Altice USA, Inc.

Greetings and welcome to the Altice USA third quarter 2023 results. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Sarah Friedman, Investor Relations. Thank you. You may begin.

Hello and welcome to our Q3 2023 Earnings Call. We are joined today by Altice USA's Chairman and CEO, Dennis Matthew, and CFO, Mark Sirota, who together will take you through the presentation and then be available for Q&A. As today's presentation may contain forward-looking statements, please carefully read the section entitled Forward-Looking Statements on slide two. Dennis, please go ahead.

Thank you, Sarah. Kicking off on slide three, the close of the third quarter marks one year since I joined Altice USA as CEO. It has been a year of transformation for the company as we established and began to deliver against our core pillars of having the best customer experiences, best customer relationships, best network, and the best people. I'm incredibly proud of what we've accomplished over the last 12 months and specifically during the third quarter. In QCRE, we saw quarter-over-quarter and year-over-year advancements across a variety of operational metrics, which correlate with the continued improved health of our business. For example, we saw improvements in broadband subscriber relationship trends, mobile net additions, fiber customer growth, financial performance, customer satisfaction scores, and operational metrics such as reduced call volume and truck rolls, to name a few. Specifically, Q3 marks the second quarter in a row of improved broadband net ads on a year-over-year basis. The progress demonstrates that we are competing better in our markets, and we are particularly pleased that we are seeing our win share improve against many competitors across our footprint as we drive high-quality services, value, and experiences with our network and products. On mobile line net additions, we grew Q3 mobile net ads at five times the pace as we did in the third quarter of last year and had our third straight quarter of mobile line growth acceleration. We continue to sell mobile across our base, emphasize our converged optimum complete bundle, and enhance the optimal mobile experience with better device offers and optimization of our sales channels to more effectively sell mobile. Turning to fiber, we continue to see growth in fiber customer net additions, reporting our best quarter in fiber customer growth in Q3. And we will continue to see penetration of our fiber network grow over time. We committed to expanding the availability of 8-gig symmetrical speeds in our fiber footprint by year-end, and I'm pleased to say that we achieved that in Q3. We now have more customers than ever experiencing our best-in-class fiber network delivering multi-gigabit symmetrical broadband speeds of up to 8 gig to all fiber passings in our east footprint. In Q3, we also continued to make progress on our customer experience transformation, making enhancements to our service and support channels with a focus on digital, self-service, and a first-time right approach, all of which are resulting in improved customer satisfaction. Our financial performance during the quarter was equally as strong, with quarterly sequential residential ARPU growth, reduced decline in both revenue and adjusted EBITDA compared to the first half of the year, a step down in capex spend, and a return to positive free cash flow in the quarter. These highlights are the result of several factors that we will walk through during today's presentation. But I want to first and foremost recognize our employees, including our strong executive, regional, and frontline teams who are driving performance and working day in and day out to deliver exceptional experiences. You know, I just cannot express enough my gratitude for their unwavering commitment to our telecommunications, news, and advertising businesses that enable millions of customers to stay connected and informed. Together, we have strengthened our network and product value proposition, enhanced how we compete in our local markets, and improved the experiences we deliver to our customers and employees. While we have more work to do, our results from the quarter affirm our strategy is working Our discipline is paying off, and we are moving fast to transform our business and be the connectivity provider of choice in every community that we serve. Since I joined the company, I've been traveling across our footprint, meeting with our frontline employees, and getting to know the people in the communities who make up our 21-state footprint. From West Virginia to Texas to Louisiana to New Jersey to North Carolina, New York, and more, There is an incredible amount of energy and fight in our local teams, and that's what we've been leaning into. We've been harnessing their local energy combined with our new leadership team and our top performing assets, network, and product portfolio. We are acting smarter and with discipline, and the results are proving that out. Turning to slide four, I want to spend a moment on reviewing some of the operational improvements that are driving costs out of the business and resulting in greater customer satisfaction. You know, when it comes to customer care, we know several truths. We know that customers want reliability of their services, and we know that if they have to contact us, the transaction needs to be painless and solved the very first time. To meet what our customers want, we have been implementing a digital first approach to customer care. This has not only reduced the number of total customer interactions, but