Q2 2025 Charter Communications Inc Earnings Call
2025 investor conference 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 Stephanie anninger.
Stephanie anninger: Thanks operator and welcome everyone.
Stephanie anninger: The presentation that accompanies this call can be found on our website IR charter.com. I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings and the encourage you to read them carefully.
Stephanie anninger: Various remarks that we make on this. Call concerning expectations predictions, plans, and Prospects constitute for looking statements, which are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results.
Stephanie anninger: Any forward-looking statements reflect Management's, current view only and Charter undertakes, no obligation to, revise or update such statements.
As a reminder, all growth rates noted on this call and in the presentation are calculated on a year-over-year basis, unless otherwise specified on today's call, we have Chris Winfrey, our president and CEO and Jessica Fischer our CFO with that. Let's turn the call over to Chris. Thanks, Stefan during the second quarter, we remained the fastest growing mobile provider in the United States. We added 500,000 Spectrum mobile lines in the quarter and 2.1 million lines over the last 12 months for growth of nearly 25%.
Stephanie anninger: All because we offer seamless connectivity with the fastest speeds at the best price.
Stephanie anninger: The second quarter internet customer, losses of 17,000 improved from 149,000 last year.
Stephanie anninger: Our video, customer losses, improved, 5-fold year-over-year to 80,000 driven by better connects and lower term.
Stephanie anninger: Revenue was up slightly year-over-year while second quarter, Evita grew by 0.5% and we expect to grow either for the 4 year.
Stephanie anninger: the operating environment remains competitive in Q2, we drove higher levels of sales year-over-year in lower voluntary churn, partly offset by higher levels of non-pay, Internet churn absent ACP
Stephanie anninger: We have not seen a material change in the competitive landscape and we remain confident that we'll return to Internet. Customer growth over time through our operating strategy of delivering the best networks and products at the best value for customers to combined with unmatched service.
Stephanie anninger: The new pricing and packaging. We launched last September continues to produce good results, including a higher number of total products, sold at connect a gig attach rate. That's nearly doubled, more mobile lines for customer connect and a video selling rate that's improved substantially with lower return across, both our traditional expanded basic packages and our skinny bundles.
Our video product continues to improve in June. We announced the inclusion of Hulu, with our traditional packages, Hulu should become available for those customers prior to the launch of the ESPN unlimited. And together with Fox 1, our inclusion offer will then be essentially complete.
Stephanie anninger: As slide 6 shows, we will offer over a hundred dollars, a monthly value inside of our seamless entertainment packages at no additional cost to customers.
Stephanie anninger: Our streaming app activation process for customers has improved and will be ramping. Our marketing seamlessly entertainment together with our programming partners.
Stephanie anninger: This month, we began launching the sale of alacarte programmer, streaming applications to customers without traditional video packages including Broadband only.
Stephanie anninger: In the coming months, we'll also launch our video Marketplace. It's a place where customers can discover activate migrate upgrade and downgrade their streaming inclusion apps. We'll also be a starting place for video Centric, sales, leads, and a place to learn about and buy Spectrum TV video packages like TV selected stream and Alucard programmer streaming applications
So why have we worked so hard to improve an ecosystem? That's been in structural decline for years. The reason is because we recreated the video product into something of much higher quality with unique video, packaging, flexibility and value together with Zumo, which solves a growing content, Discovery for all.
Stephanie anninger: Our video product can be yet another competitive Advantage for our Internet and mobile sales and it drives turn lower. It's the convergence of our connectivity services and video, through seamless entertainment.
Stephanie anninger: I do want to highlight that our programming deals over the past 2 years, including recent extensions and co-marketing efforts. Reflect our programming Partners belief in our customer video proposition, and those relationships are probably in the best place I see.
Stephanie anninger: Turning to internet specifically, we offer G capable seamless connectivity, Wireless 1 0 0.
Stephanie anninger: adding up to 1 gigahertz of additional Spectrum, when we move to 1.8 gigahertz
Stephanie anninger: We're deploying symmetrical and multi gig speeds everywhere, we operate.
Stephanie anninger: In July, we completed the addition of 2x 1, gigabit per second, service to all of our Step 1 markets, approximately, 15% of our footprint.
Step 2 including DOCSIS 3.1 distributed access architecture is now under way to the next 50% of our Footprints. We will deliver 5 by 1 gigabit per second service there, as well as fiber on demand capabilities.
Stephanie anninger: Step 3, adding text. Docs is 4.0 to the equation. We'll expand capacity, even more allowing us to offer 10 by 1 gigabit per second service.
Stephanie anninger: We're also in full deployment mode of our hybrid mobile network operator, or HMO Network.
Stephanie anninger: Deploying cbrs small cells across an additional 23 markets.
Stephanie anninger: In Mobile, a rapid growth continues. And for the last 5 quarters, the majority of our line. Net adds have come from unlimited plus lines with higher value in our group at a fraction of competitive prices with faster speeds, and better connectivity.
Stephanie anninger: We've also been selling more mobile lines for connect with our new packaging and upselling additional lines to existing mobile households.
Convergence reduces churn and higher mobile lines per customer benefits, turn further.
On convergence and higher line counts earlier this week. We announced a long-term, mbno relationship with T-Mobile which enhances our Spectrum, Business package of connectivity services, and can accelerate Spectrum mobile growth over time.
Stephanie anninger: We look forward to working with T-Mobile.
Stephanie anninger: From a financial perspective mobile, even done, Less Mobile capex is positive and for the last couple of quarters that figure has been positive. Even including the impact of customer device financing.
Outside of our multi-line phone, balance buyout. We don't see a need to of subsidized acquisition given our Market leading speed and value.
Stephanie anninger: So the mobile business is now becoming a real Tailwind to our free cash flow growth and it'll continue to increase.
