Q2 2023 Altice USA Inc Earnings Call
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Greetings and welcome to the Altice USA second quarter 2023 results conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Sarah Friedman Investor Relations. Thank you Sir you may begin.
Hello, everyone and thank you for joining us before we begin I'm thrilled to share that Nick Brown is currently on parental leave us he and his family have recently welcomed their first baby turning to our agenda. We are joined today by Al cheese, USA, Chairman and CEO , Dennis Matthew and CFO Mark <unk>.
Together, we'll take you through the presentation and that'd be available for questions about our results on today's presentation may contain forward looking statements. Please read the disclaimer on slide two.
Please go ahead thank.
Thank you, Sarah and a big congratulations to Nick kicking.
Kicking off on slide three when I joined the company in October of last year I committed that at Altice USA, We would act with discipline and focus to execute on our mission for optimum to be the connectivity provider of choice across all of the communities that we serve.
Today I'm pleased to share that we're continuing to make great progress in delivering on this strategy with sustainable operational and financial improvements across the business.
You know, we're seeing significant achievements across our care support and broader service experience due to our investments in simplifying customer experiences and improving field operations. Our diligence in this space is leading to higher customer satisfaction metrics, including double digit growth in N. P. S.
An impressive reductions in call volumes service visits and overall rates are focused on creating better experiences for our customers has led to lower operating costs and is resulting in stronger net net addition performance in the quarter compared to the prior year.
This quarter, we strengthened our product portfolio and offers to deliver greater value and experiences to our customers.
Notably in earlier than planned in the quarter, we launched ultra fast eight gig symmetrical fiber internet to more than $1 7 million passengers, representing the widest availability of eight gig speeds in the country.
The milestone cement optimum as the nation's largest eight gig internet provider and gives us a unique competitive advantage in the marketplace.
Finally, we are seeing stabilization in our operating and financial metrics by delivering on better customer experiences and by executing with greater financial discipline.
Our strategy to provide the best products the best networks, the best customer experiences and the best employee experiences through operational execution and financial discipline is leading to stronger trends across our residential and <unk> businesses.
Our work here is not done, but I am optimistic about the achievements in the quarter, which are leading indicators of a return to sustainable broadband and cash flow growth.
Turning to slide four I'd like to get into these trends in greater detail and we revisit our four key strategic pillars.
First a moment on our people and our culture over the last several months, we've welcomed over 30, new leaders to complement our existing team.
We've attracted high performing executives with significant experience from across the U S Telecom and cable industries to run finance sales product care operations and other critical positions at optimal.
<unk> to attract retain and develop our talent remains a priority for us.
We can be the best in class in everything that we do.
We also recently introduced a new regional market structure that will allow us to be more nimble responsive and hyper locally across our footprint in ways that we have not done before positioning us to achieve growth and be the connectivity provider of choice in every community that we serve.
With this new model each of our five new areas now has an experienced and dedicated general manager who owns the regional P&L drive sales leads competitive response and drives operations that includes customer experience employee experience and community engagement.
This is our approach empowers our local teams and will accelerate our ability to deliver our go to market strategies based on the unique characteristics of each market recognizing the differences in our markets, while continuing to leverage the benefits of being part of a large national organization will be a competitive advantage.
For us going forward.
Confident that we now have the right structure with the right people, who bring experience focus and commitment to our customers and employees.
Turning to our gross color as a reminder, in May we entered the market with our converged optimum complete internet plus mobile offer demonstrating the power of our connectivity services inside and outside the home.
We're pleased with the results and specifically with the attention it is bringing to our mobile service as evidenced by our mobile attachment acceleration we.
We saw impressive early mobile attachment rates for new broadband customers more than doubling since the launch of optimum complete and have more room to grow.
The optimum complete value proposition not only helps accelerate mobile growth, but it translates to better customer stickiness and greater customer lifetime value.
We also deployed optimum stream our streaming video experience that provides access to our full optimum TV service, including live T V. D V. Our on demand and more alongside any other streaming app available in the Google play store.
The CPE is lightweight and sleek and it gives customers more viewing options and doesn't require a coax connection allowing for easier self installation and we just upgraded the remote to include 10 digit keys. In addition to voice capabilities to blend the full experience of linear TV and streaming opt.
Optimum Scream creates a better video experience on fiber compared to our legacy boxes, which will help to accelerate fiber customer additions and migrations to that end. It is officially now our mark key video product and it's available to all fiber customers as their primary video solution.
It is also available to new HFC customers in select markets and we will be fully available across the majority of our markets by the end of this year.
In addition, we are identifying opportunities to manage our customer relationships and a more thoughtful way through proactive retention programs and the enhancement of our pricing strategy. We are also exploring ways to deliver greater value with targeted rewards for loyal customers, including gifting speed tier increases.
