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[00:00:03] Ladies and gentlemen, thank you for standing by and welcome to the Altice USA Q3 Twenty twenty Results presentation. At this time, all participants are in listen only mode. After the speakers presentation, there will be a question and answer session to ask a question. During this session, you will need to press star one on your telephone.

Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to turn the conference over to your speaker, Mr. Nick Brown. Thank you. Please go ahead, sir..

[00:00:34] Hello, everyone, and thank you for joining us. In a moment, I'll hand you over to our QSA. See, tDexter Goei and CFO Mike Brooks, who will take you through the presentation. And then we'll move to Q&A as today's presentation may contain forward looking statements. Please read the disclaimer on page two..

[00:00:54] Thanks, Nick. And hello, everyone. Before we begin, I once again want to thank you to take the opportunity to thank the Eltis USA team. I'm very proud of the ongoing commitment displayed by our employees in navigating this uniquely difficult time. And we delivered another great quarter together, starting with a summary on slide three.

Total revenue was flat year over year due to the adjustments for anticipated nine months of regional sports network credits. And if not for this revenue adjustment, we would have grown three percent in Q3. I'll come back to this in a moment.

Separately this quarter, our business was impacted by Hurricane Isaac in the New York Tri-State area and Hurricane Laurel, which mostly hit Louisiana and the Gulf Coast. We mainly saw disruptions from downed power lines and damaged cable strength, interrupting service for some of our customers for which we have issued customer credits.

Further adjusting revenue for the storm credits underlying revenue growth would have been a strong three point seven percent in the third quarter, a significant acceleration from growth in the first half of the year.

Our revenue, our performance was driven by broadband revenue growth of fifteen point six percent year over year, we saw strong demand for our broadband services without additions of 26000.

Even with the Stormers disruptions or 32000 adjusted for storms, our acquisition of Service Electric, which closed in July, contributed to another 30000 additional customers in the quarter.

Contributing to this growth was a successful completion of the one gig rollout on optimum, making one quick service available across the entire New York Tri-State area. [00:02:36] And business services, we continue to see resilience among both our SMB and like enterprise customers.

And use in advertising, we had a strong recovery helped by political revenue and improved local advertising.

Our strong performance led to an acceleration in adjusted EPS growth to five and a half percent year over year or six point three percent year over year, Exxon Mobile and up to seven point seven percent for the year, adjusting for the storm's impact.

Our free cash flow, 458 million was one hundred seventy six percent year over year, helping us deliver one point forty six billion in free cash flow year to date, which is already well ahead of the one point two billion generated for the full year of 2019.

We continue to take advantage of the attractive valuation in our share price, completing approximately 450 million in share repurchases in Q3, totaling just over one point eight billion year to date through the third quarter.

We have raised our target guidance to two billion or higher share repurchase for the full year from one point seven billion previously.

On the outlook, more broadly, we continue to expect revenue and adjusted EPS growth this year, we maintain our CapEx kind of less than one point three billion target year end net leverage of four and a half to five times to wrap up the summer.

I want to say we remain incredibly optimistic about the strength of our core business and we continue to focus on opportunities to drive value for shareholders. [00:04:00] Turning to slide four, you can see our underlying revenue growth remains strong in this environment, demonstrating the defensiveness of our business.

Total revenue was flat at minus zero point two percent year over year, the RSL revenue credits of 79 million booked this quarter represent an estimate of what we expect to refunds to customers when we realize rebates from the arson's due to fewer games being delivered year to date because of Major League Baseball's decision to shorten the season.

These are centrists did not impacted, reboarded, reported EBITDA nor Cash-Flow says we will have a corresponding reduction in programing costs. In Q4, we anticipate further arrests and credit to reflect the corresponding impact on the last three months of the year, which we expect to be approximately one third of the amount we recorded in Q3.

And the Q3 number, again, was a year to date number for the entire year. Excluding these arson credits, we achieved three percent total revenue growth in the third quarter. Further, excluding the impact of storm credits, which totaled about 16 million dollars this quarter, total revenue growth would have would have been three point seven percent.

Residential revenue decline one point six percent year over year, including the arson front, but would have grown two point three percent adjusted for that or three percent.

Further adjusted for the storm, credit business services grew at one point three percent year over year, but would have gone one point eight percent, adjusting for the Öresund credit and two point four percent further adjusted for the stolen credits.

[00:05:31] We are also extremely pleased with the recovery in news and advertising, where revenue grew 5.2 percent year over year. All in all, we are very pleased with the results and we continue to believe that our businesses are well positioned in this environment.

Turning to slide five, we once again delivered strong subscriber results, Altius USA added 8000 residential customers in the quarter, including 26000 residential broadband customers compared to a year ago when we reported flat unit customers and 50000 residential broadband additions. The storms had a negative impact of about 6000 subscribers.

So in the absence of these storms, you would have grown to customer relationships by 40000 with over 32000, broadband adds. The impact of Hurricane Delta in October, which hit the Louisiana area right after Hurricane Laura, is likely to have similar customer impact in Q4 given the severity of the damage in the region of Delta.

Compounding on more note that these figures exclude Service Electric, which added another 34000 customers to our base, including 30000 broadband customers in the quarter.

