Hi, thanks for joining us, and welcome to the 51st annual J.P. Morgan TMT Conference. My name is Philip Cusick. I follow the communications and media space here, and I'm pleased to welcome Jessica Fischer, CFO of Charter. Jessica, thanks for joining us. Happy to be here. You know, I thought we'd start with, you know, the conversation has been the U.S. broadband market. We had an acceleration during COVID. Mm-hmm. We're back to roughly the pre-COVID rate of growth. How do you think about the potential growth in this industry from here and Charter's piece within that? Growth of the industry, I think about in a few steps. You know, first off, you have sort of what happens with broadband penetration to homes overall. There's a couple things that can drive that. You have demographics that'll drive that, but you also have the build that we're doing into rural spaces, right? Enabling the connection of additional customers, which I think drives further penetration of broadband across the industry going forward. You have what you talked about, you know, there was pull forward during the pandemic. We have seen just a little bit of give back over the last several quarters to mobile onlys. As usage increases over time, I think eventually you probably get those back into broadband services, so I think there's potential for the industry to grow in that respect as well. Then there's household growth, and household growth kind of is what it is, but we take advantage of it as it happens, right? On the Charter side, I think about it in terms of our initiatives, like what is it that we're doing to grow inside of that broadband industry growth. In the first part, you have what we're doing around expansion. I think we'll take an oversized piece of that growth of broadband penetration that's related to connecting additional customers, because we're doing a lot to go connect additional customers in rural and all across our footprint with the investment decisions that we're making to build customers there. The second piece I think about is sort of, well, how does the evolution plan impact it? What we're doing in network upgrades. You know, we're competing well all across our footprint today, but I think what we're doing in upgrading the network will be powerful in how we compete going forward in the future. On the convergence side, you know, what we're able to offer around mobile, I think impacts the way that we'll be able to penetrate the market going forward. I think it's a big part of the growth profile, both for mobile and for broadband. We know that customers who connect through our mobile and broadband connectivity products have lower churn than other customers. As we further penetrate into the mobile market and get better brand recognition across that market, I think we'll also bring more broadband customers in with that. When it comes together, I think we still have a great growth profile, whether it's in broadband, or growing financially because of what we're doing in broadband and mobile going forward. Really growing with the broadband market, but also growing inside of it because of what we're doing around our investments in the network. You started with rural, so let's continue with that. Charter's been expanding more aggressively than most of your peers already. Mm-hmm. You've got the RDOF program, which is up and running now. We've got BEAD, which is coming down the pipe. Tell us how rapidly you're growing now in terms of expansion, both in footprint and out of footprint, and then what's the potential for that to accelerate further from here? Yeah. You know, we've had this kind of consistent year-over-year growth in our footprint, that's I think of it as business as usual and that we'll continue to do. On top of that, in this year, we're adding 300,000 rural subsidized passings. Those passings come with extraordinarily fast penetration. I think, you know, 40% after six months and growing well from that point. We are continuing to invest in expansion, so we've guided to, you know, line extension spend inside of this year that'll be $4 billion, and in the next two years to also be at amounts that are sort of similar to that. We plan to continue to expand into those spaces. It's interesting, you know, we're getting subscriber growth out of it already. You saw subscriber growth coming out of subsidized rural inside of the first quarter. You continue to get subscriber growth from that over time. When I think about what the perpetuity growth rate of the company will be because of the investments that we're making in expanding the network, because of the access to additional passings that you get by having built those passings today, it's not, it's not growth that you get all at once. You know, we're investing for the long term, I think that it adds long-term growth to the company. Maybe it's also important, not only are you building those areas, but nobody else is. So what's the value of keeping others sort of away from your footprint? You know, there certainly is a defensive aspect. I would tell you know, you say no one else is building, but we certainly see others now sort of waking up to the opportunity that I think we saw with RDOF. The good news for us is we have kind of a machine up and running, and so we're more prepared, and already kind of out there building in a way that enables us to be successful in winning some of those