Q4 2024 Cable One Inc Earnings Call
TORONTO 2015 Pan Am-Stately Fall Volunteer Marathon, March 14, 2012
Speaker Change: Thank you for standing by and welcome to the Cable One fourth quarter and full year 2024 earnings conference call.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Speaker Change: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.
Speaker Change: If you would like to withdraw your question, again, press star 1. Thank you. I'd now like to turn the call over to Jordan Morkert, Vice President of Investor Relations. You may begin.
Jordan Morkert: Good afternoon, and welcome to Cable One's fourth quarter and year-end 2024 earnings call.
We're glad to have you join us today.
Jordan Morkert: Before we proceed, I would like to remind you that today's discussion contains forward-looking statements relating to future events that involve risks and uncertainties, including statements regarding future broadband revenue and customer growth,
Future Cash Flow, Future ARPU
Jordan Morkert: The future capabilities of our network, anticipated benefits from AI, the timing and anticipated benefits of our unified billing system migration, capital expenditures, the purchase price payable if the MBI call or put option is exercised and MBI's anticipated indebtedness.
Jordan Morkert: Our ability and sources of capital to fund the MBI call or put price, anticipated tax synergies and our future financial performance, capital allocation policy, leverage ratios and financing plans.
Jordan Morkert: You can find factors that could cause Cable 1's actual results to differ materially from the forward-looking statements discussed during today's call, in today's earnings release, and in our SEC filings, including our annual report on Form 10-K.
Jordan Morkert: Cable 1 is under no obligation and expressly disclaims any obligation, except as required by law, to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
Jordan Morkert: Additionally, today's remarks will include a discussion of certain financial measures that are not presented in conformity with U.S. Generally Accepted Accounting Principles, or GAAP. When we refer to free cash flow during today's call, we mean adjusted EBITDA less capital expenditures as defined in our earnings release.
Jordan Morkert: Reconciliations of non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures can be found in our earnings release or on our website at IR.Cable1.net
Speaker Change: Joining me on today's call is our President and CEO, Julia Laulis, and Todd Koetje, our CFO. With that, let me turn the call over to Julia.
Julia Laulis: Thank you, Jordan, and good afternoon, everyone. We appreciate you joining us for today's call.
Julia Laulis: 2024 were the first fruits of a phased plan that lays the groundwork for long-term balanced broadband growth.
Julia Laulis: We kept residential subscribers relatively flat when excluding customer losses from the expiration of the Affordable Connectivity Program and stabilized residential ARPU during the back half of the year as we indicated would happen.
Julia Laulis: Continued rising demand across our carrier, enterprise, and wholesale segments also led to business broadband revenue growth.
Julia Laulis: Our resulting free cash flow grew, consistent with our prior statements, and we also took significant steps to increase our financial flexibility in order to meet future obligations, especially those related to the potential purchase of the remainder of MBI.
Julia Laulis: And, we did all this in an environment of increasing competition.
Julia Laulis: We also substantially completed rebranding the companies we've acquired in recent years.
Julia Laulis: converted many of our customers to a unified billing system and continue to implement several best-in-class technology platforms.
to accelerate our digital transformation.
and improve operational efficiency.
Julia Laulis: Additionally, we reshaped our leadership team by adding new talent to our core of experienced proven leaders.
Julia Laulis: Building on what I said during our last earnings call, we are confident that the hard work done in 2024 is setting a foundation that will help us grow broadband revenue and cash flow over the long term.
Julia Laulis: Before Todd reviews our financial performance and the recent steps we've taken to strengthen our long-term financial outlook, I'd like to provide deeper insight into our approach to broadband growth, emphasize the strength of our network, and tell you about strategic initiatives we have undertaken.
Julia Laulis: I want to reiterate that we are executing a phased plan for long-term growth.
and express my confidence that our steadfast, intentional approach
Julia Laulis: will help us to continue to successfully navigate the competitive landscape.
Julia Laulis: while delivering a differentiated value proposition to our customers and shareholders.
Julia Laulis: Turning to residential broadband growth, in the latter half of 2024, we concentrated on strengthening our customer acquisition engine by investing in the right people, platforms, and processes.
Julia Laulis: As we move into 2025, broadband revenue growth remains our top priority. Our approach will be market and segment specific, driving unit growth and ARPU expansion where appropriate based on a variety of factors.
Julia Laulis: As mentioned, our fourth quarter ARPU remains stable on a sequential basis.
Julia Laulis: Notably, gig sell-in rose 10% sequentially in the last quarter. ARPU benefited from this higher sell-in as well as an increase in the sales of our intelligent Wi-Fi product.
Julia Laulis: our Secure Plus product, which provides customers enhanced cybersecurity protection, promotional roll-offs, and the loss of lower ARPU ACP customers, as well as the continued successful implementation of our AutoPay Plus program.
Julia Laulis: As it relates to units, we remain focused on growing and retaining our premium customers through a variety of personalized products and programs that will continue to provide best-in-class reliability along with great customer experience.
Julia Laulis: For our value-conscious customers, our pay-as-you-go product continues to grow nicely. This product provides greater value than cell phone internet as it is easy to set up, has unlimited data even during busy times, and guaranteed speeds.
Julia Laulis: Last quarter, over 30% of our pay-as-you-go customers signed up for speeds of 500 megs or greater, showing the need for such guaranteed speeds.
Julia Laulis: I would like to take a minute to talk specifically about cell phone internet.
Julia Laulis: We've reached the point where cell phone internet is available throughout almost all of our footprint, but this does not worry us. Our focus is on ensuring those weighing cell phone internet as an option choose a more reliable wireline option.