Did just that surprise subscriber results shown here exclude customers who would have otherwise been disconnected in advance with our normal disconnect policy of greater than 90 days? In the absence of the FCC pledge and New Jersey executive order making these adjustments, we still would have reported 5000 customer relationship net ads and 23000 broadband Internet.

We continue to benefit from increased market share gains, including from DSL and mobile only households. [00:07:15] In summary, we feel extremely good about the underlying momentum and our customer growth mattresses.

Slide six provides a more detailed breakdown of the breach between a reported and adjusted cut from mattresses, we have been really pleased with their progress in retaining pledge customers. And as of the end of Q3, we only had a small number of customers remaining on the pledge.

Recall that last quarter we had about 10000 customers on the pledge for past due on their payment by greater than 90 days. We are now below 3000, as we had said, success in various retention initiatives implemented to retain the customers and begin receiving payments again on video. We saw an accelerated pace of disconnect compared to the prior year.

This was mostly due to lower gross and video attachments. As well as disconnecting the video products for some of our customers, associate with the Pledge and the New Jersey Executive Order as we work through our various retention programs.

Turning to slide seven, we continue to see our network performing very well, even with heavier usage during the pandemic. Our broadband speed upgrades remain elevated up 45 percent year over year.

Average monthly data usage per customer was up 44 percent year over year, averaging approximately 420 gigabytes per customer per month in Q3 and abroad, with only customers use nearly 530 gigabytes of data per month.

Twenty nine percent of our gross additions took one gigabit broadband speeds in areas where it was available, up from 24 percent in the second quarter, and we remain very optimistic about the one big opportunity.

[00:08:55] And following the commercial launch of our five or double and triple offerings, I'm pleased to say a fiver celebrates the portion of gross additions.

Taking fiber to the home in areas where it's available is already at 44 percent, up from 20 percent in Q2 2020, ending the quarter with just over 16000 customers and representing an enormous growth in cost saving opportunity.

Additionally, 60 percent of our fiber grows and are taken to one gig product, which is a higher proportion of customers taking the one gig on our HFC plant, representing a great monetization opportunity to summarize.

We're very pleased with our network performance and we remain focused on continuously monitoring and upgrading our network to support demand. Turning to slide eight, we are pleased to announce that we complete our one big rollout this quarter with one of the key services now available across 100 percent of the optic footprints.

We more than doubled one gig availability over a year to 92 percent of our consolidated Altice USA footprint, up from 76 percent at the end of the second quarter. Our one gig, customer penetration increase to five point seven percent in Q3, up from three point seven percent in Q2.

And we continue to see a lot of room to drive penetration, upselling customers to higher speed tiers. Increasing one gig availability across the rest of our footprint to the rest of twenty twenty increases our broadband opportunity to continue to absorb the higher speeds. [00:10:26] Our average download speeds continue to increase to 262 megabits.

But about 60 percent of our base today still only have Internet speeds of 200 megabits or lower, representing a meaningful opportunity for us to continue to deliver faster speeds to customers.

Turning to slide nine, we want to remind you once more of our long term network strategy, we are focused on upgrading our existing network, new build agile and pursuing additional footprint expansion opportunities.

In addition to completing our one gig up to three point one upgraded optimum footprint, we have now passed over 900000 homes US today ready for service for FTTH and we're targeting upgrading the entire optimum footprint, which totals about five million homes passed to further improve the customer experience, significantly reduce costs longer term and drive revenue growth.

As we ourselves in Suddenlink, about 80 percent of our homes are one gig enabled over HFC. But that means we have a size, a sizable upgrade opportunity remaining with approximately 400000 homes, which can be upgraded for one capacity cost effectively and further increase our penetration from approximately 30 percent today on those 400000 homes.

Our network edge out strategy is focused primarily in our suddenly footprint, where we have seen extremely strong traction in capturing market share. As soon as we roll out new builds, on average, we reach about 40 percent penetration within 12 months of a new build, a remarkable result that gives us a lot of optimism and comfort in our strategy.

[00:12:06] We are currently adding 150000 plus homes passed annually and are focused on increasing the level of Newbill activity going forward, which will help drive future customer and revenue growth.

Finally, an additional footprint expansion up to is beyond and jobs, we complete our purchase of service electric, which added another 70000 homes to our footprint. As I've shared before, we continue to look for other cable M&A opportunities to expand.

We have also filed for the upcoming FCC August auction, which starts this week, where we look for opportunities to invest in network builds in rural areas with partial subsidy by government should the return on investment be attractive.

Turning to our mobile business on Slide 10, we launched flexible data plans this quarter, offering our consumers the flexibility to choose any of our three very affordable tiered data plans. One gig for twelve dollars, three gigs for twenty dollars or unlimited at forty dollars per month.

Our mix and match capability will accommodate customers and families with all types of data used these. We added 80000 mobile net additions for the third quarter, ending the quarter with one hundred sixty two thousand line. Momentum remains slowed by retail store closures due to the pandemic, with nearly half of our stores still closed.

But we have managed to reach three and a half percent penetration as a percentage of our total unique residential customer base. We remain focused on improving customer experience and broadening our product offerings with a continued expansion of our handset lineup and launching our 5G service.

[00:13:44] We continue to see an early indication of churn reduction in mobile during a stay at home and remain excited about the opportunity for further churn reduction from bundling with our cable offerings. On Slide 11, turning to business services, we saw resilience and recovery in both our SMB and like part businesses.

