired impact on your financial though mostly looking to see an improvement in broadband subscriber trends are there other metrics that may stand out sooner than that thank you.
Right. Thank you for the question.
I'm confident that the market is looking for converged offers because we ask the market. We did the consumer research and we found that customers are looking for converged offers simple transparent pricing and we are providing that to our customers we have the power.
Sure of our fixed network fiber and DOCSIS and then we have the power of our <unk> relationship with Timo that gives us the largest five G network and.
And we're seeing it I mean, it's early days and so I can't give you too much detailed information but.
Even before the optimum complete as you can see we started to see improvements in our mobile trend even in Q1 and that was just by.
By sheer discipline and focus.
Presenting broadband and mobile together in our sales channels and starting to get that muscle flexing and now with optimum complete we have <unk>.
Not just.
We have now the marketing the offers the sales channels and a simple transparent pricing strategy for our customers and so our focus going forward is household <unk>, we are going to be driving household <unk> and I know, there's lots of questions on broadband or approve but our focuses.
Household or poo, and then driving profitability leveraging the new customer lifetime value model that we're implementing that will allow us to manage the base much more effectively going forward. So that we can drive up sell a faster speeds. So that we can sell in mobile so that we can ensure that the.
Highest value customers.
Are getting offers that are specific to them. So that we can move them up the chain and fill out the product portfolio in their homes and so that is.
Some of the metrics that you should be looking for and that's R desired impact.
Alright, thank you.
Yes.
[noise] taxing. Our next question is coming from the line of Craig Moffett with Margaret Nathan. Please proceed with your questions.
Hi, Uhm I'll stay with the topic that Brett raised which is pricing uhm. So.
Your your optimum complete pricing does seem much more competitive for the bundle but.
Your pricing for Standalone broadband in particular, especially in year, two and beyond it's still quite high relative to competitors.
Is there is there a scenario where you bring <unk> down faster it looks like our broadband or police coming down about half of a percent is that fast enough to sort of really reverse the competitiveness of your what is actually a pretty good broadband product.
For customers that aren't ready for the bundle or.
Or that large base of customers who are still standalone.
Greg. Thank you so much for the question I am very confident that we will be able to compete effectively in drive growth. We have the best network with the best products and services. We're investing in quality. We are investing to have the best go to market strategy in sales channels in particular to drive performance.
We're investing in the best customer service as I mentioned previously were leaning into digital were leaning into communicating and providing simple tools for our customers and now we have the best packaging and value propositions and leveraging some.
Some of the new tools that we're implementing with customer lifetime value. We are laser focused on improving average revenue per account and that will allow us to continue to grow and be competitive and so I do believe that we have the tools that we need to drive growth and we're starting to see that in the court.
Business.
Thank you.
Yeah.
Thank you. Our next question comes from the line of mixer with Credit Suisse. Please proceed with your question.
Oh, thanks, so much the I was hoping for a clarification on the fiber <unk> 10 dollar improvement over non fiber is that just a new customer orders that include the migrations into fiber I just want to make sure. We don't have a selection bias really someone understand if there is or isn't and then.
On the wireless strategy, you'll correct me if I'm wrong. The based here. The 45 dollar offer is for a metered line and.
And I think you've got availability, where you have special fiber, but maybe less so in the HFC areas could you just clarify for me.
The strategy around around the wireless bundling and how broad. It is is that fiber focused and is it a mix of metered and unlimited and what's the thought process there. Thanks.
Thanks for the question on your first item.
The 10% to 15 dollar increase is for new gross add fiber connect and so that is a new new growth add number or.
Our number historically or in the last quarter has been about 50% gross ads and 50% migrations and so we're.
Going to continue to lean into our fiber go to market as we go forward, we are going to be leaning into are not just our gross adds strategy, but also.
Focusing on the base and driving.
Migrations, there and so that goes back to the <unk> model and making sure that we are a disciplined approach of managing the base and getting them onto our fastest speeds speeds were fiber is available I'll pass it over to mark to talk a little bit more about the bundles.
Just one the fiber <unk> around the migrations versus new customers. We are seeing when customers do migrate we're seeing significant lift upwards of $30 per transactions, and then and retention, we're actually seeing less dilution of the retention transaction tied to fiber.
And then do you want to take the <unk>.
Wireless.
Bundle in the optimum complete is offered across the footprint both in fiber across the optimum east fiber and non fiber and across the entire west and we do have various options across depending on how many lines that you take.
Alright. Thank you thank.
Thank you.
It comes from the line of John <unk> with UBS. Please proceed with your questions.
Great I just want to follow up on some of the comments Mark.
