Good morning. My name is Kim, and I will be your conference operator today. At this time, I would like to welcome everyone to Charter’s Fourth Quarter 2017 Investor Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Stefan Anninger, you may begin your conference, sir.

Good morning and welcome to Charter's fourth quarter 2017 investor call. The presentation that accompanies this call can be found on our website, ir.charter.com, under the Financial Information section. Before we proceed, I would like to remind you that there are number of risk factors and other cautionary statements contained in our SEC filings, including our most recent proxy statement and Form 10-K. We will not review those risk factors and other cautionary statements on this call. However, we encourage you to read them carefully. Various remarks that we make on this call concerning expectations, predictions, plans, and prospects constitute forward-looking statements. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. Any forward-looking statements reflect management's current view only, and Charter undertakes no obligation to revise or update such statements or to make additional forward-looking statements in the future. During the course of today's call, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. These non-GAAP measures as defined by Charter may not be comparable to measures with similar titles used by other companies. We may also refer to pro forma results. While the Time Warner Cable and Bright House transactions closed on May 18, 2016, these pro forma results present information regarding the combined operations as if the transactions had closed on January 1, 2015 in order to provide a more useful discussion of our results. Unless otherwise specified, customer and financial data that we may refer to on this call for periods prior to the third quarter of 2016 are pro forma for the transactions as if they had closed at the beginning of the earliest period referenced. Pro forma reconciliations are provided in Exhibit 99.1 to our Form 10-Q filed on November 3, 2016. Please also note that all growth rates noted on this call and in the presentation are calculated on a year-over-year basis unless otherwise specified. Additionally, all customers and passings data that you see in today's materials continue to be based on legacy company definitions. Joining me on today's call are Tom Rutledge, Chairman and CEO, and Chris Winfrey, our CFO. With that, I'll turn the call over to Tom.

Thank you, Stefan. 2017 was formative year for the new Charter. We executed well and accomplished what we set out to do in plan. Our integration from three legacy companies to a unified company with one service and operating approach design schedule, our business is growing quickly and the most challenging elements of our integration are behind us. Our 2017 customer results were as planned. For the full year, we grew total customer relationships by nearly 4% despite all the significant changes we made to our business. Quality sales have increased and the worst of legacy Time Warner Cable churn is behind us. In the fourth quarter, we continued to see year-over-year improvement in customer connect volumes in our new markets. Spectrum, our high-value product set is now the majority of our services with over 50% of former Time Warner Cable and Bright House residential customers now subscribing for the Spectrum pricing and packaging. All of our video connects are purchasing our expanded basic product and our total expanded video relationships grew again this quarter. We now offer minimum internet speeds of 100 megabits in 99% of our entire footprint, up from just over 50% in June of last year. We grew full year revenue by 3.9% or 4.5% excluding advertising and EBITDA grew by nearly 6%. In addition to the launch of our Spectrum pricing and packaging, we also made meaningful progress in consolidating our customer-facing applications and platforms in 2017. We’ve reduced and unified our various video applications, so that today, virtually all of our customers, regardless of the footprint or package use a single Spectrum TV app to access our IT-based video products. We largely integrated our VOD content offerings and we consolidated our sales and service portals. We also continue to integrate our three legacy networks…