Total business services revenue grew one point three percent or one point eight percent, adjusted for two million in our credits and two point four percent if we further adjust for the storm credit. Life had accrued two point six percent and S&P and other groups, zero point eight percent year over year.

Flypast, we continue to see increased sales and customer engagement to the education, health care and government verticals and a benefit from shorter sales cycles due to the work from home. We also launched our CNN product suite, which helped contribute to nearly 49 percent revenue growth in our managed services offerings. Year over year.

In our SMB business, two three represent the first quarter this year that we saw positive net additions in SMB space. Our e-commerce sales activities have increased, which lowers our cost of customer acquisition.

Obviously, there is still uncertainty from a potential Fly-past second wave of shutdowns in our markets, however, remain very pleased with this business services performance and recovery throughout this challenging year, performing better than we expected.

We continue to expect a close eye close to our life path transaction in the fourth quarter following regulatory approval.

Turning to our news and advertising business on Slide 12, we're extremely pleased to report revenue growth of 5.2 percent year over year in Q3, even without the incremental contribution from political ad sales this quarter on a year over year basis. [00:15:32] The trajectory of recovery on news in the advertising business has improved.

Advertising revenue. Ex political declined only six point six percent year over year in Q3, compared to a decline of fifteen point six percent in Q2. In addition to the boost from political, we saw a recovery in local advertising from its trough in April.

October has seen a further increase in advertising revenue to the highest monthly level year to date. We continue to benefit from positive viewership trends, with 42 percent increase in chatter website traffic since pre pandemic and increase in users of 64 percent and a 35 percent increase in News 12 TV viewership on a year over year basis.

Sports are starting to come back as well, which is a positive for advertising spending. However, we still anticipate pressure in the national branding segment of our business and continue to assess market conditions.

Year to date, our news and advertising business is now flat, and we are cautiously optimistic that we can achieve a flat revenue for the full year. But this continues to depend a lot on many factors, including whether we can see a full comeback of sports the remainder of this year and avoid further protracted lockdowns.

And with that, I'll turn this over to Mike to discuMike Grau ss the financials in more detail..

[00:16:53] Thank you, sir. Good afternoon, everybody. Thanks for joining us. We certainly hope everyone is doing well. I want to spend a minute highlighting our EBITDA growth trajectory on slide 13.

For starters, in Q3, we grew adjusted EBITDA 5.5 percent year over year or six point three percent year over year, excluding mobile in the quarter, we had an additional impact of approximately sixteen million dollars to adjusted EBITDA to the Hurricanes Isaias and Laura, excluding mobile and excluding storms.

We grew even seven point seven percent year over year and you can see that our rate of growth has accelerated each quarter this year. We continue to benefit from a combination of strong customer growth and deliberate cost actions and remain very confident in our ability to grow EBITDA this year and deleverage.

We also feel very good about our opportunity to continue to drive margin expansion in our business, which I'll turn to now on slide 14.

On slide 14, you can see that we posted an adjusted EBITDA margin of forty six point three percent, up 200 basis points year over year, some of the margin improvement in this quarter is driven by the adjustment to decrease revenue and programing costs for regional sports network credits due to expected rebates from sports programs.

Excluding these RASM credits, adjusted EBITDA margin would have been forty four point eight percent, still up 100 basis points year over year.

Excluding mobile EBITDA, losses of three to EBITDA margin was forty seven point five percent, or forty six point three percent, whether adjusted for both hours and credits and storms, which is the best ever margin results ever achieved by our cable business and compares to forty four point three percent a year ago, or 200 basis point improvement year over year.

[00:18:38] In Q3, even though less capex operating free cash flow margin of 38 percent was up nearly 1000 basis points year over year due to a combination of EBITDA margin growth and lighter capex due to some delays in five minutes. Adjusted for Harrison credits, we would still have seen an increase of 840 basis points year over year.

Turning now to slide 15, we continue to underspend on CapEx this year relative to prior periods of total capital intensity for the quarter was eight point three percent in Q3. But without fiber and new home sales growth investments, this would have been six point five percent. This quarter, we did complete our one gig rollout and asked.

As I noted earlier, we remain impacted by permitting delays due to the pandemic, but I focused on reaccelerating all of our network initiatives and continue to invest in our network, anticipating that we will see permanent changes in consumption behaviors, of course, much of our customer base.

Furthermore, the combination of hurricanes Isaias, Laura and Delta has led to some one capital outlays in the third and fourth quarter to repair a storm related damage, including replacing a cybering in Louisiana. However, we continue to expect cash capex for the full year to come in below one point three dollars billion.

The next few years, as we build out fiber and optimum, we continue to think that we can comfortably operate and the one point three billion to one point four billion CapEx envelope and complete our various network upgrade and Agilent initiatives longer term, we think there remains significant opportunity for a reduction in capital spending to below one billion and.

[00:20:18] Particularly once we are completed with our five year upgrade and the optimal footprint. In summary, we continue to feel very good about the long term potential of our network to deliver superior connectivity solutions to our customers at a reasonable cost.

Turning to slide 16, I'm very pleased to report another very strong quarter of free cash flow performance. With our results in the first three quarters, we have already delivered more free cash flow year to date Twenty twenty than any prior.

