Are available at the registration desk. For those of you that I haven't met, I'm Mike Rollins. I cover communication services and infrastructure for Citi. Very pleased to welcome Jessica Fischer, Chief Financial Officer of Charter. Thank you so much for being with us today. It's great to see you. Great to be here. Thanks. To get us started, first, congratulations on your upcoming role. Last week, you announced your intention to leave Spectrum. Can you tell us a little bit about your decision and the opportunity in front of Charter? Sure. First off, I just have to express my gratitude to my teams at Spectrum, to Chris, who was a sponsor and mentor through a big chunk of my career, to the Board who has been very supportive. Look, I think we've done the right things for the future of the business, right? We've made some great investments across the business that I think will carry it into the future. We took a stand in video that has changed the trajectory of the video business, which ultimately is good for broadband, and will grow the broadband side of the business. And we stuck to the strategy, right? Which is that we're selling high-quality products that have value to customers, and doing that coupled with high-quality customer service. When you put that together, the industry has been really challenging, but we've been one of the most successful teams in the industry against that very challenging backdrop. That was what enabled us to close the Cox transaction and the Liberty Broadband transaction in the last couple of weeks, and it set the company up quite well to continue to grow its cash flow over the next few years. There's a lot of exciting stuff still to come at Charter. That being the case for me, it was a good time to go take on a new challenge. I've accepted a role at Crux AI, which is a partnership between Google and Blackstone. We'll be building AI infrastructure, which as we were just talking, is sort of being a different piece in the chain here, building what will create demand on the network going forward. It's an exciting space. I'm excited to go do it. I wish the team well, and I think there's still a lot more to come here at Charter as well. Great. Well, let's dig into that. It's great to have you here to be able to talk about this. You mentioned the big news of the last few weeks was closing the Cox transaction. Can you discuss the opportunity to take your playbook, the Charter playbook, and the converged connectivity strategy now across a larger footprint? Yeah. The total footprint coming out of this, we have more than 70 million passings, only around 37 million customers. The opportunity that's there is around almost 35 million homes and businesses that we can go sell to. The way that we're going to do that, look, on the Cox side, the lever that we have is the ability to bundle products much better than what they've done before. Their video penetration is a little under 10%. Their mobile penetration is very low. Their broadband ARPUs are high. What we will go do, and we've already sort of started to go do, is we're going to go sell using our pricing and packaging strategy, which has performed better than theirs, to drive lower pricing at acquisition, and lower pricing actually sort of throughout the life cycle of the customer from a broadband perspective. But to couple that with video and mobile such that we do what we have always done across our footprint, which is to maximize the amount of cash flow that you can get per household. And when you look at where customer ARPUs are on the Cox side versus on our side, excluding the Seamless Entertainment allocation, they are not that different. So there is really a clear opportunity to be able to sort of migrate the base in a way that will be good for the customer because it will make customers churn less because we will be delivering more value, and will be good for the business because I think that we can generate unit growth over time related to sort of creating that better package for customers. And you bring that together with like the. So you have what you need to do on the revenue side. But a lot of real opportunity on the other side as well. There are some good things inside of the business, whether it is AI tools or what they are doing on the B2B side, where we can take things that they do well and bring them to our business. There are things that we do well, where we can push them into their business, some opportunities in advertising, and some spaces like that. The confidence that we have and the synergies that will come from the transaction, I would say, has increased dramatically as we have sort of dug in further. So we have raised our synergy target to more than $1 billion. So overall, there is a lot of work to do. And we are excited. I did not mention it, but in the pricing and packaging, actually, I think in the next week and a half, that we will be rolling that out over their footprint sort of at full scale. So lots of exciting work to do on that side, but I think we are really confident in our ability to sort of bend the trajectory that they have been on to put that business in a better place, and to create value for the company in doing so. You mentioned the over $1 billion in synergy now. Is there a view on speed of travel to get there? Yeah. I actually think that there's a big chunk of the synergies that come very quickly. So you get to run- rate, like something on the order of half, probably in a very short timeframe. Then