Q1 2025 Charter Communications Inc Earnings Call
Hello, and welcome to Charter Communications, first quarter, 2025 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. Also, 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: We continue to be the fastest growing mobile provider in the U S with the fastest connectivity at the best price.
Speaker Change: Our internet customer results improved year over year, as we continue to compete well and with the affordable connectivity program headwinds now behind us.
Speaker Change: Revenue was relatively flat year over year, while EBITDA growth accelerated to four 8% driven by a strong contribution from our global growth and continually improving service quality through employee and technology investments, which also reduced service transactions and costs.
The operating environment remains competitive, but the impact of the elimination of the ACP is behind us on the fiber front, we continue to do well.
Speaker Change: While our fiber overlap is expanding its growing at about the same pace. We've seen for the past couple of years. We also believe these new fiber builds are destined for poor financial returns.
Speaker Change: Cell phone Internet growth appears to have plateaued and brought it broadband data usage continues to grow in the first quarter.
Speaker Change: Monthly data usage by our non video Internet customers grew to approximately 825 gigabytes per month.
Speaker Change: And over 30% of those customers now use over one terabyte of data per month with handset and with handset data usage growing at an even faster rate.
Speaker Change: Our fully converged network is the most efficient way to satisfy that growing demand for data.
Speaker Change: Like cell phone networks, which needed to regularly execute massive network upgrades via Densification, which gets reported as capex.
Speaker Change: Or if they choose not to densify tens of billions of dollars in spectrum acquisitions that arent included an investor or analyst models.
Speaker Change: On licensed spectrum via Wi Fi continues to be the wireless workforce for the American consumer and for the mobile telcos spec.
Speaker Change: Spectrum mobile devices utilize our gigabit enabled fully managed network for the vast majority of traffic.
Speaker Change: And they off load less than 13% of traffic to slower <unk> macro cell towers.
Speaker Change: Our <unk> deployment is going very well and by the end of this year will be launched across 23 markets using low power shared licensed and unlicensed spectrum fully deployed and deployed across high traffic areas with good ROI.
Speaker Change: In the meantime, we continue to execute on our long held strategy of delivering the best networking products at the best value for residential and business customers combined with unmatched service.
Speaker Change: So we have a unique set of assets and significant scale as shown on slide four.
Speaker Change: We offer the fastest internet the best Wi Fi the fastest mobile product.
Speaker Change: And spectrum is the leading video provider in the U S.
Speaker Change: The power of our network continues to improve with symmetrical in multi gig speeds everywhere. We operate we are adding to buy one gigabit per second service to recently upgraded markets. This year and the next phases of our network evolution, we will deliver five gig and 10 gigabit per second service.
Speaker Change: As a reminder, the high split in DOCSIS four <unk> upgrade effectively creates up two one gigahertz of spectrum acquisition across our 950000 mile footprint.
Speaker Change: That network spectrum expansion enables up to 10 gigabit per second of speed to each premise and can also power small cells for unlicensed and share of licensed spectrum nearly everywhere.
Speaker Change: Our footprint continues to grow with our expansion initiative.
Speaker Change: I think its up for future customer growth just as portions of todays rural build become tomorrows suburban footprint.
Speaker Change: And unlike our competitors, we provide the very best of our products across 100% of our footprint with full marketing and service capabilities as slow as shown on slide five.
Speaker Change: Having the best network and product capabilities by itself isn't enough. So we have to offer the most value on slide six of todays presentation shows just one example of the value we offer versus our competitors.
Customers easy ways to save hundreds and even thousands of dollars per year, whether its promotion or retail if the best products.
Speaker Change: Alaska component of service, we've always believe that investing in customer service and satisfaction creates a virtuous cycle in our business that leads to customer and financial growth and value creation.
Speaker Change: Our sales and service are 100% U S based using our own employees with good paying jobs and benefits where.
Speaker Change: We're focused on ensuring that charter is a great place to build a long rewarding career.
<unk> tenure and driving better employee performance all part of our execution of initiatives that we launched a few years ago.
Next week, we will announce to employees, our new employee stock purchase plan.
Speaker Change: The program gives eligible employees the option to purchase charter stock with matching restricted stock units, which increases based on tenure.
Speaker Change: Our employees are U S based and committed to their careers and the local communities, we all serve as customers themselves and now as owners.
Speaker Change: We've also been investing in machine learning and AI for a number of years. These applications directly benefit customers in various self help channels force, but most of our effort is on making frontline work easier and more efficient.
Speaker Change: Ultimately our investments in employee compensation tenure facilities and tools, including machine learning and AI are.
Speaker Change: All resulting in significant improved service.
Speaker Change: Cable billing and repair calls were down 15% year over year in the first quarter. The service truck rolls were down 6% that's been the trend and it continues and looking forward AI remains a very large opportunity for us to create value for customers and shareholders.
Speaker Change: While we could sit back knowing our product quality and value proposition are better than our long term investments are working we're not standing still the.
Speaker Change: In September of last year, we launched our life unlimited brand refresh.
