Q2 2026 Charter Communications Inc Earnings Call

Speaker #1: Hello and welcome to Charter Communications Q2 2026 investor conference call. We ask that you please hold all questions until the completion of the formal remarks.

Speaker #1: 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.

Speaker #1: I will now turn the call over to Stefan Anninger.

Speaker #2: Thanks, operator, and welcome everyone. 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 RICS factors and other cautionary statements contained in our SEC filings, and we encourage you to read them carefully.

Speaker #2: Various remarks that we make on this call concerning expectations, predictions, plans, and prospects constitute forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results.

Speaker #2: 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.

Speaker #2: 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.

Speaker #3: Thanks, Stefan. During the second quarter, we added over $400,000 in spectrum mobile lines, making that $1.7 million lines over the last 12 months for growth of 16%.

Speaker #3: We now have over 12.5 million mobile lines, and remain the fastest-growing mobile provider in our footprint. Our video customer losses continue to improve, with our 21,000 video customer loss significantly better than last year.

Speaker #3: We now have the best video products and value in the marketplace. In internet, we have a fully deployed and fully converged gigabit-plus network across our entire footprint, but competition for new customers from expanded competitive footprint remains high.

Speaker #3: Our second-quarter internet customer loss of $172,000 was higher than a year ago, similar to what we saw in the first quarter. Revenue was down 1.7% year over year, driven by lower residential revenue.

Speaker #3: Second quarter EBITDA excluding Cox transition expenses declined by 3.2%. Softer gross additions remains the primary driver of our internet customer growth weakness. While churn remained largely unchanged, and while internet customer growth is taking longer to reverse, the growth of new competition will subside.

Speaker #3: We expect to stabilize and return to broadband growth over time, with our better converged connectivity product and pricing higher demand for speed, data, and reliability, and as our NPS scores improve, benefiting both churn and sales.

Speaker #3: The timing of all that is hard to predict, but our cash flow growth is not, and we have full confidence in the significant free cash flow ramp we're about to see.

Speaker #3: Our outlook for a significant reduction in capital expenditures has not changed. We also expect second-half EBITDA for standalone charter to benefit from a previously discussed cost pass-through on internet this summer, and political advertising.

Speaker #3: AI service and cost benefits are also beginning to ramp, and we're implementing a series of additional cost management measures. Jessica will circle back on our free cash flow profile and outlook in a moment.

Speaker #3: So let me highlight what we're doing right now, day-to-day, to win in the marketplace. A recent change to our marketing and sales channel focus has been the redoubling of our efforts to improve our internet funnel and yield by focusing first on the internet sale.

Speaker #3: With a growing focus on mobile and video upgrades thereafter, and that bundling, of course, drives significant value and churn benefits. Internet customers that also purchase our mobile product turn nearly 40% less than internet customers who don't have mobile.

Speaker #3: And the more lines per account, the greater the churn reduction. Today, our mobile customer penetration of internet is about 20%, with an average of just below 2 lines per mobile customer.

Speaker #3: So significant upside remains for mobile penetration and lines in broadband churn reduction. Internet customers that purchase our video product, similarly churn over 40% less, and activation of our program or app inclusion offer further reduces churn across all broadband relationship tenures.

Speaker #3: Currently, 55% of our eligible video customers have activated at least one of our inclusion apps with over 4 apps activated on average. We're also focused on improving customer satisfaction and resulting NPS.

Speaker #3: Good prices and saving customers' money is a key driver of NPS, and that starts with internet pricing, with available price locks when including our mobile and video services.

Speaker #3: Including our 1,000-dollar savings guarantee for new and existing customers with mobile, service and reliability are the other top drivers of NPS. We believe our service capabilities are unique, anchored by a 100% US-based sales and service team, and that provides a significant upside.

Speaker #3: Our digital service capabilities are set to meet customers' where and how they want to be serviced. And when automated, we're ensuring that channel delivers the same quality as the top 10% of our agents.

Speaker #3: When on-site service is needed, we guarantee same-day service or we provide a credit. The reality is we're now often arriving within 2 hours of calls.

Speaker #3: And we see tangible examples of where we increasingly delight customers with our service. At the same time, we have real opportunities for improvement in reliability, how we communicate with customers, and what I call paper cuts in the service experience.

Speaker #3: At charter, we've already made the investment in the service infrastructure, our employees, and capabilities, and we'll turn that into that investment into a better service reputation.

Speaker #3: Changing perception takes time, but the organization is increasingly focused on customer satisfaction and we're incentivized around NPS. And we're doing the right things from a resource allocation, customer mindset, and organizational perspective to make that happen.

Speaker #3: That includes adding complementary talent from Cox, and on September 1st, Nick Jeffrey will join as Chief Operating Officer alongside the talented team we have today.