Stephanie anninger: Turning to customer service, we have a unique opportunity to create an competitive Advantage here. The significant Investments to improve our customer service were largely made over the past few years. Those being technology, including digitization AI Network intelligence and direct investments in our us-based employees.
Stephanie anninger: Our technology Investments have been primarily directed at applications that directly benefit customers in various Health self-help channels.
And machine learning and AI based Frontline service tools to make servicing customers easier and more efficient for our employees.
Stephanie anninger: We're currently focused on using machine learning and AI to take full advantage of all of our Network and in home Telemetry to identify and address service issues before they ever occur.
Stephanie anninger: Our investments employees themselves are focused primarily on driving employee tenure, which drives better craftsmanship and customer service. It starts with good paying us jobs and benefits and then we expanded that with career paths, including soft progression, training and education, and enhanced retirement benefits.
Stephanie anninger: We've recently extended that notion of better service from better craftsmanship and commitment to a unique Frontline ownership program geared towards tenure, with the company matched based on tenure and a 3-year investment holding period in the first election, the window of her Employee Stock. Purchase plan, nearly 15,000 largely Frontline employees opted to directly invest and become owners of our company.
Our employees understand the Investments, we're making. And they believe they are not just their career. And retirement here, they increasingly act like owners of the business and that's good for our customers. The community communities, we serve, and our shareholders.
Stephanie anninger: Ultimately our investments in employees and Technology are all resulting in significant and sustainably improved service Cable, billing. And repair calls were down, 14% year-over-year in the second quarter, with the near 10%, decrease in truck rolls, despite significant weather impacts
Stephanie anninger: And we're seeing tangible improvements in how customers perceive our service products and pricing.
Stephanie anninger: We also have a public customer commitment backed by service credits, including if we can't be at your home or business the same day, but internally removing that standard to 2 our Windows. Why? Because we can't we're now doing it at a large percentage of the time. We believe it will take our competitors years of investment to catch up.
Stephanie anninger: Taking a step back. We still recognize the competitive environment. We're in our operating and capital allocation strategy. Means we've been making the Investments to put us in a position of confidence today.
Stephanie anninger: Network Evolution to ensure the fastest water line speeds.
Stephanie anninger: Convergence to make the same speed and reliability available seamlessly.
Stephanie anninger: Extending our Network to rural footprint, which often becomes Serv Suburban density in the future.
Stephanie anninger: Ecosystem, driving connectivity, sales and retention, and then pairing those Network and product Investments, with Market, leading pricing, and packaging to save customers money.
Stephanie anninger: all with the commitment back best-in-class us-based service from employees who are tenured committed and act like owners because they are
Stephanie anninger: all of which has yet to fully take hold.
Stephanie anninger: So how do you know as an investor? Whether it works because everything we're doing is what you as a customer want and as a customer demand for bandwidth liability and low latency service seamlessly connected continues to increase. I believe we're in the best competitive position and I think that's true with or without a step change from AI, VR Edge, computer other transformational shifts, which have always occurred when we have ubiquitously expanded the capabilities for our Network, for advanced products.
Stephanie anninger: A logical expansion of our strategy was our announcement in May to acquire Cox Communications. It's a combination offers significant benefits for customers employees, local, communities, and shareholders.
Stephanie anninger: The transaction will marry spectrum's operating strategy with the B2B capabilities and Community investment Heritage of Cox together with our shared philosophy of long-term investment in our Network and employees.
Stephanie anninger: It will bring Spectrum products and prices to the Cox footprint where we don't operate today.
Stephanie anninger: Increasing competition in those markets to the benefit of consumers and increasing onshore labor to the benefit of employees. This transaction is good for America. It's also a great outcome for both our current and shareholders and for the Cox family.
Stephanie anninger: The transaction is priced at an attractive valuation and it's a creative to Topline growth margin and to leverage free cash flow per share. Even when absorbing the impact of a modesty Levering of the combined business and without factoring in the benefits of a lower cost of capital and the value of Cox, as a sophisticated long-term shareholder,
As we spend more time thinking through the integration assuming regulatory approval, we continue to see areas of additional opportunity. And in the meantime, the employees of both companies are focused on business as usual and delivering value for a respective shareholders. Now, I'll pass it over to Jessica.
Jessica: Thanks Chris.
Speaker Change: Please recall that last quarter we made a number of extensive reclassifications to reflect changes in how we manage our business in connection with the recent launch of spec, the Spectrum Business brand.
Speaker Change: Again, these reset classifications did not result in any changes to Total operating expenses or adjusted evida for any period.
But please turn to our customer results on slide 9.
Speaker Change: Including residential and small business. We lost 117,000 internet customers in the still seasonal second quarter.
Compared to a loss of about a 100,000. In last year's 2q when adjusted to remove last year's impact of about 50,000 ACP related. Disconnects
Speaker Change: When comparing this year's second quarter internet, net ads versus last year's Tokyo, we have not adjusted our second quarter 2024 internet. Net ads for the 50,000 ACP related gross ads headwind. We called out last year when comparing to 2023
Speaker Change: As neither the second quarter of 2025 Noir 2024, had the benefit of ACP related gross Editions.
Speaker Change: In Mobile, we added 500,000 lines. With higher gross, editions year-over-year offset by a lower year-over-year. Turn rate on a larger line base.
Speaker Change: Video customers decline by 80,000 versus a loss of 48,024.
Speaker Change: Our best video quarter since 2021 with the Improvement, primarily driven by better connects year-over-year resulting from the new pricing and packaging. We launched last fall and lower churn year-over-year driven in part by our programmer app inclusion Packaging.
Wireline voice. Customers declined by 220,000.
Speaker Change: in rural, we have
In rural has benefited from both the scale and experience, we bring to the complex process of network Construction.