Speaker Change: Also our new customer commitment, which commits us to reliability and same day service with customer credits when we do Miss the Mark.
Speaker Change: And our new pricing and packaging, which better lit utilizes our market, leading mobile and now video products to present, lower promotional and persistent bundled pricing to grow customer RFP, despite lower product pricing.
That pricing and packaging is driving a higher number of total products sold a connect including video with the launch of seamless entertainment is still to come.
Speaker Change: And our gig Internet attach rate is now close to double what it was a year ago.
Speaker Change: As a reminder, our internet and mobile products have no contracts price locks when bundled <unk>.
Speaker Change: Market meeting service commitments with 100% U S based service and sales and taxes and fees are included in our pricing.
Speaker Change: None of our content connectivity competitors do that.
Speaker Change: Taken together Thats, our strategy offering the best products, including seamless connectivity and seamless entertainment the most value with unmatched service driving higher quality revenue per home passed with free cash flow growth and high return on investment.
Jessica: Before I turn things over to Jessica I wanted to note that this week. We added two liberty nominated members to our board of Directors, Marty Patterson and David Wargo.
Jessica: Like to welcome them both to our board.
Jessica: And at the same time, Greg with Fei and Jim Meyer to Liberty broadband designees rolled off this week as well and I'd like to thank them for their many years of service and value creation for charter and for our shareholders.
Jessica: Now I'll pass it over to Jessica.
Jessica: Thanks, Jeff.
Jessica: Please note that today's results include several lost Angeles wildfire as.
Jessica: As Chris mentioned last quarter, we are committed to these communities and to actively rebuilding that our first quarter customer results include approximately 9000 disconnects related to the higher ups. We provided credits impacted customers and also incurred some incremental expenses that first quarter adjusted EBITDA was not meaningfully impacted by either.
Jessica: We expect that as we rebuild our plant to approximately 16000 homes passed in Los Angeles over the coming quarters, we will incur additional capex down not at a level that would require us to change our outlook.
Jessica: Also please note that this quarter, we made a number of expense reclassifications to reflect changes in how we manage our business in connection with the recent launch of our spectrum business brands.
Jessica: The Reclassifications do not result in any changes to operating expenses, our adjusted EBITDA for any period.
Jessica: We've reclassified prior periods to that appropriate year over year growth calculations can be accurately derived.
Jessica: And today's published trending schedule I'll also shows P&L using both the new and previous expense disclosure methodologies. So that you can see the impact of the changes.
Jessica: Let's please turn to our customer results on slide 10, including residential and SMB, We lost 60000 internet customers in the first quarter in mobile we added 514000 lines.
Jessica: Video customers declined by 181000 versus a loss of 405124.
Jessica: With the improvement primarily driven by the re bundling we launched in September along with our life Unlimited brand refresh.
Jessica: Video performance doesn't yet reflect the benefits of incorporating seamless entertainment apps and our products.
Jessica: Wireline voice customers declined by 278000.
Jessica: We were generally pleased with our first quarter customer results during the quarter, we saw improvements in customer gross additions across Internet video and mobile and lower churn in video and mobile with Internet churn stable year over year, despite the lack of ACP and well below pre COVID-19 levels.
Jessica: We continued to compete well across asset types.
Jessica: In rural we ended the quarter with 902000 subsidized for El Paso, we.
Jessica: We grew those passing by 89000 in the first quarter and by over 400000 over the last 12 months.
Jessica: And we generated 39000 customer net additions in our subsidized for I'll slip in the quarter.
Jessica: We continue to expect Royal passenger growth of approximately 450002 thousand 25, our biggest yourself or in addition to continued non res construction and <unk> activity.
Jessica: Moving to first quarter revenue on slide 11 over the last year residential customers declined by two 1% while residential revenue per customer relationship grew by two 1% year over year.
Jessica: Given promotional rate step ups rate adjustments and the growth of spectrum mobile.
Jessica: Those factors were partly offset by a higher mix of non video customers growth of lower priced video packages within our base and $47 million of costs allocated to programmer streaming apps and netted within video revenue.
Jessica: As slide 11 shows in total residential revenue declined by 1%.
Turning to commercial revenue in total commercial grew by one 4% year over year with mid market and large business revenue, primarily spectrum enterprise growth of three 9% driven by PSU growth of five 5%.
Jessica: When excluding all wholesale revenue mid market and large business revenue grew by four 5%.
Jessica: Small business revenue declined by 2%, reflecting a decline in small business customers, partly offset by higher revenue per customer.
Jessica: First quarter advertising revenue declined by 12, 9%, primarily due to less political revenue.
Jessica: Excluding political advertising revenue decreased by five 1% due to a more challenged national and local advertising market.
Jessica: Other revenue grew by 13, 4%, primarily driven by higher mobile devices.
Jessica: And in total consolidated first quarter revenue was up 4% year over year and 8% when excluding advertising revenue.
Jessica: Moving to operating expenses and adjusted EBITDA on Slide 12 in the first quarter total operating expenses declined by two 6% year over year.
Jessica: Programming costs declined by 10, 4% due to a seven 3% decline in video customers year over year.
