Cable One, Inc.

If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. I'd now like to turn the call over to Jordan Moorquart, Vice President of Investor Relations. You may begin.

Good afternoon and welcome to Cable One's fourth quarter and year-end 2024 earnings call. We're glad to have you join us today. Before we proceed, I would like to remind you that today's discussion contains forward-looking statements relating to future events that involve risks and uncertainties, including statements regarding future broadband revenue and customer growth, future cash flow, future ARPU, future levels of competition, growth in business data services, including carrier, wholesale, and enterprise market segments, the future capabilities of our network, anticipated benefits from AI, the timing and anticipated benefits of our unified billing system migration, capital expenditures, the purchase price payable if the MBI call or put option is exercised and MBI's anticipated indebtedness, our ability and sources of capital to fund the MBI call or put price, anticipated tax synergies, and our future financial performance, capital allocation policy, leverage ratios, and financing plans. You can find factors that could cause Cable 1's actual results to differ materially from the forward-looking statements discussed during today's call, in today's earnings release, and in our SEC filings, including our annual report on Form 10-K. Cable 1 is under no obligation and expressly disclaims any obligation, except as required by law, to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise. Additionally, today's remarks will include a discussion of certain financial measures that are not presented in conformity with U.S. generally accepted accounting principles, or GAAP. When we refer to free cash flow during today's call, we mean adjusted EBITDA less capital expenditures as defined in our earnings release. Reconciliations of non-GAAP financial measures discussed on this call to the most directly comparable GAAP measures can be found in our earnings release or on our website at ir.cable1.net. Joining me on today's call is our president and CEO, Julie Lawless, and Todd Cucci, our CFO. With that, let me turn the call over to Julie.

