Q3 2024 Charter Communications Inc Earnings Call
Questions until the completion of the formal remarks at which time, you'll be given instructions for the question and answer session.
Also as a reminder, this conference is being recorded today.
Speaker Change: If you have any objections. Please disconnect at this time I will now turn the call over to Stefan Edinger.
Stefan Edinger: Thanks, operator, and welcome everyone. The presentation that accompanies this call can be found on our website IR dot charter dot com.
I'd like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings and we encourage you to read them carefully.
Stefan Edinger: <unk> remarks that we make on this call concerning expectations predictions plans and prospects constitute forward looking statements, which are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results any forward looking statements reflect management's current view only and charter undertakes no obligation to revise.
Stefan Edinger: Our update such statements on today's call, we have Chris Winfrey, our president and CEO and Jessica Fisher, our CFO with that I'll turn the call over to Chris. Thanks, Duffy, we had a busy quarter executing our operating strategy and building on the foundational investments of the past couple of years.
Stefan Edinger: We're also successfully managing the transition of customers previously on the government's affordable connectivity program in a period of new competition.
Stefan Edinger: And while we expect some normalization of external factors as we head into 2025 and much lower capital intensity beyond 2025.
Stefan Edinger: Outstanding still evidenced by the series of announcements we made in September our market, leading customer service commitment new pricing and packaging that makes better use of our unique assets in the marketplace encapsulated in a brand refresh through spectrum LIFO limited promise.
Stefan Edinger: There was a lot of flattery press about the importance of wireline networks and convergence. This past quarter, we remain the only true convergence pure play in our footprint will look fully distributed gig capable wireline and wireless network across a growing $58 million passing everywhere we operate.
Soon to be symmetrical and multi gig and all of our communities.
Stefan Edinger: Our seamless connectivity capabilities are evidenced by our continued market leading mobile growth.
Stefan Edinger: And in just over a year, we completed a full cycle of programming renewals and the launch of Zumba to fundamentally reposition video again as an important part of the connectivity bundle whether full value hybrid DTC linear packages.
Stefan Edinger: Moller non sports streaming packages or the addition of Ala Carte program or apps to our broadband and video customers, we're well positioned to provide seamless connectivity and this new form of seamless entertainment to customers wherever they want to go.
Speaker Change: Before discussing the quarter I want to express our sympathy and commitment to the communities across the southeast impacted by Hurricanes Helene and Milton These.
Speaker Change: These were devastating storms initial impact was significant mostly because of power outages down poles and trees and drops.
But approximately 10000 of our customers, including homes and businesses fully lost have had their service restored.
Speaker Change: Particular, we're still very active in the Asheville, North Carolina area, and some remaining pockets of Tampa Bay.
Speaker Change: I'd like to keep I'd like to thank our frontline personnel for their dedication and effort in keeping our customers connected that includes our employees who live in the area and were directly impacted themselves and the teams of employees from across the country, who volunteered to help with the restoration.
Speaker Change: During the third quarter, we lost 110000 internet customers.
Speaker Change: Added 545000 spectrum mobile lines and over $2 1 million lines year over year.
Speaker Change: Revenue grew by one 6% in the quarter, while adjusted EBITDA grew by three 6%.
Speaker Change: Were it not for the impact of the end of the ACP program in June we would've grown our internet customers during the third quarter.
Speaker Change: Importantly, we have been successful in keeping low income households, connected we continued to compete well against both wireline overbuild and cell phone internet each with expanded footprints.
Speaker Change: We remain confident in our ability to return to healthy long term growth.
Speaker Change: Our internet product is faster and more reliable.
Speaker Change: Our pricing is lower and similarly bundled with mobile.
Speaker Change: We expect market activity and selling opportunities to pick up over time.
Speaker Change: I'll phone companies will face challenges as customer bandwidth demands continue to grow.
Speaker Change: As I mentioned in the meantime, we're not standing still in mid September made a series of important announcements, including the brand relaunch.
Speaker Change: <unk> customer service commitment and the new pricing and packaging structure.
Speaker Change: Our strategy has not changed we offer high quality products to customers in a package and at a price point that our customers can't replicate.
Speaker Change: We pair that with unmatched customer service.
Speaker Change: Our fully deployed high bandwidth network with ubiquitous and seamless connectivity and entertainment products creates opportunities and remove barriers to help customers in every aspect of their lives, which led us to a new brand platform life unlimited.
Speaker Change: While part of that is a new look and feel for the spectrum brand. It's also about our increasingly converged set of products and building more trust with our customers.
Our new customer commitment is comprised of four key promises reliable connectivity, we're committed to keeping our customers connected 100% of the time and promptly resolving any issues.
Speaker Change: <unk> at every step we're committed to clear and simple pricing and timely service updates and we will take responsibility when things go wrong.
Speaker Change: Exceptional service, we're committed committed to providing exceptional customer experiences.
Speaker Change: And finally always improving meaning react on our customers' feedback to improve our products and customer service.
Speaker Change: We back up those commitments with guarantees.
For example to fix any service disruptions quickly we commit to dispatch a technician the same day, if the customer requested prior to five P. M.
Speaker Change: If a customer needs help on a professional installation a technician will be available at the same or next day.
Speaker Change: Now back those commitments with proactive service credits, if we missed the mark.
We also don't have residential or S&P contracts and if a customer is not completely satisfied with any services within the first 30 days, we give them their money back.
Speaker Change: We're making these commitments because we can because we already made the investments in 100% U S based sales and service with our own employees and frontline tenure to pay progression market meeting benefits and tools and systems to make the job better for the employee and our customers.
Speaker Change: Our life and Ltd brand relaunch also includes new pricing and packaging that better utilizes our unique product assets, which work better together to provide lower promotional pricing and lower persistent bundled pricing.
Speaker Change: Our new pricing and packaging will drive more sales with higher selling of our best products broke customer <unk> connect despite lower product pricing.
Speaker Change: And reduced billing service and retention calls while reducing churn.
Speaker Change: For example, we now offer our gig internet product at $40 per month, when bundled with two unlimited mobile lines <unk> video.