Jessica: A higher mix of lighter video packages and $47 million of costs allocated to program, our streaming apps and netted within video revenue part.
Jessica: Offset by higher programming right.
Jessica: First quarter 2025 programming costs included $12 million of favorable adjustments versus $28 million of favorable adjustments in the prior year period.
Jessica: Other cost of revenue increased by eight 7%, primarily driven by higher mobile device sales and higher mobile and mobile service costs.
Jessica: Cost to service customers, which combined field and technology operations and customer operations declined two 2% year over year.
Jessica: Primarily due to productivity from our tenured investment, including lower labor costs.
Jessica: Marketing and residential sales expense grew by seven 7% as we remain focused on driving customer acquisition and given our life unlimited brand relaunch in September.
Jessica: Finally, other expense declined by seven 8%, mostly driven by onetime benefits of $75 million.
Jessica: Adjusted EBITDA grew by four 8% year over year in the quarter and by three 4% when excluding the onetime benefits in other expense that I mentioned.
Jessica: Turning to net income we generated $1 2 billion of net income attributable to charter shareholders in the first quarter compared to $1 $1 billion last year, given this quarters higher adjusted EBITDA and lower interest expense, partly offset by a noncash impairment driven by our balance sheet write down of our la Laker RSM this quarter.
Jessica: Yes.
Jessica: Turning to slide 13 capital expenditures totaled $2 $4 billion in the first quarter down about $400 million in last year's first quarter, driven by the timing of CPE spend upgrade rebuild related to network evolution and line extension spend.
Jessica: While we continue to assess the potential impact of new tariffs. We don't currently expect tariffs had a significant impact on our capital expenditures for this year and over the next several years, we have attractive agreements with our equipment vendors and we continue to work with them to minimize the impact of tariffs while at the same time supporting the health of the cable equipped.
Jessica: <unk> ecosystem.
Jessica: We continue to expect total 2025 capital expenditures to reach approximately $12 billion and we have not changed our multi year capital outlook.
Jessica: We also don't anticipate the cash have a meaningful impact on our P&L as the vast majority of our P&L expenses, our programming labor and service driven and are not subject to the new cash.
Jessica: Turning to free cash flow on slide 14, first quarter free cash totaled $1 6 billion.
Jessica: An increase of approximately $1 2 billion compared to last year's first quarter.
Jessica: The increase was primarily driven by lower capital expenditures higher EBITDA and lower cash interest.
Jessica: Just a brief comment on 2025 cash taxes, we still expect under existing tax legislation that our calendar year 2025 cash tax payments will total between $1 6 billion and $2 billion.
Jessica: However, we expect second quarter cash taxes to total around $1 billion given the two cash tax payments, we are always required to make in the second quarter and some other timing items.
Jessica: We finished the quarter with $93 6 billion in debt principal.
Jessica: Our weighted average cost of debt remains at an attractive five 2%.
Jessica: Our current run rate annualized cash interest is $4 9 billion.
Jessica: We began repurchasing stock in late February following shareholder approval of the Liberty broadband transaction during.
Jessica: During the quarter, we repurchased $2 1 million charter shares and charter holdings common units totaling $750 million at an average price per share of $365.
As of the end of the first quarter our ratio of net debt to last 12 month, adjusted EBITDA moved down to four six times.
Jessica: And stood at $4, one six times pro forma for the pending Liberty broadband transaction.
Jessica: The decline in leverage in the quarter was driven by our inability to repurchase shares in the open market until we had shareholder approval at the Liberty broadband transaction in late February.
Jessica: We expect to gradually increase our leverage to the middle of our four to four five times range pro forma for the Liberty transaction over the next several quarters.
Jessica: As we laid out last quarter. Our plan is to grow EBITDA in 2025, and with strong contributions from our mobile business as well as continuing efficiency improvements driven by our investments we made good progress against that plan in the first quarter.
Jessica: As we continue to grow the business financially. We will also see outsized improvements to free cash flow driven by the end of our major onetime investments in our network evolution and subsidized rural initiatives that.
Jessica: That reduction in capital spending from approximately $12 billion in 2025% to less than $8 billion. In 2028 is equivalent to over $25 of annual free cash flow per share based on today's share count.
Jessica: Ultimately the strength of our P&L and declining capital intensity over the next several years.
Jessica: Bind with our appropriate balance sheet management, and resulting share buybacks will drive stronger returns for shareholders for many years.
Jessica: And with that I'll turn it over to the operator for Q&A.
Jessica: Thank you.
Speaker Change: This time, if you would like to ask a question. Please click on the raise hand button, which can be found on the black bar at the bottom of your screen.
Speaker Change: When it is your turn you will receive a message on your screen from the house, allowing you to talk and then you will hear her name called please accept immune or audio and ask your question.
Speaker Change: As a reminder, we are allowing analysts to ask one question today.
Speaker Change: One moment to allow the queue to form.
Speaker Change: Our first question will come from the line of Craig Moffett with Moffett Nathanson.
Craig Moffett: Alright, thank you.
