Q4 2024 Charter Communications Inc Earnings Call
Mary Ann Didion, Zsuzsanna Vogelskinga, Plla od Rusky Executive Producers J.P.E. Platform Zsuzsanna Vulgow-Stewart, S.G.C. Music by miraculous soul summit
Speaker Change: Hello and welcome to Charter Communications fourth quarter and full year 2024 investor call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. As a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. I will now turn the call over to Stefan Anninger.
Speaker Change: I would 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.
Speaker Change: Various 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.
Speaker Change: Any forward-looking statements reflect management's current view only and charter undertakes no obligation to revise or update such statements.
Speaker Change: As a reminder, all growth rates noted on this call and in the presentation are calculated on a year-over-year basis, unless otherwise specified. On today's call, we have Chris Winfrey, our President and CEO.
Speaker Change: and Jessica Fischer, our CFO. With that, let's turn the call over to Chris. Thanks, Stefan. In 2024, we managed the end of the Affordable Connectivity Program successfully. Outside of normal churn, we kept roughly 90% of former ACP customers connected.
Speaker Change: Our Spectrum Mobile business continued to grow at a rapid rate. We added over 2 million Spectrum Mobile lines in 2024. We're the fastest growing mobile provider in the U.S. with the fastest connectivity at the best price.
Speaker Change: Our expansion initiative continued to deliver good passings growth, driven by our subsidized rural initiative and normal construction and fill-in activity. In 2024, we grew revenue by 1%.
Speaker Change: While full year EBITDA growth accelerated to 3.1% driven by continued strong mobile growth, our cost efficiency initiatives, and political advertising.
Speaker Change: Late last year and early this year, we had unexpected natural disasters from Hurricane Helene impacting Florida, the Carolinas, and the broader Southeast.
Speaker Change: with Hurricane Milton across central Florida and most recently to Los Angeles fires. There are of course subscriber and financial impact impacts which Jessica will cover but our employees work and live in these communities so it's also personal. Stories of our frontline employees commitment abound including employees helping to reestablish connectivity for customers despite losing their own homes.
and countless employees traveling in from other regions.
Speaker Change: to stay and to help. Really proud of how our frontline employees have responded. And from Stanford, we learned some lessons on how to put customers at ease sooner. We got better with our communications along the way. Part of our customer commitment is to always improve and we are.
Speaker Change: As we look to 2025 and beyond, the environment for broadband, mobile and video remains competitive, but we have better visibility than this time last year. The impact of the elimination of the ACP is now behind us, cell phone internet and net additions appear to have peaked or be stabilized, and we continue to compete well against new fiber overlap.
Speaker Change: In the meantime, we haven't stayed still, which sets us up well for the future.
Speaker Change: Our multi-year investment initiatives, including network evolution, network expansion and execution, including the investment in frontline employees and tenure to benefit our service, are all delivering tangible results. And last September, we relaunched the Spectrum brand and its promise to customers through Life Unlimited.
Speaker Change: with our first, our market first, customer service commitment in making better use of our unique assets through converged seamless connectivity across 100% of our network and now seamless entertainment and video.
Speaker Change: The positive impacts from our customer commitment and brand refresh investments take time to be recognized, but you can already see the positive effect from our new pricing and packaging in video results.
Speaker Change: In late 2022, we launched a number of strategic initiatives and communicated a significant one-time capital investment to enhance our growth potential long term.
Speaker Change: While the investments put temporary pressure on our near-term pre-cash flow growth, these were a unique set of non-recurring and generational industry investments. They include the largest broadband expansion since the 1980s, the largest physical upgrade of the network since the 1990s.
Speaker Change: market-leading convergence of our wireline and wireless capabilities and an exciting video transformation which will help drive our connectivity business.
Speaker Change: 2025 will have a slightly higher level of investment than 2024, but this year will also be our peak capital investment.
Speaker Change: So this is a fitting time to highlight where strategy leaves us competitively, operationally, and financially for the coming years.
Speaker Change: We have a unique set of assets in significant scale as shown on slide 4. Spectrum has the fastest internet, the best Wi-Fi, the fastest mobile product, and is the leading video provider in the U.S. with over 900,000 miles of network infrastructure, 57 million residential and SMB passings, and over 300,000 fiber lit buildings.
Speaker Change: Of course, we have significant competition from wireline overbuild, cell phone internet, and satellite across all of our products.
Speaker Change: The power of our network, though, continues to improve with symmetrical and multi-gig speeds, allowing product developers to create applications and use cases that require high capacity, low latency, high reliability, and edge compute.
Speaker Change: Product and software developers can rely on the ubiquitous deployment across all the major cable networks in the US, so we're very well positioned.
Speaker Change: In fact, it's always been the U.S. cable companies that have built the fully-deployed platforms that have enabled the development of next-generation products and services, despite the handicap of being regional operators competing against national and now global competitors.
Speaker Change: The ability to provide the very best of our products across our entire footprint is unique. That includes new features we're developing for seamless connectivity and seamless entertainment.
Speaker Change: Convergence is a popular phrase amongst our competitors now, and while it's flattering to hear our own wording adopted by others, slide 5 of our presentation today speaks for itself. We are very underpenetrated relative to our converged connectivity capabilities.
Speaker Change: Having the best network and product capabilities by itself isn't enough and that's why we've always focused on the ability to have the most value in our packages, combining the best products
Speaker Change: with ways for customers to save hundreds or even thousands of dollars a year, whether at promotion or retail prices.