Thanks, Tom. Before covering our results, a few administrative items; first, I want to remind everyone that when I reference fourth quarter 2017 customer results, I'll be comparing them to the fourth quarter 2016 results that have been adjusted to exclude the seasonal program customer activity in the fourth quarter of 2016 at legacy Bright House. We've provided that year-over-year comparison on Slide 6 of today's investor presentation. Additionally, as we head into the second year for integration, the distinction between pure integration activities and the implementation of our operating model is blurry. So starting in the first quarter of 2018, we’ll no longer disclose transition expenses in our P&L or transition-related capital expenditures, although this cost will still occur for some time. Page 6 of today’s trending schedule provides a mapping of historical transition expense into our regular expense lines. So those would like to adjust models in advance in the first quarter reporting can do so now. That trending schedule also shows a line flip we’ll make in Q1, all in down sales and retention expense will move from cost to service customers to marketing where these call center activities are now managed. We haven’t reflected that change in the fourth quarter financials, but wanted to highlight the change before Q1. Finally, our fourth quarter 2017 results were modestly impacted by the third quarter storms in Texas and Florida. There was no negative impact to subscriber results or revenue in the fourth quarter and fourth quarter storm-related operating expenses and capital expenditures were immaterial under $10 million combined. Now, turning to our results. During the fourth quarter grew by 206,000 or 1 million customer relationships in the last year, with 3.4% growth at TWC, 3.9% at legacy Charter, and 5.4% at Bright House. Including residential and SMB, video…

[Operator Instructions] And your first question comes from the line of Bryan Kraft with Deutsche Bank. Your line is open.

Hi, thanks. Good morning. I just had two questions. One, Chris, can you talk about what the tax rate would be on a permanent basis if you take out the benefits of the NOL and the depreciation timing, so we can start to think about how we model that tax rate in the out years of our models? And then, secondly, I know you don’t want to talk about how much of the synergies and dollars have been realized and you are going to no longer disclose those, but, can you just talk about, roughly where you are in realizing the transaction synergies, maybe in terms of rough percentage terms or something, just so we can think about how much still could be on the come as go forward? Thank you.

Sure. So, in terms of tax reform, one of the key elements in addition to a lower rate was bonus depreciation for the next five years and then, a fairly logical transition out of the 100% bonus depreciation. So your question is, to the – at the point where Charter does become tax payer, ignoring the ongoing benefits of our NOLs, the effective tax rate should be in the 24% to 25% area all in inclusive of state income tax. And as for synergies, we are not providing ongoing disclosure, part of that is also the distinction between what our operating model synergies and transaction synergies; it’s not a bright line. But I think if you take a look at our results which is for all of 2017, and in the fourth quarter, you can see that even in the earnings of cost to serve and in the other expenses and even in the marketing and sales area where we have much higher sales and marketing activity and we have synergies there that are offsetting some of those increases. We are doing everything that we intended to do on the synergy side. We expect it to get to the numbers we published over a three year period and we are not quite there yet, but we are well on our way. Given that, I think, I’d like to – what we are trying to put a pin into because it does become someone’s judgment as to what’s an operating synergy and transaction synergy at this stage.

Okay, thanks very much, Chris.

Kim, we’ll take our next question please.

Thank you and your next question comes from the line of John Hodulik with UBS. Your line is open.

Great. Couple ones. First, Chris, there is some nice EBITDA commentary about the low point for cable EBITDA growth. First, a clarification, did that include any sort of impact you are going to see from the wireless launch mid-year? And then, if you could give us anymore color on what drives that accelerating EBITDA growth? Is it more revenue-related, more margin-related? And then, maybe for Tom, the 200 megabits per second service, can you give us a timeline for sort of how do you expect that to be rolled out across the U.S.? And I realize it’s early, but any sort of early feedback you can give on in terms of uptake or improving subscriber numbers in those areas? Thanks.

The reinvestment in cable be with at in its low point because of the specific to cable and I am not saying that now, just look anybody, but if we are widely successful with wireless and there is upfront cost in terms of sales and marketing as that’s attached to wireless subscriber. So I don’t want to get trapped into a point where we are getting curious on something that ultimately is going to have significant cash flow contribution. So we think that Q4 was probably the low point for cable in the diagram and that’s our intention we said it that way. In terms of the sources of that growth, and as subscriber units have improved, and we expect to continue to improve, as many of them give you choppiness along the way, but for the medium and long-term subscriber results it’s improved. That has a significant impact on the revenue flow through. We are also coming out of the year where we didn’t have political advertising and into a year where we will have political advertising. So, all of that implies that revenue should be a contributor to that EBITDA growth. We also mentioned in the prepared remarks that we expect a lower rate of programming cost for us, which does have an impact to EBITDA growth rate as well. And I think we’ll become – continue to become more efficient on the operating side. That’s there are some trims up there and we have a lot of in-sourcing investments that are ongoing, but to answer your question, I think it comes from both revenue and it’s certainly in parts of the cost structure continuing efficiency there as well.

