Luke T. Szymczak - Frontier Communications Corp. Daniel J. McCarthy - Frontier Communications Corp. R. Perley McBride - Frontier Communications Corp..

Batya Levi - UBS Securities LLC Scott Goldman - Jefferies LLC David Barden - Bank of America Merrill Lynch Frank Garreth Louthan - Raymond James & Associates, Inc. Philip A. Cusick - JPMorgan Securities LLC Simon Flannery - Morgan Stanley & Co. LLC Amy Yong - Macquarie Capital (USA), Inc. Arun A. Seshadri - Credit Suisse Securities (USA) LLC.

Good day, everyone, and welcome to the Frontier Communications Q2 2017 Earnings Conference Call. This call is being recorded. At this time, I would like to turn the call over to Mr. Luke Szymczak. Please go ahead, sir..

Thank you, Jonathan. Good afternoon, everyone. Welcome to the Frontier Communications Second Quarter Earnings Call. My name is Luke Szymczak, Vice President of Investor Relations. With me today are Dan McCarthy, President and CEO; and Perley McBride, Executive Vice President and CFO.

The press release, earnings presentation, and supplemental financials are available in the Investor Relations section of our website, frontier.com. During this call, we will be making certain forward-looking statements. Please review the cautionary language regarding forward-looking statements found in our earnings press release and SEC filings.

On this call, we will discuss GAAP and non-GAAP financial measures as defined under SEC rules. Reconciliation between GAAP and non-GAAP financial measures are provided in our earnings press release.

Please refer to this material during our discussion, and review the cautionary language concerning non-GAAP financials and other measures in our press release. I will now turn the call over to Dan..

Thanks, Luke. Good afternoon, everyone, and thank you for joining us. I'm pleased with the company's execution during the second quarter as we've made good progress on our key initiatives. This progress was driven by our ability to implement our strategy to improve customer retention, enhance the customer experience, and improve our cost structure.

In particular, we achieved a very significant milestone in our goal of stabilizing the business with the sequential improvement in FiOS voluntary churn in the CTF markets, which contributed to sequentially improved net additions despite unfavorable seasonality.

During the second quarter, we also saw stability in our commercial business, continued cost synergies and savings, and we successfully refinanced higher interest rate debt and extended maturities.

I believe that this quarter will come to be seen as an inflection point as we continue to execute on a number of programs to accomplish our $3.8 billion annual adjusted EBITDA run rate objective.

Perley will provide more details in a few minutes but we expect ongoing stabilization to continue which will result in adjusted EBITDA margin expansion during the second half of the year.

While there is still a lot of work to be done, the progress we have made this quarter gives us confidence in our ability to achieve our adjusted EBITDA run rate objective. Now, turning to some of our key results during the second quarter starting with our consumer business.

We continue to make good progress at stabilizing our consumer business highlighted by the churn improvements in CTF FiOS as well as stable ARPC. We also continued to successfully refine and enhance our retention tactics.

As a reminder, the impact from the account cleanup is now entirely behind the company, and we are focused on getting voluntary churn back to benchmark level.

In addition, we remain on track to roll out our consumer-friendly FiOS self-installation process in the second half of the year, which we expect will improve customer satisfaction by providing customers the ability to complete FiOS installation on their own schedule.

We expect this process to increase efficiency and improve internal resource utilization by reducing our reliance on contractors. Finally, we continue to make progress in our field operations in the CTF markets, including California which was impacted by challenging weather conditions in the first quarter.

With regard to our Legacy operations, churn and ARPC stabilized compared to the first quarter of 2017, which was offset by lower-than-expected broadband gross adds primarily due to DSL.

Given our ongoing commitment to refine and enhance our retention tactics, as well as the improved seasonal trends, we expect to see improvements in these metrics in the second half of the year. Now, turning to our commercial business. We are pleased with the progress we are making as revenue have stabilized during the quarter.

Total revenue was relatively flat with the first quarter excluding our partnership business which we sold on May 31. As a reminder, our commercial business is a relatively new unit created late last year headed by Ken Arndt.

During the quarter, the commercial sales focus was on carrier sales and market share growth opportunities leveraging both our direct and indirect sales channels. Our ability to stabilize the business in Q2 was driven by growing wallet share with enterprise customers via large bandwidth services.

We are focused on enhancing our customer acquisition strategy, simplifying the process of doing business with Frontier, improving billing and product pricing evolution, and driving growth with cloud-based VoIP and data networking solutions.

