Q2 2024 Cable One Inc Earnings Call

Jordan Morkert: and others. Additionally, today's remarks will include a discussion of certain financial measures that are not presented in conformity with U.S. Generally Accepted Accounting Principles, or GAAP. Reconciliations of non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures can be found in our earnings release or on our website at ir.cableone.net. Joining me on today's call is our President and CEO, Julie Laulis, and Todd Koetje, our CFO. With that, let me turn the call over to Julie.

Formation future events or otherwise. Additionally, today's remarks will include a discussion of certain financial measures that are not presented in conformity with U S. Generally accepted accounting principles or GAAP reconciliations of non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures can be found.

Speaker Change: In our earnings release or on our website at IR Cableone net joining me on today's call is our president and CEO, Julie Lewis and Todd <unk>, our CFO with that let me turn the call over to Julie.

Julie Laulis: Thank you, Jordan, and good afternoon, everyone. We appreciate you joining us on today's call. In the second quarter, we executed on our phased plan for long-term growth by taking steps to drive penetration deeper across all market segments and strengthen our competitive position. Cabo is a durable enterprise, and our adaptability has been key to our success. As part of our focus on growth, we have continued to upgrade our internal platforms to best-in-class standards, implemented organizational changes that enhance our competitiveness by empowering greater decision-making at the local level, and continue to refine our go-to-market approach to meet evolving market conditions.

Julie Lewis: Thank you Jordan and good afternoon, everyone. We appreciate you joining us for today's call.

Speaker Change: In the second quarter, we executed on our phase plan for long term growth.

Taking steps to drive penetration deeper across all market segments and strengthening our competitive position.

Speaker Change: Cob out it's a durable enterprise.

And our adaptability has been key to our success.

As part of our focus on growth we have continued to upgrade our internal platforms to best in class standards implemented organizational changes that enhance our competitiveness by empowering greater decision, making at the local level and continued to refine our go to market approach to meet evolving market condition.

Speaker Change: Yeah.

Julie Laulis: Despite challenges such as the discontinuation of the Affordable Connectivity Program and seasonal fluctuations typical of the second quarter, we maintained steady progress with both connects and disconnects, improving on a year-over-year basis for the second consecutive quarter. We remain focused on leveraging our strong presence in rural America to capture opportunities and deliver value to our stakeholders, and we believe our second quarter results reflect execution against our strategic plan and set the stage for sustained long-term growth. Before handing the call over to Todd for a detailed review of our financial performance, I'd like to address three key topics.

Speaker Change: Despite challenges such as the continuation of the affordable connectivity program and seasonal fluctuations typical of the second quarter, we maintained steady progress with both connects and disconnects improving on a year over year basis for the second consecutive quarter.

Speaker Change: We remain focused on leveraging our strong presence in rural America to capture opportunities and deliver value to our stakeholders and we believe our second quarter results reflect the execution against our strategic plan and set the stage for sustained long term growth.

Speaker Change: Before handing the call over to Todd for a detailed review of our financial performance I'd like to address three key topics.

Julie Laulis: First, I'll discuss broadband growth across our business. I'll touch on favorable trends we are seeing due to our new initiatives, including the unique challenges and dynamics of the current marketplace, and provide insights into our expectations for the future. Second, I will explain how proactive and capital-efficient investments in our network over the past years enable us to provide a superior customer experience and position us for the next generation of speeds and service offerings necessary to deliver for our customers' expanding needs. Finally, I will outline the recent organizational changes we made to fuel our strategy for the future.

Speaker Change: First I'll discuss broadband growth across our businesses I'll touch on favorable trends, we are seeing due to our new initiatives, including the unique challenges and dynamics of the current marketplace.

Speaker Change: Provide insight into our expectations for the future.

Speaker Change: Second I'll explain how proactive and capital efficient investments in our network over the past years enable us to provide a superior customer experience and position us for the next generation of speeds and service offerings necessary to deliver for our customers expanding needs.

Speaker Change: Finally, I will outline the recent organizational changes we made to fuel our strategy for the future.

Julie Laulis: These reconfigure the relationship between our local teams and the corporate office, empowering decision making at the local level by associates closest to our customers. We believe this approach will enhance our agility and better support our growth initiatives. First, residential broadband.

Speaker Change: These reconfigure the relationship between our local teams and corporate office and powering decision, making at the local level by associates closer to our customers.

Speaker Change: Believe this approach will enhance our agility and better support our growth initiatives.

Speaker Change: First residential broadband in the second quarter, we faced the challenges presented by the ending of the affordable connectivity program.

Julie Laulis: In the second quarter, we faced the challenges presented by the ending of the Affordable Connectivity Program. Through proactive and thoughtful communication, assessing our customers' financial and usage needs, and aligning them with suitable plans, we successfully managed a net decrease of about 4,000 customers among the approximately 48,000 customers receiving an ACP subsidy during the quarter. Please note that this figure does not take into account any estimate of the impact that the end of the ACP program had on our growth connections for the quarter.

Speaker Change: Through proactive and thoughtful communication.

Speaker Change: Our customers financial and usage needs and aligning them with suitable plan. We successfully managed a net decrease of about 4000 customers of the approximately 48000 customers receiving an E C. P subsidies during the quarter.

Speaker Change: Please note. This figure does not take into account any estimate of the impact that the end of the ACP program had on our gross connections for the quarter.

Julie Laulis: We also anticipate some additional churn from ACP in the third quarter. Excluding the impact of those 4,000 lost ACP customers, our residential broadband customer base would have declined by only 200 customers on a sequential quarterly basis. This was a significant improvement compared to the seasonally impacted declines we experienced in the second quarter of 2023. Furthermore, despite the loss of ACP subsidies, we experienced both improved connects and disconnects in Q2 on a year-over-year basis for the second consecutive quarter.

Speaker Change: We also anticipate some additional churn from ADP and the third quarter.

Speaker Change: Excluding the impact of those 4000 Mas ACP customers, our residential broadband customer base would have declined by only 200 customers on a sequential quarterly basis.

Speaker Change: Significant improvement compared to the seasonally impacted declined.

Speaker Change: Experienced in the second quarter of 2023.

Speaker Change: Despite the loss of ACP subsidies, we experienced both improved connects and disconnects and Q2 on a year over year basis for the second consecutive quarter.

Julie Laulis: As I've discussed in prior quarters, our relatively low broadband penetration leaves us well-positioned to drive incremental growth over time. By segmenting our marketplace, targeting each cohort, and addressing their unique needs, we can access new market segments and increase penetration in existing ones. Furthermore, our ongoing digital transformation initiatives and significant access network capacity enable us to deliver our services more efficiently, with the marginal cost of each incremental customer lower than ever. In addition to the positive momentum and customer trends, our R2 decline slowed sequentially, as anticipated, as our customers began to roll off select promotions, and we continued to refine our competitive responses.

Speaker Change: As I've discussed in prior quarters are relatively low broadband penetration leaves us well positioned to drive incremental growth over time.

Speaker Change: By segmenting, our marketplace targeting each cohort and addressing their unique needs. We can access new market segments and increased penetration in existing ones.

Speaker Change: Furthermore, our ongoing digital transformation initiatives and significant excess network capacity enable us to deliver our services more efficiently with the marginal cost of each incremental customer lower than ever.

Speaker Change: In addition to the positive momentum in customer trends.

Speaker Change: Our two decline slowed sequentially as anticipated as our customers began to roll off the select promotions and we continue to refine our competitive responses.

Julie Laulis: We also experienced strong demand for our premium speed tiers, with 45% of new customers opting for gigabit or higher speeds, up from 39% from the same quarter a year ago. This trend resulted in increased overall sell-in ARPU this past quarter and set a favorable trajectory heading into the third quarter. In July, we implemented a new program in which we increased rates for nearly half of our HSD customers by $5 with an option to offset this increase through a $5 credit for customers who sign up for AutoPay using a debit card or bank account and paperless billing. Our research indicates that encouraging AutoPay enrollment can boost retention rates, providing an opportunity to further reduce our already low churn rate. Additionally, we anticipate this program will result in decreased billing and transaction processing costs.

Speaker Change: We also experienced strong demand for our premium speed tiers, with 45% of new customers opting for gig or higher speeds up from 39% from the same quarter a year ago.