Thank you, Jordan, and good afternoon, everyone. We appreciate you joining us for today's call. 2024 bore the first fruits of a phase plan that lays the groundwork for long-term balanced broadband growth. We kept residential subscribers relatively flat when excluding customer losses from the expiration of the affordable connectivity program and stabilized residential ARPU during the back half of the year as we indicated would happen. Continued rising demand across our carrier, enterprise, and wholesale segments also led to business broadband revenue growth. Our resulting free cash flow grew consistent with our prior statements And we also took significant steps to increase our financial flexibility in order to meet future obligations, especially those related to the potential purchase of the remainder of MBI. And we did all this in an environment of increasing competition. We also substantially completed rebranding the companies we've acquired in recent years, converted many of our customers to a unified billing system, and continue to implement several best in class technology platforms to accelerate our digital transformation and improve operational efficiency. Additionally, we reshaped our leadership team by adding new talent to our core of experienced proven leaders. Building on what I said during our last earnings call, we are confident that the hard work done in 2024 is setting a foundation that will help us grow broadband revenue and cash flow over the long term. Before Todd reviews our financial performance and the recent steps we've taken to strengthen our long-term financial outlook, I'd like to provide deeper insight into our approach to broadband growth, emphasize the strength of our network, and tell you about strategic initiatives we have undertaken. I want to reiterate that we are executing a phased plan for long-term growth and express my confidence that our steadfast, intentional approach will help us to continue to successfully navigate the competitive landscape while delivering a differentiated value proposition to our customers and shareholders. Turning to residential broadband growth, in the latter half of 2024, We concentrated on strengthening our customer acquisition engine by investing in the right people, platforms and processes. As we move into 2025, broadband revenue growth remains our top priority. Our approach will be market and segment specific, driving unit growth and ARPU expansion where appropriate, based on a variety of factors. As mentioned, Our fourth quarter ARPU remained stable on a sequential basis. Notably, gig sell-in rose 10% sequentially in the last quarter. ARPU benefited from this higher sell-in, as well as an increase in the sales of our Intelligent Wi-Fi product, our Secure Plus product, which provides customers enhanced cybersecurity protection, promotional roll-offs, and the loss of lower ARPU ACP customers as well as the continued successful implementation of our AutoPay Plus program. As it relates to units, we remain focused on growing and retaining our premium customers through a variety of personalized products and programs that will continue to provide best-in-class reliability along with great customer experience. For our value-conscious customers, our pay-as-you-go product continues to grow nicely. This product provides greater value than cell phone internet as it is easy to set up, has unlimited data even during busy times, and guaranteed speeds. Last quarter, over 30% of our pay-as-you-go customers signed up for speeds of 500 megs or greater, showing the need for such guaranteed speeds. I would like to take a minute to talk specifically about cell phone internet. We've reached the point where cell phone internet is available throughout almost all of our footprint. But this does not worry us. Our focus is on ensuring those weighing cell phone internet as an option choose a more reliable wireline option. Ours. Our customers have told us what they find most important when looking for internet. Unlimited access to data without the threat of being throttled a variety of guaranteed speeds to meet their needs and better reliability. Our product offers these key advantages, and we plan to target this customer segment in a way that expands our reach without cannibalizing our existing base. We are confident that we can and will win these customers. Business broadband also continues to be an important driver of our long-term growth strategy. with revenue up 2.6% year over year. Looking ahead to 2025, we are confident about the long-term growth of business data services. We expect to see strong, continued growth in our carrier, enterprise, and wholesale segments, with continued focus on maximizing revenue growth in our SMB market as well. Turning to competitive dynamics. We continue to believe that new competition from third-party overbuilders is moderating in our markets. While it is true that incumbent LECs continue to overbuild themselves with new fiber deployments in some of our markets, we've competed effectively against them for a long time and believe we will be able to do so going forward. We also believe that incumbent fiber builds reduce the chance of a new third party entering a given market, maintaining a two-party market where the long-term economics are favorable to us. We will continue to conduct and capitalize on learnings from trials in various markets so that we can compete effectively on our terms across our entire footprint. Turning to our network, I'd like to share more detail around why we believe it will be a long-term differentiator for Cable 1. We've traditionally talked about our network in terms of reliability and capacity. While both remain critical, they are now baseline expectations. Customers expect reliability, and they assume we will have the capacity to meet their needs. To differentiate ourselves in today's competitive landscape, we have been moving beyond these basics and focusing on how customers experience our network, remembering always that when we're serving our customers, we're also serving our neighbors. This means shifting from purely technical metrics to understanding how our services enhance our customers' lives and our continued emphasis on improving in-home experience is central to this strategy. As one example, accelerated deployment of our intelligent Wi-Fi, powered by Eero, delivers an exceptional customer experience. We see an increase in retention from customers with this service because of the superior internet service they receive. Additionally, Our customer-facing app offers valuable features like parental controls, enhanced security, and self-service troubleshooting, empowering users to manage their in-home network seamlessly. Beyond these visible benefits, our intelligent network tools allow us to collect real-time customer performance data, enabling us to not only measure when the network is performing well, but also predict and proactively address potential issues before they impact the customer. This is a significant shift in how we deliver service, moving from reactive to proactive support and is a key element of improving the overall customer experience and network resiliency. These tools help us to reduce churn, lower expenses, and create a competitive advantage as we attract and retain customers. Given how technology and customer expectations are evolving, questions like, how will you compete with fiber, miss the point. Not only is our network powered by fiber, but we already provide more speed and capacity than most customers require today. However, we fully understand that data demands will likely have step function growth over time, so our future investments will focus on two areas to meet their needs. expanding capacity to stay ahead of the demand curve, and enhancing the intelligence of our network. By integrating advanced data-driven insights and predictive capabilities, we're building a network that's not just reliable but adaptive, anticipating customer needs and leading to long-term growth in a highly capital-efficient way. Whether through our investments in multi-gig capabilities, intelligent Wi-Fi, or cybersecurity solutions, the reality is our network isn't just infrastructure. It's a catalyst for innovation, customer satisfaction, and business growth. Turning to our recent strategic initiatives, we have now migrated the acquired Fidelity, ValueNet, and Cable America operations onto our unified billing system, which will streamline operations for associates and improve the customer experience. This will help us accelerate the use of tailored customer acquisition platforms and product launches for these portions of our customer base throughout 2025 and beyond. We expect to complete the migration of all other customers this year, which, as we have noted previously, will yield us several million dollars in annual savings going forward. We also substantially completed the rebranding of our Fidelity, Hargrave, ValueNet and Cable America operations. Fourth quarter brand measurement surveys in our legacy markets show that our Sparklight brand achieves 100% needed awareness and over 85% of Sparklight customers have a very positive perception of the brand, the strongest brand perception we have recorded. It is exciting to see Sparklight uniforms, trucks, and advertisements throughout our footprint. Moreover, Consolidating all customers under a unified Sparklight brand supports growth by creating cost efficiencies and leveraging the strength of our well-established brand across our footprint. During 2025, we're excited to start our first fiber instant-on multiple dwelling unit trial, which will enable customers to activate new HSC service with multi-gig symmetrical speeds in minutes. We look forward to carrying out this trial and believe we will be able to expand it throughout our MDU footprint. Our data shows that customers on an intelligent Wi-Fi network experience higher satisfaction in turn at a much lower rate. Thus, we have focused on increasing adoption of our intelligent Wi-Fi solution, powered by Eero, throughout our customer base. We also saw the number of customers subscribing to SecurePlus Our product offering advanced cybersecurity features across the home increased by 25% in Q4 compared to Q3. As we discussed last quarter, Secure Plus costs $8 per month, and we believe this, in addition to our intelligent Wi-Fi deployment efforts, will enhance the customer experience and provide an additional tailwind for ARPU going forward. Transitioning to technological improvements, we're pleased to share that we are continuing to integrate AI into our business, enhancing customer experience, increasing operational efficiency, and helping us reduce churn. Simply put, AI is making a difference in the way we do work every day. We launched an AI model in the fourth quarter, which allows us to review 100% of call center contacts in minutes. providing real-time feedback on customer sentiment that assists our agents in delivering superior customer service. We also launched a project management tool with automation and AI built into the platform that has allowed us to streamline projects and complete them faster by identifying and reducing redundancies and roadblocks. Finally, we developed an internal AI tool which created a term propensity model for residential customers, allowing us to improve the accuracy of finding customers most likely to turn and lower costs by eliminating a third party model we were previously utilizing. This tool also contains a customer lifetime value model, which has already helped us reduce customer losses in competitive markets. Before turning it over to Todd, let me conclude by telling you that I am excited for our associates, customers, and shareholders in 2025. It reminds me of a sports team in the middle of a rebuild where success might seem sudden to outsiders, but those inside the locker room know it's the result of countless hours spent building culture, refining skills, and sticking to the plan. In the same way, The groundwork we've laid behind the scenes will start to show through in the form of smart, balanced, and sustainable growth. We'll keep pushing forward until we reach that goal. Todd will now provide a recap of our fourth quarter and full-year financial performance and further discuss our outlook for the future.