builds. Yeah, I, you know, I think that it is valuable from a, from a defensive perspective as well. Not very often that the government decides to hand out $42.5 billion to get people to build broadband. It's a once in a lifetime opportunity. We're excited to have the opportunity to do it because it really pushes the edge of our footprint out, in a way that enables us to serve the communities better, but also, that means that it's us and not someone else there at those edges of our network, right? Recognizing that it's early in the BEAD process, can you give us a little bit of a preview of what you've seen from some states? You know, BEAD money hasn't started to flow yet. What we see from states in going through the subsidized rural grant process is that people want to make sure that their networks actually get built. I think we saw in RDOF some bidders who maybe weren't as prepared and who weren't ready to go build the network the way that we were. I think we're being successful in our state grant processes because they wanna make sure that they have a company that's gonna be successful in executing on the build and actually reaching consumers. To your point a minute ago, I think you added 44,000 rural passings in the first quarter. What's the acceleration potential from here again? You said 300,000 this year. Yeah. We have to go faster. Yeah. We said, you know, back in December, we were at 15,000 or 20,000 a month then. We expected to roughly double that pace by the end of this year. That still continues to be our plan. We knew, you know, the Q1 is always slower, when half of the country is covered in snow and ice, it's difficult to build at the same pace that you can in the spring, summer, and fall. We're on plan with the builds as they stand right now, and we fully expect to reach our 300,000 and to be at pace as we go into the end of the year, consistent with what we have said already. Okay. Let's talk about the other segments within the growth of the business. ACP has been a big program, and I believe you've been a big user of that. What's the strategy there, and how durable do you think that revenue stream is? You know, we've been a big proponent of the ACP program. Can you just maybe tell people what ACP is? Yes. Yeah. ACP is a broadband subsidy. Customers get around $30 per month in subsidy toward their broadband service. We've been a big proponent of the program. We've done a lot of work to try to sign up a lot of our subscribers for that program. It's because it's really valuable to consumers. If you think about the more price sensitive segment of the market, that price sensitive segment often sort of, I'm gonna say, came in and out of our subscriber numbers over time because they're customers that had more issues with churn, whether that was non-pay churn or voluntary churn related to a lack of ability to pay. They'd come out, and they'd come back in. What we see with ACP is that customers are able to be consistently subscribed to our product, which it's good for us in terms of a consistent subscription revenue. It's also good for the customers in that you think about, who's being subsidized in these cases, that they continue to have availability of connectivity products in the home, for extended periods of time. We're big proponents of the program. We hope that it continues, that it continues to be funded because of what it does for consumers. We think it's valuable. Do those customers typically take more than their subsidized revenue? I mean, ACP and they're also stacking, in many cases, USF on top of that. Are they paying every month as well? You know, some of them are, and some of them were paying customers as well prior to the ACP program coming in. I think that they are customers who are viable customers, but customers who are otherwise more prone to churn than other customers. Is that a customer base that can continue to grow, or have you seen it sort of come through and you feel like it's sort of tapped? You know, I mean, it's all about eligibility and sort of what portion of the population is eligible for the program in the way that it stands, and then how easy it is to get people connected to the program. As I said, we've done a lot to try to connect as many people who are eligible as we can, and to enable them to take advantage of what's available to them. I think that. I guess in terms of future growth, it's hard to say. It's all about kind of who's qualified and whether you can get them connected. Got it. Yeah. A huge number of American households are eligible for it. Yes. USF, I think it was maybe 30% ever touched it. Right. I imagine this will be higher. Yeah. Okay. Let's talk about the network upgrade, and you've talked about it in sort of three steps. My question is not to go through the three steps. Why the different conclusions of the network upgrade in these different areas of the country, and what's the common denominator that means, you know, One portion of the country would be step One portion step two, One portion step three? In cable networks, we always endeavor to upgrade all of our passings consistently, right? Even with our three step process inside of markets, you'll see that sort of consistent upgrade across an entire market. Some of that is because we don't redline, we think it's important to upgrade markets as a whole, and some it's because of the architecture of our network, that's the