I think the trajectory from there's a little more that you have to do to go get to the other pieces. But look, there's a lot of opportunity, whether it's around things like organizational structure and overhead, or whether it's around just sort of the bread and butter, contracts and operating efficiencies that we'll get implementing across the business. So I think you can get to a good amount of it quickly. Great. Maybe zooming out, just broadband competition broadly. Can you just give us an update on what's going on in the competitive environment for your broadband business? Yeah. The market is still very competitive. I think you might have heard one of our peers talk about it yesterday, but I think our point of view, it was very competitive in Q1, it was very competitive in Q2, continues to be very competitive in Q3. There are ebbs and flows as to which competitor is out there being more competitive and who has sort of backed off of offers, but the overall space, it hasn't changed, but it continues to be a competitive space. How are you seeing the threats, both near- term and long- term from fiber, FWA, and now the LEOs like Starlink? Yeah. If I think about the needs, the need that AI is driving and overall data growth or data usage growth is driving, ultimately you're going to need high speed, highly reliable, low latency networks, and those networks are wired networks primarily today. The key competitor that we have across markets is going to be the wired network in those markets, which is fiber. On the fixed wireless side, are there customers who are satisfied with fixed wireless today? Yes. But does it have the same speed or the same reliability of a wired connection? It doesn't. Will it be capacity constrained at some point in the future? I think probably will. It doesn't mean that you can't discount them as a competitor, but I think that ultimately the wired networks prevail. It's kind of interesting, if you think about satellite's been really good in rural spaces where they couldn't get connectivity before. We've talked about the impact that that's had in terms of getting those RDOF markets that we've gotten to a bit later, that it is harder to pull customers away from satellite as an incumbent than it was to pull them away from some of the previous iterations, which were very bad in service for those areas. But if I look at the product and I say on fixed wireless, we have an idea of what happened, which was ease of installation with fixed wireless was much easier than waiting a few days for a cable tech to come install your service. We've done a lot to actually change, to be able to be there same day if you call before 5:00 P.M. or next day to be competitive with that aspect of fixed wireless, which was a place that we had a blind spot, and we had to adjust to them coming into the market. In satellite, the product is more expensive. It requires a more difficult installation. The reliability data that we see today is not better. The speeds are not better. You look at it and you say, okay, will they win on brand alone? That typically doesn't carry you all the way to the end of the day. I don't discount someone who is well-funded and has a lot of really smart people working for them. We continue to monitor the situation with satellite, but ultimately from a technology perspective, it certainly feels like the right technology to prevail is wired technology. While we are talking on the subject of Starlink, can you add any perspective to the press reports on a possible relationship between Charter and Starlink and SpaceX? Look, I think the right thing to do in any market is to be out there, talking to people about ways that you can lower your costs, ways that you can utilize your network in a better way or improve the quality of service you can provide to customers, ways that you can create new products that do not exist today that might create revenue streams. We have those conversations with lots of different people all the time. Sometimes they come to fruition in something that you can announce, and sometimes they do not. I do not have anything to talk about. But I think ultimately the fact that conversations happen with peers and competitors across the industry should not be a surprise to anyone. Coming back to just the broadband dynamics, it feels like, if I think about the broadband category, just across fiber, cable, the whole thing, ARPUs were a bit softer this year. The question is whether or not we are hitting some kind of resistance point, in terms of what customers are willing to pay. Is there something more secular going on or is this just the dynamics of things being a little bit more heated on competition and convergence? What can you share with us with what is happening with ARPUs? I don't think that we've hit a ceiling, if you will. I think on our side, as I said, we don't always look at broadband ARPU on its own. One of the things in the dynamic that's happened is just in how we think about pricing inside of the bundle, and there are scenarios where if you go with a lower broadband price but you add more products, like we see that as win. We don't focus as much on broadband ARPU on its own. That being said, I think across the broadband market that there still is some space for pricing. I think it has to come, in many cases for customers, with additional value that you're providing. We did a cost pass-through in July-August timeframe, and we did a speed uplift associated with it that for