Thanks, Julie. Before going through our 2024 full-year financials, I'd like to start by discussing some of the key figures from our fourth quarter results. For the fourth quarter of 2024, our total revenues were $387.2 million, compared to $411.8 million for the fourth quarter of 2023, a decrease of 6% year over year. Residential data revenues decreased by 5.4%, while business data revenues increased by 2.3% year over year. As previously discussed, residential data revenues were negatively impacted by the discontinuation of the Affordable Connectivity Program, which resulted in the loss of approximately 10,000 existing PSUs through the end of Q3. In addition, we also experienced above-average turn activity amongst the remaining ACP customer cohort in the early part of Q4. Such losses do not take into account the further negative impact on lost ACP Connect opportunities when comparing Q4 of 2024 to Q4 of 2023 when we were more active in selling to ACP customers. Decrease in residential data revenues was also driven by ARPU of $79.72, declining 5% year over year. On a sequential basis, however, ARPU was up 11 cents from the third quarter. Net loss was $105.2 million for Q4 2024, compared to net income of $103.5 million in Q4 2023. The net loss was driven primarily by various non-cash, non-operating charges associated with our investment in MBI. First, as in every quarter, we marked our MBI net option to market, which resulted in a non-cash loss. Second, as a result of the previously announced amendment to our MBI partnership, which I'll touch on later, we recognize a net gain associated with the new call and put options. And finally, as a result of our quarterly assessment for each of our equity investments, we identified an impairment of our MBI investment at year end, which resulted in a non-cash impairment charge. Collectively, these non-cash items related to MBI resulted in a $169.4 million net reduction to earnings. You can refer to our upcoming 10-K filing for additional details on these items. Adjusted EBITDA was $211 million, a decrease of 7% when compared to the prior year quarter. Adjusted EBITDA margin was 54.5% in the fourth quarter of 24 compared to 55.1% in Q4 of 23. Capital expenditures totaled $71.9 million in Q4 compared to $115.6 million in the same quarter last year. During the fourth quarter of 2024, we invested $6.5 million of CapEx for new market expansion and $5.7 million for integration activities. Adjusted EBITDA left capital expenditures was $139.1 million in the fourth quarter of 2024, compared to $111.3 million in the fourth quarter of 2023, a $27.8 million, or 25% increase, year over year. Now turning to our full year results. Total revenues for 2024 were $1.58 million, a decrease of 5.9% from 2023. Residential data revenues declined 5.5%, while business data revenues increased 2.6%. Residential data PSUs decreased by 5,500 during 2024 which includes approximately 10,000 ACP customers who disconnected as a result of the program ending. Excluding ACP losses and customer gains from a small acquisition, PSUs increased by approximately 2,200 during the year. ARPU for residential data customers was $80.39 for 2024, a decrease of 4.9% from 2023. ARPU decreased during the first two quarters of the year because of targeted pricing and product strategies in specific markets to address select competitors, along with a renewed focus on the value-conscious customer segment, which generally has lower selling rates. Residential data ARPU then stabilized during the second half of the year because of certain initiatives, including the implementation of AutoPay+, promotional roll-offs, the ramp-up of intelligent Wi-Fi and SecurePlus deployments, and the continued selling of higher-speed tiers as customers' speed and data demands continue to increase. On the business data side, the 2.6% year-over-year increase in revenue was driven by a gain of over 1,400 PSUs as strong demand from high-value carrier, wholesale, and enterprise customers continues, partially offset by a 3.4% decrease in overall business services ARPU. Operating expenses were $416.8 million, or 26.4% of revenues in 2024, compared to $440.9 million, or 26.3% of revenues in the prior year. The primary driver of the decrease in expense was a $32.8 million year-over-year drop in programming and franchise costs as lower margin residential video customers continued to decline. partially offset by increases in software costs, network backbone costs, and rent expense. Selling general and administrative expenses were $366 million for 2024 compared to $354.7 million in the prior year. SG&A as a percentage of revenue was 23.2% for 2024 compared to 21.1% for 2023 with the increase driven by software and system implementation costs that are expected to provide long-term efficiencies and significant investments in rebranding and marketing initiatives that are setting the foundation for long-term organic broadband revenue growth. These increases were partially offset by a reduction in labor and other compensation-related costs due to organizational changes implemented during the second quarter of 2024. Net income was $14.5 million for 2024 compared to $224.6 million for 2023. 