also shifts more of those interactions towards digital channels as opposed to traditional support channels. Our attention to improving customer care is resulting in higher satisfaction scores across a number of NPS metrics, including our transactional NPS score, which increased by 22 points in Q3 compared to the prior year. We expect these scores to continue to improve as we put more emphasis on quality, service, and support. When we look at self-service, we've been focused on shifting more installs to self-install. In Q3, self-installs for qualified new customers increased by 71% year over year. Satisfaction scores on our self-installation onboarding continue to increase as we get better at making the setup experience more clear, simple, and seamless for our customers. And it's cost-effective for both our field operations and our customers. We're also expanding our digital and self-service tools available to customers to bring them solutions and troubleshooting help quicker than ever. For example, our text message communication to customers increased by 19% year over year as we have become more proactive in updating customers about outages, upcoming bills, and technician arrivals. You know, we saw a 51% increase in the use of our chatbot service, which allows customer resolution without having to speak with a customer care representative. And we saw a 16% increase in engagement with our customer portal, which allows customers to directly manage their accounts. By moving more interactions to digital, we're also taking the weight off of our field and care teams by driving pure truck rolls and inbound customer calls. And so to that end, we saw 300,000 fewer truck rolls over the last 12 months and 1.3 million fewer inbound calls in the same time period, which both reflect a lower subscriber base, but more notably lower rates per customer. A key tenant in driving top line growth, maximizing margins, and sustainably growing our subscriber base is having a keen focus on doing right by our customers by ensuring that every interaction is simple, easy, and done right the first time. And that is exactly what we are focused on. So before I turn it to Mark for a deep dive into our subscriber and financial results, I want to again reinforce the key pillars of our strategy that are on slide five. and highlight how we are going to continue to deliver against these in Q4 and beyond. Now, let's start with inspiring through the best people. As I mentioned on our last earnings call, we brought in new key leaders across the business, each bringing their expertise and leadership from decades of experience in the cable and telecommunications industries. In late August, Nate Edwards, formerly from Lumen and before that AT&T, joined as EVP of field operations with responsibility for our field service, construction, and plant teams. Nate has significant experience leading field and operations organizations through times of transformation, and we could not be more thrilled to have him be on team optimum to drive our field performance. Luciano Ramos joined from Rogers Communications in early 2023 and was recently elevated to the Chief Technology and Information Officer. Luciano's focus is on quality and reliability, and he's already making an incredible impact on the technology experience, both for our customers and our employees. Finally, we recently welcomed our new Chief Marketing Officer for Optimum, Jen Garrett, who joined us from Charter last week. Jen is leading our efforts to strengthen and differentiate the Optimum brand across our markets. She will also lead our acquisition, customer-based management and retention lifecycle program. I'm excited for Jen and her team to amplify and enhance awareness around Optimum's products and services through all marketing channels and develop strategies and plans to maximize loyalty, growth, retention, and profitability across the business. These are just a few examples of the incredible new talent joining our existing teams and they're making an immediate impact on our operations and culture. We also know that what drives sales is people and we've been investing in our sales force and channel performance so that we are optimized to sell our optimum services in every interaction. The changes we've made recently, enhancing our incentive programs, new prequalification for Optimum Mobile, better training, performance management, and communications for frontline sales, and more, have had a positive impact on our ability to increase sales opportunities, and we'll continue to prioritize this so there are fewer barriers to onboard new customers to Optimum. These actions have not only helped improve our subscriber numbers, but they are having a direct impact on our employee experience as teams are working more closely than ever to sell, install, and support our customers. We are breaking down the silos to work as one optimum team. You know, turning to our customer relationship pillar, we are building a world-class data and analytics function within the company. We began rolling out AI-based programs in the third quarter and will continue to expand on these capabilities to maximize our customer lifetime value, or CLV. Specifically, we're putting in place a CLV model that provides a full end-to-end understanding of the customer journey, capturing and understanding each customer interaction to ensure we are maximizing the value of the services we deliver, fostering loyalty, and creating long-term sustainable and profitable customer relationships. We will continue to advance this work with data-driven decision-making through