We generated 450 million dollars in free cash flow in the third quarter, up 176 percent year over year, which generated one point forty six dollars billion in free cash flow year to date.

Our free cash flow per share year over year in the last 12 months basis has increased 72 percent to three dollars and six cents, representing a significant yield relative to our current share price.

In the quarter, cash flows from investing activities include a 150 million dollar outlay for the acquisition of service, electric or cash flows from financing activities reflect the number of transactions. In the third quarter, we saw a cash outlay of 133 million in Q3 for share repurchases.

In July, we received a sum total of one point seven dollars billion of our five and three percent guaranteed notes due to do 2023 and seven and three quarter percent senior notes to 2025 that we refinanced in June, which we discussed in our Q2 call.

And in September, we received proceeds of 865 million dollars from bond issuances from our LaPier financing, which is being held in escrow until the transaction completes and which appears as restricted cash on our balance sheet this quarter.

[00:22:04] Slide 17 presents an overview of our pro forma capital structure, inclusive of the new life assets of. Pro forma for the Lopez transaction, the consolidated Altice USA net leverage on the last two quarters annualized basis is four point nine times. Cablevision Limpus LLC is now an unrestricted subsidiary of CSC Holdings LLC.

In September, life has raised new debt at one point forty five dollars billion, which is held within a separate debt silo and is nonrecourse to CSC Holdings LLC. This includes 600 million dollars in a term loan facility priced at Linebaugh plus 325 basis points, which has not yet been funded.

450 million dollars in a new seven year senior secured notes price to three and seven, eight percent and 415 million of new eight year unsecured notes price to five and five percent.

This represents a blended average cost of debt of four point three percent of the life level and proceeds from the total of 860 from the notes of eight hundred sixty five million dollars are reflected as restricted cash on our balance sheet this quarter.

Cable is a life has pro forma, that leverage is approximately six point nine times on the last two quarters annualized basis. Lastly, CSC Holdings LLC is reporting that leveraged pro forma for debt and equity proceeds from the IPO transaction of four point eight times net debt to EBITDA on a relative basis.

[00:23:35] On slide 18, we provide an update on our interest savings initiative, Twenty twenty will be similar in cash interest expense to 2019 due to the timing of our recent refinancing activity.

However, a current run rate implies that we expect to realize over 200 million dollars in cash interest savings relative to 2019 cash interest expense on a monthly basis going forward. And zooming out, we are very happy to illustrate that since 2017, we have taken out approximately 600 million cumulative annual interest savings.

In Q3, we refinanced at one point seven billion dollars of ten point seven eighth notes, the Anadan on offering to our four and five eighths unsecured note, we approached in June for an effective yield of four point one six percent.

We also refinanced one billion dollars of six and five eighths and guaranteed notes into a new 10 and a half year note, and this she's a record low coupon of three and three percent. This further lower our cost of borrowing to four point nine percent in Q3 from five point four percent last quarter for CSC Holdings LLC.

If we were to refinance our entire GSE Holdings LLC debt stock at similar levels, leaving the labor identity unchanged, our annual interest expense would come in less than nine hundred million dollars. Additionally, through the refinancings, we extended our weighted average life of debt to six point nine years this quarter at the CSC.

Holding that Silow. We know annual bond maturities greater than one billion dollars before 2025, all of which could be covered by either free cash flow generation or undrawn revolver.

[00:25:16] We will continue to proactively manage our balance sheet in the same way going forward and remain very proud of the progress we have made and comfortable with the strength and resilience of that of our balance sheet. Finally, on Slide 19, we provide our updated outlook for Twenty twenty.

We are maintaining guidance for revenue is mobile and adjusted EBITDA growth this year. We delivered zero point two percent revenue growth model year to date on an as reported basis, but this growth would be one point three percent, excluding the north end credits.

Total adjusted EBITDA growth year to date is two point six percent, and we still expect faster growth in Q4 compared to the first half of the year. We continue to guide to cash capex of less than one point three dollars billion, including some temporarily elevated CapEx to address storm damage.

A leverage target remains four and a half to five times on the last two quarters annualized basis at CSC Holdings LLC, which is a level at which we are very comfortable. Given the favorable financing environment, we are likely to remain towards the higher end of this range in the short term.

We've raised our share buyback target to reflect the fact that we've already completed one point eight billion dollars in share repurchases as of the end of Q3 and now target at least two billion this year, up from one point seven billion previously. This level of share buybacks is consistent with our leverage guidance of around five times.

And to conclude, I just want to echo Dexter's remarks and that we remain incredibly proud of the Maltese team for their dedication and resilience during this time, which has once again resulted in a very strong quarter. And with that, we will now take any questions..

[00:26:59] As a reminder to ask a question, you need to press star one on your telephone to withdraw your question, press the pound key report for just a moment to compile the Q&A roster. And your first question is from Phil Cusick JP Morgan..

[00:27:20] Hey, guys, thanks. So a couple of things, if I can. First, Mike, you just talked about guidance for a second. Let's go back to that. At this point, your guidance for growth in revenue and EBITDA this year, these are a lot of room.

Can you say again how you think about sustainability of growth in both of those in the fourth quarter and anything you can give us for Twenty twenty one at this point? And then second, can you dig into how we should think about taxes in 2021? Have you run through your renewals with up to..