way it makes sense to do it. Ultimately, you know, it's a three step process related to what technologies are available as we sort of go through each step of the process. The places that you choose to go first, a lot of it is based on a multitude of factors that have things to do with things like technical readiness and labor availability and technical architecture of the network. Which spaces we hit first and second and third, I guess it's unlikely that it will appear logical from the outside because it's a multi-factor sort of equation as to what makes sense to do first. Across markets, we'll hit the entire market, and that's important in terms of how you drive future technologies, right? If you think about if you're a product developer, a software developer, you have to develop products to the least common denominator around what's widely available enough that your market is a large enough addressable market. What we can do, because we'll upgrade across our entire footprint and because our footprint has such large coverage, we'll enable by upgrading to higher speeds, we'll enable the development of technologies that actually utilize those speeds. Fiber can't do that. Fiber only covers, you know, 50%, 60% of the overall market today, even if they get to their full goal. Yep. What we will do by upgrading in this consistent manner kind of all across customers is we'll enable the development of the next generation of technologies that will actually utilize those services. You answered a little bit of one of my questions, which is if I pick a city, and I won't even name one because that would create confusion, but if I pick a city, that entire city will be of one technology. Correct. It's not gonna be, you know, pockets here and pockets there. Correct. Is it the population of the city? Is it what it looks like? Is it like the geographic mix? Why that type of upgrade instead of a different type of upgrade? This is where technological readiness, labor availability, technological architecture of the network, and what technologies are available to upgrade it today versus development later. Okay. topography. Is it aerial? Is it underground? The kinds of things that make a difference are sort of a multi-factor set that came together to help us phase out in terms of what we would hit first and second and third, which ultimately the timing then drives the technology that happens there. Okay. I'll leave it alone. At the conclusion of this in 2025, I think you said 85% of your footprint will be five gig capable. Yep. It's not gonna be all DOCSIS 4.0, or not to that level. Should we expect continued higher than normal CapEx to upgrade to DOCSIS 4.0 beyond that? I'll first say we don't have a plan to go back. If we were to go back, we think that the upgrade that we're doing today will enable us to go back and do, would enable us to go back and do that second round of upgrades at a lower cost. Because of that, I think we still sit in this space that's consistent with what we've guided to before, which is that after our Network evolution project, which will end, you know, late 2025, early 2026, we expect capital expenditures, less line extensions as a percentage of revenue to be consistent with where they were prior to or in 2022, consistent or lower, I think is how we said it. Okay. Yeah. As Fiber comes in to a lot of markets and advertises today five gigs in some areas, soon 10 gigs, do you think you need to hit them head to head on speeds? I think of the cable crushing DSL over the last 10 years and what you're, to some extent, doing to Fixed wireless today. It's a marketing claims question. Yeah. The thing that we have when we upgrade, we'll have consistent multi-gigabit speeds available over the HFC network across our footprint, right? In addition to that, we also are enabling a remote OLT in the nodes that enables success-based Fiber to the Home, which means that as part of those sort of headline advertisements, we can have a very high speed and sort of advertising claim product, and we can connect customers to it on a success based sort of basis for customers who have that need and are paying sort of appropriate pricing to get there. From an overall marketing claims perspective, I think we're actually quite comfortable with where we'll be coming. I see. -out of the network evolution. In terms of delivering to customers, what they need over the HFC network and doing it in a really efficient way, I think that we think that we'll be in a very good place. Okay. If somebody really wanted 10 gigs, you could make it work. We can make it work. You can advertise that. We can advertise that. Nobody needs it. Okay. Nobody needs it. Got it. Okay. All of those things are true, though. Yes. Yeah. Well let's think one more thing in there. As you think about the other things you can do rather than just advertising speed, what other products are you putting around it? I'm gonna get to wireless. I'm thinking about other things beyond besides wireless before we go there. I know. You're saying don't talk about wireless. I'm cutting off that. I'm gonna get there. 