Speaker Change: During the quarter, we grew our subsidized, rural passings by 123,000, and by over 440,000 over the last 12 months.
And we generated 47,000 net customer additions in our subsidized, rural footprint in the quarter.
We continue to expect rural passing growth of approximately 450,000 in 2025, in addition to continued, non-rural, construction and fill-in activity.
Moving to second quarter Revenue results on slide. 10 over the last year residential, customers declined by 2.1%, while residential Revenue per customer relationship, grew by 1.7% year-over-year, given promotional rates step-ups rate adjustments and the growth of spectrum mobile.
Speaker Change: Video customers growth of lower priced video packages within our base and 67 million of costs allocated to programmer streaming apps and netted within video Revenue.
Speaker Change: this allocation should grow over time as more customers get into our streaming application offers, but is neutral to Evita
Speaker Change: Its slide 10 shows in total residential Revenue declined by 0.4%.
Speaker Change: Turning to commercial Revenue, total commercial Revenue grew by 0.8% year-over-year.
Speaker Change: With mid-market and large business, Revenue formerly Spectrum, Enterprise growth of 2.9% and when excluding all wholesale revenue, mid-market and large business Revenue grew by 3.5%.
Small business Revenue declined by 0.6% reflecting a decline in small business customers with Revenue per customer remaining essentially flat year-over-year.
Speaker Change: Revenue declined by 6.7% including the impact of less political Revenue.
Speaker Change: Excluding political advertising Revenue decreased by 4.4% due to a more challenged national and local advertising Market. Partly offset by our higher, Advanced advertising and better inventory selling capabilities.
Speaker Change: Other Revenue Group by 18.9%, primarily driven by higher mobile device sales and a 45 million 1-time benefit.
Speaker Change: In total Consolidated. Second quarter Revenue was up 6% year-over-year.
Speaker Change: To operating expenses and adjusted IBA on slide 11 in the second quarter total operating expenses increased by 6% year-over-year.
And costs declined by 8.8% due to a 5.1% decline in video customers year-over-year.
Speaker Change: And a, a higher mix of Lighter video packages and 67 million of costs allocated to programmer streaming apps and netted within video Revenue.
Partly offset by higher programming rates.
Speaker Change: Other costs of Revenue increased by 7.3% primarily driven by higher mobile device sales and mobile direct service costs.
Speaker Change: Cost to service customers which combines field and Technology operations and customer operations increased 3.8% year-over-year primarily due to higher bad debt expense due to Prior year, Cash basis, accounting treatment for certain ACP customers and higher mobile device sales.
Speaker Change: Higher Network, utility costs labor. Related costs, primarily driven by recent storm, activity, and banking card fees, partly offset by productivity from our tenure Investments.
Speaker Change: Excluding bad debt cost to service customers grew 2.4% year-over-year.
Speaker Change: in residential, sales expense grew by 8.6% due to slight slightly, higher sales volume as we make investments in marketing and sales, including in higher cost, sales channels to drive growth
Speaker Change: finally other expense increased by 0.6%.
Before turning to adjusted Evita I wanted to note that there were a number of Storms and tornadoes particularly in the St. Louis area, Ohio and the broader Midwest that impacted our footprint in the second quarter.
Speaker Change: We extend our sympathies to those impacted.
Speaker Change: the combination of Bill credits and storm cleanup expenses spread across our expense lines resulted in a 13 million dollar headwind to Eva Jag year-over-year
Speaker Change: Is very small.
Speaker Change: Adjusted Evita grew by 0.5% year-over-year in the quarter.
Speaker Change: We expect to grow adjusted Eva for the full year 2025.
Speaker Change: And year to date. We're on track with the first half, ebita growth of 2.6%.
Speaker Change: Even a growth will be pressured in the third and fourth quarters given last year's political advertising strength.
Speaker Change: Turning to net income, we generated 1.3 billion dollars of net income attributable, to Charter shareholders in the second quarter compared to 1.2 billion dollars. Last year, given this quarter's higher adjusted Ava and lower interest expense
Speaker Change: turning to slide 12 Capital expenditures total just under 2.9 billion dollars in the second quarter flat with last year's, second quarter
Speaker Change: with higher Network, Evolution and CPE, send offset by lower line extension spend
We now expect total 2025 Capital expenditures to reach approximately 11.5 billion dollars versus 12 billion dollars previously.
Primarily due to the timing of network Evolution spend and lower line extension, spend spread and Commercial and subsidized rural.
Speaker Change: The majority of the 500 million dollars spending shortfall. This year will be spent next year in 2026.
Capital spend year in dollar terms.
Speaker Change: 2025 should also be our Peak year of capital intensity even including the impact of the Cox transaction and Associated integration capital.
Speaker Change: Assuming that it's closed with capital intensity falling going forward.
And given the powerful economic and strategic benefits of our cocks transaction. The pro-forma Entity will generate Higher free cash flow per share in spite of de-levering which will reduce our cost of capital.
Speaker Change: Turning to free cash flow on slide 13, second quarter, free cash, flow totaled, 1 billion dollars a decline of 250 million dollars a year over year.
Speaker Change: The decline was primarily driven by higher cash taxes, higher cash interest and a working capital headwind related to mobile handsets.
turning to second quarter and full year 2025,
Cash taxes.
On our last call, I noted that we expected to pay approximately 1 billion dollars in second quarter, cash taxes.
Speaker Change: In the end, we ended up paying less than that approximately 650 million dollars. Given the timing of certain tax related items,
Looking forward new federal tax legislation passed by Congress and signed into law on July has improved, our cash tax outlook for the full year.
Speaker Change: We now expect that our calendar year 2025 cash, tax payments will total a bit over 1 billion dollars down from a range of 1.6 to 2 billion previously driven by our ability to depreciate more for tax purposes. This year, given the permanent restoration of 100% bonus depreciation.