Speaker Change: And any time you have new entrants, consumers can be enticed to try a new provider, even at lower quality and higher all-in prices. But in the long term, we believe the best products and best pricing across a package of those services will win. The slide 6 of our presentation is an example of that advantage across typical broadband and mobile packages.
Speaker Change: Together with our upcoming Seamless Entertainment offers, highlighting this value is the goal of our recent pricing and packaging under the LIFE Unlimited brand refresh.
The End of the World
Speaker Change: I spoke about the sequencing of our seamless entertainment launches on last quarter's call and that timing in 2025 hasn't changed so I won't repeat the steps and priorities but we look forward to fully rolling that out in the first half this year and delivering even more value to consumers up to $80 of retail app value when subscribing to our video packages.
Speaker Change: And of course, we couple all that with high quality service. We've always believed that investing in customer service and satisfaction creates a virtuous cycle in our business.
Speaker Change: Better customer service translates to fewer customer transactions. Fewer transactions produces higher customer satisfaction and lower churn. Lower churn reduces cost and increases penetration. And lower cost gives us the ability to offer better pricing, which works for customer acquisition, service, and satisfaction, and positions us for growth.
Speaker Change: Our sales and service is 100% U.S.-based, made in America, if you will, using our own employees with good-paying jobs and benefits. Employees are also Spectrum customers, committed to developing their local communities and their career at this company. That is a competitive advantage, an investment we already made in wages, benefits, and real estate that's difficult to replicate.
Speaker Change: And that existing investment is also why it was so easy for us to make our market-leading customer commitment.
Speaker Change: We stand behind our commitment to service credits, but we missed the mark.
Speaker Change: As a reminder, we've provided a summary of those commitments on slide 8.
Speaker Change: For years, we've been investing in machine learning and now AI, and much of our effort is making front-line work easier and more efficient, which drives higher customer and employee satisfaction.
Speaker Change: Some of those examples include full service, network, CPE, and billing telemetry on the account, which is automatically presented to an agent now when answering the phone. In addition, AI is also listening to the conversation, providing proactive, optimized solutions.
Speaker Change: customer sentiment, chat GPT style technical support, call summarization, and flagging post-call trading opportunities.
Speaker Change: AI call summarization also helps the field technician assess the issue before they even get to the door, improving the customer interaction.
Speaker Change: And that's in addition to rolling out our own tech GPT on their handheld devices to more accurately pinpoint issues and recommend the best fix to the field tech.
Speaker Change: We deal with millions of transactions every year, and honestly there aren't millions of best outcomes. So transactions can be more effective, it can be shortened and reduced, driving higher customer satisfaction and lower churn, but also higher employee satisfaction, which drives lower attrition or tenure, and therefore better service.
which of course produces less transactions as a result.
Taken together, that is our strategy in competitive positioning.
Speaker Change: The best network, the best products, the most value, with unmatched service, driving more household penetration, higher product penetration for households, lower service transactions in turn, and lower operating and capital costs per customer, which allows us to have the lowest pricing, a virtuous cycle.
Speaker Change: We're not perfect, but we've always got room for better execution and speed. But I believe we have a great recipe for growth of our existing products with the investments we've already made.
Speaker Change: And we have strategic assets in our network, our fully U.S.-based sales and service employees. Those will enable future products and revenue streams and operational efficiencies that aren't even considered in our financial plans today.
Speaker Change: In the meantime, we've positioned the company for customer profitability growth, clear visibility to free cash flow growth, and a proven capital allocation and return philosophy.
Speaker Change: This is a winning formula. It's with a fully dedicated and a hungry team. So we're excited about 2025 and beyond.
And with that, let me hand it over to Jessica.
Thanks, Trev.
Speaker Change: Before discussing our fourth quarter results, I want to mention that today's results include a number of Hurricane Helene and Hurricane Milton impacts, which hit the southeast U.S. in late September and early October.
Speaker Change: Our fourth quarter customer results include over 20,000 additional disconnects related to the storm.
Speaker Change: Fourth quarter adjusted EBITDA was reduced by approximately $35 million primarily driven by hurricane-related customer credits and revenue. And the storms drove approximately $125 million in total incremental capital expenditures in the fourth quarter.
Speaker Change: Today's results do not include any impact related to the wildfires that hit Southern California in January.
Speaker Change: Our first quarter results will include some lost customers and passings related to the fires. We're still assessing impacted areas and we expect to incur capital expenditures to recover and rebuild lost passings.
Speaker Change: We've been providing bill credits to customers in impacted areas, and those one-time credits will offset some first quarter revenue.
Speaker Change: We may also have some incremental operating expense, although we expect that to be relatively small.
Speaker Change: and we'll isolate the impact of the fires when we report our first quarter results.
Speaker Change: Unrelated, we recently completed an extensive review of our serviceable passings to clean up duplicate passings and other data and to identify new passings. As a result, we reduced total estimated passings in our trending schedule for all periods presented by 1.7 million passings.
Speaker Change: Additionally, because of the GAP requirement, our cost-to-service customers expense line has been divided into two new cost lines, field and technology operations, and customer operations.
Speaker Change: The best way to forecast these two new ride items is to combine them into one figure as presented in the past as cost to service customers. And that's how I will refer to them today when reviewing our expense results.
Let's please return to our customer results on slide 10.
Speaker Change: Including residential and SMB, we lost 177,000 internet customers in the fourth quarter. In mobile, we added 529,000 lines.
Speaker Change: Video customers declined by 123,000, with the improvement driven by the rebundling we launched in September, along with our Life Unlimited brand refresh.