artificial intelligence and machine learning capabilities, led by our new Chief Data and Analytics Officer, Ben Litvinen. A large part of CLV-driven decision-making is revamping our pricing and packaging strategies, Specifically in 2024, we'll be introducing new lower rate card pricing, a more transparent approach to promo roll-offs, and a speed gifting program that will bring faster speeds to customers. We'll begin by broadly implementing this new pricing strategy with our next generation fiber rate card. New rate cards on fiber will go into effect in the first half of 2024 and will reduce rates for new and existing customers. This does not have a notable impact on revenue as a very small portion of our Friber customers are close to paying full rates. New rate cards on HFC will also be available in 2024 to new customers, and legacy HFC customers will move to new rate cards over time through speed tier adjustments to match existing customer prices, preserving revenues. In conjunction, we are simplifying our speed tier structure while also finding opportunities to proactively gift speed tier increases to customers to drive greater value. With that, we'll begin to retire low-end speed tiers in various communities across our network. And lastly, on our CLV and packaging strategy, we are leveraging AI in our retention queues to ensure that our customer relationships are net profitable through tailored offers. Early results from several of our pilots are indicating double-digit percentage level lifts in customer level profitability after a customer interacts with our retention queues. We are encouraged by these results and expect to continue to experiment and roll out these capabilities in 2024. Overall, we expect that our new pricing and packaging strategy will not have a negative impact on our go-forward revenue. Our goal here is to reduce bill-related call volume, churn, and ARPU erosion, close the gap between promo rates and rate card rates, and remove offer and other bill-related complexities to provide clear, transparent pricing to our customers. Turning to B2B, as we discussed last quarter, optimum business represents a significant opportunity for us, and we're focused on product enhancements and expansion of product offerings to further penetrate our markets we're already seeing strong growth in the take rate of our bundled solutions which add services such as professional wi-fi and business hosted voice and we're focused on continuing to expand our b2b product portfolio notably with voice solutions for example we're enabling voice solutions to some smb customers who previously could not receive voice through number portability and we are improving our business-hosted voice products, which have already seen growth in the past quarter. Additionally, we're improving the B2B customer experience through upgraded Wi-Fi technology and offering greater protection to SMB customers through multi-layered Internet security. Turning to Optimum Mobile, we'll be expanding the service in a variety of ways, including launching mobile for B2B customers. We are proud that for the iPhone 15 launch, we were able to deliver deals and match the competitiveness of many major carriers with the free iPhone 15 offers for trade-ins and on select plans. Looking ahead, we'll continue to leverage our relationship with T-Mobile and our ability to offer multi-product savings to continue to drive mobile growth. Moving to our network pillar, our focus this year and into 2024 is on quality and reliability. We currently deliver fiber at more than 2.7 million passings. As I mentioned during the quarter, we expanded our eight gig fiber service to be available across our entire fiber footprint in the New York tri-state area, which is the largest availability of residential eight gig service in the nation. 8GIG provides a huge competitive and marketing advantage for us, and will continue to tout our fast symmetrical speeds to reinforce the strength of our network. Fiber penetration remains a focus. Any new customer in a fiber-ready area gets fiber installed, bypassing our HFC product. Customer satisfaction on fiber continues to rise, and migrations remain an important part of our retention programs. You know, our DOCSIS 3.1 upgrades continue in the West as we remain committed to providing enhanced speeds and user experiences over the best network. We ended Q3 with 91% of our West footprint upgraded to DOCSIS 3.1. And more broadly, we can deliver one gigabit speeds to more than 95% of our footprint. Our video strategy has evolved with our Optimum Stream product, which is available over fiber and is expanding to more markets over our HFC network. Video is an important part of our product portfolio, and around half of our customers take video. In addition to the expansion of Optimum Stream, we're actively exploring solutions to adapt to consumers' changing viewing habits, including more flexible packages tailored to our consumers' interests with convenience and value of a bundle. More on that in the quarters ahead. And finally, I'll close with our customer experience pillar. I touched on this earlier, but I want to reinforce that our focus remains on digital, self-serve, and first-time right as we head into Q4 and beyond. In summary, we continue to deliver across every area of the business that I laid out when I joined as CEO one year ago. And I couldn't be prouder of the team's progress and their ability to drive these investments and operational advancements with a focus on financial discipline as we transform our business to enable future growth. Now, I'll turn it over to Mark.

