Charter Communications, Inc.

Good morning. My name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Charter's fourth quarter 2018 investor call. All lines have been placed on mute to prevent any background noise. After the speech remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key. I would now like to turn the call over to the second manager. Please go ahead.

Good morning, and welcome to Charter's fourth quarter 2018 investor call. The presentation that accompanies this call can be found on our website, ir.charter.com, under the financial information section. Before we proceed, I would like to remind you that there are a number of risk factors and other cautionary statements contained in our SEC filings, including our most recent 10-K filed this morning. We will not review those risk factors and other cautionary statements on this call. However, we encourage you to read them carefully. Various remarks that we make on this call concerning expectations, predictions, plans and prospects constitute forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. Any forward-looking statements reflect management's current view only and Charter undertakes no obligation to revise or update such statements or to make additional forward-looking statements in the future. During the course of today's call, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. These non-GAAP measures as defined by Charter may not be comparable to measures with similar titles used by other companies. Please also note that all growth rates noted on this call and in the presentation are calculated on a year-over-year basis unless otherwise specified. Joining me on today's call are Tom Rullage, Chairman and CEO, and Chris Winfrey, our CFO. With that, I'll turn the call over to Tom.

Thank you, Stephan. We performed well in 2018 while simultaneously completing the most customer-impacting phase of our integration. For the full year, we grew our total Internet customer base by 1.3 million customers, or 5.3%. We grouped cable revenue by 4.7% in 2018 and cable-adjusted EBITDA by 6.5%. With our integration now nearly complete, our goal is to accelerate customer relationship and cash flow growth going forward. Following our transactions in May of 2016, we put three very large companies together in order to create a new company with a larger and more concentrated footprint. giving us the scale to innovate and grow faster. We're beginning to benefit from that strategy in all the ways we expected. When we started the process of pursuing additional scale in 2013, we knew that to fully benefit from any acquisitions, we would need to create a single operating entity with a unified product marketing technology and service infrastructure. We spent over two and a half years doing that. Slide four of today's presentation reflects the progress against the integration plan we first showed in 2016 and the earlier than expected launches of DOCSIS 3.1 one gig service and Spectrum Mobile. While our integration and network upgrades have excellent long-term benefits, they've been disruptive to our customers, our ability to execute, and counter to our long-term operating strategy of reducing service interact interactions as planned. That process, though, is now essentially complete. We still have some work to do, but virtually all of the customer-facing initiatives related to our integration are now behind us. We've migrated 70% of our acquired residential customers to spectrum pricing and packaging. Our all-digital initiative is now finished. We've completed the upgrade to DOCSIS 3.1 and the launch of our gigabit speed offering. across our entire residential and business footprint. Our service infrastructure is national, specialized, and consistent. Our call centers and service platforms will be fully virtualized across the company by year end, and our field operation and customer care insourcing are also nearly complete. By the end of 2019, we expect to have completed the very last pieces of our integration, but as I said, most of this year's integration activity is non-customer facing in nature. With our biggest integration initiatives behind us, we're now in a position to drive long-term, sustainable customer relationship growth, EBITDA growth, and significantly lower capital intensity, driving accelerating free cash flow growth. As we look forward to 2019, through 2019, we remain focused on a number of key strategic priorities, driving higher sales volumes. We made some key changes to our double and triple play packaging in September, including the way we sell landline voice, and including Spectre Mobile in every sales opportunity. Those changes required that we retrain our Salesforce personnel in all sales channels. That process took through October to take hold, and our sales effectiveness will continue to improve. Our fourth quarter results demonstrate that churn continues to show meaningful improvements as planned. Spectrum Mobile is ramping up. We added over 110,000 mobile lines in the fourth quarter, and we're seeing a growing percentage of our new cable sales taking mobile service. We're also upselling mobile service to existing cable customers. Over the longer term, we expect consumer savings from our mobile offering to drive incremental cable sales as we build brand and product awareness for our Spectre Mobile service and become a more powerful retention tool. In December, we began the process of allowing customers to transfer their existing handsets to Spectre Mobile from other service providers at some of our stores. Over the coming months, we'll expand the Bring Your Own Device program to include a broader set of devices and to allow customers to bring their own device process to do their own bring their own device process themselves without having to visit us in a store. Full bring your own device availability will expand our mobile market opportunity substantially. In 2019, we are also well positioned to reduce service transactions. With the vast majority of our integration behind us, we expect to see a meaningful reduction in network activity, CPE swamps, service calls, and truck rolls. Service activity should also decline as our better product and pricing of services across a larger base improves. And as we begin to benefit from enhanced online self-service, greater levels of self-installs. So in 2019, the lower level of activity will raise customer satisfaction, reduce churn, and extend customer lifetimes. Finally, 2019 is the year we'll see a significant reduction in capital intensity. Our goal at the beginning of this process was to put our combined assets in a position to operate as a single entity and to grow faster over the long term as quickly as possible. As a result, we stepped up capital spending in the short term. That higher spending is now behind us, and cable capital intensity will fall significantly in 2019 as planned, but also beyond 2019 as CPE spend per home declines, consumers increasingly install their own services, the reliability of our plant improves, and our network becomes increasingly cloud-based and IP-driven, all on higher expected revenue, while we continue to appropriately invest in our products and in our network. Already in 2019, I expect the business and cash flow performance of our cable business will further demonstrate the superiority of our networks and our assets, the returns of our recent investment and the long-term benefits of our consumer-focused operating strategy on a larger set of assets. I'll turn the call over to Chris Winfrey.