Q2 2024 Frontier Communications Parent Inc Earnings Call

August 2, 2024

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Cole: Good morning. Thank you for attending today's Frontier Communications second quarter 2024 earnings call. My name is Cole, and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you'd like to queue for a question, you can do so by pressing star one on your telephone keypad. Now, I'd like to turn it over to Spencer Kurn. Please go ahead.

Cole: Good morning. Thank you for attending today's frontier Communications' second quarter 2024 earnings call. My name is cole and I'll be the moderator for todays call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end.

Speaker Change: If you'd like to queue for a question you can do so by pressing star one on your telephone keypad now.

Speaker Change: Like to turn it over to Spencer Kurn. Please go ahead.

Spencer Kurn: Good morning, and welcome to Frontier Communications' second quarter 2024 earnings call. This is Spencer Kern, Frontier's Head of Investor Relations, and I'm joined on the call today by Nick Jeffrey, our President and CEO, and Scott Beasley, our CFO. Today's presentation can be followed through the webcast available in the events and presentations section of our Investor Relations website. Before we start, please see our Safe Harbor disclaimer on slide two. This is a reminder that this conference call may include forward-looking statements that involve risks and uncertainties that may cause actual results to differ materially from those expressed today. During the call, we may also refer to certain non-GAAP financial measures, which are defined and reconciled in our earnings materials. With that, I'll turn the call over to Nick.

Spencer Kurn: Good morning, and welcome to Frontier Communications second quarter 2024 earnings call.

This is Spencer Kurn frontiers head of Investor Relations and I'm joined on the call today Bye, Nick Jeffery, our president and CEO and Scott Beasley our CFO.

Spencer Kurn: Today's presentation can be followed within the webcast available in the events and presentations section of our Investor Relations website.

Spencer Kurn: Before we start please see our safe Harbor disclaimer on slide two.

Speaker Change: This is a reminder, that this conference call may include forward looking statements that involve risks and uncertainties that may cause actual results to differ materially from those expressed today.

Speaker Change: During the call. We may also refer to certain non-GAAP financial measures, which are defined and reconciled in our earnings materials.

Spencer Kurn: Thanks Spencer. Good morning everybody.

Speaker Change: With that I'll turn the call over to Nick.

Nick Jeffrey: I'm here with Scott, and I'm excited to share the highlights from our second quarter results. As you saw in our press release this morning, we delivered another strong quarter of financial and operational results. We've said that 2024 is the year that we would return to full-year revenue growth, and we're proving this out quarter after quarter. Q2 was our second consecutive quarter of revenue growth and our fastest quarter of organic growth in more than a decade.

Nick: Thanks, Brent good morning, everybody I'm here with Scott and I'm excited to share the highlights from our second quarter results.

Speaker Change: As you saw in our press release. This morning, we delivered another strong quarter of financial and operational results.

Speaker Change: We said the 'twenty 'twenty four is the year that we would return to full year revenue growth and we're proving this out quarter after quarter.

Speaker Change: Q2 was our second consecutive quarter of revenue growth and our fastest quarter of organic growth in more than a decade.

Nick Jeffrey: This acceleration was driven by record fiber broadband net ads and strong ARPU growth. Combined with disciplined cost management, we delivered another quarter of solid mid-single-digit EBITDA growth and further expanded our EBITDA margin. From the onset, our team has relentlessly focused on executing our strategy and delivering the long-term value proposition of fiber as we build Gigabit America. This focus has positioned Frontier for growth, separating us from the pack of other fiber builders and highlighting us as a more attractive alternative than legacy cable. Let's talk about the strategy behind these results.

Speaker Change: This acceleration was driven by record of fiber broadband net adds and strong <unk> growth.

Speaker Change: Combined with disciplined cost management, we delivered another quarter of solid mid single digit EBITDA growth and further expanded EBITDA margins.

Speaker Change: From the onset our team has relentlessly focused on executing our strategy and delivering the long term value proposition of fiber as we build gigabit America.

Speaker Change: This focus has positioned frontier for growth separating us from the pack of other fiber builders and elevating us as a more attractive alternative than legacy cable.

Speaker Change: Let's talk about the strategy behind these results on.

Nick Jeffrey: On slide four, you can see the four pillars of our strategy: build fiber, sell fiber, improve service for all of our customers, and increase our operational efficiency. It all starts with our fiber build. In 2021, we set an initial target to pass 10 million locations with Fiverr, and this quarter, we exceeded 7 million passes in total.

Speaker Change: On slide four you can see the four pillars of our strategy build fiber cell fiber improve service for all of our customers and increase our operational efficiency.

Speaker Change: It all starts with our fiber build.

Speaker Change: In 2021, we set an initial target to Paul 10 million locations with fiber and this quarter, we exceeded 7 million policies in total.

Nick Jeffrey: We built our fiber network into a prized asset. We now have nearly twice as many passings as the next closest pure play fiber provider and have significantly more than the long tail of smaller fiber providers. Our second pillar is cell fiber.

Speaker Change: We built all fiber network into a prized asset we now have nearly twice as many power things at the next closest pure play fiber provider and have significantly more than the long tail of smaller fiber providers.

Speaker Change: Our second pillar is sell fiber.

Nick Jeffrey: In Q2, we added a record 92,000 new fiber broadband customers. And for context, that's 37% more than last year. And when you look at the first half of the year, we've grown our fiber customer base by 19%. On that, I'd like to share an anecdote to give you a sense of how our culture supports our business acceleration. Last year, we started a program called Take the Lead to incentivize our employees to sell fast, reliable internet.

Speaker Change: In Q2, we added a record 92000, new fiber broadband customers and for context, that's 37% more than last year.

Speaker Change: When you look at the first half of the year, we've grown our fiber customer base by 19%.

On this I'd like to share an anecdote to give you a sense of how our culture supports our business acceleration.

Speaker Change: Last year, we started a program called take the lead to incentivize our employees to sell fast reliable internet.

Nick Jeffrey: The way it works is that anyone in the company can submit a lead to the sales team and earn a commission once our fiber is installed in a customer's home or business. What's incredible is that so far this year, almost two-thirds of our techs in the field have submitted leads. That's almost double from a year ago.

Speaker Change: The way it works is that anyone in the company can submit a lead to the sales team and earn a commission once all fiber is installed in a customer's home or business.

Speaker Change: What's incredible is that so far this year almost two thirds of our techs in the field have submitted leads that's almost double from a year ago and.

Nick Jeffrey: And importantly, they aren't just selling fiber; they're delivering premium service to our customers, which I'll talk about in a few minutes. I also want to highlight that we reached a major milestone selling fiber this quarter; we crossed the 45% penetration threshold in our base fiber footprint. Why does this matter?

Speaker Change: And importantly, they are just selling fiber, they're delivering premium service to our customers, which I'll talk about in a few minutes.

Speaker Change: I also want to highlight that we reached a major milestone selling fiber this quarter with.

Speaker Change: We crossed the 45% penetration threshold and our base fiber footprint.

Nick Jeffrey: Well, it matters because our base fiber markets are our most mature, with full table competition, and where our brand has historically been weak. Crossing our goal of at least 45% market share in these markets demonstrates that fiber is a superior product that commands high market share and that our brand has fully recovered. It's also evidence of our ability to achieve sustainable and attractive returns on our fiber investment. If we can achieve our penetration goals in our base markets, we can do it everywhere.

Speaker Change: Why does this matter.

Speaker Change: It matters, because our base fiber markets are our most mature with full cable competition and where our brand has historically been weakest.

Speaker Change: Crossing all goal of at least 45% market share in these markets demonstrates the fiber is a superior product to come out as high market share and that our brand is fully recovered.

Speaker Change: It's also evidence of our ability to achieve sustainable and attractive returns on our fiber investment.

Speaker Change: If we can achieve a penetration goals in our base markets, we can do it everywhere.

Nick Jeffrey: And it's important to note that we are increasing penetration while also growing our third pillar, which is to improve customer service. When we started our turnaround, we were one of the most unloved brands in one of the most hated sectors.

Speaker Change: It's important to note that we are increasing penetration while also growing up.

Speaker Change: Our third pillar is to improve customer service.

Speaker Change: When we started our turnaround we were one of the most loved brands and one of the most hated sectors.

Nick Jeffrey: Three years ago, this leadership team made a commitment to put the customer back at the center of our universe. This philosophy is now deeply ingrained in our business. Over the last few years, our leadership team has met every Friday for two hours to examine all of the reasons why our customers were calling us in the first place, and then we've worked systematically to remove thousands and thousands of tiny and sometimes major customer irritations. The results speak for themselves.

Speaker Change: Three years ago. This leadership team made a commitment to put the customer back at the center of our universe. This philosophy is now deeply ingrained across all business.

Speaker Change: Over the last few years, our leadership team has met every Friday for two hours to examine all of the reasons why our customers were calling us in the first place.

Speaker Change: And then we work systematically to remove thousands and thousands of tiny and sometimes major customer irritations.

Speaker Change: The results speak for themselves today.

Nick Jeffrey: Today we have more customers, they stay with us longer, calls are down, our brand has improved, and our customers are significantly more satisfied. And while I'm pleased with this progress, we have an opportunity to be even better, and we will not stop until we've run out of things to fix. Our fourth pillar is to become more operationally efficient. Efficiency is a team sport here at Frontier, with employees identifying areas where we can remove complexity and cost, while our IT teams drive scale with new digital tools and automation.

Speaker Change: Today, we have more customers they stay with us longer coals are down our brand has improved and our customers are significantly more satisfied.

Speaker Change: And while I'm pleased with this progress we have an opportunity to be even better and we will not stop until we run out of things to fix.

Speaker Change: Our fourth pillar is to become more operationally efficient.

Speaker Change: Efficiency is it team sport here at frontier with employees identifying areas, where we can remove complexity and cost while our I T teams drive scale with new digital tools and automation.

Nick Jeffrey: Last year, we shared that we achieved cost savings of double our initial target, and we continue to uncover cost-saving opportunities. Being a simpler, more digital organization gives us the benefit of speed compared to our larger, more hierarchical, legacy competitors.

Speaker Change: Last year, we shed that we achieved cost savings of double our initial target and we continue to uncover cost saving opportunities.

Speaker Change: Being a simpler more digital organization gives us the benefit of speed compared to our larger more hierarchical legacy competitors.

Nick Jeffrey: Over the last three years, relentless execution has brought us to where we are today, the largest pure play fiber Internet company in America with growing revenues and growing profitability. You can see on slide 5 that Fibre represents the majority of our customers, revenue, and EBITDA. We've always said that as Fiverr becomes a greater share of our business, we become an even stronger company. While the success of our strategy is evident in our improving financial performance, it also shows up in our net promoter scores.

Speaker Change: Over the last three years of relentless execution has brought us to where we are today.

The largest pure play fiber Internet company in America, with growing revenues and growing profitability.

You can see on slide five that fiber represents the majority of our customers revenue and EBITDA.

Speaker Change: We've always said that as fiber becomes a greater share of our business, we become an even stronger company.