those customers, it was people in older pricing and packaging plans might have lower speeds. That was significant. We see things like our Invincible WiFi product, which adds in a cellular backup, as something that provides additional value to the customer and therefore, is a good opportunity to go do something on pricing. The market, I think, continues to bear some sort of additional pricing over time. I think that there are some folks out there who were pushing their ARPU up rapidly. You see less of that, which is probably more healthy for everyone. I think that there is still capacity for ARPU to grow. It's just a question of where exactly you are. If you keep it slow and low in terms of the increases, it is easier and with value. With value. Yeah, I think that is right, that if somebody is pushing really hard, then you end up in one of those scenarios where you are working through the resetting process, and the resetting process creates some drag. But I think that there is continued capacity for inflation like, or maybe, I do not know, target inflation like movement Yep across pricing over time. I know it is not the sole focus, but I think, on the 2Q earnings call, it was discussed that these price actions can help the ARPUs improve for broadband, specifically 3Q, 4Q. Is that still the track? It is. Certainly, with the couple of things that you see, the price adjustments, which ran mid-July to mid-August, so you get about two months of that inside of Q3. In addition to that, we talked about what had been happening with retention offers, which were quite hot early in the year, and then came down in their intensity over the course of the second quarter and were mostly normalized by the time you got to June. Because of that, I think you get sequential positive movement as you go into Q3. There's always lots of factors in ARPUs as you get farther on after that. But a good sequential movement. Helpful. One other question that we've been just trying to think through is, when I think about the Spectrum broadband strategy, it's been under this single brand. On a retail basis to the customer. Given just the pickup in competition across the category, is Charter thinking through the possibility of using what I think is commonly called flanker brands, right? To create different segmentation for the market, might give you different ways of going after different value propositions. There's another side to this, which is, would you only do it on a retail basis, or could you see a world in which you might say, you know what? There's other players out there. Let's wholesale our broadband to someone, and now you have a much larger distribution engine selling on your platform? Look, never say never. There are lots of interesting ideas out there. But I think our focus right now from a brand perspective is really on improving our go to market and improving customer satisfaction in the mainstay Spectrum brand. I suspect that where you'll see our focus in the short term is on the work that we're doing around improving in that respect. One of the big focal points has been your focus and leadership on convergence. It's not just on the mobile side, it's also on the seamless video and Seamless Entertainment side. How is that going in terms of conveying that value proposition to customers? I think if you look at the couple of sets of big new offer sets that we've done over the past few years, Spectrum One was really effective going at driving mobile. The Life Unlimited launch and those new pricing and packaging has been effective at keeping that mobile momentum. Actually, we've been generally continuing to grow gross adds in mobile on a year-over-year basis, which against our growing base allows us to continue to grow at a rapid rate. And also really stabilizing the video product, along with the changes that we made to the product set there. Both of those things, I would say they don't get a great amount of credit in the market. Slowing video losses and increasing mobile uptake from a financial perspective is an unmitigated good. in terms of where we've been from a financial perspective. Then it carries into and you say, okay, well, what do you get from it in broadband? Because ultimately, even when we talked about why do what we're doing around video, well, we're doing it because you got to have an impact on broadband. And why do what we're doing in mobile, you're doing it in part because there's good financial advantages, but also because ultimately it's got to have an impact on broadband. We're seeing a big piece of that impact, right? A customer who takes our video product churns at a rate that's about 40% less than a customer who's broadband only. And when they then go activate Seamless Entertainment apps, so then go activate streaming apps associated with that video product. That churn actually goes even lower. At this point, about 55% of our customers who have access to those Seamless Entertainment apps have activated them. We're getting good uptake there, which is having good churn impact. Similarly, on the mobile side, a customer who takes internet and mobile churns about 40% less than a customer who hasn't taken the mobile product. That gets better when they take more mobile lines. Today, mobile penetration of internet customers is only about 20%. We still have a lot of opportunity to grow the mobile business, we have opportunity to continue, and we've been effective at adding mobile lines inside of the base in order to increase