Ours.
Julia Laulis: Our customers have told us what they find most important when looking for internet.
Julia Laulis: Unlimited access to data without the threat of being throttled, a variety of guaranteed speeds to meet their needs, and better reliability.
Julia Laulis: Our product offers these key advantages, and we plan to target this customer segment in a way that expands our reach without cannibalizing our existing base. We are confident that we can and will win these customers.
Julia Laulis: Business broadband also continues to be an important driver of our long-term growth strategy, with revenue up 2.6% year-over-year. Looking ahead to 2025, we are confident about the long-term growth of business data services.
Julia Laulis: We expect to see strong continued growth in our carrier, enterprise, and wholesale segments with continued focus on maximizing revenue growth in our SMB market as well.
Julia Laulis: Turning to competitive dynamics, we continue to believe that new competition from third-party overbuilders is moderating in our markets.
Julia Laulis: While it is true that incumbent LECs continue to overbuild themselves with new fiber deployments in some of our markets, we have competed effectively against them for a long time and believe we will be able to do so going forward.
Julia Laulis: We also believe that incumbent fiber builds reduce the chance of a new third party entering a given market, maintaining a two-party market where the long-term economics are favorable to us.
Julia Laulis: Turning to our network, I'd like to share more detail around why we believe it will be a long-term differentiator for Cable 1.
Julia Laulis: We've traditionally talked about our network in terms of reliability and capacity.
Julia Laulis: While both remain critical, they are now baseline expectations. Customers expect reliability, and they assume we will have the capacity to meet their needs.
Julia Laulis: To differentiate ourselves in today's competitive landscape, we have been moving beyond these basics and focusing on how customers experience our network, remembering always that when we're serving our customers, we're also serving our neighbors.
Julia Laulis: This means shifting from purely technical metrics to understanding how our services enhance our customers' lives, and our continued emphasis on improving in-home experience is central to this strategy.
Julia Laulis: As one example, accelerated deployment of our intelligent Wi-Fi, powered by Eero, delivers an exceptional customer experience.
Julia Laulis: We see an increase in retention from customers with this service because of the superior internet service they receive.
Julia Laulis: Additionally, our customer-facing app offers valuable features like parental controls, enhanced security, and self-service troubleshooting, empowering users to manage their in-home network seamlessly.
Julia Laulis: Beyond these visible benefits, our intelligent network tools allow us to collect real-time customer performance data, enabling us to not only measure when the network is performing well, but also predict and proactively address potential issues before they impact the customer.
Julia Laulis: This is a significant shift in how we deliver service, moving from reactive to proactive support, and is a key element of improving the overall customer experience and network resiliency.
Julia Laulis: These tools help us to reduce churn, lower expenses, and create a competitive advantage as we attract and retain customers.
and many others. Thank you. Thank you. Thank you.
Julia Laulis: Given how technology and customer expectations are evolving, questions like, how will you compete with fiber, miss the point. Not only is our network powered by fiber, but we already provide more speed and capacity than most customers require today.
Julia Laulis: However, we fully understand that data demands will likely have step function growth over time, so our future investments will focus on two areas to meet their needs.
Julia Laulis: expanding capacity to stay ahead of the demand curve and enhancing the intelligence of our network.
Julia Laulis: By integrating advanced data-driven insights and predictive capabilities, we're building a network that's not just reliable but adaptive, anticipating customer needs and leading to long-term growth in a highly capital-efficient way.
Julia Laulis: Turning to our recent strategic initiatives, we have now migrated the acquired Fidelity, Valunet, and Cable America operations onto our unified billing system, which will streamline operations for associates and improve the customer experience.
Julia Laulis: This will help us accelerate the use of tailored customer acquisition platforms and product launches for these portions of our customer base throughout 2025 and beyond.
Julia Laulis: We expect to complete the migration of all other customers this year, which, as we have noted previously, will yield us several million dollars in annual savings going forward.
Julia Laulis: We also substantially completed the rebranding of our Fidelity, Hargrave, ValueNet, and Cable America operations. Fourth quarter brand measurement surveys in our legacy markets
Julia Laulis: show that our SparkLight brand achieves 100% aided awareness, and over 85% of SparkLight customers have a very positive perception of the brand, the strongest brand perception we have recorded.
Julia Laulis: It is exciting to see SPARKlight uniforms, trucks, and advertisements throughout our footprint.
Julia Laulis: Moreover, consolidating all customers under a unified Sparklight brand supports growth by creating cost efficiencies and leveraging the strength of our well-established brand across our footprint.
Julia Laulis: We look forward to carrying out this trial and believe we will be able to expand it throughout our MDU footprint.
Julia Laulis: Our data shows that customers on an intelligent Wi-Fi network experience higher satisfaction in turn at a much lower rate. Thus, we have focused on increasing adoption of our intelligent Wi-Fi solution, powered by Eero, throughout our customer base.
Julia Laulis: We also saw the number of customers subscribing to SecurePlus, our product offering advanced cybersecurity features across the home, increase by 25% in Q4 compared to Q3.
Julia Laulis: As we discussed last quarter, Secure Plus costs $8 per month, and we believe this, in addition to our intelligent Wi-Fi deployment efforts, will enhance the customer experience and provide an additional tailwind for ARPU going forward.
Julia Laulis: Transitioning to technological improvements, we're pleased to share that we are continuing to integrate AI into our business, enhancing customer experience, increasing operational efficiency, and helping us reduce churn. Simply put, AI is making a difference in the way we do work every day.