Great.

So, John, with regard to our data speeds, so, our plan is to go 1 GIG everywhere in – that we serve essentially this year. So we’ll have all 50 million passings essentially activated with 1 GIG capability with our advanced wireless product with it. So that we can distribute the 1 GIG throughout the home. The 200 megabit upgrade is currently about 18% of our footprint and we have some plans to take that up further this year. But we have – it’s really a logistical question, part of that is we are offering that to our existing customers as well and in some cases, we have modem transfers to do. And so, there are logistical issues in managing that. So we haven’t decided how fast we are going to go with that and how far we’ll roll it out entirely this year. But to sum it up, we plan to be 1 GIG everywhere and marketing 1 GIG everywhere this year, which is taking up a significant portion of our business to minimum speeds of 200 megabits at the same price we were charging the 60 a year ago. And we plan to do that as quickly as we can, but because of the all-digital rollout and some of the other operational issues we have, we haven’t fully planned out to do the whole country yet.

Gotcha. All right, thanks guys.

Kim, we’ll take the next question.

Thank you. And our next question comes from the line of Jason Bazinet with Citi. Your line is open.

Just a question for Mr. Winfrey. You do a nice job in your K outlining the aggregate transition expenses over the last three years within OpEx and CapEx. And I was just wondering if you could give any commentary about how much more transitional expense do you expect from current 2018 and is that the last year that there will be transition expenses?

Let me start with the easy one. No, it won’t be the last year. I think the – in 2019, we’ll still have – from an IT infrastructure standpoint some ongoing transition capital in particular and also as we continue to converge some of the core networks into 2019. So I think it will go on through 2019.

Okay.

The reason we are not longer going to continue to provide that is, as we make changes through the business, some of that’s really just to align to an operating model and sometimes it’s to put in a brand new overlying architecture and because it’s the right thing to do for the overall business or a set, because it’s tied to integration and making a black and white distinction was very easy early on and for coming at the end of 2018, making that distinction in a way that’s faithful that you can lay it out in your 10-K and which didn’t – we thought that was a little bit harder and maybe less relevant. And so, what we wanted to do today is, explain people why we were going to make the change, provide the transparency of where those line items repeat recast in Q1. So that people have in advance to recast it. So I think, you can already see the transition expense from an operating expense, it has been coming down. Some of that is because we are actually coming down in the activity. Some of that is because it became harder to define and when in doubt, we put it into the “ as usual” just because we rather be conservative. And if that’s the case then, providing that distinction becomes less useful over time to investors and we thought it would be more transparent to show the transition that we tend to do in Q1 and report it back to usual way to getting in Q1 and going forward.

Perfect. Thank you.

Kim, we’ll take our next question please.

Thank you. And our next question comes from the line of Jessica Reef with Bank of America. Your line is open.

Thank you. I guess, two questions. You talked a lot about the certainty that you now have from regulation and also tax reforms done. How does that play into your views on further consolidation in the industry and how you would view participating in that? And then, secondly, can give us more color on the original content strategy? How much content will you buying from Viacom and AMC? Will it be exclusive? How will you use it or benefit from it? Thank you.