Speaker Change: Customers that take the new double play will receive a two year price lock.
Speaker Change: And customers that take our new Triple play will receive a three year price lock.
And in that package customers also get our top mobile tier zummo and cloud DVR at no additional charge.
Speaker Change: For customers, who want our popular spectrum, one offering that remains available now with a higher starting speed to 500 Megabits per second with one free unlimited mobile line included for a year.
Speaker Change: Existing customers can also opt into our new bundles that persistent bundled pricing.
Speaker Change: Have also increased internet speeds for existing flagship and ultra customers.
Speaker Change: It's still very early but so far our new pricing and packaging is showing promising results, including more video selling more mobile lines per sale and more gig sell in.
Speaker Change: I expect those results and broadband sales to accelerate the seasoning of our marketing and sales approach over time.
Speaker Change: Our operating strategy remains simple sell more products to more customers driving higher penetration against our large fixed asset, reducing the operating and capital cost per product with lower churn to ultimately drive more cash flow capacity.
Speaker Change: And we're making investments in that large fixed asset through our network evolution initiative, which brings multi gigabit speeds.
Speaker Change: So 100% of our customers.
Speaker Change: We've launched symmetrical Internet service and our step one markets, including renal St. Louis Cincinnati, Dallas Fort Worth Louisville, Lexington, Rochester, Minnesota in Rochester, New York, We're now broadly marketing are symmetrical speeds in seven of these eight markets.
Speaker Change: The high split upgrade process should be largely complete in all of our step one markets by the end of this year.
Speaker Change: We're making progress on step two DAA and remote phy markets. We've deliberately slowed these markets to get the software fully certified to our specs that.
Speaker Change: That is pushed back equipment purchasing and operational deployment and we now expect our network evolution initiative project to be completed in 2027.
Speaker Change: Excluding the benefit of future capital and operating cost savings our network evolution has and will cost a very low incremental $100 per passing we have full visibility to that outcome.
Speaker Change: We will update our multi year capital expenditures outlook, including the new phasing of our network evolution spend when we report our fourth quarter results in January.
Alright.
Speaker Change: And video over the past year, we transformed all of our major programming agreements in a way that works for our customers and for charter.
Speaker Change: Including our recent early renewal of Warner Brothers Discovery, and then NBC U.
Speaker Change: These agreements give customers greater overall package flexibility and the ability to include all the key streaming apps from programmers within our spectrum TV select packages.
That enables us to offer what we now call seamless entertainment first for the industry at no extra cost.
Speaker Change: We also have paths for customers to upgrade to the AD free version of these apps and we will sell a programmer apps Ala carte to broadband and skinny package video customers.
Speaker Change: We also had the renewed support from our programming partners to get behind each other's products and distribution for healthier video ecosystem and better choice and value for customers.
Speaker Change: More to come on this but the inclusion of Max with its HBO content and TV select and how we plan to promote Max to our broadband customers and vice versa will show, how we and the programmers more broadly can support one another with our customers front and center.
Speaker Change: By early 2025, we'll be providing our TV select customers up to $80 per month of retail streaming app value at no additional cost, including the AD supported version of Max Disney plus Peacock premium Paramount plus ESPN, plus AMC, plus discovery plus <unk> plus.
Speaker Change: In VIX.
Speaker Change: Seamless entertainment, even easier with zero, which.
Speaker Change: Which proves unified search.
Speaker Change: Search and discovery with a market, leading voice remote and the highest rate of pay TV streaming app in the U S.
Speaker Change: Over the last couple of years, we had moved away from bundling video and our offers because the value proposition to customers had fallen.
Speaker Change: Still have some work to do to operationalize, the new customer propositions, including the customer front end for program or App authentication and programmer credentials, but we're proud of what we can offer customers existing and new in terms of value and utility and that breakthrough is why we are including video and the new bundles, we launched in September.
Speaker Change: Fundamentally we believe that maintaining and evolving the video business, even if it isn't growing helps customer acquisition and retention and making use of our scale and capabilities and adding more value into our unique seamless connectivity relationship.
Speaker Change: <unk> still has positive cash flow and provides us with option value.
Speaker Change: So a lot of exciting things happened in the third quarter. Our continued success in mobile is certainly one of those our mobile offering continues to evolve driving strong results and supporting our new pricing and packaging efforts, we had our highest porting quarter ever.
Speaker Change: Our highest mix of ads on unlimited plus driving higher customer value and Archer.
Speaker Change: <unk> per customer continues to grow nicely.
Today, approximately 8% of our total passenger take or converged offering of Internet and mobile. So we remain underpenetrated, despite having a differentiated and superior offering with market, leading pricing promotion and retail.
As we've worked through the onetime impacts of ACP this year.
Speaker Change: New competition with expanded footprint and our unique nonrecurring subsidized network expansion investment we remain confident in our ability to drive healthy long term connectivity customer growth.
Speaker Change: Now in the future we have the best fully deployed network uniquely capable of delivering seamless connectivity or convergence everywhere, we operate with pricing and packaging that saves customers money with the best products and a service capability investment that has yet to be fully realized as a competitive advantage.
Speaker Change: Our team is executing well on these multiyear initiatives the team that's hungry with a tremendous drive to win for our customers. The communities, we serve our fellow employees and for our shareholders.
Jessica.
Jessica Fisher: Thanks, Ken.
Jessica Fisher: Before discussing our third quarter results I want to mention that today's results do not include any impact related to hurricane Irene on mountains, which hit the southeast in late September early October.
Jessica Fisher: Our fourth quarter results will include some lost customers on patterns related to the storm and both suppressed Chris edition and the damage to strength across Manhattan West.
Jessica Fisher: We're still assessing the impact area and we expect to rebuild back half things over time as our customers rebalance.
Jessica Fisher: We expect to incur approximately $100 million incremental capital expenditures the vast majority analytics will be captured in our rebuild capital expenditure sign.
Jessica Fisher: We have been providing bill credits to customers in impacted areas and those onetime credits will offset <unk> Avenue.
Jessica Fisher: We may also have some incremental operating expense, although we expect that to evaluate the response.