[00:27:53] So on the only guidance, you're right, we are we are a little open ended and that we're guiding towards growth. And I think we mentioned that we do continue to anticipate accelerated growth in the fourth quarter, at least in terms of adjusted EBITDA relative to the first half of the year.

So I don't think we're going to get any more specific than that. But that's kind of where we are on revenue growth. We will have some headwind in the fourth quarter. I think we alluded to the fact that the ISO and credit adjustment we made in as of nine 30 will have an additional element in the fourth quarter.

But as you know, even given the Oracene credits in 3Q, anticipating fourth year, we still guiding towards revenue growth for the year.

On taxes, you know, we entered Twenty twenty saying that we would be a full federal cash taxpayer in the beginning of 2021, we then got a lot of benefit from the Carers Act in terms of enhanced deductibility of some of our interest expense, and we pushed that out to the beginning of 2022.

Now, with the latest transaction, we're back where we were when we started the year, saying that we anticipate being a full federal cash taxpayer in the beginning of a very early in 2021, the actual tax burden in that year. I mean, I think if..

[00:29:04] I was just going to continue to push the actual tax burden in that year..

[00:29:08] Yeah, it's somewhere in the neighborhood of 400 to 450 million, I think is a reasonable placeholder number. We continue. There's always room for strategy and some efficiencies in that area. And we're certainly pursuing a number of channels in that regard..

[00:29:23] That's helpful. Thank you..

[00:29:27] Your next question is from Craig Moffett of Murfitt Nathan..

[00:29:32] Hi.

A couple of questions, first on broadband, are ARPA just given how complicated the allocations within the bundle get and with the hours and discounts and that sort of thing, can you break down how we should think about broadband, our growth now and going forward in its components of upgrades and then unbundling the bundled discounts and that sort of thing? And then just a broader question.

If I look out further, given how high margins have gotten, I think he once said you didn't think 50 percent margins, Dexter, were out of the question for this business. I wonder if you'd sort of revisit that.

And what do you think the feeling on margins might be as you look out now that you're actually getting reasonably close to 50 percent margins?.

[00:30:26] Yeah, it crashed just on the broadband, our crew, you know, we're so broadband, our crew grew by about eleven point two percent and I think broadband revenue was 15, 15 1/2 percent. So the eleven point two percent breaks down. You know, very much like in our previous quarters when we called the south about one third of its accounting.

One third of it is it is growth and one third of it is. All right. So that's pretty much what we're seeing consistently year, quarter over quarter. So, you know, if you if you exclude the that’s pretty accounting allocation, you're looking at kind of a eight percent ish type cash on cash growth in in broadband or group.

In terms of how we're thinking about margins, I mean, you know, as you know, you know, we're running probably in in certain parts of our businesses north of 50 percent today. You know, clearly the shift here away from video and more focus on broadband, broadband upselling and higher broadband ARPU is going to help accelerate that margin growth.

And what we continue to do, obviously, in terms of our capital expenditures and in infrastructure, which we think are going to help us drive lower customer interactions and also continue to drive higher gross margin products.

Yeah, I mean, you know, let's first get to 50 percent and then, you know, ask me the question when we get there and I'll hopefully give you some more guidance going forward..

[00:32:16] Thank you Dexter..

[00:32:20] Your next question is from Brett Feldman of Goldman Sachs..

[00:32:26] Thanks, you know, at this point, we've seen that some of your chief competitors, Fayose and EPS fiber business, obviously had very good quarters and clearly that did not impact your ability to put together a solid quarter as well.

So we know that the question we keep getting is what is the competitive dynamic like in your markets between you and your fiber competitors? And are you seeing them in some way to step up their efforts? And have you had to make any adjustments? And I think we're really trying to understand what's the run rate been like, you know, as we move past the third quarter and look into this quarter and into Twenty twenty one..

[00:32:59] Thank you. Yeah, I think listen, you know, we've had, you know, through all disclosable mattresses, just an outstanding KPIs across the board from customer acquisition to broadband growth. The numbers, you know, I saw also on FiOS and AT&T were good, very strong numbers in Q3.

And we haven't seen anything particular from either of them in terms of over aggressiveness on the marketing side. We saw files the less present in Q2 given some of their labor issues in terms of installations. And so I think they're catching up a little bit there.

But, you know, we're still to date 80000, you know, about 125 percent higher than we were last year, year to date in terms of broadband subs. And so, you know, we're very focused on continuing to grow our customer accounts and our broadband argues.

And so we've been able to nicely defend all the gains that we got in at the end of Q1 and the balance of Q2, that we're not seeing anything outrageously different from competition out there, you know, despite the fact that they've got strong results..

[00:34:31] Your next question is from the Mitchelton from Credit Suisse..

[00:34:35] Thanks so much, Dexter. I was just hoping you could, you know, remind us of some of the facts around fiber, because the 44 percent sell in in the market, the footprint is pretty interesting. Ah, now you're scaling gross adds.

Is the cost to connect fiber as you expected? And you remind us what the timing is for when OpEx savings from the fiber network happens. That happen when you connect to customers and when you expect lots of customers or when you roll them all over fiber and turn out the Kulaks network.

And are you starting to see fiber build and fiber connect costs and customer reactions successful? Not to the point that you think, you know, parts of Suddenlink makes sense for fiber. And then for Mike, I just want to make sure I heard you right.