'Cause I'm gonna get there. Okay. I wanna hear about the other stuff. Other things that we're putting around it. You know, we have the same product set that we've always had. There are still customers in the market who are interested in buying a high quality, fully provisioned video product. For those customers, we're there for them, and attaching that product, and that is still valuable for a lot of people. Oddly enough, landline voice is still valuable, for a component of the market as well. Then you have things like our Advanced WiFi, which actually adds value both to our broadband products in terms of security services that you can advertise to consumers, as well as to our mobile product, which I won't talk about anymore other than that a little bit. We'll get there. No. You know, I think we continue to drive a collection of valuable products for consumers. And to do that in a way that drives value to them, drives revenue as well. Comcast this week launched their NOW TV product. Yes. Sort of a, I don't know, Peacock plus Philo it kind of looks like. Okay. Are things like that, like a skinnier bundle ways just things that you can offer to people to sort of tighten down churn and add value. Is that interesting? you know, people ask us this question a lot as to why we've had lower churn out of video than other than other video providers. Some of that has been that we're migrating customers into bundles that are consistent with what they actually want, which includes lighter packages. Those lighter packages have been really successful. The ability to continue to do that, the question in video always comes back to the programmers, right? How you can how you buy content from them and how you can aggregate content in such a way that the consumer is still willing to buy it and the programmer is still willing to sell it to you. That is always a constraint. We have lighter packages that have been really successful. That's been a part of the reason that our video business has shrunk more slowly than others. We did not just launch it last week. We've had products like that in the market for a while. Are they that skinny in terms of some of those video bundles? I'll admit that I haven't gone into the details of what all is inside of the. There's not much in there. There's not much in there. We have some products in the market that are relatively small. You think about. We have a choice product, the Choice 15, where a customer can choose 15 channels from a set of channels. That's a fairly successful product. That is, I mean, as you said, it's pretty small. Okay. We have lighter as well, lighter packages in the market. It doesn't mean that's the limit of what we'll do. Obviously, as the market evolves, we continue to try to pull together packages, that are valuable to consumers. We'll continue to try to do that. It's interesting, you know, Comcast packaged with their direct-to-consumer product with Peacock. When you think about what we'll be able to do with something like Xumo, which is an integrated platform that will enable our customers to have sort of seamless access to our product as well as DTC products. I think that there's opportunity to do those sorts of things, in a more interesting way than maybe what we've done before. Okay. Despite those skinnier or whatever we wanna call them products, the pace of video for you has started to accelerate. Mm-hmm. -to the downside. You passed in some programming cost increases, but are you seeing customers just less interested in video, or are you pushing wireless that much harder in the sales process, and so the attach of video is sort of naturally eroding? I think that, the biggest issue in video has been and continues to be a cost issue. It relates to programmers wanting to pass through price increases in the linear business. The linear business shrinks, they try to pass through additional price increases, it's sort of a vicious cycle. I don't know why it doesn't work. Right. Shocking. I mean, to the other question, you know, We certainly sell multiple products. We've always sold multiple products in our sales process. You know, we were a landline voice, video and cable TV broadband bundle before. You know, there's one more product in that mix now with wireless. I think that the greater factor is the vicious cycle of video and absent finding a way to sort of break that cycle, I think it's difficult to not have losses of video customers. We continue to advocate for consumers to try to get packages, as you said, that they wanna buy, that are slimmer in nature and therefore more cost-effective, and we'll continue to do that. Okay. Well, let's go to wireless for a minute. We've had Comcast yesterday, all three of the wireless guys over the last few days. Everybody says that the industry's fine, they're maintaining share, and yet your numbers are exploding upward. Yes. Help me understand the value of the customers you're adding in wireless and the sustainability of that customer as they come to the one-year mark, and in theory, are supposed to be priced up to a full price. Yeah. When I think about the value of those customers, you know, first off, I would say, as I said, we're still an emerging brand in the market, and so getting in front of the largest number of customers that we can is important. I think that we've been really successful in the Spectrum One product in connecting additional mobile customers to our product. I know that people have sort of made some statements about the quality of those ads, so I would say on that front, you know, we more than half of our net additions in both Q4 and Q1 are paying lines. If you think about our port-in data, right? The number of port-ins