Jessica Fisher: And we will isolate the storm impacts when leaner point, our fourth quarter results.
Jessica Fisher: Let's please turn to our customer results on slide eight.
Jessica Fisher: Including residential and SMB, we launched 110000 internet customers in the third quarter, while in mobile we added 545000 lines.
Jessica Fisher: Video customers declined by 294000, and wireline voice customers declined by 288 Kathryn.
Jessica Fisher: The end of the ACP program drove higher third quarter, non pay and voluntary churn among former ACP customers for a total estimated third quarter impact of approximately 200000 Internet license.
Jessica Fisher: Incremental non pay disconnects trials more than half of those losses and the rest of the impact was primarily driven by voluntary churn with a small impact from lower connects.
Jessica Fisher: We continued to deal with there and good job on managing under the program and we have retained the vast majority of our customers who were previously receiving an HCP benefit.
Jessica Fisher: Beyond Acte, we competed well across at that time.
Jessica Fisher: Note that our third quarter Internet net additions benefited from seasonal back to school connect and a work stoppage at one of our competitors while fourth quarter customer results will include impacts from this joanne.
Jessica Fisher: And about 100000 incremental non pay disconnects and some lagging voluntary disconnects both related to the end of <unk>.
Jessica Fisher: After those effects in the fourth quarter, we expect the one time impacts from ACP to be behind us.
Jessica Fisher: Yeah.
Jessica Fisher: Turning to <unk>, we ended the quarter with 696000 subsidized for all platforms.
Jessica Fisher: We grew those passing by 114000 in the third quarter and by 381000 over the last 12 months.
Jessica Fisher: And we had 41000 net customer additions and are subsidized ferro footprint on the quarter.
Jessica Fisher: We now expect to activate close to 400000, new subsidized for all passengers in 2020 for about 35% more than in 2023.
But lower than our original 2020 plan of 450000 due to shifting construction labor to rebuild activity and store in impacted markets.
Jessica Fisher: We expect our subsidized for our construction activity to recover by the end of the fourth quarter and that reacceleration of activity to put us on a higher pace in 2025 add plant.
Art off balance should still be completed by the end of 2022 years ahead of schedule.
Jessica Fisher: Moving moving to third quarter revenue on slide nine.
Jessica Fisher: Over the last year residential customers declined by one 8% while residential revenue per customer relationship grew by one 8% year over year, given promotional rate step ups rate adjustments and growth of spectrum mobile and $63 million of residential customer credits in the prior year period related to the temporary.
Jessica Fisher: The loss of Disney programming in September 2023.
These factors were partly offset by a higher mix of non video customers growth of lower priced video packages within our base and $25 million of costs allocated to program, our streaming apps, which are netted with home video revenue.
Jessica Fisher: As slide nine shows in total residential revenue grew by 3% year over year.
Jessica Fisher: Turning to commercial total commercial revenue grew by 2% year over year with F&B revenue growth of 1% year over year, reflecting higher monthly F&B revenue per SMB customer, primarily due to related to rate adjustment.
Jessica Fisher: Enterprise revenue grew by three 7% year over year, driven by enterprise PSU growth of five 7% year over year.
Jessica Fisher: And when excluding all wholesale revenue enterprise revenue grew by five 9%.
Third quarter advertising revenue grew by 18% year over year, given political revenue growth.
Jessica Fisher: Excluding political advertising revenue decreased by six 3% year over year due to higher levels of inventory in the market, partly offset by higher advanced advertising revenue.
Jessica Fisher: Other revenue grew by 11, 6% year over year, primarily driven by higher mobile device sales.
Jessica Fisher: And in total consolidated third quarter revenue was up one 6% year over year.
Jessica Fisher: Which is <unk>, 6% year over year, when excluding advertising revenue and $68 million of customer credits in the prior year period related to the temporary loss of Disney programming in September 2023.
Jessica Fisher: Okay.
Jessica Fisher: Moving to operating expenses and adjusted EBITDA on Slide 10 in the third quarter total operating expenses grew by 2% year over year.
Programming costs declined by 10% year over year due to a nine 5% decline in video customers year over year, a higher mix of lighter video packages and cost allocated to programmers training apps, which are now netted with home video revenue.
Jessica Fisher: Partly offset by higher programming rate and a $61 million benefit in the prior year period related to the temporary loss of Disney programming in September 2023.
Jessica Fisher: Other cost of revenue increased by 15, 8%, primarily driven by high end mobile device sales and higher mobile service direct costs.
Jessica Fisher: Cost to service customers declined 5% year over year, given productivity from our tenured investments, including lower labor costs.
Jessica Fisher: Partly offset by modest year over year growth in bad debt expense.
Jessica Fisher: Sales and marketing costs grew by four 4% as we remain focused on driving customer acquisition.
And given our life Unlimited branch brand relaunch in September.
Jessica Fisher: Finally, other expense grew by two 3%.
Jessica Fisher: Adjusted EBITDA grew by three 6% year over year in the corner and.
Jessica Fisher: And when excluding advertising EBIT grew by two 7% year over year.
Jessica Fisher: Turning to net income we generated $1 $3 billion of net income attributable to charter shareholders in the third quarter in line with last year as higher adjusted EBITDA was mostly offset by higher other X.
Jessica Fisher: <unk>, primarily due to noncash changes in the value of financial instruments.
Jessica Fisher: Turning to slide 11 capital expenditures totaled $2 6 billion in the third quarter down about $400 million in last year's third quarter.
Jessica Fisher: Line extension spend totaled $1 $1 billion $16 million higher than last year, driven by our subsidized royal construction initiatives and continued network expansion across residential and commercial greenfield and market Atlanta opportunities.
Third quarter capital expenditures, excluding line extensions totaled $1 $5 billion, which was lower than the prior year period by about $400 million the.
Jessica Fisher: Decline was driven by core capex items, including CPE timing and lower than originally expected spend on network evolution, given what Chris discussed earlier with respect.
Jessica Fisher: Two software certification.
Jessica Fisher: We now expect total 2020 for capital expenditures to reach approximately $11 $5 billion down from approximately $12 million previously.