Our ability to now deduct more interest for tax purposes. Given the permanent restoration of the Evita based limitation,
Speaker Change: And our ability to now, fully deduct research and experimentation expenditures for tax purposes.
Speaker Change: The new tax legislation will ultimately save us several billion dollars in cash taxes over the next 5 years, helping to finance our Capital expenditures and Investments and supporting our free cash flow for at least the next 5 years. While creating Higher free cash flow per share, essentially permanently
Speaker Change: We appreciate the efforts of the president Trump and Congress to restore these key business tax Provisions which will provide Capital intensive companies like ours, the visibility to continue pursuing our long-term Investments, including the significant Investments, we will make in the Cox network driving benefits for customers and employees and improving our competitiveness.
Speaker Change: We finished the second quarter with 94.3 billion in debt principal, our weighted, average cost of debt remains at an attractive 5.2% and our current run rate annualized cash interest is 4.9 billion.
Speaker Change: During the quarter. We repurchased, 4.5 million, Charter, shares, and Charter Holdings. Common units. Totaling 1.7 billion dollars at an average price of 375 dollars per share.
Speaker Change: As of the end of the second quarter, our ratio of net debt to last 12-month adjusted ibida, increased sequentially to 4.1 times.
And stood at 4.18%.
Speaker Change: As I mentioned on our cocks transaction investor call on May 16th during the pendency of the Cox deal, we plan to be at or slightly under 4.25 times leverage, proforma for the Liberty transaction.
Speaker Change: Post close. However, we will move to our long-term, our long-term Target leverage to 3.5 to 4.0 times.
And we would expect to de-lever to the middle of that range within 2 to 3 years following close.
I'll leave you with a few things.
Speaker Change: Our share of converged connectivity Revenue within our footprint, is still low less than 30%, and with better products and pricing. We have a long runway for organic customer, Topline IA and free cash flow growth for many years to come.
We've made and are making the Investments required to accelerate the growth of the business going forward including Network evolution, new pricing and packaging, Innovations, and seamless, connectivity, and entertainment mobile service investments in Ai and employee tenure.
Speaker Change: Our free cash flow is about to search. We are now in the midst of our Peak Capital intensity period, and moving beyond that Peak on its own. Sets us up for Rapid, free cash flow and free cash flow per share growth over the next several years as capital intensity declined. Meaningfully.
And finally we plan to add all of it with all of that, our combination with Cox which provides meaningful, share price and free cash flow accretion to our shareholders.
The operator for Q&A.
Speaker Change: Thank you at this time. If you would like to ask a question, please click on the raise hand button which can be found on the black bar at the bottom of your screen.
Speaker Change: When it is your turn, you will receive a message on your screen from the host, asking you to talk, and then you will hear your name called please. Accept, unmute your audio and ask your question.
Speaker Change: As a reminder, we are allowing analysts 1 question today.
Speaker Change: We will wait, 1 moment to allow the queue to form.
Our first question will come from Craig Moffat with Moffitt Mason. Your line is now open.
Craig Moffat: Hi. Thank you. Um, I'm going to uh, let others focus on the obligatory Broadband questions and ask you about the T-Mobile deal that you announced uh with for business. Uh and then the new mvno. Um, can you just talk about that deal a little bit? Um it it's I guess it's reasonable from our side to presume that.
Uh part of the appeal was uh was lower prices um uh relative to the existing Verizon deal. But can we read anything into uh your your targeting small businesses with T-Mobile about a potentially larger relationship and uh and what should we conclude that the deal means for the relationship with Verizon.
Craig Moffat: Sure. Um,
Craig Moffat: I'll give The Upfront caveat clearly, you know, we have a
Craig Moffat: A a good legal agreement with both of those parties with T-Mobile and Verizon. And you know, we're they've they Verizon has been a great partner to us and uh and I think we've been the same. So we're going to continue to do that.
And just entered into, I think a very strategic relationship with T-Mobile and so we intend to be good partners with them as well. We're really excited about the, uh, the deal that we announced with T-Mobile and we're looking forward to getting to Market and to small medium and for us, large business space, uh, with the ability to enter into a market selling many more lines than we've been able to sell the ability to combine, uh, those mobile products together with RDR market and price leading fireline services that we have in small medium and large businesses. I think is attractive the same way it is for residential, and we've been somewhat Limited in terms of our ability to go to market in the, uh, in the business space. And so this opens the door for us to go do that. Um, not going to comment on pricing for the reasons. I said at the outset other, than to say we're, you know, happy with the partnership that we have both with T-Mobile now and the business segments, as well as with Verizon. Uh, but I also
I also think it's always good to have, um, strategic relationships but to have multiple strategic relationships. And, you know, we feel that this is helpful to the future of the business. Overall, in terms of impact, to a Verizon is not a space that we were heavily driving today. If you take a look at our really small business segment where you can see our mobile lines that we publish, there is some business that exists there with Verizon. It's been relatively limited for the reasons that I just mentioned, um, that business on the increment will be moving towards T-Mobile and hopefully expanding in a more rapid rate. But the residential business that we have with Verizon is there and it's a great relationship. It's worked obviously very, very well. I think it's strategic for them. It's strategic for us, they've said as much and uh, we look forward to being a, a great partner to both of those companies.
And if I can just ask 1 quick, follow-up question on that topic. Um, I I assume it's reasonable to assume that that deal contemplates. The addition of Cox um, under the same relationship,
Speaker Change: Not going to get into the agreement but you know we signed it after the announcement of Cox. So you should assume that we we're thinking about a lot of things for the future.
Craig Moffat: Got it. Thank you.