Obviously, M&A in the industry, as you are talking about cable M&A as opposed to programming M&A, from our point of view, we like the cable business. We think it’s a good business and we think we can do well on that and if there were opportunities for acquisitions at the right price, we would always be interested in retaining of. I don’t know how the tax law or the Title II changes affect the regulatory environment during the M&A if that’s your question. And I am not sure they do, so, you still have all the issues that we’ve always had in the industry in terms of M&A as far as I can see. With regard to content, yes, our plan is to work with proven content companies to get economies that work for us in terms of windowing of content as to use that content to create brand halo around our product in an effective way in the marketplace. We’ve done two arrangements, one with AMC and one with Viacom and they are slightly different in scope and but they essentially create a window of opportunity for us to use content in a way that fits our customers and still together monetize that content properly over a bigger distribution footprint meaning the world. And so, we’ll see where it goes, but it’s an opportunity to – for us to be associated for a period of time with the original content.

Tom, I am sorry. Can just have one follow-up? Does that play into your efforts at all and what you are doing in targeted average pricing and can you give us an update on what advancements you’ve made in advertising?

Well, we continue to make significantly advancements in advertising and we are actually pretty bullish on our ability to grow our advertising business. As Chris said in his comments, we actually grew advertising taking political out by 3% last year. We are using more advanced data analytics anonymized data analytics to drive better advertising products in the market we have in an all-digital environment, the ability to use our inventory much more effectively and much more targeted way combined with the good data. So that, the advertiser gets a more responsive ad and we get a higher CPM and so, we think we’ve got investments planned for 2018 to finish out our platform to deliver that nationwide. We have made significant strides today and so we have a much more advanced advertising platform than we had historically having before beginning to see traction.

Great, thank you.

Thanks, Jessica. Kim, we’ll take our next question please.

Thank you. And our next question comes from the line of Phi Cusick with JPMorgan. Your line is open.

Hi, thanks. Two if I can. First, Chris, can you give us some clarity on the rate increases announced so far, both in the legacy Charter and the acquired plans? And how should we think about any ARPU impact this year? And then, maybe Tom, can you talk about wireless a little bit more, for the mid-year launch, should we expect something like a Comcast type MVNO or something substantially different? And when could we start to see you offering some type of your own cellular augmentation rather than just using a Wi-Fi in addition to the MVNO? Thank you.

So, Phil, we have not taken significant rate increases inside 2018, really consistent with our operating philosophy to go for market share growth. We didn’t have some small rate increases to true-up for retransmission expense and that’s flowed through at the beginning of January, but that’s really to offset a direct expense that we have. We’ve also harmonized some of our set-top box rates. In some cases, that resulted in a small increase, but as you know from the transition to Spectrum pricing and packaging, in many cases, that’s a dramatic reduction in set-top box fees that are paid by consumers. And so it really was more about standardization and operating increases. Those were the two biggest items. We had some other small modifications around the edges, but those are two that drive the most significant portion, but in general, our strategy is to drive revenue growth through unit growth as opposed to simply taking rates, that hasn’t changed.

Phil, with regard to wireless, we just had a rollout on mobile product. We already are in the wireless business. Today, we have 200 million authenticated devices connected to our Wi-Fi network. We’ve planned to sell the mobile product using the Verizon MVNO. We haven’t decided how to price it and – but our long run view of pricing is that, we should offer good value for high-quality products and we should integrate that into our overall product and packaging scenario. So that, the consumer ends up with a set of high-quality product features in a single customer relationship and that those features individually and in aggregate are worth more to the customer than they would be as standalone products. And so we haven’t decided our pricing. I will say just by Comcast and they did a really nice job with their pricing model and it has a lot of very positive attributes. But we have got to decide ours or announce ours. With regard to the Wi-Fi and latent spectrum opportunities, small cell radios, if that's what you’re referring to, which I referred to in the past as inside-out strategy potential for high-capacity, low-latency services to be delivered to consumer premises and businesses. We don’t have – we’ve been experimenting with various licensed and potentially unlicensed some of those spectrums did unclear of what is long run regulatory standards will be. But we are experimenting with different spectrums that we hope will become licensable or private, along with Wi-Fi, but Wi-Fi interestingly continues to increase in terms of its actual capabilities. We are doing this 1 GIG service throughout the country with Wi-Fi and Wi-Fi can handle again. And so, that’s the kind of speed that the people are talking about from a 5G perspective. So, our thought is that, we may want to take additional licensed spectrum and combine it with Wi-Fi spectrum to create an even broader, in-home, in business and mobile platform. We don’t have any current plans to launch that in 2018 or in 2019 for that matter. But we are working on the integration of licensed and unlicensed spectrum into the same radios, so that we can improve the already good wireless coverage that we provide at home. I think the most interesting fact to consider about, just the MVNO which we are about to enter, 80% of the BPS that mobile carrier customers that will seal on their devices come through our Wi-Fi networks. And so, it’s a robust network, I mean, it’s getting better.