Jessica Fisher: That update reflects full year 2024 line extension spend of approximately $4 $3 billion down from $4 5 billion.
Jessica Fisher: Partly offset by slightly higher core capex, primarily due to the shift of some of our construction labor from rural efforts to hurricane rebuild activity.
Jessica Fisher: The update also includes 2024 network evolution estimated spend of approximately $1 1 billion down from the previous estimate of $1 6 billion.
Jessica Fisher: Much of that originally planned 2024 spend being pushed into 2026 and 2027.
As Chris mentioned, we will update our multi year capital expenditures outlook. When we complete our 2025 operating plan and report our fourth quarter results in January.
Jessica Fisher: We now expect our total <unk> spend will be substantially less than our spend in Argos in each case net of subsidy.
Jessica Fisher: That lower outlook reflects the most recent broadband map updates in terms of available insurance passengers near our network.
Jessica Fisher: And a less favorable growth framework, indeed, when compared to art often see grants.
Jessica Fisher: We have been in regular communication with the states in which we operate and we are generally the largest rural builder and our states through Argos ARPA and other grants.
Jessica Fisher: While we are still finishing the 2025 operating plan, it's clear 2025 capital expenditures will not exceed the range of capital spend that we outlined in January of this year, even inclusive of a small amount of initial deal spending.
Jessica Fisher: Looking beyond 2025, we expect total capital spending in dollar terms to be on a meaningful downward trajectory even inclusive of spending.
Jessica Fisher: So total capital intensity is now poised to decline significantly after 2025, even including the unique onetime opportunity that subsidizes Rural and network evolution has presented us.
Jessica Fisher: While we always prioritize our cash flow for organic opportunities first and then accretive M&A and buybacks. There are no organic capital expenditure opportunities on the horizon that would give us concern with that capital intensity outlook.
Jessica Fisher: Free cash flow in the third quarter totaled $1 6 billion, an increase of approximately $520 million compared to last year's third quarter.
Jessica Fisher: The year over year increase was primarily driven by higher adjusted EBITDA and lower Capex.
Jessica Fisher: We finished the quarter with $95 1 billion in debt principal our current run rate annualized cash interest is $5.0 billion.
Jessica Fisher: We repurchased just under 850.
Jessica Fisher: Thousand charter shares and charter holdings common units totaling $260 million at an average price of $311 per share.
Jessica Fisher: Less than we had originally expected as we became restricted as a result of our negotiations with Liberty broadband.
Jessica Fisher: As of the end of the third quarter, our ratio of net debt to last 12 month, adjusted EBITDA moved down to 422 times.
Jessica Fisher: We remain committed to a levered equity strategy and to share repurchases as a component of that strategy.
Jessica Fisher: Our leverage ratio may decline further given our pause in buybacks, but we look forward to resuming our program. When we are able and we have not changed our target leverage.
Jessica Fisher: And with that I will turn it over to the operator for Q&A.
Speaker Change: Thank you at this time, if you would like to ask a question. Please click on the raise hand button, which can be found on the black bar at the bottom of your screen.
Speaker Change: When it is your turn you will receive a message on your screen from the host, allowing you to talk and then you will hear your name Com. Please accept on mute your audio and ask your question.
Speaker Change: As a reminder, we are allowing analysts one question today.
Speaker Change: We will wait one moment to allow the QD form.
Speaker Change: Our first question will come from cut gun morale from Evercore ISI. Please go ahead.
Speaker Change: Okay.
Speaker Change: Good morning, and thanks for taking the question just one on broadband net adds in the quarter were very encouraging where the returns are quite meaningful sub growth. Excluding ACP is there any color you can provide on the competitive backdrop and perhaps any early reads on the underlying broadband trends in the fourth quarter, excluding the incremental <unk>.
Speaker Change: <unk> net losses, you called out thank you.
Speaker Change: Sure.
Speaker Change: Very much anticipated questions. So maybe I tried to talk about the market more generally both inside of the third quarter, but we are what we think about the fourth quarter and whether that does or doesn't position us for for next year, but I think as you mentioned theres a lot of puts and takes inside the third quarter underlying all of that.
Is that we are competing very well.
Speaker Change: In a marketplace. So that still has lots of competition lots of new competition with extended footprint.
Third quarter, we did have some benefits there.
Speaker Change: Our unique to the third quarter seasonality, which is typical.
Speaker Change: We also had a some not large but some impact from positive impacts from our competitor had a work stoppage.
Speaker Change: Well understood.
Speaker Change: And then we have obviously the downside of significant ACP, primarily through non pay disconnects in voluntary churn, but we're managing that well and in the fourth quarter. When you think about the seasonality into work stoppage benefits, we won't have those inside the fourth quarter will still have.
Speaker Change: Approximately 100000, non PE to deal with from ACP that we expect to see early in the quarter and the fourth quarter.
We also have some hurricane impact and so that will impact subscribers credits as well as Jessica mentioned seed capital rebuild.
Speaker Change: And so then I think the bigger question is as you look out where does that leave us we're not about managing for short term for quarters were really about thinking about the long term for the business in 2025.
Speaker Change: There won't be ACP.
Speaker Change: And we will still have the continued tailwind of newly built passes both organic as well as rural footprint and then I think there's just a big questions are variables that will exist as lower interest rate environment does that impact mortgages in a way that drives our move rates.
Speaker Change: Have we seen the peak cell phone internet impact it has.
Speaker Change: Here's that Thats the case.
Speaker Change: Im.
Speaker Change: And can we drive even higher internet sales as well as all of the additional bundling.
Speaker Change: Higher product value packaging that are described through our new pricing and packaging and really even more so than today is for it to fully realize the benefits of mobile not just return, but through additional internet acquisition rich.
Speaker Change: And then finally.
Speaker Change: Really a bogie variable one that we wouldn't bet on but I think is out there in terms of auction values can video a reconstituted video conduct really provide broadband acquisition retention support so thats probably much longer to look towards the tail end of next year and beyond but I think we're making the right investments and doing the right things to.
Speaker Change: Compete.