Thank you, Dennis. Turning to slide seven, I'd like to begin with our broadband subscriber trends. Last quarter, we began to close the gap on our subscriber net losses year over year. I'm pleased to share In Q3, we continue to see fewer net losses, reporting broadband customer net losses of 31,000 compared to losses of 43,000 in Q3 of last year. This 13,000 improvement is driven by better trends across our footprint. Breaking down the Q3 broadband trends, we continue to be impacted by a slow housing market and a low move environment, and we have ongoing pressure from competitive fiber operators and fixed wireless. Despite these headwinds, we are receiving improved underlying trends and competing through better fiber network upgrades and more strategic go-to-market activities. For example, although we see muted gross ad activity due to the low move environment, as Dennis mentioned earlier, of the pool of potential gross ads, we saw improved rates of wind share at optimum, gaining four percentage points of wind share quarter over quarter according to open signal data. This is mainly due to our stronger competitive approach against fixed wireless, DSL, and legacy fiber operators in our footprint. Consumers who have the choice of fixed wireless in our footprint are now choosing optimum more often as we can offer speeds up to 32 times faster than fixed wireless competitors. We attribute this shift to a few things, stronger sales performance across all channels, and having strengthened our competitive marketing and advertising. to highlight our network, speed, experience, and product superiority, ensuring customers know that the quality and value of Optimum is top tier. It's just one of the factors driving our improved broadband subscriber performance, but it's also meaningful because it demonstrates that we're competing on the quality of our service and not just price. As we continue to focus on delivering quality and value, We are optimistic that we can increase wind share even further. Churn is also improving. In addition to lower move churn, non-pay churn is better year over year by almost 10% as we continue to improve customer collection practices and have become more proactive in communications around customer billing. We still have more work to do, but our goal is to continue to close the gap on a year-on-year basis subscriber losses until we get back to positive customer growth trends. As a reminder, in Q4 of last year, we had a subscriber net ad benefit from the Big Apple Connect program we launched in partnership with the New York City's mayor's office. On a reported basis, we lost 9,000 broadband subscribers in Q4 of 2022. Although on an underlying basis, we would have reported net losses of 17,000 broadband subscribers if not for a 9,000 subscriber benefit from this program. Moving to slide eight, we are seeing acceleration and an optimal mobile growth. In Q3, we added 24,000 line net additions compared to 5,000 net adds in Q3 of last year. Note that in Q1 and Q2 of 2022, we added 8,000 and 28,000 mobile lines respectively. which were receiving free 1-gigabit mobile data plans for a 12-month period. The majority of those customers rolled off of that promotion last quarter, and we had about 6,000 in Q3 2023 that rolled off the promotion. We continue to see around 60% of those customers previously on free data plans convert to a paying plan. We've remained disciplined around preserving mobile ARPU as we move away from free promotions. We previously reported the adjusted mobile line additions to exclude churn from free lines and to adjust line additions to the quarter in which they became a paying subscriber. Therefore, in Q3, the adjusted mobile line additions would have been 6,000 higher than at 30,000. After Q3, we will not have any more subscribers on this legacy free data plan. Since the launch of Optimal Complete in May, our mobile growth has accelerated and we are on a strong trajectory. Our momentum in mobile is supported by better sales training and incentives to help our employees promote and sell Optimal Mobile and through the expansion of distribution channels as we are now selling mobile through care, retention, and door-to-door sales in addition to traditional sales channels. You may have seen in September we teamed up with Baseball, Hall of Fame legend, Derek Jeter, to launch a new marketing campaign around the company's greatest offer of all time, which has been getting great traction in our markets and has been one of our best performing campaigns at Optimal. We see churn benefits when customers take fixed plus mobile, reducing annualized churns by over 20% compared to fixed only customer base. This represents a significant opportunity to further reduce churn as we expand mobile penetration in our customer base and drive higher take rates of our mobile products. Last month, with the launch of the new iPhone 15, we offered valued customers an iPhone 15 on us, and up to $800 off other iPhone 15 models we traded. This compelling offer stacked up against the other MSOs and led to additional mobile growth through our sales channels. We are pleased with our pre-order in the first four weeks of sales growth year-over-year. We're above the market average of iPhone sales, driven by our very competitive mobile promotions. We are not only driving mobile growth, but driving mobile growth of high-quality mobile customers, which support better mobile ARPU and stickiness. At the end of September, 33% of our mobile base subscribed to unlimited mobile plans, up from 20% last year. In Q3, the majority of customers on legacy free mobile plans rolled off the promotion, which yielded a 13% year-over-year increase in mobile service ARPU. We remain disciplined around our mobile pricing strategy going forward with a focus on maintaining profitability and sustaining higher mobile ARPU. In addition, we are working to deliver a B2B mobile product in Q4, which will be launched as optimum complete SMB offering next year. As Dennis shared, we have a lot of opportunity to continue to drive mobile growth through more predominantly offering mobile for our sales channels, drive penetration of mobile into our fixed Internet