Speaker #3: Turning to the Cox transaction, we're now hoping to close mid to late August. Our operating strategy of product investment and innovation and saving customers' money and onshoring our service capabilities has allowed us to be successful in M&A.

Speaker #3: Recently, investors have been asking us about what might come next, but the reality is we have a large transaction right in front of us now, which creates significant value.

Speaker #3: We have a fully developed integration plan for Cox, and we have confidence in our ability to execute well and at a faster pace than previous integrations.

Speaker #3: We expect to grow the asset. Shortly after close, we'll launch our spectrum pricing and packaging within the Cox footprint. We expect to drive better internet customer performance and unit growth acceleration with very under-penetrated mobile and video.

Speaker #3: A lower product pricing, including our $1,000 savings guarantee for new and existing customers when taking mobile, will help drive higher household product penetration maintaining healthy Cox household RPU.

Speaker #3: That's despite their higher individual product prices today. We expect our pricing and packaging to drive lower churn and higher customer satisfaction and better NPS.

Speaker #3: The bundling and migration approach will deploy a Cox is the same we successfully used with Resonant in 2013, TWC in Brighthouse in 2016, and with ourselves really over the past 2 years.

Speaker #3: We also expect significant B2B upside. By leveraging what each company does well with a long runway for growth and acceleration. The addition of Cox's hospitality capabilities, Segra, RapidScale, and a longstanding investment in its B2B infrastructure will benefit the broader spectrum.

Speaker #3: We still expect run rate, transaction expense synergies of at least $800 million per year, and while we'll update that estimate after close, I think it'll grow to $1 billion.

Speaker #3: As a reminder, transaction synergies do not include any benefit from operating or capital expenditure synergies. Separate from those synergies in procurement and overhead, there will also be a significant number of new frontline hires.

Speaker #3: We're now recruiting well over 1,000 new residential and business sales jobs in Cox territories, which will drive higher sales. We couldn't hire these jobs until we had better visibility on a likely closing date with California.

Speaker #3: Across sales, retention, and customer service, over the next year, we'll onshore and insource all call center activity. Moving the platform to 24/7 coverage for service in Cox markets.

Speaker #3: This will bring work back to the US and insource work that is currently handled by a significant number of offshore contractors. We expect to absorb most, if not all, of this offshore volume from Cox through existing spectrum operating efficiencies and digital capabilities.

Speaker #3: Following the closing of the Cox transaction, I want to frame what we'll represent as an industry partner for innovation. We'll have roughly 1.3 million miles of network with over 70 million passings.

Speaker #3: With a fully converged, multi-gig internet and mobile offering available to all of those passings. We'll have approximately 37 million customers, meaning a selling opportunity of nearly $35 million passings without a relationship today.

Speaker #3: Together, we'll generate approximately $67 billion in revenue, and approximately $28 billion in EBITDA. Spectrum will operate under two MVNOs, with the best mobile networks in the country and the only fully converged capability in our footprint.

Speaker #3: Today, there are approximately 164 million mobile lines in our footprint, and only 13 million of those will be spectrum mobile, 8% penetration with a faster lower-cost mobile product.

Speaker #3: So while we're growing mobile quickly, there's still a very large growth opportunity in front of us. Turning to capital structure, Jessica and I listened to feedback, and we heard both equity and debt investor preference for lower leverage despite our significant free cash flow and continued capital return.

Speaker #3: So today, we're moving our post-transaction leverage target to a flat 3 and a half times, which we expect to achieve within 3 years following the close of the Cox and Liberty broadband transactions.

Speaker #3: And we're taking a multifaceted approach to delevering, which Jessica will discuss in a few minutes. But the plan is to both delever earlier and further but not forgo the buyback opportunity at what is a historically low valuation.

Speaker #3: All of which provides a robust backdrop to a broad segment of shareholders and bondholders who benefit from our free cash flow growth and capital allocation.

Speaker #3: Stepping back from maintaining an optimal capital structure, the biggest value driver opportunity for us is going forward is returning to growth. And our recipe for winning in the marketplace is simple: deliver the best connectivity, at the best overall value, with the best service.

Speaker #3: Our network is a unique and strategic asset which can't be replicated. It offers converged service and 100% of our footprint with gigabit speeds and low latency everywhere.

Speaker #3: Our speed and reliability are set to improve dramatically over the next few years as we complete our network evolution. When you look at both our wireline and converged network and the traffic we already deliver today, it's clear we're more than just America's connectivity company.

Speaker #3: We provide the mission-critical AI infrastructure that will ultimately demand our superior speed, reliability, and low latency capabilities. We expect to be a significant beneficiary of AI through network demand, data center connectivity, our own service capabilities and cost structure, and the potential utilization of our edge data centers, which have fiber, primary and backup power, and cooling in space.

Speaker #3: As we complete our network evolution, we'll have over 250 megawatts of available capacity without additional investment. And capacity for much more at a very low cost with future potential partners.