Speaker Change: Video performance does not yet reflect the benefits of incorporating seamless entertainment apps in our product.
Wireline voice customers declined by 274,000.
Speaker Change: In addition to the 20,000 internet disconnects driven by the hurricanes, the end of the ACP program drove higher fourth-quarter non-pay and voluntary churn among former ACP customers, for a total estimated fourth-quarter ACP impact of approximately 140,000 internet losses.
primarily non-pay disconnects and some voluntary churn.
Speaker Change: Looking forward, we believe we're past the one-time ACP-related impacts to our customer base.
Speaker Change: Beyond ACP and hurricane impacts, we were generally pleased with our fourth-quarter customer results and core Internet results, which exclude ACP and storm-related losses, were better than last year. We continue to compete well across our footprints.
Speaker Change: As Chris discussed, we continue to pursue initiatives that are intended to drive customer and financial growth, including network evolution, new pricing and packaging, converged connectivity product development, and footprint expansion, including our subsidized rural initiative.
Speaker Change: As of year-end, we have launched symmetrical 1 gigabit speeds in all 8 of our Step 1 markets.
Speaker Change: Earlier this year, we launched 2x1 gigabit service in two of these markets, Lexington, Kentucky, and Cincinnati.
Speaker Change: and we plan to launch two-by-one service in additional markets later this year.
Speaker Change: Demand for faster internet speeds continues to grow as data usage grows. In the fourth quarter, monthly data usage by our residential internet customers, who don't have our traditional video product, reached over 800 gigabytes.
Speaker Change: Our Wi-Fi also continues to improve, driven by our advanced Wi-Fi products and our new Wi-Fi 7 router.
Speaker Change: Our Wi-Fi supports our converged connectivity product including Spectrum Mobile, which is only in about 8% of passings, but remains the fastest growing mobile service in the United States and offers the fastest overall speeds.
Speaker Change: Turning to rural, we ended the quarter with a total of 813,000 subsidized rural passings.
Speaker Change: We grew those passings by $117,000 in the fourth quarter, and by nearly $400,000 over the last 12 months. And we generated $41,000 net customer additions in our subsidized rural footprint in the quarter.
Speaker Change: 2025 customer growth should benefit from 2024 rural passings growth, as well as passings growth in 2025.
Speaker Change: We expect rural passings growth of approximately 450,000 in 2025, our biggest year so far, in addition to continued non-rural construction and fill-in activity.
Thank you for watching!
Speaker Change: Moving to fourth quarter revenue results on slide 11. Over the last year, residential customers declined by 2.2%, while residential revenue per customer relationship grew by 1.7% year over year, given promotional rate step-ups, rate adjustments, and the growth of Spectrum Mobile.
Speaker Change: Those factors were partly offset by a higher mix of non-video customers.
Speaker Change: Growth of lower-priced video packages within our base $34 million of hurricane-related residential customer credits and $37 million of costs, which accounting principles require to be allocated to programmer streaming apps and netted within video revenue.
Speaker Change: As slide 11 shows, in total, residential revenue declined by 0.4%.
Speaker Change: Turning to commercial, total commercial revenue grew by 1.9% year-over-year with S&V revenue rose 0.3% reflecting higher monthly S&V revenue per S&V customer primarily due to rate adjustments.
Speaker Change: Enterprise revenue grew by 4.4%, driven by enterprise PSU growth of 5.2%. And when excluding all wholesale revenue, enterprise revenue grew by 5.2%.
Speaker Change: Fourth quarter advertising revenue grew by 26% given political revenue growth.
Speaker Change: Excluding political, advertising revenue decreased by 8.2% due to a more challenged national and local advertising market.
Speaker Change: Other revenue grew by 14.6%, primarily driven by higher mobile device sales.
Speaker Change: And in total, consolidated fourth quarter revenue was up 1.6% year-over-year, and 1% when excluding advertising revenue and hurricane-related customer credits.
Speaker Change: Moving to operating expenses and adjusted EBITDA on slide 12. In the fourth quarter, total operating expenses grew by 0.3% year-over-year.
Speaker Change: Programming costs declined by 9.1% due to an 8.7% decline in video customers year-over-year and a higher mix of lighter video packages along with 37 million dollars of costs which accounting principles required to be allocated to programmer streaming apps and netted within video revenue.
partly offset by higher programming rates.
Speaker Change: Other costs of revenue increased by 16.2%, primarily driven by higher mobile device sales and mobile service direct costs, as well as higher advertising sales expense related to higher political revenue.
Speaker Change: Cost-to-service customers, which combine field and technology operations and customer operations, declined 0.5% year-over-year, given productivity from our 10-year investments, including lower labor costs.
Speaker Change: Sales and marketing costs grew by 3.2% as we remain focused on driving customer acquisition and given our Life Unlimited brand relaunch in September.
Finally, other expenses declined by 0.7%.
Speaker Change: Adjusted EBITDA grew by 3.4% year-over-year in the quarter and by 1.8% when excluding advertising.
Speaker Change: As we look ahead to the full year 2025, we face headwinds that we didn't last year, including the lack of political advertising revenue and the full year impact from the prior year internet customer losses primarily due to the end of ACT.
Speaker Change: But our plan is to grow Adjusted EBITDA in this year.
Thank you for watching!
Speaker Change: Turning to net income, we generated 1.5 billion dollars of net income attributable to charter shareholders in the fourth quarter, compared to 1.1 billion dollars last year.
Speaker Change: Given this order is higher adjusted EBITDA and a larger pension remeasurement loss in the prior year period.