Speaker Change: While the success of our strategy is evident in our improving financial performance. It also shows up in our net promoter scores.

Nick Jeffrey: On slide six, you'll see that our progress here has been nothing short of astonishing. NPS is the outcome of everything that we do. It's why so many industries rely on this measure as a leading indicator of performance. Here's what the third-party data is saying.

Speaker Change: On slide six you'll see that our progress here has been nothing short of astonishing.

Speaker Change: NPS is the outcome of everything that we do.

Speaker Change: It's why so many industries rely on this measure is a leading indicator of performance.

Speaker Change: Here's what the third party data is saying.

Nick Jeffrey: Our fiber NPS has dramatically improved by approximately 20 points over the past year. Our MPS is now six times higher than our closest legacy cable competitor. Think about that.

Speaker Change: Our fiber NPS has dramatically improved by approximately 20 points over the past year.

Speaker Change: Our NPS is now six times higher than our closest legacy cable competitor.

Nick Jeffrey: Cable is our main competitor, and customers are saying that they are six times more satisfied with our fiber internet than they are with the legacy cable product. We also have the highest NPS of any fixed internet provider, which means Frontier has now set the new standard for our industry. You can see here that our NPS has consistently improved over the past two years.

Speaker Change: Think about that cable is our main competitor and customers are saying that they are six times more satisfied with our fiber internet than they are with the legacy cable product.

Speaker Change: We also had the highest NPS if any fixed internet provider, which means frontier has now set the new standard for our industry.

Speaker Change: You can see here that our NPS has consistently improved over the past two years and this demonstrates that the increase is the result of our systematic approach to improving our customer journeys.

Nick Jeffrey: And this demonstrates that the increase is the result of our systematic approach to improving our customer journey. Now, let's take a look at our financial highlights on slide seven. A couple of quarters ago, I talked about our model for driving sustainable growth. We put fiber in the ground. We connect more customers to our superior fiber product. We offer higher gigabit speeds and value-added services, delivering higher ARPU, all of which leads to revenue growth. And we invest that revenue growth back into our company for the benefit of our customers, our shareholders, and our business. It's a repeatable flywheel that's driving our growth, and here's how it played out in Q2.

Speaker Change: Now, let's take a look at our financial highlights on slide seven.

Speaker Change: A couple of quarters ago, I talked about our model for driving sustainable growth, we put fiber in the ground, we connect more customers to our superior fiber product will have a higher gigabit speeds and value added services delivering higher off who all of which leads to revenue growth and we invest that revenue growth back into our comp.

Speaker Change: For the benefit of our customers our shareholders our business, it's a repeatable flywheel, that's driving our growth and here's how it played out in Q2.

Nick Jeffrey: We passed a record number of homes and businesses with fiber. We grew our fiber broadband customers by double digits, proving that we have the very best product in the market. We grew ARPU because our customers are increasingly choosing gigabit speeds and value-added services to enhance their internet experience, and they're willing to pay for them. As a result, we accelerated fiber revenue growth to 13% and lifted our overall company revenue growth to 2% year over year.

Speaker Change: We passed a record number of homes and businesses with fiber.

Speaker Change: We grew fiber broadband customers by double digits proofing that we have the very best product in the market.

Speaker Change: We grew <unk>, because our customers are increasingly choosing gigabit speeds and value added services to enhance their internet experience and they're willing to pay for it.

Speaker Change: As a result, we accelerated fiber revenue growth to 13%.

Speaker Change: A lifting our overall company revenue growth to 2% year over year.

Nick Jeffrey: And when you combine our accelerating revenue growth with our continuous focus on cost efficiency, we delivered 5% EBITDA growth again this quarter. Before I turn it over to Scott, let's turn to slide eight to recap our 2024 priorities. And our priorities have not changed.

Speaker Change: And when you combine our accelerating revenue growth with our continuous focus on cost efficiency, we delivered 5% EBITDA growth again this quarter.

Speaker Change: Before I turn it over to Scott, let's turn to slide eight to recap our 2020 full priorities.

Speaker Change: And our priorities have not changed this year, we're focused on driving three simple outcomes.

Nick Jeffrey: This year, we're focused on driving three simple outcomes: maintain strong operational momentum, hit our revenue growth milestone, and accelerate our EBITDA growth. As you can see from our results, we're on track to meet or exceed all of these targets. We'll provide more detail on our longer-term financial goals and the path for driving increased shareholder value at our forthcoming investor update. As we said last quarter, the timing of our investor update will depend on our strategic review process, which is still in progress. So we look forward to this update, and we'll keep everybody posted on timing as soon as we have something to share.

Scott: Maintaining strong operational momentum hit.

Scott: Our revenue growth milestone and accelerate our EBITDA growth.

Scott: As you can see from our results we're on track to meet or exceed all of these targets.

Speaker Change: We'll provide more detail on our longer term financial goals and the path to driving increased shareholder value at our forthcoming investor update as.

Speaker Change: As we said last quarter, the timing of our Investor update will depend on our strategic review process, which is still in flight.

Speaker Change: So we look forward to this update and we will keep everybody posted on timing as soon as we have something to share.

Nick Jeffrey: Before I wrap up, I want to say thank you to the builders of Gigabit America. As we've turned around our business, we've also turned around morale and pushed ourselves to innovate for the benefit of our customers. You may have seen the announcement last week that we were the first provider to successfully trial speeds of up to 100 gigabits over a single strand of fiber. We hosted this test in partnership with Nokia at our Fiber Innovation Lab here in Texas.

Speaker Change: Before I wrap up I want to say, thank you to the builders of Gigabit America.

Speaker Change: As we turned around our business. We've also turned around morale and pushed ourselves to innovate for the benefit of our customers.

Speaker Change: You may have seen the announcement last week that we were the first provider to successfully trials speeds of up to 100 gigabit over a single strand of fiber.

Speaker Change: We hosted this test in partnership with Nokia and all fiber innovation lab here in Texas.

Nick Jeffrey: This trial proves that we can use our existing fiber network to support future technologies of up to at least 100 gigabits. This is an industry first, led by our brilliant team of big thinkers and innovators. Our Fibre Labs team is an impressive group and has been awarded more patents in the last three years than in Frontier's entire history. I'm proud of what we've accomplished and more confident than ever in the power of our technology to change lives and communities.

Speaker Change: This trial proves that we can use our existing fiber network to support future technologies of up to at least 100 gig.

Speaker Change: This is an industry first led by a brilliant team a big thing because and innovators.

Speaker Change: Our fiber labs team has an impressive group of being awarded more patents in the last three years than in frontier its entire history.

Speaker Change: I'm proud of what we've accomplished and more confident than ever in the power of our technology to change lives and communities.

Nick Jeffrey: You can read more about our progress building a truly extraordinary company in our 2023 Sustainability Report, which we published in the second quarter. And with that, I'll turn it over to Scott to cover our quarterly results and updated guidance.

Speaker Change: Read more about our progress building a truly extraordinary company in our 2023 sustainability report, which we published in the second quarter.

Speaker Change: With that I'll turn it over to Scott to cover our quarterly results and updated guidance.

Scott Beasley: Thank you, Nick, and good morning, everyone. Our strong operational and financial performance from Q1 continued in the second quarter. Let's start with our operational highlights on slide. We added a record 388,000 fiber passings in the quarter and remain on track to achieve our goal of 1.3 million passings this year. As Nick shared, we also added a record 92,000 Fiverr broadband customers in Q2, while growing ARPU at a rate of 3.5%. Consumer fiber broadband churn was solid in the quarter, remaining roughly flat versus last year's 1.4%.

Scott: Thank you Nick and good morning, everyone.

Scott: Our strong operational and financial performance from Q1 continued in the second quarter, let's.

Let's start with our operational highlights on slide 10.

Scott: We added a record 388000 fiber passing in the quarter and remain on track to achieve our goal of $1 3 million passengers. This year.

Scott: As Nick shared we also added a record 92000 and fiber broadband customers in Q2, while growing <unk> at a rate of three 5%.

Scott: Consumer fiber broadband churn was solid in the quarter remaining roughly flat versus last year's one 4%.

Scott Beasley: Our cost savings initiatives continue. We have achieved $580 million in savings since we started the program in 2021. Last, we completed our second fiber securitization on July 1st, raising $750 million. As we previously announced, we used part of the proceeds to refinance a portion of our term loan while extending the remainder of our term loan to 2031. On slide 11, let's review our financial highlights. Our second quarter revenue was $1.48 billion, up 2% versus Q2 of last year.

Speaker Change: Our cost savings initiatives continued we've achieved $580 million of savings since we started the program in 2021.

Speaker Change: Last we completed our second fiber securitization on July 1st raising $750 million.

Speaker Change: As we previously announced we used part of the proceeds to refinance a portion of our term loan while extending the remainder of our term loan to 2031.

Speaker Change: On Slide 11, let's review our financial highlights.

Speaker Change: Our second quarter revenue was 1.48 billion up 2% versus Q2 of last year.

Scott Beasley: As Nick highlighted at the beginning of the call, this was our second quarter in a row of revenue growth and our fastest quarter of organic revenue growth in more than a decade. We reported $123 million of net loss, primarily due to a non-cash pension remeasurement, as well as a $25 million one-time legal settlement.

Speaker Change: As Nick highlighted at the beginning of the call. This was our second quarter in a row of revenue growth and our fastest quarter of organic revenue growth and more than a decade.

Speaker Change: We reported $123 million of net loss, primarily due to a noncash pension re measurement as well as a $25 million onetime legal settlement.

Scott Beasley: Our $560 million of adjusted EBITDA represents our fourth consecutive quarter of adjusted EBITDA growth. We also generated $374 million of net cash from operations, bringing this total to $1.4 billion over the trailing 12 months. Slide 12 shows our continued progress growing our Fiverr customer base. We grew total Fiverr broadband customers by 19% versus last year. This number is up more than 60% since the end of 2020.

Speaker Change: Our $560 million of adjusted EBITDA represents our fourth consecutive quarter of adjusted EBITDA growth.

Speaker Change: We also generated $374 million of net cash from operations, bringing this totaled to $1 $4 billion over the trailing 12 months.

Slide 12 shows our continued progress growing our fiber customer base.

Speaker Change: We grew total fiber broadband customers by 19% versus last year.

Speaker Change: This number is up more than 60% since the end of 2020.

Scott Beasley: In our base fiber footprint of 3.2 million locations, our penetration rose 190 basis points year over year to 45.3 percent. Since we started our turnaround more than three years ago, we have targeted terminal fiber penetration of 45 percent or better. And this is an important indication that the goal is achievable. We're still growing our customer base in these mature markets, even in the face of legacy cable competition and fixed wireless availability. And we see room for our base penetration to climb even higher.

Speaker Change: And our base fiber footprint of $3 2 million locations, our penetration rose 190 basis points year over year to 45, 3%.

Speaker Change: Since we started our turnaround more than three years ago, we have targeted terminal fiber penetration of 45% or better and this is an important indication that the goal is achievable.

Speaker Change: We're still growing our customer base in these mature markets even in the face of legacy cable competition in fixed wireless availability and we see room for our base penetration to climb even higher.