Speaker Change: Yep. Thanks Greg, Leila, we'll take our next question, please.
Speaker Change: Our next question will come from John. Hodulik with UBS. Please. Go ahead.
Speaker Change: Yes. So I'll start on the tax question. Um,
Speaker Change: As I, as I said, in the change, to the guide in this year, you know, we we did come down pretty dramatically in our expectations, for 2025 cash taxes. We expect several billion dollars, uh, in in the next, uh, 5 years. And if you look at what piece of that is in 2026, I think it's reasonable to assume that there's savings that's similar to or slightly larger than what we saw. Um, in this year. Oh, I I mean, I think the big story is around sort of what it what it does to overall free cash flow. Um and in our modeling, you know, the new rules can drive ten dollars or so of free cash flow flow per year for each of the next 6 years. Um, so so I think the the impact is pretty dramatic.
Speaker Change: $10 free cash flow per share. Yes sorry yes. Yep. Did I I said free cash flow. I was super sure. So there you go. Um in terms of how we deploy the savings you know our Capital allocation strategy hasn't changed um we have and will continue to prioritize the investments in organic uh investments in the business that generate positive Roi
Speaker Change: Um, as a result of the permanent bonus depreciation and interest deductibility rules, I would expect more projects to meet that positive Roi heardle.
Speaker Change: Um, that being said, we're not updating our multi-year Outlook, uh, except for the sort of timing items that I discussed in my remarks. Um, we we already invest a significant amount in our Network. Um, we planned to invest in our Network in rural builds. Um, and in our proxy disclosures, we did the same for Cox assuming that the transaction closes, um, and ultimately, um, our expectations around making those Investments, uh included. Uh expectations. We would continue to get favorable um rules and and we're happy to see that that that has played out uh that that's played out well.
Speaker Change: Just a tag on that. We had going into the Cox transaction. We had a good sense and uh maybe it was hope. Maybe it was a a well placed bet that the um, you know, the the tax rules would be extended and in a way that was helpful to our infrastructure investors. And that enabled us to be as committed as we are to making the investments in the Cox network that you see when we publish the, uh, the proxy statements. So, um, service factored in there. And so there will be an uptick in investment, that's directly tied to that. And it's reflected freely in the Cox transaction.
Speaker Change: John on the non-pay commentary um you know when you're in an environment where you know you're on the cusp of slight you know, losses or slight ads, you know, small movements in any category. Whether it's sales, voluntary turn or non-pay can have an outsized impact on net ads. So the non-pay just taking a step back is still a relatively low historic levels. However, it's stepped up year-over-year, and the reason that non-payers stepped up here for year, um, is because twofold 1 is you have former ACP customers who are economically challenged and have a higher non-payment rate systemically with without the benefit of the subsidy from a year-over-year standpoint. But, in addition to that from a year-over-year standpoint, you have newly acquired customers who would have qualified for the ACP. We don't have ACP today and therefore, um, they have a those newly acquired customers have a higher non-pay rates than they would otherwise but just take a step back to be clear.
Speaker Change: Non-pay is up year-over-year? It's not dramatic and it's not at a level that exceeds where we were certainly pre-pandemic. But it's enough that on the cusp of, you know, Net game versus Net loss. That it has, you know, some impact that's offsetting the benefit that we have from higher sales and lower voluntary churn
Speaker Change: Got it. Thank you both. Yep.
Speaker Change: Thanks John, Leila, we'll take our next question, please.
Speaker Change: Our next question will come from Jessica ree erlick with Bank of America. Please go ahead.
Speaker Change: Oh, thank you. Um,
Speaker Change: maybe switching to video for a second. You you had obviously a really fantastic video Improvement still losing Subs, but very modest. How do you see the offer evolving in terms of whether it's personalized recommendations or something else? Like where do you see the most, the most potential to improve the video experience? And can you just discuss the attach rate with broadband like because you there should be a ripple, you'd think there would be a ripple effect.
Speaker Change: Yes.
Speaker Change: I'm just a ton in what you just asked, um,
Speaker Change: Programmers. And we think to Consumers is to have the full-fledged expanded video product because it has the most content in there at the best value and include with that. Now over a hundred dollars worth of programmer apps uh, including
Speaker Change: Max Disney plus through the peacock, Paramount plus sticks. Uh, you know, I'm leaving out everybody. You know, everybody else ESPN, you know? But the whole thing you take a look at that slide, all that value is included, that's going to be the stickiest product. It's going to be the best for customers and for programmers us and it's going to be the best for our Broadband insurance as well. Having said that in moments of time, we're a customer can't afford that full package. You know, we have some skinnier bundles that allow for generalized General entertainment packages which we can then add on the programmer apps uh from time to time sell through the programmer. Apps directly at retail, through our video store to to those consumers. And then finally, you know, to the extent you have Broadband customers who are looking to purchase Alle cart programming apps, which they do today, and do it in a single place that will have the ability to provide that utility in that value to customers. So, wherever the market goes, wherever the product goes,
Speaker Change: We're in a position to provide that package uh, and utility to the customers really for the benefit of consumers, but also to the benefit of programmers as well. And obviously for us having a high quality video product, that matches the customer's need enhances the value of our connectivity relationship, being Internet and mobile.
