Charter Communications, Inc.

Ladies and gentlemen, thank you for standing by and welcome to Charter's third quarter 2020 investors call. At this time, all participants are in the listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. Please be advised that today's conference is being recorded. If you require further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Stephan Anninger. Please go ahead, sir.

Good morning, and welcome to Charter's third quarter 2020 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 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.

Thank you, Stephan. Despite the significant challenges that COVID-19 has posed, we've been able to operate our business throughout the pandemic. Early in the pandemic, we offered our customers a set of programs, including our remote education offer and Keep America Connected pledge that supported customers' needs, resulting in a significantly higher number of customers enjoying our services. In addition, we opened our Wi-Fi hotspots across our footprint for public use. opened up our spectrum news websites to ensure people have access to high-quality local news and information, rapidly connected and upgraded fiber services to healthcare providers, and donated significant airtime to run public service announcements to our full footprint of 16 million video subscribers. Our employees were given additional paid sick time for COVID-related illnesses and a flex time program to address other COVID issues. We also increased our wage for all hourly field operations and customer service call center employees by $1.50 an hour, and we remain on path to a $20 minimum wage by 2022. Our ability to operate for our customers and communities despite the challenging environment is a testament to the quality of our insourced and onshore workforce, our safety precautions, and in many cases, our ability to operate remotely. Our sales and care agents have continued to sell our products and to provide outstanding service to our customers. Most of our stores have been able to remain open throughout the pandemic, serving customers in need. Our field operations personnel that handle professional installations and repairs have continued their work in the field, servicing customers in their homes and maintaining the quality of our physical plant. Our plant construction has continued to And we've actually seen plant miles and passings increase more this year than last. And our product development team has continued to develop and roll out various product improvements, including updates and enhancements to our video, internet, and mobile products. Our ability to continue to operate well under the circumstances is also the result of investments we've made in various parts of our business over the last several years, including our investments in systems integrations and automation, our self-installation program, which ran at over 80% of installations during the quarter, our online and digital sales and self-service platforms, and our network, including DOCSIS 3.1, which provided ample bandwidth to withstand surging use, with residential data usage for Internet-only customers remaining at an elevated 600 gigabytes per month during the third quarter. Our operating and investment strategy has allowed us sustain, and accelerate our customer and financial growth. During the quarter, we added 537,000 residential and small business Internet customers versus 380,000 in the prior year quarter. In the past 12 months, we've added 2.3 million Internet customers and 2 million overall customer relationships. We're growing well and gaining share against all our competitors in all of our markets, regardless of competitive infrastructure. In the third quarter, we grew our mobile lines by 363,000, 87,000 more than in the third quarter of last year, and continued acceleration from last quarter. We recently purchased 210 CDRS priority access licenses in 106 counties across all our key DMAs for just over $460 million. Over a multi-year period, we'll execute on our inside-out strategy with small cells attached to our existing network using unlicensed and now our licensed spectrum based on a disciplined return on investment approach consistent with our goal of reducing mobile operating costs. Turning to the third quarter financials, we group consolidated EBITDA by over 13%, and our third quarter free cash flow grew by nearly 40% year over year. Looking forward and subject to what happens with the virus, unemployment, and stimulus, we expect our broadband and mobile products to continue to drive demand and churn and growth to return to pre-pandemic levels. SMB has actually performed better than we expected, and our ability to grow will also be partly tied to the economy. In enterprise, retail sales activity is picking back up despite limited on-site access. And as those new sales get installed in the coming months, we expect enterprise revenue growth to pick back up. Our advertising business is improving, and our core ad business, excluding political, is about 90% back to normal, in part because of the amount of sporting events that are now airing. So core ad sales are improving, and we still expect political advertising to be a meaningful contributor in the fourth quarter. To maintain that growth, we'll continue to invest in our network so that we can continue to offer new and better products to our competitors. In the coming years, we expect data usage per customer to continue to grow, and we're prepared to deliver more throughput across our network. The growth in demand for data is and will be driven by a number of factors, including the growth of IT video services, including video conferencing and gaming. Also, the number of growing IP devices connected to our network, which is nearing 400 million devices. And new and emerging products and services are being developed as we speak, such as e-learning or telemedicine in 4K, virtual reality or holographic formats, for example. We're continuously increasing the capacity in our core and hubs and augmenting the network to improve speeds and performance. In the near term, however, we have a large opportunity to improve throughput and latency by continuing to use already deployed DOCSIS 3.1 technology, which still has a long runway. And additional bandwidth tools available to us today include the conversion of the distribution network to DOCSIS 3.1 delivery for all products, including video broadband and telephony. By allocating more plant spectrum to DOCSIS 3.1 IP services, we have the ability to offer symmetrical gigabit plus speeds. We'll also continue to invest in DOCSIS 4.0 with key vendors and the rest of the industry for even greater capacity and functionality. The DOCSIS 4.0 specification allows for multiple paths to reach 10 gig and higher speeds, including full duplex DOCSIS and extended spectrum DOCSIS. Both 3.1 and 4.0 DOCSIS can be deployed in an economically efficient way as the market dictates. Our network evolution strategy allows us to offer superior connectivity products to meet changing consumer demand and extend our growth strategy and drive free cash flow. Before turning the call over to Chris, I'd once again like to thank Charter's employees for their hard work, dedication, and diligence throughout the pandemic. They've been asked to go above and beyond their regular duties and they have delivered. Now I'll turn the call over to Chris.