Scott Beasley: In tandem with our customer growth, we are delivering healthy ARPU growth in our fiber market. This quarter, we grew ARPU by 3.5% year over year, right in line with our long-term target range of 3 to 4%. Our ARPU growth was the result of three drivers: faster Customer Speed Tiers, Annual Price Adjustments, and the Expansion of our Value Added Service. In Q2, over 60% of new customers took speeds of 1 gig or faster, and over 50% of new customers purchased at least one value-added service, including products like YouTube TV and Whole Home Wi-Fi. This quarter, we have also simplified our penetration reporting.

Speaker Change: In tandem with our customer growth, we are delivering healthy <unk> growth in our fiber markets.

Speaker Change: This quarter, we grew our <unk> by three 5% year over year.

Speaker Change: In line with our long term target range of 3% to 4%.

Speaker Change: Our ARPA growth was the result of three drivers faster customer speed tiers annual price adjustments and the expansion of our value added services.

Speaker Change: In Q2 over 60% of new customers took speeds of one gig or faster and over 50% of new customers purchased at least one value added service, including products like Youtube TV and whole home Wifi.

Scott Beasley: As you saw in our trending schedule, we will report base and expansion penetration each quarter. This adjustment eliminates the complexity of reporting on four years of quarterly billed cohorts and better aligns with the industry and how we manage our business. On slide 13, you can see how our strong sales momentum is translating into revenue growth. Together, our customer and ARPU growth drove a 21% increase in fiber broadband revenue, which more than offsets legacy product decline. Consumer revenue grew for the fourth consecutive quarter, and business and wholesale revenue grew 4%, leading to consolidated revenue growth of 2%.

Speaker Change: This quarter, we've also simplified our penetration reporting.

Speaker Change: As you saw in our trending schedule, we will report base and expansion penetration each quarter.

Speaker Change: This adjustment eliminates the complexity of reporting on four years of quarterly build cohorts and better aligns with the industry and how we manage our business.

Speaker Change: On Slide 13, you can see how our strong sales momentum is translating into revenue growth.

Speaker Change: Together, our customer and <unk> growth drove a 21% increase in fiber broadband revenue, which more than offset legacy product declines.

Speaker Change: Consumer revenue grew for the fourth consecutive quarter and business and wholesale grew 4% leading to consolidated revenue growth of 2%.

Scott Beasley: For the balance of the year, we expect consumer revenue to continue to grow in the low single-digit range and business and wholesale revenue to land in the higher end of our plus or minus one to two percent range. Our fiber revenue growth and our disciplined approach to cost management continue to drive EBITDA growth. For the second quarter in a row, we achieved 5% adjusted EBITDA growth.

Speaker Change: For the balance of the year, we expect consumer revenue to continue to grow in the low single digit range and business and wholesale revenue to land in the higher end of our plus or minus 1% to 2% range.

Speaker Change: Our fiber revenue growth and our disciplined approach to cost management continue to drive EBITDA growth.

Speaker Change: For the second quarter in a row, we achieved 5% adjusted EBITDA growth.

Scott Beasley: The team continues to successfully grow revenue from fiber products while strategically managing our legacy copper decline. On slide 15, you can see that our capital investment declined in Q2 as expected. We had cash capital investment of $678 million in the quarter. This was down approximately $350 million sequentially as working capital normalized. It was also down approximately $380 million year over year as our build continued to consume pre-work and inventory that we built up in 2022 and 2022.

Speaker Change: The team continues to successfully grow revenue from fiber products, while strategically managing our legacy copper declines.

Speaker Change: On Slide 15, you can see that our capital investment declined in Q2 as expected.

Speaker Change: We had cash capital investment of $678 million in the quarter.

Speaker Change: This was down approximately $350 million sequentially as working capital normalized.

Speaker Change: It was also down approximately $380 million year over year as our build continued to consume pre work in inventory that we built up in 2022 and 2023.

Scott Beasley: We expect to continue to reduce inventory, and we expect Q3 and Q4 capital investment to be roughly flat with Q2. For the year, we remain on track to deliver lower capital investment in 2024 than in 2023. We are confident that our peak build CapEx is behind us. Going forward, an increasing portion of our spend will be on success-based customer acquisition CapEx as we connect more new fiber customers. Importantly, we remain confident that our fiber build will deliver IRRs in the mid to high teens, well above our cost of capital.

Speaker Change: We expect to continue to reduce inventory and we expect Q3 and Q4 capital investment to be roughly flat with Q2.

Speaker Change: For the year, we remain on track to deliver lower capital investment in 2024 and 2023.

Speaker Change: We are confident that our peak build capex is behind us.

Speaker Change: Going forward, an increasing portion of our spend will be on success based customer acquisition Capex as we connect more new fiber customers in.

Speaker Change: Importantly, we remain confident that our fiber build will deliver irr's in the mid to high teens, well above our cost of capital.

Scott Beasley: Once we are through the investment phase, we are confident that our business will unleash significant growing free cash. On the next slide, we review our capital structure and discuss the benefits of our recent fiber securitization. A few weeks ago, we closed on $750 million of securitized debt in our North Texas market, bringing total securitized debt in North Texas to $2.3 billion. I'll make a few points on the importance of our fiber securitization.

Speaker Change: Once we are through the investment phase, we are confident that our business will unleash significant growing free cash flow.

Speaker Change: On the next slide we review our capital structure and discuss the benefits of our recent fiber securitization.

Speaker Change: A few weeks ago, we closed on $750 million of securitized debt in our north, Texas markets, bringing total securitized debt in north, Texas to $2 $3 billion.

I'll make a few points on the importance of our fiber securitizations.

Scott Beasley: First, they provide a clear path to fully fund our fiber build. We've securitized approximately 730,000 fiber locations to date, which is only 10% of our current fiber pass. Second, fiber securitization has attracted a new pool of investment-grade long-term investors into our capital structure, which should reduce our cost of capital over time. Our most recent securitization priced at a weighted average yield of 7.4 percent, which was roughly 140 basis points lower than our first securitization in August of 2023.

Speaker Change: First they provide a clear path to fully fund our fiber build.

Speaker Change: We've securitized approximately 730000 fiber locations to date, which is only 10% of our current fiber passing.

Speaker Change: Second fiber securitization has attracted a new pool of investment grade long term investors into our capital structure, which should reduce our cost of capital over time.

Speaker Change: Our most recent securitization priced at a weighted average yield of seven 4%, which was roughly 140 basis points lower than our first securitization in August of 2023.

Scott Beasley: Finally, we expect our long-term capital structure to include a balance of securitized and traditional debt. In our most recent securitization, we used roughly $400 million of proceeds to repay a portion of our term loan, which was floating at a higher rate of 9.2%.

Speaker Change: Finally, we expect our long term capital structure to include a balance of securitized and traditional debt.

Speaker Change: And our most recent securitization, we used roughly $400 million of proceeds to repay a portion of our term loan which was floating at the higher rate of nine 2%.

Scott Beasley: We also proactively extended the maturity of our term loan from 2027 to 2031, thereby improving our near-term maturity profile. These transactions illustrate that fiber securitization is an attractive tool for raising new capital, refinancing, and lowering our overall cost of capital over the long term. Finally, slide 17 outlines our updated 2024 guidance. Given our outperformance in the first half of the year, we are raising the low end of our 2024 EBITDA guidance while reiterating the other key components.

Speaker Change: We also proactively extended the maturity of our term loan from 2027 to 2031, thereby improving our near term maturity profile.

Speaker Change: These transactions illustrate the fiber securitization is an attractive tool for raising new capital refinancing and lowering our overall cost of capital over time.

Speaker Change: Finally, slide 17 outlines our updated 2024 guidance <unk>.

Speaker Change: Given our outperformance in the first half of the year, we are raising the low end of our 2020 for EBITDA guidance, while reiterating the other key components are.

Scott Beasley: Our updated guidance of $2.22 to $2.25 billion represents growth of 5% at the midpoint, which would be a significant acceleration versus our 2% growth last year. Before we open it up for questions, I want to say thank you again to the Frontier team for delivering another solid quarter. I'm proud of the work we are doing to build Gigabit America, and I'm confident that our strong financial and operational momentum will continue in the second half of the year. Operator will now open the line for questions. Great

Speaker Change: Our updated guidance of $2 two $2 billion to $2.25 billion represents growth of 5% at the midpoint, which would be a significant acceleration versus our 2% growth last year.

Speaker Change: Before we open it up for questions I want to say, thank you again to the frontier team for delivering another solid quarter.

Speaker Change: I'm proud of the work, we're doing to build gigabit America, and I'm confident that our strong financial and operational momentum will continue in the second half of the year.

Operator, we'll now open the line for questions.

Operator: If you'd like to queue for a question, you can do so by pressing star one on your telephone keypad. If, for any reason, you'd like to remove your question, please press star two. Again, to join the question queue, please press star 1. It's been asked that you hold yourself to one question with one follow-up question. Our first question is from Jim Schneider with Goldman Sachs.

Speaker Change: Great if you'd like to queue for a question you can do so by pressing star one on your telephone keypad.

Speaker Change: If for any reason you'd like to remove your question. Please press star two.

Speaker Change: Again to join the question queue. Please press star one.

Speaker Change: It's been ask that you hold yourself to one question with one follow up question.

Speaker Change: Our first question is from Jim Schneider with Goldman Sachs. Your line is now open.

Jim Schneider: Good morning. Thanks for taking my question. Nick, we've seen a number of announcements from industry players, including 2 Mobile in recent weeks, which kind of suggests that fiber buildouts by your competitors are going to be increasing. So, directionally, does that make you more or less likely to accelerate your own fiber deployment plans, either organically or by finding one or more capital partners? Yeah.

Jim Schneider: Good morning, Thanks for taking my question I think we've seen a number of announcements from industry players, including two mobile in recent weeks, which kind of suggests that fiber build outs of your competitors are going to be increasing.

Speaker Change: So directionally does that make you more or less likely to accelerate your own fiber passing plans either organically or by finding one or more capital partners.

Nick Jeffrey: Yeah, hi Jim. Thanks for the question. I mean, first of all, I'm encouraged that others across the industry see fiber as an attractive market opportunity. This is something we saw three or four years ago. And I'm very pleased that we were the first to really scale up, kind of build across our footprint. Of course, that's been reinforced by the government coming in behind us with the BEAD program, again, signaling strongly that fiber infrastructure is something this country needs, and therefore, given the market structure and the returns we can get from it, it is a very attractive thing. Do I see it materially impacting our ability to build? Not really, nor necessarily us accelerating.

Speaker Change: Yeah, Hi, Jim Thanks for the question I mean first of all I'm encourage that others across the industry C fibers and attractive market opportunity. This is something we spotted three or four years ago and I'm very pleased that we were the first to really scale up kind of build across our footprint.

Speaker Change: Of course, that's been reinforced by government coming in behind US with the pain program again signaling strongly that fiber infrastructure is it something this country needs and therefore, given the market structure and the returns we can get from it is a very attractive thing.