At the end of that prepared remarks, you guys have had it will take about three quarters of EBITDA declines in this sort of 12% range, but it sounds like you guys think that that that gets better as we move through the year, if you could sort of help us.
Sort of pull out the the drivers of that I think you said that and you'll get a one time, you're going to step up in your programming cost or some other issues, maybe some costs coming out and if you could help us quantify.
How big of an improvement you think we get as we as we move through the year and maybe where we exit the year in terms of EBITDA declines that'd be helpful. Thanks.
Thanks, John Wheeler.
We won't get specific as far as exact numbers as far as where we think we land the full year, but as we've previously mentioned.
Certainly prior year subscriber losses will continue to weigh on current year results.
We're optimistic about the improvements we've made but we still don't want to commit to a specific number around EBITDA growth I will say that we are very confident now, though we have the new team in place we've launched optimum complete as you earlier, the best fiber network in the business and the accelerating trends in CX and Opex mixtures gives us.
Really strong confidence that we the path to improve EBITDA in the second half of the year compared to the first half.
I mean, the only other thing I'll add John is that.
Q1 was the first quarter, where we had a step down and opex sequentially.
Since the pandemic and so we do think that we are heading we've stabilized opex and we're heading in the right direction.
Can that sequential declining ethics continue mark.
Yeah. So as you as you look we did dropped $26 million of Opex, excluding share based comp.
It gives us confidence that we will have an annualized cost of about $2.6 billion. If you look at the fourth quarter the annualized cost of that would be about $2.7 billion. So.
As we discuss as we pull transactions the business. We do feel that there is potential to continue to drive cause the business, but we like we like where we're heading.
Okay. Thank you.
Okay. Our next question is coming from the line Swinger with Morgan Stanley . Please proceed with your questions.
Hey, good afternoon.
Couple of questions, maybe first an optimum west.
You mentioned some of the tactics that are working with.
Going on competitively in that market in a couple of quarters ago, you were or at least my interpretation was that was a market you were seeing some pretty aggressive competition I think both fixed wireless and fiber belts has anything changed there is it all entirely changes that you guys have made to improve the trend line would love some more color on that.
Thanks, Ben Thanks for the question the competitive environment remains the intense as as I've described in the previous calls twenty-five percent overbilled by fiber 50.
50% of that is AT&T, a very mature fiber.
Provider and then the other 50% as the fiber over builders.
Our overall footprint, we're estimating of 40% fixed wireless competition and so.
We have started to operate in a much more hyper local fashion because the way we compete in Texas versus Arizona versus Oklahoma verse, North Carolina, It has to be different and so we are.
Staffing up a little bit in terms of regional leadership teams that are laser focused on driving performance understanding the competitive landscape driving customer experience employee experience and then developing hyper local marketing strategies to give us a much more.
Much more of a local impact to help us drive or go to market and that is starting to show benefits and that is allowing us to win and now we think with optimum complete we have even more tools and our toolkit to drive.
Optimum west.
Thank you and then follow up.
Could just on broadband or two I mean, if you guys could.
Reverse the trend arrows declining year on year I think it was down like 3%. This quarter got obviously would do a lot for your goals around revenue can you just talk about what's happening in broadband or put it put pressure on that line and do you have visibility into sort of stabilizing and improving that because obviously that would help quite a bit on the revenue front.
Yeah, I'll I'll take that one.
Actually when you look at imply broadband <unk>, we're actually down about 5% year over year, which was in line with the guidance. We've previously provided around flat to stable <unk>, but if you more importantly, if you look sequentially we.
We actually have stopped the erosion of <unk> significantly we're only down 5%.
Quarter over quarter.
Last quarter that was a.
A much larger over $1.20 sequentially in the fourth quarter declined so we've pretty much stopped that I'll.
I'll say the way we've done that is just using a financially disciplined approach and having a balanced way of going to market with the revenue in right.
And that's really starting to pay dividends. Additionally, we're leveraging AI and our centers around how to treat customers differently and.
And that is.
Feeling some favorable in this in the rates. So we feel like we're on a clear path to stabilize the erosion of Providence.
Great. Thank you guys.
Thank you.
Thank you. Our next question comes from the line of Jonathan Chaplin, That's New Street. Please proceed with your questions.
Thanks, so much too.
Sort of <unk> questions I'm, sorry to say so on EBITDA, if we annualize one Q, we come out at about $3.5 billion. It sounds like from your comments you think the full yeah, it would be better than that because we get improvements in EBITDA as we progress through the year and I'm just wondering if you could <unk>.
On that and then on <unk>.
It's great to hear that <unk> are are starting to stabilise sequentially.
When I look at where your pricing your one gig product, which I assume is your flagship product.
Well below where where your average <unk>.