Our goal is to simplify our pricing structure to benefit our customers and topline performance reinforced the value of our products and experiences and of course to remain competitive we will begin rolling out pricing loyalty and proactive retention programs to select markets later this year shift.
Shifting gears to be to be this is an exciting area of opportunity for us.
We are renewing our strategy around b to B with an experienced new leadership team as of June which brings a regimented focus on growing our b to b business through expanding our product portfolio refining our go to market strategy, improving conversion rates through better onboarding and converting business customers to fiber utilization.
<unk> in a more meaningful way.
At the end of June this team was already making progress in expanding our product portfolio, having enabled single line business hosted voice connections versus requiring multiple lives, which resulted in an immediate take rate. In addition, we continue to scale, our fiber voice capabilities to offer multiline services to custom.
<unk> of all sizes, we are actively working on expanding the availability of voice solutions to <unk> customers across the west and we will launch a business services optimum complete bundle later this year, bringing the best value proposition of mobile and broadband services to our business customers.
Other areas of opportunity within B to B include the growth we are seeing in fiber circuit sales to tier one and tier two wireless carriers.
Enforcing our superior network quality as a trusted partner to some of the nation's largest wireless carriers.
We also saw a solid win rates on E rate bids for the upcoming school year, providing integral connectivity services for local case with 12 education segment.
Moving to the third pillar our network as I mentioned in the quarter, we launched eight gig symmetrical fiber service available to more than $1 7 million passengers, which strengthens our competitive advantage in our fiber markets our ability to launch eight gig symmetrical speeds because the optimum fiber is the.
Applause using state of the art <unk> PON technology.
<unk> enables multi gigabit speeds <unk> PON technology is superior to the legacy G PON or older standards used by many other fiber providers today and from our experience it would likely require significant capital investment to upgrade to a new network infrastructure that could match our network speeds.
And performance.
And optimum West we continue to upgrade the remaining network to DOCSIS three one to bring faster speeds and enable more bandwidth we upgraded an additional 70000 passengers in Q2 are.
Our teams are also actively innovating and we see a path to deliver multi gig speeds over DOCSIS three one using mid split architecture I'm pleased to share that we successfully tested in our labs uptick two gigabit download speeds and 200 megabits upload speed over DOCSIS, three one and we'll keep pressing.
To deliver the best speeds at a great value.
Thanks to both our DOCSIS and fiber upgrades, we offer one gig speeds in almost 95% of our entire footprint and we boosted our fiber capabilities to multi gig all of which gives us tremendous runway to bring customers to faster speeds as broadband usage continues to grow.
Finally, due to all our investments are broadband services are delivered with 99, 9% reliability, which is what we know matters most to our customers. This leads to our fourth pillar customer experience, which is a priority across every single team at the company.
We're finally getting better at bringing digital to the forefront of customer experience. For example, we enabled text message communication for things like appointment confirmations outages or when payments are due simple tools like this have helped drive a decline in the number of inbound calls which has a direct correlation on call.
Cost control.
Earlier this year I committed that we were planning to launch a new customer app as part of the CX and care journey I'm pleased that last week, we began to rollout. This new my optimum App, which offers an enhanced digital service app for optimum customers to manage their in home Wi Fi experience troubleshoot issues using intel's.
And assistance and make payments and manage their bill all in one place our progress here is significant from improving our onboarding experience to providing tools to help our customers better understand and access our services offering simplified experiences to meet customer needs.
These programs are having a direct impact on our customer experience metrics, which translate into lower cost to serve the customer.
Let's now turn to slide five.
Mark and I frequently get asked what Kpis, we track it give us the optimism that we are successfully executing our strategy and heading toward a return to growth on this slide you can see a few of these customer experience metrics and Mark will later review some financial Kpis all of which we would expect to turn in the right direct.
Before we get back to customer and financial growth.
First on N P. F. R. T N P S or transactional net promoter score is up 19 points year over year in Q2 P.
T N P. S measures our customers willingness to recommend our services across care field retail and said.
We've seen increases across a wide range of NPS scores, including for our service visits Onboarding experience and fiber services with double digit point increases in each of these categories.
These N P. S improvements once again signal that our dedication to improving and simplifying the customer experience is resonating and making an impact on how our customers feel about optimal.
Another important highlight is how we are easing the onboarding experience with the wider adoption of self installation and the impact it's having on our business.
Self installation minimizes both cost and time for optimum customers and our teams have enhanced our self install process to make it even clearer faster and simpler for our customer to connect to our services.
We have had great success in accelerating the pace of self installations, which has grown 49% in Q2 year over year from 22% of qualified gross additions in Q2 of last year up to 34% in Q2 this year.
This has been a tremendous cross functional effort with our sales care and field teams partnering to give our customers new and simple solutions at every single touch point.