Operator: As I said on previous calls, we've scaled our build very much to act in harmony with the rest of our business. So our ability to sell, our ability to service, our ability to provision customers, all need to work in harmony to make sure that we're maximizing returns for investors across the entirety of our investment, not just our build. So thanks. Good question. Operator, next question, please.

Speaker Change: Do I see it materially impacting our ability to build no not really no no necessarily ethics salary thing as I've said on previous calls we've scaled our build very much to act in harmony with the rest of our business. So our ability to sell our ability to service our ability to provision customers all needs to work in harmony to make sure that we're maximizing.

Speaker Change: Returns for investors across the entirety of our investment not just a build.

Speaker Change: So thanks. Good question operator next question please.

Operator: Our next question is from Batya Levi with UBS. Your line is now open.

<unk> Levi: Our next question is from <unk> Levi with UBS. Your line is now open.

Batya Levi: Great, thank you. Can you provide a little bit more color on the strength of broadband as we saw in the quarter? Any specific region or cohort that did better? And how should we think about the second half with potential ACP impact and against the typical seasonal boost you get? And just a quick follow-up on R2 growth. Can you also provide some color in terms of maybe the deceleration in the growth that we saw? Any impact from the credits that you gave to the customers potentially due to the disruption? That'd be helpful. Thanks so much.

Levi: Great. Thank you can you provide a little bit more color on the strength of broadband adds we saw in the quarter any specific region or cohort that did better.

How should we think about second half are with potential ACP impact and against the typical seasonal boost you get and it just a quick follow up on our two growth can you also provide some color in terms of the maybe the deceleration in the growth that we saw any impact from the credit side you gave.

Speaker Change: Two the customers potentially due to the disruption that'd be helpful. Thanks, So much.

Scott Beasley: Sure, Batya, this is Scott. Let me make a few points on ACP that were embedded in your question, and then I'll talk a little more broadly about Q3 and then follow up with ARPU. So you asked about ACP; it's a relatively small portion of our customer base, about 4%. As we've said before, we've developed a number of transition plans to serve this quadrant of the market, including our two hundred bag plan, but timing is still a bit uncertain.

Speaker Change: Sure about yeah. This is Scott.

Scott: Let me make a few points on ACP that was embedded in your question and then I'll talk a little more broadly about Q3, and then follow up with <unk>.

So you asked about ACP, it's a relatively small portion of our customer base about 4%. We've said before we've developed a number of transition plans to serve this quadrant of the market, including our 200 Meg plan, but timing is still a bit uncertain. We saw some voluntary disconnects from ACP in Q2, but.

Scott Beasley: We saw some voluntary disconnects from ACP in Q2, but we expect the impact to be larger in Q3 and Q4. Now, kind of broadening out to our view of Q3, we expect it to be very healthy. We have strong momentum in our sales channels, and we're selling across an expanding fiber footprint.

Scott: We expect the impact to be larger in Q3 and Q4.

Scott: Now kind of broadening out to our view of Q3.

Scott: We expect it to be very healthy we have strong momentum in our sales channels, we're selling across an expanding fiber footprint.

Scott Beasley: Q3 tends to be the seasonally strongest quarter of the year, and the primary headwind we have is ACP, as I mentioned. When you put all those factors together, we expect Q3 net ads to be up significantly year-over-year, and our team is working hard to beat the record that we just set in Q2. Now, pivoting to your question on ARPU, I'd say we're delivering very healthy growth in ARPU. Q1 was up 6%, and Q2 is up 3.5% year over year.

Scott: Q3 tends to be the seasonally strongest quarter of the year and the primary headwind rehab as ACP like I mentioned when you put all those factors together, we expect Q3 net adds to be up significantly year over year and our team is working hard to beat the record that we just set in Q2.

Now pivoting to your question on <unk>, I'd say, we're delivering very healthy growth in ARPA.

Scott: Q1 was up 6% Q2 was up three 5% year over year we.

Scott Beasley: We do expect Q3 to be roughly flat sequentially as we work through the ACP transition plans and, particularly, the 200-meg plan, but then we expect more of an ARPU pickup in Q4 to end the year right in line with the 3% to 4% range that we've given as our long-term target.

Scott: We do expect Q3 to be roughly flat sequentially as we worked through the ACP transition plans in particular, the 200 Meg plan, but then we expect more of an ARPA pick up in Q4 to end the year right in line in the 3% to 4% range that we've given as our long term target.

Nick Jeffrey: And Scott, perhaps if I could just build on that to remind everybody on the call, we have, as we've said previously, three very strong drivers of ARPU in the business. The first is the kind of core product pricing, which is, of course, aligned to the high value of the service we provide but also, in a generally price inflationary market, tends to go up over time, year over year. The second is speed.

Speaker Change: Perhaps if I can just build on that to remind everybody on the call. We have as we've said previously three very strong drivers that I'll put it in the business. The first is kind of core product pricing, which is of course aligned to the high value of the services, we provide but also in a generally priced inflationary market tends to go up overtime.

Speaker Change: Year over year.

Nick Jeffrey: As data and device trends require faster speeds, and as we introduce new speed tiers and so on, as we've done over the last few years, we see customers very actively migrating up our speed price ladder. And that's a strong indicator of underlying demand and our ability to grow ARPU sustainably over time. And then the third level we have is value-added services. So these are all the kind of extra things that people buy to deliver a really great in-home Wi-Fi experience, like things like Wi-Fi extenders, whole home Wi-Fi, YouTube TV, premium tech support, all those sorts of things.

Speaker Change: The second is speed.

Speaker Change: Data and device trends require faster speeds and as we introduce new speed tiers and so on as we've done over the last few years, we see customers very actively migrating up off speed price ladder, and that's a strong indicator of underlying demand and our ability to grow sustainably over time.

Speaker Change: And then the third lever we have is value added services. So these are all that kind of extra things that people buy to deliver a really great in home Wi Fi experience and I think like Wi Fi extended how how long Wi Fi Youtube TV premium tech support all those sorts of things.

Nick Jeffrey: And whilst we only launched that portfolio relatively recently, it has been incredibly successful for us, and we've got a long roadmap of new value-added services that we'll be bringing to market. And we're very, very confident that customers are going to buy them and that we can sell them across all of our channels. And when you combine those three levels over time, you end up with the ingredients that give us a high degree of confidence. We can grow Apu in the three to 4% range sustainably, as we've said.

Speaker Change: Whilst we only launched that portfolio relatively recently.

Speaker Change: Has been incredibly successful for us and we've got a long road map of new value added services that we'll be bringing to market and we're very very confident that customers are going to buy those and that we can sell them across all of our channels and when you combine those three levers over time, you end up with the ingredients that gives us a high degree of confidence.

Speaker Change: We can grow off of in the 3% to 4% range sustainably if we as we said.

Batya Levi: Very helpful; thank you.

Speaker Change: All right. Thank you so much.

Speaker Change: Okay.

Operator: Our next question is from Jonathan Chaplin with New Street Research. Your line is now open.

Speaker Change: Our next question is from Jonathan Chaplin with New Street Research. Your line is now open.

Speaker Change: Yeah.

Jonathan Chaplin: Thanks, guys. Just following up from Batya's question on ARPU, was there an impact from the hack on ARPU growth this quarter? And can you give us what the impact was from gift cards going away from last year to this year? And then, more importantly, when I look at the pace of gross ads, it's up close to 30 percent, despite, well, I guess looking at year over year, seasonality wouldn't be a factor

Jonathan Chaplin: Thanks, guys just following up from <unk> question on <unk> was there an impact from the hack on <unk> growth this quarter.

Speaker Change: And can you give us what the impact was from gift cards.

Speaker Change: Going away from last year to this year and then more importantly, when I look at the pace of gross adds it's up close to 30%.

Speaker Change: Well I guess looking at year over year seasonality wouldn't be a factor, but that's despite an impact from ACP and despite an impact from the hack.

Jonathan Chaplin: But despite an impact from ACP and despite an impact from the hack, pretty phenomenal growth in gross ads, particularly given that industry growth is down 30 to 40 percent. Can you give us some context? Is this sort of the new level of gross ads that you expect it to be?

Unnamed: [inaudible]

Speaker Change: Pretty phenomenal growth in <unk>.

Speaker Change: <unk> gross adds particularly given the industry growth is is down 30% to 40%.

Speaker Change: Can you give us some context. So is this the new level of gross adds that U S.

Speaker Change: We expect to be at sort of to be able to maintain was there anything one time that helped you this quarter and then I know that.

Nick Jeffrey: that you've sort of put in, cost to acquire over the course of the last two quarters. Are you at a level of spend that you can maintain, and you expect to sort of leverage from here? Jonathan, thanks. Not sure you're sticking to the one-question rule. I hope we got all of those, but Scott, perhaps you should have.

Speaker Change: Sort of put it in.

Speaker Change: Cost of sales.

Cost to acquire over the course of the last two quarters.

Speaker Change: Are you at a level of spend that you can maintain and do you expect to sort of to leverage from here. Thank you.

Speaker Change: Yeah, Jonathan that's it.

Speaker Change: I'm not sure you're sticking to the one question rollover there we go.

Speaker Change: Not all of that let's call it perhaps yourself.

Scott Beasley: Yes, let me unpack those. So first, on your question about the cyber event, as we noted before, we don't believe that the event had any material impact on our financial or operational results. That would include ARPU, so I'll just reiterate that point today that was in a previous 8K. Your second question on the impact of gift cards, we're no longer breaking that out in the training schedule, but it was roughly similar to last quarter.

Speaker Change: Yes, let me let me unpack those so first on the your question on the cyber event as we noted before we don't believe that the event had any material impact on our financial or operational results that would include <unk>. So I'll just reiterate that point today that was in our previous 8-K.

Speaker Change: Your second question on the impact of gift cards, we're no longer breaking that out in the training schedule, but it was roughly similar to last quarter. We don't have a big impact from gift cards, because those were largely.

Scott Beasley: We don't have a big impact from gift cards because those were largely discontinued about a year ago. I'm going to pass it to Nick for questions on broader industry trends. I will say, just adding to your question on the impact of the cyber event on net ads, we largely recovered throughout the quarter. The team did a great job getting everything back online, and getting customers installed. So we don't expect it to have a material impact in Q2, nor any real catch-up in Q3. But I'll pass to Nick on the broader industry trend.

Speaker Change: Discontinued about a year ago.

Speaker Change: I'm going to pass it to Nick for kind of questions on broader industry.

Nick: Trends I will say.

Nick: Adding to your question on the impact of the cyber event on the net adds we largely.

Nick: Recovered throughout the quarter the team did a great job getting everything back online getting customers installed. So we don't we don't expect it had a material impact in Q2, nor any real catch up in Q3, but I'll I'll pass to Nick on the broader industry trend, yes, I mean look on the on the kind of fiber.

Nick Jeffrey: Yeah, I mean, look, on the kind of fiber gross net ad performance, we're very, very pleased with the trajectory that we've got here. And, of course, as we look, building more fiber every single quarter. And just to remind everybody, we're building at a rate of about three and a half thousand fiber passes per day. And that means our feedstock is, of course, getting bigger. But if we take a step back a little bit, I think there are some fundamentals at play here that are now beginning to show through in our numbers.