Speaker Change: This trend resulted in increased overall selling art to this past quarter and set a favorable trajectory heading into the third quarter.

Speaker Change: In July we implemented a new program in which we increased rates for nearly half of our E&P customers by $5 with an option to offset this increase through a $5 credit for customers, who sign up for auto pay using a debit card or bank account and paperless billing.

Speaker Change: Our research indicates that encouraging auto pay enrollment can be this retention rates, providing an opportunity to further reduce our already low churn rates.

Speaker Change: Additionally, we anticipate this program will result in decreased billing and transaction processing costs.

Julie Laulis: While our approach with this program remains conservative relative to industry standards, it reflects our ongoing commitment to improving operational efficiency. Driven by the aforementioned factors, including promotional roll-offs, refinements to our competitive responses, increased selling rates, and our auto pay program, we currently expect ARPU to stabilize in the second half of the year. One of the challenges we have faced is steadily increasing wired competition. However, we have successfully navigated this hurdle in the past by leveraging our deep local knowledge and delivering products and services that make our customers' lives easier.

Speaker Change: All our approach with this program remains conservative relative to industry standard it reflects our ongoing commitment to improving operational efficiency.

Speaker Change: Driven by the aforementioned factors, including promotional roll offs refinements to our competitive responses increased selling rates and our Autopay program. We currently expect our two to stabilize in the second half of the year.

Speaker Change: One of the challenges we have faced is steadily increasing wired competition.

Speaker Change: We have successfully navigated the hurdle in the past by leveraging our deep local knowledge and delivering products and services that make our customers' lives easier.

Julie Laulis: By actively listening to and acting on customer feedback, we effectively meet our customers' needs and stay ahead of our competitors. In many of our markets, factors such as high construction costs influenced by lower population density, challenging topography, and limited access to labor pools contribute to the difficulty of entering many of our communities. These factors, along with the current cost of capital, make these areas less attractive to overbuilders.

Speaker Change: By actively listening to and acting on customer feedback, we effectively meet our customer's needs and stay ahead of our competitors.

Speaker Change: And many of our markets factors such as high construction costs influenced by lower population density.

Speaker Change: Challenging topography and limited access to labor pools contribute to the difficulty of entering many of our communities.

Speaker Change: These factors along with the current cost of capital make these areas less attractive to over builders.

Julie Laulis: For those contemplating entry into our markets, the RQM penetration rates required to yield viable returns in these higher-cost locations make aggressive pricing strategies difficult to sustain. We believe these market dynamics, coupled with our multifaceted responses that extend beyond pricing alone, have already prompted potential newcomers to reconsider their plans to enter some of our markets. Another key opportunity for long-term growth is business broadband, which saw a 1.6% increase in year-over-year revenues from the same quarter last year, despite the economic and market headwinds affecting the small business sector.

Speaker Change: For those contemplating entry into our markets, the RVO and penetration rates required to yield viable returns in these higher cost locations make aggressive pricing strategy typically to sustain.

Speaker Change: We believe these market dynamics, coupled with our multifaceted responses that extend beyond pricing alone have already prompted potential newcomers to reconsider their plans to enter some of our markets.

Speaker Change: Another key opportunity for long term growth as business broadband, which saw a one 6% increase in year over year revenues from the same quarter last year, despite the economic and market headwinds affecting the small business sector.

Julie Laulis: We also see strong demand in the carrier, wholesale, and enterprise customer segments. These markets are still emerging, but Cable ONE is consistently growing for Cable ONE. A recent notable success in our carrier services segment was a long-term contract for a several hundred site opportunity with a total contract value exceeding $30 million.

Speaker Change: We also see strong demand in carrier wholesale and enterprise customer segments. These markets are still emerging but consistently growing for cable one.

Speaker Change: A recent notable success in our carrier services segment is a long term contract for a several hundred site opportunity with a total contract value exceeding $30 million.

Julie Laulis: This achievement is a testament to our strong network, trusted brand, and the exceptional support provided by our carrier sales team. I would now like to discuss why our network is also a significant growth enabler for us. We recognize that consumer demand for data consumption, reliability, and performance is continually rising, and our ongoing investments ensure we will exceed these expectations. We are well positioned to support multi-gigabit speeds in nearly all markets as we transition our remaining video customers to our IPTV platform.

Speaker Change: This achievement is a testament to our strong network trusted brand and the exceptional support provided by our carrier sales team.

Speaker Change: I would now like to discuss why our network is also a significant growth enabler for us.

Speaker Change: We recognize that consumer demand for data consumption reliability and performance is continually rising.

Speaker Change: Our ongoing investments to ensure we will exceed these expectations.

Speaker Change: We're well positioned to support multi gig speeds in nearly all markets as we transition our remaining video customers to our IP TV platform.

Julie Laulis: Our balanced investment strategy includes a roadmap to achieve 5 and 10 gigabit speeds, including upgrade options such as DOCSIS 3.1 Enhanced and DOCSIS 4.0 over the next several years. Our whole home Wi-Fi product remains integral to enhancing in-home performance and elevating the overall customer experience.

Speaker Change: Our balanced investment strategy includes a roadmap to achieve five and 10 gig speeds, including upgrade options such as DOCSIS three one enhanced and DOCSIS four dato over the next several years.

Speaker Change: Our whole home Wi Fi products remains integral to enhancing and home performance and elevating the overall customer experience.

Julie Laulis: Recognizing Wi-Fi's pivotal role in shaping customer perceptions of their internet service, we are continually investing in state-of-the-art products to enhance our offerings in the market. We are actively focused on the development of new products, services, and partnerships aimed at elevating the customer experience and ensuring seamless connectivity. We operate our network at substantial capacity and low utilization levels that we believe significantly exceed those of our wireless competitors. For example, our HSD customer base, including those with video service, consumes approximately 700 gigabytes of data monthly per home on average, a data usage level far surpassing that of a mobile fixed wireless network.

Speaker Change: Recognizing Wi Fi pivotal role in shaping customer perceptions of their Internet service, we are continually investing in the state of the art products to enhance our offerings in the market.

Speaker Change: We're actively focused on the development of new products services and partnerships aimed at elevating the customer experience and ensuring seamless connectivity.

Speaker Change: We operate our network at substantial capacity and low utilization levels that we believe significantly exceed those of our wireless competitors.

Speaker Change: Our HFC customer base, including those with video service.

Speaker Change: Approximately 700 gigabytes monthly per home on average data usage level far surpassing that of your mobile fixed wireless networks.

Julie Laulis: We anticipate this trend will accelerate with the increasing shift of sports content to streaming platforms and the introduction of new products that leverage our extensive capabilities. Moreover, our peak hour utilization remains below 20%, underscoring our commitment to ensuring our network is never a barrier to growth.

Speaker Change: We anticipate this trend will accelerate with the increasing shift of sports content to streaming platforms and the introduction of new products that leverage our extensive capabilities.

Speaker Change: Moreover, our peak hour utilization remains below 20% underscoring our commitment to ensuring our network, it's never a barrier to growth.

Todd Koetje: Lastly, we have recently implemented significant organizational changes as part of our strategy to foster sustainable long-term growth and adapt to evolving customer needs in today's competitive landscape. Central to these changes is our unwavering dedication to community-based, reliable service bolstered by equipping our local system associates with essential tools and resources to meet these challenges. In our drive to enhance operational excellence, we have restructured the dynamics between our local and corporate teams, harnessing their respective strengths to better serve our customers.

Speaker Change: Lastly, we have recently implemented significant organizational changes as part of our strategy to foster sustainable long term growth and adapt to evolving customer needs in today's competitive landscape.

Speaker Change: Central to these changes is our unwavering dedication to community based reliable service bolstered by equipping our local system associates with essential tools and resources to meet these challenges.

Speaker Change: In our drive to enhance operational excellence, we have restructured the dynamics between our local and corporate teams harnessing their respective strengths to better serve our customers.

Todd Koetje: This involves expanding and realigning our regions around growth centers, driving decisions to the local level where teams can act with speed and agility in the best interest of customers and associates in their communities, providing those leaders with the resources necessary to deliver exceptional service and achieve region-specific performance targets, and unifying and streamlining our distributed customer care resources under common leadership who will maintain our local presence and drive our neighborly approach. Since the reorganization was announced, we've actively engaged with our associates in the field to discuss the changes and gather their feedback.