Thanks, Tom.

Thanks, Phil. Kim, we’ll take our next question please.

Thank you. And our next question comes from the line of Jeff Wlodarczak with Pivotal Research Group. Your line is open.

Good morning. One for Chris and one for Tom. Chris, you bought back dramatically more stock certainly than I anticipated in the fourth quarter and the second half of 2017. Should we assume going forward, you are going to stay at the high-end of your 4 to 4.5 times leverage target? And then for Tom, I wanted to get your thoughts on the potential for the government to nationalize a portion of the mid-band wireless spectrum to create a competitor into 5G? And then just, on 5G in general, you’ve done a lot of work on fixed 5G, how much of a competitive threat do you view telcos fixed 5G to your core data bits? Thanks.

So, Jeff, on the leverage question, and specifically related to buybacks, we did a lot of buybacks last year and the reason that we took our leverage up by half a turn, it’s still within our target leverage range. It was because we knew all the changes that we were making inside the business would make Charter statistically challenged for a short period of time. Because the higher amount of sales and higher quality sales were being masked by legacy product churn and migration and it was very difficult despite us talking about it was very difficult for people to see, we have the confidence of where it was going and we thought that was the right window to take our leverage out than buy stock at these prices in effect $347 per share both over the full year and inside of Q4. But as you point out, we are now at 4.47 times leveraged. So mathematically, if we are going to stay in our target leverage range and we intend to do so on a consolidated basis including the wireless launch cost, it doesn’t mean a whole lot of headroom. We do have EBITDA growth and we have cash flow and both of those contribute to capacity. But I think we did what we did and we’d like to price we did it, liked how aggressive we were and we thought the timing was right and of course in this year, where do we take leverage? It’s too early to say. I think a lot of that is dictated by the opportunity set that’s in front of us. I would say that, if our goal is to stay consolidated leverage at 4.5 times. And we are in way to the extent that we become more and more bullish about our ability to drive wireless growth, you would want to make sure that you’ve left enough capacity in your consolidated leverage to be able to still be within the target, that’s our goal. And that you saw M&A opportunities that came about haven’t existed in a material way recently then that would also factor and so wanted to create some headroom. And most importantly, as I mentioned before, while subscriber results did what we said they were going to do and continue to do so, there is going to be some choppiness along the way just getting the amount of change that we are driving in the business. So, it won’t be a straight-line. The overall curve over a medium to long-term, we have high confidence in that. If there are reactions to choppiness along the way and the opportunity opens up, that’s one of those strategic opportunities, we’d look at it as well. So, no guidance on where we’ll be inside the 4 to 4.5 times and that’s simply because we need to keep that flexibility to go make the right decisions which I think so far, we are pleased with.

So, Jeff, as far as the national 5G government built mobile network, which I assume you mean.

Yes.