Speaker Change: Turning to slide 13, capital expenditures totaled $3.1 billion in the fourth quarter, up about $200 million from last year's fourth quarter.
Speaker Change: Line extension spend totaled $1.1 billion, driven by our subsidized rural construction initiative and continued network expansion across residential and commercial greenfield and market fill-in opportunities.
Speaker Change: Fourth quarter capital expenditures excluding line extensions totaled $2 billion, about $130 million higher than last year.
Speaker Change: The increase was mostly driven by CPE due to purchase timing and higher scalable infrastructure spend.
Speaker Change: 2024 capital expenditures totaled $11.3 billion, less than our original expectation for $12.2 to $12.4 billion, given lower network evolution and line extension spending, both due to timing.
Speaker Change: We expect total 2025 capital expenditures to reach approximately $12 billion, including line extension spend of approximately $4.2 billion and network evolution spend of approximately $1.5 billion.
Speaker Change: On slide 14, we've provided our current expectations for capital spending through the year 2028, excluding any line extension spending associated with the BEAD program, as we are still in the early stages of bidding, and we have a lower appetite to bid due to regulatory conditions.
Speaker Change: Our current multi-year CAPEX outlook is largely unchanged in total versus our prior outlook, with retiming across years and slight changes across categories.
Speaker Change: We expect total line extension capital expenditures to decline after 2025, even inclusive of feed, which we wouldn't expect to be more than a few hundred million dollars per year for the four years starting in 2026.
Speaker Change: And our RDoS build is still expected to be completed by the end of 2026, two years ahead of schedule.
Speaker Change: We now expect our Total Network Evolution Initiative capital to reach $5.4 billion over the period 2024-2027 versus $4.6 billion previously, given our full plant walkout and the finalization of more detailed project plans.
Speaker Change: Looking beyond 2025, we expect total capital spending in dollar terms to be on a meaningful downward trajectory, even inclusive of bead spending.
Speaker Change: And after our evolution and expansion capital initiatives conclude, our run rate capital expenditures should be below $8 billion per year.
Speaker Change: Just to highlight, VAT reduction in capital expenditures on its own, from approximately $12 billion in 2025 to less than $8 billion in 2028, is equivalent to $25 of annual free cash flow per share based on today's share count.
Speaker Change: And while we always prioritize our free cash flow for organic opportunities first, and then accretive M&A and buybacks, there are currently no organic capital expenditure opportunities on the horizon that give us concern with that capital expenditures outlook.
Thank you for watching!
Speaker Change: Fourth quarter free cash flow totaled $984 million, a decrease of approximately $80 million compared to last year's fourth quarter.
Speaker Change: The decline was primarily driven by higher capital expenditures, cash taxes, and cash interest, partly offset by a larger cable working capital benefit, driven by the implementation of our supply chain financing program, and higher adjusted EBITDA in this year's fourth quarter.
Speaker Change: Just a brief comment on 2025 cash taxes. We currently expect under existing tax legislation that our calendar year 2025 cash tax payments will total between $1.6 billion and $2 billion.
Thank you for watching!
We finished the quarter with $93.8 billion in debt principal.
Speaker Change: In December, we refinanced most of our 2027 maturity tower, extending about $13 billion of our credit facilities to 2030 and 2031. After that refinancing, our maturities in each of the next three years are less than $4 billion per year.
Speaker Change: Our weighted average cost of debt remains very attractive at 5.2%, currently driven by our long-dated fixed rate profile.
Our current run rate annualized cash interest is $4.9 billion.
Speaker Change: In the fourth quarter, we repurchased 292,000 Charter Shares and Charter Holdings Common Units, totaling $113 million at an average price of $384 per share.
Speaker Change: As of the end of the fourth quarter, our ratio of net debt to last 12 months adjusted EBITDA moved down to 4.13 times.
Speaker Change: and stood at 4.24 times pro forma for the pending Liberty Broadband transaction.
Speaker Change: Our leverage ratio may decline further given our pause in buybacks, but we are still targeting the midpoint of our four to four and a half times target leverage range, though now pro forma for the pending Liberty Broadband transaction.
Speaker Change: We look forward to resuming our open market buyback program following the shareholder vote for the Liberty Broadband transaction scheduled for February 26th.
The
Speaker Change: As laid out, we've invested in a strong platform for growth, which we expect to see materialize across the business over the next several years.
Speaker Change: And as our capital spending peaks this year, we are poised for strong free cash flow growth and shareholder returns.
Speaker Change: 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. 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 called. Please accept, unmute your audio, and ask your question.
Speaker Change: As a reminder, we are allowing analysts to ask one question today. We will wait one moment to allow the queue to form.
Thank you for watching!
Speaker Change: Our first question will come from Jonathan Chaplin with Newstreet Research. Please go ahead. Thanks guys. A question on CAPEX. So I'm wondering if you can just remind us what the end state is for the network upgrade in terms of I think it's 100% of the footprint will have a high split and then a portion of the footprint
Speaker Change: portion of the footprint will be upgraded to DOCSIS 4.0 by the end of 2027. Can you remind us what that is and how it might've changed based on the new guidance?
Speaker Change: The total spend is down, but the number of rural locations is up. Have you reduced the pace of line extensions that you expect to build in non-rural locations? Thank you.
Speaker Change: Yes, so Jonathan, I'll start with the line extension one. Two things happened inside of that. We've pulled back a bit on our proactive commercial bill.
