Charter Communications, Inc.

morning. My name is Jessa, and I will be your conference operator today. At this time, I would like to welcome everyone to Charter's third 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. Thank you. You may begin your conference.

Good morning, and welcome to Charter's third 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. On today's call, we have Tom Rutledge, Chairman and CEO, and Chris Winfrey, our CFO. With that, let's turn the call over to Tom.

Good morning. Our product and service strategy is working well across all our service areas, and the benefits of the recently completed large integration are being realized through accelerated customer relationship growth, lower service transactions per customer, declining capital, cable capex intensity, and significant free cash flow generation. Although our product mix is different today than it was several years ago, we're driving customer relationship growth given our superior products, pricing, and network, combined with execution capabilities that continue to improve. In the third quarter, we had a net gain of 310,000 customer relationships with customer growth of 4% over the last 12 months. We also added 380,000 Internet customers in the quarter and 1.4 million Internet customers over the last year. and we added 276,000 mobile lines up from 208,000 additions last quarter. We grew cable-adjusted EBITDA by 5%, which combined with our lower cable capital expenditures yielded strong year-over-year cable-free cash flow growth of nearly $850 million, or 125% in the third quarter. Our consolidated free cash flow was up nearly $750 million, even including our investment in Spectre Mobile. We offer high-quality products packaged with good service and attractive pricing, which is our core operating strategy. That approach works with customers and leads to improving relationship growth rates, profitability, and cash flow over long periods of time. We continue to improve our products and service, and as a result of our pricing migration strategy, 85% of our residential Internet customers receive 100 megabits and higher speeds. And over the past two months, we raised our minimum spectrum Internet speed from 100 megabits to 200 megabits in a number of additional markets. We now offer minimum speeds of 200 megabits in approximately 60% of our footprint, up from 40% previously. We continue to offer 400 megabit our ultra product, and our gigabit speed tiers across our entire footprint. Demand for speed, throughput, and low latency uniquely offered through our network today continues to increase. That demand will continue to grow as more devices attach to our network, more IP video is consumed, online gaming continues to grow, and new technologies and applications emerge. Our network will evolve from an already low latency DOCSIS 3.1 to 10 gig symmetrical on an upgrade path we control and at relatively low incremental capital costs. Monthly data usage continues to rise rapidly. Our non-video internet customers use over 450 gigabytes per month, which compares to average mobile usage of well under 10 gigabits per month. That translates to a 50 times price per gig value advantage with truly unlimited service, high throughput, and reliability to all devices in the home and business. In mid-October, we launched our advanced in-home Wi-Fi in Austin, Texas. Given our network, software operating platform, and top-rated self-support tool, we're in a unique position to provide enhanced security, privacy, and control over all IP devices in our customers' home, easily managed by customers in a single app. while simultaneously delivering a superior customer experience through better in-home Wi-Fi coverage and managed Wi-Fi solutions through dynamic band switching and channel optimization within the bands. And over time, we plan to roll this product out to our entire footprint, starting with additional markets in late 2019. Our self-installation program continues to ramp quickly, with customer self-installations now representing 50% of our sales volume. Turning briefly to video, over 90% of the time when we sell video, it is packaged with internet, and it's an important attribute to our selling proposition for fixed and mobile connectivity services. Yet pricing and lack of security continues to be the main problems contributing to the challenges of paid video growth. Turning to mobile, our Spectrum mobile products continue to perform well. and our accelerating mobile line net ads are very encouraging. In the third quarter, bring-your-own-device capabilities became fully available across all of our sales channels and on all devices, and we recently launched Spectrum Mobile Services to small and medium business customers in all channels. Mobile remains a key area of our focus for Charter going forward, and we're uniquely positioned to take advantage of wireline and wireless network convergence over time with our fully distributed wireline network. ultimately positioning us for long-term growth under the operating strategy I mentioned at the beginning of today's call, superior products, good service, and attractive pricing.