Julia Laulis: We launched an AI model in the fourth quarter, which allows us to review 100% of call center contacts in minutes, providing real-time feedback on customer sentiment that assists our agents in delivering superior customer service.
Julia Laulis: We also launched a project management tool with automation and AI built into the platform that has allowed us to streamline projects and complete them faster by identifying and reducing redundancies and roadblocks.
Julia Laulis: Finally, we developed an internal AI tool which created a churn propensity model for residential customers, allowing us to improve the accuracy of finding customers most likely to churn and lower costs by eliminating a third-party model we were previously utilizing.
Julia Laulis: This tool also contains a customer lifetime value model, which has already helped us reduce customer losses in competitive markets.
Julia Laulis: Before turning it over to Todd, let me conclude by telling you that I am excited for our associates, customers, and shareholders in 2025.
Todd Koetje: It reminds me of a sports team in the middle of a rebuild, where success might seem sudden to outsiders, but those inside the locker room know it's the result of countless hours spent building culture, refining skills, and sticking to the plan.
Todd Koetje: In the same way, the groundwork we've laid behind the scenes will start to show through in the form of smart, balanced, and sustainable growth. We'll keep pushing forward until we reach that goal.
Todd Koetje: Todd will now provide a recap of our fourth quarter and full year financial performance and further discuss our outlook for the future.
Todd Koetje: Thanks, Julie. Before going through our 2024 full-year financials, I'd like to start by discussing some of the key figures from our fourth quarter results.
Todd Koetje: For the fourth quarter of 2024, our total revenues were $387.2 million compared to $411.8 million for the fourth quarter of 2023, a decrease of 6% year-over-year.
Todd Koetje: Residential data revenues decreased by 5.4% while business data revenues increased by 2.3% year-over-year.
Todd Koetje: As previously discussed, residential data revenues were negatively impacted by the discontinuation of the Affordable Connectivity Program, which resulted in a loss of approximately 10,000 existing PSUs through the end of Q3.
Todd Koetje: In addition, we also experienced above-average turn activity amongst the remaining ACP customer cohort in the early part of Q4.
Todd Koetje: Such losses do not take into account the further negative impact on lost ACP Connect opportunities when comparing Q4 of 2024 to Q4 of 2023 when we were more active in selling to ACP customers.
Todd Koetje: Decrease in residential data revenues was also driven by ARPU of $79.72, declining 5% year-over-year. On a sequential basis, however, ARPU was up 11 cents from the third quarter.
Todd Koetje: Net loss was $105.2 million for Q4 2024 compared to net income of $103.5 million in Q4 2023.
Todd Koetje: The net loss was driven primarily by various non-cash, non-operating charges associated with our investment in MBI.
Todd Koetje: First, as in every quarter, we marked our MBI net option to market.
which resulted in a non-cash loss.
Todd Koetje: Second, as a result of the previously announced amendment to our MBI partnership, which I'll touch on later, we recognize a net gain associated with the new call input options.
Todd Koetje: And finally, as a result of our quarterly assessment for each of our equity investments, we identified an impairment of our MBI investment at year-end, which resulted in a non-cash impairment charge.
Todd Koetje: Collectively, these non-cash items related to MBI resulted in a $169.4 million net reduction to earnings.
Todd Koetje: You can refer to our upcoming 10-K filing for additional details on these items.
Todd Koetje: Adjusted EBITDA was $211 million, a decrease of 7% when compared to the prior year quarter. Adjusted EBITDA margin was 54.5% in the fourth quarter of 24 compared to 55.1% in Q4 of 23.
Todd Koetje: Capital expenditures totaled $71.9 million in Q4 compared to $115.6 million in the same quarter last year.
Todd Koetje: During the fourth quarter of 2024, we invested $6.5 million of CapEx for new market expansion and $5.7 million for integration activities.
Todd Koetje: Adjusted EBITDA less capital expenditures was $139.1 million in the fourth quarter of 2024, compared to $111.3 million in the fourth quarter of 2023, a $27.8 million, or 25% increase.
year-over-year.
Now turning to our full year results.
Todd Koetje: Total revenues for 2024 were $1.58 billion, a decrease of 5.9% from 2023.
Presidential data revenues declined 5.5 percent.
while business data revenues increased 2.6 percent.
Todd Koetje: Residential data PSUs decreased by 5,500 during 2024, which includes approximately 10,000 ACP customers who disconnected as a result of the program ending.
Todd Koetje: Excluding ACP losses and customer gains from a small acquisition, PSUs increased by approximately 2,200 during the year.
Todd Koetje: Arpu for residential data customers with $80.39 for 2024, a decrease of 4.9% from 2023.
Todd Koetje: ARPU decreased during the first two quarters of the year because of targeted pricing and product strategies in specific markets to address select competitors, along with a renewed focus on the value conscious customer segment which generally has lower selling rates.
Todd Koetje: Residential data ARPU then stabilized during the second half of the year because of certain initiatives including the implementation of AutoPayPlus
Todd Koetje: promotional roll-offs, the ramp-up of intelligent Wi-Fi and SecurePlus deployments, and the continued sell-in of higher-speed tiers as customers' speed and data demands continue to increase.
Todd Koetje: On the business data side, the 2.6% year-over-year increase in revenue was driven by a gain of over 1,400 PSUs. A strong demand from high-value carrier, wholesale, and enterprise customers continues, partially offset by a 3.4% decrease in overall business services ARPU.
Todd Koetje: Operating expenses were $416.8 million, or 26.4% of revenues in 2024, compared to $440.9 million, or 26.3% of revenues in the prior year.