Speaker Change: Involved expanding and realigning our regions around growth centers driving decisions to the local level, where teams can act with speed and agility in the best interest of customers and associates and their communities.

Speaker Change: Providing those leaders with the resources necessary to deliver exceptional service and achieved region specific performance targets.

Speaker Change: And unifying and streamlining our distributed customer care resources under common leadership, who will maintain our local presence and drive our neighbourly approach.

Speaker Change: Since the reorganization was announced we've actively engaged with our associates in the field to discuss the changes and gather their feedback PMT.

Todd Koetje: The enthusiasm has been palpable, reflecting their excitement about being empowered to drive growth in their markets. These organizational changes, coupled with growth initiatives and ongoing network investment, exemplify our commitment to rigorously evaluating every facet of our company to ensure we are continuing to make informed and strategic decisions that deliver superior long-term value and service to our customers. And now, Todd will provide a recap of our second quarter financial performance and further discuss our outlook for the future.

Speaker Change: The enthusiasm has been palpable, reflecting their excitement about being in power to drive growth in their markets.

Speaker Change: These organizational changes coupled with growth initiatives and ongoing network investments exemplify our commitment to rigorously evaluating every facet of our company to ensure we are continuing to make informed strategic.

Speaker Change: Strategic decisions that deliver superior long term value and service to our customers.

Speaker Change: And now.

Speaker Change: Todd will provide a recap of our second quarter financial performance and further discuss our outlook for the future.

Todd Koetje: Thanks, Julie. Beginning with the top line, our total revenues for the second quarter of 2024 were $394.5 million, compared to $424 million in the second quarter of 2023. This decrease was primarily driven by lower ARPU in our residential data customer base and the continued attrition of low-margin video subscribers. Residential data revenues for Q2 decreased by $16.4 million, or 6.7% year-over-year. The primary driver was a 6.9% decrease in ARPU attributed to the implementation of targeted pricing and product offerings in specific markets against select competitors, along with a focus on accretive, value-conscious customer cohorts, which tend to have lower sell-in rates. As Julie noted, based on a number of contributing factors, we anticipate that our pool will stabilize in the latter half of the year.

Todd: Thanks, Julie beginning with the topline our total revenues for the second quarter of 2024 were $394 5 million compared to $424 million in the second quarter of 2023.

Todd: This decrease was primarily driven by lower RV residential data and customer base and the continued attrition of low margin video subscribers.

Speaker Change: Evidential data revenues for Q2 decreased by $16 4 million or six 7% year over year.

Speaker Change: Honoring driver was a six 9% decrease in RV attributed to the implementation of targeted pricing and product offerings in specific markets again select competitors, along with a focus on accretive value conscious customer cohorts, which tend to have lower selling rates.

Speaker Change: As Julie noted based on a number of contributing factors, we anticipate that <unk> will stabilize in the latter half of the year.

Todd Koetje: On the business data side, second quarter revenues grew by $0.9 million, or 1.6%, compared to the prior year. Business data PSUs grew by 500 subscribers sequentially and by more than 1,700 over the past 12 months. Operating expenses were $105.8 million, or 26.8% of revenues, in the second quarter of 2024 compared to $112.8 million, or 26.6% of revenues, in the prior year quarter. The decrease in expenses was driven largely by an $8.5 million decrease in programming costs, as well as our ongoing focus on optimizing cost structures within our labor force.

Speaker Change: On the business data side second quarter revenues grew by $9 million or one 6% compared to the prior year business data Psus grew by 500 subscribers sequentially and by more than 1700 over the past 12 months.

Speaker Change: Operating expenses were $105 $8 million or 26, 8% of revenues in the second quarter of 2024 compared to $112 8 million or 26, 6% of revenues in the prior year quarter.

Speaker Change: The decrease in expense was driven largely by an eight $5 million decrease in programming costs as well as our ongoing focus on optimizing cost structures within our labor base.

Todd Koetje: Selling, general, and administrative expenses were $90.8 million, or 23% of revenues, in the second quarter of 2024, compared to $86.2 million and 20.3% in the second quarter of last year. The increase was driven by $5.5 million of non-recurring severance costs associated with the previously mentioned organizational changes, as well as $1.2 million of costs associated with our continued investment in our long-term transformative operating platforms that we previously discussed. As we outlined in our 8k that was filed in conjunction with our recently announced reorganization, we anticipate approximately $14 million of annualized run rate savings related to these changes. That will begin in the third quarter.

Speaker Change: Selling general and administrative expenses were $98 million or 23% of revenues for the second quarter of 2024 compared to $86 $2 million and 23% in the second quarter of last year. The increase was driven by $5 5 million of nonrecurring severance costs.

Speaker Change: Associated with the previously mentioned order changes as well as $1 2 million of costs associated with our continued investment in our long term transformative operating platforms that we've previously discussed.

Speaker Change: As we outlined in our 8-K that was furnished in conjunction with our recently announced reorganization, we anticipate approximately $14 million of annualized run rate savings related to these changes that will begin in the third quarter.

Todd Koetje: Bottom-line net income was $47.6 million for the second quarter of 2024 compared to $55.2 million in the second quarter of 2023. Adjusted EBITDA was $212.4 million, or 53.8% of revenues, in Q2 2024 compared to $231.3 million, or 54.5% of revenues, in the prior year quarter as we continue to implement our plan to achieve sustainable unit growth within our data segments, albeit with the intended rebalancing of certain pricing strategies that impacted revenue per unit on a short-term basis. Are EBITDA margins slightly improved on a sequential basis?

Speaker Change: Bottom line net income was $47 6 million for the second quarter of 2024 compared to $55 $2 million in the second quarter of 2023.

Speaker Change: Adjusted EBITDA was $212 $4 million or 53, 8% of revenues in Q2, 2024, compared to $231 3 million or 54, 5% of revenues in the prior year quarter as we continued to implement our plan to achieve sustainable use.

Speaker Change: Growth within our data segments, albeit with the intended rebalancing of certain pricing strategies that impacted revenue per unit on a short term basis.

Speaker Change: Our EBITDA margins slightly improved on a sequential basis.

Todd Koetje: Capital expenditures were $71.6 million in Q2 of this year compared to $81.5 million last year, equating to a $9.9 million or 12.2% decrease year-over-year. However, sequentially, our total capital investment increased by $5.7 million, primarily due to our ongoing investment in leading whole-home Wi-Fi technology and line extension. We expect that total cutbacks for the year to be in the $300 million area.

Speaker Change: Capital expenditures were $71 6 million in Q2 of this year compared to $81 $5 million last year.

Speaker Change: Leading to a $9 $9 million or 12, 2% decrease year over year.

Speaker Change: Sequentially, our total capital investment increased by $5 7 million, primarily due to our ongoing investment in leading whole home Wi Fi technology and line extensions.

Speaker Change: We expect that total capex for the year to be in the $300 million area.

Todd Koetje: Adjusted EBITDA less capital expenditures was $140.8 million in the second quarter of 2024, a $9 million or 6% decrease from the prior year. Year-to-date, our adjusted EBITDA less CapEx was $291.9 million, a 3.4% increase from the comparable prior year period. We continue to maintain our disciplined and conservative capital allocation strategy. Our focus remains on four key areas.

Speaker Change: Adjusted EBITDA less capital expenditures was $148 million in the second quarter of 2024.

Speaker Change: $9 million or 6% decrease from the prior year.

Speaker Change: Year to date, our adjusted EBITDA less Capex was $291 9 million, a three 4% increase from the comparable prior year period.

Speaker Change: We continue to maintain our disciplined and conservative capital allocation strategy. Our focus remains on four key areas one investing in our network to ensure we are able to offer premium Internet service in the markets, we serve to pursuing organic growth investments with attractive economic returns highlight.

Todd Koetje: One, investing in our network to ensure we are able to offer premium Internet service in the markets we serve. Two, pursuing organic growth investments with attractive economic returns, highlighted by the 34,000 new miles we've built so far this year. 3. Exploring inorganic investments to consolidate complementary rural broadband assets or partner with proven operating leaders for strategic growth opportunities.

Speaker Change: By the 34000, new passing rebuilt so far this year.

Speaker Change: Three exploring inorganic investments to consolidate complementary rural broadband assets or partner with proven operating leaders for strategic growth opportunities.