2024 included a combined $186.5 million non-cash and non-operating net loss associated with the MBI items previously discussed. Adjusted EBITDA was $854 million for 2024 compared to $916.9 million for 2023 a decrease of 6.9%. Our adjusted EBITDA margin for 2024 was 54.1%, compared to 54.6% in the prior year. Capital expenditures totaled $286.4 million for 2024, which equates to 33.5% of adjusted EBITDA, compared to $371 million and 40.5% in the prior year. During 2024, we invested $30.6 million of CapEx for new market expansion and $17.7 million for integration activities. Our capital expenditures have trended downward in recent years thanks to the meaningful investments we have already made in our network, specifically with regards to DOCSIS 4.0 network architecture. The significant improvements to our network driven by these investments will allow us to be proactive in positioning for future growth and provides us with the confidence that our total capital expenditures will trend towards the low 300s for 2025. Adjusted EBITDA less capital expenditures was $567.6 million for 2024 compared to $545.9 million for the prior year, a 4% increase driven by ongoing capital efficiencies. As we've stated in the past, the four pillars of our balanced, conservative, and long-term capital allocation strategy remain intact, including building and enhancing our network infrastructure, pursuing organic growth opportunities as they arise, evaluating strategic investments and accretive acquisitions, and returning capital in the most efficient way possible, which consists primarily of accelerated debt repayments and a reduction in leverage. In 2024, we distributed $67.9 million in dividends to shareholders and repaid $238.1 million of debt, of which 219.9 million represented voluntary early repayments. We also drew $175 million under our revolver in December in connection with the amendment of our MBI agreement, which I'll touch on shortly. As of December 31st, We had approximately $154 million of cash and cash equivalents on hand. Our debt balance was approximately $3.6 billion, consisting of approximately $1.7 billion in term loans, $920 million in convertible notes, $650 million in unsecured notes, $313 million of revolver borrowings, and $4 million of finance lease liabilities. We also had $937 million available for additional borrowings under our $1.25 billion committed revolving credit facility that we successfully upsized by $250 million in Q4 of 2024. For 2024, our weighted average cost of debt was 4.15%, with nearly 80% of our borrowings either fixed issuance or synthetically fixed at underlying base rates of less than 2.7% under long-term contracts. considerably mitigating our exposure to the prevailing rate environment our net leverage ratio on a last quarter annualized basis was 4.1 times which as i will detail a bit later we believe will be our peak leverage while our secured net leverage ratio was 2.2 times looking at our unconsolidated investments in total residential and business data customers grew by nearly 18 000 or 2% on a sequential basis in the fourth quarter, and nearly 97,000 customers, or 12%, for the full year 2024. This does not include the operations of Metronet, where we have a less significant investment. Annual subscriber growth in 2024 for these investments was 15% higher than 2023, and we continue to be very pleased with the ability of our partners to grow while providing best-in-class service. Moreover, three of our existing investments, Metronet, Ziply, and CTI Towers, have been announced to be acquired by or merged into new entities, and we plan to monetize our investments in these partnerships with the proceeds to be utilized to pay down debt and reduce leverage. We are grateful for the opportunity to partner with these proven operators and trusted financial partners, and we are very pleased with the investment returns we will be providing Table 1 shareholders. And finally, turning to our MBI investment. As previously disclosed, in December, we amended the terms of the MBI partnership to provide, amongst other benefits, increased capital structure flexibility, enhanced liquidity alternatives with respect to both a future MBI consolidation as well as near-term refinancing strategies, and a reduction in our expected peak leverage upon a completion of the mbi acquisition whereas we do not expect it to exceed four times we now own a new call option exercisable starting in the third quarter of this year while the new put option held by the other investors was extended to january 1st 2026. if elected the foot option cannot be settled prior to october 1st 2026 unless Table 1 elects to close soon. The net $250 million we paid to the other investors in Q4, along with the $100 million of additional debt incurred by MBI and distributed to the other investors, will directly reduce the final purchase price payable upon any exercise of either call or put options. Based on currently available information, if the closing of a call or put option exercise occurs on October 1, 2026, we estimate that the purchase price payable by Cable 1 will range between approximately $410 and $550 million, and MBI's total net indebtedness that will be outstanding at the time it becomes wholly owned by Cable 1 will be approximately $845 to $895 million. As detailed in our previous disclosures, these estimates are based on MBI's past performance and current forecasts and could potentially change. In addition to the aforementioned balance sheet enhancements, this amended partnership agreement allows us to dedicate our 2025 focus on CABO's organic growth initiatives. Before handing it off for questions, I'd like to reiterate that 2024 was a big transition year for us, as we targeted new customer cohorts while stabilizing ARPU during the second half of the year, launched a unified billing system that will provide more targeted pricing and packaging opportunities, and substantially completed the rebranding of acquired companies, among many other initiatives. Having taken these foundational actions, we are excited at the opportunities available to us in 2025 as we continue to execute on our phased plan for long-term growth. With that, we are now ready for questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 in your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. Your first question comes from the line of Gregory Williams from TD Cowan. Your line is open.