You said 400 to 450 million was a reasonable placeholder for cash taxes in 2001, because that would be, I think, something like a 33 percent tax rate. I want to make sure I heard you right..

[00:35:31] So why don't I hit the final question first? We're still in the early days on the roll out with some what's obviously very nice to see is how the selling rate has picked up very rapidly quarter over quarter.

I think we're still in in what I would see in terms of efficiencies on OpenX connections and installations, not anywhere near where we're where we want to be in terms of the time it takes and the cost it takes to OpenX connect our fiber subscribers, which is absolutely normal, which as expected in terms of training our field techs, as well as just getting customers very comfortable with the newer technology.

So this is going to be you know, we're going to continue to monitor this very closely, put a lot of resources on the training side to improve on the efficiencies of the connections.

But we see just a very, very huge runway ahead of us in terms of the pent up demand for this product, particularly as people work from home, upload speeds, become more and more relevant here.

And so I think this is this is more of a story that I think we'd like to continue to have interaction with you guys on from quarter to quarter as we grow the base and start having some data points that we can share. I think it's still too early today.

And to your point about cost effectiveness, I don't think we're there yet in any shape or form as to where we want to be. I think in terms of what we want to do on the Suddenlink footprint, you know, we are laying fiber very, very deep into our new builds there, which effectively allow us to adapt to a fiber to the home technology.

Should we want to do that last that last drop or in-house wiring in terms of fiber? But today, I think we are going to continue to to focus on the HFC plant, by and large, on Suddenlink.

But we will look at pockets where I'm certain that we're going to upgrade to full fiber to the home, given what we're doing in terms of edge outs and how we're positioning that..

[00:37:48] Thanks..

[00:37:50] And then, Doug, in response to your question on taxes, I mean, I was giving you a rough estimate, I may have heard a little and I certainly know we're not using a 33 percent rate. We continue to use a 27 percent effective rate inclusive of states.

And I didn't mention, you know, we certainly had opportunities available to us to kind of manage that number down a little bit..

[00:38:09] Terrific. Thank you both..

[00:38:12] Your next question is from Ben Swinburne from Morgan Stanley..

[00:38:18] Thanks. Good afternoon. Maybe Dexter, for you. Two different topics. One, you mentioned a video cell and rate has continued to trend down. I'm just wondering if you could remind us of roughly where that sits and maybe that's a good way for us to think about where penetration settles in longer term.

And then on the edge, about 150000 homes a year. It gives you guys a nice kicker to sub growth. I'm wondering if you think there are opportunities to go bigger than that. I know you're focusing on the Suddenlink, but and maybe there aren't opportunities enough to him, which is obviously a pretty well built out area.

But I'm just curious if there's, you know, potential to sort of maybe take that number even higher based on the economics and the returns you're seeing around broadband built..

[00:39:06] Yeah, I mean, listen, Ben, I just answer your first question first on the video. Selling rates were in the mid to high 30s, and now, you know, that's kind of the best in class. When we were a very, very high on selling rates, we were in the low 60s.

You know, we were really seeing numbers in the mid to high 40s, as late as the second quarter of this year, and that's fallen off to the mid 30s to high 30s. And some of it is pandemic related.

As mid-30s we look at some of the things that we're doing in terms of promos and roll offs and forgiveness of debt when it comes to New Jersey executive order or pledge people. So there's some there's a big mumbo-jumbo of stuff where we've disconnected people and reconnected people.

So the numbers aren't super clean in the country as they would be historically. But I think that 40 percent number is is probably a kind of a safe number. And it goes from there. Right. So we'll see quarter over quarter where we're going from there as we get back to a more normal marketing period.

But that's but we've fallen obviously significantly from where it used to be kind of in the mid to high 50s and even touching the 60 numbers.

[00:40:34] In terms of agile, you know, the biggest thing, the biggest challenge we have is just getting the machine up and running all over again, given a lot of the work has been stopped during and during the pandemic.

So we're extremely focused on lining up our crews towards the end of this year, getting ready for the new year and delivering 150000 plus. Do we think there are more to do? Yes. Can we do them with with a lot of confidence next year? Probably not. But we're looking really in a three year trajectory.

If we're going to average 150000 a year, 450 for the next three years, can we do more? Yeah, we're definitely going try and push for more. We are going to see some opportunities on some Ardell. I can't tell you exactly how big that will be or how small that will be. We're going to be very, very thoughtful on, obviously, the return economics here.

But there is going to be some opportunity here, particularly for some areas that were just super contiguous to what we're doing already from a buildout standpoint, even though the cost per home may be expensive, you know, post subsidies, that makes a ton of sense for us to do that.

So that will be a number I think we will be more open about once we know kind of what the results are and what the opportunities are ultimately going to be..

[00:42:00] God, and those are tough opportunities, I imagine, are completely unserved, right, so it's sort of your market to go after if you get it..

[00:42:09] That's exactly right. So, you know, we expect to get some subset which are the constituents that we want to build out or not. And we want to build out the basic answer, even first for for small communities and will continue to push that particularly for, you know, very contiguous properties..

[00:42:30] Yeah. And maybe just wrapping that up into one last question then, Dexter, obviously election next week, in case you weren't aware of..

[00:42:41] You know, there's a lot of focus on the today, but I didn't want to wait in the rain..