Todd Koetje: Returning capital to shareholders through regular dividends, disciplined debt reduction, and opportunistic share repurchase. During the quarter, we invested an additional $20 million in NextLink Internet, extending our strong partnership with this leading rural broadband provider. Our investment comes alongside an incremental investment from the company's founder and CEO and will continue to support NexLink's compelling, profitable growth trajectory and expanded fiber footprint through the Central and South Central U.S. We continue to see strong long-term value creation opportunities via our existing investments in these rural broadband franchises alongside these proven owner-operators and trusted third-party financial partners.

Speaker Change: For returning capital to shareholders through regular dividends disciplined debt reduction and opportunistic share repurchases.

Speaker Change: During the quarter, we invested an additional $20 million in excellent internet extending our strong partnership with this leading rural broadband provider. Our investment comes alongside an incremental investment from the company is founder and CEO and we will continue to support next links compelling profitable growth trajectory and expanded fiber footprint.

Speaker Change: Through the central and South Central U S.

Speaker Change: We continue to see strong long term value creation opportunities via our existing investments in these rural broadband franchises.

Speaker Change: Long side, these proven owner operators and trusted third party financial partners.

Todd Koetje: In Q2, we distributed $17.1 million in dividends to shareholders and repaid $54.6 million of debt, including a $50 million volunteer revolving credit facility payday. Our capitalization and balance sheet management philosophy is rooted in a conservative mindset and one that is committed to disciplined debt repayment and demonstrated ability to deleverage, specifically subsequent to material strategic events. Since early 2023, we have repaid over $327 million of debt, including $300 million of the initial $488 million drawn under our revolving credit facility.

Speaker Change: In Q2, we distributed $17 $1 million in dividends to shareholders and repaid $54 $6 million of debt included a $50 million voluntary revolving credit facility Paydowns.

Speaker Change: Our capitalization and balance sheet management philosophy is rooted in a conservative mindset and one that is committed to disciplined debt repayment and demonstrated ability to deleverage specifically subsequent to material strategic events.

Speaker Change: Since early 2023, we have repaid over $327 million of debt, including $300 million of the initial $488 million drawn under our revolving credit facility.

Todd Koetje: As of the end of the second quarter, we had approximately $202 million of cash and cash equivalents on hand, and our debt balance was approximately $3.6 billion, consisting of approximately $1.8 billion in term loans, $920 million in convertible notes, $650 million in unsecured notes, $238 million of revolver borrowings, and $5 million of finance lease liability. We also had $762 million available for additional borrowing under our $1 billion Committed Revolving Credit Facility as of the end of the second quarter.

Speaker Change: As of the end of the second quarter, we had approximately $202 million of cash and cash equivalents on hand, and our debt balance was approximately $3 6 billion.

Speaker Change: Consisting of approximately $1 8 billion in term loans $920 million in convertible notes $650 million unsecured notes $238 million of revolver borrowings and $5 million of finance lease liabilities.

Speaker Change: We also had $762 million available for additional borrowings under our 1 billion committed revolving credit facility as of the end of the second quarter.

Todd Koetje: Our weighted average cost of debt for Q2 of 2024 was 4.2%, with over 75% of our borrowings either fixed issuance or synthetically fixed at underlying base rates that are approximately half of the prevailing floating rate. Our Net Leverage Ratio on a last quarter annualized basis was just below 4x, while our Secured Net Leverage Ratio was approximately 2x. Turning to MBI, our call option to acquire the remaining 55% of the company that we do not already own expired unexercised on June 30.

Speaker Change: Our weighted average cost of debt for Q2 of 2024 was four 2% with over 75% of our borrowings either fixed issuance or synthetically fixed at underlying base rates that are approximately half the prevailing floating rates.

Speaker Change: Our net leverage ratio on a last quarter annualized basis was just below four times, while our secured net leverage ratio was approximately two times.

Speaker Change: Turning to MBIA, our call option to acquire the remaining 55% of the company that we do not already own expired unexercised on June 30.

Todd Koetje: If the put option held by the other MBI owners is exercised during the open window in Q3 of 2025, we would expect the transaction to close around late 2025 or early 2026, subject to customary closing conditions and regulatory approval. We believe that if the put option is exercised, our existing cash balances, anticipated available capacity under a revolver at the time of the transaction, and our operating cash flows would be sufficient to fund the purchase price without raising additional incremental capital.

Speaker Change: To put options held by the other NPI owners was exercised during the open window in Q3 of 2025, we would expect the transaction to close around late 2025, or early 2026 subject to customary closing conditions and regulatory approvals.

Speaker Change: We believe that if the put option is exercised our existing cash balances anticipated available capacity under our revolver at the time of that transaction and our operating cash flows would be sufficient to fund the purchase price without raising additional incremental capital.

Todd Koetje: However, as previously mentioned, we will continue to opportunistically assess capital market conditions with a focus on ensuring we maintain meaningful excess liquidity, a long-term maturity profile, and access to diversified sources of capital. Before we hand it off to questions, I'd like to emphasize that we are executing effectively on our phased plan for long-term growth. Our robust network and dedicated associates are central to this effort, as we remain fully focused on leveraging our unique resources to deliver a seamless connectivity experience to a growing number of customers across our footprint. We are making progress, and we are just getting started. Our commitment to all stakeholders is steadfast. We are always working for you. With that, we are now ready for questions.

Speaker Change: However, as previously mentioned, we will continue to Opportunistically access capital market conditions with a focus on ensuring we maintain meaningful excess liquidity, a long term maturity profile and access to diversified sources of capital.

Speaker Change: Before we hand, it off for questions I'd like to emphasize that we are executing effectively on our phase plan for long term growth.

Speaker Change: Robust network and a dedicated associates are central to this effort as we remain fully focused on leveraging our unique resources to deliver a seamless connectivity experience to a growing number of customers across our footprint. We are making progress and we are just getting started.

Speaker Change: Our commitment to all stakeholders is steadfast and we are always working for you.

Speaker Change: With that we are now ready for questions.

Operator: At this time, I'd like to remind everyone, in order to ask a question, press star 1 on your telephone keypad. Our first question will come from the line of Greg Williams with TD Cowen. Please go ahead.

Speaker Change: At this time I'd like to remind everyone in order to ask a question press star one on your telephone keypad. Our first question will come from the line of Greg Williams with TD Cowen. Please go ahead.

Greg Williams: trough of ARPU. Wondering if you can kind of do the same for EBITDA? You know, you had a lot of investments in billing automation platforms. But then, of course, you had the 5% price hike, and you mentioned the 4% organizational headcount reduction. And so are we at trough EBITDA on a dollar on margin levels from here at $212 million? Or just any color from the trajectory would be helpful.

Greg Williams: Great. Thanks for taking my questions.

Greg Williams: You guys had some helpful color on calling the trough of <unk> wondering if you can kind of do the same for EBITDA you had a lot of investments in billing automation platforms. But then of course, you have the 5% price hikes and you mentioned the 4% organizational head count reduction and so are we at trough EBITDA dollar and margin levels from here at kindred.

Speaker Change: $1 million or just any color from the trajectory would be helpful. And then second question is just on maybe a little more color on ACP, you said 4000 subscribers left but there is 4800.

Todd Koetje: And then second question is just on maybe a little more color on ACP. You said 4,000 subscribers left, but 4,800 that were taking ACP subsidies. I thought you had 10,000 ACP subscribers. I'm just trying to reconcile that. So, you know, does that mean there are only 800 paying customers left in the third quarter? You know, if you could give us some help on the third quarter clarity, that'd be great.

Speaker Change: That were taking the CDB subsidies because I thought you had 10000 <unk> ACP.

Speaker Change: ACP subscribers I'm, just trying to reconcile that so is that.

Speaker Change: There's only 800 paying less in the third quarter.

Speaker Change: It gives us some help on the third quarter Claire that'd be great. Thanks.

Julie Laulis: The question on EBITDA and the ARPU trough comment that you reiterated, and then I'll let Julie touch on some of the ACP stuff. As it relates to that ARPU stabilization, we've talked about this as it's specific to some of the initiatives that we started late last year, both with some of the tactical responses as well as some of the more value conscious, you know, selling rates or selling rates for more value conscious customers, better said.

Speaker Change: The question on EBITDA and <unk>.