Nick: Gross and net add performance, we're very very pleased with the trajectory that we've got here and of course as we look building more fiber every single quarter and just to remind everybody. We're building at a rate of about three and a half thousand fiber path things a day.

Nick: It means our feedstock is is of course getting bigger but.

But if we take a step back a little bit I think there are some fundamental play here that are now beginning to show through in our numbers. The first of which is we just have a better product.

Nick Jeffrey: The first of which is, we just have a better product. You know, the cable company's legacy kind of product, the copper-based product, was great in its time, but fiber is the product that the market wants now. And we see this in so many countries around the world, where fiber penetration just goes up and up and up. Because it's a better product, because it's future-proof, indeed, as our recent 100-gig trial with Nokia absolutely proves, the fiber network is the last network any customer will ever have to buy.

Nick: No.

Nick: The cable companies legacy kind of product copper based products.

Nick: And it's time, but fiber is the product that the market wants now and we see this in so many countries around the world where fiber penetration just goes up on up on up because it's a better product because its future proof indeed as our recent 100 gig trial with Nokia absolutely proves the fiber network.

Speaker Change: <unk> is the lock network any customer will ever have to buy.

Nick Jeffrey: But perhaps I'll give you a little insight as well into some of the work we've been doing internally, which I haven't shared on previous calls. And that is, you know, you may have heard me talk about the very intense work we've done with our executive committee on customer service and removing and eliminating customer irritations over the past three or four years. Well, over the course of this year, we've given the same kind of intensity to our sales channels.

Speaker Change: But perhaps I'll give you a little insight as well into some of the work we've been doing internally, which I haven't said on previous calls.

Speaker Change: And that as you know you may have heard me talk about the very intense work, we've done with our executive committee on customer service, and removing and eliminating customer irritations over the past three or four years as well.

Speaker Change: Over the course of this year, we've turned the same kinds of intensity to all sales channels every 10 days or so the entire executive committee plus relevant other leaders meets to go through all of the sales channel data in.

Nick Jeffrey: Every 10 days or so, the entire executive committee, plus relevant other leaders, meets to go through all of the sales channel data, adjusting, optimizing, reviewing again. And I think we're beginning to see that flow through into improved sales momentum, improved delivery momentum, just exactly as we did in our customer care organization, and you've seen the results that that has had on our MPS results. I'm very confident we're going to see the same thing in our sales results as well. Operator, next question. Our next question is from Sam McHugh with BNP Paribas. Your line is now open. Morning, guys. I wanted to ask about the self-installs. I see you've finally launched it.

Speaker Change: Granular detail figuring out, what's working where in which city, which town with street, which state which channel what are the little hiccups one of the things we've missed how do we optimize how do we fine tune how do we learn from promotions how do we experiment with price how do we scale different channels, how do we work with different partners going through all of that.

Speaker Change: On an incredibly granular level and then adjusting optimizing reviewing adjusting optimizing reviewing again and I think we're beginning to see that flow through into improved sales momentum improved delivery momentum just exactly as we did in our customer care organization.

Speaker Change: <unk> seen the results that that had in our NPS results I'm very confident we're going to see the same thing in all sales results as well.

Speaker Change: Operator next question Thanks, guys.

Nick Jeffrey: And that, therefore, becomes an opportunity for us in the future to significantly reduce truck rolls, reduce cost to connect, and so on. And that will continue to grow over time as our base of installed customers just grows as we grow our fiber base. But, Scott, do you want to talk about the cost implications for me? Sure, Sam.

Sam Mchugh: Our next question is from Sam McHugh of BNP Paribas.

Speaker Change: Our next question is from Sam Mchugh with BNP Paribas. Your line is now open.

Nick Jeffrey: And that's primarily because we're still building our network. And as we build a network, we have to go out and install it. The first time we have a customer, we have to install an ONT and set them up, and so on. But as that base of installed fiber customers grows, then when people move out of an existing connected home and somebody else moves in, the self-install process becomes really easy. They just have to plug the router into the socket in the wall, set it up using the app, and away they go.

Good morning, guys I want to talk about the self installs are you finding launched them in July.

Sam Mchugh: There's actually two parts. One is can you just describe what actually involves if I'm a person in the house or after drilling my own rule.

Speaker Change: Any color on like what the person is actually looks like and then secondly, how should we think about that impacting the cost to connect homes have you here, but it's been a color on how that's trending and how do you think that might trend that'd be great. Thank you.

Yeah. Thanks.

Speaker Change: Yeah, let's self installed Ah is a new thing for us as you've spotted and that's primarily of course, because we're still building our network in this because as we build and that way we have to go out and install the first time, we have a customer that is installed on a wednesday and set them up and so on but that's that base of installed fiber customers grows then when people move out of an existing connected home.

Speaker Change: Somebody else moves in the self install process becomes really easy they just have to plug the.

Scott: The route that into the socket in the we'll set it up over the App in a way they go and that therefore, it becomes an opportunity for us in the future. It's a significantly reduced truck rolls reduce cost to connect and so on and that will continue to grow over time as our base of installed customers. Just grows as we grow our fiber base, but Scott you want to talk about the cost them.

Scott Beasley: The cost to connect, as we've said before, the target range is $600 to $800 per connection. We're at the higher end of the range now. But with self-install, unlocking a much bigger portion of our customer base for self-install, that should reduce costs in three areas. You no longer have to do a drop. The ONT is already in the house, and you no longer have to send a technician. So with those cost improvements, it'll take us down overall much closer to the low end of the range, potentially even below that low end of the range over time. Thanks, operator. Operator, next question.

Speaker Change: Okay.

Scott: You're saying that the cost to connect we said before the target range of six to $800 per connection we're at the higher end of the range now, but with self install unlocking a much bigger portion of our customer base.

Scott: For self install that should reduce costs in three areas you no longer have to do a drop.

Scott: <unk> is already in the house.

Scott: You no longer have to send a technician so with those cost improvements it'll take us down overall much closer to the low end of the range potentially even below that low end of the range over time.

Speaker Change: Thanks, Operator, operator next question.

Scott: Yeah.

Operator: Our next question is from Sebastiano Petti with J.P. Morgan. Your line is now open. Hi, good morning.

Speaker Change: Our next question is from Sebastiano Petti with Jpmorgan. Your line is now open.

Sebastiano Petti: Thanks for the question. Just a quick follow up on the consumer fiber ARPU comment about flat. Was that meant to be in terms of dollars? Is that how we should be thinking about that, or year on year growth? And then, relatedly, on EBITDA, it's nice to see the, you know.

Sebastiano Petti: Hi, Good morning. Thanks for the question just a quick follow up on the consumer fiber art to comment about what was that.

Sebastiano Petti: Meant to be in terms of dollars.

Speaker Change: Should we be thinking about that or a year on year growth and then relatedly on EBITDA.

Speaker Change: It was nice to see either raising the low end of the guide.

Unnamed: guide. But it does seem still to be a

Speaker Change: But it does seem still does imply a bit of a slowdown in the back half I mean marginally.

Unnamed: It does imply a bit of a slowdown in the back half, marginally. Is there anything we should be thinking about there? And I guess, zooming out related to that EBIDTA comment. Should we anticipate, you know, obviously, the pace of Fiverr ads is encouraging, and, you know, particularly in light of ACP, but is this just maybe embedding some expectations for SG&A and maybe Costa Connect, particularly in light of what you just said there with the Costa Connect being a little bit higher? And maybe that's why; maybe they're a little conservative.

Is there anything we should be thinking about there and I guess zooming out related to that EBITDA comment.

Speaker Change: Should we anticipate you know obviously the pace of fiber at encouraging and you know.

Speaker Change: Particularly in light of ACP, but is this just maybe embedding some expectations for SG&A and maybe cost of connect particularly in light of kind of what you just said there with the cost of collecting a little bit higher.

Speaker Change: Maybe that why maybe there's a little conservatism in the guide sorry, it's a long winded and multifaceted question to ask you about is there conservatism in the EBITDA guidance. Thank you guys.

Scott Beasley: Thank you, guys. Sure. Thanks, Sebastiano. I'll take those.

Scott Beasley: On ARPU, we said it would be flat, roughly flat dollar-wise, sequentially. That would mean it's up year over year. But with Q3, we've said there's some transition there related to ACP and lower price plans to serve that quadrant of the market before picking up again in Q4. So that's our expectation for ARPU. On EBITDA, the first point I'd make is that we adjusted our midpoint higher, which shows the confidence that we have in the underlying fundamentals of the business. The fiber flywheel that Nick described has a lot of momentum.

Speaker Change: Sure. Thanks, Sebastien I'll take those on our pool, we said it would be flat roughly flat dollar wise.

Sebastiano Petti: Sequentially that would mean, it's up year over year, but with Q3, we said, there's some transition there related to ACP and.

Sebastiano Petti: Lower priced plans to serve that quadrant of the market before picking up again in Q4, so that's our expectation.

Sebastiano Petti: <unk> on <unk>.

Speaker Change: On EBITDA. The first point I'd make is that we adjusted our midpoint higher which shows the confidence that we have in the underlying fundamentals of the business. The fiber flywheel that Nick described has a lot of momentum.

Scott Beasley: The midpoint now implies 5% growth in the second half, which is roughly the same as the 5% growth that we achieved in the first half and a big step up versus 2% growth last year. So overall, we feel good about that growth rate. And then your final question about some headwinds. There are some headwinds in the second half, but we've discussed most of those.

Sebastiano Petti: The midpoint now implies 5% growth in the second half, which is roughly the same as the 5% growth that we achieved in the first half and a big step up versus 2% growth last year. So overall, we feel good about that growth rate.

Speaker Change: And then your final question about some some headwinds there are some headwinds in the second half we've discussed most of those ACP could.

Scott Beasley: ACP could be a slight headwind, because we typically have much higher energy costs in Q3. It's the seasonally hottest quarter, and business and wholesale can be lumpy. We had a really strong first half there, but that business is a little tougher to project with a perfect estimate. So overall, we feel really good about the momentum heading into the second half, which should carry us nicely into next year. Operator, we'll take the next question.

Sebastiano Petti: It could be a slight headwind, we typically have much higher energy costs in Q3, it's the seasonally hottest quarter.

Speaker Change: And then business and wholesale it can be lumpy, we had a really strong first half there, but that business is a little tougher to project with a perfect estimate. So overall, we feel really good about the momentum heading into the second half we should carry us nicely into next year.

Speaker Change: Operator, we'll take the next question.

Operator: Our next question is from Greg Williams with TD Callen. Your line is now open.

Speaker Change: Our next question is from Greg Williams with TD Cowen. Your line is now open.

Greg Williams: Great, thanks for taking my questions. Maybe just dovetailing off your last comment, Scott, can you help us think about the third quarter EBITDA? How much seasonal costs or energy costs will you incur? Should it be sort of the same cadence as last year?

Greg Williams: Great. Thanks for taking my question, maybe just dovetailing off of that last comment Scott can you help us think about the third quarter EBITDA, how much seasonal cost or energy cost will you incur.