that impact. You might say, okay, but where does that go? Why don't we see it in net adds? The issue in net adds has been a gross additions problem. Then we go back to the prior question, and I say the focus that we have is on our go to market and on improving customer satisfaction, because we think that's what we need on the gross additions side. We're actually doing really well on the things that are impacting churn, which is helpful, but we got to go crack the nut on gross additions to get to the right answer. Does that mean, as you think about what you get to see internally that we don't necessarily get to see in the outside world, that by having significantly better churn from these converged bundles, the reason people leave you might just be compressing to moves, which is almost unavoidable, right? If someone moves, they can't take their broadband with them, such that you're seeing that benefit and the lifetime value of your customers get better, and it's really just a function, as you mentioned, of improving the front end. Overall churn was on a huge downward trajectory during COVID, and then we thought that it was going to come back up, and it has stayed low, and moves have stayed low and gone even lower. Look, there's always a mix of voluntary and non-pay and moves in the overall churn component. But it's been quite low. It does have a hefty and great impact on customer lifetime value. But we got to go out and use go to market, and use brand to go acquire customers. Speaking of that, I think Nick Jeffery may have just arrived at Charter. Yeah, I think he's been here a week. A week. Okay. A little over a week. a week. So any early indications on how Charter is looking to enhance that go-to-market execution and customer acquisition engine? I don't want to promise anything on Nick's behalf yet. But I think he's been really successful in other businesses with that improvement in go- to- market, with the improvement in customer satisfaction. I do see already the focus that he has around those things, and I think that that ultimately will be really good for the business. I'm excited about having him on the team. I'm excited to see what he does. I can't speak to it yet, but look, I have a lot of confidence that he's going to do great things for the business. And I think we know that we have room for improvement. We've talked about it, and looking forward to see what that is. How is the increasing emphasis on upstream traffic, including with what's happening with AI, changing the way you think about Charter's network differentiation and the investment in network modernization? Yeah. With the growth in demand for data and what it will take to serve AI, I think you need speed, I think you need reliability, and I think you need low latency. And all of those things are things that we've already made a bunch of investment in our network evolution to be able to deliver on our network. So I think that that piece positions us well for what will be sort of the competitive marketplace of the future. We already see the increasing data needs happening. Upstream data usage is up around 20% in the year-over-year. A lot of that driven by things like self-driving cars uploading lots more data. As we get additional devices at a mass scale using those kinds of models, I think we expect that is going to increase traffic a lot, which puts more pressure on more capacity-constrained networks, which should be helpful for us. The other side of that is we will also be able to use AI inside of our own business in ways that will benefit us, right? If I think about the network itself, we have been, over the course of network evolution, adding telemetry, which is like sensors, essentially, to all of the active components of the network. Previously you might have said, oh, well, having more actives in your network is actually detrimental. But in this case, because everywhere where we have an active component, we are going to get data back from that active component on the functioning of the network and how well the network is working. It means that we can be very targeted then, in improving service and in making changes to the network that need to be made, knowing where we have an issue, targeting, fixing that issue very quickly, and getting it done before the customer sees that they have a problem, which actually ultimately could end up advantaging hybrid networks versus a more passive network, just because of the amount of data that we will have and what we can do with that in terms of cost efficiency and customer service going forward. There is one other element as I try to think about just TAM expansion for Charter and cable. There is the edge data centers that you effectively have with all of your local presence. As AI workloads potentially become increasingly distributed, what does that mean in terms of a monetization opportunity for Charter? Yeah, it is absolutely an untapped revenue opportunity. When we get through with our network evolution, we will have 250 MW of capacity that is already fiber connected, that has power and backup power already there, and that has cooling, because these are effectively data centers for us, and we have just shrunk our footprint inside of them. I think particularly as AI moves in the direction of inference AI, that placement that is a bunch of small data centers at the edge of the network, but very close to the customer, will make that a really unique asset in terms of its capacity for monetization. I