Speaker Change: <unk> trough comment that you reiterated and then I'll, let Julia hit on some of the ACP stuff as it relates to that <unk> stabilization. We've talked about this is it is it specific to some of the initiatives that we started late last year.

Speaker Change: Those with some of the tactical responses as well as some of the more value conscious selling rates or selling rates were more value conscious customers better said.

Julie Laulis: And we do feel like some of the initiatives that we took had the outcomes that we expected. And now, many of the initiatives that we're putting in place now, as we referred to on the call, will provide that stabilization factor. You saw that EBITDA margins were very consistent sequentially in the quarter, slightly up, but basically, you know, by 10 basis points. And when you start to think about ARPU stabilizing, and you have a stable to growing base of units, and that's your highest-margin product outside of some of the cost things that we're going to continue to invest in, as you said, in these long-term platforms, you can allude to, you know, where we also feel like, you know, profitability can expand from here.

Speaker Change: And we do feel like some of the initiatives that we took had the outcomes that we expected.

Speaker Change: And then now many of the initiatives that we're putting in place now like we referred to on the call.

Greg Williams: We will provide that stabilization factor.

Speaker Change: You saw that EBITDA margins were very consistent sequentially in the quarter slightly up but basically.

Speaker Change: By 10 basis points.

Speaker Change: And when you start to think about <unk> stabilizing and you have a stable growing base of units and that's your highest margin product.

Speaker Change: Outside of some of the costs things that we're going to continue to invest in as you said in these long term platforms.

Speaker Change: You can you can alluded to where we also feel like.

Speaker Change: Profitability, Jim expand from here.

Speaker Change: Sure.

Julie Laulis: And jumping in on ACP, so 4,000 ACP customers lost in the second quarter out of the 48,000 total ACP customers. So at this point in time, through the second quarter, 91% of the ACP customers are being retained. But hey, we're in unprecedented times, right?

Speaker Change: And jumping in on ACP, So 4000, ACP customers loss in the second quarter.

Speaker Change: The 48000 total ACP customers. So at this point in time through the second quarter, 91% of the ACP customers are being retained hey, we're in unprecedented times right.

Julie Laulis: We have essentially been through all of our billing cycles, given that we did not give a partial subsidy in May. But we understand that customers will be adjusting to ongoing billing amounts and that future non-pay churn is possible. I also will call out that we have a small segment of ACD customers who have a loyalty credit that will roll off in the third quarter, which could be a catalyst for churn. But, as usual, we're communicating with these customers, and we're talking to them about options that meet their needs. So that is more color on ACP.

Speaker Change: We have essentially been through all of our billing cycles, given that we did not give a partial subsidy in may.

Speaker Change: But we understand that customers will be adjusting to ongoing billing amounts and that future non pay churn is possible.

Speaker Change: I also will call out that we have a small segment of ACB customers, who have a royalty credit that would roll off in the third quarter, which could be a catalyst for churn, but as usual we're communicating with these customers and we're talking to them about options that meet their needs.

Speaker Change: So is that is more color on ECP.

Speaker Change: Alright, thank you.

Sebastiano Petti: Our next question will come from the line of Sebastiano Petti with J.P. Morgan. Please go ahead.

Speaker Change: Our next question will come from the line of Sebastiani, Patti with J P. Morgan. Please go ahead.

Todd Koetje: Hi, thank you. Just a quick clarification and follow-up on the ARPU stabilization. Are we, should we be thinking about that as you exit the year, so 3Q into 4Q sequentially, ARPU begins to stabilize, or should we maybe, or should we be thinking about it on a year-on-year decline basis? And then, additionally, in regards to the price increase, any color perhaps around the level of or the percentage of your base currently on auto pay and how we should think about the price increase impacting, you know, back half trends Thank you.

Sebastiani, Patti: Hi, Thank you just a quick clarification and follow up on the ARPA stabilization.

Sebastiani, Patti: Are we should we be thinking about that as you exit the year, so <unk> into <unk>.

Speaker Change: <unk>.

Speaker Change: <unk> against the stabilized or should we maybe or should we be thinking about it on a year on year decline basis.

Speaker Change: And then subsequent and then additionally in regards to the price increase any color, perhaps around the level of or the percentage of your base currently on auto pay and how we should think about the price increase.

Speaker Change: Impacting back half trends.

Speaker Change: Trying to perhaps size the impact or benefit there. Thank you.

Todd Koetje: Yeah, maybe I'll jump in on the adjustment. It's, I don't really think of it as a price increase because, clearly, customers can completely negate it. I think we specified that half of our current HSD customers would receive this. The folks that didn't would either be currently enrolled in such a program or potentially a promotional customer or a different family of brands that have yet to be integrated into our billing database.

Speaker Change: Yes, maybe I'll jump in on the adjustment.

Speaker Change: I don't really think of it as a price increase because clearly customers can completely negate it.

Speaker Change: I think we specified that half of our current <unk> customers received des for folks that didn't.

Speaker Change: Would either be currently enrolled in such a program or potentially a promo customer or different family of brands that have yet to be integrated into our billing database.

Todd Koetje: And, Sebastiano, when you think about that, while we're going to be tracking that very closely, it's $5 if somebody does not elect to do that auto pay, right? So you can assume a population will not, but it's then approximately half that that we make up in expenses if they do, relative to, you know, fees and other charges. And, you know, we've seen data, I think others have spoken to this in the past, but we've seen data that on auto pay, you even improve on the retention side of the equation.

Sebastiana: And sebastiana when you think about that well, we're going to be tracking that very closely it's $5. If somebody does not elect do that autopay right. So you can assume a pilot relation will not.

sebastiana: But it's been approximately half that make up in expenses, if they do relative to.

Speaker Change: <unk> and <unk>.

Speaker Change: Other charges and we've seen data and I think others have spoken to this in the past, but we have seen data that on autopay.

Speaker Change: Even improve on the retention side of the equation so.

Speaker Change: If you have half of that number and just absolute costs and you're improving retention.

Speaker Change: We feel that went on either side of that equation.

Todd Koetje: So, you know, if you're half of that number and just absolute costs and you're improving retention, we feel that you win on either side of that equation. As it relates to the ARPU question, that's a sequential, you know, assumption, if you will, relative to where we are in the, you know, the kind of high 70s right now, and with the initiatives that we put in place that we've been talking about, some of the selling ARPU lists, some of the discount roll-offs, some of the competitive dynamics and the tactical strategies that, you know, we'll continue to evaluate, but the vast majority of them that were employed in late 23 and early 24, the stabilization comment is related to sequential ARPU.

Speaker Change: As it relates to the <unk> question.

Speaker Change: Is that the sequential.

Speaker Change: Assumption, if you will relative to where we are in.

Speaker Change: The kind of high <unk> right now and with the initiatives that we've put in place that we've been talking about some of the selling RP list some of the discount roll off some of the competitive dynamics in the tactical strategies that will continue.

Speaker Change: To evaluate but the vast majority of them that were employed in late 'twenty three in early 'twenty four.

Speaker Change: Stabilization comment is related to sequential RV.

Todd Koetje: I mean, if I could ask a quick follow-up on the broadband subscribers, I think maybe last quarter or perhaps fourth quarter, but I think you had talked about the year-on-year improvement in net ads continuing to accelerate as you're blocking and tackling or your go-to-market strategy was tweaked a little bit towards initiatives that would accelerate subscriber growth. Is the expectation at this point that this can continue, that the pace of change or the pace of improvements in underlying broadband subscriber growth can continue while ARPU stabilizes?

Speaker Change: And then if I could ask a quick follow up on the broadband subscribers I think maybe last quarter or perhaps fourth quarter, but I think you had talked about.

Speaker Change: The year on year improvement in.

Speaker Change: Net ads kind of continuing to accelerate as you kind of you are blocking and tackling or you'll go to market strategy was cheap tweaked a little bit in order to kind of towards initiatives that would accelerate subscriber growth is the expectation at this point that you can.

Speaker Change: That that can continue that pace of change in the pace of improvements in underlying broadband subscriber growth can continue while <unk> stabilized. Thank you.

Todd Koetje: I'll jump in there and talk. Feel free to tag along.

Speaker Change: I'll jump in there and talk to your three to tag along.

Speaker Change: Yeah, I mean, I think when you look at the second quarter as sort of the end.

Speaker Change: An example, despite the headwinds from the exploration of ACP.

Speaker Change: We still had a quarter that was dramatically better than.

