Starry Group Holdings, Inc.

Hello everyone and welcome to the Starry Group Holdings Inc second quarter 2022 earnings call. My name is Seb and I'll be the operator for your call today. There will be an opportunity to ask questions and you can do so by pressing star 1 on your telephone keypad or you can press star 2 if you wish to withdraw your question. If you need assistance at any time please press star 0 to flag an operator. I will now hand the floor over to Ben Barrett to begin. Please go ahead.

Thank you, Seb, and good morning, everyone. Welcome to our second quarter call. I'm Ben Barrett, head of investor relations for Starry. Joining me on the call today are Chet Knojia, our CEO, Komal Misra, our CFO, and Alex Moulet-Burteau, our COO. By now, you should have received a copy of Starry's earnings release for the second quarter 22 results. If you have not, copies are available on our investor relations website. Before we begin, I would note that some of our comments today may be forward-looking statements. As such, they're subject to risks and uncertainties described in SART's earnings press release and SEC filings, and results may differ materially. Additionally, during our call today, we will reference certain non-GAAP financial measures that we believe provide useful information for our investors. Reconciliations of non-GAAP financial measures, where appropriate, to the corresponding GAAP measures can be found in the company's earnings release and other filings with the SEC. With that, I'll turn the call over to Jeff.

Thank you, Ben. Thank you, everyone, for joining. It's been a busy earnings season, and we are almost at the end of it, so let's jump in. I want to leave with some highlights. First, our execution, we had a best quarter date with more than 9,700 net new customer additions. We performed better than almost every other fixed provider in the country, and I cannot overstate how strong this performance was, especially given our scale and capital constraints. We have a laser focus on customer experience and value, which is a good place to be in the current climate. Second, and this is an important one, earlier today we released an analysis that shows we quickly achieved cohort level profitability across our buildings launched in 2020 and first quarter of 2021 within three or four quarters after launch. This is a really constructive operational building block towards the profitability across the company. Just to say this one more time, our 2020 and first quarter 2021 building cohorts gets profitable in under 12 months, which I think is remarkable. And third, we are thrilled to announce our newest market, Las Vegas, Nevada, which we are actively building and plan to launch in the third quarter. Before I dig into substance, I want to give an update on our funding situation. As you know, we went public in March 29, 2020, raising total net proceeds of about $255 million. Given the market conditions when we went public, we raised approximately half of what we had initially expected to raise in the offering. Since then, we've been open about the reality that we require more capital to get to break even. We talked about this in the first quarter call when I explained that we had some runway and multiple pathways, and we were exploring a combination of debt, equity, and other financing vehicles. Today, I want to give an update on where we stand. The process is not yet concluded, but we have made significant progress on several fronts. First, we set up a committed equity facility with a financial partner that lets us raise up to $100 million in capital before fees. This is a low-cost way to raise incremental funding exclusively at our discretion. Second, we are in advanced discussions with multiple parties about potential additional investment. I can't go into specifics now, and I caution that nothing is yet complete and may not ultimately occur, but I look forward to reaching agreement in the short term that can provide us the capital to get to break even. Ultimately, on this topic, I'm extremely confident in our model and our differentiated economics and the customer demand for our product and our strong record of sustained successful execution. History has shown that good companies find funding support in even difficult times. In my opinion, we're a great company and expect to resolve this funding gap shortly. Stay tuned. Moving on to the next topic, I want to talk briefly about the macro environment. Generally, I think broadband performs well in soft market conditions given that it's an essential service. And I think within the industry, we are incredibly well positioned because broadband is not discretionary. No one wants to give up their connection to the Internet. Starry's value proposition is simple, better, faster, cheaper. We focus on providing customers a really great service at a fair price with no nonsense. Also, we are a prepaid business and have minimal to no bad debt and collection exposure. And we have a very specific focus. We have a density-based model focused mostly on MDUs today and a significant focus on underserved communities subsidized by the federal government. This is not to minimize concerns of the current environment, but we believe we can continue to be a growth company despite macro headwinds. With just about everyone now reported, it looks like the market for in-home broadband services remains healthy overall, and it's a massive industry still growing at about 3% to 4% of subscribers compared to prior year. In my view, the story here, the interesting story here is the share shift that we're seeing. Cable clearly lost share in the quarter, fixed wireless gained dramatically, fiber did okay, and DSL continues to bleed as you would expect. The takeaway from this result These results play to Starry's strength. There is a flight to better value plans, to standalone broadband over expensive bundles, and to services that put customers first instead of taking them for granted. And I think the share shift away from cable will continue as more competitors emerge with fiber and fixed wireless, especially in suburban rural areas. It is worth pointing out that the urban service is very different, and Starry is the only provider coming in at any scale in this segment. This is great news for story as we don't need a big market share to succeed, we have the potential to break even at around 4% of penetration of our home serviceable because we have a differentiated technology stack and the cost of the last mile. Also, we continue to expand our network this quarter our home serviceable grew by 20% over year over year to 5.7 million housing units. and we deployed about 10,000 new units per month in the second quarter, bringing our total deployment to roughly 400,000 activated units. Looking at these numbers another way, we have only deployed about roughly 7% of our serviceable area to date, so we have a lot of runway left for the immediate future. Usage in our network remains robust. During the second quarter, our average usage was 432 gigabytes per month, with the top 5% consuming more than one terabyte. More customers and increased usage typically slows down a network, but we continue to deliver speeds above our advertised levels. As we build out and densify our network, we are confident that the combination of our licensed millimeter wave spectrum and our network architecture will be able to continue to meet customer demand. I want to take some time to discuss an analysis of the operational performance of buildings launched in 2020 and the first quarter of 2021 that we released this morning. This presentation is on our investor relations website, which you should review in full, but I'll summarize it briefly here. For the purposes of this analysis, I want to provide a very simple visual of our business, almost how I think about it myself. We install transmitters on towers and tall buildings, then we work with property management company and real estate companies to gain access to MDUs in the coverage area. We then activate MDUs using radios on the roofs of the buildings and then start signing up customers in those buildings. Once we hit our penetration targets in a building, it is important to keep the penetration stable and growing until we hit the full utilization of the transmission site on the tower. We did this analysis that extracts the buildings that we launch in a given period and shows how quickly they turn profitable. This is how we run the business and drive our capital allocation. The analysis looks at all the buildings activated in each quarter of 2020 and the first quarter of 2021 by dividing them into cohorts based on the quarter in which they were launched. By looking at how the cohorts develop and grow over time, you can see profitability on a granular basis, something that is not obvious based on our current growth trajectory. And what it shows is that we quickly generate revenue and launch buildings and become profitable across all cohorts in three to four quarters. All of the cohorts of buildings launched in 2020 and the first quarter of 2021 are consistently growing revenue as penetration within the cohorts of buildings increases. Our average MDU penetration across our entire network as of last quarter is 16 percent 30 days after launch, 24 percent or more one year after launch, and 30 percent or more after three years after launch. There is a tremendous demand for our product. Our oldest cohort in the analysis, the first quarter of 2020, grew revenues at 25% year-over-year in 1Q22, even eight quarters post-launch. Now turning to profitability, our analysis shows that all the cohorts turned profitable within three or four quarters. Despite the fact that each cohort is a unique mix and makeup of buildings, the time to profitability was similar, and the time to profitability has decreased when compared to 1Q22. 2020 cohort, which I think is great. Cohort profitability also continues to improve after breakeven, and the margins for our 2020 cohorts continue to scale into the 40-plus percent range. This rapid turn to profitability is due to our operating model. We have relatively low fixed costs, which is supported by our continued focus on reducing our unit economics over time. As highlighted in the analysis, we saw an 18 percent decline in our cost of vertical asset hardware, over the last two years and a 70 percent decline in hardware costs per MDU building in the same timeframe. We absorbed these fixed costs relatively quickly and operated a largely variable cost operating model going forward. This cohort analysis should give investors a unique insight and confidence in StarE's business model as it shows how well we've performed in deployed buildings in our base over the last two to three years. With that, let me turn it over to Alex Muliberto, our Chief Operating Officer, to go through the operational details for the quarter.