Todd Koetje: The primary driver of the decrease in expense was a $32.8 million year-over-year drop in programming and franchise costs as lower-margin residential video customers continue to decline.
Todd Koetje: partially offset by increases in software costs, network backbone costs, and rent expense.
Todd Koetje: Selling general and administrative expenses were $366 million for 2024 compared to $354.7 million in the prior year.
Todd Koetje: SG&A as a percentage of revenue was 23.2% for 2024, compared to 21.1% for 2023, with the increase driven by software and system implementation costs that are expected to provide long-term efficiencies.
Todd Koetje: and significant investments in rebranding and marketing initiatives that are setting the foundation for long-term organic broadband revenue growth.
Todd Koetje: These increases were partially offset by a reduction in labor and other compensation-related costs due to organizational changes implemented during the second quarter of 2024.
Todd Koetje: Net income was $14.5 million for 2024 compared to $224.6 million for 2023.
Todd Koetje: 2024 included a combined $186.5 million non-cash and non-operating net loss associated with the MBI items previously discussed.
Todd Koetje: Adjusted EBITDA was $854 million for 2024 compared to $916.9 million for 2023, a decrease of 6.9%.
Todd Koetje: Our adjusted EBITDA margin for 2024 was 54.1%, compared to 54.6% in the prior year.
Todd Koetje: Capital expenditures totaled $286.4 million for 2024, which equates to 33.5% of adjusted EBITDA, compared to $371 million and 40.5% in the prior year.
Todd Koetje: During 2024, we invested $30.6 million of CapEx for new market expansion and $17.7 million for integration activities.
Todd Koetje: Our capital expenditures have trended downward in recent years, thanks to the meaningful investments we have already made in our network, specifically with regards to DOCSIS 4.0 network architecture.
Todd Koetje: The significant improvements to our network driven by these investments will allow us to be proactive in positioning for future growth and provides us with the confidence that our total capital expenditures will trend towards the low $300s for 2025.
Todd Koetje: The Justity Bedales capital expenditures was $567.6 million for 2024 compared to $545.9 million for the prior year, a 4% increase driven by ongoing capital efficiencies.
Todd Koetje: As we've stated in the past, the four pillars of our balanced, conservative, and long-term capital allocation strategy remain intact, including building and enhancing our network infrastructure, pursuing organic growth opportunities as they arise.
Todd Koetje: evaluating strategic investments and accretive acquisitions, and returning capital in the most efficient way possible, which consists primarily of accelerated debt repayments in a reduction in leverage.
Todd Koetje: In 2024, we distributed $67.9 million in dividends to shareholders and repaid $238.1 million of debt, of which $219.9 million represented voluntary early repayments.
Todd Koetje: We also drew $175 million under our revolver in December in connection with the amendment of our MBI agreement, which I'll touch on shortly.
Todd Koetje: As of December 31st, we had approximately $154 million of cash and cash equivalents on hand.
Todd Koetje: Our debt balance was approximately $3.6 billion consisting of approximately $1.7 billion in term loans, $920 million in convertible notes,
Todd Koetje: 650 million in unsecured notes, 313 million of revolver borrowings, and 4 million of finance lease liabilities.
Todd Koetje: We also had $937 million available for additional borrowings under our $1.25 billion Committed Revolving Credit Facility that we successfully upsized by $250 million in Q4 of 2024.
Todd Koetje: For 2024, our weighted average cost of debt was 4.15%, with nearly 80% of our borrowings either fixed issuance or synthetically fixed at underlying base rates of less than 2.7% under long-term contracts, considerably mitigating our exposure to the prevailing rate environment.
Todd Koetje: Our net leverage ratio on the last quarter annualized basis was 4.1 times, which as I will detail a bit later, we believe will be our peak leverage, while our secured net leverage ratio was 2.2 times.
Todd Koetje: Looking at our unconsolidated investments, in total, residential and business data customers grew by nearly 18,000, or 2% on a sequential basis in the fourth quarter, and nearly 97,000 customers, or 12%, for the full year 2024.
Todd Koetje: This does not include the operations of Metronet, where we have a less significant investment.
Todd Koetje: Annual subscriber growth in 2024 for these investments was 15% higher than 2023 and we continue to be very pleased with the ability of our partners to grow while providing best-in-class service.
Todd Koetje: Moreover, three of our existing investments, Metronet, Ziply, and CTI Towers, have been announced to be acquired by or merged into new entities, and we plan to monetize our investments in these partnerships with the proceeds to be utilized to pay down debt and reduce leverage.
Todd Koetje: We are grateful for the opportunity to partner with these proven operators and trusted financial partners and we are very pleased with the investment returns we will be providing Cable One's shareholders.
and finally turning to our MBI investment.
Todd Koetje: As previously disclosed, in December, we amended the terms of the MBI partnership to provide, amongst other benefits, increased capital structure flexibility, enhanced liquidity alternatives with respect to both a future MBI consolidation, as well as near-term refinancing strategies.
Todd Koetje: and a reduction in our expected peak leverage upon a completion of the MBI acquisition, whereas we do not expect it to exceed four times.
Todd Koetje: We now own a new call option, exercisable starting in the third quarter of this year, while the new put option held by the other investors was extended to January 1st, 2026.
Todd Koetje: If elected, the foot option cannot be settled prior to October 1, 2026, unless Table 1 elects to close sooner.
Todd Koetje: The net $250 million we paid to the other investors in Q4, along with the $100 million of additional debt incurred by MBI and distributed to the other investors, will directly reduce the final purchase price payable upon any exercise of either call or put options.
Todd Koetje: Based on currently available information, the closing of a call or put option exercise occurs on October 1st, 2026.