customer base by leveraging Optimum Complete and targeting high-quality mobile subscribers. Next, on slide nine, we will review our best-in-class Optimum Network and how we're continuing to drive network improvements. We added 45,000 new fiber customers in the quarter through a combination of gross additions and voluntary migrations of existing customers. We ended Q3 with 295,000 fiber customers. At the end of Q3, we had 2.7 million fiber passings, adding 61,000 passings in the quarter as expected. We continue to see performance and satisfaction benefits out of our fiber cohorts. We are seeing over a 10 percentage point differential of better survivability after the first 12 months on fiber versus HFC, which indicates a significant churn reduction opportunity as more of our customers use fiber. Monthly broadband revenues per customer for a new fiber customer range is consistently higher than for new HFC customers. And broadband product MBS continues trending higher on fiber versus HFC, which reflects our improved customer trends in fiber markets. We mentioned last quarter that we are temporarily slowing our fiber construction as we evaluated certain vendor relationships as part of our internal investigation. We are redesigning many of our processes and procedures relating to vendor onboarding, performance, and monitoring. I'm also pleased by the team's ability to very quickly onboard new partners and scale some existing partners to resume our fiber strategy. To that end, we expect to reach approximately 600,000 fiber passings for the full year. At this point, our internal investigation is substantially complete, and the investigation and its results are not expected to have a material financial impact on our business. We will, of course, evaluate any additional information that becomes available to us, and we will assess whether and what remedies we may pursue. Turning to slide 10, I'd like to review our revenue trends. In Q3, total revenue declined 3.2% year-over-year, driven mainly by declines in our residential and news and advertising businesses. But notably, all revenue segments have shown improved year-over-year comps versus the first half of this year. Residential revenue was down 3.4% year-over-year, mainly driven by the impact of cumulative video and broadband subscriber losses we've seen over the last year. We grew business services revenue year-over-year for the first time in six quarters, reporting 0.1% growth. This is driven by light path growth of 2.3% and improvements in our SMB and other segments, which declined 0.7%. This quarter, our B2B team is focused on improving retention and base management, with new customer success team, new implementation team, dedicated to simplifying customer onboarding, and an increased number of sales engineers to guide customers through the technical aspects of pre-sales process. And we're beginning to see results on this progress. Within other, news and advertising revenue declined 10.8% year-over-year in Q3. Despite macro slowdown in advertising spend normalizing for political cycles, News and advertising grew 4.9%, excluding political revenue in Q3. These improving revenue trends support strong margins as shown on slide 11. Third quarter adjusted EBITDA margin of 39.5% was stable compared to last quarter. We said that Q2 would be the peak of EBITDA margins as OPEX would trend slightly higher in the back half of the year compared to the first half, but have come broadly in line with Q2 margins as we remain disciplined around moderating OPEX and balancing rate and volume to support improved revenue trends. In Q3, we reported OPEX excluding share-based compensation decline of approximately 1% year-over-year, the first year-over-year decline in 10 quarters, proving our focus on operating improvements as driving towards structurally reducing our costs to operate the business. Operating free cash flow margins increased five percentage points sequentially to 24.3% as we saw capital intensity in Q3 step down significantly, supporting better free cash flow, which I'll come back to in a moment. Turning to slide 12 on capital, Q3 spend of $353 million represented capital intensity of just over 15.2%, excluding FTTH and new bill CapEx. capital intensity would have been 8.8%. Capital spend is down 28% year-over-year in Q3 and a step down of 120 million or 25% sequentially versus Q2. As we said, CapEx will step down in the back half of the year, driven by CapEx timing and fewer fiber passings constructed. Year-to-date capital spend is $1.4 billion and we continue to expect to come in on the lower end of our initial guidance of $1.7 to $1.8 billion. as we take down the run rate of CapEx in the back half of this year, driven by timing of spend and fewer fiber passings, while continuing to invest in other growth CapEx opportunities. In Q3, we added 61,000 fiber passings in the quarter. We continue to edge out our footprint, adding 30,000 new built passings. And we have upgraded 61,000 passings to DOCSIS 3.1, bringing the optimum WES footprint to over 90% upgraded to DOCSIS 3.1. In summary, we remain focused on making strategic capital investments and growth opportunities with discipline around highest ROIs and a focus to bring down capital intensity. And last, slide 13 is a bridge of our free cash flow. Free cash flow for the quarter was $121 million, attributable principally to higher operating free cash flow or EBITDA-less CapEx and working capital benefits. We saw strong free cash flow this quarter despite slightly higher cash interest expense due to timing of semiannual bond payments and floating rate exposure. Although recall that taking into account interest rate hedges in place, about 80% of our debt schedule is fixed free. We continue to expect positive free cash flow for Q4 and to be positive for the full year. In summary, in Q3, we continue to deliver on many of our commitments And we are seeing results through improving trends in subscriber, revenue, EBITDA, and free cash flow, which will allow us to continue progressing towards sustainable future growth and a return to our target leverage levels. And with that, thank you all for your time. We'll now take questions.