Speaker Change: We're still very much in a.
Speaker Change: Okay.
Speaker Change: Atypical low churn environment when you exclude ACP.
Speaker Change: And despite that it's still a competitive environment for new sales. So if you step back it's too early to too.
Declare victory or even plateau, but certainly a better unit growth set up for 2024.
Speaker Change: For 2025 than what we saw for 2020 for I think for us and probably for the rest of the cable industry.
Speaker Change: Thanks, Curt good operator, we'll take our next question.
Speaker Change: Our next question will come from Benjamin Swinburne with Morgan Stanley. Please go ahead.
Benjamin Swinburne: Thanks can you hear me.
Yep great.
Hey, Chris.
Benjamin Swinburne: Sure.
Benjamin Swinburne: Chris as we look beyond cellphone internet to fiber, but it's another fibers, new but as we think about the footprint expansion within charters, but can you talk a little bit about where that sits today sort of gig markets, where you see that going over the next I don't know three plus years and kind of how your how you think your market share.
Benjamin Swinburne: Shakes out as you as you analyze your historical performance and fiber markets and think about sort of what's happening in the marketplace and all the things youre doing at charter to compete.
Benjamin Swinburne: And I don't know if youll be able to answer this but could.
Benjamin Swinburne: Could you talk about why <unk>, the liberty broadband opportunities interesting charter.
Benjamin Swinburne: And if you do come to an agreement are you able to buy back stock pre close is there a way to put a mechanism in place to get back in the market or does that have to close before year youre able to get back and thank you so much.
Benjamin Swinburne: Sure.
Speaker Change: Let me start with the easy one which is the last question you asked about Liberty broadband we've said, what we can say for the time being.
Speaker Change: Through Liberty JK and what's what's there's very much public I think we're going to have to stay quiet until there is something more to talk about in the meantime, which of course will talk through everything that you just asked I know those are important questions. So.
Speaker Change: We're just going to have to deflect those for the time being.
Speaker Change: If you step back two gig overlap.
Speaker Change: <unk>, which includes <unk>.
Speaker Change: At all types of Giga overlap in our footprint, it's roughly 55% today and where it goes I think depends on People's access to capital what happens in the M&A environment, but also I think there are.
As widely understood is I think theres, probably some competing notions of that overlooked lab footprint and where it may not be mutually exclusive and as a result, I think people with the combination of scale back investment plans, plus recognizing that theyre not going to be the ex competitor that they thought they were going to be may need or want to back off.
Just because they are not going to be able to make returns I've always thought that.
Speaker Change: Wireline overbuild has very poor if not negative returns and start when you start to have duplicative plans of multiple over builders.
Speaker Change: It just makes it that much worse, it's actually terrible. So I think there is a realization that debt.
Speaker Change: That will take place and so where it goes depends on somewhat rational nature of our of our competitors, where they wanted to deploy capital in the meantime, what can we do around that as we can continue to make the types of investments that we're making today is to make sure that we have.
Speaker Change: A symmetrical multi gig wireline network across our entire footprint.
Speaker Change: A seamless connectivity product through convergence that none of our competitors to ubiquitously used to compete.
Speaker Change: And and then add to that the ability to save customers significant amounts of money, obviously with mobile where we offer a tremendous advantage.
Speaker Change: Given our structure.
Speaker Change: But also in some of these raw footprints.
Speaker Change: That may sound, we offer customers the ability to save significant amounts of money with their wireline phone relative to what they pay no thats not devoted to talk about the reality is something I think we could use specifically in that market to drive even faster.
Speaker Change: Penetration in the rural footprint.
Speaker Change: So overall in our existing inside of our new footprint I think we have a great set of assets are better and faster set of products.
Speaker Change: Higher quality service for 100% onshore here in the U S with sales and service primarily with our own employees, who are committed to that high quality service, then who knows over time the ability to add a unique video package.
Speaker Change: Appeals to customers of all budget levels in terms of what they can afford.
Speaker Change: And to deliver great value and utility inside the video package I think remains a big potential upside in terms of our ability to drive broadband and to compete against some of these competitors, who don't have the same network.
Speaker Change: Seamless connectivity packaging and product set and the ability to save customers money I think we've got the best hand, as it relates to our ability to compete in these marketplaces, what we typically see with any new overbuild and thats not new Thats, we have lot of experience with this been going on for probably 15 years is you'll see an initial uptake it can put a few.
Speaker Change: So penetration impact at the outset with somebody comes in for the first 18 to 24 months the market kind of settles out and so when we look at.
Speaker Change: Two historical wildlife for builders, many of which never got to the stated penetrations that today people say are required for returns.
Speaker Change: And that includes DSL conversions I feel pretty good about where we can go over time, how we can compete and the fact that at some point the reality will be there that there is not a great financial return for wireline overbuilt.
Speaker Change: When a single much less if it's a multiple.
Speaker Change: Thanks, so much risks.
Speaker Change: Thanks, Ben Operator, we'll take our next question please.
Speaker Change: And then will come from Jonathan Chaplin with New Street Research. Please go ahead.
Jonathan Chaplin: Good morning, guys.
Jonathan Chaplin: Okay.
Jonathan Chaplin: I'd like to just touch on the brand repositioning.
Jonathan Chaplin: From our perspective, I think it's a pretty profound change in the in this strategy.
Jonathan Chaplin: Would love to get some context for I mean, it's probably too early but are you starting to see any impact on gross adds or churn and yes.
Jonathan Chaplin: And when do you think how long does it do you think it sort of takes to really start to be felt in the business and then from the bill credits.
Jonathan Chaplin: That come with the commitments that you were making.
Jonathan Chaplin: Would we be expecting any impact on <unk> and costs from those or have you gotten your internal systems to the point where.
Jonathan Chaplin: You are happy to give the bill credits, because youre not going to have to give any.
Jonathan Chaplin: Sure.
Speaker Change: There's a lot in that.
Speaker Change: Okay.
I appreciate that you appreciate that the brand repositioning and the commitments that we're making a significant I think it's really exciting for us and where we can go.