Speaker Change: and our expectations are a bit lower for Greenfield given that the housing market remains sluggish, though even that I would say hasn't meaningfully reduced our passing growth outlook.
Speaker Change: So I think what you see is correct. We do have a few more rural passings than we had before, but it's offsets in there that are bringing the total number down.
Speaker Change: As far as the network upgrade goes, our plan for the
Speaker Change: Split across the three steps hasn't changed. So we're still 15%
that will be 1.2 gigahertz.
Speaker Change: 50% that then moved to distributed access architecture, but still at 1.2 GHz.
Speaker Change: and 35% that then moves up to 1.8 GHz and really is, I guess, the way that you would think of it in DOCSIS 4.0.
Speaker Change: The mix hasn't changed in terms of where we're going and the ability from there to use a combination of DOCSIS-IV and DOCSIS-III.1 extended on the increment is
Speaker Change: Keep in mind as we go through on these nodes, we're putting in OLTs as well, which allows us to do fiber on demand or a fiber drop on demand almost similar to an enterprise customer But to be able to do that in residential and SMB as well And so the network's very much capable in terms of wherever things go You still maintain all the benefits that you have through power in the network Which allows you to hang cellular radios through our CBRS deployment, which is going very well
Speaker Change: And Chris, I assume that 35% ultimately goes to 100% at 1.8 over time. The assumption is that that all happens within business-as-usual capex of less than $8 billion.
Speaker Change: Yes, and you know what you have over time. One, I'm not sure if and when the need is going to take place, but
Speaker Change: to when you get into that less than $8 billion capital expenditure environment, the benefit that you'll have is the amount of node splits and CMTS upgrades that historically took place.
Speaker Change: you know virtually be non-existent you can reallocate capital to the extent you want that would have been spent into those segmentation areas into doing drop-ins and to the actives but that's all it would really require and so it's you know it can be done on the increment within within the envelope. Got it, thanks guys.
Thanks, Jonathan. Lela, we'll take our next question, please.
Lela: Our next question will come from Benjamin Swinburne with Morgan Stanley. Your line is now open.
Good morning.
Speaker Change: I think it's about 450,000 ACP-related subscriber losses or impact in 24.
Speaker Change: I'm just wondering if you guys are thinking you can grow, you can improve your broadband results in 25 versus 24 when you consider no ACP, obviously storms are a wild card, but you'll have more and more rural footprint behind you.
Speaker Change: And then, Chris, I can't remember the last time your video subscriber numbers outperformed both customer metrics and broadband metrics. It sounds like you guys are maybe selling into the base a bit and subsidizing that with some broadband. I wonder if you could talk a little bit about what's happening inside of your offers and inside the business that's creating this kind of mix shift and how we might think about that as we move forward. Thanks so much. Sure.
Look Ben,
Speaker Change: From a Outlook perspective, we're really confident about the midterm, our ability to grow internet, but we're also sensitive to the fact that there's
Speaker Change: You know, you're on the cusp in particular periods of time between net loss versus net gain. And so I'm not going to comment on short-term small impacts to gross ads or disconnects and have a big impact. But we won't have the ACP losses this year, and so that's a huge benefit.
Speaker Change: And it's still competitive in terms of fiber and cell phone internet overlap, but that gives it a little better visibility, as I mentioned, than we had last year.
Speaker Change: at the peak cell phone internet impact we seem to have gotten there and there will be a declining pace of fiber overbuilds, so
You then add on to that in terms of
Speaker Change: growth rate over time, rule passings, the fact that data consumption continues to increase, investments we've made in network evolution to outpace the capabilities of our competitors, and then using in a more effective way than we already are, the wireless convergence, and then what's coming, seamless entertainment.
Speaker Change: I ask people to step back and think about it from a consumer perspective. We have faster connectivity, a unique set of products.
Speaker Change: Those products are available everywhere we sell, which is the point I was making with the slide that we showed today.
Speaker Change: And we save customers hundreds and thousands of dollars with internet when similarly combined with mobile, so I like
where we sit.
Speaker Change: The benefit that you saw to our net additions in the fourth quarter are simply a function of re-bundling video in with our connectivity sales.
Ann.
Speaker Change: and we had moved away from actively attaching video to our broadband cells.
Speaker Change: because we were unconvinced that over time that would be an asset to the customer relationship because of the value equation that existed.
in sewing.
a video product that had been
commoditized
had a high price.
Speaker Change: and was able to be repackaged elsewhere through direct consumer apps and otherwise at a lower cost.
Speaker Change: And so, for years, we had moved away from attaching video to our broadband cells.
Speaker Change: because what used to be a benefit was concerning us as maybe not not being a benefit.
Speaker Change: That being said, once we had moved to an environment where we had more flexibility to use packaging in a way that created packages that were valuable to a customer and then attach
Speaker Change: expanded packages in a way that allowed customers to take advantage of the full retail value of the apps as a way to save money.
Speaker Change: and the introduction of XUMO, which allows you to have unified search and discovery and combine all of those services that you now get as part of your expanded service.
Speaker Change: as well as any other DTC or SVODs that you take separately in a single place.
Speaker Change: We thought the combination of that actually did provide the value and utility that we were looking for. That's only going to get better, and so that's just the beginning. We haven't rolled out the full set of seamless entertainment packages and marketing yet.