Speaker Change: Two questions if I could.
Speaker Change: Can you just talk about the differences that you're seeing in the.
Speaker Change: Converged households, where you've got wireless now.
Speaker Change: And if you could also by the way update us on what the attach rate is since we have individual lines, but not.
Speaker Change: And households.
Speaker Change: What kind of differences are you seeing insurance rate is wireless really benefiting your your broadband numbers now that its reached some level of scale.
Speaker Change: And then just quickly Jessica that perhaps you could just let US know whether you think tariffs will have any impact on capital spending and your ability and cost of securities.
Speaker Change: We're for capital projects.
Speaker Change: Sure So let me.
Speaker Change: Tackle the first one and then we can together to tackle the second one.
Craig Moffett: Converged household difference we've talked about it before Craig there is a substantial difference in the.
Speaker Change: Internet churn rate for a customer who also takes.
Speaker Change: Mobile lines to the extent they have more local lines, achieving better and to the extent that supporting global lines, achieving better and to the extent they have.
Speaker Change: Device, but the finance for us achieving better so incrementally it goes to that.
Speaker Change: Degrees.
Speaker Change: And we are getting a good reasonable penetration on internet. So what I'm about to say starts to lose some of its weight.
However, the.
Speaker Change: There is a natural tendency for customers, who are already going to true loss through internet to be attracted to taking more of your products and so there is a self fulfilling prophecy and so probably not to get too far over our skis and estimating the benefit of that true reduction to internet.
Speaker Change: It is significant.
Speaker Change: It is based on happy customers to begin with.
Speaker Change: And.
Speaker Change: But when you look through the scale that we have today. It is clear that it's not just self fulfilling prophecy that there is dramatic benefits to our customer base.
Having that part of the reason it doesn't just product convergence.
Speaker Change: Is driving that it's really value convergence, we're saving these customers hundreds and even thousands of dollars. So there is a technology conversions that sort of allows you to have a faster mobile product because of the combination with our Wi Fi and increasingly in <unk>. So that creates a product areas variation thats positive for us.
Speaker Change: But there is also as a newcomer to the mobile space the ability for us to save these customers hundreds of thousands of dollars and so that drives penetration.
Speaker Change: Satisfaction lower churn for the existing internet relationship as well.
Speaker Change: We're seeing an improved ability to use spectrum mobile from an acquisition standpoint, three years thats been the goal and so we're starting to see not only the benefits of using mobile for sugar reduction, but also for.
Speaker Change: Also in acquisition.
Speaker Change: We've often talked about the mobile penetration I don't have that in front of me.
Speaker Change: Just under 20% of our Internet customers are.
Speaker Change: Our mobile customers today.
Speaker Change: Thank you.
Speaker Change: And then on the tariff question do you want to start off.
Craig Moffett: Yes, I said it in her prepared remarks Craig.
Speaker Change: I don't expect to.
Speaker Change: <unk>.
Speaker Change: Meaningful to the overall impact on our capital expenditures and that was part of the reason that I was able to reiterate.
Speaker Change: Our guide for the year at $12 billion, and our multiyear capex outlook, even including what we expect for the impact of tariffs.
Speaker Change: Today.
Speaker Change: Look I agree with all that you.
Speaker Change: If you take a step back I, just highlight charters as an American company offering services to more than $57 billion U S families and businesses and we have 100% U S based workforces so naturally.
Speaker Change: Craig our preference is to buy American made products, where they are available and when they are priced competitively in <unk>.
Speaker Change: The obvious I think tariff imbalances are by definition unfair.
Speaker Change: Clearly president Trump has taken a strong stand at least from the outside it appears to be creating an important opportunity for other countries to lower their tariffs eliminate trade barriers and from our perspective to benefit U S workers like ours, and our U S based customers.
Speaker Change: But again seeing the obviously state of the August we hope that happens.
Speaker Change: And certainly we're hoping that's the case.
Speaker Change: Thank you.
Operator: Thanks, Craig Operator, we will take our next question. Please.
Speaker Change: Next question will come from the line of John Hodulik with UBS. Your line is open. Please go ahead.
Speaker Change: Great. Thank you.
Speaker Change: Chris could you update us on the rollout of seamless Entertainment I think we were waiting for some.
Speaker Change: Progress on the digital storefront and folding in some new apps, but.
Speaker Change: Is there any help you can give in terms of the timing what that product will look like.
Speaker Change: It seems as if you guys are expecting some further improvement in some of your underlying kpis, whether it's video or broadband. So could you flesh that out a little bit and is there a way to size the impact that we can expect to see thanks sure.
Speaker Change: So let's go through the steps that I talked about in the past couple of quarters. The first is to get to these direct to consumer apps, which are included now as part of our spectrum TV select services launched in front of customers. So that they could actually activates to the extent they were looking for it on spectrum Dot net or my spectrum map and that has now been.
Speaker Change: Complete for all but two of the apps, which are remaining which I believe is discovery plus <unk> plus.
Speaker Change: But the most recent launches where peacock in the AMC plus I'm sure I'll forget a couple along the way, but now it means you've got Disney plus you've got ESPN plus.