Your average <unk> well above were calm costumed Chopra R and I'm wondering if you can give us an insight into sort of a demographics and the difference in.
Your go to market proposition that you feel allows you to sustain an octave above above your peers and your competitors banks.
Jonathan Thank you I'll, let mark take the first one and I'll I'll take the second question.
Anything on EBITDA, although we're not <unk>.
Providing specific guidance here for the full year EBITDA trends.
<unk> you said it correctly, we see.
That the second half of this year, we have a real plan to have improved but true.
<unk> and the second half versus the first half of all tied to the things that we talked about the new team the best network.
<unk> opex reductions that dentists mentioned.
So we're optimistic that there is a <unk> for improvement in EBITDA.
With that let me just turn it over to.
And Jonathan to your question as I mentioned I'm very bullish on focusing on customer household <unk> and so we're focused on selling in optimum complete and we there's a lot of upside in terms of selling and lines as well historically, we've sold about 1.3 lines and.
I know that we can do significantly better than that and so as we drive customer a whole household <unk> and then focused on profitability as we.
Stabilized erosion in overall are boo by just being much more sophisticated in the way that we go to market and being much more disciplined in the way that we go in.
In the offers that we provide we've pulled back on some of the gift with purchase and gift cards.
And are really driving sales performance and yield and performance management and aligning compensation. So that we can execute better in the sales channels.
We believe that we can continue to drive profitability in the business and growth.
Got it thank you very much thank.
Thank you.
Okay. Our next question comes from the line can then catastrophe with Barclays. Please proceed with your questions.
Alright. Thank you the Dennis Firstly, you talk a lot about fiber and the potential to.
Upgrade further to eight.
Eight gigs in 2005 gigs service and so on.
Why do you think.
The speeds of the limiting factor.
<unk> gig speeds that are way more than what most consumers deals in sixth wireless today has successfully when the lower speeds.
Instead take the opposite of may be slowing down fiber investments.
And.
Investing it back into customer support and building the brand back.
To some extent.
I have a follow up after that thanks.
Ken and thank you for your question.
We are investing in the future and we're investing in this network, we know that as we continue to launch faster speeds.
Customers are taking those speeds using those speeds are average usage now is over 600 gigs and our highest users are using a terabyte and they're taking the fastest speeds and so as we think about the future. We're building a network for the future that will ultimately.
Unlock applications as we think about ARV are <unk> other elements. So more streaming all of these use cases, where building our fiber network to be able to support, especially as I look at our optimum east footprint compete.
Being against a very mature fiber provider and so we need to have the best to go against the best and then ultimately that will if I look on the return on investment well, we're not going to get into the details. We know as I mentioned, the maintenance and the support of that network is apples and oranges.
Versus a legacy HFC network that being said, we're going to continue to invest in fiber strategically as we look at the competitive landscape as we look at the cost and where it makes sense. We will continue to expand the fiber network and so we believe that we are building for the future and.
We're bullish on on the network that we're building out it will allow us to compete effectively. We're also investing you mentioned in a brand and things like that.
That's our investments in customer experience, that's in our investments and quality, that's our investments and making sure that we are by.
By far providing the best service to our customers as we optimize our character centers as we optimize our field operations as we drive digital and so we're doing boat. We're building out the best network. We're also building out we're upgrading DOCSIS. So that we can compete effectively there and then on the brand cyber inverse.
Getting in quality.
And quite frankly on fixed wireless as I look at the usage 600 plus megs.
People that are taken the faster speeds using a terabyte you know I'll I'll wait and see how as capacity gets filled up on fixed wireless networks, how that performs.
Mmm cluttered.
And just as a follow up on the on the guidance for <unk> for cute to them and you did mention seasonality.
But when I look at Q1 seasonally it tends to be stronger than Q for them sequentially, but it looks like <unk> basically the same across both quarters any attributed some macro pressure.
Could you just help us understand what the impact.
<unk> was in the quarter, because you're bad debts has been quite low versus I think most of the cable and telecom.
Folks.
I'm going to let Mark talk a little bit about nonpay and some of the macro trends.
Good question, yet we have seen an uptick in Nonpay disconnects, which we believe is really macro related.
The good news is we.
Off studying this pressure is really underlining improvements in other areas. So it's not had a material impact on our customer trends thankfully.
To be specific we saw turn of additional about 9000 additional customers related to non pays in the first quarter compared to the same period last year.
Again this is just macro driven and we feel this will subside.
Okay. Thank you.
Thanks.
Second our next question is coming from the line, it's painful piano with Wolf Research. Please proceed with your questions.
Hi, Thank you ordered if you wouldn't mind, comparing chern and gross added trends in the east to the West. It was interesting to hear that you had a few better months and suddenly I think that's different than commonly perceived love to hear you break down the different territories.