Speaker Change: but we felt confident enough beginning in late September to start.
selling
Speaker Change: video again actively together with our broadband subscriptions and As a way to create value and utility in the overall package not just for video But really did that add value back into the broadband relationship
Speaker Change: And what we did with our spectrum pricing and packaging that we offered in September is it allowed us
So when you take
two or three
sets of products between really broadband, mobile, and video.
allowed us to offer Internet
Speaker Change: at a lower price both at promotional and retail value and to offer a price block based on the bundle that you were taking.
Speaker Change: and offer lower roll-offs on the move from promotion to retail pricing, all of which has a long and a both short-term impact on your abilities from acquisition standpoint as well as from a retention standpoint.
Speaker Change: So we feel good about where it's going. It's it's only going to get better and That doesn't mean that's not a quarterly outlook on video. Don't get me wrong. It's just saying that over time as our capabilities increase
selling capabilities and training to re-bundle these services.
Speaker Change: is enhanced. I think it gives us real benefits, not just to video, but also into broadband and to mobile.
Speaker Change: Thanks so much. Thanks, Ben. We'll take our next question, please.
Speaker Change: Our next question will come from Craig Moffitt with Moffitt Nathanson. Your line is now open.
Craig Moffitt: Hi. I'm going to try to squeeze in two questions. First,
Craig Moffitt: wireless bundling strategy. I'm gonna leave aside the comments that you just had about video.
Craig Moffitt: Can you point to any real evidence of what wireless is doing for your broadband business? And the way that you think about, whether it's through Churn or something else, that suggests that the convergence strategy...
Craig Moffitt: is having a meaningful impact. It's obviously topical because Comcast essentially said they're going to try to emulate the strategy that you've already been pursuing for a couple of years. And then also on the topic of Comcast, you mentioned organic.
Craig Moffitt: growth opportunities, I have to ask, because we get the question so often, how do you think about inorganic growth opportunities and with the commentary so frequently being discussed about the possibility of combining with Comcast, how do you think about getting bigger as a cable operator?
Craig Moffitt: There's a lot in there, Craig, but they're good questions. So, from a wireless standpoint, in the benefits to convergence, if you think back to what we were doing, and we continue to do with the Spectrum One offer, it was really
Craig Moffitt: using the broadband relationship and offering a time of acquisition or retention of free mobile line. And what that was driving is additional attach, obviously the mobile line which was actively used, but additional mobile lines that would attach. And so we were using
broadband, really for the benefit of mobile.
and what we had seen along the way.
Craig Moffitt: Some of due to the convergence benefits and the seamless connectivity and some of it obviously with self-selection that takes place and there's bias there, so that's why we've been careful.
Craig Moffitt: is that we saw a much lower turn rate in those broadband customers when they had mobile versus when not. Some of that is clearly self-selection.
Craig Moffitt: and we've always recognized that and that's why we've been careful not to...
Craig Moffitt: report out on that too heavily, but it's not all self-selection, and there's a clear benefit, and it's a better product, and it saves customers tremendous amounts of money.
Craig Moffitt: What we did with the new pricing and packaging is we recognized that we now have a brand recognition in the marketplace of Spectrum Mobile, which is the fastest mobile product. It's now widely recognized both from a brand and capability standpoint.
It does have superior speed.
and we decided, you know, when at acquisition or retention...
Craig Moffitt: We can use mobile, it doesn't need to be always priced at $0 for the first line, for free. We can use it to drive improved acquisition and retail pricing for internet. And flip it a little bit. It doesn't mean that we've stopped using Spectrum One.
Craig Moffitt: We still have Spectrum 1 active in the marketplace and it works well.
But we can also use
The Life Unlimited Bundles, as I like to call them.
to enhance our capabilities for internet selling. That's early stages.
Craig Moffitt: but I think it's clearly going to have benefits. So I think the convergent strategy works.
Craig Moffitt: The point I was making in the slide that we showed in today's presentation
Craig Moffitt: says, we have a unique capability to deliver that where nobody else really does across their entire footprint. And so to the extent that convergence matters, we think it does, we think we're in the best position to do that.
Craig Moffitt: And I just want to make sure that we address there as well, that not only does mobile benefit the broadband subscriber, but mobile also has financial benefits.
Craig Moffitt: all on its own. It drives additional margin at the customer level by attaching it to more customers. We drive sort of additional margin across the business and really it's one of the key sort of cornerstones to how we can get comfortable with a plan for EBITDA growth.
inside of 2025 because we have that.
Craig Moffitt: that mobile revenue and therefore mobile margin as a driver of growth in the business. It's become significant and
Craig Moffitt: Just to add on to that, it's not just, you mentioned convergence, you can think about convergence as really the wireline of wireless capabilities together, but also with video, and that hasn't been the case, what I was mentioning to Ben. I think video can become an asset again, and it doesn't mean that we're going to grow video, I'm not saying that, but I think we can use it as a significant asset that's also unique to us compared to most of our competitors, together with mobile, to find ways to drive growth to a unique set of products and to save customers a lot of money.
Craig Moffitt: On the M&A front, I know there's a lot of chatter out there.
Craig Moffitt: Craig is really to create values never been dependent on M&A.
Craig Moffitt: In fact, it's really been moving in purely from an organic growth perspective, and how do we create value for shareholders from that perspective? And you do that by being a great operator. You do that by saving customers lots of money, providing great service, doing that with in-source, onshore employees, and being, you know, hopefully a good allocator of capital. But by being a good operator, that also, I think, opens acquisition opportunities over time.