Speaker #3: And while our focus is squarely on broadband, we also have separate resources focused on developing new revenue streams and ensuring we can develop network capabilities and products that others cannot replicate.

Speaker #3: With that, I'll hand it over to Jessica.

Speaker #1: Thanks, Chris. Please note that any forward-looking financial or customer information that we provide in today's discussion or presentation does not include Cox or any transition costs related to Cox integration planning unless otherwise noted.

Speaker #1: Now, let's please turn to our customer results on slide 7. Including residential and small business, we lost $172,000 internet customers in the second quarter, driven by lower connects year over year, while churn was essentially flat.

Speaker #1: As Chris has said before, we've been facing top-of-the-funnel softness. We continue to see expanded fixed wireless competition versus a year ago, including lower sales from low-income consumers.

Speaker #1: Ongoing mobile substitution and fiber overlap growth at a rate similar to prior quarters, with aggressive promotions by certain competitors. Though I would point out that we continue to lead the market in converged connectivity pricing at Connect and have higher market share than our fiber competitors, even in our mature fiber overlap.

Speaker #1: As it relates to satellite, so far we haven't observed meaningful share loss to Starlink, including in our subsidized rural footprint. But we continue to monitor it closely and take it seriously.

Speaker #1: In mobile, we added 406,000 lines with higher gross additions year over year, offset by higher disconnects. Video customers declined by 21,000 versus a loss of 80,000 in Q2 25.

Speaker #1: With the improvement primarily driven by lower video downgrades, lower customer churn, and higher upgrades year over year, resulting from our seamless entertainment product improvements including our programmer app inclusion packaging, and the new pricing and packaging we launched in late 2024.

Speaker #1: New Connects to our fully featured video package with apps were also better year over year, with some benefit from the World Cup. In rural, we continue to see strong customer relationship growth, generating 47,000 net customer additions in our subsidized rural footprint in the quarter.

Speaker #1: Subsidized rural passings grew by 127,000 in the second quarter, and by 487,000 over the last 12 months, which is in addition to our continued non-rural construction and fill-in activity.

Speaker #1: Moving to second-quarter revenue results on slide 8. Over the last year, residential customers declined by 1.8%. Residential revenue per customer relationship declined by 1.8% year over year, but was essentially flat when excluding the programmer app allocation headwind of 251 million dollars this quarter, versus 67 million dollars in the prior period prior year period.

Speaker #1: There were other puts and takes, including pricing and packaging mixed within our customer base and a decline in video customers during the last year.

Speaker #1: Offset by the growth of Spectrum Mobile lines. As slide 8 shows, in total, residential revenue declined by 3.5% and was down by 1.8% when excluding costs allocated to streaming apps and netted within video revenue in both periods.

Speaker #1: From a pure internet revenue perspective, we are balancing rate actions in an inflationary environment and retention activities, where our more aggressive retention offers in the first quarter are largely normalized over the course of Q2.

Speaker #1: As Chris mentioned, we're making some pricing adjustments, which also include meaningful speed upgrades for the vast majority of affected customers. Those adjustments didn't impact Q2, but will drive better residential revenue in the back half of the year.

Speaker #1: Turning to commercial, total commercial revenue grew by 1.5% year over year, with mid-market and large business revenue growth of 2.8%. And when excluding all wholesale revenue, mid-market and large business revenue grew by 3.5%.

Speaker #1: Small business revenue grew by 0.7%, reflecting year-over-year growth in revenue for small business customer of 1.5%, partly offset by year-over-year decline in small business customers of 0.8%.

Speaker #1: Second-quarter advertising revenue grew by 12.3%, given higher political revenue year over year. Excluding political, advertising revenue declined 4.6% year over year. Other revenue grew by 7.1%, driven by higher mobile device sales, partly offset by a 45 million dollar one-time benefit in the prior year period.

Speaker #1: In total, consolidated second-quarter revenue was down by 1.7% year over year, but decreased 0.8% when excluding advertising revenue and programmer app allocation. Moving to operating expenses and adjusted EBITDA on slide 9.

Speaker #1: In the second quarter, total operating expenses were virtually flat year over year. Programming costs declined by 9.7% due to 251 million dollars of costs allocated to programmer streaming apps and netted within video revenue, versus 67 million dollars in the prior period.

Speaker #1: A higher mix of lighter video packages, and a 0.8% decline in video customers year over year, partly offset by higher programming rates. Other costs of revenue increased by 11.3%, primarily driven by higher mobile device sales, mobile service direct costs, and higher advertising sales costs, given higher political revenue, and a higher mix of third-party impressions.

Speaker #1: Cost to service customers, which combines field and technology operations and customer operations, grew 1.4% year over year, primarily due to higher fuel and medical costs.