<unk> is choosing a self installation over a professional install yields many benefits customers enjoy that it is fast easy and doesn't require an at home appointment and for our business. It translates into fewer installation truck rolls.
Self install remains a huge opportunity for us and we will be leaning into it more in the second half of this year.
Moving to truck roll and service visit trends higher self installation adoption is just one piece of our lower overall truck rolls.
Bind with improved network and product quality and simplified effective troubleshooting tools, both on the customer side and in our field operations. We've seen 300000 fewer truck rolls over the last 12 months supported by a 10% decline the rate at which a customer acquires a service visits annually.
In addition to fewer service visit truck Rolls, we are lowering the frequency at which we need to perform network maintenance truckloads, both through better network quality and improving tools around network repair.
Earlier this year, we launched a new tool for proactive network management, which enables us to identify and resolve network issues faster <unk>.
Traditionally our right out as required to find issues such as damaged cables taps or other equipment, but with the launch of this new advanced tool. Our team can now pinpoint the exact location of impaired network, resulting in faster detection lower time to repair a better network experience for our customers.
And lower Opex related to fewer truck rolls to physically identified network impairments.
Lower overall truck roll volumes and improve service visit rates reflect a huge opportunity for us to continue reducing costs, while delivering a superior service experience.
On the same note we saw 900000 less inbound calls into our call centers in the last 12 months. Thanks to our self service features proactive communications and ongoing experience improvements, we see the annual rate at which customers contact us for account questions our technical troubleshooting.
Also continued to decline improving 7% in Q2 year over year.
First time right as our model when we consider the customer experience and we are laser focused on getting it right. The first time on everything from installations and onboarding to addressing any customer needs.
When we do get a technical or customer care call. We want to ensure that we give each customer thoughtful tailored and specific solutions that it is also solve the very first time around.
This attention to customer experience is beginning to improve voluntary churn year over year voluntary churn in Q2 was relatively flat. Despite the incremental competition, we have seen over the last 12 months.
Moving that easing customer pain points and focusing on total customer experience gives us runway to continue to see improvements involuntary churn trends.
Overall these kpis are early indicators, which support that we are making progress on our strategy and we will continue to press hard on these areas to deliver the best customer experience, while structurally reducing operating costs and improving trends.
Finally, before turning it over to Mark to review, our quarterly business and financial performance I wanted to take a moment to address the news you may have seen coming out of Portugal.
Last month, the Portuguese authorities identified that Altice, Portugal was allegedly the Friday as a result of harmful practices and misconduct of certain individuals and external entities and that the company was cooperating with the authorities.
In response to these circumstances in Portugal, we have made the immediate and prudent decision to launch our own internal investigation at Altice USA.
I was appointed chairman of the Board in addition to my responsibilities as CEO and.
And we placed our head of procurement on leaf.
Since the commandment commencement of the investigation, we have subsequently separated him and hired a new chief procurement officer, Jennifer Yogi, a 25 year veteran in the U S cable procurement industry.
For understanding that we do not have any additional information to share at this time and of course, if there is anything material to share in the future we will do something.
And now I'll turn it over to Mark.
Thank you Dennis turning to slide seven I'd like to begin with some key highlights demonstrating our commitment to financial and operational discipline and how that is reflected in our two Q2 performance.
First we have stabilized broadband losses and for the first time in five quarters, we've improved broadband it adds versus the prior year, a promising indicator of our go forward customer expectations.
Moving onto <unk>, we have continued our paths of stabilizing ogpu declines and I'm excited to highlight that we've as sequentially grown residential or poo and Q2 through disciplined acquisition pricing broadband speed up hearing and retention segmentation.
Our operating costs have come down in queue to declining sequentially from Q1 and from the peak of our recent Opex spin in Q4 of 2022.
These lower operating costs contributed to improve margin trends, which will come back to momentarily.
In addition to Opex moderation, we brought down capital spin and Q2 stepping down capex sequentially versus force first quarter by 19%.
And last I want to highlight that we are well positioned our debt maturities schedule. Following the men didn't extend transaction that we did at the end of last year to extend about half of our 25 and 26 term loans to.
28.
We raised a new 1 billion senior guaranteed note April 2023, we use the proceeds to repay outstanding borrowings drawn under the revolving credit facility.
We ended Q2 with over $1.8 billion in liquidity through a combination of Undrawn, RSC F and ending cash balance, which positions us well to address near term maturities.
As always we will continue to be off to our domestic and proactive and managing our debt maturity profile.
Turning to slide eight let's go deeper on quarterly customer trends.
As I said earlier for the first time in five quarters, we came and stronger and Q2 compared to the prior year with net losses of 37000 compared to 39000, and Q2 of 2022 and a proven of approximately 3000 it adds year over year <unk>.
Recall, we typically have a seasonally low point in net additions during the second quarter due to the impact of disconnects and our University footprints, primarily an optimum west.