Craig Moffitt: and the rest of the cable industry, you sit back and think about it, it's all family-owned or family-controlled, and they'll decide. This is not like Time Warner Cable, where there's another large publicly-traded company out there, and so it's really in the hands of these families or family-controlled businesses who get to decide when's the time that they'd like to combine. And the other thing I would tell you is that
Craig Moffitt: You know the door for M&A, I think there's a lot of chatter that it's also wide open. I don't think it's wide open I think any M&A transaction that you have to do in any administration anytime it has to be good for customers and it has to be good for jobs and you know when you think about our organic operating strategy that drives growth
Craig Moffitt: That's been helpful in that respect in the past in terms of our ability to get things done as well. But it's not, you know, it's a potential add-on to our strategy. It's not the core of our strategy, and it's not the only way that we can create value.
Thanks, Craig. Leila, we'll take our next question, please.
Leila: Our next question will come from the line of Sebastiano Petty from J.P. Morgan. Your line is open.
Thank you for taking the question.
Speaker Change: If perhaps, Jessica, you could comment just around EBIDA, you do expect growth for the year, any color perhaps at a OPEX?
Speaker Change: level across the different buckets that we should be assuming obviously as spectrum life unlimited ramps.
Speaker Change: and what you and Chris have talked about, creates more attach opportunities. There's probably sales and marketing costs that come with that. So, just maybe trying to frame that a little bit would be helpful against the backdrop as well of improving costs that you implemented in 2024.
Speaker Change: And then maybe just thinking about the CapEx guide, obviously it was helpful, does not include limited bead appetite per se, but maybe how you're thinking about any changes to tax policy. Should we get an extension of bonus depreciation? How would you perhaps maybe think about that across the buckets of shareholder returns versus maybe improving or accelerating some of your network efforts? Thank you very much.
Go to Beadaholique.com for all of your beading supply needs!
Speaker Change: I'll start on EBITDA growth. We said we plan to grow EBITDA growth in 2025. I think we do that through a combination of growth in the mobile business.
Customer benefits from the new pricing and packaging.
Speaker Change: There's Spectrum Rent 1 promotional roll-off and some other rate benefits that we'll see. And then continued efficiencies in the business.
Speaker Change: particularly in Cost to Serve, as you heard Chris sort of talk about with.
Speaker Change: Some of the benefits that we see from machine learning and AI and just driving around the customer commitments to have fewer transactions with customers.
Speaker Change: but also the continuing benefits of what we've done on the expense side.
Speaker Change: In that respect, I think across programming and cost-to-service customers, I generally expect that we'll be flat to slightly down, acknowledging that we think about programming on a per-video customer basis, and that mix does matter there a lot, and so to the extent that mix
Speaker Change: The mix of products that customers take changes as a result of the inclusion of the Seamless Entertainment Apps. I think that one ultimately will be dependent on results, but that's what we expect.
Speaker Change: In sales and marketing, as you point out there, I think there's a little more growth, maybe low to mid single digits, given what we're doing to drive and grow customers and to roll out or continue to roll out of the Life Unlimited brand.
Speaker Change: And so that's where I'm sitting on the expense side. I don't know, Chris, do you want to talk about it? Taxes usually, where Jessica would think, but if we're talking about capital allocation, maybe we tag-teamed this one.
Speaker Change: if needed. We don't know where tax legislation is going to go, but if it was enacted, it is
Speaker Change: It's obvious that we'd have potentially a very sizable reduction in our cash taxes versus the outlook that Jessica has been talking about.
Speaker Change: Whether that's rate or interest deductibility or bonus depreciation, actually all three of those are really important to an infrastructure builder. And that's what we do is we build the infrastructure here in the U.S. to highway the pipeline for.
Speaker Change: all of these applications in traffic. And so, any of those three things, and hopefully it's all three, which is rate, interest deductibility, and bonus depreciation, would make the return on
Speaker Change: all of our capital projects that might have been less attractive to be much more attractive. I don't think that means that you should run and say it's one for one in terms of dollar for dollar, in terms of incremental, but to projects that are very good for customers and very good for our communities that might have been on the edge from a returns profile suddenly can get really enhanced. And I think that's good for the economy and for jobs and for shareholders all in one.
Thanks, Sebastiano. Leila, we'll take our next question, please.
Leila: Our next question will come from Jessica Rief-Ehrlich from Bank of America. Your line is open.
Jessica Rief-Ehrlich: Thank you. I guess, you know, on LA, I know you said you'd be more specific on the first quarter fall.
Jessica Rief-Ehrlich: But is there any, you know, early read that you can give, I mean, I don't know what you're assuming for House at Home's coming back, but is it a step, a multi-year step down? And then a follow-up for both video and M&A.
Jessica Rief-Ehrlich: Video seems to be working before you were even marketing. Can you give us some color on what your marketing plans are for what is clear value for customers? And then on M&A, Chris, you made a remark at the beginning about national and global competition. So can you just talk about like how you would compete with more national competitors? What benefits you would get? Is it all like costs or revenue? Like any color you can give.
Sure.
Thank you for watching!
So from an LA perspective...
What's widely reported is there's roughly 15,000-16,000 passings that have
Jessica Rief-Ehrlich: burned and no longer inhabitable. You should assume that the entirety of LA is really our footprint and so that reflects passings for us.
Jessica Rief-Ehrlich: in the grand scheme of overall charter at 57 million passings, that's not that large, but it's near and dear to home. And so it's, like I said, personal to us. So there's a penetration rate on that, and that should be the subscriber impact that's immediate.
Jessica Rief-Ehrlich: those homes over time, so they'll be taken out of passings, they'll be taken out of customer relationships.