that we're getting, from other carriers as a portion of our gross additions, is essentially the same today as it was prior to Spectrum One. The, the quality when you think about of the incoming customers is. Caloric content. Maintained the same. Yes. Maintained over that period of time. On the other side, this is another... Like, you think about the growing pains of being a mobile provider. Our port-outs are actually essentially the same on an absolute basis, not on a percentage basis, this year as they were last year. Even with a hugely growing customer base, the absolute number of customers that we're porting out to other carriers has stayed steady. That means our net porting ratios have come up fairly dramatically across the market. You know, we've looked at the usage data. We're comfortable with what's happening on free lines. Ultimately, when those customers get to the 12-month mark, they're coming out into the fastest wireless product in the market and a price that is not being beat across the mobile space. We're pretty confident and pretty happy with the set of customers that we are bringing into our mobile business. If you think about what it drives in the long term, I mean, we have the space or we certainly have the opportunity to be a big player in mobile. Like, the fact that we can create a price competitive product is one thing, but to be able to create a really high quality price competitive product gives you a lot of power to then go push into a market. It takes time to get market acceptance and to continue to grow in that space. We've been through that before. It's what happened to us in wireline voice as we were growing in that market. We think that over time, we can continue to take larger and larger sort of shares of revenue out of that, out of that market. We do it by driving value for consumers by bringing them a higher quality product, and ultimately use that to drive financial growth at Charter. Yeah. I think your competitors disparage you for going after the low end, but that doesn't mean that's the only thing you ever go after. Right. Well, ultimately, you know, as you gain market acceptance, we've seen this over time, the composition of the customers that you bring in, changes over time, if you have a high quality product, that product eventually sort of brings customers from all across the market. I'll ask. It's been answered, in case. Any incremental thinking on the cellular offload versus Wi-Fi offload, where you are in that sort of calculation? You know, I don't think of them as one versus the other, right? Offload for us is good. If we can offload customer data onto our network in one location by driving customers onto Wi-Fi connections in those locations and in another location by setting a CBRS radio that's very low cost, and that gathers enough traffic to sort of generate a good return, we should do both. I think that we'll do both. We're being really successful in offloading to Wi-Fi. Today, our CBRS trial is going well. I think we'll continue to offload more data over time with sort of deployment of our CBRS spectrum as well. Okay. We've talked about broadband and the pieces you put around it, but talk about competition. Yeah. What are you seeing from your competitors? Is there a generally rational view of pricing in the world, or are you seeing sort of silly things out there? You know, from fiber competitors, I think that they have a capital cost that they have to cover, right? Whether they're continuing to do new build or whether they're sort of looking for returns on the existing fiber that they've built, that sort of embedded capital cost is driving sort of behavior that's consistent with what you would expect sort of appropriately pricing products in the market. Fixed wireless is a little bit different in that respect. They're selling their product as though it has no capital cost, right? They said that it's excess spectrum in their network. What's interesting about that is if you have a network. Essentially what you have in the network is capacity, and you have growing usage in that network over time. When you try to sell that excess capacity, what happens is one of two things. Either you have to attrit those customers back out at the end of the day, or you have to go spend capital to create additional capacity once you get to that excess capacity point. We've seen one of those providers actually came out last week and said, "Oh, well, now we're thinking about maybe spending capital to create additional network for these." They're pricing the product as though it has no capital cost. That's not a path that works over time. I think in that space, you know, it's an inferior product. There's not a reason to sort of price it against it. Ultimately, what we do is we provide high quality products to customers, and we provide them at a value. I think that from an overall sort of market perspective, that that is still working. On the competitive side, sort of that's what I would say we see. Okay. As you look at the fiber builders, we've seen sort of a steady progress from them. Mm-hmm. Do you see any sign of actually any pulling back from the market or slowing? We have seen what seems to be some slowing of fiber builds in our footprint. It's early in that sort of in that sort of view, so I don't wanna put too much certainty on it. Certainly, I think it's reasonable to say that we have seen