Still a lot more work to do but it's the first sign that our optimum start Asia Dennis reviewed is taking hold.
Furthermore, we continue to be impacted by the small housing market and a low move environment.
Plus we have ongoing pressure from both fixed wireless and competitive fiber operators. Despite these headwinds we do see improved trends in parts of our footprint, we're competing throw a fiber network upgrades and improve go to market strategies.
While much of the macroeconomic industry and competitive trends are out of our control. We remain focused on how we can drive continued improved performance.
As an example of this recall last quarter, we highlighted nonpay trends worsening year over year due to macro pressures and Q2, we reduce those year over year declines by nearly 80%.
We attributed to partly to new programs to proactively notify customers when their bills are due as well as programs who care for the individual needs of our customers.
As a result, we saw significant reduction and customers who went into collections compared to Q2 last year. Another example of ways that we are enhancing our customer communication and overall experience leading to improve customer trends.
In addition, we are directly addressing competition by strengthening our marketing and advertising to Holly our network speed experience and product superiority, ensuring customers know that the quality and value of optimum is unmatched by new entrants.
On the right side as I mentioned earlier, we are seeing acceleration, an optimal mobile growth, adding 16000 lines and Q2 or plus 35000, when adjusting to include only paying subscribers.
Call last year, we ran a promotion for free one gigabyte mobile data plans for 12 months.
And expect to begin to close the gap between reported and adjusted mobile lines by next quarter is a majority of the legacy free mobile customers migrate off the free plan.
Are positive trends in optimal mobile are supported by our optimal complete offer as well as better sales training incentives to help our employees promote and sell optimal mobile through our existing distribution channels.
Finally in light of our converge strategy with optimal incomplete I'd like to note that we have updated our disclosures around residential revenue in <unk>.
Mobile service revenue is now reported in residential and business service revenue lines and mobile equipment revenue sits in other.
We have restated revenue in our food through 2021 to align with this reporting.
This updated disclosure highlights our focus on driving improved average revenue per account across all of our connectivity solutions moving.
Moving to slide nine we will review our fiber progress.
We added an additional 287000 fiber passings in the quarter, which brings us to more than 500000, new fiber passengers year to date pending Q2, with just under $2.7 million fiber passings.
We continue to accelerate the pace of new fiber customer additions, adding 40000, new fiber customers through growth.
Growth additions and voluntary migrations of existing customers. We ended Q2 at 250000 fiber customers. So we continue to see performance and satisfaction benefits out of this cohort.
First our broadband product NPS continues trending higher on fiber versus HFC, which reflects our improved customer trends in fiber markets second monthly.
And monthly broadband revenue per customer for new customers, taking our fiber product remains consistently higher compared to new HFC customers unless we are seeing it over a 10% point differential of better survivability. After the first 12 months on fiber versus HFC, which indicates a significant.
Term reduction opportunity.
On usage, we continue to see customers, taking in warning faster speeds today, our broadband only customers average over 600 gigabyte of data usage per month and this continues to trend up.
Our fiber plan has the capacity to handle well beyond this level of data usage and canal delivered up to eight gigs symmetrical speeds and the majority of our fiber footprint.
Looking ahead is Dennis mentioned, our focus today with respect to our fiber program is to ramp up sales and marketing to more more customers onto the new fiber network as we temporarily pause some capital spent.
Our fiber builds to date or focused on the east optimum footprint with about 46% of the east upgraded to the most advanced fibre technology.
We have just 110% penetration of our $2.7 million fiber passings today, with a backdrop of financial and customer experience benefits on fiber strong NPS scores improved turn rates and superior network quality. It makes sense for us to use this as an opportunity to derive moral R. I.
Strengthening our customer metrics going forward.
We know our technology and experience is better than any other service or there is fixed wireless or legacy fiber company. Our goal is to reinforce our market leadership has the best network to attract the best customer relationships to optimal.
Turning to slide 10 on revenue and expenses and Q2 total revenues declined five 6% year over year, driven by declines in a residential and news and advertising businesses.
Residential revenue was down five 7% year over year, mainly driven by the impact of cumulative video and broadband subscriber losses, we've seen over the last year.
Business services revenues declined 1.9% year over year, driven by SMB in other segments declining 2% and.
Like Pat down 1.4%, although excluding one time sprint early termination revenue in the prior period Lightpath would have grown 1.1% in total business services would have been down 1.3%.
Within other news and advertising revenues decline, 14.8% year over year, and Q2 or down eight 4%. Excluding political revenue, we continue to see macro slowdown in advertising spend but see underlying growth in our direct channels.
Quarterly trend on the right hand side shows revenue stepping up sequentially, representing sequential <unk> growth through disciplined pricing and up tearing as well as promotional roelof weighted towards Q too.