Speaker Change: Got you Scott Max you've got Peacock Paramount plus.
Speaker Change: Tennis channel all of which either through TV everywhere or through DTC authentication on those to Bob for a second on that are more spectrum out you can go authenticate those as a customer that the AD supported version of those today. The second piece that we were looking to implement the ability for customers to seamlessly upgrade.
Speaker Change: Those added.
Speaker Change: Supported I think I said AD free AD supported TTC ops to upgrade those to add free for the incremental dollars of retail value.
Speaker Change: <unk> is taking place and for the most part is implemented those apps that have been launched as well and all of that's available today and a much easier format. It's not always consistent based on the credential requirements and authentication requirements of the program, but at least to put forward a user from it today than it was just a couple of months ago, and so we're making real progress there.
The digital store that we've talked about we'll be launching a little bit later this year, which enables all of that to be put together, an even more seamless way, but also to sell these direct to consumer apps to our broadband customers on the increment as well and manage your subscription and are now, including DTC direct to consumer AD supported.
Speaker Change: <unk> upgrade to add free selling these apps too.
Speaker Change: <unk> customers.
Speaker Change: And upgrading into packages that will allow you to have more value inside these direct to consumer so it's all making progress we are at a stage.
Speaker Change: We're we're feeling more comfortable driving that into the marketplace and so those of you living footprint, particularly for investors New York City in Los Angeles keep an eye out for advertising that will be highlighting the benefits to customers of our video products as being able to include the services.
Speaker Change: The really exciting part is having the.
Speaker Change: Support of the programmers to help drive and understand that spectrum and then that is the best place to be able to get these apps and that these apps are included as part of your service for spectrum TV select.
Speaker Change: We've gotten the programs combined yes.
Speaker Change: And behind Us and so youll see advertising thats really compelling helping.
Helping support the spectrum products from Disney.
Speaker Change: Max and Paramount plus all of that's in market today, and it's compelling and it recognizes that the best place for customers to get all this values the spectrum and the best place for programmers to get the value to them is really to have all the services bundled together to the extent of customer can afford it and so I'm excited the video product.
Speaker Change: Where we've gone through it's not necessarily cheap.
Speaker Change: Because of all the.
Speaker Change: Rate increases that the perverse took historically.
Speaker Change: But now there's real value inside there when you combine that with the utility of sumo. It gives you the ability to save significant amounts of money. We now have $80 more of value that comes in from the inclusion of these apps as part of your Tv's Flex service and.
Speaker Change: So we're excited about it so to answer your question.
Speaker Change: Haven't started to aggressively market that youll start to see some of that coming around I don't think that the improvement in video that you've seen so far is uniquely driven by these apps inclusions as of yet so I would hope that it gets better.
Speaker Change: The reason our video performance et cetera, because we've been of the new pricing and packaging that bundles and allows us to present, a lower internet price both the promotion of retail when you bundled video.
Speaker Change: Isn't that we're able to do that is because we have more confidence in the value of the video product that we're putting in front of customers.
Speaker Change: So feel good about.
Speaker Change: Standing behind the products that we offer and Thats, a real testament to the programmers who've worked with us over the past year and a half to get to that space.
Speaker Change: Think we're on a good trajectory.
Speaker Change: It's a little unknown.
Speaker Change: Call it option value.
Speaker Change: The biggest driver here for us is obviously internet and mobile.
Speaker Change: I think our video results can improve and I think we're offering a compelling product at a minimum that's something that we're proud to put on the bill now until used together with broadband.
Speaker Change: Chris do you think the launch of the service also will benefit the trends on the broadband side along with video.
Speaker Change: I think over time that is certainly that is certainly the goal.
Speaker Change: If for no other reason that by bundling in mobile and video it allows us to.
Speaker Change: Have a lower presented price for internet, both the promotion and retail and have lower roll offs in terms of promotional roll offs, which benefits not only at acquisition, but service transactions over time and churn over time as well.
Speaker Change: So it was an elegant way to get us into an environment, where we.
Speaker Change: We could despite.
Speaker Change: Despite having a superior product present, a lower price than our competitors because of the all in value that we can provide to the household which is unique none of our competitors are able to have internet and mobile everywhere, we operate and none of our competitors are able to actually offer that bundled together with video, let's say importantly, save customers hundreds of thousands of dollars on.
Mobile to provide them a video product that can.
Speaker Change: Potentially reduce their bill compared to what they are paying us for this.
Speaker Change: Well to.
Speaker Change: Direct to consumer apps that they are paying for we're not paying for through an authorized credentials.
Speaker Change: Great. Thank you.
Speaker Change: Thanks, John Operator, we will take our next question. Please our next question will come from Jonathan Chaplin with New Street Research. Your line is open. Please go ahead.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Hey, Jonathan you might be on mute.
Speaker Change: Jonathan Your line is open emphases on mute on your side, but please.
Speaker Change: Feel free to go ahead.
Speaker Change: Why do we go to our next questioner and will return to Jonathan.