Great. Thanks for taking my question. And question for Todd. you know, good job on fixing the MBI call option in the past. We thought, you know, you'd have to address that first and then you'd have to address the 2026 convert second. But now I guess that's been flipped. You're going to try to address the converts now and then the MBI later. So on the converts, I know it's early, but just maybe talking generally, you know, how would you think about that? When would you think about that as you consider your uh, monetization of your, um, you know, Metro net and, and, and, uh, other assets as well as your revolver capacity and how open are the capital markets. Um, and then the second question I have is. Uh, on our poo, uh, nice work on stabilizing it, uh, a lot of moving parts. So just understanding where we go from here, whether it's the $5 autopay price hikes, that's still coming. And then you mentioned intelligent wifi, secure plus promo roles, but then you have to pay you go. So just are we looking at like flat R approved through the cadence of the year or slight increase, slight decrease? Any color would be helpful. Thank you.

Hey, Greg. Thanks for the question. Yeah, MBI and the strategic amendment that we were able to execute in December with our partners definitely brought us some additional capital structure flexibility and enhanced liquidity, as I mentioned earlier. Really both for how we think about ultimately consolidating MBI in late 26, but also for our near-term refinancing strategies, as you point out, with the converts that come due in Q1 of 2026. I mean, you already kind of said it. We've got that flexibility. We've got a committed $1.25 billion revolver with just slightly north of $300 million funded underneath that facility that will continue to pay down. We have other monetization from those strategic investments that's going to be coming in throughout the course of the year. I would expect those to be the first half to early second half. The gross proceeds from those, as we previously stated, are in excess of 100 million. CTI was actually announced here more recently. It's a smaller monetization, but it's incremental to what we had, and it's a good return for our shareholders. And some of the losses that exist in our strategic investments portfolio, specifically with MBI, should also be able to effectively offset a meaningful amount of the tax on the gains and the other investments. So you can get to a, you know, comparable net proceeds to the gross proceeds. So answering your question, then I guess in a long winded fashion is we will be very proactive in evaluating the capital markets. They seem to be very constructive right now for us. And, you know, while we've maybe extended the strategic partnership and, you know, bought some time, we don't plan to rest on that time.

I'll hop in and I'll start on the ARPU piece. Yes, Greg, there are tons of puts and takes that go into that ARPU. And we like that. We like that there's lots of levers. I mean, we can grow units and we can expand ARPU to get to our overall goal of broadband revenue growth this year. And we think that's absolutely possible. Where appropriate, we will attack different market segments and customer segments to do what makes cents most. So double clicking on that a little bit. For example, if you have markets that are maybe less competitive and you have high value customers and they see value in enhanced products, we can launch those and ARPU will expand. In markets where penetration is a little bit lower than average, we can attack that with different offers and drive unit growth. I think you see what I'm getting at. It is the beauty of having about a million customers in 24 different states. We can go after them in different ways. And if you think about it in the past, an example or a corollary would be our use of usage-based billing or unlimited, which differentiated the products and the people that really wanted that bought it they had a willingness to pay and to them it was enhanced value it wasn't increased cost although in fact it was both on occasion when the enhancements bring a lot of value you might see us take an occasional rate increase as well so all of those things are at our disposal and we'll use the the tactics that make the most sense again, based on the markets and the customer segments.

Got it. Thank you.

Your next question comes from a line of Sebastiano Petty from JP Morgan. Your line is open.

Hi. Thank you for taking the question. I think, you know, Todd, you talked about, you know, focusing efforts on, you know, your core organic growth initiatives. Julie, helpful commentary as well about targeting some different demos, but Taking a step back, one of your larger peers earlier this reporting season noted that maybe they need to lean a little bit more on mobile and try to offer maybe more bundling opportunities to drive acquisition and drive gross ads. Over the last several quarters, churn has been good. And I think the message has been that you need to maybe try to drive top line gross at the top of the funnel, some gross additions. So how do you get there? Do you need mobile You talked about some of these MDU initiatives as well, but specifically with mobile, as we're seeing more of a converged environment in telecommunications and broadband, is that, you know, are you more open to that, less open to that, maybe the last 12, 24 months? Thank you.