If you then add Zumo into the equation. So the first piece that I just talked about with solving the, the value equation for customers, and the second piece is solving utility with Zumo. Zumo has the ability to integrate live TV together with all of these apps which are included in increasingly more, simplified authentication for customers to have in a single spot. So you have unified search and Discovery across live, uh, ask God, as well as programmer apps in a way, that's pretty unique in the marketplace. And, uh, with, with a
Speaker Change: Voice remote that works. I think better than any other voice remote that's out in the marketplace credit to Comcast towards our partner in Zumo. 5050 partner with Zumo really developed that technology. Um I think Zoom is a powerful tool to solve that utility and even more. So when you combine it with the value,
Speaker Change: you asked about the attach rate, um, when we started to include in our new pricing and packaging in September, uh, a more
Focused effort including video on the package together with mobile as a way to lower your internet pricing today at $30 for 500. Megabits a second $40 for a gig internet. When you bundle with either video or Internet, the uptake in video, attach rate is significant is because we focused on it. In fact, at the time, it really wasn't because of what we yet, because of what we had done with the product. In fact, we haven't really started to put the full marketing engine between this, what we call Seamless entertainment, the combination of your live video Service, Plus all these apps, the digital store, the video store, isn't even launched yet. Um, and we don't yet have the full backing which we will of our programming partners and all of their marketing capabilities behind
Speaker Change: So, I think the, the video space for us can continue to improve and improve significantly. And what I said in my prepared remarks is meant to make sure people don't think that we're, uh, we're thinking about this the wrong way, the our our
Speaker Change: Our driver for having a high quality video product is to be able to sell and retain more, uh, Internet and mobile relationships and that's the big driver for us. And we said, 2 years ago that we wanted to get an environment either where we were going to not have video and focus on broadband or have video and have it as a competitive tool and asset towards our broadband and mobile relationships. And you know, it's taking some time, but it's going well. And I, I think it's going to continue to get better for the benefit of not just video, but for the benefit of broadband and mobile relationships,
Thank you. Yep. Thanks, Jessica Lea, we'll take our next question, please.
Our next question will come from Peter subpoena with wolf research. Your line is now open.
I wondered if you could bridge that for us and and if you have any time to talk about, uh, your your top of funnel customer, acquisition results, um, how you feel about the results right now, and what you might need to see to to change the strategy. Thank you.
Speaker Change: So Peter, I I I think that the amount of of additional free cash flow um that I stated is appropriate. What what matters is what you believe about share count over that period of time. Um and and how chair count might change.
Speaker Change: Um, you want to talk about the funnel? Yeah. So um,
Speaker Change: If you're going to, if I going to talk about funnel, I really need to go talk about the overall Market color, kind of reframe or restate, a little bit of what I saw in the prepared remarks. When you think about the top of the funnel mobile auction, is actually very good video. As I just talked about significant improvements. So everything I'm about to say really focus on Market color, and funnel as it relates to internet, um, just so that we set the stage. The, the volume as I talked about sales are actually up, uh, you know, a percentage twice year-over-year and in units, voluntary Turf is down non-payers. I just talked about is up a little bit due to the lack of ACP. Um, the competitive environment is stable, uh, not improving, but not deteriorating. So we have steady fiber overlap. That's not new cell phone. Internet continues at its pace for now.
Speaker Change: um, but just as big, when you think about the overall market and funnel is, you know, the overall Market is challenged because there's a
Speaker Change: a an incredibly low amount of moves and new build which is going very slow. And then in addition to that you have a reversion to Mobile 1, customers and ACP accelerated that that was taking place. Reverting mobile only back to the pre-pandemic level.
Speaker Change: You put all of those Market movements or in this case, lack of market movement together with a new competitor. Even if there's inferior and it puts pressure on it. It's it's not ideal.
Speaker Change: Um,
Speaker Change: We're not sitting still uh, as I talked about in the prepared remarks, we have Network Evolution. We have the convergence features that we've been launching and we're increasingly using mobile, and video as a competitive advantage, to drive internet sales and churn. We also have an expanding role footprint which isn't just about today. A lot of what we're building today will turn into Suburban footprint over a 5 10 year period. And so I think we're putting investing uh significant like to growth all of which In fairness is long term.
Speaker Change: So if you think about, you know, the short term and the top of the funnel for internet specifically, we don't have a product of pricing issue. We have the fastest speeds, we have the most reliable product, the best Wi-Fi selling uh, particularly in bundle $30, 500 megabit per second, internet $40 gig. Um, so it's not a product or pricing issue at the top of the funnel. It's the broader Market that I talked about some brand new competition, but In fairness, you know, we're working through our marketing message and how to do a better job of breaking through with our marketing message, uh, giving that there's an evolving mix in the marketplace in terms of channels and message. Um, and you know, we're changing some of the ways that we go to market market including some partners that we've used. And the second piece I think is an industry overall for the cable industry. And you know, we're at the heart of that is the value pitch that we're making to customers and going back to customers very clearly both in marketing and at the time of sale and at the time of retention and
Speaker Change: Saying, the only reason that you can have a cell phone internet product at that price, is because they're forcing you to pay 60 700 per mobile line. And when you think about what is on your bill with T-Mobile or Verizon 5G home internet, the reality is this dramatically more expensive than what you would pay to Spectrum for an Internet and mobile product. I just said that in 30 seconds but how do you convert that into an advertising message? And how do you invert that into a sales pitch? I've said it before.
Speaker Change: You know I said internally as well. I think that those are areas that, you know, we need to continue to do a better job. The good news is if you step back
Speaker Change: What I said, holds true, we have the best network, we have the best product we have the best pricing, we're doing things long term to even, you know, expand that competitive Advantage. But clearly, you know, there's a sense of urgency that exists inside the company and uh, you know we're we're driving and um you know as an investor I said it in the prepared remarks but I really, I would say it again is I ask everyone to sit back and say, okay, as a customer, what do you want and and where you want is all the things I've been describing. And so I think we're a great position. It's just uh, you know, we're we're doing things to move things both in the short term and the long term.
Leila: Leila will take our next question, please.
Leila: Our next question will come from the line of Sebastiano pesi with JP Morgan. Please go ahead.