Speaker Change: So for our next question, we will hear from Ben Swinburne with Morgan Stanley.
Ben Swinburne: Good morning can you hear me.
Speaker Change: Yep.
Speaker Change: Great.
Speaker Change: Chris I'm sure you're aware, there's a lot of focus right now is certainly in the investment community in the industry on kind of promotions and promotional roll off this is not new but something.
Speaker Change: The charter has been doing for a long time, and we can sort of see in your results now I think the success, you're having in kind of rolling off some of the spectrum one promotions and.
Speaker Change: Driving faster revenue growth in mobile and broadband I am just wondering if you could talk about.
Speaker Change: Why it's working well for you in this environment and maybe more importantly, why you think you've continued to execute that approach with your new life unlimited plans in a market that seems to be increasingly focused on kind of price locks in on.
Speaker Change: One pricing.
Speaker Change: And I guess your confidence that it's the right strategy because it because the revenues are there as you can tell from the questions people are still looking for broadband to get better on the <unk> front.
Speaker Change: But I'd love to just get your thoughts given where we are in the market around.
Speaker Change: Promo from a roll off pricing and packaging and the competitive environment.
Speaker Change: And then I just wanted to ask Jessica anything you'd want to give us in terms of opex outlook for the year, that's different from the end of the fourth quarter call thinking maybe.
Speaker Change: Cost of service and other expenses seem to be trending nicely for you year on year, just any update if you have any would be helpful. Thanks, so much.
Jessica: So on the promotions of roll off that's a very deep and extensive topics I'll do my best to help for a bit of it.
Speaker Change: I think first and foremost you have to have the very best product in terms of speed and reliability reliability. The second is that you have to create value for customers and save them money, whether thats a promotion or at retail.
Third is yes, we do reuse promotional pricing to drive acquisition, but even when you are at retail it needs to stick.
Speaker Change: Minimize the promotional roll offs that you have.
Speaker Change: Because it drives service transactions customer dissatisfaction can.
Speaker Change: Result, insurer and particularly if the retail price it doesn't deliver the value relative to your competition. So while.
Speaker Change: Charter.
Speaker Change: Had we believe the lowest prices.
Speaker Change: <unk> cable.
Speaker Change: When you get into a retail rate pricing, we're looking for a way that said is there an elegant way to <unk>.
Speaker Change: Migrate to lower pricing lower pricing at retail for Internet.
Speaker Change: Primarily bundle, but also putting foreseeable play products.
Speaker Change: In a way that was not tearing apart the existing base of revenue that we have and the way to do that is to use the products that we have that our competitive advantage, which is mobile and now given the work that we've done this video to say when you bundled together.
Speaker Change: You can have.
Speaker Change: At a promotional rate $40 gig.
Speaker Change: Which will have low rollout, which will have first and foremost you're pushing price lock two years achieved a level of two types of products.
Three year price lock as you fund over three products and even when Youre out of that you have two years of promotional roll offs of five years down the road.
Speaker Change: You are at a price point that is still very competitive in the marketplace and offers a better product and more value.
Speaker Change: Whether it's bundled or not and that's where we put ourselves in a position.
Speaker Change: To do so in a way that was still.
Speaker Change: That works well for customers.
Speaker Change: Well for our shareholders as well.
Speaker Change: So that's.
Speaker Change: Without spending 30 minutes on it that is the essence of our strategy and to put more products and value and so when you think about driving with gig as opposed to just 500 megabit per second using the strengths that we have putting in the unlimited plus version of the product when you bundled together with gig putting into cloud DVR is included.
Speaker Change: As part of the service as long as consumer box as well as the zero box, where you're bundling and that triple play. So it's more than just the amount of psus its the depth and the quality of the product that we're willing to add in and contributing to the bundle as you move upstream it drives quality.
Speaker Change: Into the customer base and protects them from churn.
Speaker Change: As these small step ups occur and most importantly, when you get to a retail pricing because it is a product set and pricing and packaging that cannot be replicated in the marketplace because of how we approach the market and then if you can combine that with high quality service.
Speaker Change: The goal is to have this customer for life.
Speaker Change: I think we had always done a pretty good job of all those things I said.
Speaker Change: But we had an opportunity to do even better and that's what the pricing and packaging that we launched in September enabled us to do I think it's early days and I think they are real.
Speaker Change: The real value of what we've done last September you wont see until you start to get into your beyond year, one as you have.
Speaker Change: Roll offs that are less or in fact bundled price locks that are taking place, which means you have even lower amounts of calls lower amounts of churn.
Speaker Change: And then for many years to come you will have a compounding effect of those lower service transactions in the mature because theres more value inside that bondholders more customers who are bundled.
Speaker Change: That makes sense.
Speaker Change: On the operating expenses side then.
Speaker Change: We had a little more volatility in the quarter and the growth rate for marketing in residential sales.
I still anticipate.
Speaker Change: Over the course of the year that the.
Speaker Change: That that line will grow in the low to mid single digits.
Speaker Change: Yes.
Speaker Change: In the same place than we were this line programming cost per video customer and cost to service customers.