think it is an exciting opportunity, and we are trying to figure out what the right way is to sort of get to the point of that monetization. You've already given us some examples on how AI can really improve efficiency. As you look out over the next few years, whether it's AI or other aspects of driving efficiency, what are the ways that Charter can generate measurable cost savings or even revenue enhancements? Yeah. The things that we're doing right now, right? We've implemented AI and other sort of digitization tools that are allowing us to contain many, many more calls in digital channels in the call flow. That's advantageous from a cost perspective. It's also actually improving customer experience and improving the experience for the folks in the call center doing the work because their tools are better. It enabled us as we closed the Cox transaction to have extra capacity to be able to bring in quickly some of those Cox workloads. Our integration is also speeding up because of what we've been able to do with AI, bringing them inside of that space. So that one I think is exciting, and it's kind of immediate. There's also some things, and it's kind of fun even on the. We had folks. These tools sort of democratize the ability to fix the problem that you're dealing with. Inside of our field ops organization, we had someone who developed a tool that then has already been sort of now scaled to the broader organization that helps maintenance technicians prioritize their work better, right? Get to the right place more quickly and ultimately will generate cost savings. It's going to make them dramatically more efficient. So some super exciting things kind of happening in real time. Look, I think there also continue to be opportunities on the cost side where we can go do some things to really make ourselves more efficient. I think that we see the need to go get after some of those things. You saw us do some things even that'll have an impact between now and the end of the year that are continuing to be, maybe not bread and butter, but doing the right thing for the organization around whether it's centralization of some spaces where that's the right thing to do, or benchmarking our benefit structure against others and making sure that we're aligned in ways that are beneficial from a cost perspective. We'll see benefits from that in the second half of the year. I think there continues to be a lot more to do on that front in addition to the synergies that we'll get from Cox. There's exciting stuff to do to drive financial outcomes going forward as well. On 2Q earnings call, Charter talked about standalone EBITDA being better in the second half of the year. Is that still tracking? Is it really more just about the political ad benefit, or is it more about, in terms of delivering that standalone better EBITDA, really some of these cost opportunities that you just shared? It is definitely a good amount of both. You do have the benefit of political advertising in the second half of the year. You also have the rate adjustment that we did inside of the July-August timeframe. You have the things that I just talked about that we did on the cost side around some organization enhancements as well as some of the things that we did around overhead costs and normalizing those costs to the marketplace. The combination of those things, I think, gets you to that sort of better performance from an EBITDA perspective in the second half, along with political advertising. I do want to point out just from a reporting perspective that you will not actually see Charter standalone EBITDA in the reporting for the second half of the year. Inside of Q3 and Q4, we will do standalone reporting for Cox and Charter pro forma revenue, and KPIs to customer metrics. On the cost side, because things integrate so quickly and some of the ways that I was talking about where you are having Cox workloads that are moving to a Charter call center where you have people, organizations on the overhead side that are already sort of largely collapsing together. Because of that, trying to pull that back apart into what belongs to which company is very difficult. So we will not provide it in that way. And maybe just taking just another step back, I want to hit a little bit more on just some of the financial opportunities. Do you see further opportunities for large-scale consolidation within the cable and broadband category? How do you think Charter's role will play out in that context? Look, we like cable businesses, and we think we're good stewards of cable businesses. Where it makes sense from a shareholder accretion perspective, and from an industrial logic perspective, which I think combinations of cable businesses do, we'll look at M&A. I think today the standard for increasing your leverage in one of those transactions is very, very high. It would be a surprise to me to see us do a transaction that did that. But look, we want to do the right thing to drive shareholder value. In doing that, we want to be sort of good stewards of capital from an investment perspective. We want to be financially prudent across the business. Ultimately, I think that drives the best outcomes for the company, and so that's how we would approach on the M&A side. Is there any other advice that you have for investors as people are thinking about how to incorporate all these financial contributions from Cox, just in terms of not just obviously just bringing in the subs and the