Speaker Change: Should it be sort of a similar cadence versus last year, but it's because you're obviously doing costumes too. So some moving parts there, helping us think about it would be great.

Speaker Change: Second question just on your commercial revenue that you're now strong momentum in guiding high end of the plus or minus 2% were there any one time benefits to speak of or just tell us about the momentum and what youre doing doing there too.

Speaker Change: This outperformance thanks.

Greg Williams: Because you're obviously doing cost savings too, so some moving parts there. Helping us think about it would be great. Second question is on your commercial revenue. You are now at strong momentum and guiding the high end of plus or minus 2%. Were there any one-time benefits to speak of?

Greg Williams: Yeah sure Greg.

Speaker Change: On EBITDA in Q3, I mean, we're obviously not giving specific quarterly guidance, but.

Speaker Change: There are some seasonally heavier cost in Q3, primarily energy, but then also growth related SG&A in Q3, as we said is typically the strongest seasonal quarter for customer growth and so the marketing and commissions dollars that flow through SG&A are typically higher in Q3, we still expect to be well up year over year.

Speaker Change: But just want to caution people and remind them about the seasonality of Q3, but overall the second half we expect to grow 5%, which is a really healthy growth rate.

Greg Williams: Benefits to speak of, or just tell us about the momentum and what you're doing there to achieve a solid performance. Thanks.

Speaker Change: I think then on business and wholesale as I've said on previous calls I mean that this kind of revenue can be lumpy you know when you could win a big deal in a quarter or the time between winning a deal and converting it to revenue and so on.

Speaker Change: That said, we significantly outperformed the industry last year and that strong ongoing performance continued into the first half of this year.

Scott Beasley: Yeah, sure, Greg. On EBITDA in Q3, I mean, we're obviously not giving specific quarterly guidance, but there are some seasonally heavier costs in Q3, primarily energy, but then also growth-related SG&A. Q3, as we said, is typically the strongest seasonal quarter for customer growth, and so the marketing and commission dollars that flow through SG&A are typically higher in Q3. We still expect to be well up year over year, but I just want to caution people and remind them about the seasonality of Q3. But overall, for the second half, we expect to grow 5%, which is a really healthy growth rate.

Nick Jeffrey: This kind of revenue can be lumpy, you know, when you can win a big deal in a quarter or the time between winning a deal and converting it to revenue and so on. That said, we significantly outperformed the industry last year, and that strong ongoing performance continued into the first half of this year. You know, our business and wholesale revenues grew 2% in the first half of the year, significantly better than the industry's high single-digit declines.

Speaker Change: Business and wholesale revenues grew 2% in the first half of the year significantly better than the industry as high single digit declines.

Nick Jeffrey: And I'm really encouraged by the underlying strength of our fiber growth in business and wholesale, which grew 9% through the first half of this year. So I expect this fiber growth to continue. It's part of the flywheel that I described and Scott just built on, and it will continue to offset the very predictable declines we see in our legacy copper. So we're off to a strong start in business and wholesale this year. I expect us to come in towards the higher end of our previously expected plus or minus 1% to 2% growth range over 2024. Operator, next question, please.

Speaker Change: And I'm really encouraged by the underlying strength of our fiber growth and business and wholesale which grew 9% through the first half of this year. So I expect this fiber growth to continue its part of the flywheel that I described and Scott just built on and continue to offset the very predictable declines we see in our legacy copper.

Speaker Change: We're off to a strong start in business and wholesale this year I expect us to come in towards the higher end of our previously expected plus or minus one 2% growth range over 2024.

Speaker Change: Operator next question please.

Operator: Our next question is for Michael Rollins with Citi. Your line is now open.

Speaker Change: Our next question is from Michael Rollins with Citi. Your line is now open.

Michael Rollins: Thanks. Just a quick follow up. Has there been anything when you look at the flattening of the copper business revenue that's been helping that line item? And is that something that over time just kind of goes back to sort of the way legacy businesses trend in this category? And then second, on a strategic front, I'm curious if the success that you're having in both Core and Expansion Markets, is influencing the strategic review and, you know, the way you may consider the number of homes you could build at good returns in wave three, the quantum of markets that you may consider non-core and could be up for some form of monetization event, and the way in which, you know, if you do a joint venture of some kind, you know, the way in which you may want to own and control that, just given what you're seeing in the core and expansion.

Speaker Change: Thanks, Yeah, just a quick follow up has there been anything when you look at the flattening of the copper business revenue, that's been helping that line item and that's something that over time.

Speaker Change: It goes back to sort of the way.

Speaker Change: You see businesses trend in this category and then secondly on the strategic front I'm curious if the success that you're having in both core and expansion markets.

Speaker Change:

Speaker Change: Lou and seeing the strategic review.

Speaker Change: And the way you may consider the number of homes you could build a good returns in wave three.

Speaker Change: The quantum of market that you may consider non core and could be up for some form of monetization of that and the way in which you know if you do a joint venture of some kind.

Speaker Change: On the way in which you may want to own and control that just given what you're seeing in our core and expansion.

Scott Beasley: Sure, Michael, this is Scott. Let me take the copper question, and then I'll pass it to Nick. Your question overall on copper ARPU in particular: we've been in a broadly inflationary environment in the last few years, and the cost to run and maintain our networks has risen, particularly on the copper side. We have to pass a portion of that on to our customers, and they understand that because they're seeing that in other parts of their business or their personal lives as well. So, that's point number one.

Speaker Change: Sure. Michael This is Scott, let me take the the copper question and then I'll pass to Nick.

Speaker Change: Your question overall on copper <unk> in particular, we've been in a broadly inflationary environment in the last few years and the cost to run and maintain our network have risen.

Speaker Change: Particularly in the copper side, we have to pass a portion of those onto our customers and they understand that because they are seeing that in other parts of their business or their personal lives as well.

Scott Beasley: Point number two, when you look specifically at copper ARPU, As consumer speed requirements and data usage have continued to increase, we've actually stopped selling some of our lowest speed, lowest price copper internet products. And that has had a lifting effect on overall ARPU. That's what's going on with copper ARPU. Yeah.

Speaker Change: So that's point number one point number two when you look specifically at.

Speaker Change: Copper <unk>.

Speaker Change: As consumer speed requirements in data usage has continued to increase.

Speaker Change: Actually stopped selling some of our lowest speed lowest price.

Speaker Change: Copper internet products and that has had a lifting effect on overall ARPA, that's what's going on with copper our poop, yes and on your question on the strategic.

Nick Jeffrey: Yeah, and your question on the strategies... Oh, sorry.

Speaker Change:

Scott Beasley: Oh, sorry, Scott. I was just asking about copper, where just the business revenue's been flat for the last three quarters, where normally you see legacy copper business revenues fall.

Speaker Change: Oh, sorry, Scott I was just asking about copper business revenues.

Scott: Where that's just business revenues being flat for the last three quarters would normally see legacy copper business revenues fall.

Scott Beasley: Yeah, I think it's the same dynamic that I just described.

Speaker Change: Yeah I think it is the same dynamic that I just described so.

Scott Beasley: Deactivations have kind of been roughly flat. We've had some pricing actions to help offset cost increases. We're managing our copper decline both on the business side and the consumer side. I don't think it is flat yet. We're managing a still declining market, but we've made good progress balancing those different objectives. Yeah, thanks, Scott.

Speaker Change: D Activations have kind of been roughly flat we've.

Speaker Change: We've had some pricing actions to help offset cost increases we're managing our copper declined both on the business side and the consumer side.

Speaker Change: I don't think it is flat yet we're managing are still declining.

Speaker Change: Climbing market, but we are we've had a good.

Speaker Change: Good progress balancing those different objectives.

Nick Jeffrey: Yeah, thanks, Scott. And just the second half of your question on the strategic review. I mean, really, our investor update, which we've talked about, goes hand-in-hand with the strategic review. We set out to build 10 million fiber paths in total, and that objective is now clearly in sight.

Speaker Change: Yeah. Thanks, Scott just in the second half of your question on the strategic review I mean are are really our investor update, which which we've talked about goes hand in hand with the strategic review, we set out to build 10 million fiber policies in total and that objective now clearly insight. So just to remind everybody that now is really a natural time for us to look at the net.

Nick Jeffrey: So just to remind everybody that now is really a natural time for us to look at the next phase of growth and consider all the options for how we could deliver that. And as I've said previously, that includes continuing optimization of our operations and financing structures, strategic partnerships of all sorts, joint ventures, divestitures, mergers, business combinations, and the management team and the board are working very intensively on all of those things.

Speaker Change: Phase of growth and consider all the options.

Speaker Change: How we can deliver that and as I've said previously that includes continuing optimization of our operations and financing structures strategic partnerships of all sorts joint ventures divestitures merges business combinations and the management team and the board are working very intensively on all of those things.

Nick Jeffrey: Now, of course, with IRRs looking good, penetration looking good, revenue growing, EBITDA growing, customer numbers growing, the fact that we're past peak capex for build, the fact that our NPS has gone from industry worst to absolutely hands down industry best means that we have increasing strategic optionality coupled with the fact that the market is becoming generally more convergent. And in a convergent market, you need, you know, wireless access, which is readily available.

Speaker Change: Now of course with kind of a I.

Speaker Change: They are all looking good penetration looking good revenue growing EBITDA growing customer numbers growing the fact that with past peak capex for build the.

Speaker Change: The fact that our M. P. S has gone from industry works to absolutely hands down industry best.

Speaker Change: Meaning that we have increasing strategic optionality.

Speaker Change: Coupled with the fact that the market is becoming generally more convergence in the convergent market you need wireless access which is readily available and of course fiber broadband which is the status of all the assets in a converging market and as the largest pure play fiber provider in America that also brings us a lot of strategic Optionality.

Nick Jeffrey: And, of course, fiber broadband, which is the scarcest of all the assets in a converging market. And as the largest pure play fiber provider in America, that also brings us a lot of strategic optionality. And of course, all of those things need to be thought through. I mean, coupled probably even more so with the fact that we see, we predict, probably, I think everybody would see interest rates perhaps tracking down in the future, improving the efficiency of our build, and improving IRRs as well. So there's a lot of optionality, a lot of things we're thinking through there, all of which comes into the mix when we think about the answer to your question. Operator, next question please.

Speaker Change: And of course, all of those things need to be thought through.

Speaker Change: Probably even more so with the fact that we see we predict probably I think everybody would see interest rates, perhaps it tracking down in the future.

Speaker Change: Improving the efficiency of all build improving I R. Ards as well so there's a lot of optionality a lot of things, we're thinking through the all of which comes into the mix. When we when we think about the answer to your question.

Speaker Change: Operator next question please.

Operator: Our next question is from Shipra Pandey with Bank of America.

Speaker Change: Our next question is from shipper of Pan de with Bank of America. Your line is now open.

Shipra Pandey: Hi, thank you. Yeah, I mean, to kind of answer this in the prior question, but just more so thinking about your strategic review process. And if you could provide any sort of update on visibility for the analyst day and how you're thinking about the timing and the structure of that analyst day. And more so on the strategic review as well and any potential capital sources that may come about. How are you thinking about the best uses of capital that you might get from there?