Thank you. And ladies and gentlemen, at this time, we'll conduct our question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press the star key followed by the number two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Phil Cusick with JP Morgan. Please state your question.

Thanks a lot, guys. Dennis, let's dig into the new rate card that you discussed. How should we think about that impacting subscriber trends and promoting around that? Should we think about lower gross ads with a little less promotion upfront? Some companies do things like never changing ARPU, things like that, and impacting churn later, or do you anticipate a less of an impact? And then second, you talked about stabilizing broadband subscribers. Do you think that's feasible in 2024 or maybe beyond that? Thanks very much.

Thanks, Phil. You know, the new rate card is all about simplicity, transparency, predictability. And so as we move forward, we really want to be able to reduce the complexity for our customers. This will reduce the delta between uh gross ad offers that are in the marketplace versus rate card but we believe we have the right offers in market today and so we have a great value we've got the right offers and with optimum complete and the converged offer we really do think we have a great value we'll start to roll this out in queue in first half of next year with fiber and then for our hfc customer base No, it's really all about getting them the right speeds at the right price. And so we will be moving forward with the speed gifting and making sure that all of our customers have the right speeds based on their rate cards. And that's going to be a process that we'll undertake over the next few, over 24, aggressively to really make sure that we've got everybody right-sized. And in terms of our broadband subscriber growth and sustainability, we're very optimistic. We're seeing all of the right trends, and especially as we look at our KPIs, we're focused on delivering a great customer experience. And so as we look at NPS and the improvements we've seen there, reduced contact rate, reduced service visit rates. These are all leading metrics that we know are going to help us have a healthier business, healthier foundation. We're able to execute much more effectively with self-install and digital. Now, that being said, there's still a whole host of macroeconomic challenges when we look at moves being down almost at all time levels, inflation. And so we're very focused on controlling what we can control so that we can get back to long-term subscriber revenue and EBITDA growth.

Thank you.

Yep.

Our next question comes from Kutka Maral with Evercore ISI. Please, your question.

Good afternoon, and thanks for taking the questions. If I could just follow up on the broadband side, you talked about your wind share improving against a number of your competitors. It sounds like that was mostly in the optimum footprint and broad-based against different competitive technologies. Is there anything you could share on the Suddenlink side as well? And I know maybe you didn't want to talk about 2024 too much in terms of getting back to stable on the broadband side, but is there anything you could share on whether or not in Q4 you could continue the trend of improving the year-over-year results on broadband net ads against the 19,000 adjusted loss trend? And just briefly on the fiber passing side, Mark, I believe you've talked about new fiber passings to be at roughly 600,000 in 2023. Can you help us think about the build plan for 2024 and maybe 2025 as well? Thank you.

Thanks, Kukun. The good thing is that we've seen, you know, improvements across the entire footprint. When I look at trends both in the east and the west, when we look at year-over-year trends, we are seeing improvements. And part of that is tied to implementing our new local market structure. We have five areas and we have five new general managers that we've put in place. And these folks are living and breathing the business every day from a competitive perspective, subscriber perspective, customer experience, operating metrics, employee engagement, community engagement. And that's making an impact. and they are empowered to drive the business. We are supporting them. We traveled the country. We visited each of these areas. They've been in place for, quite frankly, less than 90 days. One is brand new, just starting in the role, but we are starting to see improvements across the board, across the footprint. You know, when I look at Q4, You know, the competition is very aggressive as we head into the holiday season, and so that's putting some pressure on Q4 trends, but it's too soon to commit to that Q4 performance. But our goal is absolutely to continue to drive improvement year over year. And so as I see the channels performing, whether it's door-to-door, whether it's inbound, whether it's retail, You know, we're continuing to see improved performance in terms of yield and productivity, but we are going to be disciplined. We're going to be disciplined around driving profitability and sustained growth.

Mark? Yeah, as it relates to the 600,000 passings this year, you're right. As far as our plans for next year and beyond, we won't give specific guidance, but we're still very much bullish on the FIBR plan and what the benefits that we see coming off of the fire plan as we talked about previously. But as we said, each year we'll evaluate the capital intensity of the business. Certainly the level of fiber upgrade will be a part of that equation. And we'll take a very disciplined and balanced approach to make sure we're maintaining the right level of capital intensity. Understood. Thank you both.

Thank you.

Our next question comes from Jonathan Chaplin with New Street. Please state your question. Jonathan Chaplin, your line is open. Go ahead. Oh, I'm sorry.

I was on mute. Just following up on the last question on the fiber deployment, Dennis, I'm just wondering if it doesn't actually make sense to continue the sort of the postponement of the fiber process as you just work through some deleveraging next year and you know potentially kick it off again when subscribers and EBITDA are growing in a sort of a convincing sustainable fashion and I'm wondering if you can give us some context for like the reason not to do that obviously would be if it would have a material impact on the recovery and subscriber growth. And so maybe you could give us some context around that, around the trends and growth you see in fiber markets versus non-fiber markets and how much postponing fiber deployment might impact the trends.