Speaker Change: Hi. Thank you, uh, for taking the question, um, just quickly on IBA. So your reiterated, uh, expectations to grow ibida within 2025, quick. Just housekeeping questions. So the Jessica, the 45 billion 1-time on other Revenue, what's the, what's the flow through to the bottom line there? Just trying to see if you know Eva would have grown in the second quarter, excluding that. And then in the past you've talked about uh cost to serve benefits. Um you know having legs and that's 1 of the material drivers that plus mobile for the IBA dog growth through the year, any change there versus uh prior expectations? Should we still think about those as the drivers? And then if you could update us on cost expectations relative to last quarter, just given um, you know, cost of service and sales and marketing were a little bit uh higher than anticipated. Thank you.
Leila: Yeah. Um,
Leila: The bottom line uh, there was a little bit of bad debt expense against it, I think around 7 million dollars today, its width 38 million that follows all the way down.
Um, we did point out there, there was the sort of unusual storm activity as well. I think, when you factor those couple of things in, you end up, you end up pretty close to flat.
Leila: Um from a cautious survey, I guess if I just sort of go through the outlook for expense line items. Um, it really it really hasn't changed. Um so cost to serve um had a difficult comp inside of last year if you look across the quarters last year. Um this is really the only quarter that suffers from that issue that issue. So I think still flat to slightly down in the year-over-year. Um,
Marketing and resi sales. Uh, there, I also would say still a low to mid signal digit growth for the full year.
Leila: um,
we should have a much slower year-over-year growth rate in the back, half of the Year versus the front half. Um, a good portion of that is the comps are a bit easier in the back back half of the year.
Leila: Um, and we also expect overall sales and marketing expense to subside slightly as we move later in the year because of the mix of our activities. Um, and and we think that we'll do that without impacting sort of overall marketing levels or effectiveness.
Um, and then in other, um, there I would say, also still in the low low to mid single digits, um, though, as I've noted before other because of what's inside of it can be a bit more volatile, uh, than some of the other expense items.
Leila: You know, the 1 thing, I just stepped back on cost to serve when you think longer term and not just in the coming quarter, long term cost to serve as a is a huge opportunity and Remains the case. Um because the amount of transactions as I mentioned, is coming down double digits every year. And I think that can accelerate with the benefit of the AI tools that we're putting in front of our, our agents. Um, it's making the job easier, it's making the handle time go down into making a repeats, go down, which means you've got lower alternate overall transactions. And you need, you know, less labor to handle the transactions because of the, the lower handle time and the lower number of transactions and all of that set to not only continue, but to compound. So I feel really good about the long-term trajectory of your cost to serve both as a standalone Charter, as well as assuming regulatory approval, the combination with Cox. So, it remains 1 of the, the biggest opportunities in in front of the company. And it's why we spend so much time talking about the Investments that we've made, not just
Leila: And Ai and machine learning but also the quality of craftsmanship that exists with our employees because that's the key to to getting to that to that Holy Grail.
Leila: And the eventual impact obviously, in the end isn't isn't really just about cost. It's really about having better retention and having a better net promoter score and customer satisfaction in the marketplace, which drives sales as well. So it all comes together as a purchase Circle, that you can have better revenue and uh, and lower cost as a result of making the right Investments today. And that's, that's what we've been doing for years.
Thank you, both.
Speaker Change: Thanks Sebastiano, Leila, we'll take our next question, please.
Our next question will come from Brian kraff?
Speaker Change: With Deutsche Bank, please go ahead.
Speaker Change: For the lower end um and toward the full video packages as a result of the the new product construct that you've launched. Thanks.
Speaker Change: um, I think the answer to your first question is yes, we're seeing higher sales, we're seeing lower churn
Speaker Change: um,
And uh better upgrades um so you know video sales at new internet acquisition as well as uh video upgrades to existing internet.
Speaker Change: And so it's all of all of the above. Um, and it's, you know, it's going well.
Speaker Change: And I expect that to to continue to improve here. Um,
Speaker Change: in terms of shift,
Speaker Change: we're at the point where not only are we going to start marketing? The benefits of seeing those entertainment more, broadly together with the pending launch of our
Our video store, but as part of that has the ability to increase in the upgrade customers who are inside of the skinnier bundles into a more wholesome package. You can think about different ways to do that, of course, traditional email or text or, you know, direct even direct mail. But in addition to that, if you take a look on our guide today, what you'll notice in the Spectrum TV app guide, and or guides generally is an ability to upgrade into different packages by using title and guide and using the programmer apps as an insertion of the title.
Speaker Change: In the guide to drive that, now, that can be for existing, uh, full expanded basic customers, who haven't activated yet and, uh, have the ability to activate and we'll use that for Activation activity, but also for customers who are in a skinny package and have the ability to upgrade, you know, a good example of that would be uh, the inclusion of peacock now that they're going to have 50 exclusive games and having the peacock title and guide inside of their, somebody goes and takes a look at the traditional channels that have historically covered the MBA and have a peacock title and guide that allows them to either activate their peacock subscription, which included for expanded video or to upgrade into the full expanded package from a skinny package. So if that's just 1, you know, tiny example, you can think about how we'd use Macs for sure. Already Disney plus already in in those genre areas as well as Hulu. Um, I'm giving 1 example by using title and guide when you think about the video store and what it
Speaker Change: Can do and what we can do, in my spectrum app and dotnet.com platforms that we have. Um, I think we can start to get the customer to where they're going to find the most value according to what they can afford and again, none of that's because we're
Speaker Change: Outright just trying to save video. It's really because we're trying to drive better broadband and mobile performance. And we think it's a competitive advantage that we have if we do it right.
Speaker Change: Thank you. Thanks. Brian, Leila, we'll take our next question, please.
Speaker Change: Our next question will come from Stephen cahal with Wells Fargo.