Speaker Change: Hi, Thank you Yeah, I mean did you kind of answered this in a prior question, but just more thinking about your strategic review process and if you could provide any sort of update on visibility on the analyst day, and how you are thinking about the timing and on the structure at the analyst day and more so.

Speaker Change: Mr Cheesecake.

Speaker Change: And any potential capital sources that may come about how are you thinking about the best uses of capital I think you might get from there and I think you've mentioned.

Speaker Change: On getting a joint venture style partnership before and we just recently saw Bloomberg report that frontiers and talk to form a joint venture. So you know how is how are you thinking about the right economic structure for your team and for frontier.

Shipra Pandey: And I think you've mentioned doing a joint venture style partnership before. And we just recently saw a Bloomberg report on Frontiers and talked to former joint ventures. So, you know, how are you thinking about the right economic structure for your team and for Frontier, whether it's open access and, you know, in region or out of region filled, and where are you in the planning phase on everything? Thank you.

Speaker Change: But access and in region are out of reach himself and where you're kind of planning phase on everything. Thank you yeah, yeah. Thanks.

Nick Jeffrey: Yeah, thanks. As I just said, I think the investor update really goes hand-in-hand with our strategic review, which is an ongoing, very intense piece of work. But we really want to get some firm conclusions on that before we come back and share those with the market. I think on joint ventures specifically, I mean, we won't comment on press speculation, of course, but generically, I think the joint ventures that the industry has seen announced recently just underscore that building fiber in the U.S. is an extremely attractive investment.

Speaker Change: I just said I think these the investor update really goes hand in hand, with our strategic review, which is ongoing very intensive piece of work, but we really want to get some firm conclusions with that before we could come back and share those with the market.

Speaker Change: I think on the joint ventures, specifically I mean, we won't comment on press speculation of course, but generically I think the joint ventures that the industry has seen announced recently just underscore the building fiber in the U S is an extremely attractive investment.

Nick Jeffrey: And we view this increased interest as further validation of the long-term value and shareholder return profile of Fibre, so this is a very positive thing. It's also clear that convergence is driving our competitors' recent decisions. And as I just said, Frontier is the largest pure-play fiber provider in the US, and fiber is the scarcest and most difficult-to-replicate asset of all in a converging market. Scott, I don't know if you have any comments on capital allocation. Sure.

Speaker Change: And we view this increased interest as further validation that the long term value and shareholder return profile from fibre. So this is a very positive thing. It's also clear that convergence is driving a competitor's recent decisions and as I. Just said a frontier is the largest pure play fiber provider in the U S and fibers the skeptics.

Scott: And most difficult to replicate assets all in is converging market Scott I don't know if you have any comments on capital allocation sure.

Scott Beasley: Sure. Shipra, thanks for the question.

Scott: Super Thanks for the question, let me give you some color on how we think about our capital structure and then put the recent transactions into that context, we have three main objectives, where we want to reduce our cost of capital over time increase our flexibility by maintaining liquidity to fund the build and extended our maturities and.

Scott: We want to maintain appropriate net leverage eventually getting back to that target a mid threes following our build.

Speaker Change: And from the transactions that we did in Q2 I think we accomplished all three of those are securitization reduced our cost of capital we extended the maturity of our term loan to 2031, and then we used a portion of the securitization proceeds from North Texas to pay down first lien debt, thus keeping leverage relatively calm.

Scott Beasley: Let me give you some color on how we think about our capital structure and then put the recent transactions into that context. We have three main objectives. We want to reduce our cost of capital over time, increase our flexibility by maintaining liquidity to fund the build and extending our maturities. And then we want to maintain appropriate net leverage, eventually getting back to that target of mid-threes following our build. And from the transactions that we did in Q2, I think we accomplished all three of those. Furthermore, our securitization reduced our cost of capital. We extended the maturity of our term loan to 2031.

Scott: And so in the future, we'll look to do similar transactions that meet those long term objectives.

Scott Beasley: And then we used a portion of the securitization proceeds from North Texas to pay down first lien debt, thus keeping leverage relatively constant. In the future, we'll look to do similar transactions that meet those long-term objectives. Thanks. Operator, we'll take the next question, please. Our next question is from Nick Deldeo with Moffett Nathanson. Your line is now open. Hey, good morning, guys. Thanks for taking my questions about one on SG&A and one on video. So adjusted SG&A expense was, you know,

Speaker Change: Thanks, Operator, we'll take the next question please.

Nick DelDeo: I'm just trying to understand the degree to which that's a product of higher settings.

Speaker Change: Our next question is from Nick del Deo with Moffett Nathanson. Your line is now open.

Nick DelDeo: or SAC versus other factors; just any color you can try on that front would be great.

Speaker Change: Hey, good morning, guys. Thanks for taking my questions.

Speaker Change: About one in SG&A one on video.

Speaker Change: Adjusted SG&A expense was elevated for the second quarter in a row I'm just trying to understand the degree to which that's a product of higher sac versus other factors just any color you can turn on that front would be great and then with video getting smaller and smaller you know at what point does it make sense to pull the plug.

Scott Beasley: And then, with video getting smaller and smaller, at what point does it make sense to pull the plug?

Nick DelDeo: to pull the plug. Sure, Nick, this is Scott.

Speaker Change: Sure Nick this is Scott.

Scott Beasley: Cost discipline, on the first question about SG&A, cost discipline remains very important for us. I'll dive deep into SG&A in a second, but let me take a step back and look at our overall cost base. In the first half of the year, we've been able to keep our total cost base flat despite absorbing significant growth-related SG&A. And most of that increase in SG&A has been in marketing and commissions to support the much higher growth that we had in the first half versus what we had last year.

Scott: Cost discipline on the first question on SG&A cost discipline remains very important for us I'll dive deep into SG&A in a second but let me take a step back and look at our overall cost base in the first half of the year, we've been able to keep our total cost base flat despite absorbing significant growth related SG&A.

Scott: And most of that increase in SG&A has been in marketing and commissions to support the much higher growth that we had in the first half.

Scott: Versus what we had last year.

Scott Beasley: In order to offset that SG&A and actually improve our margins, which we've done by more than 100 basis points, we've taken costs out of our fixed cost base, primarily network, cost to serve, and video content costs, and therefore managed to improve our margins by more than 100 basis points, despite that extra growth-related SG&A. Almost all that SG&A, as I described, is in marketing and commissions. The second part of your question video.

Speaker Change: In order to offset that SG&A and actually improve our margins, which we've done by more than 100 basis points, we've taken cost out of our fixed cost base, primarily network our cost to serve.

Speaker Change: Video content costs, and therefore managed to improve our margins by more than 100 basis points, despite that extra growth related SG&A.

Speaker Change: Almost all of that SG&A like I described is in marketing and commissions on the second part of your question video.

Scott Beasley: You'll recall we made a strategic decision more than three years ago to stop selling linear video to new customers and instead focus on partnerships with leading over-the-top providers. We did an industry-first partnership with YouTube TV that has been great for our customers, giving them access to YouTube TV, the industry-leading over-the-top provider, where they can receive a single bill from us, which is typically a pain point for customers. That's had excellent traction in the market and helped us bundle connectivity with TV and then often whole home Wi-Fi connectivity. At some point, you're right, the video base will get small enough where it's not something we're going to support, but we're not there yet.

Speaker Change: You'll recall, we made a strategic decision more than three years ago to stop selling linear video to new customers and instead focus on partnerships with leading over the top providers. We did an industry first partnership with Youtube TV.

Speaker Change: Great for our customers, giving them access to Youtube TV and the industry leading.

Speaker Change: Over the top provider, where they can receive a single bill from US which is typically a pain point for customers. That's had excellent traction in the market and helped us bundle connectivity with T V. And then opt in whole home Wi Fi connectivity at some point you're right. The video base will get small enough where it's not.

Speaker Change: Something we're going to support but we're not there yet instead were focused on growing that over the top options for our customers.

Scott Beasley: Instead, we're focused on growing the over-the-top options for our customers. Thanks. Operator, we'll take the next question. The next question is from Simon Flannery with Morgan Stanley. Your line is now open.

Speaker Change: Thanks, Operator, we'll take the next question please.

Speaker Change: Yeah.

Operator: Yeah, thanks Simon, Nick here. I'll start, perhaps.

Speaker Change: Next question is from Simon Flannery with Morgan Stanley. Your line is now open.

Simon Flannery: Great. Thank you very much on the fiber ARP who can.

Simon Flannery: Can you give us a little bit of color on what youre seeing in terms of the intake. There is that I'm, giving you are selling a lot of gig plus.

Speaker Change: Ah well above the $65. So give a sense of where this can go over time and then any comments on low end macro there's a little bit of a tick up in the copper churn you talked about HCP, but we obviously saw weak unemployment number today cables talks a little bit about softness are you seeing on the same at the low end of the consumer.

Nick Jeffrey: At the low end, I think the answer is no; we're not seeing any softening. And, in fact, as we've said on previous calls, we've been very active in experimenting with different price points in different markets, pulsing promotions in and out as a learning opportunity to really understand the sort of price speed dynamics in different segments, in different cities, different locations, and so on. And we've been really encouraged by what we

Speaker Change: Yeah, Thanks, Nik I'll stop perhaps at the low end.

Speaker Change: I think the answer is no we're not seeing any softening and in fact as we've said on previous calls we've been very active in.

Speaker Change: Experimenting with different price points and different markets pulsing promotions in and out as a learning opportunity to really understand the that sort of price speed dynamic in different segments in different cities different locations and so on and we've been really encouraged by what we found in fact, we moved our promo pricing up.

Nick Jeffrey: In fact, we've moved our promo pricing up with no negative impact on volumes at all. And the thing that has been most interesting is the extent to which those promos have been incredibly successful at educating a new customer segment on our gig plus speeds, which they've very actively taken. So this has been a very good experiment for us. It's worked economically very, very well and doesn't indicate any softening at all at the low end with a fiber product. I mean, I can't talk about sort of legacy cable copper products; that's a different sort of thing. But Scott, anything on the ARPU side? Yeah, Simon.

Speaker Change: With no negative impact on volumes at all and the thing that's been most interesting is the extent to which those promos have been incredibly successful at educating a new customer segments on a gig plus speeds, which they've a.

Speaker Change: You know very actively.

Speaker Change: Taken sorry. This this has been a very good experiment for US it's worked economically very very well and doesn't indicate any softening at all at the at the low end with with a fiber product I mean, I can't talk to the legacy cable copper products, that's a different sort of thing, but let's call. It anything on the RP thought yeah Simon.

Scott Beasley: Yeah, Simon, intake ARPU, we've we've really bifurcated, we have great, now more than 60% of our customers taking our gig plus, that's typically additive to ARPU. We did have a higher mix in Q2 and are expecting Q3 to be on some of the lower end, what we call the ACP transition plans of 200 meg, that's below the overall ARPU. So it's kind of a bifurcation now in this transition period, but by Q4, we expect most of that transition to be complete, and then our sequential ARPU to be growing again nicely, thus putting us on target for that 3 to 4% range by the end. Thank you. Operator, we'll take the next question. Our next question is from Frank Louthan with Raymond James. Your line is now open.