Wow, I have a lot of things flying through my head, Sebastian. I mean, one of the first things is that, you know, absent ACP, we would have grown broadband units. And I don't think even absent ACP, our larger peers could say that. So first of all, I have to think, do we even need something else? Which the answer for me was yes, because we have so much growth to go and get. But starting there, we're always looking for ways to grow. And we're certainly open to partnering with a mobile provider if it will better serve our customers and provide an impetus for other individuals to become new customers. And we've spent so much time discussing this in every functional area, whether it's technology or marketing or operations and with potential vendors. But I have to tell you, honestly, when you think about mid to smaller scale operators, not the big guys, I have heard very mixed results. We'll keep having the conversations. We're open to the possibility. But right now, I believe we believe that the opportunity for us is to focus on our team, you know, our new team, our new tools, and just getting after organic broadband revenue growth. We think that's the best use of our time. I don't think we need mobile to do it. It's been really fun to have enough time elapse from the time we've instituted some of the trials and experiments that we've been talking about, to be able to measure them and measure them precisely because of some of these new tools and actually people as well that we've put into place and see that we have a better line of sight to things that are resonating with customers. And we absolutely positively have tools in our toolkit to go after growth.

and sebastiano i'll add just a couple on that as you pointed out and julie reiterated on the organic growth where we are from a penetration perspective on the high margin data product and what we believe we can do to confidently grow that um brings so much more accretive value uh in the interim than you know viewing a product that could potentially as julie said be a product that our customers, you know, say they want to take from a single provider and we can do so, you know, accretively. But currently when you look at our, you know, churn as it was the second lowest quarter in the last three years, the year was the lowest in the last three years when you look at it on an annual basis.

And that's with ACP.

With ACP. And that is usually a major assumption you have to believe in as it relates to improving that with another product. versus just finding another revenue stream that might not be economical. And that's the core to how we evaluate it. Again, open minds are probably the best strategic minds, so we're open-minded. But the element of needing to do it right now, and we have so much more organic, accretive growth in front of us with our core data product, is what we're going to remain focused on in 2025.

Okay, and quick housekeeping question, I guess, just to follow up on Greg's question. Do you think in this effort to maximize broadband revenue growth, as well as attacking some maybe opportunities within your customer, within your footprint in terms of a customer segmentation perspective. Do you think ARPU can remain stable in 2025 as you maybe target some additional gross additions?

I do.

Yeah, I was going to say it sounds a little guidance-y to me. And I think we're going to do a little of both. And it's going to add up to broadband revenue growth.

Thank you very much for the call.

Your next question comes from the line of Brandon Nisp from KeyBank Capital Markets. Your line is open.

Hey, guys. Two questions. One, could you talk about what happened in the quarter in terms of churn? I think you mentioned that it sort of picked up. So what changed during the quarter that drove churn and the subscriber results? And then back on ARPU, Could you help us understand where you're at from a penetration standpoint on advanced Wi-Fi and the security products and help us sort of frame the opportunity that you have there? Thanks.

Yeah, Brandon, I'll start. As it relates to the quarter, what I was just alluding to is that churn actually went down. Churn for Q4 2024 is the second lowest quarter when you look at the last three years. So I just want to make sure I reiterate that. And then Julie can jump in on the ARPU as well.

Well, so for the quarter in terms of overall performance, I would say there were some one-time or unique headwinds. You think about the back half of the year, ACP winding down. We had platform installation and migration going on, which takes a huge amount of focus. from the organization and actually caused us to stand still on some of our marketing initiatives in certain areas. And we also had some pretty major changes in key team members. So I think that those all went to affecting our performance overall in the quarter. As it relates to ARPU, I think your question was around Intelligent Wi-Fi and Secure Plus, of our customers that lease equipment, I believe 35% of those are currently on Intelligent Wi-Fi. And Secure Plus has just started. I mean, literally, we've just started rolling it out. So it's a brand new baby product.

Yep, it's about a third on the Intelligent Wi-Fi, exactly. with really good momentum.

Your next question comes from a line of Craig Moffitt from Moffitt Nathanson. Your line is open.

Hi, thanks. Sebastiano asked my obligatory question of why not mobile? So I'm going to go in a different direction. And Julie, you mentioned at the... What's that?

I said so rude of him.

No, I'm just glad it got asked. So let me go back to a comment that you said at the beginning of the call, Julie, where you mentioned that you're seeing less independent overbuilding in your footprint, you think, not from the incumbents, but from others building fiber. Can you just talk some more about that? What do you think is going on there? Is it that they've built the attractive parts of your footprint and moved on to other areas in the country? Is it that they are starting to struggle with ROIs? Or what insight do you have about why that's happening?