Speaker Change: Thank you. Um, so Chris, you all have a lot of experience buying an integrating um including on the customer facing side with your historical Acquisitions. Uh, I I think, with Cox the internet RP, who is a bug Charters? So, can you just think about how you're thinking about managing that transition when it comes? I imagine, you're going to see a lot of customer touch points. It's probably an opportunity to sell in more services, so maybe you can just help us think through that. Um, and then uh, as it relates to, to the capex Outlook and and capital intensity um kind of related questions, so it sounds like that's going to be going down even proforma for the acquisition. I imagine that's a lot of Technology savings. So maybe you can just uh give a bit more color on where you see a lot of those savings for that intensity coming from. Thank you.
Speaker Change: Sure.
Speaker Change: Um,
Speaker Change: You know, from an integration perspective on customer, pricing and packaging, you're right. We have a, a lot of experience doing that. When you think about resin,
Time Warner Cable.
Speaker Change: Right house and even the original uh, Charter in 2013. All of those Integrations, had higher starting rpu for broadband and we needed to find a way to migrate those customers into a package that was more competitive without uh,
and for existing customers um is the usually the second stage where you start to offer them proactively only to the extent that they want it, the ability to have better pricing on a single product when they add additional products in
The way that we've done that historically, really withdrew just video and and Wireline phone today. I think we have an even more powerful tool to do that when you think about mobile. And if you reflect on everything that we've been talking about on this, call around the video product and what we can do with that and the mobile product and have a saving a customer, hundreds, or even thousands of dollars a year when they add, you know, just a couple mobile lines, our ability to migrate customers at their discretion and to have new customer acquisition with lower product pricing, but higher overall, customer relationship are through this, fairly proven the Cox, in particular if you think about it, their video penetration is about half of what ours is today and their mobile penetration today because they started later is a is is coming from almost Nowhere by definition and so we have all the tools available I think to do that. And you combine that with you know, these networks that have been very well invested. It's had
Speaker Change: You know, very good service. Um, so it's actually a better position. We're coming from in Cox relative to what we had in Time Warner Cable. For example, probably more to to Bright House, frankly where we have a lot of success, uh, growing that very quickly as a result of putting
A better product pricing and packaging on the back of very well-invested network, with great employees. And from a service perspective,
Speaker Change: the capex trajectory, um,
Speaker Change: You know, the the type of network activity that we do given our scale, I believe can occur at a lower cost per passing, um, and probably more important to that is the technology platforms that we're deploying. You deploy it once instead of twice, when you combine together, all of which means that you, you know, you have the ability to reduce the amount of capital expenditure on some of the fixed platforms and reinvest the transaction synergies, from a capex of capex perspective, back into additional Network capabilities, through the eventual, High split upgrade that would take place on Cox later later down the road.
Speaker Change: They're all you know, fairly traditional. And clearly there's concernment synergies there, too given our scale and procurement synergies that don't just apply to the Cox assets. But as getting marginally bigger for Charter, you know, not not huge, but marginally bigger for Charter, not factored, probably into that as could. We could we do even better, you know, as the combined company.
Speaker Change: Company, you know, we'll see. But that's not, that's not an explicit goal.
Yeah, and I and I think the thing to sort of layer on top of that is you do have the natural benefit. I mean, Charter Standalone, Capital intensity. Uh we had an expectation that it was going to decline dramatically over the next 4 years already. And and that Standalone expectation isn't diminished in any way by taking on the Cox assets. When you, when you take on the tax assets, you have more Revenue. But actually we have, we have space to do the what we need to from a transition Capital perspective inside of still having a a really um nice decline in in capital intensity over time. It's probably good enough opportunity to highlight. I know there's been some questions for speculation the the charter capex Outlook other than some timing between years, that could push from 1 year to the other.
Speaker Change: Investors can depend on what we've provided for the charter capex. You know, when we we don't typically do that. The fact that we did that we understood the importance and you can take that 1 literally to the bank. It should also feel very comfortable with, you know, the
Speaker Change: Outlook. That was in the proxy statement for Combined, capex of of the, uh, of the combined company. I feel pretty comfortable with the envelope that should exist inside there as well. And so, you know, the Greek cash flow generation. That Jessica spoke about at this point. Uh, we feel like it's pretty much math and um, and you know, atypical for us we wanted to make sure that it was provided out there and that people could depend on it.
Stephen Isla: Thanks Stephen Isla, we'll take our last question, please.
Speaker Change: Your last question will come from Jim Schneider with Goldman Sachs.
Jim Schneider: Good morning. Thanks for taking my question. I was wondering, uh, in light of some of the increased fiber Investments, you've seen from, uh, some of your competitors. In, in the market, whether you're thinking any differently about your multi-year, capex outlook e, either in terms of the overall envelope or in terms of the composition and specifically maybe talk to, uh, the, uh, the prospects for increase rural build Investments, uh, and maybe using that. As a, as a, a source for the uh, the cash tax savings. Thank you.
Jim Schneider: No.
Jim Schneider: And through our Network upgrade, we have the ability to do fiber on demand, to the extent that a customer needed 25 gigs symmetrical speeds, which, you know, is pretty far out there at this point. So we have that capability in the fiber on demand. So there's no, there's no need to update in any way or change the capex Outlook as I just mentioned for increased rural investment. You know, there will be some bead that comes in as an overlay. Um, and uh, you know, we're looking through that currently, we expect to participate. But because of how much role we've already built today, the opportunities at the edge of our Network. It's a lot lower than it. Once was primarily because of what we ourselves have done but as well as others through Ardo and arpa. So the size of the opportunity of, of tangential Network, build, you know, it's lower than it was just a couple of years ago.
Speaker Change: Thanks very much everybody. That concludes our call, thank you very much.
Speaker Change: Thank you for joining this. Concludes today's call. You may now disconnect