Thanks, Jonathan. We are evaluating the pace at which we want to continue that program. The good thing is we've got the right partners now in place. You know, as we've gone through the process the last couple of months, we've identified some great partners, great quality, and we're ready to continue our fiber construction. We are evaluating the pace at which we'd like to do that going forward. It will likely not be at the same pace that we had initially planned for as we entered into the year, but still working through what that should be and what makes sense as we enter into 2024. That being said, fiber is just one of the tools that we have in our toolkit to drive recovery and long-term sustainable. subscriber growth. We have a whole host of tools. We know that customers want quality and they want value. And so we are doubling down on quality, quality network, quality product, quality service. We're looking at every element of this business in terms of the CPE, in terms of training, in terms of making sure we fix the issues the first time. and that is having a meaningful payoff and benefit in terms of reducing contact rate increasing nps which we know is foundational to helping us drive long-term growth and then on the value side with optimum complete we're seeing that really resonate in the market we're seeing that resonate in our sales channels and so we know that that also is a great tool Additionally, as we look at the entire footprint, you've heard me talk about 3.1 and continuing to invest there. And we want to continue that journey to make sure that we have one gig available throughout the footprint. We have it available 95% of the footprint, but we want it to be at 100%. And so we're going to continue to drive that. And so all of these are tools that will allow us to get back to that objective of long-term revenue subscriber and EBITDA growth. And so fiber is one of those tools. And we'll decide in the coming days at the right level, right pace, where we need it. The good thing is we have 2.7 million homes. And so we are going to be focused also on driving further penetration against those 2.7 million.

Great. Thanks, Dennis.

Yeah. Thank you. Our next question comes from Jessica Reif-Ehrlich with Bank of America Securities. Please state your question.

Thank you. I have two questions. Dennis, you kicked off the call highlighting that it's been a year and how much has been done. Obviously, the first year there was a ton of heavy lifting and restructuring, a lot of management changes. As you look at the year ahead, can you talk about remaining priorities and any other significant changes you think you still need to make? And then secondly, I think that you said that half your subs are still taking video. Can you just kind of give us your longer-term view on video and maybe a comment on does Charter's deal with Disney indicate anything about how contracts will be dealt with going forward? How are you thinking about contracts with programmers going forward?

Thanks, Jessica. It's been an incredible year. As I look at the accomplishments, you know, the number one objective, my number one objective was to transform the culture. And to transform the culture, we needed the right team in place, and we have 50-plus new vice presidents and above that are driving this business forward, folks from all over the industry in every part of the organization, from sales to marketing to field to care. to finance, to program management, the list goes on, procurement, et cetera. And we still have some more work to do. And so as we close out the year and get ready for next year, we really need to make sure that we have all the right people on the bus and they're all in the right seats. And so that is still my top priority because that is what is going to enable us to continue to drive this business and this transformation. And as I look at quality and value, we're going to continue to lean into quality. There's still more work to be done, and we're going to lean into driving our quality programs, whether it's on the network, whether it's on the product, whether it's on the service, making sure we have the right business partners and that they're delivering the right level of quality and holding folks to SLAs and really making sure across every part of this business we are firing on all cylinders when it comes to quality and first time right we're also going to lean into digital and continuing to drive that journey you know as i think about uh programs like self-install you know we've improved that by 71 and we have more room to go and we need to lean more into self-install particularly as we think about video and other solutions Other priorities, though, that I'm excited about from a growth perspective is B2B. We have built a brand-new B2B team in terms of sales, in terms of product, and we're excited to build out that product portfolio. We're excited to drive execution, everything from funnel management to driving sales and quota to installation. And so a lot of work to do. And that's why, you know, but it's a lot of fun and we've got the right team to do it. As I think about video, you know, the model is broken. I just have to say, you know, for the last 10 years, the consumers have made it clear that there is a significant shift from linear to streaming. And yet the costs for linear have just continued to rise. And us as distributors need to find a way to work with our programming partners to put the customer at the center. We need to give them great value. We need to give them the right content. As we look at these programming deals, we're bundling in content that basically nobody wants to watch, along with the content that consumers actually want to watch. They want more access and availability to direct-to-consumer products. They want simplicity. You know, we are hearing from our customers it's challenging to have so many different apps and logins and billing relationships. And so those will be part of our conversations as we go forward, that we need to put the customer at the center and there needs to be a business model that's a win-win, the customer wins, and we as distributors and programmers win. And so that will be part of the discussions as we go forward.

Thank you. And our next question comes from Brett Feldman with Goldman Sachs. Please state your question.

Thanks, too, if you don't mind. The first one is, if we just take a step back and think about the path to getting your broadband business back to growth, I'm talking about broadband revenues, and you look at the sum total of the things you've done and the anticipated benefits of that, ultimately, what does that path look like? Meaning, Do you anticipate that you could begin to see a tailwind reemerge in your broadband ARPU, or is this really all about driving growth in subscribers, and as the subscriber base grows, you're inevitably going to return to broadband revenue growth? So any help in terms of thinking about the mix there, if you get everything right, would be helpful. And then the second is it's great to see that you're still converting about 60% of customers into paid lines when they come to the end of the promotional period. What have you learned about the 40% that aren't? You know, how good are you getting at predicting that and do you see an opportunity to either tweak the offer or tweak the upselling to kind of get to a higher pay rate on that? Thank you.