Yeah, great question. Probably, like most things, it's a lot of things. So it is possible that folks are thinking that the really cherry, Um, areas, whether that means density or demos or ease of build are, are gone. Um, I do believe that they, you know, human nature is like, boy, this sounds really easy. Let's go do it. And even building a network isn't all that hard, but running and maintaining a network really is especially in. non-consolidated, more rural America. But I'm going to guess, and I would love for Todd to jump in here, that a part of it really has to do with us, quite honestly. I mean, we took a bit of heat in the first half of last year when our ARPU dropped. But as Todd mentioned in his piece, we were selecting certain markets and certain competitors to send a really strong message, which was our customers love us. We've been here for decades and we're not letting you come. And so I think part of it has been our response to competition. And, you know, once we did that in certain areas, then we could turn our attention back to stabilizing ARPU. And again, I imagine that there'll be a little bit of this give and take as things normalize and shake out. What do you think? What else?

Yeah, Craig, on the discipline capital side of the equation, you know, when you think about what's been built versus what hasn't, the cost associated with that, just the cost of labor, but the cost of equipment in these rural markets make those more challenging from a return discipline perspective. We are getting closer to the end of some of what I would call the initial investment lives, where many of these new overbuilders were privately capitalized, and people are looking at exits. Some of those will exit well, like we've seen in some of the investments we've made. Some of them won't exit so well. And the access to the capital, while there is new markets for the more sophisticated, larger overbuilders, like the ABS environment and capital markets, The regular way is more challenged, and in all cases, more costly, which also is an input into those returns. Then there's just the element, as Julie said, of operating in some of these rural markets, and I believe there's a lot of folks out there that have realized building is one thing, but operating on a day-to-day, non-contractual consumer business and doing it well is even more challenging. The overall competitive dynamics, as Julie mentioned, is something that we believe is as we continue to press harder on that pedal of competitive intensity is going to make it hard for folks. We've already evidenced that we'll take the behaviors to do it from a, you know, multiple toolkit perspective that we have. Our people live in these markets. They have, this is where they want to live, their hometown and defending turf is something that they're very proud of. And that's something that we're going to lean into even more heavily this year. I would say from a, overbuild of just fiber that overlap in total continues to move higher it's now in the call it high 40s but the largest percentage increase in that is coming from the incumbent telcos and the largest one of that for us is at t yeah i mean i i agree taking really great neighborly care is is something that when you say the words again sounds really easy

but that's not something that can be easily replicated.

That's helpful. Thank you.

Your next question comes from a line of Sam McHugh from BNP Paribas. Your line is open.

Yeah, thanks, guys. Excuse me, a few questions if I can. Thanks for the fiber overlap update. You know, where do you think that will go in the medium to long term? Like, what is your anticipation? Is it kind of 60%, 70% higher or lower than that? And then secondly, if we look at Q4, it looks like the losses in residential did accelerate a lot relative to the rest of the year. As we look into 2025, is that kind of 4,000 underlying losses a reasonable run rate for 2025? Thank you very much.

Yeah, I'll hit the first one. I'll let Julie take the second one, Sam. As it relates to the fiber overlap, as I mentioned, it's, you know, Right now estimated to be in that kind of high 40% area based on all of our ground truth and the largest contributing increase to that has been the incumbent telcos. You know, as you know, almost 85% of our overlap is between two and the one that's been the most ambitious out there is our largest. And I would intend that I would expect based on their intentions and what's been publicly released that that will continue to increase from there, but. We're okay with that, right? Our multi-gig capable networks against their multi-gig capable networks and our people in these markets creates long-term attractive economic returns for us. And that's what we've competed against for years. And then, you know, I would be remiss if it an ad that we also do have some non-fiber but i would say very capable providers and that's usually in the approximate another 10 percentage point so when you think about just overall competitive overlap right now with gig capable we're going to be in that kind of high 50 land not that different from others and what we would view is probably a little bit more to go but you know a lot of that is behind us and with a lot of that behind us and this is the year of the last three years when most of that was happening that we had the lowest churn, I think there's a strong testament to the retention and the loyalty in our customer base.

And yeah, we talked a little bit about the unique headwinds that we experienced in the last quarter of the year, which things like the winding down of ACP continuing and completing a platform, a very large platform, installation and migration, actually more than one, and key changes in team members that I believe affected us. Again, unique headwinds. I do not anticipate that being the run rate in 2025 at all. In fact, I see a lot of bright spots. We have better line of sight now than we ever have because of new tools and new folks. to see what resonates with non-customers, bringing them on board. I think you'll see some actions around cell phone internet. I'm not going to go into details. I'm very aware that our competitors also listen to our calls. We have a factory, and I mean it is a legitimate factory going as it relates to our new builds. We have the measurements on experiments that we did in 24 that are showing that we have very real tools to go after customers and get the connects. Our issue is not churn, as you heard Todd elaborate. We need to get connects, and I have every confidence that we've figured out a couple of things, and we'll work on figuring out some more.