Todd Koetje: We estimate that the purchase price payable by Cable One will range between approximately $410 and $550 million.
Todd Koetje: and MVI's total net indebtedness that will be outstanding at the time it becomes wholly owned by Cable One will be approximately $845 to $895 million.
Todd Koetje: As detailed in our previous disclosures, these estimates are based on MBI's past performance and current forecasts and could potentially change.
Todd Koetje: In addition to the aforementioned balance sheet enhancements, this amended partnership agreement allows us to dedicate our 2025 focus on CAVO's organic growth initiatives.
Todd Koetje: Before handing it off for questions, I'd like to reiterate that 2024 was a big transition year for us, as we targeted new customer cohorts, while stabilizing ARPU during the second half of the year, launched a unified billing system that will provide more targeted pricing and packaging opportunities,
Todd Koetje: and substantially completed the rebranding of acquired companies, among many other initiatives.
Todd Koetje: Having taken these foundational actions, we are excited at the opportunities available to us in 2025 as we continue to execute on our phased plan for long-term growth.
With that, we are now ready for questions.
Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 in your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line of Gregory Williams from TD Cowan. Your line is open.
Questions for Todd?
Gregory Williams: Good job on fixing the MBI call option in the past. We thought you'd have to address that first and then you'd have to address the 2026 convert second, but now I guess that's been flipped. You're gonna try to address the converts now.
Speaker Change: and then the MBI later. So on the convert, I know it's early, but just maybe talking generally, you know, how would you think about that? When would you think about that as we consider your?
Speaker Change: monetization of your you know, metronet and and and other assets as well as your revolver capacity and how open are the capital markets
And then the second question I have is...
Speaker Change: on ARPU. Nice work on stabilizing it. A lot of moving parts, so just understanding where we go from here, whether it's the $5 autopay price hike that's still coming, and then you mentioned intelligent Wi-Fi, Secure Plus, Promo Roll-Offs, but then you also have pay-as-you-go. So just, are we looking at, like, flat ARPU through the cadence of the year, or a slight increase, slight decrease? Any color would be helpful. Thank you.
Speaker Change: Hey Greg, thanks for the question. Yeah, MBI and the strategic amendment that we were able to execute in December with our partners.
definitely brought us some additional capital structure flexibility.
Speaker Change: and Enhanced Liquidity, as I mentioned earlier, really both for how we think about ultimately consolidating MBI in late 26, but also for our near-term refinancing strategies, as you point out.
with the converts that come due in Q1.
of 2026.
Speaker Change: I mean, you already kind of said it. We've got that flexibility. We've got a committed $1.25 billion revolver with just slightly north of $300 million funded underneath that facility.
Speaker Change: that will continue to pay down. We have other monetization from those strategic investments that's going to be coming in throughout.
Speaker Change: the course of the year. I would expect those to be late, you know, first half to, you know, early second half.
Speaker Change: The gross proceeds from those, as we previously stated, are in excess of $100 million.
CTI was actually announced here more
Speaker Change: monetization, but it's incremental to what we had and it's a good return for our shareholders.
Speaker Change: and some of the losses that exist in our strategic investments portfolio, specifically with MBI.
Speaker Change: should also be able to effectively offset a meaningful amount of the tax on the gains and the other investments, so you can get to a
Speaker Change: you know comparable net proceeds to the gross proceeds. So answering your question then I guess in a long-winded fashion is we will be very proactive in evaluating the capital markets. They seem to be very constructive right now for us and you know while we've
Speaker Change: maybe extended the strategic partnership and you know bought some time. We don't plan to rest on that time.
I'll hop in and I'll start on the ARPU.
Yes, Greg, there are.
tons of puts and takes.
that go into
that are poo.
Speaker Change: We like that. We like that there's lots of levers. I mean, we can grow units and we can expand ARPU to get to our overall goal of broadband revenue growth this year, and we think that's absolutely possible. Where appropriate, we will attack different market segments.
and customer segments to do what makes sense most.
So
double-clicking on that a little bit.
For example, if you have markets that are maybe
Speaker Change: less competitive and you have high value customers and they see value in enhanced products, we can launch those and ARPU will expand. In markets where penetration is a little bit lower than average, we can attack.
Speaker Change: that with different offers and drive unit growth. I think you see what I'm getting at. It is the beauty of having about a million customers in 24 different states.
Speaker Change: We can go after them in different ways. And if you think about it in the past, an example or a corollary would be
Speaker Change: On occasion, when the enhancements bring a lot of value, you might see us take an occasional rate increase as well. So all of those things are at our disposal, and we'll use the tactics that make the most sense, again, based on the markets and the customer segments.
Got it. Thank you.
Speaker Change: Your next question comes from a line of Sebastiano Petty from JP Morgan. Your line is open.
Sebastiano Petty: Hi, thank you for taking the question. I think, you know, Todd, you talked about, you know, focusing efforts on, you know, your core organic growth initiatives.
Speaker Change: really helpful commentary as well about targeting some different demos. But taking a step back, one of your larger peers earlier this reporting season noted that, you know, maybe they need to lean a little bit more on mobile and try to try to offer maybe more bundling opportunities to drive acquisition and drive gross ads.
Thank you for watching!
Speaker Change: over the last several quarters turn has been good and I think the message has been that, you know, you need to maybe try to drive top-line gross at the top of the funnel, some gross additions. So how do you get there? Do you need mobile? You talked about some of these MDU initiatives as well, but specifically with mobile as we're seeing more of a converged environment in telecommunications and broadband.