Speaker Change: It really comes about because we made a significant investment in our own employees investing in frontline tenure, which is progression and the ability for our employees to not just think about it as a job but to have it as a career.
Speaker Change: And that gives us a higher quality crafts, and what you could have with contractors or offshore personnel.
Speaker Change: At the same time, we really had not gotten the credit I think in the marketplace from customer satisfaction or NPS. The way that we thought that reflected the investments that we've made and so some of that comes down to doing a better job as a management team and avoiding some of the paper cuts that exist in customer service the quality of the service there.
Speaker Change: The investment is there this isn't a money issue this is a.
Speaker Change: Really trying to just.
Speaker Change: Around the edges, how can you do better that's one two is.
Speaker Change: Making sure that we have.
Speaker Change: <unk> implemented some of the softer touch for customer service and.
Speaker Change: And to just give customers more recognition for their tenure with us and to remind them that we're local inside of their communities.
Speaker Change: These are committed employees to company.
Speaker Change: And three is to really stand behind.
Speaker Change: Our service.
Speaker Change: Back it up with guarantees, but guarantees for service and guarantees.
Speaker Change: What happens if we're honest when we fail to meet that.
Speaker Change: Service level that we've committed to customers and to stand behind that and so most of that which goes to your bill credit question isn't going to be giving out bill credits its going to be reminding customers that that's the type of quality of service that they can expect from charter for spectrum and.
Speaker Change: To the extent that we.
Miss we're going to proactively apply apply credits and own it and.
Speaker Change: And apologize for when we don't get it right and to do a better job I don't think the bill credits there will be some incremental impact I don't think it's going to be particularly material as it relates to <unk>, but what it does is it puts a pretty significant flashlight on us internally to make sure that what are those paper cuts where those services and.
Speaker Change: It provides a real incentives internally for us to go manage that down by providing even better and higher quality of service. So a lot of this is just making sure that we get.
Speaker Change: Recognized for the investments that we've already made but a lot of it also is <unk>.
Speaker Change: Forcing ourselves to be better and to do better and then you match that service commitment at the same time with some of the.
Speaker Change: Ethos that was in what I described which is around billing transparency and having high quality services and products, which we do have but even simple things about rounding to pricing instead of 99 cents to rounding at two to even dollars into having lower promotional pricing.
When bundled and lower persistent pricing when bundled in a way that not only saves customers money now and we always did over time, but even more money over time to the extent that take more product from us as customer friendly.
Speaker Change: And competitive in the marketplace.
Speaker Change: So I'm really excited about it there is is way way too early you're question about any early impact of that.
Speaker Change: I think it's less about what you say, it's more about what you do and that takes time to be recognized in the marketplace and so I think this is something that maybe if we're lucky.
Back end of next year from just the customer commitments and service aspect, we could see the benefit of that this is a multi year process. It's not something that we're looking to immediately but I think the good news as you've highlighted is we're very very focused on our reputation in the marketplace, which impacts both our customer acquisition as well as.
Speaker Change: Retention and.
Speaker Change: Customer life, which has a better financial outcome for our shareholders as well as well as just being a great operator in local communities we serve.
Speaker Change: Maybe the one item that I think is really clear that's worth pointing out though is that the bundled strategy and what was rolled out in the new pricing and packaging is being really successful.
Speaker Change: And doing the things that we hoped that it would do which collectively drive higher customer our appeal.
In terms of getting customers to take higher tiered packages getting customers to take more products inside of those packages and also expanding the number of mobile lines that we're seeing <unk> taken per customer.
Speaker Change: The one piece I think it's been easy to see upfront.
Is that that strategy around ships pushing value back into the bundle and utilizing that to drive.
Speaker Change: Higher customer.
Speaker Change: Do you think will be quite effective.
Speaker Change: <unk>.
Speaker Change: It's field field strategy that you can lower your product pricing and have higher customer group. Both at the time of sale as well as overtime and have longer customer lives and have lower operating costs and therefore have.
Speaker Change: Better returns.
Speaker Change: Doing the right thing.
Speaker Change: Thanks, guys.
Speaker Change: Thanks, Jonathan.
Speaker Change: Operator, we will take our next question please.
Speaker Change: Our next question will come from Craig Moffett with Moffett Nathanson. Please go ahead hi.
Speaker Change: <unk>.
Craig Moffett: I'm going to try to squeeze in two if I can first just.
Craig Moffett: This is an interesting question that we've been pondering a bit that you've been building out FTE th networks yourselves in your head.
Craig Moffett: <unk> out an expansion areas.
Craig Moffett: How much of your plant today is FTE th, rather than HFC and what kinds of differences do you notice competitively in places I know a lot of those are noncompetitive markets, but what kind of differences do you see competitively when you do have fiber to compete.
Craig Moffett: With that rather than relying on your HFC network and.
Speaker Change: Then if I could squeeze in one extra.
Chris you talked about lower participation in the <unk> program.
Speaker Change: Does that open.
Speaker Change: <unk> opened the door, perhaps to say if you can expand your footprint through subsidized building there may be opportunities for small scale M&A sort of rural cable operators for example that that might be attractive and can be acquired for less than the cost of building yourself and a lot of cases.
Speaker Change: Sure.
Speaker Change: On the fiber to the home expansion I don't have that number in front of me I know when we started our rural build we had a roughly 750000 passes our 750000 miles plant I think we're well over 900000 today. If you think about how that's evolved over time with at the time, we were 750000 miles of plant. We're about 50 50 in terms.
Speaker Change: Of construction that was between HFC and FTE th and we're now at close to 90% of the Newbuild that we do is fiber to the home.
Speaker Change: We do that simply because on the increment, it's fine to do the reality is what we see from a competitive standpoint as well as from a service standpoint, we see absolutely no difference in fact.
Speaker Change: In our fiber to the home footprint oddly enough, we have a slightly higher trouble call rate than we do inside of our HFC plant on a 10 year adjusted basis for customers and plant construction.
Speaker Change: So I think that will normalize over time.
Speaker Change: Some of that is more software driven related to royalties and whatnot.