Julie Laulis: Yeah, I mean, when you look at the second quarter as sort of an example, despite the headwinds from the expiration of ACP, we still had a quarter that was dramatically better than last year, same period. And our connects have been improving on a year-over-year basis. This is the third quarter that that has happened.

Speaker Change: Last year same period.

Speaker Change: And <unk> have been improving on a year over year basis. This is the third quarter that that happened.

Speaker Change: And our churn is also at all time lows.

Julie Laulis: And our churn is also at all-time lows. So I think we are learning, we are calibrating, we are leveraging, we are taking those learnings and putting them to use. So our focus is, absolutely, as we've talked about in the past, on a phased growth plan, and the first phase of that is really driving growth. Thank you, and you are obviously a part of that.

Speaker Change: I think we are learning we are calibrating we are leveraging.

Speaker Change: We are taking.

Speaker Change: Those learnings and putting them to use so.

Speaker Change: Our focus is absolutely is as we've talked about in the past.

Speaker Change: On a phased growth plan in the first phase of that is really driving growth.

Speaker Change: Unit growth specifically.

Speaker Change: Thank you and Kevin are a part of that obviously.

Frank Louthan: Our next question will come from the line of Frank Louthan with Raymond James. Please go ahead.

Speaker Change: Our next question will come from the line of Frank Louthan with Raymond James. Please go ahead.

Todd Koetje: Okay, great. And just to back on the ARPU question, you know, should we think of Q2 as sort of the low, and it kind of bottoming from there? Or will it be more, you know, maybe drift down a little bit and then maybe grow in the back half of 25? Something like that. And then when you say you're targeting certain customers, you know, how much longer can you do that? And when you talk about these customers, are these some of the bigger customers, national players, or more some of the smaller regional ankle biters?

Frank Louthan: Okay, Great and just back on the <unk> question should we think of Q2 is sort of the low and it kind of bottoming from there or will it be more.

Speaker Change: Maybe drift down a little bit and then Ben maybe grow in the back half of <unk>.

Speaker Change: Of 25, something like that.

Speaker Change: And then when you say you're targeting certain customers.

Speaker Change: How much longer can you do that.

Speaker Change: Can you talk about these customers or these some of the bigger customers national players or more some of the smaller regional ankle biters.

Julie Laulis: Frank, I'll kick off. I would say again on the ARPU side that it's a stabilization factor sequentially. Getting into like, you know, sense on that relative to up or down is not the guidance we're going to give. But I think with some of the initiatives that we have in place, the stability and growing customer base that we have, SANS ACP, we feel very confident in that, not only just through the balance of the year but even as we're into the next quarter.

Frank: Frank I'll kick off.

Frank Louthan: I would say again on the RFP side, it's a stabilization factor sequentially getting into light.

Speaker Change: So on that relative to up or down is not the guidance were going to give but I think with some of the initiatives that we have in place the stability and growing customer base that we have songs ACP.

Speaker Change: We feel very confident in that not only just through the balance of the year, but even as we're into the next quarter.

Julie Laulis: And then on the customer side, from a competitive perspective, as we mentioned in the past, the tactical strategies were very specific to certain competitors, certain competitors that, in most cases, were new. In most cases, not in most cases, in all cases, we knew where capital access was, cost of capital, you know, go-to-market strategies, and we were able to employ specific strategies against those. So I won't put them into a specific defined category that you use, but you can probably, you know, take away from that the types of specific competitors that we were focused on there.

Speaker Change: And then on the customer side from a competitive perspective, as we mentioned in the past the tactical strategies were very specific to certain competitors.

Speaker Change: Certain competitors that.

Speaker Change: In most cases were new.

Speaker Change: In most cases not in most cases in all cases, we knew where capital access was cost of capital.

Speaker Change: Go to market strategies, and we were able to employees specific strategies against those so I will put them into a specific defined category that you used but you can probably.

Speaker Change: Takeaway from that.

Speaker Change: A specific competitors that we were focused on there.

Julie Laulis: And just to follow on the, so, oh, never mind. Yep, well, go ahead. I was going to say to give an example where, you know, when we go up against small overbuilders with these targeted offers, we have seen wins in that there may have been press releases about other markets that they were going into that have been quietly taken down. And so, that is the sort of result that we are seeing from those targeted efforts.

Speaker Change: And just to be correct.

Speaker Change: Never mind.

Speaker Change: Yes go ahead.

Speaker Change: I was going to say just to give an example, where.

Speaker Change: When we go up against small overbuilt errors with these targeted offers we have seen wins in that there may have been press releases about other markets that they were going into that has been quietly taken down and so.

Speaker Change: That is the sort of result that we're seeing from those targeted efforts.

Speaker Change: Got it.

Speaker Change: Okay. Thank you.

Steven Cahall: Our next question will come from the line of Steven Cahall with Wells Fargo. Please go ahead.

Speaker Change: Our next question will come from the line of Steven Cahall with Wells Fargo. Please go ahead.

Danon: Hi, this is Danon on behalf of Steve. Unfortunately, I'm going to beat a dead horse here, but back on broadband ARPU, the stabilization commentary is helpful, but, you know, looking back historically, we've grown ARPU in the mid-single-digit range. So, you know, would you expect to return to these levels of broadband ARPU growth over time, or should we expect a more persistent level of promotion and targeted pricing

Dan: Hi, This is Dan on for Steve Unfortunately, going to beat a dead horse here, but back on broadband <unk> stabilization commentary was helpful. But looking back historically, you've grown <unk> in the mid single digit range. So would you expect to return to these levels of broadband ARPA growth over time or should we expect a more persistent level of promotion and targeted.

Speaker Change: Pricing actions moving forward.

Julie Laulis: I don't – well, we're not going to give specific guidance, but I think the idea of growing in a mid-single-digit range over the long term is something that we'd be looking forward to, but we're in a phased growth plan at this point in time, so that starts with stabilization. So, again, as part of a long-term plan, sure. Right now, stabilization.

Speaker Change: Well, we're not going to give specific guidance, but I think the idea of growing in a mid single digit range over the long term.

Speaker Change: It's something that we'd be looking forward to.

Speaker Change: But we're in a phased growth plan at this point in time, so that starts with stabilization. So again, that's part of a long term plan sure.

Speaker Change: Right now stabilization.

Todd Koetje: And Dan, I'll just add on that. I'll just add that, Dan, it's Todd. You continue to see more and more discipline in the market across all operators. I mean, there's still a select few that you scratch your head at from time to time.

Speaker Change: And Dan I'll, just add on that.

Todd: I'll just add on that Dan It's Todd you continue to see more and more discipline in.

Dan: In the market.

Dan: All operators I mean, there is still a select few.

Speaker Change: <unk> heard that from time to time, but as it relates to pricing discipline return on invested capital.

Speaker Change: For these highly complex extremely costly to build especially in these rural markets costly to operate net.

Speaker Change: Network.

Speaker Change: We believe as Julie alluded to in her remarks that that will continue to be a discipline that's required as it relates to long term returns.

Todd Koetje: But as it relates to pricing discipline, you know, return on invested capital for these highly complex [inaudible] for invested capital, whether that be, you know, public capital or private capital.

Speaker Change: For invested capital whether that be.

Julie Lewis: Public capital or private capital.

Todd Koetje: Right, and when you compare that with the demand for connectivity, both speed and data, you realize that there are lots of opportunities for monetization in the future.

Speaker Change: Got it right.

Speaker Change: Demand for connectivity, both speed and data and you realize that there are lots of opportunities for monetization in the future.

Todd Koetje: That's helpful. And maybe, just as a quick follow-up, could you please update us on where your fiber overlap sits today?

Speaker Change: That's helpful and maybe just as a quick follow up could you.

Speaker Change: Update us with where your fiber overlap sits today.

Julie Laulis: Yes, we are currently sitting at 42% of our markets overbuilt with fiber.

Speaker Change: Yes, we can.

Speaker Change: Currently are sitting at 42% of our markets overbuilt with fiber.

Speaker Change: Thank you.

Kohulan Paramaguru: Our next question will come from the line of Kohulan Paramaguru, with BNP Paribas. Please go ahead.

Speaker Change: Our next question will come from the line of coolant Terra Margaret with BNP Paribas. Please go ahead.