Jessica Rief-Ehrlich: And over time, if you know that area, and I know you do, it'll get rebuilt and those will become new passings and new homes inside of our footprint.
Jessica Rief-Ehrlich: We're already looking at the exact plans for rebuild and starting in many cases to do so.
Jessica Rief-Ehrlich: That'll drive, as Jessica mentioned, clearly some capital, which we'll be able to highlight.
Jessica Rief-Ehrlich: and there'll be a subscriber impact which we'll highlight you know definitively once that's in our next earnings call.
Jessica Rief-Ehrlich: There will be credits along the way for customers who are impacted through, obviously if they lost their home, but in addition to that through evacuation and otherwise where we've got policies in place to do that.
Jessica Rief-Ehrlich: And so there will be a number of one-time financial impacts and similar to other times. We'll just go through that list and Jessica will do that on the next call. The video, from a marketing perspective,
Jessica Rief-Ehrlich: From a competitive standpoint, I'm not going to sit here and articulate everything that we're doing, but I think strategically positioning our video product and our package of services in a way that allows customers to have more product than they'd be able to afford otherwise and to save significant amounts of money. When you look at that slide,
Jessica Rief-Ehrlich: The page that we concluded not all of those apps are yet deployed including for example peacock which will come
Jessica Rief-Ehrlich: within the next month or so. But once we've got all the apps
Jessica Rief-Ehrlich: fully activated for inclusion, and once we have a consumer-friendly way for them to upgrade into the ad-free versions, which is for the benefit of us, the programmer, and the consumer,
Jessica Rief-Ehrlich: And we have that in a store that allows customers to go through at least the perception of a unified authentication process that's customer friendly. Then you'll start to see us push more and more into driving that, not just for video sales, but as a way to contribute to the broadband connectivity and the mobile relationship.
Jessica Rief-Ehrlich: One of the key features that we've had as part of our negotiations with the programmers along the way is to say We need to cooperate. This is a partnership and it shouldn't be that every four or five years. We're going to go Do battle and try to find a net zero game This is really about because that hasn't worked the net zero game actually less left to Led to significant losses for everyone including the customers, but as well as obviously programmers and even us
Jessica Rief-Ehrlich: So the idea here is to form a true partnership where we can get behind each other's products.
that we can co-market together.
Jessica Rief-Ehrlich: They have fantastic brands, they have fantastic IP. The way that Spectrum, as good as our brand is, would be difficult to replicate.
Jessica Rief-Ehrlich: and we're out there selling their product every single day with 25,000 frontline sales and retention people.
Jessica Rief-Ehrlich: And we are very good at distribution, but I think having them get behind and help us advertise the value that's here can work well for the programmer, but also work well for us. And obviously it works very well for the customer because they save money, they are able to take more product, and they can actually upgrade to the ad-free version, which creates additional revenue for the programmers and for us over time in a way that works as a much better ecosystem.
Jessica Rief-Ehrlich: So without getting into any tactics around marketing, I think you can see where we're trying to make sure that the incentives are very much aligned between the programmers, us, and the customer in a way that from our perspective really works to sell more connectivity relationships.
Jessica Rief-Ehrlich: You know, from a scale perspective, which is what you asked, if we, you know, if we as Charter, if we had more scale.
I think the
brand recognition of our mobile services.
Jessica Rief-Ehrlich: Internet tends to be a little bit more local but you know clearly when you think about us competing against national mobile operators, when you think about us in the video space, there's
Jessica Rief-Ehrlich: Amazon, there's Google, and so across really all of our products you can think about where there's marketing advantage to having some additional scale.
Jessica Rief-Ehrlich: We have scale today, and it's sufficient. I'm not saying that we're deprived of that, but I think we could do better for customers.
Jessica Rief-Ehrlich: By having that scale, I think we could save customers additional money.
Jessica Rief-Ehrlich: I think we could in-source jobs the way that we did with Time Warner Cable and Bright House and bring more U.S. jobs back from offshore call centers on to onshore.
Jessica Rief-Ehrlich: environments that create good paying jobs, as well as bringing contract labor into in-house as well. So I think we can be good for ourselves in terms of scale, for consumers in terms of scale. I think we can be good for jobs. And then finally, if you think about an environment that we've talked a lot about is
AI development to actually enhance our service capabilities.
That's Nick.
these onshore and house jobs better for our employees.
Speaker Change: AI is not cheap and the more skill you have for that.
to the extent you could become less regional and...
Speaker Change: Closer to a national operator to compete it allow you to invest more into AI and to actually have lower cost per customer to do so
Speaker Change: and to drive additional benefits for customers that way. Look, I could go on and on. You know, we have enough scale to operate well today and we're doing it.
Speaker Change: But having additional scale, of course, is always beneficial when you operate a large, fixed-network, high-capital business.
Speaker Change: Thank you. Yep. Thanks, Jessica. Layla, we'll take our last question, please.
Thank you for watching!
Speaker Change: Our final question will come from CutGunMorale with Evercore ISI. Your line is now open.
CutGunMorale: Good morning and thanks for taking the question. Just a follow up on the M&A discussion from a different lens and maybe focus on wireless. You've scaled their mobile efforts quite meaningfully and I know that you've had a lot of success with migrating traffic onto your own network. But as that business grows and perhaps Comcast's efforts also ramp, is there a change to your view on whether owner's economics would make more sense on a standalone basis or through a partnership? I just wanted to revisit the topic because the coming pushback that we get.
CutGunMorale: We still assume that rural subnet ads will also accelerate, or are there other nuances that we should be mindful of? Thank you.
Ummm.