Peter Thanks for your question.
We are seeing improvements in gross ads in the west which is helping us drive overall.
Performance and as I mentioned three out of the last five months.
We've seen we've seen positive broadband growth and that is on the back of stronger gross adds.
We are seeing pressure on churn across the board as Mark just mentioned Nonpay is a challenge across the board and.
There is overall growth add pressure across both the east and West is moves are down 6.5% in.
In both the east and the West as we looked at it so that is providing overall pressure as well.
[noise] Snicket, one more I would love to ask you. If you have thought at all about how you think about the possibility of selling the portion of Lightpath, but you still owned as a way to pay down debt given the very high cost to borrow money. These days.
Peter Thanks for the question, we are not actively pursuing but it's.
Always listening to opportunities, but we're not actively pursuing anything right now.
Thank you so much.
Yeah.
Our next question comes from the line of Microbalance with City. Please proceed with your questions.
Good afternoon, I was curious if I can revisit the discussion EBITDA margin in three parts first part would.
The dentist operated and studied cable assets.
What are the portfolio attribute that you found that had the highest correlation.
Two.
EBITDA margin performance.
It isn't in broadband revenue mix artist penetration the size of the footprint just curious.
What what's the most causal factor and then secondly, as you look at where your margin spinning me finish here.
Vs. Some of your public peers.
You have a a bridge of where.
<unk> greatest berrien.
And then the final part of this is just your North Star as you are looking at over the next few years.
Where kenneth margin getcha overtime.
Mike. Thanks for your question in terms of the first item and then maybe I'll, let mark take number two and then we can tag team number three but I've been in the industry for a long time and it's no secret that broadband is.
Where we can drive the most margin and profitability and so that's why we are now a connectivity company. When I joined in October I wanted to set a northstar and that was to be the connectivity provider of choice and every community that we serve and so we lead.
With broadband we want connectivity in the home, but then we also have a <unk> relationship that we are very excited about and so we want to lead also with connectivity outside the home and so we leave with broadband and we put together optimum complete to allow us to drive or go to market.
As we go forward and we know that customers are looking for two things quality and value quality and value and so for us to drive the highest opportunity of margin profitability. We've gotta be laser focused on both of those elements the the value.
You is there now with optimum complete we have studied.
Studied this and we've we've done the research and we're excited that this is an offer that we believe will allow us to compete and provide customers. The value. They are looking for on the quality side, we now need to make the strategic investments to ensure that our products are service network are providing the level of.
Quality to allow us to drive maximum profitability in this in our portfolio.
Yeah, Michael just on the margin this year, we're not gonna give specific guidance, but as you as you see our margins are compressed given the top line growth pressures in the the video subscribers in this.
The subscriber losses, we've had over the past year.
Coupled with that we've made investments is Dennis mentioned in our in our sales teams in our CX teams to really improve the quality.
Of what we can do as a company.
But we're pretty optimistic with the new team an optimum complete this.
This network, who which is yielding just incredible savings on a truck roles in volumes.
We're pretty bullish that we can return to normal levels over time.
Again, I call attention to the Opex reductions, we've had quarter over quarter. The first time since the pandemic.
$26 million or 4% reduction.
And we also see our gross margins are also improving 60 basis points here over here.
So we're optimistic that there is a clear path to have.
Better second half EBITDA performance in the first half.
And then in the longer term again, we're focused on returning to sustainable customer revenue and cash flow growth, which.
Which will get us to where we need to be from a margin perspective, yeah and you asked a question about peers I believe in bridging and ultimately you know we don't have the same scale. So on the programming side, we have a bit lower margins and we're looking at the video business that I know, we haven't talked about it at all but we are looking at.
That business as well and figuring out how that fits into the portfolio going forward. We know people are watching video obviously more than I've ever. We know that there are there is interest in linear there's an interest in screaming and so we're looking at right sizing that product in our portfolio.
And evolving that go to market going forward and so that will be a focus of ours as well.
Just one quick one on that is it possible to consider outsourcing business has had an option for all peace.
Anything is possible. So we are looking at all of these options.
We build out into Newbuild territories were actively having conversations of should we build out video infrastructure or should we be looking at partnering as some of our.
Others have done and so those are all options that we're looking at as we evolve the portfolio.
Thank you.
Thank you and that is all the time, we have for questions today I would now like to hand, the call back over to management for any closing comments.
Thanks, everyone for joining time hesitate to reach out even have any further questions. Thank you. Thank you. Thank you think so.
Thank you that does conclude today's teleconference. We appreciate your participation may disconnect. Your lines at this time enjoy the rest of your day.