I don’t know there is such a thing architecturally, even possible as a pre-spec notion. There is no 5G spec yet. If they do it in a mobile environment within a massive amount of very tiny cells. And could government manage something like that? It's hard to conceive. So, I don’t know any – I understand the security issues that I think underlie the – how that can’t just come into the public space and I do think there are significant cyber security issues that we have to deal with as a country and privacy issues that are real policy issues. But I just can’t imagine a nationalized infrastructure and I don’t even know from a mobile platform where the product would be. When it comes to 5G, fixed, now I think it’s – you got to remember 5G is just a format puts in data at a certain speed and there are alternatives to 5G can, which is why we talk about 6G, it’s kind of like that number of longer and its final path, but, there are a lot of ways to get speed. 5G isn’t the only way to provide a high-capacity low-latency network. And so, so what is a 5G fixed network? It sounds to me like, it’s a wireless drop that costs more than a wireline drop. And what do you attach it to? You have to attach it to a network, just like you do all wire drop connections. And so, I see all the same kind of costs necessary to build a 5G network as there is to build a wireline network and maybe more. And so, we’ll ask – does that potential exists, does anyone with capital want to do that and will they get a return to that capital? I don’t know, but I think it has much of the same aspects of investments as wireline if not greater.

Thank you.

Kim, we’ll take our last question please.

Thank you. And our final question comes from the line of Vijay Jayant with Evercore. Your line is open.

Thanks. Two if I may. Tom, there is some comments that in the prepared remarks about the stream product becoming a bigger piece of the mix. Just want to get thoughts on the virtual MVPDs and how they are scaling? What’s the sort of response broadly in the marketplace and do we expect these IP products to be a bigger piece of the mix going forward? And just very quickly for Chris, you obviously talked about the trough, EBITDA trends ex wireless, possibly where they are right now? Can you just talk about the arc on the commercial side where it’s sort of doing the similar thing, is that behind the consumer arc on the recovery? Just for our understanding of scaling of the business going forward? Thanks so much.

Well, and let’s ensure and I describe what's going on in the video business and it’s complicated. There is a lot of issues out there. I still think that we can grow video. I think there are lot of pressures in the video business with the pricing and packaging, price of the products and the fact that in order to carry the whole product, again to buy the whole product, as a distributor and which makes the retail price generally expensive for a fully featured service. And there are a lot of people being priced out of the market and price value relationship is declining because, among other things, it’s gotten more expensive, but also across but not paying for us has gotten cheaper meaning, with password sharing and lack of control by programmers over their content, you have an easy ability to substitute pay TV for free TV. And you can do that with an intent for broadcast television, which is now become an expensive product. And you can do that with streams products that isn’t properly matched. So you have price pressure in the business that’s significant, you have income levels that makes price pressure significant. So the overall category is shrinking from pay perspective for all of those reasons and then you have our ability to sell which I think is still good and significant and I think that we have the ability to put better video products in front of the consumer and package them. There is no product out there that I can see that we don’t have access to, to sell to our consumers or to provide to our consumers and integrate it with our existing services. So, as if we have an opportunity to continue to have a fully featured video product that meets customer expectations that’s equivalent to what anyone else could do. And therefore I think because we have a better business model, and better infrastructure that we can win against the satellite and we can against other wireline competitors in the marketplace and grow our video business. But, the overall category I think still is under enormous pressure for all the reasons I said.

Thanks, Vijay. That ends our call. Thanks operator.

Just we didn’t ignore, Vijay, I’ve forgotten, he had the second question on commercial.

Okay.

The commercial migration, what’s happening in commercial, sales are up significantly. I mentioned in the prepared remarks, 32% year-over-year growth at TWC and Bright House, on SMB from a unit perspective, that’s really significant and 32% increase in net adds. The trade-off to that is ARPU pressure. And so, similar to residential with migration that’s been taking place. The key difference in SMB and the same applies to enterprise is the pricing differential is greater and the time period for it to occur is longer. And so the SMB migration takes a longer period of time as does enterprise. So, I think we are going to see similar pressure throughout 2018. I’m not giving you revenue guidance other than to say, kind of we’ll have positive unit growth, we’ll have positive revenue growth, but it is going to be depressed through 2018 relative to the unit growth until we can get a little bit further on in that migration path and get over the 50% point similar to what we’ve been talking about on residential. So, that, I think that does wraps us up. We apologize and thanks everybody for joining the call.

Thank you. Ladies and gentlemen, this concludes today's conference call and you may now disconnect.