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 Charter's first quarter 2019 investor call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, 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 Stephan Anager. Please go ahead.

Good morning, and welcome to Charter's first quarter 2019 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 and also our 10-Q file 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 Rutledge, Chairman and CEO, and Chris Winfrey. our CFO. With that, I'll turn the call over to Tom.

Thanks, Stephan. With the most customer-impacting and capital-intensive elements of our integration behind us, we're now focused on growing our business. We're doing that by driving high-quality subscriptions, reducing transactions and churn with high-quality products and service, and maintaining and creating product superiority with a value proposition that our competitors don't provide. We performed well in the first quarter, and our three-year effort to deliver better products at better prices via a single operating entity with a unified product marketing and service infrastructure is beginning to pay off in our results. We added over 425,000 internet customers in the first quarter, and we created over 350,000 new customer relationships with customer growth of nearly 4% over the last 12 months. We also added 176,000 mobile lines, over 60,000 more than we added in the fourth quarter. So Spectrum Mobile is ramping quickly as expected. Our cable EBITDA growth of 7% combined with our falling capital intensity yielded strong year-over-year free cash flow growth despite our investments in Spectrum Mobile and the one-time changes in working capital that Chris mentioned last quarter. We have an excellent path in front of us for growth both in customer relationships and cash flow. Our core asset, our powerful, flexible, and easy to upgrade network allows us to offer data rich wireless connectivity products to both consumers and businesses. And the demand for both speed and throughput on our network continues to increase, driven by more devices in the home and growth in IP video. That demand will continue to grow as new technologies and applications emerge. Monthly data usage by our residential Internet customers is rising rapidly, and monthly median data usage is over 200 gigabytes per customer. When you look at average monthly usage for customers that don't subscribe to our traditional video product, usage climbs to over 400 gigabytes per month, which compares to an average mobile usage of well under 10 gigabytes per month. Over 80% of our Internet customers are now in packages that deliver 100 megabits of speed or more, and 30% of our customers are in packages that deliver 200 megabits or more. We're also seeing strong demand for our ultra product, which delivers 400 megabits, and we have gigabit service available everywhere. Despite that, we only penetrate about 50% of our passings with our Internet product a day. We view that as low relative to our potential, regardless of market conditions. given the importance of our connectivity services and the way we price and package them, and the fact that we have a faster, better, and cost-efficient pathway to offer multi-gigabit wireline and wireless speeds in the near future. For example, in only 14 months, we launched DOCSIS 3.1, which took our speeds up to one gigabit across our entire footprint at a cost of just $9 per passing, enabling $1 million 51 million passings to receive the service. We also have the ability, at low incremental cost, to expand our existing connectivity product set, and in coming years, through what we call 10G services, as our network is bandwidth-rich, fully deployed, and fully powered. Today, our Spectrum mobile product is being sold to our MVNO agreement with Verizon, and we believe that product will help drive our connectivity customer growth. We're currently testing the possibility to broaden the mobile capabilities of our network using a combination of dual SIM technology with unlicensed and potentially licensed spectrum deployed in-home, in-business, on-strand, and across our 51 million passings. Any of that future development would be fully funded through a clear payback on incremental economics to our mobile business with a further goal of to deliver unique and truly converged connectivity products more quickly and more efficiently than our competitors. We're also investing in other new products. In video, we recently launched our TV Essentials package and continue to drive growth of our Spectrum Stream and Choice products. We just launched Cloud DVR functionality for those streaming products. Spectrum Guide is now fully rolled out to all new video connects with a set-top box in over 90% of our footprint. We're beginning to offer in-app, on-box upgrade capabilities. We're also working on developing a security, privacy, and control product to accompany our core internet product, which we'll discuss in more detail in the coming quarters. In an enterprise, we recently launched SD-WAN products nationally, which will help drive better selling to multi-site customers. So our connectivity product set and the services we sell with them continues to expand and offer a strong penetration and growth opportunities. Over the last two and a half years, we have deployed the tools we need to grow new customer relationships quickly. Our sales channels are improving their effectiveness in selling our simple, easy to understand Spectrum pricing and packaging, which we modified last fall to include Spectrum Mobile. We're also seeing an increase in frictionless sales and service delivery through our online sales portals, our growing self-installation program, and our self-service applications. Our operating model and infrastructure is also designed to reduce customer transaction volume and churn, and we're seeing declines in each of those metrics. The improvements are being driven by better product and pricing, less integration activity, and the better service we're delivering, whether it be from our call centers or in the field. Our customer care and field operations insourcing initiative is nearly complete and continues to produce higher quality service. Our internal IT infrastructure, which we've built over the last few years, will be fully deployed by the end of this year, and our self-care platform is developing on schedule. These efforts take time to fully realize, but we're already witnessing a decline in service transactions, better quality service on the customer's own terms, with first-time resolution and less churn. So we're pleased with our progress, and our operating model is designed to drive continuous improvement and long-term growth in a way that works for customers, our employees, communities we serve, and our shareholders. I'll turn it over to Chris.