Speaker Change: To service customers, where I would expect it.
Speaker Change: And to be flat to slightly down for the year.
Speaker Change: In other expense.
Speaker Change: I think we havent given a suggestion there.
Speaker Change: I think I'm, saying.
Speaker Change: The one time item in this quarter and I would just note that other expense.
Speaker Change: Is it stays very sometimes scale encounter onetime items over the course of the year.
Speaker Change: Those I would have expected.
Speaker Change: Also a low to mid single digit growth rate in other expense.
Speaker Change: But.
Speaker Change: I'll call out that is subject to those one time items got it. Thank you so much.
Speaker Change: Sure.
Speaker Change: Operator, we will take our next question please.
Speaker Change: Our next question will return to Jonathan Chaplin with New Street Research. Please limit your line and go ahead.
Speaker Change: Okay, I'm going to say that you are a muted you may need to slightly different microphone input.
Jonathan Chaplin: Alright can you hear me.
Speaker Change: We can yes go ahead, yeah, sorry about that.
Speaker Change: I'd love to just delve a little bit more into the life Unlimited pivot you guys made back in September I think this was sort of a really important moment for the company.
Speaker Change: When we look at our recon analytics data on NPS. It looks like there's a steady improvement since September and I'd love to get a perspective of how that sort of matches. Your internal tracking and then I know you said in response to the earlier question. The real benefit we will see over time, but I'm wondering.
Speaker Change: What sort of Youre seeing in early life churn on the customers that are on the life unlimited package relative to what you've seen before.
Speaker Change: Sort of signals that give you confidence in that.
Speaker Change: In that future improvement.
Speaker Change: Yes. So what you were just asked there is what I would.
Speaker Change: Young early tenured customer retention rate is better post the launch of.
Speaker Change: The bundled pricing and packaging in September which is what you would expect and so that.
That answers the question there I think the.
Ben Swinburne: I think as I was talking through Ben.
Ben Swinburne: The real benefit of this wont be fully recognized until we get beyond year, one into year, two and into year, three and I think even going into years, four and five youll see the benefit of that we are.
Ben Swinburne: Looking at ways when customers call in under what I would call legacy pricing and packaging ways to migrate them into this new spectrum pricing and packaging and a.
Ben Swinburne: Way that delivers.
Ben Swinburne: A much higher level of value at the same or slightly higher price point, but we're giving them a tremendously higher amount of product and doing so because we can.
Ben Swinburne: And because it preserves margin for us and puts the customer in a much better relationship and so maybe there's a chance that even prior to the September one year exploration that we can start to act.
Ben Swinburne: Actively migrate customers into spectrum pricing and packaging that was launched at the same time as the life unlimited branding.
Ben Swinburne: And that May give us an opportunity to more.
Ben Swinburne: Legacy customer or existing customer base earlier.
Ben Swinburne: As it relates to NPS.
Ben Swinburne: There are so many different factors going in you can have great improving NPS and then you can have a small rate increase that puts a dig into that but I do agree generally we see the same overall trend that net promoter score is increasing that's a function of the pricing and packaging and thats the function of the quality and the reliability of the product.
Ben Swinburne: Also a function of.
Ben Swinburne: The changes we've made with our customer commitment.
Ben Swinburne: Some of the softer things that we've done inside of the call centers to make sure our customers know that the employees that they are speaking to Jen who is an employee space here in the U S and that we appreciate the.
Ben Swinburne: At the time, the customers had with us and really their commitment to us the spectrum and so we've made a lot of changes in that environment to installing 100 products with credits providing that transparency and proactively providing credits when we do Mr. Mark.
Ben Swinburne: It goes a long way all those things put together.
Ben Swinburne: Is how you get net promoter score to grow so value reliability, great service recognition.
Ben Swinburne: U S based employees that we have 100% for sales and service infrastructure, which I don't think the talented enough.
Ben Swinburne: Yeah.
Ben Swinburne: And I think all that is working to your point, but I think it's very early days and I think youll see bumps along the road.
Ben Swinburne: But the overall trend distribute during up into the right.
Speaker Change: And Chris.
Speaker Change: If there is no change in market growth for the competitive environment from what we're seeing right now the improvements that you expect in year 234 et cetera. Do you think those are enough to get you back to positive broadband subscriber growth.
Speaker Change: I do.
Speaker Change: Great. Thank you.
Operator: Thanks, Jonathan Operator, we will take our next question. Please.
Speaker Change: Our next question will come from Jim Schneider with Goldman Sachs. Your line is open. Please go ahead.
Speaker Change: Good morning, Thanks for taking my question I was wondering if you can maybe give us a bit of an update on what you see in terms of the broader consumer behavior in your base one of your peers sort of called out higher mobile substitution and some of their cohorts I'm wondering if you're seeing any of those effects, but then more broadly maybe talk about any consumer.
Speaker Change: Trade down effects pressuring credit bank strict someone's they didn't seem to show up this quarter in any way just kind of wondering what youre hearing anecdotally from the consumer side based on all the sort of macro uncertainty we have right now thank you sure.