Programming rates continue to increase with more of a step up in Q1 as usual, but overall programming costs continue to come down due to video customer loss.
We continue to also see stabilize operating expenses, excluding share based compensation, which have declined by $14 million in queue to sequentially from Q1.
Which is $40 million lower or 6% lower than the recent pecan opex in Q4 of 2022.
The recent improved Opex trends are a direct result of the improved operational metrics that Dennis highlighted earlier view.
Trucks lower call volumes more self install along with many other improvements across our operations that structurally reduce operating costs swollen enhancing our customer experience.
This leads us to slide 11 on margin trends.
And Q2, we saw 180 basis points of EBITDA margin expansion compared to the prior quarter, which is the first quarter of sequential margin expansion in eight quarters.
And Q2, adjusted EBITDA margin was 39.7%, reflecting are disciplined approach to operating expenses and a balance of rate and volume on the revenue side.
Operating free cash flow margins increase 690 basis points sequentially to $19, 3%, reflecting the moderation in our capex spend quarter over quarter.
This brings me to slide 12 on capital Q2 capital spend was $473 million.
Representing capital intensity of over just 20%, excluding FTE th and Newbuild Capex capital intensity would have been 11.4%.
Capital spending step down $110 million or 19% sequentially in Q2 versus Q1, we.
We have remained focused in Q2 and capital investments and growth opportunities in areas, where we are reinvesting back into the business.
And Q2, we have added 287000 fiber Passings 66000, new building Passings and upgraded 70000 passings to DOCSIS $3 a month.
As Dennis noted earlier, you should expect to see a lower level of capital spending and fiber passing is completed in the second half and we may come in below our prior capex guidance for the full year.
And last slide 13 is a bridge of our free cash flow free.
Free cash flow for the quarter was negative $35 million to principally to higher capital spend in the quarter associated with the fiber ability and higher cash taxes due to the timing of payments and the second quarter.
Without the additional $152 million of capital honor fiber project and Q2 free cash flow would have been a positive $118 million.
We continue to expect improved free cash flow over the back half of the year and to be positive for the full year is capex continues to step down.
In summary, and Q2, we have continued to deliver on many of the commitments we set out over the last few quarters and remain steadfast on getting back to sustainable customer revenue EBITDA and cash flow growth that will return us to our target leverage levels and with that thank you all for your time, we owned.
Now take questions and asked that they focus on our business performance operator.
Thank you will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation telling him on the account. Your line isn't the question queue. You May press, two if you'd like to remove your question from the queue for participants using speaker equipment may be necessary to pick up your handset before pressing this.
One moment please for.
More questions.
Thank you. Our first question is from breath Feldman with Goldman Sachs. Please proceed with your question.
Alright, thanks for taking the question.
I'll start off here with Capex I. Appreciate you may not have focused the ability and that how long you're going to be in this reevaluation dates that you can give us any insight.
How much lower capital intensity, it's going to be while you're going through that just so we can kind of think through but we're comforter comfortable marley out for the rest of the year and then just.
Is this cause really predominantly about assessing the integrity of the procurement funnel, where you actually maybe doing a more holistic reassessment of the scope of the fiber upgrade project. Thanks.
Hey, Brian This is data solid hall comment on the second part of your question and I'll, let Mark talk about the Capex trajectory here, but as I mentioned, when we learned about the.
Investigation through the media that the Portuguese authorities had begun we began our own investigation as well and we're going to conduct a thorough.
<unk> of a number of our vendors and that includes some of the vendors who are supporting us from a fiber perspective, and so we feel it's very prudent for us to take a moment.
And paused as we look at as we conduct this investigation and we will continue to drive our fiber strategy in growth strategies as we continue to learn more and as we.
Proceed here, but mark can provide a little bit of guidance on what we're expecting on the capex and fiber side brand as you. As you mentioned, we will have a firmer line of sight as we get deeper into the investigation, but given the construction already in process.
Committed to and kind of paid for we are anticipating that we should have completed at least 600000 passings tongue for fiscal 2023.
That would imply potentially about $100 million to $200 million or less.
Capital intensity than we originally previously disclosed.
Okay. Thanks for that color.
Mmm.
Thank you. Our next question is from Philly.
With J P. Morgan. Please proceed with your question.
I guess, Dennis you mentioned higher competition year over year can you talk at all about what you're seeing from fixed wireless and fiber not just year over year, but quarter to quarter, we've heard of.
Some incremental fiber backing off over the last six months from some of your competitors and then second if you could talk about the your expectations and gross and churn on the wireless side over the next couple of quarters and you start Comping, that's promotions coming off that would be great as well. Thank you.
Oh, absolutely fell from a competition perspective, we still see aggressive competition.
From fixed wireless you know as we looked at the data and we look at availability, we do see availability across the footprint of course, there's <unk> capacity constraints.