Speaker Change: Big point there is there is zero difference to us in terms of the service quality or what we see really in competitiveness between the FTE th plant, where we operate with HFC.
Speaker Change: The HFC over time is going to have certain advantages relative to fiber than I would start by saying that remember.
Speaker Change: Of our HFC plant I don't know the exact stat, but whether its 99, 5% or 99, 8% of our HFC plant really is fiber and it's really at the end that its coax when that run, which often use case with fiber to the home and home wiring as well.
Speaker Change: So we are essentially the same network, except at the end we have the advantage of having the ability to have more telemetry because of power and the ability to hang small cells from a wireless strategy perspective, and a very capillary way. So we're spending time on really thinking through overtime.
Speaker Change: Is the HFC network actually superior.
Speaker Change: As a result of some of the capabilities that it will lend him not theyre, making that claim today, but.
Speaker Change: But I think there are some real advantages to the plant and today there is really no different for us from what we see between.
Speaker Change: One of the other.
Speaker Change: Do you want to jump in on yes.
Speaker Change: The lower fee participation in what we would do that in small scale M&A. Okay. We.
Speaker Change: I say, we like the cable business as we believe we operate in while when Theyre small scale opportunities that fit well with our footprint.
Speaker Change: We will often.
Speaker Change: Go after those that typically so small that is I don't see them and how they fall then.
Speaker Change: But I think that we look at those opportunities the way that we look at any other opportunity in expanding our footprint in that way it does make sense when it's at the right price.
Speaker Change: I don't necessarily foresee theres, a tradeoff as between feed and doing small scale M&A I think we pursue both of those opportunities where they make sense and we want to drive returns for the company.
Speaker Change: Thanks, Craig Operator, we'll take our next question please.
Our next question will come from John Hodulik from UBS. Please go ahead.
John Hodulik: Great, Thanks, and two sort of related questions.
Speaker Change: Actually Jessica you may have you sort of touched on.
John Hodulik: I was just wondering are there any sort of margin implications for the new pricing and packaging it.
John Hodulik: It sounds like Youre going to you expect to have a better sell in which should lead to better margins, but sort of any when should we expect to see the benefits of that both in terms of margins and maybe changes in subscriber trends on the data side and video side and then obviously you've seen some nice EBITDA acceleration through the year, probably will again in the fourth quarter with the law.
John Hodulik: <unk> advertising.
John Hodulik: Can you can you sort of point out any puts or takes as we try to get to get a sense for what the EBITDA trends look like in 2025, obviously don't want to give guidance now but is there anything you can point to that suggests the momentum you've seen through the year. We will continue in 'twenty five.
Yeah, so starting on the margin implications for the new pricing and packaging.
John Hodulik: What we think about when we lose.
John Hodulik: Look at the success of the program.
Speaker Change: What Chris was describing in terms of how do you drive the most the most product value to the consumer and that generate the most revenue and then really I guess I think of it as the most cash flow per customer.
Speaker Change: Isn't margin as a percentage its margin as an absolute dollar value.
Speaker Change: And in that case, I think that we're quite confident that the new pricing and packaging will be really successful in driving additional cash flow per customer because of the value that we've pushed into the bundle.
Speaker Change: And what that means for <unk>.
Speaker Change: For the total margin that we can generate on the services offered to those customers.
Speaker Change: Does that mean that margin as a percentage will go up that one.
Less clear I actually think that the video product is a bit more attractive and the new pricing and packaging as we pull that together and.
Speaker Change: And so because of that your mix around how much video versus how much mobile and how much.
Speaker Change: Internet might change mix tends to drive margin percentage across the company.
Speaker Change: In this case it might get to you the wrong answer because I think that we can drive the most collective margin by driving the most products to the customer.
Speaker Change: On the EBITDA front.
Speaker Change: Thinking about the fourth quarter and next year.
Speaker Change: We still anticipate strong EBIT growth in Q4.
Speaker Change: Though it might not accelerate the way that we had hoped given that some of our expense reduction impacts I think came in a little earlier than we expected and we will have the storm impacts.
Speaker Change: Inside of Q4.
Speaker Change: Still strong but.
Speaker Change: Maybe not accelerating and then going into next year.
Speaker Change: Of course going to target EBIT growth, but there is some meaningful headwinds, which I think include our internet customer losses in 2024, and a nonpolitical year for advertising.
Speaker Change: Even with that our expense reduction efforts, which I've mentioned before I include things that are both short term and have already rolled in as well as some medium and longer term items that are still building.
Speaker Change: I think that they will put us in a good place.
Speaker Change: But that there are meaningful headwinds as we go into next year.
Speaker Change: Got it.
Speaker Change: John on the first question, just because right about a refocus on cash flow margin, but even with the percent of her time so.
Speaker Change: I'm not talking at acquisition, but over time.
Speaker Change: I think it's important to note that our triple play bundles of different combinations they have the highest.
Speaker Change: Dollars of EBIDTA concert in not only the highest charter, but the highest dollars of EBITDA contribution. They also have the lowest churn in the longest customer life and they have the best ROI.
Speaker Change: And that still is the case today.
Comes back to our launch of the new spectrum pricing and packaging is you just have to make sure that there is real value in the products that you're putting on the bill and if there is and it's a high quality product theres value in your hubs utility all packaged together you can be in an environment, where you have higher dollars of RP.
Speaker Change: Have hard dollars of margin you have lower churn and lower operating cost per PSU and even as a result of having a mix with products with different direct cost in there you can end up long term with higher EBITDA margin, even as a percent.
Speaker Change: Also because your operating cost so much lower churn has lowered as a result, your subscriber acquisition cost is lower because you're not having to replace customers that you lost with new ones to facilitate the hole and instead youre using your subscriber acquisition cost to acquire net new customers, which has the impact of increasing your dog.
The margin as well as your percent margin over the long term.
Speaker Change: I mean, that's that's the unique competitive advantage I think that we have is we have all those products seamless connectivity and seamless entertainment.
Speaker Change: And the 100% of our footprint and that's what we're trying to do is make better use of those capabilities.
Speaker Change: Got it thanks, John Thank you operator, we'll take our next question. Please.