Yeah, let me jump in. Thanks, Brad. Let me jump in on the mobile and then I'll hand it off to Mark to talk a little bit about broadband. But on the mobile side, you know, we're excited that we were able to convert the 60% and we were able to proactively reach out to customers, make them aware, have great conversations. It's a testament really to, you know, great products, great service. They see the value in the Converge bundle. We offered them an optimum complete offer and that really brought that value together. Quite frankly, for the 40% that, you know, received it, you know, when I think about the approach last year, you know, there was some opportunity in terms of really making sure the folks that were taking the product understood what they were getting, why they were getting it, you know, when we look at the usage rates, things like that. there was definitely opportunity in terms of how we were going to market last year with that free offer. And so we have those learnings. I mean, everyone I brought in comes in with those learnings so that we don't repeat the mistakes of the past. And going forward, it's about selling the value, selling mobile, and really making sure that we're selling solutions that our customers want and need And we've transformed the retail environment as well. We've transformed it from a service center to a sales experience. And that's going to allow us to make sure that we're properly solution selling going forward with mobile.

Mark? As regards to broadband revenue, it will be a balance between subscribers and rate. And so you see we're starting to chunk into some of the subscriber losses, and we like the trend that we have there. But more importantly, on the rate side, you've seen that we've stabilized the broadband ARPU rates. And in fact, the past two quarters, we've actually grown the rates, and we're improving that year over year 22 cents, which is fantastic. And so you'll see that we'll continue to strike the right balance between rate and volume to ultimately drive top-line growth. In addition, we're very optimistic around what fiber actually brings to the table. We see when customers migrate onto the network from a HFC platform, we're seeing uplift in those customers. We're also seeing from just a gross ads perspective on pricing, customers want the highest value and they're willing to pay for one gig symmetrical speeds and beyond. And so they're paying us over $10 versus an HFC connect. And so We think that there is a path for both rate and volume to drive sustainable broadband revenue, and that's how we'll think about it and continue to kind of monitor it. On the other side, on the back book as well, we're being very disciplined. We've introduced a lot of AI functionality into the business, and we're just beginning to scale that. And so we're going to take a very disciplined, customer-specific approach to managing the back book, And we're optimistic about what some of those early trials are yielding. And so I think we'll continue to be disciplined on the front book as well as the back book to ultimately drive broadband growth.

Thank you.

Our next question comes from Craig Moffitt with Moffitt & Nathanson. Please state your question.

Hi. Yeah, I'm going to stay with this same topic of the new rate card, guys. Just to make sure I understand, so what you were just describing, should we read that as you're going to try to opportunistically raise some rates at the low end of the customer base while you're presumably cutting some prices for customers that are at the very higher end of your range and sort of try to bring everybody into the middle? Does that mean that any customer losses that you see are more likely to be concentrated in lower ARPU types of customers? And then I have one separate question, and that's just as I think about the growth rate of the footprint where you had been growing in the 2% plus range, should we expect that to continue to decelerate as it did a bit in the quarter as you sort of refocused your capital budget? to potentially a slower path of rural edge outs and the like.

Craig, on the pricing and the base management strategy, again, as I mentioned, it's all about making sure that we have simplicity, reduce the complexity, and provide transparency and predictability as we move forward. And we believe we have the right offers from a go-to-market perspective. What Mark was talking about was really, as we move forward, just doing a much better job in channels like care, like retention to make sure that we're disciplined when we are having a conversation with a customer that we are providing them the right value leveraging our CLV tools. So it's not about going back in and figuring out how do we cut at the low end, you know, increase at the low end, cut at the high end. get into the middle. It's all about leveraging customer lifetime value and being disciplined about the offers and the save rates and the erosion, which quite frankly, when I walked in the door, was at an all-time high. And so we just have to become much more disciplined, both on the front end in terms of our go-to-market offers, as well as in our channels, retention, and others. And we do want to reduce the delta between the go-to-market offers and the rate card and make sure that folks understand what's happening in year one and year two so that there isn't confusion. And that, I believe, will actually reduce call volumes it'll increase customer loyalty it'll remove some of the noise that's within our system today on confusion on billing complexity on you know just not understanding kind of what's the end game here let's give everybody uh clear transparency there In terms of market growth, we're very bullish on new build, and we're going to rapidly get back to the pace that we were at, and we're already hitting the accelerator where we can in Q4. We have the right partners now in place, and we're very bullish on continuing to drive new build and edge out as we go forward. That is a key element of our strategy, has been, and will continue to be.

Do you think you can keep that north of 2% sustainably?

Yes, absolutely.

Thank you.

Yeah.

Thank you. And ladies and gentlemen, that's all the time we have left today for questions. I'll hand the floor back to management for closing remarks. Thank you.

Thanks, everyone, for joining. Have a good evening.

Thank you. This concludes today's conference. All parties may disconnect. Have a good day.