Super. And if I can ask one very small follow-up, just on the overlap market, some of the ones that are more tenured, how should we think about market share differentials between the overlap and non-overlap markets?

Yeah, Sam, we have not disclosed penetration. I think if that's what you mean by market and how you break out, you know, where you're overlapping with fiber or where you're not, you know, it depends also on for how long. And so going into that on a, you know, cohort by cohort basis is something we've not disclosed in the past.

And I will say, by and large, just to give you a little bit of flavor, if you're talking about a market where we've had overlap, you said most tenured, those are the markets where we're actually growing again. I mean, there is a normalization period, and we've seen it vary. for a whole bunch of reasons that I could go into. But typically, after some period of time, could be as short as 12 months, could be as long as 19 months, we start growing again.

That's a good point. And maybe to add to that, Sam, we've talked about this in the past, but it's consistent still this past quarter, is our churn was actually lowest in our most competitive markets.

Okay. Awesome, guys. Thanks very much.

Your next question comes from a line of Stephen Cahill from Wells Fargo. Your line is open.

Yeah, thank you. Just one on subs and one on ARPU. So just on the subs, you know, it sounds like that the little less than 5,000 data losses that you saw in Q4, I think, Julie, you said that's certainly not what you expect to be the run rate for 25, you know, When we sit here in Excel, sometimes it's tough to see what's changed. So could you talk maybe a little bit about what you've seen in Q1 or just help us understand why that's not the run rate? I'm not sure I quite fully appreciated some of the nuance there. And then as it relates to your plan to grow ARPU in 25. So ARPU, I think, was down kind of 5%, 6% in 24. I know there was a lot of aggressive action in a few markets, which implies some of those markets ARPU was down maybe two to three times that. Do you feel comfortable enough about the competitive environment that in those places where you took ARPU down, you can bring it back up and you won't see those same overbuilders or new overbuilders start to come in? And then, sorry, just a small one, but Altice has talked about putting more CapEx into the West. Do you have much overlap with Optimum or not really, mostly just AT&T? Thank you.

Yeah, I was like, wow, I'm writing so fast just trying to capture your question, Stephen. So, no, I do not expect that to be our run rate. Why do I think it's different? Again, because we had very specific one-time headwinds in Q4 related to ACP winding down, doing installations of new platforms, and migrating customers onto a really large one of those. and changing out quite a few key team members. We also, in the course of that occurring, have had a chance to exercise those platforms, and quite honestly, the people as well, and gather really great measurements on some of the trials and experiments that we did in 24, such that we now have line of sight into some of the tactics that we've tried that are much more nuanced, much more surgical, very segmented and have proven to be fruitful. So we're going to do more of that and we're going to keep trialing other things as well. We plan on going up against which one of the items that we think is affecting connects in a large way, which is cell phone internet. Again, not going to go into the details because I just let it get out there and let that run its course. You talked about ARPU as well. And I mean, I really, one of the beautiful things about our markets is it gives us lots of room to play. So if a competitor comes into a specific market and we feel like we have to, you know, winning against competition number one is about more than price absolutely positively our people and their infinite caring and the investment that we've made not just in the network but in these communities over decades matters but price might as well if we take price down in a certain marketplace that's okay because we likely can take price up in other places we don't usually like to do that and what I would call a quote-unquote naked rate increase. We prefer to talk to our customers, find out their needs and wants, and then give them products and enhanced features that they're willing to pay for that actually drives that ARPU up. So lots of room to play. We'll adjust where we need to. Sometimes that's going to mean that a certain marketplace is really growing units. Sometimes that's going to mean a certain marketplace is really growing ARPU. We think we have the room to move. Now, if something comes up in the future and someone encroaches in an area that we really need to defend, we're going to do that because that's the right long-term move.

And then on the optimum side, I believe you asked specifically, Stephen, the CapEx minimal overlap first and foremost. And I believe a lot of the capital that was discussed was upgrading to basically levels that we are already at. You know, all of our network is 3.1. Our investments are being made into 4.0 with virtualized CMTS, distributed access architecture, things that really set us up for, you know, 4.0 10 gig environments in the near future.

Great. Thank you.

And that concludes our question and answer session. I will now turn the call back over to Julie for closing remarks.

Thank you, Rob. Before we conclude, I want to extend my sincere gratitude to our associates for their relentless efforts throughout 2024. Whether it was your work on the billing conversion, the rebranding efforts, solving customer issues on the phone, or working hard within every community across our footprint, To provide our customers the connectivity they need, your unflagging dedication to one another, our customers, and our company is spectacular, and I am grateful to each of you. Thank you, and we look forward to speaking with you all again next quarter.

This concludes today's conference call. Thank you for your participation. You may now disconnect.