revenue, but you mentioned earlier that some of the management that you're going to have to do around the ARPU side, the risk that certain ARPUs come down as you're trying to get growth in the converged packages. Are there some timing issues, some revenue headwinds, repricing that people should just be mindful of? Yeah. First, I'm going to take another minute on reporting. Mid-October, we will give you a trending schedule that has pro forma for both legacy companies, as well as the combined to help from a modeling perspective. The one metric that will not be inside of the pro forma for Cox is on the business side, business passings, and business customers. Their definitions are enough different from ours that we don't think it makes sense to report them at this time, so they won't be in there. From an overall reporting perspective, I anticipate that with the transaction closing in the quarter, we may report slightly later than our normal reporting schedule, which has sort of long been contemplated as a possibility. We'll let folks know when that date might be. In terms of how you think about then going and doing the modeling, I think on the revenue side, recognize that, as I said earlier, their customer ARPU isn't that different from ours. There's not sort of immediate repricing of the base. What will happen is in acquisition, we'll be bringing people into better acquisition pricing. Then for Cox customers who call in and are looking for different pricing, you'll see them also migrating onto new pricing paths. That looks a lot like what we did in Time Warner Cable and in Bresnan, and actually did with our own base with the Life Unlimited packages. I think that it can be maybe not perfectly linear, but what you should see is potentially their component of broadband ARPU, like sort of comes down over time to get people into more competitive broadband pricing. But at the same time, that revenue comes back on the other side in the form of mobile and video. From a synergies perspective, we talked about, I think there's a big chunk that comes early, something on the order of half, then after that, you have a good blend into getting to our synergy target, where we have a lot of confidence. On the capital side, we gave some very rough thoughts on that inside of the proxy materials. We talked about that there might be a little bit of mix, sort of what's OpEx versus CapEx, from an integration cost perspective. But over time, what was in that model and what we believe to be the case is that their capital should trend to something that looks much more like Legacy Charter's capital from a capital intensity perspective. Not today, but in the forward look that we've given you, where that capital intensity trends down to a level that I think is fully sustainable in terms of the investments being made in the business, but creates a very healthy and large free cash flow going forward. How is Charter balancing now return of capital to shareholders, and how do you think about that relative to just reducing the net debt leverage? What I wonder about is just given where valuation is, should you just keep chipping away and lowering the leverage if you're not getting any credit for the buybacks? Yeah. Look, we just lowered our leverage target to 3.5x, which I think that we'll get to over the course of three years. In doing that, we were trying to thread a needle between different sets of investor and debt holder priorities. We certainly had heard many of our capital holders who saw delevering as a priority, and we've created the path to get there. I think that we've done that while leaving space in terms of the amount of free cash flow that there is to continue to be able to buy back equity at what we believe to be very valuable prices, right? I don't know. But where we'll create value for shareholders by doing that. As I said before, look, ultimately, we're trying to be good stewards of capital, to allocate both back into the business and investments in the right way, but then also be financially prudent in a way that drives value for shareholders. If we can thread the needle around this point in a way that gets at both of those categories, we feel like that'll be a good outcome for shareholders and debt holders alike. Very lastly, just anything that you want to leave us with that as you see on the inside of Charter that you just feel is being missed or underappreciated by the market? Sure. Look, the valuation would tell you that people think that cable businesses are in for a very long and detrimental road, and that is not what it looks like from the inside, right? I think we have some work to do around what I said in go-to-market and in customer satisfaction, but actually, I think we have all of the tools to go do that. I think we have work to do around the cost side as well. We have all of the tools to go do that. In fact, the way that we're able to compete in front of customers, we compete quite well, and we have the right technology, the right network to be able to drive and to be one of the winners in the long-term business going forward. I really think it is that. It's that cable, I think, continues to compete well in the very long- term because we have the right capacity, the right networks, and the right strategy to be able to deliver to customers. I think the picture is a lot rosier than people have priced in, at least. I look forward to seeing what that looks like in the future. Thanks so much for being with us today. Thank you.