As a result, we expect to see continued improvement during the second half of 2017 compared to the first half of the year. In addition to the progress we have made across our consumer and commercial businesses, the company is starting to benefit from our overall efficiency and cost reduction initiatives.

Specifically, during the quarter, we reported lower content cost partially due to our increased scale, a trend which we expect to continue for the remainder of the year.

We also expect to see some of the benefits associated with the implementation of the first phase of the Pega platform during the second half of the year, which ultimately will transform the customer experience, improve customer care, increase retention, and drive higher customer acquisition.

In addition, we benefited from lower overall maintenance cost due to leveraging third-party partnerships, as well as efficiencies from moving to a centralized reporting structure. These and other programs resulted in Frontier achieving a modest increase in adjusted EBITDA margins compared to the first quarter despite the typical seasonality in Q2.

Given our commitment to achieve another $350 million in cost synergies by mid-2018, we expect to see an improvement in adjusted EBITDA margins in the back half of 2017. Finally, during the second quarter we completed our term loan facility and upsized cash tender offer for our 2020 notes, which lowers interest expense and extends maturities.

Before I hand it over to Perley, I also wanted to highlight the success we had in increasing the breadth and experience of the senior management team which we expect to add significant value to the company longer term.

Some of the recent additions include John Maduri, as EVP of Consumer Sales, Marketing, and Product, who recently served as President of the Commercial Business Unit at Cable & Wireless Communications; Chris Levendos as Executive Vice President, Field Operations, who is the former Head of the Network Deployment and Operations organization at Google Fiber, as well as a 25-year veteran at Verizon; and Victoria Boston as Vice President, Sales and Retention, who is also a 25-year Verizon veteran.

So in summary, we are pleased with the progress we made during the second quarter as we executed well on a number of key initiatives. Looking forward, I am confident in our ability to further stabilize the business and believe we are well-positioned to achieve to our $3.8 billion adjusted EBITDA run rate objective.

I'll now turn the call over to our CFO, Perley McBride, to discuss our financial performance..

Thank you, Dan, and good afternoon, everyone. I will first start with a more detailed overview of our second quarter financial performance and provide our outlook for full year 2017. We will then open up the call to your questions. We were pleased with the company's second quarter execution given the progress we made on our key initiatives.

Total revenue came in at $2.3 billion or a 2% decline compared to the first quarter of 2017, and we continued the trend of sequential improvement in CTF revenue in Q2. As you can see on slide 5, we continued to execute on our cost reduction initiatives highlighted by the $35 million reduction in adjusted operating expense in Q2.

This resulted in adjusted EBITDA of $906 million or an adjusted EBITDA margin of 39.3%, a modest increase from the first quarter of 2017. We continue to target adjusted EBITDA margins above 40% and remain committed to achieving $350 million in additional cost synergies by mid-2018.

Our second quarter results include a $532 million after-tax goodwill impairment charge, which has an immaterial impact on our secured debt capacity. Adjusted free cash flow was $205 million, up from $175 million in Q1 2017 due to some seasonality in our working capital. Please turn to slide 6.

Revenues for our commercial business were $982 million or $967 million excluding the partnerships business, which was consistent with Q1 primarily due to net add progress particularly with our remote home office and small business customers.

As a reminder, the Frontier partnerships business was not a strategic asset, and consisted of two contracts and four call centers was an immaterial impact on adjusted EBITDA. As Dan mentioned, we expect to see improvements in commercial during the second half of the year compared to the first half of 2017.

Consumer revenue, which consists of CTF Operations and Frontier Legacy was $1.1 billion, down $40 million or 3% sequentially from Q1 of 2017. Please turn to slide 7. Q2 is typically our seasonally toughest quarter, and we did experience higher-than-expected Legacy DSL voluntary churn due to seasonal moves.

As Dan mentioned, we expect to see improvements in these metrics in the second half of the year given our ongoing commitment to refine and enhance our retention tactics coupled with enhanced marketing efforts in our CAF (11:28) territories and improved seasonal trends. Please turn to slide 8.

We are very pleased that we were able to overcome the challenging seasonality in CTF and achieve a sequential improvement in both voluntary and involuntary churn for CTF FiOS and an improvement in the CTF net add trends across all products in CTF while maintaining stable ARPC. Please turn to slide 9.

Consumer ARPC in our Legacy business was $63.65 and relatively consistent with Q1. Legacy ARPC was positively impacted by higher-than-expected voluntary churn of low-priced DSL customers, which was partly offset by video customer losses.

ARPC within our CTF markets was also consistent with the prior quarter coming in at $106.25 and in-line with our expectations. As a result, our combined ARPC of $80.38 for the quarter was also consistent with the level of recent quarters. Please turn to slide 10. During the first half of 2017, CapEx was $578 million.

The Connect America Fund, or CAF II program, requires companies that accepted funds to deploy broadband to 40% of eligible locations by the end of 2017. We're proud to report Frontier has reached that milestone in nine states and is on track to accomplish this requirement in the remaining states.

Frontier now provides broadband to 238,000 households and small businesses in its CAF-eligible areas. CAF II investments enabled approximately 22,000 households in Q2. Please turn to slide 11. Frontier obtained $1.5 billion senior secured Term Loan B facility maturing on June 15, 2024.

In June of 2017, Frontier used cash proceeds from the Term Loan B, offering to retire $763 million of 8.875% Notes due 2020 and $527 million of 8.500% Notes also due 2020.

Our near-term maturity profile is manageable for the $583 million of bonds due in Q4 of 2018, $434 million due in 2019, less than $1 billion due in 2020, and we continue to have an undrawn $850 million revolver. At the end of the second quarter, our covenant leverage ratio was 4.2, and it was 4.39 at the end of Q1.

Please turn to slide 12 and our guidance. In terms of our adjusted free cash flow guidance, we are narrowing the range to $800 million to $900 million, which now includes a narrower capital expenditure range of $1.1 billion to $1.2 billion, and zero cash taxes excluding any impact from legislation that may occur.

Thank you for taking the time to join us on the call today. And with that, we will open the lines to take your questions.

Operator?.

Thank you. And our first question today will come from Batya Levi with UBS..

Great. Thank you. A question on the broadband side. Can you provide more color on the strategy to improve the gross adds going forward? When we look at the Legacy side, it looks like the gross adds were down year-over-year.

How do you plan to stabilize that? And on the CTF side, adjusting for the account cleanup last quarter, there wasn't that much of an improvement. So – and I believe you were pretty promotional this quarter and cable is increasing competition.

So can you just provide more color on how we should expect broadband trend to improve from here?.

Batya, this is Dan. On the Legacy side, what we saw really was an uptick in the churn that was associated with moves, about 7,000 to 9,000 units there. I think on the gross adds side, there was a huge amount of focus on CTF and really stabilizing CTF.

So, some of the new marketing programs that are being rolled out are really reflecting some of the speed availability that we have in those markets. Looking at the cap, two markets are opening up. And we're starting to see some improvements on that already.

So we feel pretty good that we'll see those improve as we get into this quarter and to the next quarter. As far as CTF goes, Q2 has historically been a very slow quarter for the three states. We've looked historical performance on gross adds and we made some conscious decisions around marketing to deal with the seasonality effect that happens there.

We're back in the market with new offers, slightly higher speeds, and we feel pretty good about that. Those offers launch really this week, and we're expecting to see continued voluntarily churn reduction, as well as an uptick in gross adds, and the combination of the two is where we see improvements in net as we get into this quarter..

Have you seen that improvement in July after the second quarter ended?.

We did see an improvement in voluntary churn. As I said, we're launching the new offers really over the next week. So we're confident that the trend that we saw in voluntary churn will continue, and we think that we have a very compelling offer going into the market..

Okay. One more if I could. The consumer business fell about $40 million on a sequential basis.

Can you provide more color on the split for the CTF versus Legacy?.

Yeah, Batya. It's Perley. Yes, the CTF side of – well, in consumer – let me just talk about it in terms of on that customer side, I think this was a better way to look at it than kind of consumer between CTF and Legacy.

As you saw, when we normalize for the sale of the Frontier partnerships business, you'll see that the commercial business was relatively flat quarter-on-quarter, which then basically gave CTF customers – when you look at the CTF customer side, it declined about $28 million, which is an improvement over last quarter's $38 million that we quoted when you adjust that for the impact of the NPVs.

So the Legacy side of that declined at about $14 million while last quarter we saw that decline about $5 million. And so Legacy didn't quite perform as well as we wanted it to, but I think everything was in-line with the continued improvement on CTF that we saw..

Okay. Thank you..

And our next question comes from Scott Goldman with Jefferies..

Hey. Good afternoon and thanks for taking the question. I wonder if you maybe could just talk to us a little bit about how the synergies start to layer in beginning in 3Q.

And if we think about your commentary not only around toward the exit rate but the expectation that revenue continues to stabilize from here and you have these synergies layering in, and presumably some additional cost cutting that you've talked about in the past.

Is it a view that 2Q is sort of the trough quarter for EBITDA and we should move higher from here into the back half of the year? Thanks..

So I think a multi-parted question there, but let me take you through it. So for our EBITDA improvement, it's not just about synergies, it's also about revenue stabilization as we've chatted about. I think we saw a good progress in the commercial business unit stabilizing.

As Dan said, the commercial team now has roughly six – they've had – working together for now six months under Ken's leadership. And they are making good progress now. We do expect commercial to continue to improve in the back half of the year. On the consumer side, we've always said that consumer stabilization will continue to improve.

And we do expect it to continue to improve but it's a longer trajectory to kind of a true stabilization on the consumer side than commercial.

And then as you mentioned, our $350 million of synergies really kind of begins in Q3 of this year, and we do expect to see kind of a – I'll probably say it's probably a fairly linear way of how we're reaching the ultimate $350 million by the end of the Q2 of 2018.

And so you can probably build in that we're kind of seeing a linear trend of starting to realize those synergies in Q3 to Q4 to Q1 to Q2. It won't be completely linear because there is some ebb and flow, but that's probably a good way to do it.

And so we do expect to see improved EBITDA in the back half of the year as long as we can continue to see the improvement in commercial, consumer stabilization and then our synergy programs all kicking in..

Great. And then one additional one. Dan, I think you mentioned the uptick in move-related churn impacting Legacy broadband in 2Q. I'm wondering if you guys could quantify how much the finalization of that onetime automation process impact had on Legacy.

And, Dan, if you go back to prior to the way this deal closed, Legacy had been growing broadband 20,000, 25,000 a quarter.

Where do you see the path to get back into positive broadband adds on the Legacy side going forward?.

Scott, let me take the second part of the question. Perley will probably take the first part. So, Scott, I think that when you look at what's necessary to get the train back to positive growth on the Legacy side, I think there's a couple different things.

One is different ways that we're going to be going to market and pricing and offering our products. So we've invested a fair amount of resources around being able to provision broadband differently in a much more flexible manner. So we're going to be changing that and moving it into the market over the coming quarters.

But in the meantime, we have a laser focus on the CAF homes that we're going to be opening up. We are going to take advantage of the speed upgrades that we really put into the market over the last year.

And now that we have the rhythms back from our largest sales channel, which is our call centers both internally and externally, I think we're going to see better and better performance from that, which is really our largest channel.

And that was really suffering, as I've talked about on previous calls, through Q3, Q4, and even into the beginning of Q1 principally because of some of the outsource partners that we have, not really our internal call centers.

So all the stars are coming in alignment from a distribution perspective, as well as some of the capabilities that we added as part of the conversion in our systems and our provisioning. And we have to take advantage of all those things to really drive Legacy back to where we need it to be, which is stability and growth..

And the one-time impact from the automation process, if any, in 2Q?.

On the Legacy side, there was an impact in April. There was no impact on the CTF side of the business.

It was just – you're talking about what we talked about in the catching up of the – syncing up of the processes between Legacy and CTF, is that your question?.

Correct. If you go back to 1Q, I think you reported a loss of 26,000 on the Legacy side, but if you adjust for what, it was probably only about a loss of 8,000 subs. This quarter I think you reported a loss of 33,000 on the Legacy broadband.

Obviously, some of that was the move-related churn, but I'm wondering how much of that may have been because of that automation process cleanup?.

Yeah. There was a small piece of that in April related to Legacy which was about 5,000 catch-up on the NPV side, not on the voluntary churn side..

Perfect. Thank you, guys. Appreciate it..

Next will be David Barden with Bank of America..

Hey, guys. Thanks for taking the question. I guess two if I could. The first one would be kind of related to the synergy realization question.

As we look at the sequential consumer revenue compression, how do we think about the margin that's attached with that so that we can kind of understand the two moving parts, the revenue compression and margin-related – then offset by some of the synergies? And then the second question would be just on the commercial side.

It's been – it appears to have stabilized. And I think, Dan, you mentioned that you were expecting that to continue to improve. So, kind of what are the growth "drivers" of the commercial side as we look into the second half and into 2018? Thanks..

The first, Perley....

Yeah, I'll handle it. So, David, it's Perley. On the consumer margin, probably the best way to think about it is we don't – as you know, these are more sales and marketing channels. They're not P&Ls or segments that we operated in.

But the way to think about it is for every – when you look at the loss of customers, and there still is pretty much for every broadband customer we're losing, we're also losing a video customer the video margins are small, if you will.

And so I tend to think that margin shouldn't compress on the consumer side because as we lose $1 of consumer revenue, we're also losing a fair amount of COGS along with that when that typical dollar revenue leaves. And so it has very little flow-through into EBITDA.

So, we still – that's why we still are confident that we can achieve our EBITDA margins of 40% or greater just through improvement and stabilization of the commercial and consumer revenue streams and our continued cost-out initiatives. But I think that's probably the best way to think about it.

Am I answering your question? Is that the question that you wanted answered? I just want to make sure I'm clear on that..

Yeah, I guess it was. The question was related to the incremental margin pressure that consumer revenue declines created. I mean, I think it's – most people on this call would probably be surprised to hear that your argument is that it's a near-zero effect whereas most people seem to think it's a near 100% of effect.

Can you maybe elaborate a little bit on that?.

Well, certainly. I mean, our video margins are not what cable video margins are. So when we lose a video customer, it has a negligible impact on EBITDA. And so really when you look at our blended ARPU of $100, there's a chunk of video COGS that goes away with that if we lose a $100 customer.

And so that's why we are confident through our continued cost-out synergies. Obviously, we need to get consumer stabilized, so they both need to happen. Consumer does need to stabilize in our continued cost-out initiatives. But we do believe we can expand margins because when we do lose a video customer, we're not losing any EBITDA..

But it's not just the video that's compressing, right? It's the voice and the broadband too?.

Yeah. I think that the voice certainly on the CTF side is not as big of a voice product as it is on the Legacy side. And broadband certainly has some COGS with it but it has obviously – certainly much better margins than video. But we believe we can continue to balance this..

Okay..

And, Dave....

And then just on the commercial side? Thanks..

Sure. On the commercial side, from the beginning, one of the things that we highlighted as one of the growth levers for the opportunity of bringing in the CTF properties into Frontier was that the commercial sales that we inherited were really very low-end products, services, it was basic.

DSL, some POTS, there certainly was carrier business that came with it. But we built the sales team from scratch and we did it in a very purposeful way with the idea of having that as one of the growth levers.

And we've been tracking exactly to our plan on what the MRC growth would be as we staffed up and built competency and started to get to people to build their funnels.

So just in the last, I would say, two months, we've got to the point where the sales funnels are at a point where we would start to hit our model for commercial MRC production, and you're starting to see some of that flow in now and drive the stability that you saw on this quarter.

I feel very good about the continued trends of Ted and his team on the direct side is also turning up additional indirect channels. And starting a direct channel on the small side that would all be incremental here.

And each one of those we're really coming in as a challenger versus the incumbent because Verizon had really led the market share attrite in these areas, and it hadn't been a focus area. So we see it as a big opportunity. We're starting to see the benefit already, and we think more will come as we get into the back half of the year..

Great. Thanks, guys..

And next will be Frank Louthan with Raymond James..

Great. Thank you. Quick question.

Do you have any regulatory trips in the quarter? And if not, just curious why the switched access and subsidy grew sequentially? And then can you give us a little bit more color on exactly what you were doing with the go-to-market strategy, maybe some more explicit examples and kind of what you've changed to now? Been discussing this for a while.

And at what point do we see sort of a more material shift and have that impact to subscriber numbers? Is it another six months of the newer go-to-market strategy or are we starting to see that now? How should we think about that?.

Frank, this is Dan. I think on the second part of the question, we're starting to see some of the benefits. So it's been two-pronged effort for us on the CTF side, and we're bringing some of those same tactic into Legacy right now. But it's been a two-pronged effort. One obviously has been to get the gross add machine going.

And I think you're kind of fighting against the tide in Q2 in some of the markets. And so we realize that. And we stop really pushing as hard on the gross adds side in Q2 knowing that we're going to ramp it up for Q3 and Q4. The bigger effort that we've had is really on mitigating voluntary churn.

We knew that we'd get through involuntary churn and we talked about that exhaustibly on other calls, and we're through that. We're in a very stable place. Bad debt levels are extremely good in these markets, so we feel very good about that. And we put all of the effort really around how do you improve voluntary churn.

And obviously I'm not going to talk about discrete tactics that would cause competitive disadvantage in the market. But suffice it to say that we're finding very segmented approaches to offer customers different value-enhancing benefits for the relationship and we're seeing significant improvements.

And we saw that really in the back half of Q2 and we're seeing it in July. And we expect to continue to see it as we go through the rest of the year..

And, Frank, it's Perley. There is nothing material though on the regulatory side. Nothing material in changes or what have you there..

All right. Just how did the – just curious how does the switched access and subsidy grew sequentially..

Yeah. I can take you through that in our follow-up call but there's nothing there. I mean, it's a very stable – it still has a steady declining revenue stream over time and I think that it's just a quarter move from one quarter. There's nothing of material to note in there really. So the minutes are slightly down. The rates are very stable.

I think there was a small true-up in there but nothing that's significant to note..

Got it. Okay. Thank you very much..

You're welcome..

And moving on to Phil Cusick with JPMorgan..

Hey, guys, thanks. Two things, and I apologize, some of these have been addressed a couple of times already. But number one, can you just talk about the EBITDA run rate discussion? $3.8 billion is the guidance for the run rate exiting 2017. It seemed like that was a full-year number back on the first quarter call.

Is that a change in the business trajectory or is it just a change on how we're talking about it?.

Hey, Phil. It's Perley. So I think it's a change in how we're talking about. I think the business is performing as – we're progressing through year as we expected.

When we look at all the initiatives that we have taking place, we do expect the business to continue to improve, we do expect improvement in the back half of the year, and we do expect to be on a $3.8 billion run rate and be able to get back to there in the second half of the year.

So whether or not we're specifically able to hit $3.8 billion in a year or not, there's a lot of things that need to go right but we certainly believe we'll be on a run rate to get back to that number..

Sorry, I'm afraid we just added another definition of $3.8 billion.

Is $3.8 billion is the run rate for the back half or is that the run rate exiting the year? So sort of a 4Q number?.

It's the run rate exiting the year..

Okay. Understood.

And then can you help us – and again I know that there's a lot of this that's out there, but can you help us bridge the free cash flow and CapEx and taxes guidance toward getting to an EBITDA number?.

Well, I think those – you should have all the pieces that you need. There's nothing else really of note. And just seeing on the working model backwards from the free cash flow guidance to CapEx and what we've laid out..

Okay. And then last one if I can, and I apologize because some of this again was asked a little bit.

But can you go through the broadband sub losses in the second quarter voluntary versus involuntary, Legacy versus CTF, and talk about which of those should be better in 3Q?.

So from our perspective, we're starting to see the involuntary should be pretty stable from what we're seeing, both Legacy and CTF at the current levels. We're seeing voluntary churn improve in the CTF side.

And obviously, we only have one month down in this quarter, but we see definite improvement there and we see improvement both on the churn and the gross add side on the Legacy side. So, again, one month does not a quarter make, but we feel pretty good about the trends that we're seeing on both Legacy and on the CTF side right now..

Okay. Thanks, guys..

And next will be Simon Flannery with Morgan Stanley..

Thanks a lot. Good evening. Perley, you've been active with the balance sheet in the last few months.

Can you just talk about your philosophy here as you go forward? What are your priorities? A lot of debt trading with attractive yields? Are you looking to pick off the best value? Are you looking to extend maturities, reduce the rate? How should we think about your activities and use of the free cash flow through the balance of the year? And then any color on what restructuring might look like, charges in the second half of the year?.

Certainly. So, the way – right now, I mean, we're just very focused on generating cash in order to give the market confidence that we have, the ability to take care of the 2018s and 2019s. So we do believe we've got the right runway but I want to make sure that there's very clear messaging that the 2018s and 2019s aren't at all an issue.

So at this stage of the game, we're not really – for the remainder of this year, we're very much focused on building cash. If we see things that are opportunistic, we may look at them, but we're really kind of managing our maturities for 2018, for 2019. We believe we've addressed the 2020s to get those in a good place.