Speaker #1: Marketing and residential sales expense declined by 3.1% year over year, due to lower marketing expenses from procurement initiatives, but our volume of impressions and our marketing activity generally was much higher year over year.

Speaker #1: Transition expenses related to the pending talks transaction totaled 65 million dollars in the quarter, driven by systems disentanglement from Cox Enterprises and systems integration with Cox Communications.

Speaker #1: Transition expenses of becoming in a bit higher than expected, some of that is closing delay, and some is from a change in the expected mix of operating costs versus capital expenditures.

Speaker #1: But we still expect the sum of our Cox transition costs and capital expenditures to be at or better than what we anticipated. Finally, other expense declined by 2.5%, primarily driven by lower professional service expense.

Speaker #1: Adjusted EBITDA declined by 4.3% year over year in the quarter, and declined by 3.2% when excluding transition expenses. Currently, for the full year 2026, we expect standalone charter EBITDA excluding the impact of transition costs to decline around 1% year over year, the back half of this year will benefit from political advertising, cost pass-throughs, and efficiency initiatives, and we're working on a number of additional initiatives to improve the full year trajectory.

Speaker #1: Turning to net income, we generated 1.3 billion dollars of net income attributable to charter shareholders in the second quarter, essentially flat with the prior year period, with lower year-over-year adjusted EBITDA offset by a gain on extinguishment of debt related to open market debt repurchases in QQ 26, which I will discuss in a moment.

Speaker #1: Turning to slide 10, second-quarter capital expenditures totaled 2.9 billion dollars, virtually flat with last year's second quarter, with lower line extension spending offset by higher network evolution spend, which lands in upgrade rebuild spends.

Speaker #1: For standalone charter, we continue to expect total 2026 capital expenditures to reach approximately 11.4 billion dollars. And as we've said before, looking beyond 2026, we expect total capital spending in dollar terms to be on a meaningful downward trajectory.

Speaker #1: And after our evolution and expansion initiatives conclude, our run rate capital expenditures for standalone charter would be below 8 billion dollars per year. That reduction in capital expenditures on its own from approximately 12.1 billion dollars over the last 12 months to less than 8 billion dollars in 2028 is equivalent to over $30 of free cash flow per share based on our June 30th share count.

Speaker #1: If we take consensus 2026 free cash flow for standalone charter, and substitute our expected 2028 capex for 2026 capex, our current stock price would imply a free cash flow multiple of a bit over 2 times, and a free cash flow yield of nearly 50%.

Speaker #1: Turning to second-quarter free cash flow on slide 12, second-quarter free cash totaled 1 billion dollars, about 75 million dollars lower than last year, given lower EBITDA and a less favorable change in working capital, partly offset by lower cash paid for taxes.

Speaker #1: Turning to cash taxes, second-quarter cash taxes totaled 101 million dollars, we continue to expect that our calendar year 2026 cash tax payments will total between 500 and 800 million dollars.

Speaker #1: We finished the second quarter with 94 billion dollars in debt principal, the weighted average life of our debt is 11.7 years, our weighted average cost of debt remains at an attractive 5.2%, and our current run rate annualized cash interest totals 4.9 billion dollars.

Speaker #1: During the quarter, we repurchased 4 million charter shares, totaling 838 million dollars, at an average price of 210 dollars per share. As of the end of the second quarter, our ratio of net debt to last 12-month adjusted EBITDA was 4.18 times, and stood at 4.21 times pro forma for the pending Liberty Broadband transaction.

Speaker #1: Cable industry growth has been pressured by the pace of new competition growth, combined with a challenging housing growth and move environment. Those factors have reduced our customer and EBITDA growth, and our trading multiple.

Speaker #1: We've always regularly evaluated our balance sheet to maintain our financial strength and strategic flexibility, and to be responsive to our debt and equity holders.

Speaker #1: As a result, today we are lowering our post-transaction leverage target to a flat 3.5 times, which we expect to achieve with consistent progress along the way, within 3 years of the close of the Cox and Liberty Broadband transactions.

Speaker #1: We've already begun executing a multi-pronged strategy to achieve that goal. During the second quarter, we repurchased over 1.2 billion dollars of our own debt in the open market for 1 billion dollars in cash, reducing our total leverage by capturing approximately 250 million dollars of discount.

Speaker #1: We also plan to reduce our total debt through liability management. Last night, we announced the launch of a capped exchange offer, targeting 20 billion dollars of par value of our investment-grade rated debt, that trades at a discount to par.

Speaker #1: Participating bondholders will receive new par bonds and applicable 12 or 15-year maturities, and in some cases cash, in equivalent value to the current discounted trading value of the exchanged bonds plus a premium.

Speaker #1: If successful, this exchange will reduce our total debt principal, and accelerate deleveraging. As of the end of the third quarter, including the impact of the Cox and Liberty Broadband transactions, and including the impact of our second-quarter debt repurchases, and assuming the success of the exchange offer announced yesterday evening, we expect our ratio of net debt to last 12-month adjusted EBITDA to be just above 3.9 times.

Speaker #1: Paying down debt, including the opportunity to repay secured maturities as they've come due, will be part of our effort to reach our long-term leverage target.

Speaker #1: And we expect there to be continuing opportunities for liability management approaches to support deleveraging. Our leverage target is not aspirational. We have high confidence in the strength of our business and its ability to generate substantial cash flow to achieve our targets.

Speaker #1: Given the pending close at Cox closing and its financing, and our focus on liability management, we have paused our share repurchases through the end of the third quarter.

Speaker #1: We expect share repurchases to restart in the fourth quarter, and we expect to be in a position to repurchase shares throughout the deleveraging process to 3.5 times.

Speaker #1: We expect our deleveraging efforts to create value for all providers of capital, including shareholders and debt holders. And we remain committed to maintaining an investment-grade rating on our secured debt.

Speaker #1: Before turning the call over to Q&A, I want to make a few comments regarding our pending Cox transaction and our reporting plans, some of which I mentioned last quarter.

Speaker #1: Our first post-close quarterly results, which we expect will be our third-quarter results, will reflect a full quarter for legacy charter, plus a stub period for legacy Cox.

Speaker #1: So year over year, actual comparisons won't be helpful. But we intend to present charter's quarterly trending schedule with pro forma data along the lines of what you received today.

Speaker #1: Going forward, we will report similar customer PSU and revenue data for both legacy entities, for several quarters following close, both separately and on a consolidated basis.

Speaker #1: We will not show expenses or capital expenditures by legacy entity. That's not possible given the shared nature of key large items, like programming overhead and significant centralized capital spend.

Speaker #1: We will also continue to report transition expense and capital related to the integration, and will provide updates on certain items, including estimates for the synergies we've realized, so that you can better isolate the organic growth of the business.

Speaker #1: Our balance sheet and P&L will also be impacted by purchase accounting. Part of that will be fair market value step-up of Cox assets, reflecting the fair market value of the consideration we pay for the Cox assets, as of the closing date.

Speaker #1: Taken at today's charter share price, the current implied transaction enterprise value for the Cox business is 27 billion dollars. Which is roughly 5 times EBITDA on transaction EBITDA, and a 4.4 times multiple when including 800 million dollars of transaction synergies, which we now view as conservative.

Speaker #1: As of the end of the second quarter, and pro forma for the Cox and Liberty Broadband transactions, our net debt totaled approximately 110 billion dollars, and consisted of legacy charter net debt of approximately 93 billion dollars, the net debt we are assuming from Liberty Broadband of about 1 billion dollars.

Speaker #1: The approximately 4 billion dollars of debt we will issue to fund our cash payments to Cox enterprises, and legacy Cox debt principal of about 12 billion dollars.

Speaker #1: Note that, for balance sheet purposes, the Cox debt we will assume will be fair valued in an amount less than the face value based on current market prices.

Speaker #1: A few other items to keep in mind. After close and on a quarterly basis, we will expense a charge of approximately 103 million dollars of preferred coupons for Cox's ownership of preferred partnership units.

Speaker #1: That charge will be reported in our P&L as part of net income attributable to non-controlling interest. Similar to how we reported the advanced new house preferred interest following our transactions in 2016.

Speaker #1: We will also have some below-the-EBITDA line charges, including additional transaction advisory expenses, which are contingent and payable at closing, we also expect restructuring and separation expenses through the integration process that will post below EBITDA as well.

Speaker #1: Interest expense will increase for the combined company, given the debt assumed from Cox, the new charter debt issued for the cash portion of the purchase price, and the accretion of the discount on assumed Cox debt.

Speaker #1: As I mentioned last quarter, our outstanding share count will increase, as we issue the equivalent of just over 46 million charter shares to Cox enterprises, comprised of common and preferred partnership units.

Speaker #1: Partly offset by a net charter share reduction of about 4.7 million shares associated with the Liberty Broadband transaction. That 4.7 million figure is lower now than when we announced the Liberty Broadband transactions, primarily due to our ongoing share repurchases from Liberty Broadband.

Speaker #1: Based on our June 30 standalone share count, at close and on an as-converted as-exchange basis, we expect our total shares to be about 177 million.

Speaker #1: And with that, I'll turn it over to the operator for Q&A.

Speaker #2: Thank you. At this time, she 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 #2: When it is your turn, you will receive a message on your screen from the host allowing you to talk, and then you will hear your name called.

Speaker #2: Please accept, unmute your audio, and ask your question. As a reminder, we are allowing analysts to ask one question today. We will wait one moment to allow the queue to form.

Speaker #2: Our first question will come from Craig Moffett with Moffett Nathanson. You may now unmute and ask your question.