Speaker Change: Our next question will come from Steven Cahall from Wells Fargo. Please go ahead.
Steven Cahall: Thank you can you hear me okay.
Speaker Change: Yes.
Steven Cahall: So Chris do you have a unique video offering at this point and I know you've worked hard to add the streaming services to their customers.
Steven Cahall: When we think about where you can go from here I am not sure theres been an uptick kind of year on year in <unk>.
Speaker Change: Double and triple play customers, yet it sounds like Youre thinking maybe later next year as when you might see the fruition of a lot of those efforts come together in those multi product customers. So I was just wondering how you could add a little more color to retention and acquisition.
Speaker Change: And what the timing and the impact of that looks like at the at the customer level over over the medium term and then just a small one I know, it's tough to unpack ARPA, but if we just think about roll to pay you were very aggressive on spectrum. One about 18 months ago can you help us at all think about how much role to pay is contributing to either revenue or ARPA at this point. Thank you.
Speaker Change: Okay.
Speaker Change: Why don't I take the first one and Jessica if you have thoughts on the second.
Speaker Change: I agree we have a unique video offering.
And at the same time, it's easy to get impatient as to how quickly we can get all of that fully rolled out in a way that's easy for customers to understand depreciates fine up too.
Speaker Change: Utilized and yet when you think about that first half of 2025 that I've talked about to fully operationalize. It is really.
Speaker Change: That would only be 18 months from the time, we first started to enter into these programming agreements and so it's.
Speaker Change: It's a relatively short period of time, where we're going to be fully operationalize our goals. Our priorities here was first too.
I really focus on getting all these programming agreements done and.
I think what turned out to be a 12 or 13 months period.
Speaker Change: So pretty quick to really run through all of those program agreements some of which were early renewals because for a reverse we're getting behind us. The second piece is to just physically get launched.
Speaker Change: The programmer apps to form part of our seamless entertainment so that customers can subscribe to those.
Speaker Change: Not the same because they have a broader direct to consumer businesses and we need to work with them on authentication as well as programmers specific credentials, which means that in its current state its a high value proposition, but it's not always easy to find and it's not always easy to subscribing to manage your existing subscriptions potentially with.
As a programmer apps and so that's the environment that we sit today.
Which is good take up but not exactly the most customer friendly proposition just yet which is what we're working through the second priority. The third priority versus programming relationships. Two was launched the direct to consumer.
Speaker Change: Third is to implement the ability for customers to upgrade to the AD free version of these apps.
Speaker Change: Only a couple of which has already been launched or will run the progress with that as well.
Speaker Change: Then the final piece is really to put it all inside of what I would call a video portal, which launched manage all of your video subscription with us, including all of the program or apps. When it's included as part of your offer when its upgrade to the AD free version or rehab economics as well.
Speaker Change: And the ability to sell.
Speaker Change: <unk> program or apps to our broadband customers or to our skinny package video customers. All in the same place where you can manage your subscriptions.
Speaker Change: And Thats a compelling marketplace for video that we're developing today that requires for some.
Speaker Change: Pretty significant cooperation as well as you can imagine with the programmers and we think we will have all that placed in the first half of 2025 is be able to present that to customers as part of our.
Pricing and packaging.
I think there was some misconception in the marketplace. The thought that we're going to do some big huge marketing campaign and that would have a financial impact next year, that's really not the case the investment we're making is the utility of finding all of this in a place that can manage their subscriptions that have been able to activate all of that within zummo in particular or.
Speaker Change: Other platforms.
Speaker Change: And the marketing and sales that we're doing really is tied to our new pricing and packaging as part of these bundles that we're putting out so.
Speaker Change: Longer term I expect all of that have a pretty significant impact on.
Speaker Change: Acquisition and retention certainly for video, but hopefully also with Internet I Wouldnt bundled together.
Speaker Change: Already without getting to that.
Speaker Change: Place that we expect to be next year, we already see a significant uplift in the video sell in just from the way that we're bundling in going to market with this new spectrum pricing and packaging, even without the benefit of that.
Speaker Change: The video marketplace environment that I described we're already seeing a pretty significant uplift and the reason that we're comfortable with that is because we know the value is there because of what's in place already today with some of the program reps in.
What's coming what will be launched and the ability to actually find and manage it in a better way so pretty look.
Speaker Change: On one hand, we're excited about the space because it adds value in the other hand, it wouldn't be careful we're not forecasting video growth, we're simply saying that it's a way to add utility and tour seamless connectivity relationships in a way that hasn't existed in.
Speaker Change: From our past experience, we know the value that can come about to the overall bundle by doing that right.
Speaker Change: I'll take the other one on the mobile.
Speaker Change: The payback.
Speaker Change: We still see our free line converting in paying customers.
Speaker Change: And at very strong rates.
Speaker Change: In terms of the impact that that has on <unk> at this time. So once you get to a normalized but once you get to a similar number of overall free lines inside of the system in a year over year.
Speaker Change: Then you know longer end up with the same sort of boost.
Speaker Change: The impact of the year over year, alright, the same year over year impact on <unk>.
Speaker Change: On <unk>, so if I think about Internet RP there as an example, internet <unk> grew two 8% on a GAAP basis.
Speaker Change: It would have been three 1%, excluding the GAAP allocation, which is which has a closer tie between the two of those and then what we've seen previously and I think going forward, you'll find us coming together.
On the other side mobile App, you'll actually was up.
Speaker Change: And it's looking really good but the increase that you see in mobile <unk> it related to.
Speaker Change: The uptake of our unlimited plus plan, which really has been driven by anytime upgrade.
Speaker Change: It could be driven further given some of the incentives that we have around it and the new pricing and packaging plants.
Speaker Change: So we're seeing I guess good growth in our pill.
Speaker Change: But not as much at this point related to the roll off of free lines in the system not because of the free lines are performing well, but just because of the free lines now as a portion of it.
Speaker Change: The total base are more normalized.
Speaker Change: Thanks, Steven and that concludes our call today, operator, you will pass it back to you. Thank you very much.
Speaker Change: This concludes our call you may now disconnect.