But we believe that we're very well positioned that's why we launched optimum complete provide.
Provides a value when you bundle both broadband with mobile and when you look at other fiber providers, we have a better product and a better value with $300 annual savings and so while we see fiber competition, we do while we see the fixed wireless.
Competition, we're very comfortable we have the right.
Tools were also seeing increased fiber overbilled or competition in the west as we looked at the data. We do think that it's now grown to 30, 35% in the west.
Which historically has been more than the 25% range, but again I believe that we have the right tools with optimum complete to compete.
And I'm very excited about our local management team that we've now put in place.
We have <unk> that are deployed across our footprint and they are going to help us compete a much more effectively.
At the local level as we get into town by town and as we look at the competitive offerings will be able to be to evolve and be nimble to be able to drive growth that that local level. So we feel really good about that on the mobile side, we offered that.
Free promotion crew Q2 of last year, we think there is a little bit more that will roll off in queue agree we've been able to convert 60% of those into paying sub so we think there's going to be stabilization we.
We feel really good about the mobile growth that we've seen.
Since the launch of optimum complete we have been able to double R attachment rate of mobile and so we view that mobile.
We continue we're going to see continue to see mobile acceleration in the second half.
Thanks.
Yep.
Thank you. Our next question is from Ben Swinburne with Morgan Stanley . Please proceed with your question.
Hey, guys. Good afternoon, I guess two questions you guys talked about and Ah wrapping up your sales efforts I couldn't tell if you're sort of <unk>.
Redirecting some of the Capex savings that you may be seeing this year I think he talked about $100 million or so into opex I try to drive volume that was a sort of a comment in your prepared remarks I wanted to get more color on that and then programming Cos I think for supper up like three would over three per cent this quarter and they've been trending lower.
I guess anything one time this border or any help thinking about the programming cost growth on a per customer basis going forward and not sure. If you guys are maybe negotiating the rates are seeing things there. Thank you [noise].
Yep that I'll I'll take the first part and then all growed over to Mark on the programming side on the sales it's not at all about driving up Opex, we have stabilized opex and we've built up our channels, it's all about execution and driving execution, we've made some operational.
Fixes and system level fixes so that we are more effectively selling fiber in our fiber footprint. We did have circumstances, where we we're not offering fiber.
Across the board and we've made some system level changes to ensure that we are offering fiber in the footprint, there's still some incremental.
Incremental fixes that we need to continue to drive we've also invested in our retail centers in our door to door and we're going to continue to drive messaging around fiber in these channels. So that we can more effectively cell.
From a gross adds perspective.
Two we delivered 40000 fiber ads, which is the best quarter today and 50 per cent of that was on the gross add side 50 per cent of that was on the migration side. So just crew more disciplined operational execution I believe that we can drive more from a gross adds perspective.
On the migration side. There are also some execution challenges that we've had in the past that we fixed I talked about stream. We now have a video solution that works on fiber that we're very excited about as we were migrating folks in the past we did have that.
Had double play we had some challenges there and so now with the new stream solution. We're excited about being able to drive more effective migration as well and so this is all about continuing to drive our our execution as we go forward and I'll throw it over to Mark to talk a little bit about the program.
Cause yeah, Hi, Ben.
<unk>.
Significant one timeline m's reflected in the decline you see on a per customer basis are increasingly per customer basis from a programming perspective.
As I mentioned on the previous call, we're very focused on margin improvement and video as a part of that as well.
So we're taking a much more discipline approach around the video business and in fact, you can see sequentially, we've grown or video margin over 250 basis points and.
And that's.
Partly due to pricing and partly due to tear mix shifts and so.
There were some of the things that we're doing to try to drive video profitability.
Thank you guys.
Yep.
Thank you. Our next question is from Craig Moffett with Moffett Nathan. Please. Please proceed with your question.
Right. Thank you two questions if I could first I'm wondering if you can comment on reports about the possible sale of Cheddar and how you're thinking about that and then second my favorite topic. If you could just talk about your broad standalone pricing and if you've updated your thinking at all about how do we.
Sure that your broadband pricing is competitive with with Ah Verizon fires and competitors in the west.
Hey, Craig. This is Dennis says you cannot understand we're not going to address rumors are press speculation today on Cheddar, we're very focused on executing and driving our strategy across.
All of our lines of business and so that's that's the focus right now I talked a little bit about based management and a little bit about how we're thinking about.
Pricing this is going to be a journey that we're on we're absolutely focused on driving revenue growth subscriber.
Subscriber growth EBITDA growth.
And we want to make sure that we are doing that in a very strategic fashion and part of that is based management and part of that is retail pricing on the base management side, we have not deploy we have not had.
A relationship with the customers that we are there's opportunity there and so we're going to start doing things like speed gifting implementing a loyalty program and then on the pricing side, we do want to take a look at how do we provide more clarity simplicity.
Make sure that we're reducing the number of step ups and really reduce the gap between promotional pricing and retail pricing and so as we look at that we were going to begin with fiber or sub base is a bit smaller there and so we can navigate and managed through that first and then we'll.
We are actively looking at our pricing.
Across the board across the footprint and so more to come on that we are working on some strategies that I believe will be in market. The first half of the year for fibre and we will continue to evolve that strategy as we move forward, but we do want to provide.
Simplicity transparency less.
<unk> bumps and closed that gap as we move forward, while all the time driving overall top line revenue growth and EBITDA and subscriber growth.
Is there a sense that you have to be at price parity with competitors with with your your full rack rates still being quite a bit higher than than say, Verizon fires or AT&T and in the west.
You know in the West we have a whole host of tools that we get we are deploying to be able to win and we're just starting to really drive that local level competition. We believe optimum complete is a great strategy. That's gonna allow us to win the speed gifting is a great tool, we're going to deploy that.
And a whole host of markets later this year and that's gonna really allow us to drive some of our tactics on the base management side, we're going to start to deploy the loyalty program and we will provide some more details on that in the next meeting we believe that as we upgrade.
<unk> dot one across.
The west and take up those 500000 homes 200000. This year. That's also going to continue to improve the customer experience and so these are all things that are going to ensure that we can be competitive and win in the west.
But thank you and by the way congratulations to Nick who I'm sure is listening from home.
Yes, we're very excited for Nick and family.
Thanks, correct. Thank you.
Our next question is from John .
UBS. Please proceed with your question.
Great. Thank you maybe back to the margin question you sure can you shed some nice sequential improvement in margins can that continues to look into that.
Half of the year or there's some seasonal issues, we need to think about and then does the stream product or at least the repositioning the stream practice.
Video product does that does that help from a margin standpoint, as we look into the back half of the year.
I guess, that's on my one but that number to just you know I don't want to hop on the investigation, but.
Yeah, there's a lot of sort of moving parts, but.
Slowdown in Capex fibre sort of hurt the overall high speed data sub trends or or should we think about that as a sort of break on the improvement as we look into the back half of this year or into 24. Thanks.
Hey, John .
Kind of go in reverse order here Uhm, we're very bullish on our broadband trends and we are very.
Very excited about an optimistic about continuing to drive our strategies, we believe that strategies like optimum complete allow us to compete very effectively against mature fiber providers against fiber over builders against fixed wireless, we believe that being able to <unk>.
Vinew to make the upgrades and <unk> dot one in all of the enhancements that in investments that we've made in customer experience Ah really allowing us to win the fewer jump balls that are in the marketplace.
There's a whole and so the local market local management team that we've put in place will allow us to compete much more effectively hyper locally. So I do believe that will continue to drive broadband very effectively in the second half the on the <unk> on the cat on the Capex slow.
[noise] down as we said we've begun the investigation and so there are a number of vendors that are part of that investigation, which include some that are related to our fiber build and so we're gonna moderate that for now and Mark is already provided some of the details that we are able to share at this time.
In terms of stream.
Scream, we're excited about as the video solution and a as a product in terms of providing a much better solution, particularly on fiber, where we had some challenges with our video solution. Historically. So I think this will also help us from driving broadband and driving video on fire.
Uber as we move forward from a margin perspective, Marco crowed over to you Yeah, I mean, we think.
We're very pleased with the rebound and margins that you've seen here.
And we're we're very focused on not and seeing sniffing and increases in <unk> for the full year 2003.
As I mentioned in my earlier remarks, we could see a slight uptick in the second half just tied to pushing a little harder on marketing, but again will monitor it doesn't take a very balanced approach I would say I would expect our margins for the rest of the year and full year to aggregate can be better than the first quarter margin save some.
So we feel like we're in a good spot now and will continue to to take a measured imbalance approach on driving growth.
Okay. Okay.
Mhm.
Thank you. Our next question is from Jonathan Kaplan with New Street. Please proceed with your question.
Thanks, So two quick ones by ma'am, we saw a big deal for fiber assets price and the avs market.
This week I'm wondering if that's a market that you guys had looked at if there's anything in your capital structure that prevents you.
From doing something similar with with your fiber assets.
And then I'm wondering if you can give us a little bit of color on the subscriber trends in the east persons.
Versus the the west Thank you.
Hey, Jonathan I'll throw it over to Mark to talk a little bit about the fiber question yet.
We did see and then.
Certainly in the news as well and we are considering all kind of potential sources of financing and certainly one that we are looking at a considering and we will look.
To to drive as much liquidity in the business as possible and that may be an alternative for us as well.
Yeah on the <unk> on the subscriber trends as as I've mentioned before two two is typically seasonally more challenging than Q1 that being said, we did see some year over year improvement, we've got a number of headwinds as mark alluded to in terms of.