Speaker #3: Hi. Thank you. I'm going to see if I can squeeze into if I can. First, Jessica, a while back you said I think it was two quarters ago you guided to positive Broadband ARPU for the year.

Speaker #3: I wonder if you could just update us on your outlook for broadband ARPU for the year. And then I wanted to ask a question about wireless.

Speaker #3: Comcast yesterday said that 90% of all their traffic is now offloaded onto Wi-Fi, or perhaps some of that is over CBRS. Can you give a comparable number for Charter, and how you see that progressing?

Speaker #1: Sure. So Craig, I'll start with ARPU. Broadband ARPU will be sequentially higher in Q3. The use of more aggressive retention offers, as I said, lessened through Q2 and largely normalized in June.

Speaker #1: We're still feeling the impact from some of those more aggressive offers in Q2, and we will over the course of the rest of the year.

Speaker #1: But the impact isn't building in the same way at this point, and we'll have a tailwind from the rate for the cost pass-through that's hitting in late July and early August.

Speaker #1: I understand the sensitivity and the rationale for the focus around broadband ARPU, but I remind people we don’t manage the business for product-level ARPUs.

Speaker #1: Our focus is on penetration as well as connectivity ARPU, and overall customer relationship ARPU, excluding the program or app allocation, both of which I think will grow in FY26.

Speaker #4: Maybe I'll just tag on to that a little bit. The pressure that we had inside of Q1, which carried through Q2, really was a bet at the time that you could get a substantial lift through putting in that retention effort, and it had some impact, but not enough to really merit what we did.

Speaker #4: So we pulled back. I own that. It took a bit to pull back, and when we did, it had a cascading impact to carry forward on the ARPU through the retention.

Speaker #4: So that was the driver inside of Q2, and as Jessica mentioned, you're going to have lift coming from that going away, and in addition to that, to great increased pass-through.

Speaker #4: The other thing we need to take a look at is a full-year perspective, leaving aside Cox integration, and leaving aside what Jessica said about managing for total customer relationship ARPU, which is a full suite of products that we include.

So um that was the driver inside of Q2 and, as Jessica mentioned, you're going to have lift coming from, you know, that going away. And in addition to that to to read increased pass through the other thing, we need to take a look at a full year of perspective. Leaving aside, you know, Cox integration leaving aside with Jessica said about, you know, management for total customer relationship marker, which is how Suite of products that we include, you know, we have Nick Jeffery coming on board on September 1st and the last thing I want to do, you know, when he's coming on board with really a a stated Focus, you know, from our perspective of enhancing our go to market capabilities and our net promoter score and really hopefully being a big Catalyst for those 2 categories and returning us to growth is some talent to, uh, to hamstring, you know, the ability of the company to, you know, go do some things to accelerate our growth. And so, I don't think it's wise for us to focus on product arcade. Generally, we've always said that, but particularly in this environment, you know, we're, we're focused on creating shareholder value, and I don't think it makes sense to kind of hamstrung us that way.

um,

The second question you asked, Craig, was around wireless. Um, I hadn't seen the Comcast reported up at 90%. We've been at 88%, and we're kind of moving—we were kind of moving up to 89% through exactly the same reasons, which was, um, you know, the continued offload that we have through Wi-Fi, through seamless authentication, not only in our footprint but in Comcast, and also in the Coxville front as well, across the three major cable operators. Um, and in addition to that, the continued rollout of CBRS. What we did inside the quarter is, we, you know, effectively...

uh,

Make sure that we had better service above certain caps that were in place. And so as a result, what you ended up with a bit more 5G usage than we've had before? Because of the product changes, to be made to improve the customer experience, the customer service. So that actually pushes back down to 87%, which is where we've been previously, not because there was less offload, but because there was actually more 5G traffic usage, which was a positive thing for the consumer perspective. So that was kind of a, you know, what should be a 1-time push down. So we, you know, modified the product capability and a good way and then we'll expect to be, you know, moving back up as the continued Wi-Fi, offload and continued to see the rest deployment takes place, uh, over time. So slightly different, you know for that reason, but you know, on the same trajectory as being my, my estimate,

Thanks, Greg. Operator, we'll take our next question, please.

Your next question will come from the cast. Carloha, with New Street Research?

Oh, thanks so much for taking the question 2. If I could, um, you've changed your goal for, Evita, for the year. Um, I just wanted to to, um, ask what changed, um, in the first 6 months for you to lower your uh, Target for a Ka. And then second there were some press supports mentioning that Starling may look to partner with Charter. Any comment on that. Thank you.