Julie Laulis: Hi, thanks for the opportunity. My first question is on ACP. Can you just try and quantify for us how much of the impact this quarter was from churn and how much was from gross ads declining in the market? And secondly, we noticed you have added a new risk factor related to MBI to the filing. I know you've been reluctant in the past, but please can you try and give us a little bit more color around the potential size of the outlay here or the multiple for this business, given it's so material for shareholders? Thank you.

Margaret: Alright, Thanks for the opportunity first question is on ACP can you just try and quantify for us how much the impact this quarter was from churn and how much is from gross adds.

Speaker Change: Declining in the market and secondly.

Speaker Change: We now have added a new risk factor related to MBIA IND filing.

Speaker Change: I know you've been reluctant in the past.

Speaker Change: Can you try and give us a little bit more color around the potential size of the outlay.

Speaker Change: A multiple for this business given its so material.

Speaker Change: Thank you.

Todd Koetje: I'll start on the ACP question. We noted in our comments that the 4,000 lost during the second quarter of the 48,000 total ACP customers were on the disconnect side. We did not quantify the connect side. But given that, you know, we stopped selling ACP in the first quarter, and our connects are still up, and actually, about a third of our connects in the second quarter came from what I would call our value segment, which I would assume is very similar to ACP customers, and the majority of those folks took 300 meg service, services, or higher. So we did not quantify the connect side but rather the disconnect side.

Speaker Change: I'll start on the ACP question, we noted in our comments that the 4000 lost during the second quarter of the 48000 total ACP customers was on the disconnect side, we did not quantify the connect side, but given.

Speaker Change: That we stopped selling ACP and the first quarter and our connects are still up.

Speaker Change: And actually about a third of our connection in the second quarter.

Speaker Change: <unk> from what I would call our value segment, which I would assume it's very similar to ACP customers.

Speaker Change: And the majority of those folks took 300 Meg.

Speaker Change: Service services or higher.

Speaker Change: So I.

Speaker Change: We did not quantify the connect side, but rather the disconnect side.

Todd Koetje: And then on the MBI side, I will reiterate a few things I've said. Over the last couple of quarters as it relates to an event, well, one, an event that we expect to occur if nothing else changes according to the agreement we have in late 25, early 26. We did outline in our prepared remarks that the call option has expired as of this quarter on exercise. That put option is in, you know, Q3 of 2025.

Speaker Change: And then on the MDI side I will reiterate a few things I've said.

Speaker Change: Over the last couple of quarters as it relates to.

Speaker Change: Any events one event that we expect to.

Speaker Change: Occur if nothing else changes according to the agreement we have.

Speaker Change: In late 'twenty five early 'twenty six we did outlined in our prepared remarks that the call option has expired as of this quarter on exercise.

Speaker Change: That put option as in Q3 of 2020 fives, we've been actively planning for that our commentary has been very centered around our confidence in the ability.

Todd Koetje: We've been actively planning for that, and our commentary has been very centered around our confidence and the ability to effect that transaction without even the need to go to the capital markets. Yet we will remain very opportunistic in looking at capital markets. We have a very diversified access strategy and a very proactive long-term strategy to ensure we have excess liquidity, long-term maturities, you know, cost-efficient capital. And we're actively evaluating those, but that's something that we feel very comfortable can be executed within our historical operating leverage of 2.5 to 4.5 times. We're going to be towards the higher end of that range, acknowledging that, but well within that higher end, if that's helpful.

Speaker Change: To affect that transaction without even the need to go to the capital markets. Yes, we will remain very opportunistic and looking at capital markets. We have a very diversified access.

Speaker Change: Strategy in a very proactive long term strategy to ensure we have.

Speaker Change: Excess liquidity long term maturities cost efficient capital.

Speaker Change: And we're actively evaluating those.

Speaker Change: But that's something that we feel very comfortable it can be executed within our historical operating leverage of two five to four five times is it going to be towards the higher end of that range technology, Matt, but well within that higher and if that is helpful.

Matt: That's helpful. Thank you.

Craig Moffett: Our next question will come from the line of Craig Moffett with Moffett-Nathanson. Please go ahead. All right, thank you. Two questions.

Speaker Change: Our next question will come from the line of Craig Moffett with Moffett Nathan Cheng. Please go ahead.

Todd Koetje: Hi, thank you. I have two questions if I could. First, I know I've asked this question in the past, but given how much convergence is on everyone's lips, I'm wondering if you are thinking at all about how you might add wireless to your consumer offering and whether there's anything to discuss on that front. And then, second, do you think that your competitors who are building fiber in your footprints are making money?

Craig Moffett: Hi, Thank you two questions if I could.

Speaker Change: First.

Craig Moffett: I know I've asked this question in the past, but I thought I'd just given how much convergence is on everyone's lips I'm wondering if you are.

Speaker Change: Thinking at all about.

Speaker Change: How you might add wireless to your consumer offering and whether there was anything to discuss on that.

Speaker Change: On that front and then second.

Speaker Change: Do you think that your competitors, who are building fiber in your footprints are making money.

Todd Koetje: Todd, I think I know you well enough to know you probably have a pretty good guess about what they're spending in cost per home passed. Is it your sense that they are still overbuilding at a positive return on capital?

Speaker Change: I think I know you well enough to know you probably have a pretty good guess about what theyre spending and cost per home passed is it your sense that.

Speaker Change: They are still overbuilding at a positive return on capital.

Julie Laulis: I'll start with the latter, and then I'll let Julie speak to some of the convergence. Craig, thanks for the question.

Speaker Change: I'll start with the latter and then I'll, let Julie speak to some of that convergence.

Speaker Change: Thanks for the question and yes, we have spoken a lot about that I would say I think it is important to note that while Julie alluded, we have 42% overlap from fiber and that's both with incumbent fiber as well as new entry overbuild fiber.

Julie Lewis: But that pace has continued to increase in spite of that our discos and are connected as Julie was outlined in the call.

Todd Koetje: And, yeah, we have spoken a lot about that. I would say, I think it's important to note that while, you know, Julie alluded to the fact that we have 42% overlap in fiber, and that's both with incumbent fiber, as well as new entry, you know, overbilled fiber, that that pace has continued to increase. In spite of that, our DISCOs and our Connects, as Julie was outlining on the call, are at really healthy levels of improvement. On the DISCO side, it's actually, for Q2, a low for the last six years, if you take out the pandemic years, of course.

Speaker Change: Brad.

Brad: Really healthy.

Brad: Improvement levels on the disco side, it's actually for Q2.

Brad: A low for the last six years, if you take out the pandemic years of course and.

Brad: And we think that Thats actually a great testimonial to how we're performing against even this increased competition as it relates to the economics.

Todd Koetje: And we think that that's actually a great testament to how we're performing against even this increased competition. What's been built to date was probably where they're going to get, you know, more disciplined economics and where, maybe, in many cases, you had access to lower costs of capital over the last three years. We know the cost of capital has changed. We know access to capital has changed, with the exception of maybe a few of the larger scale players.

Speaker Change: What's been built to date was probably where they're going to get more disciplined economics, and where maybe in many cases, you had access to lower cost of capital over the last three years, we know the cost of capital has changed as we know the access to capital has changed.

Brad: With the exception of maybe a few of the larger scaled players.

Brad: We do expect that when you start to get into cost per home and then the overall labor cost to operate which I think so many people failed to think about as it relates to how do you operate a highly rural low density in a efficient operating cost structure that.

Todd Koetje: And we do expect that when you start to get into cost per home and then the overall labor cost to operate, which I think so many people fail to think about as it relates to how you operate a highly rural, low density area in an, you know, efficient operating cost structure, that the areas that have not yet been built will probably be built at a slower pace over time because of the economic dynamics we talked about.

Speaker Change: The areas that have not yet been built will probably be built over a slower pace over time because of the economic dynamics you're talking about.

Julie Laulis: In jumping in on convergence, it's interesting to watch today to see where wireless companies are either building or buying wired providers. I think that suggests something interesting to us all.

Speaker Change: And jumping in on convergence.

Speaker Change: Interesting to watch.

J C: J C, where wireless companies are either building or buying wire providers I think that suggests something interesting to us all.

Julie Laulis: And I think we continue to muse over the utility of a wireless and wired bundle, either to the customer or to the companies that are providing them for the long term. That being said, the MVNO possibility is something that we look at and model and remodel multiple times a year to check and see. It needs to be economically viable and compelling for both us and our customers over the long term to jump into that.