The slowdown and move certain months, 20% less moves across.
Across the board as well as some of the macroeconomic challenges.
That being said, we did see some improvement in the east year over year by about 2000 subscribers. We're seeing some nice improvement on the voluntary side with all the investments that we're making from our customer experience perspective.
I think about the I think about <unk>.
Pre pandemic Q3 was typically seasonally better postpay endemic Q Cree was is typically seasonally seasonally and it has been seasonally worse I do think that we with the momentum that we have will be better year over year, given all of the investments that we're making and cuss.
From our experience leveraging and having a couple more months of optimum complete under our belts and continuing to drive that having the local management teams that we've put in place.
And so I'm optimistic about the subscriber trends as we move forward.
Just to follow up <unk> quickly if I could is there anything in your newly negotiated that deals with the complicated doing an atheist deal or or prevent you from doing doing instruction like that.
Well, yes, Jonathan there is there is not anything that would preclude us from doing the a P. S. Two.
Nathan Thanks very much.
Mhm Yep.
Thank you. Our next question is from <unk> with Evercore ice please.
Please proceed with your question.
Good afternoon, and thanks for taking my question, one broadband are true and one on the balance sheet. So if I could just follow up on the Prague anarcho discussion.
You're consistently adding on faster broadband speed tiers, perhaps more so than your peers last year, you began rolling out to gig in five G. <unk>.
<unk> five are available across nearly 2 million passing.
When do we start to see the benefits and broadband speed up hearing drive a more positive inflection and trajectory with <unk> and Dennis to your commentary earlier about maybe starting with tweaking the pricing on fiber in the first half of next year suggest maybe any meaningful improvement may not occur until the back happen.
24.
I know you're not guidance anything, but it's not the right way to think about it.
And then on the balance sheet.
<unk> is elevated free cash one remains pressure I think you have about $750 million that coming due next year and 1.6 billion in 2025, I know you've been proactive with extending some of your maturity and has a decent amount of liquidity, but can you expand on how you're thinking about the balance sheet at this point, what's your comfort.
[noise] level operating at these levels and are there any levers you might be looking at to strengthen the overall position. Thank you.
Oh, great. Thank you for the question on the broadband or Poo peace, we're just getting our feet under us in terms of starting to sell gig in multi gig in a more meaningful way optimum complete is helping us in that regard from a one gig selwyn perspective in queue.
Two we were at 29% and on fiber was at 34%.
When you talk about two and five it was still in the single digits in terms of <unk> and so we are just I feel like we're just getting started we're working with the teams on really starting to improve from my <unk> in terms of channel performance yield productivity, providing the training.
Providing the tools being able to sell the value in helping our teens understand how to most effectively sell the value of gig in multi gig and we're starting to see the improvement as we look at it quarter over quarter, and we're not going to provide guidance on specifically.
Some of those elements, but we're very optimistic about the momentum and we're gonna continue to build on that.
Target just add to that does.
We are down year over year on broadband employ are too.
Turn your attention to the sequential improvement. So we have as you saw in the first quarter moderated are are blue laws in the second quarter here, we've actually accelerated we're up almost over a dollar and <unk> expansion. So I think some of the things that dentists mentioned this helping us drive a better outcome on the <unk> side.
As it relates to liquidity in the dead as I mentioned earlier, we have $1.8 billion of liquidity right now we feel like we're in a very good spot to address or.
Our upcoming maturities, but is Jonathan asked.
We are certainly looking at all options around.
Print vehicles to help our deadline.
That's great. Thank you though.
Yeah.
Thank you. Our next question is from Brian craft with Deutsche Bank. Please proceed with your question.
Hi, Thanks for taking my question I had a couple I guess remark Mark can you help us to think through the outlook for Capex beyond twenty-three in other words, maybe 24 25 and 26 just in broad strokes.
And any time period in mind for returning to your target leverage range and maybe just one more with all the progress that you guys have been making to improve really every aspect of a business do you feel that you've got visibility into when you might be able to stabilize EBITDA. Thanks.
Thanks, Brian .
Yeah, we're not going to specifically give guidance on 24 or beyond that on specific targets around Capitol EBITDA or exactly one were gone ahead are targeted.
Ratios, but I will say is and we're very optimistic around the progress we've made with there's still work to be done and we're very much focused on returning to consistent revenue customer and EBITDA and free cash flow growth.
And that's really one of our focus but unfortunately, we're not gonna give specific timelines around that.
Alright, anything directionally, though on Capex for for the next couple of years.
Yeah, well as we mentioned earlier, we will assess our capital deployment needs annually and we will update you at the appropriate time.
Okay. Thank you.
Thank you there are no further questions at this time I would like to turn it back to the company for any closing comments.
Great. Thank you all and have a good evening. Thank you.
This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.