Sure. So on the even side, you know I I think some of what changed and and Chris described a bit of it was a expectations around um,

Broadband subscribers. And, and, and our poo over the course of the Year based on, um, some of those things that we had done around offers that we that we thought might work, but they didn't work out as well. There's also a little bit of pressure in some controllable expenses, you know, things like fuel, um, and medical where um, where we haven't been able to sort of make adjustments against those in the same way as you can. Some others. Um, we do have uh, the ability and and you know, we've done um

We've done quite a bit to think about uh, expenses for the second half of the year and and how we can uh, be in a better place. Uh, and so, um, as Chris said, we've, we've made some changes around uh, moving price adjustments through. We are um,

Doing some work around uh, driving down and expenses across the business and in some cases from making, uh, some changes to benefits plans to bring them more in line with Market. Uh, and to doing some simplification on the overhead side that I think makes a lot of sense. Um, and that's that's rolling through now. So we continue to have levers and we'll continue to push to, um, be in a better place than, uh, than that trajectory as as we get through the year.

I want to be clear: what Jessica said is, you know, we're providing this as an outlook, you know, as an update to what was previously provided, but we're actually targeting to do better, for all the reasons that Jessica gave.

Um, the question on Starlink, um, look.

It's natural for us. We we talked to many industry players, anytime that we think that we can you know enhance our own product capabilities, or do things that are Innovative in the marketplace or we can lower costs for customers. You know, those, the type of conversations that we have with, you know many industry players, we did that all the time. Um, I don't think it makes any sense to get into the detail of the, you know, any of those conversations other than to say we should expect us to continue to do that, you know, across the board and and that when there's something to announce or talk about, you know, we'll do that in a certain way. It's not the case today.

Thank you.

Good operator, we'll take our next question, please.

Our next question will come from Stephen Kale with Wells Fargo.

Thank you. Um, first I wanted to maybe piggyback on Craig's question about your wireless offload, um, as well as the last question on Starlink. It's possible we could see, uh, SpaceX or Starlink try to build the fourth wireless network. You know, you've taken an asset-light approach to wireless, but you're able to do all this offload. I was wondering if you think there's the potential for Charter to partner,

To the playbook, since it sounds like competition has picked up, once you closed the acquisition. Thank you.

Sure.

um, um,

You know, look, let me take a more global approach to your first question around our willingness to use our network for offloading. Um, our principal focus as a company has always been about, you know, retail and the consumer segments, and the B2B segment.

Um, and sometimes that means that we've forgone appropriately, or sometimes, you know, maybe we should have had a different point of view on the wholesale opportunities that exist with the capabilities of our network,

I'll start out, I'll give you an example, just as a parallel. Do you know the B2B side? You know, we've done a lot of work around Salt Tower back all um, years ago. Um, which was a good business. It's great Roi. You know, it's not as good as it used to be. But the what we did there made a lot of sense. Similarly, you know, you can talk about the data center of business that exists today for fiber connectivity and I think Cox has done a really good job of being aggressive and getting after that and because we're so retail focused. I think we getting into it now. We'll have a great opportunity but you know, maybe we didn't focus on it as much as we should have. You can then to get to your question, use that as a parallel with our, you know, just our seamless, authentication capabilities across Wi-Fi and cbrs. Um, and should we be using that in a wholesale environment versus our current retail approach that we have?

And I think the answer is, it depends. Um, it depends on, you know, what's the long-term uh path that we're doing? How does it impact us? You know, from our, our main objective on the retail side. But we are doing offloads today you think about the Amazon deal that we did with their Fleet, which is public where we have seamless authentication for the Amazon drivers and the trucks to be able to offload to us at a more attractive rate than what they typically pay for cellular Services. I could see us being uh, and we have had those discussions for electric vehicle companies. Think about the tremendous amount of offload that they have to do from all the cameras that are operating during the course of the day and need to Upstream, you know, where our network is uniquely capable of doing that and being able to monetize it for us. But to say if you know, our customers, in that case, the whole self customer, lots of money. So we we have those capabilities. We've set up a platform called bright IQ that enables all of that to take place seamlessly. It works very well and and to the extent that

We can be innovative around that. Great additional revenue streams if it’s going to be material—it's certainly something we would think about. But, um, I think that between one partner or another, it’s just—the answer is, it just depends, and we’ll think it through at the right time.

You know, by the way, we could do that for, you know, even, uh, even mobile operators as well. You know, in terms of being able to, you know, offload for them and in a different way than they already do today—private SSIDs and, you know, we could—I'm not sure that's somewhere we'll go, but it's another potential business opportunity that's out there.

Thanks, Stephen. Oh, he asked a question about sorry to come back Cox. Nothing, you know. Nothing new or major to report Cox's Trends on, um, both subscribers and revenue has been a couple clicks lower than here at Spectrum and um, and that continues to be the case. Um, so I wouldn't say there's been any traumatic change of what we've seen relative to our own performances, at the time of signing up the transaction, no change to the Playbook. Um, you know, Cox has been a very well-invested asset over the years. It's prided itself on, you know, good service and and, uh, having a great reputation in the market in the communities that they serve. But I do think, um, you know, when you look at our products which include speed for internet, the convergence with mobile or video product for sure and its ability to have seamless entertainment, the zoom mode deployment and

Uh, the pricing of all that, both on a standalone basis and, in particular, when it's put together,

And packaging into the Cox markets, and we're really excited about getting this done and getting going for the benefit of employees, customers, and, you know, a real, I think, growth opportunity that's there.