Speaker Change: And I think we continue to views over the utility of a wireless and wired bongo either to the customer or to the companies that are providing them.

J C: For the long term.

Brad: That being said.

Speaker Change: The <unk> possibility is something that we look at and model and remodel.

Speaker Change:

Speaker Change: Multiple times a year.

Speaker Change: To check and see it needs to be.

Speaker Change: Economically viable and compelling.

Speaker Change: Both us and our customers over the long term to jump into that and we think that there are is that it's just one of the products and capabilities and partnerships that will serve customers and be monetized.

Julie Laulis: And we think that there are, that is just one of the products and capabilities and partnerships that will serve customers and be monetized by companies like ours over the long term. If we do decide to jump into the wireless world, I think we have options available to us that get us off to a relatively quick start. Time will tell, Craig.

Speaker Change: By companies like ours over the long term.

Speaker Change: If we do decide to jump into the wireless world.

Speaker Change: I think we have options available to us that get us off to a relatively quick start.

Speaker Change: So.

Craig Moffett: Time will tell Craig.

Craig Moffett: Alright, thank you.

Brandon Nispel: Our next question will come from the line of Brandon Nispel with KeyBank Capital Markets. Please go ahead.

Speaker Change: Our next question will come from the line of Brandon <unk> with Keybanc capital markets. Please go ahead.

Julie Laulis: Great. Hey guys, thanks for taking the questions. Hoping you could help us understand your expectations for broadband to travel growth in the second half of the year, maybe some comments on July. Julia, are you guys positive about July? And then, just from a bigger picture, when will we start to see penetration go up? Obviously, that's the goal of this program in terms of changing strategy. I'm still hoping you could help there. Thanks. Yep.

Brandon: Great Hey, guys. Thanks for taking the questions. So hoping you could help us.

Brandon: I understand your expectations for broadband subscriber growth in the second half of the year, maybe some comments in terms of July Julia you guys positive in July.

Speaker Change: And then just bigger picture when will we start to see penetration. So obviously, that's the goal of this program in terms of change in strategy.

Speaker Change: So hoping you could help there thanks.

Todd Koetje: Yep, well... I would point us all back to our focus on growth on a phased, long-term growth plan for increasing penetrations across all customer segments. That is what we are focused on, and I remind you that, again, despite the headwinds that we experienced with the ACP expiring, we are making steady progress on that. I don't think you're hearing about Connects being up year-over-year for three quarters or customer growth like you are hearing from us because of our focus and the fact that these initiatives are gaining momentum.

Speaker Change: Yeah well.

Speaker Change: I would point us.

Julia: Two our focus on growth on a phased long term growth plan on increasing penetrations across all customer segments.

Julia: That is what we are focused on and remind you that again, despite the headwinds that we experienced with ACP expiring.

Speaker Change: We are making steady progress on that I don't think youre hearing about connects being.

Speaker Change: Over year over year, or three quarters, where customer growth like you are hearing from us because of our focus.

Julia: And the fact that these initiatives are gaining momentum.

Speaker Change: Hum.

Todd Koetje: Disconnects are down as well, but I am not going to give specific guidance about what sub-growth will look like in the second half. Only that that is what we are focused on. Todd said at the end of his comments, "We're always working for you. That is our branding tagline. And I think that the reorganization that we've recently accomplished is part of making sure that that focus comes to life in a very bespoke way in each one of our markets.

Speaker Change: Disconnects being down as well.

Speaker Change: Not going to get specific guidance about what.

Speaker Change: Hum curve will look like in the second half.

Speaker Change: Only that Todd is what we are focused on is <unk>.

Speaker Change: At the end of his comments, we're always working for you that is our branding tagline and I think that the reorganization that we've recently.

Speaker Change: Accomplished as part of making sure that that focus comes to life in a very bespoke way in each one of our markets.

Todd Koetje: And Brandon, I'll just jump in, Brandon, if you're okay. You know, as it relates to what is, I think, a really compelling incremental opportunity for us, you've seen our passing rates increase. We talked about in the prepared remarks about 35,000 year-to-date. On an LTM basis, that's over 75,000 homes. A meaningful amount of those are in our existing markets, and these are in our existing markets where we see really strong, well, really strong may be a little bit of a stronger term, but, you know, stronger than what we've seen in the last couple years, developments from, you know, economic stimulus, economic growth, new builds, new housing permits, Texas, northern Arizona, South Carolina, Idaho.

Speaker Change: Got it.

Brandon: Thanks Brandon.

Speaker Change: I'll just jump in Brandon I figure okay.

Speaker Change: As it relates to what is I think a really compelling incremental opportunity for us you've seen our passing is increase.

Speaker Change: We talked about it in the prepared remarks of about 35000 in the year to date.

Speaker Change: On an LTM basis sets over 75000 homes.

Speaker Change: The full amount of those are in our existing markets and these are in our existing markets, where we see really strong well really strong maybe be a little bit about a stronger term but.

Speaker Change: Stronger than what we've seen in the last couple of years.

Speaker Change: Developments from economics.

Speaker Change: Stimulus economics gross new builds new housing permits, Texas, Northern Arizona, South Carolina, Idaho. These are some areas yet still very rural markets that are seeing some really strong growth areas and we can capitalize on those and these are capitalizing on them and markets.

Todd Koetje: These are some areas, yet still very rural markets, that are seeing some really strong growth areas, and we can capitalize on those, and we are capitalizing on them in markets we've been in for years with a very strong brand and highly upgraded networks. And so that's the best return on invested capital, you know, we can allocate to, and then we can benefit from a growth perspective. But as we all know, when you build those, you're not just a connection a day away, right?

Speaker Change: <unk> been in for years with a very strong brand with highly upgraded networks and so that's the the best return on invested capital.

Julia: Can allocate towards and then we can capitalize from a growth perspective, but as we all know when you build those youre not just a connection a day away right. So that lags a little bit, but as Julia said with our re org and the changes that we've made there werent really powering that growth through that.

Todd Koetje: So that lags a little bit, but as Julie was saying, with our RE-ORG and the changes that we've made there, we're really powering that growth through, you know, that local approach and those local leaders.

Julia: Local approach.

Julia: And those local leaders.

Brandon Nispel: Got it. Thank you. And if I could just follow up, just so we are all perfectly clear, you guys said stabilization in ARPU in the second half. That implies that there could still be sequential declines in ARPU, or it could be sequentially positive in 3Q14.

Speaker Change: Got it.

Speaker Change: Thank you.

Speaker Change: If I could just follow up just so that we are all perfectly clear you guys said stabilization in <unk> in the second half that implies that there could still be sequential declines in our pool or it could be sequentially positive in <unk> <unk>.

Todd Koetje: Don't think we're going to expand on the comments.

Speaker Change: Don't think standard comments.

Todd Koetje: Alright, I tried. I think the initiatives we put in place give us confidence in that stabilization factor, and sequentially, that should be seen in Q3.

Speaker Change: Alright, I tried I think I think the initiatives we've put in place gives us confidence in that stabilization factor.

Speaker Change: Sequentially that should be seen in Q3.

Todd Koetje: Thanks, Todd. Thanks, Julia. You've got it.

Todd: Thanks, Todd Thanks, Joe.

Brandon: You got it Brandon.

Julie Laulis: I will now turn the call back to Julie Laulis for her closing remarks. Thank you, Regina. So before we conclude, I want to extend my gratitude.

Todd: I will now turn the call back to Julie Lewis for closing remarks.

Julie Lewis: Thank you Regina.

Julie Laulis: So, before we conclude, I want to extend my gratitude to our associates. Their energy, dedication, and ability to navigate this ever-changing environment have never been more evident. I am incredibly proud of and thankful for each and every one of them. Thanks, and we look forward to speaking to you again next quarter.

Julie Lewis: So before we conclude I want to extend my gratitude to our associates their energy dedication and ability to navigate this ever changing environment has never been more evident I am incredibly proud of and thankful for each and every one of them.

Speaker Change: And we look forward to speaking to you again next quarter.

Operator: And this will conclude today's call. Thank you all for joining us. You may now disconnect.

Speaker Change: And this will conclude today's call. Thank you all for joining you may now disconnect.

Julie Lewis: [music].

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Speaker Change: Thank you.

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