Speaker Change: Intake our pool, we've we've really bifurcated, we have a great now more than 60% of our customers taking a gig plus that's typically additive to <unk>. We did have a higher mix in Q2 and expect in Q3 to be on some of the lower end, what we call. The ACP transition plans of 200, Meg that's below the.

Speaker Change: The the overall ARPA. So it's kind of a bifurcation now in this transition period, but by Q4, we expect most of that transition to be complete and then our sequential <unk> to be growing again nicely, thus, putting us on target for that 3% to 4% range by the end of the year.

Speaker Change: Thank you operator, we'll take the next question.

Speaker Change: Our next question is from Frank Louthan with Raymond James Your line is now open.

Frank Louthan: Great, thanks. I know you've been asked this before, but maybe you could give us some thoughts on fixed mobile convergence. You know, at what point do you think it's appropriate and necessary to need that type of a product? I mean, you say clearly fiber is the most scarce resource, but at some point, how does that factor in? And then can you quantify the impact of some of the customer care efforts that you've done on your Friday a.m. group calls there maybe give us in terms of the amount of declines in inbound calls or fewer truck rolls or any kind of tangible benefits from those improvements? Thanks.

Frank Louthan: Great. Thanks, I know you've been asked this before but maybe give us some thoughts on fixed mobile convergence what point do you think it's appropriate and to to need that type of a product I mean, you say clearly fiber is the most scarce resource but at some point what is how does that how does that factor in and then can you.

Speaker Change: Wanted by the impact of some of the customer care efforts that you've you've done on your Friday a M.

Speaker Change: Group calls there maybe give us in terms of.

Speaker Change: The amount of declines in inbound calls or fewer truck rolls or any kind of tangible benefits from from those improvements. Thanks.

Nick Jeffrey: Yeah, Frank, thanks. I'll take the conversion one.

Speaker Change: Yeah, Brian Thanks, I'll I'll take the conversion one Scott, perhaps you can talk about the impact of our improved care.

Scott Beasley: Scott, perhaps you can talk about the impacts of improved care. Look, I mean, as we've said previously, that, you know, our convergence is definitely happening in the US market. The data is unequivocally clear on that. And I'm sure you've all got the same data that we have access to.

Speaker Change:

Scott: Look I mean, as we've said previously that are.

Speaker Change: Convergence is definitely happening in the U S market data is unequivocally clear on that and I'm sure. You've all got the same data that we have access to it's really led by the cable companies and.

Nick Jeffrey: It's really led by the cable companies. And if I take a step back and think about my experience in Europe and other countries where I've seen convergence start and then develop, accelerate, and mature, I have made a few observations. First of all, I don't think there's a market anywhere in the world where once convergence starts, it slows down or stops. So it tends to accelerate, driven by asymmetry of market share, asymmetry of product availability, and asymmetry of technology cycles. And there's always one or two players behind one or both of those axes.

Speaker Change: And if I take a step back and think about my experience in Europe, and other countries, where I've seen convergence starts and then develop and accelerate and mature.

Scott: A few observations first of all I don't think that the market anywhere in the world, where once convergence starts it slows down or stops so it tends to accelerate driven by a symmetry of market share I asymmetry of product availability and a symmetry of.

Scott: Technology cycles, and there's always one or two players behind 101 or other of those axes and as they attempt to catch up through convergence. They stopped the convergence race and then everybody has to join in or accept that they're going to lose share or price. So that's the dynamic that we're seeing in the U S. I think very very much taking root cause there.

Nick Jeffrey: And as they tend to catch up through convergence, they start the convergence race, and then everybody has to join in or accept that they're going to lose share or price. So that's a dynamic that we're seeing in the US, I think, very, very much taking root. Of course, there is a question about at what speed it goes. And, of course, that varies between countries.

Speaker Change: A question about at what speed does it go and uncles that varies between countries.

Nick Jeffrey: And whether it creates economic value or not. And, you know, you can read the reports on that as well as I can. And I think the evidence around the world is pretty clear on the answer to that. But nonetheless, once it starts, it doesn't stop. It doesn't slow down.

Scott: And whether it creates economic value and often you can read the reports on that as well as I can and I think the evidence around the world is pretty clear on the answer to that but nonetheless once it started it doesn't stop it doesn't slow down now.

Nick Jeffrey: Now, what does that mean for Frontier? Well, the first question is, should we launch a wireless offer? And as I've said previously, we have a lot of wireless operational chops in this business. I spent 16 years at Vodafone. Veronica Bloodworth, our chief network officer, built and ran, well, she didn't build it, actually, she ran AT&T's cellular network. But she certainly built their fiber network. We've got John Harobin, who is the head of marketing for Verizon Wireless. John Stratton, of course, our chairman, has also had deep experience at Verizon Wireless. Vishal Dixit, our head of wholesale and strategy again, ex-Vodafone.

Speaker Change: Now what does that mean for frontier well.

Speaker Change: First question is should we launched a a wireless offer and as I've said previously we have a lot of wireless operational chops. In this business I spent 16 years at Vodafone Priyanka Bloodworth, Our Chief Network Officer, built and run unless you can build actually as you ran at&t's.

Speaker Change: And that was certainly built a five minute what.

Speaker Change: We've got John her Rubin, who is the head of marketing Verizon wireless don't strike Nicholls, our chairman also deep experience at Verizon Wireless Vishal Dixit head of wholesale strategy again ex Vodafone we have a lot of expertise in wireless hip and because of that we've been able to do all the kind of pre work on our ability to launch.

Nick Jeffrey: We have a lot of expertise in wireless here, and because of that, we've been able to do all the kind of pre-work on our ability to launch a wireless offer if we had to. So we're kind of very well prepared. We understand the economics. We understand the dynamics very, very well. The question is, should we do it now? And what I've always said is we will be led by data on this.

Speaker Change: A wireless offer if we had two so we're kind of very well prepared we understand the economics, but it's down the dynamics very very well.

Speaker Change: The question is should we do it now.

Speaker Change: And what I've always said is we will be led by the data on this and what the data is very clearly telling us at the moment is we do not need to offer mobile yet.

Nick Jeffrey: And what the data is very clearly telling us at the moment is we do not need to offer mobile yet. We surpassed our target of 45% fiber penetration in our base markets this quarter, and our churn remains low. And this indicates that the best current use of our capital continues to be building and selling fiber without the distraction of new product launches for cellular, re-educating our channel, reconfiguring our web-based markets, and all of that sort of stuff. We're prepared, we see the dynamic, we'll be led by the data, but it's not something that we currently feel we should be doing if our goal remains to be disciplined in the use of capital. Scott.

Speaker Change: We surpassed our target of 45% fiber penetration in our base market this quarter and our churn remains low.

Scott: And this indicates that the best current use of our capital continues to be building and selling fiber without the distraction of new product launches the cellular reeducating our channel Reconfiguring.

Speaker Change: Our.

Speaker Change: Uh huh.

Speaker Change: Web based buckets and all of that sort of stuff. So.

Speaker Change: We prepared we see the dynamic will be led by the data, but it's not something that we currently feel we should be doing if all golar remains to be disciplined on the use of capital it's Scott.

Scott Beasley: Sure, Frank. Let me talk about the customer service improvements. I'd point you to a few numbers. A healthy portion of our total $580 million of cost savings has been driven by customer service improvements. Our calls are down 50% over the last three years. 75% of our customer interactions are now digital. And through those improvements, we've been able to drive margins up. This quarter, they were up about 120 basis points to 38%.

Scott: Sure Frank Let me talk about the customer service improvements I'd point, you to a few numbers a healthy portion of our total $580 million of cost savings has been driven.

Speaker Change: Driven by customer service improvement our calls are down 50% over the last three years, 75% of our customer interactions are now digital and through those improvements we've been able to drive margins up this quarter. They are up about 120 basis points to 38%. So it's a big part of our.

Scott Beasley: So it's a big part of our overall margin expansion, and we're not done yet. Operator, great. Thank you. Our next question is from Peter Supino with Wolfe Research. Your line is now open.

Scott: Overall margin expansion and we're not done yet.

Speaker Change: Operator right.

Speaker Change: Our next question is from Peter So Pinot with Wolfe Research. Your line is now open.

Peter Supino: Hi, good morning. I will ask you to return to the topic of the narrowed vintage penetration disclosure. You mentioned in your prepared remarks that peer companies report differently than you have been and that the New Disclosure aligns more with how you manage the business, and we appreciate those points. But unlike peer companies, Frontier is allocating a huge amount of expansion capital, and many of us have valued the Vintage Disclosure, in particular because of the absence in your financial statements of really clear data for evaluating marginal returns on capital.

Speaker Change: Hi, Good morning, I will ask you to return to the topic of the narrowed vintage penetration disclosure.

Speaker Change: You mentioned in your prepared remarks that peer companies.

Speaker Change: Report differently than you have been in the new disclosure aligns more with how you manage the business and we appreciate those points, but unlike peer companies frontiers allocating a huge amount of expansion capital and many of us have valued the vintage disclosure I'm in particular.

Speaker Change: Because of the absence in your financial statements are really clear.

Speaker Change: Data for evaluating marginal returns on capital and so in that light I wondered if you could help us understand what changed and why you made the decision at this time and how you'd want us to think about marginal return on capital going forward. Thank you.

Peter Supino: And so in that light, I wondered if you could help us understand what changed and why you made the decision at this time and how you'd want us to think about marginal return on capital going forward. Thank you.

Scott Beasley: Sure, Peter, this is Scott. So when we started building fiber in 2020, we thought it was important to give enhanced visibility at a very granular cohort level because we hadn't built fiber before. But now, in 2024, this is our fifth calendar year of the build. We've added more than 4 million users, and reporting on quarterly cohorts for each of those five years has just become too complex. So it's the right time to simplify our reporting to separate it into base and expansion and better match how we manage the business. Thanks, Peter. And with that, we'll conclude our second quarter 2024 earnings call. Thank you all for joining us.

Speaker Change: Sure. Peter This is Scott so when we started building fiber in 2020, we thought it was important to give enhanced visibility at a very granular cohort level, because we hadn't built fiber before.

Speaker Change: But now in 2024.

Speaker Change: This is our fifth calendar year of the build we've added more than 4 million passing and reporting on quarterly cohorts for each of those five years has just become too complex.

Speaker Change: So it's the right time to simplify our reporting to separate it into base and expansion and better match, how we manage the business.

Peter Supino: Thanks Peter. And with that, we'll conclude our second quarter 2024 earnings call. Thank you all for joining us. Thanks, Peter. And with that, we'll conclude.

Peter: Thanks Peter.

Speaker Change: That will conclude our second quarter 2024 earnings call. Thank you all for joining us.

Speaker Change: Thank you Peter.

Speaker Change: And with that we'll conclude.

Q2 2024 Frontier Communications Parent Inc Earnings Call

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