Speaker Change: That you know, are you more open to that less open to that maybe the last 12-24 months. Thank you
Speaker Change: Wow, I have a lot of things flying through my head, Sebastiano. I mean, one of the first things is that, you know, absent ACP, we would have grown broadband units, and I don't think even absent ACP, our larger peers could say that. So, first of all, I have to think, do we even need something else?
Speaker Change: Which the answer for me was yes, because we have so much growth to go and get but but starting there We're always looking for ways to grow and and we're certainly open to partnering
Speaker Change: with a mobile provider if it will better serve our customers.
Speaker Change: and provide an impetus for other individuals to become new customers. And we've spent so much time discussing this. I mean, every functional area, whether it's technology or marketing or operations and with potential vendors,
Speaker Change: But I have to tell you, honestly, when you think about mid to smaller scale operators, not the big guys, I have heard very mixed results.
Speaker Change: We'll keep having the conversations. We're open to the possibility. But right now, I believe, we believe that the opportunity for us is to focus on our team, you know, our new team, our new tools, and just getting after organic broadband revenue growth. We think that's the best use of our time.
Speaker Change: I don't think we need mobile to do it. It's been really...
fun to have enough time elapsed.
Speaker Change: from the time we've instituted some of the the trials and experiments that we've been talking about to be able to measure them and measure them precisely because of some of these new tools and actually people as well that we've put into place.
Speaker Change: and see that, you know, we have a better line of sight to things that are resonating with customers and we absolutely, positively have tools in our toolkit to go after growth.
Speaker Change: Yeah, and Sebastiano, I'll add just a couple on that as you pointed out and Julie reiterated on the organic growth.
Speaker Change: Where we are from a penetration perspective on the high margin
Speaker Change: Data product and what we believe we can do to confidently grow that
bring so much more accretive value.
in the interim, then.
you know, viewing a product.
Speaker Change: that could potentially, as Julie said, be a product that our customers, you know, say they want to take from a single provider and we can do so, you know, accretively, but currently when you look at our, you know, churn as
Speaker Change: It was the second lowest quarter in the last three years. The year was the lowest in the last three years, when you look at it on an annual basis. And that's with ACP. With ACP. And that is usually a major assumption you have to believe in as it relates to improving that.
with another product.
Speaker Change: versus just finding another revenue stream that might not be economical.
and that's the core to how we evaluate it.
Speaker Change: Again, open minds are probably the best strategic minds, so we're open-minded, but the element of needing to do it right now, and we have so much more organic and creative growth in front of us with our core data product, is what we're going to remain focused on in 2025.
Speaker Change: Okay and quick housekeeping question I guess just to follow up on Greg's question. Do you think in this in this effort to maximize broadband revenue growth as well as attacking some maybe opportunities within your customer within your footprint in terms of a customer segmentation perspective, do you think ARPU can remain stable in 2025 as you maybe target some additional gross additions?
Adieu.
Speaker Change: I was going to say it sounds a little guidance-y to me and I think we're going to, we're going to
Do a little of both.
and it's going to add up to broadband revenue growth.
Thank you very much for the call.
Speaker Change: Your next question comes from the line of Brandon Nisp from KeyBank Capital Markets. Your line is open.
Brandon Nisp: Hey guys, two questions. One, could you talk about what happened in the quarter in terms of churn? I think you mentioned that it sort of picked up.
Speaker Change: You know, so what what changed during the quarter that drove churn and the subscriber results and then you know back back on ARPU Could you help us understand where you where you're at from a penetration standpoint on advanced Wi-Fi and and the security products and help us
sort of frame the opportunity that you have there. Thanks.
Speaker Change: Yeah, Brandon, I'll start. As it relates to the quarter, what I was alluding to is that churn actually went down.
churn for Q4 2024.
Speaker Change: is the second lowest quarter when you look at the last three years. So I just want to make sure I reiterate that. Then Julie can jump in on the ARPU as well. Well, so in.
for the quarter in terms of
Speaker Change: overall performance. I would say there were some one-time or unique headwinds. You think about the back half of the year, ACP winding down, we had platform installation and migration going on which takes a huge amount of focus.
Speaker Change: from the organization and actually caused us to stand still on some of our marketing initiatives in certain areas. And we also had some pretty major changes in key team members.
Speaker Change: Of our customers that lease equipment, I believe 35% of those are
Speaker Change: currently on Intelligent Wi-Fi and Secure Plus has just started. I mean literally we just started rolling it out so it's a brand new baby product.
Yep, it's about a third on the Intelligent Wi-Fi side.
with really good momentum.
Speaker Change: Your next question comes from a line of Craig Moffitt from Moffitt Nathanson. Your line is open.
Speaker Change: Hi, thanks. Sebastiano asked my obligatory question of why not mobile, so I'm going to go in a different direction. And, Julia, you mentioned at the...
What's that?
I said, so rude of him.
Julia Laulis: No, I'm just glad it got asked. So let me go back to a comment that you said at the beginning of the call, Julie, where you mentioned that you're seeing less
Julia Laulis: independent overbuilding in your your footprint you think that not that not from the incumbents from but from
Speaker Change: others building fiber. Can you just talk some more about that? What do you think is going on there? Is it...
Speaker Change: that they've built the attractive parts of your footprint and moved on to other areas in the country? Is it ...
Speaker Change: that they are starting to struggle with ROIs or what insight do you have about why that's happening?
Speaker Change: Yeah, great question. Probably, like most things, it's a lot of things.
Speaker Change: So, it is possible that folks are thinking that the really cherry
Speaker Change: areas, whether that means density or demos or ease of build.
are gone, I do believe that they
Speaker Change: human nature is like, boy, this sounds really easy. Let's go do it. And even building a network isn't all that hard, but running and maintaining a network really is, especially in non-consolidated, more rural America.