Speaker Change: Yeah.
Speaker Change: Look I don't think what we're seeing is that different.
Speaker Change: I'll come to that but I just wanted to be clear our sales are up and our churn is relatively stable. Despite the higher non pay disconnects.
Speaker Change: Just mentioned so we feel good about our own trends the factors that are going into broadband industry growth right now you've got the end of ACP is largely behind us I assume that's the same for the industry as a whole.
Speaker Change: As you mentioned mobile substitution.
Speaker Change: Including some low end cell phone Internet migration is almost back to where it was pre pandemic. So it's continuing.
My hope is that slows and gets back to where it was and thats our expectation. So both of those I think are going our direction in terms of industry growth.
Speaker Change: One of the Big Bogey here is we'll have to see where the housing market goes and that's always been a contributor to broadband industry growth that hasnt changed.
Speaker Change: So the first two I mentioned end of ACP mobile substitution reversion.
Speaker Change: I think our going our direction and the housing climate.
Speaker Change: A little bit unknown right down that will have an impact but even that.
Speaker Change: <unk> tends to be temporary in nature.
Speaker Change: Then the other thing that you asked about is essentially I think the market climate related the recession question we.
Speaker Change: Have not seen anything significant with the consumer so far and neither in non pay disconnect rates, they're up slightly only because of the lack of ACP.
Speaker Change: And I would say in a market environment, where.
Speaker Change: Our customers are rightfully tightening your wallet or our strategy go back and think about what I, just said with Ben and Jonathan our strategy of having the very best products and service at attractive prices and focusing on saving customers money. If you look at that slide that's in the presentation that we have today, it's huge money.
Speaker Change: So in a recessionary in any environment, but particularly in a recessionary environment I think our products and our pricing.
Speaker Change: It works very well across all environments, and I think even in a recession.
Speaker Change: We can present value to customers is stickiness drove the best products at the best prices advertising and selling customers you can save hundreds or even thousands of dollars on converged broadband and mobile services is a great way and if you can.
Speaker Change: Put together their video package, whether it's through skinny bundles or through really full when I say full many linear live video plus all of the direct to consumer App bundles in a way that.
Speaker Change: That creates value and save some money in a recessionary environment I think you are in a good position.
Speaker Change: I'd just add one final thing to that we do have we're proud of that as a variety of packages that meet the needs of low income or income constrained consumers, we always have.
Speaker Change: And we target that market to make sure that we're servicing all areas of our our communities. So.
Speaker Change: I don't have a crystal ball on the economy.
Speaker Change: But I think we're pretty well positioned for potential headwinds in a recessionary environment. If that's what's coming on like I said I don't have a crystal ball and I'm not predicting that I'm, just saying that we're in a pretty good spot.
Speaker Change: Thanks, Jim Operator, we'll take our final question. Please.
Operator: Our final question will come from Bryan Kraft with Deutsche Bank.
Bryan Kraft: Hi can you hear me okay.
Speaker Change: Brian.
Speaker Change: Hi, Good morning, I just have a question on fiber competition would you be able to give us a sense for the difference in your broadband penetration levels in markets, where you have competed with fiber for a long time relative to the non fiber markets.
Speaker Change: Splitting the market 50 50 in those areas. After you kind of take out the portion captured by fixed wireless at this point.
Speaker Change: And also specifically in the older markets has it been stable as of late or is competitive fiber still gaining share in those areas.
Speaker Change: Just trying to get some more color there if you wouldn't mind sharing that thank you.
Speaker Change: The.
Speaker Change: It's been a while but we've provided color on this in the past.
Speaker Change: When.
Speaker Change: When we have new fiber overbuild, there is inside of our markets. We have as you kind of penetration points of rollback.
Speaker Change: That's been the case still the case and so it's just a question of mix and newness.
Speaker Change: Fiber rollout.
Speaker Change: And the pace of fiber Rollouts has been about the same so when you think about all of the market dynamics that are impacting our internet growth rate. It isn't because of that fiber overbuild has been there for more than a decade, the impact of fibers and consistent in the study.
Speaker Change: And it's really more about the mobile substitution and the introduction of the new low end competitor where cell phone internet those have been the two big drivers and just market.
Speaker Change: <unk>.
Speaker Change: Because of all the things that we've been talking about through this call.
So the other thing I would tell you about fiber penetration is at least inside of our footprint, which goes to your question. A 50 50 split that's not what we see it's never been what we see it's not what we see today and so.
Speaker Change: When you hear other companies talk about the type of penetration that they.
Speaker Change: Are getting.
Speaker Change: All I can say is they must be having outsized penetration non charter markets. Because we don't see a 50 50 split sure ourselves continuing even after a tenured rollout of the fiber overbuild of <unk>.
Speaker Change: Having higher penetration and 50 50 of the broadband penetration inside of those markets.
Thanks, Thanks for that color I appreciate it.
Thanks, Brian that concludes our call. Thanks, everyone Laila I'll pass it back to you. Thank you all.
Thank you for joining the call today, we have now concluded and you may disconnect.