Thanks, Stephen. We'll take our next question. Operator!

Before we go to our next question, just a reminder: if you'd like to raise your hand, you may use the Raise Hand feature at the bottom of your Zoom interface. Our next question will come from Walter Piecyk with LightShed Partners. Please go ahead.

Thanks, Chris. I just want to go back to the last question, um, because I think what he was asking about wasn't necessarily just wholesaling the hotspots, but also—

Whether closing out like that last 12%, meaning, like joining in a network build—whether it's SpaceX or someone else—whether that might be something that makes sense to put some dollars behind.

Yeah. Um let me start with, you know, that probably the hottest topic of the day and I want to be really clear. We don't have any plans to do anything different as it relates to our capex trajectory so, you know, give them where we are. And, and if, if if we had, if there were opportunities, I think that there are ways that we could look at them from an off-balance sheet, sort of, not part of our own Capital perspective, not in this specific 1, but but our, but our Capital trajectory in terms of what we've laid out in the multi-year uh Capital plan is is that? Yeah. So um

So I don't think we—you know, there's no specific plans that we have today to do anything around what you described. I would step back and say, you know, we're in a capital-light approach that we're really enamored with as it relates to going for mobility and the ability to deliver, you know, converged retail services.

We have great Partners. Verizon now, principally on the residential side, who's been a great partner, great Network. And in, we've recently launched on the B2B side incrementally going forward with T-Mobile. Uh, also, you know, obviously a fantastic network, uh, in a capital light approach for us. That makes a lot of sense, but we're also able to add in some additional features and product features into the business side that we didn't have before, as well as the ability to just sell a lot more lines and move Upstream into that space and they've been great Partners as well, you know, pretty seamless in terms of the launch. Um, and working very well with with both of those partners and and we're pleased. So there's there's no driving need for us to quote unquote, go build a network of any type because we have it. I mean, the other way to think about it, I've always said not to be provocative, but we're the largest facilities based wireless provider in the country.

Which is a little counterintuitive, but the reason I say that is not only do we offload 87 to 88% of our own traffic, but we—you know, the cable operators and Wi-Fi—generally, Wi-Fi is the workhorse of spectrum and of data delivery across the entire footprint, and it's Wi-Fi.

That delivers probably 75-80% of the traffic for DMOs for the wireless telcos.

And so that's our W line and Wi-Fi facilities. That's delivering not only wireless offload for us, but also for, you know, the major telcos as well. And so I don't think it's that productive. We're the largest—

Uh, Wireless facilities provider in the country, particularly when we closed Cox. So maybe today, it's a Comcast and tomorrow and and it's not us as number 2. But you know, we're going to be the largest Wireless space facilities provider in the country and I don't think there's a real need for us to feel like we have to go after that. Last 12%. Given the Partnerships that we have in the economic setup that we have today. Yeah and when you look at the the off flow that you have um

Could you give any sense of the mix between, you know, the extra SSID from someone's home modem versus the hotspots that you may have deployed on wires or in communities and things like that? Like, what's the relative split there, and is it changing as you maybe invest a little bit in CBRS?

Yeah, it is changing. Um, you know, when we first—trying to think of the best way to answer your question. Um,

And then cbrs, which is still early days. So we're across, you know, a vast number of markets but we're, you know well on our way on the increment to just continue to penetrate more deeply on an Roi based approach based on where there's density and traffic. Um, that justifies the investment, the payback we get in that is well, under a year. Um, so it's and that, you know, just to be clear, that's always been included in our capital expenditure Outlook.

Um, so I think we'll continue to, you know, move upstream. But as you saw even in this past quarter, when I answered the question for Craig, there are things that will bump you back down a little bit as we do things with the product. But I think our original outlook is still the same, and I think the mix is, first and foremost, it's our own Wi-Fi. Uh, the second is out-of-footprint, you know, when a New York customer goes to Philadelphia, for example. Um, but increasingly, to your point, it's the CBRS that gets more fully deployed, not just for us but as it gets more fully deployed into Comcast's footprint and the Cox footprint, which soon enough will be Spectrum. Um, you know, that CBRS deployment that each of us makes benefits the other, because we have the same capabilities there as we do with Wi-Fi.

Thanks.

Thanks, Walter, and thanks to everyone else. That concludes our call. Leila, back to you.

Thank you, everyone, for joining. This concludes today's call. You may now disconnect.