Speaker Change: But I'm going to guess, and I would love for Todd to jump in here, that
Speaker Change: A part of it really has to do with us, quite honestly. I mean, we took a bit of heat in the first half of last year when our ARPU dropped. But as Todd mentioned in his piece, we were selecting certain markets and certain competitors to send a really strong message, which was
Speaker Change: The regular way is more challenged and in all cases more costly, which also is an input into those returns.
Julie Laulis: They are in there is just the element as Julie set of operating in some of these rural markets and I believe theres a lot of folks out there that have realized buildings, one thing, but operating on a day to day non contractual consumer business and doing it well is even more challenging.
Julie Laulis: The overall competitive dynamics as Julie mentioned is something that we believe as we continue to press harder on that pedal of competitive intensity.
Julie Laulis: <unk> is going to make it hard for folks.
Julie Laulis: We've already evidenced that will take the behaviors to do it.
Julie Laulis: From a multiple toolkit perspective that we have our people live in these markets. They have this is where they want to live their hometown in defending turf is something that they are very proud of.
Julie Laulis: And that's something that we're going to lean into even more heavily this year I would say from an overbuild of just fiber that overlap.
Julie Laulis: In total continues to move higher.
Julie Laulis: Now in the call it high <unk>.
Julie Laulis: The largest percentage increase and that is coming from the incumbent telcos and the largest one of that for us is AT&T.
Speaker Change: Yeah, I mean, I agree taking really great knee really care.
Is is something that.
Speaker Change: That when you say the words again, it sounds really easy but.
Speaker Change: Not something that can be easily replicated.
Speaker Change: That's helpful. Thank you.
Speaker Change: Your next question comes from the line of Sam Mchugh from BNP Paribas. Your line is open.
Hey, Thanks, guys excuse me a few questions if okay. Thanks.
Speaker Change: Thanks for the fiber overlap update.
Speaker Change: Or do you think that will go in the medium to long term like what is your anticipation is it kind of 60% to 70% higher all over the map.
Speaker Change: And then secondly, if we look at Q4, it looks like the losses in residential that accelerate a lot relative to the rest of the year.
Speaker Change: We look into 2025 is that kind of 4000.
Speaker Change: Underlying losses at a reasonable run rate for 2025, Thank you very much.
Speaker Change: Yeah I'll hit the first one I'll, let Julie take the second one Sam as it relates to the fiber overlap as I mentioned.
Speaker Change: Right now estimated to be in that kind of high 40% area based on all of our ground truth in the largest contributing increase to that has been the incumbent telcos.
Speaker Change: As you know almost 85% of our overlap is between two.
Speaker Change: And the one that's been the most ambitious out there is our largest and I would intend to I would expect based on their intentions and what's been publicly released that that will continue to increase from there, but we're okay with that right.
Speaker Change: Our multi gig capable networks against their multi gig cable networks and our people in these markets.
Speaker Change: <unk> long term attractive.
Speaker Change: Economic.
Speaker Change: Returns for us.
Speaker Change: Yes.
Speaker Change: We've competed against three years.
Speaker Change: And then.
Speaker Change: I would be remiss, if it and add that we also do have some non fiber, but I would say very capable providers and that's usually in the approximate another 10 percentage points. So when you think about just overall competitive overlap right now with gig capable we're going to be in that kind of high 50% land not that different from others.
Speaker Change: And what we would view as.
Speaker Change: Probably a little bit more to go but a lot of that is behind us and with a lot of that behind us and this is the year of the last three years. When most of that was happening that we had the lowest churn I think there is a strong testament to the retention and the loyalty in our customer base.
Speaker Change: And yes, we talked a little bit about the.
Speaker Change: Unique headwinds that we experienced in the last quarter of the year, which.
Speaker Change: Things like.
Speaker Change: The winding down of ACP can continuing and completing.
Speaker Change: That form a very large platform installation and migration actually more than one and key changes and team members.
Speaker Change: That I believe affected us again unique headwinds.
Speaker Change: <unk> do not anticipate that paying that run rate in 2025 at all in fact I see.
Speaker Change: A lot of bright spots.
Speaker Change: We have better line of sight now than we ever have because of new tools and new folks.
Speaker Change: To see what resonates with non customers, bringing them on board.
Speaker Change: I think youll see some actions around cell phone internet I'm not going to go into details I'm very aware that our competitors also listened to our calls.
Speaker Change: We have a factory in I mean, it is a legitimate factory going.
Speaker Change: As it relates to our new builds.
Speaker Change: We have the measurements on experiments that we did in 2004.
Speaker Change: That are showing that we have very real tools to go after customers.
Speaker Change: The connects our issue is not churn as you heard Todd elaborate we need to get connected and I have every confidence that we see.
Speaker Change: Figure it out a couple of things and we will work on figuring out some more.
Speaker Change: And then if I could ask one very small follow up just on the overlap market.
Speaker Change: The ones that are more tentative.
How should we think about market share of differentials between the overlap not overlap markets.
Speaker Change: Yeah, Sam we have not disclosed penetration I think if thats, what you mean by market and how you break out.
Speaker Change: Where you are overlapping with fiber where youre not.
Speaker Change: It depends also on for how long.
And so going into that.
Speaker Change: Cohort by cohort basis is something we've not disclosed in the past.
Speaker Change: I will say by and large just to give you a little bit of flavor, if youre talking about a market, where we had overlap you said most tenured those are the markets, where we're actually growing again.
Speaker Change: There is a normalization period.
Speaker Change: And we've seen it there yet.
For a whole bunch of reasons that I can go into but.
Speaker Change: Typically after some period of time could be as short as 12 months could be as long as 19 months, we start growing again.
Speaker Change: That's a good point and maybe to add to that Sam we've talked about this in the past, but it's consistent still this past quarter.
Speaker Change: Our churn was actually lowest in our most competitive market.
Speaker Change: Okay, great. Thanks very much.
Speaker Change: You bet.
Speaker Change: Your next question comes from the line of Steven Cahall from Wells Fargo. Your line is open.
Speaker Change: Yes. Thank you just one on subs and one on <unk>. So just on the subs.
Speaker Change: It sounds like that little less than 5000.
Speaker Change: Data losses that you saw in Q4, I think Joe you said, that's certainly not what you expect to be the run rate for 'twenty five.
Speaker Change: When we sit here in itself, sometimes it's tough to see what's changed so could you talk maybe a little bit about what you've seen in Q1 or just help us understand why that's not the run rate I'm not sure I quite fully.
Speaker Change: Appreciated some of the nuance there.
Speaker Change: Then as it relates to your plan to grow <unk> and 'twenty five so ARPA I think was down kind of five 6% in 'twenty four I know there was a lot of aggressive action in a few markets, which implies some of those markets are proving down maybe two to three times that do you feel comfortable enough about the competitive environment that in those places where you took.
Speaker Change: <unk> down you can bring it back up and you won't see those same overbuild or as our new Overbill there's.
Speaker Change: Start to come in.
Speaker Change: And then sorry, just a small kind of small but all piece has talked about putting more capex into the west do you have much oh.
Speaker Change: Overlap with optimum or not really mostly just AT&T. Thank you.
Speaker Change: Okay.
Speaker Change: Once you hit the 70, I think while I'm, writing so fast just trying to capture your question Steven.
Speaker Change: So no I do not expect that to be our run rate why do I think it's different again, because we had very specific one time headwinds in Q4 related to ACP winding down doing installations of new platforms.
Speaker Change: Migrating customers onto a really large one of those and changing out quite a few key team members.
Speaker Change: We.
Speaker Change: Also in the course of that occurring.
Speaker Change: Had a chance to.
Speaker Change: Exercise those platforms and quite honestly the people as well.
Speaker Change: Gather really great measurements on some of the trials and experiments that we did in 'twenty four such that we now have line of sight into some of the tactics that we've tried that are much more nuance much more surgical.
Speaker Change: Very segmented.
Speaker Change: And.
Speaker Change: Has proven to be fruitful, so we're going to do more of that.
Speaker Change: And we're going to keep trialing.
Speaker Change: Other things as well, we plan on going up against which one of the items that we think is.
Speaker Change: <unk> connects.
Speaker Change: In a large way, which is cell phone and internet.
Speaker Change: Again, not going to go into the details because right.
Speaker Change: Let it get out there and.
Speaker Change: Let that run its course.
Speaker Change: You talked about <unk> as well and I mean, I really wanted the beautiful things about our markets is it gives us lots of room to play. So if a competitor comes into a specific market and we feel like we have to.
Speaker Change: Leaning against competition number one is about more than price absolutely positively.
Speaker Change: People and their infinite carrying and the investment that we've made not just in the network, but in these communities over decades matters, but price might as well if we take price down in a certain marketplace. That's okay. Because we likely can take price up in places we don't.
Speaker Change: Usually like to do that and what I would call a quote unquote need good rate increase we prefer to talk to our customers find out their needs and wants and then give them products and enhanced features that they're willing to pay for that actually drives that <unk>, so lots of room to play well.
Speaker Change: Just where we need to sometimes that's going to mean that a certain marketplace is really growing unit, sometimes thats going to mean, a certain marketplaces really growing <unk>, we think we have.
Speaker Change: Room to news now.
Speaker Change: If something comes up in the future and someone encroaches in an area that we really need to defend but we're going to do that because that's the right long term move.
Speaker Change: And then on the optimum side I believe you asked specifically Stephen.
Speaker Change: The capex.
Speaker Change: Our minimal overlap first and foremost.
Speaker Change: And I believe a lot of the capital.
Speaker Change: That was discussed was upgrading to basically levels that we are already at.
Speaker Change: All of our network as <unk>, one our investments are being made into for that one.
Speaker Change: With Virtualized <unk>.
Speaker Change: Distributed access architecture things that really set us up for <unk>.
<unk> 10 gig environments in the near future.
Speaker Change: Great. Thank you.
Julie Laulis: And that concludes our question and answer session I will now turn the call back over to Julie for closing remarks.
Julie Laulis: Thank you Rob before we conclude I want to extend my sincere gratitude to our associates for their relentless efforts throughout 2024.
Julie Laulis: Whether it was your work on the billing conversion the rebranding efforts solving customer issues on the phone are working hard within every community across our footprint to provide our customers the connectivity they need your unflagging dedication to one another our customers and our company is spectacular and.
Julie Laulis: I am grateful to each of you.
Julie Laulis: Thank you and we look forward to speaking with you all again next quarter.
Julie Laulis: This concludes today's conference call. Thank you for your participation you may now disconnect.
Julie Laulis: Okay.
Julie Laulis: [music].
Julie Laulis: Yes.
Julie Laulis: [music].
Julie Laulis: Yes.
Julie Laulis: Okay.
Julie Laulis: Yeah.
Julie Laulis: Okay.
Julie Laulis: Okay.
Julie Laulis: Yes.
Julie Laulis: Yes.