[00:42:45] Three hours. Yeah, 12 hours. Right. A lot of focus on the implications for cable. And, you know, you guys, fortunately, aren't going to be, you know, the targets in Washington, at least among the cable industry. But it could affect you.

I'm just wondering how you think about the implications if any of things like Title two, maybe a greater political focus for the.

And access, I mean, to me, the art of stuff seems like it works financially and politically, not to sound too cynical, but just wondering how you're thinking about all this stuff as you look out to a potential Democratic FCC..

[00:43:19] Yeah, it's you know, it's really difficult then to lose any sleep over this and to think to overthink it, because, you know, you can take you can take a snippet of rhetoric from, you know, some debate six months ago and go crazy about it. Right.

You could just basically understand that the process of anything to do with something that could be overregulation really relative to our sector is going to take a very, very long time to enact, as we saw last time. And and whether or not, you know, any type of FCC administration is going to want to act on it is something else altogether. Right.

So this is this is a dialog that's not even reached our screens yet as a sector, even with obviously the focus on three-year potentially many regulatory elements that may come into a new administration. But, you know, I think this is a wait and see. We'll be reactive and we'll always be proactive in many respects on certain things.

But, you know, I think I think I think the country is extremely focused on great broadband and continued improvement and enlargement of access. And so continuing to incentivize people to do that, I think is going to be the underlying criteria after that.

You know, can we do things for different subsets of demographics? I'm sure there will be things that come up. But again, there's nothing that we see that's imminently on the horizon that we need to be worried about..

[00:45:03] Thanks a lot..

[00:45:07] Your next question is from John Hodulik from UBS..

[00:45:13] I think I think first, any updated thoughts on the use of proceeds from the light passed transaction just given the better than expected EBITDA growth we've seen in the in the second half here? And then you talk about, you know, M&A among smaller cable companies.

Can you give us a sense of what the landscape looks like? Obviously, there's a lot of small cable companies out there, sort of is it a target rich environment or you guys got a lot queued up or any sort of insight into sort of what you look for.

But obviously we know about the Atlantic broadband situation, but are you looking for contiguous regions or under penetrated assets or lower margins or any any hints as to Houlis to how you guys sort of look at the landscape to be great?.

[00:45:58] Sure. Listen, I think I may use the proceeds of my path, you know, and you guys are probably doing your back of the envelope math. You know, our two billion plus guidance, you know, is Houlis a guidance based on non-life accuracy. All right.

So given the EBITDA growth we saw in Q2 and Q3 and Houlis and some expectations that we see for Q4, we'll be able to do two billion or more of buybacks just on Houlis non-paper proceeds. You know, the one point one billion of net proceeds we're going to get.

You know, to the extent we don't see any attractive M&A opportunities to deploy that, I think it's fair to say that that will probably use some or all of it to buy back shares. On the M&A side, I like all of your criteria, you know, contiguous, under penetrated cable, you know, all that stuff sounds So, great.

We are out there looking at a handful of things. The smaller operators like Service Electric, there are those types of guys a little bit all over the place. And given that we're in 21 different states, you know, 18 through Suddenlink, there's a lot of contiguous, smaller assets out there. It's not necessarily that easy to unlock all this stuff.

But I do think, given the environment, given the interest rate environment, given that size does really matter here in terms of getting operational synergies and investing heavily in technology and customer service, it is starting to percolate that some of the smaller operators from the mom and pop guys are looking to deal here.

[00:47:46] And, you know, I think it's very obvious to us when we picked up service electric, even though it's very small in scale, that's been a network that that has not been invested in a lot. There has not been any consistent marketing for the residential and especially not in the SMB side of the business.

And we're seeing, you know, a lot of low hanging fruit just by adding, you know, two or three additional salespeople, both on the SMB side and on the B2C side. That's been very lucrative of us just increasing penetration out there, bringing new products. And we're upgrading, obviously, the network as quickly as we can.

So, you know, everything that we are able to get our hands on in terms of M&A opportunities will be the best use of our capital in terms of returns standpoint. But absent that, I think, you know, we like buying, you know, 12 percent, 13 percent free cash flow yield equity when we're financing, you know, at four, four, four and a half percent. Right.

So that will that will continue to be the best use of our capital in the meantime, outside of M&A..

[00:49:04] Your next question is from Peter Supino from Bernstein..

[00:49:09] I was curious to ask about Suddenlink, and in particular whether in September you provided some really helpful color on the profitability of Suddenlink and I would love to know more about subscriber growth and or Harpa levels and trends in the suddenly territories, given the different customer demographics there. Thanks..

[00:49:33] Hey, Peter, we don't break out on the Suddenlink numbers, but it's been clear that, you know, a disproportionate chunk of our volume growth is coming from Harpal Suddenlink, which is very similar to some of our other public peers out there in terms of the demographics. So, you know, the sub growth has been good.

We benefit from a better programing lineup as our sons are not as prominent in the Suddenlink footprint as it is in the New York Tri-State area. And you throw on, you know, a lot of diversity channels as well. And the gross margins on video are are worse in the in the optimal footprint than is Suddenlink.

Funnily enough, it makes a lot of sense from a UPU broadband or who we consistently see broadband ARPU on the Suddenlink side, B, let's call it the five to 10 percent higher than our average broadband or Pu's on the opposite side.