And as we get into 2018, we'll take a look at our cash position and see what kinds of things we're going to do there. But right now we're very focused on executing on our plan and addressing the near-term maturities on the 2018s and 2019s..

Okay. Great.

And on the restructuring?.

The restructuring. So yeah, we're anticipating probably another, I'd say, we've estimated around another $30 million in the back half of 2017. And I think for 2018 we're expecting that to be less than $50 million..

Right. Thank you very much..

And next will be Amy Yong with Macquarie..

Thanks. So two questions. First, maybe a broader question. We just saw a smaller provider, I guess, while divest (38:20) fiber to Verizon.

Any other assets that you're looking at as you evaluate the portfolio? I mean, I think you highlighted some of your fiber assets in the slide, and I was just wondering if perhaps you would consider an opportunity like that? And my second question is on ARPC.

It's been relatively stable for the last two quarters, but given the offers that you have in place, just wondering how that might impact ARPC in the back half. Thank you..

Amy, it's Dan. I think we're very happy with the assets we have right now. Obviously we think we can do a lot more with the assets as we get the machine really tuned up both on the churn side and on the gross add side.

So we feel good about the fact that we have 4.5 million households that we can serve with fiber and all the fiber that is in the network that enables a lot of the commercial opportunities that Ken and the team are going after. So we feel really good about that. We're not really looking to do anything at this point.

And I think as you look at the back half of the year and you look at some of the offers, they're not really about price. There's some interesting value propositions we're bringing to market. But the ARPC change really won't – there won't be an ARPC change associated with the offers.

And there might be opportunities to actually improve the harvest in Legacy by doing things a little bit differently..

Got it. Thank you. And then just a follow-up question on the $350 million of synergies. Did I hear that most of it will be realized by the back half of this year? Can you just talk about the cadence of those cost synergies? Thank you..

Yeah. No, I think I've said that we'll be realizing them fairly linearly from Q3 of 2017 through Q2 of 2018 because they'll be realized in full by the end of Q2 of 2018..

Got it. Thank you..

Operator, this will be our last – this will be the last call..

Okay. The last one will come from Arun Seshadri with Credit Suisse..

Yes. Hi. Thanks for taking my questions. Just wanted to understand, your free cash flow for the quarter was negative if you sort of look at them on a fully loaded basis.

Just wanted to understand, for Q3 and Q4, do you expect to generate positive free cash? And then sort of tying your comments earlier around the 2018 and 2019 maturities, do you expect to be able to make a significant dent in those maturities using your organic free cash?.

Yes. Hi, Arun, it's Perley. Yes, we do expect to be generating free cash flow in the back half of this year and then continue to generate free cash flow going forward to address the 2018, 2019 maturities as they come due..

Got it. Thank you. And then just to make sure I got all the commentary around the EBITDA numbers.

So basically for Q3 we should expect some sort of sequential improvement given the cost savings that you're expecting, and then Q4 to really get towards that $3.8 billion divided by four type number, did I understand that right?.

Yes. That is correct. That is what we're executing against. As we talked about with commercial stabilization, commercial being able to grow, more consumer stabilization to David's question on kind of keeping margins all being able to stabilize the consumer business and then continuing to take more cost out of the business, enabling EBITDA to grow..

Got it. Thank you..

And that does conclude the question-and-answer session. I'll now turn the conference back over to you for any additional or closing remarks..

Yeah. Thank you, operator. Before we conclude the call, I just wanted to reiterate some points. So, first, we have a large and growing fiber-rich network. Approximately 4.5 million households we passed can have access the Fiber-to-the-Home services.

We also have a very deep Fiber-to-the-Node capability, and we can provide 100 megabits broadband service to nearly 1 million households and at least 25 megabits service to approximately 6 million households. So, in total, we have approximately 10 million fiber-fed households in our footprint that we can serve with 25 megs or greater speed.

We also have more than 180,000 router fiber miles and we have approximately 39,000 fiber-connected commercial buildings.

Our strategy to stabilize the business is starting to work, evidenced by the progress we've made during Q2, and we continue to focus on improving operating leverage and remain on track to take another $350 million in cost out of the business.

And as a result, I believe we are at an inflection point as we continue to execute on a number of programs to accomplish our $3.8 billion annual adjusted EBITDA run rate objective. Thanks for joining us on the call, and we look forward to updating you next quarter..

Thank you. That does conclude today's conference call. We do thank you for your participation..