what looks like there could be some slowing. Okay. Let's talk about. Well, while we're talking about broadband for a second, you and I have talked about seasonality in the past, and you haven't said either way what you expect in terms of seasonality. Yeah. I understand that. Any view you can give us on sort of where we are here at mid in May? You know, I'm not gonna give additional color on the quarter here. I didn't expect it. Yeah. I had to ask. All right. Well, let's talk about business. The SMB side, we've been sort of waiting for this to come through. Yes. It's hard to tell whether that is the economy overall or the same problem in consumer, which is just more fiber competition. Yes. Which do you see? There's a few things going on in SMB. One, you know, broader economic impacts higher interest rates and somewhat less healthy consumers. I think that there is some sort of macro happening in the SMB space. The second thing, you know, similar to what we see in the resi market, we do see fixed wireless sort of taking a share of those more price sensitive business consumers who also have sort of lower data needs, that similar to other spaces with fixed wireless. I think ultimately over time as usage needs increase and as their capacity is more constrained, those customers potentially come back our way. And then the other thing that is hard in SMB revenue, you know, businesses today are taking fewer phone lines than they took in the past. What you can get from an individual SMB customer is actually changing over time, sort of related to how they're upgrading their own technologies. You have the combination of those things. On the other side of it, you know, we continue to have great pricing, great packaging for SMB customers. We continue to be under penetrated in SMB across our footprint. I think we continue to have the capacity to grow SMB in the medium to longer term. In the short term, there's some pressure on the SMB market. Nothing changing there? Yeah. Okay. I forgot to ask on wireless, you said on the call that you expected neutral working capital this year except for handset receivable working capital. Mm-hmm. You know, we've estimated that that might be as much as a half a billion dollars. I don't expect you to comment either way. Most of your peers will sell those receivables and capture some of that. Yes. Is that attractive to you? It is an interesting idea. I don't have anything to announce. Okay. I don't know why you. Yeah. instead of leaving that capital outstanding. Okay, let's talk about margins instead. Charter's invested a lot in the employee base in the last few years, with training and trying to drive a longer tenure and better employee force. Mm-hmm. Where are we in that process? I don't wanna say drag on margin, but the upfront in-investment in margin... Yes. Where are we on that sort of continuum? Ultimately, our plan in the long term is to drive down cost to service customers on a per customer basis. I think we've been clear about that. What we saw that we needed to do in the interim is because of some issues that we were seeing in employee tenure, to address some pay issues as well as some job structure issues. The impact to those you would've seen in expense, in, you know, cost to serve, sales and marketing and even a little at other expense, late in the year, last year. Once you make those investments in employees, it takes a period of time for that to bake. You've had six to nine months between the investments we made, which were to drop attrition. I would tell you that was really successful. We dropped attrition sort of faster even than we expected to. Now we're sort of going through a period of seasoning those employees. I think when you get to the sort of six to nine month mark coming out of that seasoning, that we expect to see some transactional efficiencies, which is why sort of some of the things that we've said about expense later in the year, that you, that you have some expense moderation there. It's not all sort of cash in, transactions out. The other piece, in field operations in particular, you know, we invested in upskilling our field operations employees. The advantage of doing that is that we think that we'll be able to use a lot of internal labor to drive our network evolution plan. Using internal labor gets the projects done with higher quality than I think we would otherwise get. It normalizes for some of those labor force issues that you otherwise have when you're dealing with contractors. So we're ultimately really happy about having made those decisions. I think they'll be the right decisions financially for the long term in terms of driving growth in the business. cost of service and SG&A have come up. Mm-hmm. There is an investment in growing the business, which is gonna be a sort of natural increase in cost. How should we think about the pace of cost growth from here? Can it flatten or just sort of inflect lower? I certainly think, you know, when we look at some of the line items that I was talking about, and I gave some more specific sort of notes on them in our, in our first quarter call, but, the pace of growth of most of those items moderates pretty significantly even as you get into the late part of this year. Okay. Okay. I think we're out of time. Thank you very much, Jessica. Thank you. Nice to see you. Thanks everybody for joining us. Thanks, guys. Have a great day.