And that's really driven by the intensity of competition that historically has been in the Firestones versus the Suddenlink zones, which is less penetrated by competitors there. And also historically, we've been upgraded to one gig a lot earlier on the Suddenlink side than we have in the upstream side, which we just finished.

So, you know, maybe that gives you some insight into it. One of the things that that you don't see when you try and break out the two businesses is also the SMB side of the business is a much stronger growing business on Suddenlink than it is on the up and side, given the penetration of them.

However, the flip side is most of the advertising dollars and profitability and growth comes from the optimum side that it does consulting side. So that is a little bit of an equalizer in certain respects in terms of the overall consolidated numbers for each property, one versus the other..

[00:51:55] Thanks..

[00:51:58] Your next question is from Jonathan Chaplin of New Street Research..

[00:52:03] Thanks, guys. You could follow up on questions the the with the Atlantic broadband processed extras that over at this point.

And if not, is there sort of a date at which point it will be over? And when we think about the use of proceeds from my part is if there isn't another deal like Atlantic broadband to do, is that would you do an accelerated share repurchase program in the fourth quarter that would consume that? Or would the one point one billion be sort of spread out over time in terms of share repurchases?.

[00:52:42] I think on the just the answer on Atlantic broadband, you know, our also, latest offer had an expiration date going to November 18th.

So other than reiterating that, I think there's anything for small steps for me to see there in terms of the one point one billion, obviously, there's a lot of ways we could we could deploy that, whether it is an accelerated share repurchase or just trying to be aggressive in open market repurchases or doing some other type of structured offering.

But I do think that given where the price levels are today, we'll continue to try and be opportunistic in the today as opposed to trying to spread it over the next 12 months..

[00:53:33] Got it. And just going back to the Atlantic broadband process. So the letter from New York, that seems fairly definitive.

Do you regard that as as definitive or is there still is there still an opportunity for you there?.

[00:53:49] Yeah, listen, I think we were very cognizant that the controlling shareholder needs to acquiesce, to engage at a minimum, let alone look to to do a strategic transaction with two other strategics.

So, you know, based on his on his rhetoric and his statements today, I think it's fair to say that there's little chance of us being able to collectively and Roger's being able to move forward on this project. But, you know, I guess, you know, formally, we've got until November 18th to see if there's anything that shakes loose..

[00:54:27] It seems like investors went either way, we had to get Atlantic broadband to one point one billion of share repurchases. Thanks, guys. [00:54:39] Your next question is from Bentley Cross from TD Securities..

[00:54:45] Quick question on capital intensity. Just wondering when we get down to that dream scenario of some one billion and if you can put a time frame on that..

[00:55:08] Yeah, I mean, I think a lot of it has to do with our fiber to the home rollout. We obviously are not on budget for this year given the permitting and construction restrictions that we've run into. Same thing on Edgehill's. We're definitely not going to hit the numbers that we budgeted this year.

So, you know, we are in the process of, you know, given what we see today in terms of the availability of resources and the ability for us to go out and do stuff as aggressively and quickly as we can in the first half of next year, you know, we're probably going to do 500000 plus more fiber to the home homes next year.

And to the extent that we reach that milestone, because the machine has gone up and running, we've got the permitting process moving at a quick pace. You know, we'll probably be doing million plus per year thereafter.

So we're looking if we just do the math, you're probably looking at three and a half to four years before we complete the entire optimum footprint on FTTH..

[00:56:25] We have time for one last question and your final question is from Michael Rollins of City..

[00:56:32] Thanks and good afternoon.

Curious if you could talk a bit more about the mobile strategy in terms of how you're looking at rolling into the T-Mobile network and if you're looking at and building some infrastructure in your market and related to that, when you're building fiber to the home, are you layering in a lot more strands or capability where you might be able to leverage your own fiber over time to either build or a partner and offer a solution to another provider? Thanks..

[00:57:08] So just to take your second question first, yes, as we are rolling out fiber across our footprint, we're putting very high Australian counts into that fiber so that we could multipurpose it going forward, not knowing necessarily exactly what could happen. But that is clearly in our planning in terms of the mobile strategy.

You know, we are with good dialog with T-Mobile. We are roaming on them right now. We are discussing a very near term timetable in terms of holding ourselves off the Sprint network and onto the T-Mobile network. And that really is a function of their preparedness. Some near-term some to do with their own SPSS, some other technical factors.

But that is a very near term thing that we expect to happen. And we're going to continue to look to develop additional products and services with our partners at T-Mobile and look at other opportunities to grow the business.

I think in terms of let's call it sizable capital allocations relating to building infrastructure, that's probably not something that we are going to do a lot of.

I think we like the model more of of looking to partner with people who may have some infrastructure or help people build out their infrastructure in exchange for capacity and those types of deals, as opposed to focusing on near-term a subset of a region where we could potentially buy spectrum or build up some infrastructure.

I think that is probably less economical given, given the fact that a lot of our subscribers are moving around. And near-term that probably doesn't near-term drive the economics that attractively. Thank you very much, everyone. Sounds like that's the last question. Appreciate your time.

And obviously, Nick Kathee, myself and Mike are available for follow questions whenever..

[00:59:25] Thank you..

[00:59:26] Thank you..

[00:59:27] Thank you, everybody..

[00:59:29] Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect..